Great Elm Capital Corp.

Good day, ladies and gentlemen, and thank you for standing by. Welcome to the Great Elm Capital Corporation First Quarter 2022 Financial Results Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star then 1 on your telephone keypad. If you require any further assistance, please press star then 0. At this time, I would like to turn the conference over to Mr. Garrett Edson of ICR. Sir, please begin.

Good morning, and thank you, everyone, for joining us for Great Elm Capital Corp's first quarter 2022 earnings conference call. If you'd like to be added to our distribution list, you can email investorrelations at greatelmcap.com, or you can sign up for alerts directly on our website, www.greatelmcc.com. I'd like to note that Slide presentation posted on our website accompanying today's call. Slide presentation can be found on our website under financial information quarterly results. On our website, you can also find our earnings release and SEC filings. I'd like to call your attention to the customary safe harbor statement regarding forward-looking information. Also, please note that nothing in today's call constitutes an offer to sell or a solicitation of offers to purchase our securities. Today's conference call includes forward-looking statements and projections, and we ask that you refer to Great Elm Capital Corp's filings with the SEC for important factors that could cause actual results to differ materially from these projections. Great Elm Capital Corp does not undertake to update its forward-looking statements unless required by law. To obtain copies of SEC filings, please visit Great Elm Capital Corp's website under Financial Information, SEC Filings, or visit the SEC's website. Hosting the call this morning is Matt Kaplan, Great Elm Capital Corp's Chief Executive Officer. I will now turn the call over to Matt.

Good morning, and thank you for joining us today. On today's call, I'll walk through some first quarter highlights, and our CFO, Carrie Davis, will take us through some of our financials for the quarter. We'll then open up for Q&A, and Adam Kleinman, our Chief Compliance Officer, and Mike Keller, President of Great Elm Specialty Finance, will join us to answer questions. Over the past two months as CEO, I have taken certain actions to seek to ensure our legacy issues are largely behind us and to position the company for future success. Looking at our first quarter, we saw net asset value once again decline from the prior quarter as we worked through remaining legacy items. Also, NII, excluding the reversal of past incentive fees, was below what we expect our portfolio can achieve over time. Despite these legacy headwinds, I am excited about our strategy, with support from a refreshed board of directors and a clean portfolio. We also believe that our pending rights offering, if successfully completed, will provide the capital needed to support our growth. This quarter, the waiver of past incentive fees benefited NII. Going forward, we intend to grow our operational NII by executing on our strategy. On our last call in March, in concert with beginning to transform GECC, I called out three core objectives that were aligned with our new strategy. The first was to increase GECC's allocation to specialty finance to constitute half of the portfolio through direct investments in specialty finance companies as well as in participation. Secondly, to maintain a high quality diversified portfolio focused on performing and cash yielding investments. Finally, to increase our scale by raising equity and debt capital. To that end, I am pleased to report that our team has been executing the strategy we set forth and is making progress. On that final capital raising point and before diving into the quarter, I would like to highlight that this morning we filed an amended registration statement for a one-for-one rights offering at $12.50 per share or up to $57.5 million assuming 100% participation. Great Elm Group and certain affiliates have indicated that they intend to exercise their subscription rights and oversubscribe in the rights offering. If completed, We intend to use the proceeds from the offering to pursue a robust pipeline and grow GECC. Moving to other strategic items, in the first quarter, we refreshed the board with the appointment of Chad Perry, Matthew Drapkin, and Richard Cohen. With two non-independent directors declining to be compensated by GECC, our board continues to take shareholder-friendly actions. I also was successful in negotiating with the board of Great Elm Group to waive past incentive fees as part of the reset. As a result, we were able to reverse an additional $4.9 million of previously accrued incentive fees in the first quarter, which benefited NII and NAV by over a dollar per share. In terms of our legacy portfolio, we continued to monetize legacy reorg equity positions, such as True Taj and CPK, and also saw a further write down of the Avanti investment. At March 31st, the fair value of our investments in Avanti related securities are now below $1 million, driven largely by Avanti's recent debt restructuring. Crucially, we ended the first quarter of 2022 with only 2% of our assets or approximately 5% of NAV comprised of legacy assets. Entering the second quarter, cash generating investments now comprise 98% of our portfolio. Furthering our strategy to increase our investments in specialty finance and related opportunities, in February, we acquired Sterling Commercial Credit, a leading asset-based specialty finance lender that provides short-term, asset-based loans, and working capital solutions to small businesses with annual sales typically between $3 and $10 million. During the quarter, we deployed $22 million into specialty finance-related investments for 80% of total dollars deployed in the period. As a result, approximately one-third of our assets at the end of March are now composed of specialty finance-related investments, up from 22% at year-end 2021. enabling us to make significant progress on one of our key objectives. On the specialty finance front, I think it is very important for investors to understand that our investments in the equities of specialty finance companies, including Sterling, Prestige, and Lenders Funding, are not just passive private equity investments. These are strategic income-generating investments in businesses we are focused on growing to create a proprietary sourcing engine for bespoke credit investments within GECC. Combined, these specialty finance companies offer a unique one-stop shop of credit solutions to American small businesses. Over the past two months, I have begun to dive into these businesses with industry veteran Mike Keller. We are laser focused on driving best practices and operational improvement across the platforms. We are implementing various initiatives to streamline, optimize, and monitor these businesses across various KPIs. While still early days, as I've only been at the helm for a couple months, we are in the process of building out our long-term targets. To drive value, we will look to grow the loan portfolios of these businesses, expand net interest margins, improve funding flexibility and cost of capital, grow book value, and increase returns on equity. Turning back to some of the financial numbers, for the first quarter of 2022, NII was approximately $6 million or $1.31 per share, which is inclusive of the $4.9 million reversal of previously accrued incentive fees. Excluding the reversal, NII would have been about $1.1 million or 24 cents per share. Our goal in the quarters ahead is to grow our portfolio and our investment income to cover our quarterly distribution on a regular basis. As of March 31st, our asset coverage ratio stood at 147.5%, which is just below the 150% threshold. If we are able to successfully complete our announced rights offering, the net proceeds would positively impact our asset coverage ratio. While the macro environment remains challenging and we're not done transforming GECC, we are encouraged by the progress we have made. We have brought together a strong team to helm our transformation and remain confident in our team's ability to address any challenges head on. With that, I'd like to hand the call over to Carrie to discuss our first quarter 2022 performance and add further color on our repositioned portfolio.