Silver Spike Investment Corp.

Good morning. This is Umesh Mahajan, CFO of Silver Spike Investment Corp. With me here today is Scott Gordon, CEO of Silver Spike Investment Corp. Welcome to Silver Spike's earnings conference call and live webcast for the third quarter of 2023. Silver Spike's financial results for the quarter ended September 30, 2023, were released yesterday and can be accessed from our website at SSISC.SilverSpikeCap.com. A replay of the call will also be available on Silver Spike's website. Before we begin, I would like to remind everyone that certain statements that are not based on historical facts made during this call, including any statements related to financial guidance, may be deemed forward-looking statements under federal securities laws. Because these forward-looking statements involve known and unknown risks and uncertainties, there are important factors that could cause actual results to differ materially from those expressed or implied by these forward-looking statements. We encourage you to refer to our most recent SEC filings for information on some of these risk factors. Silver Spike assumes no obligation or responsibility to update any forward-looking statements. Please note that the information reported on this call speaks only as of today, November 10, 2023. Therefore, you're advised that time-sensitive information may no longer be accurate at the time of any replay or transcript reading. All right, so good morning again, and thank you all for joining. We released our results yesterday, and there's a management presentation deck attached to the 8K that was filed. Those who are joining us today on this earnings webcast should also be able to see it live. We may refer to the slides by numbers just for your reference as we go through those pages. I'll cover the presentation slides and then turn it over to Scott Gordon for his thoughts towards the end of the presentation. So if you please turn to page three of the presentation, it shows the financial highlights for the third quarter 2023, gross investment income of $2.9 million, expenses of 1.3 million, which gives us net investment income of 1.6 million. Net investment income per share of 26 cents this quarter. Net assets at the end of period of 87.4 million. It's down from last quarter due to the payment of dividend that we recently paid. Our net asset value per share is at 14.06. There were no new investments this quarter. We'll discuss our origination efforts and portfolio in more detail in subsequent slides. We're also pleased to announce that our board has approved a cash dividend of 70 cents per share, consisting of a regular quarterly dividend of 25 cents per share versus 23 cents per share last quarter, and a special dividend of 45 cents versus 40 cents paid last quarter. These dividends will be payable on December 29 to stockholders of record on December 20. We'll be going through the next few pages quickly as most of our investors are already familiar with our story. On page four, Silver Spike Investment Corp, the BDC, is managed by Silver Spike Capital, a SEC-registered investment advisor. with a seasoned team that has decades of investing experience and an extensive network in the cannabis industry. On page five, it presents the experience profile of our management team. Page six presents the competitive advantages and differentiation that a BDC offers vis-a-vis other types of investment vehicles, primarily REITs, which are our main competitors in the cannabis lending space. SSIC can lend against cash flows as well as real estate. And unlike REITs, we are not required to have at least 75% of our assets invested in real estate, which allows us for more flexible lending strategies that the industry really needs and will need going forward. On page seven, we talk about the market opportunity. We believe we are in the early innings of a multi-year secular growth story for the cannabis industry. with a really compelling opportunity for lenders because of a general lack of institutional capital for this industry. On page eight, we show our detailed underwriting process that we go through for every investment that we make with our capital. On page nine, we show our sourcing and origination effort. Our active pipeline remains very robust. There was a temporary lull in deal activity towards the end of the summer, but that has picked up again in October. We have an active deal pipeline of $448 million, and we are very busy working through the existing deals and feel very good about the opportunities that we are currently pursuing. On page 10, it shows the diversification embedded in our portfolio. The bar chart on the left shows the number of states that each of our portfolio companies operate in. For the cannabis industry, this is important systems. Each state has its own set of regulations and unique competitive dynamics. Each company in our portfolio is diversified. And at an overall portfolio level, we are even more diversified across various state jurisdictions. The pie chart on the company strategy in the center of this page shows that we have a healthy mix of companies across those that have brands as their primary focus versus MSOs that are focused on setting up business infrastructure across multiple states. So we feel good about the overall risk diversification embedded in our portfolio. Slide 10 shows our portfolio summary as of September 30. Company A is Shrine, which is the owner of Brand Steezy. Company B is Pharmacan. These two investments were made last year in the summer. Company C shows Q-reliefs, 8% secured bonds due 2026. They were purchased at a significant discount to its par value. Our last three investments are floating rate loans, and they were made with prime as a base rate. Company D is one of our large investments in Verano's forced lien term loan, a transaction that was done last October. Company E represents our investment in Merrimet, investment earlier this year. And Company F represents Dreamfield Brands, owner of the brand Jeter, one of the most recognized cannabis brands, especially in the pre-roll category. This quarter, we facilitated an expansion of the credit facility for Jeter, though our position size remains the same. So overall, if you look at the top of the page, our total investment value is about $57 million, with an average yield to maturity on the loans of 18.2%. A few additional points we like to emphasize when we look at this portfolio and when we are comparing this with other BDCs out there, all of our positions are forced lien loans or secure bonds. None of our loans or bonds are in a non-accrual status. Over 90% of our portfolio is in floating rate securities. And our gross portfolio yield of over 18% compares quite favorably to the broader listed BDC universe. So the portfolio compares favorably, and we also believe that each of our portfolio companies is actually very well positioned in the industry for the long term. So let me conclude by reminding the investors that the quarterly dividend of 25 cents and the special dividend of 45 cents will be paid to the stockholders of record on December 20, 2023. So with that, let me pass it on to Scott Gordon for a few remarks.

Thanks, Umesh. Just briefly with respect to the broader market, market conditions over the course of the quarter were decidedly mixed. News on the regulatory front with respect to a potential rescheduling of cannabis earlier in the quarter led to widespread enthusiasm among industry participants. Publicly traded cannabis names rallied strongly in anticipation of finally long-awaited and meaningful regulatory reform taking shape. Generally, operators in the space were led to believe that this would result in an imminent increase in capital flow coming into the sector. As such, they paused many of their financing initiatives, which resulted in a lull of capital market activity across the board that Amesh referred to. We believe this is a temporary thing and are already beginning to see a meaningful pickup in our deal sourcing efforts. Meanwhile, macro trends in the sector remain intact. Growth in most markets is broadly in line with forecasts, and many of the price and margin compression pressures we have seen over the last several years seem to be finally abating. New state markets continue to come online, most notably the electoral decision this week in Ohio to implement adult use. Consolidation among operators continues to be a theme as smaller and less efficient companies are either shuttering or merging to create better economies of scale and operating efficiencies. This is particularly prevalent in California, a market which has struggled of late with its own idiosyncratic issues and challenges. Overall, though, we remain excited that the opportunity set for us at SSIC is attractive as capital in the industry remains a scarce commodity. affording us the ability to continue executing on structuring solid loans with very favorable lender terms and credit metrics. With that, I'll turn it back to Amesh.

Thank you, Scott. So that's all we had in terms of our formal presentation. We would be happy to answer any questions you may have. Operator?