Great Elm Capital Corp. (NASDAQ:GECC) Q3 2023 Earnings Call Transcript
Great Elm Capital Corp. (NASDAQ:GECC) Q3 2023 Earnings Call Transcript November 4, 2023
Operator: Greetings. Welcome to the Great Elm Capital Corp. Third Quarter 2023 Financial Results. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to your host, Garrett Edson, a representative of the company. You may begin.
Garrett Edson: Good morning, and thank you, everyone, for joining us for Great Elm Capital Corp.'s Third Quarter 2023 Earnings Conference Call. If you like to be added to our distribution list, you can e-mail investorrelations@greatelmcap.com or you can sign up for alerts directly on our website, www.greatelmcc.com. I'd like to note the slide presentation posted on our website accompanying today's call. The 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 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 statements. Great Elm Capital Corp 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 which is at the SEC's website. Hosting the call this morning is Matt Kaplan, Great Elm Capital Corp's Chief Executive Officer, who will be joined by Chief Financial Officer, Keri Davis, Chief Compliance Officer, Adam Kleinman; and Mike Keller, President of Great Elm Specialty Finance. I will now turn the call over to GECC's CEO, Matt Kaplan.
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Matt Kaplan: Thank you, Garrett. Good morning, and thank you for joining us today. Our momentum throughout the year continued, and I'm pleased to report yet another strong quarter for Great Elm, generating an ROE of nearly 8.5% in the quarter, bringing our year-to-date ROE to approximately 25%. We continue to successfully deliver across all facets of our business. We saw portfolio growth, continued cash income generation, capital structure improvements and implemented operational enhancements. I remain proud of our team's consistent execution and incredible effort to position us to further grow our platform and portfolio in the quarters and years to come. Turning to Slide 6. You can see we would have reported NII of $0.45 per share if we excluded the net impact of certain refinancing items in the quarter, showing continued sequential growth from our second quarter 2023 NII.
However, the impact of the refinancing transaction in the quarter led us to report third quarter NII of $3.1 million or $0.40 per share, again, exceeding our quarterly distribution of $0.35 per share. I especially want to highlight Slide 7, which shows our cash NII. Even with the double interest expense associated with the refinancing, we continue to generate enough cash NII from our portfolio to cover our distribution driven by another consecutive quarter of record cash income generated from our investment portfolio. The cash income we generated in the third quarter represented approximately 88% of total investment income. We continue to make great strides in enhancing our portfolio to generate increased cash income. We also successfully harvested lower-yielding investments and used the proceeds to continue enhancing our mix of first lien secured debt, with 90% of our deployments in the quarter going into first lien investments, all while further improving overall corporate portfolio yield.
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