Q2 2023 Silver Spike Investment Corp Earnings Call
Speaker 1: you
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Speaker 2: Good morning, and thank you for standing by. Welcome to the Silver Spike Investment Corp second quarter 2023 earnings conference call. At this time, all participants are in a listen only mode. After the speaker's presentation, there'll be a question and answer session. To ask a question during the session, you will need to press star 1 1 on your telephone. You will then hear an automated message advising you your hand is raised. To withdraw your question, please press star 1 1 again.
Good morning, and thank you for standing by and welcome to the Silver Spike Investment Corp. Second quarter 2023 earnings Conference call. At this time all participants are in a listen only mode. After the speaker's presentation there'll be a question and answer session to ask a question. During the session you will need to press star.
One one on your telephone you will then hear an automated message advising you. Your hand is raised to withdraw your question. Please press star one one again please.
Speaker 3: Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Umesh Mahajan, Chief Financial Officer. Please go ahead.
Please be advised that today's conference is being recorded I would now like to hand, the conference over to your speaker today, who mesh by Hudson Chief Financial Officer. Please go ahead.
Speaker 4: Thank you, Catherine. Good morning, everyone. This is Umesh Mahajan, CFO of Silver Spike Investment Corp. With me here today is Carl Gordon, CEO of Silver Spike Investment Corp.
Thank you Catherine good morning, everyone. This is a mash mahajan CFO also it looks like investment Corp. With me here today is our Gordon CEO also reflect investment Corp.
Speaker 5: Welcome to the SilverSpy's earnings conference call and live webcast for the second quarter of 2023. SilverSpy's financial results for the quarter ended June 30, 2023, were released yesterday and can be accessed from our website at ssic.silverspicap.com. A replay of the call will also be available on SilverSpy's website.
Welcome to the <unk>.
Earnings Conference call and live up gas for the second quarter of 2023 silver spikes financial results for the quarter ended June 32023 were released yesterday and can be accessed from our website at S. S. ICD Doc Silvar Spike gap Dot com a replay.
The call will also be available on <unk> website.
Before I 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, maybe deemed forward looking under forward looking statements under federal Securities laws. Because these forward looking statements involve known and unknown risks and uncertainties.
Speaker 5: 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.
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.
Speaker 5: We encourage you to refer to our most recent SEC filings for information on some of these risk factors. Civil Rights by consumes no obligation or responsibility to update any forward-looking statements. Please note that the information reported on this call speaks only as of today, August 11, 2023. Therefore, you're advised that time-sensitive information may no longer be accurate at the time of any replay or transfer.
Looks like 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 August 11, 2023, and therefore, you're advised that time sensitive information may no longer be accurate at the time of any replay or drastically.
That said good morning, again, and thank you all for joining early in the morning today.
Speaker 5: That said, good morning again, and thank you all for joining early in the morning today. We will leave our earnings yesterday, and there's also a earnings slide deck attached to the 8K that was filed with the results. Those have joined us on this earnings webcast, should see live. I'll refer to the slides by numbers, just for you, Rep.
We released our earnings yesterday, and there's also an earnings slide deck attached to the 8-K that was filed with the results.
Those who have joined US on this earnings webcast should see lives.
I'll refer to those slides by numbers.
Just for just for your reference.
Turning to page three of the presentation financial highlights for the second quarter 2023.
Speaker 5: Turn to page three of the presentation, financial highlights for the second quarter 2023.
Speaker 5: goes investment income of 2.9 million, up from 2.5 million in the first quarter of 2023, expenses of approximately...
Gross investment income of $2 9 million up from $2 5 million in the first quarter of 2023.
Spencers of approximately $1 million.
Speaker 5: net investment income of 1.9 million up from 1.4 million last quarter. Net investment income per share of 31 cents versus 22 cents last quarter. Net assets of 90 million and net asset value per share is at $14.49.
Net investment income of $1 9 million.
Up from $1 4 million last quarter net.
Net investment income per share of 31.
Versus trying to sense last quarter net assets of $90 million and net asset value per share is $14 49.
Speaker 5: The increase in the growth investment income reflects the steady ramp up in our investment portfolio. We made one new investment during this quarter. The growth investment income reflects the interest beyond on that investment, as well as the increase in the base rate for all of our floating rate loans. We'll discuss the portfolio in more detail in subsequent slides.
The increase in the gross investment income reflects the steady ramp up in our <unk>.
Just one portfolio, we made one new investment during this quarter.
Gross investment income reflects the interest we earn on that investment as well as an increase in the base rate for all of our floating rate loans will discuss our portfolio in more detail in subsequent slides.
Speaker 5: Also, we're pleased to announce that our board has approved the cash dividend of 63 cents per share, consisting of a regular quarterly dividend of 23 cents per share, and a special dividend of 40 cents.
Also we are pleased to announce that our board has approved a cash dividend of <unk> 63 per share.
A listing of our regular quarterly dividend of 23 per share and a special dividend of <unk> 40.
Speaker 5: These dividends will be payable on September 29 to stockholders of record on September 15.
These dividends will be payable on September 29 to stockholders of record on September 15.
Speaker 5: The company also expects to pay another special dividend during the last quarter of...
Company also expects to pay another special dividend during the last quarter of this year.
Speaker 6: We'll talk more about the dividend announcement in subsequent slides. But to expand more on the Silver Spy story and the market opportunity, I'll turn it over to Scott Gordon RC.
We'll talk more about the dividend announcement.
Subsequent slides.
But to expand more on the diversified story and a market opportunity.
Over to Scott Gordon our CEO .
Scott.
Speaker 7: Thank you, Mesh. Good morning, everyone. Turning to slide four, please. Just briefly in terms of an overview of SilverSpy Capital. SilverSpy Investment Corp, the BDC is externally managed by SilverSpy Capital. SilverSpy Capital is an SEC registered investment advisor that works with its clients to originate, underwrite and deploy first in the senior secured, fixed and floating rate debt to the cannabis industry is most established operator.
Thank you, Matt and good morning, everyone turning to slide four please just briefly in terms of.
An overview of silver Spike capital.
So much like investment Corp. The BDC is externally managed by <unk> capital.
<unk> capital as an SEC registered investment advisor that works with its clients to originate underwrite and deploy first lien senior secured fixed and floating rate debt to the cannabis industry as most established operators.
Speaker 8: The investment team receives them with decades of experience across various market cycles and complex legal regulatory frameworks and credit special situations, equities, distress, and emerging market debt.
The investment team this season with decades of experience across various market cycles and complex legal regulatory frameworks and credit special situations equities distressed and emerging market debt.
Speaker 8: We have raised over $600 million in public and private capital since inception and we are the first and then only publicly traded cannabis focus business development co-op.
We have raised over $600 million in public and private capital since inception, and we are the first and only publicly traded cannabis focused business development Corp.
Just jumping.
<unk>.
Two the market opportunity.
Speaker 7: to the market opportunity slide on page seven and just an update here in terms of what we're seeing. We've brought market. The secular growth story in cannabis continues in tax.
On page seven and just an update here in terms of what we're seeing.
Broad market the secular growth story and candidates continues intact.
Speaker 8: albeit at a much more subdued taste than in previous years.
Albeit.
And a much more subdued pace than in previous years.
Speaker 8: States continue to come on stream. Generally speaking, though, the rollout has been slower than had hoped for on the state and local regulatory frameworks get through growing pains of early adoption and commercialization.
New states continue to come on stream generally speaking, though the rollout has been slower than hoped for on a state and local regulatory frameworks get through growing pains of early adoption and commercialization.
Speaker 8: Progress at the federal level remains all expectations of the passage of the safe act continue to get rolled back. We don't really have a strong view in terms of what the timetable will look like for any meaningful reform at the federal level and are not generally optimistic that we'll see much progress this year.
At the federal level remained stalled.
Expectations of the passage of the Safe Act continue.
Continue to get rolled back we don't really have a strong.
In terms of what the timetable will look like for any meaningful reform at the federal level.
And are not generally optimistic that we will see much progress this year.
Speaker 8: Capital market conditions within the sector continue to be very tight, equity market activity for public companies with respect to IPOs, secondaries and follow-ons is virtually nonexistent. Debt capital is also scarce, but more available is become the funding source of choice for most companies in the space.
Capital market conditions.
Within the sector continue to be very tight equity market activity for public companies with respect to Ipos secondaries and follow ons is virtually nonexistent.
Debt capital.
So scarce, but more available and has become the funding source of choice for most companies in this space.
Speaker 8: The net result of that is a deepening of the trend toward very favorable conditions for lenders such as ourselves at the command attractive terms, structure and pricing which drives compelling risk-adjusted returns for us. Jumping forward.
The net result of that as the deepening of the trend towards very favorable conditions for lenders such as ourselves to command attractive terms structure and pricing, which drives compelling risk adjusted returns for us.
Jumping forward.
Two.
Speaker 8: slide nine, just briefly on sourcing the original nation, and then I'll pass it back to a mesh. We continue to have a significant pipeline potential debt investments. We reviewed over $7.8 billion in transactions across 368 different deals. Our active pipeline today is just shy. It's 600 million representing about 25 different transactions.
Slide nine.
Just briefly on sourcing and origination and then I'll pass it back to mesh we continue to have a significant pipeline of potential debt investments.
We've reviewed over $7 8 billion.
Transactions across 368 different deals are active pipeline today is just shy of $600 million, representing about 25 different transactions.
Speaker 8: With that, I'll pass it back to Mesh to talk more specifics about the current activity within Portfolio.
With that I'll pass it back to mesh to talk more specifics about.
The current activity within the portfolio.
Sure.
Thank you Scott.
Speaker 4: So yeah, we definitely feel very good about the opportunity set in front of us. But moving to slide 10, a little bit more about our portfolio. This slide applies to shows that risk diversification that is embedded within our existing portfolio companies.
But yes, we definitely feel very good about the opportunity set in front of us, but moving to slide 10.
A little bit more about our portfolio. This slide tries to show that risk diversification that is embedded within our existing portfolio companies.
Speaker 5: The bar chart on the left shows the number of states that each of our portfolio companies operates in. So for the cannabis industry, this is important since each state has its own sort of regulations and has its own unique competitive dynamics.
Chart on the left shows the number of stages that each of our portfolio companies operate in so for the kind of industry. This is important since each state has its own set of regulations and has its own unique competitive dynamics.
Speaker 6: Each company does diversify when it's operating across multiple states. And at an overall portfolio level, we are even more diversified with portfolio companies operating across various state jurisdictions. The pie chart on company strategy in the middle shows
Each company has diversified.
When it's operating across multiple states and.
And at an overall portfolio level, even more diversified.
Portfolio companies operating across.
Various state jurisdictions, the Pie chart on company strategy.
In the mirror and shows.
Speaker 5: Like we have a heavy mix of companies across those that have brands as their primary focus versus those that are focused on setting up business infrastructure across multiple states as their primary strategy.
We have a healthy mix of companies across those that have brands as their primary focus.
Those that are focused on setting the business infrastructure across multiple states as they as their primary strategy.
Speaker 5: At the same time, if you see the pie chart on the right, we like the fact that most of our portfolio companies do have a vertically integrated operation structure. That somewhat protects them from any supply chain issues if they.
At the same time, you can see the Pie chart on the right. We like the fact that most of our portfolio companies do have a vertically integrated operation structure.
Somewhat protects them from any supply chain issues. If they are in their state. So we feel good overall about the diversification.
Speaker 9: So we feel good overall about the diversification embedded within our portfolio.
Within our portfolio.
Speaker 5: Then it just light 11, it shows, it's not trying to afford a portfolio as a June 30.
Turning to slide 11 it shows.
Four of our portfolio as of June utility companies, A&D, our shine and farmer, Mccann, which where the investments we made last summer company.
Speaker 5: Companies A and B are Shine and Pharmacan, which were the investments we made last summer.
Speaker 6: Company C shows cure leaves 8% secured bonds due to 2026.
Company C shows clear leaves, 8% secured bonds. Due 2026. This investment was made a significant discount to its par value.
Speaker 6: This investment was made as significant as count to its far value.
Speaker 5: Our bottom three investments have a floating rate loan structure and so with prime currently at 8.5% these investments offer pretty attractive.
Currently investments have a floating rate loan structure and so it's prime currently at eight 5%. These investments offer a pretty attractive return company D is one of our large positions in <unk> first lien term loan.
Speaker 5: return company D is one of our large positions in Toronto's porcelain term loan.
Speaker 6: My transaction that was done in fourth quarter of last year, company EAR presents, Maddegmaeg, which was investment done earlier this year. And in the second quarter, we made an investment in Greenfield Brands Inc. Shown as company F. We talked about this investment briefly in our last earnings call. The company's brand Geter is one of the most recognized cannabis brands, especially in the pre-doll category. And it's experiencing strong growth across all its markets.
Actually that was done in the fourth quarter of last year.
Any ear, President Mary Meg, which wasn't investment done earlier this year and in the second quarter, we made an investment in Greenfield brands, Inc.
As shown on this company as we talked about this investment deeply in our last earnings call. The company has been Jeter is one of the most recognized cannabis brands.
Especially in the peak oil category and is experiencing strong growth across all its markets. So overall, if you look at the top of the page.
Speaker 5: So overall, if we look at the top of the page, we have about 58 million invested with an average yield, the weighted average used to maturity of a lower 18.
Have about $58 million invested with an average yield.
The weighted average years to maturity.
A little over 18%.
Speaker 5: And a few additional points that we'd like to highlight about this portfolio that an investor may want to consider when comparing Silver spike investment core to other listed BDCs out there.
And a few additional points that we'd like to highlight about this portfolio.
And is that sort of may want to consider when comparing silver spike investment car to other listed Bdcs out there.
Speaker 4: First, all of our positions are fosling bones or fosling looms or secure bones, as you can see on this.
All of our positions our first lien bonds are first lien loans were secured bonds as you can see on this page.
Speaker 5: Second, none of our looms or bonds are in non-acole status.
None of our loans or bonds are in non accrual status.
Speaker 5: Third, 86% of our portfolio is in floating rate, floating rate down.
Third 86% of our portfolio is in floating rate floating rate loans.
Speaker 4: And lastly, our goal portfolio yield of over 18% compares fairly to the broader lipstick BDC universe and therefore.
And lastly, our gross portfolio yield of over 18% compares favorably to the broader listed BDC universe.
And their portfolios. So we believe our portfolio is attractive.
Speaker 5: So we believe our portfolio is attractive and we also strongly believe that our portfolio companies are very well positioned in the industry for the longer term. And we remain extremely busy working on a number of very interesting opportunities our pipeline remains robust and we hope to have more updates as we continue to deploy our capital and build our portfolio.
<unk>.
We also strongly believe that our portfolio companies are very well positioned in the industry for the longer term and we remain extremely busy working on a number of very interesting opportunities our pipeline remains robust.
And do you hope to have more updates.
We continue to deploy our capital.
Our portfolio.
Speaker 4: Moving to slide 12, again, on the dividend announcement, a little bit more, our board has approved a cast of 60% of 23% of regular quarterly dividend and a specialty dividend of 40% per share.
Moving to slide 12, again on the dividend announcement, a little bit more our board has approved.
A cash dividend of 63.
<unk> of our regular quarterly dividend and a special dividend of <unk> 40 per share.
Speaker 6: I show on the table for the regular dividend as well as the special dividend. The record date is September 15 and the payment date is September 25.
As shown in the table.
The regular dividend as well as the special dividend record date is September 15, and the payment date is September 25.
Speaker 4: Further, we also expect that the board will approve another similar size roughly, especially dividend, to be paid during the last quarter of this.
Further we also expect that the board will approve another similar size roughly a special dividend to be paid during the last quarter of this year.
Speaker 4: With that, I'll pass it back to the operator, Kevin.
With that I'll pass.
Back to the operator Catherine.
Speaker 2: Thank you. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster.
Thank you as a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again please.
Please standby, while we compile the Q&A roster.
One moment.
Speaker 2: Our first question comes from Michael LaVairey from Piper Sandler. Your line is open. Thank you.
Our first question comes from Michael Lavere from Piper Sandler Your line is open.
Thank you good morning.
Good morning, Michael how are you.
Speaker 10: Yeah, just was wondering if you could unpack your thinking on the special dividend in addition to the regular dividend and it would what drove that structure and and any of the thoughts behind that there.
Good yes.
Wondering if you could unpack your thinking on the special dividend in addition to the regular dividend.
What drove that structure.
Any of the thoughts behind that there.
Speaker 6: So as you are aware, we are a BDC and we are required to distribute over 90% of our net investment income to shareholders in the form of dividends. We started our operations middle of last year and we have been wrapping up our portfolio. And our tax year
Absolutely.
So as Youre aware the.
Our BDC and we are required to distribute.
Over 90% of our net investment income to shareholders in the form of dividends, we started our operations.
Last year.
And we have been ramping up our portfolio and our tax year ends in March of <unk>.
Speaker 11: ends in March of every year. So all the income that the net investment income that we have earned through March is something is an amount that we have to take into account for making distributions this year.
Every year. So all the income that the lender investment income that we have on through March.
If something is an amount that we have to take into account for making distributions. This year.
Speaker 5: So effectively, a specialist dividend that we have announced, that the board has announced here today, is for a catch up in some form for the dividends that we should have based on the net investment come that was on.
So effectively especially the dividend that we have announced that the board has announced here today is.
As for.
A catch up in some form for the dividends that we should abate based upon the net investment income that was armed.
Speaker 6: until the March quarter end.
Until March.
Quarter end and the regular dividend is effectively.
Speaker 11: And the regular dividend is effectively the dividend that we expect to pay on a regular basis based on a net investment income trend that we see go.
Dividend that we expect to pay on a regular basis based on.
A.
Net investment income trends that we see going forward.
Okay. That's helpful.
Speaker 12: Okay, that's helpful. And so to clarify, there are again, on there are two special different things that before see we split them into two.
And so to clarify there are again there are two special dividends that before see the split them into two.
Speaker 6: So that we can finalize the exact levels of special dividends that we need to pay our base on the tax calculations. And so the first special dividend is $0.40, the second one will be somewhat similar, but the number is not finalized yet and approved yet. But that will be paid later in the year before the calendar year.
Just so that we can finalize the exact.
Levels of <unk>.
The special dividend that we need to pay out based on the tax calculations.
And so.
The first special dividend as 40, the second one will be somewhat similar but the number is not finalized yet and approved yet.
That will be paid later end of the year before they kind of do you get to one.
Speaker 13: Okay, great. And just as a look ahead, can you give us a sense of what other investments might be in the pipeline and how to expect some, how much visibility you have on some timing or what might be necessary.
Okay great.
<unk>.
As I look ahead can you give a sense of.
What other investments might be on the pipeline.
So to expect some how much visibility you have on timing or what might be next.
Speaker 4: Yes. So I think our pipeline is really robust and we do have a good, extremely busy looking at a number of opportunities. As you can appreciate, there's a lot going on in this industry across multiple states and we have been very deliberate and focused and disciplined on going through each one of the opportunities very carefully and doing a deep dive. And you
Yes, so I think our pipeline is really really robust and we do have good extremely busy looking at a number of opportunities. As you can appreciate there is theres a lot going on in this industry across multiple states and.
We have been very deliberate and focused and disciplined on <unk>.
Going through each one of the opportunities.
Very carefully and doing a deep dive and.
Speaker 5: I would not say that we have deliberately slowed down our deployment, but a natural corollary of having to do a much deeper dive and deeper analysis and diligence on each of these offers.
I would not say that we have deliberately slowed down our deployment, but.
Natural corollary of having to do a much deeper dive and deeper analysis and diligence on each of these opportunities.
Speaker 6: has led to a slightly different pace of deployment than what was expected earlier.
Has bought into.
<unk> has led to a slightly different pace of deployment, Denmark was expected earlier, but I would say that in terms of what we see in our pipeline is a very healthy mix of.
Speaker 5: But I would say that in terms of what we see in our pipeline is a very healthy mix of
Speaker 9: really well performing companies that are looking to raise capital Opportunistically to expand into new states as they see the opportunity to go into new states and Potentially either through organic growth or through M&A, but also a lot of the smaller companies who have and smaller operators Who have shown that they have the ability to be resilient?
The really well performing companies that are looking to raise capital.
All participants lead to expand into new states as they see the opportunity to.
Go into new States and.
And potentially either through organic growth or through M&A, but also a lot of the smaller companies, who will have and smaller operators, who have shown that they have the ability to be resilient.
Speaker 6: There are a number of companies that have reached out to us who we do not really think are credit worthy. And...
There are a number of companies that have reached out to us.
Who we do not really think are credit worthy.
And.
It's Mike.
Speaker 4: But we are very happy with the pipeline that we see right now. Scott, do you have...
But we are very happy with the pipeline that we see right now Scott do you have anything else to add.
Speaker 14: Yeah, no, I was just bad to that. Michael, that, and you know, I've said this before in previous calls.
Yes, no I would just add to that Michael that and I've said this before in previous calls.
I think the same is true today that.
Speaker 8: true today that, you know, I think it behooves us to be
I think it behooves us to be.
Speaker 8: extremely selective and patient and disciplined in terms of our deployment here.
Extremely selective and patient and disciplined in terms of our deployment here.
Speaker 8: And, you know, as you mentioned, I think the market continues to come our way, you know, in terms of pricing and structuring terms.
And as.
As <unk> alluded to I think the market continues to come our way.
In terms of pricing.
In structure and terms.
Speaker 8: And we're in a position, fortunately, where we can really sort of pick and choose among the best and the most compelling opportunities in the space. So we like to say that we have a patient, expensive urgency to deploy the capital. I think as you can see in the presentation, and as we mentioned, the pipeline does remain robust. It's really on us, and we're just...
And.
We're in a position Fortunately, where we can really sort of pick and choose among.
The best and the most compelling opportunities in the space. So.
We like to say that where we have a patient sense of urgency.
To deploy the capital I think as you can see in the presentation.
And as you suggested.
The pipeline does remain robust.
Really on us and we're just being.
Speaker 7: very, very careful in what has been extremely challenging and market operating environment per our borrowers.
Very very careful in what has been extremely challenging and market operating environment for our borrowers.
Speaker 8: to make sure that we're positioning ourselves carefully in the opportunities that really sort of rise to the top. So we feel good about it. We think the flip side of the industry kind of challenges are really sort of our opportunity. So we feel very good in terms of where we're positioned and having dried powders of deploy.
To make sure that we're positioning ourselves carefully.
And.
And the opportunity is that really sort of rise to the top.
So we feel good about it.
No.
The flip side of the industry kind of challenges are really sort of our opportunity. So we feel very good in terms of where we're positioned and having dry powder to deploy.
Okay, great. Thanks, so much.
Youre welcome.
Yes.
Speaker 2: Thank you and I'm showing no further questions. I'd like to turn the call back to management for any closer in remarks.
Thank you and I'm showing no further questions I would like to turn the call back to management for any closing remarks.
Speaker 11: Well, thank you, guys. Thank you, everyone, for taking the time to join us on this call this morning. We look forward to updating you further on our next call in the meantime. If you have any questions on our earnings or on our dividends, please don't untest day to reach out our investor relations team.
Okay, well. Thank you Catherine Thank you everyone for taking the time to join US on this call. This morning, we look forward to.
Dating you further on our next call in the meantime, if you have any questions on our earnings are on our dividends. Please do not hesitate to reach out our investor relations team. Thank you so much for joining today.
Speaker 2: This concludes today's conference call. Thank you for participating. You may now disconnect.
This concludes today's conference call. Thank you for participating you may now disconnect.
Okay.
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