Q4 2023 Silver Spike Investment Corp Earnings Call
Good day, and thank you for standing by welcome to the silver Spike in last phone call at fiscal year end 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 suppressed.
Jas Mahajan: One on one on your telephone you will then have an automated message advising Johan does raise to withdraw your question. Please press star. One again, please be advised that today's conference is being recorded I would now like turn the conference over to your fast Speaker today, you must Mahajan. Please go ahead Sir.
Must Mahajan: Thank you thank you Sharon.
Nitesh Mahajan: Good morning. This is a nice margin chief financial officer of Citrus like investment Corp. With me here today is our Gordon CEO of Citrus like investment Corp.
Gordon: Welcome to silver spikes earnings conference call and live webcast for the fiscal year end 2023. So that's why its financial results for the fiscal year ended December 31, 2023 were released yesterday.
Gordon: Can be accessed from our website at S. S. ICD dot silver Spike cap Dot com a replay of this call will also be available on our website later.
Gordon: 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.
Gordon: There are important factors that could cause actual results to differ materially from those expressed or implied by these forward looking statements.
And Greg you to refer to our most recent SEC filings for information on some of these risk factors like assumes no.
Gordon: No obligation or responsibility to update any forward looking statements. Please note that the information reported on this call speaks only as of today March 28, 2024, therefore, you're advised that time sensitive information may no longer be accurate at the time of any replay or transcript reading.
None: But that said good morning, again, and thank you all for joining today.
None: Released our earnings yesterday, and there's a management presentation deck attached to the 8-K that was filed yesterday evening.
None: Those who have joined US on this earnings call that cash it also should see a link to the slides.
None: The slides by numbers for for your reference as we walk through those pages.
None: And I'll cover the presentation slides to start and then turn it over to Scott Gordon for his thoughts into March.
None: Turning to page three of our presentation financial highlights for the quarter ended.
None: At December 31, 2023.
None: The very first column shows the results for the quarter.
None: Gross investment income of <unk> 6 million compared to $2 9 million in the previous quarter.
Scott Gordon: Expenses of approximately 1.2 million.
Scott Gordon: Excluding expenses related to the loan portfolio acquisition.
Scott Gordon: Transaction that we have previously announced but not as but it has not closed yet.
Scott Gordon: Scott will discuss the transaction in more detail later in this presentation.
Scott Gordon: We then have the loan portfolio acquisition expenses of <unk> seven.
Scott Gordon: $7 million essentially legal expenses for the transaction and guard.
Scott Gordon: So far we.
Scott Gordon: Net investment income of one 7 million for the quarter.
Scott Gordon: Again this net investment income would have been higher if we exclude the impact of the loan portfolio acquisition expenses.
Net investment income per share of 28 this quarter.
Scott Gordon: Net assets of $85 6 million at the end of the period down slightly from last quarter due to the payment of dividend.
Scott Gordon: And our net asset value per share.
Scott Gordon: At December 31st is 13.77.
Scott Gordon:
Scott Gordon: There were there were no new investments this quarter will discuss our origination efforts and our portfolio in more detail in subsequent slides.
Scott Gordon: Also our board declared a regular quarterly dividend of 25 cents per share this dividend will be payable on March 28 today.
Scott Gordon: To shareholders on record as.
Scott Gordon: As of March 20th.
Scott Gordon: On page.
Scott Gordon: Four we show the financial highlights for the full year 2023. Please note that this was the first full year of operations for US the comparison for the previous year is for nine months far from April 122.
Scott Gordon: Till December 31 22.
Scott Gordon: So far this fiscal year ended 2023, the first column.
Scott Gordon: Gross investment income of $11 9 million.
Scott Gordon: Total expenses of.
Scott Gordon: $5 3 million, which includes the point 7 million expenses related to the loan portfolio acquisition.
Scott Gordon: Net investment income of $6 6 million again. This net investment income would have been higher if we exclude the impact of the loan portfolio acquisition expenses.
Scott Gordon: Net investment income per share of $1 <unk> seven cents.
Scott Gordon:
Scott Gordon: And we have paid a tour dividend of $1.33 during the year ended 2023.
None: Will not be covering the next few slides in the in the slide deck and detail as.
None: Most of the investors are already familiar with our story.
None: But turning to page 10.
None: I'd like to talk a little bit about the about the origination on the deal pipeline our deal pipeline remains very strong.
None: In general the last quarter of 23, it was a slow period for loan transactions in the cannabis sector as a whole large extent there was an expectation.
Among the cannabis operators that some progress on the rescheduling of cannabis is imminent.
None: And that these borrowers should wage.
None: At this point many of those potential borrowers that figure it maybe best to not necessarily wait for an update on the rescheduling front.
None: And have begun to reengage with lenders like us. So we expect activity to pick up in the discussions have already picked up and we have an active pipeline of over $420 million.
None: We have used a slow period in the industry productively by working on the loan portfolio acquisition transaction.
None: So turning to page.
None: 12.
None: We show our portfolio summary, as of December 31.
None: Companies, a and B are trying and farm Mccann the trade investments, we made last year in the summer companies see as Cura leave 8% secured bonds that we had purchased at a significant discount to the par value.
None: Last year.
None: <unk> D is one of our large positions in where I know, it's a first lien term loan transaction done in the last quarter of last year.
None: And company EDA prisons Dream theater brands our gear.
None: One of our portfolio companies magnet.
None: We paid the loan along with a <unk> and premium.
None: In in the quarter ending December 31, 23. So overall, if you look at the top of the page our total investment value is a little over $54 million.
None: Average yield to maturity across the unknowns is 18%.
None: And a few additional points that you'd like to highlight about this portfolio.
None: And remind the investors.
None: To consider when they compare FSIC with other listed Bdcs first all of our positions. Our first lien bonds are first lien loans are secured bonds.
None: None of our loans or bonds are in nonaccrual status status.
None: Third all of.
None: So actually or 90% of our portfolio is in floating rate notes.
None: And our gross portfolio yield of 18% compares quite favorably to the broader listed BDC universe and.
None: And we believe each of these portfolio companies.
None: Is extremely well positioned in the industry for the longer term.
None: With that let me pass it onto Scott for his remarks.
Scott Gordon: Thank you much.
Scott Gordon: Good morning, everybody just wanted to take a few moments to discuss the proposed loan portfolio acquisition.
Scott Gordon: FSIC announced on February 20th.
Scott Gordon: This year that had entered into a definitive agreement to purchase from Chicago Atlantic loan portfolio.
Scott Gordon: Portfolio loans in exchange for newly issued shares of Fsic's common stock.
Scott Gordon: This acquisition is expected to provide various benefits to FSIC and its stockholders, including increased scale and liquidity enhance portfolio diversification improved access to debt and equity capital markets and accretion to net investment income.
Scott Gordon: Pro forma information following the closing of the loan portfolio acquisition based on FSIC data as of December 31, 2023, and the cap loan portfolio data as of January 21.
Scott Gordon: January one 2024.
Scott Gordon: Is the following pro forma net assets of approximately $213 million, including approximately $187 million of portfolio investments across 27 portfolio companies.
Scott Gordon: <unk> $25 million of cash.
Scott Gordon: Approximately 19, 1% pro forma combined gross weighted yield to maturity of the loan portfolio.
Scott Gordon: S. S. Ice's President officers will continue to be part of the FSIC management team. Following the loan portfolio acquisition and anticipate closing is mid 2024 subject to satisfaction of customary closing conditions.
Scott Gordon: In February we also announced that our board of directors unanimously approved an expansion of our investment strategy.
Permit investments in companies outside of the cannabis and health and wellness sectors that otherwise meet our investment criteria.
Scott Gordon: The investment strategy change is expected to become effective on or about April 20.
Scott Gordon: This year.
Scott Gordon: With that I'll pass it back to mesh.
Mesh: Thank you Scott.
Mesh: That's all we actually had.
Mesh: In our prepared remarks.
None: Ready for Q&A.
None: Thank you to ask a question press star one on one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one on one again, please standby, while we compile the Q&A will stall.
Thank you we will now go to our first question.
None: One moment please.
None: Your first question comes from Michael Lavery from Piper Sandler. Please go ahead.
None: Okay.
Michael Lavery: Good morning, Thank you.
Michael Lavery: Good morning, Michael.
Michael Lavery: Some of your key.
Michael Lavery: Comments in the release about some improving market conditions and at least from certain states could you give a little bit more.
Michael Lavery: On what Youre seeing and how that looks.
Michael Lavery: Okay.
Michael Lavery: Let me start and then I'll pass it on to Scott, Yes, definitely I think the.
Scott Gordon: We can talk about the stats, but overall, if we step back and look at the market.
Scott Gordon: As a whole.
Scott Gordon: Yes.
Scott Gordon: The first thing that we observed here is that.
Scott Gordon: The.
Scott Gordon: The industry is poised for growth.
Scott Gordon: Where all the inflation concerns are abating.
Scott Gordon: <unk> seems to be a resilient consumer is feeling good the sentiment is improving and the demand for cannabis as a product continues to remain strong. So that's the backdrop.
Scott Gordon: And if you look at the development.
Scott Gordon: Of various trades, we have seen a lot of improvement or are positive developments across multiple states we saw.
Scott Gordon: Several states laws.
Scott Gordon: Launched their recreational use this year.
Some of the states were a little disappointing in terms of the way the market has grown compared to expectations.
Scott Gordon: But many other states have done fabulously, Missouri is a great example, that it has really exceeded expectations in every way.
Scott Gordon: You have seen.
Scott Gordon: A lot of movement in terms of.
Scott Gordon: Updates and expected.
Scott Gordon:
Scott Gordon: Adult use legislation getting past, we're very excited about Pennsylvania, Ohio about something that we are hopefully waiting to hear on Florida today.
Scott Gordon: So there are a lot of these developments across the various states if.
Scott Gordon: If you'd look at the key markets of California, and Michigan prices have stabilized.
Scott Gordon: Yes, there is a lot of change happening within the California retail market, but again these are slow, but improving trends in those markets and there are new states that are coming up and so overall when we look at the landscape.
Scott Gordon: The operators, who have successfully executed the strategy.
Scott Gordon:
Scott Gordon: Half are definitely feeling better.
Scott Gordon: And are re engaging with us on all of that growth plans and we are here to support them.
Scott Gordon: All of their.
Scott Gordon: <unk> plans and the capital needs.
None: Okay. That's great. Thanks, so much.
None: Thank you.
None: Thank you.
None: We will now go to the next question.
None: One moment please.
None: And your next question comes from the line of William Carter from Stifel. Please go ahead.
William Carter: Hey, Thanks, Good morning, I wanted to ask about this transaction I mean do you see any material risk to this not closing not getting approval potentially even taking longer than expected and in that case I mean, what options would you consider because I think with your acquisition announcement I think you suggested the current scale is not.
William Carter: Tenable, so just kind of understand the plan B. If there is one no matter how low probability there is.
William Carter: Sure.
None: I'll start with that and then pass it over to mesh thanks Andrew.
None: The.
None: So the transaction is obviously subject to SEC review.
None:
None: We'll be filing in 2014.
None: Shortly.
None: For the SEC to review and upon upon covering all aspects of the transaction.
None: Obviously, our pope and expectation.
None: Is that we we passed the review process with the SEC.
None: Unclear.
None: How long.
None: That will be we've estimated and stated that we're anticipating to close the transaction sometime this summer.
None: In terms of a plan b.
None: Obviously, we acknowledged that.
None: A BDC of our size is sub optimal.
None: But our hope and expectation Andrew is that.
None: This transaction is sound.
None: It makes a lot of sense for our shareholders.
None: And.
None: We'll be able to pass through the SEC review process.
None: So I think premature at this point for us to.
None: Charlie talked about a plan b our focus is on plan for the moment.
None: Thanks, I'll pass it on.
Thank you.
None: There are currently no further questions I will hand, the call back to you.
None: Thank you Sharon Thank you everyone for joining.
None: If you have any questions. Please reach out to us or our Investor Relations Department, we'd be happy to answer your questions. Thank you again for joining the policy rate. Thank you.
None: Thank you. This concludes today's conference call. Thank you for participating you may now disconnect.
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