Q1 2024 Great Elm Capital Corp Earnings Call

Good afternoon, ladies and gentlemen, and welcome to the Great Elm Capital Corp, first quarter 2020 to 24, sorry financial results Conference call.

Operator: Good afternoon, ladies and gentlemen, and welcome to the Great Elm Cptl Corp first quarter 2022-24 financial results conference call. At this time, all lines are in listen-only mode.

Operator: At this time all lines are in listen only mode.

Operator: Following the presentation, we will conduct a question and answer session. If at any time during this call, you require immediate assistance, please press star zero for the operator. This call is being recorded on Thursday, May 2nd, 2021. I would now like to turn the conference over to Garrett Edson, a representative of the company. Please go ahead.

Operator: Following the presentation, we will conduct a question and answer session.

Garrett Edson: If at any time during this call you require immediate assistance.

Operator: Please press star zero for the operator.

Garrett Edson: This call is being recorded on Thursday may 2nd of 2024.

Operator: I would now like to turn the conference over to Garrett Edson representative of the company. Please go ahead.

Garrett Edson: Good morning. Thank you everyone for joining us for Great Elm Capital Corp, first quarter 2020 or earnings conference call.

Garrett Edson: Good morning, and thank you everyone for joining us for Great Elm Capital Corp's first quarter 2024 earnings conference call. If you would 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 the slide presentation posted on our website accompanying today's call. The slide presentation can be found on our website under financial information and quarterly results.

Garrett Edson: We added to our distribution list you can email investor relations at Great <unk> Dot Com, where you can sign up for alerts directly on our website www dot great Elm C C dot com.

Garrett Edson: 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 the SEC filings I would 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 sellers with patient offers.

Garrett Edson: On our website, you can also find our earnings release and SEC filings. I would 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 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 that differ materially from these statements. Great Elm Capital Corps does not undertake to update its forward-looking statements unless required by law.

Garrett Edson: Our securities based.

Garrett Edson: This conference call includes forward looking statements. 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 does not undertake to update its forward looking statements unless required by law.

Garrett Edson: Copies of the SEC filings. Please visit greet them capital Corp's, let's say financial information SEC filings or visit the Sec's website.

Garrett Edson: To obtain copies of SEC filings, please visit Great Elm Capital Corp's website for 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, 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 CEO Matt Kaplan. Thanks, Garrett.

Garrett Edson: The call. This morning, Matt Chaplin, Great Elm capital Corp's, Chief Executive Officer will be joined by Chief Financial Officer, Karen Davis, Chief compliance officer at climate, and Mike <unk> President of Great Elm specialty buying it now.

Garrett Edson: I'll now turn the call over to G. E C. C C E O Matt Kaplan.

Matt Kaplan: Good morning, and thank you all for joining us today. We had a solid start to 2024, making further significant strides in our growth strategy, as reflected in the strategic initiatives we have undertaken at the beginning of the year, increasing our asset base by over 20%, as well as expanding our reach into structured products. In February, we raised $24 million of equity at net asset value from a special purpose vehicle supported by a $6 million investment by Great Elm Group.

Matt Kaplan: Thanks, Gary Good morning, and thank you all for joining us today.

Matt Kaplan: We had a solid start to 2020 for making further significant strides in our strategy as reflected in the strategic initiatives. We have undertaken in the beginning of the year, increasing our asset base by over 20% as well as expanding our reach into structured products.

Matt Kaplan: In February we raised $24 million of equity at net asset value from a special purpose vehicle supported by a $6 million investment by Great Elm Creek.

Matt Kaplan: This capital raise not only strengthened our financial position but also provided a template for future capital raises and investment opportunities. The successful completion of this non-dilutive equity race is a testament to our portfolio repositioning efforts over the past two years, further empowering us to grow Great Elm while enabling us to execute on our robust investment pipeline at greater scale. Subsequent to quarter end, we also successfully completed an underwritten public offering of $34.5 million of eight and a half percent notes due in June 2029.

Matt Kaplan: This capital raise not only strengthened our financial position, but also provided a template for future capital raises and investment opportunities.

Matt Kaplan: The successful completion of this non dilutive equity raise is a testament to our portfolio repositioning efforts over the past two years further empowering us to grow great elm, while enabling us to execute on our robust investment pipeline at greater scale.

Matt Kaplan: Subsequent to quarter end, we also successfully completed an underwritten public offering of $34 $5 million of eight <unk> percent notes due in June 2020 that.

Matt Kaplan: We were pleased to issue these notes at a more than 50 basis point spread to treasury improvement as compared to the August 2023 note-off. We believe this financing rate improvement was driven by our strong earnings, fresh equity capital, and the Egan Jones rating upgrade to triple B flat from triple B minus since our August offering. Our timing was also prudent in hindsight, with the five-year treasury increasing over 30 basis points in the week after the offering on higher for longer interest rate expectations, which we believe will benefit our business.

Matt Kaplan: We were pleased to issued these notes at a more than 50 basis point spread to treasury improvement as compared to the August 2023 note offering. We believe this financing rate improvement was driven by our strong earnings fresh equity capital empty Egan Jones rating upgrade to Triple B flat from Triple B minus since our August.

Matt Kaplan: Offering.

Matt Kaplan: Our timing was also prudent in hindsight with the five year treasury, increasing over 30 basis points and the week after all the offering on higher for longer interest rate expectations, which we believe will benefit our business.

Matt Kaplan: The notes provide us with additional capital to deploy into compelling investments that offer attractive risk-adjusted returns for our shareholders. In aggregate, these efforts have resulted in us raising nearly $60 million of fresh capital in the past few months.

Matt Kaplan: <unk> provide us with additional capital to deploy into compelling investments that offer attractive risk adjusted returns for our shareholders.

Matt Kaplan: In aggregate. These efforts have resulted in us raising nearly $60 million of fresh capital in the past few months.

Matt Kaplan: In addition to our successful capital raising efforts, last week, we formed a new joint venture focused on investing in CLO entities and related warehouse facilities. Given the structure of these investments, we expect to receive sizable distributions from the JV beginning in the second half of the year and continuing into 2025 and beyond. Over time, we expect to generate mid-teens to low 20% returns from our investments in CLO structures. We are excited about this new joint venture as it further diversifies Great Elm through exposure to structured vehicles that have historically generated strong returns throughout economic cycles.

Matt Kaplan: In addition to our successful capital raising efforts last week, we formed a new joint venture focused on investing in CLO entities and related warehouse facilities.

Matt Kaplan: Given the structure of these investments we expect to receive sizeable distributions from the JV beginning in the second half of the year and continuing into 2025 and beyond.

Matt Kaplan: Overtime, we expect to generate mid teens to low 20% returns from our investments in CLO structures. We are excited for this new joint venture as it further diversifies <unk> through exposure structured vehicles that have historically generated strong returns throughout economic cycles.

Matt Kaplan: Shifting back to our first quarter performance and <unk> <unk> per share declined in the quarter ending at $12 57 per share on March 31 down from $12.99 as of year end 2023.

Matt Kaplan: Diving back to our first quarter performance, MAV per share declined in the quarter, ending at $12.57 per share on March 31st, down from $12.99 as of the year in 2023. This decline is concentrated in illiquid Level 3 investments originated by prior management in two portfolio companies, ResearchNow and PFS Holden.

Matt Kaplan: Decline is concentrated in illiquid level three investments originated by prior management in two portfolio companies.

Matt Kaplan: Research now and PFS holdings.

Matt Kaplan: As shown on the NAV walk on slide 9, the impact of these inherited positions adversely affected NAV by approximately $0.55 per share in the quarter. We continue to actively monitor these investments as well as one other position we placed on non-accrual in the quarter, total non-accruals as a quarter, and total $4.7 million of portfolio fair value, or less than 2% of the portfolio. Away from these investments, our portfolio is otherwise performing well overall.

Matt Kaplan: As shown on the walk on slide nine the impacts from these inherited positions adversely affected by approximately 55 per share in the quarter.

Matt Kaplan: We continue to actively monitor these investments as well as one other position we placed on non accrual in the quarter totaled.

Matt Kaplan: Total non accruals as of quarter end totaled $4 7 million, a portfolio fair value or less than 2% of the portfolio.

Matt Kaplan: Away from these investments our portfolio is otherwise performing well overall.

Matt Kaplan: In fact, holding the marks from these inherited investments constant from the prior quarter, NAV otherwise would have increased sequentially to $13.07 per share. In the first quarter, we generated $0.37 per share of NII, exceeding the base dividend of $0.35 per share. sequentially, our NII per share declines due to cash drag related to the additional share issuance from our equity offering in February, as well as from the timing of cash flows from certain newly made investments and the impact of the previously discussed inherited investments.

Matt Kaplan: Fact, holding the marks from these inherited investments called some from the prior quarter.

Matt Kaplan: Otherwise would've increased sequentially to $13 seven per share.

Matt Kaplan: In the first quarter, we generated 37 per share of NII exceeding the base dividend of 35 per share.

Matt Kaplan: Sequentially, our NII per share declines due to cash drag related to the additional share issuance from our equity offering in February.

Matt Kaplan: As well as from the timing of cash flows from certain newly made investments and the impact from the previously discussed inherited investments.

Matt Kaplan: With the successful notes offering last month and the expected additional cash drag from that issue as we seek to deploy capital, we expect our NII in dollar terms in the second quarter to be relatively consistent with our first quarter performance. Overall, we put up a solid quarter of results in addition to executing on our strategic initiative, enhancing both our capital structure and overall operations while positioning us for sustainable long-term growth.

Matt Kaplan: With the successful notes offering last month and expected additional cash drag from that issue as we seek to deploy capital we expect our NII in dollar terms in the second quarter to be relatively consistent with our first quarter performance.

Matt Kaplan: Overall, we put up a solid quarter of results. In addition to executing on our strategic initiatives.

Matt Kaplan: Hansen, both our capital structure and overall operations, while positioning us for sustainable long term growth.

Matt Kaplan: With the expected ramp-up of distributions from our JV in the back half of the year, coupled with income from the prudent deployments from the capital raises in 1Q and 2Q, we expect NII in the second half of the year to meaningfully outpace the first half. As a result, we believe we remain well positioned to continue covering our dividend and expect our board will be in a position to evaluate a special distribution again around year end. With that, I'd like to hand the call over to Keri Davis to discuss our first quarter 2024 performance.

Matt Kaplan: With the expected ramp up of distributions from our JV in the back half of the year, coupled with income from the prudent deployments from the capital raises and <unk>.

Keri A. Davis: We expect NII in the second half of the year to meaningfully outpace the first half.

Keri A. Davis: As a result, we believe we remain well positioned to continue covering our dividend and expect our board will be in a position to evaluate a special distribution again around year end.

Keri A. Davis: With that I'd like to hand, the call over to Karen Davis to discuss our first quarter 2024 points.

Keri A. Davis: Thanks, Matt I'll go over our financial highlights now, but we invite all of you to review our press release accompanying presentation, and our SEC filings for greater detail.

Keri A. Davis: Thanks, Matt. I'll go over our financial highlights now, but we invite all of you to review our press release, accompanying presentation, and SEC filings for greater detail. During the first quarter, GECC generated NII of $3.2 million or $0.37 per share as compared to $3.3 million or $0.43 per share in the fourth quarter of 2023. The sequential decline is largely attributed to cash drag and the increased share count from our February equity issuance at NAAF. Despite this, we exceeded our quarterly base dividend for the fifth consecutive quarter.

Keri A. Davis: During the first quarter GEC generated NII of $3 2 million or <unk> 37 cents per share as compared to $3 3 million or <unk> 43 cents per share in the fourth quarter of 2023.

Keri A. Davis: The sequential decline is largely attributed to cash drag and increased share count from our February equity issuance at Nab. Despite this we exceeded our quarterly based dividend for the fifth consecutive quarter.

Keri A. Davis: Our net assets as of March 31st, 2024, rose to $119 million compared to $99 million at December 31st, 2023. Our NAV per share was $12.57 as of March 31st versus $12.99 as of December 31st, with the decline attributable to the write-down of certain inherited investments, which impacted NAV by approximately $0.55 per share in the quarter. Details of the quarter-over-quarter change in NAV can be found on slide 9 of the investor presentation.

Keri A. Davis: Our net assets as of March 31, 2024 rose to $119 million compared to $99 million at December 31, 2023, our NAV per share was 12 57 as of March 31 versus 12 99 as of December 31st with the decline attributable to the write down of certain inherited investments, which impacted NAV by approximately.

Keri A. Davis: <unk> 55 per share in the quarter.

Keri A. Davis: For the quarter over quarter change in NAV can be found on slide nine of the investor presentation.

Keri A. Davis: As of March 31st Gec's asset coverage ratio improved to approximately 182%.

Matt Kaplan: As of March 31st, GECC's asset coverage ratio improved to approximately 180.2% as compared to 169% as of December 31st. Pro forma for the April bond issuance and pay down of the revolver, our asset coverage would be approximately 166.9%. As of March 31st, total debt outstanding was approximately $148 million, which includes $5 million outstanding on our $25 million revolver. Cash and Money Market Securities totaled approximately $9 million. Pro forma, for the April bond issuance and subsequent paydown of our outstanding revolver balance, the total debt outstanding was approximately $178 million.

Matt Kaplan: Compared to 169% as of December 31.

Matt Kaplan: Pro forma for the April bond issuance and Paydown of the revolver, our asset coverage would be approximately 166, 9%.

Matt Kaplan: As of March 31, total debt outstanding was approximately $148 million, which includes $5 million outstanding on our $25 million revolver.

Matt Kaplan: Cash and money market securities totaled approximately $9 million pro forma for the April bond issuance and subsequent pay down of our outstanding revolver balance the total debt outstanding was approximately $178 million.

Matt Kaplan: Our board of directors has authorized a 35 cents per share cash distribution for the quarter ending June 32024.

Matt Kaplan: Our Board of Directors has authorized a $0.35 per share cash distribution for the quarter ending June 30, 2024. The second quarter cash distribution will be payable on June 28, 2024 to stockholders of record as of June 14. The distribution equates to an 11% annualized dividend yield on our March 31st NAV of $12.57 per share. With that, I'll turn the call back over to Matt.

Matt Kaplan: Second quarter cash distribution will be payable on June 28, 2024 to stockholders of record as of June 14th.

Matt Kaplan: The distribution equates to an 11% annualized dividend yield on our March 31, NAV of $12 57 per share.

Matt Kaplan: With that I'll turn the call back over to Matt.

Matt Kaplan: Thanks, Keri. In the first quarter, we continued to rotate into higher-yielding investments, taking advantage of the ongoing hire-for-longer environment and deploying approximately $64 million into new investments at average yields of approximately 13%. Meanwhile, we opportunistically monetized $29 million of assets in the quarter at average yields of approximately 11%. Our rotation into more floating rate investments continued, with 69% of our debt investment portfolio at quarter end comprised of floating rate debt, compared to 67% last quarter.

Matt Kaplan: Thanks, Gary in the first quarter, we continued to rotate into higher yielding investments taking advantage of the ongoing higher for a longer environment and deploying approximately $64 million into new investments at average yields of approximately 13%.

Matt Kaplan: Meanwhile, we opportunistically monetize $29 million of assets in the quarter at average yields of approximately 11%.

Matt Kaplan: Our rotation to more floating rate investments continued with 69% of our debt investment portfolio at quarter end comprised of floating rate debt compared to 67% last quarter.

Matt Kaplan: Notably, along with our portfolio's yield profile, which stood at 13.1% at quarter end, the majority of the capital deployed in the quarter was into first lien investments, continuing to strengthen the overall credit quality of our portfolio. Despite the impact of the inherited investments, we are pleased with the composition and return profile of the portfolio and are excited to begin receiving distributions from our recent CLOJV investment starting in the third quarter. Given the ongoing volatility in the macro environment, we remain disciplined in our approach to deploying capital, directing it toward investments that are well suited to perform both in the current elevated rate environment and through economic cycles. As always, we are focused on credit quality and investments with limited risk of permanent capital loss.

Matt Kaplan: Notably along with our portfolio yield profile, which stood at 13, 1% at quarter end.

Matt Kaplan: Majority of the capital deployed in the quarter was into first lien investments continuing to strengthen the overall credit quality of our portfolio. Despite the.

Matt Kaplan: Impact of the inherited investments we are pleased with the composition and return profile of the portfolio and are excited to begin receiving distributions from our recent CLO JV investment starting in the third quarter.

Matt Kaplan: Given the ongoing volatility in the macro environment, we remain disciplined in our approach to deploying capital directing it towards investments that are well suited to perform both in the current elevated rate environment and through economic cycles.

Matt Kaplan: As always we are focused on credit quality and investments with limited risk of permanent capital loss.

Matt Kaplan: Maintaining this approach we are well positioned to further broke radome capital Corp, and deliver compelling risk adjusted returns for our shareholders.

Michael Keller: By maintaining this approach, we are well positioned to further grow Great Elm Capital Corp. and deliver compelling risk-adjusted returns for our shareholders. You remain excited about the future of GECC. And with that, I would like to turn the call over to Mike Keller to provide an update on specialty finance. Thanks, Matt.

Matt Kaplan: We remain excited about the future of GCC and with that I would like to turn the call over to Mike <unk> to provide an update on specialty finance.

Michael Keller: Thanks, Matt.

Operator: Despite a sluggish start to 2024 for new deal originations across all our specialty finance platforms, GESF began to experience a positive uptick in deal activity as the first quarter drew to a close. The pipelines will remain robust thus far in the second quarter when we are laser focused on closing deals and streamlining operations. In support of these initiatives, I'm pleased to announce Jason Schwartz, a seasoned banking executive, joined GESF in February as Chief Credit Officer, adding significant experience in underwriting, finance, and operations to our platform.

Michael Keller: Despite a sluggish start to 2024 for new deal originations across all our specialty finance platforms GE asset began to experience a positive uptick in deal activity as the first quarter drew to a close.

Operator: The pipelines remain robust thus far in the second quarter and we are laser focused on closing deals and streamlining operations.

Operator: All of these initiatives I am pleased to announce Jason Schwartz, a seasoned banking executive joined GE assets in February as Chief Credit Officer Eddie.

Operator: Any significant experience in underwriting finance and operations to our platform.

Operator: Additionally, in February, we exited our position in the Lenders Funding Revolver at Par Plus Accrued, further simplifying our specialty finance vertical, touching on our platform company. Prestige started the first quarter with lower invoice financing volumes but has seen a pickup in activity in March and April. At Sterling, groundwork laid in January paved the way to close deals in February and March, and the business has a strong foundation in place to further convert the pipeline into earning assets over the coming months.

Operator: Additionally in February we exited our position in lenders funding revolver at par plus accrued further simplifying our specialty finance vertical.

Operator: Hi, Ciena platform companies prestige started the first quarter with lower invoice financing volumes, but has seen a pickup in activity in March and April.

Operator: At Sterling groundwork laid in January paved the way to close deals in February and March and the business has a strong foundation in place to further convert the pipeline into earning assets over the coming months.

Operator: Finally at Great Elm healthcare finance, while deal volume has lagged projections management remains focused on implementing strategic refinements to further position the platform for success.

Operator: Finally, at Great Elm Healthcare Finance, while deal volume has lagged projections, management remains focused on implementing strategic refinements to further position the platform for success. In summary, while the year got off to a slow start, we are excited for the opportunities in front of us and will seek to execute on our pipeline over the coming month. Thanks, Mike. To sum it up, it was a good start to the year for GECC.

Operator: In summary, while the year got off to a slow start we are excited for the opportunities in front of us and we will seek to execute on our pipeline over the coming months.

Speaker Change: Thanks, Mike to sum it up it was a good start to the year for <unk> the.

Operator: The strategic initiatives undertaken over the past few months are evidence of our commitment to further strengthen and build our platforms and portfolio. Looking ahead, we believe we remain well positioned to continue to meet our quarterly base distribution throughout 2024. With that, I'll turn the call over to the operator for questions. Operator? Thank you.

Operator: Our strategic initiatives undertaken over the past few months are evidence of our commitment to further strengthen and build our platforms and portfolio.

Operator: Looking ahead, we believe we remain well positioned to continue to cover our quarterly base distribution throughout 2024.

Operator: With that I'll turn the call over to the operator for questions operator.

Speaker Change: Thank you.

Operator: Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star 1 on your touchtone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press start. If you're using a speakerphone, please lift the handset before pressing any key. One moment, please, for your first question. Ladies and gentlemen, as a reminder, if you have a question, please press star one. Your first question comes from Jim Fowler of Kings Moran Capital Management. Your line is already open.

Speaker Change: Ladies and gentlemen, we will now begin the question and answer session.

James J. Fowler: Should you have a question. Please press star one on your Touchtone phone.

James J. Fowler: You will hear a prompt that your hand has been raised.

Operator: Should you wish to decline from the polling process. Please press star two.

James J. Fowler: If you're using a speaker phone please lift the handset before pressing any keys.

Operator: One moment. Please for your first question.

Operator: Okay.

Operator: Ladies and gentlemen, as a reminder, if you have a question. Please press star one.

Operator: Yeah.

Operator: Your first question comes from Jim Fowler.

James J. Fowler: King's Marin capital Management your line is already open.

James J. Fowler: Thank you Hello, Matt how are you.

James J. Fowler: Thank you. Hello Matt, how are you?

James J. Fowler: Good how are you doing Jim.

Matt Kaplan: Good. How are you doing, Jim? Very well. I wanted to just a couple things that caught my eye after just a quick perusal of the deck on page 13. Could you characterize the 29 investments that were made in the quarter, the type of investments, those were, I mean, by category. I'm going by category and believe over half of them are in first lien secured debt. So that's a big chunk there.

Speaker Change: Very well thank you.

Matt Kaplan: And then about $10.8 million you'll see is into CLO subordinated notes, also colloquially known as CLO equity, which is part of our focus on jumping into that structured product arena, which we believe will pay a lot of dividends going forward for us. However, there is a timing lag in terms of cash flows. So we do expect a ramp-up of our NII kind of starting in the third quarter of the year based on. Got it. On that specifically, I wanted to ask a question. How is that initiative exactly structured, if you mind?

Matt Kaplan: Wanted to just a couple of things that caught my eye. After Roger just a quick perusal of the deck.

Speaker Change: The type of investments those work.

Matt Kaplan: Pay.

Speaker Change: Exactly structured if you Mike.

Matt Kaplan: It is a joint venture that we formed as a strategic partner. We are 75%, they are 25%, and we are looking to invest in both CLO, security, as well as warehouse facilities to start the formation called CLF Formation JV. Okay, you know, a lot of capital is now engaged in COO equity. How will Great Elm go about accessing it?

Matt Kaplan: And with a strategic partner we are 25%.

Matt Kaplan: We are 75% they are 25%.

Speaker Change: Got it okay.

Matt Kaplan: You know, attractive investment opportunities given, you know, the significant amount of capital that's been targeting that asset class for some time. So this initial investment, as I said, was about $10.8 million, which is, you know, pro forma for our asset mix. I think we will have about 300 million after the round numbers after the bond deal done in April.

Matt Kaplan: So that's, you know, sub-4%; we can see that grow over time, of course, as we identify attractive opportunities and warehouses ramp up. This is an attractive way for us to get access to the loan market with attractive funding sources and continue to generate significant ROEs and returns to continue to pay solid distributions and access, you know, the broadly syndicated loan market, which on a look-through basis, these entities are largely, you know That's right.

Matt Kaplan: Yeah. And what is your JV partner, the 25% owner, what is their role in it? They are, you know, involved in the CLO business and have, you know, developed a strategic relationship with us over time, and we look forward to continuing to grow it with them. Is that a name that will be disclosed in the queue? At this point in time, we're limited; what we can say is that it's an institutional investor. You know, then there's a, let's support that.

Matt Kaplan: Last question, if I may squeeze it in here. On page 24, the boxes on specialty finance, Great Elm Specialty Finance, real estate, and junior capital are still white. Are you continuing to move forward with initiatives building out those three boxes? We continue to evaluate many opportunities and have a high bar. A key part is partnering with management teams and continuing to look at and evaluate transactions all the time. At this point in time, we just haven't found any of them that fit in that box. Okay, I lied. I'm gonna have one more if I can.

James J. Fowler: Page 27 on health care finance. Other direct lenders to healthcare have talked about reimbursement issues, labor costs, et cetera, across a number of these categories. What are you seeing in that area?

Matt Kaplan: Are you seeing, or at the operating entity level, are things going okay, or do you also see some pressures across some of these categories? So, before turning it over to Mike Keller for a quick discussion on healthcare finance, again, just these are asset-based loans focused on the receivables primarily of these businesses. And it's a very specialized entity.

Matt Kaplan: We have our partner, Arcadia, alongside us. And overall, I think we're not just making unsecured loans or enterprise value loans here. So, there's a little bit of a nuance there, and I'll let Mike turn it over to you. So even though even though in the use of funds on that page, you state a lot of those things, you're really, you're really just focusing right now on asset-backed receivable finance.

Matt Kaplan: Yes. Assets. Accidents. Yeah, that's correct. And we're very judicious in the healthcare space and how we deploy capital. There has been a lot of turmoil. But as Matt mentioned, we're focused on the asset-based side of the equation. So we are very keenly aware of cash flows in and out of business, and we're able to monitor them literally on a daily basis. So we don't get out over our skis on it.

James J. Fowler: Good. Okay, guys, thank you so much. And I really appreciate you taking the question. Congratulations on a good quarter.

Matt Kaplan: There are no further questions at this time. I would hand over the call to Matt Kaplan, CEO. Please proceed with closing comments.

Matt Kaplan: Thank you again for joining us today, everyone. We are pleased with another quarter of solid performance as we continue to execute on our growth strategy. We look forward to continued investor dialogue. Please let us know if we can help with any follow-up questions that you may have. Thank you.

Operator: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation, and you may now disconnect.