Silver Spike Investment Corp. (NASDAQ:SSIC) Q1 2024 Earnings Call Transcript May 10, 2024
Silver Spike Investment Corp. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Good day and thank you for standing by. Welcome to Silver Spike Investment Corp. First Quarter 2024 Earnings Conference Call. At this time, all participants are in listen-only mode. After the speaker’s presentation there’ll be a question-and-answer session. [Operator Instructions]. Please be advised that today’s conference is being recorded. I would now like to turn the conference over to your first speaker today, Umesh Mahajan, Chief Financial Officer. Please go ahead.
Umesh Mahajan: 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 first quarter ended March 31, 2024. Silver Spike’s financial results for the first quarter ended March 31, 2024 were released yesterday, and can be accessed from our website at ssic.silverspikecap.com. A replay of this call will also be available on our 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 that 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, May 10, 2024. Therefore, you’re advised that time-sensitive information may no longer be accurate at the time of any replay or transcript reading. So, good morning again, and thank you all for joining the release our results yesterday along with our 10-Q and there is a management presentation deck attached to the 8-K that was filed and made available this morning.
A finance professional in their office, surrounded by financial documents and charts.
Those who have joined us on this earnings webcast should also see a link to the slides that we will use for our discussion today. We may refer to the slides by numbers for your reference. I’ll cover the presentation slides and then turn it over to Scott Gordon for his thoughts and remarks. Before we get to the financial highlights for the quarter ended March 31, 2024, a quick recap about the loan portfolio acquisition that we announced in this quarter. On February 20, 2024, the company announced that it entered into a definitive agreement to purchase from Chicago Atlantic Loan Portfolio, LLC, a portfolio of loans in exchange for newly issued shares of the company’s common stock, subject to certain customary closing conditions. On April 15, 2024, the company filed a registration statement on Form N-14 in connection with this loan portfolio acquisition with the Securities and Exchange Commission, SEC.
We are currently anticipating this transaction to close in mid-2024. With that, turning to Page 3 of the presentation for financial highlights for the first quarter 2024. The gross investment income for this quarter was $2.8 million compared to $2.5 million in the first quarter last year. Expenses of approximately $0.8 million excluding the expenses related specifically to the loan portfolio acquisition. Results in investment income excluding transaction expenses of $2 million compared to $1.4 million last year. We have incurred transaction related expenses of $2.1 million in the quarter as the definitive agreements were signed in this quarter. Net investment income of negative $0.1 million, net assets of $84.5 million down from last year due to the payment of dividends and the transaction expenses.
On a per-share basis, the investment income, excluding the transaction expenses, was $0.33 per share compared to $0.22 per share last year. The net investment income was negative $0.01 per-share and net asset value at the end of the period as of March 31, 2024 was $13.60. Also, the Board declared a regular quarterly cash dividend of $0.25 per share. This dividend will be payable on June 28th to stockholders of record on June 20th. We will not really go through the subsequent few slides in the slide deck in detail as we have covered them in the past and most investors are already familiar with our story. But turning to Page 9, to talk about our origination efforts, our deal pipeline remains strong. In general, since last quarter of 2023, many of the potential borrowers in the industry have not rushed into borrowing money as they were watching the interest rate movements in the credit markets, as well as the developments on the rescheduling of cannabis to Schedule 3.
We view that time period towards due diligence and underwriting of over 25 borrowers, as a part of our loan portfolio acquisition that we announced. And at this point, as the industry continues to grow, good operators in the industry have started revisiting their growth and expansion plans and have started thinking about raising more capital to support their plans. We have an active dialogue with many of the best operators in the industry and have an active pipeline of over $425 million. On Page 11, we show our portfolio summary as of March 31st. Similar new investments in this quarter, as you can see at the top of the page, we have over $54 million, almost $55 million invested with an average yield to maturity of about 18%. A few points we’d like to reiterate about this portfolio.
First, all of our positions are first lien loans or secured bonds. None of these loans or bonds are in on accrual status. Over 90% of our invested portfolio is in floating-rate loans and our gross portfolio yield of 18% compares favorably to the broader listed BDC universe. With that, let me pass it on to Scott Gordon for a few remarks.
Scott Gordon: Thanks, Umesh. Just wanted to take a minute and talk about the big industry news of late, which has been the apparent approval by the DEA of the HHS’s recommendation to reschedule cannabis. This has been a widely anticipated move since the HHS announcement last year. The process timeline, however, is uncertain and could take up to several years to complete if met with challenges seeking judicial review and/or administrative hearings. The change, however, would have a major impact on company cash flows through the elimination of the 280E tax effect. While we view the news as positive, like all legislative initiatives in the cannabis realm, the devil remains in the detail around both timing and implementation. Given the myriad of ambiguities with respect to that, we believe that the current dynamic of capital constraints in the industry will be largely unchanged.
Nor do we extrapolate anything further on the regulatory front because of the rescheduling process. SAFER Act and other pending pieces of reform will muddle as usual and continue to be subject to all of the same vagaries and obstacles that have been present for some time. As such, we take a mildly optimistic view of the news and maintain some hope that perhaps this time is different. On balance, it’s clearly a step in the right direction. With that, I’ll pass it back to Umesh.
Umesh Mahajan : Thank you, Scott. That’s all we had in terms of prepared remarks. We can take questions. Is there anything, Gigi?
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Silver Spike Investment Corp. (NASDAQ:SSIC) Q4 2023 Earnings Call Transcript March 28, 2024
Silver Spike Investment Corp. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Good day and thank you for standing by. Welcome to Silver Spike Investment Corp. Fiscal Year End 2023 Earnings Conference Call. At this time, all participants are in listen-only mode. After the speaker’s presentation there’ll be a question-and-answer session. [Operator Instructions] Please be advised that today’s conference is being recorded. I would now like to turn the conference over to your first speaker today, Umesh Mahajan. Please go ahead, sir.
Umesh Mahajan: Thank you. Thank you, Sharon [ph]. Good morning. This is Umesh Mahajan, Chief Financial Officer 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 fiscal year end 2023. Silver Spike’s financial results for the fiscal year ended December 31, 2023 were released yesterday, and can be accessed from our website at ssic.silverspikecap.com. A replay of this call will also be available on our website later. 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 that 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, 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. With that said, good morning again, and thank you all for joining today. We released our earnings yesterday and there is a management presentation deck attached to the 8-K that was filed yesterday evening.
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Those who have joined us on this earnings call webcast should also see a link to the slides. We may refer to the slides by numbers for your reference as we walk through those pages. And I will cover the presentation slides to start and then turn it over to Scott Gordon for his thoughts and remarks. Turning to Page 3 of our presentation; financial highlights for the quarter ended December 31, 2023. The very first column shows the results for the quarter; gross investment income of $3.6 million compared to $2.9 million in the previous quarter. Expenses of approximately $1.2 million excluding expenses related to the loan portfolio acquisition. A transaction that we have previously announced but not has — but has not closed yet; Scott will discuss the transaction in more detail later in this presentation.
We then have the loan portfolio acquisition expenses of $0.7 million, essentially legal expenses for the transaction incurred so far. We have net investment income of $1.7 million for the quarter. 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 $0.28 this quarter, net assets of $85.6 million at the end of the period, down slightly from last quarter due to the payment of dividend. And our net asset value per share at December 31 is $13.77 [ph]. There were no new investments this quarter; we’ll discuss our origination efforts and our portfolio in more detail in subsequent slides. Also, our Board declared a regular quarterly dividend of $0.25 per share; this dividend will be payable on March 28, today, to shareholders on record as of March 28 [ph].
On Page 4, we show the financial highlights for the full year of 2023. Please note that this was the first full year of operations for us. The comparison for the previous year is for nine months, from April 1, 2022 till December 31, 2022. So for the fiscal year ended 2023, the first column goes investment income of $11.9 million, total expenses of $5.3 million which includes the $0.7 million expenses related to the loan portfolio acquisition, 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, net investment income per share of $1.07, and we have paid a poor [ph] dividend of $1.33 during the year ended 2023. We will not be covering the next few slides in the slide deck in detail as most of the investors are already familiar with our story.
But turning to Page 10, I would like to talk a little bit about the origination and the deal pipeline. Our deal pipeline remains very strong. In general, the last quarter of 2023 was a slow period for loan transactions in the cannabis sector as a whole. To a large extent, there was an expectation among the cannabis operators that some progress on the rescheduling of cannabis is imminent, and that these borrowers should wait. At this point, many of those potential borrowers have figured it may be best to not necessarily wait for an update on the rescheduling front and have begun to re-engage with lenders like us. So, we expect activity to pick up — in fact, the discussions have already picked up. And we have an active pipeline of over $420 million, we — we have used the slow period in the industry productively by working on the loan portfolio acquisition transaction.
So turning to Page 12, we share our portfolio summary as of December 31. Companies A and B are Shrine and PharmaCann, which were investments we made last year in the summer. Company C is purely 8% secured bonds that we had purchased at a significant discount to the par value last year. Company D is one of our large positions in Verano [ph], it’s a first lien term loan transaction done in the last quarter of last year. And company E represents DreamFields Brands or Jeeter. One of our portfolio companies MayMaid [ph] prepaid the loan along with a prepayment premium in the quarter ending December 31, 2023. So overall, if you look at the top of the page, our total investment value is a little over $54 million, average yield to maturity across all the zones is 18%.
And a few additional points that we’d like to highlight about this portfolio and remind the investors to consider when they compare SSIC with other listed BDCs; first, all of our positions are firstly in bonds — are firstly in loans or secured bonds. Second, none of our loans or bonds are in non-accrual status. Third, all of — sorry, actually over 90% of our portfolio is in floating rate notes. And our gross portfolio yield of 18% compares quite favorably to the broader listed BDC universe. And we believe each of these portfolio companies is extremely well positioned in the industry for the longer term. With that, let me pass it on to Scott for his remarks.
Scott Gordon: Thank you, Umesh. Good morning, everybody. Just wanted to take a few moments to discuss the proposed loan portfolio acquisition. SSIC announced on February 20 of this year that it entered into a definitive agreement to purchase from Chicago Atlantic Loan Portfolio, portfolio of loans in exchange for newly issued shares of SSIC’s common stock. This acquisition is expected to provide various benefits to SSIC and it’s stockholders, including increased scale and liquidity, enhanced portfolio diversification, improved access to debt and equity capital markets, and accretion to net investment income. Pro forma information following the closing of the loan portfolio acquisition based on SSIC data as of December 31, 2023 and the capital loan portfolio data as of January 21 — January 1, 2024 as the following pro forma net assets of approximately $213 million, including approximately $187 million of portfolio investments across 27 portfolio companies, and approximately $25 million of cash.
Approximately 19.1% pro forma combined gross weighted yield to maturity of the loan portfolio. SSIC’s present officers will continue to be part of the SSIC management team following the loan portfolio acquisition and anticipated closing is mid-2024, subjected to satisfaction of customary closing conditions. In February, we also announced that our Board of Directors unanimously approved an expansion of our investment strategy to permit investments in companies outside of the cannabis and health and wellness sectors that otherwise meet our investment criteria. The investment strategy change is expected to become effective on or about April 22 of this year. With that, I’ll pass it back to Umesh.
Umesh Mahajan: Thank you, Scott. That’s all we actually had in our prepared remarks. We are ready for the Q&A event.
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