Good day, ladies and gentlemen, and welcome to the Great Elm Capital Corp's Second Quarter 2018 Financial Results Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will follow at that time. [Operator Instructions] And at this time, I would now like to introduce your host for today's conference, Ms. Meaghan Mahoney. Ma'am, you may begin.

Thank you, Sandra, and good morning everyone. Thank you all for joining us for Great Elm Capital Corp's second quarter 2018 earnings conference call. As a reminder, this webcast is being recorded on Friday, August 10, 2018. If you'd like to be added to our distribution list, you can e-mail investorrelations@greatelmcap.com, or you can sign up for alerts directly on our Web site. The slide presentation accompanying this morning's conference call and webcast can be found on Great Elm Capital Corp.'s Web site www.greatelmcc.com under Financial Information, Quarterly Results, as can a copy of our earnings release and Form 10-Q. A link to the webcast is also available on the Great Elm Capital Corp. Web site. I'd like to call your attention to the customary Safe Harbor Statement regarding forward-looking information. Also, please note that nothing in today's call constitutes an offer to sell or a solicitation of offers to purchase our securities. Today's conference call includes forward-looking statements and projections, and we ask that you refer to Great Elm Capital Corp's filings with the SEC for important factors that could cause actual results to differ materially from these projections. Great Elm Capital Corp. does not undertake to update its forward-looking statements, unless required by law. To obtain copies of the SEC filings, please visit Great Elm Capital Corp's Web site under Financial Information, SEC Filings or by visiting the SEC's Web site. Hosting the call this morning is Peter Reed, Great Elm Capital Corp's President and Chief Executive Officer. I will now turn the call over to Peter.

Thank you, Meaghan. Good morning, and thank you everyone for joining us today. I'm joined this morning by our Investment Committee, comprised of John Ehlinger, Adam Yates, Adam Kleinman, and me, as well as by John Woods, our Chief Financial Officer, and Meaghan Mahoney, our Head of Investor Relations. Where relevant in our prepared remarks, we will point you to the corresponding slide number in the deck that Meaghan referenced, which is available on our Web site, as well as throughout the webcast. As noted in our press release, we were very active this quarter on the capital deployment, monetization, and restructuring fronts. I would specifically like to highlight the restructuring of Avanti Communications Group PLC, a significant pay down of our loan to the selling source and the continued deployment of capital into existing portfolio companies. We will start this morning's call by walking through a review of the quarterly financials followed by portfolio highlights and investment activity. We will then provide an update on our capital structure activity before concluding the call with Q&A. Before I turn the call over to John Woods, our Chief Financial Officer, to discuss the financial results from the second quarter of 2018, I would officially like to welcome John Woods to the team. By way of background, John Woods recently joined the Great Elm Capital Corp team as CFO, but has been a member of the broader Great Elm organization since early 2017. In addition to this role as the CFO of GECC, John also serves as the CFO of Great Elm Capital Management, our external manager, and Great Elm Capital Group, the parent company of Great Elm Capital Management. Now let's turn the call over to John to discuss financial results from the quarter.

Thanks, Peter. Please turn to slide five for a snapshot of the financial highlights from the quarter. For the quarter ended June 30, 2018, we generated $0.57 of NII per share, significantly in excess of the $0.25 per share in base distributions that were paid during the quarter. Turning to slide six, as of June 30, our net asset value was $125.6 million, which was flat quarter-over-quarter. On a per share basis, that's equated to $11.79 NAV, also flat quarter-over-quarter. While NII significantly exceeded our distribution for the quarter, this impact in NAV was offset by mark-to-market depreciation in the portfolio. The mark-to-market depreciation in the portfolio was driven predominantly by our investments in Avanti Communications Group PLC. As of the end of the second quarter, the fair value of our investment portfolio was $199.3 million, versus $194.8 million at the end of Q1, representing modest growth of approximately 2% in our investment portfolio during the quarter, and approximately 20% portfolio growth during the six months ended June 30, 2018. We also had $8.5 million in cash and cash equivalents predominantly held in money market mutual fund investments as of the same date. Now, please turn to slide seven to walk through the quarterly financial review. Total investment income for the quarter ended June 30 was $7.2 million, against net expenses of $1.1 million, resulting in net investment income of $6.1 million or $0.57 per share. This compares to total investment of $7.5 million for Q1 against net expenses of $3.6 million, which resulted in net investment income of $3.9 million, and NII per share of $0.36 for the first quarter. Net investment income of $6.1 million generated in the quarter was driven in part by the $2.6 million reversal of previously accrued but unpaid incentive fees associated with the Avanti third lien position. And our Q2 distribution coverage was nearly 230% as we earned $0.57 per share in net investment income and paid approximately $0.25 in the form of three-monthly 8.3% distributions. Driving this coverage was the solid base of core NII generated from the portfolio growth year-to-date and the aforementioned reversal of the previously accrued but unpaid incentive fee. Net realized gains on investments were approximately $810,000 which equated to approximately $0.08 per share versus $0.03 per share in Q1 on gains of approximately $317,000. Net unrealized depreciation on investments during the quarter was $4.2 million which equated to $0.40 per share. This compares to net unrealized depreciation of $8.2 million or $0.77 per share in Q1 of 2018. Again this was primarily driven by the mark-to-market depreciation on our investments in Avanti. Now let me turn the call back to Peter to discuss portfolio highlights and activity.

Thanks, John. Let's now turn to Slide 9 to discuss some of the portfolio highlights. We have constructed a portfolio comprised almost entirely of senior secured credit instruments with a weighted average current yield of 11.1%. As of June 30, 93% of the fair value of our investments was invested at the top of the capital structure and positions that are classified as first lien and/or senior secured credit instruments. Our overall credit portfolio had a weighted average valuation of approximately $0.87 on the dollar highlighting the upside potential in addition to the high current income. Lastly, 81% of the portfolio was comprised of positions that are representative of the way in which we intend to invest going forward, as we have been actively deploying capital into new opportunities, while continuing to focus on monetizing the legacy full circle positions. Turning to slide 10, as of June 30, we had 29 debt investments across 23 companies that represented $185.4 million in fair market value and five equity investments representing $14 million or 7% of the fair value of all investments. Please turn to slide 11 to walk through our quarterly portfolio activity. On the investment front, during the second quarter of 2018, we added to eight existing investments deploying $37.9 million at a weighted average price of $0.99 on the dollar and a weighted average current yield of 10.9% including revolver draws. All of these investments were first lien and or senior secured instruments. Let's walk through briefly where we have been deploying capital. Please turn to Slide 12. First, we acquired an additional 1.8 million face value of Aptean second lien loan in the secondary market at a price of 101% of par value. Next, we acquired an additional $5 million face value of Michael Baker's second lien bond…

Thanks, Peter. We have a brief update this quarter with respect to capital activity. Let's discuss our distribution policy first. Please turn to Slide 23. In May our BOARD of Directors declared our distributions for Q3 of $8.3 per share per month. In our earnings release, we reported that we generated $0.57 per share in NII, which covered our declared base distributions by approximately 2.3 times. This morning we announced our distribution schedule for Q4, 2018 with the plan to continue to distribute $8.3 per share per month or approximately 8.4% of June 30 NAV. With that capital activity update, let me turn the call back over to Peter for closing remarks and then Q&A.

Thank you all for joining us this morning. We continue to be excited about the upside potential in the portfolio as well as with the progress we have made with both the legacy full circle and other day one investments. We believe that we have created a significant alignment of interest with you our shareholders and we hope to have displayed this. Thank you again for the support and confidence that you have placed in us. With that, we will turn it over to the operator to open the call for questions.

Thank you. [Operator Instructions] And our first question comes from the line of Chris Kotowski with Oppenheimer. Your line is now open.

Yes, good morning. So I guess in the time you've been public had been kind of an unusual time in that you've been winding down the full circle legacy portfolio, but when I look at your activity this quarter, it seems like there is an extraordinary amount of churn in there looking at the deployments and the monetizations and then I guess I thought it's on page 13, it's an interesting exhibit that shows every quarter you are buying a bunch that positions at $0.96 to $0.99 and selling them at a 100. So I mean, is that what we should expect going forward that this is the kind of - but there isn't a lot of portfolio growth upright and at least to most recent three-month period, should we expect that level of churn or is this really a kind of an unusual period?

Hey, Chris. So, one of the things about that statistic that could potentially be misleading is it does include both draws and pay downs on revolving credit facilities that we provide to certain of our portfolio companies. And as you might imagine within the course of a quarter, the amount of activity that a company might be utilizing on both sides of that could be significant. And as a result, I think there is probably less actual churn of portfolio positions than that statistic implies. So for example, on slide 12, the way from revolver positions, funding revolvers, we show all of the additions to the portfolio, whether new position or funding more of existing positions, and I think if you look at that, that is meaningfully less than the total amount of capital deployed.

All right, okay. Fair enough. Then on that page, the one name that's jumped out kind of is Aptean, I know it's a small position, but it's the first time I recall having seen you bought anything at a premium to par, can you - I'm just curious on the rationale there.

Sure. Aptean has a pretty - we think it's a very high quality enterprise software company backed by Vista Equity Partners who we consider to be the premier private equity firm dedicated to that space. And this particular loan has an attractive coupon, and from time to time has had co-protection, so that it wasn't necessarily callable by the company at par. So, the LIBOR plus 950 coupon coupled with the - what we consider to be the attractive characteristics of the business and demonstrated history of growing cash flow, we thought all things considered, that's a pretty attractive investment.

Okay. And then, you have a fair amount of liquidity, I guess do you have an ideal or targeted level of debt investments over, say, 12, 18 months period, or it's kind of the level that we are at now what we should expect going forward?

No. I think that we do intend to be growing the portfolio. I think we had $8 million of cash and equivalents at the quarter end, which is not all that much. And within the course of a quarter we can have deployments or pay downs that can impact our level of liquidity. We do intend to grow the portfolio. Our leverage is less than most of our peer group. So, we do think that as the opportunity set warrants, both as far as our ability to deploy and where we might raise incremental debt capital that we do expect over time that we'd be expanding the portfolio and raising incremental debt capital to fund that. And so, I do expect continued portfolio growth.

You also have the $75 million treasury build portfolio, right?

There is - if you look, there is an offsetting liability that almost exactly matches that asset number, so…

Okay. All right, thank you. That's it from me.

Thank you.

[Operator Instructions] And I'm showing no further questions at this time. I would like to return the call to Ms. Meaghan Mahoney for any closing remarks.

Thanks, Sandra, and thank you all for joining us this morning. We look forward to our continued dialog, and please do let us know if we can be helpful with anything in follow-up. Have a great day.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program, and you may all disconnect. Everyone have a great day.