Great Elm Capital Corp. · NASDAQ:GECC
Great Elm Capital — Q2 2020 Earnings Presentation
28 slides from Great Elm Capital's earnings presentation, Aug 10, 2020
Slide 1: Great Elm Capital Corp. Investor Presentation – Quarter Ended June 30, 2020
Great Elm Capital Corp. (NASDAQ: GECC) Investor Presentation – Quarter Ended June 30, 2020 August 10, 2020 © 2020 Great Elm Capital Corp.
Slide 2: Disclaimer
Disclaimer Statements in this communication that are not historical facts are “forward-looking” statements within the meaning of the federal securities laws. These statements are often, but not always, made through the use of words or phrases such as “expect,” “anticipate,” “should,” “will,” “estima
Slide 3: GECC Repositioning
GECC Repositioning This quarter marked the beginning of Great Elm Capital Corp.’s portfolio repositioning ▪ We remain intently focused on maximizing shareholder value through our monthly distributions, potential special distributions and by increasing the book value of our shares ▪ During the quarte
Slide 4: Total Investment Income Reconciliation
Total Investment Income Reconciliation QoQ Total Investment Income Detail ▪ The quarter-over-quarter reduction in Total Investment Income was driven by: QoQ Per Share Reason for Drivers Change* Change Change ▪ Proactive sales of investments in PFS Holdings Corp. ($538) ($0.05) Nonaccrual Commercial
Slide 5: Investment Activity: New Investments (April 1, 2020 – August 7, 2020)
Investment Activity: New Investments (April 1, 2020 – August 7, 2020) Investment Activity: New Investments1* Par Amount Market Interest Current Current Portfolio Company Investment Description Maturity Cost Notes / Quantity Discount Rate Yield (%)3 Yield ($)3 Crestwood Equity Partners, LP Preferred
Slide 6: Specialty Finance Investments
Specialty Finance Investments © 2020 Great Elm Capital Corp. 6
Slide 7: Specialty Finance Investments: Prestige Capital Finance, LLC
Specialty Finance Investments: Prestige Capital Finance, LLC ▪ On February 8, 2019, GECC acquired 80.0% of the outstanding equity interests of Prestige for approximately $7.5 million ▪ GECC acquired its interests from founder Harvey Kaminski, facilitating his retirement and a transition of the busin
Slide 8: Specialty Finance Investments: Prestige Capital Finance, LLC (Continued)
Specialty Finance Investments: Prestige Capital Finance, LLC (Continued) ▪ Prestige is a highly profitable company ▪ In 2019, Prestige’s pretax income was approximately $2.8 million on average book equity of $3.1 million ▪ Through the first half of 2020, Prestige’s pretax income was approximately $1
Slide 9: Specialty Finance Investments: Additional Investments
Specialty Finance Investments: Additional Investments ▪ The positive trends our investment in Prestige continues to exhibit lead us explore complementary opportunities in other niche areas of specialty finance ▪ We are focused on acquiring controlling interests in a number of sub-categories of speci
Slide 10: Portfolio Review
Portfolio Review (Quarter Ended 6/30/2020) © 2020 Great Elm Capital Corp. 10
Slide 11: Portfolio Review: GECC Snapshot
Portfolio Review: GECC Snapshot ▪ Externally managed, total-return-focused BDC ▪ Liquid balance sheet GECC ▪ Employees and affiliates of Great Elm Capital Management, Inc., GECC’s investment manager, own approximately 24% of GECC’s outstanding shares ▪ To generate both current income and capital app
Slide 12: Portfolio Review: GECC Overview
Portfolio Review: GECC Overview ▪ The majority of our third and fourth quarter 2020 distributions will be paid in shares of our common stock in order to maximize liquidity and strengthen our balance sheet Distributions ▪ LTM total distribution yield of 20.5% on 6/30/20 NAV and 24.6% on 6/30/20 marke
Slide 13: Portfolio Review: Quarter End Portfolio Detail
Portfolio Review: Quarter End Portfolio Detail Debt Investments: 29 $121.0 million 82.7% 10.2%1 78.3% Debt Investments Fair Value of Debt Of Invested Capital in Weighted Average Weighted Investments Debt Investments Current Yield of Debt Average Dollar Investments Price of Debt Investments Equity In
Slide 14: Portfolio Review: Quarter End Asset Type and Interest Rate Type
Portfolio Review: Quarter End Asset Type and Interest Rate Type Portfolio by Asset Type ($MM) Portfolio by Interest Rate Type ($MM) 17.3% ▪ Weighted average fixed 37.4% rate yield of 13.6%1 62.6% ▪ Weighted average 82.7% floating rate yield of 8.2%1 Debt Equity / Other Fixed Rate Floating Rate Fair
Slide 15: Portfolio Review: Quarter End Industry Breakdown
Portfolio Review: Quarter End Industry Breakdown June 30, 2020 Investments at Percentage of Industry Fair Value Fair Value Wireless Telecommunications Services $ 38,456 26.29% Internet Media 16,006 10.94% Chemicals 10,534 7.20% Food & Staples 10,477 7.16% Software Services 10,429 7.13% Retail 10,127
Slide 16: Portfolio Review: Quarterly Investment Activity
Portfolio Review: Quarterly Investment Activity New Investments vs. Monetized Investments Q2/2019 Q3/2019 Q4/2019 Q1/2020 Q2/2020 Dollar Value of New Investments1 $61.7 million $46.1 million $15.1 million $31.9 million $15.9 million Weighted Average Price of New Debt $0.98 $0.97 $0.97 $0.99 $0.92 In
Slide 17: Financial Review
Financial Review (Quarter Ended 6/30/2020) © 2020 Great Elm Capital Corp. 17
Slide 18: Financial Review: Per Share Data
Financial Review: Per Share Data Financial Highlights – Per Share Data Q2/20191 Q3/20191 Q4/20191 Q1/20201 Q2/20201 Earnings Per Share (“EPS”) ($0.43) ($0.96) ($0.16) ($3.33) $0.34 Net Investment Income (“NII”) $0.29 $0.26 $0.25 $0.26 $0.09 Per Share Net Realized Gains / (Losses) Per $0.04 $0.02 $0.
Slide 19: Financial Review: Portfolio
Financial Review: Portfolio Financial Highlights - Portfolio Q2/2019 Q3/2019 Q4/2019 Q1/2020 Q2/2020 Capital Deployed $61.7 million $46.1 million $15.1 million $31.9 million $15.9 million Investments Monetized $36.6 million $44.6 million $9.6 million $29.4 million $37.5 million Total Fair Value of I
Slide 20: Financial Review: Quarterly Operating Results
Financial Review: Quarterly Operating Results Q2/2019 Q3/2019 Q4/2019 Q1/2020 Q2/2020 ($ in Thousands) Per Share1 Per Share1 Per Share1 Per Share1 Per Share1 Total Investment Income2 $6,711 $0.66 $7,002 $0.70 $7,012 $0.70 $6,429 $0.64 $4,768 $0.47 Interest Income 5,664 0.55 6,200 0.62 6,614 0.66 5,9
Slide 21: Capital Activity
Capital Activity © 2020 Great Elm Capital Corp. 21
Slide 22: Capital Activity: Overview
Capital Activity: Overview ▪ We are excited about our investment pipeline, particularly the opportunities we see in specialty finance ▪ As a result, on July 13, 2020, we filed a Form N-2 Registration Statement with the SEC to conduct a non- transferable rights offering1 ▪ We are subject to a minimum
Slide 23: Capital Activity: Declared Distributions
Capital Activity: Declared Distributions ▪ As previously announced, in May 2020, our Board set monthly distributions of $0.083 per share for the third quarter of 2020, through the month ending September 30, 2020. The distributions will be paid in cash or shares of our common stock at the election of
Slide 24: Summary
Summary © 2020 Great Elm Capital Corp. 24
Slide 25: Summary
Summary ▪ During the quarter, we began repositioning the portfolio, including taking actions to create liquidity that had the effect of depressing NII Portfolio ▪ Toward the end of the quarter and following quarter end, we redeployed a majority of our cash into new, Repositioning cash-generative inv
Slide 26: Appendix
Appendix © 2020 Great Elm Capital Corp. 26
Slide 27: Appendix: General Risks
Appendix: General Risks Debt instruments are subject to credit and interest rate risks. Credit risk refers to the likelihood that an obligor will default in the payment of principal or interest on an instrument. Financial strength and solvency of an obligor are the primary factors influencing credit
Slide 28: Appendix: Contact Information
Appendix: Contact Information Investor Relations 800 South Street, Suite 230 Waltham, MA 02453 Phone: +1 (617) 375-3006 investorrelations@greatelmcap.com © 2020 Great Elm Capital Corp. 28