Great Elm Group, Inc. · NASDAQ:GEG
Great Elm — Great Elm Capital Group — Q3 FY2020 Earnings Presentation
36 slides from Great Elm's earnings presentation, May 12, 2020
Slide 1: Great Elm Capital Group, Inc. Investor Presentation – Quarter Ended March 31, 2020
Great Elm Capital Group, Inc. Investor Presentation – Quarter Ended March 31, 2020 May 12, 2020 © 2020 Great Elm Capital Group, Inc.
Slide 2: Disclaimer
Disclaimer Statements in this press release that are “forward-looking” statements, including statements regarding expected growth, profitability and outlook involve risks and uncertainties that may individually or collectively impact the matters described herein. Investors are cautioned not to place
Slide 3: Table of Contents
Table of Contents Slide Section 4 A Note to Shareholders 5 Performance Overview 7 Organizational Overview 10 Operating Companies: Great Elm DME 14 Investment Management 19 Real Estate 23 General Corporate 25 Financial Review 28 Summary 30 Q&A 31 Appendix © 2020 Great Elm Capital Group, Inc. 3
Slide 4: A Note to Shareholders
A Note to Shareholders ▪ The impact of COVID-19 has been significant and widespread but our businesses are well positioned for the difficult economic environment ▪ DME: Year-over-year revenue growth of 20.2% during the quarter ended March 31, 2020, underpinned by growth in major product categories ▪
Slide 5: Performance Overview
Performance Overview © 2020 Great Elm Capital Group, Inc. 5
Slide 6: Performance Overview: Quarter Ended March 31, 2020
Performance Overview: Quarter Ended March 31, 2020 1 Revenue by Segment Net Income (Loss) by Segment Segment 3Q20 3Q19 Segment 3Q20 3Q19 DME $14.1 $11.8 DME ($1.4) ($0.5) Investment Management $0.8 $1.1 Investment Management $0.5 ($0.2) Real Estate 2 $1.3 $1.3 Real Estate 2 $0.1 $0.0 General Corpora
Slide 7: Organizational Overview
Organizational Overview © 2020 Great Elm Capital Group, Inc. 7
Slide 8: Organizational Overview: Drivers of Shareholder Value
Organizational Overview: Drivers of Shareholder Value ▪ Target undercapitalized small and mid-sized companies where we can partner with management to accelerate earnings and cash flow growth Operating Companies ▪ Focus on companies that offer a platform for follow-on acquisitions and investment, par
Slide 9: Organizational Overview: Alignment of Interest
Organizational Overview: Alignment of Interest Employee ▪ Employees of GEC/Great Elm Capital Management, Inc. (“GECM”) Share collectively own approximately 2.0 million shares of GEC, representing Ownership approximately 7% of GEC’s outstanding shares1 Director ▪ The directors of GEC collectively own
Slide 10: Operating Companies: Great Elm DME
Operating Companies: Great Elm DME © 2020 Great Elm Capital Group, Inc. 10
Slide 11: Operating Companies: Growth at DME Amid Uncertainty
Operating Companies: Growth at DME Amid Uncertainty ▪ In FY 3Q20, Great Elm DME, Inc. (“DME”) generated $14.1 million of revenue, $1.4 million of net loss and $2.5 million of adjusted EBITDA1 ▪ Meaningful revenue growth in major product categories, including PAP ▪ Management is investing heavily in
Slide 12: Operating Companies: M&A
Operating Companies: M&A ▪ Acknowledging the many challenges in the current business environment, DME seeks to partner with companies in tangential and overlapping markets ▪ Exploring opportunities for corporate development with respiratory-focused, durable medical equipment businesses may result in
Slide 13: Operating Companies: DME Segment Financial Detail
Operating Companies: DME Segment Financial Detail DME Segment Financials - Quarter Ended 3/31/20 Total revenues $ 14,131 Total expenses (15,529) GAAP Net income (1,398) Adjusted EBITDA: GAAP Net income (1,398) Interest expense, net 906 ▪ Revenue and profitability Depreciation and amortization expens
Slide 14: Investment Management
Investment Management © 2020 Great Elm Capital Group, Inc. 14
Slide 15: Investment Management: A Focus on Liquidity and Opportunity
Investment Management: A Focus on Liquidity and Opportunity ▪ In FY 3Q20, Investment Management generated $0.8 million of revenue, $0.5 million of net income and $0.3 million of adjusted EBITDA1 ▪ The first half of 2020 has been characterized by remarkable volatility in the leveraged credit markets,
Slide 16: Investment Management: A Scalable, High Margin Business
Investment Management: A Scalable, High Margin Business AUM GROWTH HIGH MARGINS Grow GECC’s AUM through the issuance of AUM Growth Given the largely fixed cost nature of the additional debt and equity, supplemented by Investment Management business, we expect accretive acquisitions of other BDCs, re
Slide 17: Investment Management: Management Fee Stability
Investment Management: Management Fee Stability GECM Management Fees $900 $800 758 760 742 Investment Management Fee Revenue $691 683 $700 $600 ($ Thousands) $500 $400 $300 $200 $100 $- Mar-19 Jun-19 Sep-19 Dec-19 Mar-20 © 2020 Great Elm Capital Group, Inc. 17
Slide 18: Investment Management: Segment Financial Detail
Investment Management: Segment Financial Detail IM Segment Financials - Quarter Ended 3/31/20 Near-Term Drivers of Incremental Total revenues $ 829 Free Cash Flow: Total expenses (338) GAAP Net income 491 ▪ Despite recent volatility, we believe GECC will continue to grow its investment Adjusted EBIT
Slide 19: Real Estate
Real Estate © 2020 Great Elm Capital Group, Inc. 19
Slide 20: Real Estate: Overview
Real Estate: Overview Our current Real Estate investment is attractive for the following reasons: Limited Equity High Level of Monetization Capital Non-Recourse of Significant Deployed Leverage NOLs © 2020 Great Elm Capital Group, Inc. 20
Slide 21: Real Estate: Fort Myers – Organic Equity Growth
Real Estate: Fort Myers – Organic Equity Growth $65.00 8.0x 7.1x ▪ Assuming a constant 7.0x $60.00 7.0x property value of $61.2 6.5x million, the chart at the 6.0x $55.00 5.9x right depicts the Debt and Equity Values ($ in Millions) 5.3x growth in GEC’s 5.0x Multiple of Invested Capital $50.00 4.7x
Slide 22: Real Estate: Segment Financial Detail
Real Estate: Segment Financial Detail Real Estate Financials - Quarter Ended 3/31/20 Total revenues $ 1,276 Total expenses (1,209) GAAP Net income 67 Adjusted EBITDA: Interest expense 654 Depreciation and amortization expense 430 Adjusted EBITDA1 $ 1,151 Non-cash rental income (162) Capital expendit
Slide 23: General Corporate
General Corporate © 2020 Great Elm Capital Group, Inc. 23
Slide 24: General Corporate: Segment Financial Detail
General Corporate: Segment Financial Detail General Corporate Financials - Quarter Ended 3/31/20 EBITDA and Free Cash Flow - Quarter Ended 3/31/20 ▪ As of March 31, 2020, Revenue: Adjusted EBITDA: GEC’s consolidated Total revenue $ 34 GAAP net loss (11,078) cash balance was Management fee (34) appro
Slide 25: Financial Review
Financial Review © 2020 Great Elm Capital Group, Inc. 25
Slide 26: Financial Review: 3Q20 Consolidating Balance Sheets (Unaudited)
Financial Review: 3Q20 Consolidating Balance Sheets (Unaudited) Investment DME Real Estate Corporate Eliminations Consolidated $ in thousands Management ASSETS Cash and cash equivalents, including restricted cash $ 1,559 $ 161 $ 847 $ 36,963 $ - $ 39,530 Accounts receivable, net 8,522 1,008 - 163 -
Slide 27: Financial Review: 3Q20 Consolidating Income Statement (Unaudited)
Financial Review: 3Q20 Consolidating Income Statement (Unaudited) For the three months ended March 31, 2020 Investment DME Real Estate Corporate Eliminations Consolidated $ in thousands Management Total Revenues $ 14,131 $ 829 $ 1,276 $ 34 $ (34) $ 16,236 Cost of revenue (6,038) - - - (6,038) Deprec
Slide 28: Summary
Summary © 2020 Great Elm Capital Group, Inc. 28
Slide 29: Summary: Drivers of Shareholder Value
Summary: Drivers of Shareholder Value ▪ Focus on growing Great Elm DME, Inc. both organically and via an expansion strategy that targets existing and adjacent markets Operating Companies ▪ Continue to strengthen Great Elm DME, Inc.’s scalable infrastructure, investing in people, processes and techno
Slide 30: Q&A
Q&A © 2020 Great Elm Capital Group, Inc. 30
Slide 31: Appendix
Appendix © 2020 Great Elm Capital Group, Inc. 31
Slide 32: Appendix: Non-GAAP Reconciliation
Appendix: Non-GAAP Reconciliation For the three months ended March 31, 2020 Durable Medical Investment General 1 $ in thousands Equipment Management Real Estate Corporate Consolidated EBITDA: Net income (loss) - GAAP $ (1,398) $ 491 $ 67 $ (11,078) $ (11,918) Interest expense 906 39 654 155 1,754 De
Slide 33: Appendix: Non-GAAP Reconciliation (Continued)
Appendix: Non-GAAP Reconciliation (Continued) For the nine months ended March 31, 2020 Durable Medical Investment General 1 $ in thousands Equipment Management Real Estate Corporate Consolidated EBITDA: Net income (loss) - GAAP $ (2,893) $ 451 $ 187 $ (14,968) $ (17,223) Interest expense 2,839 122 1
Slide 34: Appendix: Non-GAAP Reconciliation (Continued)
Appendix: Non-GAAP Reconciliation (Continued) For the three months ended March 31, 2019 Durable Medical Investment General 1 $ in thousands Equipment Management Real Estate Corporate Consolidated EBITDA: Net income (loss) - GAAP $ (517) $ (163) $ 38 $ 4,843 $ 4,201 Net income from discontinued opera
Slide 35: Appendix: Non-GAAP Reconciliation (Continued)
Appendix: Non-GAAP Reconciliation (Continued) For the nine months ended March 31, 2019 Durable Medical Investment General 1 $ in thousands Equipment Management Real Estate Corporate Consolidated EBITDA: Net income (loss) - GAAP $ (91) $ (859) $ 127 $ (1,261) $ (2,084) Net income from discontinued op
Slide 36: 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 Group, Inc. 36
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