Great Elm Group, Inc. · NASDAQ:GEG

Great Elm — Great Elm Capital Group — Q1 2020 Earnings Presentation

35 slides from Great Elm's earnings presentation, Nov 12, 2019

  1. Slide 1: Great Elm Capital Group, Inc. Investor Presentation – Quarter Ended September 30, 2019

    Great Elm Capital Group, Inc. Investor Presentation – Quarter Ended September 30, 2019 November 12, 2019 © 2019 Great Elm Capital Group, Inc.

  2. Slide 2: Disclaimer

    Disclaimer Statements in this presentation that are “forward-looking” statements, including statements regarding revenue, adjusted EBITDA, expected growth, profitability, free cash flow and outlook involve risks and uncertainties that may individually or collectively impact the matters described her

  3. Slide 3: Table of Contents

    Table of Contents Slide Section 4 Performance Overview 6 Organizational Overview 9 Operating Companies: Great Elm DME 13 Investment Management 17 Real Estate 21 General Corporate 23 Financial Review 26 Summary 28 Q&A 29 Appendix © 2019 Great Elm Capital Group, Inc. 3

  4. Slide 4: Performance Overview

    Performance Overview © 2019 Great Elm Capital Group, Inc. 4

  5. Slide 5: Performance Overview: Quarter Ended September 30, 2019

    Performance Overview: Quarter Ended September 30, 20191 Revenue by Segment Net Income (Loss) by Segment Segment 1Q20 1Q19 Segment 1Q20 1Q19 DME 2 $13.2 $4.1 DME 2 ($0.8) $0.0 Investment Management $0.9 $0.9 Investment Management ($0.1) ($0.7) Real Estate 3 $1.3 $1.5 Real Estate 3 $0.1 $0.1 General C

  6. Slide 6: Organizational Overview

    Organizational Overview © 2019 Great Elm Capital Group, Inc. 6

  7. Slide 7: 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

  8. Slide 8: 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 8% of GEC’s outstanding shares1 Director  The directors of GEC collectively own

  9. Slide 9: Operating Companies: Great Elm DME

    Operating Companies: Great Elm DME © 2019 Great Elm Capital Group, Inc. 9

  10. Slide 10: Operating Companies: Rapid Growth at DME

    Operating Companies: Rapid Growth at DME  In FY 1Q20, Great Elm DME, Inc. (“DME”) generated $13.2 million of revenue, $0.8 million of net loss and $3.0 million of adjusted EBITDA1  Meaningful revenue growth in major product categories  Management is investing heavily in people, processes and tech

  11. Slide 11: Operating Companies: M&A

    Operating Companies: M&A  In addition to driving organic revenue, EBITDA and volume growth, DME will seek to acquire complementary, patient-focused businesses  DME is pursuing an expansion strategy that targets businesses in tangential or overlapping markets  These acquisition opportunities can h

  12. Slide 12: Operating Companies: DME Segment Financial Detail

    Operating Companies: DME Segment Financial Detail DME Segment Financials - Quarter Ended 9/30/19 Total revenues $ 13,231 (Total opex) (14,050) GAAP Net Loss (819) Adjusted EBITDA: GAAP Net Loss (819) Interest expense, net 996 Depreciation and amortization expense 2,508 Transaction and integration re

  13. Slide 13: Investment Management

    Investment Management © 2019 Great Elm Capital Group, Inc. 13

  14. Slide 14: 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, complemented Investment Management business, we expect with accretive acquisitions of other BDCs,

  15. Slide 15: Investment Management: Management Fee Growth

    Investment Management: Management Fee Growth GECM Management Fees $900 $800 $754 $768 $755 758 Investment Management Fee Revenue 742 $693 $691 $700 $606 $600 $551 ($ Thousands) $500 $400 $300 $200 $100 $- 9/30/2017 12/31/2017 3/31/2018 6/30/2018 9/30/2018 12/31/2018 3/31/2019 6/30/2019 9/30/2019 © 2

  16. Slide 16: Investment Management: Segment Financial Detail

    Investment Management: Segment Financial Detail IM Segment Financials - Quarter Ended 9/30/19 Total revenues $ 867 (Full Circle consulting fee) (211) Near-Term Drivers of Incremental Free Cash Flow: (Total other opex) (701)  We believe GECC will continue to grow its GAAP Net Loss (45) investment po

  17. Slide 17: Real Estate

    Real Estate © 2019 Great Elm Capital Group, Inc. 17

  18. Slide 18: Real Estate: Overview

    Real Estate: Overview We view Credit Tenant Lease financings to high quality tenants as an attractive business for GEC for the following reasons: Limited Equity High Level of Monetization Capital Non-Recourse of Significant Deployed Leverage NOLs We believe we are uniquely positioned to be a preferr

  19. Slide 19: 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

  20. Slide 20: Real Estate: Segment Financial Detail

    Real Estate: Segment Financial Detail Real Estate Financials - Quarter Ended 9/30/19 Revenues: GAAP Net income 60 Rental income $1,273 EBITDA: GAAP Net income 60 Operating costs and expenses: Interest expense 658 Insurance (38) Depreciation and amortization 431 Sales tax on rent & management fee (63

  21. Slide 21: General Corporate

    General Corporate © 2019 Great Elm Capital Group, Inc. 21

  22. Slide 22: General Corporate: Segment Financial Detail

    General Corporate: Segment Financial Detail General Corporate Financials - Quarter Ended 9/30/19 EBITDA and Free Cash Flow - Quarter Ended 9/30/19 Revenue: GAAP Net Loss (2,474) Total revenue $ 23 Adjusted EBITDA: GAAP Net Loss (2,474) Operating costs and expenses: Management fee (23) Public company

  23. Slide 23: Financial Review

    Financial Review © 2019 Great Elm Capital Group, Inc. 23

  24. Slide 24: Financial Review: 1Q20 Consolidating Balance Sheets (Unaudited)

    Financial Review: 1Q20 Consolidating Balance Sheets (Unaudited) Investment DME Real Estate Corporate Eliminations Consolidated $ in thousands Management ASSETS Cash and cash equivalents, including restricted cash $ 209 $ 92 $ 768 $ 9,786 $ - $ 10,855 Accounts receivable, net 8,442 1,176 - 164 - 9,78

  25. Slide 25: Financial Review: 1Q20 Consolidating Income Statement (Unaudited)

    Financial Review: 1Q20 Consolidating Income Statement (Unaudited) Investment DME Real Estate Corporate Consolidated $ in thousands Management Total Revenues $ 13,231 $ 867 $ 1,273 $ 23 $ 15,394 Cost of revenue (5,728) - - - (5,728) Depreciation and amortization expense (457) (179) (431) - (1,067) Se

  26. Slide 26: Summary

    Summary © 2019 Great Elm Capital Group, Inc. 26

  27. Slide 27: 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

  28. Slide 28: Q&A

    Q&A © 2019 Great Elm Capital Group, Inc. 28

  29. Slide 29: Appendix

    Appendix © 2019 Great Elm Capital Group, Inc. 29

  30. Slide 30: Appendix: Non-GAAP Reconciliation

    Appendix: Non-GAAP Reconciliation For the three months ended September 30, 2019 Investment General DME Real Estate Consolidated $ in thousands Management Corporate EBITDA: Net income (loss) - GAAP $ (819) $ (45) $ 60 $ (2,474) $ (3,278) Interest expense 996 42 658 - 1,696 Depreciation & Amortization

  31. Slide 31: Appendix: Non-GAAP Reconciliation (Continued)

    Appendix: Non-GAAP Reconciliation (Continued) For the three months ended September 30, 2019 Investment General DME Real Estate Consolidated $ in thousands Management Corporate Free Cash-flow: Adjusted EBITDA $ 3,015 $ 1,006 $ 1,149 $ (1,719) $ 3,450 1 Interest expense paid (1,786) - (454) - (2,240)

  32. Slide 32: Appendix: Non-GAAP Reconciliation (Continued)

    Appendix: Non-GAAP Reconciliation (Continued) For the three months ended September 30, 2018 Investment General DME 3 Real Estate Consolidated $ in thousands Management Corporate 4 EBITDA: Net income (loss) - GAAP $ 27 $ (689) $ 51 $ (1,398) $ (2,009) Interest 286 44 665 - 995 Depreciation and amorti

  33. Slide 33: Appendix: Non-GAAP Reconciliation (Continued)

    Appendix: Non-GAAP Reconciliation (Continued) For the three months ended September 30, 2018 Investment General DME 3 Real Estate Consolidated $ in thousands Management Corporate 4 Free Cash-flow: Adjusted EBITDA $ 1,320 $ 612 $ 1,147 $ (1,383) $ 1,696 Interest expense paid (243) (44) (471) - (758) N

  34. Slide 34: Appendix: Non-GAAP Reconciliation (Continued)

    Appendix: Non-GAAP Reconciliation (Continued) (1) Unrecognized incentive fees earned include amounts earned under investment management agreements which are not recognized under US GAAP. (2) Acquisition and integration related costs include transaction costs, costs to integrate acquired businesses a

  35. Slide 35: Appendix: Contact Information

    Appendix: Contact Information Investor Relations 800 South Street, Suite 230 Waltham, MA 02453 Phone: +1 (617) 375-3006 investorrelations@greatelmcap.com © 2019 Great Elm Capital Group, Inc. 35

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