Great Elm Group, Inc. · NASDAQ:GEG

Great Elm — Great Elm Capital Group — Q3 2019 Earnings Presentation

36 slides from Great Elm's earnings presentation, May 10, 2019

1. Slide 1: Great Elm Capital Group, Inc. Investor Presentation

   Great Elm Capital Group, Inc. Investor Presentation – Quarter Ended March 31, 2019 May 10, 2019 © 2019 Great Elm Capital Group, Inc.

2. Slide 2: Disclaimer

   Disclaimer Statements in this presentation that are “forward-looking” statements, including, but not limited to, statements regarding potential or expected IRRs, cash-on-cash returns, collection of incentive fees and net operating loss utilization involve risks and uncertainties that may individuall

3. Slide 3: Table of Contents

   Table of Contents Slide Section 4 Performance Overview 6 Organizational Overview 9 Operating Companies: Great Elm DME 14 Investment Management 18 Real Estate 22 General Corporate 24 Financial Review 27 Summary 29 Q&A 30 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

   Performance Overview  For the quarter ended March 31, 2019, Great Elm reported:  Consolidated Revenue of $14.1 million vs. ($0.5) million during the same period the prior year  DME: $11.8 million  Investment Management: $1.1 million  Real Estate: $1.3 million  General Corporate: -  Consolidat

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 growth Operating Companies  Focus on companies that offer a platform for follow-on acquisitions and investment  Grow Great Elm C

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 over 1.8 million shares of GEC, representing greater than 7% Ownership of GEC’s outstanding shares1 Director  The directors of GEC collectively own greater t

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 September 2018, Great Elm acquired Valley Healthcare Group and combined it with Northwest Medical Group for $63.6 million  The purchase price corresponded to 4.9x June 30 LTM pro forma adjusted EBITDA of $12.9 million, which included anticipated cost sy

11. Slide 11: Operating Companies: Foundation for Long-Term Profitability

    Operating Companies: Foundation for Long-Term Profitability Strong  Double-digit growth year-over-year in referrals, new patient setups and Operating active rentals in PAP and Ventilators Growth  $2.5 million of capital expenditures was recorded in the quarter Limited  Approximately $2.1 million

12. Slide 12: Operating Companies: M&A

    Operating Companies: M&A  In addition to driving organic revenue, EBITDA and volume growth, DME intends to acquire complementary, patient-focused businesses  The respiratory-focused, durable medical equipment industry is characterized by a fragmented landscape that we believe offers a significant

13. Slide 13: Operating Companies: DME Segment Financial Detail

    Operating Companies: DME Segment Financial Detail DME Segment Financials - Quarter Ended 3/31/19 Total revenues $ 11,752 (Total opex) (10,871) Operating income 881 Adjusted EBITDA: Operating income 881 Depreciation and amortization 2,275 Location start up expense 58 Transaction costs & mgmt fees 3 O

14. Slide 14: Investment Management

    Investment Management © 2019 Great Elm Capital Group, Inc. 14

15. Slide 15: 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 AUM Growth  Given the largely fixed cost nature of the of additional debt and equity, Investment Management business, we complemented with accretive expect adjusted EBITDA margins

16. Slide 16: Investment Management: Management Fee Growth

    Investment Management: Management Fee Growth GECM Management Fees $900 Investment Management Revenue ($ Thousands) $800 $754 $768 $755 $693 $691 $700 $606 $600 $551 $546 $500 $400 $300 $200 $100 $- 6/30/2017 9/30/2017 12/31/2017 3/31/2018 6/30/2018 9/30/2018 12/31/2018 3/31/2019 © 2019 Great Elm Cap

17. Slide 17: Investment Management: Segment Financial Detail

    Investment Management: Segment Financial Detail IM Segment Financials - Quarter Ended 3/31/19 Total revenues $ 1,060 (Full Circle consulting fee) (178) Near-Term Drivers of Incremental Free Cash Flow: (Total opex) (998) Operating income (116)  We believe GECC will grow its investment portfolio, inc

18. Slide 18: Real Estate

    Real Estate © 2019 Great Elm Capital Group, Inc. 18

19. Slide 19: 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

20. Slide 20: 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

21. Slide 21: Real Estate: Segment Financial Detail

    Real Estate: Segment Financial Detail Real Estate Financials - Quarter Ended 3/31/19 Revenues: GAAP Net Income 38 Rental income $1,272 EBITDA: GAAP net income 38 Operating costs and expenses: Interest 667 Insurance (38) Taxes - Real estate taxes - Depreciation and amortization 436 Sales tax on rent

22. Slide 22: General Corporate

    General Corporate © 2019 Great Elm Capital Group, Inc. 22

23. Slide 23: General Corporate: Segment Financial Detail

    General Corporate: Segment Financial Detail General Corporate Financials - Quarter Ended 3/31/19 EBITDA and Free Cash Flow - Quarter Ended 3/31/19 GAAP Net Income 4,843 Revenue: Total revenue (5) EBITDA: GAAP net income 4,843 Operating costs and expenses: Net income from discontinued operations (3,8

24. Slide 24: Financial Review

    Financial Review © 2019 Great Elm Capital Group, Inc. 24

25. Slide 25: Financial Review: 3Q19 Consolidating Balance Sheets

    Financial Review: 3Q19 Consolidating Balance Sheets Investment DME Management Real Estate General Corporate Eliminations Consolidated ASSETS Cash and cash equivalents, including restricted cash $ 334 $ 872 $ 735 $ 17,368 $ - $ 19,309 Inventories 1,781 - - - - 1,781 Accounts receivable 8,019 1,145 -

26. Slide 26: Financial Review: 3Q19 Consolidating Income Statement

    Financial Review: 3Q19 Consolidating Income Statement Investment General DME Management Real Estate Corporate Eliminations Consolidated Total revenue $ 11,752 $ 1,060 $ 1,272 $ (5) $ 5 $ 14,084 Operating costs and expenses: Cost of revenue (4,602) - - - - (4,602) Depreciation and amortization (371)

27. Slide 27: Summary

    Summary © 2019 Great Elm Capital Group, Inc. 27

28. Slide 28: Summary: Drivers of Shareholder Value

    Summary: Drivers of Shareholder Value  Target undercapitalized small and mid-sized companies where we can partner Operating with management to accelerate earnings growth Companies  Focus on companies that offer a platform for follow-on acquisitions and investment  Focus on driving asset growth in

29. Slide 29: Q&A

    Q&A © 2019 Great Elm Capital Group, Inc. 29

30. Slide 30: Appendix

    Appendix © 2019 Great Elm Capital Group, Inc. 30

31. Slide 31: Appendix: Non-GAAP Reconciliation

    Appendix: Non-GAAP Reconciliation For the three months ended March 31, 2019 Durable Medical Investment General (1) (2) (Dollar amounts in thousands) Equipment Management Real Estate Corporate Total Net income (loss) - GAAP $ (517) $ (163) $ 38 $ 4,843 $ 4,201 EBITDA: Net income (loss) - GAAP $ (517)

32. Slide 32: Appendix: Non-GAAP Reconciliation

    Appendix: Non-GAAP Reconciliation For the nine months ended March 31, 2019 Durable Medical Investment General (1) (2) (Dollar amounts in thousands) Equipment Management Real Estate Corporate Total Net income (loss) - GAAP $ (91) $ (859) $ 127 $ (1,261) $ (2,084) EBITDA: Net loss - GAAP $ (91) $ (859

33. Slide 33: Appendix: Non-GAAP Reconciliation

    Appendix: Non-GAAP Reconciliation For the three months ended March 31, 2018 Durable Medical Investment General (1) (2) (Dollar amounts in thousands) Equipment Management Real Estate (5) Corporate Total Net income (loss) - GAAP $ - $ (2,056) $ 23 $ (2,356) $ (4,389) EBITDA: Net income (loss) - GAAP $

34. Slide 34: Appendix: Non-GAAP Reconciliation

    Appendix: Non-GAAP Reconciliation For the nine months ended March 31, 2018 Durable Medical Investment General (1) (2) (Dollar amounts in thousands) Equipment Management Real Estate (5) Corporate Total Net loss - GAAP $ - $ (3,532) $ 23 $ (5,465) $ (8,974) EBITDA: Net loss - GAAP $ - $ (3,532) $ 23 $

35. Slide 35: Appendix: Non-GAAP Reconciliation

    Appendix: Non-GAAP Reconciliation (1) Our durable medical equipment business began in September 2018 and there was no related activity prior to that date. (2) General Corporate includes net income (loss) attributable to discontinued operations. (3) Unrecognized incentive fees earned include amounts

36. 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 © 2019 Great Elm Capital Group, Inc. 36

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