Great Elm Capital Corp. · NASDAQ:GECC

Great Elm Capital — Q4 2021 Earnings Presentation

37 slides from Great Elm Capital's earnings presentation, Mar 4, 2022

  1. Slide 1: Investor Presentation Quarter Ended December 31, 2021

    Great Elm Capital Corp. NASDAQ: GECC Investor Presentation Quarter Ended December 31, 2021 March 4, 2022

  2. Slide 2: Forward Looking Statement

    Forward Looking Statement 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,”

  3. Slide 3: About GECC

    About GECC  Externally managed, total-return-focused BDC Great Elm  Directors of GECC, employees of GECM and officers and directors of GECM’s Capital Corp. parent, including investment funds managed by directors of GECM’s parent, own approximately 37% of GECC’s outstanding shares  To generate cur

  4. Slide 4: Fourth Quarter 2021

    Fourth Quarter 2021 (Quarter Ended 12/31/2021) March 2022 © 2022 Great Elm Capital Corp. 4

  5. Slide 5: Fourth Quarter 2021: Overview

    Fourth Quarter 2021: Overview  NII of $7.1 million or $1.58 per share vs. $1.6 million or $0.39 per share (3Q21) and $1.6 million or $0.44 per share (4Q20)(1) Net Investment  NII for the quarter ended December 31, 2021 was positively impacted by the reversal of approximately $5.2 Income (“NII”) mi

  6. Slide 6: Fourth Quarter 2021: Net Investment Income Analysis

    Fourth Quarter 2021: Net Investment Income Analysis NII for the quarter ended December 31, 2021 was approximately $7.1 million or $1.58 per share, as compared to NII of $1.6 million or $0.39 per share for the quarter ended September 30, 2021(1)  Removing the impact of the Avanti-related incentive f

  7. Slide 7: Fourth Quarter 2021: Avanti Update

    Fourth Quarter 2021: Avanti Update The fair value of GECC’s investments in Avanti meaningfully declined in the quarter  Investments in Avanti’s securities totaled $8.1 million of fair value ($1.81 per share(1)) as of December 31, 2021, as compared to $32.1 million of fair value ($7.15 per share(1))

  8. Slide 8: Fourth Quarter 2021: NAV Walk

    Fourth Quarter 2021: NAV Walk Net assets were approximately $74.6 million ($16.63 per share(1)) on December 31, 2021, as compared to $99.4 million ($22.17 per share(1)) on September 30, 2021 Value Impact Description $ Million $ / Share(1) Avanti Communications Group plc ($26.6 million) ($5.94) PFS H

  9. Slide 9: Portfolio Review

    Portfolio Review (Quarter Ended 12/31/2021) March 2022 © 2022 Great Elm Capital Corp. 9

  10. Slide 10: Portfolio Review: Cash Generating Portfolio Comparison

    Portfolio Review: Cash Generating Portfolio Comparison(1) 36 Debt $141.9 million 10.0% Investments Fair Value Wtd. Avg. CY(3) $187.6 million Fair Value(2) 12/31/21 41 Portfolio Investments 5 Equity $45.7 million 12.8% 10.7% Wtd. Avg. CY(3) Investments Fair Value Wtd. Avg. CY(3) 19 Debt $125.6 millio

  11. Slide 11: Cash Generating Portfolio - Concentrations

    Portfolio Review: Cash Generating Portfolio - Concentrations (1) Increased Industry Diversification and Reduced Average Position Size 12/31/2019 12/31/2021 $6.7 million Average Position Size & 13 Industries $4.6 million Average Position Size & 20 Industries Specialty Finance Software Services 11.0%

  12. Slide 12: Cash Generating Portfolio Investment Type Mix

    Portfolio Review: Cash Generating Portfolio Investment Type Mix (1) Broadened Investment Universe and Increasing Exposure in Specialty Finance (“SF”) 12/31/2019 12/31/2021 11.0% Weighted Average Current Yield 10.7% Weighted Average Current Yield 6% 7% 14% 26% 1L 1L* 2L SF - Equity 2L 52% SF - Credit

  13. Slide 13: Portfolio Review: Quarterly Investment Activity

    Portfolio Review: Quarterly Investment Activity  During Q4 2021, deployed $34.2 million, excluding SPACs, into 23 investments at a Deployment of weighted average current yield of 8.2% Capital  Current yield appears artificially depressed as approximately 1/3 of the capital was deployed into an inv

  14. Slide 14: Total Quarter End Portfolio Detail

    Portfolio Review: Total Quarter End Portfolio Detail Debt Investments: 45 97.2%(1) $149.8 million 70.6% 10.8%(1) Debt Investments Weighted Fair value of Of Portfolio Weighted Average Average Dollar Debt in Debt Current Yield of Price of Debt Investments Investments Debt Investments Investments Equit

  15. Slide 15: Total Quarter End Asset Mix

    Portfolio Review: Total Quarter End Asset Mix Portfolio by Asset Type ($MM) Portfolio by Interest Rate Type ($MM) SPACs Other Equities 1% 6%  Weighted average fixed Income- rate yield of Generating Equities Floating 12.8%1 Fixed Rate 22% Debt Rate 45% 71% 55%  Weighted average floating rate yield

  16. Slide 16: Total Quarter End Industry Breakdown

    Total Quarter End Industry Breakdown December 31, 2021 ($000s) Investments at Percentage of Specialty Finance Industry Fair Value Fair Value Energy Midstream Specialty Finance $ 47,952 22.60% Chemicals Energy Midstream 31,815 15.00% Metals & Mining Chemicals 15,058 7.10% Internet Media Metals & Mini

  17. Slide 17: Strategy Update

    Strategy Update March 2022 © 2022 Great Elm Capital Corp. 17

  18. Slide 18: Background

    Background In February 2020, Great Elm Group, the parent of GECC’s external investment manager, added three new board members with significant investment management experience  Began process of reshaping the investment management business In 2H 2020, the Investment Committee and Investment Process

  19. Slide 19: Investment Approach Changes

    Investment Approach Changes Leadership Changes Led to New Investment Approach Objectives:  Increase Allocation to Specialty Finance through:  Equity Investments in Specialty Finance Companies (“SFCs”)  Direct Credit Investments and Participations  Creation of Great Elm Specialty Finance (“GESF”)

  20. Slide 20: Increasing Focus and Allocation in Specialty Finance

    Increasing Focus and Allocation in Specialty Finance GECC’s Specialty Finance Platform is led by Michael Keller as it continues to expand across the “Continuum of Lending”  Equity ownership in SFCs generates two levels of unique and proprietary investment exposure for investors:  We believe direct

  21. Slide 21: Continuum of Lending Benefits

    Continuum of Lending Benefits A “Continuum of Lending” platform provides significant benefits  The Continuum allows lenders to improve “stickiness” of clientele and hold onto key borrowers longer  The Continuum provides an ideal platform to cross-sell products and services to a borrower  By addin

  22. Slide 22: Focus and Execution

    Focus and Execution Great Elm is utilizing a 3-pronged approach to build out its specialty finance platform: 1. Strategic Acquisitions: Opportunities which allow Great Elm to further build out its specialty finance platform, expand its continuum of lending strategy and add complementary lines of bus

  23. Slide 23: GECC's Specialty Finance Growth

    GECC’s Specialty Finance Growth Specialty Finance Percentage of GECC’s Investable Assets(1) 50.0% 50.0% 45.0% 40.0% 35.0% 30.0% 25.0% 20.0% 21.9% 15.0% 18.4% 10.0% 10.7% 5.0% 8.5% 4.3% 4.5% 6.3% 5.7% 3.6% 0.0% 4Q19 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 Plan (1) Investible Assets = Investments + Ca

  24. Slide 24: Great Elm Specialty Finance

    Great Elm Specialty Finance March 2022 © 2022 Great Elm Capital Corp. 24

  25. Slide 25: Great Elm Specialty Finance

    Great Elm Specialty Finance Great Elm Specialty Finance (“GESF”) is a holding company that was created for GECC’s existing Specialty Finance investments and all future specialty finance acquisitions, strategic partnerships, and direct origination opportunities The following chart highlights the GESF

  26. Slide 26: GESF: Prestige Capital Finance

    GESF: Prestige Capital Finance Provider of “spot factoring” services, providing clients with opportunities to sell individual accounts receivable for upfront payments Diversified Functional Limited Risk Experienced Customer Base Prestige purchases the Prestige’s clients are generally The combination

  27. Slide 27: GESF: Lenders Funding

    GESF: Lenders Funding Private funding and risk sharing source for factors and asset-based lenders  Purchases participations in factoring and asset-based lending transactions as well as provides working capital solutions to customers under a variety of lending programs  Founder and CEO Robert Zadek

  28. Slide 28: GESF: Sterling Commercial Credit

    GESF: Sterling Commercial Credit Provider of asset-based loans to small and middle market companies throughout the United States  Provides short term, asset-based loans and working capital solutions to small businesses with annual sales typically between $3 Million and $10 Million  Founder and CEO

  29. Slide 29: GESF: Great Elm Utica

    GESF: Great Elm Utica Great Elm Utica (“GEU”) is a JV formed to leverage the equipment financing track record and expertise of Utica LeaseCo (“Utica”) with the permanent capital of GECC  Utica’s expertise in appraising and liquidating equipment will allow the JV to finance deals with hard asset cov

  30. Slide 30: Financial Review

    Financial Review (Quarter Ended 12/31/2021) March 2022 © 2022 Great Elm Capital Corp. 30

  31. Slide 31: Financial Review: Per Share Data

    Financial Review: Per Share Data Financial Highlights – Per Share Data Q4/20201 Q1/20211 Q2/20211 Q3/20211 Q4/20211,2 Earnings Per Share (“EPS”) ($2.60) $3.22 $0.63 ($0.79) ($4.95) Net Investment Income (“NII”) $0.44 $0.39 $0.54 $0.39 $1.58 Per Share Net Realized Gains / (Losses) Per $0.21 ($0.84) (

  32. Slide 32: Financial Review: Quarterly Operating Results

    Financial Review: Quarterly Operating Results Q4/2020 Q1/2021 Q2/2021 Q3/2021 Q4/20211 $ in $000s Per Share2 Per Share2 Per Share2 Per Share2 Per Share2 Total Investment Income3 $5,749 $1.55 $5,295 $1.36 $6,233 $1.59 $7,373 $1.85 $6,353 $1.42 Interest Income 4,664 1.26 4,179 1.07 5,092 1.30 5,872 1.

  33. Slide 33: Financial Review: Portfolio

    Financial Review: Portfolio Financial Highlights - Portfolio Q4/2020 Q1/2021 Q2/2021 Q3/2021 Q4/2021 Capital Deployed $35.3 million $58.4 million $49.9 million $71.1 million $34.2 million Investments Monetized $43.8 million $28.3 million $35.5 million $30.0 million $40.3 million Total Fair Value of

  34. Slide 34: Distributions

    Distributions March 2022 © 2022 Great Elm Capital Corp. 34

  35. Slide 35: Distributions: Quarterly Cash Dividends

    Distributions: Quarterly Cash Dividends Quarterly Distributions Quarter Ending March 31, 2022 Quarter Ending June 30, 2022  On November 5, 2021, we announced that our  In addition, our Board of Directors has approved Board of directors approved a quarterly a $0.45 per share cash distribution for t

  36. Slide 36: General Risks

    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 risk. In

  37. Slide 37: Contact Information

    Contact Information Investor Relations 800 South Street, Suite 230 Waltham, MA 02453 (617) 375-3006 investorrelations@greatelmcap.com March 2022 © 2022 Great Elm Capital Corp. 37

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