Great Elm Group, Inc. · NASDAQ:GEG

Great Elm — Great Elm Capital Group — FY2019 Earnings Presentation

36 slides from Great Elm's earnings presentation, Sep 13, 2019

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

   Great Elm Capital Group, Inc. Investor Presentation – Quarter and Year Ended June 30, 2019 September 13, 2019 © 2019 Great Elm Capital Group, Inc.

2. Slide 2: Disclaimer

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

3. Slide 3: Table of Contents

   Table of Contents Slide Section 4 Performance Overview 7 Organizational Overview 10 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: Fourth Quarter 2019

   Performance Overview: Fourth Quarter 2019  For the quarter ended June 30, 2019, Great Elm reported:  Consolidated Revenue of $15.1 million vs. $2.1 million during the same period the prior year  DME: $12.9 million  Investment Management: $0.9 million  Real Estate: $1.3 million  General Corpora

6. Slide 6: Performance Overview: Full Year 2019

   Performance Overview: Full Year 2019  For the full year ended June 30, 2019, Great Elm reported:  Consolidated Revenue of $51.2 million vs. $5.9 million during the same period the prior year  DME: $41.9 million  Investment Management: $3.8 million  Real Estate: $5.5 million  General Corporate:

7. Slide 7: Organizational Overview

   Organizational Overview © 2019 Great Elm Capital Group, Inc. 7

8. 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  Gr

9. 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 8% of GEC’s outstanding shares1 Director  The directors of GEC collectively own

10. Slide 10: Operating Companies: Great Elm DME

    Operating Companies: Great Elm DME © 2019 Great Elm Capital Group, Inc. 10

11. Slide 11: Operating Companies: Rapid Growth at DME

    Operating Companies: Rapid Growth at DME  In FY 4Q19, Great Elm DME, Inc. (“DME”) generated $12.9 million of revenue and $2.8 million of adjusted EBITDA1  Meaningful revenue growth in major product categories  Management is investing heavily in people, processes and technology to enhance DME’s sc

12. Slide 12: 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

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

    Operating Companies: DME Segment Financial Detail DME Segment Financials - Quarter Ended 6/30/19 Total revenues $ 12,885 (Total opex) (13,055) Operating income (170) Adjusted EBITDA: Operating income (170) Depreciation and amortization 2,033 Transaction related costs 226 Location build out 103 Chang

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 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,

16. Slide 16: Investment Management: Management Fee Growth

    Investment Management: Management Fee Growth GECM Management Fees $900 $800 $754 $768 $755 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 © 2019 Great Elm

17. Slide 17: Investment Management: Segment Financial Detail

    Investment Management: Segment Financial Detail IM Segment Financials - Quarter Ended 6/30/19 Total revenues $ 926 (Full Circle consulting fee) (183) Near-Term Drivers of Incremental Free Cash Flow: (Total opex) (834) Operating income (91)  We believe GECC will continue to grow its investment portf

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 6/30/19 Revenues: GAAP Net income 64 Rental income $1,271 EBITDA: GAAP Net income 64 Operating costs and expenses: Interest 660 Insurance (38) Taxes - Real estate taxes - Depreciation and amortization 431 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 6/30/19 EBITDA and Free Cash Flow - Quarter Ended 6/30/19 GAAP Net income 41 Revenue: EBITDA: Total revenue 58 GAAP net income 41 Net loss from discontinued operations 50 Operating costs and expenses: Interest,

24. Slide 24: Financial Review

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

25. Slide 25: Financial Review: 4Q19 Consolidating Balance Sheets (Unaudited)

    Financial Review: 4Q19 Consolidating Balance Sheets (Unaudited) Durable Medical Investment Equipment Management Real Estate General Corporate Eliminations Consolidated ASSETS Cash and cash equivalents, including restricted cash $ 1,435 $ 288 $ 719 $ 10,388 $ - $ 12,830 Inventories 1,336 - - - - 1,33

26. Slide 26: Financial Review: FY19 Consolidating Income Statement (Unaudited)

    Financial Review: FY19 Consolidating Income Statement (Unaudited) Durable Medical Investment General Equipment Management Real Estate Corporate Eliminations Consolidated Total revenue $ 41,880 $ 3,841 $ 5,459 $ 123 $ (123) $ 51,180 Operating costs and expenses: Cost of revenue (17,261) - - - - (17,2

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  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

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 June 30, 2019 Durable Medical Investment General (1) (2) (Dollar amounts in thousands) Equipment Management Real Estate Corporate Total Net income (loss) - GAAP $ (1,016) $ (136) $ 64 $ 41 $ (1,047) EBITDA: Net income (loss) - GAAP $ (1,01

32. Slide 32: Appendix: Non-GAAP Reconciliation

    Appendix: Non-GAAP Reconciliation For the year ended June 30, 2019 Durable Medical Investment General (1) (Dollar amounts in thousands) Equipment Management Real Estate Corporate Total Net income (loss) - GAAP $ (1,107) $ (995) $ 191 $ (1,220) $ (3,131) EBITDA: Net loss - GAAP $ (1,107) $ (995) $ 19

33. Slide 33: Appendix: Non-GAAP Reconciliation

    Appendix: Non-GAAP Reconciliation For the three months ended June 30, 2018 Durable Medical Investment General (1) (2) (Dollar amounts in thousands) Equipment Management Real Estate Corporate Total Net income (loss) - GAAP $ - $ (1,378) $ 60 $ (1,214) $ (2,532) EBITDA: Net income (loss) - GAAP $ - $

34. Slide 34: Appendix: Non-GAAP Reconciliation

    Appendix: Non-GAAP Reconciliation For the year ended June 30, 2018 Durable Medical Investment General (1) (7) (Dollar amounts in thousands) Equipment Management Real Estate Corporate Total Net loss - GAAP $ - $ (4,910) $ 83 $ (6,679) $ (11,506) EBITDA: Net loss - GAAP $ - $ (4,910) $ 83 $ (6,679) $

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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