Great Elm Capital Corp. · NASDAQ:GECC
Great Elm Capital — Q2 2022 Earnings Presentation
32 slides from Great Elm Capital's earnings presentation, Aug 4, 2022
Slide 1: Great Elm Capital Corp. Investor Presentation
Great Elm Capital Corp. NASDAQ: GECC Investor Presentation Quarter Ended June 30, 2022 August 4, 2022
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,”
Slide 3: About GECC
About GECC ▪ Externally managed, total-return-focused BDC Great Elm Capital Corp. ▪ Significant insider ownership of GECC by GEG and its officers and directors ▪ To generate current income and capital appreciation by investing in debt and Investment Objective income generating equity securities, inc
Slide 4: Second Quarter 2022
Second Quarter 2022 (Quarter Ended 6/30/2022) August 2022 © 2022 Great Elm Capital Corp. 4
Slide 5: Second Quarter 2022: Overview
Second Quarter 2022: Overview ▪ NII of $1.2 million, or $0.23 per share, vs. $6.0 million, or $1.31 per share, (1Q22) and $2.1 million, or $0.54 per share (2Q21)(1) Net Investment ▪ NII for the quarter ended March 31, 2022 was positively impacted by the reversal of approximately $4.9 Income (“NII”)
Slide 6: Second Quarter 2022: Net Investment Income Analysis
Second Quarter 2022: Net Investment Income Analysis NII for the quarter ended June 30, 2022 was $1.2 million, or $0.23 per share(1), as compared to NII of $6.0 million, or $1.31 per share, for the quarter ended March 31, 2022(1) ▪ Removing the impact of expense reversal, Pro Forma Adjusted NII for t
Slide 7: Second Quarter 2022: NAV Walk
Second Quarter 2022: NAV Walk Net assets were approximately $97.6 million ($12.84 per share(1)) on June 30, 2022, as compared to $69.3 million ($15.06 per share(1)) on March 31, 2022 Value Impact Description $ Million $/Share Research Now - 2nd Lien ($0.7 million) ($0.14) Avanti Related Securities (
Slide 8: Portfolio Review
Portfolio Review (Quarter Ended 6/30/2022) August 2022 © 2022 Great Elm Capital Corp. 8
Slide 9: Cash Generating Portfolio Comparison
Portfolio Review: Cash Generating Portfolio Comparison(1) 42 Debt $153.2 million 10.3% Investments Fair Value Wtd. Avg. CY(3) $201.0 million Fair Value(2) 6/30/22 48 Portfolio Investments 6 Equity $47.8 million 15.4% 11.5% Wtd. Avg. CY(3) Investments Fair Value Wtd. Avg. CY(3) 35 Debt $144.5 million
Slide 10: Cash Generating Portfolio - Concentrations
Portfolio Review: Cash Generating Portfolio - Concentrations (1) Strong Industry Diversification and Average Position Size 3/31/2022 6/30/2022 $4.7 million Average Position Size & 18 Industries $4.2 million Average Position Size & 19 Industries Specialty Finance Specialty Finance 14.9% 15.0% Energy
Slide 11: Cash Generating Portfolio Investment Type Mix
Portfolio Review: Cash Generating Portfolio Investment Type Mix (1) Broadened Investment Universe and Exposure in Specialty Finance (“SF”) 3/31/2022 6/30/2022 11.6% Weighted Average Current Yield 11.5% Weighted Average Current Yield 4.9% 10.2% 11.9% 22.4% 1L 24.9% 1L 10.5% 2L 2L SF - Equity SF - Equ
Slide 12: Quarterly Investment Activity
Portfolio Review: Quarterly Investment Activity ▪ During Q2 2022, deployed $44.7 million, excluding SPACs, into 27 investments at a Deployment of weighted average current yield of 9.2% Capital ▪ During Q2 2022, monetized $34.0 million, excluding SPACs, across 21 investments, in whole or in part, at
Slide 13: Total Quarter End Portfolio Detail
Portfolio Review: Total Quarter End Portfolio Detail(1) Debt Investments: 44 95.6%(2) $153.2 million 75.0% 10.3%(2) Debt Investments Weighted Fair value of Of Portfolio Weighted Average Average Price as Debt in Debt Current Yield of % of Par Investments Investments Debt Investments Equity Investment
Slide 14: Total Quarter End Asset Mix
Portfolio Review: Total Quarter End Asset Mix Portfolio by Asset Type ($204.6mm) Debt Investments by Rate Type ($153.2mm)(1) Other Equity 2% ▪ Weighted SF - Equity 13% average fixed rate yield of SF - Debt Floating Rate 33% 10.4%(2) 15% Fixed Rate 67% Corporate Debt 60% ▪ Weighted Preferred Equity a
Slide 15: Total Quarter End Industry Breakdown
Total Quarter End Industry Breakdown June 30, 2022 Specialty Finance Investments at Percentage of Energy Midstream Industry Fair Value Fair Value Chemicals Specialty Finance 58,009 28.35% Metals & Mining Energy Midstream 31,423 15.36% Internet Media Chemicals 20,113 9.83% Oil & Gas Exploration & Pro
Slide 16: Great Elm Specialty Finance
Great Elm Specialty Finance August 2022 © 2022 Great Elm Capital Corp. 16
Slide 17: 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
Slide 18: 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
Slide 19: 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
Slide 20: GECC's Specialty Finance Growth
GECC’s Specialty Finance Growth Specialty Finance Percentage of GECC’s Investable Assets(1) 50.0% 45.0% 50.0% 40.0% 35.0% 30.0% 31.8% 28.9% 25.0% 20.0% 21.9% 15.0% 18.4% 10.0% 10.7% 5.0% 8.5% 6.3% 5.7% 4.5% 0.0% 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 Target (1) Investible Assets = Investments
Slide 21: 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
Slide 22: 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
Slide 23: 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
Slide 24: 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 ▪ Management cont
Slide 25: Financial Review
Financial Review (Quarter Ended 6/30/2022) August 2022 © 2022 Great Elm Capital Corp. 25
Slide 26: Financial Review: Per Share Data
Financial Review: Per Share Data Financial Highlights – Per Share Data Q2/2021 Q3/2021 Q4/20211 Q1/20222 Q2/2022 Earnings Per Share (“EPS”) $0.63 ($0.79) ($4.95) ($1.12) ($0.87) Net Investment Income (“NII”) $0.54 $0.39 $1.58 $1.31 $0.23 Per Share Net Realized and Unrealized $0.10 ($1.18) ($6.53) ($
Slide 27: Financial Review: Quarterly Operating Results
Financial Review: Quarterly Operating Results Q2/2021 Q3/2021 Q4/20211 Q1/2022 Q2/2022 $ in $000s Per Share2 Per Share2 Per Share2 Per Share2 Per Share2 Total Investment Income3 $6,233 $1.59 $7,373 $1.85 $6,353 $1.42 $5,558 $1.22 $5,513 $1.06 Interest Income 5,092 1.30 5,872 1.47 4,774 1.06 4,041 0.
Slide 28: Financial Review: Portfolio
Financial Review: Portfolio Financial Highlights - Portfolio Q2/2021 Q3/2021 Q4/2021 Q1/2022 Q2/2022 Capital Deployed $49.9 million $72.3 million $34.2 million $27.4 million $44.7 million Investments Monetized $35.5 million $30.0 million $40.3 million $26.9 million $34.0 million Total Fair Value of
Slide 29: Distributions
Distributions August 2022 © 2022 Great Elm Capital Corp. 29
Slide 30: Quarterly Cash Distributions
Quarterly Cash Distributions Quarterly Distributions Quarter Ending September 30, 2022 Quarter Ending December 31, 2022 ▪ On May 11, 2022, the Company announced that ▪ In addition, the company’s Board of Directors its Board of Directors approved a quarterly cash has approved a $0.45 per share cash d
Slide 31: 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
Slide 32: Contact Information
Contact Information Investor Relations Contact: Garrett Edson investorrelations@greatelmcap.com August 2022 © 2022 Great Elm Capital Corp. 32