Great Elm Capital Corp. · NASDAQ:GECC
Great Elm Capital — Q1 2023 Earnings Presentation
31 slides from Great Elm Capital's earnings presentation, May 4, 2023
Slide 1: Investor Presentation Quarter Ended March 31, 2023
Investor Presentation Quarter Ended March 31, 2023 May 4, 2023 NASDAQ: GECC
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: First Quarter 2023 Overview
First Quarter 2023 Overview NII of $2.8 million, or $0.37 per share in 1Q 23, vs. $2.3 million, or $0.30 per share in 4Q 22 Net Investment • NII up 26% quarter over quarter, driven by strategic capital deployment and rotation into Income (“NII”) higher-yielding floating rate investments • Highest ca
Slide 4: Quarterly Cash Distributions Quarter Ending June 30, 2023
Quarterly Cash Distributions Quarter Ending June 30, 2023 $0.35 June 30 17.4% 11.8% Per Share Payable Date Annualized Dividend Annualized Dividend Yield on Stock Price Yield on NAV On May 4, 2023, the The second quarter 2023 The cash distribution The cash distribution Company announced that cash dis
Slide 5: About GECC
About GECC Great Elm Capital Corp. Investment Objective Portfolio Overview Externally managed, total-return- To generate current income and • $226.9 million of portfolio fair value focused BDC capital appreciation by investing • $90.3 million of net asset value (“NAV”) Significant insider ownership
Slide 6: Net Investment Income (NII)
Net Investment Income (NII) NII for the quarter ended March 31, 2023 was $2.8 million, or $0.37 per share1, compared to NII of $2.3 million, or $0.30 per share1, for the quarter ended December 31, 2022 NII by Quarter $3,000 $2,500 $2,000 $1,500 $1,000 $500 $0 2 2 $ in $000s 1Q20 2Q20 3Q20 4Q20 1Q21
Slide 7: Total Investment Income (TII)
Total Investment Income (TII) TII for the quarter ended March 31, 2023 was $8.4 million and was the highest cash income quarter in the Company’s history Cash Accretion + PIK $9,000 $8,000 $7,000 $6,000 $5,000 $4,000 $3,000 $2,000 $1,000 $0 $ in $000s 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22
Slide 8: Net Asset Value (NAV) Bridge
Net Asset Value (“NAV”) Bridge1 Net assets were approximately $90.3 million ($11.88 per share1) on March 31, 2023, as compared to $84.8 million ($11.16 per share1) on December 31, 2022 1 Based on shares outstanding of 7.6 million as of March 31, 2023, and December 31, 2022. May 4, 2023 ©2023 Great E
Slide 9: Q1 2023 Portfolio Review
Q1 2023 Portfolio Review May 4, 2023 ©2023 Great Elm Capital Corp. 9
Slide 10: Total Quarter End Portfolio Detail
Total Quarter End Portfolio Detail1 Debt Investments 89.8%2 $184.0 81.1% 48 Weighted million Of Portfolio 13.1%2 Debt Average Price as Weighted Average Current Fair Value of in Debt Investments % of Par Investments Yield of Debt Investments Debt Investments Equity Investments Fair Value % of Portfol
Slide 11: Portfolio Concentration Overview
Portfolio Concentration Overview1 Strong Industry Breadth and Diversified Position Concentration 12/31/2022 3/31/2023 $3.5 Million Average Position Size & 23 Industries $3.7 Million Average Position Size & 22 Industries Specialty Finance Specialty Finance 21% Chemicals Chemicals 26% 25% 25% Energy M
Slide 12: Portfolio Investment Type Mix
Portfolio Investment Type Mix1 Investment Universe and Exposure 12/31/2022 3/31/2023 12.4% Weighted Average Current Yield2 13.1% Weighted Average Current Yield2 10% 1L 12% 1L 7% 2L 2L 30% 8% 39% SF - Equity SF - Equity 15% SF - Credit SF - Credit 26% in 14% Specialty 25% in Finance Preferred Special
Slide 13: Quarterly Investment Activity
Quarterly Investment Activity Deployment of $46.0 million deployed into 18 investments at a weighted average current yield of 12.3% in 1Q 23 Capital During 1Q 23, monetized $52.8 million across 34 investments, in whole or in part, at a weighted average current yield of 10.1% Monetization of • Includ
Slide 14: Total Quarter End Asset Mix
Total Quarter End Asset Mix Portfolio by Asset Type ($226.9mm) Debt Investments by Rate Type ($184.0mm)1 Other Equity 3% SF - Equity 11% Weighted average fixed SF - Debt rate yield of Fixed Rate 14% 10.3%2 42% Floating Corporate Rate Dividend- Credit 58% Weighted average Paying Equity 67% floating r
Slide 15: Total Quarter End Industry Breakdown
Total Quarter End Industry Breakdown Specialty Finance March 31 ,2023 Chemicals Investments at Fair % of Other (15 Industries) Industry Value ($ in 000s) Fair Value Insurance Specialty Finance $56,589 24.9% Chemicals $26,204 11.6% Oil & Gas E&P Insurance $14,591 6.4% Energy Midstream Oil & Gas E&P $
Slide 16: Great Elm Specialty Finance
Great Elm Specialty Finance May 4, 2023 ©2023 Great Elm Capital Corp. 16
Slide 17: GECC's Specialty Finance Growth
GECC’s Specialty Finance Growth Specialty Finance as a Percentage of GECC’s Investable Assets1 40% 30% 20% 31.8% 28.9% 26.2% 24.1% 24.9% 10% 21.9% 18.4% 8.5% 5.7% 0% 1Q 21 2Q 21 3Q 21 4Q 21 1Q 22 2Q 22 3Q 22 4Q 22 1Q23 1 Investible Assets = Investments + Cash, net of unsettled trades. May 4, 2023 ©2
Slide 18: 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 Specialty Finance Companies (SFCs) generates two levels of proprietary investment exposure for investors: •
Slide 19: Continuum of Lending Benefits
Continuum of Lending Benefits A “Continuum of Lending” platform provides significant benefits By having a Continuum of Lending The Continuum allows lenders to improve platform, we will be able to offer “stickiness” of clientele and hold onto key borrowers economic incentives to stay borrowers longer
Slide 20: Specialty Finance Focus and Execution
Specialty Finance Focus and Execution Great Elm is utilizing a 3-pronged approach to build out its specialty finance platform 1 2 3 Acquisitions Strategic Relationships Direct Originations Actively source complimentary acquisition Increase deal flow to the GESF family through Proprietary origination
Slide 21: Great Elm Specialty Finance
Great Elm Specialty Finance Great Elm Specialty Finance (“GESF”) is a subsidiary of GECC formed to oversee Specialty Finance investments and all future specialty finance acquisitions, strategic partnerships, and direct origination opportunities • GESF oversees existing platforms (shaded below) and o
Slide 22: GESF: Great Elm Healthcare Finance
GESF: Great Elm Healthcare Finance Formed and funded in November 2022 in partnership with Berkadia • Acquired a portfolio of loans in December 2022 • Building a robust pipeline of proprietary deal flow • Closed $50m committed credit facility (with uncommitted $50m accordion) with Encina Lender Finan
Slide 23: GESF: Sterling Commercial Credit
GESF: Sterling Commercial Credit Provider of asset-based loans to small and middle market companies throughout the United States Direct Lending Solution Diversified Products Sterling provides short term, asset-based Sterling offers a variety of product types loans and working capital solutions to to
Slide 24: GESF: Lenders Funding
GESF: Lenders Funding Private funding and risk sharing source for factors and asset-based lenders Flexible Lending Solution Customized Structures Lenders Funding purchases Lenders Funding offers customized, participations in factoring and asset- creative participation structures to meet based lendin
Slide 25: GESF: Prestige Capital
GESF: Prestige Capital Provider of “spot factoring” services, providing clients with opportunities to sell individual accounts receivable for upfront payments Functional Risk Management Prestige purchases the individual The combination of clients’ capital needs accounts receivable of creditworthy an
Slide 26: Q1 2023 Financial Review
Q1 2023 Financial Review May 4, 2023 ©2023 Great Elm Capital Corp. 26
Slide 27: Financial Review: Per Share Data
Financial Review: Per Share Data Financial Highlights – Per Share Data 1Q 221,2 2Q 22 3Q 22 4Q 22 1Q 23 Earnings Per Share (“EPS”) ($1.12) ($0.87) $0.18 ($0.96) $1.07 Net Investment Income (“NII”) $1.31 $0.23 $0.14 $0.30 $0.37 Per Share Pre-Incentive NII Per Share $0.24 $0.23 $0.14 $0.37 $0.47 Net R
Slide 28: Financial Review: Quarterly Operating Results
Financial Review: Quarterly Operating Results 1Q 2022 2Q 2022 3Q 2022 4Q 2022 1Q 2023 $ in $000s Per Share1 Per Share1 Per Share1 Per Share1 Per Share1 Total Investment Income2 $5,558 $1.22 $5,513 $1.06 $6,033 $0.79 $7,325 $0.96 $8,410 $1.11 Interest Income 4,041 0.89 3,734 0.72 4,990 0.66 5,919 0.7
Slide 29: Financial Review: Portfolio
Financial Review: Portfolio Financial Highlights - Portfolio 1Q 22 2Q 22 3Q 22 4Q 22 1Q 23 Capital Deployed $27.4 million $44.7 million $39.9 million $37.6 million $46.0 million Investments Monetized $26.9 million $34.0 million $28.4 million $20.4 million $52.8 million Total Fair Value of Investment
Slide 30: 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 31: Contact Information
Contact Information Media & Investor Contact: Investors Relations investorrelations@greatelmcap.com May 4, 2023 ©2023 Great Elm Capital Corp. 31