Great Elm Group, Inc. · NASDAQ:GEG

Great Elm — Great Elm Capital Group — Q1 FY2019 Earnings Presentation

33 slides from Great Elm's earnings presentation, Nov 9, 2018

  1. Slide 1: Investor Presentation – Quarter Ended September 30, 2018

    Great Elm Capital Group, Inc. Investor Presentation – Quarter Ended September 30, 2018 November 9, 2018 © 2018 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 individual

  3. Slide 3: Table of Contents

    Table of Contents Slide(s) 4-7 Organizational Overview 8 - 14 Operating Companies 15 - 18 Investment Management 19 - 22 Real Estate 23 - 26 Financial Review 27 - 28 Summary 29 Q&A 30 - 33 Appendix © 2018 Great Elm Capital Group, Inc. 3

  4. Slide 4: Organizational Overview

    Organizational Overview © 2018 Great Elm Capital Group, Inc. 4

  5. Slide 5: Organizational Overview

    Organizational Overview Objective: to create long-term shareholder value by building a business across the following three verticals Investment Management Real Estate Operating Companies Great Elm Capital Management, Inc. (“GECM”) Great Elm FM Acquisition, Inc. Great Elm DME Holdings, Inc.  SEC Reg

  6. Slide 6: Organizational Overview: Drivers of Shareholder Value

    Organizational Overview: Drivers of Shareholder Value  Grow GECC through capital raises, as well as by acquiring other BDCs Investment  Increase assets under management (“AUM”) via new fund launches, Management SMAs and co-investments  Seek opportunities, such as the Fort Myers transaction that c

  7. Slide 7: Organizational Overview: Alignment of Interest

    Organizational Overview: Alignment of Interest Employee Share  Employees of GEC/GECM collectively own over 1.8 million shares in Ownership GEC, representing approximately 7.0% of the shares outstanding1 Director Share  The directors of GEC collectively own approximately 10.5% of GEC’s Ownership ou

  8. Slide 8: Operating Companies: Valley Healthcare Group & Northwest Medical

    Operating Companies: Valley Healthcare Group & Northwest Medical © 2018 Great Elm Capital Group, Inc. 8

  9. Slide 9: Operating Companies: Deal Summary

    Operating Companies: Deal Summary  In September 2018, Great Elm announced that we partnered with the management team of Valley Healthcare Group (“VHG”) to acquire and combine VHG and Northwest Medical (“NWM”)  VHG and NWM, which together serve approximately 70,000 patients annually across five sta

  10. Slide 10: Operating Companies: Terms of the Capital Structure

    Operating Companies: Terms of the Capital Structure  Revolving Credit Facility (“DME Credit Facility”)  Size: up to $10.0 million, $6.3 million currently drawn as of SOURCES & USES1 9/30/2018 ($ in 000's)  Rate: PRIME plus 0.40% (effective rate at 9/30/2018 was 5.65%) Sources  Maturity: August 3

  11. Slide 11: Operating Companies: Summary of Progress Post-Closing

    Operating Companies: Summary of Progress Post-Closing  Growth in Adjusted EBITDA1 of 9.3% for the LTM ended 9/30/2018 vs. Financial 6/30/2018 Update  Growth in revenue of 1.3% for the LTM ended 9/30/2018 vs. 6/30/2018  Significant levered free cash flow generation of $587K for September 2018 Impl

  12. Slide 12: Operating Companies: Financial Update

    Operating Companies: Financial Update  For the LTM ended September 30, 2018, VHG and NWM would have generated $14.1 million in Pro Forma Adjusted EBITDA1, growth of 9.3% over the previously disclosed $12.9 million of Pro Forma Adjusted EBITDA1 for the LTM period ended June 30, 2018  For the LTM en

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

    Operating Companies: DME Segment Financial Detail DME Inc. Financials - Period Ended 09/30/2018 Total revenues $ 4,091 (Total opex) (3,798) Operating income 293 Depreciation and amortization 422 Other income 45 Transaction costs & mgmt fees 560 Adj. EBITDA1 $ 1,320 (Capex) (490) (Interest expense -

  14. Slide 14: Operating Companies: Potential M&A

    Operating Companies: Potential M&A  One of the compelling investment considerations for the DME platform was the opportunity to partner with a seasoned management team who has successfully integrated seven acquisitions (prior to the GEC transaction) to consolidate a fragmented industry of approxima

  15. Slide 15: Investment Management

    Investment Management © 2018 Great Elm Capital Group, Inc. 15

  16. Slide 16: Investment Management: A Scalable, High Margin Business

    Investment Management: A Scalable, High Margin Business AUM GROWTH AUM Growth  Grow GECC’s AUM through the issuance HIGH MARGINS of additional debt and equity, complemented with accretive  Given the largely fixed cost nature of the acquisitions of other BDCs, resulting in asset management business

  17. Slide 17: Investment Management: AUM by Vehicle and Revenue Growth

    Investment Management: AUM by Vehicle ($ in M) and Revenue Growth1 ($ in K)  From September 2017 to September 2018, GECM grew $250.0 $754 $768 $800 GECC’s investment portfolio by $693 approximately 33% year-over- $1 $700 Investment Management Revenue ($ in Thousands) $612 year and its management fe

  18. Slide 18: Investment Management: Segment Financial Detail

    Investment Management: Segment Financial Detail Key Near-Term Drivers of Incremental Free Cash GECM Financials - Quarter Ended 09/30/2018 Flow:  We believe GECC will grow its investment Total revenues $ 940 portfolio, including via incremental capital raises, (Full Circle consulting fee) (204) whic

  19. Slide 19: Real Estate

    Real Estate © 2018 Great Elm Capital Group, Inc. 19

  20. Slide 20: Real Estate: A Refresher

    Real Estate: A Refresher We view Credit Tenant Lease financings in Real Estate 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 position

  21. Slide 21: Real Estate: Fort Myers – Organic Equity Growth

    Real Estate: Fort Myers – Organic Equity Growth $65.00 8.0x 7.0x 7.1x  Assuming a constant 7.0x $60.00 6.5x property value of $61.2 $3.01 $4.02 $5.29 5.9x million, the chart at the $6.63 6.0x $55.00 $8.03 right depicts the Debt and Equity Values ($ in Millions) $9.51 $14.27 $11.04 5.3x growth in GE

  22. Slide 22: Real Estate: Segment Financial Detail

    Real Estate: Segment Financial Detail EBITDA and Free Cash Flow - Quarter Ended Real Estate Financials - Quarter Ended 09/30/2018 09/30/2018 Revenues: GAAP Net Income $ 51 Rental income $ 1,442 EBITDA: GAAP net income 51 Operating costs and expenses: Interest 665 Insurance (39) Taxes - Real estate t

  23. Slide 23: Financial Review

    Financial Review © 2018 Great Elm Capital Group, Inc. 23

  24. Slide 24: Financial Review: Consolidating Balance Sheets

    Financial Review: Consolidating Balance Sheets Investment Corporate Management Real Estate DME DME Holdco Eliminations Consolidated ASSETS Current assets: Cash and cash equivalents $ 21,517 $ 305 $ 628 $ 960 $ - $ - $ 23,409 Inventories - - - 1,698 - - 1,698 Accounts receivable - - - 5,813 - - 5,813

  25. Slide 25: Financial Review: Consolidating Income Statement

    Financial Review: Consolidating Income Statement Investment Corporate Management Real Estate DME DME Holdco Eliminations Consolidated Total revenue $ - $ 940 $ 1,442 $ 4,091 $ - $ - $ 6,473 Operating costs and expenses: Transaction costs expensed (1,324) - - (542) - - (1,866) Depreciation and amorti

  26. Slide 26: Financial Review: Corporate Segment Financial Detail

    Financial Review: Corporate Segment Financial Detail Corporate Segment Financials - Quarter Ended 09/30/2018 EBITDA and Free Cash Flow - Quarter Ended 09/30/2018 Operating costs and expenses: GAAP Net Loss $ (1,398) Public company costs $ (1,115) Transaction costs (1,324) EBITDA: Other general and a

  27. Slide 27: Summary

    Summary © 2018 Great Elm Capital Group, Inc. 27

  28. Slide 28: Summary: Drivers of Shareholder Value

    Summary: Drivers of Shareholder Value  Focus on driving asset growth in GECC coupled with raising capital for SMAs / other Investment investment vehicles. Through leveraging the existing team and infrastructure, we Management anticipate this growth could result in an improvement in cash flow genera

  29. Slide 29: Q&A

    Q&A © 2018 Great Elm Capital Group, Inc. 29

  30. Slide 30: Appendix

    Appendix © 2018 Great Elm Capital Group, Inc. 30

  31. Slide 31: Appendix: Non-GAAP Reconciliation

    Appendix: Non-GAAP Reconciliation For the three months ended September 30, 2018 Investment Durable Medical General (Dollar amounts in thousands) Management Real Estate Equipment(1) Corporate(2) Total Net income (loss) - GAAP $ (689) $ 51 $ 27 $ (1,398) $ (2,009) EBITDA: Net income (loss) - GAAP $ (6

  32. Slide 32: Appendix: Non-GAAP Reconciliation

    Appendix: Non-GAAP Reconciliation For the three months ended September 30, 2017 Investment Durable Medical General (Dollar amounts in thousands) Management Real Estate(4) Equipment(1) Corporate Total Net loss - GAAP $ (1,626) $ - $ - $ (1,758) $ (3,384) EBITDA: Net loss - GAAP $ (1,626) $ - $ - $ (1

  33. Slide 33: Appendix: Contact Information

    Appendix: Contact Information Investor Relations Meaghan K. Mahoney Senior Vice President 800 South Street, Suite 230 Waltham, MA 02453 Phone: +1 (617) 375-3006 investorrelations@greatelmcap.com © 2018 Great Elm Capital Group, Inc. 33

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