Great Elm Group, Inc. · NASDAQ:GEG

Great Elm — Great Elm Capital Group — Q2 2019 Earnings Presentation

35 slides from Great Elm's earnings presentation, Feb 11, 2019

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

   Great Elm Capital Group, Inc. Investor Presentation – Quarter Ended December 31, 2018 February 11, 2019 © 2019 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 Section 4 Organizational Overview 8 Operating Companies: Great Elm DME 14 Investment Management 18 Real Estate 22 Financial Review 26 Summary 28 Q&A 29 Appendix 35 Contact Information © 2019 Great Elm Capital Group, Inc. 3

4. Slide 4: Organizational Overview

   Organizational Overview © 2019 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 Management  Increase assets under management (“AUM”) via new fund launches, SMAs and co-investments  Seek opportunities, such as the Fort Myers transaction, that

7. Slide 7: Organizational Overview: Alignment of Interest

   Organizational Overview: Alignment of Interest Employee  Employees of GEC/GECM collectively own over 1.8 million shares in GEC, Share representing greater than 7% of the shares outstanding1 Ownership Director  The directors of GEC collectively own approximately 11% of GEC’s Share outstanding share

8. Slide 8: Operating Companies: Great Elm DME

   Operating Companies: Great Elm DME © 2019 Great Elm Capital Group, Inc. 8

9. Slide 9: Operating Companies: Rapid Growth at DME

   Operating Companies: Rapid Growth at DME  In September 2018, Great Elm acquired Valley Healthcare Group and combined it with Northwest Medical Group for $63.6 million  The purchase price corresponded to 4.9x June 30 LTM pro forma adjusted EBITDA of $12.9 million, which included anticipated cost sy

10. Slide 10: Operating Companies: The Timing of DME Cash Flows

    Operating Companies: The Timing of DME Cash Flows  DME is characterized by upfront capex requirements that potentially generate durable, long-term free cash flow  DME’s patient-service oriented model necessitates that it stock product in inventory for quick delivery following a patient order  Res

11. Slide 11: Operating Companies: Foundation for Long-Term Profitability

    Operating Companies: Foundation for Long-Term Profitability Strong  Double-digit growth year-over-year in referrals, new patient setups and Operating active rentals in CPAP / BiPAP and Ventilators Growth  $2.1 million of capital expenditures was recorded in the quarter Limited  Approximately $1.9

12. Slide 12: Operating Companies: M&A

    Operating Companies: M&A  In addition to driving organic revenue, EBITDA and volume growth, DME intends to acquire complementary, patient- focused businesses  The respiratory-focused, durable medical equipment industry is characterized by a fragmented landscape that we believe offers a significant

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

    Operating Companies: DME Segment Financial Detail DME Segment Financials - Quarter Ended 12/31/18 Total revenues $ 13,152 (Total opex) (11,672) Operating income 1,480 Adjusted EBITDA: Operating income 1,480 Depreciation and amortization 2,142 Other income / (expense) (42) Transaction costs & mgmt fe

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 AUM Growth  Given the largely fixed cost nature of the of additional debt and equity, Investment Management business, we complemented with accretive expect adjusted EBITDA margins

16. Slide 16: Investment Management: Management Fee Growth

    Investment Management: Management Fee Growth Management Fees $900 $800 $754 $768 $755 $693 Management Fees ($ Thousands) $700 $612 $600 $546 $547 $500 $400 $300 $200 $100 $- 6/30/2017 9/30/2017 12/31/2017 3/31/2018 6/30/2018 9/30/2018 12/31/2018 © 2019 Great Elm Capital Group, Inc. 16

17. Slide 17: Investment Management: Segment Financial Detail

    Investment Management: Segment Financial Detail IM Segment Financials - Quarter Ended 12/31/18 Near-Term Drivers of Incremental Free Cash Flow: Total revenues $ 915 (Full Circle consulting fee) (198)  We believe GECC will grow its investment (Total opex) (680) portfolio, including via incremental c

18. Slide 18: Real Estate

    Real Estate © 2019 Great Elm Capital Group, Inc. 18

19. Slide 19: Real Estate: A Refresher

    Real Estate: A Refresher 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 pref

20. Slide 20: 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

21. Slide 21: Real Estate: Segment Financial Detail

    Real Estate: Segment Financial Detail Real Estate Financials - Quarter Ended 12/31/2018 EBITDA and Free Cash Flow - Quarter Ended Revenues: GAAP Net Income 38 Rental income $1,474 EBITDA: GAAP net income 38 Operating costs and expenses: Interest 663 Insurance (40) Taxes - Real estate taxes (159) Dep

22. Slide 22: Financial Review

    Financial Review © 2019 Great Elm Capital Group, Inc. 22

23. Slide 23: Financial Review: 2Q19 Consolidating Balance Sheets

    Financial Review: 2Q19 Consolidating Balance Sheets Investment General Corporate Management Real Estate DME Eliminations Consolidated ASSETS Current assets: Cash and cash equivalents $ 19,214 $ 97 $ 705 $ 2,047 $ - $ 22,063 Inventories - - - 1,587 - 1,587 Accounts receivable 390 967 - 7,232 - 8,589

24. Slide 24: Financial Review: 2Q19 Consolidating Income Statement

    Financial Review: 2Q19 Consolidating Income Statement Investment General Corporate Management Real Estate DME Eliminations Consolidated Total revenue $ 52 $ 915 $ 1,474 $ 13,152 $ (52) $ 15,541 Operating costs and expenses: Transaction costs expensed (135) - - (2) - (137) Depreciation and amortizati

25. Slide 25: Financial Review: 2Q19 Corporate Segment Financial Detail

    Financial Review: 2Q19 Corporate Segment Financial Detail EBITDA and Free Cash Flow - Quarter Ended 12/31/18 General Corporate Financials - Quarter Ended 12/31/18 GAAP Net Loss (4,706) Revenue: EBITDA: Total revenue 52 GAAP net loss (4,706) Interest, taxes, depreciation Operating costs and expenses:

26. Slide 26: Summary

    Summary © 2019 Great Elm Capital Group, Inc. 26

27. Slide 27: Summary: Drivers of Shareholder Value

    Summary: Drivers of Shareholder Value  Focus on driving asset growth in GECC and raising capital for SMAs / other Investment investment vehicles Management  Leverage the existing team and infrastructure to improve free cash flow generation  Seek to enhance the value of existing and potentially ac

28. Slide 28: Q&A

    Q&A © 2019 Great Elm Capital Group, Inc. 28

29. Slide 29: Appendix

    Appendix © 2019 Great Elm Capital Group, Inc. 29

30. Slide 30: Appendix: Non-GAAP Reconciliation

    Appendix: Non-GAAP Reconciliation For the three months ended December 31, 2018 Durable Investment Medical General (Dollar amounts in thousands) Management Real Estate Equipment Corporate(2) Total Net income (loss) - GAAP $ (7) $ 38 $ 399 $ (4,706) $ (4,276) EBITDA: Net income (loss) - GAAP $ (7) $ 3

31. Slide 31: Appendix: Non-GAAP Reconciliation

    Appendix: Non-GAAP Reconciliation For the six months ended December 31, 2018 Durable Investment Medical General (Dollar amounts in thousands) Management Real Estate(5) Equipment(1) Corporate Total Net income (loss) - GAAP $ (696) $ 89 $ 426 $ (6,104) $ (6,285) EBITDA: Net loss - GAAP $ (696) $ 89 $

32. Slide 32: Appendix: Non-GAAP Reconciliation

    Appendix: Non-GAAP Reconciliation For the three months ended December 31, 2017 Durable Investment Medical General (Dollar amounts in thousands) Management Real Estate Equipment(1) Corporate(2) Total Net income (loss) - GAAP $ 150 $ - $ - $ (1,352) $ (1,202) EBITDA: Net income (loss) - GAAP $ 150 $ -

33. Slide 33: Appendix: Non-GAAP Reconciliation

    Appendix: Non-GAAP Reconciliation For the six months ended December 31, 2017 Durable Investment Medical General (Dollar amounts in thousands) Management Real Estate(4) Equipment(1) Corporate Total Net loss - GAAP $ (1,477) $ - $ - $ (3,109) $ (4,586) EBITDA: Net loss - GAAP $ (1,477) $ - $ - $ (3,10

34. Slide 34: 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 net loss includes net loss attributable to discontinued operations. (3) Unrecognized incentive fees earned include amounts

35. Slide 35: 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. 35

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