Great Elm Group, Inc. · NASDAQ:GEG

Great Elm — Great Elm Capital Group — Q2 FY2020 Earnings Presentation

35 slides from Great Elm's earnings presentation, Feb 10, 2020

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

   Great Elm Capital Group, Inc. Investor Presentation – Quarter Ended December 31, 2019 February 10, 2020 © 2020 Great Elm Capital Group, Inc.

2. Slide 2: Disclaimer

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

3. Slide 3: Table of Contents

   Table of Contents Slide Section 4 Performance Overview 6 Organizational Overview 9 Operating Companies: Great Elm DME 13 Investment Management 17 Real Estate 21 General Corporate 23 Financial Review 26 Summary 28 Q&A 29 Appendix © 2020 Great Elm Capital Group, Inc. 3

4. Slide 4: Performance Overview

   Performance Overview © 2020 Great Elm Capital Group, Inc. 4

5. Slide 5: Performance Overview: Quarter Ended December 31, 2019

   Performance Overview: Quarter Ended December 31, 2019 1 Revenue by Segment Net Income (Loss) by Segment Segment 2Q20 2Q19 Segment 2Q20 2Q19 DME $14.4 $13.2 DME ($0.7) $0.4 Investment Management $0.9 $0.9 Investment Management $0.0 $0.0 Real Estate 2 $1.3 $1.5 Real Estate 2 $0.1 $0.0 General Corporat

6. Slide 6: Organizational Overview

   Organizational Overview © 2020 Great Elm Capital Group, Inc. 6

7. Slide 7: 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, par

8. Slide 8: 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

9. Slide 9: Operating Companies: Great Elm DME

   Operating Companies: Great Elm DME © 2020 Great Elm Capital Group, Inc. 9

10. Slide 10: Operating Companies: Rapid Growth at DME

    Operating Companies: Rapid Growth at DME ▪ In FY 2Q20, Great Elm DME, Inc. (“DME”) generated $14.4 million of revenue, $0.7 million of net loss and $3.5 million of adjusted EBITDA1 ▪ Meaningful revenue growth in major product categories ▪ Management is investing heavily in people, processes and tech

11. Slide 11: 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

12. Slide 12: Operating Companies: DME Segment Financial Detail

    Operating Companies: DME Segment Financial Detail DME Segment Financials - Quarter Ended 12/31/19 Total revenues $ 14,391 Total expenses (15,067) GAAP Net income (676) Adjusted EBITDA: GAAP Net income (676) Interest expense, net 937 Depreciation and amortization expense 2,483 Transaction and integra

13. Slide 13: Investment Management

    Investment Management © 2020 Great Elm Capital Group, Inc. 13

14. Slide 14: 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, supplemented by Investment Management business, we expect accretive acquisitions of other BDCs, re

15. Slide 15: Investment Management: Management Fee Growth

    Investment Management: Management Fee Growth GECM Management Fees $900 $800 $754 $768 $755 758 760 Investment Management Fee Revenue 742 $693 $691 $700 $606 $600 $551 ($ Thousands) $500 $400 $300 $200 $100 $- 9/30/17 12/31/17 3/31/18 6/30/18 9/30/18 12/31/18 3/31/19 6/30/19 9/30/19 12/31/19 © 2020 G

16. Slide 16: Investment Management: Segment Financial Detail

    Investment Management: Segment Financial Detail IM Segment Financials - Quarter Ended 12/31/19 Near-Term Drivers of Incremental Total revenues $ 889 Free Cash Flow: Full Circle consulting fee (73) Total other expenses (811) ▪ We believe GECC will continue to grow its investment portfolio, including

17. Slide 17: Real Estate

    Real Estate © 2020 Great Elm Capital Group, Inc. 17

18. Slide 18: 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

19. Slide 19: 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

20. Slide 20: Real Estate: Segment Financial Detail

    Real Estate: Segment Financial Detail (1) Please refer to the disclaimers on slide 2 and the Adjusted EBITDA reconciliation tables in the Appendix © 2020 Great Elm Capital Group, Inc. 20

21. Slide 21: General Corporate

    General Corporate © 2020 Great Elm Capital Group, Inc. 21

22. Slide 22: General Corporate: Segment Financial Detail

    General Corporate: Segment Financial Detail General Corporate Financials - Quarter Ended 12/31/19 EBITDA and Free Cash Flow - Quarter Ended 12/31/19 Revenue: GAAP Net Loss (1,416) Total revenue $ 57 Adjusted EBITDA: GAAP net loss (1,416) Operating costs and expenses: Management fee (57) Public compa

23. Slide 23: Financial Review

    Financial Review © 2020 Great Elm Capital Group, Inc. 23

24. Slide 24: Financial Review: 2Q20 Consolidating Balance Sheets (Unaudited)

    Financial Review: 2Q20 Consolidating Balance Sheets (Unaudited) Investment DME Real Estate Corporate Eliminations Consolidated $ in thousands Management ASSETS Cash and cash equivalents, including restricted cash $ 548 $ 67 $ 967 $ 7,802 $ - $ 9,384 Accounts receivable, net 8,164 1,110 - 262 - 9,536

25. Slide 25: Financial Review: 2Q20 Consolidating Income Statement (Unaudited)

    Financial Review: 2Q20 Consolidating Income Statement (Unaudited) Investment DME Real Estate Corporate Eliminations Consolidated $ in thousands Management Total Revenues $ 14,391 $ 889 $ 1,271 $ 57 $ (57) $ 16,551 Cost of revenue (5,874) - - - (5,874) Depreciation and amortization expense (520) (179

26. Slide 26: Summary

    Summary © 2020 Great Elm Capital Group, Inc. 26

27. Slide 27: 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

28. Slide 28: Q&A

    Q&A © 2020 Great Elm Capital Group, Inc. 28

29. Slide 29: Appendix

    Appendix © 2020 Great Elm Capital Group, Inc. 29

30. Slide 30: Appendix: Non-GAAP Reconciliation

    Appendix: Non-GAAP Reconciliation For the three months ended December 31, 2019 Durable Medical Investment General $ in thousands Equipment Management 1 Real Estate Corporate Consolidated EBITDA: Net income (loss) - GAAP $ (676) $ 5 $ 60 $ (1,416) $ (2,027) Interest expense 937 41 655 - 1,633 Depreci

31. Slide 31: Appendix: Non-GAAP Reconciliation (Continued)

    Appendix: Non-GAAP Reconciliation (Continued) For the six months ended December 31, 2019 Durable Medical Investment General $ in thousands Equipment Management 1 Real Estate Corporate Consolidated EBITDA: Net income (loss) - GAAP $ (1,495) $ (40) $ 120 $ (3,890) $ (5,305) Interest expense 1,933 83 1

32. Slide 32: Appendix: Non-GAAP Reconciliation (Continued)

    Appendix: Non-GAAP Reconciliation (Continued) For the three months ended December 31, 2018 Durable Medical Investment General 1 $ in thousands Equipment Management Real Estate Corporate 4 Consolidated EBITDA: Net income (loss) - GAAP $ 399 $ (7) $ 38 $ (4,706) $ (4,276) Interest expense 1,081 44 663

33. Slide 33: Appendix: Non-GAAP Reconciliation (Continued)

    Appendix: Non-GAAP Reconciliation (Continued) For the six months ended December 31, 2018 Durable Medical Investment General $ in thousands Equipment 3 Management 1 Real Estate Corporate 4 Consolidated EBITDA: Net income (loss) - GAAP $ 426 $ (696) $ 89 $ (6,104) $ (6,285) Interest expense 1,367 88 1

34. Slide 34: Appendix: Non-GAAP Reconciliation (Continued)

    Appendix: Non-GAAP Reconciliation (Continued) (1) Prior year non-GAAP adjustments have been updated to conform to current year presentation by removing adjustments associated with the adoption of ASC 606 Contracts with Customers. (2) Acquisition and integration related costs include transaction cost

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 © 2020 Great Elm Capital Group, Inc. 35

Great Elm Capital Group — Q2 FY2020 Earnings Presentation on 6ix