Great Elm Capital Corp. · NASDAQ:GECC
Great Elm Capital — Q4 2018 Earnings Presentation
47 slides from Great Elm Capital's earnings presentation, Mar 13, 2019
Slide 1: Investor Presentation – Quarter Ended December 31, 2018
Great Elm Capital Corp. (NASDAQ: GECC) Investor Presentation – Quarter Ended December 31, 2018 March 13, 2019 © 2019 Great Elm Capital Corp. Exhibit 99.2
Slide 2: Disclaimer
© 2019 Great Elm Capital Corp. Disclaimer 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 “believe,” “expect
Slide 3: GECC Snapshot
GECC Snapshot GECC Investment Objective Investment Strategy Externally managed, special situations-focused BDC Common stock trades as “GECC” and baby bonds as “GECCL” and “GECCM” on NASDAQ $0.083 per share monthly distribution1 Insiders own greater than 20% of GECC’s outstanding shares To generate b
Slide 4: Highlights and Recent Achievements
Highlights and Recent Achievements NII in excess of declared distributions in each quarter of 20161, 2017 and 2018 Special distribution of $0.24 per share that was declared in December 2018 2018 annual distribution yield of 12.0% (on 12/31/2018 NAV) and 15.7% (on 12/31/2018 market value) During Q4 2
Slide 5: Realized Investments (through March 12, 2019)
Realized Investments (through March 12, 2019) Past performance is not indicative of future results. It should not be assumed that the realization of other positions will be profitable or equal to the performance of the positions realized in the quarter ended December 31, 2018 and the partial quarter
Slide 6: The Performance of Realized Investments
The Performance of Realized Investments (through March 12, 2019) © 2019 Great Elm Capital Corp. The IRR on the pool of realized investments is approximately 22.5% The cash-on-cash return on the pool of realized investments is approximately 1.12x (1) IRR information is presented at the issuer level.
Slide 7: The Performance of Realized Investments: Legacy Full Circle Investments
The Performance of Realized Investments: Legacy Full Circle Investments © 2019 Great Elm Capital Corp. (1) IRR information is presented at the issuer level. (2) IRR based on 11/3/2016 or acquisition date fair value as purchase price, income and principal cash flows. *All amounts in ($000’s) Since th
Slide 8: Individual Realized Investments (through March 12, 2019)
Individual Realized Investments (through March 12, 2019) Past performance is not indicative of future results. It should not be assumed that the realization of other positions will be profitable or equal to the performance of the positions realized in the quarter ended December 31, 2018 and the part
Slide 9: California Pizza Kitchen
Background Catalyst Outcome CPK is a casual dining restaurant chain and provider of prepared foods, specializing in pizza CPK has a senior secured term loan that carries a LIBOR + 600 basis point coupon and matures in 2022 GECC purchased $2 million par value of CPK’s senior secured term loan at appr
Slide 10: GEO Specialty Chemicals, Inc.
Background Catalyst Outcome GEO is a leading developer and manufacturer of specialty and performance chemicals GEO had a senior secured revolver and term loan that each carried a LIBOR + 475 basis points coupon and matured in 2019 GECC purchased approximately $10.9 million par value of the combined
Slide 11: International Wire Group, Inc.
Background Catalyst Outcome ITWG is the largest bare copper wire and copper wire products manufacturer in the US ITWG has a senior secured note that carries a fixed 10.75% coupon and matures in 2021 GECC purchased $17.5 million par value of the note at approximately $0.93 in 2017 and 2018 Through ye
Slide 12: Sungard Availability Services Capital, Inc.
Background Catalyst Outcome Sungard provides custom enterprise cloud and technology services Sungard has a senior secured term loan that carries a LIBOR + 700 basis point coupon and matures in 2021 and a senior secured term loan that carries a LIBOR + 1,000 basis point coupon and matures in 2022 GEC
Slide 13: TRU Taj LLC
Background Catalyst Outcome TRU Taj is a leading global retailer of toys and juvenile products, focused predominantly in Asia TRU Taj had a senior secured DIP note that carried an 1,100 basis point coupon and matured in January 2019 GECC purchased approximately $6.2 million par value at approximatel
Slide 14: Viasat, Inc.
Background Catalyst Outcome Viasat is an international provider of high-speed satellite broadband services Viasat owed Avanti Communications plc. (“Avanti”) approximately $2 million in the form of a receivable that Avanti was interested in having factored GECC purchased the $2 million Viasat receiva
Slide 15: Portfolio Review (Quarter Ended 12/31/2018)
Portfolio Review (Quarter Ended 12/31/2018) © 2019 Great Elm Capital Corp.
Slide 16: Portfolio Review
Portfolio Review 12.0% Weighted average current yield on portfolio1 96.6% Percentage of the portfolio (based on fair value of investments) invested in 1st lien and/or senior secured instruments $0.88 Weighted average dollar price of debt investments in the portfolio, representative of our special si
Slide 17: Portfolio Review (Continued)
Portfolio Review (Continued) 26 Debt Investments $178.0 million Fair Value Invested in Debt Instruments 58.0% in Floating Rate Instruments (Based on % of Fair Value) 12.0%1 Weighted Average Current Yield 96.6% Of Invested Capital in Debt Instruments (100% of fair value in first lien / senior secured
Slide 18: Portfolio Review (Continued): Capital Deployed and Monetized
Portfolio Review (Continued) $34.8 million Capital deployed into 10 investments, including one new issuer, with a weighted average dollar price of $0.92 and a weighted average current yield of 11.2%1 $40.0 million Monetized (in part or full) 19 investments at a weighted average dollar price of $0.99
Slide 19: Portfolio Review: New & Additional Investments
Portfolio Review: New & Additional Investments During Q4 / 2018, we purchased investments in four companies (one new, three existing), deploying approximately $14.7 million. A brief snapshot of these investments is as follows: This deployment activity does not include revolver draws or PIK interest.
Slide 20: Portfolio Review: Asset Type and Interest Rate Type
Portfolio Review: Asset Type and Interest Rate Type ($ in Thousands) Portfolio by Asset Type Portfolio by Interest Rate Type Weighted average fixed rate yield of 12.4%1 Weighted average floating rate yield of 11.7% (1) Weighted average fixed rate current yield is based upon the stated coupon rate an
Slide 21: Portfolio Review: Asset Type (End of Period Investments - % of FMV)
Portfolio Review: Asset Type (End of Period Investments - % of FMV) © 2019 Great Elm Capital Corp.
Slide 22: Portfolio Review: Interest Rate (End of Period Investments - % of FMV)
Portfolio Review: Interest Rate (End of Period Investments - % of FMV) © 2019 Great Elm Capital Corp.
Slide 23: Portfolio Review: Industry Breakdown
Portfolio Review: Industry Breakdown Amounts in the above table do not include investments in short-term securities, including United States Treasury Bills and money market mutual funds. © 2019 Great Elm Capital Corp. September 30, 2018 Investments at Fair Value Percentage of Fair Value Wireless Tel
Slide 24: Portfolio Review: Portfolio Growth
Portfolio Review: Portfolio Growth ($ in Millions) © 2019 Great Elm Capital Corp. Portfolio growth of approximately 19% over the past two years Capital deployment generally in excess of investments monetized as the portfolio grows *Partial period
Slide 25: Portfolio Review: Portfolio Rotation
Portfolio Review: Portfolio Rotation © 2019 Great Elm Capital Corp. During the past nine quarters, we have consistently monetized higher dollar priced investments and deployed capital into lower dollar priced investments, building total return In addition, substantially all new debt investments sinc
Slide 26: Portfolio Review: Portfolio Rotation (Continued)
Portfolio Review: Portfolio Rotation (Continued) Q4/2017 Q1/2018 Q2/2018 Q3/2018 Q4/2018 Dollar Value of New Investments1 $49.1 million $63.2 million $37.9 million $39.0 million $34.8 million Weighted Average Price of New Debt Investments $0.97 $0.99 $0.99 $0.89 $0.92 Weighted Average Current Yield
Slide 27: Portfolio Review: Avanti: Update
Portfolio Review: Avanti: Update The fair value of Avanti senior secured notes and common shares continues to diverge from the significant fundamental company progress Since GECC was formed, it has worked with other key Avanti creditors to: Identify and recruit Kyle Whitehill as CEO Restructure Avan
Slide 28: Subsequent Events
Subsequent Events © 2019 Great Elm Capital Corp.
Slide 29: Subsequent Events (through March 12, 2019)
Subsequent Events (through March 12, 2019) In January and February 2019, we sold an aggregate $6 million par value of Michael Baker International, LLC senior secured bond at a price of approximately $1.00 In January 2019, we sold approximately $4.8 million par value of Sungard Availability Services
Slide 30: Subsequent Events (through March 12, 2019) (Continued)
Subsequent Events (through March 12, 2019) (Continued) In January 2019, we received and exercised the right to purchase 718,900 shares of common stock of TRU Taj at a price of $13.94 per share. In January 2019, we purchased $10.0 million par value senior secured revolving commitment of Research Now
Slide 31: Subsequent Events: Acquisition of Prestige Capital Corporation
Subsequent Events: Acquisition of Prestige Capital Corporation On February 8, 2019, GECC acquired 80.0% of the outstanding equity interests in Prestige Capital Corporation (“PCC”) for aggregate cash consideration of approximately $7.4 million In 2017, PCC generated Revenue of approximately $6.4 mill
Slide 32: Financial Review (Quarter Ended 12/31/2018)
Financial Review (Quarter Ended 12/31/2018) © 2019 Great Elm Capital Corp.
Slide 33: Financial Review: Per Share Data
Financial Review: Per Share Data Q4/20171 Q1/20181 Q2/20181 Q3/20181 Q4/20181 Earnings Per Share (“EPS”) $0.47 ($0.38) $0.25 $0.46 ($1.18) Net Investment Income (“NII”) Per Share $0.60 $0.36 $0.57 $0.25 $0.25 Net Realized Gains / (Losses) Per Share $0.02 $0.03 $0.08 $0.08 $0.04 Net Unrealized Gains
Slide 34: Financial Review: Portfolio
Financial Review: Portfolio Q4/2017 Q1/2018 Q2/2018 Q3/2018 Q4/2018 Capital Deployed $46.1 million $63.2 million $37.9 million $39.0 million $34.8 million Investments Monetized $39.7 million $29.1 million $27.7 million $38.0 million $40.0 million Total Fair Value of Investments at Period End1 $164.9
Slide 35: Financial Review: Quarter Ended 12/31/2018
Financial Review: Quarter Ended 12/31/2018 Total investment income for the quarter ended December 31, 2018 was approximately $6.9 million, or $0.65 per share Net expenses for the quarter ended December 31, 2018 were approximately $4.2 million, or $0.40 per share Net investment income for the quarter
Slide 36: Financial Review: Unrealized Loss Detail
Financial Review: Quarter Ended 12/31/2018 - Unrealized Loss Detail The secondary markets were particularly volatile in the fourth quarter of 2018 Consequently, the fair value of certain of GECC’s significant investments was depressed and GECC experienced an unrealized loss of approximately $15.6 mi
Slide 37: Financial Review: Quarterly Operating Results
Financial Review: Quarterly Operating Results (1) The per share figures are based on a weighted average of the shares outstanding for the preceding quarter, except where such amounts need to be adjusted to be consistent with the financial highlights of our consolidated financial statements. (2) Tota
Slide 38: Capital Activity
Capital Activity © 2019 Great Elm Capital Corp.
Slide 39: Capital Activity: Distribution Policy & Declared Distributions
Capital Activity: Distribution Policy & Declared Distributions (1) There can be no assurance that any such supplemental amounts will be received or realized, or even if received and realized, distributed or available for distribution. Past distributions are not indicative of future distributions. Di
Slide 40: Capital Activity: Distribution Yield as a Percentage of Market Value
Capital Activity: Distribution Yield as a Percentage of Market Value © 2019 Great Elm Capital Corp. * Partial period ** Annualized distribution yield is calculated by dividing the declared distribution by the closing price at quarter end and annualizing over four periods. The special distribution is
Slide 41: Capital Activity: Historical Distribution Coverage
Capital Activity: Historical Distribution Coverage © 2019 Great Elm Capital Corp. * Partial period ended December 31, 2016; Adjusted NII excludes one-time merger / formation costs. NII has covered the base distribution every quarter since inception
Slide 42: Summary
Summary © 2019 Great Elm Capital Corp.
Slide 43: Summary
Summary Earned or out-earned declared distributions in each quarter of 20161, 2017 and 2018 Declared a special distribution of $0.24 per share in December 2018, resulting in an annual distribution yield of 12.0% (based on 12/31/2018 NAV) and 15.7% (based on 12/31/2018 closing market value) To date,
Slide 44: Appendix
Appendix © 2019 Great Elm Capital Corp.
Slide 45: Appendix: General Risks
Appendix: 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
Slide 46: Appendix: Acquisition of Prestige Capital Corporation
Appendix: Acquisition of Prestige Capital Corporation © 2019 Great Elm Capital Corp. (in thousands) FY2017 GAAP Net Income $ 1,125 Adjustments: Owner's compensation & expenses 613 Other compensation 164 Transaction fees 88 Total Adjustments 865 Adjusted Net Income $ 1,990 Non-GAAP Reconciliation:
Slide 47: 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 Corp.