Great Elm Capital Corp. · NASDAQ:GECC
Great Elm Capital — Q2 2023 Earnings Presentation
33 slides from Great Elm Capital's earnings presentation, Aug 3, 2023
Slide 1: Investor Presentation Quarter Ended June 30, 2023
Investor Presentation Quarter Ended June 30, 2023 August 3, 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: Second Quarter 2023 Overview
Second Quarter 2023 Overview NII of $3.4 million, or $0.44 per share in 2Q 23, vs. $2.8 million, or $0.37 per share in 1Q 23 Net Investment • NII up 19% quarter over quarter, driven by strategic capital deployment and rotation into Income (“NII”) higher-yielding floating rate investments • Highest c
Slide 4: Quarterly Cash Distributions Quarter Ending September 30, 2023
Quarterly Cash Distributions Quarter Ending September 30, 2023 September $0.35 29 16.7% 11.5% Per Share Payable Date Annualized Dividend Annualized Dividend Yield on Stock Price Yield on NAV On August 3, 2023, the The third quarter 2023 The cash distribution The cash distribution Company announced t
Slide 5: About GECC
About GECC Great Elm Capital Corp. Investment Objective Portfolio Overview Externally managed, total-return- To generate current income and • $236.4 million of portfolio fair value focused BDC capital appreciation by investing • $92.9 million of net asset value (“NAV”) Significant insider ownership
Slide 6: Net Investment Income (NII)
Net Investment Income (NII) NII for the quarter ended June 30, 2023 was $3.4 million, or $0.44 per share1, compared to NII of $2.8 million, or $0.37 per share1, for the quarter ended March 31, 2023 $ in $000s NII by Quarter $3,500 $3,000 $2,500 $2,000 $1,500 $1,000 $500 $0 2 2 1Q20 2Q20 3Q20 4Q20 1Q
Slide 7: Cash NII
Cash NII1 Highest Cash NII1 in the Company’s history totaling $2.6 million, or $0.35 per share2, compared to Cash NII of $2.0 million, or $0.27 per share2, for the quarter ended March 31, 2023 1 $ in $000s Cash Non-Cash $4,000 $3,000 $2,000 $1,000 $0 ($1,000) 3 3 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4
Slide 8: Total Investment Income (TII)
Total Investment Income (TII) TII for quarter ended June 30, 2023 of $9.0 million - highest cash income quarter in Company history $ in $000s Cash Accretion + PIK $10,000 $8,000 $6,000 $4,000 $2,000 $0 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 August 3, 2023 ©2023 Great E
Slide 9: Net Asset Value (NAV) Bridge
Net Asset Value (“NAV”) Bridge1 Net assets were approximately $92.9 million ($12.21 per share1) on June 30, 2023, as compared to $90.3 million ($11.88 per share1) on March 31, 2023 1 Based on shares outstanding of 7.6 million as of June 30, 2023 and March 31, 2023. August 3, 2023 ©2023 Great Elm Cap
Slide 10: Q2 2023 Portfolio Review
Q2 2023 Portfolio Review August 3, 2023 ©2023 Great Elm Capital Corp. 10
Slide 11: Total Quarter End Portfolio Detail
Total Quarter End Portfolio Detail1 Debt Investments 91.6%2 $198.8 84.1% 48 Weighted million Of Portfolio 13.5%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 12: Portfolio Concentration Overview
Portfolio Concentration Overview1 Strong Industry Breadth and Diversified Position Concentration 3/31/2023 6/30/2023 $3.7 Million Average Position Size & 22 Industries $3.9 Million Average Position Size & 22 Industries Specialty Finance Specialty Finance Chemicals Chemicals 23% 25% 25% 27% Insurance
Slide 13: Portfolio Investment Type Mix
Portfolio Investment Type Mix1 Investment Universe and Exposure 3/31/2023 6/30/2023 13.0% Weighted Average Current Yield2 13.8% Weighted Average Current Yield2 5% 3% 1L 3% 3% 1L 11% 12% 2L 2L 39% SF - Equity SF - Equity 44% SF - Credit 13% SF - Credit 14% 23% in 25% in Unsecured Specialty Unsecured
Slide 14: Quarterly Investment Activity
Quarterly Investment Activity Deployment of $23.0 million deployed into 19 investments at a weighted average current yield of 14.8% in 2Q 23 Capital During 2Q 23, monetized $16.0 million across 34 investments, in whole or in part, at a weighted average current yield of 10.1% Monetization of • Includ
Slide 15: Total Quarter End Asset Mix
Total Quarter End Asset Mix Portfolio by Asset Type ($236.4mm) Debt Investments by Rate Type ($198.8mm)1 Other Equity 3% SF - Equity 10% Weighted SF - Debt average fixed Fixed Rate 13% rate yield of 37% Floating Corporate 10.5%2 Rate Yielding Credit 63% Equity 71% Weighted average 3% floating rate y
Slide 16: Total Quarter End Industry Breakdown
Total Quarter End Industry Breakdown Specialty Finance June 30, 2023 Chemicals Investments at Fair % of Other (12 Industries) Industry Value ($ in 000s) Fair Value Insurance Specialty Finance $54,208 22.9% Chemicals $26,172 11.1% Transportation Equip Mfg Insurance $16,365 6.9% Shipping Transportatio
Slide 17: Great Elm Specialty Finance
Great Elm Specialty Finance August 3, 2023 ©2023 Great Elm Capital Corp. 17
Slide 18: GECC Specialty Finance
GECC Specialty Finance Specialty Finance as a Percentage of GECC’s Investable Assets1 40% 30% 20% 31.8% 28.9% 26.2% 24.1% 24.9% 23.6% 10% 21.9% 18.4% 8.5% 0% 2Q 21 3Q 21 4Q 21 1Q 22 2Q 22 3Q 22 4Q 22 1Q23 2Q23 1 Investable Assets = Investments + Cash, net of unsettled trades. August 3, 2023 ©2023 Gr
Slide 19: Increasing Focus in Specialty Finance
Increasing Focus 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: • We believe dire
Slide 20: 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 21: 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 22: 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 • Oth
Slide 23: 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 24: 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 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: GESF: Lender Finance
GESF: Lender Finance GESF is exploring the creation of a new lender finance platform, focused on participation opportunities that present definable downside protection while leveraging existing specialty finance infrastructure Business Focus Risk Management • Participations with other lenders that •
Slide 27: Q2 2023 Financial Review
Q2 2023 Financial Review August 3, 2023 ©2023 Great Elm Capital Corp. 27
Slide 28: Financial Review: Per Share Data
Financial Review: Per Share Data Financial Highlights – Per Share Data 2Q 22 3Q 22 4Q 22 1Q 23 2Q 23 Earnings Per Share (“EPS”) ($0.87) $0.18 ($0.96) $1.07 $0.69 Net Investment Income (“NII”) $0.23 $0.14 $0.30 $0.37 $0.44 Per Share Pre-Incentive NII Per Share $0.23 $0.14 $0.37 $0.47 $0.56 Net Realiz
Slide 29: Financial Review: Quarterly Operating Results
Financial Review: Quarterly Operating Results 2Q 2022 3Q 2022 4Q 2022 1Q 2023 2Q 2023 $ in $000s Per Share1 Per Share1 Per Share1 Per Share1 Per Share1 Total Investment Income2 $5,513 $1.06 $6,033 $0.79 $7,325 $0.96 $8,410 $1.11 $8,977 $1.18 Interest Income 3,734 0.72 4,990 0.66 5,919 0.78 6,630 0.8
Slide 30: Financial Review: Portfolio
Financial Review: Portfolio Financial Highlights - Portfolio 2Q 22 3Q 22 4Q 22 1Q 23 2Q 23 Capital Deployed $44.7 million $39.9 million $37.6 million $46.0 million $23.0 million Investments Monetized $34.0 million $28.4 million $20.4 million $52.8 million $16.0 million Total Fair Value of Investment
Slide 31: Financial Review: Cash NII
Financial Review: Cash NII Financial Highlights – Cash NII $000s 2Q 22 3Q 22 4Q 22 1Q 23 2Q 23 Total Investment Income (TII) $5,513 $6,033 $7,325 $8,410 $8,977 Less: Accretion of OID and PIK income (439) (624) (867) (1,223) (1,170) "Cash" Total Investment Income $5,074 $5,409 $6,458 $7,187 $7,807 “C
Slide 32: 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 33: Contact Information
Contact Information Media & Investor Contact: Investors Relations investorrelations@greatelmcap.com August 3, 2023 ©2023 Great Elm Capital Corp. 33