Great Elm Capital Corp. · NASDAQ:GECC
Great Elm Capital — Q1 2022 Earnings Presentation
36 slides from Great Elm Capital's earnings presentation, May 11, 2022
Slide 1: Great Elm Capital Corp. Investor Presentation
Great Elm Capital Corp. NASDAQ: GECC Investor Presentation Quarter Ended March 31, 2022 May 11, 2022
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: About GECC
About GECC Externally managed, total-return-focused BDC Great Elm Directors of GECC, employees of GECM and officers and directors of GECM’s Capital Corp. parent, including investment funds managed by directors of GECM’s parent, own approximately 35% of GECC’s outstanding shares To generate cur
Slide 4: First Quarter 2022
First Quarter 2022 (Quarter Ended 3/31/2022) May 2022 © 2022 Great Elm Capital Corp. 4
Slide 5: First Quarter 2022: Overview
First Quarter 2022: Overview NII of $6.0 million, or $1.31 per share, vs. $7.1 million, or $1.58 per share, (4Q21) and $1.5 million, or $0.39 per share Net Investment (1Q21)(1) Income (“NII”) NII for the quarter ended March 31, 2022 was positively impacted by the reversal of approximately $4.9 m
Slide 6: First Quarter 2022: Net Investment Income Analysis
First Quarter 2022: Net Investment Income Analysis NII for the quarter ended March 31, 2022 was $6.0 million, or $1.31 per share(1), as compared to NII of $7.1 million, or $1.58 per share, for the quarter ended December 31, 2021(1) Removing the impact of the fee reversal, Pro Forma Adjusted NII fo
Slide 7: First Quarter 2022: NAV Walk
First Quarter 2022: NAV Walk Net assets were approximately $69.3 million ($15.06 per share(1)) on March 31, 2022, as compared to $74.6 million ($16.63 per share(2)) on December 31, 2021 Value Impact Description $ Million $/Share Avanti ($7.7 million) ($1.69) Viasat ($0.8 million) ($0.19) Monitronics
Slide 8: Portfolio Review
Portfolio Review (Quarter Ended 3/31/2022) May 2022 © 2022 Great Elm Capital Corp. 8
Slide 9: Portfolio Review: Cash Generating Portfolio Comparison
Portfolio Review: Cash Generating Portfolio Comparison(1) 35 Debt $144.5 million 10.4% Investments Fair Value Wtd. Avg. CY(3) $194.7 million Fair Value(2) 3/31/22 41 Portfolio Investments 6 Equity $50.2 million 14.9% 11.6% Wtd. Avg. CY(3) Investments Fair Value Wtd. Avg. CY(3) 36 Debt $141.9 million
Slide 10: Portfolio Review: Cash Generating Portfolio - Concentrations
Portfolio Review: Cash Generating Portfolio - Concentrations (1) Strong Industry Diversification and Increased Average Position Size 12/31/2021 3/31/2022 $4.6 million Average Position Size & 20 Industries $4.7 million Average Position Size & 18 Industries Specialty Finance Specialty Finance 13.0% En
Slide 11: Portfolio Review: Cash Generating Portfolio Investment Type Mix
Portfolio Review: Cash Generating Portfolio Investment Type Mix (1) Broadened Investment Universe and Increasing Exposure in Specialty Finance (“SF”) 12/31/2021 3/31/2022 10.7% Weighted Average Current Yield 11.6% Weighted Average Current Yield 4.9% 7% 26% 1L 11.9% 22.4% 14% 1L 2L 2L SF - Equity SF
Slide 12: Portfolio Review: Quarterly Investment Activity
Portfolio Review: Quarterly Investment Activity During Q1 2022, deployed $27.4 million, excluding SPACs, into 14 investments at a Deployment of weighted average current yield of 10.7% Capital During Q1 2022, monetized $26.9 million, excluding SPACs, across 26 investments, in Monetization whole o
Slide 13: Portfolio Review: Total Quarter End Portfolio Detail
Portfolio Review: Total Quarter End Portfolio Detail Debt Investments: 45 98.46%(1) $145.2 million 72.9% 10.4%(1) Debt Investments Weighted Fair value of Of Portfolio Weighted Average Average Dollar Debt in Debt Current Yield of Price of Debt Investments Investments Debt Investments Investments Equi
Slide 14: Portfolio Review: Total Quarter End Asset Mix
Portfolio Review: Total Quarter End Asset Mix Portfolio by Asset Type ($199.3M) Portfolio by Interest Rate Type ($145.2M) Other Equities 6% Weighted average fixed Income- rate yield of Generating Floating Equities Rate 10.6%1 21% Fixed 42% Debt Rate 73% 58% Weighted average floating rate yield o
Slide 15: Total Quarter End Industry Breakdown
Total Quarter End Industry Breakdown March 31, 2022 Investments at Percentage of Industry Fair Value Fair Value Specialty Finance Specialty Finance 66,513 33.37% Energy Midstream Energy Midstream 29,185 14.64% Chemicals Chemicals 14,912 7.48% Metals & Mining Metals & Mining 13,708 6.88% Internet Med
Slide 16: Strategy Update
Strategy Update May 2022 © 2022 Great Elm Capital Corp. 16
Slide 17: Background
Background In February 2020, Great Elm Group, Inc. the parent of GECC’s external investment manager, added three new board members with significant investment management experience Began process of reshaping the investment management business In 2H 2020, the Investment Committee and Investment Pro
Slide 18: Investment Approach Changes
Investment Approach Changes Leadership Changes Led to New Investment Approach Objectives: Increase Allocation to Specialty Finance through: Equity Investments in Specialty Finance Companies (“SFCs”) Direct Credit Investments and Participations Creation of Great Elm Specialty Finance (“GESF”)
Slide 19: Increasing Focus and Allocation in Specialty Finance
Increasing Focus and Allocation 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 SFCs generates two levels of unique and proprietary investment exposure for investors: We believe direct
Slide 20: Continuum of Lending Benefits
Continuum of Lending Benefits A “Continuum of Lending” platform provides significant benefits The Continuum allows lenders to improve “stickiness” of clientele and hold onto key borrowers longer The Continuum provides an ideal platform to cross-sell products and services to a borrower By addin
Slide 21: Focus and Execution
Focus and Execution Great Elm is utilizing a 3-pronged approach to build out its specialty finance platform: 1. Strategic Acquisitions: Opportunities which allow Great Elm to further build out its specialty finance platform, expand its continuum of lending strategy and add complementary lines of bus
Slide 22: GECC's Specialty Finance Growth
GECC’s Specialty Finance Growth Specialty Finance Percentage of GECC’s Investable Assets(1) 50.0% 45.0% 50.0% 40.0% 35.0% 30.0% 31.8% 25.0% 20.0% 21.9% 15.0% 18.4% 10.0% 10.7% 5.0% 8.5% 6.3% 5.7% 4.3% 4.5% 0.0% 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22 Plan (1) Investible Assets = Investments + C
Slide 23: Great Elm Specialty Finance
Great Elm Specialty Finance May 2022 © 2022 Great Elm Capital Corp. 23
Slide 24: Great Elm Specialty Finance
Great Elm Specialty Finance Great Elm Specialty Finance (“GESF”) is a holding company that was created for GECC’s existing Specialty Finance investments and all future specialty finance acquisitions, strategic partnerships, and direct origination opportunities The following chart highlights the GESF
Slide 25: GESF: Prestige Capital Finance
GESF: Prestige Capital Finance Provider of “spot factoring” services, providing clients with opportunities to sell individual accounts receivable for upfront payments Diversified Functional Limited Risk Experienced Customer Base Prestige purchases the Prestige’s clients are generally The combination
Slide 26: GESF: Lenders Funding
GESF: Lenders Funding Private funding and risk sharing source for factors and asset-based lenders Purchases participations in factoring and asset-based lending transactions as well as provides working capital solutions to customers under a variety of lending programs Founder and CEO Robert Zadek
Slide 27: GESF: Sterling Commercial Credit
GESF: Sterling Commercial Credit Provider of asset-based loans to small and middle market companies throughout the United States Provides short term, asset-based loans and working capital solutions to small businesses with annual sales typically between $3 Million and $10 Million Management cont
Slide 28: GESF: Great Elm Utica
GESF: Great Elm Utica Great Elm Utica (“GEU”) is a JV formed to leverage the equipment financing track record and expertise of Utica LeaseCo (“Utica”) with the permanent capital of GECC Utica’s expertise in appraising and liquidating equipment will allow the JV to finance deals with hard asset cov
Slide 29: Financial Review
Financial Review (Quarter Ended 3/31/2022) May 2022 © 2022 Great Elm Capital Corp. 29
Slide 30: Financial Review: Per Share Data
Financial Review: Per Share Data Financial Highlights – Per Share Data Q1/20211 Q2/20211 Q3/20211 Q4/20211,2 Q1/20221,3 Earnings Per Share (“EPS”) $3.22 $0.63 ($0.79) ($4.95) ($1.12) Net Investment Income (“NII”) $0.39 $0.54 $0.39 $1.58 $1.31 Per Share Net Realized Gains / (Losses) Per ($0.84) ($0.6
Slide 31: Financial Review: Quarterly Operating Results
Financial Review: Quarterly Operating Results Q1/2021 Q2/2021 Q3/2021 Q4/20211 Q1/20222 $ in $000s Per Share3 Per Share3 Per Share3 Per Share3 Per Share3 Total Investment Income3 $5,295 $1.36 $6,233 $1.59 $7,373 $1.85 $6,353 $1.42 $5,558 $1.22 Interest Income 4,179 1.07 5,092 1.30 5,872 1.47 4,774 1
Slide 32: Financial Review: Portfolio
Financial Review: Portfolio Financial Highlights - Portfolio Q1/2021 Q2/2021 Q3/2021 Q4/2021 Q1/2022 Capital Deployed $58.4 million $49.9 million $72.3 million $34.2 million $27.4 million Investments Monetized $28.3 million $35.5 million $30.0 million $40.3 million $26.9 million Total Fair Value of
Slide 33: Distributions
Distributions May 2022 © 2022 Great Elm Capital Corp. 33
Slide 34: Distributions: Quarterly Cash Dividends
Distributions: Quarterly Cash Dividends Quarterly Distributions Quarter Ending June 30, 2022 Quarter Ending September 30, 2022 On March 4, 2022, we announced that our Board In addition, our Board of Directors has approved of Directors approved a quarterly dividend of a $0.45 per share cash distr
Slide 35: 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 36: Contact Information
Contact Information Investor Relations Contact: Garrett Edson investorrelations@greatelmcap.com May 2022 © 2022 Great Elm Capital Corp. 36