Great Elm Capital Corp. · NASDAQ:GECC
Great Elm Capital — Q3 2023 Earnings Presentation
35 slides from Great Elm Capital's earnings presentation, Nov 2, 2023
Slide 1: Investor Presentation Quarter Ended September 30, 2023
Investor Presentation Quarter Ended September 30, 2023 November 2, 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: Third Quarter 2023 Overview
Third Quarter 2023 Overview NII of $3.1 million, or $0.40 per share in 3Q 23, vs. $3.4 million, or $0.44 per share in 2Q 23 Net Investment • Third consecutive quarter of NII more than covering the dividend Income (“NII”) • Highest cash income quarter in company’s history • NII includes $0.05 per sha
Slide 4: Quarterly Cash Distributions
Quarterly Cash Distributions Quarter Ending December 31, 2023 December $0.35 29 16% 11% Per Share Payable Date Annualized Dividend Annualized Dividend Yield on Stock Price Yield on NAV On November 2, 2023, the The fourth quarter 2023 The cash distribution The cash distribution Company announced that
Slide 5: About GECC
About GECC Great Elm Capital Corp. Investment Objective Portfolio Overview Externally managed, total-return- To generate current income and • $235.4 million of portfolio fair value focused BDC capital appreciation by investing • $97.9 million of net asset value (“NAV”) Significant insider ownership
Slide 6: Net Investment Income (NII)
Net Investment Income (NII) NII for the quarter ended September 30, 2023 was $3.1 million, or $0.40 per share1, compared to NII of $3.4 million, or $0.44 per share1, for the quarter ended June 30, 2023 • Refinancing items impacted NII by $0.3 million, or $0.05 per share1 in the September 30, 2023 qu
Slide 7: Cash NII
Cash NII1 Highest Cash NII1 in the Company’s history totaling $2.7 million, or $0.35 per share2 1 $ in $000s Cash Non-Cash Refinancing $0.3 million net impact $4,000 $3,000 $2,000 $1,000 $0 ($1,000) 3 3 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 3Q23 1 Cash NII = Total Inv
Slide 8: Total Investment Income (TII)
Total Investment Income (TII) TII for the quarter ended September 30, 2023 was $9.3 million and was the highest cash income quarter in the Company’s 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 3Q
Slide 9: Net Asset Value Bridge
Net Asset Value Bridge1 Net assets were approximately $97.9 million ($12.88 per share1) on September 30, 2023, as compared to $92.9 million ($12.21 per share1) on June 30, 2023 1 Based on shares outstanding of 7.6 million as of September 30, 2023 and June 30, 2023. November 2, 2023 ©2023 Great Elm C
Slide 10: Q3 2023 Portfolio Review
Q3 2023 Portfolio Review November 2, 2023 ©2023 Great Elm Capital Corp. 10
Slide 11: Total Quarter End Portfolio Detail
Total Quarter End Portfolio Detail1 Debt Investments 93.3%2 $203.1 86.3% 42 Weighted million Of Portfolio 13.4%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: Quarterly Investment Activity
Quarterly Investment Activity Deployment of $32.6 million deployed into 20 investments at a weighted average current yield of 11.4% in 3Q 23 Capital During 3Q 23, monetized $37.0 million across 37 investments, in whole or in part, at a weighted average current yield of 11.0% Monetization of • Includ
Slide 13: Portfolio Asset Mix
Portfolio Asset Mix1 Focus on Secured Investments End of Period Investments ($mm) 9/30/2023 $236.4 $235.4 $224.9 $226.9 $217.0 3% 3% 3% 3% 1% 3% 3% 3% 2% 6% 5% 6% 11% 8% 8% 10% 12% 11% 1L 22% 23% 2L 26% 25% 24% Specialty Finance 14% 50% 16% 22% Unsecured 16% 27% 29% Yielding Equity Other Equity 44%
Slide 14: Total Quarter End Asset Mix
Total Quarter End Asset Mix Portfolio by Asset Type ($235.4mm) Debt Investments by Rate Type ($203.1mm)1 Yielding Equity 3% Other Equity 3% SF - Equity 7% Weighted SF - Debt average fixed Fixed Rate rate yield of 15% 37% Floating Corporate 11.2%2 Rate Credit 63% 72% Weighted average floating rate yi
Slide 15: Corporate Portfolio Overview
Corporate Portfolio Overview November 2, 2023 ©2023 Great Elm Capital Corp. 15
Slide 16: Corporate Portfolio: Investment Mix Type ($mm)
Corporate Portfolio: Investment Mix Type ($mm) $182.2 $183.2 $166.7 $170.3 $165.6 4% 4% 4% 4% 2% 2% 4% 8% 7% 10% 8% 14% 13% 16% 15% 18% 20% 21% 37% 38% 64% 58% 52% 37% 41% 3Q22 4Q22 1Q23 2Q23 3Q23 1L 2L Unsecured Yielding Equity Other Equity November 2, 2023 ©2023 Great Elm Capital Corp. 16
Slide 17: Corporate Portfolio: Fixed and Floating Rate Exposure
Corporate Portfolio: Fixed and Floating Rate Exposure Portfolio by Rate Type1 9/30/2023 4% Weighted Average Value % of ($mm) Corp. Price Coupon Maturity CY Fixed Rate $46.2 27% 91.47 9.3% 2.8 yrs 10.0% 27% Floating Rate $122.4 65% 92.18 13.7% 3.4 yrs 14.9% Total Credit $168.5 92% 91.99 12.5% 3.3 yrs
Slide 18: Corporate Portfolio: Industry Breakdown
Corporate Portfolio: Industry Breakdown September 30, 2023 Percentage of Fair Value Industry Investments at Fair Value ($ in 000s) % of Fair Value Chemicals $27,192 14.8% Chemicals 10% Insurance Insurance $17,150 9.4% 15% Transportation Equip Mfg Transportation Equip Mfg $16,675 9.1% 3% Shipping Shi
Slide 19: Great Elm Specialty Finance
Great Elm Specialty Finance November 2, 2023 ©2023 Great Elm Capital Corp. 19
Slide 20: Increasing Focus in Specialty Finance
Increasing Focus in Specialty Finance The Specialty Finance Platform 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 direct investments in SFCs are largely
Slide 21: 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 22: Specialty Finance Focus and Execution
Specialty Finance Focus and Execution 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 originations send a clea
Slide 23: 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 24: GECC Specialty Finance
GECC Specialty Finance Specialty Finance as a Percentage of Investment Portfolio 26% 25% 24% 23% 22% 3Q22 4Q22 1Q23 2Q23 3Q23 November 2, 2023 ©2023 Great Elm Capital Corp. 24
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: 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 27: 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 28: GESF: Great Elm Lender Finance
GESF: Great Elm Lender Finance GESF is in the process of creating 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 len
Slide 29: Q3 2023 Financial Review
Q3 2023 Financial Review November 2, 2023 ©2023 Great Elm Capital Corp. 29
Slide 30: Financial Review: Per Share Data
Financial Review: Per Share Data Financial Highlights – Per Share Data 3Q 22 4Q 22 1Q 23 2Q 23 3Q 23 Earnings Per Share (“EPS”) $0.18 ($0.96) $1.07 $0.68 $1.02 Net Investment Income (“NII”) $0.14 $0.30 $0.37 $0.44 $0.40 Per Share Pre-Incentive NII Per Share $0.14 $0.37 $0.47 $0.56 $0.50 Net Realized
Slide 31: Financial Review: Quarterly Operating Results
Financial Review: Quarterly Operating Results 3Q 2022 4Q 2022 1Q 2023 2Q 2023 3Q 2023 $ in $000s Per Share1 Per Share1 Per Share1 Per Share1 Per Share1 Total Investment Income2 $6,033 $0.79 $7,325 $0.96 $8,410 $1.11 $8,977 $1.18 $9,276 $1.22 Interest Income 4,990 0.66 5,919 0.78 6,630 0.87 7,081 0.9
Slide 32: Financial Review: Portfolio
Financial Review: Portfolio Financial Highlights - Portfolio 3Q 22 4Q 22 1Q 23 2Q 23 3Q 23 Capital Deployed $39.9 million $37.6 million $46.0 million $23.0 million $32.6 million Investments Monetized $28.4 million $20.4 million $52.8 million $16.0 million $37.0 million Total Fair Value of Investment
Slide 33: Financial Review: Cash NII
Financial Review: Cash NII $000s 3Q 22 4Q 22 1Q 23 2Q 23 3Q 23 Total Investment Income (TII) $6,033 $7,325 $8,410 $8,977 $9,276 Less: Accretion of OID and PIK income (624) (867) (1,223) (1,170) (1,157) "Cash" Total Investment Income $5,409 $6,458 $7,187 $7,807 $8,119 “Cash” TII Mix 89.7% 88.2% 85.5%
Slide 34: 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 35: Contact Information
Contact Information Media & Investor Contact: Investors Relations investorrelations@greatelmcap.com November 2, 2023 ©2023 Great Elm Capital Corp. 35