Great Elm Capital Corp. · NASDAQ:GECC
Great Elm Capital — Q3 2022 Earnings Presentation
33 slides from Great Elm Capital's earnings presentation, Nov 3, 2022
Slide 1: Great Elm Capital Corp. Investor Presentation
Great Elm Capital Corp. NASDAQ: GECC Investor Presentation Quarter Ended September 30, 2022 November 3, 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 Capital Corp. Significant insider ownership of GECC by GEG and its officers and directors To generate current income and capital appreciation by investing in debt and Investment Objective income generating equity securities, inc
Slide 4: Third Quarter 2022
Third Quarter 2022 (Quarter Ended 9/30/2022) November 2022 © 2022 Great Elm Capital Corp. 4
Slide 5: Third Quarter 2022: Overview
Third Quarter 2022: Overview NII of $1.1 million, or $0.14 per share, vs. $1.2 million, or $0.23 per share (2Q22), and $1.6 million, or $0.39 per share (3Q21)(1) Net Investment NII for the quarter ended September 30, 2022 was impacted by costs and expenses related to certain legacy Income (“NII”
Slide 6: Third Quarter 2022: Net Investment Income Analysis
Third Quarter 2022: Net Investment Income Analysis NII for the quarter ended September 30, 2022 was $1.1 million, or $0.14 per share(1), compared to NII of $1.2 million, or $0.23 per share, for the quarter ended June 30, 2022(1) Removing the impact of the expense reversal, NII for the quarter ende
Slide 7: Third Quarter 2022: NAV Walk
Third Quarter 2022: NAV Walk Net assets were approximately $95.5 million ($12.56 per share(1)) on September 30, 2022, as compared to $97.6 million ($12.84 per share(1)) on June 30, 2022 Impact Description $ Million $/Share(2) Lenders Funding ($1.3 million) ($0.18) Universal Fiber +$0.5 million +$0.0
Slide 8: Portfolio Review
Portfolio Review (Quarter Ended 9/30/2022) November 2022 © 2022 Great Elm Capital Corp. 8
Slide 9: Portfolio Review: Cash Generating Portfolio Comparison
Portfolio Review: Cash Generating Portfolio Comparison(1) 46 Debt $173.0 million 11.6% Investments Fair Value Wtd. Avg. CY(3) $213.0 million Fair Value(2) 9/30/22 53 Portfolio Investments 7 Equity $39.6 million 13.8% 12.0% Wtd. Avg. CY(3) Investments Fair Value Wtd. Avg. CY(3) 42 Debt $153.2 million
Slide 10: Cash Generating Portfolio - Concentrations
Portfolio Review: Cash Generating Portfolio - Concentrations (1) Strong Industry Diversification and Average Position Size 6/30/2022 9/30/2022 $4.2 million Average Position Size & 19 Industries $4.0 million Average Position Size & 21 Industries Specialty Finance Specialty Finance 15.0% Energy Midstr
Slide 11: Cash Generating Portfolio Investment Type Mix
Portfolio Review: Cash Generating Portfolio Investment Type Mix (1) Investment Universe and Exposure 6/30/2022 9/30/2022 11.5% Weighted Average Current Yield 12.0% Weighted Average Current Yield 10.2% 11.5% 24.9% 1L 6.5% 1L 10.5% 28.7% 2L 2L SF - Equity SF - Equity 12.0% 15.5% SF - Credit SF - Credi
Slide 12: Portfolio Review: Quarterly Investment Activity
Portfolio Review: Quarterly Investment Activity During Q3 2022, deployed $39.9 million into 24 investments at a weighted average current Deployment of yield of 12.1% Capital Approximately 60% of deployments were in floating rate investments During Q3 2022, monetized $28.4 million across 26 inv
Slide 13: Total Quarter End Portfolio Detail
Portfolio Review: Total Quarter End Portfolio Detail(1) Debt Investments: 46 95.4%(2) $173.4 million 79.9% 11.6%(2) Debt Investments Weighted Fair value of Of Portfolio Weighted Average Average Price as Debt in Debt Current Yield of % of Par Investments Investments Debt Investments Equity Investment
Slide 14: Total Quarter End Asset Mix
Portfolio Review: Total Quarter End Asset Mix Portfolio by Asset Type ($217.0mm) Debt Investments by Rate Type ($173.4mm)(1) Other Equity Closed-End 2% Funds 1% Weighted average fixed SF - Equity 12% rate yield of SF - Debt Fixed Rate 52% 9.8%(2) 12% Corporate Credit 68% Floating Rate 48% Weight
Slide 15: Total Quarter End Industry Breakdown
Total Quarter End Industry Breakdown September 30, 2022 Investments at Percentage of Specialty Finance Industry Fair Value Fair Value Energy Midstream Specialty Finance 51,347 23.66% Chemicals Energy Midstream 26,333 12.13% Metals & Mining Chemicals 24,477 11.28% Internet Media Metals & Mining 13,69
Slide 16: Great Elm Specialty Finance
Great Elm Specialty Finance November 2022 © 2022 Great Elm Capital Corp. 16
Slide 17: GESF: Great Elm Healthcare Finance
GESF: Great Elm Healthcare Finance Great Elm De-novo platform created to provide capital solutions Healthcare to healthcare related businesses across the U.S. Experienced Portfolio Nationwide Lending Focus Management Management Refinancing existing debt, growth capital, working capital, •Asset drive
Slide 18: 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 proprietary investment exposure for investors: We believe direct investment
Slide 19: 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 20: 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 21: GECC's Specialty Finance Growth
GECC’s Specialty Finance Growth Specialty Finance Percentage of GECC’s Investable Assets(1) 50.0% 50.0% 45.0% 40.0% 35.0% 30.0% 31.8% 25.0% 28.9% 24.1% 20.0% 21.9% 15.0% 18.4% 10.0% 10.7% 5.0% 8.5% 6.3% 5.7% 0.0% 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22 Target (1) Investible Assets = Investments
Slide 22: 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 23: 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 24: 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 25: 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 26: Financial Review
Financial Review (Quarter Ended 9/30/2022) November 2022 © 2022 Great Elm Capital Corp. 26
Slide 27: Financial Review: Per Share Data
Financial Review: Per Share Data Financial Highlights – Per Share Data Q3/2021 Q4/20211 Q1/20222 Q2/2022 Q3/2022 Earnings Per Share (“EPS”) ($0.79) ($4.95) ($1.12) ($0.87) $0.18 Net Investment Income (“NII”) $0.39 $1.58 $1.31 $0.23 $0.14 Per Share Pre-Incentive NII Per Share $0.49 $0.42 $0.24 $0.23
Slide 28: Financial Review: Quarterly Operating Results
Financial Review: Quarterly Operating Results Q3/2021 Q4/2021 Q1/2022 Q2/2022 Q3/2022 $ in $000s Per Share1 Per Share1 Per Share1 Per Share1 Per Share1 Total Investment Income2 $7,373 $1.85 $6,353 $1.42 $5,558 $1.22 $5,513 $1.06 $6,033 $0.79 Interest Income 5,872 1.47 4,774 1.06 4,041 0.89 3,734 0.7
Slide 29: Financial Review: Portfolio
Financial Review: Portfolio Financial Highlights - Portfolio Q3/2021 Q4/2021 Q1/2021 Q2/2022 Q3/2022 Capital Deployed $72.3 million $34.2 million $27.4 million $44.7 million $39.9 million Investments Monetized $30.0 million $40.3 million $26.9 million $34.0 million $28.4 million Total Fair Value of
Slide 30: Distributions
Distributions November 2022 © 2022 Great Elm Capital Corp. 30
Slide 31: Quarterly Cash Distributions
Quarterly Cash Distributions Quarter Ending December 31, 2022 On August 4, 2022, the Company announced that its Board of Directors approved a quarterly cash distribution of $0.45 per share for the quarter ending December 31, 2022 The fourth quarter cash distribution will be payable on December 3
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 Investor Relations Contact: Garrett Edson investorrelations@greatelmcap.com November 2022 © 2022 Great Elm Capital Corp. 33