Great Elm Capital Corp. · NASDAQ:GECC
Great Elm Capital — Q1 2020 Earnings Presentation
29 slides from Great Elm Capital's earnings presentation, May 11, 2020
Slide 1: Great Elm Capital Corp. Investor Presentation – Quarter Ended March 31, 2020
Great Elm Capital Corp. (NASDAQ: GECC) Investor Presentation – Quarter Ended March 31, 2020 May 11, 2020 © 2020 Great Elm Capital Corp.
Slide 2: Disclaimer
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 “expect,” “anticipate,” “should,” “will,” “estima
Slide 3: A Note to Shareholders
A Note to Shareholders ▪ The first half of 2020 has been characterized by remarkable volatility in the leveraged credit markets, driven by the impact of the COVID-19 pandemic and violent swings in commodity prices ▪ We believe we must take every opportunity to bolster liquidity in order to successfu
Slide 4: GECC Snapshot
GECC Snapshot ▪ Externally managed, total-return-focused BDC ▪ Common stock trades as “GECC” on NASDAQ GECC ▪ Liquid balance sheet ▪ Employees and affiliates of Great Elm Capital Management, Inc., GECC’s investment manager, own approximately 23% of GECC’s outstanding shares ▪ To generate both curren
Slide 5: Overview
Overview ▪ The majority of our third quarter 2020 distributions will be paid in shares of our common stock in Distributions order to maximize liquidity and strengthen our balance sheet & Coverage ▪ LTM total distribution yield of 20.8% on 3/31/20 NAV and 37.5% on 3/31/20 market value ▪ During Q1 202
Slide 6: Portfolio Review
Portfolio Review (Quarter Ended 3/31/2020) © 2020 Great Elm Capital Corp. 6
Slide 7: Portfolio Review
Portfolio Review 10.0% Weighted average current yield on debt portfolio1 As of March 31, 2020, approximately 93% of the Weighted average dollar price of debt portfolio was comprised of $0.79 ideas that are representative of investments in the portfolio2 the manner in which we intend to invest3 Perce
Slide 8: Portfolio Review (Continued)
Portfolio Review (Continued) Debt Investments: 28 $146.7 million 88.6% 10.0%1 72.1% Debt Investments Fair Value Invested in Of Invested Capital in Weighted Average in Floating Rate Debt Instruments Debt Instruments Current Yield Instruments (100% of fair value in (Based on % of first lien / secured)
Slide 9: Portfolio Review: New & Additional Investments
Portfolio Review: New & Additional Investments During Q1 / 2020, we purchased six investments (four new, two existing), deploying approximately $8.2 million1 New ▪ Viasat, Inc. – Purchased approximately $2.0 million of receivables at a price of $0.90 Investment ▪ The receivables matured in April 202
Slide 10: Portfolio Review: Asset Type and Interest Rate Type
Portfolio Review: Asset Type and Interest Rate Type Portfolio by Asset Type ($MM) Portfolio by Interest Rate Type ($MM) ▪ Weighted average fixed rate yield of 14.5%1 ▪ Weighted average floating rate yield of 8.5%1 Fair Value of Percentage of Fair Value of Percentage of Investments Investments Count
Slide 11: Portfolio Review: Industry Breakdown
Portfolio Review: Industry Breakdown March 31, 2020 Investments at Percentage of Industry Fair Value Fair Value Wireless Telecommunications Services $ 35,986 21.74% Internet Media 18,978 11.47% Software Services 15,824 9.56% Food & Staples 13,133 7.93% Retail 9,904 5.98% Chemicals 9,560 5.78% Teleco
Slide 12: Portfolio Review: Portfolio Rotation
Portfolio Review: Portfolio Rotation ▪ As volatility increased in leveraged credit markets, the prices of certain of our investments fell ▪ We chose to monetize a portion of our investment portfolio in order to increase our cash balance ▪ Our substantial cash balance should allow us to invest in gre
Slide 13: Portfolio Review: Portfolio Rotation (Continued)
Portfolio Review: Portfolio Rotation (Continued) Portfolio Rotation: New Investments vs. Monetized Investments Q1/2019 Q2/2019 Q3/2019 Q4/2019 Q1/2020 Dollar Value of New Investments1 $54.5 million $61.7 million $46.1 million $15.1 million $31.9 million Weighted Average Price of New Debt $0.97 $0.98
Slide 14: Subsequent Events
Subsequent Events (Through May 8, 2020) © 2020 Great Elm Capital Corp. 14
Slide 15: Subsequent Events
Subsequent Events ▪ In April: ▪ We bought $2.0 million of par value of Viasat Inc. receivable at 90% of par value ▪ We bought $1.0 million of par value of Avanti Communications Group plc 1.25 lien secured loan at par ▪ We bought $0.6 million of par value of Apache Corp. unsecured notes at approximat
Slide 16: Subsequent Events (Continued): Avanti Communications Update
Subsequent Events (Continued): Avanti Communications Update ▪ Avanti’s business has not been significantly impacted by COVID-19 and demand remains strong for its capacity ▪ In April, Avanti Communications Group plc (“Avanti”) raised approximately $8 million from its largest stakeholders in the form
Slide 17: Financial Review
Financial Review (Quarter Ended 3/31/2020) © 2020 Great Elm Capital Corp. 17
Slide 18: Financial Review: Per Share Data
Financial Review: Per Share Data Financial Highlights – Per Share Data Q1/20191 Q2/20191 Q3/20191 Q4/20191 Q1/20201 Earnings Per Share (“EPS”) $0.76 ($0.43) ($0.96) ($0.16) ($3.33) Net Investment Income (“NII”) $0.26 $0.29 $0.26 $0.25 $0.26 Per Share Net Realized Gains / (Losses) Per $0.06 $0.04 $0.
Slide 19: Financial Review: Portfolio
Financial Review: Portfolio Financial Highlights - Portfolio Q1/2019 Q2/2019 Q3/2019 Q4/2019 Q1/2020 Capital Deployed $54.5 million $61.7 million $46.1 million $15.1 million $31.9 million Investments Monetized $59.9 million $36.6 million $44.6 million $9.6 million $29.4 million Total Fair Value of I
Slide 20: Financial Review: Quarterly Operating Results
Financial Review: Quarterly Operating Results Q1/2019 Q2/2019 Q3/2019 Q4/2019 Q1/2020 ($ in Thousands) Per Share1 Per Share1 Per Share1 Per Share1 Per Share1 Total Investment Income2 $6,313 $0.59 $6,711 $0.66 $7,002 $0.70 $7,012 $0.70 $6,429 $0.64 Interest Income 5,720 0.54 5,664 0.55 6,200 0.62 6,6
Slide 21: Capital Activity
Capital Activity © 2020 Great Elm Capital Corp. 21
Slide 22: Capital Activity: Distribution Policy & Declared Distributions
Capital Activity: Distribution Policy & Declared Distributions ▪ We are subject to a minimum asset coverage ratio of 150.0% (the “Minimum ACR”), per the proposal that was approved at our 2018 Annual Stockholders’ Meeting ▪ As of March 31, 2020, our asset coverage ratio was approximately 141.1% ▪ As
Slide 23: Capital Activity: Distribution Yield as a Percentage of Market Value
Capital Activity: Distribution Yield as a Percentage of Market Value 47 consecutive monthly base distributions of $0.083 per share1 Special distributions declared: ▪ $0.20 per share (December 2017) ▪ $0.24 per share (December 2018) ▪ $0.05 per share (December 2019) Cumulative distributions declared
Slide 24: Capital Activity: Historical Distribution Coverage
Capital Activity: Historical Distribution Coverage NII has covered the base distribution every quarter since inception * Partial period ended December 31, 2016; Adjusted NII excludes one-time merger / formation costs. © 2020 Great Elm Capital Corp. 24
Slide 25: Summary
Summary © 2020 Great Elm Capital Corp. 25
Slide 26: Summary
Summary ▪ Earned or out-earned declared distributions every quarter since inception ▪ Declared a special distribution of $0.05 per share in December 2019, resulting in a LTM distribution yield Distributions of 20.8% on 3/31/2020 NAV and 37.5% on 3/31/2020 closing market value & Coverage ▪ To date, 4
Slide 27: Appendix
Appendix © 2020 Great Elm Capital Corp. 27
Slide 28: 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 29: Appendix: Contact Information
Appendix: Contact Information Investor Relations 800 South Street, Suite 230 Waltham, MA 02453 Phone: +1 (617) 375-3006 investorrelations@greatelmcap.com © 2020 Great Elm Capital Corp. 29