Great Elm Capital Corp. · NASDAQ:GECC
Great Elm Capital — Q4 2023 Earnings Presentation
36 slides from Great Elm Capital's earnings presentation, Feb 29, 2024
Slide 1: Investor Presentation Quarter Ended December 31, 2023
Investor Presentation Quarter Ended December 31, 2023 February 29, 2024 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: Fourth Quarter 2023 Overview
Fourth Quarter 2023 Overview NII of $3.3 million, or $0.43 per share in 4Q 23, vs. $3.1 million, or $0.40 per share in 3Q 23 Net Investment • Fourth consecutive quarter of NII more than covering the base dividend Income (“NII”) • NII of $12.5 million, or $1.65 per share covers the $1.50 of total div
Slide 4: Quarterly Cash Distributions Quarter Ending March 31, 2024
Quarterly Cash Distributions Quarter Ending March 31, 2024 March $0.35 29 13% 11% Per Share Payable Date Annualized Dividend Annualized Dividend Yield on Stock Price Yield on NAV On February 8, 2024, the The first quarter 2024 The cash distribution The cash distribution Company announced that cash d
Slide 5: $24 Million Equity Raise at NAV
$24 Million Equity Raise at NAV On February 8, 2024, GECC issued 1.85 million shares at $12.97 (then current NAV) for $24 million • Great Elm Group, Inc. (“GEG”) participated in $6 million of the $24 million Overview • A strategic institutional investor participated in the other $18 million of the t
Slide 6: About GECC
About GECC Great Elm Capital Corp. Investment Objective Portfolio Overview Externally managed, total-return- To generate current income and • $230.6 million of portfolio fair value focused BDC capital appreciation by investing • $98.7 million of net asset value (“NAV”) Significant insider ownership
Slide 7: Net Investment Income (NII)
Net Investment Income (NII) NII for the quarter ended December 31, 2023 was $3.3 million, or $0.43 per share1, compared to NII of $3.1 million, or $0.40 per share1, for the quarter ended September 30, 2023 • Refinancing items impacted NII by $0.3 million in the September 30, 2023 quarter Refinancing
Slide 8: Total Investment Income (TII)
Total Investment Income (TII) TII for the quarter ended December 31, 2023 was $9.2 million, closing out 2023 with the highest cash income year 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 1
Slide 9: 4Q 2023 Net Asset Value Bridge
4Q 2023 Net Asset Value Bridge1 Net assets were approximately $98.7 million ($12.99 per share1) on December 31, 2023, as compared to $97.9 million ($12.88 per share1) on September 30, 2023. 1 Based on shares outstanding of 7.6 million as of December 31, 2023 and September 30, 2023. February 29, 2024
Slide 10: FY 2023 Net Asset Value Bridge
FY 2023 Net Asset Value Bridge1 Net assets were approximately $98.7 million ($12.99 per share1) on December 31, 2023, as compared to $84.8 million ($11.16 per share1) on December 31, 2022 1 Based on shares outstanding of 7.6 million as of December 31, 2022 and throughout all of 2023. February 29, 20
Slide 11: Q4 2023 Portfolio Review
Q4 2023 Portfolio Review February 29, 2024 ©2024 Great Elm Capital Corp. 11
Slide 12: Total Quarter End Portfolio Detail
Total Quarter End Portfolio Detail1 Debt Investments 93.5%2 $199.3 86.4% 37 Weighted million Of Portfolio 13.8%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 13: Quarterly Investment Activity
Quarterly Investment Activity Deployment of $29.9 million deployed into 15 investments at a weighted average current yield of 14.0% in 4Q 23 Capital During 4Q 23, monetized $36.2 million across 32 investments, in whole or in part, at a weighted average current yield of 11.0% Monetization of • Includ
Slide 14: Portfolio Asset Mix
Portfolio Asset Mix1 Focus on Secured Investments End of Period Investments ($mm) 12/31/2023 $236.4 $235.3 $230.6 $224.9 $226.9 3% 3% 3% 3% 1% 3% 3% 3% 3% 6% 3% 5% 11% 8% 7% 7% 10% 12% 1L 22% 23% 23% 2L 26% 25% Specialty Finance 14% 13% 23% 16% 52% Unsecured 16% 27% Yielding Equity 52% Other Equity
Slide 15: Total Quarter End Asset Mix
Total Quarter End Asset Mix Portfolio by Asset Type ($230.6mm) Debt Investments by Rate Type ($199.3mm)1 Yielding Equity 3% Other Equity 3% SF - Equity 8% Weighted Fixed Rate average fixed SF - Debt 33% rate yield of 15% 10.7%2 Corporate Floating Credit Rate 71% 67% Weighted average floating rate yi
Slide 16: Corporate Portfolio Overview
Corporate Portfolio Overview February 29, 2024 ©2024 Great Elm Capital Corp. 16
Slide 17: Corporate Portfolio: Investment Mix Type ($mm)
Corporate Portfolio: Investment Mix Type ($mm) $182.2 $183.2 $178.3 $166.7 $170.3 4% 4% 4% 2% 2% 7% 4% 4% 8% 8% 10% 9% 14% 13% 16% 18% 16% 20% 21% 37% 64% 67% 58% 52% 41% 4Q22 1Q23 2Q23 3Q23 4Q23 1L 2L Unsecured Yielding Equity Other Equity February 29, 2024 ©2024 Great Elm Capital Corp. 17
Slide 18: Corporate Portfolio: Fixed and Floating Rate Exposure
Corporate Portfolio: Fixed and Floating Rate Exposure Portfolio by Rate Type1 12/31/2023 4% Weighted Average Value % of ($mm) Corp. Price Coupon Maturity CY 20% Fixed Rate $36.5 20% 95.45 9.1% 2.5 yrs 9.7% Floating Rate $128.0 72% 92.14 14.1% 3.3 yrs 15.3% Total Credit $164.5 92% 92.21 13.0% 3.1 yrs
Slide 19: Corporate Portfolio: Industry Breakdown
Corporate Portfolio: Industry Breakdown December 31, 2023 Percentage of Fair Value Industry Investments at Fair Value ($ in 000s) % of Fair Value Chemicals $27,024 15.2% Chemicals 8% Consumer Products $20,211 11.3% 15% Consumer Products 2% Transportation Equipment $17,261 9.7% 2% Transportation Equi
Slide 20: Great Elm Specialty Finance
Great Elm Specialty Finance February 29, 2024 ©2024 Great Elm Capital Corp. 20
Slide 21: 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 22: 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 23: 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 24: 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 25: GECC Specialty Finance
GECC Specialty Finance Specialty Finance as a Percentage of Investment Portfolio 26% 25% 23% 23% 22% 4Q22 1Q23 2Q23 3Q23 4Q23 February 29, 2024 ©2024 Great Elm Capital Corp. 25
Slide 26: 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 27: 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 28: 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 29: 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 30: Q4 2023 Financial Review
Q4 2023 Financial Review February 29, 2024 ©2024 Great Elm Capital Corp. 30
Slide 31: Financial Review: Per Share Data
Financial Review: Per Share Data Financial Highlights – Per Share Data 4Q 22 1Q 23 2Q 23 3Q 23 4Q 23 Earnings Per Share (“EPS”) ($0.96) $1.07 $0.68 $1.02 $0.55 Net Investment Income (“NII”) $0.30 $0.37 $0.44 $0.40 $0.43 Per Share Pre-Incentive NII Per Share $0.37 $0.47 $0.56 $0.50 $0.54 Net Realized
Slide 32: Financial Review: Quarterly Operating Results
Financial Review: Quarterly Operating Results 4Q 2022 1Q 2023 2Q 2023 3Q 2023 4Q 2023 $ in $000s Per Share1 Per Share1 Per Share1 Per Share1 Per Share1 Total Investment Income2 $7,325 $0.96 $8,410 $1.11 $8,977 $1.18 $9,276 $1.22 $9,161 $1.20 Interest Income 5,919 0.78 6,630 0.87 7,081 0.93 7,592 1.0
Slide 33: Financial Review: Portfolio
Financial Review: Portfolio Financial Highlights - Portfolio 4Q 22 1Q 23 2Q 23 3Q 23 4Q 23 Capital Deployed $37.6 million $46.0 million $23.0 million $32.6 million $29.9 million Investments Monetized $20.4 million $52.8 million $16.0 million $37.0 million $36.2 million Total Fair Value of Investment
Slide 34: Financial Review: Cash NII
Financial Review: Cash NII $000s 4Q 22 1Q 23 2Q 23 3Q 23 4Q 23 Total Investment Income (TII) $7,325 $8,410 $8,977 $9,276 $9,161 Less: Accretion of OID and PIK income (867) (1,223) (1,170) (1,157) (1,446) "Cash" Total Investment Income $6,458 $7,187 $7,807 $8,119 $7,838 “Cash” TII Mix 88.2% 85.5% 87.
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 Media & Investor Contact: Investors Relations investorrelations@greatelmcap.com February 29, 2024 ©2024 Great Elm Capital Corp. 36