Great Elm Capital Corp. · NASDAQ:GECC
Great Elm Capital — Q4 2022 Earnings Presentation
32 slides from Great Elm Capital's earnings presentation, Mar 2, 2023
Slide 1: Investor Presentation
Investor Presentation Quarter Ended December 31, 2022 March 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: Fourth Quarter 2022 Overview
Fourth Quarter 2022 Overview Net Investment NII of $2.3 million, or $0.30 per share in 4Q 22 , vs. $1.1 million, or $0.14 per share in 3Q 22 • NII more than doubled from the third quarter of 2022 Income (“NII”) • Highest cash income quarter in company’s history Cash income-generating investments com
Slide 4: Quarterly Cash Distributions
Quarterly Cash Distributions Quarter Ending March 31, 2023 $0.35 March 31 14.8% 12.5% Per Share Payable Date Annualized Dividend Annualized Dividend Yield on Stock Price Yield on NAV On March 2, 2023, the The first quarter 2023 The cash distribution The cash distribution Company announced that cash
Slide 5: About GECC
About GECC Great Elm Capital Corp. Investment Objective Portfolio Overview Externally managed, total-return- To generate current income and • $225.0 million of portfolio fair value focused BDC capital appreciation by investing • $84.8 million of net asset value (“NAV”) Significant insider ownership
Slide 6: Net Investment Income (NII)
Net Investment Income (NII) NII for the quarter ended December 31, 2022 was $2.3 million, or $0.30 per share1, compared to NII of $1.1 million, or $0.14 per share, for the quarter ended September 30, 20221 NII by Quarter $3,000 $2,500 $2,000 $1,500 $1,000 $500 $0 2 2 $ in $000s 4Q19 1Q20 2Q20 3Q20 4
Slide 7: Total Investment Income (TII)
Total Investment Income (TII) TII for the quarter ended December 31, 2022 was $7.3 million and the highest cash income quarter in the company’s history Cash Accretion + PIK $8,000 $7,000 $6,000 $5,000 $4,000 $3,000 $2,000 $1,000 $0 $ in $000s 4Q19 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 3Q
Slide 8: Net Asset Value (NAV) Bridge
Net Asset Value (“NAV”) Bridge1 Net assets were approximately $84.8 million ($11.16 per share1) on December 31, 2022, as compared to $95.5 million ($12.56 per share1) on September 30, 2022 1 Based on shares outstanding of 7.6 million as of September 30, 2022 and December 31, 2022. March 2, 2023 ©202
Slide 9: Q4 2022 Portfolio Review
Q4 2022 Portfolio Review March 2, 2023 ©2023 Great Elm Capital Corp. 9
Slide 10: Cash Generating Portfolio Sequential Comparison
Cash Generating Portfolio Sequential Comparison1 Portfolio as of December 31, 2022 48 Debt Investments $184.3mm Fair Value 12.5% Wtd Avg CY3 $221.7mm Fair Value 58 Investments + 10 Equity Investments $37.4mm Fair Value 13.9% Wtd Avg CY3 12.7% Wtd Avg CY 2 Portfolio as of September 30, 2022 46 Debt I
Slide 11: Cash Generating Portfolio Concentration Overview
Cash Generating Portfolio Concentration Overview1 Strong Industry Diversification and Average Position Size 9/30/2022 12/31/2022 $4.0 Million Average Position Size & 21 Industries $3.8 Million Average Position Size & 22 Industries Specialty Finance Specialty Finance 21.8% Energy Midstream 21.2% Chem
Slide 12: Cash Generating Portfolio Investment Type Mix
Cash Generating Portfolio Investment Type Mix1 Investment Universe and Exposure 9/30/2022 12/31/2022 12.0% Weighted Average Current Yield 12.7% Weighted Average Current Yield 11.5% 9.5% 1L 1L 5.8% 28.7% 2L 2L 6.5% 30.8% SF - Equity SF - Equity 15.2% 12.0% SF - Credit 26% in SF - Credit 24% in Specia
Slide 13: Quarterly Investment Activity
Quarterly Investment Activity Deployment of $37.6 million deployed into 22 investments at a weighted average current yield of 11.8% in 4Q 22 Capital During 4Q 22, monetized $20.4 million across 23 investments, in whole or in part, at a weighted average current yield of 9.6% Monetization of • Include
Slide 14: Total Quarter End Portfolio Detail
Total Quarter End Portfolio Detail1 Debt Investments 91.7%2 $185.0 82.2% 49 Weighted million Of Portfolio 12.4%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 15: Total Quarter End Asset Mix
Total Quarter End Asset Mix Portfolio by Asset Type ($225.0mm) Debt Investments by Rate Type ($185.0mm)1 SF - Equity Other Equity 1% 11% SF - Debt 15% Fixed Rate 50% Floating Corporate Rate Preferred Credit Weighted 50% Equity 67% average fixed 6% rate yield of Weighted average 10.2%2 floating rate
Slide 16: Total Quarter End Industry Breakdown
Total Quarter End Industry Breakdown Specialty Finance December 31 ,2022 Chemicals Investments at Fair % of Energy Midstream Industry Value ($ in 000s) Fair Value Specialty Finance $58,250 25.9% Other (13 Industries) Chemicals $31,702 14.1% Oil & Gas E&P Energy Midstream $22,559 10.0% Internet Media
Slide 17: Great Elm Specialty Finance
Great Elm Specialty Finance March 2, 2023 ©2023 Great Elm Capital Corp. 17
Slide 18: GECC's Specialty Finance Growth
GECC’s Specialty Finance Growth Specialty Finance as a Percentage of GECC’s Investable Assets1 50% 40% 30% 50.0% 20% 31.8% 28.9% 24.1% 26.2% 10% 21.9% 18.4% 6.3% 5.7% 8.5% 0% 4Q 20 1Q 21 2Q 21 3Q 21 4Q 21 1Q 22 2Q 22 3Q 22 4Q 22 Target 1 Investible Assets = Investments + Cash, net of unsettled trade
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 Specialty Finance Companies (SFCs) generates two levels of proprietary investment exposure for investors: •
Slide 20: 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 21: Specialty Finance Focus and Execution
Specialty Finance Focus and Execution Great Elm is 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 origination
Slide 22: 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) and o
Slide 23: 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 Experienced Management Nationwide Lending Focus • Over 100 years of collective Use of Funds: exper
Slide 24: 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 25: GESF: Lenders Funding
GESF: Lenders Funding Private funding and risk sharing source for factors and asset-based lenders Flexible Lending Solution Customized Structures Lenders Funding purchases Lenders Funding offers customized, participations in factoring and asset- creative participation structures to meet based lendin
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: Q4 2022 Financial Review
Q4 2022 Financial Review March 2, 2023 ©2023 Great Elm Capital Corp. 27
Slide 28: Financial Review: Per Share Data
Financial Review: Per Share Data Financial Highlights – Per Share Data 4Q 211,2 1Q 221,3 2Q 22 3Q 22 4Q 22 Earnings Per Share (“EPS”) ($4.95) ($1.12) ($0.87) $0.18 ($0.96) Net Investment Income (“NII”) $1.58 $1.31 $0.23 $0.14 $0.30 Per Share Pre-Incentive NII Per Share $0.42 $0.24 $0.23 $0.14 $0.37
Slide 29: Financial Review: Quarterly Operating Results
Financial Review: Quarterly Operating Results 4Q 2021 1Q 2022 2Q 2022 3Q 2022 4Q 2022 $ in $000s Per Share1 Per Share1 Per Share1 Per Share1 Per Share1 Total Investment Income2 $6,353 $1.42 $5,558 $1.22 $5,513 $1.06 $6,033 $0.79 $7,325 $0.96 Interest Income 4,774 1.06 4,041 0.89 3,734 0.72 4,990 0.6
Slide 30: Financial Review: Portfolio
Financial Review: Portfolio Financial Highlights - Portfolio 4Q 21 1Q 22 2Q 22 3Q 22 4Q 22 Capital Deployed $34.2 million $27.4 million $44.7 million $39.9 million $37.6 million Investments Monetized $40.3 million $26.9 million $34.0 million $28.4 million $20.4 million Total Fair Value of Investment
Slide 31: 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 32: Contact Information
Contact Information Media & Investor Contact: Investors Relations investorrelations@greatelmcap.com March 2, 2023 ©2023 Great Elm Capital Corp. 32