EX-99.1 2 gecc-ex99_1.htm EX-99.1 EX-99.1

Exhibit 99.1

img78866663_0.jpg 

 

Great Elm Capital Corp. Announces Third Quarter 2022 Financial Results

 

Company to Host Quarterly Conference Call and Webcast at 11:00 AM ET Today

 

WALTHAM, Mass., November 3, 2022 – Great Elm Capital Corp. (“we,” “us,” “our,” the “Company” or “GECC,”) (NASDAQ: GECC), a business development company, today announced its financial results for the third quarter ended September 30, 2022.

 

Financial and Operating Highlights

▪
Formed Great Elm Healthcare Finance, a specialty asset-based lending platform led by industry veteran Mike Gervais, to provide capital to healthcare-related businesses across the U.S.
▪
Modest increase in portfolio fair value in the third quarter as compared to the second quarter.
▪
Net investment income (“NII”) for the quarter ended September 30, 2022 was $1.1 million, or $0.14 per share.
▪
NII was impacted by costs and expenses related to the formation of Great Elm Healthcare Finance as well as certain legacy investments.
▪
Net assets were $95.5 million on September 30, 2022, as compared to $97.6 million on June 30, 2022, and $99.4 million on September 30, 2021.
▪
NAV per share was $12.56 as of September 30, 2022, as compared to $12.84 as of June 30, 2022, and $22.17 as of September 30, 2021.
▪
GECC’s asset coverage ratio was approximately 165.5% as of September 30, 2022, as compared to 166.9% as of June 30, 2022, and 163.8% as of September 30, 2021.
▪
The Board of Directors has approved a quarterly dividend of $0.45 per share for the fourth quarter of 2022, equating to a 14.3% annualized yield on September 30, 2022 NAV per share.

 

Management Commentary

“Our portfolio value remained resilient in the face of a challenging market and economic backdrop,” said Matt Kaplan, GECC’s Chief Executive Officer. “NII was adversely impacted in the quarter by elevated costs and expenses largely related to legacy positions and the creation of our Healthcare lending platform. We continue to work on building our Specialty Finance pipeline and positioning our platforms for consistent and durable growth. We remain disciplined with respect to deploying capital as we look to further grow our diverse portfolio and ultimately increase our NII and NAV.”

 

 

 

 

 

Financial Highlights – Per Share Data(1)

 

Q3/20211

Q4/20211

Q1/20221

Q2/20221

Q3/20221

Earnings Per Share (“EPS”)

($0.79)

($4.95)

($1.12)

($0.87)

$0.18

Net Investment Income (“NII”) Per Share

$0.39

$1.58

$1.31

$0.23

$0.14

Pre-Incentive Net Investment Income Per Share

$0.49

$0.42

$0.24

$0.23

$0.14

Net Realized and Unrealized Gains / (Losses) Per Share

($1.18)

($6.53)

($2.43)

($1.10)

$0.04

Net Asset Value Per Share at Period End

$22.17

$16.63

$15.06

$12.84

$12.56

Distributions Paid / Declared Per Share

$0.60

$0.60

$0.60

$0.45

$0.45

 

Portfolio and Investment Activity

As of September 30, 2022, GECC held total investments of $217.0 million at fair value, as follows:

•
42 debt investments in corporate credit, totaling approximately $147.8 million and representing 68.1% of the fair market value of the Company’s total investments. Secured debt investments comprised a substantial majority of the fair market value of the Company’s debt investments.
•
8 debt investments in specialty finance, totaling approximately $25.6 million and representing 11.8% of the fair market value of the Company’s total investments.
•
3 income generating equity investments in specialty finance companies, totaling approximately $25.7 million, representing 11.9% of the fair market value of the Company’s total investments.
•
2 income generating preferred equity investments totaling approximately $11.2 million and 2 income generating closed-end funds totaling approximately $2.7 million, representing 6.4% of the fair market value of the Company’s total investments.
•
Other equity investments, totaling approximately $4.0 million, representing 1.8% of the fair market value of the Company’s total investments.

 

As of September 30, 2022, the weighted average current yield on the Company’s debt portfolio was 11.6%. Floating rate instruments comprised approximately 48.3% of the fair market value of debt investments (compared to 33.4% as of June 30, 2022) and the Company’s fixed rate debt investments had a weighted average maturity of 3.4 years.

 

During the quarter ended September 30, 2022, we deployed approximately $39.9 million into 24 investments(2) at a weighted average current yield of 12.1% with approximately 60% of deployments in floating rate investments.

 

During the quarter ended September 30, 2022, we monetized, in part or in full, 26 investments for approximately $28.4 million(3), at a weighted average current yield of 9.5%. Monetizations include $23.6 million of mandatory debt paydowns and redemptions at a weighted average current yield of 9.7%. Sales aggregated $4.8 million at a weighted average current yield of 8.5%. Approximately 90% of monetizations were of fixed rate investments.

 

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Financial Review

Total investment income for the quarter ended September 30, 2022 was $6.0 million, or $0.79 per share. Net expenses for the quarter ended September 30, 2022 were approximately $4.9 million, or $0.65 per share.

 

Net realized and unrealized gains for the quarter ended September 30, 2022 were approximately $0.3 million, or $0.04 per share.

 

Liquidity and Capital Resources

As of September 30, 2022, cash and money market securities totaled approximately $21.3 million, exclusive of holdings of United States Treasury Bills.

Total debt outstanding (par value) as of September 30, 2022 was $145.9 million, comprised of 6.50% senior notes due June 2024 (NASDAQ: GECCN), 6.75% senior notes due January 2025 (NASDAQ: GECCM), and 5.875% senior notes due June 2026 (NASDAQ: GECCO). The Company also has a $25.0 million revolving credit facility due May 2024, which was undrawn as of September 30, 2022.

 

Distributions

The Company’s Board of Directors has approved a quarterly cash distribution of $0.45 per share for the quarter ending December 31, 2022. The fourth quarter distribution will be payable on December 30, 2022 to stockholders of record as of December 15, 2022.

The distribution equates to a 18.0% annualized dividend yield on the Company’s closing market price on November 2, 2022 of $9.98 and a 14.3% annualized dividend yield on the Company’s September 30, 2022 NAV of $12.56 per share.

 

 

Conference Call and Webcast

GECC will discuss these results in a conference call on Thursday, November 3, 2022 at 11:00 a.m. ET.

 

Conference Call Details

Date/Time: Thursday, November 3, 2022 – 11:00 a.m. ET

 

Participant Dial-In Numbers:

(United States): 877-407-0789

(International): 201-689-8562

 

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To access the call, please dial-in approximately five minutes before the start time and, when asked, provide the operator with passcode “GECC”. An accompanying slide presentation will be available in pdf format via the “Investor Relations” section of Great Elm Capital Corp.’s website at

http://www.investor.greatelmcc.com/events-and-presentations/presentations after the issuance of the earnings release.

 

Webcast

The call and presentation will also be simultaneously webcast over the internet via the Investor Relations section of GECC’s website or by clicking on the conference call link:

https://edge.media-server.com/mmc/p/24c6xpze

 

About Great Elm Capital Corp.

Great Elm Capital Corp. is an externally managed, business development company that seeks to generate current income and capital appreciation by investing in debt and income generating equity securities, including investments in specialty finance businesses.

 

Cautionary Statement Regarding Forward-Looking Statements

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,” “estimate,” “designed,” “seek,” “continue,” “upside,” “potential” and similar expressions. All such forward-looking statements involve estimates and assumptions that are subject to risks, uncertainties and other factors that could cause actual results to differ materially from the results expressed in the statements. Among the key factors that could cause actual results to differ materially from those projected in the forward-looking statements are: conditions in the credit markets, the price of GECC common stock, the performance of GECC’s portfolio and investment manager and risks associated with the economic impact of the COVID-19 pandemic on GECC and its portfolio companies. Information concerning these and other factors can be found in GECC’s Annual Report on Form 10-K and other reports filed with the SEC. GECC assumes no obligation to, and expressly disclaims any duty to, update any forward-looking statements contained in this communication or to conform prior statements to actual results or revised expectations except as required by law. Readers are cautioned not to place undue reliance on these forward-looking statements that speak only as of the date hereof.

 

This press release does not constitute an offer of any securities for sale.

 

Endnotes:

(1) The per share figures are based on a weighted average outstanding share count for the respective period following the 6-for-1 reverse stock split effective on February 28, 2022.

(2) This includes new deals, additional fundings (inclusive of those on revolving credit facilities), refinancings and capitalized PIK income. Amounts included herein do not include investments in short-term securities, including United States Treasury Bills.

(3) This includes scheduled principal payments, prepayments, sales and repayments (inclusive of those on revolving credit facilities). Amounts included herein do not include investments in short-term securities, including United States Treasury Bills.

 

 

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Investor Relations Contact:

Garrett Edson

investorrelations@greatelmcap.com

 

 

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GREAT ELM CAPITAL CORP.

CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES (unaudited)

Dollar amounts in thousands (except per share amounts)

 

 

September 30, 2022

 

 

December 31, 2021

 

Assets

 

 

 

 

 

 

Investments

 

 

 

 

 

 

Non-affiliated, non-controlled investments, at fair value (amortized cost of $175,873 and $175,800, respectively)

 

$

169,552

 

 

$

164,203

 

Non-affiliated, non-controlled short-term investments, at fair value (amortized cost of $69,680 and $199,995, respectively)

 

 

69,676

 

 

 

199,995

 

Affiliated investments, at fair value (amortized cost of $13,436 and $129,936, respectively)

 

 

2,686

 

 

 

10,861

 

Controlled investments, at fair value (amortized cost of $41,924 and $32,649, respectively)

 

 

44,775

 

 

 

37,085

 

Total investments

 

 

286,689

 

 

 

412,144

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

 

1,502

 

 

 

9,132

 

Restricted cash

 

 

-

 

 

 

13

 

Receivable for investments sold

 

 

452

 

 

 

766

 

Interest receivable

 

 

3,049

 

 

 

1,811

 

Dividends receivable

 

 

827

 

 

 

1,540

 

Due from portfolio company

 

 

1

 

 

 

136

 

Due from affiliates

 

 

-

 

 

 

17

 

Deferred financing costs

 

 

265

 

 

 

376

 

Prepaid expenses and other assets

 

 

343

 

 

 

379

 

Total assets

 

$

293,128

 

 

$

426,314

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

Notes payable (including unamortized discount of $3,071 and $3,935, respectively)

 

$

142,862

 

 

$

141,998

 

Payable for investments purchased

 

 

53,132

 

 

 

203,575

 

Interest payable

 

 

58

 

 

 

29

 

Accrued incentive fees payable

 

 

-

 

 

 

4,854

 

Due to affiliates

 

 

974

 

 

 

1,012

 

Accrued expenses and other liabilities

 

 

586

 

 

 

290

 

Total liabilities

 

$

197,612

 

 

$

351,758

 

 

 

 

 

 

 

 

Commitments and contingencies (Note 7)

 

$

-

 

 

$

-

 

 

 

 

 

 

 

 

Net Assets

 

 

 

 

 

 

Common stock, par value $0.01 per share (100,000,000 shares authorized,
7,601,958 shares issued and outstanding and 4,484,278 shares issued and
  outstanding, respectively)

(1)

$

76

 

 

$

45

 

Additional paid-in capital

 

 

284,359

 

 

 

245,531

 

Accumulated losses

 

 

(188,919

)

 

 

(171,020

)

Total net assets

 

$

95,516

 

 

$

74,556

 

Total liabilities and net assets

 

$

293,128

 

 

$

426,314

 

Net asset value per share

(1)

$

12.56

 

 

$

16.63

 

Authorized, issued and outstanding shares of common stock and net asset value per share have been adjusted for the periods prior to February 28, 2022 to reflect the six-for-one reverse stock split effected on that date on a retroactive basis.

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GREAT ELM CAPITAL CORP.

CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)

Dollar amounts in thousands (except per share amounts)

 

 

 

For the Three Months Ended September 30,

 

 

For the Nine Months Ended September 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Investment Income:

 

 

 

 

 

 

 

 

 

 

 

 

Interest income from:

 

 

 

 

 

 

 

 

 

 

 

 

Non-affiliated, non-controlled investments

 

$

4,221

 

 

$

3,765

 

 

$

10,496

 

 

$

9,337

 

Non-affiliated, non-controlled investments (PIK)

 

 

259

 

 

 

63

 

 

 

728

 

 

 

161

 

Affiliated investments

 

 

25

 

 

 

305

 

 

 

68

 

 

 

889

 

Affiliated investments (PIK)

 

 

-

 

 

 

1,588

 

 

 

58

 

 

 

4,595

 

Controlled investments

 

 

485

 

 

 

151

 

 

 

1,415

 

 

 

161

 

Total interest income

 

 

4,990

 

 

 

5,872

 

 

 

12,765

 

 

 

15,143

 

Dividend income from:

 

 

 

 

 

 

 

 

 

 

 

 

Non-affiliated, non-controlled investments

 

 

340

 

 

 

435

 

 

 

1,297

 

 

 

1,369

 

Controlled investments

 

 

400

 

 

 

480

 

 

 

2,099

 

 

 

1,440

 

Total dividend income

 

 

740

 

 

 

915

 

 

 

3,396

 

 

 

2,809

 

Other income from:

 

 

 

 

 

 

 

 

 

 

 

 

Non-affiliated, non-controlled investments

 

 

303

 

 

 

561

 

 

 

943

 

 

 

642

 

Affiliated investments (PIK)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

282

 

Controlled investments

 

 

-

 

 

 

25

 

 

 

-

 

 

 

25

 

Total other income

 

 

303

 

 

 

586

 

 

 

943

 

 

 

949

 

Total investment income

 

$

6,033

 

 

$

7,373

 

 

$

17,104

 

 

$

18,901

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Management fees

 

$

804

 

 

$

876

 

 

$

2,355

 

 

$

2,301

 

Incentive fees

 

 

-

 

 

 

382

 

 

 

-

 

 

 

888

 

Administration fees

 

 

221

 

 

 

175

 

 

 

704

 

 

 

511

 

Custody fees

 

 

13

 

 

 

13

 

 

 

41

 

 

 

39

 

Directors’ fees

 

 

49

 

 

 

61

 

 

 

156

 

 

 

172

 

Professional services

 

 

878

 

 

 

937

 

 

 

1,669

 

 

 

1,613

 

Interest expense

 

 

2,671

 

 

 

3,147

 

 

 

8,008

 

 

 

7,636

 

Other expenses

 

 

313

 

 

 

209

 

 

 

698

 

 

 

561

 

Total expenses

 

$

4,949

 

 

$

5,800

 

 

$

13,631

 

 

$

13,721

 

Incentive fee waiver

 

 

-

 

 

 

-

 

 

 

(4,854

)

 

 

-

 

Net expenses

 

 

4,949

 

 

 

5,800

 

 

$

8,777

 

 

$

13,721

 

Net investment income before taxes

 

$

1,084

 

 

$

1,573

 

 

$

8,327

 

 

$

5,180

 

Excise tax

 

$

22

 

 

$

-

 

 

$

123

 

 

$

-

 

Net investment income

 

$

1,062

 

 

$

1,573

 

 

$

8,204

 

 

$

5,180

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net realized and unrealized gains (losses):

 

 

 

 

 

 

 

 

 

 

 

 

Net realized gain (loss) on investment transactions from:

 

 

 

 

 

 

 

 

 

 

 

 

Non-affiliated, non-controlled investments

 

$

1,171

 

 

$

1,770

 

 

$

(17,729

)

 

$

38

 

Affiliated investments

 

 

-

 

 

 

(110

)

 

 

(110,784

)

 

 

(4,162

)

Controlled investments

 

 

-

 

 

 

-

 

 

 

-

 

 

 

140

 

Total net realized gain (loss)

 

 

1,171

 

 

 

1,660

 

 

 

(128,513

)

 

 

(3,984

)

Net change in unrealized appreciation (depreciation) on investment transactions from:

 

 

 

 

Non-affiliated, non-controlled investments

 

 

163

 

 

 

(3,202

)

 

 

5,274

 

 

 

13,994

 

Affiliated investments

 

 

5

 

 

 

(3,568

)

 

 

108,325

 

 

 

(5,062

)

Controlled investments

 

 

(1,070

)

 

 

406

 

 

 

(1,586

)

 

 

1,774

 

Total net change in unrealized appreciation (depreciation)

 

 

(902

)

 

 

(6,364

)

 

 

112,013

 

 

 

10,706

 

Net realized and unrealized gains (losses)

 

$

269

 

 

$

(4,704

)

 

$

(16,500

)

 

$

6,722

 

Net increase (decrease) in net assets resulting from operations

 

$

1,331

 

 

$

(3,131

)

 

$

(8,296

)

 

$

11,902

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net investment income per share (basic and diluted):

(1)

$

0.14

 

 

$

0.39

 

 

$

1.42

 

 

$

1.32

 

Earnings per share (basic and diluted):

(1)

$

0.18

 

 

$

(0.79

)

 

$

(1.43

)

 

$

3.02

 

Weighted average shares outstanding (basic and diluted):

(1)

 

7,601,958

 

 

 

3,985,741

 

 

 

5,796,255

 

 

 

3,935,008

 

 

Weighted average shares outstanding and per share amounts have been adjusted for the periods shown to reflect the six-for-one reverse stock split effected on February 28, 2022 on a retroactive basis.

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