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Great Elm Capital Corp. Announces Second Quarter 2023 Financial Results

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Company to Host Conference Call and Webcast at 8:30 AM ET Today

WALTHAM, Mass., Aug. 03, 2023 (GLOBE NEWSWIRE) -- Great Elm Capital Corp. (“we,” “our,” the “Company” or “GECC,”) (NASDAQ: GECC), a business development company, today announced its financial results for the second quarter ended June 30, 2023. 

Second Quarter and Other Recent Highlights:

  • Net investment income (“NII”) for the quarter ended June 30, 2023 grew 19% to $3.4 million, or $0.44 per share, as compared to $2.8 million, or $0.37 per share, for the quarter ended March 31, 2023.
    • Second consecutive quarter of NII more than covering the dividend.
    • NII growth was driven by strategic capital deployment and rotation into higher-yielding, secured floating rate investments.
  • Highest cash income quarter in the Company’s history, with only 13% of GECC’s $9.0 million Total Investment Income attributable to PIK and accretion income.
  • Net assets were $92.9 million, or $12.21 per share, on June 30, 2023, as compared to $90.3 million, or $11.88 per share, on March 31, 2023, and $97.6 million, or $12.84 per share, on June 30, 2022.
  • GECC’s asset coverage ratio was approximately 161.5% as of June 30, 2023, as compared to 159.8% as of March 31, 2023, and 166.9% as of June 30, 2022.
  • The Board of Directors approved a quarterly dividend of $0.35 per share for the third quarter of 2023, equating to a 16.7% annualized yield on the Company’s closing market price on August 2, 2023 of $8.37.

Management Commentary
“We are very pleased with our second quarter performance, as we generated another quarter of record total investment income, our NII once again exceeded our quarterly dividend and we grew NAV for the second consecutive quarter,” said Matt Kaplan, GECC’s Chief Executive Officer. “We continued to proactively deploy capital into higher-yielding, secured and floating rate investments and thanks to our actions over the past year, our portfolio is generating enough cash to cover our dividend – a notable transformation from one year ago. We also made progress in expanding our Specialty Finance platform, closing attractive new transactions at Prestige, Great Elm Healthcare Finance and Sterling Commercial Credit. Looking ahead, we believe we are well positioned to cover our quarterly dividend and create additional value for our shareholders.”

Financial Highlights – Per Share Data

 Q2/2022Q3/2022Q4/2022Q1/2023Q2/2023
Earnings Per Share (“EPS”) ($0.87)$0.18($0.96)$1.07$0.69
Net Investment Income (“NII”) Per Share$0.23$0.14$0.30$0.37$0.44
Pre-Incentive Net Investment Income Per Share$0.23$0.14$0.37$0.47$0.56
Net Realized and Unrealized Gains / (Losses) Per Share ($1.10)$0.04($1.26)$0.70$0.24
Net Asset Value Per Share at Period End$12.84$12.56$11.16$11.88$12.21
Distributions Paid / Declared Per Share$0.45$0.45$0.45$0.35$0.35
      

Portfolio and Investment Activity

As of June 30, 2023, GECC held total investments of $236.4 million at fair value, as follows:

  • 40 debt investments in corporate credit, totaling approximately $167.9 million and representing 71.0% 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 $30.9 million and representing 13.1% of the fair market value of the Company’s total investments.
  • 4 equity investments in specialty finance companies, totaling approximately $23.3 million, representing 9.8% of the fair market value of the Company’s total investments.
  • 3 dividend paying equity investments, totaling approximately $7.9 million, representing 3.3% of the fair market value of the Company’s total investments.
  • Other equity investments, totaling approximately $6.4 million, representing 2.7% of the fair market value of the Company’s total investments.

In July, GECC exited its entire equity and subordinated note investments in Lenders Funding at valuations consistent with the June 30, 2023 fair values. The Company continues to hold a commitment under Lenders Funding’s senior credit facility.

As of June 30, 2023, the weighted average current yield on the Company’s debt portfolio was 13.5%. Floating rate instruments comprised approximately 63% of the fair market value of debt investments (compared to 58% as of March 31, 2023) and the Company’s fixed rate debt investments had a weighted average maturity of 2.9 years.

During the quarter ended June 30, 2023, we deployed approximately $23.0 million into 19 investments(1) at a weighted average current yield of 14.8%.

During the quarter ended June 30, 2023, we monetized, in part or in full, 34 investments for approximately $16.0 million(2), at a weighted average current yield of 10.1%. Monetizations include $3.8 million of mandatory debt paydowns and redemptions at a weighted average current yield of 11.6%. Sales aggregated to $12.1 million at a weighted average current yield of 8.9%.

Financial Review
Total investment income for the quarter ended June 30, 2023 was $9.0 million, or $1.18 per share. Net expenses for the quarter ended June 30, 2023 were approximately $5.6 million, or $0.74 per share.

Net realized and unrealized gains for the quarter ended June 30, 2023 were approximately $1.8 million, or $0.24 per share.

Liquidity and Capital Resources
As of June 30, 2023, cash and money market securities totaled approximately $11.8 million, exclusive of holdings of United States Treasury Bills.

As of June 30, 2023, total debt outstanding (par value) was $150.9 million, comprised of 6.50% senior notes due June 2024 (NASDAQ: GECCN), 6.75% senior notes due January 2025 (NASDAQ: GECCM), 5.875% senior notes due June 2026 (NASDAQ: GECCO), and $5.0 million outstanding on the $25.0 million revolving credit facility due May 2024.

Distributions
The Company’s Board of Directors has approved a quarterly cash distribution of $0.35 per share for the quarter ending September 30, 2023. The third quarter distribution will be payable on September 29, 2023 to stockholders of record as of September 15, 2023.

The distribution equates to a 16.7% annualized dividend yield on the Company’s closing market price on August 2, 2023 of $8.37 and an 11.5% annualized dividend yield on the Company’s June 30, 2023 NAV of $12.21 per share.

Conference Call and Webcast
GECC will discuss these results in a conference call today at 8:30 a.m. ET.

Conference Call Details 
Date/Time:Thursday, August 3, 2023 – 8:30 a.m. ET
  
Participant Dial-In Numbers: 
(United States):877-407-0789
(International):201-689-8562
  

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 here after the issuance of the earnings release.

Webcast

The call and presentation will also be simultaneously webcast over the internet via the “News & Events” section of GECC’s website or by clicking on the conference call link here.

About Great Elm Capital Corp.

GECC 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, rising interest rates, inflationary pressure, the price of GECC common stock and the performance of GECC’s portfolio and investment manager. Information concerning these and other factors can be found in GECC’s Annual Report on Form 10-K and other reports filed with the Securities and Exchange Commission. 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) 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.
(2) 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.

Media & Investor Contact:
Investor Relations
investorrelations@greatelmcap.com

GREAT ELM CAPITAL CORP.
CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES (unaudited)
Dollar amounts in thousands (except per share amounts)

  June 30, 2023  December 31, 2022 
Assets      
Investments      
Non-affiliated, non-controlled investments, at fair value (amortized cost of $191,570 and $183,061, respectively) $186,091  $171,743 
Non-affiliated, non-controlled short-term investments, at fair value (amortized cost of $78,158 and $76,140, respectively)  78,139   76,127 
Affiliated investments, at fair value (amortized cost of $13,427 and $13,433, respectively)  1,450   1,304 
Controlled investments, at fair value (amortized cost of $52,882 and $54,684, respectively)  48,890   51,910 
Total investments  314,570   301,084 
       
Cash and cash equivalents  3,352   587 
Receivable for investments sold  90   396 
Interest receivable  2,932   3,090 
Dividends receivable  1,124   1,440 
Due from portfolio company  3   1 
Deferred financing costs  146   226 
Prepaid expenses and other assets  260   3,288 
Total assets $322,477  $310,112 
       
Liabilities      
Notes payable (including unamortized discount of $2,213 and $2,781, respectively) $143,721  $143,152 
Revolving credit facility  5,000   10,000 
Payable for investments purchased  77,049   70,022 
Interest payable  56   42 
Accrued incentive fees payable  2,116   565 
Due to affiliates  1,174   1,042 
Accrued expenses and other liabilities  511   480 
Total liabilities $229,627  $225,303 
       
Commitments and contingencies  $-  $- 
       
Net Assets      
Common stock, par value $0.01 per share (100,000,000 shares authorized, 7,601,958 shares issued and outstanding and 7,601,958 shares issued and outstanding, respectively) $76  $76 
Additional paid-in capital  284,107   284,107 
Accumulated losses  (191,333)  (199,374)
Total net assets $92,850  $84,809 
Total liabilities and net assets $322,477  $310,112 
Net asset value per share $12.21  $11.16 
         


GREAT ELM CAPITAL CORP.

CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
Dollar amounts in thousands (except per share amounts)

  For the Three Months Ended
June 30,
  For the Six Months Ended
June 30,
 
  2023  2022  2023  2022 
Investment Income:            
Interest income from:            
Non-affiliated, non-controlled investments $5,836  $3,016  $11,312  $6,275 
Non-affiliated, non-controlled investments (PIK)  590   223   1,039   469 
Affiliated investments  32   22   62   43 
Affiliated investments (PIK)  -   -   -   58 
Controlled investments  623   473   1,065   930 
Controlled investments (PIK)  -   -   233   - 
Total interest income  7,081   3,734   13,711   7,775 
Dividend income from:            
Non-affiliated, non-controlled investments  327   454   645   957 
Controlled investments  700   935   1,316   1,699 
Total dividend income  1,027   1,389   1,961   2,656 
Other income from:            
Non-affiliated, non-controlled investments  869   390   1,715   640 
Total other income  869   390   1,715   640 
Total investment income $8,977  $5,513  $17,387  $11,071 
             
Expenses:            
Management fees $884  $771  $1,753  $1,551 
Incentive fees  842   -   1,552   - 
Administration fees  341   262   636   483 
Custody fees  21   14   43   28 
Directors’ fees  53   44   105   107 
Professional services  434   373   970   791 
Interest expense  2,769   2,667   5,590   5,337 
Other expenses  265   194   503   385 
Total expenses $5,609  $4,325  $11,152  $8,682 
Incentive fee waiver  -   -   -   (4,854)
Net expenses  5,609   4,325  $11,152  $3,828 
Net investment income before taxes $3,368  $1,188  $6,235  $7,243 
Excise tax $-  $-  $28  $101 
Net investment income $3,368  $1,188  $6,207  $7,142 
             
Net realized and unrealized gains (losses):            
Net realized gain (loss) on investment transactions from:            
Non-affiliated, non-controlled investments $542  $1,033  $2,387  $(18,900)
Affiliated investments  -   (110,784)  -   (110,784)
Total net realized gain (loss)  542   (109,751)  2,387   (129,684)
Net change in unrealized appreciation (depreciation) on investment transactions from:    
Non-affiliated, non-controlled investments  3,054   (11,424)  5,835   5,112 
Affiliated investments  (11)  116,009   152   108,320 
Controlled investments  (1,751)  (540)  (1,219)  (517)
Total net change in unrealized appreciation (depreciation)  1,292   104,045   4,768   112,915 
Net realized and unrealized gains (losses) $1,834  $(5,706) $7,155  $(16,769)
Net increase (decrease) in net assets resulting from operations $5,202  $(4,518) $13,362  $(9,627)
             
Net investment income per share (basic and diluted):(1)$0.44  $0.23  $0.82  $1.46 
Earnings per share (basic and diluted):(1)$0.68  $(0.87) $1.76  $(1.97)
Weighted average shares outstanding (basic and diluted):(1) 7,601,958   5,194,910   7,601,958   4,878,439 
                  

(1) 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.


Great Elm Capital. Corp.

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