Great Elm Capital Corp. (“we,” “us,” “our,” or “GECC,”) (NASDAQ:
GECC), a business development company, today announced its
financial results for the second quarter and six months ended June
30, 2021.
Financial and Operating
Highlights
- Net investment income (“NII”) for the quarter was $2.1 million,
as compared to NII of $1.5 million for the quarter ended March 31,
2021, and $0.9 million for the quarter ended June 30, 2020. NII
increased quarter-over-quarter due to accelerated deployment of
capital during the prior quarter.
- NII per share was $0.09 based on weighted average shares
outstanding of 23,508,232 for the quarter ended June 30, 2021, as
compared to NII per share of $0.06, based on weighted average
shares outstanding of 23,401,837, for the quarter ended March 31,
2021.
- As of June 30, 2021, GECC’s asset coverage ratio was
approximately 166.2%, compared to 177.1% as of March 31, 2021, and
144.5% as of June 30, 2020.
- Net assets grew slightly to approximately $91.7 million on June
30, 2021, as compared to $91.5 million on March 31, 2021, and $79.6
million on December 31, 2020.
- NAV per share improved to $3.90 as of June 30, 2021, from $3.89
as of March 31, 2021 and $3.46 at December 31, 2020.
- Paid a quarterly dividend of $0.10 per share for the second
quarter of 2021, consistent with the quarterly dividend paid for
the first quarter of 2021.
- Closed a $25.0 million senior secured revolving line of credit
with City National Bank. Borrowings under the revolving line bear
interest at the applicable LIBOR rate plus 3.50% with a 1.00%
floor. The line of credit was undrawn as of June 30, 2021.
- Further diversified capital structure and enhanced liquidity by
issuing $50.0 million of notes in June 2021, and an additional $7.5
million in July 2021 with the full exercise of the underwriters’
overallotment option, that bear interest at a rate of 5.875% per
year (due June 2026).
- Redeemed its 6.50% Notes due 2022 subsequent to quarter end on
July 23, 2021.
Management CommentaryPeter A.
Reed, GECC’s Chief Executive Officer, stated, “We are pleased with
our operating results for the second quarter, which was highlighted
by growth in NII as a result of a differentiated investment
strategy focused on specialty finance investments. We continue to
actively pursue investment opportunities in this space. We deployed
$49.9 million into new investments at a favorable yield, and grew
our total investments to $209.4 million at fair value. We are
continuing to benefit from an efficient, low-cost operating
structure, and further grew our capital base at a lower cost
through the signing of a $25 million senior revolving line of
credit as well as issuing $57.5 million in senior notes which
provided an incremental $24 million of liquidity following the
redemption of the 2022 Notes.”
Financial Highlights – Per Share
Data(1)
|
Q2/20201 |
Q3/20201 |
Q4/20201 |
Q1/20211 |
Q2/20211 |
Earnings Per Share (“EPS”) |
$0.34 |
$0.72 |
|
($0.43 |
) |
$0.53 |
|
$0.11 |
|
Net Investment Income (“NII”) Per Share |
$0.09 |
$0.18 |
|
$0.07 |
|
$0.06 |
|
$0.09 |
|
Net Realized Gains / (Losses) Per Share |
$0.09 |
($0.02 |
) |
$0.03 |
|
($0.14 |
) |
($0.10 |
) |
Net Unrealized Gains / (Losses) Per Share |
$0.16 |
$0.56 |
|
($0.54 |
) |
$0.61 |
|
$0.12 |
|
Net Asset Value Per Share at Period End |
$5.10 |
$5.53 |
|
$3.46 |
|
$3.89 |
|
$3.90 |
|
Distributions Paid / Declared Per Share |
$0.249 |
$0.249 |
|
$0.249 |
|
$0.10 |
|
$0.10 |
|
Portfolio and Investment
Activity
As of June 30, 2021, GECC held total investments
of $209.4 million at fair value, as follows:
- 42 debt investments, totaling
approximately $155.7 million and representing 74.4% of the fair
market value of our total investments. Secured debt investments
comprised a substantial majority of the fair market value of our
debt investments.
- 3 income generating equity
investments, totaling approximately $25.4 million, representing
12.1% of the fair market value of our total investments.
- 8 other equity investments,
totaling approximately $18.7 million and representing 8.9% of the
fair market value of our total investments.
- Special Purpose Acquisition Company
(SPAC) instruments totaling approximately $9.7 million, which
consist of SPAC units, common stock, and warrants, representing
approximately 4.6% of total investments.
As of June 30, 2021, the weighted average
current yield on our debt portfolio was 11.1%. Floating rate
instruments comprised approximately 43.6% of the fair market value
of debt investments.
During the quarter ended June 30, 2021, we
deployed approximately $49.9 million into 25 investments(2)
excluding SPACs, at a weighted average current yield of 9.29%. The
weighted average price of our new debt investments was 98% of
par.
During the quarter ended June 30, 2021, we
monetized, in part or in full, 18 investments for approximately
$35.1 million(3) excluding SPACs, at a weighted average current
yield of 8.0%. The weighted average realized price was 100% of par.
We also monetized $0.4 million of SPAC securities during the
period.
Financial ReviewTotal
investment income for the quarter ended June 30, 2021 was
approximately $6.2 million, or $0.27 per share. Total expenses for
the quarter ended June 30, 2021 were approximately $4.1 million, or
$0.18 per share.
Net realized losses for the quarter ended June
30, 2021 were approximately $2.4 million, or $0.10 per share. Net
unrealized appreciation from investments for the quarter ended June
30, 2021 was approximately $2.8 million, or $0.12 per share.
Liquidity and Capital
ResourcesAs of June 30, 2021, our unrestricted cash
balance was approximately $29.1 million, comprised of $59.8 million
of gross cash less $30.7 million reserved for the July 23rd
redemption of our unsecured notes due 2022, and is exclusive of
holdings of United States Treasury Bills.
Total debt outstanding (par value) as of June
30, 2021 was $138.4 million, comprised of our 6.50% senior notes
due June 2024 (NASDAQ: GECCN), our 6.75% senior notes due January
2025 (NASDAQ: GECCM), and our 5.875% senior notes due June 2026
(NASDAQ: GECCO). Total debt outstanding excludes the Company’s
6.50% senior notes due 2022 (NASDAQ: GECCL), which were called
prior to quarter end and subsequently redeemed at 100% of their
principal amount, plus accrued and unpaid interest through the
redemption date on July 23, 2021.
DistributionsWe also announced
this morning that our board of directors authorized a $0.10 per
share cash distribution for the quarter ending December 31, 2021.
The record and payment dates for the distribution are expected to
be set by GECC in the third quarter pursuant to authority granted
by its board of directors.
Conference Call and WebcastGECC
will discuss these results in a conference call later this morning
(Tuesday, August 3, 2021) at 11:00 a.m. ET.
Conference Call Details |
Date/Time: |
Tuesday, August 3, 2021 – 11:00 a.m. ET |
|
|
Participant Dial-In Numbers: |
|
(United States): |
844-820-8297 |
(International): |
661-378-9758 |
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.
WebcastThe 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: Great Elm Capital Corp (GECC) Q2 2021 Conference Call
Webcast.
About Great Elm Capital Corp.
Great Elm Capital Corp. is an externally managed, specialty finance
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.
GECC elected to be regulated as a business development company
under the Investment Company Act of 1940, as amended.
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.(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.
Media & Investor Contact:
Investor Relations+1 (617)
375-3006investorrelations@greatelmcap.com
Adam PriorThe Equity Group Inc.+1 (212)
836-9606aprior@equityny.com
GREAT ELM CAPITAL CORP.CONSOLIDATED
STATEMENTS OF ASSETS AND LIABILITIES
(unaudited)Dollar amounts in thousands (except per
share amounts)
|
|
June 30, 2021 |
|
December 31, 2020 |
Assets |
|
|
|
|
Investments |
|
|
|
|
Non-affiliated, non-controlled investments, at fair value
(amortized cost of $167,643 and $147,494, respectively) |
|
$ |
154,225 |
|
|
$ |
112,116 |
|
Non-affiliated, non-controlled short-term investments, at fair
value (amortized cost of $119,987 and $74,997,
respectively) |
|
|
119,984 |
|
|
|
74,998 |
|
Affiliated investments, at fair value (amortized cost of $126,638
and $109,840, respectively) |
|
|
39,833 |
|
|
|
29,289 |
|
Controlled investments, at fair value (amortized cost of $11,394
and $7,630, respectively) |
|
|
15,375 |
|
|
|
10,243 |
|
Total
investments |
|
|
329,417 |
|
|
|
226,646 |
|
|
|
|
|
|
Cash and
cash equivalents |
|
|
59,761 |
|
|
|
52,582 |
|
Restricted cash |
|
|
- |
|
|
|
600 |
|
Receivable for investments sold |
|
|
3,907 |
|
|
|
- |
|
Interest
receivable |
|
|
2,985 |
|
|
|
2,423 |
|
Dividends receivable |
|
|
640 |
|
|
|
- |
|
Due from
portfolio company |
|
|
723 |
|
|
|
837 |
|
Deferred
financing costs |
|
|
324 |
|
|
|
- |
|
Prepaid
expenses and other assets |
|
|
33 |
|
|
|
240 |
|
Total assets |
|
$ |
397,790 |
|
|
$ |
283,328 |
|
|
|
|
|
|
Liabilities |
|
|
|
|
Notes
payable 6.50% due September 18, 2022 (including unamortized
discount of $354 and $494, respectively) |
|
$ |
29,939 |
|
|
$ |
29,799 |
|
Notes
payable 6.75% due January 31, 2025 (including unamortized
discount of $916 and $1,042, respectively) |
|
|
44,694 |
|
|
|
44,568 |
|
Notes
payable 6.50% due June 30, 2024 (including unamortized
discount of $1,312 and $1,529, respectively) |
|
|
41,511 |
|
|
|
41,294 |
|
Notes
payable 5.875% due June 30, 2026 (including unamortized
discount of $1,646) |
|
|
48,354 |
|
|
|
- |
|
Payable
for investments purchased |
|
|
130,374 |
|
|
|
75,511 |
|
Interest
payable |
|
|
415 |
|
|
|
328 |
|
Distributions payable |
|
|
- |
|
|
|
1,911 |
|
Accrued
incentive fees payable |
|
|
9,682 |
|
|
|
9,176 |
|
Due to
affiliates |
|
|
905 |
|
|
|
764 |
|
Accrued
expenses and other liabilities |
|
|
249 |
|
|
|
362 |
|
Total liabilities |
|
$ |
306,123 |
|
|
$ |
203,713 |
|
|
|
|
|
|
Commitments and contingencies |
|
$ |
- |
|
|
$ |
- |
|
|
|
|
|
|
Net Assets |
|
|
|
|
Common
stock, par value $0.01 per share (100,000,000 shares authorized,
23,508,232 shares issued and outstanding and 23,029,453
shares issued and outstanding, respectively) |
|
$ |
235 |
|
|
$ |
230 |
|
Additional paid-in capital |
|
|
232,219 |
|
|
|
230,504 |
|
Accumulated losses |
|
|
(140,787 |
) |
|
|
(151,119 |
) |
Total net assets |
|
$ |
91,667 |
|
|
$ |
79,615 |
|
Total liabilities and net assets |
|
$ |
397,790 |
|
|
$ |
283,328 |
|
Net asset value per share |
|
$ |
3.90 |
|
|
$ |
3.46 |
|
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, |
|
|
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
Investment
Income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income from: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-affiliated, non-controlled investments |
|
$ |
2,983 |
|
|
$ |
2,616 |
|
|
$ |
5,425 |
|
|
$ |
7,082 |
|
Non-affiliated, non-controlled investments (PIK) |
|
|
68 |
|
|
|
- |
|
|
|
98 |
|
|
|
- |
|
Affiliated investments |
|
|
324 |
|
|
|
243 |
|
|
|
584 |
|
|
|
470 |
|
Affiliated investments (PIK) |
|
|
1,568 |
|
|
|
1,297 |
|
|
|
3,007 |
|
|
|
2,521 |
|
Controlled investments |
|
|
149 |
|
|
|
28 |
|
|
|
157 |
|
|
|
98 |
|
Total
interest income |
|
|
5,092 |
|
|
|
4,184 |
|
|
|
9,271 |
|
|
|
10,171 |
|
Dividend
income from: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-affiliated, non-controlled investments |
|
|
453 |
|
|
|
- |
|
|
|
934 |
|
|
|
3 |
|
Controlled investments |
|
|
640 |
|
|
|
480 |
|
|
|
960 |
|
|
|
880 |
|
Total
dividend income |
|
|
1,093 |
|
|
|
480 |
|
|
|
1,894 |
|
|
|
883 |
|
Other
income from: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-affiliated, non-controlled investments |
|
|
48 |
|
|
|
26 |
|
|
|
81 |
|
|
|
56 |
|
Affiliated investments (PIK) |
|
|
- |
|
|
|
75 |
|
|
|
282 |
|
|
|
75 |
|
Controlled investments |
|
|
- |
|
|
|
3 |
|
|
|
- |
|
|
|
12 |
|
Total
other income |
|
|
48 |
|
|
|
104 |
|
|
|
363 |
|
|
|
143 |
|
Total investment income |
|
$ |
6,233 |
|
|
$ |
4,768 |
|
|
$ |
11,528 |
|
|
$ |
11,197 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Management fees |
|
$ |
765 |
|
|
$ |
591 |
|
|
$ |
1,425 |
|
|
$ |
1,289 |
|
Incentive fees |
|
|
398 |
|
|
|
228 |
|
|
|
506 |
|
|
|
328 |
|
Administration fees |
|
|
180 |
|
|
|
191 |
|
|
|
336 |
|
|
|
395 |
|
Custody
fees |
|
|
13 |
|
|
|
19 |
|
|
|
26 |
|
|
|
39 |
|
Directors’ fees |
|
|
56 |
|
|
|
51 |
|
|
|
111 |
|
|
|
102 |
|
Professional services |
|
|
251 |
|
|
|
250 |
|
|
|
676 |
|
|
|
507 |
|
Interest
expense |
|
|
2,291 |
|
|
|
2,390 |
|
|
|
4,489 |
|
|
|
4,695 |
|
Other
expenses |
|
|
176 |
|
|
|
132 |
|
|
|
352 |
|
|
|
274 |
|
Total
expenses |
|
$ |
4,130 |
|
|
$ |
3,852 |
|
|
$ |
7,921 |
|
|
$ |
7,629 |
|
Net
investment income |
|
$ |
2,103 |
|
|
$ |
916 |
|
|
$ |
3,607 |
|
|
$ |
3,568 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
realized and unrealized gains (losses): |
|
|
|
|
|
|
|
|
|
Net realized gain (loss) on
investment transactions from: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-affiliated, non-controlled investments |
|
$ |
1,683 |
|
|
$ |
(42 |
) |
|
$ |
(1,732 |
) |
|
$ |
(11,498 |
) |
Affiliated investments |
|
|
(4,052 |
) |
|
|
- |
|
|
|
(4,052 |
) |
|
|
- |
|
Controlled investments |
|
|
- |
|
|
|
- |
|
|
|
140 |
|
|
|
- |
|
Realized
gain on repurchase of debt |
|
|
- |
|
|
|
974 |
|
|
|
- |
|
|
|
1,117 |
|
Total net realized gain
(loss) |
|
|
(2,369 |
) |
|
|
932 |
|
|
|
(5,644 |
) |
|
|
(10,381 |
) |
Net change in
unrealized appreciation (depreciation) on investment transactions
from: |
|
|
|
|
|
Non-affiliated, non-controlled investments |
|
|
7,706 |
|
|
|
2,472 |
|
|
|
17,196 |
|
|
|
(17,243 |
) |
Affiliated investments |
|
|
(5,777 |
) |
|
|
(1,030 |
) |
|
|
(1,494 |
) |
|
|
(6,115 |
) |
Controlled investments |
|
|
824 |
|
|
|
221 |
|
|
|
1,368 |
|
|
|
144 |
|
Total net change in unrealized
appreciation (depreciation) |
|
|
2,753 |
|
|
|
1,663 |
|
|
|
17,070 |
|
|
|
(23,214 |
) |
Net
realized and unrealized gains (losses) |
|
$ |
384 |
|
|
$ |
2,595 |
|
|
$ |
11,426 |
|
|
$ |
(33,595 |
) |
Net increase (decrease) in net assets resulting from
operations |
|
$ |
2,487 |
|
|
$ |
3,511 |
|
|
$ |
15,033 |
|
|
$ |
(30,027 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
investment income per share (basic and diluted): |
|
$ |
0.09 |
|
|
$ |
0.09 |
|
|
$ |
0.15 |
|
|
$ |
0.35 |
|
Earnings
per share (basic and diluted): |
|
$ |
0.11 |
|
|
$ |
0.34 |
|
|
$ |
0.64 |
|
|
$ |
(2.96 |
) |
Weighted
average shares outstanding (basic and diluted): |
|
|
23,508,232 |
|
|
|
10,195,857 |
|
|
|
23,455,328 |
|
|
|
10,129,269 |
|
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