Great Elm Capital Corp. (“we,” “our,” the “Company” or “GECC,”)
(NASDAQ: GECC), a business development company, today announced its
financial results for the first quarter ended March 31, 2023.
First Quarter and Other Recent
Highlights:
- Net investment income (“NII”) for
the quarter ended March 31, 2023 grew 26% to $2.8 million, or $0.37
per share, as compared to $2.3 million, or $0.30 per share, for the
quarter ended December 31, 2022.
- NII growth was driven by strategic
capital deployment and rotation into higher-yielding floating rate
investments.
- This was the highest cash income
quarter in the Company’s history with only 15% of GECC’s $8.4
million Total Investment Income attributable to PIK and accretion
income.
- Net assets were $90.3 million, or
$11.88 per share, on March 31, 2023, as compared to $84.8 million,
or $11.16 per share, on December 31, 2022, and $69.3 million, or
$15.06 per share, on March 31, 2022.
- Great Elm Healthcare Finance, LLC
(“GEHF”) closed on a $50 million committed credit line with Encina
Lender Finance to fund the growth of its active pipeline.
- The facility includes an additional
$50 million uncommitted accordion to provide up to $100 million of
financing for healthcare-related, secured lending.
- GECC’s asset coverage ratio was
approximately 159.8% as of March 31, 2023, as compared to 154.4% as
of December 31, 2022, and 147.5% as of March 31, 2022.
- The Board of Directors approved a
quarterly dividend of $0.35 per share for the second quarter of
2023, equating to an 11.8% annualized yield on March 31, 2023 NAV
per share.
Management Commentary“Our
strategy is bearing fruit, as evidenced by our strong first quarter
results with a recovery in NAV and growth in NII. Continued
rotation into higher yielding, floating rate, secured investments
drove sequential growth in NII and, as a result, we generated NII
that exceeded our quarterly dividend,” said Matt Kaplan, GECC’s
Chief Executive Officer. “GEHF recently closed on a facility to
provide up to $100 million of financing for Great Elm Specialty
Finance’s healthcare secured lending platform which will allow this
venture with Berkadia to capitalize on its robust pipeline. Looking
ahead, we believe we are well positioned to grow NII in the second
quarter and cover our quarterly dividend.”
Financial Highlights – Per Share Data
|
Q1/20221 |
Q2/2022 |
Q3/2022 |
Q4/2022 |
Q1/2023 |
Earnings Per Share (“EPS”) |
($1.12) |
($0.87) |
$0.18 |
($0.96) |
$1.07 |
Net Investment Income (“NII”) Per Share |
$1.31 |
$0.23 |
$0.14 |
$0.30 |
$0.37 |
Pre-Incentive Net Investment Income Per Share |
$0.24 |
$0.23 |
$0.14 |
$0.37 |
$0.47 |
Net Realized and Unrealized Gains / (Losses) Per Share |
($2.43) |
($1.10) |
$0.04 |
($1.26) |
$0.70 |
Net Asset Value Per Share at Period End |
$15.06 |
$12.84 |
$12.56 |
$11.16 |
$11.88 |
Distributions Paid / Declared Per Share |
$0.60 |
$0.45 |
$0.45 |
$0.45 |
$0.35 |
|
|
|
|
|
|
Portfolio and Investment
Activity
As of March 31, 2023, GECC held total
investments of $226.9 million at fair value, as follows:
- 43 debt
investments in corporate credit, totaling approximately $152.4
million and representing 67.2% 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 $31.6 million and representing
13.9% of the fair market value of the Company’s total
investments.
- 4 equity investments in specialty
finance companies, totaling approximately $25.0 million,
representing 11.0% of the fair market value of the Company’s total
investments.
- 5 dividend paying equity investments, totaling approximately
$11.6 million, representing 5.1% of the fair market value of the
Company’s total investments.
- Other equity investments, totaling
approximately $6.3 million, representing 2.8% of the fair market
value of the Company’s total investments.
As of March 31, 2023, the weighted average
current yield on the Company’s debt portfolio was 13.2%. Floating
rate instruments comprised approximately 57.9% of the fair market
value of debt investments (compared to 50.0% as of December 31,
2022) and the Company’s fixed rate debt investments had a weighted
average maturity of 3.1 years.
During the quarter ended March 31, 2023, we
deployed approximately $46.0 million into 18 investments(2) at a
weighted average current yield of 12.3%.
During the quarter ended March 31, 2023, we
monetized, in part or in full, 34 investments for approximately
$52.8 million(3), at a weighted average current yield of 10.1%.
Monetizations include $41.2 million of mandatory debt paydowns and
redemptions at a weighted average current yield of 10.3%. Sales
aggregated $11.6 million at a weighted average current yield of
8.5%.
Financial Review Total
investment income for the quarter ended March 31, 2023 was $8.4
million, or $1.11 per share. Net expenses for the quarter ended
March 31, 2023 were approximately $5.6 million, or $0.73 per
share.
Net realized and unrealized gains for the
quarter ended March 31, 2023 were approximately $5.3 million, or
$0.70 per share.
Liquidity and Capital
ResourcesAs of March 31, 2023, cash and money market
securities totaled approximately $12.5 million, exclusive of
holdings of United States Treasury Bills.
As of March 31, 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.
DistributionsThe Company’s
Board of Directors has approved a quarterly cash distribution of
$0.35 per share for the quarter ending June 30, 2023. The second
quarter distribution will be payable on June 30, 2023 to
stockholders of record as of June 15, 2023.
The distribution equates to a 17.4% annualized
dividend yield on the Company’s closing market price on May 3, 2023
of $8.05 and an 11.8% annualized dividend yield on the Company’s
March 31, 2023 NAV of $11.88 per share.
Conference Call and WebcastGECC
will discuss these results in a conference call today at 8:30 a.m.
ET.
Conference Call
DetailsDate/Time: Thursday,
May 4, 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) 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.
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)
|
|
March 31, 2023 |
|
|
December 31, 2022 |
|
Assets |
|
|
|
|
|
|
Investments |
|
|
|
|
|
|
Non-affiliated, non-controlled investments, at fair value
(amortized cost of $182,982 and $183,061, respectively) |
|
$ |
174,441 |
|
|
$ |
171,743 |
|
Non-affiliated, non-controlled
short-term investments, at fair value (amortized cost of $80,570
and $76,140, respectively) |
|
|
80,560 |
|
|
|
76,127 |
|
Affiliated investments, at fair
value (amortized cost of $13,430 and $13,433, respectively) |
|
|
1,464 |
|
|
|
1,304 |
|
Controlled investments, at fair
value (amortized cost of $53,276 and $54,684, respectively) |
|
|
51,034 |
|
|
|
51,910 |
|
Total investments |
|
|
307,499 |
|
|
|
301,084 |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
|
1,641 |
|
|
|
587 |
|
Receivable for investments
sold |
|
|
415 |
|
|
|
396 |
|
Interest receivable |
|
|
3,027 |
|
|
|
3,090 |
|
Dividends receivable |
|
|
1,059 |
|
|
|
1,440 |
|
Due from portfolio company |
|
|
1 |
|
|
|
1 |
|
Due from affiliates |
|
|
4 |
|
|
|
- |
|
Deferred financing costs |
|
|
186 |
|
|
|
226 |
|
Prepaid expenses and other
assets |
|
|
233 |
|
|
|
3,288 |
|
Total
assets |
|
$ |
314,065 |
|
|
$ |
310,112 |
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
Notes payable (including
unamortized discount of $2,499 and $2,781, respectively) |
|
$ |
143,435 |
|
|
$ |
143,152 |
|
Revolving credit facility |
|
|
5,000 |
|
|
|
10,000 |
|
Payable for investments
purchased |
|
|
72,317 |
|
|
|
70,022 |
|
Interest payable |
|
|
27 |
|
|
|
42 |
|
Accrued incentive fees
payable |
|
|
1,274 |
|
|
|
565 |
|
Due to affiliates |
|
|
1,104 |
|
|
|
1,042 |
|
Accrued expenses and other
liabilities |
|
|
600 |
|
|
|
480 |
|
Total
liabilities |
|
$ |
223,757 |
|
|
$ |
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 |
|
|
(193,875 |
) |
|
|
(199,374 |
) |
Total net
assets |
|
$ |
90,308 |
|
|
$ |
84,809 |
|
Total liabilities and net
assets |
|
$ |
314,065 |
|
|
$ |
310,112 |
|
Net asset value per
share |
|
$ |
11.88 |
|
|
$ |
11.16 |
|
GREAT ELM CAPITAL CORP. CONSOLIDATED
STATEMENTS OF OPERATIONS (unaudited) Dollar
amounts in thousands (except per share
amounts)
|
|
For the Three Months Ended March 31, |
|
|
|
2023 |
|
|
2022 |
|
Investment
Income: |
|
|
|
|
|
|
Interest income from: |
|
|
|
|
|
|
Non-affiliated, non-controlled investments |
|
$ |
5,476 |
|
|
$ |
3,259 |
|
Non-affiliated, non-controlled investments (PIK) |
|
|
449 |
|
|
|
246 |
|
Affiliated investments |
|
|
30 |
|
|
|
21 |
|
Affiliated investments (PIK) |
|
|
- |
|
|
|
58 |
|
Controlled investments |
|
|
442 |
|
|
|
457 |
|
Controlled investments (PIK) |
|
|
233 |
|
|
|
- |
|
Total interest income |
|
|
6,630 |
|
|
|
4,041 |
|
Dividend income from: |
|
|
|
|
|
|
Non-affiliated, non-controlled investments |
|
|
318 |
|
|
|
503 |
|
Controlled investments |
|
|
616 |
|
|
|
764 |
|
Total dividend income |
|
|
934 |
|
|
|
1,267 |
|
Other income from: |
|
|
|
|
|
|
Non-affiliated, non-controlled investments |
|
|
846 |
|
|
|
250 |
|
Total other income |
|
|
846 |
|
|
|
250 |
|
Total investment income |
|
$ |
8,410 |
|
|
$ |
5,558 |
|
|
|
|
|
|
|
|
Expenses: |
|
|
|
|
|
|
Management fees |
|
$ |
869 |
|
|
$ |
780 |
|
Incentive fees |
|
|
710 |
|
|
|
- |
|
Administration fees |
|
|
295 |
|
|
|
221 |
|
Custody fees |
|
|
22 |
|
|
|
14 |
|
Directors’ fees |
|
|
52 |
|
|
|
63 |
|
Professional services |
|
|
536 |
|
|
|
418 |
|
Interest expense |
|
|
2,821 |
|
|
|
2,670 |
|
Other expenses |
|
|
238 |
|
|
|
191 |
|
Total expenses |
|
$ |
5,543 |
|
|
$ |
4,357 |
|
Incentive fee waiver |
|
|
- |
|
|
|
(4,854 |
) |
Net expenses |
|
$ |
5,543 |
|
|
$ |
(497 |
) |
Net investment income before
taxes |
|
$ |
2,867 |
|
|
$ |
6,055 |
|
Excise tax |
|
$ |
28 |
|
|
$ |
101 |
|
Net investment income |
|
$ |
2,839 |
|
|
$ |
5,954 |
|
|
|
|
|
|
|
|
Net realized and
unrealized gains (losses): |
|
|
|
|
|
|
Net realized gain (loss) on
investment transactions from: |
|
|
|
|
|
|
Non-affiliated, non-controlled investments |
|
$ |
1,845 |
|
|
$ |
(19,933 |
) |
Total net realized gain
(loss) |
|
|
1,845 |
|
|
|
(19,933 |
) |
Net change in
unrealized appreciation (depreciation) on investment transactions
from: |
|
|
|
|
Non-affiliated, non-controlled investments |
|
|
2,781 |
|
|
|
16,536 |
|
Affiliated investments |
|
|
163 |
|
|
|
(7,689 |
) |
Controlled investments |
|
|
532 |
|
|
|
23 |
|
Total net change in unrealized
appreciation (depreciation) |
|
|
3,476 |
|
|
|
8,870 |
|
Net realized and unrealized gains
(losses) |
|
$ |
5,321 |
|
|
$ |
(11,063 |
) |
Net increase (decrease)
in net assets resulting from operations |
|
$ |
8,160 |
|
|
$ |
(5,109 |
) |
|
|
|
|
|
|
|
Net investment income per share (basic and diluted): |
(1 |
) |
$ |
0.37 |
|
|
$ |
1.31 |
|
Earnings per share (basic and
diluted): |
(1 |
) |
$ |
1.07 |
|
|
$ |
(1.12 |
) |
Weighted average shares
outstanding (basic and diluted): |
(1 |
) |
|
7,601,958 |
|
|
|
4,558,451 |
|
(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.
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