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
|
Q2/2022 |
Q3/2022 |
Q4/2022 |
Q1/2023 |
Q2/2023 |
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
ResourcesAs 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.
DistributionsThe 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 WebcastGECC
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 Relationsinvestorrelations@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 EndedJune 30, |
|
|
For the Six Months EndedJune 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.
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