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, 2024.
Second Quarter and Other Recent
Highlights:
- In June 2024, the Company raised
$12 million of equity at Net Asset Value from Prosper Peak
Holdings, LLC (“PPH”), supported by a $3 million investment by
Great Elm Group, Inc. (“GEG”) in PPH.
- In April 2024, the Company issued
$34.5 million of 8.50% notes due 2029 (the “GECCI Notes”) to
further bolster liquidity and provide balance sheet flexibility.
- In July, the Company issued $22
million of additional GECCI Notes in a registered direct offering
to an institutional investor.
- Net investment income (“NII”) for
the quarter ended June 30, 2024 was $3.1 million, or $0.32 per
share, as compared to $3.2 million, or $0.37 per share, for the
quarter ended March 31, 2024.
- Net assets were $126.0 million, or
$12.06 per share, on June 30, 2024, as compared to $118.8 million,
or $12.57 per share, on March 31, 2024.
- NAV adversely impacted by
approximately $0.39 per share in the quarter from additional
write-downs on investments in illiquid assets that were also
written down in the prior quarter.
- GECC’s asset coverage ratio was
171.0% as of June 30, 2024, as compared to 180.2% as of March 31,
2024 and 161.5% as of June 30, 2023.
- The Board of Directors approved a
quarterly dividend of $0.35 per share for the third quarter of
2024, equating to a 13.0% annualized yield on the Company’s closing
market price on July 31, 2024 of $10.73.
Management
Commentary “We are pleased to have raised an
additional $34 million of fresh capital in June and July, bringing
our total 2024 capital raising activities to over $90 million
year-to-date. These capital raises further strengthen our balance
sheet and position us well to expand our investment portfolio,”
said Matt Kaplan, GECC’s Chief Executive Officer. “While there was
some residual negative effect on NAV in the quarter, as the same
illiquid portfolio company investments placed on non-accrual from
the previous quarter experienced further write-downs, we believe
the bulk of the impact has now been realized. Our investments in
CLOs are also beginning to bear fruit, with our first distribution
received in July, enabling us to capitalize on strong yields and
boost NII in the second half of the year. We remain well-positioned
to grow our platform and cover our dividend.”
Financial Highlights – Per Share
Data
|
Q2/2023 |
Q3/2023 |
Q4/2023 |
Q1/2024 |
Q2/2024 |
Earnings Per Share (“EPS”) |
$0.68 |
$1.02 |
$0.55 |
($0.05) |
($0.14) |
Net Investment Income (“NII”) Per Share |
$0.44 |
$0.40 |
$0.43 |
$0.37 |
$0.32 |
Pre-Incentive Net Investment Income Per Share |
$0.56 |
$0.50 |
$0.54 |
$0.46 |
$0.40 |
Net Realized and Unrealized Gains / (Losses) Per Share |
$0.24 |
$0.62 |
$0.12 |
($0.42) |
($0.46) |
Net Asset Value Per Share at Period End |
$12.21 |
$12.88 |
$12.99 |
$12.57 |
$12.06 |
Distributions Paid / Declared Per Share |
$0.35 |
$0.35 |
$0.45 |
$0.35 |
$0.35 |
Portfolio and Investment
Activity
As of June 30, 2024, GECC held total investments
of $297.7 million at fair value, as follows:
- 49 debt investments in corporate credit, totaling approximately
$190.0 million and representing 63.8% 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.
- An investment in Great Elm Specialty Finance comprised of 1
debt investment totaling approximately $29.7 million and 1 equity
investment totaling approximately $15.0 million, representing 10.0%
and 5.0%, respectively, of the fair market value of the Company’s
total investments.
- 4 dividend paying equity investments, including our CLO JV
investment, totaling approximately $43.7 million, representing
14.7% of the fair market value of the Company’s total
investments.
- Other equity investments, totaling approximately $19.2 million,
representing 6.4% of the fair market value of the Company’s total
investments.
As of June 30, 2024, the weighted average
current yield on the Company’s debt portfolio was 13.1%. Floating
rate instruments comprised approximately 69% of the fair market
value of debt investments (comparable to last quarter) and the
Company’s fixed rate debt investments had a weighted average
maturity of 2.1 years.
During the quarter ended June 30, 2024, we
deployed approximately $108.9 million into 25 investments(1) at a
weighted average current yield of 11.6%.
During the quarter ended June 30, 2024, we
monetized, in part or in full, 35 investments for approximately
$72.4 million(2), at a weighted average current yield of 11.3%.
Monetizations include $10.9 million of mandatory debt paydowns and
redemptions at a weighted average current yield of 9.2%.
Financial Review Total
investment income for the quarter ended June 30, 2024 was $9.5
million, or $1.00 per share. Net expenses for the quarter ended
June 30, 2024 were approximately $6.5 million, or $0.68 per
share.
Net realized and unrealized losses for the
quarter ended June 30, 2024 were approximately $4.4 million, or
$0.46 per share.
Liquidity and Capital
ResourcesAs of June 30, 2024, cash and money market
securities totaled approximately $3.0 million.
As of June 30, 2024, total debt outstanding (par
value) was $177.6 million, comprised of 6.75% senior notes due
January 2025 (NASDAQ: GECCM), 5.875% senior notes due June 2026
(NASDAQ: GECCO), 8.75% senior notes due September 2028 (NASDAQ:
GECCZ) and 8.50% notes due April 2029 (NASDAQ: GECCI).
DistributionsThe Company’s
Board of Directors has approved a quarterly cash distribution of
$0.35 per share for the quarter ending September 30, 2024. The
third quarter distribution will be payable on September 30, 2024 to
stockholders of record as of September 16, 2024.
The distribution equates to a 13.0% annualized
dividend yield on the Company’s closing market price on July 31,
2024 of $10.73 and an 11.6% annualized dividend yield on the
Company’s June 30, 2024 NAV of $12.06 per share.
Conference Call and WebcastGECC
will discuss these results in a conference call today at 5:00 p.m.
ET.
Conference
Call Details |
|
|
|
Date/Time: |
Thursday, August 1, 2024 – 5:00 p.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 “Events and Presentations”
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 “Events and
Presentations” section of GECC’s website or by clicking on the
webcast 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. http://www.greatelmcc.com
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, 2024 |
|
|
December 31, 2023 |
|
Assets |
|
|
|
|
|
|
Investments |
|
|
|
|
|
|
Non-affiliated, non-controlled investments, at fair value
(amortized cost of $228,477 and $179,626, respectively) |
|
$ |
224,798 |
|
|
$ |
183,335 |
|
Non-affiliated, non-controlled short-term investments, at fair
value (amortized cost of $20,432 and $10,807, respectively) |
|
|
20,430 |
|
|
|
10,807 |
|
Affiliated investments, at fair value (amortized cost of $12,378
and $13,423, respectively) |
|
|
- |
|
|
|
1,067 |
|
Controlled investments, at fair value (amortized cost of $75,452
and $46,300, respectively) |
|
|
72,853 |
|
|
|
46,210 |
|
Total investments |
|
|
318,081 |
|
|
|
241,419 |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
|
2,575 |
|
|
|
953 |
|
Receivable for investments
sold |
|
|
390 |
|
|
|
840 |
|
Interest receivable |
|
|
3,594 |
|
|
|
2,105 |
|
Dividends receivable |
|
|
1,309 |
|
|
|
1,001 |
|
Due from portfolio company |
|
|
1 |
|
|
|
37 |
|
Deferred financing costs |
|
|
286 |
|
|
|
335 |
|
Prepaid expenses and other
assets |
|
|
283 |
|
|
|
135 |
|
Total
assets |
|
$ |
326,519 |
|
|
$ |
246,825 |
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
Notes payable (including
unamortized discount of $3,808 and $2,896, respectively) |
|
$ |
173,765 |
|
|
$ |
140,214 |
|
Payable for investments
purchased |
|
|
22,755 |
|
|
|
3,327 |
|
Interest payable |
|
|
66 |
|
|
|
32 |
|
Accrued incentive fees
payable |
|
|
1,576 |
|
|
|
1,431 |
|
Distributions payable |
|
|
- |
|
|
|
760 |
|
Due to affiliates |
|
|
1,362 |
|
|
|
1,195 |
|
Accrued expenses and other
liabilities |
|
|
986 |
|
|
|
1,127 |
|
Total
liabilities |
|
$ |
200,510 |
|
|
$ |
148,086 |
|
|
|
|
|
|
|
|
Commitments and
contingencies |
|
$ |
- |
|
|
$ |
- |
|
|
|
|
|
|
|
|
Net Assets |
|
|
|
|
|
|
Common stock, par value $0.01 per
share (100,000,000 shares authorized, 10,449,888 shares issued and
outstanding and 7,601,958 shares issued and outstanding,
respectively) |
|
$ |
104 |
|
|
$ |
76 |
|
Additional paid-in capital |
|
|
319,438 |
|
|
|
283,795 |
|
Accumulated losses |
|
|
(193,533 |
) |
|
|
(185,132 |
) |
Total net
assets |
|
$ |
126,009 |
|
|
$ |
98,739 |
|
Total liabilities and net
assets |
|
$ |
326,519 |
|
|
$ |
246,825 |
|
Net asset value per
share |
|
$ |
12.06 |
|
|
$ |
12.99 |
|
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, |
|
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
Investment
Income: |
|
|
|
|
|
|
|
|
|
|
|
|
Interest income from: |
|
|
|
|
|
|
|
|
|
|
|
|
Non-affiliated, non-controlled investments |
|
$ |
5,968 |
|
|
$ |
5,836 |
|
|
$ |
11,955 |
|
|
$ |
11,312 |
|
Non-affiliated, non-controlled investments (PIK) |
|
|
811 |
|
|
|
590 |
|
|
|
1,441 |
|
|
|
1,039 |
|
Affiliated investments |
|
|
31 |
|
|
|
32 |
|
|
|
64 |
|
|
|
62 |
|
Controlled investments |
|
|
953 |
|
|
|
623 |
|
|
|
1,884 |
|
|
|
1,065 |
|
Controlled investments (PIK) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
233 |
|
Total interest income |
|
|
7,763 |
|
|
|
7,081 |
|
|
|
15,344 |
|
|
|
13,711 |
|
Dividend income from: |
|
|
|
|
|
|
|
|
|
|
|
|
Non-affiliated, non-controlled investments |
|
|
1,045 |
|
|
|
327 |
|
|
|
1,431 |
|
|
|
645 |
|
Controlled investments |
|
|
525 |
|
|
|
700 |
|
|
|
910 |
|
|
|
1,316 |
|
Total dividend income |
|
|
1,570 |
|
|
|
1,027 |
|
|
|
2,341 |
|
|
|
1,961 |
|
Other commitment fees from
non-affiliated, non-controlled investments |
|
|
175 |
|
|
|
802 |
|
|
|
700 |
|
|
|
1,604 |
|
Other income from: |
|
|
|
|
|
|
|
|
|
|
|
|
Non-affiliated, non-controlled investments |
|
|
40 |
|
|
|
67 |
|
|
|
72 |
|
|
|
111 |
|
Total other income |
|
|
40 |
|
|
|
67 |
|
|
|
72 |
|
|
|
111 |
|
Total investment income |
|
$ |
9,548 |
|
|
$ |
8,977 |
|
|
$ |
18,457 |
|
|
$ |
17,387 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
Management fees |
|
$ |
1,068 |
|
|
$ |
884 |
|
|
$ |
2,008 |
|
|
$ |
1,753 |
|
Incentive fees |
|
|
764 |
|
|
|
842 |
|
|
|
1,562 |
|
|
|
1,552 |
|
Administration fees |
|
|
396 |
|
|
|
341 |
|
|
|
781 |
|
|
|
636 |
|
Custody fees |
|
|
36 |
|
|
|
21 |
|
|
|
72 |
|
|
|
43 |
|
Directors’ fees |
|
|
54 |
|
|
|
53 |
|
|
|
108 |
|
|
|
105 |
|
Professional services |
|
|
413 |
|
|
|
434 |
|
|
|
801 |
|
|
|
970 |
|
Interest expense |
|
|
3,473 |
|
|
|
2,769 |
|
|
|
6,280 |
|
|
|
5,590 |
|
Other expenses |
|
|
286 |
|
|
|
265 |
|
|
|
589 |
|
|
|
503 |
|
Total expenses |
|
$ |
6,490 |
|
|
$ |
5,609 |
|
|
$ |
12,201 |
|
|
$ |
11,152 |
|
Net investment income before
taxes |
|
$ |
3,058 |
|
|
$ |
3,368 |
|
|
$ |
6,256 |
|
|
$ |
6,235 |
|
Excise tax |
|
$ |
- |
|
|
$ |
- |
|
|
$ |
5 |
|
|
$ |
28 |
|
Net investment income |
|
$ |
3,058 |
|
|
$ |
3,368 |
|
|
$ |
6,251 |
|
|
$ |
6,207 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net realized and
unrealized gains (losses): |
|
|
|
|
|
|
|
|
|
|
|
|
Net realized gain (loss) on
investment transactions from: |
|
|
|
|
|
|
|
|
|
|
|
|
Non-affiliated, non-controlled investments |
|
$ |
155 |
|
|
$ |
542 |
|
|
$ |
2,511 |
|
|
$ |
2,387 |
|
Affiliated investments |
|
|
(625 |
) |
|
|
- |
|
|
|
(625 |
) |
|
|
- |
|
Total net realized gain
(loss) |
|
|
(470 |
) |
|
|
542 |
|
|
|
1,886 |
|
|
|
2,387 |
|
Net change in
unrealized appreciation (depreciation) on investment transactions
from: |
|
|
|
|
Non-affiliated, non-controlled investments |
|
|
(3,856 |
) |
|
|
3,054 |
|
|
|
(7,389 |
) |
|
|
5,835 |
|
Affiliated investments |
|
|
827 |
|
|
|
(11 |
) |
|
|
(23 |
) |
|
|
152 |
|
Controlled investments |
|
|
(885 |
) |
|
|
(1,751 |
) |
|
|
(2,509 |
) |
|
|
(1,219 |
) |
Total net change in unrealized
appreciation (depreciation) |
|
|
(3,914 |
) |
|
|
1,292 |
|
|
|
(9,921 |
) |
|
|
4,768 |
|
Net realized and unrealized gains
(losses) |
|
$ |
(4,384 |
) |
|
$ |
1,834 |
|
|
$ |
(8,035 |
) |
|
$ |
7,155 |
|
Net increase (decrease)
in net assets resulting from operations |
|
$ |
(1,326 |
) |
|
$ |
5,202 |
|
|
$ |
(1,784 |
) |
|
$ |
13,362 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income per share
(basic and diluted): |
|
$ |
0.32 |
|
|
$ |
0.44 |
|
|
$ |
0.69 |
|
|
$ |
0.82 |
|
Earnings per share (basic and
diluted): |
|
$ |
(0.14 |
) |
|
$ |
0.68 |
|
|
$ |
(0.20 |
) |
|
$ |
1.76 |
|
Weighted average shares
outstanding (basic and diluted): |
|
|
9,551,037 |
|
|
|
7,601,958 |
|
|
|
9,105,190 |
|
|
|
7,601,958 |
|
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