Great Elm Capital Corp. (“we,” “us,” “our,” the “Company” or
“GECC,”) (NASDAQ: GECC), a business development company, today
announced its financial results for the second quarter ended June
30, 2022.
Financial and Operating
Highlights
- Completed previously announced
rights offering, selling approximately 3.0 million shares of common
stock for aggregate gross proceeds of $37.5 million.
- Net investment income (“NII”) for
the quarter ended June 30, 2022 was $1.2 million, or $0.23 per
share.
- Net assets were $97.6 million on
June 30, 2022, as compared to $69.3 million on March 31, 2022, and
$91.7 million on June 30, 2021.
- NAV per share was $12.84 as of June
30, 2022, as compared to $15.06 as of March 31, 2022, and $23.40 as
of June 30, 2021.
- GECC’s asset coverage ratio was
approximately 166.9% as of June 30, 2022, as compared to 147.5% as
of March 31, 2022, and 166.2% as of June 30, 2021.
- Board of Directors has approved a
quarterly dividend of $0.45 per share for the fourth quarter of
2022, equating to a 14.0% annualized yield on June 30, 2022 NAV per
share.
Management Commentary“We
completed our rights offering in June, which strengthened our
balance sheet, enhanced our asset coverage ratio and provided added
liquidity which we are deploying opportunistically into new
higher-yielding investments,” said Matt Kaplan, GECC’s Chief
Executive Officer. “We are navigating through the challenging macro
environment and have been able to take advantage of volatility in
the secondary markets. Moving forward, we continue to focus on our
strategy of growing our Specialty Finance platforms as we seek to
grow our NII and NAV over time and create stockholder value.”
Rights OfferingOn June 13,
2022, the Company announced the final results of a non-transferable
rights offering, which entitled holders of rights to purchase one
new share of common stock for every one right held at a
subscription price of $12.50 per share. The company sold
approximately 3.0 million shares of common stock for aggregate
gross proceeds of $37.5 million.
Net proceeds from the offering will be deployed
opportunistically in accordance with the Company’s investment
objectives and policies, including into investments in specialty
finance businesses.
Financial Highlights – Per Share
Data(1)
|
Q2/20211 |
Q3/20211 |
Q4/20211 |
Q1/20221 |
Q2/20221 |
Earnings Per Share (“EPS”) |
$0.63 |
($0.79) |
($4.95) |
($1.12) |
($0.87) |
Net Investment Income (“NII”)
Per Share |
$0.54 |
$0.39 |
$1.58 |
$1.31 |
$0.23 |
Net Realized and Unrealized
Gains / (Losses) Per Share |
$0.10 |
($1.18) |
($6.53) |
($2.43) |
($1.10) |
Net Asset Value Per Share at
Period End |
$23.40 |
$22.17 |
$16.63 |
$15.06 |
$12.84 |
Distributions Paid / Declared
Per Share |
$0.60 |
$0.60 |
$0.60 |
$0.60 |
$0.45 |
Portfolio and Investment
Activity
As of June 30, 2022, GECC held total investments
of $204.6 million at fair value, as follows:
- 38 debt investments in corporate
credit, totaling approximately $122.2 million and representing
59.7% 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.
- 9 debt investments in specialty
finance, totaling approximately $31.2 million and representing
15.3% of the fair market value of the Company’s total
investments.
- 3 income generating equity
investments in specialty finance companies, totaling approximately
$26.8 million, representing 13.1% of the fair market value of the
Company’s total investments.
- 3 income generating preferred
equity investments, totaling approximately $21.0 million,
representing 10.3% of the fair market value of the Company’s total
investments.
- Other equity investments, totaling
approximately $3.4 million and representing 1.6% of the fair market
value of the Company’s total investments.
As of June 30, 2022, the weighted average
current yield on the Company’s debt portfolio was 10.3%. Floating
rate instruments comprised approximately 33.4% of the fair market
value of debt investments and the Company’s fixed rate debt
investments had a weighted average maturity of 3.1 years.
During the quarter ended June 30, 2022, we
deployed approximately $44.7 million into 27 investments(2) at a
weighted average current yield of 9.2%.
During the quarter ended June 30, 2022, we
monetized, in part or in full, 21 investments for approximately
$34.0 million(3) excluding SPACs, at a weighted average current
yield of 10.8%. Monetizations include $27.0 million of mandatory
debt paydowns and redemptions at a weighted average current yield
of 11.1%. Sales aggregated $7.0 million at a weighted average
current yield of 9.8%
Financial Review Total
investment income for the quarter ended June 30, 2022 was $5.5
million, or $1.06 per share. Net expenses for the quarter ended
June 30, 2022 were approximately $4.3 million, or $0.83 per
share.
Net realized and unrealized losses for the
quarter ended June 30, 2022 were approximately ($5.7) million, or
($1.10) per share. Net realized and unrealized losses were driven
largely by general market weakness and spread widening, largely in
June, impacting portfolio marks, as well as a further write-down of
investments in Avanti. As of June 30, 2022, the fair value of
investments in Avanti was approximately $0.2 million, or less than
1% of portfolio fair value.
Liquidity and Capital
ResourcesAs of June 30, 2022, cash and money market
securities totaled approximately $34.1 million, exclusive of
holdings of United States Treasury Bills.
Total debt outstanding (par value) as of June
30, 2022 was $145.9 million, comprised of 6.50% senior notes due
June 2024 (NASDAQ: GECCN), 6.75% senior notes due January 2025
(NASDAQ: GECCM), and 5.875% senior notes due June 2026 (NASDAQ:
GECCO). The Company also has a $25.0 million revolving credit
facility due May 2024, which was undrawn as of June 30, 2022.
DistributionsOn May 11, 2022,
the Company announced that its Board of Directors approved a
quarterly cash distribution of $0.45 per share for the quarter
ending September 30, 2022. The third quarter distribution will be
payable on September 30, 2022 to stockholders of record as of
September 15, 2022.
In addition, the Company’s Board of Directors
has approved a $0.45 per share cash distribution for the quarter
ending December 31, 2022. The distribution equates to a 14.5%
annualized dividend yield on the Company’s closing market price on
August 3, 2022 of $12.42 and a 14.0% annualized dividend yield on
the Company’s June 30, 2022 NAV of $12.85 per share. The record and
payment dates for the distribution are expected to be set in the
fourth quarter, pursuant to authority granted by the Company’s
Board of Directors.
Conference Call and WebcastGECC
will discuss these results in a conference call on Thursday, August
4, 2022 at 11:00 a.m. ET.
Conference
Call Details |
|
Date/Time: |
Thursday, August 4, 2022 – 11:00 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 at
http://www.investor.greatelmcc.com/events-and-presentations/presentations
after the issuance of the earnings release.
Webcast
The 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:
https://edge.media-server.com/mmc/p/inknpstn
About Great Elm Capital
Corp.
Great Elm Capital Corp. 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, 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 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.
Investor Relations Contact:
Garrett
Edson investorrelations@greatelmcap.com
GREAT ELM CAPITAL CORP.CONSOLIDATED
STATEMENTS OF ASSETS AND LIABILITIES
(unaudited)Dollar amounts in thousands (except per
share amounts)
|
|
June 30, 2022 |
|
|
December 31, 2021 |
|
Assets |
|
|
|
|
|
|
Investments |
|
|
|
|
|
|
Non-affiliated, non-controlled investments, at fair value
(amortized cost of $158,910 and $175,800, respectively) |
|
$ |
152,446 |
|
|
$ |
164,203 |
|
Non-affiliated, non-controlled short-term investments, at fair
value (amortized cost of $132,327 and $199,995, respectively) |
|
|
132,306 |
|
|
|
199,995 |
|
Affiliated investments, at fair value (amortized cost of $13,439
and $129,936, respectively) |
|
|
2,684 |
|
|
|
10,861 |
|
Controlled investments, at fair value (amortized cost of $45,553
and $32,649, respectively) |
|
|
49,472 |
|
|
|
37,085 |
|
Total investments |
|
|
336,908 |
|
|
|
412,144 |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
|
1,728 |
|
|
|
9,132 |
|
Restricted cash |
|
|
- |
|
|
|
13 |
|
Receivable for investments
sold |
|
|
3,823 |
|
|
|
766 |
|
Interest receivable |
|
|
2,261 |
|
|
|
1,811 |
|
Dividends receivable |
|
|
1,335 |
|
|
|
1,540 |
|
Due from portfolio company |
|
|
23 |
|
|
|
136 |
|
Due from affiliates |
|
|
37 |
|
|
|
17 |
|
Deferred financing costs |
|
|
305 |
|
|
|
376 |
|
Prepaid expenses and other
assets |
|
|
80 |
|
|
|
379 |
|
Total
assets |
|
$ |
346,500 |
|
|
$ |
426,314 |
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
Notes payable (including
unamortized discount of $3,360 and $3,935, respectively) |
|
$ |
142,573 |
|
|
$ |
141,998 |
|
Payable for investments
purchased |
|
|
105,275 |
|
|
|
203,575 |
|
Interest payable |
|
|
57 |
|
|
|
29 |
|
Accrued incentive fees
payable |
|
|
- |
|
|
|
4,854 |
|
Due to affiliates |
|
|
985 |
|
|
|
1,012 |
|
Accrued expenses and other
liabilities |
|
|
4 |
|
|
|
290 |
|
Total
liabilities |
|
$ |
248,894 |
|
|
$ |
351,758 |
|
|
|
|
|
|
|
|
Net Assets |
|
|
|
|
|
|
Common stock, par value $0.01 per share (100,000,000 shares
authorized,7,601,958 shares issued and outstanding and 4,484,278
shares issued andoutstanding, respectively) |
(1 |
) |
$ |
76 |
|
|
$ |
45 |
|
Additional paid-in capital |
|
|
284,359 |
|
|
|
245,531 |
|
Accumulated losses |
|
|
(186,829 |
) |
|
|
(171,020 |
) |
Total net
assets |
|
$ |
97,606 |
|
|
$ |
74,556 |
|
Total liabilities and net
assets |
|
$ |
346,500 |
|
|
$ |
426,314 |
|
Net asset value per
share |
(1 |
) |
$ |
12.84 |
|
|
$ |
16.63 |
|
|
|
|
|
|
|
|
|
|
|
(1) Authorized, issued and outstanding shares
of common stock and net asset value per share have been adjusted
for the periods prior to February 28, 2022 to reflect the
six-for-one reverse stock split effected on that date on a
retroactive basis.
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, |
|
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
Investment
Income: |
|
|
|
|
|
|
|
|
|
|
|
|
Interest income from: |
|
|
|
|
|
|
|
|
|
|
|
|
Non-affiliated, non-controlled investments |
|
$ |
3,055 |
|
|
$ |
2,983 |
|
|
$ |
6,314 |
|
|
$ |
5,425 |
|
Non-affiliated, non-controlled investments (PIK) |
|
|
223 |
|
|
|
68 |
|
|
|
469 |
|
|
|
98 |
|
Affiliated investments |
|
|
4 |
|
|
|
324 |
|
|
|
25 |
|
|
|
584 |
|
Affiliated investments (PIK) |
|
|
- |
|
|
|
1,568 |
|
|
|
58 |
|
|
|
3,007 |
|
Controlled investments |
|
|
452 |
|
|
|
149 |
|
|
|
909 |
|
|
|
157 |
|
Total interest income |
|
|
3,734 |
|
|
|
5,092 |
|
|
|
7,775 |
|
|
|
9,271 |
|
Dividend income from: |
|
|
|
|
|
|
|
|
|
|
|
|
Non-affiliated, non-controlled investments |
|
|
454 |
|
|
|
453 |
|
|
|
957 |
|
|
|
934 |
|
Controlled investments |
|
|
935 |
|
|
|
640 |
|
|
|
1,699 |
|
|
|
960 |
|
Total dividend income |
|
|
1,389 |
|
|
|
1,093 |
|
|
|
2,656 |
|
|
|
1,894 |
|
Other income from: |
|
|
|
|
|
|
|
|
|
|
|
|
Non-affiliated, non-controlled investments |
|
|
390 |
|
|
|
48 |
|
|
|
640 |
|
|
|
81 |
|
Affiliated investments (PIK) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
282 |
|
Total other income |
|
|
390 |
|
|
|
48 |
|
|
|
640 |
|
|
|
363 |
|
Total investment income |
|
$ |
5,513 |
|
|
$ |
6,233 |
|
|
$ |
11,071 |
|
|
$ |
11,528 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
Management fees |
|
$ |
771 |
|
|
$ |
765 |
|
|
$ |
1,551 |
|
|
$ |
1,425 |
|
Incentive fees |
|
|
- |
|
|
|
398 |
|
|
|
- |
|
|
|
506 |
|
Administration fees |
|
|
262 |
|
|
|
180 |
|
|
|
483 |
|
|
|
336 |
|
Custody fees |
|
|
14 |
|
|
|
13 |
|
|
|
28 |
|
|
|
26 |
|
Directors’ fees |
|
|
44 |
|
|
|
56 |
|
|
|
107 |
|
|
|
111 |
|
Professional services |
|
|
373 |
|
|
|
251 |
|
|
|
791 |
|
|
|
676 |
|
Interest expense |
|
|
2,667 |
|
|
|
2,291 |
|
|
|
5,337 |
|
|
|
4,489 |
|
Other expenses |
|
|
194 |
|
|
|
176 |
|
|
|
385 |
|
|
|
352 |
|
Total expenses |
|
$ |
4,325 |
|
|
$ |
4,130 |
|
|
$ |
8,682 |
|
|
$ |
7,921 |
|
Incentive fee waiver |
|
|
- |
|
|
|
- |
|
|
|
(4,854 |
) |
|
|
- |
|
Net expenses |
|
|
4,325 |
|
|
|
4,130 |
|
|
$ |
3,828 |
|
|
$ |
7,921 |
|
Net investment income before
taxes |
|
$ |
1,188 |
|
|
$ |
2,103 |
|
|
$ |
7,243 |
|
|
$ |
3,607 |
|
Excise tax |
|
$ |
- |
|
|
$ |
- |
|
|
$ |
101 |
|
|
$ |
- |
|
Net investment income |
|
$ |
1,188 |
|
|
$ |
2,103 |
|
|
$ |
7,142 |
|
|
$ |
3,607 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net realized and
unrealized gains (losses): |
|
|
|
|
|
|
|
|
|
|
|
|
Net realized gain (loss) on
investment transactions from: |
|
|
|
|
|
|
|
|
|
|
|
|
Non-affiliated, non-controlled investments |
|
$ |
1,033 |
|
|
$ |
1,683 |
|
|
$ |
(18,900 |
) |
|
$ |
(1,732 |
) |
Affiliated investments |
|
|
(110,784 |
) |
|
|
(4,052 |
) |
|
|
(110,784 |
) |
|
|
(4,052 |
) |
Controlled investments |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
140 |
|
Total net realized gain
(loss) |
|
|
(109,751 |
) |
|
|
(2,369 |
) |
|
|
(129,684 |
) |
|
|
(5,644 |
) |
Net change in
unrealized appreciation (depreciation) on investment transactions
from: |
|
|
|
|
Non-affiliated, non-controlled investments |
|
|
(4,630 |
) |
|
|
7,706 |
|
|
|
11,906 |
|
|
|
17,196 |
|
Affiliated investments |
|
|
109,214 |
|
|
|
(5,777 |
) |
|
|
101,525 |
|
|
|
(1,494 |
) |
Controlled investments |
|
|
(539 |
) |
|
|
824 |
|
|
|
(516 |
) |
|
|
1,368 |
|
Total net change in unrealized
appreciation (depreciation) |
|
|
104,045 |
|
|
|
2,753 |
|
|
|
112,915 |
|
|
|
17,070 |
|
Net realized and unrealized
gains (losses) |
|
$ |
(5,706 |
) |
|
$ |
384 |
|
|
$ |
(16,769 |
) |
|
$ |
11,426 |
|
Net increase
(decrease) in net assets resulting from operations |
|
$ |
(4,518 |
) |
|
$ |
2,487 |
|
|
$ |
(9,627 |
) |
|
$ |
15,033 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income per share (basic and diluted): |
(1 |
) |
$ |
0.23 |
|
|
$ |
0.54 |
|
|
$ |
1.46 |
|
|
$ |
0.92 |
|
Earnings per share (basic and
diluted): |
(1 |
) |
$ |
(0.87 |
) |
|
$ |
0.63 |
|
|
$ |
(1.97 |
) |
|
$ |
3.85 |
|
Weighted average shares
outstanding (basic and diluted): |
(1 |
) |
|
5,194,910 |
|
|
|
3,918,039 |
|
|
|
4,878,439 |
|
|
|
3,909,221 |
|
(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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