Great Elm Capital Corp. (“we,” “our,” the “Company” or “GECC,”)
(NASDAQ: GECC), a business development company, today announced its
financial results for the fourth quarter and full year ended
December 31, 2022.
Fourth Quarter and Other Recent
Highlights:
- Net investment income (“NII”) for
the quarter ended December 31, 2022 was $2.3 million, or $0.30 per
share, more than doubling NII of $1.1 million, or $0.14 per share
for the quarter ended September 30, 2022.
- NII was positively impacted by
continued capital deployment, rotation into higher yielding
floating rate investments and lower expenses.
- Net assets were $84.8 million, or
$11.16 per share, on December 31, 2022, as compared to $95.5
million, or $12.56 per share, on September 30, 2022, and $74.6
million, or $16.63 per share, on December 31, 2021.
- Net assets for the quarter were
negatively impacted by unrealized losses on certain
investments.
- Partnered with an affiliate of
Berkadia Commercial Mortgage, LLC (“Berkadia”) to form Great Elm
Healthcare Finance, LLC (“GEHF”), a specialty, asset-based lending
platform formed to provide capital to healthcare-related businesses
across the U.S.
- In December 2022, GEHF closed on
the purchase of three healthcare asset-based loans.
- GECC’s asset coverage ratio was
approximately 154.4% as of December 31, 2022, as compared to 165.5%
as of September 30, 2022, and 151.1% as of December 31, 2021.
- The Board of Directors has approved
a quarterly dividend of $0.35 per share for the first quarter of
2023, equating to a 12.5% annualized yield on December 31, 2022 NAV
per share.
Management Commentary“During
the fourth quarter, we generated the highest amount of cash income
from interest, dividends and fees in the Company’s history,” said
Matt Kaplan, GECC’s Chief Executive Officer. “Our capital
deployment program and focus on senior secured, floating rate
investments has increased NII materially from the prior quarter. In
addition, we made significant progress in expanding our specialty
finance platform with the formation and funding of Great Elm
Healthcare Finance alongside an affiliate of Berkadia, our
strategic minority partner. With a growing and diversified
portfolio of cash-generating investments, we believe we are well
positioned to cover our quarterly dividend during the course of the
year.”
Financial Highlights – Per Share Data
|
Q4/20211 |
|
Q1/20221 |
|
Q2/2022 |
|
Q3/2022 |
|
Q4/2022 |
|
Earnings Per Share (“EPS”) |
($4.95 |
) |
($1.12 |
) |
($0.87 |
) |
$0.18 |
|
($0.96 |
) |
Net Investment Income (“NII”) Per Share |
$1.58 |
|
$1.31 |
|
$0.23 |
|
$0.14 |
|
$0.30 |
|
Pre-Incentive Net Investment Income Per Share |
$0.42 |
|
$0.24 |
|
$0.23 |
|
$0.14 |
|
$0.37 |
|
Net Realized and Unrealized Gains / (Losses) Per Share |
($6.53 |
) |
($2.43 |
) |
($1.10 |
) |
$0.04 |
|
($1.26 |
) |
Net Asset Value Per Share at Period End |
$16.63 |
|
$15.06 |
|
$12.84 |
|
$12.56 |
|
$11.16 |
|
Distributions Paid / Declared Per Share |
$0.60 |
|
$0.60 |
|
$0.45 |
|
$0.45 |
|
$0.45 |
|
Portfolio and Investment
Activity
As of December 31, 2022, GECC held total
investments of $225.0 million at fair value, as follows:
- 44 debt investments in corporate
credit, totaling approximately $151.2 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.
- 10 debt investments in specialty
finance, totaling approximately $33.8 million and representing
15.0% of the fair market value of the Company’s total
investments.
- 4 income generating equity
investments in specialty finance companies, totaling approximately
$24.5 million, representing 10.9% of the fair market value of the
Company’s total investments.
- 6 other income generating equity
investments, totaling approximately $12.9 million, representing
5.7% of the fair market value of the Company’s total
investments.
- Other equity investments, totaling
approximately $2.6 million, representing 1.2% of the fair market
value of the Company’s total investments.
As of December 31, 2022, the weighted average
current yield on the Company’s debt portfolio was 12.4%. Floating
rate instruments comprised approximately 50.0% of the fair market
value of debt investments (compared to 48.3% as of September 30,
2022) and the Company’s fixed rate debt investments had a weighted
average maturity of 2.7 years.
During the quarter ended December 31, 2022, we
deployed approximately $37.6 million into 22 investments(2) at a
weighted average current yield of 11.8%.
During the quarter ended December 31, 2022, we
monetized, in part or in full, 23 investments for approximately
$20.4 million(3), at a weighted average current yield of 9.6%.
Monetizations include $12.1 million of mandatory debt paydowns and
redemptions at a weighted average current yield of 8.7%. Sales
aggregated $8.3 million at a weighted average current yield of
9.4%.
Financial Review Total
investment income for the quarter ended December 31, 2022 was $7.3
million, or $0.96 per share. Net expenses for the quarter ended
December 31, 2022 were approximately $5.1 million, or $0.66 per
share.
Net realized and unrealized losses for the
quarter ended December 31, 2022 were approximately $9.5 million, or
($1.26) per share.
Liquidity and Capital
ResourcesAs of December 31, 2022, cash and money market
securities totaled approximately $6.9 million, exclusive of
holdings of United States Treasury Bills.
Total debt outstanding (par value) as of
December 31, 2022 was $155.9 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 $10.0 million outstanding as of December 31, 2022 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 March 31, 2023. The first
quarter distribution will be payable on March 31, 2023 to
stockholders of record as of March 15, 2023.
The distribution equates to a 14.8% annualized
dividend yield on the Company’s closing market price on March 1,
2023 of $9.44 and a 12.5% annualized dividend yield on the
Company’s December 31, 2022 NAV of $11.16 per share.
Conference
Call and Webcast |
GECC will discuss these results in a conference call today at 8:30
a.m. ET. |
|
|
Conference Call Details |
|
Date/Time: |
Thursday, March 2, 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 Investor Relations
section of GECC’s website or by clicking on the conference call
link here.
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, 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 Relationsinvestorrelations@greatelmcap.com
GREAT ELM CAPITAL CORP.CONSOLIDATED
STATEMENTS OF ASSETS AND LIABILITIES Dollar
amounts in thousands (except per share amounts)
|
|
December 31, 2022 |
|
|
December 31, 2021 |
|
Assets |
|
|
|
|
|
|
Investments |
|
|
|
|
|
|
Non-affiliated, non-controlled investments, at fair value
(amortized cost of $183,061 and $175,800, respectively) |
|
$ |
171,743 |
|
|
$ |
164,203 |
|
Non-affiliated, non-controlled short-term investments, at fair
value (amortized cost of $76,140 and $199,995, respectively) |
|
|
76,127 |
|
|
|
199,995 |
|
Affiliated investments, at fair value (amortized cost of $13,433
and $129,936, respectively) |
|
|
1,304 |
|
|
|
10,861 |
|
Controlled investments, at fair value (amortized cost of $54,684
and $32,649, respectively) |
|
|
51,910 |
|
|
|
37,085 |
|
Total investments |
|
|
301,084 |
|
|
|
412,144 |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
|
587 |
|
|
|
9,132 |
|
Restricted cash |
|
|
- |
|
|
|
13 |
|
Receivable for investments
sold |
|
|
396 |
|
|
|
766 |
|
Interest receivable |
|
|
3,090 |
|
|
|
1,811 |
|
Dividends receivable |
|
|
1,440 |
|
|
|
1,540 |
|
Due from portfolio
company |
|
|
1 |
|
|
|
136 |
|
Due from affiliates |
|
|
- |
|
|
|
17 |
|
Deferred financing costs |
|
|
226 |
|
|
|
376 |
|
Prepaid expenses and other
assets |
|
|
3,288 |
|
|
|
379 |
|
Total
assets |
|
$ |
310,112 |
|
|
$ |
426,314 |
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
Notes payable (including
unamortized discount of $2,781 and $3,935, respectively) |
|
$ |
143,152 |
|
|
$ |
141,998 |
|
Revolving credit facility |
|
|
10,000 |
|
|
|
- |
|
Payable for investments
purchased |
|
|
70,022 |
|
|
|
203,575 |
|
Interest payable |
|
|
42 |
|
|
|
29 |
|
Accrued incentive fees
payable |
|
|
565 |
|
|
|
4,854 |
|
Due to affiliates |
|
|
1,042 |
|
|
|
1,012 |
|
Accrued expenses and other
liabilities |
|
|
480 |
|
|
|
290 |
|
Total
liabilities |
|
$ |
225,303 |
|
|
$ |
351,758 |
|
|
|
|
|
|
|
|
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 4,484,278
shares issued and outstanding, respectively) |
(1 |
) |
$ |
76 |
|
|
$ |
45 |
|
Additional paid-in
capital |
|
|
284,359 |
|
|
|
245,531 |
|
Accumulated losses |
|
|
(199,626 |
) |
|
|
(171,020 |
) |
Total net
assets |
|
$ |
84,809 |
|
|
$ |
74,556 |
|
Total liabilities and
net assets |
|
$ |
310,112 |
|
|
$ |
426,314 |
|
Net asset value per
share |
(1 |
) |
$ |
11.16 |
|
|
$ |
16.63 |
|
|
(1) |
Authorized, issued and outstanding shares of common stock and net
asset value per share 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. |
GREAT ELM CAPITAL CORP. CONSOLIDATED
STATEMENTS OF OPERATIONS Dollar amounts in
thousands (except per share amounts)
|
|
For the Year Ended December 31, |
|
|
|
2022 |
|
|
2021 |
|
|
2020 |
|
Investment
Income: |
|
|
|
|
|
|
|
|
|
Interest income from: |
|
|
|
|
|
|
|
|
|
Non-affiliated, non-controlled investments |
|
$ |
15,325 |
|
|
$ |
13,100 |
|
|
$ |
12,740 |
|
Non-affiliated, non-controlled investments (PIK) |
|
|
1,220 |
|
|
|
387 |
|
|
|
22 |
|
Affiliated investments |
|
|
97 |
|
|
|
910 |
|
|
|
981 |
|
Affiliated investments (PIK) |
|
|
58 |
|
|
|
4,874 |
|
|
|
5,218 |
|
Controlled investments |
|
|
1,984 |
|
|
|
646 |
|
|
|
249 |
|
Total interest income |
|
|
18,684 |
|
|
|
19,917 |
|
|
|
19,210 |
|
Dividend income from: |
|
|
|
|
|
|
|
|
|
Non-affiliated, non-controlled investments |
|
|
1,815 |
|
|
|
1,713 |
|
|
|
867 |
|
Controlled investments |
|
|
2,539 |
|
|
|
2,634 |
|
|
|
2,240 |
|
Total dividend income |
|
|
4,354 |
|
|
|
4,347 |
|
|
|
3,107 |
|
Other income from: |
|
|
|
|
|
|
|
|
|
Non-affiliated, non-controlled investments |
|
|
1,391 |
|
|
|
683 |
|
|
|
125 |
|
Non-affiliated, non-controlled investments (PIK) |
|
|
- |
|
|
|
- |
|
|
|
368 |
|
Affiliated investments (PIK) |
|
|
- |
|
|
|
282 |
|
|
|
75 |
|
Controlled investments |
|
|
- |
|
|
|
25 |
|
|
|
12 |
|
Total other income |
|
|
1,391 |
|
|
|
990 |
|
|
|
580 |
|
Total investment income |
|
$ |
24,429 |
|
|
$ |
25,254 |
|
|
$ |
22,897 |
|
|
|
|
|
|
|
|
|
|
|
Expenses: |
|
|
|
|
|
|
|
|
|
Management fees |
|
$ |
3,205 |
|
|
$ |
3,182 |
|
|
$ |
2,511 |
|
Incentive fees |
|
|
565 |
|
|
|
(4,323 |
) |
|
|
1,020 |
|
Administration fees |
|
|
938 |
|
|
|
673 |
|
|
|
729 |
|
Custody fees |
|
|
53 |
|
|
|
54 |
|
|
|
51 |
|
Directors’ fees |
|
|
215 |
|
|
|
233 |
|
|
|
198 |
|
Professional services |
|
|
1,967 |
|
|
|
1,937 |
|
|
|
1,441 |
|
Interest expense |
|
|
10,690 |
|
|
|
10,428 |
|
|
|
9,126 |
|
Other expenses |
|
|
937 |
|
|
|
737 |
|
|
|
655 |
|
Total expenses |
|
$ |
18,570 |
|
|
$ |
12,921 |
|
|
$ |
15,731 |
|
Incentive fee waiver |
|
|
(4,854 |
) |
|
|
- |
|
|
|
- |
|
Net expenses |
|
$ |
13,716 |
|
|
$ |
12,921 |
|
|
$ |
15,731 |
|
Net investment income before
taxes |
|
$ |
10,713 |
|
|
$ |
12,333 |
|
|
$ |
7,166 |
|
Excise tax |
|
$ |
252 |
|
|
$ |
48 |
|
|
$ |
17 |
|
Net investment income |
|
$ |
10,461 |
|
|
$ |
12,285 |
|
|
$ |
7,149 |
|
|
|
|
|
|
|
|
|
|
|
Net realized and
unrealized gains (losses): |
|
|
|
|
|
|
|
|
|
Net realized gain (loss) on
investment transactions from: |
|
|
|
|
|
|
|
|
|
Non-affiliated, non-controlled investments |
|
$ |
(15,262 |
) |
|
$ |
(5,770 |
) |
|
$ |
(9,604 |
) |
Affiliated investments |
|
|
(110,784 |
) |
|
|
(4,162 |
) |
|
- |
|
Controlled investments |
|
|
- |
|
|
|
293 |
|
|
|
(1,382 |
) |
Realized gain on repurchase of
debt |
|
|
- |
|
|
|
- |
|
|
|
1,237 |
|
Total net realized gain
(loss) |
|
|
(126,046 |
) |
|
|
(9,639 |
) |
|
|
(9,749 |
) |
Net change in
unrealized appreciation (depreciation) on investment transactions
from: |
|
|
|
|
|
|
|
Non-affiliated, non-controlled investments |
|
|
267 |
|
|
|
19,019 |
|
|
|
(14,520 |
) |
Affiliated investments |
|
|
106,945 |
|
|
|
(33,763 |
) |
|
|
(18,455 |
) |
Controlled investments |
|
|
(7,210 |
) |
|
|
1,823 |
|
|
|
3,619 |
|
Total net change in unrealized
appreciation (depreciation) |
|
|
100,002 |
|
|
|
(12,921 |
) |
|
|
(29,356 |
) |
Net realized and unrealized
gains (losses) |
|
$ |
(26,044 |
) |
|
$ |
(22,560 |
) |
|
$ |
(39,105 |
) |
Net increase
(decrease) in net assets resulting from operations |
|
$ |
(15,583 |
) |
|
$ |
(10,275 |
) |
|
$ |
(31,956 |
) |
|
|
|
|
|
|
|
|
|
|
Net investment income per share (basic and diluted): |
(1 |
) |
$ |
1.67 |
|
|
$ |
3.02 |
|
|
$ |
3.22 |
|
Earnings per share (basic and
diluted): |
(1 |
) |
$ |
(2.49 |
) |
|
$ |
(2.52 |
) |
|
$ |
(14.41 |
) |
Weighted average shares
outstanding (basic and diluted): |
(1 |
) |
|
6,251,391 |
|
|
|
4,073,454 |
|
|
|
2,218,244 |
|
|
(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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