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, 2023.
Fourth Quarter and Other Recent
Highlights:
- In February 2024, the Company
raised $24 million of equity at Net Asset Value from a special
purchase vehicle (“SPV”), supported by a $6 million investment by
Great Elm Group (“GEG”) into the SPV.
- Net investment income (“NII”) for
the quarter ended December 31, 2023 was $3.3 million, or $0.43 per
share, as compared to $3.1 million, or $0.40 per share, for the
quarter ended September 30, 2023.
- Fourth consecutive quarter of NII
more than covering the base dividend.
- Full Year 2023
NII of $12.5 million, or $1.65 per share, exceeded $1.50 per share
of total declared dividends in 2023.
- Net assets increased to $98.7
million, or $12.99 per share, on December 31, 2023, as compared to
$97.9 million, or $12.88 per share, on September 30,
2023.
- GECC’s asset coverage ratio
improved to 169.0% as of December 31, 2023, as compared to 168.4%
as of September 30, 2023, and 154.4% as of December 31, 2022.
- Amended existing $25 million
revolving line of credit (the “Revolver”), extending the maturity
to May 2027.
- In addition, the rate in effect for
any future Company borrowings was reduced by 50 basis points to
SOFR plus 300 bps.
- Paid $0.10 per common share special
distribution in January 2024, attributable to the Company’s strong
performance throughout 2023.
- The Board of Directors approved a
quarterly dividend of $0.35 per share for the first quarter of
2024, equating to a 13.1% annualized yield on the Company’s closing
market price on February 28, 2024 of $10.66.
Management
Commentary “We capped 2023 with another
quarter of strong NII that exceeded our quarterly dividend, and
finished with the highest cash income year in the Company’s
history. Our NAV also continued to grow as we harvested
lower-yielding investments and reinvested the capital into
higher-yielding, higher-quality investments,” said Matt Kaplan,
GECC’s Chief Executive Officer. “Additionally, 2024 is off to a
great start as we recently raised $24 million of equity at net
asset value from a special purchase vehicle, further enhancing
alignment between the Company’s investment manager and
shareholders. This transaction is validation of our successful
transformation and significant progress over the last two years,
enabling us to further advance our growth strategy and execute on
our robust investment pipeline.”
Financial Highlights – Per Share
Data
|
Q4/2022 |
Q1/2023 |
Q2/2023 |
Q3/2023 |
Q4/2023 |
Earnings Per Share (“EPS”) |
($0.96) |
$1.07 |
$0.68 |
$1.02 |
$0.55 |
Net Investment Income (“NII”) Per Share |
$0.30 |
$0.37 |
$0.44 |
$0.40 |
$0.43 |
Pre-Incentive Net Investment Income Per Share |
$0.37 |
$0.47 |
$0.56 |
$0.50 |
$0.54 |
Net Realized and Unrealized Gains / (Losses) Per Share |
($1.26) |
$0.70 |
$0.24 |
$0.62 |
$0.12 |
Net Asset Value Per Share at Period End |
$11.16 |
$11.88 |
$12.21 |
$12.88 |
$12.99 |
Distributions Paid / Declared Per Share |
$0.45 |
$0.35 |
$0.35 |
$0.35 |
$0.45 |
Portfolio and Investment
Activity
As of December 31, 2023, GECC held total
investments of $230.6 million at fair value, as follows:
- 35 debt
investments in corporate credit, totaling approximately $164.5
million and representing 71.3% 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.
- 2 debt
investments in specialty finance, totaling approximately $34.7
million and representing 15.1% of the fair market value of the
Company’s total investments.
- 1 equity
investment in a specialty finance company, totaling approximately
$17.5 million, representing 7.6% of the fair market value of the
Company’s total investments.
- 2 dividend
paying equity investments, totaling approximately $6.8 million,
representing 2.9% of the fair market value of the Company’s total
investments.
- Other equity
investments, totaling approximately $7.1 million, representing 3.1%
of the fair market value of the Company’s total
investments.
As of December 31, 2023, the weighted average
current yield on the Company’s debt portfolio was 13.8%. Floating
rate instruments comprised approximately 67% of the fair market
value of debt investments (compared to 63% as of September 30,
2023) and the Company’s fixed rate debt investments had a weighted
average maturity of 2.4 years.
During the quarter ended December 31, 2023, we
deployed approximately $29.9 million into 15 investments(1) at a
weighted average current yield of 14.0%.
During the quarter ended December 31, 2023, we
monetized, in part or in full, 32 investments for approximately
$36.2 million(2), at a weighted average current yield of 11.0%.
Monetizations include $14.8 million of mandatory debt paydowns and
redemptions at a weighted average current yield of 12.5%. Sales
aggregated to $21.4 million at a weighted average current yield of
9.6%.
Financial Review Total
investment income for the quarter ended December 31, 2023 was $9.2
million, or $1.21 per share. Net expenses for the quarter ended
December 31, 2023 were approximately $5.7 million, or $0.74 per
share.
Net realized and unrealized gains for the
quarter ended December 31, 2023 were approximately $0.9 million, or
$0.12 per share.
Liquidity and Capital
ResourcesAs of December 31, 2023, cash and money market
securities totaled approximately $11.8 million, and availability on
the Company’s undrawn revolving line of credit remained at $25.0
million.
As of December 31, 2023, total debt outstanding
(par value) was $143.1 million, comprised of 6.75% senior notes due
January 2025 (NASDAQ: GECCM), 5.875% senior notes due June 2026
(NASDAQ: GECCO), and 8.75% senior notes due September 2028 (NASDAQ:
GECCZ).
DistributionsThe Company’s
Board of Directors has approved a quarterly cash distribution of
$0.35 per share for the quarter ending March 31, 2024. The first
quarter distribution will be payable on March 29, 2024 to
stockholders of record as of March 15, 2024.
The distribution equates to a 13.1% annualized
dividend yield on the Company’s closing market price on February
28, 2024 of $10.66 and a 10.8% annualized dividend yield on the
Company’s December 31, 2023 NAV of $12.99 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, February 29, 2024 – 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
Relations investorrelations@greatelmcap.com
GREAT ELM CAPITAL CORP.CONSOLIDATED
STATEMENTS OF ASSETS AND LIABILITIES Dollar
amounts in thousands (except per share amounts)
|
|
December 31, 2023 |
|
|
December 31, 2022 |
|
Assets |
|
|
|
|
|
|
Investments |
|
|
|
|
|
|
Non-affiliated, non-controlled investments, at fair value
(amortized cost of $179,626 and $183,061, respectively) |
|
$ |
183,335 |
|
|
$ |
171,743 |
|
Non-affiliated, non-controlled short-term investments, at fair
value (amortized cost of $10,807 and $76,140, respectively) |
|
|
10,807 |
|
|
|
76,127 |
|
Affiliated investments, at fair value (amortized cost of $13,423
and $13,433, respectively) |
|
|
1,067 |
|
|
|
1,304 |
|
Controlled investments, at fair value (amortized cost of $46,300
and $54,684, respectively) |
|
|
46,210 |
|
|
|
51,910 |
|
Total investments |
|
|
241,419 |
|
|
|
301,084 |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
|
953 |
|
|
|
587 |
|
Receivable for investments sold |
|
|
840 |
|
|
|
396 |
|
Interest receivable |
|
|
2,105 |
|
|
|
3,090 |
|
Dividends receivable |
|
|
1,001 |
|
|
|
1,440 |
|
Due from portfolio company |
|
|
37 |
|
|
|
1 |
|
Deferred financing costs |
|
|
335 |
|
|
|
226 |
|
Prepaid expenses and other assets |
|
|
135 |
|
|
|
3,288 |
|
Total assets |
|
$ |
246,825 |
|
|
$ |
310,112 |
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
Notes payable (including unamortized discount of $2,896 and
$2,781, respectively) |
|
$ |
140,214 |
|
|
$ |
143,152 |
|
Revolving credit facility |
|
|
- |
|
|
|
10,000 |
|
Payable for investments purchased |
|
|
3,327 |
|
|
|
70,022 |
|
Interest payable |
|
|
32 |
|
|
|
42 |
|
Accrued incentive fees payable |
|
|
1,431 |
|
|
|
565 |
|
Distributions payable |
|
|
760 |
|
|
|
- |
|
Due to affiliates |
|
|
1,195 |
|
|
|
1,042 |
|
Accrued expenses and other liabilities |
|
|
1,127 |
|
|
|
480 |
|
Total liabilities |
|
$ |
148,086 |
|
|
$ |
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 |
|
|
283,795 |
|
|
|
284,107 |
|
Accumulated losses |
|
|
(185,132 |
) |
|
|
(199,374 |
) |
Total net assets |
|
$ |
98,739 |
|
|
$ |
84,809 |
|
Total liabilities and net assets |
|
$ |
246,825 |
|
|
$ |
310,112 |
|
Net asset value per share |
|
$ |
12.99 |
|
|
$ |
11.16 |
|
|
GREAT ELM CAPITAL CORP. CONSOLIDATED
STATEMENTS OF OPERATIONS Dollar amounts in
thousands (except per share amounts)
|
|
For the Year Ended December 31, |
|
|
|
2023 |
|
|
2022 |
|
|
2021 |
|
Investment
Income: |
|
|
|
|
|
|
|
|
|
Interest income from: |
|
|
|
|
|
|
|
|
|
Non-affiliated, non-controlled investments |
|
$ |
23,582 |
|
|
$ |
15,325 |
|
|
$ |
13,100 |
|
Non-affiliated, non-controlled investments (PIK) |
|
|
2,281 |
|
|
|
1,220 |
|
|
|
387 |
|
Affiliated investments |
|
|
128 |
|
|
|
97 |
|
|
|
910 |
|
Affiliated investments (PIK) |
|
|
- |
|
|
|
58 |
|
|
|
4,874 |
|
Controlled investments |
|
|
2,677 |
|
|
|
1,984 |
|
|
|
646 |
|
Controlled investments (PIK) |
|
|
233 |
|
|
|
- |
|
|
|
- |
|
Total interest income |
|
|
28,901 |
|
|
|
18,684 |
|
|
|
19,917 |
|
Dividend income from: |
|
|
|
|
|
|
|
|
|
Non-affiliated, non-controlled investments |
|
|
1,147 |
|
|
|
1,815 |
|
|
|
1,713 |
|
Controlled investments |
|
|
2,331 |
|
|
|
2,539 |
|
|
|
2,634 |
|
Total dividend income |
|
|
3,478 |
|
|
|
4,354 |
|
|
|
4,347 |
|
Other commitment fees from
non-affiliated, non-controlled investments |
|
|
3,075 |
|
|
|
1,155 |
|
|
|
- |
|
Other income from: |
|
|
|
|
|
|
|
|
|
Non-affiliated, non-controlled investments |
|
|
264 |
|
|
|
236 |
|
|
|
683 |
|
Non-affiliated, non-controlled investments (PIK) |
|
|
107 |
|
|
|
- |
|
|
|
- |
|
Affiliated investments (PIK) |
|
|
- |
|
|
|
- |
|
|
|
282 |
|
Controlled investments |
|
|
- |
|
|
|
- |
|
|
|
25 |
|
Total other income |
|
|
371 |
|
|
|
236 |
|
|
|
990 |
|
Total investment income |
|
$ |
35,825 |
|
|
$ |
24,429 |
|
|
$ |
25,254 |
|
|
|
|
|
|
|
|
|
|
|
Expenses: |
|
|
|
|
|
|
|
|
|
Management fees |
|
$ |
3,539 |
|
|
$ |
3,205 |
|
|
$ |
3,182 |
|
Incentive fees |
|
|
3,132 |
|
|
|
565 |
|
|
|
(4,323 |
) |
Administration fees |
|
|
1,522 |
|
|
|
938 |
|
|
|
673 |
|
Custody fees |
|
|
81 |
|
|
|
53 |
|
|
|
54 |
|
Directors’ fees |
|
|
205 |
|
|
|
215 |
|
|
|
233 |
|
Professional services |
|
|
1,772 |
|
|
|
1,967 |
|
|
|
1,937 |
|
Interest expense |
|
|
11,742 |
|
|
|
10,690 |
|
|
|
10,428 |
|
Other expenses |
|
|
1,003 |
|
|
|
937 |
|
|
|
737 |
|
Total expenses |
|
$ |
22,996 |
|
|
$ |
18,570 |
|
|
$ |
12,921 |
|
Incentive fee waiver |
|
|
- |
|
|
|
(4,854 |
) |
|
|
- |
|
Net expenses |
|
$ |
22,996 |
|
|
$ |
13,716 |
|
|
$ |
12,921 |
|
Net investment income before
taxes |
|
$ |
12,829 |
|
|
$ |
10,713 |
|
|
$ |
12,333 |
|
Excise tax |
|
$ |
287 |
|
|
$ |
252 |
|
|
$ |
48 |
|
Net investment income |
|
$ |
12,542 |
|
|
$ |
10,461 |
|
|
$ |
12,285 |
|
|
|
|
|
|
|
|
|
|
|
Net realized and
unrealized gains (losses): |
|
|
|
|
|
|
|
|
|
Net realized gain (loss) on
investment transactions from: |
|
|
|
|
|
|
|
|
|
Non-affiliated, non-controlled investments |
|
$ |
(1,246 |
) |
|
$ |
(15,262 |
) |
|
$ |
(5,770 |
) |
Affiliated investments |
|
|
- |
|
|
|
(110,784 |
) |
|
|
(4,162 |
) |
Controlled investments |
|
|
(3,461 |
) |
|
|
- |
|
|
|
293 |
|
Total net realized gain
(loss) |
|
|
(4,707 |
) |
|
|
(126,046 |
) |
|
|
(9,639 |
) |
Net change in
unrealized appreciation (depreciation) on investment transactions
from: |
|
|
|
|
|
|
|
Non-affiliated, non-controlled investments |
|
|
15,040 |
|
|
|
267 |
|
|
|
19,019 |
|
Affiliated investments |
|
|
(226 |
) |
|
|
106,945 |
|
|
|
(33,763 |
) |
Controlled investments |
|
|
2,684 |
|
|
|
(7,210 |
) |
|
|
1,823 |
|
Total net change in unrealized
appreciation (depreciation) |
|
|
17,498 |
|
|
|
100,002 |
|
|
|
(12,921 |
) |
Net realized and unrealized gains
(losses) |
|
$ |
12,791 |
|
|
$ |
(26,044 |
) |
|
$ |
(22,560 |
) |
Net increase (decrease)
in net assets resulting from operations |
|
$ |
25,333 |
|
|
$ |
(15,583 |
) |
|
$ |
(10,275 |
) |
|
|
|
|
|
|
|
|
|
|
Net investment income per share (basic and diluted): |
(1 |
) |
$ |
1.65 |
|
|
$ |
1.67 |
|
|
$ |
3.02 |
|
Earnings per share (basic and
diluted): |
(1 |
) |
$ |
3.33 |
|
|
$ |
(2.49 |
) |
|
$ |
(2.52 |
) |
Weighted average shares
outstanding (basic and diluted): |
(1 |
) |
|
7,601,958 |
|
|
|
6,251,391 |
|
|
|
4,073,454 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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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