Great Elm Capital Corp. (“we,” “our,” the “Company” or “GECC”)
(NASDAQ: GECC), a business development company, today announced its
financial results for the first quarter ended March 31, 2024.
First 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.
- 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.
- Net investment income (“NII”) for
the quarter ended March 31, 2024 was $3.2 million, or $0.37 per
share, as compared to $3.3 million, or $0.43 per share, for the
quarter ended December 31, 2023.
- Fifth consecutive quarter of NII
per share covering the base dividend.
- Net assets were $118.8 million, or
$12.57 per share, on March 31, 2024, as compared to $98.7 million,
or $12.99 per share, on December 31, 2023.
- NAV adversely impacted by $0.55 per
share in the quarter from write-downs on certain investments in
illiquid assets originated by prior management.
- GECC’s asset coverage ratio
improved to 180.2% as of March 31, 2024, as compared to 169.0% as
of December 31, 2023, and 159.8% as of March 31, 2023.
- Asset coverage ratio pro forma for
April bond issuance of approximately 166.9%.
- The Board of Directors approved a
quarterly dividend of $0.35 per share for the second quarter of
2024, equating to a 13.5% annualized yield on the Company’s closing
market price on May 1, 2024 of $10.36.
Management
Commentary “With 2024 underway, we were
pleased to generate NII that covered the dividend for the fifth
consecutive quarter,” said Matt Kaplan, GECC’s Chief Executive
Officer. “NAV in the quarter was negatively impacted by 55 cents
per share from illiquid investments in two portfolio companies
which we inherited from prior management. We also successfully
completed a Notes offering shortly after quarter-end, which
provides us with additional capital to deploy into quality
investments that offer attractive risk-adjusted returns for our
shareholders. Additionally, we recently announced a JV to invest in
CLO entities and related warehouse facilities. We expect the CLO JV
will start receiving quarterly distributions in the third quarter
and are targeting mid-teens to low-20% IRRs over time. Looking
ahead, we expect NII to ramp in the second half of the year as we
deploy capital from our recent issuances and generate income from
new investments, including our CLO JV, leaving us well positioned
to cover our dividend.”
Financial Highlights – Per Share
Data
|
Q1/2023 |
Q2/2023 |
Q3/2023 |
Q4/2023 |
Q1/2024 |
Earnings Per Share (“EPS”) |
$1.07 |
$0.68 |
$1.02 |
$0.55 |
($0.05) |
Net Investment Income (“NII”) Per Share |
$0.37 |
$0.44 |
$0.40 |
$0.43 |
$0.37 |
Pre-Incentive Net Investment Income Per Share |
$0.47 |
$0.56 |
$0.50 |
$0.54 |
$0.46 |
Net Realized and Unrealized Gains / (Losses) Per Share |
$0.70 |
$0.24 |
$0.62 |
$0.12 |
($0.42) |
Net Asset Value Per Share at Period End |
$11.88 |
$12.21 |
$12.88 |
$12.99 |
$12.57 |
Distributions Paid / Declared Per Share |
$0.35 |
$0.35 |
$0.35 |
$0.45 |
$0.35 |
|
|
|
|
|
|
Portfolio and Investment
Activity
As of March 31, 2024, GECC held total
investments of $262.9 million at fair value, as follows:
- 44 debt
investments in corporate credit, totaling approximately $184.5
million and representing 70.2% 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.
- An investment in
Great Elm Specialty Finance comprised of 1 debt investment totaling
approximately $28.7 million and 1 equity investment totaling
approximately $15.9 million and representing 10.9% and 8.1%,
respectively, of the fair market value of the Company’s total
investments.
- 3 dividend
paying equity investments, including our CLO investment, totaling
approximately $21.2 million, representing 8.1% of the fair market
value of the Company’s total investments.
- Other equity investments, totaling
approximately $12.5 million, representing 4.8% of the fair market
value of the Company’s total investments.
As of March 31, 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 (up from 67% as of December 31, 2023) and
the Company’s fixed rate debt investments had a weighted average
maturity of 2.2 years.
During the quarter ended March 31, 2024, we
deployed approximately $64.2 million into 29 investments(1) at a
weighted average current yield of 12.5%.
During the quarter ended March 31, 2024, we
monetized, in part or in full, 33 investments for approximately
$28.9 million(2), at a weighted average current yield of 11.4%.
Monetizations include $16.5 million of mandatory debt paydowns and
redemptions at a weighted average current yield of 12.2%. Sales
aggregated to $12.4 million at a weighted average current yield of
9.7%.
Financial Review Total
investment income for the quarter ended March 31, 2024 was $8.9
million, or $1.03 per share. Net expenses for the quarter ended
March 31, 2024 were approximately $5.7 million, or $0.66 per
share.
Net realized and unrealized losses for the
quarter ended March 31, 2024 were approximately $3.7 million, or
$0.42 per share.
Liquidity and Capital
ResourcesAs of March 31, 2024, cash and money market
securities totaled approximately $8.7 million.
As of March 31, 2024, total debt outstanding
(par value) was $148.1 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 $5.0 million outstanding on the $25.0 million revolving
credit facility due May 2027.
Subsequent to quarter-end, the Company issued
$34.5 million in aggregate principal amount of 8.50% notes due June
2029 (NASDAQ: GECCI), and repaid $5.0 million of the outstanding
balance on the revolving line of credit, leaving no borrowings
outstanding under the revolving line.
DistributionsThe Company’s
Board of Directors has approved a quarterly cash distribution of
$0.35 per share for the quarter ending June 30, 2024. The second
quarter distribution will be payable on June 28, 2024 to
stockholders of record as of June 14, 2024.
The distribution equates to a 13.5% annualized
dividend yield on the Company’s closing market price on May 1, 2024
of $10.36 and an 11.1% annualized dividend yield on the Company’s
March 31, 2024 NAV of $12.57 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, May
2, 2024 – 5:00 p.m. ET |
|
|
|
Participant Dial-In Numbers: |
|
|
(United States): |
|
800-717-1738 |
(International): |
|
646-307-1865 |
|
|
|
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
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. 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 Dollar amounts in thousands (except
per share amounts) |
|
|
|
March 31, 2024 |
|
|
December 31, 2023 |
|
Assets |
|
|
|
|
|
|
Investments |
|
|
|
|
|
|
Non-affiliated, non-controlled investments, at fair value
(amortized cost of $217,882 and $179,626, respectively) |
|
$ |
218,060 |
|
|
$ |
183,335 |
|
Non-affiliated, non-controlled short-term investments, at fair
value (amortized cost of $8,335 and $10,807, respectively) |
|
|
8,335 |
|
|
|
10,807 |
|
Affiliated investments, at fair value (amortized cost of $13,420
and $13,423, respectively) |
|
|
214 |
|
|
|
1,067 |
|
Controlled investments, at fair value (amortized cost of $46,300
and $46,300, respectively) |
|
|
44,586 |
|
|
|
46,210 |
|
Total investments |
|
|
271,195 |
|
|
|
241,419 |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
|
334 |
|
|
|
953 |
|
Receivable for investments
sold |
|
|
2,595 |
|
|
|
840 |
|
Interest receivable |
|
|
3,827 |
|
|
|
2,105 |
|
Dividends receivable |
|
|
763 |
|
|
|
1,001 |
|
Due from portfolio
company |
|
|
38 |
|
|
|
37 |
|
Deferred financing costs |
|
|
311 |
|
|
|
335 |
|
Prepaid expenses and other
assets |
|
|
64 |
|
|
|
135 |
|
Total
assets |
|
$ |
279,127 |
|
|
$ |
246,825 |
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
Notes payable (including
unamortized discount of $2,641 and $2,896, respectively) |
|
$ |
140,469 |
|
|
$ |
140,214 |
|
Revolving credit facility |
|
|
5,000 |
|
|
|
- |
|
Payable for investments
purchased |
|
|
10,411 |
|
|
|
3,327 |
|
Interest payable |
|
|
37 |
|
|
|
32 |
|
Accrued incentive fees
payable |
|
|
1,466 |
|
|
|
1,431 |
|
Distributions payable |
|
|
- |
|
|
|
760 |
|
Due to affiliates |
|
|
1,560 |
|
|
|
1,195 |
|
Accrued expenses and other
liabilities |
|
|
1,389 |
|
|
|
1,127 |
|
Total
liabilities |
|
$ |
160,332 |
|
|
$ |
148,086 |
|
|
|
|
|
|
|
|
Commitments and
contingencies |
|
$ |
- |
|
|
$ |
- |
|
|
|
|
|
|
|
|
Net
Assets |
|
|
|
|
|
|
Common stock, par value $0.01
per share (100,000,000 shares authorized, 9,452,382 shares issued
and outstanding and 7,601,958 shares issued and outstanding,
respectively) |
|
$ |
94 |
|
|
$ |
76 |
|
Additional paid-in
capital |
|
|
307,599 |
|
|
|
283,795 |
|
Accumulated losses |
|
|
(188,898 |
) |
|
|
(185,132 |
) |
Total net
assets |
|
$ |
118,795 |
|
|
$ |
98,739 |
|
Total liabilities and
net assets |
|
$ |
279,127 |
|
|
$ |
246,825 |
|
Net asset value per
share |
|
$ |
12.57 |
|
|
$ |
12.99 |
|
|
GREAT ELM
CAPITAL CORP.CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)Dollar amounts in thousands (except per
share amounts) |
|
|
|
For the Three Months Ended March 31, |
|
|
|
2024 |
|
|
2023 |
|
Investment
Income: |
|
|
|
|
|
|
Interest income from: |
|
|
|
|
|
|
Non-affiliated, non-controlled investments |
|
$ |
5,987 |
|
|
$ |
5,476 |
|
Non-affiliated, non-controlled investments (PIK) |
|
|
630 |
|
|
|
449 |
|
Affiliated investments |
|
|
33 |
|
|
|
30 |
|
Controlled investments |
|
|
931 |
|
|
|
442 |
|
Controlled investments (PIK) |
|
|
- |
|
|
|
233 |
|
Total interest income |
|
|
7,581 |
|
|
|
6,630 |
|
Dividend income from: |
|
|
|
|
|
|
Non-affiliated, non-controlled investments |
|
|
386 |
|
|
|
318 |
|
Controlled investments |
|
|
385 |
|
|
|
616 |
|
Total dividend income |
|
|
771 |
|
|
|
934 |
|
Other commitment fees from
non-affiliated, non-controlled investments |
|
|
525 |
|
|
|
802 |
|
Other income from: |
|
|
|
|
|
|
Non-affiliated, non-controlled investments |
|
|
32 |
|
|
|
44 |
|
Total other income |
|
|
32 |
|
|
|
44 |
|
Total investment income |
|
$ |
8,909 |
|
|
$ |
8,410 |
|
|
|
|
|
|
|
|
Expenses: |
|
|
|
|
|
|
Management fees |
|
$ |
940 |
|
|
$ |
869 |
|
Incentive fees |
|
|
798 |
|
|
|
710 |
|
Administration fees |
|
|
385 |
|
|
|
295 |
|
Custody fees |
|
|
36 |
|
|
|
22 |
|
Directors’ fees |
|
|
54 |
|
|
|
52 |
|
Professional services |
|
|
388 |
|
|
|
536 |
|
Interest expense |
|
|
2,807 |
|
|
|
2,821 |
|
Other expenses |
|
|
303 |
|
|
|
238 |
|
Total expenses |
|
$ |
5,711 |
|
|
$ |
5,543 |
|
Net investment income before
taxes |
|
$ |
3,198 |
|
|
$ |
2,867 |
|
Excise tax |
|
$ |
5 |
|
|
$ |
28 |
|
Net investment income |
|
$ |
3,193 |
|
|
$ |
2,839 |
|
|
|
|
|
|
|
|
Net realized and
unrealized gains (losses): |
|
|
|
|
|
|
Net realized gain (loss) on
investment transactions from: |
|
|
|
|
|
|
Non-affiliated, non-controlled investments |
|
$ |
2,356 |
|
|
$ |
1,845 |
|
Total net realized gain
(loss) |
|
|
2,356 |
|
|
|
1,845 |
|
Net change in
unrealized appreciation (depreciation) on investment transactions
from: |
|
|
|
|
Non-affiliated, non-controlled investments |
|
|
(3,533 |
) |
|
|
2,781 |
|
Affiliated investments |
|
|
(850 |
) |
|
|
163 |
|
Controlled investments |
|
|
(1,624 |
) |
|
|
532 |
|
Total net change in unrealized
appreciation (depreciation) |
|
|
(6,007 |
) |
|
|
3,476 |
|
Net realized and unrealized
gains (losses) |
|
$ |
(3,651 |
) |
|
$ |
5,321 |
|
Net increase
(decrease) in net assets resulting from operations |
|
$ |
(458 |
) |
|
$ |
8,160 |
|
|
|
|
|
|
|
|
Net investment income per
share (basic and diluted): |
|
$ |
0.37 |
|
|
$ |
0.37 |
|
Earnings per share (basic and
diluted): |
|
$ |
(0.05 |
) |
|
$ |
1.07 |
|
Weighted average shares
outstanding (basic and diluted): |
|
|
8,659,344 |
|
|
|
7,601,958 |
|
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