Chronicle Journal: Finance

Great Elm Capital Corp. Announces Second Quarter 2021 Financial Results

WALTHAM, Mass., Aug. 03, 2021 (GLOBE NEWSWIRE) -- Great Elm Capital Corp. (“we,” “us,” “our,” or “GECC,”) (NASDAQ: GECC), a business development company, today announced its financial results for the second quarter and six months ended June 30, 2021.

Financial and Operating Highlights

  • Net investment income (“NII”) for the quarter was $2.1 million, as compared to NII of $1.5 million for the quarter ended March 31, 2021, and $0.9 million for the quarter ended June 30, 2020. NII increased quarter-over-quarter due to accelerated deployment of capital during the prior quarter.
  • NII per share was $0.09 based on weighted average shares outstanding of 23,508,232 for the quarter ended June 30, 2021, as compared to NII per share of $0.06, based on weighted average shares outstanding of 23,401,837, for the quarter ended March 31, 2021.
  • As of June 30, 2021, GECC’s asset coverage ratio was approximately 166.2%, compared to 177.1% as of March 31, 2021, and 144.5% as of June 30, 2020.
  • Net assets grew slightly to approximately $91.7 million on June 30, 2021, as compared to $91.5 million on March 31, 2021, and $79.6 million on December 31, 2020.
  • NAV per share improved to $3.90 as of June 30, 2021, from $3.89 as of March 31, 2021 and $3.46 at December 31, 2020.
  • Paid a quarterly dividend of $0.10 per share for the second quarter of 2021, consistent with the quarterly dividend paid for the first quarter of 2021.
  • Closed a $25.0 million senior secured revolving line of credit with City National Bank. Borrowings under the revolving line bear interest at the applicable LIBOR rate plus 3.50% with a 1.00% floor. The line of credit was undrawn as of June 30, 2021.
  • Further diversified capital structure and enhanced liquidity by issuing $50.0 million of notes in June 2021, and an additional $7.5 million in July 2021 with the full exercise of the underwriters’ overallotment option, that bear interest at a rate of 5.875% per year (due June 2026).
  • Redeemed its 6.50% Notes due 2022 subsequent to quarter end on July 23, 2021.

Management Commentary
Peter A. Reed, GECC’s Chief Executive Officer, stated, “We are pleased with our operating results for the second quarter, which was highlighted by growth in NII as a result of a differentiated investment strategy focused on specialty finance investments. We continue to actively pursue investment opportunities in this space. We deployed $49.9 million into new investments at a favorable yield, and grew our total investments to $209.4 million at fair value. We are continuing to benefit from an efficient, low-cost operating structure, and further grew our capital base at a lower cost through the signing of a $25 million senior revolving line of credit as well as issuing $57.5 million in senior notes which provided an incremental $24 million of liquidity following the redemption of the 2022 Notes.”

Financial Highlights – Per Share Data(1)

 Q2/20201Q3/20201Q4/20201Q1/20211Q2/20211
Earnings Per Share (“EPS”)$0.34$0.72 ($0.43)$0.53 $0.11 
Net Investment Income (“NII”) Per Share$0.09$0.18 $0.07 $0.06 $0.09 
Net Realized Gains / (Losses) Per Share$0.09($0.02)$0.03 ($0.14)($0.10)
Net Unrealized Gains / (Losses) Per Share$0.16$0.56 ($0.54)$0.61 $0.12 
Net Asset Value Per Share at Period End$5.10$5.53 $3.46 $3.89 $3.90 
Distributions Paid / Declared Per Share$0.249$0.249 $0.249 $0.10 $0.10 

Portfolio and Investment Activity

As of June 30, 2021, GECC held total investments of $209.4 million at fair value, as follows:

  • 42 debt investments, totaling approximately $155.7 million and representing 74.4% of the fair market value of our total investments. Secured debt investments comprised a substantial majority of the fair market value of our debt investments.
  • 3 income generating equity investments, totaling approximately $25.4 million, representing 12.1% of the fair market value of our total investments.
  • 8 other equity investments, totaling approximately $18.7 million and representing 8.9% of the fair market value of our total investments.
  • Special Purpose Acquisition Company (SPAC) instruments totaling approximately $9.7 million, which consist of SPAC units, common stock, and warrants, representing approximately 4.6% of total investments.

As of June 30, 2021, the weighted average current yield on our debt portfolio was 11.1%. Floating rate instruments comprised approximately 43.6% of the fair market value of debt investments.

During the quarter ended June 30, 2021, we deployed approximately $49.9 million into 25 investments(2) excluding SPACs, at a weighted average current yield of 9.29%. The weighted average price of our new debt investments was 98% of par.

During the quarter ended June 30, 2021, we monetized, in part or in full, 18 investments for approximately $35.1 million(3) excluding SPACs, at a weighted average current yield of 8.0%. The weighted average realized price was 100% of par. We also monetized $0.4 million of SPAC securities during the period.

Financial Review
Total investment income for the quarter ended June 30, 2021 was approximately $6.2 million, or $0.27 per share. Total expenses for the quarter ended June 30, 2021 were approximately $4.1 million, or $0.18 per share.

Net realized losses for the quarter ended June 30, 2021 were approximately $2.4 million, or $0.10 per share. Net unrealized appreciation from investments for the quarter ended June 30, 2021 was approximately $2.8 million, or $0.12 per share.

Liquidity and Capital Resources
As of June 30, 2021, our unrestricted cash balance was approximately $29.1 million, comprised of $59.8 million of gross cash less $30.7 million reserved for the July 23rd redemption of our unsecured notes due 2022, and is exclusive of holdings of United States Treasury Bills.

Total debt outstanding (par value) as of June 30, 2021 was $138.4 million, comprised of our 6.50% senior notes due June 2024 (NASDAQ: GECCN), our 6.75% senior notes due January 2025 (NASDAQ: GECCM), and our 5.875% senior notes due June 2026 (NASDAQ: GECCO). Total debt outstanding excludes the Company’s 6.50% senior notes due 2022 (NASDAQ: GECCL), which were called prior to quarter end and subsequently redeemed at 100% of their principal amount, plus accrued and unpaid interest through the redemption date on July 23, 2021.

Distributions
We also announced this morning that our board of directors authorized a $0.10 per share cash distribution for the quarter ending December 31, 2021. The record and payment dates for the distribution are expected to be set by GECC in the third quarter pursuant to authority granted by its board of directors.

Conference Call and Webcast
GECC will discuss these results in a conference call later this morning (Tuesday, August 3, 2021) at 11:00 a.m. ET.

Conference Call Details
Date/Time:Tuesday, August 3, 2021 – 11:00 a.m. ET
  
Participant Dial-In Numbers: 
(United States):844-820-8297
(International):661-378-9758

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: Great Elm Capital Corp (GECC) Q2 2021 Conference Call Webcast.

About Great Elm Capital Corp.
Great Elm Capital Corp. is an externally managed, specialty finance 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. GECC elected to be regulated as a business development company under the Investment Company Act of 1940, as amended.

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.
(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 Relations
+1 (617) 375-3006
investorrelations@greatelmcap.com

Adam Prior
The Equity Group Inc.
+1 (212) 836-9606
aprior@equityny.com


GREAT ELM CAPITAL CORP.
CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES (unaudited)
Dollar amounts in thousands (except per share amounts)

  June 30, 2021 December 31, 2020
Assets    
Investments    
Non-affiliated, non-controlled investments, at fair value (amortized cost of $167,643 and
  $147,494, respectively)
 $154,225  $112,116 
Non-affiliated, non-controlled short-term investments, at fair value (amortized cost of
  $119,987 and $74,997, respectively)
  119,984   74,998 
Affiliated investments, at fair value (amortized cost of $126,638 and $109,840, respectively)  39,833   29,289 
Controlled investments, at fair value (amortized cost of $11,394 and $7,630, respectively)  15,375   10,243 
Total investments  329,417   226,646 
     
Cash and cash equivalents  59,761   52,582 
Restricted cash  -   600 
Receivable for investments sold  3,907   - 
Interest receivable  2,985   2,423 
Dividends receivable  640   - 
Due from portfolio company  723   837 
Deferred financing costs  324   - 
Prepaid expenses and other assets  33   240 
Total assets $397,790  $283,328 
     
Liabilities    
Notes payable 6.50% due September 18, 2022 (including unamortized discount
  of $354 and $494, respectively)
 $29,939  $29,799 
Notes payable 6.75% due January 31, 2025 (including unamortized discount
  of $916 and $1,042, respectively)
  44,694   44,568 
Notes payable 6.50% due June 30, 2024 (including unamortized discount
  of $1,312 and $1,529, respectively)
  41,511   41,294 
Notes payable 5.875% due June 30, 2026 (including unamortized discount
  of $1,646)
  48,354   - 
Payable for investments purchased  130,374   75,511 
Interest payable  415   328 
Distributions payable  -   1,911 
Accrued incentive fees payable  9,682   9,176 
Due to affiliates  905   764 
Accrued expenses and other liabilities  249   362 
Total liabilities $306,123  $203,713 
     
Commitments and contingencies  $-  $- 
     
Net Assets    
Common stock, par value $0.01 per share (100,000,000 shares authorized, 23,508,232 shares
  issued and outstanding and 23,029,453 shares issued and outstanding, respectively)
 $235  $230 
Additional paid-in capital  232,219   230,504 
Accumulated losses  (140,787)  (151,119)
Total net assets $91,667  $79,615 
Total liabilities and net assets $397,790  $283,328 
Net asset value per share $3.90  $3.46 


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, 
  2021  2020  2021  2020 
Investment Income:                
Interest income from:                
Non-affiliated, non-controlled investments $2,983  $2,616  $5,425  $7,082 
Non-affiliated, non-controlled investments (PIK)  68   -   98   - 
Affiliated investments  324   243   584   470 
Affiliated investments (PIK)  1,568   1,297   3,007   2,521 
Controlled investments  149   28   157   98 
Total interest income  5,092   4,184   9,271   10,171 
Dividend income from:                
Non-affiliated, non-controlled investments  453   -   934   3 
Controlled investments  640   480   960   880 
Total dividend income  1,093   480   1,894   883 
Other income from:                
Non-affiliated, non-controlled investments  48   26   81   56 
Affiliated investments (PIK)  -   75   282   75 
Controlled investments  -   3   -   12 
Total other income  48   104   363   143 
Total investment income $6,233  $4,768  $11,528  $11,197 
                 
Expenses:                
Management fees $765  $591  $1,425  $1,289 
Incentive fees  398   228   506   328 
Administration fees  180   191   336   395 
Custody fees  13   19   26   39 
Directors’ fees  56   51   111   102 
Professional services  251   250   676   507 
Interest expense  2,291   2,390   4,489   4,695 
Other expenses  176   132   352   274 
Total expenses $4,130  $3,852  $7,921  $7,629 
Net investment income $2,103  $916  $3,607  $3,568 
                 
Net realized and unrealized gains (losses):         
Net realized gain (loss) on investment transactions from:                
Non-affiliated, non-controlled investments $1,683  $(42) $(1,732) $(11,498)
Affiliated investments  (4,052)  -   (4,052)  - 
Controlled investments  -   -   140   - 
Realized gain on repurchase of debt  -   974   -   1,117 
Total net realized gain (loss)  (2,369)  932   (5,644)  (10,381)
Net change in unrealized appreciation (depreciation) on investment transactions from:     
Non-affiliated, non-controlled investments  7,706   2,472   17,196   (17,243)
Affiliated investments  (5,777)  (1,030)  (1,494)  (6,115)
Controlled investments  824   221   1,368   144 
Total net change in unrealized appreciation (depreciation)  2,753   1,663   17,070   (23,214)
Net realized and unrealized gains (losses) $384  $2,595  $11,426  $(33,595)
Net increase (decrease) in net assets resulting from operations $2,487  $3,511  $15,033  $(30,027)
                 
Net investment income per share (basic and diluted): $0.09  $0.09  $0.15  $0.35 
Earnings per share (basic and diluted): $0.11  $0.34  $0.64  $(2.96)
Weighted average shares outstanding (basic and diluted):  23,508,232   10,195,857   23,455,328   10,129,269 

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