Great Elm Capital Group, Inc. (NASDAQ: GEC, “Great Elm”) announced
its financial results for the quarter ended September 30, 2020.
Great Elm will host a conference call and webcast on Monday,
November 16, 2020 at 8:00 a.m. Eastern Time to discuss its first
fiscal quarter 2021 financial results. Please see below for
details.
Select highlights from the first quarter 2021
include:
▪ For the three
months ended September 30, 2020, $14.6 million of revenue, $0.5
million of net loss and $2.8 million of adjusted
EBITDA▪ Having completed significant investments into the
platform, DME management is focused on continuing organic growth,
driving improved margins, and making add-on acquisitions▪ New
PAP patient setups declined 24.7% year over year but increased
sequentially 2.8% as the business recovers from the effects of the
COVID-19 pandemic
▪ For the three
months ended September 30, 2020, $0.8 million of revenue, net loss
of $0.1 million and $0.2 million of adjusted EBITDA▪ Great Elm
Capital Corp. (“GECC”), managed by our wholly owned subsidiary,
Great Elm Capital Management, Inc. (“GECM”), raised gross proceeds
of $31.7 million through the completion of a rights
offering.▪ GEC purchased approximately 3.0 million shares in
the offering for $8.8 million
"We made significant progress toward the
achievement of our strategic goals for both our DME and Investment
Management businesses during the quarter, " remarked Peter A. Reed,
Great Elm's Chief Executive Officer. "DME added key management
talent, continued to improve operationally and is
actively pursuing attractive add-on acquisition opportunities.
For Investment Management, not only will the successful
rights offering at GECC enable the pursuit of attractive
acquisitions in the specialty finance sector, it enhances GECM's
revenue, earnings and cash flow potential which ultimately benefits
our shareholders."
Alignment of Interest
The employees and directors of Great Elm and
GECM collectively own or manage 7.1 million shares or approximately
27% of Great Elm’s outstanding shares.
FINANCIAL REVIEW: SEGMENT
FINANCIALS
As of September 30, 2020, Great Elm had four
operating segments: Durable Medical Equipment, Investment
Management, Real Estate and General Corporate.
Durable Medical Equipment
Three Months Ended September 30, 2020:
Revenue:
- During the three months ended
September 30, 2020, Great Elm recognized $14.6 million in total
revenue vs. $13.2 during the same period in the prior year.
Net Income (Loss):
- During the three months ended September 30, 2020, Great Elm
recognized a net loss of $0.5 million vs. $0.8 million of net loss
during the same period in the prior year.
Adjusted EBITDA:
- During the three months ended
September 30, 2020, Great Elm recognized $2.8 million in adjusted
EBITDA vs. $3.0 million during the same period in the prior
year.
Commentary:
- During the quarter, PAP supply
sales remained strong while rental revenues continued to be
negatively impacted by suppressed referral pipelines for new
equipment set-ups during the pandemic. We remain intently
focused on exploring ways to lower DME’s cost of capital and
obtaining additional funds for potential future acquisitions.
Investment Management
Three Months Ended September 30, 2020:
Revenue:
- During the three months ended September 30, 2020, Great Elm
recognized total investment management revenue of $0.8 million vs.
$0.9 million during the same period in the prior year.
Net Income (Loss):
- During the three months ended September 30, 2020, Great Elm
recognized a net loss of $0.11 million vs. a net loss of $0.05
million during the same period in the prior year.
Adjusted EBITDA:
- During the three months ended September 30, 2020, Great Elm
recognized adjusted EBITDA of $0.2 million vs. $0.4 million during
the same period in the prior year.
Commentary:
- During the quarter, GECC benefitted
from strong performance of its specialty finance investments, the
redeployment of funds into attractive risk-adjusted opportunities
and the rebounding of the valuations of certain of its investments
following COVID related volatility in the prior quarter.
Great Elm intends to continue to focus on attractive acquisition
opportunities in the specialty finance sector going forward.
Real Estate
Three Months Ended September 30, 2020:
Revenue:
- During the three months ended September 30, 2020, Great Elm
recognized $1.3 million in rental revenue vs. $1.3 million during
the same period in the prior year.
Net Income (Loss):
- During the three months ended September 30, 2020, Great Elm
recognized $0.1 million in net income vs. $0.1 million in net
income during the same period in the prior year.
Adjusted EBITDA:
- During the three months ended September 30, 2020, Great Elm
recognized $1.1 million in adjusted EBITDA vs. $1.1 million during
the same period in the prior year.
Commentary
- Great Elm continues to manage the Fort Myers investment to
monetize significant net operating loss carryforwards.
General Corporate
Three Months Ended September 30, 2020:
Revenue:
- During the three months ended
September 30, 2020, Great Elm recognized $0.09 million in revenue
vs. $0.02 million in revenue during the same period in the prior
year.
Net Income (Loss):
- During the three months ended September 30, 2020, Great Elm
recognized $3.4 million in net loss vs. net loss of $2.5 million
during the same period in the prior year.
Adjusted EBITDA:
- During the three months ended
September 30, 2020, Great Elm recognized $(1.1) million in adjusted
EBITDA vs. $(1.7) million during the same period in the prior
year.
Commentary:
- During the quarter, Great Elm made
significant progress on reducing its corporate overhead, driven
largely by a reduction in audit cost. Great Elm intends to
continue to focus on reducing its corporate overhead going
forward.
Conference Call &
Webcast
Great Elm will host a conference call and
webcast on Monday, November 16, 2020 at 8:00 a.m. Eastern Time to
discuss its first quarter 2021 financial results.
All interested parties are invited to
participate in the conference call by dialing +1 (844) 559-0750;
international callers should dial +1 (647)
689-5386. Participants should enter the Conference
ID 4790827 when asked. For a copy of the slide presentation that
will be referenced during the course of our conference call, please
visit:
https://www.greatelmcap.com/events-and-presentations/default.aspx.
The conference call will be webcast
simultaneously at:
https://event.on24.com/wcc/r/2625162/1D4EAD6DA2778005450B2AF1E04864A3
[event.on24.com]
About Great Elm Capital Group,
Inc.
Great Elm is a publicly-traded holding company
that seeks to build a business across two operating verticals:
Operating Companies and Investment Management. Great Elm’s website
can be found at www.greatelmcap.com.
Safe Harbor Statement under the Private
Securities Litigation Reform Act of 1995
Statements in this press release that are
“forward-looking” statements, including statements regarding
revenue, adjusted EBITDA, expected growth, profitability, free cash
flow and outlook involve risks and uncertainties that may
individually or collectively impact the matters described herein.
Investors are cautioned not to place undue reliance on any such
forward-looking statements, which speak only as of the date they
are made and represent Great Elm’s assumptions and expectations in
light of currently available information. These statements
involve risks, variables and uncertainties, and Great Elm’s actual
performance results may differ from those projected, and any such
differences may be material. For information on certain factors
that could cause actual events or results to differ materially from
Great Elm’s expectations, please see Great Elm’s filings with the
SEC, including its most recent annual report on Form 10-K and
subsequent reports on Forms 10-Q and 8-K. Additional information
relating to Great Elm’s financial position and results of
operations is also contained in Great Elm’s annual and quarterly
reports filed with the SEC and available for download at its
website www.greatelmcap.com or at the SEC website www.sec.gov.
Non-GAAP Financial Measures
The SEC has adopted rules to regulate the use in
filings with the SEC, and in public disclosures, of financial
measures that are not in accordance with US GAAP, such as adjusted
earnings before interest, taxes, depreciation and amortization
(“Adjusted EBITDA”). Adjusted EBITDA is derived from methodologies
other than in accordance with US GAAP. Great Elm believes that
Adjusted EBITDA is an important measure for investors to use in
evaluating Great Elm’s businesses. In addition, Great Elm’s
management reviews Adjusted EBITDA as they evaluate acquisition
opportunities.
Adjusted EBITDA has limitations as an analytical
tool, and you should not consider it either in isolation from, or
as a substitute for, analyzing Great Elm’s results as reported
under US GAAP. Non-GAAP financial measures reported by Great Elm
may not be comparable to similarly titled amounts reported by other
companies.
Set forth below is a reconciliation of Adjusted
EBITDA to the most directly comparable US GAAP financial measure,
net income. The information in the table below represents Great
Elm’s assumptions and expectations in light of currently available
information. Great Elm’s actual performance results may differ from
those projected in in the table below, and any such differences may
be material.
|
|
For the three months ended September 30,
2020 |
$ in thousands |
|
DME |
|
|
Investment Management |
|
|
Real Estate |
|
|
General Corporate |
|
|
Consolidated |
|
EBITDA: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) - GAAP |
|
$ |
(458 |
) |
|
$ |
(107 |
) |
|
$ |
67 |
|
|
$ |
(3,365 |
) |
|
$ |
(3,863 |
) |
Interest expense |
|
709 |
|
|
26 |
|
|
650 |
|
|
572 |
|
|
1,957 |
|
Depreciation &
Amortization |
|
2,211 |
|
|
128 |
|
|
430 |
|
|
- |
|
|
2,769 |
|
Tax expense |
|
- |
|
|
- |
|
|
- |
|
|
99 |
|
|
99 |
|
EBITDA |
|
$ |
2,462 |
|
|
$ |
47 |
|
|
$ |
1,147 |
|
|
$ |
(2,694 |
) |
|
$ |
962 |
|
Adjusted EBITDA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock based compensation |
|
- |
|
|
194 |
|
|
- |
|
|
235 |
|
|
429 |
|
GECC dividend income |
|
- |
|
|
- |
|
|
- |
|
|
(524 |
) |
|
(524 |
) |
GECC Unrealized (gains) /
losses |
|
- |
|
|
- |
|
|
- |
|
|
1,902 |
|
|
1,902 |
|
Other (income) expense |
|
3 |
|
|
- |
|
|
- |
|
|
(1 |
) |
|
2 |
|
Transaction and integration
costs 2 |
|
112 |
|
|
- |
|
|
- |
|
|
33 |
|
|
145 |
|
Severance |
|
27 |
|
|
- |
|
|
- |
|
|
- |
|
|
27 |
|
Location start up expense |
|
54 |
|
|
- |
|
|
- |
|
|
- |
|
|
54 |
|
DME management and monitoring
fees |
|
116 |
|
|
- |
|
|
- |
|
|
(91 |
) |
|
25 |
|
Adjusted
EBITDA |
|
$ |
2,774 |
|
|
$ |
241 |
|
|
$ |
1,147 |
|
|
$ |
(1,140 |
) |
|
$ |
3,022 |
|
|
|
For the three months ended September 30,
2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ in thousands |
|
DME |
|
|
Investment Management 1 |
|
|
Real Estate |
|
|
General Corporate |
|
|
Consolidated |
|
EBITDA: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) - GAAP |
|
$ |
(819 |
) |
|
$ |
(45 |
) |
|
$ |
60 |
|
|
$ |
(2,474 |
) |
|
$ |
(3,278 |
) |
Interest expense |
|
996 |
|
|
42 |
|
|
658 |
|
|
- |
|
|
1,696 |
|
Depreciation &
Amortization |
|
2,508 |
|
|
179 |
|
|
431 |
|
|
- |
|
|
3,118 |
|
Tax expense |
|
- |
|
|
- |
|
|
- |
|
|
242 |
|
|
242 |
|
EBITDA |
|
$ |
2,685 |
|
|
$ |
176 |
|
|
$ |
1,149 |
|
|
$ |
(2,232 |
) |
|
$ |
1,778 |
|
Adjusted EBITDA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock based compensation |
|
- |
|
|
175 |
|
|
- |
|
|
118 |
|
|
293 |
|
Change in contingent
consideration 2 |
|
- |
|
|
- |
|
|
- |
|
|
(195 |
) |
|
(195 |
) |
Dividend income from GECC |
|
- |
|
|
- |
|
|
- |
|
|
(490 |
) |
|
(490 |
) |
GECC Unrealized (gains) /
losses |
|
- |
|
|
- |
|
|
- |
|
|
983 |
|
|
983 |
|
Other (income) expense |
|
(3 |
) |
|
- |
|
|
- |
|
|
- |
|
|
(3 |
) |
Transaction and integration
costs 2 |
|
148 |
|
|
- |
|
|
- |
|
|
120 |
|
|
268 |
|
Severance |
|
2 |
|
|
- |
|
|
- |
|
|
- |
|
|
2 |
|
Location start up expense |
|
135 |
|
|
- |
|
|
- |
|
|
- |
|
|
135 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DME management and monitoring
fees |
|
48 |
|
|
- |
|
|
- |
|
|
(23 |
) |
|
25 |
|
Adjusted
EBITDA |
|
$ |
3,015 |
|
|
$ |
351 |
|
|
$ |
1,149 |
|
|
$ |
(1,719 |
) |
|
$ |
2,796 |
|
(1) |
|
Prior year non-GAAP adjustments have been updated to conform to
current year presentation by removing adjustments associated with
the adoption of ASC 606 Contracts with Customers. |
|
|
|
(2) |
|
Transaction and integration related costs include costs to acquire
and integrate acquired businesses. This also represents
change in contingent consideration liability since the initial
valuation at the acquisition date. |
|
|
|
Media & Investor
Contact:
Investor Relations+1 (617)
375-3006investorrelations@greatelmcap.com
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