Great Elm Capital Group, Inc. (NASDAQ: GEC, “Great Elm”)
announced its financial results for the fiscal quarter and year
ended June 30, 2020. Great Elm will host a conference call and
webcast on Friday, September 18, 2020 at 8:00 a.m. Eastern Time to
discuss its fiscal fourth quarter 2020 financial results. Please
see below for details.
BUSINESS OVERVIEW
Great Elm is a diversified, publicly-traded
holding company that seeks to build long-term shareholder value
across two verticals: Operating Companies and Investment
Management.
Select highlights from the fiscal fourth quarter
2020 include:
-
Operating Companies:
- DME’s
investments in people, process and technology have been critical in
adapting to uncertain business conditions caused by the COVID-19
pandemic. DME continues to operate and serve patients in all
markets
- Having completed
significant investments into the platform, DME management is
focused on continuing organic growth, driving improved margins, and
making add-on acquisitions
- During the
quarter ended June 30, 2020, physician referrals declined in
response to shelter-in-place orders. This resulted in new PAP
patient setups declining 23% year-over-year. Throughout the
quarter, both physician referrals and PAP setups improved over
their post-COVID lows, but have not yet reached pre-COVID
levels.
- For the three
months ended June 30, 2020, generated $13.9 million of revenue,
$2.8 million of net income and $7.0 million of adjusted EBITDA
-
Investment Management:
- For the three
months ended June 30, 2020, generated $0.8 million of revenue, net
income of ($0.0) million and $0.2 million of adjusted EBITDA
- Great Elm
Capital Corp. (“GECC”) managed by Great Elm Capital Management,
Inc. (“GECM”), announced a rights offering on August 31, 2020. If
completed, this would increase AUM, revenue, and earnings for our
Investment Management business
- Great Elm and
certain other shareholders of GECC (the “Participating
Shareholders”) have agreed to purchase up to $24 million of shares
in this offering through an exercise of their basic and
oversubscription rights; provided that any over-subscription by the
Participating Shareholders will be effected only after pro rata
allocation of over-subscription shares to record date holders
(other than the Participating Shareholders) who fully exercise all
rights issued to them
“We have significant momentum in both our DME
business and our Investment Management business,” remarked Peter A.
Reed, Great Elm’s Chief Executive Officer. “After a long period of
investment in the platform, DME is focused on driving organic
growth and making follow on acquisitions. GECC has had success in
its specialty finance investments, has an attractive pipeline of
potential future investments, and has announced a rights offering
in order to capitalize upon those opportunities.”
Alignment of Interest
The employees of Great Elm and GECM collectively
own approximately 2.0 million shares of GEC stock, representing
approximately 7% of its outstanding shares. Additionally, the
directors of Great Elm collectively own or manage approximately 20%
of Great Elm’s shares. Altogether, insiders collectively own or
manage approximately 27% of the company’s outstanding shares, which
Great Elm believes fosters a strong alignment of interest between
employees, directors and the company’s shareholders.
Operating Companies
In the three months ended June 30, 2020, DME
generated $2.8 million of net income and $7.0 million of adjusted
EBITDA, an increase from ($1.0) million of net income and $2.8
million of adjusted EBITDA during the same period in the prior
year. During the quarter, DME experienced significant growth in its
sales of PAP supplies, with more moderate growth in rental revenue
driven by lower new PAP patient setups. We continue to explore ways
to lower DME’s cost of capital and obtain additional funds for
potential future acquisitions.
Investment Management
In the three months ended June 30, 2020,
Investment Management generated ($0.0) million of net income and
$0.2 million of adjusted EBITDA1, an increase from ($0.1) million
of net income and $0.0 million of adjusted EBITDA during the same
period in the prior year. We remain focused on driving increased
revenue and earnings through higher AUM. 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.
FINANCIAL REVIEW: SEGMENT
FINANCIALS
As of June 30, 2020, Great Elm had four
operating segments: Durable Medical Equipment, Investment
Management, Real Estate and General Corporate.
Durable Medical Equipment
Three and Twelve Months Ended June 30,
2020:2
Revenue:
- During the three
and twelve months ended June 30, 2020, Great Elm recognized $13.9
million and $55.7 million in total revenue vs. $12.9 million and
$41.9 million during the same periods in the prior year.
Net Income (Loss):
- During the
three and twelve months ended June 30, 2020, Great Elm recognized
net income of $2.8 million and a net loss of $0.1 million vs. a net
loss of $1.0 million and $1.1 million during the same periods in
the prior year.
Adjusted EBITDA:
- During the
three and twelve months ended June 30, 2020, Great Elm recognized
$7.0 million and $16.0 million of adjusted EBITDA vs. $2.8 million
and $10.4 million during the same periods in the prior year.
1Prior 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 Customers2 Prior year
twelve-month period reflects a partial year from September 7, 2018
to June 30, 2019
Investment Management
Three and Twelve Months Ended June 30, 2020:
Revenue:
- During the
three and twelve months ended June 30, 2020, Great Elm recognized
total investment management revenue of $0.7 million and $3.3
million vs. $0.9 million and $3.8 million during the same periods
in the prior year.
Net Income (Loss):
- During the
three and twelve months ended June 30, 2020, Great Elm recognized
net income of ($0.0) million and $0.4 million vs. a net loss of
$0.1 million and $1.0 million during the same periods in the prior
year.
Adjusted
EBITDA1:
- During the
three and twelve months ended June 30, 2020, Great Elm recognized
adjusted EBITDA of $0.2 million and $1.2 million vs. $0.0 million
and $0.4 million during the same periods in the prior year.
Real Estate
Three and Twelve Months Ended June 30, 2020:
Revenue:
- During the
three and twelve months ended June 30, 2020, Great Elm recognized
$1.3 million and $5.1 million in rental revenue vs. $1.3 million
and $5.5 million during the same periods in the prior year.
Net Income (Loss):
- During the
three and twelve months ended June 30, 2020, Great Elm recognized
$0.03 million and $0.2 million in net income vs. $0.06 million and
$0.2 million in net income during the same periods in the prior
year.
Adjusted EBITDA:
- During the
three and twelve months ended June 30, 2020, Great Elm recognized
$1.1 million and $4.6 million in adjusted EBITDA vs. $1.2 million
and $4.6 million during the same periods in the prior year.
General Corporate
Three and Twelve Months Ended June 30, 2020:
Revenue:
- During the
three and twelve months ended June 30, 2020, Great Elm recognized
$0.05 million and $.16 million in revenue vs. approximately $0.06
million and $.12 million in revenue during the same periods in the
prior year.
Net Income (Loss):
- During the
three and twelve months ended June 30, 2020, Great Elm recognized
$1.3 million in net income and a net loss of $13.7 million vs.
$0.04 million in net income and a net loss of $1.2 million during
the same periods in the prior year. $2.9 million of the $1.3
million net income during the quarter derived from an unrealized
gain on our investment in GECC stock
Adjusted EBITDA:
- During the three
and twelve months ended June 30, 2020, Great Elm recognized ($1.2)
million and ($6.0) million in adjusted EBITDA vs. ($1.6) million
and ($6.1) million during the same periods in the prior year.
Conference Call &
Webcast
Great Elm will host a conference call and
webcast on Friday, September 18, 2020 at 8:00 a.m. Eastern Time to
discuss its fiscal fourth quarter 2020 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 2416529 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/2395114/5E5DD7BDBB644C6852EF57E7C8AA0EE5
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
expected growth, profitability 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. Among the key factors that could cause actual results to
differ materially from those projected in the forward-looking
statements are risks associated with the economic impact of the
COVID-19 pandemic on Great Elm’s businesses, including DME as well
as GECC and its portfolio investments. 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 June 30, 2020 |
$ in
thousands |
|
Durable Medical Equipment
(1) |
|
Investment Management (2) |
|
Real Estate |
|
General Corporate |
|
Consolidated |
EBITDA: |
|
|
|
|
|
|
|
|
|
|
Net
income (loss) - GAAP |
|
$ |
2,787 |
|
|
$ |
(15 |
) |
|
$ |
33 |
|
$ |
1,291 |
|
|
$ |
4,096 |
|
Interest
expense |
|
|
816 |
|
|
|
35 |
|
|
|
652 |
|
|
609 |
|
|
|
2,112 |
|
Depreciation
& Amortization |
|
|
2,800 |
|
|
|
127 |
|
|
|
430 |
|
|
1 |
|
|
|
3,358 |
|
Tax
expense |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
49 |
|
|
|
49 |
|
EBITDA |
|
$ |
6,403 |
|
|
$ |
147 |
|
|
$ |
1,115 |
|
$ |
1,950 |
|
|
$ |
9,615 |
|
Adjusted EBITDA |
|
|
|
|
|
|
|
|
|
|
Stock based
compensation |
|
|
- |
|
|
|
67 |
|
|
|
- |
|
|
246 |
|
|
|
313 |
|
GECC
dividend income |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
(500 |
) |
|
|
(500 |
) |
GECC
Unrealized (gains) / losses |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
(2,919 |
) |
|
|
(2,919 |
) |
Other
(income) expense |
|
|
(2 |
) |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
(2 |
) |
Transaction
and integration costs (3) |
|
|
417 |
|
|
|
- |
|
|
|
- |
|
|
36 |
|
|
|
453 |
|
Severance |
|
|
53 |
|
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
53 |
|
Location
start up expense |
|
|
9 |
|
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
9 |
|
DME
management and monitoring fees |
|
|
70 |
|
|
|
- |
|
|
|
- |
|
|
(45 |
) |
|
|
25 |
|
Adjusted EBITDA |
|
$ |
6,950 |
|
|
$ |
214 |
|
|
$ |
1,115 |
|
$ |
(1,232 |
) |
|
$ |
7,047 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the year ended June 30, 2020 |
$ in
thousands |
|
Durable Medical Equipment
(1) |
|
Investment Management (2) |
|
Real Estate |
|
General Corporate |
|
Consolidated |
EBITDA: |
|
|
|
|
|
|
|
|
|
|
Net
income (loss) - GAAP |
|
$ |
(106 |
) |
|
$ |
435 |
|
|
$ |
219 |
|
$ |
(13,675 |
) |
|
$ |
(13,127 |
) |
Interest
expense |
|
|
3,655 |
|
|
|
157 |
|
|
|
2,619 |
|
|
764 |
|
|
|
7,195 |
|
Depreciation
& Amortization |
|
|
10,145 |
|
|
|
636 |
|
|
|
1,722 |
|
|
1 |
|
|
|
12,504 |
|
Tax
expense |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
44 |
|
|
|
44 |
|
EBITDA |
|
$ |
13,694 |
|
|
$ |
1,228 |
|
|
$ |
4,560 |
|
$ |
(12,866 |
) |
|
$ |
6,616 |
|
Adjusted EBITDA |
|
|
|
|
|
|
|
|
|
|
Stock based
compensation |
|
|
- |
|
|
|
(33 |
) |
|
|
- |
|
|
580 |
|
|
|
547 |
|
Change in
contingent consideration (3) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
(1,135 |
) |
|
|
(1,135 |
) |
GECC
dividend income |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
(2,067 |
) |
|
|
(2,067 |
) |
GECC
Unrealized (gains) / losses |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
8,684 |
|
|
|
8,684 |
|
Other
(income) expense |
|
|
(5 |
) |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
(5 |
) |
Transaction
and integration costs (3) |
|
|
1,693 |
|
|
|
- |
|
|
|
- |
|
|
962 |
|
|
|
2,655 |
|
Severance |
|
|
53 |
|
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
53 |
|
Location
start up expense |
|
|
329 |
|
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
329 |
|
DME
management and monitoring fees |
|
|
259 |
|
|
|
- |
|
|
|
- |
|
|
(159 |
) |
|
|
100 |
|
Adjusted EBITDA |
|
$ |
16,023 |
|
|
$ |
1,195 |
|
|
$ |
4,560 |
|
$ |
(6,002 |
) |
|
$ |
15,777 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended June 30, 2019 |
$ in
thousands |
|
Durable Medical Equipment
(1) |
|
InvestmentManagement (2) |
|
Real Estate |
|
GeneralCorporate |
|
Consolidated |
EBITDA: |
|
|
|
|
|
|
|
|
|
|
Net
income (loss) - GAAP |
|
$ |
(1,016 |
) |
|
$ |
(136 |
) |
|
$ |
64 |
|
$ |
41 |
|
|
$ |
(1,047 |
) |
Net
income from discontinued operations - GAAP |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
50 |
|
|
|
50 |
|
Interest
expense |
|
|
1,050 |
|
|
|
45 |
|
|
|
660 |
|
|
- |
|
|
|
1,755 |
|
Depreciation
& Amortization |
|
|
2,033 |
|
|
|
178 |
|
|
|
431 |
|
|
- |
|
|
|
2,640 |
|
Tax
expense |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
(953 |
) |
|
|
(953 |
) |
EBITDA |
|
$ |
2,067 |
|
|
$ |
87 |
|
|
$ |
1,155 |
|
$ |
(862 |
) |
|
$ |
2,447 |
|
Adjusted EBITDA |
|
|
|
|
|
|
|
|
|
|
Stock based
compensation |
|
|
- |
|
|
|
(80 |
) |
|
|
- |
|
|
114 |
|
|
|
34 |
|
GECC
dividend income |
|
|
(88 |
) |
|
|
- |
|
|
|
- |
|
|
(402 |
) |
|
|
(490 |
) |
GECC
Unrealized (gains) / losses |
|
|
(116 |
) |
|
|
- |
|
|
|
- |
|
|
(749 |
) |
|
|
(865 |
) |
Transaction
and integration costs (3) |
|
|
218 |
|
|
|
- |
|
|
|
- |
|
|
401 |
|
|
|
619 |
|
Severance |
|
|
8 |
|
|
|
- |
|
|
|
- |
|
|
3 |
|
|
|
11 |
|
Location
start up expense |
|
|
103 |
|
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
103 |
|
Changes in
revenue reserve estimates related to system conversions (4) |
|
|
231 |
|
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
231 |
|
Equipment
sold outside of predominant use (4) |
|
|
354 |
|
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
354 |
|
Finalization
of purchase accounting valuations (4) |
|
|
(43 |
) |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
(43 |
) |
DME
management and monitoring fees |
|
|
94 |
|
|
|
- |
|
|
|
- |
|
|
(69 |
) |
|
|
25 |
|
Adjusted EBITDA |
|
$ |
2,828 |
|
|
$ |
7 |
|
|
$ |
1,155 |
|
$ |
(1,564 |
) |
|
$ |
2,426 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the year ended June 30, 2019 |
(Dollar
amounts in thousands) |
|
Durable Medical Equipment
(1) |
|
Investment Management (2) |
|
Real Estate |
|
General Corporate |
|
Consolidated |
EBITDA: |
|
|
|
|
|
|
|
|
|
|
Net
income (loss) - GAAP |
|
$ |
(1,107 |
) |
|
$ |
(995 |
) |
|
$ |
191 |
|
$ |
(1,221 |
) |
|
$ |
(3,132 |
) |
Net
income from discontinued operations - GAAP |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
(3,736 |
) |
|
|
(3,736 |
) |
Interest
expense |
|
|
3,415 |
|
|
|
180 |
|
|
|
2,655 |
|
|
- |
|
|
|
6,250 |
|
Depreciation
& Amortization |
|
|
6,873 |
|
|
|
631 |
|
|
|
1,729 |
|
|
- |
|
|
|
9,233 |
|
Tax
expense |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
(2,182 |
) |
|
|
(2,182 |
) |
EBITDA |
|
$ |
9,181 |
|
|
$ |
(184 |
) |
|
$ |
4,575 |
|
$ |
(7,139 |
) |
|
$ |
6,433 |
|
Adjusted EBITDA: |
|
|
|
|
|
|
|
|
|
|
Stock based
compensation |
|
|
- |
|
|
|
521 |
|
|
|
- |
|
|
457 |
|
|
|
978 |
|
Change in
contingent consideration (3) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
469 |
|
|
|
469 |
|
Dividend
income from GECC |
|
|
(717 |
) |
|
|
- |
|
|
|
- |
|
|
(1,714 |
) |
|
|
(2,431 |
) |
Unrealized
(gain) loss on investment in GECC |
|
|
894 |
|
|
|
- |
|
|
|
- |
|
|
168 |
|
|
|
1,062 |
|
Severance
costs |
|
|
8 |
|
|
|
46 |
|
|
|
- |
|
|
209 |
|
|
|
263 |
|
Location
start up expense |
|
|
161 |
|
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
161 |
|
DME
management and monitoring fees |
|
|
217 |
|
|
|
- |
|
|
|
- |
|
|
(134 |
) |
|
|
83 |
|
Finalization
of purchase accounting valuations (4) |
|
|
(143 |
) |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
(143 |
) |
Transaction
and integration costs (3) |
|
|
769 |
|
|
|
- |
|
|
|
- |
|
|
1,582 |
|
|
|
2,351 |
|
Adjusted EBITDA |
|
$ |
10,370 |
|
|
$ |
383 |
|
|
$ |
4,575 |
|
$ |
(6,102 |
) |
|
$ |
9,226 |
|
|
|
|
|
|
|
|
|
|
|
|
(1): Our durable medical equipment business
began in September 2018. Prior year figures represent
activity for the period September 1, 2018 through June 30, 2019,
where applicable.
(2): 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.
(3): 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.
(4): Represents approximately $0.5 million of
aggregate adjustments which negatively impact adjusted EBITDA by
the same amount for the period beginning with the acquisition of
DME on September 7, 2018 and ending March 31, 2019. There is no
material impact on the US GAAP numbers reported for this
period.
Media & Investor
Contact:Investor Relations+1 (617)
375-3006investorrelations@greatelmcap.com
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