Q4 2020 Great Elm Capital Group Inc Earnings Call

They buy and welcome Craig.

Okay fiscal fourth quarter and full year 2020, <unk> earnings conference call.

At this time all participants are in a lesser only mode. After the speakers presentation, there will be a question and answer session.

A question during this time simply press star and the number one on your telephone keypad. If you require any further assistance. Please press star zero.

I like to turn the call over to Mr. Adam. Please go ahead.

Thank you Michelle and good morning, everyone.

Thank you for joining us for great on capital group's fiscal fourth quarter and full year 2020 earnings conference call.

As a reminder, this webcast is being recorded on Friday September 18 2020.

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The slide presentation accompanying this morning's conference call and webcast can be found on great capital goods website, www dot great on cap dotcom under events and presentations.

A link to the webcast is also available on our website as well as in the press release that was disseminated to announced a quarterly and annual results.

I'd like to call your attention to the customary safe Harbor statement regarding forward looking information.

Also please note that nothing in today's call constitutes an offer to sell or solicitation of offers to purchase our securities.

Today's conference call includes forward looking statements and projections and we ask that you refer to great on capital groups filings with the FCC for important factors that could cause actual results to differ materially from these projections.

Great on capital group does not undertake to update its forward looking statements unless required by law to.

To obtain copies of the SEC filings. Please visit grade on capital goods website under financial info and select and SEC filings.

Hosting our call. This morning is Peter Reid, Great on capital group's Chief Executive Officer, I will now turn the call over to Peter.

Thank you Adam and good morning, everyone. Thank you for joining us today I'm.

I'm joined this morning by our President and COO, Adam Kleinman, our CFO, Brent Pearson into senior members of our investment team, Adam Yates and John I Wonder.

We'll walk through an update on our operating companies investment management real estate and general corporate business segments as well as their associated financials.

We're relevant in our prepared remarks, we will point you to the corresponding slide in the presentation that Adam referenced.

Please turn to slide four for a Nokia shareholders regarding our current operating environment.

We have good momentum in both our D N E business as well as our investment management business.

Despite a significant negative impact from cobot 19, Dnbi grew its revenues, 7.9% year over year in the fiscal fourth quarter.

M.B. generated 2.8 million of net income and seven point Onemillion of adjusted EBITDA in the quarter aided by 5.1 million of government assistance, which reduced its operating expenses.

Importantly, the army has resumed its search for attractive add on acquisition candidates.

It is looking for businesses with complimentary product lines and existing or tangential geographic markets.

In our investment management business right on capital Corp has developed an attractive pipeline potential investments and especially finance sector.

Focused on opportunities in this sector in part because of the performance of GE Ccs investment in prestige capital, which has exceeded internal expectations.

In order to capitalize upon this pipeline GE Si Si announced a rights offering on August 31st.

Completed our A.U.M. revenue and earnings will encourage.

Please turn to slide six.

During the quarter ended June Thirtyth 2020, we reported consolidated revenue net income and adjusted EBITDA of 16.0 million 4.1 million and 7.0 million respectively. We are intently focused on growing both revenue and profitability across our verticals.

Please turn to slide eight to discuss drivers of shareholder value.

With clear objectives in each of our verticals in operating companies, we're focused on acquiring undercapitalized companies with significant growth potential both organic and through M&A.

In investment management, we seek to increase assets under management, both in GE Si Si and in other investment vehicles managed by GE Si.

In real estate, we're managing our existing investment in Fort Myers to monetize our substantial tax assets.

Please turn to slide nine is very important for us to maintain long term alignment with you our shareholders.

Our team collectively owns approximately 2 million shares or 7% of the company.

Including our board of directors and their funds under management insiders collectively own circa 27% of the shares outstanding. We believe this fosters a significant and long term alignment of interest amongst employees directors and other shareholders.

Let's turn to slide 11 for an overview of our operating company activity.

Yeah me generated 13.9 million of revenue and 7.0 million of adjusted EBITDA during the quarter.

He managed to generate year over year revenue growth in the fiscal fourth quarter of 7.9% despite the challenging environment.

Sales growth of pet supplies was strong with more moderate growth in rental revenues.

After a sustained period of investment and the scalability of the platform do you mean management is focused upon growing revenue and enhancing margins did.

Additionally, Dnbi has resumed its search for add on acquisition candidates.

In the near term it is focused on acquiring businesses and existing or tangential geographic markets with significant product overlap.

Please turn to slide 12 to walk through the financial update for Dnbi segment.

Total revenue for the quarter was approximately 13.9 billion net income for the quarter was 2.8 million and adjusted EBITDA was approximately 7.0 million.

As I mentioned earlier adjusted EBITDA in the quarter was aided by the receipt of 5.1 million of government assistance, which allowed the Emmy to retain employees. Despite the negative financial impact of scope at 19.

The Emmys Unlevered free cash flow of 5.8 million was aided by reduced capital expenditures in the quarter as fewer and new patient set ups resulted in the purchase of less rental equipment than in previous quarters.

Turning to slide 14, let's discuss the operating environment for our investment management business.

Revenue and profitability were stable and the fair value of G.E. cheese portfolio, partially recovered in the quarter.

As I mentioned earlier, she Ccs investment in prestige capital has exceeded its internal expectations.

Profitability of that investment the recent growth that is it his experience and its outlook for future growth. It's helped GCC to develop an attractive pipeline of potential investment opportunities and the specialty finance sector on all.

On August 30, Onest, GCC announced a rights offering in order to capitalize upon this pipeline.

And certain other shareholders of GE Si Si 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 oversubscription by the participating shareholders will be affected only after pro rata allocation of Oversubscription shares to read.

Her date holders fully exercised albright's issued to them.

If this offering is completed or HM revenue and earnings will increase.

Please turn to slide 15 to discuss characteristics of the investment management vertical.

We believe investment management is an attractive business for gray dome due to its scalable business model high margins and the potential for free cash flow generation over the long term, we plan to grow our investment management business by increasing assets under management, either through additional GCC capital raises BDC M&A or by growing.

Other investment vehicles.

With significant embedded operating leverage and an established infrastructure. We believe the investment management business has the potential to generate free cash flow on a meaningful scale.

On slide 16, we break out the segment financials for investment management.

Total revenues, which include both management fees and administration fees are approximately 747000 during the quarter.

Net income for the quarter was a modest loss and adjusted EBITDA was approximately 214000.

Potential growth and adjusted EBITDA should translate to a commensurate amount of leverage free cash flow generation.

Please turn to slide 18 to discuss real estate or.

A real estate investment has been characterized by a limited amount of upfront capital deployed a significant amount of non recourse leverage to finance our acquisition in 2018 and continued taxable income to help monetize our rental wells.

Turning to slide 19, as you see on this chart assuming no appreciation in the property value. She sees equity in the Fort Myers investment will continue to grow between now and the lease expiration and 2030.

As cash flows from the rental stream are utilized to amortize debt equity grows from one times, our investment in acquisition to greater than seven times and 2030, all without deploying any additional capital.

Turning to slide 20.

To walk through the segment financials for real estate.

During the fourth quarter, we generated approximately $1.3 million in rental income 33000 in net income and 1.11 million of adjusted EBITDA.

I'm not generating leverage free cash flow for great Albert as we discussed on the prior slide we continue to build equity value and this investment through the amortization of debt.

On slide 22, we have a review of great on General corporate segment financial detail is.

This quarter's net income was in large part driven by a 2.9 million unrealized gain on the investment in GCC shares.

As of June Thirtyth 2020, Gecs consolidated cash balance was approximately 41 million. She is actively looking for new investment opportunities.

Beyond the financial overview on slide 27, we have a summary of how we plan to continue to drive shareholder value we intend.

We intend to achieve this goal through growth at Gray dome, DMV and investment management enhanced by reduced corporate overhead.

That concludes our review of Grahams fiscal fourth quarter and full year 2020 financial results, let's open the call up for Q and a.

At this time if anybody has a question. Please press star one on your telephone keypad again that would be star one on your telephone keypad, let's just wait a moment to compile acumen a rush or.

I can if anybody would like to ask a question. Please press star one on your telephone keypad.

I have no questions in queue I turn the call back over to the presenters for closing remarks.

Thank you again for joining us this morning to discuss great on capital group's fiscal fourth quarter and full year 2020 financial results. We appreciate your support and we look forward to creating long term shareholder value together.

These do not hesitate to reach out to us if we can be helpful with anything and follow up and have a great day.

Thank you everyone. This concludes today's conference call you may now disconnect.

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