UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
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(Address of Principal Executive Offices) |
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(Zip Code) |
Registrant’s Telephone Number, Including Area Code: (
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered pursuant to Section 12(b) of the Act:
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Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02 Results of Operations and Financial Condition.
On September 20, 2021, Great Elm Group, Inc. issued the press release and published the presentation furnished as exhibits 99.1 and 99.2, respectively, to this report.
The foregoing information (including the exhibits hereto) is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall such information be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as expressly set forth by specific reference in such filing.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
The following exhibits are furnished with this report but shall not be deemed filed:
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Exhibit Number |
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Description |
99.1 |
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99.2 |
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104 |
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The cover page from this current Report on Form 8-K, formatted as inline XBRL. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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GREAT ELM GROUP, INC. |
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Date: September 20, 2021 |
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_/s/ Brent J. Pearson______ |
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By: Brent J. Pearson |
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Title: Chief Financial Officer |
Exhibit 99.1
Great Elm Group Reports FISCAL 2021 FOURTH quarter AND
YEAR END financial resulTs
Company to Host Conference Call at 8:30 AM ET on Tuesday, September 21, 2021
WALTHAM, Mass., September 20, 2021 -- Great Elm Group, Inc. (“we,” “us,” “our,” “GEG,” or “Great Elm”) (NASDAQ: GEG), a diversified holding company, today announced financial results for its fiscal 2021 fourth quarter and year ended June 30, 2021.
Fiscal 2021 Fourth Quarter and Annual Financial Highlights
(all comparisons versus the prior-year period unless otherwise noted)
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Consolidated revenue for the fiscal quarter and year ended June 30, 2021 was $16.3 million and $60.9 million, compared to $14.7 million and $59.0 million |
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Consolidated net loss for the fiscal quarter and year ended June 30, 2021 was $1.4 million and $9.3 million, compared to net income of $4.1 million and net loss of $13.3 million |
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Consolidated Adjusted EBITDA for the fiscal quarter and year ended June 30, 2021 was $3.5 million and $8.6 million, compared to $5.9 million and $11.2 million |
Operating Companies:
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Durable Medical Equipment (DME) reported total revenue for the fiscal quarter and year ended June 30, 2021 of $15.4 million and $57.6 million, compared to $13.9 million and $55.7 million |
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DME reported net income for the fiscal quarter and year ended June 30, 2021 of $5.9 million and net loss of $2.5 million, compared to net income of $2.8 million and net loss of $0.1 million |
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DME reported Adjusted EBITDA for the fiscal quarter and year ended June 30, 2021 of $4.3 million and $12.4 million, compared to $7.0 million and $16.0 million |
Investment Management (IM):
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IM reported revenue for the fiscal quarter and year ended June 30, 2021 of $0.9 million and $3.2 million, compared to $0.7 million and $3.3 million |
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IM reported net income for the fiscal quarter and year ended June 30, 2021 of $1.3 million and $2.7 million, compared to net income of $3.4 million and net loss of $6.2 million |
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IM reported Adjusted EBITDA for the fiscal quarter and year ended June 30, 2021 of $0.1 million and $0.4 million, compared to $0.2 million and $1.2 million |
Fiscal 2021 Annual Operating Highlights
Consolidated:
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Completed a holding company reorganization and financing transaction with J.P. Morgan Broker-Dealer Holdings Inc. (JPM) that resulted in a $5 million distribution to GEG, lowered DME’s cost of capital and provided additional capital for acquisition opportunities |
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Sold the real estate business consisting of our entire ownership interest in two Class A office buildings located in Fort Myers, Florida to an affiliate of Monomoy Properties, LLC, for a cash payment of $4.6 million which was reinvested in shares of Monomoy. This disposition helped to simplify GEG’s financial statements by removing approximately $54 million of non-recourse debt and generates cash flow for GEG through ongoing dividend payments from Monomoy |
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Repurchased substantially all of the minority equity interest in GECC GP Corp. (GP Corp) as well as a $3.1 million note issued by GP Corp, removing another $3.1 million of non-recourse debt from GEG’s consolidated balance sheet and further simplifying its corporate structure |
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As of June 30, 2021, we had approximately $952 million of net operating loss (NOL) carryforwards for federal income tax purposes |
Operating Companies:
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Completed the acquisitions by DME of Advanced Medical DME, LLC and PM Sleep Lab, LLC (AMPM), providers of sleep testing, PAP, and other respiratory products and services in 9 locations throughout Kansas and Missouri |
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Following fiscal year end, completed the acquisition by DME of the power mobility assets of MedOne Healthcare LLC (MedOne), which enhances DME’s power mobility solutions and expands its geographic reach |
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Reported revenue growth at DME driven by strong resupply sales despite challenging pandemic related conditions |
Investment Management:
-2-
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Completed a $30 million rights offering at Great Elm Capital Corp. (GECC), a publicly traded business development company managed by our wholly owned subsidiary, Great Elm Capital Management, Inc., in October 2020, increasing GECC’s investable assets |
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Completed a $57 million senior note offering at GECC in June and July 2021, the proceeds of which were used to redeem GECC’s senior notes due 2022 at a lower cost of capital and to provide $24 million of incremental liquidity |
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Closed a three-year, $25 million revolving credit facility at GECC to support its investment activities |
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Continued portfolio rotation at GECC with a focus on proprietary specialty finance investments |
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Launched a new private fund (GESOF) to invest in SPACs and capitalize on the asymmetric risk profile inherent in the SPAC structure, with a focus of acquiring pre-announcement SPACs securities at or below cash trust value |
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Enhanced the depth and experience of our investment team through the execution of a shared services agreement with Imperial Capital Asset Management |
Management Commentary
Peter A. Reed, Chief Executive Officer, stated, “We continue to build on the positive momentum in all aspects of our business. During the fiscal year, we entered into a transformative transaction with JPM which resulted in a distribution to GEG, lowered DME’s cost of capital and provided additional liquidity for future acquisitions. To that end, DME completed the acquisitions of AMPM and MedOne, which expanded DME’s total revenue, geographic reach and cross selling opportunities. In addition, we grew revenue at IM by raising significant capital at GECC and continuing to rotate its portfolio into higher quality credits with a focus on specialty finance. In June, we exited our real estate business at an attractive valuation, generating additional cash flow through ongoing dividend payments from the Monomoy shares while, together with the GP Corp transaction, eliminating $57 million of debt from our consolidated balance sheet and simplifying our corporate structure. We believe all of these developments leave Great Elm well positioned to maximize the value of DME, further grow IM fee revenue and create long term value for our shareholders.”
Alignment of Interest
A distinct attribute of Great Elm is the particularly strong alignment of interest among shareholders and the employees, directors, and other insiders of Great Elm. As of June 30, 2021, Great Elm’s employees and directors (including funds under their management) collectively own or manage approximately 28% of GEG’s total outstanding shares.
-3-
-4-
Financial Review
Discussion of Financial Results for the Fiscal Quarter and Year ended June 30, 2021
Great Elm is a holding company with two operating segments: Operating Companies and Investment Management, with General Corporate representing unallocated costs and activity to arrive at consolidated operations.
Operating Companies
During the three months ended June 30, 2021, DME recognized $15.4 million in total revenue, compared to $13.9 million during the same period in the prior year. The increase in revenues was due to organic growth in resupply sales and the impact of the AMPM acquisition. The demand for sleep studies continues to be soft due to the ongoing impact from the COVID-19 pandemic, and referrals for new equipment set-ups declined as they are generally driven by in-house or external sleep studies. Late in the fiscal fourth quarter we encountered a slowdown in usage at our sleep labs due to products on recall as well as supply chain delays, which have been largely offset due to our ability to scale the DME business in the year. We are continuing to work closely with our manufacturing partners and remain opportunistic as the industry continues to consolidate. For the year ended June 30, 2021, DME recognized a 3.6% increase in total revenue to $57.6 million, compared to $55.7 million for the same period in the prior year. The increase in total revenue was due primarily to the AMPM acquisition and organic growth in resupply sales.
During the three months ended June 30, 2021, DME reported net income of $5.9 million, compared to net income of $2.8 million for the same period in the prior year. Net income increased largely due to a $5.4 million benefit related to a fair value adjustment recorded in connection with the preferred stock issued to Forest Investments, Inc. (Forest), GEG’s majority owned subsidiary, with an offsetting impact to General Corporate and eliminated in consolidation. For the year ended June 30, 2021, DME reported a net loss of $2.5 million, compared to a net loss of $0.1 million for the same period in the prior year.
During the three months ended June 30, 2021, DME Adjusted EBITDA, a non-GAAP measure, was $4.3 million, compared to $7.0 million in the prior-year period. For the year ended June 30, 2021, DME Adjusted EBITDA was $12.4 million, compared to $16.0 million for the same period in the prior year.
-5-
Subsequent to quarter end, DME acquired the power mobility assets of MedOne. This acquisition strengthens DME’s geographic reach into Arizona, where MedOne is a market leader in power mobility solutions.
Investment Management
During the three months ended June 30, 2021, IM recognized total revenue of $0.9 million, compared to $0.7 million during the same period in the prior year. Revenue for the quarter was slightly higher due to increases in the average assets on which such fees are calculated. For the year ended June 30, 2021, IM recognized total revenue of $3.2 million, compared to $3.3 million during the same period in the prior year. Revenue for the year was slightly lower due to decreases in the average assets on which such fees are calculated over the course of the year.
During the three months ended June 30, 2021, IM recognized net income of $1.3 million, compared to $3.4 million during the same period in the prior year. For the year ended June 30, 2021, IM recognized net income of $2.7 million, compared to a net loss of $6.2 million for the same period in the prior year. IM recognized net realized and unrealized gains on its investments of $0.7 million and unrealized losses of $8.7 million, respectively, for the fiscal years ended June 30, 2021 and 2020.
During the three months ended June 30, 2021, IM Adjusted EBITDA was $0.1 million, compared to $0.2 million during the same period in the prior year. Adjusted EBITDA for the quarter was impacted primarily by increased employee-related costs and professional fees related to investment management growth initiatives. For the year ended June 30, 2021, IM Adjusted EBITDA was $0.4 million, compared to $1.2 million during the same period in the prior year.
On October 1, 2020, GECC successfully completed a non-transferable rights offering which entitled holders of rights to purchase one new share of common stock for each right held at a subscription price of $2.95 per share. In total, GECC sold 10,761,950 shares of its common stock for aggregate gross proceeds of approximately $31.7 million.
In March 2021, we launched GESOF, a private investment fund to invest in SPACs. GEG invested $10 million in GESOF to help seed this vehicle, which we hope will contribute to increased assets under management for the investment management business and help drive additional fee revenue.
-6-
In May 2021, GECC closed a three-year, $25 million revolving credit facility that bears interest at LIBOR plus 3.50%.
In June and July 2021, GECC issued $57.0 million of senior notes due 2026 that bear interest at a rate of 5.875% per year. GECC subsequently used the proceeds of this offering to redeem its 6.50% Notes due 2022, resulting in a $24 million of incremental liquidity.
General Corporate
During the three months ended June 30, 2021, General Corporate recognized $0.3 million in revenue compared to $45 thousand in revenue during the same period in the prior year. For the year ended June 30, 2021, General Corporate recognized $0.6 million in revenue compared to $0.2 million for the same period in the prior year. Revenue increased slightly as a result of increased management fees earned from DME, along with new management fees earned from Forest arising from our transaction with JPM.
During the three months ended June 30, 2021, Great Elm recognized a net loss of $1.4 million, compared to $4.1 million in net income during the same period in the prior year. The difference in net income was driven primarily by higher interest expense in addition to lower net unrealized gains on GEG’s investment in GECC during the fiscal fourth quarter, compared to the same period in the prior year. For the year ended June 30, 2021, Great Elm recognized a net loss of $9.3 million, compared to a net loss of $13.4 million during the same period in the prior year.
During the three months ended June 30, 2021, Great Elm recognized $3.5 million in Adjusted EBITDA, compared to Adjusted EBITDA of $5.9 million during the same period in the prior year. For the year ended June 30, 2021, Great Elm recognized $8.6 million in Adjusted EBITDA, compared to Adjusted EBITDA of $11.2 million during the same period in the prior year. Great Elm made significant progress on reducing its corporate overhead, driven by lower audit fees due to a change in auditors in the prior fiscal year and other decreases in professional service expense.
Fiscal 2021 Fourth Quarter and Year End Conference Call & Webcast Information
When:Tuesday, September 21, 2021, 8:30 a.m. Eastern Time (ET)
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Call: |
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 6449060 when asked. |
About Great Elm Group, Inc.
Great Elm Group, Inc. (NASDAQ: GEG) is a publicly-traded holding company that is building a business across two operating verticals: operating companies and investment management. Great Elm Group, Inc.’s website can be found at www.greatelmgroup.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, acquisition opportunities 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.greatelmgroup.com or at the SEC website www.sec.gov.
Non-GAAP Financial Measures
-8-
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.
Media & Investor Contact:
Investor Relations
investorrelations@greatelmcap.com
Adam Prior
The Equity Group Inc.
+1 (212) 836-9606
aprior@equityny.com
-9-
Great Elm Group, Inc.
Condensed Consolidated Balance Sheets (Unaudited)
Dollar amounts in thousands (except per share data)
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2021 |
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2020 |
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Cash and cash equivalents |
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$ |
24,382 |
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$ |
40,500 |
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Accounts receivable |
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6,518 |
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7,991 |
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Related party receivables |
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1,665 |
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1,059 |
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Investments, at fair value (cost $45,326 and $30,279, respectively) |
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24,044 |
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8,705 |
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Inventories |
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1,066 |
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1,470 |
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Prepaid and other current assets |
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3,791 |
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689 |
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Assets of consolidated funds: |
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Investments, at fair value (cost $26,814) |
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26,490 |
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- |
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Prepaid expenses |
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578 |
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- |
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Current assets of discontinued operations |
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- |
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914 |
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Total current assets |
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88,534 |
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61,328 |
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Property and equipment, net |
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981 |
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1,410 |
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Equipment held for rental, net |
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7,391 |
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7,483 |
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Identifiable intangible assets, net |
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8,928 |
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10,258 |
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Goodwill |
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50,536 |
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50,010 |
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Right of use assets |
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5,241 |
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5,392 |
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Other assets |
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258 |
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248 |
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Noncurrent assets of discontinued operations |
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- |
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59,316 |
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Total assets |
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$ |
161,869 |
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$ |
195,445 |
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LIABILITIES, NON-CONTROLLING INTEREST AND STOCKHOLDERS' EQUITY |
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Current liabilities: |
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Accounts payable |
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$ |
5,521 |
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$ |
5,007 |
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Accrued expenses and other liabilities |
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6,955 |
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3,062 |
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Deferred revenue |
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4,438 |
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5,652 |
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Current portion of lease liabilities |
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1,920 |
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1,617 |
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Current portion of long term debt |
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- |
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3,895 |
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Current portion of related party notes payable |
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- |
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5,207 |
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Current portion of equipment financing debt |
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1,974 |
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2,034 |
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Liabilities of consolidated funds - accrued expenses and other |
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12,197 |
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- |
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Current liabilities of discontinued operations |
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- |
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2,829 |
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Total current liabilities |
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33,005 |
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29,303 |
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Lease liabilities, net of current portion |
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3,596 |
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4,060 |
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Related party notes payable, net of current portion |
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- |
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22,696 |
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Convertible Notes (face value $34,346 and $30,521, respectively, including $16,231 and $13,277, respectively, held by related parties) |
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22,054 |
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17,444 |
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Equipment financing debt, net of current portion |
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67 |
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196 |
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Redeemable preferred stock of subsidiaries (held by related parties, face value $37,018) |
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35,529 |
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- |
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Other liabilities |
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1,070 |
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395 |
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Noncurrent liabilities of discontinued operations |
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- |
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52,781 |
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Total liabilities |
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95,321 |
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126,875 |
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Commitments and Contingencies |
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Contingently redeemable non-controlling interest |
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2,639 |
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3,890 |
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-10-
Stockholders' equity |
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Preferred stock, $0.001 par value; 5,000,000 authorized and zero outstanding |
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- |
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- |
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Common stock, $0.001 par value; 350,000,000 shares authorized and 26,613,913 shares issued and 25,948,100 outstanding at June 30, 2021; and 26,217,380 shares issued and 25,529,534 outstanding at June 30, 2020 |
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26 |
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|
26 |
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Additional paid-in-capital |
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3,319,767 |
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3,318,117 |
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Accumulated deficit |
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(3,265,433 |
) |
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(3,257,349 |
) |
Total Great Elm Group, Inc. stockholders' equity |
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54,360 |
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60,794 |
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Non-controlling interests |
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9,549 |
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|
3,886 |
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Total stockholders' equity |
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63,909 |
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64,680 |
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Total liabilities, non-controlling interest and stockholders' equity |
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$ |
161,869 |
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$ |
195,445 |
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-11-
Great Elm Group, Inc.
Condensed Consolidated Statements of Operations (Unaudited)
Dollar amounts in thousands (except per share data)
-12-
Great Elm Group, Inc.
Reconciliation from EBITDA to Adjusted EBITDA - Quarterly
Dollar amounts in thousands (except per share data)
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For the three months ended June 30, 2021 |
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Durable Medical Equipment |
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Investment Management (1) |
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Corporate |
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Consolidated |
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EBITDA: |
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||||
Income (loss) from continuing operations – GAAP |
$ 5,906 |
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$ 1,311 |
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$ (8,607) |
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$ (1,390) |
||||
Interest expense |
1,274 |
|
25 |
|
1,340 |
|
2,639 |
||||
Interest income from preferred stock |
- |
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- |
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(1,186) |
|
(1,186) |
||||
Depreciation & amortization |
2,079 |
|
109 |
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- |
|
2,188 |
||||
Tax expense |
- |
|
- |
|
1,807 |
|
1,807 |
||||
EBITDA |
9,259 |
|
1,445 |
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(6,646) |
|
4,058 |
||||
Adjusted EBITDA |
|
|
|
|
|
|
|
||||
Stock based compensation |
- |
|
185 |
|
240 |
|
425 |
||||
Change in contingent consideration 2 |
(126) |
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- |
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- |
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(126) |
||||
GECC dividend income |
- |
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(554) |
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- |
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(554) |
||||
GECC unrealized (gains) / losses |
- |
|
(981) |
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- |
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(981) |
||||
Other (income) expense |
(5,457) |
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- |
|
5,442 |
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(15) |
||||
Transaction and integration costs 2 |
340 |
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- |
|
254 |
|
594 |
||||
Extinguishment of debt |
- |
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- |
|
- |
|
- |
||||
Severance |
121 |
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- |
|
- |
|
121 |
||||
Pharmacy closure |
- |
|
- |
|
- |
|
- |
||||
DME management and monitoring fees |
168 |
|
- |
|
(168) |
|
- |
||||
Adjusted EBITDA |
$ 4,305 |
|
$ 95 |
|
$ (878) |
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$ 3,522 |
||||
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For the three months ended June 30, 2020 |
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Durable Medical Equipment |
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Investment Management (1) |
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Corporate |
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Consolidated |
|
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EBITDA: |
|
|
|
|
|
|
|
|
|||
Income (loss) from continuing operations – GAAP |
$ 2,787 |
|
$ 3,404 |
|
$ (2,127) |
|
$ 4,064 |
|
|||
Interest expense |
816 |
|
35 |
|
609 |
|
1,460 |
|
|||
Interest income from preferred stock |
- |
|
- |
|
- |
|
- |
|
|||
Depreciation & amortization |
2,800 |
|
127 |
|
- |
|
2,927 |
|
|||
Tax expense |
- |
|
- |
|
49 |
|
49 |
|
|||
EBITDA |
6,403 |
|
3,566 |
|
(1,469) |
|
8,500 |
|
|||
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 2 |
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 |
|
(1,232) |
|
5,932 |
|
(1) Previously reported non-operating activity including dividend income and unrealized gains/losses related to managed investments has been reclassified from General Corporate to Investment Management to conform with current segment organization
-13-
(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.
Great Elm Group, Inc.
Reconciliation from EBITDA to Adjusted EBITDA - Annual
Dollar amounts in thousands (except per share data)
|
For the year ended June 30, 2021 |
||||||||||
|
Durable Medical Equipment |
|
Investment Management (1) |
|
Corporate |
|
Consolidated |
||||
EBITDA: |
|
|
|
|
|
|
|
||||
Income (loss) from continuing operations – GAAP |
$ (2,489) |
|
$ 2,723 |
|
$ (9,562) |
|
$ (9,328) |
||||
Interest expense |
3,950 |
|
101 |
|
3,923 |
|
7,974 |
||||
Interest income from preferred stock |
- |
|
- |
|
(2,354) |
|
(2,354) |
||||
Depreciation & amortization |
8,195 |
|
473 |
|
1 |
|
8,669 |
||||
Tax expense |
- |
|
- |
|
1,813 |
|
1,813 |
||||
EBITDA |
9,656 |
|
3,297 |
|
(6,179) |
|
6,774 |
||||
Adjusted EBITDA |
|
|
|
|
|
|
|
||||
Stock based compensation |
- |
|
757 |
|
998 |
|
1,755 |
||||
Change in contingent consideration 2 |
(126) |
|
- |
|
- |
|
(126) |
||||
GECC dividend income |
- |
|
(2,954) |
|
- |
|
(2,954) |
||||
GECC unrealized (gains) / losses |
- |
|
(721) |
|
- |
|
(721) |
||||
Other (income) expense |
(692) |
|
- |
|
647 |
|
(45) |
||||
Transaction and integration costs 2 |
1,046 |
|
- |
|
670 |
|
1,716 |
||||
Extinguishment of debt |
1,866 |
|
- |
|
- |
|
1,866 |
||||
Severance |
195 |
|
- |
|
- |
|
195 |
||||
Pharmacy closure |
54 |
|
- |
|
- |
|
54 |
||||
DME management and monitoring fees |
392 |
|
- |
|
(350) |
|
42 |
||||
Adjusted EBITDA |
$ 12,391 |
|
$ 379 |
|
$ (4,214) |
|
$ 8,556 |
||||
|
|
|
|
|
|
|
|
||||
|
|
||||||||||
|
For the year ended June 30, 2020 |
|
|||||||||
|
Durable Medical Equipment |
|
Investment Management (1) |
|
Corporate |
|
Consolidated |
|
|||
EBITDA: |
|
|
|
|
|
|
|
|
|||
Income (loss) from continuing operations – GAAP |
$ (106) |
|
$ (6,182) |
|
$ (7,058) |
|
$ (13,346) |
|
|||
Interest expense |
3,655 |
|
157 |
|
764 |
|
4,576 |
|
|||
Depreciation & amortization |
10,145 |
|
636 |
|
1 |
|
10,782 |
|
|||
Tax expense |
- |
|
- |
|
44 |
|
44 |
|
|||
EBITDA |
13,694 |
|
(5,389) |
|
(6,249) |
|
2,056 |
|
|||
Adjusted EBITDA |
|
|
|
|
|
|
|
|
|||
Stock based compensation |
- |
|
(33) |
|
580 |
|
547 |
|
|||
Change in contingent consideration 2 |
- |
|
- |
|
(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 2 |
1,693 |
|
- |
|
962 |
|
2,655 |
|
|||
Severance |
53 |
|
- |
|
- |
|
53 |
|
|||
Pharmacy closure |
329 |
|
- |
|
- |
|
329 |
|
|||
DME management and monitoring fees |
259 |
|
- |
|
(159) |
|
100 |
|
|||
Adjusted EBITDA |
$ 16,023 |
|
1,195 |
|
(6,002) |
|
11,217 |
|
(1) Previously reported non-operating activity including dividend income and unrealized gains/losses related to managed investments has been reclassified from General Corporate to Investment Management to conform with current segment organization
-14-
(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.
-15-
Great Elm Group, Inc. Conference Call Presentation Fiscal Fourth Quarter and Year Ended June 30, 2021 September 20, 2021 NASDAQ: GEG Exhibit 99.2
Disclaimer Statements in this press release that are “forward-looking” statements, including statements regarding expected growth, profitability, acquisition opportunities 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.greatelmgroup.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”) and free cash flow. See the Appendix for important information regarding the use of non-GAAP financial measures and reconciliations of non-GAAP measures to their most directly comparable GAAP measures. This presentation does not constitute an offer of any securities for sale. 2
Driving Shareholder Value Growth Strategy Target undercapitalized small and mid-sized companies where we can partner with management to accelerate earnings and cash flow growth Focus on growing Great Elm DME, Inc. both organically and via an expansion strategy that targets existing and adjacent markets Great Elm Capital Management, Inc. (“GECM”) SEC Registered Investment Advisor Investment Advisor to Great Elm Capital Corp. (Nasdaq: GECC), a publicly-traded business development company Manager of the Great Elm SPAC Opportunity Fund (“GESOF”), a privately-held fund Three IMAs with a leading institutional investor Manager of the Great Elm Opportunities Fund (“GEOF”), a fund structured for a series of co-investment opportunities Manager of future funds, co-investments and separately managed accounts Investment Management Great Elm Durable Medical Equipment (“DME”) Business Distributor of respiratory care equipment (CPAP, ventilators, oxygen) and sleep study services Services a large and growing segment of the population who suffer from sleep disorders Aging population, rising obesity rates and the prevalence of smoking are causative factors Operates in AK, AZ, KS, IA, MO, NE, OR, WA 362 employees Operating Companies Business Operating Units Focus on driving asset growth in GECC Increase AUM via new fund launches, SMAs and co-investments and leverage the existing team and infrastructure to generate incremental free cash flow 3
Fiscal 2021 Annual Highlights As of June 30, 2021, we had approximately $952 million of net operating loss (NOL) carryforwards for Federal income tax purposes. Completed a holding company reorganization and financing transaction with J.P. Morgan Broker-Dealer Holdings Inc. (JPM) resulting in a $5 million distribution to GEG Lowered GEG’s durable medical equipment (DME) segment’s cost of capital and provided additional capital for acquisition opportunities Eliminated $57 million in debt from our balance sheet through the sale of the real estate business and transactions at GECC GP Corp (GP Corp). Consolidated Sold Real Estate business to an affiliate of Monomoy Properties, LLC (“Monomoy”) for a cash payment of $4.6 million, which was subsequently reinvested in dividend-earning shares of Monomoy Simplified financial statements by removing the non-recourse debt of approximately $54 million Cash flow for the company generated through ongoing dividend payments Sale of Real Estate DME Revenue grew 10.8% QTD and 3.4% YTD as compared to fiscal 2020 Continued to expand the DME business with additional acquisitions Following fiscal year end, completed the acquisition the power mobility assets of MedOne Healthcare LLC (“MedOne”), which enhances DME’s power mobility solutions and expands its geographic reach Operating Companies Investment Management (IM) business grew AUM substantially through growth and capital raises at GECC Launched GESOF, a privately-held fund with a focus on investments in special purpose acquisition companies Repurchased substantially all of the minority equity interest in GECC GP Corp. (GP Corp) as well as a $3.1 million note issued by GP Corp, further simplifying GEG’s corporate structure IM 4
(1) Please refer to the disclaimers on slide 2 and the Adjusted EBITDA reconciliation tables in the Appendix. Consolidated Summary Financials: By Quarter 5
Consolidated Summary Financials: Year Over Year (1) Please refer to the disclaimers on slide 2 and the Adjusted EBITDA reconciliation tables in the Appendix. 6
In fiscal 4Q21, Great Elm DME, Inc. (“DME”) generated $15.4 million of revenue, $5.9 million of net income and $4.3 million of adjusted EBITDA1 Revenues overall increased due to continued organic growth in resupply sales and one month of contributions from the AMPM acquisition in fiscal 3Q21 Profitable operations on higher sales, largely due to the strengthening of our Midwest business in Kansas and Missouri as a result of our AMPM acquisition Encountered a slowdown in usage at our sleep labs due to products on recall as well as supply chain delays, which have been largely offset due to our ability to scale the DME business in the year We are continuing to work closely with our manufacturing partners and remain opportunistic as the industry continues to consolidate (1) Please refer to the disclaimers on slide 2 and the Adjusted EBITDA reconciliation tables in the Appendix 7 Operating Companies: DME – Operating Highlights
Subsequent to quarter end, DME acquired the power mobility assets of MedOne Strengthens geographic reach into Arizona 8 DME Acquisitions On March 1, 2021 closed the acquisition of Advanced Medical DME, LLC and PM Sleep Lab, LLC (“AMPM”), providers of sleep testing, PAP, and other respiratory products and services in 9 locations throughout Kansas and Missouri, for purchase consideration of $1.1 million Increased the patient base by 2,500+ active patients to provide full range of respiratory equipment and PAP resupply, and the opportunity to introduce ventilator and oxygen services and gain additional referral opportunities in the acquired markets Potential operating efficiencies and procurement savings through better pricing and volumes AMPM MedOne Power Mobility Assets
Operating Companies: DME – Quarterly Financials (1) Please also refer to the disclaimers on slide 2 and the Adjusted EBITDA reconciliation tables in the Appendix 9
Operating Companies: DME – Year over Year Financials (1) Please also refer to the disclaimers on slide 2 and the Adjusted EBITDA reconciliation tables in the Appendix 10
AUM Growth High Margins Scalable Model Free Cash Flow AUM GROWTH Grow GECC’s AUM through the issuance of additional debt and equity, supplemented by accretive acquisitions of other BDCs, resulting in an increase in fee revenue Grow the Investment Management business by leveraging the existing team to launch additional vehicles HIGH MARGINS Given the largely fixed cost nature of the Investment Management business, we expect adjusted EBITDA margins to increase as our AUM increases and the business scales SCALABLE MODEL Investment team and infrastructure in place to support growth in AUM and new investment vehicles FREE CASH FLOW Growth in AUM in the Investment Management business coupled with its high margins and scalable business model could result in operating leverage and, thus, the potential for growth in adjusted EBITDA and free cash flow 11 Investment Management: A Scalable, High Margin Business
In fiscal 4Q21, Investment Management generated $0.9 million of revenue, $0.7 million of net income and $0.1 million of adjusted EBITDA1 Revenue and profitability were stable and reflect the increases in average assets on which management fees are calculated. Sequential revenue growth as IM revenue recovers from lows during COVID GECC’s deployment accelerated throughout the quarter, ending solidly with $49.9 million in new investments (excluding SPACs) GECC’s NAV per share increased driven by unrealized gains as a result of positive developments at several portfolio companies At GECC, we: 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 LoC was undrawn as of June 30, 2021 Increased investible assets by completing a $31.7 million rights offering Further diversified capital structure and enhanced liquidity by issuing $57.5 million of 5.875% senior dues 2026 Redeemed the 6.50% Notes due 2022 subsequent to quarter end Increased average assets on which IM earns management fees by 29% in fiscal 4Q21 as compared to fiscal 4Q20 driven by portfolio appreciation as well as the deployment of proceeds generated by the rights offering and issuance of the 2026 notes (net of the redemption of the 2022 notes) Simplified balance sheet and corporate structure at subsidiary, GECC GP Corp., resulting in a greater share of investment profits for GEG. Transactions included the purchase of 18.2% of GP Corp’s noncontrolling interests and the purchase of a $3.1 million note at GP Corp (1) Please refer to the disclaimers on slide 2 and the Adjusted EBITDA reconciliation tables in the Appendix 12 Investment Management: Solid Progress and Momentum Increasing
(1) Please also refer to the disclaimers on slide 2 and the Adjusted EBITDA reconciliation tables in the Appendix 13 Investment Management: Quarterly Financials
(1) Please also refer to the disclaimers on slide 2 and the Adjusted EBITDA reconciliation tables in the Appendix 14 Investment Management: Year over Year Financials
15 Sold our Real Estate business consisting of our entire ownership interest in two Class A office buildings located in Fort Myers, Florida to an affiliate of Monomoy Properties, LLC (“Monomoy”), a privately-held industrial properties focused REIT managed by Imperial Capital Asset Management, LLC, for a cash payment of $4.6 million, which was reinvested for a member interest. Improves overall capitalization Eliminated $54 million of Debt associated with our Real Estate Business from our balance sheet Consolidated operating and leverage ratios that are more reflective of our current operating businesses Diversifies holdings from a single location real estate asset to membership interests in a diversified industrial properties REIT portfolio Benefits of cash flow for the company generated through ongoing dividend payments and improved liquidity Real Estate Transaction: Sale of Fort Myers
(1) Please also refer to the disclaimers on slide 2 and the Adjusted EBITDA reconciliation tables in the Appendix 16 General Corporate: Financials by Quarter
(1) Please also refer to the disclaimers on slide 2 and the Adjusted EBITDA reconciliation tables in the Appendix 17 General Corporate: Financials Year Over Year
Financial Review: 4Q21 Consolidating Balance Sheets (Unaudited) (1) Intercompany balances, including intercompany borrowings and GEC investments in subsidiaries. All intercompany balances eliminate in consolidation. 18
(1) Please refer to the disclaimers on slide 2 and the Adjusted EBITDA reconciliation tables in the Appendix 19 Financial Review: 4Q21 Consolidating Income Statement (Unaudited)
Employee Share Ownership Significant Alignment of Interest Director Share Ownership Employees of GEG/Great Elm Capital Management, Inc. (“GECM”) collectively own approximately 1.9 million shares of GEG, representing approximately 7% of GEG’s outstanding shares1 The directors of GEG beneficially own approximately 5.2 million shares of GEG in the aggregate, representing approximately 20% of GEG’s outstanding shares When combined, insider ownership totals approximately 27% of the outstanding shares We believe this level of insider ownership results in a significant and long-term alignment of interest between the shareholders and the insiders of GEG (1) This includes restricted shares that are subject to both performance and service vesting and is based on the share count pro forma for the vesting of said restricted shares. Employee Share Ownership Significant Alignment of Interest Employees of GEG collectively own approximately 2.0 million shares of GEG, representing approximately 7% of GEG’s outstanding shares1 The directors of GEG beneficially own approximately 6.0 million shares of GEG in the aggregate, representing approximately 23% of GEG’s outstanding shares When combined, insider ownership totals approximately 30% of the outstanding shares We believe this level of insider ownership results in a significant and long-term alignment of interest between the shareholders and the insiders of GEG 20 Strong Shareholder Alignment
Appendix 21
Corporate Reorganization and Financing Transaction Overview On December 29, 2020, we completed a reorganization of our corporate structure and executed a financing transaction with J.P. Morgan Broker-Dealer Holdings (“JPM”), wherein JPM invested a total of $37.7 million Great Elm Capital Group, Inc. (“GEC”) changed its name to Forest Investments, Inc. (“Forest”) and became a subsidiary of a new parent holding company, Great Elm Group, Inc. (“Great Elm” or “GEG”) Common shares of GEC automatically converted into common shares of Great Elm Group, and began trading on NASDAQ under a new ticker “GEG”; GEC stock was delisted and deregistered JPM Financing Details JPM purchased Preferred Shares and common equity of Forest Forest issued to JPM $35 million of 9.0% Preferred Shares maturing 2027 JPM also purchased 20% of the common equity of Forest for $2.7 million Proceeds were used to refinance DME’s existing term loan of approximately $24.8 million and provide growth capital; DME also distributed approximately $2.3 million to GEG inclusive of fees and expenses Distributions and Ownership Forest distributed to GEG its common ownership of the DME business, its ownership of the Investment Management business, its GECC shares and its cash, and retained ownership of the Real Estate business and a preferred interest in the DME business Forest also retained its U.S. Federal NOLs, which were unaffected and remain usable across the Great Elm platform 22
Organization: Structure Great Elm Group, Inc. (“Great Elm” or “GEG”) (NASDAQ: GEG) Great Elm Capital Management, Inc. (“GECM”) Investment advisor to GECC, GESOF, GEOF and SMAs Great Elm Capital Corp (“GECC”) (NASDAQ: GECC) Publicly traded BDC Great Elm Durable Medical Equipment (“DME”) Business Forest Investments, Inc. (“Forest”) fka Great Elm Capital Group, Inc. (formerly NASDAQ: GEC) 80% Holds ~23.6% shares 100% 80.1% Former owners 19.9% JPM 20% Note: Chart is designed to be illustrative following the JPM financing transaction and does not include all entities comprising Great Elm Group, Inc’s corporate structure. 23
24 Appendix: Non-GAAP Reconciliation
25 Appendix: Non-GAAP Reconciliation (cont.)
26 Appendix: Non-GAAP Reconciliation (cont.)
27 Appendix: Non-GAAP Reconciliation (cont.)
Investor Relations 800 South Street, Suite 230 Waltham, MA 02453 Phone: +1 (617) 375-3006 investorrelations@greatelmcap.com Adam Prior The Equity Group Inc. +1 (212) 836-9606 aprior@equityny.com 28 Appendix: Contact Information
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