Investor Presentation Quarter Ended March 31, 2025 May 6, 2025 NASDAQ: GECC Forward Looking Statement Statements in this communication that are not historical facts are "forward-looking" statements within the meaning of the federal securities laws. These statements include statements regarding our future business plans and expectations. These statements are often, but not always, made through the use of words or phrases such as "expect," "anticipate," "should," "will," "estimate," "designed," "seek," "conti ...

Financial Performance - Total investment income for Q1 2025 reached a record $12.5 million, with net investment income (NII) of $4.6 million, or $0.40 per share, compared to $2.1 million, or $0.20 per share, in Q4 2024[3][4] - Total investment income for Q1 2025 was $12,495,000, an increase of 40% compared to $8,909,000 in Q1 2024[19] - Net investment income before taxes rose to $4,644,000, up 45.5% from $3,198,000 in the same quarter last year[19] - Earnings per share (basic and diluted) improved to $0.04, compared to a loss of $(0.05) in Q1 2024[19] - Net investment income per share (basic and diluted) increased to $0.40 from $0.37 year-over-year[19] Distribution and Cash Flow - The quarterly distribution was increased by 5.7% to $0.37 per share, with a projected annualized yield of 14.7% based on the closing price of $10.09 on May 2, 2025[4][10] - Cash distributions from the CLO JV amounted to $3.8 million in Q1 2025, significantly up from $0.5 million in Q4 2024, with an additional $4.3 million received in April 2025[4] Investment Activity - Approximately $37.4 million was deployed into 16 investments during Q1 2025, achieving a weighted average current yield of 15.1%[7] - Total investments held at fair value as of March 31, 2025, were $341.9 million, with a weighted average current yield on the debt portfolio of 12.3%[6][18] Expenses and Losses - The company incurred total expenses of approximately $7.9 million for Q1 2025, resulting in net realized and unrealized losses of approximately $4.1 million[8] - Total expenses increased to $7,851,000, a rise of 37.4% from $5,711,000 in Q1 2024[19] - Management fees rose to $1,272,000, up 35.3% from $940,000 in Q1 2024[19] - Interest expense increased significantly to $4,251,000, compared to $2,807,000 in Q1 2024, reflecting higher borrowing costs[19] Asset and Debt Management - Net assets decreased to $132.3 million, or $11.46 per share, down from $136.1 million, or $11.79 per share, at the end of Q4 2024, primarily due to unrealized losses[4][18] - The asset coverage ratio was 163.8% as of March 31, 2025, compared to 169.7% at the end of Q4 2024[4] - The company held $1.3 million in cash as of March 31, 2025, with total debt outstanding of $207.4 million[9] Market Outlook - The company plans to continue monitoring the macro environment and deploy capital into opportunities with compelling risk-adjusted returns[3] Unrealized Gains and Losses - Net realized gain on investment transactions was $264,000, a significant decrease from $2,356,000 in Q1 2024[19] - Net change in unrealized depreciation on investments was $(4,387,000), compared to $(6,007,000) in Q1 2024, indicating an improvement[19] Shareholder Information - Weighted average shares outstanding increased to 11,544,415 from 8,659,344 in the previous year[19]

PART I. FINANCIAL INFORMATION [Item 1. Financial Statements](index=5&type=section&id=Item%201.%20Financial%20Statements) This section incorporates the company's unaudited financial statements for Q1 2025, detailed from page F-17 - The financial statements listed in the index to financial statements are incorporated by reference into this item[14](index=14&type=chunk) - The detailed financial statements and corresponding notes begin on page F-17 of the report[96](index=96&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=5&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) GECC, a BDC, reported increased Q1 2025 investment income and net investment income, alongside portfolio growth and affirmed liquidity [Overview](index=5&type=section&id=Overview) GECC operates as a BDC, investing in secured debt, specialty finance, and CLO securities, externally managed and structured as a RIC - GECC's investment strategy focuses on secured debt in middle-market companies, income-generating equity in specialty finance companies, and investments in collateralized loan obligation (CLO) securities[15](index=15&type=chunk) - On April 23, 2024, the company formed a joint venture, the CLO Formation JV, LLC, to invest in CLO equity and loan accumulation facilities[16](index=16&type=chunk) - The company is externally managed by Great Elm Capital Management, LLC (GECM) and has elected to be treated as a Regulated Investment Company (RIC) for U.S. federal income tax purposes[18](index=18&type=chunk)[19](index=19&type=chunk) [Portfolio and Investment Activity](index=8&type=section&id=Portfolio%20and%20Investment%20Activity) GECC's investment portfolio grew to **$341.9 million** in Q1 2025, with **$48.1 million** in acquisitions and a **12.29%** weighted average yield, concentrated in key industries Investment Activity (Q1 2025 vs. Prior Quarters) | Quarter ended | Acquisitions (in thousands) | Dispositions (in thousands) | Weighted Average Yield (End of Period) | | :--- | :--- | :--- | :--- | | March 31, 2024 | $64,584 | $(29,289) | 12.84% | | December 31, 2024 | $61,724 | $(71,123) | 12.37% | | March 31, 2025 | $48,097 | $(27,039) | 12.29% | Portfolio Reconciliation (Q1 2025) | (in thousands) | For the Three Months Ended March 31, 2025 | | :--- | :--- | | Beginning Investment Portfolio, at fair value | $324,262 | | Portfolio Investments acquired | $48,097 | | Portfolio Investments repaid or sold | $(27,039) | | Net change in unrealized (depreciation) | $(4,387) | | Net realized gain | $264 | | **Ending Investment Portfolio, at fair value** | **$341,910** | - As of March 31, 2025, the top three industry concentrations by fair value were **Structured Finance (15.29%)**, **Specialty Finance (12.51%)**, and **Technology (9.28%)**[38](index=38&type=chunk) [Results of Operations](index=11&type=section&id=Results%20of%20Operations) Total investment income rose to **$12.5 million** in Q1 2025, yielding **$4.6 million** net investment income despite increased expenses, with a net unrealized depreciation Investment Income Comparison (in thousands) | Income Source | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Interest income | $7,966 | $7,581 | | Dividend income | $3,612 | $771 | | Other income | $917 | $557 | | **Total Investment Income** | **$12,495** | **$8,909** | Expenses Comparison (in thousands) | Expense Category | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Total advisory and management fees | $2,422 | $1,738 | | Interest expense | $4,251 | $2,807 | | Other expenses | $1,179 | $1,166 | | **Total Expenses** | **$7,851** | **$5,711** | - The increase in dividend income is primarily due to the investment in the CLO JV, which was formed in the current year[41](index=41&type=chunk) - Interest expense increased primarily due to the issuance of the **8.50% Notes due 2029** and **8.125% Notes due 2029** in 2024[46](index=46&type=chunk) Net Realized and Unrealized Gain/Loss (in thousands) | Category | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net Realized Gain (Loss) | $264 | $2,356 | | Net change in unrealized appreciation/ (depreciation) | $(4,387) | $(6,007) | [Liquidity and Capital Resources](index=14&type=section&id=Liquidity%20and%20Capital%20Resources) As of March 31, 2025, GECC maintained **$1.3 million** cash, **$12 million** drawn on its credit facility, **$207.4 million** total debt, and a **163.8%** asset coverage ratio, affirming sufficient liquidity - As of March 31, 2025, the company had approximately **$1.3 million** of cash and cash equivalents and **$3.5 million** in unfunded commitments[53](index=53&type=chunk)[54](index=54&type=chunk) Contractual Obligations as of March 31, 2025 (in thousands) | Obligation | Total | Less than 1 year | 1-3 years | 3-5 years | More than 5 years | | :--- | :--- | :--- | :--- | :--- | :--- | | GECCO Notes | $57,500 | - | $57,500 | - | - | | GECCZ Notes | $40,000 | - | - | $40,000 | - | | GECCI Notes | $56,500 | - | - | $56,500 | - | | GECCH Notes | $41,400 | - | - | $41,400 | - | | Revolving Credit Facility | $12,000 | - | $12,000 | - | - | | **Total** | **$207,400** | **-** | **$69,500** | **$137,900** | **-** | - The company's asset coverage ratio was approximately **163.8%** as of March 31, 2025, exceeding the **150%** minimum requirement under the Investment Company Act[70](index=70&type=chunk) [Distributions](index=17&type=section&id=Distributions) The company declared a **$0.37 per share** distribution for Q1 2025, an increase from prior quarters, and set the same rate for Q2 2025 Recent Quarterly Distributions Declared | Record Date | Payment Date | Distribution Per Share | | :--- | :--- | :--- | | Dec 16, 2024 | Dec 31, 2024 | $0.35 | | Mar 17, 2025 | Mar 31, 2025 | $0.37 | | Jun 16, 2025 | Jun 30, 2025 | $0.37 | - The board set the distribution for the quarter ending June 30, 2025, at a rate of **$0.37 per share**, to be paid in cash from distributable earnings[76](index=76&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=18&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risk is interest rate exposure, with **$186.1 million** in variable-rate debt, sensitive to a **1%** rate change impacting net investment income by **$1.86 million** - As of March 31, 2025, the company's debt portfolio consisted of approximately **$186.1 million** in variable-rate instruments and **$64.6 million** in fixed-rate instruments[78](index=78&type=chunk) Hypothetical Impact of Interest Rate Changes on Net Investment Income (in thousands) | Reference Rate Change | Increase (decrease) of Net Investment Income | | :--- | :--- | | +3.00% | $5,583 | | +2.00% | $3,722 | | +1.00% | $1,861 | | -1.00% | $(1,861) | | -2.00% | $(3,722) | | -3.00% | $(5,583) | [Controls and Procedures](index=19&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of March 31, 2025, with no material changes to internal controls during the quarter - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of March 31, 2025[83](index=83&type=chunk) - There were no changes in internal control over financial reporting during the quarter ended March 31, 2025, that have materially affected, or are reasonably likely to materially affect, internal controls[84](index=84&type=chunk) PART II. OTHER INFORMATION [Legal Proceedings](index=19&type=section&id=Item%201.%20Legal%20Proceedings) The company is a defendant in *Intrepid Investments, LLC v. London Bay Capital*, a lawsuit alleging fiduciary duty breaches, currently in pre-trial discovery - The company is a defendant in the lawsuit *Intrepid Investments, LLC v. London Bay Capital*, which is currently in the pre-trial discovery phase on surviving claims[209](index=209&type=chunk) [Risk Factors](index=19&type=section&id=Item%201A.%20Risk%20Factors) No material changes to the company's risk factors were reported for the period, with a full discussion available in the Form 10-K for FY2024 - No material changes in risk factors were reported for the period covered by this report. The company refers to its Form 10-K for the year ended December 31, 2024 for a full discussion[87](index=87&type=chunk) [Other Information](index=19&type=section&id=Item%205.%20Other%20Information) No directors or officers adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the quarter ended March 31, 2025 - During the quarter ended March 31, 2025, no director or officer adopted or terminated a Rule 10b5-1 trading arrangement[88](index=88&type=chunk) [Exhibits](index=20&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including CEO and CFO certifications and financial data in inline XBRL format - The exhibits filed with this report include the CEO and CFO certifications (Exhibits **31.1, 31.2, 32.1**) and financial statements in inline XBRL format (Exhibit **101**)[91](index=91&type=chunk) Financial Statements and Notes [Statements of Assets and Liabilities (unaudited)](index=23&type=section&id=Statements%20of%20Assets%20and%20Liabilities%20(unaudited)) As of March 31, 2025, GECC reported total assets of **$350.8 million**, net assets of **$132.3 million**, and NAV per share of **$11.46** Key Balance Sheet Items (in thousands, except per share data) | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total investments, at fair value | $341,910 | $332,710 | | Total assets | $350,830 | $342,028 | | Total liabilities | $218,535 | $205,915 | | **Total net assets** | **$132,295** | **$136,113** | | **Net asset value per share** | **$11.46** | **$11.79** | [Statements of Operations (unaudited)](index=24&type=section&id=Statements%20of%20Operations%20(unaudited)) For Q1 2025, total investment income was **$12.5 million**, yielding **$4.6 million** net investment income and a **$0.5 million** net increase in net assets from operations Key Operational Results (in thousands, except per share data) | Line Item | For the Three Months Ended March 31, 2025 | For the Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Total investment income | $12,495 | $8,909 | | Total expenses | $7,851 | $5,711 | | Net investment income | $4,576 | $3,193 | | Net realized and unrealized gains (losses) | $(4,123) | $(3,651) | | **Net increase (decrease) in net assets** | **$453** | **$(458)** | | **Earnings per share (basic and diluted)** | **$0.04** | **$(0.05)** | [Statements of Changes in Net Assets (unaudited)](index=25&type=section&id=Statements%20of%20Changes%20in%20Net%20Assets%20(unaudited)) In Q1 2025, net assets decreased by **$3.8 million** to **$132.3 million**, primarily due to distributions, partially offset by operations Reconciliation of Net Assets for Q1 2025 (in thousands) | Description | Amount | | :--- | :--- | | Net assets at beginning of period (Jan 1, 2025) | $136,113 | | Net increase from operations | $453 | | Distributions to stockholders | $(4,271) | | **Net assets at end of period (Mar 31, 2025)** | **$132,295** | [Statements of Cash Flows (unaudited)](index=26&type=section&id=Statements%20of%20Cash%20Flows%20(unaudited)) Net cash used in operating activities was **$5.9 million** in Q1 2025, offset by **$7.1 million** from financing, resulting in a **$1.3 million** increase in cash - Net cash used for operating activities was **$(5.9) million** for the three months ended March 31, 2025, driven by purchases of investments of **$47.8 million**, offset by proceeds from sales and principal payments[102](index=102&type=chunk)[55](index=55&type=chunk) - Net cash provided by financing activities was **$7.1 million**, consisting of **$12.0 million** in net borrowings on the revolving credit facility less **$4.8 million** in distributions paid to stockholders[102](index=102&type=chunk)[56](index=56&type=chunk) [Schedule of Investments (unaudited)](index=27&type=section&id=Schedule%20of%20Investments%20(unaudited)) As of March 31, 2025, the **$341.9 million** investment portfolio was primarily debt and equity, concentrated in key industries, with **93.7%** in the US Portfolio Composition by Investment Type (as of March 31, 2025) | Investment Type | Fair Value (in thousands) | Percentage of Net Assets | | :--- | :--- | :--- | | Debt | $242,921 | 183.63% | | Equity/Other | $98,989 | 74.82% | | **Total** | **$341,910** | **258.45%** | Top 5 Industry Concentrations (as of March 31, 2025) | Industry | Fair Value (in thousands) | Percentage of Fair Value | | :--- | :--- | :--- | | Structured Finance | $52,210 | 15.29% | | Specialty Finance | $42,778 | 12.51% | | Technology | $31,730 | 9.28% | | Consumer Products | $25,675 | 7.51% | | Transportation Equipment Manufacturing | $25,611 | 7.49% | - The portfolio is primarily concentrated in the United States, which accounts for **93.7%** (or **$320.5 million**) of the portfolio's fair value[109](index=109&type=chunk) [Notes to the Unaudited Financial Statements](index=39&type=section&id=Notes%20to%20the%20Unaudited%20Financial%20Statements) This section details accounting policies, GECM agreement, fair value measurements (**$178.9 million** Level 3), **$207.4 million** debt, and financial highlights including **$11.46** NAV per share [Note 3. Significant Agreements and Related Parties](index=44&type=section&id=Note%203.%20Significant%20Agreements%20and%20Related%20Parties) The company is externally managed by GECM, incurring a **1.50%** base management fee and a **20%** income incentive fee over a **7%** hurdle, with **$1.3 million** in management fees and **$1.2 million** in income incentive fees for Q1 2025 - The base management fee is calculated at an annual rate of **1.50%** of the company's average adjusted gross assets. For Q1 2025, this amounted to **$1,272 thousand**[155](index=155&type=chunk)[156](index=156&type=chunk) - The Income Incentive Fee is **20%** of pre-incentive fee net investment income over a **7.0%** annualized hurdle rate. For Q1 2025, the company incurred **$1,150 thousand** in income incentive fees[158](index=158&type=chunk)[163](index=163&type=chunk) - The Capital Gains Incentive Fee is **20%** of cumulative realized capital gains since April 1, 2022, net of losses and unrealized depreciation. No fee was accrued for Q1 2025[162](index=162&type=chunk)[163](index=163&type=chunk) [Note 4. Fair Value Measurement](index=46&type=section&id=Note%204.%20Fair%20Value%20Measurement) The **$341.9 million** investment portfolio is categorized by fair value hierarchy, with **$178.9 million** in Level 3 assets and **$56.0 million** valued at NAV Fair Value Hierarchy of Investments (as of March 31, 2025, in thousands) | Level | Debt | Equity/Other | Total | | :--- | :--- | :--- | :--- | | Level 1 | $ - | $3,127 | $3,127 | | Level 2 | $103,897 | $ - | $103,897 | | Level 3 | $139,024 | $39,912 | $178,936 | | **Total Categorized** | **$242,921** | **$43,039** | **$285,960** | | Investment measured at NAV | | | $55,950 | | **Total Investments** | | | **$341,910** | - For the three months ended March 31, 2025, there was a net transfer of assets from Level 3 to Level 2 of **$21.9 million**, primarily due to increased pricing transparency for six investments[178](index=178&type=chunk) [Note 5. Debt](index=50&type=section&id=Note%205.%20Debt) As of March 31, 2025, total debt outstanding was **$207.4 million**, including **$12 million** from a credit facility and **$195.4 million** in unsecured notes, with a **163.8%** asset coverage ratio - The company has a **$25 million** senior secured revolving credit facility with City National Bank, maturing in May 2027. As of March 31, 2025, **$12 million** was outstanding[185](index=185&type=chunk) Unsecured Notes Outstanding (as of March 31, 2025, in thousands) | Note Series | Principal Outstanding | Maturity Date | | :--- | :--- | :--- | | GECCO 5.875% | $57,500 | June 30, 2026 | | GECCZ 8.75% | $40,000 | Sep 30, 2028 | | GECCI 8.50% | $56,500 | April 30, 2029 | | GECCH 8.125% | $41,400 | Dec 31, 2029 | | **Total** | **$195,400** | | - The company's asset coverage ratio was approximately **163.8%** as of March 31, 2025, compliant with the **150%** minimum requirement[198](index=198&type=chunk) [Note 9. Financial Highlights](index=57&type=section&id=Note%209.%20Financial%20Highlights) For Q1 2025, NAV per share decreased to **$11.46**, with **$0.40 per share** net investment income, a **0.34%** NAV return, and a **20.88%** annualized expense ratio Financial Highlights Per Share | Per Share Data | For the Three Months Ended March 31, 2025 | For the Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Net asset value, beginning of period | $11.79 | $12.99 | | Net investment income | $0.40 | $0.37 | | Net increase (decrease) from operations | $0.04 | $(0.05) | | Distributions declared | $(0.37) | $(0.35) | | **Net asset value, end of period** | **$11.46** | **$12.57** | Key Ratios and Supplemental Data | Ratio/Data | For the Three Months Ended March 31, 2025 | For the Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Total return based on net asset value | 0.34% | (0.53)% | | Total return based on market value | (3.91)% | 7.14% | | Ratio of total expenses to avg. net assets (annualized) | 20.88% | 18.51% | | Ratio of net investment income to avg. net assets (annualized) | 16.12% | 13.71% | | Portfolio turnover | 8% | 12% |

Core Viewpoint - Great Elm Capital Corp. reported strong financial results for Q1 2025, achieving record total investment income of $12.5 million, driven by cash flows from its CLO joint venture and new investments, with net investment income (NII) exceeding the increased quarterly distribution [3][5]. Financial Highlights - Total investment income for Q1 2025 was $12.5 million, or $1.08 per share, compared to $8.9 million in Q1 2024 [8][20]. - NII for Q1 2025 was $4.6 million, or $0.40 per share, up from $2.1 million, or $0.20 per share, in Q4 2024 [5][20]. - The company increased its quarterly distribution by 5.7% to $0.37 per share for Q1 2025, with a second quarter distribution of the same amount approved, equating to a 14.7% annualized yield based on the closing price of $10.09 on May 2, 2025 [5][10]. Portfolio and Investment Activity - As of March 31, 2025, GECC held total investments of $341.9 million at fair value, with a significant portion in corporate credit [5][19]. - The weighted average current yield on the debt portfolio was 12.3%, with floating rate instruments comprising approximately 73% of the fair market value of debt investments [6][11]. - During Q1 2025, GECC deployed approximately $37.4 million into 16 investments at a weighted average current yield of 15.1% [6]. Asset and Liability Overview - Net assets were $132.3 million, or $11.46 per share, as of March 31, 2025, down from $136.1 million, or $11.79 per share, at the end of Q4 2024 [5][19]. - Total debt outstanding was $207.4 million, with various senior notes and $12.0 million outstanding on a revolving line of credit [9][19]. Management Commentary - The CEO expressed optimism about the company's ability to cover distributions throughout 2025 and emphasized a focus on capital deployment into opportunities with compelling risk-adjusted returns [3].

Core Viewpoint - Great Elm Capital Corp. (GECC) will release its financial results for Q1 2025 on May 5, 2025, and discuss them in a conference call on May 6, 2025, at 8:30 a.m. ET [1] Group 1 - The conference call will be accessible via dial-in numbers for both the United States and international participants [2] - Participants are advised to join the call approximately five minutes before the start time and provide the passcode "GECC" [2] - An accompanying slide presentation will be available in PDF format on GECC's website after the earnings release [2][3] Group 2 - GECC is an externally managed business development company focused on generating current income and capital appreciation through investments in debt and income-generating equity securities [4] - The company invests in specialty finance businesses and collateralized loan obligations (CLOs) [4]

Financial Data and Key Metrics Changes - In Q4 2024, the company generated net investment income (NII) of $2.1 million or $0.20 per share, down from $4.1 million or $0.39 per share in Q3 2024, primarily due to uneven cash flows from CLOs [23][24] - The net asset value (NAV) per share decreased to $11.79 as of December 31, 2024, from $12.04 as of September 30, 2024, while total net assets increased to $136 million from $126 million [25][26] - The asset coverage ratio improved to 169.7% from 166.2% in the previous quarter, with total debt outstanding at approximately $195 million [26] Business Line Data and Key Metrics Changes - The corporate portfolio grew by 34% in 2024, reaching $240 million, with first lien loans comprising 71% of the portfolio at year-end, up from 67% [29] - The CLO joint venture (JV) has deployed approximately $40 million through December 31, 2024, and is expected to become a significant income source for the company [30][31] Market Data and Key Metrics Changes - The company experienced a total return on stock of nearly 80% over the past two years, outperforming the Cliffwater and S&P BDC indices, with a cumulative return on NAV per share exceeding 30% [14] Company Strategy and Development Direction - The company aims to enhance portfolio quality by increasing secured debt positions and focusing on cash-generating assets, with a target return of high teens to 20% from the CLO JV [28][29] - The strategy includes a measured approach to capital deployment, prioritizing credit quality and seeking investments with minimal risk of permanent capital loss [34] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in covering the increased dividend in Q1 2025 and anticipates that NII will improve in subsequent quarters, setting the stage for growth in 2025 [20][55] - The company is optimistic about its ability to generate sustainable returns and deliver increasing value to shareholders in 2025 and beyond [21][41] Other Important Information - The Board of Directors authorized a cash distribution of $0.37 per share for Q1 2025, representing a 5.7% increase from the previous quarter [27] - The company has a $25 million undrawn revolver available to meet remaining commitments for the CLO JV [48] Q&A Session Summary Question: Has the CLO JV been fully funded? - The JV is not fully funded, with some uncommitted capital still to be drawn as of December 31 [45] Question: How will the company raise capital to finish funding the JV? - The company has $8 million in cash and equivalents and a $25 million unfunded revolver available to meet the remaining commitment [47][48] Question: Why is the JV only investing in Apex CLOs? - The current investment mix is focused on Apex due to strategic partnerships, but diversification may occur over time [50] Question: How does spread compression impact CLO cash flows? - Despite spread compression, the company expects high teens to 20% IRRs from CLO cash flow generation [52] Question: What is the outlook for the Maverick Gaming position? - The company evaluates the position quarterly and monitors the situation closely, but specific details cannot be disclosed [56][59] Question: What is the target size or contribution of the CLO JV to total results? - The company targets CLO exposure to grow to around 20% of its asset base over time [62] Question: What is the outlook for the corporate portfolio pipeline? - The company sees a stable pipeline with some opportunities in the secondary market, but immediate repayments are not expected [70]

Great Elm Capital (GECC) Q4 2024 Earnings Call March 11, 2025 02:34 PM ET Company Participants Peter Sceusa - Investor Relations Senior AssociateMatt Kaplan - CEO & PresidentKeri Davis - CFO & TreasurerMichael Keller - President - Specialty Finance BusinessMickey Schleien - MD - Equity ResearchErik Zwick - Managing Director, Equity Research Operator Greetings, and welcome to the Great Elm Capital Corporation Fourth Quarter twenty twenty four Financial Results Call. At this time, all participants are in a li ...

Market Share and Product Segments - First Brands, Inc. holds a 26% market share in the aftermarket brake components market, leading with its Centric, Raybestos, Specialty, and private label offerings[26] - The Filter Products segment of First Brands commands a 30% market share, driven by its FRAM and Champion Laboratory brands[26] - First Brands' Wiper Segment is the top supplier of aftermarket wiper blades, with a significant 37% market share through brands like Trico, ANCO, and Michelin[26] Investment Management and Fees - The base management fee for GECM is set at an annual rate of 1.50% of average adjusted gross assets, payable quarterly[49] - The Income Incentive Fee is based on pre-incentive fee net investment income, which includes interest and dividend income minus operating expenses[51] - The fixed hurdle rate for pre-incentive fee net investment income is 1.75% per quarter, equating to 7.00% annualized[53] - For the year ended December 31, 2024, the company incurred $4.5 million in base management fees and $2.6 million in income-based fees accrued during the period[66] - For the year ended December 31, 2023, the company incurred $3.5 million in base management fees and $3.1 million in income-based fees accrued during the period, with no capital gains incentive fees earned[67] - For the year ended December 31, 2022, the company incurred $3.2 million in base management fees and $0.6 million in income-based fees accrued during the period, with no capital gains incentive fees earned[68] - The Capital Gains Incentive Fee is calculated as 20% of the positive difference between cumulative realized capital gains and cumulative realized capital losses, minus any fees paid in prior years[57] - The pre-incentive fee net investment income must exceed a hurdle rate of 1.75% to earn an incentive fee, with a "catch up" provision applicable for income exceeding 2.1875%[60] - Aggregate realized capital gains for Year 2 in Assumption 1 were $30.0 million, leading to a Capital Gains Incentive Fee of $6.0 million[63] - Aggregate realized capital gains for Year 3 in Assumption 1 were $31.0 million, resulting in a Capital Gains Incentive Fee calculated as greater than zero[64] - The company deferred cash payment of any Income Incentive Fee exceeding 20% of the Cumulative Pre-Incentive Fee Net Return during the Trailing Twelve Quarters[56] - The cumulative aggregate realized capital gains are calculated as the sum of positive differences between net sales price and cost basis of investments[58] Compliance and Regulatory Requirements - The company intends to qualify as a regulated investment company (RIC) and must derive at least 90% of its gross income from qualifying sources each taxable year[92] - To maintain RIC status, the company must ensure that at least 50% of its total assets are represented by cash, U.S. Government securities, and other regulated investment companies, with no more than 25% in securities of any one issuer[92] - If the company fails to meet the 90% gross income requirement, it may be subject to corporate-level U.S. federal income tax[93] - The company must distribute at least 90% of its investment company taxable income to avoid U.S. federal income tax on that income[95] - A 4% federal excise tax is imposed if the company does not meet certain distribution requirements during the calendar year[97] - The company is prohibited from making cash distributions or repurchasing stock unless it meets applicable asset coverage ratios[87] - The company must maintain a bond issued by a reputable fidelity insurance company as part of its BDC requirements[77] - The company may not acquire assets unless at least 70% of its total assets are qualifying assets[80] - The Board must consist of a majority of directors who are not "interested persons" as defined by the Investment Company Act[77] - The company has adopted a code of business conduct and ethics applicable to its directors and officers[88] - The company maintains an insider trading policy to govern securities transactions by its directors and officers[90] - The company is required to meet various distribution, income, and asset-related requirements to qualify as a RIC, with no assurance of continued compliance[114] Financial Risks and Investment Strategies - The company is subject to financial risks, including changes in market interest rates, with approximately $179.8 million in principal amount of debt investments bearing variable interest rates as of December 31, 2024[386] - Interest rate increases could lead to higher gross investment income for the company, impacting net investment income positively if not offset by increased operating expenses[386] - The company may face challenges in making distributions necessary to satisfy tax requirements due to the nature of its investments[102] - If the company invests in foreign securities, it may be subject to withholding and other foreign taxes, which could affect stockholder tax credits[105] - The company may need to restructure investments in portfolio companies facing financial difficulties, potentially leading to non-qualifying income[103] - The company’s ability to pay dividends may be limited by loan covenants, which could jeopardize its RIC status[110] - The company may employ subsidiaries treated as U.S. corporations to manage income that could disqualify it from RIC status, leading to reduced yields for stockholders[113] Governance and Agreements - The Investment Management Agreement was renewed on July 23, 2024, and is effective until September 26, 2025[75] - The Board considered factors such as the quality of advisory services, investment performance, and economies of scale in approving the Investment Management Agreement[76] - GECM is indemnified for damages arising from its services under the Investment Management Agreement, except in cases of willful misconduct or gross negligence[73] - The Administration Agreement with GECM includes provisions for indemnification from the company for damages arising from GECM's services, absent willful misconduct[117] - The company bears all costs and expenses incurred in its operations and transactions not specifically assumed by GECM[116] - The company has a non-exclusive, royalty-free license to use the name "Great Elm Capital Corp." as long as GECM remains its investment adviser[118] - The Administration Agreement may be terminated by either party with 60 days' written notice[115] Distribution and Earnings - The Board set a distribution for the quarter ending March 31, 2025, at a rate of $0.37 per share, fully from distributable earnings[388] - The aggregate amount of brokerage commissions paid by the company during the three most recent fiscal years is approximately $129, with nearly 100% of these commissions paid to Imperial Capital, LLC[120] - GECM is responsible for selecting brokers and dealers for publicly traded securities transactions, aiming to obtain the best net results[119]

Capital Raising and Financial Position - Great Elm Capital Corp. raised nearly $150 million in capital during 2024, including $50 million of equity at net asset value[3] - Net assets increased to $136.1 million, or $11.79 per share, as of December 31, 2024, compared to $125.8 million, or $12.04 per share, at the end of Q3 2024[4] - Cash and money market fund investments totaled approximately $8.4 million, with an undrawn revolving line of credit availability of $25.0 million[9] Investment Income and Expenses - Net investment income (NII) for Q4 2024 was $2.1 million, or $0.20 per share, down from $4.1 million, or $0.39 per share in Q3 2024[4] - Total investment income for Q4 2024 was $9.1 million, or $0.85 per share, while net expenses were approximately $7.0 million, or $0.66 per share[8] - Total investment income for 2024 was $39,323,000, an increase of 9.2% from $35,825,000 in 2023[21] - Net investment income for 2024 was $12,453,000, slightly down from $12,542,000 in 2023[21] - Total expenses increased to $26,522,000 in 2024, up 15.0% from $22,996,000 in 2023[21] Investment Performance - Net realized gain on investment transactions was $1,871,000 in 2024, compared to a loss of $4,707,000 in 2023[21] - Net change in unrealized depreciation on investments was $(10,771,000) in 2024, contrasting with an appreciation of $17,498,000 in 2023[21] - Interest income from non-affiliated, non-controlled investments rose to $24,619,000 in 2024, up from $23,582,000 in 2023[21] - Total dividend income increased to $6,925,000 in 2024, compared to $3,478,000 in 2023[21] Shareholder Returns - A special cash distribution of $0.05 per common share was declared in December 2024, reflecting strong performance throughout the year[4] - The quarterly dividend was increased by 5.7% to $0.37 per share for Q1 2025, representing a 13.7% annualized yield based on the closing market price of $10.78 on March 7, 2025[4] Share Statistics - Earnings per share (basic and diluted) for 2024 was $0.36, a significant decrease from $3.33 in 2023[21] - Weighted average shares outstanding increased to 9,844,014 in 2024 from 7,601,958 in 2023[21] Asset Coverage and Cash Flow - The asset coverage ratio improved to 169.7% as of December 31, 2024, from 166.2% at the end of Q3 2024[4] - Cash distributions from the CLO JV decreased to $0.5 million in Q4 2024 from $3.2 million in Q3 2024[4]

Core Viewpoint - Great Elm Capital Corp. reported strong financial results for 2024, raising nearly $150 million in capital and enhancing its cash-generating capabilities through a CLO joint venture, while also increasing its dividend by 5.7% for the first quarter of 2025 [3][4]. Financial Highlights - For Q4 2024, the company reported earnings per share (EPS) of $0.17 and net investment income (NII) per share of $0.20, down from $0.39 in Q3 2024 [4][7]. - Total investment income for Q4 2024 was $9.1 million, with net expenses of approximately $7.0 million, resulting in net realized and unrealized losses of about $0.3 million [7]. - The net asset value (NAV) per share decreased to $11.79 as of December 31, 2024, from $12.99 at the end of Q4 2023 [4][20]. Portfolio and Investment Activity - As of December 31, 2024, GECC held total investments valued at $324.3 million, with a weighted average current yield on the debt portfolio of 12.4% [5][6]. - The company deployed approximately $47.2 million into 18 investments during Q4 2024, achieving a weighted average current yield of 12.9% [6]. - GECC monetized 48 investments for approximately $57.5 million during the same quarter, with a weighted average current yield of 9.9% [6]. Liquidity and Capital Resources - As of December 31, 2024, GECC had cash and money market fund investments totaling approximately $8.4 million, with an undrawn revolving line of credit of $25.0 million [8]. - Total debt outstanding was $195.4 million, with various senior notes maturing between 2026 and 2029 [9]. Distributions - The Board of Directors approved a quarterly cash distribution of $0.37 per share for Q1 2025, reflecting a 13.7% annualized yield based on the closing market price of $10.78 on March 7, 2025 [10].