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Great Elm Capital (GECC) - 2025 Q1 - Earnings Call Presentation
2025-05-05 21:04
Financial Performance - Total Investment Income (TII) increased by 367% from $91 million in 4Q 2024 to a record $125 million in 1Q 2025 [6, 12] - Net Investment Income (NII) increased from $21 million or $020 per share in 4Q 2024 to $46 million or $040 per share in 1Q 2025 [6, 14] - Net assets decreased from $1361 million or $1179 per share in 4Q 2024 to $1323 million or $1146 per share in 1Q 2025 [6, 17] Portfolio Composition - The fair value of the total investment portfolio was $3419 million as of March 31, 2025 [11, 29] - Debt investments comprised 710% of the portfolio with a fair value of $2429 million and a weighted average current yield of 123% [23] - CLO investments accounted for 153% of the portfolio with a fair value of $522 million [23, 30] Distribution - The Board approved a quarterly distribution of $037 per share for the quarter ending June 30, 2025 [6, 7] - This equates to a 147% annualized yield on the May 2, 2025 closing market price of $1009 and a 129% annualized yield on the March 31, 2025 NAV of $1146 per share [6, 7] CLO Joint Venture - GECC deployed approximately $48 million into the CLO JV and holds a 7125% interest [47] - The CLO JV generated a 29% IRR since inception in April 2024 [50] - The CLOs and Warehouse have exposure to approximately $11 billion of underlying assets [50]
Great Elm Capital (GECC) - 2025 Q1 - Quarterly Results
2025-05-05 20:52
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]
Great Elm Capital (GECC) - 2025 Q1 - Quarterly Report
2025-05-05 20:49
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% |
Great Elm Capital Corp. Announces First Quarter 2025 Financial Results
Globenewswire· 2025-05-05 20:15
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].
Great Elm Capital Corp. (“GECC”) Schedules First Quarter 2025 Earnings Release and Conference Call
Globenewswire· 2025-04-30 20:15
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]
Great Elm Capital (GECC) - 2024 Q4 - Earnings Call Transcript
2025-03-11 17:00
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) - 2024 Q4 - Earnings Call Transcript
2025-03-11 18:34
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 ...
Great Elm Capital (GECC) - 2024 Q4 - Annual Report
2025-03-10 21:13
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]
Great Elm Capital (GECC) - 2024 Q4 - Annual Results
2025-03-10 21:06
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]
Great Elm Capital Corp. Announces Fourth Quarter and Full Year 2024 Financial Results
GlobeNewswire News Room· 2025-03-10 20:15
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].