Great Elm Capital (US:GECC)2024-05-02 20:09Investment Performance - The company generated total investments of $226.1 million for the year ended December 31, 2023, with a weighted average yield of 13.77%[34] - For the quarter ended March 31, 2024, the company acquired investments totaling $64.6 million and disposed of $29.3 million, resulting in a weighted average yield of 12.84%[34] - The ending investment portfolio at fair value increased to $262.9 million as of March 31, 2024, up from $230.6 million at the end of the previous quarter[36] - The company’s net change in unrealized appreciation on investments for the three months ended March 31, 2024, was a decrease of $6.0 million[36] - The company’s net realized gain on investments for the same period was $2.4 million, contrasting with a loss of $4.7 million for the year ended December 31, 2023[36] - As of March 31, 2024, the total fair value of the investment portfolio was $262.86 million, an increase from $230.61 million as of December 31, 2023, representing a growth of approximately 13.93%[37] - Total investment income for the three months ended March 31, 2024, was $8.91 million, compared to $8.41 million for the same period in 2023, reflecting an increase of 5.9%[38] - Interest income rose to $7.58 million for the three months ended March 31, 2024, up from $6.63 million in the prior year, driven by a portfolio growth and an increase in the average coupon rate from 11.8% to 12.6%[39] - Net realized gains for the three months ended March 31, 2024, were $2.36 million, compared to $1.85 million in the prior year, indicating a growth of approximately 27.03%[48] - The net change in unrealized appreciation/depreciation for the three months ended March 31, 2024, was a loss of $6.01 million, contrasting with a gain of $3.48 million in the same period of 2023[50] Financial Position and Liquidity - As of March 31, 2024, the company had approximately $0.3 million in cash and cash equivalents and $8.3 million in money market fund investments[53] - For the three months ended March 31, 2024, net cash used for operating activities was approximately $25.4 million, while net cash provided by financing activities was $24.8 million[55][56] - The company believes it has sufficient liquidity to meet its short-term and long-term obligations for at least the next 12 months[56] - As of March 31, 2024, total contractual obligations amount to $148.1 million, with $45.6 million due within one year, $57.5 million due in 1-3 years, and $40.0 million due in 3-5 years[57] Debt and Financing - The company has a senior secured revolving line of credit of up to $25 million, with $5.0 million borrowed as of March 31, 2024, and an interest rate of SOFR plus 3.00%[62] - The company issued $30.0 million in 8.50% notes due 2029 on April 17, 2024, with an additional $4.5 million issued following the underwriters' over-allotment option[75] - The company has outstanding GECCM Notes totaling $45.6 million, GECCO Notes totaling $57.5 million, and GECCZ Notes totaling $40.0 million, with respective maturity dates in 2025, 2026, and 2028[64][65][66] Regulatory and Tax Considerations - The company is treated as a RIC for U.S. federal income tax purposes, allowing it to avoid corporate level taxes on distributed income[18] - The company has reset the capital gains incentive fee, eliminating $163.2 million of realized and unrealized losses incurred prior to April 1, 2022, impacting future incentive fees[17] - The company has made amendments to its Investment Management Agreement, eliminating $163.2 million of prior losses from future capital gains calculations[58] - The company is subject to various financial covenants, including maintaining net assets of not less than $65 million and asset coverage of at least 150%[63] Revenue Sources and Business Operations - The company expects to generate revenue and cost synergies through its subsidiary, Great Elm Specialty Finance, LLC, in which it holds approximately 87.5% equity[16] - The company’s primary revenue source is interest from debt investments, with additional revenue from dividends, capital gains, and various fees[21] - The company’s investment activity is influenced by factors such as the availability of capital for middle-market companies and the competitive investment environment[19] Stock Performance and Distributions - The company declared a distribution of $0.35 per share for the quarter ending June 30, 2024, fully sourced from distributable earnings[74] - The company's common stock has traded at a premium of up to 26.1% and a discount of up to 40.4% to NAV over the last two fiscal years[70] - Approximately $164.4 million of the company's debt investments bear interest at variable rates, which are influenced by market interest rates[76] Asset Coverage - As of March 31, 2024, the asset coverage ratio was approximately 180.2%, exceeding the minimum requirement of 150% under the Investment Company Act[68]