Financial Data and Key Metrics Changes - The company reported net investment income (NII) of $16.6 million or $0.45 per share for Q1 2025, down from $20.5 million or $0.55 per share in Q4 2024, primarily due to lower base rates, the roll-off of one-time items, and reduced dividend income from the Logan JV [5][23][24] - The increase in loans on non-accrual rose to 3.5% of debt investments at cost and fair value, with four new names added, representing less than 1.2% of the total portfolio at fair value [6][12] Business Line Data and Key Metrics Changes - Gross deployment in Q1 totaled $105 million, with 98% in first lien investments, compared to approximately $78 million in exits, resulting in a net deployment of approximately $27 million [17] - The weighted average yield of income-producing securities at cost decreased by 50 basis points quarter over quarter to 10.4% [20] Market Data and Key Metrics Changes - The company noted a slowdown in M&A activity due to tariff announcements, leading to a backlog of deal activity [8] - The overall direct material exposure of the portfolio to tariffs is modest at 4%, with a focus on service businesses with low material costs [18] Company Strategy and Development Direction - The company continues to focus on first lien loans, which represent 91% of the portfolio at fair value, and aims to invest in non-cyclical industries [11] - The management emphasized a disciplined credit underwriting approach and capital preservation, particularly in light of market volatility [30] Management's Comments on Operating Environment and Future Outlook - Management expressed that the current earnings reflect a near-term baseline, with potential tailwinds from asset-based facility repricing and rightsizing completed at the beginning of the quarter [6][7] - The company remains optimistic about its ability to weather potential volatility due to its diversified portfolio and strong relationships with private equity sponsors [20] Other Important Information - The company declared a regular dividend of $0.42 per share for Q2 2025, along with a special dividend related to undistributed taxable income [12][29] - The stockholders' equity was reported at $727 million, resulting in a net asset value per share of $19.62 [26] Q&A Session Summary Question: Regarding the new accruals this quarter, specifically New Era of Technology - Management clarified that the mark reflects the latest view on earnings outlook and that the company has not yet restructured [34][36] Question: What is Crescent's approach to resolving non-accrual situations? - Management stated that the primary goal is to preserve capital, and they consider various options including restructuring or selling the company [42][44] Question: Can you explain the significant decline in the Logan dividend? - Management explained that the decline was due to timing mismatches in cash distributions and the impact of overcollateralization tests within the CLO structure [50][56] Question: What percentage of the portfolio consists of Crescent-led deals? - Management indicated that about 8% of the total fair value consists of acquired assets, while 92% are loans originated by Crescent [46] Question: What is the sentiment towards the overall market and outlook for spreads? - Management noted significant inflows into non-traded BDCs, which are putting pressure on spreads, but they remain selective in their investment approach [78][82]

Financial Data and Key Metrics Changes - For the quarter ending March 31, 2025, the company reported net investment income before taxes of $700,000 or $0.05 per share, down from $0.06 per share in the prior quarter [4] - The net asset value per share increased by $0.02 to $5.42 compared to $5.39 as of September 30, 2024 [4] - The fair value of the portfolio was $192.4 million, an increase from $191.6 million on December 31 [14] - Net assets increased by $500,000 from the prior quarter to $78.1 million [14] - The weighted average yield of the debt portfolio increased to 10.8% from 10.4% in the previous quarter [14] Business Line Data and Key Metrics Changes - The company invested in one new portfolio company and two existing portfolio companies during the quarter, with total fundings for new investments amounting to $5.1 million [9] - The weighted average yield of debt investments made in the quarter was approximately 10.2% [9] - The five largest industry concentrations by fair market value were professional services (15.5%), containers and packaging (9.2%), trading companies and distributors (8.6%), commercial services and suppliers (8%), and IT services (7.9%) [12] Market Data and Key Metrics Changes - There was a noticeable slowdown in new deal activity, attributed to a decline in M&A volume and sponsor-less financing [6] - The company estimates that less than 20% of its portfolio may experience moderate direct effects from tariffs [7] Company Strategy and Development Direction - The company is focused on maintaining NAV stability and sustainable net investment income while selectively deploying capital in high-quality opportunities [18] - The management is optimistic about the second half of the year providing interesting investment opportunities due to current market volatility [18] Management's Comments on Operating Environment and Future Outlook - Management noted that the portfolio remains stable, with a significant reduction in non-accruals, now representing approximately 1.7% of the total portfolio at fair value [5] - There is cautious optimism that market fundamentals will improve, leading to a rebound in activity as macro uncertainty decreases [6] - Management indicated that they are currently in the process of raising another pool of capital, expected to benefit the company in the second half of 2025 [27] Other Important Information - The company declared a distribution of $0.12 per share payable in cash on June 14, 2025, to stockholders of record as of May 24, 2025 [16] - Gross leverage was 1.53x and net leverage was 1.37x as of March 31, compared to 1.57x and 1.42x in the previous quarter [17] Q&A Session Summary Question: How can the adviser scale or provide benefits to the BDC? - Management indicated that waiving fees is always a consideration and that they are working on scaling the private credit platform, which will help absorb overhead and expenses [21][23] Question: What is the timeline for capital raising? - Management confirmed that they are currently in the process of raising capital, which is expected to benefit shareholders in the second half of 2025 [27] Question: Why not consider share repurchases given the current stock price? - Management acknowledged that share repurchases are a tool they consider but have no immediate plans to implement [32] Question: Should there be an increase in net investment income in the second quarter? - Management suggested that there could be an increase in net investment income due to spread widening in new opportunities [34][35]

Financial Data and Key Metrics Changes - For the first quarter ended March 31, 2025, the company generated GAAP net investment income of $0.35 per share and core net investment income of $0.37 per share, which excludes estimated excise taxes [6] - Net asset value per share decreased by $0.21 during the quarter primarily due to company-specific write-downs in the loan portfolio and a reduction of spillover income [6] - The company issued 656,085 shares for $9.3 million at an average gross price of $14.11, all above net asset value [6] Business Line Data and Key Metrics Changes - The investment portfolio at fair value increased to $991.1 million across 110 portfolio companies, up from $953.5 million across 105 companies as of December 31, 2024 [7] - During the first quarter, the company invested $46.7 million in seven new portfolio companies and had $8.7 million in other investment activity at par [7] - 90% of the loans were secured, and 91% were priced at floating rates, with an average loan per company of $9.4 million [7][9] Market Data and Key Metrics Changes - The company noted that 52% of the portfolio is rated two or on or ahead of plan, while 21% is marked at an investment category of three or below, indicating some loans are not meeting expectations [9] - Currently, loans to five portfolio companies are on non-accrual status, comprising 6.7% of the total cost and 4% of the fair value of the total loan portfolio, representing a decrease from the prior quarter [9] Company Strategy and Development Direction - The company plans to draw new leverage under the SBIC III license to continue funding qualifying portfolio company investments [10] - The company aims to grow the portfolio to over $1 billion, with expectations for more than $10 million in equity gains by year-end [12] Management's Comments on Operating Environment and Future Outlook - Management indicated that the average portfolio in the first quarter was higher than in the fourth quarter, which is expected to continue into the second quarter, leading to a potential increase in yield [16] - The management expressed optimism about the return of M&A activity, which was temporarily disrupted due to tariff-related uncertainties [20][51] - The company expects to maintain the dividend at $0.40 per share for the second and third quarters, subject to Board approval [12][24] Other Important Information - The company has paid $295 million in dividends since its IPO, representing $17.9 per share to an investor in the IPO [6] - The company received a green light letter from the Small Business Administration for Stellus Capital SBIC III, which is a significant step in the licensing process [10] Q&A Session Summary Question: Impact of first quarter originations on interest income - Management noted that the average portfolio in the first quarter was higher than the fourth, which should lead to a pickup in yield in dollars [16] Question: Pipeline status and lending opportunities - Management indicated that the pipeline is slower compared to three months ago, but they expect interesting opportunities to close in the upcoming quarters [20] Question: Trajectory of net investment income (NII) to cover dividends - Management acknowledged that NII is currently less than the dividend but expects to be in a good position by the end of the year due to potential equity co-investments [24] Question: Trade education acquisition restructuring - Management confirmed that the business was restructured and recapitalized satisfactorily, expecting it to perform well going forward [29] Question: Logic behind issuing fixed-rate debt - Management explained that the issuance was necessary to retire maturing bonds and to have some unsecured debt in the capital stack [36] Question: Future issuance of common shares under the ATM program - Management stated that future issuances would depend on market conditions and stock price trading [40] Question: Second lien loans strategy - Management confirmed that they do not expect to issue new second lien loans, focusing instead on first lien unitranche secured lending [42] Question: Impact of SBA green light on earnings in a lower interest rate environment - Management confirmed that the potential for SBIC debentures would allow for borrowing at lower rates, positively impacting earnings [44]

Great Elm Capital (GECC) Q1 2025 Earnings Call May 06, 2025 08:30 AM ET Speaker0 Greetings and welcome to the Great Elm Capital Corp First Quarter twenty twenty five Financial Results Call. At this time, all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Peter Skusa, a representative of the company. Thank you. You may begin. Speaker1 Hello and than ...