GECCI — Great Elm Capital Corp. 8.50% Notes DUE 2029

Summary of Great Elm Capital Corp. (GECC) Q4 2025 Earnings Call

1. Key Financial Results and Metrics:

• Net Investment Income (NII): Increased to $4.4 million ($0.31 per share) from $2.4 million ($0.20 per share) in Q3 2025, driven by higher cash income and stronger CLO joint venture distributions.
• Net Asset Value (NAV): Declined to $112.9 million ($8.07 per share) from $140.1 million ($10.10 per share) in Q3 2025. Pro forma NAV, accounting for waived incentive fees, was $8.23 per share.
• Debt and Liquidity: Total debt outstanding was $194.4 million, with a strong liquidity position including $5 million in cash and no borrowings on a $50 million revolver. Asset coverage ratio was 158.1%, improving to 166% pro forma for the incentive fee waiver.

2. Strategic Updates and Business Highlights:

• Leadership Changes: Jason Reese appointed as Executive Chairman to enhance oversight and accountability.
• Portfolio Repositioning: Significant actions taken to reduce exposure to higher-risk investments, with nonaccruals below 1% of portfolio fair value. The portfolio is now more diversified and focused on cash-generative investments.
• Investment Strategy: The company is prioritizing senior secured positions and maintaining a conservative approach to capital deployment, particularly in light of market volatility.
• CLO Performance: Despite challenges in the CLO equity market, GECC's CLO investments generated positive returns and outperformed the broader market.

3. Forward Guidance and Outlook:

• GECC aims to generate sustainable NII growth and rebuild NAV through disciplined credit execution and strategic capital allocation. The company is positioned to capitalize on attractive investment opportunities as market conditions evolve.
• The Board approved a quarterly dividend of $0.30 per share for 2026, reflecting a 19.2% annualized yield based on recent stock prices.

4. Bad News, Challenges, or Points of Concern:

• Declining NAV: The decrease in NAV was attributed to unrealized losses from stock price volatility and lower fair values on CLO investments, alongside losses from restructuring efforts.
• Market Volatility: The broader credit market remains uncertain, with increasing dispersion and pressure on CLO equity cash flows, which could affect future performance.
• Portfolio Risks: Although the company has reduced exposure to software businesses, concerns about potential disintermediation from AI remain relevant.

5. Notable Q&A Insights:

• Portfolio Repositioning: Management indicated that significant repositioning actions have been completed, but they remain vigilant for further opportunities to derisk the portfolio.
• Investment Opportunities: There is a focus on private credit opportunities, with a selective approach to new investments, ensuring strong covenants and aligned incentives.
• Stock Buyback Program: The Board is actively evaluating the balance between new investments and stock repurchases, emphasizing the importance of shareholder value creation.

Overall, GECC is navigating a challenging credit environment with a focus on improving portfolio quality, maintaining liquidity, and positioning for future growth while addressing the risks associated with market volatility.