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

Summary of Great Elm Capital Corp. Q1 2026 Earnings Call

1. Key Financial Results and Metrics

• Net Investment Income (NII): $5 million, or $0.36 per share, up from $4.4 million or $0.31 per share in Q4 2025, primarily due to a waiver of incentive fees.
• Net Asset Value (NAV): Declined to $107.5 million, or $7.74 per share, from $112.9 million, or $8.07 per share in the previous quarter.
• Asset Coverage Ratio: Improved to 161.8% from 158.1%.
• Debt-to-Equity Ratio: Decreased to 1.62x from 1.72x, reflecting ongoing deleveraging efforts.
• Cash Position: Approximately $10 million in cash and liquid assets, with no borrowings on the $50 million revolving credit facility.
• Dividend: Quarterly dividend of $0.25 per share approved for Q2 2026, yielding 18% based on the closing price of $5.56 on May 1, 2026.

2. Strategic Updates and Business Highlights

• Leadership Transition: Jason Reese appointed as CEO, emphasizing a focus on protecting and growing NAV while creating income.
• Investment Strategy: Shift towards strengthening oversight and disciplined underwriting, with a focus on first lien investments, which now comprise nearly 75% of the corporate portfolio.
• Deleveraging Actions: Full repurchase of $57.5 million in GECCO notes, eliminating near-term refinancing risk until 2029.
• CLO Investments: Continued cash flow generation from CLO investments, despite recent market volatility. The company has waived incentive fees for three consecutive quarters, benefiting shareholders directly.
• Growth Initiatives: Expansion of proprietary sourcing efforts and a robust pipeline in asset-based lending and healthcare finance.

3. Forward Guidance and Outlook

• Cash Flow Expectations: Anticipated consistent cash flows from CLO investments, with approximately $2.5 million expected each quarter moving forward.
• Investment Focus: Continued emphasis on traditional private credit deals over broadly syndicated loans, aiming for better yields with less risk.
• Capital Deployment Strategy: Ongoing evaluation of capital allocation between share repurchases, debt repayment, and new investments, with a priority on rebuilding NAV.

4. Bad News, Challenges, or Points of Concern

• NAV Decline: The decrease in NAV was attributed to unrealized losses in specific investments, particularly in CLOs and a private investment affected by an idiosyncratic event.
• Market Volatility: The broader BDC sector is facing challenges, and GECC is not immune to these macroeconomic pressures.
• CLO Market Risks: While CLOs provide diversification, their inherent leverage can lead to volatility, impacting investment valuations.

5. Notable Q&A Insights

• Deleveraging Status: Jason Reese indicated that the company has nearly completed its deleveraging efforts, with only $18 million of 2026 notes remaining, which are expected to be paid off soon.
• Investment Pipeline: The company is focusing on traditional private credit opportunities, with a preference for risk-adjusted returns. Share repurchases are being considered alongside new investments.
• Incentive Fee Waiver: The management is committed to waiving the incentive fee if necessary to protect shareholder interests and ensure dividend coverage, reflecting a shift in focus towards NAV protection.

Overall, Great Elm Capital Corp. is navigating a challenging environment with a strategic focus on capital preservation and disciplined investment practices while maintaining a commitment to shareholder value through fee waivers and dividend distributions.