• Net Investment Income (NII): $2.1 million or $0.20 per share in Q4 2024, down from $4.1 million or $0.39 per share in Q3 2024.
• Net Assets: $136 million as of December 31, 2024, up from $126 million as of September 30, 2024.
• NAV per Share: $11.79 as of December 31, 2024.
• Asset Coverage Ratio: 169.7% as of December 31, 2024, compared to 166.2% as of September 30, 2024.
• Total Debt Outstanding: Approximately $195 million as of December 31, 2024.
• Cash and Money Market Securities: Approximately $8 million as of December 31, 2024.
• Quarterly Dividend: Increased to $0.37 per share for Q1 2025, up 5.7% from the prior quarter.
• Annualized Dividend Yield: 12.6% based on December 31, 2024, NAV.
• Market Capitalization: Increased from around $60 million to over $120 million over 2023 and 2024.
• Net Earnings: In excess of $3.60 per share over 2023 and 2024.
• Total Return on Stock: Nearly 80% over the period, outperforming relevant indices.
• First Lien Loans: Comprised 71% of the corporate portfolio at year-end 2024.
• CLO JV Distributions: $3.2 million in Q3 2024 and $3.8 million to date in Q1 2025.

• Warning! GuruFocus has detected 6 Warning Signs with GECC.

Release Date: March 11, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Great Elm Capital Corp (NASDAQ:GECC) increased its quarterly base dividend by 6% to $0.37 per share for the first quarter of 2025, reflecting confidence in its financial position.
• The company's market capitalization doubled from $60 million to over $120 million over the past two years, showcasing significant growth.
• GECC's net asset value (NAV) per share increased by over $0.60, and the company reported net earnings in excess of $3.60 per share.
• The formation of a joint venture to invest in CLOs is expected to enhance cash generation and provide high returns over time.
• GECC's asset coverage ratio improved to 169.7% as of December 31, 2024, indicating a strong financial position.

Negative Points

• The fourth quarter saw a decline in net investment income (NII) due to uneven cash flows from CLOs and temporary impacts from equity raises.
• The company's NAV per share decreased due to dividends exceeding NII in the period.
• The refinancing of debt and new shelf registration led to a $0.03 impact on NII per share.
• The company's earnings were affected by the lumpiness of cash distributions from CLOs, which are uneven at the beginning of their life.
• There is a potential risk associated with the company's investment in Maverick Gaming, which is marked at a distressed level.

Q & A Highlights

Q: Have you and your partners fully funded the CLO JV? A: Matt Kaplan, Chief Executive Officer: The JV commitment is outlined in our 10-Ks, and we have some uncommitted capital still to be drawn. We expect to continue growing it over time.

Q: How do you intend to raise the capital to finish funding your commitment? A: Matt Kaplan, Chief Executive Officer: We ended the quarter with $8 million of cash and equivalents and a $25 million unfunded revolver. We closed on a new SPV to raise equity at net asset value into GECC, which added some funding. We have extra capacity on our revolver to meet the remaining commitment.

Q: Why is the JV only investing in Apex credit CLOs instead of diversifying the portfolio? A: Matt Kaplan, Chief Executive Officer: The current investment mix allows us to take majority positions with strategic institutional partners. We may diversify our CLO exposure over time.

Q: How do you see spread compression impacting the CLO's cash flows this year, and what's your target ROE on your CLO JV investment? A: Matt Kaplan, Chief Executive Officer: We are confident in our CLO cash flow generation, expecting 10% to 20% IRRs. The nature of distributions from the JV can be lumpy initially, but we expect our trailing 12 months NII to improve over the year.

Q: Can you provide a sense of the outlook for Maverick Gaming, given its distressed level? A: Matt Kaplan, Chief Executive Officer: The company operates in multiple geographies, and we evaluate the position quarterly. It's a private company, so there's limited information I can share.

Q: How do you think about the appropriate size or contribution of the CLO JV to Great Elm's total results? A: Matt Kaplan, Chief Executive Officer: Over time, we could see the CLO JV grow to around 20% of our asset base. We plan to continue growing the platform, increasing the income mix as we expand our asset base.

Q: Can you explain your investment selection process for CLOs and how you share responsibilities with your partner? A: Matt Kaplan, Chief Executive Officer: Our partners are sophisticated institutional investors with deep understanding of the CLO market. We evaluate every opportunity as they arise, benefiting from the ability to take majority equity positions.

Q: Could you provide an update on the corporate portfolio pipeline and outlook for deployments? A: Matt Kaplan, Chief Executive Officer: We are seeing opportunities in the secondary space and starting to deploy capital. The direct lending side maintains an active dialogue with a stable pipeline. There are no immediate repayments expected, but some portfolio companies are in discussions for potential refinancing or M&A.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.