Summary of Great Elm Capital Corp. Q1 2026 Earnings Call

1Key Financial Results and Metrics

Net Investment Income (NII): Increased to $5 million ($0.36 per share) from $4.4 million ($0.31 per share) in Q4 2025, a 13% quarter-over-quarter growth largely attributed to a waiver of incentive fees.

Net Asset Value (NAV): Declined to $107.5 million ($7.74 per share) from $112.9 million ($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: A quarterly dividend of $0.25 per share was approved for Q2 2026, representing an 18% annualized yield based on the May 1 closing price.

2Strategic Updates and Business Highlights

Jason Reese, newly appointed CEO, emphasized a shift in focus to protect and grow NAV while still generating income.

The company waived approximately $2.8 million in accrued incentive fees, benefiting shareholders directly.

GECC has repurchased $57.5 million of GECCO notes, eliminating near-term refinancing risks and allowing for strategic capital deployment.

Portfolio quality is improving, with nearly 75% of investments now in first lien positions, the highest level in recent history.

Great Elm Specialty Finance (GESF) is undergoing a strategic transformation, with all three core verticals (Commercial Finance, Healthcare Finance, and Invoice Financing) now profitable.

3Forward Guidance and Outlook

The company aims to continue rebuilding NAV and generating sustainable NII, with a focus on disciplined underwriting and capital allocation.

Cash flows from CLO investments are expected to stabilize, with an anticipated $2.5 million in cash flows for the upcoming quarters.

There is a commitment to balance between investing in new opportunities and share repurchases, with a preference for traditional private credit deals over broadly syndicated loans.

4Bad News, Challenges, or Points of Concern

NAV decline due to unrealized losses in CLO investments and a private investment affected by an idiosyncratic event.

The broader BDC sector is facing challenges, which have impacted GECC's performance.

There remains a risk associated with CLO investments due to their inherent volatility and leverage, although they provide diversification and cash flow.

5Notable Q&A Insights

Jason Reese indicated that the company has completed its current deleveraging efforts, with no funded debt maturities until 2029.

The focus will remain on protecting NAV, and the possibility of continuing to waive incentive fees will be evaluated based on shareholder interests.

The company is not currently looking to make new CLO equity investments, aiming to maintain stability in cash flows.

There is a clear strategy to prioritize risk-adjusted returns in capital deployment decisions, balancing between investments and share repurchases. Overall, GECC is positioned to navigate current challenges while focusing on long-term value creation and maintaining a strong balance sheet.