Financial Data and Key Metrics Changes - In Q4 2024, the company generated net investment income (NII) of $2.1 million or $0.20 per share, down from $4.1 million or $0.39 per share in Q3 2024, primarily due to uneven cash flows from CLOs [23][24] - The net asset value (NAV) per share decreased to $11.79 as of December 31, 2024, from $12.04 as of September 30, 2024, while total net assets increased to $136 million from $126 million [25][26] - The asset coverage ratio improved to 169.7% from 166.2% in the previous quarter, with total debt outstanding at approximately $195 million [26] Business Line Data and Key Metrics Changes - The corporate portfolio grew by 34% in 2024, reaching $240 million, with first lien loans comprising 71% of the portfolio at year-end, up from 67% [29] - The CLO joint venture (JV) has deployed approximately $40 million through December 31, 2024, and is expected to become a significant income source for the company [30][31] Market Data and Key Metrics Changes - The company experienced a total return on stock of nearly 80% over the past two years, outperforming the Cliffwater and S&P BDC indices, with a cumulative return on NAV per share exceeding 30% [14] Company Strategy and Development Direction - The company aims to enhance portfolio quality by increasing secured debt positions and focusing on cash-generating assets, with a target return of high teens to 20% from the CLO JV [28][29] - The strategy includes a measured approach to capital deployment, prioritizing credit quality and seeking investments with minimal risk of permanent capital loss [34] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in covering the increased dividend in Q1 2025 and anticipates that NII will improve in subsequent quarters, setting the stage for growth in 2025 [20][55] - The company is optimistic about its ability to generate sustainable returns and deliver increasing value to shareholders in 2025 and beyond [21][41] Other Important Information - The Board of Directors authorized a cash distribution of $0.37 per share for Q1 2025, representing a 5.7% increase from the previous quarter [27] - The company has a $25 million undrawn revolver available to meet remaining commitments for the CLO JV [48] Q&A Session Summary Question: Has the CLO JV been fully funded? - The JV is not fully funded, with some uncommitted capital still to be drawn as of December 31 [45] Question: How will the company raise capital to finish funding the JV? - The company has $8 million in cash and equivalents and a $25 million unfunded revolver available to meet the remaining commitment [47][48] Question: Why is the JV only investing in Apex CLOs? - The current investment mix is focused on Apex due to strategic partnerships, but diversification may occur over time [50] Question: How does spread compression impact CLO cash flows? - Despite spread compression, the company expects high teens to 20% IRRs from CLO cash flow generation [52] Question: What is the outlook for the Maverick Gaming position? - The company evaluates the position quarterly and monitors the situation closely, but specific details cannot be disclosed [56][59] Question: What is the target size or contribution of the CLO JV to total results? - The company targets CLO exposure to grow to around 20% of its asset base over time [62] Question: What is the outlook for the corporate portfolio pipeline? - The company sees a stable pipeline with some opportunities in the secondary market, but immediate repayments are not expected [70]

Great Elm Capital (GECC) Q4 2024 Earnings Call March 11, 2025 02:34 PM ET Company Participants Peter Sceusa - Investor Relations Senior AssociateMatt Kaplan - CEO & PresidentKeri Davis - CFO & TreasurerMichael Keller - President - Specialty Finance BusinessMickey Schleien - MD - Equity ResearchErik Zwick - Managing Director, Equity Research Operator Greetings, and welcome to the Great Elm Capital Corporation Fourth Quarter twenty twenty four Financial Results Call. At this time, all participants are in a li ...

Market Share and Product Segments - First Brands, Inc. holds a 26% market share in the aftermarket brake components market, leading with its Centric, Raybestos, Specialty, and private label offerings[26] - The Filter Products segment of First Brands commands a 30% market share, driven by its FRAM and Champion Laboratory brands[26] - First Brands' Wiper Segment is the top supplier of aftermarket wiper blades, with a significant 37% market share through brands like Trico, ANCO, and Michelin[26] Investment Management and Fees - The base management fee for GECM is set at an annual rate of 1.50% of average adjusted gross assets, payable quarterly[49] - The Income Incentive Fee is based on pre-incentive fee net investment income, which includes interest and dividend income minus operating expenses[51] - The fixed hurdle rate for pre-incentive fee net investment income is 1.75% per quarter, equating to 7.00% annualized[53] - For the year ended December 31, 2024, the company incurred $4.5 million in base management fees and $2.6 million in income-based fees accrued during the period[66] - For the year ended December 31, 2023, the company incurred $3.5 million in base management fees and $3.1 million in income-based fees accrued during the period, with no capital gains incentive fees earned[67] - For the year ended December 31, 2022, the company incurred $3.2 million in base management fees and $0.6 million in income-based fees accrued during the period, with no capital gains incentive fees earned[68] - The Capital Gains Incentive Fee is calculated as 20% of the positive difference between cumulative realized capital gains and cumulative realized capital losses, minus any fees paid in prior years[57] - The pre-incentive fee net investment income must exceed a hurdle rate of 1.75% to earn an incentive fee, with a "catch up" provision applicable for income exceeding 2.1875%[60] - Aggregate realized capital gains for Year 2 in Assumption 1 were $30.0 million, leading to a Capital Gains Incentive Fee of $6.0 million[63] - Aggregate realized capital gains for Year 3 in Assumption 1 were $31.0 million, resulting in a Capital Gains Incentive Fee calculated as greater than zero[64] - The company deferred cash payment of any Income Incentive Fee exceeding 20% of the Cumulative Pre-Incentive Fee Net Return during the Trailing Twelve Quarters[56] - The cumulative aggregate realized capital gains are calculated as the sum of positive differences between net sales price and cost basis of investments[58] Compliance and Regulatory Requirements - The company intends to qualify as a regulated investment company (RIC) and must derive at least 90% of its gross income from qualifying sources each taxable year[92] - To maintain RIC status, the company must ensure that at least 50% of its total assets are represented by cash, U.S. Government securities, and other regulated investment companies, with no more than 25% in securities of any one issuer[92] - If the company fails to meet the 90% gross income requirement, it may be subject to corporate-level U.S. federal income tax[93] - The company must distribute at least 90% of its investment company taxable income to avoid U.S. federal income tax on that income[95] - A 4% federal excise tax is imposed if the company does not meet certain distribution requirements during the calendar year[97] - The company is prohibited from making cash distributions or repurchasing stock unless it meets applicable asset coverage ratios[87] - The company must maintain a bond issued by a reputable fidelity insurance company as part of its BDC requirements[77] - The company may not acquire assets unless at least 70% of its total assets are qualifying assets[80] - The Board must consist of a majority of directors who are not "interested persons" as defined by the Investment Company Act[77] - The company has adopted a code of business conduct and ethics applicable to its directors and officers[88] - The company maintains an insider trading policy to govern securities transactions by its directors and officers[90] - The company is required to meet various distribution, income, and asset-related requirements to qualify as a RIC, with no assurance of continued compliance[114] Financial Risks and Investment Strategies - The company is subject to financial risks, including changes in market interest rates, with approximately $179.8 million in principal amount of debt investments bearing variable interest rates as of December 31, 2024[386] - Interest rate increases could lead to higher gross investment income for the company, impacting net investment income positively if not offset by increased operating expenses[386] - The company may face challenges in making distributions necessary to satisfy tax requirements due to the nature of its investments[102] - If the company invests in foreign securities, it may be subject to withholding and other foreign taxes, which could affect stockholder tax credits[105] - The company may need to restructure investments in portfolio companies facing financial difficulties, potentially leading to non-qualifying income[103] - The company’s ability to pay dividends may be limited by loan covenants, which could jeopardize its RIC status[110] - The company may employ subsidiaries treated as U.S. corporations to manage income that could disqualify it from RIC status, leading to reduced yields for stockholders[113] Governance and Agreements - The Investment Management Agreement was renewed on July 23, 2024, and is effective until September 26, 2025[75] - The Board considered factors such as the quality of advisory services, investment performance, and economies of scale in approving the Investment Management Agreement[76] - GECM is indemnified for damages arising from its services under the Investment Management Agreement, except in cases of willful misconduct or gross negligence[73] - The Administration Agreement with GECM includes provisions for indemnification from the company for damages arising from GECM's services, absent willful misconduct[117] - The company bears all costs and expenses incurred in its operations and transactions not specifically assumed by GECM[116] - The company has a non-exclusive, royalty-free license to use the name "Great Elm Capital Corp." as long as GECM remains its investment adviser[118] - The Administration Agreement may be terminated by either party with 60 days' written notice[115] Distribution and Earnings - The Board set a distribution for the quarter ending March 31, 2025, at a rate of $0.37 per share, fully from distributable earnings[388] - The aggregate amount of brokerage commissions paid by the company during the three most recent fiscal years is approximately $129, with nearly 100% of these commissions paid to Imperial Capital, LLC[120] - GECM is responsible for selecting brokers and dealers for publicly traded securities transactions, aiming to obtain the best net results[119]

Capital Raising and Financial Position - Great Elm Capital Corp. raised nearly $150 million in capital during 2024, including $50 million of equity at net asset value[3] - Net assets increased to $136.1 million, or $11.79 per share, as of December 31, 2024, compared to $125.8 million, or $12.04 per share, at the end of Q3 2024[4] - Cash and money market fund investments totaled approximately $8.4 million, with an undrawn revolving line of credit availability of $25.0 million[9] Investment Income and Expenses - Net investment income (NII) for Q4 2024 was $2.1 million, or $0.20 per share, down from $4.1 million, or $0.39 per share in Q3 2024[4] - Total investment income for Q4 2024 was $9.1 million, or $0.85 per share, while net expenses were approximately $7.0 million, or $0.66 per share[8] - Total investment income for 2024 was $39,323,000, an increase of 9.2% from $35,825,000 in 2023[21] - Net investment income for 2024 was $12,453,000, slightly down from $12,542,000 in 2023[21] - Total expenses increased to $26,522,000 in 2024, up 15.0% from $22,996,000 in 2023[21] Investment Performance - Net realized gain on investment transactions was $1,871,000 in 2024, compared to a loss of $4,707,000 in 2023[21] - Net change in unrealized depreciation on investments was $(10,771,000) in 2024, contrasting with an appreciation of $17,498,000 in 2023[21] - Interest income from non-affiliated, non-controlled investments rose to $24,619,000 in 2024, up from $23,582,000 in 2023[21] - Total dividend income increased to $6,925,000 in 2024, compared to $3,478,000 in 2023[21] Shareholder Returns - A special cash distribution of $0.05 per common share was declared in December 2024, reflecting strong performance throughout the year[4] - The quarterly dividend was increased by 5.7% to $0.37 per share for Q1 2025, representing a 13.7% annualized yield based on the closing market price of $10.78 on March 7, 2025[4] Share Statistics - Earnings per share (basic and diluted) for 2024 was $0.36, a significant decrease from $3.33 in 2023[21] - Weighted average shares outstanding increased to 9,844,014 in 2024 from 7,601,958 in 2023[21] Asset Coverage and Cash Flow - The asset coverage ratio improved to 169.7% as of December 31, 2024, from 166.2% at the end of Q3 2024[4] - Cash distributions from the CLO JV decreased to $0.5 million in Q4 2024 from $3.2 million in Q3 2024[4]

Core Viewpoint - Great Elm Capital Corp. reported strong financial results for 2024, raising nearly $150 million in capital and enhancing its cash-generating capabilities through a CLO joint venture, while also increasing its dividend by 5.7% for the first quarter of 2025 [3][4]. Financial Highlights - For Q4 2024, the company reported earnings per share (EPS) of $0.17 and net investment income (NII) per share of $0.20, down from $0.39 in Q3 2024 [4][7]. - Total investment income for Q4 2024 was $9.1 million, with net expenses of approximately $7.0 million, resulting in net realized and unrealized losses of about $0.3 million [7]. - The net asset value (NAV) per share decreased to $11.79 as of December 31, 2024, from $12.99 at the end of Q4 2023 [4][20]. Portfolio and Investment Activity - As of December 31, 2024, GECC held total investments valued at $324.3 million, with a weighted average current yield on the debt portfolio of 12.4% [5][6]. - The company deployed approximately $47.2 million into 18 investments during Q4 2024, achieving a weighted average current yield of 12.9% [6]. - GECC monetized 48 investments for approximately $57.5 million during the same quarter, with a weighted average current yield of 9.9% [6]. Liquidity and Capital Resources - As of December 31, 2024, GECC had cash and money market fund investments totaling approximately $8.4 million, with an undrawn revolving line of credit of $25.0 million [8]. - Total debt outstanding was $195.4 million, with various senior notes maturing between 2026 and 2029 [9]. Distributions - The Board of Directors approved a quarterly cash distribution of $0.37 per share for Q1 2025, reflecting a 13.7% annualized yield based on the closing market price of $10.78 on March 7, 2025 [10].

Group 1 - Great Elm Capital Corp. (GECC) will release its financial results for Q4 and the full year ended December 31, 2024 on March 10, 2025, after market close [1] - A conference call to discuss these results is scheduled for March 11, 2025, at 8:30 a.m. ET [2] - Participants can access the call by dialing in five minutes before the start time and providing the passcode "GECC" [3] Group 2 - The call and presentation will be available via webcast on GECC's website [4] - GECC is an externally managed business development company focused on generating current income and capital appreciation through investments in debt and income-generating equity securities [5]

Core Points - Great Elm Capital Corp. (GECC) will release its financial results for Q4 and the full year ended December 31, 2024, after market close on March 10, 2025 [1] - A conference call to discuss these results is scheduled for March 11, 2025, at 8:30 a.m. ET [2] - The call will be accessible via dial-in numbers for both the United States and international participants, with a passcode required for access [2] - An accompanying slide presentation will be available on GECC's website after the earnings release [2][3] - GECC is an externally managed business development company focused on generating current income and capital appreciation through investments in debt and income-generating equity securities [4]

Distribution Announcements - Great Elm Capital Corp. declared a special cash distribution of $0.05 per common share, payable on January 15, 2025, to stockholders of record as of December 31, 2024 [1] - The Board of Directors approved a quarterly cash distribution of $0.37 per share for the first quarter of 2025, equating to a 14.5% annualized yield based on the closing market price of $10.24 on December 16, 2024, payable on March 31, 2025, to stockholders of record as of March 17, 2025 [2] Financial Performance - The base quarterly distribution increased by 5.7% from $0.35 per share to $0.37 per share, reflecting the company's strong income generation throughout the year [3] Company Overview - Great Elm Capital Corp. is an externally managed business development company focused on generating current income and capital appreciation through investments in debt and income-generating equity securities, including specialty finance businesses and CLOs [4]

Core Points - Great Elm Capital Corp. (GECC) has declared a special cash distribution of $0.05 per common share, payable on January 15, 2025, to stockholders of record as of December 31, 2024 [1] - The Board of Directors has approved a quarterly cash distribution of $0.37 per share for the first quarter of 2025, representing a 14.5% annualized yield based on the closing market price of $10.24 on December 16, 2024 [2] - The base quarterly distribution has increased by 5.7% from $0.35 to $0.37 per share, reflecting the company's strong income generation throughout the year [3] Company Overview - Great Elm Capital Corp. is an externally managed business development company focused on generating current income and capital appreciation through investments in debt and income-generating equity securities, including specialty finance businesses and CLOs [4]

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