Great Elm Capital Corp. Q4 FY2024 earnings call

• Fourth quarter earnings: NII impacted by temporary items, dividend increased to $0.37 per share for Q1 2025. - Past achievements: Over 3 years, cleaned up portfolio, upgraded and optimized, with market cap doubling, NAV per share up, and strong total return. - Portfolio changes: Increased secured debt positions, first lien loans now 71% of corporate portfolio. - CLO JV: Formed a JV to invest in CLO equity, received distributions with expected increase in future quarters, expecting fluctuations to dampen as scale increases. - Specialty Finance: GESF revenue up from Prestige, ABL businesses rebranded and repositioned.

The investment portfolio had NII of $2.1 million or $0.20 per share in the fourth quarter, down from $4.1 million or $0.39 per share in the third quarter, mainly due to uneven CLO cash flows. Net assets as of December 31, 2024, were $136 million vs. $126 million on September 30, with NAV per share at $11.79 vs. $12.04. Specialty Finance: Revenue and net income at GESF increased, driven by Prestige's rebound. ABL businesses were consolidated under Great Elm Commercial Finance, with legacy Great Elm Healthcare Finance repositioned for health care real estate financing. Revenue contribution from investment portfolio and Specialty Finance: Investment portfolio's NII and net assets are key metrics, while Specialty Finance's growth is a separate segment.

• Board declared 6% increase in quarterly base dividend to $0.37 per share for Q1 2025. - Confident in covering increased dividend in Q1 2025 and over 2025. - Expect second quarter 2025 income to exceed first quarter. - CLO JV poised to have distributions increase in future quarters as scale grows.

• Uneven distribution patterns of CLOs in early stages. - Short-term impact on NII from equity raises through SPVs. - Macro environment uncertainties including rate cuts and tariff policy. - Credit cycle maturity leading to potential credit deterioration in the space.

Q: Have you and your partners fully funded the CLO JV?

A: The JV commitment is outlined in the 10-K, not fully funded, with uncommitted capital still to be drawn.

Q: How do you intend to raise capital to finish funding the commitment?

A: Ended the quarter with $8 million cash and equivalents, $25 million unfunded revolver, and closed an SPV to raise equity at net asset value, with target debt-to-equity ratio around 1.5x.

Q: Why only investing in Apex CLOs?

A: Current investment mix, JV allows majority positions with strategic partners, may diversify CLO exposure over time.

Q: How does spread compression impact CLO cash flows and target ROE?

A: Loan and liability spreads compressed, but confident in cash flow generation, expecting high teens to 20% IRRs, looking at 12-month period for NII improvement.

Q: Outlook for Maverick Gaming position?

A: Company has operations in multiple geographies, evaluated quarterly by third-party valuers, regional specific and private company, limited info to share.

Q: How to think about the CLO JV's contribution to total results?

A: Over time, CLO JV could grow to around 20% of asset base, income mix to increase as asset base grows.

Q: Pipeline and deployments in corporate portfolio?

A: Seeing opportunities in secondary market, active dialogue on direct lending, some portfolio companies in discussions for refinancing or M&A, M&A timing uncertain due to tax policy.