Great Elm Capital Corp. Q3 FY2024 earnings call

• Completed a $22 million tack on to GECCI bonds in July with institutional investor using stop for first time.
• Closed second CLO in CLO JV in August.
• Priced GECCH bonds at lower rate than previous debt financings in 2024, used proceeds to retire notes maturing in Jan 2025, leaving no maturities for next 20 months.
• Investment income was highest ever, NII $0.39 per share rebounded from $0.32 in Q2 and exceeded quarterly distribution of $0.35.
• CLO JV deployed ~$33 million through Sept 30th, received ~$3 million in distributions on $33 million invested. CLOs hold diverse first lien loans, mitigating interest rate risk.
• Enhanced portfolio strength by increasing secured debt positions, with first lien loans and CLO positions now 60% of portfolio.
• Successfully issued $36 million of 8.125% GECCH notes due 2029, underwriters exercised full shoe for additional $5.4 million, used proceeds to redeem GECCM notes, extending debt maturity profile.

For GECC: In the third quarter, GECC generated NII of $4.1 million or $0.39 per share, up from $3.1 million or $0.32 per share in the second quarter. NAV per share was $12.04 as of September 30th, essentially flat from $12.06 as of June 30th. Asset coverage ratio was 166.2% as of September 30th compared to 171% in Q2. Total debt outstanding was approximately $235 million, with a $25 million revolver undrawn. Cash and money market securities totaled ~$26 million. For Great Elm Specialty Finance (GESF): After a rebound in Q2, momentum stalled in Q3. Prestige had declined income in Q3 due to slower volumes, but volumes ticked up near end of September. Sterling had stable operations but challenging new business originations. Great Elm Healthcare Finance lagged projections, with cost-cutting measures taken including headcount reductions and change in CEO.

• Expect NII to step down in fourth quarter due to uneven CLO distributions at start of life, but expect quarterly income fluctuations to normalize over time.
• Board authorized $0.35 per share cash distribution for fourth quarter, payable Dec 31 to stockholders of record Dec 16, equating to 11.6% annualized dividend yield on Sept 30th net asset value.

• Ongoing macro environment volatility, including uncertainties around further rate cuts and electoral outcomes.
• Challenges in Great Elm Specialty Finance's platform companies: Prestige had income decline in Q3, Sterling faced challenging new business originations, Great Elm Healthcare Finance lagged projections and required cost-cutting measures.

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