Great Elm Capital Corp. Q1 FY2026 earnings call

• Jason Reese assumed roles as Executive Chairman and then CEO, reprioritizing to protect and grow NAV first and create income secondarily, working to strengthen oversight, protect shareholder value, and reinforce accountability.
• Matt Kaplan continues as portfolio manager. Gradome Capital Management waived all accrued and unpaid incentive fees through June 30, 2026, amounting to approximately $2.8 million or 20 cents per share.
• Took decisive action to deleverage balance sheet, called and repurchased $57.5 million of GECCO notes due later this year, eliminating near-term refinancing risk.
• Deployed approximately $22 million across 12 investments while exiting higher risk investments, increasing first lien investments to nearly 75% of corporate portfolio.
• Expanded proprietary sourcing efforts, closed three transactions through institutional partnerships and one additional proprietary private investment in April, expecting more in future.
• At GESF, Great Elm Commercial Finance builds asset-based lending pipeline, Great Elm Healthcare Finance repositioned and closed another transaction, invoice financing business generates durable returns with quarter-to-quarter variability.
• Closed quarter with less than 1% of fair value of all investments on non-accrual, and repurchased approximately 1% of shares outstanding under stock repurchase program with remaining capacity of $9.5 million.

The company's high-quality portfolio is strong, composed primarily of performing cash generative investments. At quarter end, less than 1% of fair value of all investments were on non-accrual. First lien investments now comprise nearly 75% of the corporate portfolio, the highest level in recent history. At Great Elm Specialty Finance (GESF), all three core verticals are profitable and generate cash distributions. GESF is poised for continued growth and represents an increasingly important source of diversification across both assets and income. NII for the first quarter of 2026 was $5 million, or $0.36 per share, with an approximate 13% growth quarter-over-quarter driven primarily by the incentive fee waiver. Net assets were $107.5 million, or $7.74 per share, as of March 31, 2026.

• Prioritizing protecting and growing NAV first and creating income secondarily.
• Will continue looking at what's in best interests of shareholders, including considering incentive fee waivers to cover dividends and rebuild NAV.
• Balancing capital deployment between debt pay down, share repurchase, and investments, focusing on best risk-adjusted returns, currently more focused on traditional private credit deals than broadly syndicated loans.
• Expecting cash flows from CLO investments to be more consistent going forward with less volatility unless new CLO equity investments are made, and currently not looking at making new ones.

• Recent quarters have been challenging for broader BDC sector, and GECC was not immune to macro environment; NAV declined driven by unrealized losses in select investments like CLOJV and one private investment with idiosyncratic event.
• CLO investments can exhibit volatility given their inherent leverage and the broader CLO equity market declined in first quarter.

Q: Jason, you mentioned efforts to deleverage the balance sheet. At this point, have you completed deleveraging opportunities or are there more to do?

A: At end of quarter, $18 million of 2026 paper was still outstanding but will be paid off in next few weeks, probably completed deleveraging for moment, though 8.5% paper callable at end of month could be looked at.

Q: How do you weigh opportunities in pipeline and share repurchase authorization?

A: Will balance and look at best risk-adjusted returns, more focused on traditional private credit deals than broadly syndicated loans currently, and balance debt pay down, share repurchase, and investments based on return, with paying down debt being riskless but also focused on rebuilding NAV.

Q: Is it safe to assume potential continued incentive fee waiver if run rate of earnings without waiver is less than dividend?

A: Will continue looking at what's in best interests of shareholders, definitely want to cover dividends, and focus on protecting NAV.

Q: Can you communicate expected timing of CLO cash flows?

A: Will get cash flows every quarter now, already received $2.5 million this quarter at similar rate going forward but will vary, and less volatility expected going forward unless new CLO equity investments are made, which are not currently being looked at.