Great Elm Capital Corp. 7.75% Notes Due 2030 Q2 FY2025 earnings call

• Delivered highest total investment income in company history at $14.3 million in Q2 2025, with cash TII comprising ~90% of total investment income.
• NAV grew over $0.60 per share from prior quarter to $12.10 per share as of June 30.
• NII exceeded quarterly distribution by ~38%, leading to NAV benefit.
• CLO platform is a significant contributor, with $52 million deployed through June 30 and $6 million into a new CLO investment directly on the balance sheet.
• CoreWeave-related investment in CW Opportunity 2 led to unrealized gains, though the non-yielding other equity mix increased due to CoreWeave's IPO.
• Specialty Finance unit rebranded Sterling as Great Elm Commercial Finance, exited equipment leaseholding at a gain, and Great Elm Healthcare Finance positioned for profitability.

In the second quarter of 2025, Great Elm Capital Corp. (GECC) delivered the highest total investment income in its history at $14.3 million. Net investment income (NII) was $5.9 million, or $0.51 per share, up from $4.6 million ($0.40 per share) in the prior quarter. NAV per share increased from $11.46 as of March 31 to $12.10 as of June 30. The CLO platform was a significant contributor, with cash TII comprising approximately 90% of total investment income. The corporate portfolio grew to nearly $240 million of investments, with first lien loans making up 2/3 of the corporate portfolio as of June 30.

• Anticipate third quarter NII per share to step down similar to Q4 2024 due to uneven cash flows from CLO platform.
• Expect fourth quarter NII to rebound significantly from third quarter.
• Confident in covering base distributions for full year 2025.
• Believe full year 2025 NII per share will exceed 2024 levels and more than cover the increased distribution rate of $1.48 per share annualized.

• Uneven income reporting due to recognition of income from CLO JV only when distributions are received.
• Volatility in CoreWeave equity post-IPO affecting valuations.
• Two debt investments in Maverick Gaming and Del Monte placed on nonaccrual, though expecting a portion to accrue again in second half of 2025.
• Potential knock-on supply side effects from tariffs impacting portfolio indirectly.

Q: Wanted to start to make sure I understood the impact with the dividend on the preference shares and the insurance-related investment. Could you quantify the amount of that dividend in the most recent quarter and is it ongoing?

A: The event will be an annual event. The benefit to NII is approximately $1.6 million net after all things are said and done, $1.7 million.

Q: Curious in terms of the degree of insight you have from the managing partner for the CoreWeave investment perspective, what is their intention in terms of holding it versus potentially realizing some gain? Is there an expected time frame on that LP?

A: It is up to the GP to decide when and how to provide liquidity. Currently, the underlying shares are subject to a lockup, which should expire this quarter. We have a good relationship and dialogue with the GP, but currently can't provide concrete color.

Q: As you assess the market, curious about the relative attractiveness of investing in additional corporate debt middle market portfolio versus CLO equity opportunities and maybe anything else that's on your radar today, where we could see growth in the portfolio going forward?

A: Over the course of the quarter, the corporate debt secondary market has strengthened. Shifted focus to some private side transactions with blue chips, closed on a transaction last week and hope to close another next week.

Q: With regard to the investment in Maverick Gaming, anything different that changed in your thinking around that investment or what prompted the move to nonaccrual?

A: Have active dialogue with many portfolio companies. It became clear the situation was not improving in the quarter and they filed for bankruptcy, so it was prudent to put the position on nonaccrual.

Q: You talked about both Maverick and Del Monte on nonaccrual now, but said you expect maybe a portion to return to accrual in second half '25. Was that related to just one of those or potentially positive developments in both?

A: Largely tied to DIP funding and when we fund the DIP, a portion of pre-petition debt gets rolled up into the DIP, and then that starts to accrue interest during the pendency of the bankruptcy case.