Great Elm Capital Corp. - 8.125 Q3 FY2024 earnings call

• Completed a $22 million tack on to the GECCI bonds in July and closed the second CLO in the CLO JV in August. Priced GECCH bonds at a lower rate in September and used proceeds to retire notes maturing in January 2025, leaving no maturities for the next 20 months.
• Investment income was the highest ever for GECC. NII was $0.39 per share, rebounding from $0.32 in Q2 and exceeding the quarterly distribution. NAV was flat at $12.04 per share. Non-accruals declined.
• CLO joint venture deployed approximately $33 million through September 30, received approximately $3 million in distributions. Portfolio shifted to 60% first lien loans and CLO positions from 44% first lien last year.
• Issued $36 million of 8.125% GECCH notes, with underwriters exercising the full shoe for an additional $5.4 million in October. Refinanced GECCM notes, extending debt maturity profile and providing enhanced financial flexibility.

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 30, 2024, essentially flat from $12.06 as of June 30. Non-accruals declined to $1.3 million or less than 1% of portfolio fair value as of September 30, compared to $9.4 million or approximately 3% of portfolio fair value as of June 30. For Great Elm Specialty Finance (GESF): Prestige had income decline in the third quarter due to slower volumes; Sterling had stable operations but challenging new business originations; Great Elm Healthcare Finance lagged projections, with cost cuts and leadership changes implemented.

• Board authorized a $0.35 per share cash distribution for the fourth quarter, payable on December 31.
• Expect NII to step down in the fourth quarter due to uneven CLO distributions at the start of their life, but expect quarterly income fluctuations to normalize over time.
• Confident in continuing to increase scale and cover dividend with CLO JV distributions and strategic capital deployments.

• Macro environment volatility, including uncertainties around further rate cuts and electoral outcomes.
• GESF's platform companies facing challenges in converting and closing new business. Great Elm Healthcare Finance struggling with origination, high cost of leverage, and leadership changes.

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