Great Elm Capital Corp. (“we,” “our,” the “Company” or “GECC”) (NASDAQ: GECC), a business development company, today announced its financial results for the second quarter ended June 30, 2024.      

Second Quarter and Other Recent Highlights:

  • In June 2024, the Company raised $12 million of equity at Net Asset Value from Prosper Peak Holdings, LLC (“PPH”), supported by a $3 million investment by Great Elm Group, Inc. (“GEG”) in PPH.
  • In April 2024, the Company issued $34.5 million of 8.50% notes due 2029 (the “GECCI Notes”) to further bolster liquidity and provide balance sheet flexibility.
    • In July, the Company issued $22 million of additional GECCI Notes in a registered direct offering to an institutional investor.
  • Net investment income (“NII”) for the quarter ended June 30, 2024 was $3.1 million, or $0.32 per share, as compared to $3.2 million, or $0.37 per share, for the quarter ended March 31, 2024.
  • Net assets were $126.0 million, or $12.06 per share, on June 30, 2024, as compared to $118.8 million, or $12.57 per share, on March 31, 2024.
    • NAV adversely impacted by approximately $0.39 per share in the quarter from additional write-downs on investments in illiquid assets that were also written down in the prior quarter.
  • GECC’s asset coverage ratio was 171.0% as of June 30, 2024, as compared to 180.2% as of March 31, 2024 and 161.5% as of June 30, 2023.
  • The Board of Directors approved a quarterly dividend of $0.35 per share for the third quarter of 2024, equating to a 13.0% annualized yield on the Company’s closing market price on July 31, 2024 of $10.73.                     

Management Commentary   “We are pleased to have raised an additional $34 million of fresh capital in June and July, bringing our total 2024 capital raising activities to over $90 million year-to-date. These capital raises further strengthen our balance sheet and position us well to expand our investment portfolio,” said Matt Kaplan, GECC’s Chief Executive Officer. “While there was some residual negative effect on NAV in the quarter, as the same illiquid portfolio company investments placed on non-accrual from the previous quarter experienced further write-downs, we believe the bulk of the impact has now been realized. Our investments in CLOs are also beginning to bear fruit, with our first distribution received in July, enabling us to capitalize on strong yields and boost NII in the second half of the year. We remain well-positioned to grow our platform and cover our dividend.”

Financial Highlights – Per Share Data

  Q2/2023 Q3/2023 Q4/2023 Q1/2024 Q2/2024
Earnings Per Share (“EPS”) $0.68 $1.02 $0.55 ($0.05) ($0.14)
Net Investment Income (“NII”) Per Share $0.44 $0.40 $0.43 $0.37 $0.32
Pre-Incentive Net Investment Income Per Share $0.56 $0.50 $0.54 $0.46 $0.40
Net Realized and Unrealized Gains / (Losses) Per Share $0.24 $0.62 $0.12 ($0.42) ($0.46)
Net Asset Value Per Share at Period End $12.21 $12.88 $12.99 $12.57 $12.06
Distributions Paid / Declared Per Share $0.35 $0.35 $0.45 $0.35 $0.35

Portfolio and Investment Activity

As of June 30, 2024, GECC held total investments of $297.7 million at fair value, as follows:

  • 49 debt investments in corporate credit, totaling approximately $190.0 million and representing 63.8% of the fair market value of the Company’s total investments. Secured debt investments comprised a substantial majority of the fair market value of the Company’s debt investments.
  • An investment in Great Elm Specialty Finance comprised of 1 debt investment totaling approximately $29.7 million and 1 equity investment totaling approximately $15.0 million, representing 10.0% and 5.0%, respectively, of the fair market value of the Company’s total investments.
  • 4 dividend paying equity investments, including our CLO JV investment, totaling approximately $43.7 million, representing 14.7% of the fair market value of the Company’s total investments.
  • Other equity investments, totaling approximately $19.2 million, representing 6.4% of the fair market value of the Company’s total investments.  

As of June 30, 2024, the weighted average current yield on the Company’s debt portfolio was 13.1%. Floating rate instruments comprised approximately 69% of the fair market value of debt investments (comparable to last quarter) and the Company’s fixed rate debt investments had a weighted average maturity of 2.1 years.

During the quarter ended June 30, 2024, we deployed approximately $108.9 million into 25 investments(1) at a weighted average current yield of 11.6%.

During the quarter ended June 30, 2024, we monetized, in part or in full, 35 investments for approximately $72.4 million(2), at a weighted average current yield of 11.3%. Monetizations include $10.9 million of mandatory debt paydowns and redemptions at a weighted average current yield of 9.2%.      

Financial Review Total investment income for the quarter ended June 30, 2024 was $9.5 million, or $1.00 per share. Net expenses for the quarter ended June 30, 2024 were approximately $6.5 million, or $0.68 per share.

Net realized and unrealized losses for the quarter ended June 30, 2024 were approximately $4.4 million, or $0.46 per share.

Liquidity and Capital ResourcesAs of June 30, 2024, cash and money market securities totaled approximately $3.0 million.

As of June 30, 2024, total debt outstanding (par value) was $177.6 million, comprised of 6.75% senior notes due January 2025 (NASDAQ: GECCM), 5.875% senior notes due June 2026 (NASDAQ: GECCO), 8.75% senior notes due September 2028 (NASDAQ: GECCZ) and 8.50% notes due April 2029 (NASDAQ: GECCI).

DistributionsThe Company’s Board of Directors has approved a quarterly cash distribution of $0.35 per share for the quarter ending September 30, 2024. The third quarter distribution will be payable on September 30, 2024 to stockholders of record as of September 16, 2024.

The distribution equates to a 13.0% annualized dividend yield on the Company’s closing market price on July 31, 2024 of $10.73 and an 11.6% annualized dividend yield on the Company’s June 30, 2024 NAV of $12.06 per share.

Conference Call and WebcastGECC will discuss these results in a conference call today at 5:00 p.m. ET.                        

Conference Call Details  
   
Date/Time:   Thursday, August 1, 2024 – 5:00 p.m. ET
   
Participant Dial-In Numbers:  
(United States): 877-407-0789
(International): 201-689-8562

To access the call, please dial-in approximately five minutes before the start time and, when asked, provide the operator with passcode “GECC”. An accompanying slide presentation will be available in pdf format via the “Events and Presentations” section of Great Elm Capital Corp.’s website here after the issuance of the earnings release.

Webcast

The call and presentation will also be simultaneously webcast over the internet via the “Events and Presentations” section of GECC’s website or by clicking on the webcast link here.

About Great Elm Capital Corp.

GECC is an externally managed business development company that seeks to generate current income and capital appreciation by investing in debt and income generating equity securities, including investments in specialty finance businesses. http://www.greatelmcc.com

Cautionary Statement Regarding Forward-Looking Statements Statements in this communication that are not historical facts are “forward-looking” statements within the meaning of the federal securities laws. These statements are often, but not always, made through the use of words or phrases such as “expect,” “anticipate,” “should,” “will,” “estimate,” “designed,” “seek,” “continue,” “upside,” “potential” and similar expressions. All such forward-looking statements involve estimates and assumptions that are subject to risks, uncertainties and other factors that could cause actual results to differ materially from the results expressed in the statements. Among the key factors that could cause actual results to differ materially from those projected in the forward-looking statements are: conditions in the credit markets, rising interest rates, inflationary pressure, the price of GECC common stock and the performance of GECC’s portfolio and investment manager. Information concerning these and other factors can be found in GECC’s Annual Report on Form 10-K and other reports filed with the Securities and Exchange Commission. GECC assumes no obligation to, and expressly disclaims any duty to, update any forward-looking statements contained in this communication or to conform prior statements to actual results or revised expectations except as required by law. Readers are cautioned not to place undue reliance on these forward-looking statements that speak only as of the date hereof.

This press release does not constitute an offer of any securities for sale.

Endnotes:(1) This includes new deals, additional fundings (inclusive of those on revolving credit facilities), refinancings and capitalized PIK income. Amounts included herein do not include investments in short-term securities, including United States Treasury Bills.(2) This includes scheduled principal payments, prepayments, sales and repayments (inclusive of those on revolving credit facilities). Amounts included herein do not include investments in short-term securities, including United States Treasury Bills.

Media & Investor Contact: Investor Relations        investorrelations@greatelmcap.com

GREAT ELM CAPITAL CORP.CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES (unaudited)Dollar amounts in thousands (except per share amounts)

    June 30, 2024     December 31, 2023  
Assets            
Investments            
Non-affiliated, non-controlled investments, at fair value (amortized cost of $228,477 and $179,626, respectively)   $ 224,798     $ 183,335  
Non-affiliated, non-controlled short-term investments, at fair value (amortized cost of $20,432 and $10,807, respectively)     20,430       10,807  
Affiliated investments, at fair value (amortized cost of $12,378 and $13,423, respectively)     -       1,067  
Controlled investments, at fair value (amortized cost of $75,452 and $46,300, respectively)     72,853       46,210  
Total investments     318,081       241,419  
             
Cash and cash equivalents     2,575       953  
Receivable for investments sold     390       840  
Interest receivable     3,594       2,105  
Dividends receivable     1,309       1,001  
Due from portfolio company     1       37  
Deferred financing costs     286       335  
Prepaid expenses and other assets     283       135  
Total assets   $ 326,519     $ 246,825  
             
Liabilities            
Notes payable (including unamortized discount of $3,808 and $2,896, respectively)   $ 173,765     $ 140,214  
Payable for investments purchased     22,755       3,327  
Interest payable     66       32  
Accrued incentive fees payable     1,576       1,431  
Distributions payable     -       760  
Due to affiliates     1,362       1,195  
Accrued expenses and other liabilities     986       1,127  
Total liabilities   $ 200,510     $ 148,086  
             
Commitments and contingencies   $ -     $ -  
             
Net Assets            
Common stock, par value $0.01 per share (100,000,000 shares authorized, 10,449,888 shares issued and outstanding and 7,601,958 shares issued and outstanding, respectively)   $ 104     $ 76  
Additional paid-in capital     319,438       283,795  
Accumulated losses     (193,533 )     (185,132 )
Total net assets   $ 126,009     $ 98,739  
Total liabilities and net assets   $ 326,519     $ 246,825  
Net asset value per share   $ 12.06     $ 12.99  

GREAT ELM CAPITAL CORP.CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)Dollar amounts in thousands (except per share amounts)

    For the Three Months Ended June 30,     For the Six Months Ended June 30,  
    2024     2023     2024     2023  
Investment Income:                        
Interest income from:                        
Non-affiliated, non-controlled investments   $ 5,968     $ 5,836     $ 11,955     $ 11,312  
Non-affiliated, non-controlled investments (PIK)     811       590       1,441       1,039  
Affiliated investments     31       32       64       62  
Controlled investments     953       623       1,884       1,065  
Controlled investments (PIK)     -       -       -       233  
Total interest income     7,763       7,081       15,344       13,711  
Dividend income from:                        
Non-affiliated, non-controlled investments     1,045       327       1,431       645  
Controlled investments     525       700       910       1,316  
Total dividend income     1,570       1,027       2,341       1,961  
Other commitment fees from non-affiliated, non-controlled investments     175       802       700       1,604  
Other income from:                        
Non-affiliated, non-controlled investments     40       67       72       111  
Total other income     40       67       72       111  
Total investment income   $ 9,548     $ 8,977     $ 18,457     $ 17,387  
                         
Expenses:                        
Management fees   $ 1,068     $ 884     $ 2,008     $ 1,753  
Incentive fees     764       842       1,562       1,552  
Administration fees     396       341       781       636  
Custody fees     36       21       72       43  
Directors’ fees     54       53       108       105  
Professional services     413       434       801       970  
Interest expense     3,473       2,769       6,280       5,590  
Other expenses     286       265       589       503  
Total expenses   $ 6,490     $ 5,609     $ 12,201     $ 11,152  
Net investment income before taxes   $ 3,058     $ 3,368     $ 6,256     $ 6,235  
Excise tax   $ -     $ -     $ 5     $ 28  
Net investment income   $ 3,058     $ 3,368     $ 6,251     $ 6,207  
                         
Net realized and unrealized gains (losses):                        
Net realized gain (loss) on investment transactions from:                        
Non-affiliated, non-controlled investments   $ 155     $ 542     $ 2,511     $ 2,387  
Affiliated investments     (625 )     -       (625 )     -  
Total net realized gain (loss)     (470 )     542       1,886       2,387  
Net change in unrealized appreciation (depreciation) on investment transactions from:        
Non-affiliated, non-controlled investments     (3,856 )     3,054       (7,389 )     5,835  
Affiliated investments     827       (11 )     (23 )     152  
Controlled investments     (885 )     (1,751 )     (2,509 )     (1,219 )
Total net change in unrealized appreciation (depreciation)     (3,914 )     1,292       (9,921 )     4,768  
Net realized and unrealized gains (losses)   $ (4,384 )   $ 1,834     $ (8,035 )   $ 7,155  
Net increase (decrease) in net assets resulting from operations   $ (1,326 )   $ 5,202     $ (1,784 )   $ 13,362  
                         
Net investment income per share (basic and diluted):   $ 0.32     $ 0.44     $ 0.69     $ 0.82  
Earnings per share (basic and diluted):   $ (0.14 )   $ 0.68     $ (0.20 )   $ 1.76  
Weighted average shares outstanding (basic and diluted):     9,551,037       7,601,958       9,105,190       7,601,958  
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