Great Elm Capital Group Q2 2025 Earnings Report

Great Elm Capital Group EPS Results

• Actual EPS: $0.51
• Consensus EPS: $0.44
• Beat/Miss: Beat by +$0.07
• One Year Ago EPS: N/A

Great Elm Capital Group Revenue Results

• Actual Revenue: $14.28 million
• Expected Revenue: $13.25 million
• Beat/Miss: Beat by +$1.02 million
• YoY Revenue Growth: N/A

Great Elm Capital Group Announcement Details

• Quarter: Q2 2025
• Date: 8/5/2025
• Time: After Market Closes
• Conference Call Date: Tuesday, August 5, 2025
• Conference Call Time: 8:30AM ET

Great Elm Capital Corp. is a business development company which specializes in loan and mezzanine, middle market investments. It invests in the debt instruments of middle market companies. The fund prefers to invest in media, commercial services and supplies, healthcare, telecommunication services, communications equipment. It typically makes equity investments between $3 million and $10 million in companies with revenues between $3 million and $75 million.

Great Elm Capital Group Q2 2025 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Great Elm delivered a record $14.3 million in total investment income and saw NAV rise by $0.60 to $12.10 per share in Q2.
• Positive Sentiment: Net investment income per share grew to $0.51 from $0.40 last quarter, driven by a timely preference share distribution and higher cash flows from the CLO JV.
• Positive Sentiment: Unrealized gains on the CW Opportunity II stake in CoreWeave post-IPO contributed approximately $0.14 per share of NAV benefit for the quarter.
• Negative Sentiment: Two senior secured positions—Maverick Gaming and Del Monte—were placed on non-accrual, representing under 3% of portfolio fair value, though DIP funding may allow partial accrual resumption.
• Positive Sentiment: Great Elm Specialty Finance completed a rebrand and strategic refinancing, paid down over $5 million of subordinated debt, and is positioned for improved profitability in 2025.

Presentation

[Operator]

Greetings, and welcome to the Great Elm Capital Second Quarter twenty twenty '5 Financial Results. At this time, all participants are in listen only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Peter Skisel, a representative of the company. Please go ahead.

[Peter Sceusa, Investor Relations Senior Associate at ICR]

Hello, and thank you everyone for joining us for Great Elm Capital Corp. Second Quarter twenty twenty five Earnings Conference Call. If you'd like to be added to our distribution list, you can email investorrelationsgreatelmcap dot com, where you can sign up for alerts directly on our website, w w w dot greatelmcc dot com. I'd like to note the slide presentation posted on our website accompanying today's call. The slide presentation can be found on our website under Events and Presentations.

[Peter Sceusa, Investor Relations Senior Associate at ICR]

On our website, you could also find our earnings release and SEC filings. I'd like to call your attention to the customary Safe Harbor statement regarding forward looking information. Also, please note that nothing in today's call constitutes an offer to sell or solicitation of offers to purchase our securities. Today's conference call includes forward looking statements, and we ask that you refer to Great Elm Capital Corp. Filings with the SEC for important factors that could cause actual results to differ materially from these statements.

[Peter Sceusa, Investor Relations Senior Associate at ICR]

Great Elm Capital Corp. Does not undertake to update its forward looking statements unless required by law. To obtain copies of the SEC filings, please visit Great Elm Capital Corp. Website under Financials, SEC Filings or visit the SEC's website. Hosting the call today is Matt Kaplan, Great Elm Capital Corp's Chief Executive Officer, who will be joined by Chief Financial Officer, Kerry Davis Chief Compliance Officer and General Counsel, Adam Kleinman and Mike Tower, President of Great Elm Specialty Finance.

[Peter Sceusa, Investor Relations Senior Associate at ICR]

I'll now turn the call over to GECC CEO, Matt Gatlin.

[Matt Kaplan, CEO & President at Great Elm Capital]

Thanks, Peter, and thank you all for joining us today. We had a tremendous quarter, delivering the highest total investment income in the company's history at $14,300,000 and NAV growing over $0.60 per share from the prior quarter to $12.1 per share as of June 30. The 2025 was GECC's highest ever cash generative quarter with cash TII comprising approximately 90% of our total investment income, a 14% increase in TII from last quarter as well as TII growth of nearly 50% year over year was primarily driven by the success of our growing CLO platform, as well as income from other cash generating investments in the quarter. All of this is a continued testament to the strategic portfolio enhancements we've undertaken over the past few years to upgrade portfolio quality and focus on cash income generation. In addition, net investment income once again exceeded our quarterly distribution and was up approximately 29% sequentially.

[Matt Kaplan, CEO & President at Great Elm Capital]

NII per share was $0.51 compared to $0.40 in the prior quarter. NII growth was largely attributable to a timely cash distribution on preference shares of an insurance related investment, as well as $4,300,000 of cash distributions from our CLO JV, up from $3,800,000 last quarter. We remain committed to delivering growing income to shareholders over the long term supported by solid underlying portfolio performance. Moving through the second half of the year, we anticipate third quarter NII per share to step down similarly to what we experienced in the 2024. This is driven by the uneven cadence of cash flows from our growing CLO platform at these still early stages as we have touched on before.

[Matt Kaplan, CEO & President at Great Elm Capital]

Nevertheless, we anticipate fourth quarter NII will rebound significantly from the third quarter and we remain confident that we are well positioned to cover our base distributions for the full year as we continue to execute on our long term growth strategy. As previously discussed, we expect quarterly fluctuations in income to dampen over time as we fund additional CLO investments and continue to leverage our increased scale. As we scale the platform and deploy capital into additional investments, both in CLOs and across our strategies more broadly, we continue to believe that it makes more sense to evaluate GECC on an annual basis as opposed to benchmarking our performance quarter to quarter. On that note, if you look at our trailing twelve month performance, GECC has demonstrated continued momentum in both top line and bottom line results. Total investment income for the trailing twelve month period increased by 29% and net investment income grew even more meaningfully over the same period rising by 32% in each case compared to the same period one year ago.

[Matt Kaplan, CEO & President at Great Elm Capital]

This growth underscores the enhanced income producing capability of our portfolio, driven by strong asset performance and disciplined capital deployment. It's worth noting that our share count has also increased over the past year as a result of our capital raising programs, which have successfully led to GECC issuing shares at NAV, a premium to market. These capital raises have led to short term cash drag impacts and have modestly offset our absolute NII growth, resulting in a relatively flat NII per share on a trailing twelve month basis. Nevertheless, our trailing twelve months NII of $1.0.5 per share demonstrates our earnings power through this rapid growth with NII more than covering the base dividends paid over the same period, reinforcing our commitment to sustainable shareholder returns backed by solid income generation. As we look into the 2025, we believe we are well positioned for full year '25 NII per share to exceed twenty twenty four levels supported by our diversified portfolio of cash generating investments and more than cover our recently increased distribution rate of $1.48 per share on an annualized basis.

[Matt Kaplan, CEO & President at Great Elm Capital]

Moving on to portfolio performance, alongside strong NII generation, we also meaningfully improved our NAV per share as outlined on slide eight. This increase in NAV was primarily driven by unrealized gains on our investment in CW opportunity to LP, a vehicle created to hold convertible preferred equity in CoreWeave, an AI hyperscaler that IPO earlier this year and has seen strong post IPO equity performance. In addition, our NII outpaced our quarterly distribution by approximately 38% leading to a NAV benefit in the quarter of approximately $0.14 Looking ahead, we believe our portfolio underpinned by a diversified book of senior secured investments is increasingly well positioned to weather the dynamic macro environment. With our strengthened foundation, we remain confident in our ability to generate sustainable returns and deliver increasing value to our shareholders. With that, I'd like to hand the call over to Carrie Davis to discuss our second quarter twenty twenty five performance.

[Keri Davis, CFO & Treasurer at Great Elm Capital]

Thanks, Matt. I'll go over our financial highlights now, but we invite all of you to review our press release, accompanying presentation and SEC filings for greater detail. During the second quarter, GECC generated NII of $5,900,000 or $0.51 per share as compared to $4,600,000 or $0.40 per share in the 2025. The increase in NII was primarily driven by the receipt of distribution from an insurance related investment and higher income from our CLO JV. Our net assets as of 06/30/2025 were $140,000,000 as compared to $132,000,000 as of March 31.

[Keri Davis, CFO & Treasurer at Great Elm Capital]

Our NAV per share was $12.1 as of June 30 versus $11.46 as of March 31. The increase in net asset value was primarily driven by unrealized gains on our investment in our COREWEE related investment in CW opportunity two as well as from our NII exceeding the quarterly distribution. Details for the quarter over quarter change in NAV can be found on Slide eight of the investor presentation. As of June 30, GECC's asset coverage ratio was 169.5% as compared to 163.8 as of March 31. As of June 30, total debt outstanding was approximately $2.00 $1,000,000 and we have $6,000,000 outstanding on our $25,000,000 revolver. Cash and money market securities totaled approximately $4,000,000 and we had $19,000,000 of availability under our revolver. Our Board of Directors authorized a $0.37 per share cash distribution for the third quarter, which will be payable on September 30 to our stockholders of record as of September 15.

[Keri Davis, CFO & Treasurer at Great Elm Capital]

The distribution equates to a 12.2 annualized dividend yield on our June 30 net asset value. I'll turn the call back over to Matt.

[Matt Kaplan, CEO & President at Great Elm Capital]

Thanks, Carrie. We continue to enhance our portfolio strength by maintaining a focus on secured debt positions. Our growing CLO platform remains a significant contributor to this strategy as we continue to prudently expand the vertical, targeting high teens to 20% returns over time. We have grown our corporate portfolio to nearly $240,000,000 of investments and first lien loans comprised two thirds of the corporate portfolio as of June 30. This demonstrates our commitment to enhancing portfolio quality while maintaining a focus on secured income generating assets.

[Matt Kaplan, CEO & President at Great Elm Capital]

Before moving on to more portfolio detail, I think it's important to highlight why our non yielding other equity mix as outlined on slide 11 increased in the quarter. This is almost entirely attributable to the IPO of CoreWeave I mentioned earlier. The underlying preferred equity investment held by CW Opportunity II LP converted into common equity in connection with the IPO and there will be no more income from the coupon on the preferred to distribute going forward. While this optically reduces our gross portfolio yield, it is meaningfully positive for our shareholders as GECC's IRR from the May 2024 funding through June 30 on CW opportunity two is nearly 200%. I would also like to take a few minutes to address some potential uncertainties around our exposure in CoreWheath through our investment in CW opportunity two.

[Matt Kaplan, CEO & President at Great Elm Capital]

Our investment is in a private fund and as disclosed in our filings since the inception of our investment, it has been carried on our balance sheet at net asset value as reported to us by the general partner. While the private fund does not charge a management fee to GECC, there are various other expenses and fees typical with these types of vehicles and post IPO, the valuations have not been one to one with the move in CoreWheath stock. Nevertheless, it is safe to say the value of CW opportunity two is very directionally correlated with the core we've publicly traded equity, which has exhibited some significant volatility since IPO. That said, as noted above, this investment has been overwhelmingly positive for GECC and reflects our ability to source and structure unique opportunities in transformative sectors. Moving back to the portfolio, notably our CLO JV alongside other recent investments helped drive our record total investment income in the quarter.

[Matt Kaplan, CEO & President at Great Elm Capital]

The CLO JV expands our exposure to a diverse portfolio of broadly syndicated first lien loans and continues to be a key contributor to our recent success with approximately $52,000,000 deployed through June 30. Additionally, we have deployed $6,000,000 into a new CLO investment directly on our balance sheet. This investment is held outside the JV, highlighting diversification both in the underlying asset class and in the top tier managers with whom we partner. A reminder that we hold the majority of our CLO exposure a bit differently than other public BDCs for closed end funds. Other companies typically hold their CLO investments directly, which allows the income to be recognized utilizing the effective yield methodology, while GECC recognizes income from investments held in the CLO JV only when the CLO JV makes distributions and cash is actually received.

[Matt Kaplan, CEO & President at Great Elm Capital]

This potentially leads to a more uneven nature to our income reporting. While we may hold certain minority CLO positions directly on our balance sheet, the JV affords us the ability to have exposure to majority interests in CLOs, which we believe can provide enhanced economics. We are comfortable with this quarter to quarter income undulation, which as I noted previously, we expect will dampen over time as we continue to scale. Further, our investment portfolio was generally stable in the quarter, although we did place our two debt investments in Maverick Gaming on non accrual in the period. Subsequent to quarter end, we placed our first out senior secured debt investment in Del Monte on non accrual as the storied packaged food producer initiated a bankruptcy filing in July.

[Matt Kaplan, CEO & President at Great Elm Capital]

As of June 30, the Maverick Gaming and Del Monte investments comprised less than 3% of portfolio fair value. I would note, these are senior secured first lien investments and we do expect a portion of them to begin accruing income again in the 2025. We continue to actively monitor these investments and believe the vast majority of the portfolio is well positioned in the current environment. To date, we have otherwise seen minimal direct impact of tariffs on our portfolio. Our portfolio maintains broad diversification with a predominantly domestic focus and minimal exposure to China.

[Matt Kaplan, CEO & President at Great Elm Capital]

We continue to monitor the changing landscape and also work to evaluate the second and third order effects of tariffs and shifting trade dynamics. While tariffs may not directly impact the business, they may have knock on supply side effects that can be negative or positive. Our team continues to be focused on thinking through that lens when reviewing existing investments as well as underwriting new opportunities. With our defensive portfolio structure, we believe we are well positioned to navigate the ongoing tariff uncertainty. In this dynamic macro environment, we continue to take a measured approach to capital deployment.

[Matt Kaplan, CEO & President at Great Elm Capital]

As always, we prioritize credit quality and seek investments with minimal risk of permanent capital loss, directing capital toward opportunities that are primed to perform across various economic cycles. This balanced approach combined with our strengthened platform and diversified portfolio positions us well to continue growing Great Elm Capital Corp and delivering attractive risk adjusted returns for our shareholders. We remain excited for the future of GECC. And with that, I'd like to turn the call over to Mike Keller to provide an update on Specialty Finance.

[Michael Keller, President - Specialty Finance Business at Great Elm Capital]

Thanks, Matt. Raytown Specialty Finance continued to execute on its strategic transformation this quarter. By simplifying our business model and securing favorable financing arrangements, we've successfully repositioned the platform for future growth and improved profitability. In April, we completed the rebranding of Sterling as Great Elm Commercial Finance, which now offers traditional asset based lending solutions to a broad range of industries, including healthcare.

[Michael Keller, President - Specialty Finance Business at Great Elm Capital]

In addition, GESF exited its final equipment leaseholding at a gain, further streamlining the business and enhancing focus. We have also completed several transactions and secured additional financing, which enabled us to pay down over $5,000,000 in GESF subordinated debt in the second quarter. As part of our strategic changes made earlier this year, we are pleased to report that Great Elm Healthcare Finance is now better positioned for profitability and is expected to grow its income and distributions to Great Elm Specialty Finance as we move through 2025. For Great Elm Commercial Finance, growth this quarter was temporarily constrained due to a delay in the upsizing of our back leverage facility. The syndication process was impacted by industry wide caution following the April tariff announcements.

[Michael Keller, President - Specialty Finance Business at Great Elm Capital]

However, syndication activity resumed in July, resulting in a more than 20% increase in GECF's borrowing capacity. In summary, these initiatives have streamlined our operations and better aligned our platform with long term growth objectives. We're seeing the benefits of our strategic repositioning take hold, and we remain confident in our ability to generate improved sustainable returns going forward.

[Matt Kaplan, CEO & President at Great Elm Capital]

Thanks, Mike. In closing, we had a phenomenal second quarter, growing NII and net asset value. We are excited for the second half of the year as we look to execute on our growth and optimization initiatives. We believe we remain well positioned to cover our dividend in 2025, continuing to deliver attractive risk adjusted returns for our shareholders. With that, I'll turn the call over to the operator for questions. Operator?

[Operator]

At this time, if you would like to ask a question, please press star then one on your telephone keypad. A confirmation tone will indicate your question. You may and then if you would your question queue. First question that we have comes from Eric Zwick of Lucid Capital Markets. Please go ahead.

[Erik Zwick, MD - Equity Research at Lucid Capital Markets LLC]

Thanks. Good morning, everyone.

[Matt Kaplan, CEO & President at Great Elm Capital]

Good morning, Eric.

[Erik Zwick, MD - Equity Research at Lucid Capital Markets LLC]

Wanted to start just to make sure I kind of understood the impact with the you referenced the dividend on the preference shares and the insurance related investment. Are you able to quantify the amount of that dividend in the most recent quarter? And is it right to think about that? It sounds like potentially that was a onetime event in that magnitude or is that something that's going to be ongoing?

[Matt Kaplan, CEO & President at Great Elm Capital]

So good question. The event will be an annual event. So it'll be ongoing, but we just will receive it about once per year. Believe the benefits to NII is approximately 1,600,000.0 net after all things are said and done, 1,700,000.0.

[Erik Zwick, MD - Equity Research at Lucid Capital Markets LLC]

Okay. Great. That's helpful. Thanks, Matt.

[Erik Zwick, MD - Equity Research at Lucid Capital Markets LLC]

And then I appreciate all of the detail on the core Weave investment. And just curious in terms of, you know, to the degree that you, you know, kind of have some insight and where you're able to share from the managing partner for that investment's perspective. What is their intention in terms of holding it versus potentially realizing some gain? Is there an expected time frame on that LP? Just curious if you can shed any light there that would be helpful.

[Matt Kaplan, CEO & President at Great Elm Capital]

So, it is up to the GP to decide when and how to provide liquidity. I would note that currently the underlying shares are subject to a lockup, which should expire this quarter. We have a good relationship and dialogue with the GP on many other matters as well. As of this point in time, can't really provide any color. It's kind of up to them.

[Matt Kaplan, CEO & President at Great Elm Capital]

The options today are limited. So all things being equal, this has been a fantastic investment for GECC and we'll provide an update to you all and all the rest of the investing community when we have something more concrete to say.

[Erik Zwick, MD - Equity Research at Lucid Capital Markets LLC]

Excellent. No, I appreciate the color there. And you're right. It's been a great investment. So you guys are due congratulations for spotting that investment and moving forward with it.

[Erik Zwick, MD - Equity Research at Lucid Capital Markets LLC]

That's So great. Just as I think about, your kind of your closing comments, Matt, you mentioned being fairly positive about growth opportunities going forward. So as you assess the market, and I guess I'm curious about if you could just weigh maybe from your perspective, the relative attractiveness of investing in additional corporate debt kind of middle market portfolio versus CLO equity opportunities and maybe anything else that's on your radar today, know, where we could see growth in the portfolio going forward?

[Matt Kaplan, CEO & President at Great Elm Capital]

Great question. So, over the course of the quarter, the corporate debt secondary market has definitely strengthened significantly. We're seeing some repricings begin to creep back into the market. So we have shifted some focus more into some of the more private side transactions that we partner with some blue chips on. We actually closed on a transaction last week, private transaction, and we hope to close on another one next week as well.

[Matt Kaplan, CEO & President at Great Elm Capital]

So, you know, these are not huge, but every little bit helps here. And I think we're finding that, you know, with some of the uncertainty, there are lots of businesses out there that are good businesses that are on the in the syndicated market and on the little smaller side that we can still get yield premium on relative to the syndicated market that's coming back. So that is where we have shifted our focus today.

[Erik Zwick, MD - Equity Research at Lucid Capital Markets LLC]

Thanks. And then maybe just switching gears a little bit. With regard to the investment in Maverick Gaming, I know that had been marked down in previous quarters, but now moved to nonaccrual in the most recent quarter. Anything kind of different that changed in your thinking around that investment? Or what prompted the move to non accrual?

[Matt Kaplan, CEO & President at Great Elm Capital]

I mean, we have an active dialogue with many of our almost all of our portfolio companies and management teams, right? So we've been having an active dialogue with the company and it became clear to us that that situation was not improving in the quarter and actually have filed for bankruptcy. So, in connection with the preparation for the bankruptcy filing, we believe it was prudent to put the position on non accrual.

[Erik Zwick, MD - Equity Research at Lucid Capital Markets LLC]

Makes sense. And then I just want to make sure I interpreted or heard one of your comments right. I think you're talking about both Maverick and Del Monte on non accrual now, but said you expect maybe a portion return to accrual in second half twenty five. And was that related to just one of those or potentially positive developments in both? But just wanted to make sure I interpreted that correctly.

[Matt Kaplan, CEO & President at Great Elm Capital]

That is largely tied to the DIP funding and the fact that when we fund the DIP, a portion of our pre petition debt gets rolled up into the DIP as well. And then that starts to accrue interest during dependency of the bankruptcy case.

[Erik Zwick, MD - Equity Research at Lucid Capital Markets LLC]

Got it. Okay. Great. That's all I have today. I appreciate you taking all my questions this morning.

[Matt Kaplan, CEO & President at Great Elm Capital]

You got it.

[Operator]

Thank you. Ladies and gentlemen, just a reminder, if you would like to ask a question, At this stage, there are no further questions on the conference call. I would now like to hand the call back to Matt Kaplan for any closing remarks. Please go ahead, sir.

[Matt Kaplan, CEO & President at Great Elm Capital]

Thank you again for joining us today. We are pleased with another quarter of solid performance as we continue to execute on our long term growth strategy, and we look forward to continued investor dialogue. Please let us know if we can help with any follow-up questions that you may have. Thank you.

[Operator]

Thank you. Ladies and gentlemen, that then concludes today's conference. Thank you for joining us. You may now disconnect your lines.

Participants

Analysts

• Peter Sceusa, Investor Relations Senior Associate at ICR
• Matt Kaplan, CEO & President at Great Elm Capital
• Keri Davis, CFO & Treasurer at Great Elm Capital
• Michael Keller, President - Specialty Finance Business at Great Elm Capital
• Erik Zwick, MD - Equity Research at Lucid Capital Markets LLC