Sign in

You're signed outSign in or to get full access.

GE

Great Elm Capital Corp. (GECC)·Q1 2025 Earnings Summary

Executive Summary

  • Record total investment income of $12.5M and highest cash income quarter; NII of $4.6M ($0.40/share) covered the increased dividend, with management guiding to higher NII in Q2 2025 .
  • NAV per share declined to $11.46 (from $11.79) on unrealized marks, mainly CLO JV equity and CoreWeave exposure amid market volatility; management expects reversals as markets stabilize .
  • CLO JV cash distributions stepped up to $3.8M in Q1 and $4.3M in April, supporting sequential NII momentum and dividend coverage across 2025 .
  • Dividend maintained at $0.37 for Q2 2025 (14.7% annualized yield on $10.09 price; 12.9% on Q1 NAV), with asset coverage ratio at 163.8% .

What Went Well and What Went Wrong

What Went Well

  • Record TII of $12.5M; only 12% from PIK/accretion, signaling quality of cash generation .
  • NII rose to $4.6M ($0.40/share), covering the increased quarterly distribution; CEO: “we expect NII to increase in the second quarter…well positioned to cover our distributions over the course of 2025.” .
  • CLO JV distributions accelerated ($3.8M in Q1; $4.3M in April), with targeted high-teens to ~20% IRRs; first-lien composition at 71% of corporate portfolio improves defensiveness .

What Went Wrong

  • NAV/share fell to $11.46 (from $11.79) due to unrealized losses, notably CLO JV equity and CoreWeave convertible preferred exposure amid volatility; net realized/unrealized losses were ~$4.1M ($0.36/share) .
  • Asset coverage ratio declined to 163.8% (from 169.7%); cash decreased to ~$1.3M as GECC drew $12.0M on the revolver to optimize portfolio deployment .
  • Earnings remain temporarily “lumpy” given JV distribution timing and CLO ramp dynamics; management reiterates evaluating GECC on TTM basis vs. quarter-to-quarter .

Financial Results

MetricQ1 2024Q3 2024Q4 2024Q1 2025
Total Investment Income ($USD Millions)$8.909 $11.727 $9.100 $12.495
Net Investment Income ($USD Millions)$3.193 $4.072 $2.100 $4.576
NII per Share ($)$0.37 $0.39 $0.20 $0.40
GAAP EPS ($)($0.05) $0.33 $0.17 $0.04
Net Realized + Unrealized Gains/Losses ($USD Millions)($3.651) ($0.598) ($0.300) ($4.123)
NAV per Share ($)$12.57 $12.04 $11.79 $11.46
Q1 2025 vs Street ConsensusActual Q1 2025Consensus Q1 2025Surprise
NII per Share vs “Primary EPS”* ($)$0.40 $0.3825*+$0.0175*
Total Investment Income vs “Revenue”* ($USD Millions)$12.495 $12.1105*+$0.3845*

Values retrieved from S&P Global (asterisked). Note: For BDCs, Street “Primary EPS” often reflects NII per share rather than GAAP EPS; GECC reported GAAP EPS of $0.04 in Q1 2025 .

Segment breakdown (fair value):

SegmentQ3 2024Q4 2024Q1 2025
Corporate Credit Debt ($USD Millions)$204.8 $207.0 $213.2
Great Elm Specialty Finance (Debt + Equity) ($USD Millions)$43.6 $43.2 $42.8
CLO Investments ($USD Millions)$32.9 $40.1 $52.2
Dividend-Paying Equity ($USD Millions)$36.3 $10.7 $9.3
Other Equity ($USD Millions)$15.7 $23.3 $24.4
Total Investments ($USD Millions)$333.3 $324.3 $341.9

KPIs:

KPIQ3 2024Q4 2024Q1 2025
Asset Coverage Ratio (%)166.2% 169.7% 163.8%
Weighted Avg Current Yield – Debt12.8% 12.4% 12.3%
Floating Rate Mix – Debt (% of FV)~72% ~72% ~73%
Cash ($USD Millions)$26.0 $8.4 $1.3
Total Debt Outstanding (Par, $USD Millions)$235.3 $195.4 $207.4
Revolver Drawn ($USD Millions)$0.0 $0.0 $12.0
CLO JV Cash Distributions (Quarter, $USD Millions)$3.2 (Q3) $0.5 (Q4) $3.8 (Q1); $4.3 in April
Dividend Declared per Share$0.35 (Q4) $0.37 (Q1 2025) $0.37 (Q2)

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
NIIQ2 2025n/aExpect NII to increase sequentially vs Q1 2025 New (raised)
Dividend per ShareQ2 2025$0.37 (Q1 2025) $0.37 (Q2 2025) Maintained
Dividend Yield (annualized reference)Q2 202512.6% on Dec 31 NAV 14.7% on $10.09 close; 12.9% on $11.46 NAV Updated reference context

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2024)Previous Mentions (Q4 2024)Current Period (Q1 2025)Trend
CLO JV distributions/returnsCLO JV launched; TII $11.7M; distributions driving income Lumpy distributions; $3.2M (Q3) → $0.5M (Q4); targeting high-teens to ~20% IRRs $3.8M in Q1; $4.3M in April; expect Q2 NII up; new CLO closed in April with first distribution expected Oct 2025 Improving cadence
Macro/tariffsRefinanced notes; cautious deployment Measured deployment amid tariff uncertainty Limited direct tariff exposure; cautious underwriting; government contract exposure monitored Cautious/stable
Portfolio quality/nonaccrualsStable; first lien mix rising Nonaccruals ~1% FV; focus on first lien 0 nonaccruals; first lien 71% corporate portfolio Improving
Specialty Finance (GESF)Stable growth Rebranding/consolidation plan initiated Consolidation executed; new facilities; simplifying business; expected returns to increase Executing/uptrend
Capital/ATMDebt refinanced; shelf filed $500M shelf; equity raised at NAV $100M ATM prospectus supplement for flexibility Added flexibility
AI/Technology exposure (CoreWeave)n/an/aVolatile mark on convertible preferred via CW Opportunity 2 LP; expectation for reversal as market stabilizes Volatility to watch

Management Commentary

  • “Record total investment income of $12.5 million…highest-ever cash income quarter…NII exceeded our increased quarterly distribution.” — Matt Kaplan, CEO .
  • “Looking ahead, we expect NII to increase in the second quarter, and we remain well positioned to cover our distributions over the course of 2025.” — Matt Kaplan .
  • “We hold the majority of our CLO exposure…GECC only recognized the income when the CLO JV makes distributions. This leads to a more uneven nature to our income reporting.” — Matt Kaplan .
  • “0 positions on nonaccrual…restructured prior nonaccrual into 3 debt instruments to begin generating income in 2026.” — Matt Kaplan .
  • “Transformative start to 2025 for Great Elm Specialty Finance…consolidated ABL under Great Elm Commercial Finance…new facilities…expect increasing returns over remainder of the year.” — Michael Keller .

Q&A Highlights

  • CLO timing/warehouse: New CLO closed in April; first distribution expected October 2025; income remains uneven initially but accelerating in Q2 .
  • NAV marks and market volatility: ~$0.30 of ~$0.38 per-share unrealized loss attributable to CLO JV equity and CoreWeave; expectation for reversal as markets stabilize .
  • Revolver/covenants: Borrowing base tied to FV; significant capacity; covenants include NAV ≥ ~$65M, ACR ≥ 150%; revolver drawn to optimize deployment .
  • Pipeline/yields: Barbelled deployments (Jan/March); expect flow-through into Q2; direct lending pipeline stronger than 3–4 months ago; opportunistic rotation from cash surrogates .
  • Portfolio exposures: Limited tariff exposure; consumer exposures skew to private label/trade-down beneficiaries; CSC ServiceWorks viewed as recession-resilient .
  • CLO ROE: Targeting high-teens to ~20% IRRs; JV does not charge fees; Q1 CLO income net of marks positive to GECC .

Estimates Context

  • Q1 2025 beat: NII per share $0.40 vs Street “Primary EPS”* $0.3825; TII $12.495M vs Street “Revenue”* $12.1105M. Management guides to higher NII in Q2 on stronger JV distributions and new deployments . Values retrieved from S&P Global (asterisked).
  • Forward snapshot: Street “Primary EPS”* Q3 2025: $0.23 (3 est.); “Revenue”* $10.25M (3 est.). Q4 2025: “Primary EPS”* $0.35 (3 est.); “Revenue”* $13.23M (3 est.). Values retrieved from S&P Global (asterisked). [GetEstimates]*

Key Takeaways for Investors

  • Sequential NII momentum into Q2 supported by $4.3M April JV distributions and active deployment; dividend coverage intact near term .
  • NAV volatility driven by mark-to-market in CLO equity and CoreWeave exposure; management expects reversals as spreads normalize — monitor market conditions and CLO equity vintages .
  • Portfolio defensiveness: 71% first-lien corporate loans; 0 nonaccruals; limited direct tariff exposure — reduces downside risk amid macro uncertainty .
  • Capital strategy: $100M ATM adds flexibility to fund growth; potential issuance at/above NAV can support scaling while managing leverage/ACR .
  • Liquidity/leverage watch: Cash of ~$1.3M and revolver draw of $12M; total debt at par $207.4M — track ACR (163.8%) and revolver utilization as CLO distributions/monetizations fund operations .
  • CLO JV is a core earnings driver; understand income “lumpiness” with distribution timing; first distribution from new April CLO expected Oct 2025 — consider trailing-12 evaluation .
  • Tactical implication: Near-term catalysts include Q2 dividend coverage, sequential NII increase, and JV distribution cadence; medium-term thesis hinges on scaling CLO JV, specialty finance execution, and disciplined deployment driving sustained NII growth .