Great Elm Capital Corp. (GECC)·Q2 2025 Earnings Summary

Executive Summary

• Record total investment income of $14.3M and NII of $5.9M ($0.51/share), with cash income comprising over 90% of TII; NAV rose to $12.10 (+$0.64 QoQ), driven by unrealized gains on a CoreWeave-related investment and NII exceeding the distribution by 38% .
• EPS of $1.02 materially beat Wall Street consensus of $0.43; TII of $14.28M exceeded the $13.26M consensus. Management guided an expected Q3 NII step-down due to uneven CLO JV cash flows, while reiterating full-year coverage of the dividend *.
• CLO JV distributions increased to $4.3M (from $3.8M in Q1), and weighted average current yield on the debt portfolio rose to 12.5%; asset coverage ratio improved to 169.5% .
• Liquidity improved post-quarter with revolver capacity doubled to $50M (up to $90M under certain conditions) and pricing cut to SOFR+2.50% from SOFR+3.00%—a cost-of-capital tailwind and funding flexibility catalyst .

What Went Well and What Went Wrong

What Went Well

• Record TII and NII with over 90% cash income; NII exceeded the quarterly distribution by 38% (adding ~$0.14/share to NAV) .
• CLO JV momentum: $4.3M cash distributions (vs. $3.8M in Q1) and expanding platform; management targets high teens to ~20% returns over time .
• CoreWeave-related investment contributed meaningfully to NAV via unrealized gains; management highlighted strong post-IPO performance and directional correlation to publicly-traded equity .

Quotes:

• “Record total investment income and NII that exceeded our recently increased quarterly distribution… NAV also improved meaningfully… unrealized gains on our CoreWeave related investment” — CEO Matt Kaplan .
• “We anticipate third quarter NII per share to step down… nevertheless… well positioned to cover our base distributions for the full year” — CEO Matt Kaplan .

What Went Wrong

• Non-accruals: Two Maverick Gaming debt investments moved to non-accrual in Q2; subsequent to quarter-end, Del Monte first-lien debt moved to non-accrual amid bankruptcy filing .
• Income cadence volatility: JV structure recognizes income only on cash distribution, leading to quarter-to-quarter undulation; management expects dampening over time as scale grows .
• Specialty finance ABL growth temporarily constrained by delay in upsizing back leverage facility due to industry-wide caution following April tariff announcements (resolved in July with >20% increase in borrowing capacity) .

Financial Results

Income Statement and Per-Share Metrics

Actual vs Wall Street Consensus (Q2 2025)

Values with asterisks retrieved from S&P Global.

Margins

Values with asterisks retrieved from S&P Global.

Segment/Portfolio Mix (Q2 2025)

Key KPIs and Balance Sheet

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• “NII that exceeded our recently increased quarterly distribution… Looking ahead, while we expect third quarter NII will step down… we remain well-positioned for our NII to exceed our distribution for the full year.” — Matt Kaplan, CEO .
• “The increase in NII was primarily driven by the receipt of distribution from an insurance related investment and higher income from our CLO JV… NAV per share was $12.1… asset coverage ratio was 169.5%.” — Keri Davis, CFO .
• “CW Opportunity II LP… convertible preferred equity in CoreWeave… carried at NAV… value… very directionally correlated with… publicly traded equity… has exhibited some significant volatility since IPO.” — Matt Kaplan .
• “We have grown our corporate portfolio… first lien loans comprised two thirds… targeting high teens to 20% returns over time [CLOs].” — Matt Kaplan .

Q&A Highlights

• Insurance preference shares distribution: Annual event; approx. $1.6–$1.7M net benefit to NII in Q2 .
• CoreWeave investment liquidity: GP-controlled; current lock-up expected to expire this quarter; directional correlation to CoreWeave’s stock noted .
• Portfolio allocation outlook: Shift focus to private-side transactions amid syndicated market repricing; recent private closings highlighted .
• Non-accrual management: Maverick Gaming placed on non-accrual; Del Monte non-accrual post quarter; expectation for partial accrual via DIP roll-up during bankruptcy .

Estimates Context

• EPS: $1.02 Actual vs $0.43 Consensus → strong beat; reflects insurance pref share distribution timing and higher CLO JV cash distributions *.
• TII/Revenue: $14.28M Actual vs $13.26M Consensus → beat; driven by cash-heavy income mix (>90% cash income) and CLO JV distributions *.
• Estimate coverage: Low estimate counts (3) suggest limited Street coverage; results likely to prompt upward revisions to NII/EPS trajectories even with Q3 step-down guidance *.

Values with asterisks retrieved from S&P Global.

Key Takeaways for Investors

• Cash income strength and CLO JV distributions drove material beats on EPS and TII; NAV inflected higher (+$0.64/share QoQ) with CoreWeave marks, supporting total-return thesis .
• Expect near-term NII volatility (Q3 step-down) due to JV cash cadence, but management reiterated full-year dividend coverage—focus on annual earnings power rather than quarterly noise .
• Credit events contained (Maverick, Del Monte <3% of FV); DIP roll-up expected to restart accruals—monitor recoveries and timing .
• Funding flexibility and lower cost of capital post-quarter (revolver to $50M, SOFR+2.50%) enhances ability to deploy into high-IRR opportunities and mitigate income volatility over time .
• Portfolio yield remains robust (12.5% weighted average) with 73% floating-rate debt—income resilient in current rate environment; watch macro for spread/OC cushion impacts .
• CoreWeave exposure is a positive NAV lever but introduces market-linked volatility; lock-up expiry is a tactical watchpoint for potential liquidity actions by GP .
• Tactical emphasis shifting toward private transactions for yield premium vs syndicated market repricings—incremental contributors to NII in H2 .