Great Elm Capital (GECC) Q2 FY26 earnings call: the analyst Q&A

What does the pipeline look like for Q3 and beyond, specifically regarding the mix of private credit and broadly syndicated loans (BSL)?

Management stated their mix is moving more towards private credit, as BSL is a more difficult market for desired yields. They have a strong backlog of private credit deals, which offer better risk-return profiles, but they are being conservative with underwriting due to the overall market characteristics.

“Our mix is definitely moving more towards private credit from BSL at this point in time. We'll always have a portion of BSL, but obviously that's a much more difficult market to find the yields we need at this point.”

asked by Eric Zwick · answered by Jason Reese

What was the contribution from CLO distributions in the quarter, and what is the expected cadence going forward, considering variability?

Management indicated that they haven't made new CLO investments recently, so the cadence should become less variable. They also noted opportunities to refinance older CLOs, which could improve cash flow. The specific dollar amount for the quarter was not immediately available on the call but was referenced as being in the investor deck.

“Yes, but Eric, we haven't made a new CLO investment in a while, so some of that cadence should become less variable. But some of it also will depend. We're getting to the point where we've held some of these for two years, and so there's some opportunities to refinance the CLOs, which should help our cash flow.”

asked by Eric Zwick · answered by Jason Reese

Does the company have any undistributed taxable income (UTI) or spillover at this point, and if so, what is the amount?

Management confirmed they do have UTI and monitor it regularly to ensure they stay current with distributions. The exact amount for the most recent tax year was not yet finalized but would be updated in the next quarter.

“Yes, we do. We do. And we monitor that regularly to make sure we are staying current on that with distributions. Do you happen to have what the amount is either in dollar terms or on a per share basis? We're currently working through our most recent tax year with some of our underlying investment information coming through. So we should have that update in the next quarter.”

asked by Eric Zwick · answered by Unknown Speaker

What drove the $2.6 million CoreWeave distribution, given its conversion to equity and prior distributions being less regular? Did the vehicle sell shares?

Management confirmed that the distribution came from the sponsor selectively selling underlying shares of CoreWeave based on market prices. They noted that while they have no control over the liquidation, they have already recovered over 150% of their original investment.

“The sponsor there is selectively selling shares based on market prices. So all of that distribution came from shares, underlying shares being sold. we have no control over how that investment liquidates, but as it liquidates over time, we will continue to get distributions.”

asked by Eric Zwick · answered by Jason Reese

Given the one-time nature of the $2 million insurance dividend and the unpredictable timing of CoreWeave distributions, does the core earnings run rate currently cover the dividend, and what levers are available to improve this?

Management clarified that the board assesses dividend coverage on an annual, four-quarter basis, accounting for variability from items like the annual insurance distribution (which occurs in Q2) and the factoring business. They aim to set the dividend at a level that can be covered over a full year, rather than varying it quarter-to-quarter.

“So, Eric, we try, the board tries to look at what our annual Earnings are going to be and make sure we're covering the dividend. Okay, because there is that variability. So we, you know, the insurance distribution comes in the second quarter every year. We get that. You're right, we will not have that next quarter.”

asked by Eric Zwick · answered by Jason Reese

How does management balance using capital for share repurchases (given the discount to NAV) versus new investments or debt reduction, and what is the expected pace of repurchases?

Management stated that the pace of repurchases depends on the stock price. They continuously evaluate the balance between repurchasing shares (to increase NAV and shareholder ownership) and deploying capital into new investments or reducing debt. They highlighted the risk-free benefit of retiring high-cost debt, such as the 8.5% GECCI notes (over 9% GAAP cost), as a strong alternative to share repurchases.

“Well, the obvious answer is that completely depends on the stock price, right, and how the stock trades. But we're constantly looking, and the boards involved in the balance of, you know, putting capital to work. And there's multiple ways that that could be done versus buying back the shares.”

asked by Eric Zwick · answered by Jason Reese