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    GECC
    Earnings call· Jun 2026(Q2 FY26)

    Great Elm Capital Q2 FY26 earnings call GECC

    Aug 6, 2026 Source

    Executive summary

    Great Elm Capital Corp. Q2 FY26 — NAV Growth, NII Coverage, and Balance Sheet Optimization

    Great Elm Capital Corp. delivered a strong Q2 FY26, marked by a nearly 3% increase in NAV and full coverage of its quarterly distribution by net investment income. The company continued to optimize its balance sheet by extending debt maturities and reducing leverage, while strategically deploying capital into private credit. Management emphasized a disciplined approach to portfolio management and capital allocation amidst a competitive credit market, aiming for durable earnings and long-term shareholder value.

    Highlights

    6

    • Net Asset Value (NAV) increased nearly 3% from the prior quarter to $7.95 per share.

    • Net investment income (NII) of $4.5 million or $0.32 per share fully covered the quarterly distribution of $0.25 per share.

    • Pre-incentive fee NII increased approximately 66% to $4.5 million from $2.7 million.

    • Received $2.6 million in distributions from the CoreWeave-related equity investment, bringing cumulative distributions to $9.5 million, well above the original $6 million investment.

    • Asset coverage improved to 166.4% from 161.8%, and debt to equity improved to 1.51x from 1.62x.

    • Extended revolving credit facility maturity from 2027 to 2029 and retired all outstanding GECCO notes, with no debt maturities until 2029.

    Concerns

    3

    • Reported NII for the second quarter was $4.5 million ($0.32 per share), a decrease from $5 million ($0.36 per share) in the prior quarter, primarily due to a smaller incentive fee waiver.

    • The broader credit market remains highly competitive, making it difficult to find desired yields, particularly in broadly syndicated loans (BSL).

    • The invoice factoring business (Prestige) experiences quarter-to-quarter variability due to a high customer churn rate.

    Operational metrics

    20
    Net Asset Value per share
    $7.95up from $7.74
    Q2 FY26

    Net assets increased to $110.4 million, or $795 per share, as of June 30, 2026, from $107.5 million, or $774 per share, as of March 31, 2026.

    Net Asset Value growth
    nearly 3%QoQ
    Q2 FY26

    NAV increased nearly 3% from the prior quarter.

    Net Investment Income per share
    $0.32compared to $0.36 per share in Q1 FY26
    Q2 FY26

    NII for the second quarter was $4.5 million, or 32 cents per share, compared to $5 million, or 36 cents per share, in the prior quarter.

    NII coverage of distribution
    fully covered
    Q2 FY26

    NII fully covered our quarterly distribution and we generated meaningful realized and unrealized gains from investment modernizations and appreciation. The distribution was fully covered by our second quarter NII.

    Pre-incentive fee Net Investment Income
    $4.5 millionincreased approximately 66% from $2.7 million
    Q2 FY26

    Pre-incentive fee NII increased approximately 66% to $4.5 million from $2.7 million, reflecting higher total investment income and lower interest expense.

    Incentive fee waiver
    $0.9 millioncompared to $2.8 million in Q1 FY26
    Q2 FY26

    The incentive fee waiver contributed approximately $0.9 million or $0.06 per share during the quarter compared to $2.8 million or $0.20 per share in the first quarter.

    Cumulative incentive fee waiver
    $3.7 million
    through Q2 FY26

    GECM, waived all accrued and unpaid incentive fees through the second quarter of 2026. This marks the third consecutive quarter of fee waivers. directly benefiting shareholders through approximately $3.7 million or 26 cents per share of cumulative waived incentive fees as of June 30th

    CoreWeave distributions
    $2.6 million
    Q2 FY26

    During the quarter, we received $2.6 million in distributions from this investment

    CoreWeave cumulative distributions
    $9.5 millionwell above our original $6 million investment
    cumulative

    bringing and cumulative distributions to approximately $9.5 million, well above our original $6 million investment.

    Non-accrual percentage of portfolio
    less than 1%
    Q2 FY26

    We once again ended the quarter with less than 1% of the portfolio on non-accrual.

    Capital deployed
    $30 million
    Q2 FY26

    During the quarter, we deployed approximately $30 million of capital across 14 investments, including three private credit transactions sourced through our proprietary network of partners, representing approximately $12 million.

    CLO investments as % of portfolio fair value
    16%
    Q2 FY26

    Our CLO investments also helped increase portfolio diversity, providing GECC with exposure to over 300 senior secured loans. CLO investments accounted for approximately 16% of our portfolio fair value at quarter end

    Asset coverage ratio
    166.4%from 161.8%
    Q2 FY26

    Asset coverage improved to 166.4% from 161.8%

    Debt to equity ratio
    1.51xfrom 1.62x
    Q2 FY26

    while debt to equity improved to 1.51x from 1.62x in the prior quarter.

    Cash and equivalents
    $6 million
    Q2 FY26

    We ended the quarter with approximately $6 million of cash and equivalents.

    Available revolving credit facility capacity
    $39 million
    Q2 FY26

    $39 million of available capacity under a revolving credit facility

    Shares repurchased
    approximately 1%
    Jan 1, 2026 through Aug 4, 2026

    Beginning January 1, 2026 through August 4, 2026, we have repurchased approximately 1% of our outstanding shares at an average 37% discount toward June 30 NAV

    Remaining share repurchase authorization
    $9.5 million
    as of Aug 4, 2026

    leaving $9.5 million of remaining capacity. under the $10 million authorization approved in October 2025. At current market prices, the remaining authorization represents approximately 14% of GECC's market capitalization.

    Quarterly distribution
    $0.25
    Q2 FY26

    our Board of Directors declared a quarterly distribution of $0.25 per share payable on September 30, 2026 to stockholders of record as of September 15.

    GECCI notes called
    $6.5 million
    subsequent to Q2 FY26

    Subsequent quarter end, we also called $6.5 million of GECCI notes our highest cost debt, further reducing our capital cost... It's an 8.5% coupon. But when you look at the total gap cost of that debt with, you know, amortized expenses and so on, it's more, it's above a 9% cost.

    Risks & headwinds

    4
    Competitive Credit MarketOngoing

    much more difficult market to find the yields we need for BSL

    Mitigation: Disciplined approach to portfolio management, prioritizing capital protection, strict underwriting, and investing only where risk-adjusted returns are justified; shifting mix towards private credit.

    CoreWeave Investment VolatilityOngoing

    CoreWeave-related equity investment remains subject to market volatility

    Mitigation: Management acknowledges lack of control over liquidation but highlights significant returns already achieved (150% of original investment back).

    Invoice Factoring Business VariabilityOngoing

    quarter-to-quarter variability due to high customer churn rate inherent in its business

    Mitigation: Attributed to the inherent nature of the business model, implying it is a known characteristic.

    NII Fluctuation due to Incentive Fee WaiversQ2 FY26

    Q2 NII $0.32/share vs Q1 NII $0.36/share; Q2 waiver $0.9M vs Q1 waiver $2.8M

    Mitigation: Management views dividend coverage on an annual, four-quarter basis, smoothing out quarterly variability from such items.

    What to watch in Q3 FY26

    5

    Private credit deal pipeline conversion

    Next quarter and beyond
    Currentpretty strong backlog of private credit deals
    TargetContinued deployment of capital into private credit transactions.

    Why it matters

    Indicates successful execution of strategy to shift portfolio mix towards higher-yielding private credit in a competitive market.

    Our mix is definitely moving more towards private credit from BSL at this point in time... So we have a pretty strong backlog of private credit deals.

    Q&A highlights

    6

    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

    2 min read6 chapters

    Detailed Narrative

    01

    NAV Growth and NII Coverage

    NAV per share increased to $7.95, up from $7.74, driven by realized and unrealized investment gains. Net investment income (NII) of $0.32 per share fully covered the $0.25 quarterly distribution, despite a sequential decline in reported NII due to a smaller incentive fee waiver compared to Q1. Management clarified that dividend coverage is assessed on an annual, four-quarter basis to account for quarterly variability.

    02

    Strategic Portfolio Management

    The company deployed approximately $30 million across 14 investments, including $12 million in three private credit transactions. The portfolio maintained strong quality with less than 1% on non-accrual. CLO investments, representing 16% of fair value, provided diversification and cash flow, with management noting opportunities to refinance older CLOs to improve returns.

    03

    CoreWeave Investment Performance

    The CoreWeave-related equity investment continued to be a significant contributor, providing $2.6 million in distributions during the quarter, bringing cumulative distributions to $9.5 million against an original $6 million investment. These distributions are driven by the sponsor selectively selling underlying shares, and while subject to market volatility🌐, the investment has yielded over 150% of the original capital back.

    04

    Balance Sheet Optimization and Liquidity

    GECC extended its revolving credit facility maturity to 2029 and retired all outstanding GECCO notes, eliminating debt maturities until 2029. Subsequent to quarter-end, $6.5 million of GECCI notes, carrying an 8.5% coupon (over 9% GAAP cost), were called, further reducing capital costs. The company ended the quarter with $6 million in cash and $39 million in available credit facility capacity, providing flexibility for investment opportunities.

    05

    Shareholder Alignment and Capital Returns

    The investment manager waived $0.9 million (or $0.06 per share) in incentive fees during the quarter, contributing to $3.7 million ($0.26 per share) in cumulative waivers since January 1, 2026. GECC also repurchased approximately 1% of outstanding shares at a 37% discount to NAV since January 1, 2026, with $9.5 million remaining under the $10 million authorization, representing about 14% of market capitalization.

    06

    Great Elm Specialty Finance (GESF) Performance

    All three GESF verticals—Gradome Commercial Finance, Gradome Healthcare Finance, and Prestige invoice factoring—were profitable and generated cash distributions during the quarter. This reinforces GESF's role as a growing source of diversified assets and income for GECC, despite the inherent quarter-to-quarter variability in the Prestige factoring business due to high customer churn.

    AI-generated summary of the company’s earnings call. Not investment advice.