Great Elm Capital Corp Stock

Thank you. Good day and welcome to Great Elm Capital Corp.'s second quarter 2026 financial results conference call. [Operator Instructions] Also, please be aware that today's call is being recorded. I would now like to turn the call over to Adam Yates, Managing Director. Please go ahead.

Hello, and thank you for joining us for Great Elm Capital Corp.'s second quarter 2026 earnings conference call. If you would like to be added to our distribution list, you can email Investor Relations at [email protected], or you can sign up for alerts directly on our website, www.greatelmcc.com. The slide presentation accompanying today's conference call and webcast can be found on our website under Events and Presentations. On our website, you can also find our earnings release and SEC filings.

I would 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 a 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.'s filings with the SEC for important factors that could cause actual results to differ materially from these statements. Great Elm Capital Corp. does not undertake to update its forward-looking statements unless required by law.

To obtain copies of our SEC filings, please visit Great Elm Capital Corp.'s website, Financials, SEC Filings, or visit the SEC's website. Hosting the call today is Jason Reese, Great Elm Capital Corp.'s Chairman of the Board and CEO. He will be joined by Matt Kaplan, Portfolio Manager, Chris Croteau, Head of Research, Chief Financial Officer, Keri Davis, Chief Compliance Officer and General Counsel, Adam Kleinman, and Mike Keller, President of Great Elm Specialty Finance. I will now turn the call over to GECC's Chairman and CEO, Jason Reese.

Thanks, Adam, and thank you everyone for joining us today. Since stepping into the CEO role, our priorities have remained unchanged. Protecting and growing NAV, generating sustainable net investment income, and maintaining a disciplined approach to capital allocation and portfolio management. We believe this quarter's results demonstrate solid progress toward each of those objectives. NAV increased nearly 3% from the prior quarter.

Net investment income or NII fully covered our quarterly distribution, and we generated meaningful realized and unrealized gains from investment monetizations and appreciation. At the same time, we continue to strengthen the quality of the portfolio and position GECC to generate durable earnings and create long-term shareholder value. These results were supported by continued strong portfolio performance, including our CoreWeave-related equity investment. During the quarter, we received $2.6 million in distributions from this investment, bringing cumulative distributions to approximately $9.5 million, well above our original $6 million investment.

Although our CoreWeave-related equity investment remains subject to market volatility, it continues to provide meaningful upside potential. Importantly, this quarter's strong results were achieved while we enhanced the overall quality of the portfolio. We once again ended the quarter with less than 1% of the portfolio on non-accrual, reflecting our focus on proactive risk management and portfolio quality. The broader credit market remains highly competitive, but our disciplined approach to portfolio management has not changed.

We continue to prioritize protecting capital, maintaining strict underwriting standards, and investing only where we believe risk-adjusted returns are justified. During the quarter, we deployed approximately $30 million of capital across 14 investments, including 3 private credit transactions sourced through our proprietary network of partners, representing approximately $12 million.

We also selectively expanded our broadly syndicated loan portfolio, increasing our diversified pool of primarily senior secured investments.

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, generating meaningful cash flow to GECC, diversifying our income streams, and supporting the sustainability of our NII. At Great Elm Specialty Finance, or GESF, we continue to execute on our strategic transformation to streamline the platform and enhance growth and profitability.

Great Elm Commercial Finance and Great Elm Healthcare Finance continue to build robust lending pipelines, while Prestige Capital, our invoice factoring business, continues to generate attractive returns, albeit with some quarter-to-quarter variability due to the high customer churn rate inherent in its business. All 3 GESF verticals were profitable during the quarter and generated cash distributions, reinforcing GESF's role as a growing source of diversified assets and income for GECC. Manager alignment with our shareholders remains a core principle at GECC.

Consistent with that commitment, our investment manager, 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 $0.26 per share of cumulative waived incentive fees as of June 30, including approximately $0.9 million or $0.06 per share during the second quarter. These waivers are accretive to NAV and directly support shareholder returns. We also continue to opportunistically repurchase GECC shares at a discount to NAV through our Stock Repurchase Program.

Beginning January 1, 2026 through August 4, 2026, we have repurchased approximately 1% of our outstanding shares at an average 37% discount to our June 30 NAV, 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. Our balance sheet continues to strengthen. During the quarter, we extended the maturity of our revolving credit facility from 2027 to 2029 and retired all outstanding GECCO notes, leaving no debt maturities until 2029.

Subsequent to quarter end, we also called $6.5 million of GECCI notes, our highest cost debt, further reducing our capital cost. Furthermore, our liquidity position is a competitive advantage, allowing us to navigate a volatile market environment while selectively capitalizing on attractive investment opportunities. We ended the quarter with approximately $6 million of cash and equivalents, $39 million of available capacity under our revolving credit facility, and a meaningful portfolio of liquid investments. This liquidity and disciplined capital deployment provides us with the flexibility to act quickly when the right investment opportunities arise.

Looking ahead, we remain focused on disciplined execution and prudent capital allocation. We believe the progress we've made this quarter, strengthening portfolio quality, maintaining dividend coverage, enhancing the balance sheet, and preserving liquidity positions GECC to continue creating long-term value for shareholders.

I'd now like to turn the call over to Keri Davis to review our financial results in greater detail.

Thanks, Jason. I'll go over our financial highlights now, but we invite all of you to review our earnings release, accompanying presentation, and SEC filings for additional detail. Total investment income for the second quarter increased to $10.9 million from $9.5 million in the first quarter, primarily driven by a $2 million dividend from our investment in insurance-related preference shares. NII for the second quarter was $4.5 million, or $0.32 per share, compared to $5 million, or $0.36 per share, in the prior quarter.

While reported NII declined sequentially, the first quarter benefited from a larger incentive fee waiver. Excluding that difference, underlying earnings improved meaningfully. Pre-incentive fee NII increased approximately 66% to $4.5 million from $2.7 million, reflecting higher total investment income and lower interest expense. 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. Net assets increased to $110.4 million, or $7.95 per share, as of June 30, 2026, from $107.5 million, or $7.74 per share, as of March 31, 2026.

The increase was driven primarily by realized and unrealized investment gains, including gains on our CoreWeave-related equity investment. Additional detail is provided in the NAV bridge on slide 11 of the investor presentation. Our balance sheet remains strong and liquid. Asset coverage improved to 166.4% from 161.8%, while debt to equity improved to 1.51x from 1.62x in the prior quarter, reflecting our continued focus on deleveraging and balance sheet optimization. As of June 30, total debt outstanding was $166.4 million. We also held cash and money market investments of approximately $6 million, along with $39 million of availability under our revolving credit facility.

Finally, 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. The distribution was fully covered by our second quarter NII. I will now hand it over to the operator for questions.

We will now begin the question-and-answer session. [Operator Instructions] At this time, we will pause just momentarily to assemble our roster. Our first question here will come from Erik Zwick with Lucid Capital Markets. Please go ahead.

Thank you. Good morning, all. I wanted to start with a question on the pipeline for new originations, kind of looking forward into 3Q and beyond, just curious what that looks like from a mix perspective in terms of private credit and BSL and any other kind of commentary you might have there.

Yes, it's Jason. Erik, thanks for the question and following us. 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 in time. So we have a pretty strong backlog of private credit deals. I think you see we closed 3 in the last quarter. Those definitely take longer to close, but we're seeing a number of very interesting things and we're seeing much better risk-return profiles on private credit.

That being said, we're being pretty conservative. We're not going out on the risk curve anywhere right now. We don't love the overall risk-reward characteristics of the market. So the things that we're doing, we're doing very, very thorough underwriting on and trying to get very comfortable. Does that make sense?

Yes, that's helpful. Thank you. Shifting gears a little bit, the next question, just curious, and I may have overlooked it in the release, maybe Keri can help me out. What was the CLO distributions, and what was the contribution to the CLO distribution in the quarter? And then I know those can potentially, there can be some variability quarter to quarter based on when you've made recent changes or investments that they haven't made their first distribution yet. So just, kind of, curious about the kind of cadence of the contributions going forward as well, if you've got any detail to share there.

Sorry, can you hear me?

Yes. Yes.

Yes. Okay. I'm pulling the information up as we are speaking. So I think we did have that in our investor deck for this quarter. I think you're right that the cadence can change. I think we try to include as much of that information as we have available in those materials.

Okay, I'll take a look there and follow up with that. Yes, exactly.

Yes, but Erik, 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 2 years, and so there's some opportunities to refinance the CLOs, which should help our cash flow. So there is still some variance, but it should be less than it has been historically.

Got you. So it should be more consistent. And if you're able to opportunistically refinance some of the liability side there, then you could see a little bit of maybe an improved return, which would be nice. Okay. That makes sense.

Correct.

And then curious, I can't remember. Do you guys have any undistributed taxable income or spillover at this point?

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.

Yes, we'll get that to you, Erik, as soon as we have it.

Excellent. Thanks. Appreciate that. And then just with regard to the CoreWeave distribution in the quarter, I know, you were receiving those more regularly prior when it was the preferred investment, but once it converted to the equity, so, what drove that distribution? Did the vehicle sell shares, or is there some other kind of something that drove that? Just, kind of, curious there.

The sponsor there is selectively selling shares based on market prices. So all of that distribution came from 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. But I think if you look at the numbers, we've kind of, got over 150% of our investment back and we still have a pretty significant chunk there that's been a very good one for us.

Yes, okay. That's what I suspected. Thank you for the confirmation. And just trying to think about the run rate of kind of, you know, core earnings going forward, the insurance investment dividend that you received was $2 million this quarter, and I think typically that's, you know, annual, so you won't be getting that for another 3 quarters or 4 quarters or so. CoreWeave distribution, hard to predict timing there for when those are sold.

So if I back those two out, it seems like the core run rate of earnings is below the dividend level now. So just curious about your thoughts for that, you know, kind of levers. And I know you've talked a little bit about, you know, improving the portfolio, improving the structure and liabilities. But what does it take to ge,t kind of, that core run rate of earnings closer to the dividend level at this point?

So, Erik, 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. So that will change the core piece. It's hard to really sketch out, but we look pretty hard on an annual 4-quarter basis. And we're trying to set the dividend so it could be covered over that period of time.

So we're doing our best to try to figure out not just what the base is, but with those other things from the CLOs, from insurance, there's some variability when we look at like Prestige, our factoring business is great every year, the earnings, but quarter by quarter, it can vary significantly. So we're trying to set the dividend based on what we think we can cover and pay on a 4-quarter basis, as opposed to every individual quarter. We don't think it makes sense for our shareholders to vary our dividends significantly quarter to quarter.

Understood, yep, thanks for the explanation there. And last one for me, you know, you started to use the share repurchase authorization and just given the discount that shares, you know, trade relative to NAV today, it seems like it's still a really attractive proposition for you. You've also got a strong pipeline and you're seeing good opportunities there. So just how do you think about the balance of using capital between those two and what could we potentially see in terms of rate of repurchases going forward over the next quarter or so?

Look, the obvious answer is that completely depends on the stock price, right, and how the stock trades. But we're constantly looking, and the Board's 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. So we clearly have levels at which we think it's better for our shareholders to repurchase shares and increase their NAV and increase their percentage ownership of the company by repurchasing those shares. I think you'll see us from time to time doing that in the market. And then we're also balancing looking at working our liabilities versus making new investments too.

I think you saw that we called $6.5 million of our GECCI notes in July. Those are the most costly piece of debt that we have outstanding. It's an 8.5% coupon. But when you look at the total GAAP cost of that debt with, you know, amortized expenses and so on, it's above a 9% cost. And so we're balancing, do you repurchase shares? Do you repurchase debt? Do you make new investments? And we're constantly looking at that to figure out. Obviously, repurchasing 9% cost of funds is a riskless transaction. So there's a lot of positives, I think, in retiring the high-cost debt when the time is right.

Thank you, both of you, Jason and Keri, for all of the answers today. I appreciate it. That's all for me.

Erik, happy to do a follow-up one-on-one anytime you want.

I appreciate that.

[Operator Instructions] That will conclude our question-and-answer session. I would like to turn the conference back over to Jason Reese for any closing remarks.

Thank you again for joining us today. This quarter reflects continued progress on the priorities we outlined earlier this year. We increased NAV, strengthened portfolio quality, generated net investment income that fully covered our dividend, and further improved our balance sheet while reducing cost of capital. I am pleased with both the trajectory of the portfolio and the strength of the team executing our strategy.

As we look ahead, our priorities remain unchanged. Protect and grow NAV, generate sustainable NII, and allocate capital with discipline. We will continue to actively manage portfolio risk, pursue differentiated investment opportunities, and maintain the liquidity and financial flexibility to act on attractive opportunities as they arise. We believe GECC is well-positioned to continue delivering durable, long-term value for shareholders. We appreciate your continued support and look forward to updating you on our progress. Thank you very much.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.

Greetings, and welcome to Great Elm Capital Corp.'s First Quarter 2026 Financial Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Mr. Adam Yates, Managing Director. Thank you. Mr. Yates, you may begin.

Hello, and thank you, everyone, for joining us for Great Elm Capital Corp.'s First Quarter 2026 Earnings Conference Call. If you would like to be added to our distribution list, you can e-mail [email protected] or you can sign up for alerts directly on our website, www.greatelmcc.com. The slide presentation accompanying today's conference call and webcast can be found on our website under Events and Presentations. On our website, you can also find our earnings release and SEC filings.

I would 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 a 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.'s filings with the SEC for important factors that could cause actual results to differ materially from these statements. Great Elm Capital Corp. does not undertake to update its forward-looking statements unless required by law. To obtain copies of our SEC filings, please visit Great Elm Capital Corp.'s website under Financials, SEC filings or visit the SEC's website.

Hosting the call today is Jason Reese, Great Elm Capital Corp.'s Chairman of the Board and newly appointed CEO. He'll be joined by Matt Kaplan, Portfolio Manager; Chris Croteau, Head of Research; Chief Financial Officer, Keri Davis; Chief Compliance Officer and General Counsel, Adam Kleinman; and Mike Keller, President of Great Elm Specialty Finance.

I will now turn the call over to GECC's Chairman and CEO, Jason Reese.

Thanks, Adam, and thank you, everyone, for joining us today. In March, I assumed the role of Executive Chairman of GECC at an important inflection point for the company. On May 4, I was appointed CEO.

The company was established to create income and protect and grow NAV. In the near term, I am reprioritizing. We will protect and grow NAV first and secondarily create income. We will accomplish this by strengthening oversight, protecting shareholder value and reinforcing accountability across the platform. We are well underway, making progress on these fronts.

I noted last quarter that as Chairman and CEO of Great Elm Group, the parent company of GECC's investment manager, I bring deep familiarity with both the team and our investment process. That familiarity enables a seamless transition into my role as both GECC Chairman and CEO, and I'm working closely with management to reinforce disciplined underwriting and thoughtful capital allocation. Before turning to the quarter, I would like to thank Matt Kaplan for his leadership during his tenure as CEO. Matt will continue in his role as Portfolio Manager.

Turning to results. Recent quarters have been challenging for the broader BDC sector, and GECC was not immune to the macro environment. Our NAV declined this quarter, driven primarily by unrealized losses in select investments, most notably our CLO JV and one private investment with an idiosyncratic event. Our CLO investments can exhibit volatility given their inherent leverage.

Additionally, in the first quarter, the broader CLO equity market declined. Despite the volatility of the quarterly mark, CLO exposure provides additional diversification to GECC's portfolio of secured investments. Our CLO investments continue to generate meaningful cash flow, diversify our income streams and support the sustainability of our net investment income.

In light of these unrealized losses, Great Elm Capital Management, GECM, investment adviser, has waived all accrued and unpaid incentive fees through June 30, 2026, marking the third consecutive quarter of fee waivers. As of March 31, 2026, that waiver amounted to approximately $2.8 million or $0.20 per share of direct benefit to our shareholders. This action is immediately accretive to NAV and underscores our alignment with shareholders.

We have also taken decisive action to deleverage the balance sheet. Recently, we called and repurchased all $57.5 million of GECCO notes due later this year. Once these notes are fully retired, GECC will have no funded debt maturities until 2029. This eliminates near-term refinancing risk and enables our flexibility to deploy capital strategically.

In addition, we continue to improve portfolio credit quality through active investment rotation. During the quarter, we deployed approximately $22 million across 12 investments while exiting investments we viewed as higher risk. As a result, first lien investments now comprise nearly 75% of the corporate portfolio, the highest level in the company's recent history. This reflects a deliberate shift towards senior secured investments with stronger downside protection and is a direct outcome of the underwriting discipline we have instilled across the platform.

At the same time, we're expanding our proprietary sourcing efforts. During the quarter, we closed 3 transactions sourced through institutional partnerships, committing approximately $15 million to new private investments. We closed on one additional proprietary private investment in April, and we expect to close additional investments in the near future, building on this momentum as our sourcing network continues to deepen and differentiate our platform.

At Great Elm Specialty Finance, or GESF, we continue to execute on the strategic transformation aimed at streamlining the platform for enhanced growth and profitability. Great Elm Commercial Finance is building a robust pipeline of asset-based lending opportunities, while Great Elm Healthcare Finance has successfully repositioned the business and recently closed on another transaction. Prestige, our invoice financing business generates durable returns, but can exhibit quarter-to-quarter variability due to the spot nature of its business.

I'm pleased to say all 3 of our core verticals under GESF are profitable and generate cash distributions. Collectively, GESF is poised for continued growth and represents an increasingly important source of diversification across both assets and income.

Today, GECC's high-quality portfolio is strong, composed primarily of performing cash-generative investments. We closed the quarter with less than 1% of fair value of all investments on nonaccrual, stark contrast to our peers. In addition, in the last quarter, we opportunistically purchased shares at a discount to NAV under our stock repurchase program. Through May 1, 2026, under our $10 million stock repurchase program authorized in October 2025, we have repurchased approximately 1% of all shares outstanding at an average 36% discount to our March 31 NAV, leaving approximately $9.5 million of remaining capacity under the program for future repurchases.

Stepping back, GECC is well capitalized and supported by a strong balance sheet. At quarter end, we held approximately $10 million in cash, $4 million of liquid exchange-traded assets and had full availability under our $50 million revolving credit facility. With no near-term debt maturities, ample liquidity and a higher quality portfolio, we are well positioned to act decisively when compelling opportunities arise.

Now I'd like to turn the call over to Keri Davis to walk through the financial details.

Thanks, Jason. 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.

NII for the first quarter of 2026 was $5 million or $0.36 per share compared to $4.4 million or $0.31 per share in the fourth quarter of 2025. The approximate 13% growth quarter-over-quarter in NII was driven primarily by the benefit of the incentive fee waiver, accounting for approximately $0.20 per share. Net assets were $107.5 million or $7.74 per share as of March 31, 2026, compared to $112.9 million or $8.07 per share as of December 31, 2025.

Details for the quarter-over-quarter change in NAV can be found on Slide 11 of the investor presentation. Our balance sheet remains strong and liquid. GECC's asset coverage ratio was 161.8% as of March 31, 2026, compared to 158.1% as of December 31, 2025. Our debt-to-equity ratio also improved to 1.62x from 1.72x in the prior quarter, reflecting the continued deleveraging Jason noted.

As of March 31, 2026, total debt outstanding was $174 million, and we had no borrowings on our $50 million revolver. Cash and money market fund investments totaled approximately $10 million. Importantly, our Board of Directors approved a quarterly dividend of $0.25 per share for the second quarter of 2026, equating to an 18% annualized yield on GECC's May 1, 2026, closing price of $5.56.

I'll now hand it over to the operator for questions.

[Operator Instructions] The first question comes from the line of Erik Zwick with Lucid Capital Markets LLC.

Jason, if I could start with a question for you. You mentioned in your prepared comments, some efforts to deleverage the balance sheet. I know there's no additional maturities until 2029. I guess at this point, have you kind of completed those deleveraging opportunities or efforts? Or are there still more you could do through, I guess, maybe deleveraging?

At the end of the -- I'm sorry, at the end of the quarter, there was still $18 million of our 2026 paper outstanding. Approximately, we called that paper. It hasn't been paid off yet, but it will be in the next few weeks. At that point, we've probably completed our deleveraging for the moment, although our 8.5s do become callable at the end of this month.

Okay. So that could potentially be something that you would look at. Okay. That's helpful. And maybe switching gears a little bit just in terms of the pipeline, and maybe this is kind of a two-part question. One is, as you look at what's in your pipeline today, the opportunities there that you're seeing as you look at through kind of a risk-adjusted lens, but then also looking at the opportunity to continue using the share repurchase authorization kind of given where the shares are trading today, how do you weigh those two opportunities and choose which to -- where to deploy capital at this point?

So, we're obviously going to balance and look at all opportunities and look where we think the best risk-adjusted returns are. As far as our opportunities, we are much more focused on more traditional private credit deals than broadly syndicated loans right now. We think that there's better yields, actually, with less risk there right now, and we've closed a number of those transactions already this year, and we're working on a number more.

As for looking at share repurchases or debt paydown versus investments, I mean, we're constantly looking at what the return is. Obviously, paying down debt is riskless for us, and so that's important. But we're very serious about rebuilding NAV, as I've tried to say. And as you've seen with us waiving for 3 quarters our investment (sic) [incentive] fee, and by actually buying back shares, which a lot of BDCs don't do, we're looking to rebuild that NAV piece. Did that address your question?

Yes. No, it does. And maybe just a follow-up on that as I try and kind of look at the future run rate of earnings and think about that incentive fee waiver. And you mentioned that the priority #1 now is protecting and growing NAV. So, is it safe to assume that you would potentially continue considering waiving the incentive fee if the kind of run rate of earnings without the incentive fee waiver is less than the current level of the dividend, the new kind of $0.25 per share level?

We will continue looking at what's in the best interest of the shareholders for sure. And yes, we definitely want to be covering our dividend. So, I'm just changing emphasis, right? We've done a pretty good job of generating income and covering our dividends. We haven't done as good a job as protecting our NAV. And so, we're going to really focus on that. I think there's times when you take more risks and there's times when you take less risk in your investments. And the last couple of quarters have shown to be a time to take less risk.

Got it. And then just in terms of trying to get kind of a better understanding of the CLO cash flow timing. I know that depending on when you made those and the scheduled payments that can be a little bit kind of bumpy quarter-to-quarter. To the extent that you have some visibility over the next few quarters, anything you can communicate there in terms of expected timing of cash flows?

We will be getting cash flows every quarter now. I mean, in part, when you first make CLO investments, there's a lag, and that's created a lot of the variability, but it will also depend on how those CLOs continue to perform. I mean we're very comfortable about the cash flows we're going to receive over the life of those equities. But like in the first quarter, obviously, the broadly syndicated loan came down. But we expect -- we've already received $2.5 million this quarter, which is kind of at the same rate as the first quarter. That's probably a reasonable number for you to look at going forward, but they will vary.

Okay. And so if you -- correct me if I'm wrong, I don't think you made any new CLO investments in the last quarter or 2. So some of that kind of initial as it goes through the warehouse period and then makes its first distribution, most of that should be in the past, barring any new investments you might make?

Correct. There should be less volatility going forward than there has been in the past unless we decide to make new investments, which we, at the current moment, are not looking at making any new CLO equity investments. We're pretty happy with where our position is.

[Operator Instructions] Ladies and gentlemen, we have reached the end of the question-and-answer session. I would now like to turn the floor over to Jason Reese for closing comments.

Thank you again for joining us today. Our priorities remain clear: Protect capital, methodically rebuild NAV and generate sustainable net investment income. During the quarter, we advanced each of these objectives. GECM again waived incentive fees to the direct benefit of GECC shareholders. We took action to retire all near-term funded debt, and we increased first lien exposure to its highest level in recent periods.

We have instilled greater rigor, transparency and accountability across the platform, and I am encouraged by both the trajectory of the portfolio and the strength of the team executing on our strategy. As we move through the second quarter, GECC's solid foundation and strong liquidity positions us to deliver more consistent and durable returns over time. We remain focused on disciplined execution and long-term value creation. We appreciate your continued support and look forward to updating you next quarter. Thank you.

Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

Greetings, and welcome to the Great Elm Capital Corporation Fourth Quarter and Full Year 2025 Financial Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce Adam Yates, Managing Director. Please go ahead.

Hello, and thank you, everyone, for joining us for Great Elm Capital Corp Fourth Quarter and Full Year 2025 Earnings Conference Call.

If you would like to be added to our distribution list, you can e-mail [email protected] or you can sign up for alerts directly on our website, www.greatelmcc.com. The slide presentation accompanying today's conference call and webcast can be found on our website under Events and Presentations. On our website, you can also find our earnings release and SEC filings. I would 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 a 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.'s filings with the SEC for important factors that could cause actual results to differ materially from these statements. Great Elm Capital Corp. does not undertake to update its forward-looking statements unless required by law. To obtain copies of our SEC filings, please visit Great Elm Capital Corp.'s website under Financials, SEC filings or visit the SEC's website.

Hosting the call today is Jason Reese, Great Elm Capital Corp.'s newly appointed Executive Chairman of the Board. He will be joined by Matt Kaplan, Chief Executive Officer; Chris Croteau, Head of Research; Chief Financial Officer, Keri Davis; Chief Compliance Officer and General Counsel, Adam Kleinman; and Mike Keller, President of Great Elm Specialty Finance.

I will now turn the call over to GECC's Executive Chairman, Jason Reese.

Thanks, Adam, and thank you for joining us today. I am excited to assume the role of Executive Chairman at this important time for the company. This change reflects the Board's decision to enhance direct engagement with management and increase active oversight on our operations as we navigate a more demanding credit environment.

I would like to begin by thanking Matt Drapkin for his service and leadership during his tenure on the Board. His commitment to GECC helped guide the company for a meaningful chapter and we are grateful for his many contributions. It is important to note Matt will continue in his role as Vice Chairman of GEG working closely with me to create value for both GEG and GECC shareholders.

As the Chairman and CEO of Great Elm Group, the parent company to GECC's investment manager, I'm well acquainted with both the management team and our investment process. That familiarity supports a seamless transition in this role. My focus is clear. Strengthen oversight, protect shareholder value and reinforce accountability across the platform. We recognize that recent quarters were challenging for GECC as they have been across much of the sector. We experienced losses that reduced NAV. And when performance falls short of expectations, it is our responsibility to respond decisively and transparently. That is precisely what we have done.

First, Great Elm capital management waived all accrued and unpaid incentive fees through March 31, 2026. As of year-end, that represented a direct benefit to shareholders of approximately $2.3 million or $0.16 per share. This action is immediately accretive to NAV and reinforces our commitment to economic alignment.

Second, we strengthened our investment platform with the addition of Chris Croteau as Head of Credit Research. Chris brings over 25 years of credit experience and deep underwriting discipline to the team. Since joining, he's worked alongside Matt and the team to enhance portfolio surveillance, fortify risk management and source compelling new investments. We're excited to have Chris speak with you today.

Third, we have been deliberate in repositioning the portfolio. We ended the year with minimal investments on nonaccrual, significantly expanded portfolio diversification, meaningfully reduce exposure to higher-risk investments, and materially enhance our liquidity profile. We believe the portfolio today is more resilient and better aligned with current market conditions. Matt and Chris will provide additional details shortly.

Finally, through my appointment as Executive Chairman, I will be actively engaged. With decades of credit investing experience, I look forward to working closely with management to reinforce disciplined underwriting, thoughtful capital allocation, and proactive portfolio management and sourcing. During late 2025 and into first quarter of 2026, we have selectively closed what we believe are compelling cash-generative investments to support sustainable NII growth. We are operating from a position of balance sheet strength. We maintain substantial liquidity, including meaningful cash on hand availability under our revolving credit facility and a healthy base of liquid assets. We have no near-term balance sheet constraints and full flexibility to act. That flexibility matters.

Periods of uncertainty often create the most attractive risk-adjusted opportunities for disciplined investors. With our strength in underwriting framework, reduced exposure to higher volatility sectors and ample liquidity, we are well positioned to selectively deploy capital as markets reprice risk. We intend to be patient but decisive. When compelling cash-generative opportunities emerge through our proprietary sourcing network, we have the capital, the experience and the governance structure to move quickly.

We are committed to rigorous credit standards, transparency, accountability and long-term shareholder value creation. We believe these principles position GECC to deliver durable performance for our shareholders.

I'll now turn it over to Matt to discuss operating results and portfolio positioning in greater detail.

Thanks, Jason, and thank you all for joining us today. Our fourth quarter reflected a challenging credit and broader market environment, but also meaningful progress and improved the earnings profile of the company. Total investment income increased sequentially and net investment income grew more than 50% quarter-over-quarter to $0.31 per share. That growth was primarily driven by higher cash income including stronger distributions from our CLO joint venture.

Net asset value per share declined from $10.01 on September 30, 2025, to $8.07 on December 31, 2025. To note, reflecting the incentive fee waiver that Jason highlighted, pro forma NAV was incrementally higher at $8.23 per share at the end of the fourth quarter. Drivers of the quarter-over-quarter decrease in NAV include approximately $0.40 per share of unrealized losses resulting from volatility in CoreWeave stock price and approximately $0.30 per share from lower quarter-over-quarter fair values on our CLO investments due to spread tightening of the CLO's assets, coupled with credit market dispersion.

In addition, both realized and unrealized losses associated with investments that have undergone restructurings and liability management exercises or LMEs accounted for approximately $0.80 per share of the decline. Our first brand investments further impacted NAV by $0.09 per share and we took actions in the quarter to materially reduce exposure to first brands, which was de minimis as of year-end.

In the fourth quarter, we sold our entire allocation of the senior secured DIP loan at an average price of 107% of par after funding the loan at approximately 5% at par. In addition, we fully exited our roll-up DIP loans at an average price of 45% of par. The derisking of our first brand dispositions were collectively at much higher levels than where they trade today. As a result of our decisive actions taken in the quarter, which Chris will expand on, the portfolio is now cleaner and more streamlined, comprised primarily of performing more liquid cash-generative investments and we ended the quarter with nonaccruals at less than 1% of our portfolio fair value.

Turning to our CLO investments. 2025 was a challenging year for CLO equity investors. Cash flows to the equity tranches of CLOs began to come under pressure as we moved through 2025 as spreads on broadly syndicated loans held by CLOs tightened meaningfully. In addition, lower base interest rates contributed to reduced income. Credit market headwinds also intensified in the back half of the year with dispersion increasing across the leverage loan market. Certain sectors and several notable idiosyncratic credits experienced significant price declines with weakness accelerating in the fourth quarter.

Despite contributing to the NAV decline in the fourth quarter, our CLO investments generated a positive return throughout 2025 and outperformed the broader CLO equity market. For example, Inclusive of our income from the CLO JV in the quarter, the gross return of the JV was roughly flat, while we saw CLO equity-focused closed-end funds report net asset plus cash distribution turns down negative 6% to negative 13% in the fourth quarter. While our CLO investments may see volatility to their marks, given their leverage and the current backdrop of the history, it is important to remember these vehicles have long-duration liabilities and are constructed to be resilient through periods of market volatility.

Further, these investments continue to produce meaningful cash flows which diversify our income streams and support our ability to consistently deliver sustainable net investment income to our shareholders. As Jason also noted, our portfolio today is positioned more defensively than in prior periods. We have historically maintained an underweight exposure to software-based businesses that may be more susceptible to artificial intelligence and disintermediation, a stark contrast to many of our peers.

Over the last several months, we have taken proactive steps to further reduce that exposure and rotate capital into investments of stronger downside protection. As of the end of February, investments in our corporate credit portfolio that we believe fall in the category of software businesses comprised less than 4% of our portfolio. From a capital deployment perspective, we are investing at a measured approach in a credit market where spreads in investment grade and high yield ended 2025 in the 14th and fourth percentile, respectively. We saw some compression in private credit spreads over the course of the year as well. We are prudently deploying capital, prioritizing senior secured positions with durable cash flows while continuing to monetize select positions.

More broadly, in the fourth quarter of 2025, we improved credit quality in the portfolio, strengthened our balance sheet and exited the year with ample liquidity. We have also enhanced our capital structure by opportunistically repurchasing approximately $18.7 million of our GECCO notes in the fourth quarter and through the end of last week at or below par plus accrued interest. As of the end of last week, we had $39 million of notes outstanding against $16 million of cash, $50 million of revolver capacity and $14 million of liquid exchange tradable assets, providing more than sufficient liquidity to address the upcoming maturity of the balance of these notes in the coming months. To that end, we called approximately half of our remaining GECCO bonds on Friday, which brings our pro forma debt-to-equity ratio to approximately 1.5x, consistent with our historical average leverage level.

Finally, as previously mentioned, we also strengthened our investment team with the addition of Chris Croteau as Head of Research. Chris is a seasoned investor with experience across syndicated credit and direct lending. He has played a key role in our portfolio underwriting through capital deployment, and we are very pleased to have him on board.

With that, I'll turn it over to Chris to introduce himself and provide additional insight into the portfolio.

Thanks, Matt. Just a bit of background on me. I've spent over 25 years in leveraged credit, including serving as Head of Credit for North America for a large public asset manager and acting as agent on private credit transaction. That experience shapes the underwriting rigor and discipline we are executing at GECC. Our investment framework is built on three core pillars. Downside protection, portfolio granularity and durable underwriting edge.

First, we anchor every underwriting decision to downside outcome in credit investing, protecting NAV, and avoiding permanent capital impairment are paramount.

Second, portfolio granularity serves as a key risk management tool. We utilize broadly syndicated credit intention to enhance liquidity and diversification while deliberately maintaining smaller physician side. This allows us to be nimble and reduce exposure when our thesis plays out or when compensation for risk no longer justifies the capital at work. Liquidity and granularity work hand in hand.

Third, investments are underwritten collaboratively with management and sector analysts prior to investment committee review. We are concentrating capital in areas where our underwriting advantage is durable, supported by deep sector expertise and aligned strategic partners. We apply this underwriting intensity to our entire corporate credit portfolio. During the quarter, we sold or reduced 18 credit positions. We began the quarter with 61 corporate credit. So that means nearly 30% of the portfolio by number was actively repositioned. Those actions included reductions in second lien exposure, which now represents approximately 7% of the corporate portfolio, reflecting stronger structural positioning and improved portfolio granularity.

At the same time, we added 12 new broadly syndicated credit positions with an average size of approximately $2 million, reinforcing smaller and more diversified exposures in liquid market. In private credit in the fourth quarter, we closed one transaction with a mid-teens yield profile and warrant participation. Our private credit pipeline remains active with aligned strategic partners were incentives, information flow and governance oversight are strongest.

While we continue to expand that funnel we remain highly selective in light of current spread levels. We continue to engage in active dialogue with our CLO investment partners to identify emerging credit trends early and to enhance idea generation across the platform. Our objective is consistent, attractive risk-adjusted returns driven by disciplined capital allocation, senior positioning in the capital structure and steadfast protection of NAV. We believe robust underwriting intensity, greater portfolio granularity, aligned partnerships and active monitoring positions the portfolio for more durable performance across market cycles.

Now I'll turn the call over to Michael Keller to discuss Specialty Finance.

Thanks, Chris. Great Elm's Specialty Finance delivered a solid fourth quarter, distributing approximately $287,000 to GECC. We continue to execute on GESF's strategic transformation, successfully repositioning the platform for future growth and enhanced profitability. A great owned commercial finance, which now offers traditional asset-based lending solutions across a broad range of industries, we continue working with lenders to scale the platform.

Asset-based lending when underwritten conservatively and structured properly can provide attractive risk-adjusted turns with meaningful downside protections. As we scale the platform, operating leverage has begun to take hold, driving meaningful improvement over the past several quarters. In addition, our pipeline of potential transactions remains robust. As part of the strategic initiatives implemented in 2025, Great Elm Healthcare Finance is now better positioned for sustained profitability and generated solid distributable income in the fourth quarter.

The GEHF platform is supported by a strong pipeline of actionable opportunities, which we expect to drive continued profitability into 2026. Meanwhile, Prestige, our invoice financing business continues to perform exceptionally well. As a reminder, Prestige provides spot invoice financing solutions and it consistently demonstrated the ability to generate attractive returns on equity over the course of the year.

In summary, as we move through 2026, we believe we have built a significantly enhanced specialty finance platform aligned with our long-term growth objectives. We are seeing the benefits of our strategic repositioning take hold across all platforms and remain confident in our ability to generate improved returns for shareholders going forward.

Now I'd like to turn the call over to Keri Davis to go over our financial performance.

Thanks, Mike. 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 fourth quarter, GECC generated NII of $4.4 million or $0.31 per share compared to $2.4 million or $0.20 per share in the third quarter of 2025. The increase in NII was driven primarily by higher CLO JV income and increased earnings from deployed capital. Our net assets as of December 31, 2025, were $112.9 million or $8.07 per share as compared to $140.1 million or $10.01 per share as of September 30, 2025. Details for the quarter-over-quarter change in NAV can be found on Slide 12 of the investor presentation.

Net assets pro forma for the incentive fee waiver previously noted were $8.23 per share as of December 31, 2025. Our balance sheet remains strong and liquid. GECC's asset coverage ratio was 158.1% on December 31, 2025, as compared to 168.2% at September 30, 2025. Pro forma for the incentive fee waiver and the call baby bonds, our asset coverage ratio was 166% as of December 31, 2025. As of December 31, 2025, total debt outstanding at par value was $194.4 million and we had no borrowings on our $50 million revolver, providing meaningful liquidity and flexibility.

Cash and money market fund investments totaled approximately $5 million. Our Board of Directors approved a quarterly dividend of $0.30 per share for the first quarter of 2025 equating to a 19.2% annualized yield on GECC's February 27, 2026 closing price of $6.26.

I'll now hand the call back to Matt.

Thanks, Keri. We continued to strengthen the portfolio during the quarter by rotating capital into senior secured investments and exiting credits with weaker downside protection. Our CLO joint venture is a meaningful contributor to earnings and provides added portfolio diversification. The portfolio today is well positioned to generate sustainable income in the year to come.

Our proprietary sourcing platform continues to be a key differentiator which highlights our ability to generate attractive returns through unique opportunities. Nonaccruals remained below 1% in the portfolio, reflecting the progress we've made improving overall credit quality. While the broad market remains uncertain, we remain disciplined in deploying capital and focus on protecting NAV while growing earnings. We believe our strong liquidity position, improving income profile, diversified portfolio and disciplined investment approach position GECC well as we move through 2026.

I'll now hand it over to the operator for questions.

[Operator Instructions] Our first question is from Erik Zwick with Lucid Capital Markets.

I wanted to start with a question just in terms of the portfolio repositioning that Chris was describing the actions that you have contemplated? Are they complete at this time? Are there potentially more actions to reposition and maybe derisk the portfolio? Is there a particular more that you could undertake here in this quarter or in future quarters?

Good morning, Erik, and thanks for the question here. I would say we took a lot of actions in the quarter, as Chris highlighted, to exit out of names that we have perceived more downside risk and rotating higher-quality credits on a liquid basis.

And further, I highlighted over the last few months, we have look to risk on the portfolio of our software side of the business, I'd say at the end of the year when we looked at the software-ish component is about 70% of the portfolio, and we're right now around 4%. So less than 4%, I would say. So I think right now, we have a very clean portfolio on the corporate credit side of things, and we've taken a lot of actions to clean it up.

And then just the comments around volatility in the market, potentially creating opportunity. You certainly have ample liquidity today. Wondering if you could just frame for me, how you view your pipeline today and where you're seeing the best risk-adjusted opportunities for new investments?

So on the pipeline, we continue to evaluate private credit opportunities, and we're very selective and evaluate the deals where we have strong covenants alongside strategic partners where incentives are aligned.

And then secondly, as I touched on for a minute in the software space, we are underweight software in the space relative to other BDCs and the U.S. loan market in general, I think BDC's exposure is well over 20% according to Morgan Stanley research and the U.S. loan market is up 16%. We are evaluating lots of opportunities in the average loan market, especially with the current volatility in the geopolitical events here. And we continue to be very focused and rigorously looking at downside protection across all industries in which we invest. Not looking to catch any falling knives here and opportunities as they come.

But it is obviously a dynamic market environment right now, and we have ample liquidity to manage both our maturities and take advantage of any opportunities in names where we have, as Chris mentioned, durable edge in relationships with sponsors, management teams, et cetera

And then is private credit where you're seeing greater opportunities there relative to additional CLO investments or BSL investments?

We've evaluated many private credit opportunities over the course of the year. And I would say that we are very selective in executing on them, focused on the covenants on both maintenance covenants from a financial perspective, as well as making sure the incentives are aligned. So it changes over time for us as we look at the marketplace and it shifts. And right now, there's a shift. So I think we are very real time day by day looking at where the public markets are, as well as the private markets. We have a very robust liquidity position in both cash -- full access to our revolver and kind of exchange-traded assets.

And then just thinking about the stock repurchase authorization, you have outstanding, just how do you weigh the relative opportunities between new investments for the portfolio versus buying back stock at this juncture?

Something that we constantly evaluate, and there's lots of factors that go into that based on the portfolio opportunities in the market and discussions with the Board. So lots of factors go into making that decision, but we actively monitor the stock -- our stock price as well as the opportunity set in the marketplace.

Matt, it's Jason, maybe I can jump in. And Erik, I mean, as the Board, we are looking at creating the best ways to create shareholder value. So right, we can constantly look at the stock price versus NAV and decide where we're better off. Obviously, buying back stock is riskless as opposed to putting cash into a credit where there's a level of risk. So we'll be looking at that daily and to have the opportunity to create value.

And just last one for me. I know in 2025, the contribution from the CLO investments was a little bit lumpy as that got ramped up. Are we at the point now where the contribution would be a little bit more even quarter-to-quarter? Or is there still some variability expected as those cash flow payments come in?

I would say there is still some variability as cash flow payments do come in, but it's -- I would expect it to be less lumpy than it was over the course of 2024 and 2025.

Our next question is from Alan Denzer, Private Investor.

I just heard my question answered pretty much regarding stock buyback program that you announced. And I would just urge you to take a look at the economics of that being that you might find being more aggressive on this program behooves you. So I urge you to -- given the fact that you expect things to stabilize in the marketplace NAV-wise, to really go forward with a clear eye about the value that is inherent in buying back your stock

I can promise you that the Board is taking this very seriously and looking at this every day.

There are no further questions at this time. I would like to hand the floor back over to Jason Reese, Executive Chairman, for closing remarks.

Thank you again for joining us today. We're closing the period with a strong governance framework, enhanced oversight and a portfolio that is meaningfully more resilient. Our priorities are clear, protect capital to generate sustainable NII and methodically rebuild NAV over time through disciplined credit execution.

The actions we've taken, waiving incentive fees, strengthening our credit leadership, enhancing Board engagement, improving portfolio quality and maintaining liquidity reflect a clear commitment to accountability and long-term value creation. We believe GECC is operating from a position of balance sheet strength with the flexibility and underwriting discipline required to navigate uncertainty and capitalize on attractive opportunities as they emerge. We appreciate your continued support and look forward to updating you on our progress next quarter. Thank you.

This concludes today's conference. We thank you for your participation. You may disconnect your lines at this time.

Good day, and welcome to the Great Elm Capital Corp. Third Quarter 2020 Financial Results Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Adam Yates, Managing Director. Please go ahead.

Hello, and thank you, everyone, for joining us for Great Elm Capital Corp's Third Quarter 2025 Earnings Conference Call. If you would like to be added to our distribution list, you can e-mail [email protected] or you can sign up for alerts directly on our website, www.greatelmcc.com. The slide presentation accompanying today's conference call and webcast can be found on our website under Events and Presentations.

On our website, you can also find our earnings release and SEC filings. I would 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 a 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.'s filings with the SEC for important factors that could cause actual results to differ materially from these statements. Great Elm Capital Corp. does not undertake to update its forward-looking statements unless required by law.

To obtain copies of our SEC filings, please visit Great Elm Capital Corp.'s 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, Keri Davis; Chief Compliance Officer and General Counsel, Adam Kleinman; and Mike Keller, President of Great Elm Specialty Finance. I will now turn the call over to GECC's CEO, Matt Kaplan.

Thanks, Adam, and thank you all for joining us today. After a very strong first half of 2025 we had a solid start to the third quarter, and we're on pace to meet and potentially exceed our internal income generation targets for 3Q. In August, and through the first half of September, we raised significant equity at NAV, doubled the size of our revolver, reduced the revolver's interest rate by 50 basis points and successfully refinanced our highest cost 100 basis points lower. These transactions leave us with ample deployable cash and capacity to invest in income-generating opportunities in the coming quarters, leaving us in a position of strength to capitalize on attractive risk-adjusted investment opportunities and further our long-term growth strategy.

In contrast to a positive start to the quarter, our results are colored by First Brands, which traded down sharply in the back half of September before filing for bankruptcy at the end of the quarter. GECC has held exposure to First Brands through syndicated loans since 2020 with a portfolio allocation of over 5% to First Brands since 2023, as noted in our recent 10-K. First Brands was paying cash income to GECC and we received our last regularly scheduled full cash quarterly interest payment at the end of July this year. As outlined in our October 7 press release, our direct exposure to First Brands adversely impacted NAV by approximately $16.5 million in the third quarter. In addition, we put loans on nonaccrual, which adversely impacts our income generation.

On the other side of the spectrum, I want to highlight the tremendous success we had in the quarter with Nice-Pak. In 2022, we funded a secured loan with warrants to Nice-Pak, a wet wipes producer. The company was acquired this past quarter, generating an approximately 38% IRR to GECC over the 3-year holding period. Over the last few years, we have found certain select and unique income-generating opportunities to deploy capital into with strong upside convexity, like Nice-Pak as well as some of our insurance and CoreWeave related investments.

I am confident that our strong sourcing engine is intact, and I remain excited about the future of GECC. We entered the fourth quarter with leverage in line with our target and ample liquidity with over $25 million of cash to deploy. In addition, we expect to begin harvesting nonyielding assets in excess of $20 million to prudently deploy into cash-generating investments. As we enter this final quarter of 2025 on a strong foundation, our Board of Directors has approved a $0.37 dividend for the fourth quarter of 2025. Furthermore, the Board has approved a $10 million share repurchase program. I'm confident that with our strong capital position, our focus on risk management and further portfolio diversification, we can rebuild income and NAV from the third quarter to deliver strong returns to shareholders.

Before diving into the numbers, I want to further touch on First Brands. In retrospect, our exposure to First Brands was too large. We are fortunate to have a strong balance sheet and ample liquidity and will be focused on driving further portfolio diversification and reducing our average position sizing as we deploy capital.

Now turning to our third quarter numbers. our NII was $0.20 per share. The decrease from the second quarter was largely due to the anticipated decline in distributions from our CLO JV, which totaled $1.5 million in the third quarter down from $4.3 million in the second quarter. Also, NII was impacted from elevated interest expense associated with the refinancing of our high-cost GECCZ notes, where we wrote off approximately $1 million of deferred offering costs and had double interest expense for most of September.

In addition, our preference shares in an insurance-related investment did not pay a dividend this quarter as we expected, after paying $2.1 million in the second quarter. In the fourth quarter to date, we have received $4.3 million of distributions from our CLO JV but do not expect a distribution on our insurance-related preference shares until potentially 2Q of 2026.

I would like to note that even with all of the moving parts in our numbers, we reported NII of $0.40 per share in the first quarter, $0.51 in the second quarter and now $0.20 in the third quarter, which totals $1.11 and compares to $1.11 per share of regular quarterly distributions in the first 3 quarters of this year. As we look into the fourth quarter and our modeling today, we expect NII to significantly rebound from the third quarter based on increased CLO distributions, normalized interest expense and income generated from our capital deployments.

It's worth noting that our share count has increased over the past year as a result of our capital-raising programs, which have successfully led to GECC issuing shares and transactions that did not dilute NAV like past rights offerings. These transactions have been a huge positive to scaling our platform. However, they have led to short-term cash drag impacts and have modestly offset our absolute NII growth on a trailing 12-month basis.

Moving on to portfolio performance. Our NAV per share declined to $10.01 from $12.10 as outlined on Slide 9. The decrease in NAV was primarily driven by unrealized losses associated with First Brands and to a lesser extent, an unrealized decline in the fair value of our investment in CW Opportunity 2 LP as the underlying CoreWeave common stock declined approximately 16% in the quarter.

Looking ahead, we have ample liquidity and are actively working to further diversify our portfolio across senior secured investments that we believe are well positioned to perform amid evolving market conditions. With a solid foundation and disciplined investment approach we remain confident in our ability to generate sustainable returns and deliver increasing value to our shareholders.

With that, I'd like to turn the call over to Keri Davis to discuss our third quarter 2025 performance.

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 third quarter, GECC generated NII of $2.4 million or $0.20 per share as compared to $5.9 million or $0.51 per share in the second quarter of 2025. The decrease in NII was primarily driven by the lack of the distribution from an insurance-related investment and lower income from our CLO JV. Our net assets as of September 30, 2025, were $140 million, consistent with $140 million as of June 30. Our NAV per share was $10.01 as of September 30 versus $12.10 as of June 30. The decrease in net asset value was primarily driven by losses on First Brands as noted.

Details for the quarter-over-quarter change in NAV per share can be found on Slide 9 of the investor presentation. As of September 30, GECC's asset coverage ratio was 168.2% compared to 169.5% as of June 30. As of September 30, total debt outstanding was approximately $205 million, and we had nothing outstanding on our $50 million revolver. Cash and money market securities totaled approximately $25 million and we have $50 million of availability under our revolver. Our Board of Directors authorized a $0.37 per share cash distribution for the fourth quarter, which will be payable on December 31 to stockholders of record as of December 15, from distributable earnings. The distribution equates to a 14.8% annualized dividend yield on our September 30 net asset value.

I'll turn the call back over to Matt.

Thanks, Keri. We continue to enhance our portfolio strength by maintaining a focus on secured debt positions. Our corporate portfolio is comprised of over $220 million of investments and first lien loans comprised 2/3 of the corporate's portfolio as of September 30. As we deploy capital, we are focused on increasing our allocation to first lien senior secured investments. This demonstrates our commitment to enhancing portfolio quality while maintaining a focus on secured income-generating assets.

Before moving on to more portfolio detail, I think it is important to highlight our nonyielding other equity mix as outlined on Slide 17. The bulk of this is attributable to CW Opportunity 2 LP the vehicle we discussed last quarter that initially held a preferred investment in CoreWeave, which converted into common equity in connection with the IPO. While there is no more income from the coupon on the preferred to distribute going forward, reducing our gross portfolio yield, this investment is a meaningful positive to our shareholders.

In the third quarter, we began to receive capital distributions as the vehicle took steps to generate liquidity for its investors. We received $2.9 million of capital distributions in the quarter, almost half of our original $6 million investment, and the post distribution value was $14.8 million as of September 30. In October, we received an incremental $2.8 million, bringing our life-to-date income and capital distributions to $6.1 million or 102% of our original investment in CW Opportunity 2. Importantly, as we receive distributions from CW Opportunity 2 and monetize other non-yielding equity investments in the coming months, we will rotate this capital into cash income generative investments and further diversify our portfolio.

As of September 30, our nonaccrual positions included investments in First Brands, Del Monte and Maverick Gaming, representing 1.5% of portfolio fair value. Aside from our nonaccrual investments, our corporate portfolio has performed well on the whole, and we saw solid performance in Specialty Finance. Importantly, we have no exposure to nonprime consumer finance issuers or tricolor. In addition, we have limited exposure to software and have been monitoring portfolio investments for signs of disruption from AI.

There are many widespread concerns about businesses at risk from AI disruption. We believe caution is appropriate but needs to be addressed on a case-by-case basis. 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. We continue to monitor the changing landscape and also work to evaluate the second and third order effects on tariffs and shifting trade dynamics. With our defensive portfolio structure, we believe we are well positioned to navigate the ongoing tariff uncertainty.

As we look ahead, we are focused on deploying capital into high-quality income-generating investments. We are taking a measured approach to new originations, prioritizing credit fundamentals and downside protection along with increased portfolio diversification. With $25 million of deployable cash, monetization of our non-yielding equity investments and $50 million of revolver availability, we have significant dry powder and financial flexibility to capitalize on opportunities. We remain excited for the future of GECC and with that, I would like to turn the call over to Mike Keller to provide an update on Specialty Finance.

Thanks, Matt. Great Elm Specialty Finance had a very strong third quarter and increased its distribution to GECC to approximately $450,000 from $120,000 last quarter. We continue to execute on GESF's strategic transformation by simplifying our business model and securing favorable financing arrangements, successfully repositioning 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.

In July, GECF upsized its back leverage facility by more than 20%. We continue to work with lenders to scale this platform as our deal pipeline remains robust. 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 generated strong distributable income in the third quarter. Prestige, our invoice financing business had a phenomenal quarter. As a reminder, Prestige provides spot invoice financing solutions and has exhibited high ROEs over the course of the year but can be lumpy quarter-over-quarter.

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.

Thanks, Mike. In closing, we had a challenging end to the third quarter. However, we remain well capitalized and are focused on protecting NAV and generating NII. We are excited to close out 2025 with a strong balance sheet and ample liquidity as we look to execute on our growth and optimization initiatives. We believe we remain well positioned to rebuild our NAV over time and to deliver attractive risk-adjusted returns for our shareholders.

With that, I'll turn the call over to the operator for questions. Operator?

[Operator Instructions] Our first question comes from Erik Zwick with Lucid Capital Markets.

I wanted to start with a question on CoreWeave and the capital distributions you've started to receive. Curious if you could provide any kind of color expectation into the cadence and timing of any future distributions if there's been something kind of formal announced? Or if you just kind of perceive them periodically?

I think we provided the color on the capital distribution in the September period as well as October. I think importantly, we've received distributions that cover all of our cost basis and the investment and everything from here on out is going to be generating additional capital for GECC to invest in income going forward, we'll provide the market an update next quarter when we report on where we've been seeing the distributions. But again, that vehicle has been making returns of capital, and we're fortunate to be able to be in a position to redeploy that income-generating opportunities going forward here.

And then you kind of combine those distributions with your expectations to harvest. I think you mentioned kind of $20 million of kind of capital from nonyielding assets. Is those $20 million separate from any future expected distributions from CoreWeave? And yes, maybe kind of answer that question first, would be great.

Sure. I think the $20 million or over $20 million includes CoreWeave and a couple of other non-yielding assets that we've identified that we believe we'll be able to harvest over the coming months here into 2026, early '26.

Great. And then just kind of taking that to the next step, you've got this kind of capital coming, you've got liquidity in your revolver. Can you just talk maybe about the opportunities that you're seeing in your pipeline today? How you evaluate them from kind of a risk-adjusted perspective and just the size of the pipeline relative to maybe kind of 3 months ago?

Yes. I'd say spreads in the public markets are tight right now. We're not reaching for yield. We're very focused on secured and income-generating opportunities, investing at the top of the capital structure. We continue to work on various private credit transactions and are expanding the funnel, also working to get more granular in the portfolio and diversify. There's one private credit transaction that we're working to close on this week. That is a teens-type return profile and comes with warrants. I highlighted Nice-Pak, which was a tremendous success in the quarter, which had a warrant package as well.

So as we look to rebuild NII and NAV, we're focused on trying to find those interesting opportunities and that's at the top of the capital structure and find certain situations that provides some upside complexity going forward.

And if I can squeeze one more in, and then I'll jump back in the queue. My understanding, most CLOs make their distributions towards the beginning of the quarter. So the $4.3 million that you mentioned that you received so far in 4Q. Is that likely to be pretty close to the full number for 4Q? Or is there anything else you're expecting to receive later in the quarter?

I would say you should use that number for the quarter.

This concludes our question-and-answer session. I would like to turn the conference back over to Matt Kaplan for any closing remarks.

Thank you again for joining us today. We look forward to the continued investor dialogue, and please let us know if we can help with any follow-up questions that you may have. Thank you again.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.