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Operator: Greetings, and welcome to the Great Elm Capital Corp. First Quarter 2025 Financial Results Call. [Operator Instructions] It is now my pleasure to introduce your host Peter Sousa IR representative of the company. Thank you. You may begin.

Peter Sousa: Hello, and thank you, everyone, for joining us for Great Elm Capital Corp.’s First Quarter 2025 Earnings Conference Call. If you’d like to be added to our distribution list, you can e-mail investorrelations@greatelmcap.com or you can sign up for alerts directly on our website, www.greatelmcc.com. I’d like to note the slide presentation posted on our website accompanying today’s call. The slide presentation can be found on our website under Events and Presentations. On our website, you could also find our earnings release and SEC filings. I’d 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 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’s Specialty Finance.

We’ll now turn the call over to GECC’s CEO, Matt Kaplan.

Matt Kaplan: Thanks, Peter, and thank you all for joining us today. We are pleased to start 2025 with a record-setting quarter, achieving the highest total investment income in the company’s history at $12.5 million. Notably, the first quarter was also our highest-ever cash income quarter, a testament to the strategic portfolio enhancements undertaken over the past few years. This 37% increase in TII from last quarter and more than 40% year-over-year growth was driven by the success of our CLO JV as well as from income generated by new investments in the quarter. NII per share doubled to $0.40 per share from $0.20 in the prior quarter, largely attributable to the increase in total investment income and the ramping contributions from investments.

Our NII more than covered the increased first quarter distribution of $0.37 per share, a 5.7% increase from the prior quarter’s $0.35 per share distribution. This marks our commitment to delivering growing income to shareholders, supported by solid underlying portfolio performance. As we move through the second quarter, we are well positioned to further execute on our long-term growth strategy and navigate the dynamic macro environment. Based on current expectations, we anticipate that second quarter NII will exceed first quarter levels. As we discussed on our last call, we anticipated an increase in cash distributions from the CLO JV this quarter at CLO distribution patterns are typically uneven in their early stages. For example, we received $3.8 million of cash distributions from the CLO JV in the first quarter of 2025 as compared to $0.5 million in the fourth quarter of 2024, which was a step down from the $3.2 million in the third quarter of 2024.

Additionally, in the second quarter to date, we have received $3 million of cash distributions from the JV. We do expect these fluctuations will dampen over time as we fund additional CLO investments and continue to leverage our increased scale. For these reasons and considering our ongoing capital raising and deployment initiatives we’d like to reiterate that it is best to review GECC on a 4-quarter basis opposed to benchmarking the company quarter-to-quarter. Moving on to our portfolio’s performance. While our NII generation was strong, we did see a modest step down in NAV per share, as outlined on Slide 8, driven by unrealized losses on portfolio investments. We began to see volatility in the markets pick up in the middle of the quarter, which led to markdowns on positions at quarter end, specifically our CLO JV equity and our investments in CW Opportunity 2 LP a vehicle, which was created to hold convertible preferred equity in CoreWeave, an AI hyperscaler, which went public at the end of March.

We remain confident in these investments in our portfolio and expect these unrealized losses to reverse over time as market conditions stabilize. Additionally, we recently filed a prospectus supplement for a $100 million at-the-market equity program to issue shares at NAV or better. We believe this new tool will provide us with additional capital flexibility as we seek to continue scaling GECC. We remain well positioned to cover our dividend over the course of 2025, and our portfolio is set up to weather the uncertain macro environment. With our strength and foundation, we remain confident in our ability to generate sustainable returns and deliver increasing value to our shareholders in the years ahead. With that, I’d like to hand the call over to Keri Davis to discuss our first quarter 2025 performance.

Keri Davis: 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 first quarter, GECC generated NII of $4.6 million or $0.40 per share as compared to $2.1 million or $0.20 per share in the fourth quarter of 2024. The increase in NII was primarily driven by the receipt of distributions from the CLO JV as well as income from other new investments. Our net assets as of March 31, 2025, were $132 million as compared to $136 million as of December 31. Our NAV per share was $11.46 as of March 31 versus $11.79 as of December 31. Details for the quarter-over-quarter change in NAV can be found on Slide 8 of the investor presentation.

As of March 31, GECC’s asset coverage ratio was 163.8% compared to 169.7% as of December 31. As of March 31, total debt outstanding was approximately $207 million and we had $12 million outstanding on our $25 million revolver. Cash totaled approximately $1.3 million. Our Board of Directors authorized a $0.37 per share cash distribution for the second quarter, which will be payable on June 30 to stockholders of record as of June 16. The distribution equates to a 12.9% annualized dividend yield on our March 31 net asset value. I’ll turn the call back over to Matt.

Matt Kaplan: Thanks, Keri. In the quarter, we continued to enhance our portfolio strength by steadily increasing our secured debt positions. Our CLO joint venture remains a significant contributor to the strategy and we expect it to remain an important source of income for GECC as we continue to expand the vertical, targeting high teens to 20% returns over time. We have grown our corporate portfolio to nearly $250 million of investments and first-lien loans comprised 71% of the corporate portfolio as of March 31. This demonstrates our commitment to enhancing portfolio quality while maintaining a focus on secured income-generating assets. Alongside new investments, our CLO JV helped drive us to record total investment income this quarter.

This joint venture expands our exposure to a diverse portfolio of broadly syndicated first lien loans and continues to be a key contributor to our early success, with approximately $48 million deployed through March 31. As a reminder, we hold the majority of our CLO exposure a bit differently than other BDCs for closed-end funds that many may be familiar with. These other entities typically hold their investments directly, which allows the income to be recognized utilizing the effective yield methodology, while GECC only recognized the income when the CLO JV makes distributions. This leads to a more uneven nature to our income reporting. While we may hold some minority CLO positions directly on our balance sheet, the JV affords us the ability to have exposure to majority interest in CLOs, which we believe can provide enhanced economics.

We are comfortable with this quarter-to-quarter income oscillation, which we expect will dampen over time. Further, outside of some markdowns we discussed, our investment portfolio is performing well. And as of March 31, we had 0 positions on nonaccrual. Notably, the single issuer that we had on nonaccrual at year-end was restructured in February into 3 debt instruments, which will begin generating income in 2026, demonstrating our hands-on approach to working with our portfolio companies. While it’s still too early to assess the overall impact of tariffs on our portfolio, our initial analysis suggests the limited direct exposure. Our portfolio maintains broad diversification with a predominantly domestic focus and minimal exposure to China.

With our defensive portfolio structure, we believe we are well positioned to navigate the ongoing tariff uncertainty. In this volatile environment, we continue to take a measured approach to capital deployment. As always, we prioritize credit quality and seek investments with minimal risk of permanent capital loss, directing capital towards opportunities that are primed to perform across various economic cycles. This balanced approach, combined with our strengthened platform and diversified portfolio positions us well to continue growing Great Elm Capital Corp. and delivering attractive risk-adjusted returns for our shareholders. 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.

Mike Keller: Thanks, Matt. The start of 2025 has been transformative for Great Elm Specialty Finance. In January, we combined the corporate and health care ABL portfolios and replaced our existing asset-backed lender with a new facility led by CIBC, which is now an active syndication to increase the facility commitment as our business ramps. In March, after repositioning the legacy, Great Elm Healthcare Finance business to focus solely on health care real estate financing opportunities, we closed on a leverage facility to support the real estate assets held within that platform. In April, we completed the rebranding of Sterling as Great Elm Commercial Finance, which today offers traditional ABL products to a wide range of industries, including health care.

Also, GESF exited its last equipment lease holding at, again, further simplifying the business. These actions have streamlined our operations and better aligned our platform with growth objectives. While income from GESF was similar to the prior quarter, we are confident that these changes will translate into increasing returns over the remainder of the year.

Matt Kaplan: Thanks, Mike. In closing, we are pleased with our first quarter results and remain well positioned to grow NII in the second quarter and cover our dividend in 2025. With that, I’ll turn the call over to the operator for questions. Operator?

Operator: [Operator Instructions] The first question is from Mickey Schleien from Ladenburg Thalmann.

Mickey Schleien: Matt, how do you see the portfolio and the funds NAV performing with both the broadly syndicated loan market and private spread — private credit spreads widening in April.

Matt Kaplan: So that’s a great question, Mickey. So I think overall, you can see in the first quarter, we saw some modest markdowns in our portfolio. You can see we had $0.38 of net unrealized gain loss, of which about $0.30 of that is actually attributable to 2 positions that we noted the CLO JV and also our investment in CoreWeave. Away from that, the rest of the portfolio was performing pretty heavily, and we actually started to see some marked volatility pick up in, call it, late February, early March. In April, really, if you look at kind of the CLO market by the end of last week, we’re kind of getting close to being back to where we ended March, interestingly enough in spread. So kind of depends on where we remain to be seen.

For the syndicated loan market, you can pull up this move down a little bit from 331 to 431. So obviously, on a whole on a diversified portfolio. You can read between the lines there. But I think overall, the portfolio is pretty healthy and we had minimal NAV impact, those are all unrealized. Over time, as market conditions stabilize, we would expect a lot of that to largely reverse. One of the positives of our CLO position is they’re relatively young. So actually, when you look at CLOs in choppy markets like this, kind of this best CLO vintages, are the ones that were issued just prior to significant bouts of market volatility due to the long-term financing structure of them. You look at the 2007, ’08 vintages of CLOs or you look to the 2019 vintages of COVID, all very, very strong performance over the life cycle.

So I think we’re well set up there. And then on CoreWeave, if you could just look at the publicly traded stock now, we are invested in a vehicle that has a convertible preferred. So you can kind of think about it at 331, if the stock had closed around $48 a share, we would have had a roughly flat mark quarter-on-quarter, you can see that at 331, the stock did close to 37 or 38 level and around the end of March there. So we took a hit on that. But look at the — it’s been a volatile name. We have a lot of faith in the company over time and stock, I think, was over 50 as of yesterday’s close.

Mickey Schleien: You just mentioned that the CLO market has sort of stabilized. The JV holds warehouse facility with Apex credit, what is the JV earning on that warehouse? And now that the market is stabilized, when do you expect that CLO to price?

Matt Kaplan: So that CLO actually closed in at the end of last month already, and we were able to get the execution on that done with commitments that were made in kind of early March. So it was a very successful outcome to be able to get that one taken care of.

Mickey Schleien: I’m sorry, when did you say it priced?

Matt Kaplan: It closed, April.

Mickey Schleien: April. And do you — so it usually takes a quarter or 2 for CLOs to provide their initial distribution. Would that be the case for this investment?

Matt Kaplan: For that specific one, yes, I think we would expect our first distribution from that underlying investment in the underlying CLO JV to come in October of 2025.

Mickey Schleien: Okay. So relative to…

Matt Kaplan: So as I kind of laid out on the CLO — CLOs and to a whole business, we have kind of — we’ll have a little bit of fluctuation in the way our earnings are done because the CLO JV will be distributing dividends, right? That’s how we record our income from that. So in the first quarter, we got about $3.8 million from the CLO JV. This far quarter-to-date, $4.3 million. So I think we’re well positioned to grow NII and covered $0.37 dividend next quarter. And as I mentioned, we kind of have to look and evaluate our business over a 12-month period rather than quarter-to-quarter. And I expect our full year NII will improve and cover as it looks to relatively ’24 to be higher and we’ll cover the dividend.

Mickey Schleien: I understand. And then 1 more question, if I might. You borrowed on your credit facility, and I’m curious whether that facility requires mark-to-market accounting just thinking in terms of all the volatility we’re seeing in the markets.

Matt Kaplan: Sure. So the facility has a borrowing base, which is feeds in the fair value of investments that are comprised of the borrowing base, but that we have significant borrowing capacity, multiples of what the actual commitment is more than 3x the commitment level using recent parks. So I have no concerns there. And then the covenants are laid out in the Q, it’s I think minimum net asset value of $65 million. We have $135-ish million of NAV and then 150% ACR. So kind of just the standard BDC ACR covenant there. I think we drew on the revolver. If you look, we raised equity at the very end of the fourth quarter, which led to an increase in share count, and we rolled over the quarter with year-end with $8.5-ish million of cash.

So that was just as we deployed and we raised $12 million – or sorry, we raised $13.3 million in the fourth quarter, modestly drawing on our revolver to optimize our portfolio and yield helped also, as I said, our income this quarter was driven by new deployments as well as the CLO JV. So we are looking to continue to grow, diversify and scale GECC.

Operator: The next question is from Erik Zwick from Lucid Capital Markets.

Erik Zwick: I wanted to start first with the question. I’m curious if you could provide a little, maybe, color into the timing of the new deployments and the monetizations you had in the quarters based on the incoming yields being significantly higher than the outgoing yield, it seems like there should be some benefit to the overall portfolio. So curious how much of that was actually reflected in the first quarter. And if there may be some benefit in 2Q as well?

Matt Kaplan: I think it was — we had a good question. I think it was a little barbelled. We had excess cash and some commitments that we had to close on in the January time frame, but then kind of February was more of a low. And then in March, I would say, we were able to take advantage of a little bit of the market, also it started to pick up some deployments. And we hope to see some additional flow-through effect into Q2. As I said, I think we’re looking to see 2Q NII increase sequentially from 1Q?

Erik Zwick: Got it. And maybe just kind of continuing along that thought process in terms of forward yield, could you maybe just quantify what the pipeline looks like today in terms of magnitude of size as well as what you’re seeing for yields in the pipeline today?

Matt Kaplan: Sure. I think we are looking at a few private credit kind of direct lending opportunities. As always, we had a couple that have been put on pause, until we figure out the tariff situation as tariffs are kind of leading to some uncertainty out there. However, there is other activity going on in the space in lending. We’re starting — we have seen some M&A or refinancing opportunities, companies looking for capital. So the pipeline actually remains a little stronger, I’d say, than it was probably 3 to 4 months ago on the direct lending side. And then we are — the broadly syndicated tradable loan space is providing certain pockets of opportunity here and there. There are some babies that get thrown out with the bathwater due to industry sometimes.

And our team continues to look at underwriting those. We maintain relationships with many management teams and sponsors that allow us to work to create a pipeline of names in the syndicated market that maybe aren’t interesting when they come as a new issue, but we follow them and track them and that pipeline is looking interesting. We need to maintain a cautious approach to that and we have certain assets in our portfolio that are in the broadly syndicated loan space that are very, very high-quality kind of I would quasi call it a cash surrogate bucket that when we want to take advantage of certain opportunistic trading levels in names that we know and companies that we know how we can go harvest some of our cash surrogate low-yielding investments to rotate into that.

But it’s opportunistic and not a large percentage of what we do, but helps generate some alpha over time.

Erik Zwick: And then I appreciate the comments you gave in the prepared remarks regarding kind of limited exposure, direct exposure to tariffs. So I’m curious if you’ve look at your portfolio in terms of exposure to government contracts just given some of the dose cuts and cutbacks in federal spending and things of that nature?

Matt Kaplan: We have. We were looking at an investment that we saw that we had historically been involved in the situation. It was refinanced and then this is not in our portfolio anymore, but due to the government contract nature of it, it’s traded off, we’ve decided not to take — to get reinvolved. But I think on the tariff side, the question is that a lot of people are asking, what’s the direct exposure? And I think we’re working to think through the second and third-order effects, the dynamic of tariffs and also the other government initiatives. I think the bigger question that everyone is trying to understand is what’s the duration of this uncertainty and how will that lead to economic changes. And to that end, we’ve been reunderwriting our existing investments and focusing on thinking through that lens on new investments on if there is a recession, how severe could it be?

What’s the company’s defensive position? So we are considering that in all of our current portfolio investments as we do our routine portfolio reviews as well as new underwriting.

Erik Zwick: Great. And one last one for me, and I’ll step aside. So just looking at the kind of industry breakdown of the corporate portfolio, about 10% is categorized as consumer, maybe, say, another 2% if you include casinos and gaming, there are concerns in the market regarding that the lower-end consumer and especially if we get another inflation from the tariffs. So just curious if you could kind of characterize your portfolio in terms of what segment of consumers there, they’re targeting. And what potential kind of impacts or mitigations might need to be made there?

Matt Kaplan: Yes. Our largest exposure in the consumer space would be in companies that have exposure to private label products and manufacturing. So to the extent there is weakness in the consumer, that’s kind of – they should benefit from any trade-down effect from the premium brands into – in the private label. So I think our consumer and another one of our consumer services businesses or larger exposure is you can look on the scheduled investments is CSC ServiceWorks, which is laundry math. So generally, very recession-resilient businesses. So I think our consumer is actually more defensive than just if you think about the kind of regular white label brand like what is the consumer product. It’s more tied to the benefit from any trade-down effects.

Operator: [Operator Instructions] Next question is from Mitchel Penn from Oppenheimer & Company.

Mitchel Penn: A quick question on the CLO. What’s your expected ROE on that investment? We are targeting, call it, high teens to 20% returns over IRRs on our dollars in. And is that before fees, do you take any fees out at the joint venture level?

Matt Kaplan: There’s no like GECC, I think that’s just income that GECC, the TII return that we expect to receive from the JV. There’s no — the JV does not charge a management fee or anything like that specifically.

Mitchel Penn: And if we just look at Q1, you had $3.8 million in dividends. And then what was the loss relative to the CLO?

Matt Kaplan: Yes, I think it was approximately $2 million. It was, I want to say, say less than a 5% hit to NAV. So if you kind of look at the other publicly traded CLO closed-end funds, I think they kind of some of them have provided ranges, I guess, for the first quarter, but you can look at their NAVs. They’re down anywhere from, call it, I want to say, it’s a big range from like 6% 14%. I think our CLOs are younger and longer reinvestment periods, less relatively cleaner portfolios, et cetera.

Mitchel Penn: Yes, we did. We actually track those in the first quarter ROEs were negative for everyone. So when you took the cash flow minus the marks, they were all down. So they charge.

Matt Kaplan: They have a fee structure on their side. I think when we look at the JV, right, the JV is just if you look at it actually on the quarter, even with the markdown with the income we generated, it was positive to GECC.

Operator: There are no further questions at this time. I would like to turn the floor back over to Matt Kaplan for closing comments.

Matt Kaplan: Thank you again for joining us today. We’re pleased with another quarter of solid performance as we continue to execute on our long-term growth strategy. We look forward to continued investor dialogue. Please let us know if we can help with any follow-up questions that you may have.

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