Great Elm Capital Corp. Reports 14% Increase in Total Investment Income, Net Realized Gain, and Strategic Investments in Latest 10-Q Filing

Great Elm Capital Corp. (GECC) reported significant financial developments in its latest 10-Q filing for the nine months ended September 30, 2024. The company, classified as a business development company (BDC), focuses on generating income and capital appreciation through debt and equity investments, particularly in middle-market companies.

For the nine months ended September 30, 2024, GECC's total investment income reached $30.2 million, an increase from $26.7 million in the same period of 2023. This growth was driven by a rise in interest income, which amounted to $23.5 million compared to $21.3 million in the prior year, alongside a notable increase in dividend income from $2.7 million to $5.9 million. The increase in dividend income is attributed to the company's investment in CLO Formation JV, LLC, established in 2024.

Despite the revenue growth, total expenses also rose, totaling $19.8 million for the nine months ended September 30, 2024, up from $17.3 million in the previous year. This increase was primarily due to higher management and incentive fees, which were influenced by increased pre-incentive net investment income. Interest expenses also rose significantly, reflecting the issuance of new notes totaling $56.5 million and $36.0 million during the period.

The company reported a net realized gain of $2.1 million for the nine months ended September 30, 2024, compared to a gain of $563,000 in the same period of 2023. However, unrealized depreciation was significant, totaling $(10.7) million, contrasting with an unrealized appreciation of $11.3 million in the prior year. This depreciation was largely driven by declines in the fair value of certain investments, including GESF common stock.

As of September 30, 2024, GECC's total assets increased to $427.0 million from $246.8 million at the end of 2023, while total liabilities rose to $301.2 million from $148.1 million. The company's net assets also grew, reaching $125.8 million, although the net asset value per share decreased from $12.99 to $12.04 during the same period.

Strategically, GECC made significant investments, totaling $284.0 million in acquisitions for the nine months ended September 30, 2024, while dispositions amounted to $174.5 million. The company also amended its Investment Management Agreement in August 2022, which reset capital gains incentive fee calculations, eliminating $163.2 million of prior losses from future calculations.

Overall, GECC's performance reflects a complex interplay of increased revenues and expenses, strategic investments, and significant unrealized losses, positioning the company for future growth while navigating market challenges.