Great Elm Capital Corp. Announces Q4 and Full-Year 2025 Results, Major Leadership Changes, and Incentive Fee Waiver

Key Highlights

• Appointment of New Executive Chairman: Jason Reese named Executive Chairman of the Board, replacing Matthew Drapkin, who remains actively involved as Vice Chairman of Great Elm Group, Inc. (GEG).
• Incentive Fee Waiver: GECC’s investment adviser has waived all accrued incentive fees as of December 31, 2025 (approx. \$2.3 million, or \$0.16/share), and will waive all incentive fees for Q1 2026 as well. This is expected to directly enhance Net Asset Value (NAV) for shareholders.
• Financial Performance:
  • Q4 2025 Net Investment Income (NII) of \$0.31/share, up over 50% quarter-over-quarter.
  • GAAP NAV at \$8.07/share (down from \$10.01/share in Q3); pro forma NAV at \$8.23/share with fee waiver.
  • Total investment income for Q4: \$12.6 million (\$0.90/share). Net realized and unrealized losses for Q4: \$26.4 million (\$1.88/share).
• Distribution Announcement: The Board declared a \$0.30/share dividend for Q1 2026, equating to a 19.2% annualized yield at the February 27, 2026 closing price of \$6.26, and 14.9% yield on GAAP NAV.
• Stock Buyback Program: Authorization to repurchase up to \$10 million of common shares (approx. 11% of market cap as of Feb 27, 2026).
• Debt Repurchase and Redemption: Repurchased \$18.7 million of GECCO notes due June 2026, with \$38.8 million outstanding as of Feb 27, 2026. Call notice issued for \$20 million of GECCO notes to be redeemed on March 31, 2026.
• Liquidity: \$5 million in cash and equivalents; \$50 million undrawn revolving credit facility; \$11 million in liquid exchange-traded assets.
• Portfolio Quality: Less than 1% of investments on nonaccrual. Notably underweight in software sector (down to <4% as of late Feb 2026).
• Personnel Strengthening: Chris Croteau hired as Head of Research, bringing 25+ years of credit experience.

In-Depth Analysis and Investor Considerations

Leadership and Governance Changes

The naming of Jason Reese as Executive Chairman is significant. Reese, who is also Chairman and CEO of Great Elm Group (GEG), brings seasoned credit investment experience and is expected to enhance management oversight and strategic direction. The outgoing Chairman, Matthew Drapkin, remains involved as Vice Chairman of GEG, maintaining continuity and ongoing engagement with both the fund and its investment adviser.

The addition of Chris Croteau as Head of Research further strengthens the platform, with an explicit aim to improve credit quality and portfolio oversight.

Fee Waiver: Direct NAV Benefit

The decision by Great Elm Capital Management (the external adviser) to waive all accrued and 1Q 2026 incentive fees is a substantial, shareholder-friendly move. As of year-end, this waiver amounts to approximately \$2.3 million (\$0.16/share), and is reflected as a pro forma increase in NAV from \$8.07 to \$8.23/share. This action is an explicit signal of management’s alignment with shareholders and could be received positively by the market as it immediately improves NAV and NII.

Dividend and Shareholder Yield

The Board’s declaration of a \$0.30/share quarterly dividend (annualized yield of 19.2% at recent share price) stands out, especially in the current interest rate environment. Even on a NAV basis, the yield is a robust 14.9%. This commitment to return capital to shareholders could support the share price, particularly given the company’s current discount to NAV.

Stock Buyback Authorization

The newly authorized \$10 million repurchase program (~11% of market cap) provides a potential tailwind for the stock, supporting the share price and reducing the NAV discount if executed.

Debt Management and Capital Structure

The company’s proactive approach to debt management—repurchasing \$18.7 million in GECCO notes and calling \$20 million for redemption—reduces refinancing risk and interest expense, and further de-risks the balance sheet. As of year-end, total debt outstanding was \$194.4 million, with a well-laddered maturity profile.

Portfolio Positioning and Credit Quality

GECC ended the year with \$298.3 million in investments (fair value), diversified as follows:

• 67 corporate credit debt investments (\$178.2 million, 59.7% of portfolio)
• Great Elm Specialty Finance (\$38.4 million, 12.9%)
• CLO investments (\$47.9 million, 16.1%)
• Dividend-paying equity investments (\$17.7 million, 5.9%)
• Other equity investments (\$16.1 million, 5.4%)

The weighted average current yield on the debt portfolio was 11.7%. Notably, floating rate instruments comprised 74% of the debt book, offering some protection against interest rate changes. Nonaccruals were less than 1% of the portfolio, and the software sector exposure was trimmed to below 4%.

For the full year, GECC took steps to improve risk quality by exiting higher-risk investments and reducing payment-in-kind income.

Operating Results

Quarterly Results (Q4 2025):

• Total investment income: \$12.6 million (\$0.90/share)
• Total expenses: \$8.2 million (\$0.58/share, including excise tax)
• Net realized and unrealized losses: \$26.4 million (\$1.88/share), with over half being unrealized.
• Net assets: \$112.9 million (\$8.07/share) at December 31, 2025 (down from \$140.1 million, \$10.01/share at end Q3).
• Net investment income: \$4.4 million (\$0.31/share) in Q4, up from \$2.4 million (\$0.20/share) in Q3.

Full Year 2025:

• Total investment income: \$49.99 million
• Net investment income: \$17.32 million
• Net loss (including realized/unrealized losses): \$(31.79) million
• Earnings per share: \$(2.57) (2025), \$0.36 (2024), \$3.33 (2023)

The drop in NAV and net assets in Q4 was largely driven by unrealized losses, which is a key risk factor for investors to monitor.

Liquidity and Resources

At year-end, GECC had \$5 million in cash and equivalents, \$50 million of available revolver capacity, and \$11 million in liquid exchange-traded assets. This solid liquidity profile supports ongoing portfolio management and dividend payments.

Potential Share Price Sensitivities

• Fee waiver increases NAV and NII, which may narrow the discount to NAV and support the share price.
• Dividend yield of 19.2% (market price basis) is highly attractive and could draw income-focused investors.
• Stock buyback program could provide upward pressure on the share price if executed.
• Leadership changes and addition of experienced credit personnel are likely to be viewed positively, especially given current market uncertainties.
• Material realized and unrealized losses in Q4 and full year may weigh on sentiment, but are partially offset by improved portfolio quality and liquidity.
• Ongoing debt reduction and balance sheet strengthening may reduce risk perception.

Conclusion

Great Elm Capital Corp.’s Q4 and full-year 2025 results reveal a company taking decisive steps to align management with shareholders, enhance portfolio quality, and support its share price through both capital returns and buybacks. While the realized and unrealized losses are a concern, the combination of a fee waiver, strong dividend, new buyback program, and strengthened management team are all potentially price-moving developments. Investors should weigh these positives against ongoing credit risks and NAV declines, but the overall package is likely to be viewed constructively by the market.

Disclaimer: This article is for informational purposes only and does not constitute investment advice. Investors should conduct their own research or consult a qualified financial advisor before making investment decisions. The information presented is based on company filings and may be subject to change.

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