Great Elm Capital Corp. Reports Solid NII Growth and NAV Increase for Q4 and Full Year 2023
Net Investment Income (NII): Q4 NII rose to $3.3 million, or $0.43 per share, surpassing the base dividend for the fourth consecutive quarter.
Net Asset Value (NAV): NAV per share increased to $12.99 as of December 31, 2023, from $12.88 in the previous quarter.
Asset Coverage Ratio: Improved to 169.0% as of December 31, 2023, up from 168.4% in the previous quarter.
Special Equity Raise: In February 2024, GECC raised $24 million of equity at NAV, including a $6 million investment by Great Elm Group into the SPV.
Dividend: A special distribution of $0.10 per share was paid in January 2024, with a quarterly dividend of $0.35 per share approved for Q1 2024.
On February 29, 2024, Great Elm Capital Corp (NASDAQ:GECC) released its 8-K filing, announcing its financial results for the fourth quarter and full year ended December 31, 2023. GECC, an externally managed, non-diversified closed-end management investment company, focuses on generating current income and capital appreciation through debt and equity investments, particularly in middle-market companies and small businesses.
Financial Performance and Strategic Highlights
GECC's fourth quarter showed a continuation of its solid performance with a Net Investment Income (NII) of $3.3 million, or $0.43 per share, an increase from $3.1 million, or $0.40 per share, in the previous quarter. The full year 2023 NII reached $12.5 million, or $1.65 per share, outpacing the total declared dividends of $1.50 per share. The company's net assets also saw an uptick to $98.7 million, or $12.99 per share, as of December 31, 2023, compared to $97.9 million, or $12.88 per share, on September 30, 2023.
GECC's asset coverage ratio, a key metric for investment companies that indicates the level of protection for debt investors, improved to 169.0% by the end of 2023, reflecting a stronger financial cushion against potential losses. This improvement is significant for the asset management industry as it enhances investor confidence in the company's financial health.
Capital Raising and Dividend Distribution
In a strategic move to bolster its financial position, GECC raised $24 million of equity at Net Asset Value in February 2024 through a special purchase vehicle, with Great Elm Group investing $6 million into the SPV. This capital raise is a testament to the company's growth strategy and the confidence of its investment manager in GECC's future prospects.
Reflecting the company's strong performance throughout 2023, GECC paid a special distribution of $0.10 per common share in January 2024. Additionally, the Board of Directors approved a quarterly dividend of $0.35 per share for the first quarter of 2024, representing a 13.1% annualized yield based on the closing market price as of February 28, 2024.
Portfolio and Investment Activity
As of December 31, 2023, GECC's portfolio consisted of $230.6 million in total investments at fair value, with a significant portion in secured debt investments. The weighted average current yield on the company's debt portfolio was 13.8%, and during the fourth quarter, GECC deployed approximately $29.9 million into 15 investments at a weighted average current yield of 14.0%. The company also monetized 32 investments for approximately $36.2 million at a weighted average current yield of 11.0%.
Management Commentary
We capped 2023 with another quarter of strong NII that exceeded our quarterly dividend, and finished with the highest cash income year in the Companys history. Our NAV also continued to grow as we harvested lower-yielding investments and reinvested the capital into higher-yielding, higher-quality investments, said Matt Kaplan, GECCs Chief Executive Officer. Additionally, 2024 is off to a great start as we recently raised $24 million of equity at net asset value from a special purchase vehicle, further enhancing alignment between the Companys investment manager and shareholders. This transaction is validation of our successful transformation and significant progress over the last two years, enabling us to further advance our growth strategy and execute on our robust investment pipeline.
Great Elm Capital Corp's financial results for the fourth quarter and full year 2023 demonstrate the company's ability to generate solid income and responsibly manage its investment portfolio. The strategic capital raise and the continued payment of dividends are indicative of GECC's commitment to shareholder value and its positive outlook for the future.
For more detailed financial information and analysis, investors and interested parties are encouraged to review the full 8-K filing.
Explore the complete 8-K earnings release (here) from Great Elm Capital Corp for further details.
This article first appeared on GuruFocus.
