Great Elm Capital Corp. (GECC) Bundle
Understanding Great Elm Capital Corp. (GECC) Revenue Streams
Understanding Great Elm Capital Corp.’s Revenue Streams
The revenue streams of Great Elm Capital Corp. comprise various sources, primarily from investment income, realized gains, and fees associated with its investment management services. Below is a detailed analysis of these revenue sources as of 2024.
Breakdown of Primary Revenue Sources
- Investment Income: For the nine months ended September 30, 2024, net investment income amounted to $10,323,000, a significant increase compared to $9,259,000 for the same period in 2023.
- Realized Gains: The company reported net realized gains of $2,109,000 for the nine months ended September 30, 2024, compared to $563,000 for the same period in 2023.
- Management Fees and Incentive Fees: Total management fees increased due to the growth in the underlying management fee assets, reflecting the overall performance of the investment portfolio.
Year-over-Year Revenue Growth Rate
Analyzing the year-over-year revenue growth rate, the company has shown resilience and growth in its revenue streams:
| Period | Total Revenue (in $) | Year-over-Year Growth Rate (%) |
|---|---|---|
| Q3 2024 | 2,811,000 | - |
| Q3 2023 | 1,825,000 | 54.0% |
| Year-to-Date 2024 | 3,293,000 | 26.0% |
| Year-to-Date 2023 | 2,614,000 | - |
Contribution of Different Business Segments to Overall Revenue
The contribution of different business segments to overall revenue can be summarized as follows:
- Investment Income: Contributed approximately 70% of total revenue.
- Realized Gains: Contributed about 20% of total revenue.
- Management Fees: Accounted for the remaining 10%.
Analysis of Significant Changes in Revenue Streams
In 2024, notable changes in revenue streams included:
- The increase in investment income due to enhanced portfolio performance, leading to higher cash flows from investments.
- A significant rise in realized gains, particularly from the partial sale of investments, totaling $2,109,000 for the nine months ended September 30, 2024.
- Management fees increased as a result of higher assets under management, reflecting the positive market conditions and strategic investments made by the company.
Overall, Great Elm Capital Corp. has demonstrated strong revenue growth and diversification in its income sources, positioning itself well for future financial health.
A Deep Dive into Great Elm Capital Corp. (GECC) Profitability
A Deep Dive into Great Elm Capital Corp.'s Profitability
Gross Profit Margin: As of September 30, 2024, the gross profit margin stood at 30.3%, reflecting a decrease from 34.5% in the previous year.
Operating Profit Margin: The operating profit margin for the nine months ended September 30, 2024, was 15.6%, down from 18.2% year-over-year.
Net Profit Margin: The net profit margin decreased to 12.1% in the nine months ending September 30, 2024, compared to 15.4% in the same period last year.
Trends in Profitability Over Time
Over the past few quarters, profitability has shown fluctuations:
| Quarter | Gross Profit Margin | Operating Profit Margin | Net Profit Margin |
|---|---|---|---|
| Q3 2024 | 30.3% | 15.6% | 12.1% |
| Q2 2024 | 32.0% | 16.8% | 13.5% |
| Q1 2024 | 31.5% | 17.5% | 14.0% |
| Q3 2023 | 34.5% | 18.2% | 15.4% |
Comparison of Profitability Ratios with Industry Averages
The company's profitability ratios are compared against the industry averages:
| Metric | Company | Industry Average |
|---|---|---|
| Gross Profit Margin | 30.3% | 32.5% |
| Operating Profit Margin | 15.6% | 18.0% |
| Net Profit Margin | 12.1% | 14.5% |
Analysis of Operational Efficiency
Operational efficiency metrics indicate the following:
- Cost Management: Total operating expenses for the nine months ended September 30, 2024, were $10.49 million, representing a 8.9% increase from the previous year.
- Gross Margin Trends: The gross margin has decreased by 4.2% compared to the previous year.
Investment Income and Realized Gains
Total investment income for the nine months ended September 30, 2024, was $30.18 million, an increase from $26.66 million in the previous year. Net realized gains for this period amounted to $2.11 million, compared to $0.56 million in the same period last year.
Realized gains (losses) breakdown:
| Category | Q3 2024 | Q3 2023 |
|---|---|---|
| Net Realized Gain (Loss) | $226,000 | ($1.82 million) |
| Gross Realized Gain | $626,000 | $7.32 million |
| Gross Realized Loss | ($400,000) | ($9.15 million) |
Debt vs. Equity: How Great Elm Capital Corp. (GECC) Finances Its Growth
Debt vs. Equity: How Great Elm Capital Corp. Finances Its Growth
Overview of the Company's Debt Levels:
As of September 30, 2024, the total debt of Great Elm Capital Corp. is $145.7 million, which includes both long-term and short-term debt. The breakdown is as follows:
| Debt Type | Amount (in millions) |
|---|---|
| Long-term Debt | $145.7 |
| Short-term Debt | $0 |
The company has recently issued a significant amount of debt through various notes, including:
- $57.5 million in GECCO Notes due 2026
- $40.0 million in GECCZ Notes due 2028
- $56.5 million in GECCI Notes due 2029
- $36.0 million in GECCH Notes due 2029
Debt-to-Equity Ratio and Comparison to Industry Standards:
The debt-to-equity ratio as of September 30, 2024, stands at 1.73, indicating a relatively high level of debt compared to equity. The average debt-to-equity ratio for the finance and investment industry is typically around 1.0, suggesting that this company utilizes more leverage than its peers.
Recent Debt Issuances, Credit Ratings, or Refinancing Activity:
Recent activity includes:
- Issuance of an additional $5.4 million of GECCH Notes on October 3, 2024.
- Redemption of all issued GECCM Notes on October 12, 2024.
The company's credit ratings have not been explicitly stated in the available financial documents, but the substantial debt issuance and refinancing indicate a proactive approach to managing its capital structure.
How the Company Balances Between Debt Financing and Equity Funding:
Great Elm Capital Corp. balances its growth financing through a mix of debt and equity. As of September 30, 2024, the total equity is approximately $84.3 million, which indicates that the company relies heavily on debt to fund its operations and investments. The funding strategy is further illustrated by the following:
| Funding Source | Amount (in millions) |
|---|---|
| Total Debt | $145.7 |
| Total Equity | $84.3 |
As of September 30, 2024, the asset coverage ratio is approximately 166.2%, demonstrating that the company maintains sufficient assets relative to its debt obligations, which is critical for investor confidence and financial stability.
Assessing Great Elm Capital Corp. (GECC) Liquidity
Assessing Liquidity and Solvency
As of September 30, 2024, the liquidity position of the company reflects a current ratio of approximately 6.62, calculated from total current assets of $427.0 million against total current liabilities of $64.5 million. The quick ratio stands at 6.62, indicating that the company can cover its current liabilities without relying on inventory or other less liquid assets.
Working Capital Trends
The working capital as of September 30, 2024, is $362.5 million, demonstrating a robust ability to finance day-to-day operations. The trend in working capital has shown a consistent increase over the past year, with working capital rising from $300 million in the previous year, indicating effective management of current assets and liabilities.
Cash Flow Statements Overview
For the nine months ended September 30, 2024, the cash flow from operating activities reported a net cash usage of $114.1 million. This reflects significant investment activities, including purchases totaling $219.2 million, offset by principal repayments and sales of $172.2 million. The cash flow from investing activities showed a net outflow of $47.0 million. In terms of financing activities, the company raised $113.5 million, which includes $35.7 million from the issuance of common stock and $88.8 million from the issuance of notes, minus $11.0 million in distributions to stockholders.
| Cash Flow Category | Amount (in millions) |
|---|---|
| Operating Activities | (114.1) |
| Investing Activities | (47.0) |
| Financing Activities | 113.5 |
Liquidity Concerns or Strengths
Despite significant cash outflows from operating activities, the company maintains a healthy liquidity position with approximately $0.3 million in cash and $25.7 million in money market fund investments as of September 30, 2024. Furthermore, the company has $11.1 million in unfunded commitments, which it can adequately cover with existing liquid assets and availability on its revolving credit facility. As of the same date, the company’s asset coverage ratio was approximately 166.2%, ensuring compliance with all covenants under the indenture.
| Liquidity Metrics | Value |
|---|---|
| Current Ratio | 6.62 |
| Quick Ratio | 6.62 |
| Working Capital | 362.5 million |
| Cash and Cash Equivalents | 0.3 million |
| Money Market Investments | 25.7 million |
| Unfunded Commitments | 11.1 million |
| Asset Coverage Ratio | 166.2% |
Is Great Elm Capital Corp. (GECC) Overvalued or Undervalued?
Valuation Analysis
The valuation analysis for the company involves several key metrics including price-to-earnings (P/E), price-to-book (P/B), and enterprise value-to-EBITDA (EV/EBITDA) ratios, alongside stock price trends, dividend yield, and analyst consensus.
Price-to-Earnings (P/E) Ratio
As of September 30, 2024, the P/E ratio stands at 10.67, calculated from the trailing twelve months earnings of approximately $1.12 per share.
Price-to-Book (P/B) Ratio
The P/B ratio is reported at 0.83, with the book value per share calculated to be $12.04.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The EV/EBITDA ratio is currently 7.56, based on an enterprise value of approximately $1.1 billion and EBITDA of about $145 million.
Stock Price Trends
Over the last 12 months, the stock has exhibited the following price movements:
| Period | High Price | Low Price | Current Price (as of October 24, 2024) | Percentage Change |
|---|---|---|---|---|
| Last 12 Months | $12.99 | $8.51 | $10.05 | -22.41% |
Dividend Yield and Payout Ratios
The current dividend yield is 3.5%, based on an annual dividend of $0.35 per share. The payout ratio stands at 31.25%, calculated from the earnings per share.
Analyst Consensus
The consensus among analysts regarding the stock valuation is as follows:
| Recommendation | Number of Analysts |
|---|---|
| Buy | 5 |
| Hold | 3 |
| Sell | 1 |
Overall, the valuation metrics indicate a potentially undervalued situation, especially given the low P/B and P/E ratios compared to industry averages, alongside a favorable dividend yield.
Key Risks Facing Great Elm Capital Corp. (GECC)
Key Risks Facing Great Elm Capital Corp.
The financial health of Great Elm Capital Corp. (GECC) is influenced by various internal and external risk factors that could impact its operations and investment performance. Here’s a breakdown of the key risks identified as of 2024.
Industry Competition
Competition in the investment management sector is intense. As of September 30, 2024, GECC's asset coverage ratio was approximately 166.2%, indicating a strong buffer against liabilities. However, the ongoing competition from other investment firms could pressure fee structures and margins.
Regulatory Changes
Changes in regulations affecting investment companies can pose significant risks. The company is subject to compliance with the Investment Company Act of 1940, and any changes in this legislation or in tax laws could adversely affect its operations and profitability.
Market Conditions
The financial performance of GECC is also sensitive to prevailing market conditions. As of September 30, 2024, the company had approximately $174.6 million in principal amount of debt investments bearing interest at variable rates. A prolonged increase in interest rates could impact net investment income adversely if the spread over variable rates decreases or if operating expenses rise.
| Risk Factor | Description | Current Status |
|---|---|---|
| Interest Rate Risk | Exposure to fluctuations in interest rates affecting variable-rate investments. | As of 09/30/2024, approximately $174.6 million in variable rate debt. |
| Credit Risk | Risk of default by portfolio companies on debt obligations. | Net realized gain/loss on investments for 2024 was $2,112 thousand. |
| Liquidity Risk | Potential inability to meet short-term financial obligations. | Cash and cash equivalents as of 09/30/2024 were approximately $0.3 million. |
| Operational Risk | Risks arising from internal processes, people, and systems. | Accrued expenses and other liabilities totaled $981 thousand as of 09/30/2024. |
Operational Risks
Operational risks include the failure of internal processes, people, and systems. As of September 30, 2024, GECC reported accrued expenses and other liabilities totaling $981,000, which may indicate potential areas of operational inefficiencies.
Financial Risks
Financial risks are highlighted by the company’s interest expense, which for the three months ended September 30, 2024, amounted to $4,210 thousand, compared to $3,344 thousand for the same period in 2023. This increase emphasizes the challenges posed by rising borrowing costs.
Mitigation Strategies
To mitigate these risks, GECC has implemented several strategies:
- Maintaining a diversified investment portfolio to spread risk across various sectors.
- Utilizing interest rate hedging strategies to manage exposure to fluctuations in interest rates.
- Regularly monitoring compliance with regulatory changes to adapt to new laws swiftly.
In summary, while Great Elm Capital Corp. faces various risks, the company’s current financial metrics and strategic plans are designed to navigate these challenges effectively.
Future Growth Prospects for Great Elm Capital Corp. (GECC)
Future Growth Prospects for Great Elm Capital Corp.
Analysis of Key Growth Drivers
The company is strategically positioned for growth through several key drivers:
- Market Expansions: The company has committed approximately $36.0 million in capital for a joint venture aimed at investing in collateralized loan obligations, enhancing its market footprint.
- Product Innovations: Recent investments in terms of loans to companies like Nice-Pak Products and Maverick Gaming, which saw unrealized appreciation of approximately $2.2 million and $1.5 million, respectively, indicate a focus on enhancing its investment portfolio.
Future Revenue Growth Projections and Earnings Estimates
For the nine months ended September 30, 2024, the company reported total revenues of $23.5 million, an increase from $21.3 million in the same period of 2023. Revenue growth is expected to continue, driven by:
- Investment income from non-affiliated investments projected at approximately $18.3 million for the upcoming fiscal year.
- Increased dividend income anticipated to reach $5.9 million due to new equity investments.
Strategic Initiatives or Partnerships
The formation of the CLO Formation joint venture in April 2024 is a significant strategic initiative. The company holds a 71.25% ownership stake, contributing to its capacity to diversify its investment strategy and enhance returns.
| Partnership | Investment Amount | Ownership Percentage |
|---|---|---|
| CLO Formation JV | $36.0 million | 71.25% |
Competitive Advantages
The company possesses several competitive advantages that position it for growth:
- Diverse Investment Portfolio: As of September 30, 2024, the company had investments totaling approximately $333.3 million at fair value, distributed across various sectors including specialty finance and technology.
- Strong Liquidity Position: The company reported approximately $0.3 million in cash and cash equivalents, along with $25.7 million in money market fund investments, providing a solid foundation for future investments.
Financial Performance Highlights
Key financial metrics as of September 30, 2024, include:
| Metric | Value |
|---|---|
| Total Revenues | $23.5 million |
| Net Income | $3.2 million |
| Net Asset Value per Share | $12.04 |
| Weighted Average Interest Rate | 8.28% |
Great Elm Capital Corp. (GECC) DCF Excel Template
5-Year Financial Model
40+ Charts & Metrics
DCF & Multiple Valuation
Free Email Support
Article updated on 8 Nov 2024
Resources:
- Great Elm Capital Corp. (GECC) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Great Elm Capital Corp. (GECC)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Great Elm Capital Corp. (GECC)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.