Great Elm Capital Corp. (GECC): Business Model Canvas [10-2024 Updated]

In the dynamic world of finance, understanding the intricacies of a company's business model is essential for investors and analysts alike. Great Elm Capital Corp. (GECC) operates with a robust business model that emphasizes strategic partnerships, expertise in investment management, and diversification across various asset classes. This blog post delves into the essential components of GECC's Business Model Canvas, providing a comprehensive overview of how the company creates value and generates revenue in the competitive investment landscape. Discover the key elements that drive GECC's success and how they cater to the diverse needs of their investor base.

Great Elm Capital Corp. (GECC) - Business Model: Key Partnerships

Collaborations with investment firms

Great Elm Capital Corp. (GECC) has established strategic partnerships with various investment firms to enhance its investment capabilities and expand its portfolio. Notably, the company collaborated with a strategic partner to create a joint venture, CLO Formation JV, LLC, in April 2024, which focuses on investments in collateralized loan obligations (CLOs) and related warehouse facilities. The total capital commitment for this venture amounts to $32 million, with GECC contributing $17.4 million for a 75% ownership interest.

Relationships with portfolio companies

GECC maintains robust relationships with its portfolio companies, which are essential for generating consistent revenue streams. As of September 30, 2024, GECC had investments in 54 debt instruments across 45 companies, with a total fair value of approximately $234.5 million. Additionally, GECC holds 20 equity investments in 18 companies, valued at around $98.8 million. These investments are diversified across various industries, including financial services, insurance, and chemicals, allowing GECC to mitigate risks associated with market fluctuations.

Portfolio Company	Industry	Investment Type	Fair Value (in thousands)	Percentage of Class
American Coastal Insurance Corp.	Insurance	Unsecured Bond	12,238	N/A
Blackstone Secured Lending	Financial Services	Common Equity	9,519	N/A
Blue Ribbon, LLC	Food & Staples	1st Lien, Secured Loan	4,150	N/A
Apex Credit CLO 2024-I Ltd	Structured Finance	CLO Equity	12,360	N/A
Apex Credit CLO 2024-II Ltd	Structured Finance	CLO Equity	31,461	N/A

Partnerships with financial institutions

GECC's financial strategy also involves partnerships with various financial institutions. As of September 30, 2024, the company had a senior secured revolving line of credit with City National Bank (CNB) for up to $25 million. This agreement was amended in November 2023, extending the maturity date to May 5, 2027. The interest on borrowings under this facility is pegged to the Secured Overnight Financing Rate (SOFR) plus 3.00%, providing GECC with flexible funding options to support its investment strategies.

Moreover, GECC's total liabilities as of September 30, 2024, stood at approximately $301.2 million, with notes payable amounting to $229.9 million. This structure allows GECC to leverage its capital effectively while managing its financial obligations in alignment with its investment objectives.

Great Elm Capital Corp. (GECC) - Business Model: Key Activities

Managing investment portfolios

As of September 30, 2024, Great Elm Capital Corp. (GECC) managed a diversified investment portfolio with a total fair value of approximately $333.3 million. This portfolio included investments in 54 debt instruments across 45 companies, valued at $234.5 million, and 20 equity investments in 18 companies, with a fair value of $98.8 million.

GECC's investment strategy focuses on generating returns through interest income and capital appreciation. For the nine months ended September 30, 2024, GECC reported net investment income of approximately $10.3 million and total revenues of $3.3 million for the same period.

Conducting market research

GECC conducts thorough market research to identify potential investment opportunities and assess market conditions. This research is critical for making informed investment decisions and managing risks associated with the portfolio. The company’s focus on Structured Finance and Specialty Finance sectors is indicative of its targeted investment approach. As of September 30, 2024, investments in the Specialty Finance sector accounted for approximately 13.08% of the total investments.

Monitoring performance of assets

Monitoring the performance of assets is a crucial activity for GECC to ensure the portfolio's alignment with its investment objectives. As of September 30, 2024, the company reported an asset coverage ratio of approximately 166.2%, indicating a strong position relative to its liabilities. The company also tracks unrealized and realized gains, with a net realized gain of $2.1 million for the nine months ended September 30, 2024.

Category	Value (thousands)
Total Fair Value of Portfolio	$333,283
Debt Instruments Fair Value	$234,500
Equity Investments Fair Value	$98,800
Net Investment Income (9 months)	$10,323
Total Revenues (9 months)	$3,293
Asset Coverage Ratio	166.2%
Net Realized Gain (loss)	$2,109

Great Elm Capital Corp. (GECC) - Business Model: Key Resources

Capital from equity and debt financing

As of September 30, 2024, Great Elm Capital Corp. (GECC) reported total liabilities of $301.2 million and total net assets of $125.8 million, indicating a solid capital structure. The company had outstanding borrowings of $235.3 million across various unsecured debt facilities, with commitments totaling $235.3 million.

In 2024, GECC successfully raised equity through private placements, issuing shares at prices reflecting its net asset value. On February 8, 2024, the company issued 1,850,424 shares at $12.97 per share for an aggregate of $24 million, showcasing its ability to attract investment.

Skilled investment management team

GECC is managed by Great Elm Capital Management, LLC (GECM), which has established expertise in managing investment portfolios with a focus on generating current income and capital appreciation. The team is skilled in sourcing and managing investments in secured and senior secured debt instruments of middle-market companies.

The investment management strategy has been structured to leverage the team's experience in specialty finance, enabling GECC to create a diverse portfolio that includes various debt and equity investments.

Diverse portfolio of investments

As of September 30, 2024, GECC's investment portfolio was valued at $418.8 million, comprising a mix of non-affiliated, controlled, and affiliated investments. The portfolio includes:

Investment Type	Fair Value ($ million)	Percentage of Total Investments
Non-affiliated investments	256.8	61.4%
Short-term investments	85.5	20.4%
Controlled investments	76.5	18.3%
Affiliated investments	0.0	0.0%

GECC's investments span various industries, with significant allocations in specialty finance, chemicals, and consumer products, reflecting a well-diversified investment strategy.

The company has positioned itself strategically within the investment landscape, targeting middle-market companies and utilizing a combination of debt and equity investments to optimize returns.

Great Elm Capital Corp. (GECC) - Business Model: Value Propositions

High potential returns for investors

Great Elm Capital Corp. (GECC) aims to generate attractive returns for its investors through a diversified investment strategy focused on both debt and equity securities. As of September 30, 2024, GECC reported a net income of approximately $3.241 million for the nine months ended, with total revenues of $3.293 million during the same period. The net investment income per share for the period was $1.08. The company's strategic focus on middle-market companies, defined as those with enterprise values between $100 million and $2 billion, allows it to tap into potentially high-growth sectors while maintaining a robust risk management framework.

Diversification through various asset classes

GECC's investment portfolio is diversified across multiple asset classes, including secured and unsecured debt, equity investments, and structured finance products. As of September 30, 2024, GECC held investments totaling approximately $234.5 million in debt instruments and $98.8 million in equity, showcasing a total investment fair value of $438.2 million. The company has also committed approximately $11.1 million in unfunded commitments to its portfolio companies, ensuring a pipeline for future growth opportunities. This diversification strategy is designed to mitigate risks and enhance overall returns, catering to the varied risk appetites of its investors.

Expertise in managing complex investments

GECC benefits from a team with extensive expertise in managing complex investments, particularly in the specialty finance sector. The company employs a rigorous investment process, focusing on thorough credit analysis and risk assessment. The average effective yield on GECC's investments is influenced by prevailing market conditions, with a weighted average interest rate of 8.28% reported for the three months ended September 30, 2024. Additionally, the company's management fee structure, which includes a base management fee of 1.50% on average adjusted gross assets, reflects its commitment to aligning interests with those of its investors.

Financial Metric	Value
Net Income (Nine Months Ended September 30, 2024)	$3.241 million
Total Revenues (Nine Months Ended September 30, 2024)	$3.293 million
Net Investment Income per Share	$1.08
Total Investments (Fair Value)	$438.2 million
Debt Instruments	$234.5 million
Equity Investments	$98.8 million
Unfunded Commitments	$11.1 million
Weighted Average Interest Rate	8.28%

Great Elm Capital Corp. (GECC) - Business Model: Customer Relationships

Regular communication with investors

Great Elm Capital Corp. (GECC) maintains consistent communication with its investors through various channels. The company provides updates via quarterly earnings calls and frequent press releases. As of September 30, 2024, GECC had total assets of $427.0 million and net assets of $125.8 million. The weighted average shares outstanding during this period were 10,449,888.

Transparent reporting on performance

GECC emphasizes transparency in its financial reporting. The company reported net investment income of $10.3 million for the nine months ended September 30, 2024, with a net investment income per share of $1.08. The net realized gain for the same period was $2.1 million. The firm also declared distributions totaling $10.3 million to stockholders during this timeframe.

Period	Net Investment Income	Net Realized Gain (Loss)	Total Distributions
Q3 2024	$4.1 million	$0.2 million	$3.7 million
9 Months 2024	$10.3 million	$2.1 million	$10.3 million

Personalized investment strategies

GECC offers personalized investment strategies tailored to the needs of its investors. The company’s portfolio as of September 30, 2024, included 54 debt instruments across 45 companies, valued at approximately $234.5 million. Additionally, GECC had 20 equity investments in 18 companies, with a fair value of approximately $98.8 million. This diversification allows the firm to create customized investment solutions based on individual investor profiles.

Furthermore, the firm has committed approximately $11.1 million in unfunded commitments to provide financing to certain portfolio companies. This strategic approach enables GECC to align its investment offerings with the specific goals and risk tolerance of its investors.

Great Elm Capital Corp. (GECC) - Business Model: Channels

Direct outreach to potential investors

Great Elm Capital Corp. (GECC) actively engages in direct outreach to potential investors through various means including targeted marketing campaigns, investor presentations, and participation in industry conferences. In 2024, GECC has increased its investor outreach efforts, focusing on institutional investors and high-net-worth individuals. The company aims to expand its shareholder base and enhance its capital raise strategies.

Online platforms for investment management

GECC utilizes several online platforms to manage investments and communicate with investors. The company leverages its website and investor relations portals to provide real-time access to financial reports, investment opportunities, and performance metrics. As of September 30, 2024, GECC reported total assets of approximately $427 million, with significant investments in a diverse portfolio including specialty finance and structured finance sectors.

Platform	Type	Usage	Key Metrics
Investor Relations Website	Informational	Provides financial data, press releases, and reports	Over 15,000 unique visitors in Q3 2024
Webinars	Engagement	Regularly scheduled to discuss performance and strategy	Average attendance of 500 investors per session
Social Media	Marketing	Engagement with potential investors and stakeholders	Increased followers by 30% in 2024

Financial reports and presentations

Financial transparency is a critical component of GECC's communication strategy. The company releases quarterly and annual financial reports, which provide comprehensive insights into its financial health and investment performance. For the three months ended September 30, 2024, GECC reported total revenues of $2.811 million and net income of $2.792 million, reflecting effective management of its investment portfolio.

Report Type	Frequency	Key Highlights	Impact on Investors
Quarterly Earnings Report	Quarterly	Details on revenue, expenses, and net income	Informed investor decisions and confidence
Annual Report	Annually	Comprehensive overview of financial performance	Strengthened relationships with institutional investors
Investor Presentations	As needed	Targeted updates on strategic initiatives	Enhanced engagement with potential investors

Great Elm Capital Corp. (GECC) - Business Model: Customer Segments

Individual investors seeking income

Great Elm Capital Corp. (GECC) targets individual investors who are looking for income through dividend payments and capital appreciation. As of September 30, 2024, GECC has declared a distribution rate of $0.35 per share for the quarter ending December 31, 2024. The company has a history of consistent distributions, with total distributions to stockholders reaching $10.3 million for the nine months ended September 30, 2024. This focus on income generation is critical, as individual investors often prioritize yield in their investment strategies.

Institutional investors looking for diversification

Institutional investors represent a significant customer segment for GECC, as they seek to diversify their portfolios through alternative investments. GECC's investment portfolio is valued at approximately $333.3 million as of September 30, 2024, with a variety of debt and equity positions across different industries. The company's portfolio includes investments in specialty finance (13.08%), structured finance (9.87%), and technology sectors, among others. Such diversification is attractive to institutional investors who aim to mitigate risk while enhancing returns.

High-net-worth individuals

High-net-worth individuals (HNWIs) are also a key customer segment for GECC, as they typically seek tailored investment solutions and higher yield opportunities. As of September 30, 2024, GECC has raised $35.7 million from the issuance of common stock, indicating strong interest from affluent investors. The firm’s strategic focus on high-yield investments and its ability to provide customized investment opportunities align well with the preferences of HNWIs, who often look for unique strategies to enhance their wealth.

Customer Segment	Key Characteristics	Value Proposition	Recent Financial Metrics
Individual Investors	Seeking income through dividends	Consistent dividend payments and capital appreciation	Total distributions: $10.3 million (9 months ending Sept 30, 2024)
Institutional Investors	Diversification of portfolios	Diverse investment portfolio across multiple sectors	Portfolio value: $333.3 million as of Sept 30, 2024
High-Net-Worth Individuals	Seeking tailored investment solutions	High-yield investment opportunities	Common stock issuance raised: $35.7 million

Great Elm Capital Corp. (GECC) - Business Model: Cost Structure

Operating expenses for management team

As of September 30, 2024, the total operating expenses for Great Elm Capital Corp. amounted to $7,580,000 for the three-month period and $19,781,000 for the nine-month period. The management fees accounted for $1,201,000 (three months) and $3,209,000 (nine months). Incentive fees reached $1,018,000 (three months) and $2,580,000 (nine months). The total advisory and management fees summed up to $2,219,000 for the three months and $5,789,000 for the nine months.

Costs associated with investment research

The investment research costs are primarily reflected within the professional services expenses, which amounted to $409,000 for the three months ended September 30, 2024, and $1,210,000 for the nine months ended September 30, 2024. Additionally, the administration fees, which support the investment research efforts, were $375,000 for the three months and $1,156,000 for the nine months.

Fees for compliance and regulatory requirements

Compliance and regulatory fees also contribute to the overall cost structure. For the three months ended September 30, 2024, the excise tax expense was recorded at $75,000, while for the nine-month period, it was $80,000. Other compliance-related costs, such as custody fees, amounted to $38,000 for the three months and $110,000 for the nine months.

Cost Category	Three Months Ended September 30, 2024 (in $)	Nine Months Ended September 30, 2024 (in $)
Operating Expenses	7,580,000	19,781,000
Management Fees	1,201,000	3,209,000
Incentive Fees	1,018,000	2,580,000
Total Advisory and Management Fees	2,219,000	5,789,000
Professional Services	409,000	1,210,000
Administration Fees	375,000	1,156,000
Excise Tax	75,000	80,000
Custody Fees	38,000	110,000

Great Elm Capital Corp. (GECC) - Business Model: Revenue Streams

Investment Income from Portfolio Returns

Great Elm Capital Corp. generates substantial revenue through investment income derived from its portfolio. As of September 30, 2024, the total investment income amounted to $11.727 million for the three months ended and $30.184 million for the nine months ended. This income is primarily composed of:

• Interest Income: $8.121 million for the three months and $23.465 million for the nine months.
• Dividend Income: $3.586 million for the three months and $5.927 million for the nine months.
• Other Income: $20,000 for the three months and $92,000 for the nine months.

Type of Income	Three Months Ended September 30, 2024	Nine Months Ended September 30, 2024
Interest Income	$8.121 million	$23.465 million
Dividend Income	$3.586 million	$5.927 million
Other Income	$20,000	$92,000
Total Investment Income	$11.727 million	$30.184 million

Management Fees from Assets Under Management

Great Elm Capital Corp. earns management fees calculated at an annual rate of 1.50% of the average adjusted gross assets. For the three months ended September 30, 2024, management fees totaled $1.201 million, compared to $899,000 for the same period in 2023. For the nine months ended September 30, 2024, management fees reached $3.209 million, up from $2.652 million in the previous year.

Period	Management Fees
Three Months Ended September 30, 2024	$1.201 million
Three Months Ended September 30, 2023	$899,000
Nine Months Ended September 30, 2024	$3.209 million
Nine Months Ended September 30, 2023	$2.652 million

Performance-Based Incentives for Investment Team

Incentive fees are another revenue stream for Great Elm Capital Corp., based on the performance of its investment team. The incentive fee consists of two components: the Income Incentive Fee and the Capital Gains Incentive Fee. For the three months ended September 30, 2024, incentive fees amounted to $1.018 million, compared to $763,000 in the same period of 2023. For the nine months ended September 30, 2024, the total incentive fees were $2.580 million, an increase from $2.315 million in the prior year.

Period	Incentive Fees
Three Months Ended September 30, 2024	$1.018 million
Three Months Ended September 30, 2023	$763,000
Nine Months Ended September 30, 2024	$2.580 million
Nine Months Ended September 30, 2023	$2.315 million

Article updated on 8 Nov 2024

Resources:

1. 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.
2. 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.