Stellus Capital Investment Corporation (SCM): Business Model Canvas [11-2024 Updated]
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Stellus Capital Investment Corporation (SCM) Bundle
Understanding the business model of Stellus Capital Investment Corporation (SCM) reveals the intricacies behind its investment strategies and operational success. This blog post delves into the essential components of SCM's Business Model Canvas, highlighting key partnerships, activities, resources, and value propositions that drive its ability to deliver attractive risk-adjusted returns to investors. Discover how SCM effectively engages with various customer segments and the mechanisms that underpin its revenue generation. Read on to explore the details that make SCM a compelling player in the investment landscape.
Stellus Capital Investment Corporation (SCM) - Business Model: Key Partnerships
Collaborations with Portfolio Companies
Stellus Capital Investment Corporation (SCM) maintains strategic collaborations with its portfolio companies to enhance operational efficiency and drive value creation. As of September 30, 2024, SCM had made an aggregate of $112.6 million in investments across 12 new portfolio companies and 18 existing ones. The average investment per portfolio company was approximately $9.7 million at amortized cost.
Relationships with Financial Institutions
SCM's financial strategy is heavily reliant on its relationships with various financial institutions. As of September 30, 2024, the company had $99.3 million in notes payable and $154.6 million in credit facilities. The weighted average yield on all debt investments was approximately 11.0%, reflecting the company's focus on generating high returns through its financial partnerships.
Partnerships with Investment Advisors
Investment advisors play a crucial role in SCM's operations, providing insights and expertise that guide investment decisions. The company has incurred $3.15 million in income incentive fees payable as of September 30, 2024, indicating a significant reliance on these advisors. Furthermore, the total investment income for the nine months ended September 30, 2024, was $79.12 million, showcasing the effectiveness of these partnerships.
| Partnership Type | Investment Amount | Yield/Fees | Notes Payable | Credit Facility |
|---|---|---|---|---|
| Portfolio Companies | $112.6 million | 11.0% | $99.3 million | $154.6 million |
| Investment Advisors | N/A | $3.15 million | N/A | N/A |
Stellus Capital Investment Corporation (SCM) - Business Model: Key Activities
Portfolio management and investment analysis
As of September 30, 2024, Stellus Capital Investment Corporation (SCM) had total investments at fair value of approximately $902.1 million, reflecting a growth from $874.5 million at December 31, 2023. The weighted average yield on all debt investments was around 11.0%. The company made an aggregate of $112.6 million of investments in 12 new portfolio companies and 18 existing portfolio companies during the nine months ended September 30, 2024.
Conducting due diligence on potential investments
SCM employs a rigorous due diligence process, utilizing an investment rating system to assess the credit profile and expected returns of each investment. As of September 30, 2024, SCM had loans to six portfolio companies that were on non-accrual status, which represented approximately 6.9% of the loan portfolio at cost. The company also had $38.3 million in unfunded debt commitments and $297,219 in unfunded equity commitments to 58 existing portfolio companies.
Monitoring performance of portfolio companies
SCM closely monitors the performance of its portfolio companies using a five-level numeric scale for investment ratings. As of September 30, 2024, the breakdown of the investment categories was as follows:
| Investment Category | Fair Value (in millions) | % of Total Portfolio | Number of Portfolio Companies |
|---|---|---|---|
| 1 | $232.1 | 26% | 25 |
| 2 | $505.3 | 56% | 54 |
| 3 | $129.5 | 14% | 12 |
| 4 | $38.5 | 4% | 5 |
| 5 | $3.3 | —% | 4 |
This data indicates that the majority of SCM's investments are performing within or above expectations, underlining the effectiveness of its monitoring activities.
Stellus Capital Investment Corporation (SCM) - Business Model: Key Resources
Experienced management team
The management team at Stellus Capital Investment Corporation is composed of seasoned professionals with extensive experience in the financial services industry. As of September 30, 2024, the company had a management team that excels in investment strategies, portfolio management, and risk assessment, contributing significantly to the firm's overall performance.
Access to capital markets for funding
Stellus Capital Investment Corporation has demonstrated strong access to capital markets, raising a total of $392.4 million in gross proceeds since inception, with $11.9 million incurred in offering expenses. As of September 30, 2024, the company reported cash and cash equivalents amounting to $38.6 million, compared to $26.1 million at the end of 2023. This liquidity supports ongoing investment activities and operational flexibility.
Comprehensive investment research and analytics tools
Stellus Capital leverages advanced investment research and analytics tools to assess potential investments. The company utilizes a five-level investment rating system to monitor and evaluate the credit profiles of its portfolio, ensuring informed decision-making. As of September 30, 2024, the fair value of the investment portfolio was approximately $900.97 million, with a weighted average yield on debt investments of 11.0%.
| Investment Category | Fair Value (Sept 30, 2024) | % of Total Portfolio | Number of Portfolio Companies |
|---|---|---|---|
| 1 | $232.1 million | 26% | 26 |
| 2 | $505.3 million | 56% | 54 |
| 3 | $129.5 million | 14% | 12 |
| 4 | $38.5 million | 4% | 5 |
| 5 | $0.0 million | 0% | 0 |
As of September 30, 2024, Stellus Capital had invested in 12 new portfolio companies and 18 existing portfolio companies, with total investments amounting to $112.6 million during the nine months ended on that date. The company's strategic focus on middle-market companies allows it to identify and capitalize on attractive investment opportunities.
Stellus Capital Investment Corporation (SCM) - Business Model: Value Propositions
Attractive risk-adjusted returns for investors
As of September 30, 2024, Stellus Capital Investment Corporation (SCM) reported a net investment income of $10,259,690 for the third quarter, translating to a net investment income per share of $0.39. This is indicative of the corporation's ability to generate steady income for its investors. The weighted average yield on all debt investments was approximately 11.0%. The total investments at fair value were $902,143,550, demonstrating a robust portfolio capable of delivering attractive returns.
Diversified investment portfolio across sectors
SCM's investment portfolio is diversified across various sectors, including healthcare, technology, consumer goods, and services. As of September 30, 2024, the fair value of controlled investments was $7,749,169, while non-controlled, non-affiliated investments stood at $900,969,724. This diversification is critical in mitigating risks and enhancing potential returns. The company had a total of 58 portfolio companies, with aggregate unfunded commitments of $38,271,369 in debt and $297,219 in equity.
| Investment Category | Fair Value (in millions) | % of Total Portfolio | Number of Companies |
|---|---|---|---|
| 1 | $232.1 | 26% | 26 |
| 2 | $505.3 | 56% | 54 |
| 3 | $129.5 | 14% | 12 |
| 4 | $38.5 | 4% | 4 |
| 5 | $0.0 | 0% | 0 |
Expertise in managing middle-market investments
SCM specializes in managing middle-market investments, which are typically defined as companies with annual revenues between $10 million and $1 billion. The company made an aggregate of $112.6 million in investments across 12 new and 18 existing portfolio companies during the nine months ended September 30, 2024. The average portfolio company investment at amortized cost was approximately $9.7 million. The company employs a rigorous investment rating system to monitor the credit profile of its investments, ensuring effective risk management and performance tracking.
Stellus Capital Investment Corporation (SCM) - Business Model: Customer Relationships
Regular communication with shareholders
Stellus Capital Investment Corporation maintains a robust communication strategy with its shareholders. As of September 30, 2024, the company had issued 27,039,364 shares, raising a total of $392,392,518 in gross proceeds since inception . The net asset value at the beginning of the period was $13.26 per share . The company regularly provides updates on its financial performance and strategic initiatives through quarterly earnings reports and annual shareholder meetings. These reports include detailed discussions on net investment income, which stood at approximately $10.26 million for the quarter ended June 30, 2024, as well as net realized gains and losses on investments .
Personalized investor services
Stellus Capital offers personalized investor services to enhance shareholder engagement. The company focuses on addressing individual investor needs through dedicated investor relations representatives who provide tailored support. This includes direct communication channels for inquiries and assistance with investment decisions. The management fees payable as of September 30, 2024, were approximately $3.96 million , indicating a commitment to maintaining high-quality service for its investors. Furthermore, the company has a structured approach to distributing dividends, having declared a dividend of $0.1333 per share for the ex-dividend date of October 10, 2024 .
Educational resources about investment strategies
To empower its investors, Stellus Capital provides educational resources focused on investment strategies. This includes webinars, newsletters, and market analysis reports that help investors understand the dynamics of their investments and the broader market environment. The company emphasizes transparency in its operations, allowing investors to make informed decisions. As of September 30, 2024, Stellus Capital had cash and cash equivalents of $38.58 million, reflecting its liquidity position to support ongoing investor engagement initiatives .
| Metrics | September 30, 2024 | June 30, 2024 | December 31, 2023 |
|---|---|---|---|
| Shares Issued | 27,039,364 | 25,980,998 | 24,125,642 |
| Gross Proceeds Raised | $392,392,518 | $375,430,445 | $361,167,004 |
| Net Investment Income | $10,259,690 | $11,792,661 | $9,067,620 |
| Cash and Cash Equivalents | $38,580,261 | $26,125,741 | $19,210,721 |
| Dividend per Share | $0.1333 (upcoming) | $0.1333 | $0.1333 |
Stellus Capital Investment Corporation (SCM) - Business Model: Channels
Direct investment offerings to accredited investors
Stellus Capital Investment Corporation (SCM) primarily targets accredited investors through direct investment offerings. As of September 30, 2024, SCM has raised a total of $392.4 million in gross proceeds since inception. The company has issued 27,039,364 shares, incurring $11.9 million in offering expenses and underwriting fees.
Online platforms for investor communication
SCM utilizes online platforms to enhance investor communication and engagement. This includes a robust digital presence where investors can access real-time information about investment performance, financial statements, and market insights. For the three months ended September 30, 2024, the company recorded net investment income of $10.3 million, translating to $0.39 per common share. The increased digital engagement reflects a strategic focus on transparency and accessibility for investors.
Financial advisors and brokers for distribution
SCM also leverages financial advisors and brokers to distribute its investment products. This channel is crucial for reaching a broader audience of potential investors. The company has established relationships with various financial intermediaries, which facilitate the sale of its investment offerings. As of September 30, 2024, SCM reported net realized losses of $3.3 million for the three-month period, which highlights the importance of maintaining strong distribution partnerships to navigate market fluctuations.
| Channel | Details | Financial Impact |
|---|---|---|
| Direct Investment Offerings | Total gross proceeds raised: $392.4 million | Shares issued: 27,039,364 |
| Online Platforms | Net investment income for Q3 2024: $10.3 million | Net investment income per share: $0.39 |
| Financial Advisors and Brokers | Key distribution partnerships established | Net realized losses for Q3 2024: ($3.3 million) |
Stellus Capital Investment Corporation (SCM) - Business Model: Customer Segments
Individual accredited investors
As of September 30, 2024, Stellus Capital Investment Corporation (SCM) has issued a total of 27,039,364 shares, raising gross proceeds of $392,392,518 since inception. The net asset value per share as of this date was $13.55. Individual accredited investors represent a significant portion of SCM's customer base, contributing to the overall capital raised and benefiting from the company’s investment strategies aimed at generating high yields.
Institutional investors, including pension funds
Institutional investors, such as pension funds, are pivotal to SCM's funding strategy. The company reported total investments at fair value of $909,319,888 as of September 30, 2024. The weighted average yield on all debt investments was approximately 11.0%, emphasizing the attractive returns offered to institutional investors. These entities typically look for stable income generation and capital appreciation, which SCM provides through its diverse investment portfolio.
Family offices seeking income and growth
Family offices are increasingly drawn to SCM’s offerings due to the dual focus on income and growth. The company made an aggregate of $112.6 million of investments in 12 new portfolio companies and 18 existing portfolio companies during the nine months ended September 30, 2024. This investment activity reflects SCM's commitment to fostering long-term relationships with family offices, which often prioritize financial security and wealth growth strategies.
| Customer Segment | Key Metrics | Investment Focus |
|---|---|---|
| Individual accredited investors |
|
High yield investments |
| Institutional investors |
|
Stable income generation |
| Family offices |
|
Income and growth |
Stellus Capital Investment Corporation (SCM) - Business Model: Cost Structure
Management fees and performance incentives
Stellus Capital Investment Corporation (SCM) pays an annual base management fee of 1.75% of gross assets, including assets purchased with borrowed funds, and excluding cash and cash equivalents. For the three months ended September 30, 2024, the management fees recorded were $3,959,554, while for the nine months, the total was $11,664,020.
The income incentive fees for the same period were $2,564,922 for the three months and $7,616,562 for the nine months. As of September 30, 2024, the amount of management fees payable was $3,959,554.
Operating expenses for investment management
SCM’s total operating expenses for the three months ended September 30, 2024, were $16,238,569, while for the nine months, the expenses reached $48,659,833. The breakdown of these expenses is highlighted in the table below:
| Expense Type | Three Months Ended September 30, 2024 | Nine Months Ended September 30, 2024 |
|---|---|---|
| Management fees | $3,959,554 | $11,664,020 |
| Valuation fees | $151,535 | $343,753 |
| Administrative services expenses | $469,274 | $1,441,436 |
| Income incentive fees | $2,564,922 | $7,616,562 |
| Professional fees | $312,034 | $847,866 |
| Interest expense and other fees | $7,956,403 | $23,840,473 |
| Other general and administrative expenses | $245,043 | $908,185 |
| Total Operating Expenses | $16,238,569 | $48,659,833 |
Compliance and regulatory costs
Compliance and regulatory costs for SCM include expenses related to legal fees, regulatory filing fees, and insurance. As of September 30, 2024, the income tax expense recorded was $360,192 for the three months and $1,304,948 for the nine months. The costs associated with directors’ fees were $93,250 for the three months and $315,750 for the nine months.
Additionally, insurance expenses were $126,362 for the three months and $376,840 for the nine months. These costs contribute to the overall regulatory compliance framework that SCM adheres to in its operations.
Stellus Capital Investment Corporation (SCM) - Business Model: Revenue Streams
Interest income from portfolio investments
Stellus Capital generates a significant portion of its revenue through interest income from its portfolio investments. For the nine months ended September 30, 2024, the total interest income was approximately $75.54 million, compared to $75.30 million for the same period in 2023. The breakdown is as follows:
| Type of Interest Income | Q3 2024 | Q3 2023 | 9M 2024 | 9M 2023 |
|---|---|---|---|---|
| Loan interest | $23.49 million | $24.27 million | $69.96 million | $69.67 million |
| PIK income | $0.93 million | $0.83 million | $2.49 million | $2.73 million |
| Fee amortization income | $0.73 million | $0.75 million | $2.26 million | $2.23 million |
| Fee income acceleration | $0.18 million | $0.38 million | $0.83 million | $0.67 million |
| Total Interest Income | $25.34 million | $26.22 million | $75.54 million | $75.30 million |
The weighted average yield on all debt investments was approximately 11.0% as of September 30, 2024, down from 11.9% as of December 31, 2023.
Realized gains from asset sales
Realized gains from asset sales contribute to Stellus Capital's revenue, although they are less predictable than interest income. For the nine months ended September 30, 2024, Stellus reported a net realized gain on investments totaling approximately $1.99 million, compared to a net realized loss of $20.38 million in the same period of the previous year.
Management fees from assets under management
Stellus Capital also earns revenue through management fees associated with its assets under management. For the nine months ended September 30, 2024, management fees amounted to approximately $11.66 million, compared to $11.53 million for the same period in 2023. The management fees reflect the ongoing commitment to managing the investments effectively.
| Period | Management Fees |
|---|---|
| Q3 2024 | $3.96 million |
| Q3 2023 | $3.93 million |
| 9M 2024 | $11.66 million |
| 9M 2023 | $11.53 million |
Overall, Stellus Capital Investment Corporation's revenue streams are diversified, stemming from interest income, realized gains, and management fees, allowing for a robust financial foundation as of 2024.
Updated on 16 Nov 2024
Resources:
- Stellus Capital Investment Corporation (SCM) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Stellus Capital Investment Corporation (SCM)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Stellus Capital Investment Corporation (SCM)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.