Breaking Down Great Elm Capital Corp. (GECC) Financial Health: Key Insights for Investors

Is Great Elm Capital Corp. (GECC) a financially sound investment for your portfolio? As of December 31, 2024, GECC held total investments of $324.3 million at fair value, including $207.0 million in 52 debt investments in corporate credit, representing 63.8% of its total investments. But how does this translate to shareholder value, and can the company sustain its dividend payouts? In December 2024, GECC declared a $0.05 per common share special distribution and the board approved a 5.7% increase in the quarterly dividend to $0.37 per share for Q1 2025, equating to a 13.7% annualized yield based on the market price on March 7, 2025. Let's delve deeper into GECC's financial health and uncover key insights for investors.

Great Elm Capital Corp. (GECC) Revenue Analysis

Analyzing Great Elm Capital Corp. (GECC)'s financial health requires a detailed look into its revenue streams, growth, and segment contributions. This analysis provides investors with key insights into the company's financial performance and sustainability. You can further explore GECC's financial health at: Breaking Down Great Elm Capital Corp. (GECC) Financial Health: Key Insights for Investors.

Breakdown of Primary Revenue Sources

GECC generates revenue through:

• Investments in debt and income-generating equity securities.
• Specialty finance businesses.
• Collateralized Loan Obligations (CLOs).

GECC focuses on generating current income and capital appreciation through strategic investments. The company's investment portfolio is divided into two segments: corporate credit and specialty finance.

• Corporate Credit: Investments in loans, bonds, preferred equities, and other non-specialty finance investments.
• Specialty Finance: Direct investments in SFCs (equity and debt) as well as participations and other specialty finance related assets.

For the quarter ended December 31, 2024, total investment income was reported at $9.1 million, or $0.85 per share.

Year-over-Year Revenue Growth Rate

While specific year-over-year revenue growth rates may fluctuate, GECC has demonstrated efforts to expand its platform. For instance, in 2024, GECC raised nearly $50 million of equity at net asset value, strengthening its platform for future growth and expanding its scale.

However, reports indicate a complex financial landscape. For the fiscal year ended August 31, 2024, total gross revenue appeared 2% lower than in the previous year. Despite this, the company demonstrated steady growth, with domestic enrollment increases offsetting decreases in international enrollment. For the last reported fiscal year 2024 ending December 31, 2024, GECC reported annual earnings of $3.6M, with -86% growth.

To provide a clearer picture, here's a summary of GECC's revenue performance:

Contribution of Different Business Segments to Overall Revenue

GECC's revenue is derived from two primary segments:

1. Corporate Credit: This segment includes investments in loans, bonds, and other credit instruments.
2. Specialty Finance: This segment focuses on direct investments in specialty finance companies and related assets.

As of December 31, 2024, GECC held total investments of $324.3 million at fair value:

• $207.0 million (63.8%) in 52 debt investments in corporate credit.
• Secured debt investments comprised a substantial majority of the fair market value of the Company's debt investments.

The company also benefits from its CLO Joint Venture, which has become an increasingly significant source of income. In 2024, GECC received approximately $3.7 million of distributions from the CLO JV, generating a 23% IRR on GECC's capital contributions to the CLO JV.

Analysis of Significant Changes in Revenue Streams

Several factors have influenced GECC's revenue streams:

• Equity Raises: GECC has successfully raised equity to strengthen its platform for future growth. In December 2024, the company raised $13.2 million of equity at Net Asset Value.
• Strategic Investments: Investments in specialty finance businesses and CLOs have contributed to revenue generation.
• Market Conditions: Fluctuations in interest rates and market conditions can impact investment income and overall revenue.

Net investment income (NII) for the quarter ended December 31, 2024, was $2.1 million, or $0.20 per share, compared to $4.1 million, or $0.39 per share, for the quarter ended September 30, 2024.

These insights are crucial for investors seeking to understand GECC's financial dynamics and potential for future growth. Understanding these revenue streams, their historical performance, and the factors influencing them is vital for making informed investment decisions regarding Great Elm Capital Corp.

Great Elm Capital Corp. (GECC) Profitability Metrics

Assessing Great Elm Capital Corp.'s (GECC) financial health requires a detailed look into its profitability metrics. These metrics provide insights into how efficiently GECC generates profit from its revenue and assets. Let's delve into the gross profit, operating profit, and net profit margins, examining their trends and how they stack up against industry averages.

Gross profit is the profit a company makes after deducting the costs associated with producing and selling its goods or services. It serves as a key indicator of production efficiency. Operating profit, also known as earnings before interest and taxes (EBIT), reveals a company's earnings from its core business operations, excluding interest and taxes. Net profit, often referred to as the bottom line, represents the actual profit after all expenses, including interest, taxes, and other deductions, have been paid.

Analyzing these margins over time helps to identify trends in GECC's profitability. An increasing margin generally indicates improved efficiency and cost management, while a decreasing margin may signal rising costs or pricing pressures. Comparing GECC's profitability ratios with industry averages provides context for its performance. If GECC's margins are higher than the industry average, it suggests a competitive advantage. Conversely, lower margins may indicate areas where GECC needs to improve its operational efficiency.

Operational efficiency is critical for maintaining and improving profitability. Effective cost management and favorable gross margin trends are essential components. GECC's ability to control its costs and manage its gross margin directly impacts its profitability. For additional insights, consider Exploring Great Elm Capital Corp. (GECC) Investor Profile: Who’s Buying and Why?

To provide a clearer picture, let's consider a hypothetical (purely illustrative) scenario based on typical financial metrics. Please note that this is not actual data for Great Elm Capital Corp. (GECC), but rather an example to demonstrate how such data could be presented and analyzed:

Hypothetical Financial Data Table

In this hypothetical scenario, all three margins show a positive trend from 2022 to 2024, suggesting improved profitability and efficiency. Here are some key observations based on this illustrative data:

• Gross Profit Margin: The increase from 45% to 50% indicates better cost management in production and sales.
• Operating Profit Margin: The rise from 20% to 23% suggests more efficient core business operations.
• Net Profit Margin: The growth from 10% to 12% shows improved overall profitability after all expenses.

These metrics, when compared to industry averages, can offer a comprehensive view of GECC's financial health and its ability to deliver returns to investors. Keep in mind that this is a hypothetical example, and actual data should be consulted for an accurate analysis of GECC's financial performance.

Great Elm Capital Corp. (GECC) Debt vs. Equity Structure

Understanding how Great Elm Capital Corp. (GECC) finances its operations is crucial for investors. This involves analyzing its debt levels, debt-to-equity ratio, and recent financing activities to assess its financial leverage and risk.

As of December 31, 2023, Great Elm Capital Corp. reported the following debt components:

• Senior Secured Notes due 2025: Outstanding principal of $60.0 million with an interest rate of 6.50%.
• Senior Secured Notes due 2026: Outstanding principal of $75.0 million with an interest rate of 6.75%.
• Senior Secured Notes due 2027: Outstanding principal of $75.0 million with an interest rate of 6.50%.
• Investment Fund Credit Facility: Outstanding balance of $34.9 million with an interest rate of SOFR + 2.75%.
• Convertible Notes due 2024: Outstanding principal of $8.0 million with an interest rate of 5.875%. These notes were fully repaid on February 7, 2024.

Additionally, GECC has a revolving credit facility. As of December 31, 2023, there were no borrowings outstanding under the Revolving Credit Facility.

Great Elm Capital Corp.'s debt-to-equity ratio provides insight into its financial leverage. As of December 31, 2023, the ratio can be calculated using the total debt and total equity figures from its balance sheet. The total debt includes the Senior Secured Notes, Investment Fund Credit Facility, and Convertible Notes. Total equity represents the net assets attributable to common stockholders.

To illustrate, let's create a hypothetical scenario based on the provided information:

Hypothetical Calculation (Based on Available Data):

Let's assume GECC's total debt is the sum of the listed debts:

Total Debt = $60.0M + $75.0M + $75.0M + $34.9M + $8.0M = $252.9 million

Now, let's hypothetically say GECC's total equity is $300 million (This number is assumed for illustrative purposes only as the exact value requires real-time data).

Debt-to-Equity Ratio = Total Debt / Total Equity = $252.9M / $300M = 0.84

A debt-to-equity ratio of 0.84 indicates that for every dollar of equity, GECC has $0.84 in debt. Comparing this ratio to industry standards is crucial, as the acceptable level varies by industry. Generally, a lower ratio indicates less risk.

Recent activity includes the full repayment of the $8.0 million Convertible Notes due 2024 on February 7, 2024. This action reduces short-term debt obligations and can positively impact the company's financial flexibility.

Balancing debt and equity is vital for sustainable growth. GECC utilizes debt financing to fund its investment activities and manage its capital structure. The mix of debt and equity affects the company's cost of capital and its ability to generate returns for shareholders. Prudent management of this balance is essential for maintaining financial stability and supporting long-term growth. Analyzing these elements provides a clearer picture of GECC's financial strategy and risk profile.

Read more about GECC's financial health: Breaking Down Great Elm Capital Corp. (GECC) Financial Health: Key Insights for Investors

Great Elm Capital Corp. (GECC) Liquidity and Solvency

Analyzing Great Elm Capital Corp.'s (GECC) liquidity involves examining several key financial metrics and statements. These include the current and quick ratios, working capital trends, and cash flow statements. This assessment helps to understand the company's ability to meet its short-term obligations and overall financial health. For additional details, you might find this resource helpful: Breaking Down Great Elm Capital Corp. (GECC) Financial Health: Key Insights for Investors.

The current and quick ratios are essential indicators of a company's liquidity position. The current ratio measures a company's ability to pay off its current liabilities with its current assets. The quick ratio, also known as the acid-test ratio, excludes inventories from current assets to provide a more conservative view of liquidity. For Great Elm Capital Corp. (GECC), analyzing these ratios involves comparing its current assets to its current liabilities to gauge its short-term financial health. As of the fiscal year 2024, a ratio above 1.0 generally indicates good liquidity, meaning the company has enough liquid assets to cover its short-term liabilities.

Working capital, which is the difference between a company's current assets and current liabilities, provides insights into its operational liquidity. An upward trend in working capital typically suggests improved liquidity, while a downward trend may indicate potential challenges. Monitoring Great Elm Capital Corp.'s (GECC) working capital trends helps to identify whether the company is efficiently managing its short-term assets and liabilities.

Cash flow statements are crucial for understanding the movement of cash both into and out of a company. These statements are divided into three main sections:

• Operating Activities: Cash generated or used from the company's core business operations.
• Investing Activities: Cash flow related to the purchase or sale of long-term assets.
• Financing Activities: Cash flow related to debt, equity, and dividends.

Analyzing these trends offers a comprehensive view of Great Elm Capital Corp.’s (GECC) cash management and financial stability. Positive cash flow from operations is generally a healthy sign, indicating the company can fund its activities internally. Significant cash outflows from investing activities may suggest the company is making strategic investments, while financing activities reveal how the company is managing its capital structure.

To provide a clearer picture, here’s a hypothetical overview of Great Elm Capital Corp.'s (GECC) cash flows, based on the 2024 fiscal year:

In this hypothetical scenario, positive cash flow from operating activities suggests efficient core business operations. Negative cash flow from investing activities indicates investments in long-term assets, while negative cash flow from financing activities may reflect debt repayments or dividend payouts. Collectively, these cash flow trends provide valuable insights into Great Elm Capital Corp.'s (GECC) financial strategy and liquidity management.

Identifying potential liquidity concerns or strengths involves analyzing the trends and patterns in the aforementioned financial statements and ratios. Consistently low current and quick ratios, declining working capital, or negative cash flow from operations could signal liquidity issues. Conversely, strong positive trends in these areas would indicate a solid liquidity position, ensuring Great Elm Capital Corp. (GECC) is well-prepared to meet its financial obligations.

Great Elm Capital Corp. (GECC) Valuation Analysis

Determining whether Great Elm Capital Corp. (GECC) is overvalued or undervalued requires a multifaceted approach, incorporating several key financial metrics and market indicators. Let's delve into these aspects to provide a comprehensive valuation analysis.

Valuation Ratios

These ratios offer a snapshot of how the market values Great Elm Capital Corp. (GECC) relative to its earnings, book value, and operational cash flow.

• Price-to-Earnings (P/E) Ratio: As of April 2025, the P/E ratio for Great Elm Capital Corp. (GECC) is approximately 10.8. A lower P/E ratio might suggest that the stock is undervalued compared to its earnings.
• Price-to-Book (P/B) Ratio: Recent data indicates a Price-to-Book ratio of 0.91. A P/B ratio below 1 could imply that the stock is trading below its net asset value.
• Enterprise Value-to-EBITDA (EV/EBITDA) Ratio: The EV/EBITDA ratio as of December 2024 was 25.14. This ratio helps to evaluate the company's total value (including debt) against its earnings before interest, taxes, depreciation, and amortization.

Stock Price Trends

Analyzing the stock price movement over the past year provides insights into market sentiment and potential valuation changes.

• 52-Week High: $11.39
• 52-Week Low: $8.87

As of April 3, 2025, the stock price was $9.92. Recent trading data from April 17, 2025, shows a closing price of $10.24. Monitoring these fluctuations helps in understanding the stock's volatility and potential entry or exit points.

Dividend and Payout Ratios

For income-focused investors, dividend yield and payout ratios are critical valuation indicators.

• Dividend Yield: The forward dividend yield is around 14.94%.
• Annualized Dividend: The company declared a quarterly cash distribution of $0.37 per share, equating to an annualized dividend of $1.48 per share.
• Payout Ratio: The payout ratio was 216.91% in Q4 2024.

A high dividend yield can be attractive, but investors should also scrutinize the payout ratio to ensure the dividend is sustainable.

Analyst Consensus

Understanding how analysts perceive the stock can offer additional insights into its valuation.

• Analysts' Price Target: The average analyst price target for Great Elm Capital Corp. (GECC) is $11.00.
• Analyst Ratings: Based on recent reports, analysts' ratings include upgrades to 'Buy,' suggesting a positive outlook on the stock's potential.

Additional Factors

Other elements influencing Great Elm Capital Corp.'s (GECC) valuation include:

• Net Asset Value (NAV): As of December 31, 2024, the NAV was $11.79 per share.
• Recent Equity Raise: In December 2024, Great Elm Capital Corp. (GECC) raised $13.2 million in equity at Net Asset Value.
• Earnings Per Share (EPS): The GAAP EPS was $0.36, missing estimates by $0.15.
• Total Investment Income: Total investment income reached $39.32 million.

Great Elm Capital Corp. Mission Statement

To gain further insight into the long-term strategy and values, review the Mission Statement, Vision, & Core Values of Great Elm Capital Corp. (GECC).

Great Elm Capital Corp. (GECC) Risk Factors

Great Elm Capital Corp. (GECC) faces a variety of risks that could impact its financial health. These risks can be broadly categorized into internal and external factors. External risks include industry competition, regulatory changes, and overall market conditions. Internal risks often involve operational, financial, and strategic challenges highlighted in company filings and earnings reports.

Industry Competition: The financial services industry is intensely competitive. GECC competes with other business development companies (BDCs), commercial banks, investment funds, and private equity firms. Increased competition could lead to lower investment yields and reduced profitability.

Regulatory Changes: Changes in regulations governing BDCs can significantly affect GECC's operations. These include changes to the Investment Company Act of 1940, tax laws, and other financial regulations. Compliance with new regulations can be costly and may limit the company's investment flexibility.

Market Conditions: Economic downturns, changes in interest rates, and volatility in the capital markets can all negatively impact GECC. A recession could lead to increased defaults on its investments, while rising interest rates could increase its borrowing costs. Market volatility can make it difficult to value its investments accurately.

Operational Risks:

• Investment Strategy: GECC's investment strategy involves investing in smaller, middle-market companies, which can be riskier than investing in larger, more established companies.
• Valuation of Investments: Many of GECC's investments are in private companies, making them difficult to value. Inaccurate valuations can lead to poor investment decisions and financial losses.
• Dependence on Key Personnel: GECC relies on its management team to identify, evaluate, and manage its investments. The loss of key personnel could negatively impact the company's performance.

Financial Risks:

• Leverage: GECC uses leverage to increase its investment capacity, which also increases its risk. High levels of debt can make the company more vulnerable to economic downturns and rising interest rates.
• Liquidity: GECC needs to maintain sufficient liquidity to meet its obligations. A lack of liquidity could force the company to sell assets at unfavorable prices.
• Credit Risk: There is a risk that borrowers will default on their obligations to GECC. This risk is higher when investing in smaller, riskier companies.

Strategic Risks:

• Integration of Acquisitions: If GECC pursues acquisitions, there is a risk that it will not be able to successfully integrate the acquired companies.
• Competition for Investments: GECC faces competition from other investors for attractive investment opportunities. This competition can drive up prices and reduce returns.

While specific mitigation strategies for GECC were not found in the provided search results, typical risk mitigation strategies for BDCs include:

• Diversification: Spreading investments across different industries and geographic regions to reduce the impact of any single investment.
• Due Diligence: Conducting thorough research and analysis before making an investment.
• Active Monitoring: Closely monitoring the performance of investments and taking corrective action when necessary.
• Hedging: Using financial instruments to protect against interest rate risk and other market risks.
• Maintaining Adequate Capital: Ensuring that the company has sufficient capital to absorb potential losses.

For more insights into GECC and its investors, check out: Exploring Great Elm Capital Corp. (GECC) Investor Profile: Who’s Buying and Why?

Great Elm Capital Corp. (GECC) Growth Opportunities

Great Elm Capital Corp. (GECC) faces a complex landscape of growth opportunities, influenced by strategic initiatives, market conditions, and competitive positioning. Analyzing these factors provides insights into the company's potential for future expansion and profitability.

Key growth drivers for Great Elm Capital Corp. (GECC) include:

• Strategic Investments: GECC's ability to identify and invest in undervalued or distressed companies can drive growth. Successful turnarounds and strategic acquisitions can lead to increased asset value and revenue generation.
• Market Expansion: Exploring new markets and industries can diversify GECC's portfolio and reduce its reliance on specific sectors. This expansion can involve both geographic diversification and venturing into new investment areas.
• Operational Improvements: Enhancing the operational efficiency of its portfolio companies can improve their profitability and, consequently, GECC's returns. This includes implementing better management practices, streamlining operations, and leveraging technology.

Future revenue growth projections and earnings estimates for Great Elm Capital Corp. (GECC) are contingent upon several factors, including the overall economic climate, interest rate movements, and the performance of its portfolio companies. While specific projections vary, analysts generally assess GECC's potential based on its historical performance, current investment strategies, and market trends.

Strategic initiatives and partnerships that may drive future growth include:

• Strategic Partnerships: Collaborating with other financial institutions or industry players can provide access to new deals, expertise, and capital. These partnerships can enhance GECC's ability to source and manage investments.
• Debt Restructuring: Successfully restructuring debt obligations can free up capital for new investments and improve GECC's financial flexibility. Effective debt management is crucial for sustaining growth.
• Technological Integration: Utilizing technology to improve investment analysis, portfolio management, and operational efficiency can provide a competitive edge. Embracing fintech solutions can enhance decision-making and streamline processes.

Great Elm Capital Corp.'s (GECC) competitive advantages that position the company for growth include:

• Experienced Management Team: A skilled and experienced management team can effectively navigate complex market conditions and make informed investment decisions. Strong leadership is essential for driving growth and maximizing returns.
• Flexible Investment Approach: GECC's ability to invest across different asset classes and industries provides flexibility in pursuing growth opportunities. This adaptability allows the company to capitalize on changing market dynamics.
• Strong Network: A robust network of industry contacts and relationships can provide access to proprietary deals and valuable insights. A strong network enhances GECC's ability to source and execute successful investments.

For further insights into Great Elm Capital Corp. (GECC) and its investors, consider reading Exploring Great Elm Capital Corp. (GECC) Investor Profile: Who’s Buying and Why?