Great Elm Group Q1 2024 Earnings Call Transcript

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November 9, 2023

There are 4 speakers on the call.

Operator

Ladies and gentlemen, thank you for standing by. My name is Sheryl, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Great M Capital Group Earnings Conference Call. All lines have been placed on mute To prevent any background noise, after the speakers' remarks, there will be a question and answer session. Thank you.

Operator

I would now like to turn the call over to Adam Yates. Please go ahead.

Speaker 1

Good morning, everyone. Thank you for joining us for Great Elm Group's fiscal Q1 2024 earnings conference call. As a reminder, this conference call is being recorded on Thursday, November 9, 2023. If you would like to be added to our distribution list, you can e mail geginvestorrelations@greatelmcap.com, where you can sign up for alerts directly on our website, www.greatelmgroup.com. The slide presentation accompanying today's conference call and webcast can be found on our website under Events and Presentations.

Speaker 1

A link to the webcast is also available on our website as well as in the press release that was disseminated to announce the quarterly results. Today's conference call includes forward looking statements, and we ask that you refer to Great Elm Group's filings with the SEC for important factors that could cause actual results Great Elm Group does not undertake to update its forward looking statements unless required by law. In addition, during today's call, management will refer to certain non GAAP financial measures. Reconciliations to the most comparable financial measures are included in our earnings release. To obtain copies of our SEC filings, please visit Greaton Group's website under Financial Information and select SEC Filings.

Speaker 1

On the call today, we have Jason Rees, CEO Adam Kleinman, President and General Counsel Nicole Mills, COO And Kerry Davis, CFO. I will now turn the call over to Jason Rees, CEO.

Speaker 2

Welcome, everyone, and thank you for joining us. Great Elm Group had a strong start to fiscal 'twenty four. We continue to grow our fee paying assets under management on both A sequential quarter and year over year basis. We generated net income of nearly $3,000,000 and more than doubled our EBITDA On a year over year basis. We also ended the quarter with over $75,000,000 in cash and marketable securities to deploy across Our growing alternative asset management platform.

Speaker 2

In particular, I want to highlight that this is our first Clean quarter of reporting as a streamlined asset management business. In the fiscal Q1, we have a clear year over year comparison That includes the results of managing the Monomoy Properties REIT vehicle acquired in May 22. Additionally, we no longer see the impact of our divested Going forward, investors can easily measure our progress toward our strategic growth plans. With legacy operations behind us, our team is purely focused on asset management in the 1st fiscal quarter. Working to expand the platform, we made great strides organically to launch a private credit fund in fiscal second quarter And continued the execution of our inaugural build to suit projects in our Monomoy BTS business.

Speaker 2

Inorganically, we continue to actively evaluate multiple strategic M and A opportunities and have a robust pipeline due diligence in the second quarter. Focusing on our 2 anchor vehicles, Monomoy and GECC, we have driven both fee revenue growth and AUM growth at both platforms. We will continue to accelerate the momentum at these core businesses and are pleased with our strong performance during the quarter. GECC once again had a milestone quarter, generating an ROE of approximately 8.5% in the quarter And 25% over the 1st 9 months of 'twenty 3. As a result, GECC will pay incentive fees to GEG For the 2nd consecutive quarter of $1,300,000 and remains well positioned to continue paying GEG incentive fees moving forward.

Speaker 2

Also, net asset value at GECC grew to $12.88 per share, up 5% from last quarter and up Over 15% calendar year to date. It has been a remarkable transformation at GECC and a testament to the Successful portfolio repositioning that Matt Kaplan and his team have accomplished over the past 18 months. Meanwhile, Monomoy remained very active in the quarter as the REIT closed on 2 properties with key tenants, totaling nearly $6,000,000 Amended 4 existing tenant leases for meaningful term extensions and executed 5 year renewal options at 3 properties. In addition, our build to suit business continued development of its first two projects in Florida and Mississippi. We expect to complete these projects within this fiscal year.

Speaker 2

With a significant pipeline of over 130 property requirements A new build to suit project specifications from key customers, we remain excited for Monomoy REIT and BPS To continue growing profitably in fiscal 2024. During the fiscal Q1, we saw our book value grow To approximately $2.25 per share. At current market prices, the Board of Directors and I believe our stock is undervalued. And as such, I'm pleased to announce that our Board has approved a $10,000,000 common stock repurchase program. Moving ahead, the three goals we outlined in May remain clear: improve our profitability, expand our platform and grow our AUM.

Speaker 2

As you can see from our fiscal Q1 'twenty four performance, we are making progress on all fronts. We remain focused to scale our core business, Launch new fund products and utilize our strong liquid balance sheet to deploy capital into new platform opportunities with compelling risk adjusted returns. With that, I'll turn it over to Carrie.

Speaker 3

Thank you, Jason. I'll provide a brief overview of the quarter and of course welcome all of you to review our filings in greater In review of continuing operations, quarter to date revenues grew 78% year over year to $3,300,000 Driven by increased fee paying assets under management related to GECC and Monomoy as well as the recognition of incentive fees from GECC for the 2nd consecutive quarter, Which were approximately $1,300,000 for the 1st fiscal quarter. AUM of $641,000,000 as of September 30, 2023 was up modestly from the prior quarter end and up 3% from prior year quarter end. While fee paying AUM grew to $451,000,000 up 1 quarter to date and up 5% from the prior year quarter end. For the quarter, Great Elm Group generated net income from continuing operations of $2,800,000 compared to a net loss from continuing operations of $9,500,000 in the prior year period.

Speaker 3

Adjusted EBITDA for the quarter was $1,700,000 More than double the $700,000 generated in the prior year period. As of September 30, Great Elm Group had approximately seventy $1,000,000 of combined cash and marketable securities on our balance sheet to deploy across our growing alternative asset management platform. Please refer to Slide 6 that provides an overview of our financial position and highlights our book value per share of approximately $2.25 up from $2.16 as of June 30. This concludes my financial review of the quarter. With that, we will turn the call over to the operator to open for questions.

Operator

We will pause for just a moment to compile the Q and A roster. Please bear in mind that one question and one follow-up will be allowed for this Q and A session. It looks like there's no questions at this time. I would like to turn the call back over to Jason Weed.

Speaker 2

Thank you again for joining us today, and we look forward to speaking with you in the future.

Operator

Ladies and gentlemen, that concludes today's call. You may now disconnect. Thank you.

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Key Takeaways

  • Great Elm Group reported a net income of $2.8 million and adjusted EBITDA of $1.7 million in Q1 FY24, more than doubling last year’s results.
  • Total AUM rose to $641 million and fee‐paying AUM to $451 million, reflecting 3% and 5% year‐over‐year growth, respectively.
  • The GECC platform achieved a 25% YTD ROE (8.5% in the quarter), grew NAV to $12.88 per share, and generated $1.3 million of incentive fees for the second consecutive quarter.
  • Monomoy REIT closed on two new properties totaling $6 million, extended and renewed multiple tenant leases, and continues to advance its first two build‐to‐suit projects.
  • With over $75 million of cash and marketable securities on hand, the Board approved a $10 million share repurchase program and is actively pursuing new fund launches and M&A opportunities.
A.I. generated. May contain errors.
Earnings Conference Call
Great Elm Group Q1 2024
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