Great Elm Group Q3 2025 Earnings Call Transcript

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Provided by Quartr
May 8, 2025

There are 4 speakers on the call.

Operator

Ladies and gentlemen, greetings, and welcome to the Great Elm Group Fiscal twenty twenty five Third Quarter Conference Call. At this time, all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. As a reminder, this conference call is being recorded. It is now my pleasure to introduce your host, Adam Yates, Managing Director.

Operator

Please go ahead.

Speaker 1

Good morning, everyone. Thank you for joining us for Great Elm Group's Fiscal Third Quarter twenty twenty five Earnings Conference Call. As a reminder, this conference call is being recorded on Thursday, 05/08/2025. If you would like to be added to our distribution list, you can email geginvestorrelationsgreatelmcap dot com or 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 to differ materially from these statements. 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.

Speaker 1

To obtain copies of our SEC filings, please visit Great Group's website under Financial Information and select SEC Filings. Today's comments do not constitute an offer to sell or solicitation of an offer to buy interest in any investment vehicle managed by Great Elm or its affiliate. Any such offer or solicitation will only be made pursuant to the applicable offering documents for such investment vehicle. 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 today. We delivered a solid fiscal third quarter '20 '20 '5 marked by significant year over year growth in both assets under management and revenues across our businesses. This momentum reflects our continued evolution into a streamlined alternative asset management business and strengthens our position to expand our core credit and real estate platforms as we execute on our long term growth strategy. Among our recent highlights, in February, we launched Monomoy Construction Services, an integrated full service construction business with the strategic acquisition of Greenfield CRE, a leading construction management company, which was combined with our existing Monomoy BTS construction management business. We continue to grow our assets under management increasing our fee paying AUM by 15% on a year over year basis.

Speaker 2

We generated total revenue of $3,200,000 growing 15% year over year. We closed on the land purchase for our third build to suit property and made meaningful progress on our fourth project. We continued to repurchase shares at a meaningful discount to book value, executing on our $20,000,000 buyback program. And we ended the quarter in a strong fiscal position with approximately $32,000,000 in cash available to facilitate continued growth across our asset management platforms. Diving into the quarter in more detail, fee paying assets under management continued to grow and reached approximately $565,000,000 representing a 15% increase over the prior year period, primarily driven by our BDC, Great Elm Capital Corp, which raised approximately $147,000,000 through equity and debt issuances in calendar twenty twenty four.

Speaker 2

Notably, GEG has participated in three equity raises at GECC with a combined investment of approximately $12,000,000 facilitating an increase in fee paying AUM at GECC of over 40%. GECC also delivered strong results to kick off the first quarter of twenty twenty five, generating record total investment income of $12,500,000 driven by cash flows from its CLO JV with net investment income that exceeded its recently increased quarterly distribution. Notably, it was also the highest cash income quarter in the company's history, a testament to the strategic portfolio enhancements undertaken in the last two years. As you may have seen, this week GECC launched an at the market offering to sell common shares at NAV or better, which we expect will provide an additional avenue for growth in assets under management. Overall, GECC's recent successes further reinforce our growth strategy.

Speaker 2

The increased capital base expands our fee paying AUM, driving both higher recurring management fees and incentive fee potential. Notably, our base management fees from GECC grew over 40% year over year to $1,300,000 and GECC is well positioned to pay meaningful fees in the coming quarters. We're very pleased with the performance of GECC marked by continued portfolio growth and increased cash distributions. GECC continues to deliver significant value to shareholders by expanding and diversifying its portfolio while leveraging its institutional quality infrastructure. Shifting to our other products, Great Elm Credit Income Fund, a private credit fund has delivered returns on invested capital approximately 13.9 net of fees since inception through March 2025.

Speaker 2

With these returns and track record, we are favorably positioned for future growth in the fund. Meanwhile, our real estate business, Monemoy continues to execute and we are pleased to have closed on the land purchase for our third built to suit property, which we expect to complete during the calendar year. We also made meaningful progress on our fourth project as we progress through our growing pipeline of opportunities. Looking ahead, we anticipate continued profitability across the MonoMoy platform as we remain committed to executing on these development projects to drive profitability and deliver value for both our tenants and shareholders. Further, building on strategic growth initiatives, in February, we significantly expanded our real estate capabilities through the acquisition of Greenfield CRE, a leading construction management company and a long standing partner of Monemoy.

Speaker 2

Greenfield has deep knowledge of our development projects, a strong understanding of our tenant needs and expectations, and a proven track record of delivering on Monemoy's high standards. In connection with this transaction, we launched Monemoy Construction Services or MCS and combined the assets of Greenfield with the assets of our Monomoy BTS construction management consulting business. MCS meaningfully bolsters our real estate platform by creating a fully integrated full service construction vertical to serve our existing asset management entities. Our close relationship with the Greenfield team has made for a seamless integration with MonoMoi. MCS also expands our owner rep consulting services with third parties, a majority of which are sourced from existing relationships within the Monomoy ecosystem.

Speaker 2

This adds accretive revenue opportunities and enhances operational efficiencies through the economies of scale, delivering revenue and operational synergies from greenfield acquisition. With a large backlog and existing civil engineering and land planning talent, we are now able to offer an expanded range of services and fortify our overall real estate value proposition to our investors and clients. Additionally, Montemoy REIT continues to execute and maintain solid activity throughout the quarter. We acquired a property for approximately $3,000,000 during the quarter and continue to maintain a strong pipeline of transaction opportunities and open requirements from our tenants. Outside of our core businesses, we've made significant progress in repurchasing GEG shares under our $20,000,000 buyback program.

Speaker 2

Through 05/06/2025, we have repurchased approximately 4,800,000.0 shares for $8,700,000 at an average cost of $1.84 per share, representing approximately a 15% discount to the quarter end book value per share of $2.14 Before Carey reviews our financial results in more detail, I would like to note that the net loss in the quarter was primarily driven by unrealized losses related to our investments in CoreWeave and GECC shares, both marked lower at quarter end amid broader market volatility. We remain highly confident in these investments and fully expect the losses to reverse over time as market conditions stabilize. While uncertainty can drive asset price volatility in the near term, it can also create very attractive entry points into investment opportunities. Our strong liquidity position with approximately $32,000,000 of cash at quarter end puts us in an advantageous position when market volatility presents. In addition, unique investments like the convertible preferred financing we provided for CoreWeave prior to its public listing and the private fund managed by Stoneridge Asset Management, a best in class reinsurance manager are a testament to the strength of our sourcing capabilities, both through our experienced Board of Directors and our network of investment partners more broadly.

Speaker 2

Our ample liquidity combined with our unique sourcing capabilities enables us to support future growth initiatives across our alternative asset management platform. In closing, we're pleased with the performance of our credit and real estate businesses this quarter. The acquisition of Greenfield CRE strengthens our real estate capabilities while providing revenue and cost synergies. And GECC's continued growth demonstrates our momentum in credit. As always, we remain focused on our core objectives, enhancing financial performance, expanding our platform and growing AUM.

Speaker 2

Looking ahead, we will continue to evaluate strategic opportunities to expand our businesses and add accretive differentiated product offerings with attractive risk adjusted return profiles. With that, I'll turn it over to Keri.

Speaker 3

Thank you, Jason. I will provide a brief overview of the quarter and, of course, welcome all of you to review our filings in greater detail or reach out to our team with any questions. Fiscal third quarter revenues grew 15% to $3,200,000 from the prior year period, primarily driven by increased revenue from real estate project management fees and rental income, as well as increased management fees from attributable to fee paying AUM growth. AUM and fee paying AUM totaled approximately $768,000,000 and $565,000,000 respectively, up 1215%, respectively, from the prior year quarter end. Radon Group generated net loss of $4,500,000 for the quarter as compared to net loss of $2,900,000 for the prior year period.

Speaker 3

The net loss was primarily driven by unrealized losses related to certain investment positions marked down at quarter end, which we expect to reverse over time as market conditions stabilize. Adjusted EBITDA for the quarter was $500,000 compared to $1,200,000 in the prior year period. As of March 31, we had approximately $32,000,000 in cash on our balance sheet to deploy across our growing alternative asset management platform. Please refer to slide six that provides an overview of our financial position and highlights our book value per share of approximately $2.14 This concludes my financial review of the quarter. With that, we will turn the call over to the operator to open for questions.

Operator

Thank you. Ladies and gentlemen, we will now be conducting a question and answer session. If you would like to ask a question, please press star and one on your telephone keypad. Session. As there are no questions, I would now like to hand the conference over to Jason Rees, CEO for closing comments.

Speaker 2

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

Operator

Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

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Great Elm Group Q3 2025
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