Great Elm Group Q1 Earnings Call Highlights

Key Points

• Revenue fell to $3.3 million from $10.8 million, largely because the prior-year quarter included $7.4 million from a property sale; the net loss narrowed to $4.1 million from $7 million.
• GECC faced valuation pressure, with NAV declining $0.55 per share to $7.40. It had about $50 million in liquidity, reduced debt by $6.5 million during the quarter, and has no debt maturities until 2029.
• Monomoy completed four acquisitions and has a nearly $90 million potential investment pipeline as Great Elm seeks capital to support expansion. The company also repurchased about 266,000 shares at an average $2.20 per share.

Great Elm Group NASDAQ: GEG reported lower revenue and a narrower net loss for its fiscal 2027 first quarter, as the timing of real estate sales and weakness in alternative credit weighed on results.

CEO Jason Reese said results fell short of expectations, but the company continued to pursue capital raising for its Monomoy real estate platform and efforts to improve investment performance in its credit business.

“We remain encouraged by the underlying momentum across our businesses and confident in our strategic direction,” Reese said on the November 5 earnings call.

Revenue Falls as Prior-Year Property Sale Rolls Off

First-quarter revenue declined to approximately $3.3 million from $10.8 million a year earlier, CFO Keri Davis said. The prior-year period included about $7.4 million in revenue from the sale of a build-to-suit property.

Great Elm’s net loss narrowed to approximately $4.1 million from $7 million, primarily reflecting lower net realized and unrealized investment losses, Davis said.

As of September 30, fee-paying assets under management were approximately $564 million, down 5% year over year. Total assets under management fell 3% to about $760 million. The company ended the quarter with $43.2 million in cash and cash equivalents.

Credit Business Faces Valuation Pressure

Reese said Great Elm Capital Corp., or GECC, remains focused on rebuilding net asset value, generating sustainable investment income and deploying capital selectively.

GECC’s net asset value declined by $0.55 per share during the quarter to $7.40, including a $3.3 million reduction in the fair value of its collateralized loan obligation joint venture investment.

“We’re not satisfied with these results and remain committed to strengthening portfolio quality, preserving liquidity, and improving investment performance,” Reese said.

GECC had approximately $50 million of liquidity at quarter end, consisting of $6 million in cash and money market investments and $44 million available under its revolving credit facility. It also retired $6.5 million of its highest-cost debt during the quarter, bringing calendar-year-to-date debt reduction to nearly $40 million, Reese said. GECC has no debt maturities until 2029.

Monomoy Seeks Capital for Expansion

In real estate, Monomoy REIT completed four property acquisitions during the quarter, deploying approximately $8 million of committed capital, including estimated future capital expenditures and tenant improvements. Reese said the REIT had built its largest acquisition pipeline to date, representing nearly $90 million in potential investments.

Great Elm is pursuing capital-raising initiatives for the REIT. If successful, Reese said, the efforts could accelerate acquisitions and increase fee-paying assets and recurring fee revenue.

Monomoy CRE generated approximately $1.1 million in investment and property management fees during the quarter, up about 18% from a year earlier. Reese said recurring fees are expected to become a more important contributor to Great Elm’s earnings as the REIT grows.

The company’s build-to-suit business was nearing completion of its fourth development project and acquired two properties during the quarter for approximately $4 million. It acquired a third property after quarter end for approximately $5 million. Monomoy Construction Services generated about $700,000 in quarterly revenue, Reese said.

Distributions and Share Repurchases

Great Elm received approximately $700,000 in distributions from its CoreWeave-related investment during the quarter. Cumulative distributions reached approximately $8.6 million, compared with the original $5 million investment, Reese said.

The company also repurchased approximately 266,000 shares at an average price of $2.20 per share, marking its 12th consecutive quarter of buybacks. As of October 30, it had repurchased approximately 8.4 million shares for nearly $17 million, leaving about $23 million available under its $40 million authorization.

Reese said Great Elm will continue to weigh repurchases against other investment opportunities. Management’s priorities include growing assets under management and recurring fees, improving investment performance and scaling its credit and real estate businesses.

About Great Elm Group (NASDAQ:GEG)

Great Elm Group, Inc NASDAQ: GEG is a diversified holding company focused on asset management, specialty finance and related investment activities. Through its subsidiaries and affiliated businesses, the company seeks to invest in and manage a range of financial assets and operating businesses.

One of Great Elm Group's principal activities is alternative asset management. Its investment-management operations have been associated with investment vehicles that pursue credit and other opportunistic strategies, including Great Elm Capital Corp., a business development company.

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