Great Elm Group Q4 Earnings Call Highlights

Key Points

• Fourth-quarter revenue surged 88% year over year to $10.6 million, but net income fell to approximately $1.1 million and adjusted EBITDA declined to $0.3 million due largely to mark-to-market losses on GECC-related investments.
• GECC weighed on performance as its share price fell nearly 49% and its discount to NAV widened to about 31%; however, Great Elm said GECC improved sequentially, extended debt maturities to 2029 and maintained less than 1% non-accrual investments.
• The real estate platform continued expanding, with Monomoy REIT completing six acquisitions, fee revenue rising 29% year over year and Great Elm ending the year with $53.5 million in cash plus nearly $24 million remaining under its share-repurchase authorization.

Great Elm Group NASDAQ: GEG reported higher fourth-quarter revenue for fiscal 2026 but said results were weighed down by mark-to-market losses tied primarily to its investments in Great Elm Capital Corp. and related vehicles.

Fourth-quarter revenue rose 88% year over year to $10.6 million from $5.6 million, Chief Financial Officer Keri Davis said. Net income was approximately $1.1 million, compared with $13.6 million in the prior-year period, reflecting lower unrealized investment gains. Adjusted EBITDA was about $0.3 million, down from $1.5 million a year earlier.

Chief Executive Officer Jason Reese said the company made operational progress during the year despite the reported loss. Great Elm and its managed vehicles raised nearly $400 million of gross capital during fiscal 2026, while fee-paying assets under management increased 7% to about $590 million. Total AUM was approximately $771 million at June 30, up 2% from the prior-year period.

GECC Performance and Capital Structure

Reese said Great Elm Capital Corp., or GECC, was the primary source of the company’s investment-related volatility. GECC’s share price declined from $10.67 to $5.45 over the fiscal year, while its discount to net asset value widened to approximately 31% from about 12%. GECC’s NAV was $7.95 per share as of June 30.

Reese, who became executive chairman of GECC’s board in March and its CEO in May, said the company’s priorities are to protect and grow NAV, generate sustainable income, and maintain underwriting and capital-allocation discipline.

During the fourth quarter, GECC’s net assets increased approximately 3% sequentially, portfolio performance improved, and less than 1% of investments were on non-accrual status at quarter-end, Reese said. GECC also retired all $18.6 million of notes maturing in 2026 and extended its revolving credit facility, leaving no debt maturities until 2029. After quarter-end, it called an additional $6.5 million of its highest-cost debt.

At June 30, GECC had approximately $39 million available under its revolving credit facility. Great Elm Capital Management waived about $0.9 million of GECC incentive fees during the fourth quarter, bringing fiscal-year waivers to approximately $3.7 million, or $0.26 per GECC share.

Real Estate Platform Expands

Reese described real estate as an area of strength, citing growth supported by Great Elm’s partnership with Kennedy Lewis. Monomoy REIT completed six acquisitions in the fourth quarter representing about $34 million of committed capital, including estimated future capital expenditures and tenant-improvement commitments.

The company also drew the remaining $50 million under its $150 million strategic financing arrangement with Kennedy Lewis during the quarter. Reese said the capital, along with property-level financings completed during the year, positions Monomoy REIT to continue expanding its industrial outdoor storage portfolio.

Monomoy CRE generated approximately $1.1 million in investment and property-management fees during the fourth quarter, up about 29% from the prior-year period. Full-year fees totaled approximately $3.9 million, an increase of 19%.

Elsewhere in real estate, Monomoy BTS sold its third development property in June for an approximately $0.9 million gain. The business began development on a fourth Texas project during the quarter and, after year-end, acquired a fifth property for roughly $3 million. Monomoy Construction Services generated approximately $0.4 million in fourth-quarter revenue, though Reese said its ramp had been slower than initially expected.

Liquidity, Investments and Repurchases

Great Elm ended the fiscal year with approximately $53.5 million in cash and cash equivalents. Reese said the company views that liquidity as providing capacity to invest in existing businesses, pursue new opportunities and repurchase shares.

The company repurchased approximately 265,000 shares in the fourth quarter at an average price of $2.18 per share, representing roughly 1% of shares outstanding at June 30. Since its repurchase program began in 2023, Great Elm has repurchased about 8.1 million shares for $16.1 million at an average price of approximately $2 per share. Its board has authorized up to $40 million in total repurchases, leaving nearly $24 million available.

Great Elm also received approximately $3 million of distributions from its CoreWeave-related investment since April 1, bringing cumulative distributions to approximately $8.6 million against an original $5 million investment. The company recognized an approximately $2.1 million net gain on that investment in the fourth quarter.

For fiscal 2027, Reese said Great Elm intends to grow AUM and fee-related earnings, scale its real estate and alternative-credit platforms, improve investment performance and selectively deploy capital into new opportunities.

About Great Elm Group (NASDAQ:GEG)

Great Elm Group NASDAQ: GEG is a closed-end investment company specializing in private credit and equity co-investments for U.S. middle-market companies. The firm's portfolio is composed primarily of senior secured loans, unitranche financing structures and selective equity interests, with an emphasis on providing flexible capital solutions for growth initiatives, refinancings, acquisitions and recapitalizations.

Through a disciplined underwriting process, Great Elm Group evaluates opportunities across a diverse range of industry sectors, including healthcare, business services, manufacturing and consumer products.

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