Great Elm Group Q1 2027 Earnings Call Transcript

Great Elm Group (NASDAQ:GEG) reported first-quarter financial results on Thursday. The transcript from the company’s first-quarter earnings call has been provided below.

This transcript is brought to you by Benzinga APIs. For real-time access to our entire catalog, please visit https://www.benzinga.com/apis/ for a consultation.

View the webcast at https://viavid.webcasts.com/starthere.jsp?ei=1746029&tp_key=84cf9d68f0

Summary

Great Elm Group’s first-quarter financial results were below expectations due to timing issues in real estate sales and challenges in alternative credit, resulting in a net loss of approximately $4.1 million.

The company is focusing on strategic initiatives to grow its Alternative Asset Management platform, expand fee-paying assets under management, and build a durable earnings base, particularly through its Monomoy REIT and real estate business.

Great Elm Capital Corp (GECC) reported a decline in net asset value but maintains strong liquidity and lower leverage, positioning it to capitalize on selective investment opportunities.

Monomoy REIT completed four property acquisitions and built a significant acquisition pipeline, aiming to enhance capital access and increase recurring fee revenue.

The company ended the quarter with $43 million in cash and cash equivalents and continued its share repurchase program, acquiring approximately 266,000 shares.

Looking forward, priorities include growing assets under management, improving investment performance, and scaling credit and real estate businesses to achieve sustainable long-term value for shareholders.

Full Transcript

OPERATOR

Fiscal 2027 First Quarter Conference Call. At this time, all participants are in a listen-only mode. The question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press Star-0 on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to Adam Yates, Managing Director at Great Elm Group. Thank you, Adam. You may begin.

Adam Yates (Managing Director)

Good morning everyone. Thank you for joining us for Great Elm Group’s fiscal first quarter 2027 earnings conference call. As a reminder, this conference call is being recorded on Thursday, November 5, 2026. If you would like to be added to our distribution list, you can email GEG investor relations ehmcap.com or sign up for alerts directly on our website at www.greatelmgroup.com. The slide presentation accompanying today’s conference call and webcast can be found on our website under Events and Presentations.

A link to the webcast is also available on our website as well as in the press release announcing our 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.

To obtain copies of our SEC filings, please visit Great Elm Group’s website under Financial Information and select SEC Filings. Today’s comments do not constitute an offer to sell or a solicitation of an offer to buy interests in any investment vehicle managed by Great Elm or its affiliates. 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 Reese, Chairman of the Board and CEO; Adam Kleinman, President and General Counsel; Nichole Milz, COO; and Keri Davis, CFO. I will now turn the call over to Jason Reese, CEO.

Jason Reese (Chief Executive Officer)

Good morning and thank you for joining us today. We made meaningful progress during the quarter on strategic initiatives designed to drive growth across our Alternative Asset Management platform, expand fee-paying assets under management and build a more durable earnings base. In particular, we continue to pursue capital raising initiatives for Monomoy REIT to support the growth of our real estate business. Our first quarter financial results fell short of expectations, reflecting the timing of certain real estate investment sales and headwinds in alternative credit.

Nevertheless, we remain encouraged by the underlying momentum across our businesses and confident in our strategic direction. I’ll start with alternative credit. At GECC, our priorities continue to be rebuilding net asset value, generating sustainable investment income and maintaining disciplined capital deployment. During the quarter, GECC’s NAV declined by $0.55 per share to $7.40, including a $3.3 million reduction in the fair value of its CLO JV investment. We’re not satisfied with these results and remain committed to strengthening portfolio quality, preserving liquidity and improving investment performance.

Our investment approach emphasizes diversification, disciplined underwriting and credit quality over incremental yield. With credit spreads tight and valuations elevated across the broadly syndicated market, we continue to deploy capital selectively. We are leveraging our institutional relationships and differentiated sourcing capabilities to identify attractive risk-adjusted opportunities. GECC’s lower leverage and strong liquidity provide flexibility to capitalize on these opportunities as they arise.

At quarter end, GECC had approximately $50 million of liquidity, including $6 million of cash and money market investments and $44 million of revolving credit facility availability. During the quarter, GECC also retired $6.5 million of its highest-cost debt, bringing total debt reduction to nearly $40 million calendar year to date, with no debt maturities until 2029. Together, these efforts are intended to strengthen GECC’s financial position, support more consistent investment performance and benefit Great Elm through its direct investments and recurring management fees.

Turning to Real Estate, we continue to see strong momentum across the Monomoy platform, supported by the growth of Monomoy REIT’s industrial outdoor storage portfolio and our vertically integrated operating capabilities. Our strategic partnership with Kennedy Lewis has provided significant capital to support acquisitions and development across the business. During the first quarter, Monomoy REIT completed four property acquisitions, deploying approximately $8 million of committed capital, including estimated future capital expenditures and tenant improvements.

The REIT also built its largest acquisition pipeline to date, representing nearly $90 million of potential investments. We continue to pursue capital raising initiatives to support the next phase of Monomoy REIT’s growth and the broader real estate platform. If successful, we believe these efforts have the potential to expand our access to capital, accelerate acquisitions and increase fee-paying assets under management and recurring fee revenue. Monomoy CRE generated approximately $1.1 million of investment and property management fees during the quarter, an increase of approximately 18% from the prior-year period.

As the REIT scales, we expect recurring fee revenue to become an increasingly important contributor to Great Elm’s earnings. Our build-to-suit development business also continued to expand. Monomoy BTS is nearing completion of its fourth development project and acquired two new properties during the quarter for approximately $4 million. After quarter end, we acquired a third property for approximately $5 million. These projects strengthen tenant relationships, create new customer opportunities and offer the potential to generate attractive investment returns.

Monomoy Construction Services generated approximately $700,000 of revenue during the quarter and continues to develop its pipeline of construction, consulting and pre-construction opportunities, including third-party engagements. Together, these businesses provide a differentiated, integrated platform spanning acquisitions, development, construction and asset management. While the timing of individual development sales can create variability in quarterly results, we believe the underlying momentum positions the business for continued growth.

Turning to our direct investments, we received approximately $700,000 in distributions from our CLO JV-related investment during the quarter. This brings cumulative distributions to approximately $8.6 million against our original $5 million investment, with additional upside potential. With respect to capital allocation, Great Elm ended the quarter with approximately $43 million of cash and cash equivalents, providing substantial flexibility to pursue our strategic priorities. We also repurchased common stock for the 12th consecutive quarter, acquiring approximately 266,000 shares at an average price of $2.20 per share. As of October 30th, we have repurchased approximately 8.4 million shares for nearly $17 million at an average price of $2.01 per share.

That leaves approximately $23 million available under our $40 million repurchase authorization. We will continue to evaluate share repurchases alongside other investment opportunities to maximize shareholder returns. Looking ahead, our priorities are to grow assets under management and recurring fee revenue, improve investment performance and scale our credit and real estate businesses. We believe executing on these priorities will translate into stronger financial results and sustainable long-term value for shareholders. With that, I’ll turn the call over to Keri for a review of our financial results.

Keri Davis (Chief Financial Officer)

Thank you, Jason. I’ll provide a brief overview of our fiscal first quarter results and, as always, encourage everyone to review our earnings release and accompanying filings for additional detail. For the first quarter, total revenue was approximately $3.3 million compared to $10.8 million in the prior-year period. The decrease reflects the timing of real estate sales, as the prior-year quarter included approximately $7.4 million of revenue from the sale of a build-to-suit property.

Net loss for the quarter was approximately $4.1 million compared to $7 million in the prior-year period. The smaller net loss primarily reflected lower net realized and unrealized investment losses. As of September 30, fee-paying assets under management totaled approximately $564 million, a decrease of 5% year over year. Total assets under management were approximately $760 million, a decrease of 3% from the prior-year period. We ended the quarter with $43.2 million of cash and cash equivalents. Our strong liquidity position provides flexibility to support our strategic initiatives and ongoing operations. For additional information regarding our financial position and operating results, please refer to our earnings release, investor presentation and Form 10-Q. This concludes my financial review. Operator, please open the line for questions.

OPERATOR

Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question, please press Star-1 on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. You may press Star-2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for questions.

Once again, if you would like to ask a question, please press Star-1 on your telephone keypad. There are no questions at this time. I would like to turn the floor back over to Jason Reese, CEO, for closing comments.

Jason Reese (Chief Executive Officer)

Thank you again for joining us today. While our first quarter financial results were below expectations, we’re encouraged by the progress made across our businesses and the opportunities ahead. We continue to see strong growth in real estate while taking meaningful steps to strengthen investment performance in alternative credit. Our objective is to translate this progress into growth in assets under management, more consistent earnings and long-term shareholder value.

We look forward to keeping you updated. Thank you for your time and continued support.

OPERATOR

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

Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company’s SEC filings and official press releases. Corporate participants’ and analysts’ statements reflect their views as of the date of this call and are subject to change without notice.