Great Elm Group Inc (GEG) 2026 Q1 法說會逐字稿

Greetings and welcome to the Great Elm Group fiscal 2026 First quarter conference call. (Operator Instruction)

It is now my pleasure to introduce your host, Adam Yates, Managing Director.

Good morning everyone.

Thank you for joining us for Great Elm Group's fiscal Year 2026 First quarter earnings conference call. As a reminder, this conference call is being recorded on Thursday, November 13, 2025.

If you would like to be added to our distribution list, you can email greatelm.investor relations@reelmcap.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. 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.

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 interest 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 W. Reese, CEO, Adam M. Kleinman, President and General Counsel, Nichole Milz, COO, and Keri A. Davis, CFO. I will now turn the call over to Jason Reese, CEO.

Good morning and thank you for joining us today. Great Elm made significant progress across our strategic initiatives in the fiscal first quarter, building on the momentum from our record year in fiscal '25.

During the quarter, we advanced our goals to expand our platform, grow assets under management, and enhance our profitability.

Notably, we raised nearly $250 million of debt and equity capital across our credit and real estate platforms through both private investments from strategic partners and public raises through GECC's at the Market equity program and a new baby bond.

Fee-paying assets under management grew 9% year over year to approximately $594 million or 10% on a pro forma basis to approximately $601 million.

As I have reviewed on prior calls, in July, we established a transformative partnership with Kennedy Lewis Investment Management, which invested in both GEG and Monomoy REIT, committing up to $150 million in leverageable capital to Monomoy REIT to. Accelerate our real estate platform expansion and purchasing 1.3 million shares of GEG common stock. This partnership is a true catalyst for growth, bringing not only capital but also deep institutional expertise in scaling real estate platforms. As part of this partnership, Lloyd Nathan joined the board of GEG and (Insudible) joined the board of Monomoy Reed.

In August, Wooded Value Fund purchased 4 million newly issued shares of GEG Common stock at $2250 per share, raising approximately $9 million in equity capital.

Alongside the investment, Booker Smith joined our boards to help advance and expand our key verticals.

Greatam also issued 10 year warrants to Woodstead for an additional 2 million shares of GEG Common stock, $1 million truck at $3.50 and $1 million at $5 further aligning their interests with those of all shareholders.

Freedom Real Estate Ventures continued to ramp during the quarter. Monomoy BTS sold its second build to suit development property in Canton, Mississippi for over $7 million generating a gain of over $500.

Construction on the third BTS property is nearing completion, with a robust pipeline of development opportunities behind it.

Monomoy Construction Services completed its second full quarter since inception, contributing approximately $700,000 in revenue. With construction capabilities fully integrated in-house, we can offer tenants comprehensive turnkey solutions, capture more value through the property life cycle, and execute on our growing project pipeline.

At Monomoy CRE, investment management and property management fees increased 12% over the prior year period, driven by the growth in fee paying AUM and growing rental income.

The REI deployed over $13 million to acquire seven new properties at attractive cap rates and acquired a land parcel adjacent to an existing asset to accommodate a tenant expansion under a new 10-year lease. This transaction demonstrates our ability to meet tenants' needs while enhancing portfolio value.

In our alternative credit business, GECC delivered a strong quarter in terms of capital formation and balance sheet optimization. GECC raised approximately $28 million in equity proceeds, including a $15 million private placement and a $13 million through its at the market equity program.

In August, GECC doubled the borrowing capacity under its revolver to $50 million from $25 million reducing the revolver interest rate by 50 basis points, and has the ability to further expand the facility to $90 million under certain circumstances. In September, GECC refinanced its highest cost debt, the $40 million of 8375% notes due in September 28th.

With a $57.5 million of 73%, 75% notes due in December 30, reducing annual cash interest expense by 100 basis points and extending its debt maturity profile.

GECC's operating results for the quarter were impacted by First Brands, which traded down sharply in late September before filing for bankruptcy at the end of the quarter. GECC held exposure to First Brands through syndicated loans. Consequently, NAV was negatively affected, and GECC placed its First Brand's investments on non-accrual at the end of September.

Despite this operating setback, the capital initiatives executed in the quarter leave GECC in a position of strength with a strong balance sheet, ample deployable cash, and capacity to invest in income generating opportunities in the coming quarters.

Meanwhile, our great on private credit strategy continued with strong performance, returning 15.2% net calendar year-to-date through September 30th. Since inception, we have made income distributions exceeding 15% of original invested capital to investors in the strategy, highlighting discipline, deployment, and a focus on value preservation.

Outside of our core business, our core weave related investment remains a significant success story. We have already received over 100% of our initial $5 million investment in distributions to date, and we continue to see meaningful upside potential despite recent volatility in Corey's stock price that contributed to unrealized losses in this investment and GEG's net loss for the quarter.

Shifting back to Great Elm, our balance sheet also remains solid, ending the corridor with approximately $53.5 million in cash, providing us with ample flexibility to support our growth initiatives and take advantage of attractive opportunities as they arise.

In July, our board expanded our stock repurchase program by $5 million to $25 million in total.

Through November 11th, we have repurchased 5.6 million shares for $10.9 million at an average price of $1.93 per share, leaving $14.1 million in remaining program capacity. These repurchases reflect our continued confidence in the company's long-term value and are highly accretive use of capital.

As we move through fiscal 26, we remain focused on growing fee paying AUM, scaling our creditor and real estate platforms, and translating our strategic progress into sustained financial performance as we seek to create enduring value for our shareholders. With that, I'll hand it over to Keri.

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 first quarter revenue was $10.8 million compared to $4 million for the prior year period. The increase was primarily driven by $7.4 million in revenue recognized from the sale of our second Monomoy BTS built to suit property.

AUM and fee-paying AUM totaled approximately $785 million and $594 million respectively, with fee-paying AUM up 9% from the prior year quarter end.

On a pro forma basis, AUM and fee-paying AUM totaled approximately $792 million and $601 million up 7% and 10% from the prior year period respectively. These figures incorporate the pro forma impact of GECC financing activities.

We reported a net loss of $7.9 million for the quarter versus net income of $3 million a year ago, primarily due to unrealized losses on GEG's investments in GECC common stock and our core weave-related investments.

Adjusted EBITDA for the quarter was a loss of $50,000 compared to a gain of $1.3 million in the prior year period.

As of September 30th, 2025, we held approximately $53.5 million cash on our balance sheet to deploy across our growing alternative asset management platform.

Please refer to slide six for a summary of our financial position and book value per share of approximately $2.30.

This concludes my financial review of the quarter. With that, we will turn the call over to the operator to open for questions.

(Operator Instruction). (Inaudible).

Yeah, good morning, thanks for taking my question.

I've been following, Great Elm Group for quite a while, and, I'm pretty interested in the evolution the business has had lately, I was just trying to figure out.

Kind of where you are in the growth picture and you know obviously you know with the asset management businesses if you manage to keep the fixed costs at least relatively flat and grow a and revenue it's going to create a lot of earnings growth so I was just curious what what you guys think about your current overhead and expense structure. And kinda like, this is from a financial point of view like where are you on this growth trajectory.

In terms of growing the regrowing the BDC other op opportunities, kind of what clues can you give us about where you see this going and when we're going to really see some operating leverage kick in.

Thanks, Nate, it's Jason Reese.

I think.

Best to say we have spent a lot of time and effort building all the back office infrastructure as you know as as you stated this business is high fixed cost and then low marginal costs going forward I think we have the bulk of our fixed costs in. Place and now the strategy is all about growing as I think you've seen you know let this past quarter we made a major growth move on the real estate side we're not putting that capital to work as we look to raise additional capital to the reit. And on the BBC kind of the same thing we've done, quite a bit of capital raising over the last 15 months we hope to accelerate that we do not think we need to, come anywhere near growing the costs that we have in the past so we think we're in a great spot going forward, to leverage.

Okay, just like a little follow-up question. Obviously there's a lot of, public information on the BDC. The strategy there looks very good with that setback you had this quarter. I know I listened to that call. They talked about, they need to diversify and maybe reduce some of the position sizes, which makes a lot of sense on the, Monmoyre side. I could be wrong, perhaps I just am not seeing it, but. I'd be interested in just learning more about that business like it doesn't seem to have a lot of a public facing information about it am I just missing it or not seeing it or is that kind of, how do we learn more about that? What's going on there? Just a little more in depth understanding of that.

Well, let me give you a minute or two, but I'd be happy, to get on a call separately with you and get Chris Macker, who is the head of that business on the call, but it is a privatere, so there's not a lot of public information about it, but it focuses on, the industrial outside storage space. The RI has been operating for approximately 11 years. We have over 150 million, 150 buildings.

That we own in that rate and growing a lot of our focus is on the equipment rental space. Our largest tenant in the space is United Rentals, which the second largest tenant is Sun Belt Rentals in that space, and we've taken the time to build. We're not just an asset manager there. We have built our BTS business or built to suite where we're building our own properties for.

That'll then go in the REIT or get sold to third parties but for servicing the tenants and we've also if you remember in January we purchased a construction business that we were using from the outside so that we brought all of that in-house to have the capabilities to do everything from kind of cradle to grave with properties.

We think it's a great business. We think it could be a public vehicle at some point in time. We're probably not quite at the scale I would want it to be before we took it public, but that is a possibility in the future. At that point there would be the ultimate disclosure about it, obviously. But I'd be happy, Nate, if you want to email me after the call, to set up a separate call and go in depth with you on Monomoy if you'd like to know more.

Okay, yeah, is that, what if I just email the IR, will that I email, will that get through?

It'll get through to me.

yes, okay, I'll do that. Alright, well thank you.

(Operator Instruction).

Thank you again for joining us today. We remain confident in the strategic direction of our business. We continue to raise significant capital, advance our credit and real estate platforms, and strengthen our balance sheet. We're committed to executing on our growth strategy, scaling fee paying assets under management, and delivering sustained value for our shareholders over time. We look forward to keeping you updated on our progress.

Thank you for your time and continued support.

(Operator Instruction).