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Great Elm Group Reports Fiscal 2024 Second Quarter Financial Results

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Great Elm Group, Inc. (GEG) announces financial results for the fiscal second quarter ended December 31, 2023, including a $24 million equity capital raise, launch of Great Elm Credit Income Fund, and revenue growth of 50%. Despite a net loss from continuing operations, Adjusted EBITDA improved to $0.6 million. GEG's strategic investments aim to scale the credit platform, while a stock repurchase program has been initiated.
Positive
  • Great Elm Group, Inc. reported total revenue of $2.8 million for the fiscal second quarter, a 50% increase from the prior-year period.
  • The company raised $24 million of equity capital from a special purchase vehicle (SPV) and launched Great Elm Credit Income Fund, LLC (GECIF), focusing on direct lending and credit investing.
  • Fee-paying assets under management increased to approximately $461 million, and total assets under management reached $655 million as of December 31, 2023.
  • Despite a net loss from continuing operations of ($0.2) million, Adjusted EBITDA improved to $0.6 million for the second quarter.
  • GEG initiated a stock repurchase program authorizing the repurchase of up to $10 million of its outstanding common stock.
  • Management remains committed to scaling existing businesses, growing recurring revenue streams, and delivering strong returns through strategic investments and growth initiatives.
Negative
  • None.

Company to Host Conference Call at 8:30 a.m. ET on February 14, 2024

WALTHAM, Mass., Feb. 13, 2024 (GLOBE NEWSWIRE) -- Great Elm Group, Inc. (“we,” “our,” “GEG,” “Great Elm,” or “the Company”), (NASDAQ: GEG), an alternative asset manager, today announced financial results for its fiscal second quarter ended December 31, 2023.

Fiscal Second Quarter 2024 and Other Recent Highlights

  • On February 8, 2024, GECC raised $24 million of equity capital from a special purchase vehicle (“SPV”) that acquired GECC common stock at net asset value, supported by a GEG investment into the SPV of $6 million.
  • Great Elm launched a credit fund, Great Elm Credit Income Fund, LLC (“GECIF”), during the quarter, focused on income generation and capital preservation through direct lending, syndicated credit and opportunistic credit investing.
  • Fee-paying assets under management totaled approximately $461 million as of December 31, 2023, up 2% from September 30, 2023, and up 5% year-over-year.
  • Assets under management totaled approximately $655 million as of December 31, 2023, up 2% from September 30, 2023, and up 6% year-over-year.
  • Total revenue for the second quarter grew 50% to $2.8 million, compared to $1.9 million for the prior-year period.
  • Great Elm collected incentive fees for the third consecutive quarter from Great Elm Capital Corp. (“GECC”), totaling $0.7 million for the three months ended December 31, 2023.
  • Net loss from continuing operations attributable to GEG was ($0.2) million for the second quarter, compared to net income from continuing operations of $29.7 million in the prior-year period.
    • Net income from continuing operations in the prior-year period was inclusive of $22.2 million in net realized and unrealized gain on investments and a $10.5 million gain related to the Forest transaction.
  • Adjusted EBITDA for the second quarter was $0.6 million, compared to $0.1 million for the prior-year period.
  • As of December 31, 2023, GEG had approximately $69 million of cash and marketable securities on its balance sheet to support growth initiatives across its alternative asset management platform.

Management Commentary

Jason Reese, Chief Executive Officer of the Company, stated, “As evidenced by our recent investment to support a capital raise at GECC as well as our seed investment in the Great Elm Credit Income Fund, we remain committed to leveraging our strong, liquid balance sheet to scale our existing businesses, grow our recurring revenue streams and deliver strong returns. I am encouraged by this quarter’s continued growth in revenue and assets under management. GECC’s sustained strong performance has allowed GEG to collect incentive fees for a third consecutive quarter. As fiscal 2024 progresses, GEG remains well-positioned to add to its growing alternative asset management vehicles and investments. We remain steadfast in our strategy to further scale our core credit and real estate businesses, introduce new investment funds, and deploy capital into promising platform opportunities that offer compelling risk-adjusted returns.”

Strategic Investments to Scale the Credit Platform

On February 8, 2024, GECC raised $24 million of capital from a SPV that acquired GECC common stock at net asset value. GEG supported the capital raise by making a $6 million investment into the SPV.

During the three months ended December 31, 2023, GEG invested approximately $6 million to seed GECIF alongside additional investors. GECIF is a Great Elm-managed credit fund that focuses on direct lending, syndicated credit and special situations.

Discussion of Financial Results for the Fiscal Second Quarter Ended December 31, 2023

GEG reported total revenue of $2.8 million, a 50% increase from $1.9 million in the prior-year three-month period.

GEG recorded a net loss from continuing operations of ($0.2) million, compared to net income from continuing operations of $29.7 million in the prior-year three-month period. Net income from continuing operations in the prior-year period was inclusive of $22.2 million in net realized and unrealized gain on investments and a $10.5 million gain related to the Forest transaction.

GEG recorded Adjusted EBITDA of $0.6 million, compared to $0.1 million in the prior-year three-month period.

Stock Repurchase Program

In the fiscal second quarter, GEG’s Board of Directors approved a stock repurchase program under which GEG is authorized to repurchase up to $10 million in the aggregate of its outstanding common stock in the open market.   To date, the Company has repurchased a modest number of shares.

Fiscal 2024 Second Quarter Conference Call & Webcast Information

When: Wednesday, February 14, 2024, 8:30 a.m. Eastern Time (ET)

Call:All interested parties are invited to participate in the conference call by dialing +1 (888) 440-4537; international callers should dial +1 (646) 960-0669. Participants should enter the Conference ID 2595129 when asked.

Webcast: The conference call will be webcast simultaneously and can be accessed here. A copy of the slide presentation accompanying the conference call, can be found here.


About Great Elm Group, Inc.

Great Elm Group, Inc. (NASDAQ: GEG) is a publicly-traded, alternative asset manager focused on growing a scalable and diversified portfolio of long-duration and permanent capital vehicles across credit, real estate, specialty finance, and other alternative strategies. Great Elm Group, Inc. and its subsidiaries currently manage Great Elm Capital Corp., a publicly-traded business development company, and Monomoy Properties REIT, LLC, an industrial-focused real estate investment trust, in addition to other investments. Great Elm Group, Inc.’s website can be found at www.greatelmgroup.com.

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995

Statements in this press release that are “forward-looking” statements, including statements regarding expected growth, profitability, acquisition opportunities and outlook involve risks and uncertainties that may individually or collectively impact the matters described herein. Investors are cautioned not to place undue reliance on any such forward-looking statements, which speak only as of the date they are made and represent Great Elm’s assumptions and expectations in light of currently available information. These statements involve risks, variables and uncertainties, and Great Elm’s actual performance results may differ from those projected, and any such differences may be material. For information on certain factors that could cause actual events or results to differ materially from Great Elm’s expectations, please see Great Elm’s filings with the Securities and Exchange Commission (“SEC”), including its most recent annual report on Form 10-K and subsequent reports on Forms 10-Q and 8-K. Additional information relating to Great Elm’s financial position and results of operations is also contained in Great Elm’s annual and quarterly reports filed with the SEC and available for download at its website www.greatelmgroup.com or at the SEC website www.sec.gov.

Non-GAAP Financial Measures

The SEC has adopted rules to regulate the use in filings with the SEC, and in public disclosures, of financial measures that are not in accordance with US GAAP, such as adjusted earnings before interest, taxes, depreciation and amortization (“Adjusted EBITDA”). Adjusted EBITDA is derived from methodologies other than in accordance with US GAAP. Great Elm believes that Adjusted EBITDA is an important measure for investors to use in evaluating Great Elm’s businesses. In addition, Great Elm’s management reviews Adjusted EBITDA as they evaluate acquisition opportunities.

Adjusted EBITDA has limitations as an analytical tool, and you should not consider it either in isolation from, or as a substitute for, analyzing Great Elm’s results as reported under US GAAP. Non-GAAP financial measures reported by Great Elm may not be comparable to similarly titled amounts reported by other companies.

Included in the financial tables below is a reconciliation of Adjusted EBITDA to the most directly comparable US GAAP financial measure, net income from continuing operations.

Media & Investor Contact:
Investor Relations
geginvestorrelations@greatelmcap.com

  
Great Elm Group, Inc.
Condensed Consolidated Balance Sheets (Unaudited)
Dollar amounts in thousands (except per share data)
 
  
ASSETS December 31, 2023  June 30, 2023 
Current assets      
Cash and cash equivalents $39,068  $60,165 
Receivables from managed funds  3,492   3,308 
Investments in marketable securities  29,698   24,595 
Investments, at fair value (cost $44,500 and $40,387, respectively)  39,312   32,611 
Prepaid and other current assets  2,982   717 
Real estate under development  4,905   1,742 
Assets of Consolidated Funds:      
Cash and cash equivalents  10,055   - 
Investments, at fair value (cost $4,567)  4,680   - 
Other assets  92   - 
Total current assets  134,284   123,138 
Identifiable intangible assets, net  11,563   12,115 
Right-of-use assets  322   497 
Other assets  54   143 
Total assets $146,223  $135,893 
LIABILITIES AND STOCKHOLDERS' EQUITY      
Current liabilities      
Accounts payable $158  $191 
Accrued expenses and other current liabilities  4,357   5,418 
Current portion of related party payables  1,154   1,409 
Current portion of lease liabilities  271   359 
Liabilities of Consolidated Funds:      
Payable for securities purchased  944   - 
Total current liabilities  6,884   7,377 
Lease liabilities, net of current portion  38   142 
Long-term debt (face value $26,945)  25,948   25,808 
Related party payables, net of current portion  -   926 
Convertible notes (face value $38,859 and $37,912, including $15,780 and $15,395 held by related parties, respectively)  38,135   37,129 
Other liabilities  611   669 
Total liabilities  71,616   72,051 
Commitments and contingencies (Note 11)      
Stockholders' equity      
Preferred stock, $0.001 par value; 5,000,000 authorized and zero outstanding  -   - 
Common stock, $0.001 par value; 350,000,000 shares authorized and 31,174,605 shares issued and 30,050,059 outstanding at December 31, 2023; and 30,651,047 shares issued and 29,546,655 outstanding at June 30, 2023  30   30 
Additional paid-in-capital  3,316,708   3,315,378 
Accumulated deficit  (3,249,142)  (3,251,566)
Total Great Elm Group, Inc. stockholders' equity  67,596   63,842 
Non-controlling interests  7,011   - 
Total stockholders' equity  74,607   63,842 
Total liabilities and stockholders' equity $146,223  $135,893 


  
Great Elm Group, Inc.
Condensed Consolidated Statements of Operations (Unaudited)
Amounts in thousands (except per share data)
 
  
  For the three months ended
December 31,
  For the six months ended
December 31,
 
  2023  2022  2023  2022 
Revenues $2,819  $1,879  $6,129  $3,739 
Operating costs and expenses:            
Investment management expenses  2,839   2,311   5,601   4,300 
Depreciation and amortization  283   295   566   589 
Selling, general and administrative  2,393   2,061   4,108   3,548 
Expenses of Consolidated Funds  -   -   -   46 
Total operating costs and expenses  5,515   4,667   10,275   8,483 
Operating loss  (2,696)  (2,788)  (4,146)  (4,744)
Dividends and interest income  2,072   1,439   4,058   2,912 
Net realized and unrealized gain on investments  1,204   22,242   4,488   15,445 
Net realized and unrealized gain (loss) on investments of Consolidated Funds  114   -   114   (16)
Interest and other income of Consolidated Funds  128   -   128   - 
Gain on sale of controlling interest in subsidiary  -   10,524   -   10,524 
Interest expense  (1,061)  (1,955)  (2,123)  (3,929)
(Loss) income before income taxes from continuing operations  (239)  29,462   2,519   20,192 
Income tax benefit (expense)  -   231   -   (2)
Net (loss) income from continuing operations  (239)  29,693   2,519   20,190 
Discontinued operations:            
Net income from discontinued operations  -   35   16   999 
Net (loss) income $(239) $29,728  $2,535  $21,189 
Less: net income (loss) attributable to non-controlling interest, continuing operations  111   18   111   (1,554)
Less: net income attributable to non-controlling interest, discontinued operations  -   180   -   1,504 
Net (loss) income attributable to Great Elm Group, Inc. $(350) $29,530  $2,424  $21,239 
Basic net income (loss) per share from:            
Continuing operations $(0.01) $1.03  $0.08  $0.76 
Discontinued operations  -   (0.01)  -   (0.02)
Basic net income (loss) per share $(0.01) $1.02  $0.08  $0.74 
Diluted net income (loss) per share from:            
Continuing operations $(0.01) $0.74  $0.08  $0.56 
Discontinued operations  -   -   -   (0.01)
Diluted net income (loss) per share $(0.01) $0.74  $0.08  $0.55 
Weighted average shares outstanding            
Basic  29,889   28,803   29,734   28,672 
Diluted  29,889   40,586   30,916   40,455 

 

  
Great Elm Group, Inc.
Reconciliation from Net Income (Loss) from Continuing Operations to Adjusted EBITDA
Dollar amounts in thousands
 
  
   For the three months ended
December 31,
 For the six months ended
December 31,
 
   2023   2022   2023   2022 
Net Income (Loss) from Continuing Operations – GAAP  $ (239) $ 29,693  $ 2,519  $ 20,190 
Interest expense  1,061   1,955   2,123   3,929 
Income tax expense (benefit)  -   (231)  -   2 
Depreciation and amortization  283   295   566   589 
Non-cash compensation  839   645   1,726   1,586 
(Gain) loss on investments  (1,318)  2,131   (4,602)  8,944 
Gains related to sale of Forest  -   (34,897)  -   (34,897)
Transaction and integration related costs(1)  -   425   -   471 
Change in contingent consideration  18   130   36   60 
Adjusted EBITDA(2) $ 644  $ 146  $ 2,368  $ 874 

(1) Transaction and integration-related costs include costs to sell, acquire and integrate acquired businesses.
(2) Adjusted EBITDA for prior periods has been adjusted to include dividend income earned during such periods consistent with the methodology for December 31, 2023.


FAQ

What were Great Elm Group, Inc.'s total revenue and net loss from continuing operations for the fiscal second quarter ended December 31, 2023?

Great Elm Group, Inc. reported total revenue of $2.8 million and a net loss from continuing operations of ($0.2) million for the fiscal second quarter ended December 31, 2023.

What was the percentage increase in total revenue for Great Elm Group, Inc. compared to the prior-year period?

Great Elm Group, Inc. experienced a 50% increase in total revenue for the fiscal second quarter ended December 31, 2023, compared to the prior-year period.

What strategic investments did Great Elm Group, Inc. make to scale the credit platform?

Great Elm Group, Inc. made strategic investments by raising $24 million of equity capital from a special purchase vehicle (SPV) and launching Great Elm Credit Income Fund, LLC (GECIF) focused on direct lending and credit investing.

What is the purpose of the stock repurchase program initiated by Great Elm Group, Inc.?

Great Elm Group, Inc. initiated a stock repurchase program authorizing the repurchase of up to $10 million of its outstanding common stock in the open market.

When is the conference call to discuss Great Elm Group, Inc.'s fiscal 2024 second quarter results scheduled?

The conference call to discuss Great Elm Group, Inc.'s fiscal 2024 second quarter results is scheduled for Wednesday, February 14, 2024, at 8:30 a.m. Eastern Time (ET).

Great Elm Group, Inc.

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