Great Elm Group Reports Fiscal 2024 Second Quarter Financial Results

About this update from Great Elm Group, Inc.

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 [email protected] 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 . Source: Great Elm Group, Inc.

View stock analysis, news, and events for Great Elm Group, Inc.