8-K: Great Elm Group Reports Fiscal 2025 Third Quarter Results: AUM and Revenue Up, Net Loss Widens

Great Elm Group's fiscal third quarter saw revenue and AUM growth, but also a larger net loss due to unrealized investment losses.

Summary

• Great Elm Group (GEG) announced its financial results for the third fiscal quarter ended March 31, 2025.
• Fee-paying assets under management (FPAUM) reached approximately $565 million, and assets under management (AUM) totaled approximately $768 million.
• This represents a 15% and 12% growth in FPAUM and AUM, respectively, compared to the prior-year period.
• Total revenue for the quarter increased by 15% to $3.2 million, up from $2.8 million in the same period last year.
• The revenue growth was primarily driven by increased real estate project management fees, rental income, and higher management fees from Great Elm Capital Corp. (GECC).
• However, the net loss from continuing operations widened to ($4.5) million, compared to ($2.9) million in the prior-year period.
• This increase in net loss was mainly due to unrealized losses on certain investment positions marked down at quarter-end.
• Adjusted EBITDA for the third quarter was $0.5 million, down from $1.2 million in the prior-year period.
• Through May 6, 2025, Great Elm repurchased approximately 4.8 million shares for $8.7 million, at an average cost of $1.84 per share.
• Book value per share was $2.14 as of March 31, 2025, excluding Consolidated Funds.
• As of March 31, 2025, GEG had approximately $32 million of cash on its balance sheet.
• Subsequent to quarter end, GECC launched a $100 million At-the-Market equity program.

Sentiment

Score: 6

Explanation: The sentiment is neutral to slightly positive. While revenue and AUM grew, the increased net loss and decreased adjusted EBITDA temper the positive aspects. The management's optimistic outlook and share repurchase program provide some positive signals.

Positives

• FPAUM and AUM experienced significant growth compared to the prior year.
• Total revenue increased, driven by real estate and management fees.
• GECC achieved record total investment income.
• GECC increased its quarterly distribution.
• The company actively repurchased shares, indicating confidence in its value.
• The acquisition of Greenfield CRE and formation of MCS expands the company's real estate capabilities.

Negatives

• Net loss from continuing operations increased due to unrealized losses on certain investment positions.
• Adjusted EBITDA decreased compared to the prior-year period.

Risks

• The company's net loss was primarily driven by unrealized losses related to certain investment positions, which are subject to market conditions.
• The company's future performance is subject to risks and uncertainties, as detailed in its filings with the SEC.

Future Outlook

Management remains committed to growing core businesses and pursuing compelling investment opportunities to maximize long-term shareholder value.

Management Comments

• Jason Reese, CEO, stated that they achieved a solid fiscal third quarter 2025, continuing positive momentum by expanding assets under management and maintaining performance across credit and real estate businesses.
• Jason Reese noted that GECC delivered record total investment income and is well-positioned to pay meaningful incentive fees to GEG in the coming quarters.
• Jason Reese mentioned the launch of Monomoy Construction Services and its positive reception by Monomoy's tenants.

Industry Context

Great Elm Group operates in the alternative asset management industry, which is characterized by a focus on less traditional investments such as credit, real estate, and specialty finance. The company's performance is influenced by broader market conditions, interest rates, and the demand for alternative investments. The acquisition of Greenfield CRE and the formation of MCS reflect a trend towards vertical integration and offering comprehensive services within the real estate sector.

Comparison to Industry Standards

• Comparing Great Elm Group to other alternative asset managers like Apollo Global Management or The Carlyle Group is difficult due to the difference in scale.
• However, the growth in AUM and FPAUM can be benchmarked against industry averages for smaller firms.
• GECC's performance can be compared to other publicly traded business development companies (BDCs) such as Ares Capital Corporation or Prospect Capital Corporation, focusing on metrics like net investment income and dividend yield.
• The return of 13.9% net of fees for Great Elm Credit Income Fund is a key metric to compare against similar credit-focused funds.

Stakeholder Impact

• Shareholders may be concerned about the increased net loss, but encouraged by the share repurchase program.
• Employees may benefit from the company's growth and expansion initiatives.
• Customers of Monomoy may benefit from the integrated construction services offered by MCS.
• Creditors should monitor the company's financial performance and debt levels.

Next Steps

• Continue integrating Monomoy Construction Services.
• Focus on the robust project and property pipeline at Monomoy BTS.
• Pursue compelling investment opportunities to maximize long-term shareholder value.

Key Dates

Keywords

Great Elm Group, GEG, financial results, alternative asset manager, FPAUM, AUM, GECC, Monomoy, real estate, share repurchase, Greenfield CRE, MCS