8-K: Great Elm Group Reports Q2 Loss Amid Market Volatility

Great Elm Group, Inc. announced a net loss of $16.5 million for its fiscal second quarter ended December 31, 2025, primarily due to significant unrealized investment losses.

Summary

• Net loss was $(16.5) million for the fiscal second quarter ended December 31, 2025, a significant decline from net income of $1.4 million in the prior-year period.
• Total revenue for the second quarter was $3.0 million, compared to $3.5 million for the prior-year period.
• Fee-Paying Assets Under Management (FPAUM) grew 4% year-over-year to approximately $561 million as of December 31, 2025.
• Assets Under Management (AUM) reduced by 2% year-over-year to approximately $740 million.
• The net loss was primarily driven by $14.4 million in unrealized loss and $2.3 million in realized gain from GEG's investments.
• Adjusted EBITDA for the second quarter was $(1.6) million, compared to $1.0 million in the prior-year period.
• The company repurchased approximately 1.1 million shares, or over 3% of shares outstanding, at an average price of $2.47 per share during the quarter.
• Through February 3, 2026, Great Elm repurchased approximately 6.4 million shares for $12.7 million at an average price of $1.99 per share, with $12.3 million remaining capacity under the program.
• Monomoy BTS substantially completed its third build-to-suit development property in Florida.
• The Great Elm Credit Income Fund, launched in November 2023, began an orderly wind-down in response to recent portfolio events and market conditions.

Sentiment

Score: 3

Explanation: StockSavvy.ai views this as a challenging quarter marked by significant investment losses and a decline in key financial metrics, despite some operational progress and shareholder-friendly actions like share repurchases.

Positives

• Fee-Paying AUM (FPAUM) increased by 4% year-over-year to $561 million as of December 31, 2025.
• Received distributions of $5.8 million from the CoreWeave-related investment to date, exceeding the original $5 million capital investment by $0.8 million.
• Monomoy BTS substantially completed its third build-to-suit development property in Florida and commenced active marketing.
• MCRE investment and property management fees grew over 15% from the prior-year period to approximately $1.0 million.
• Repurchased approximately 1.1 million shares (over 3% of shares outstanding) at an average price of $2.47 per share during the quarter, underscoring confidence in the business and commitment to shareholder value.
• Maintained approximately $51.2 million of cash and cash equivalents on the balance sheet to support growth initiatives.
• GECC management undertook targeted portfolio reviews and credit optimization initiatives, positioning the platform for success and aiming to rebuild in calendar 2026.

Negatives

• Net loss of $(16.5) million for the fiscal second quarter, a significant decline from net income of $1.4 million in the prior-year period.
• Total revenue decreased to $3.0 million from $3.5 million in the prior-year period.
• Adjusted EBITDA was $(1.6) million, down from $1.0 million in the prior-year period.
• Significant unrealized loss of $14.4 million on GEG's investments, primarily from GECC common stock, related special purpose vehicles (SPVs), and a CoreWeave-related investment.
• Net realized and unrealized loss of $4.5 million from the CoreWeave-related investment during the quarter, driven by market-based valuation changes.
• Unrealized losses on GECC common stock and SPVs related to GECC common stock totaled $4.0 million and $3.0 million, respectively.
• The Great Elm Credit Income Fund began an orderly wind-down in response to recent portfolio events and market conditions.
• Assets Under Management (AUM) reduced by 2% year-over-year to $740 million.

Risks

• Market headwinds and heightened volatility impacting investment valuations, leading to significant unrealized losses.
• Challenging market backdrop for the Business Development Company (BDC), Great Elm Capital Corp. (GECC).
• Actual performance results may differ materially from forward-looking statements due to various risks, variables, and uncertainties, as outlined in SEC filings.

Future Outlook

The company is focused on leveraging its balance sheet to find new investments, grow assets under management and fee revenue, and deliver sustained, long-term value for shareholders. GECC management aims to rebuild in calendar 2026 by continuing to diversify investments and optimize the portfolio for credit quality.

Management Comments

• "We continued to build momentum across our alternative asset management platform despite market headwinds during the quarter."
• "While heightened volatility drove significant unrealized losses in our core portfolio investments and weighed on reported results, we remain focused on disciplined execution."
• "With significant liquidity, a healthy balance sheet, and a lower cost of capital, we believe GECC remains well-positioned to rebuild in calendar 2026."
• "Our CoreWeave-related investment continues to represent a compelling success despite significant market volatility during the quarter that contributed to our unrealized losses."
• "We continue to believe there is meaningful upside potential based on current trading levels [for CoreWeave-related investment]."
• "Underscoring our confidence in the business and our commitment to shareholder value [regarding share repurchases]."

Industry Context

StockSavvy.ai notes that Great Elm Group operates in the alternative asset management sector, which has faced significant market volatility, particularly impacting investment valuations. The company's focus on Industrial Outdoor Storage (IOS) through its Real Estate Ventures aligns with a growing niche in the real estate market. The challenges faced by its BDC, GECC, reflect broader credit market conditions, while strategic portfolio re-underwriting is a common response to such environments.

Comparison to Industry Standards

• The filing does not provide specific comparisons to comparable companies, projects, or industry benchmarks. StockSavvy.ai cannot provide a detailed assessment against global benchmarks based solely on the provided information.

Corporate Governance

Related Party Transactions

• Convertible notes include $17,418 thousand held by related parties as of December 31, 2025.
• Current portion of related party payables of $182 thousand as of December 31, 2025.
• Receivables from managed funds of $3,648 thousand as of December 31, 2025.

Stakeholder Impact

• Shareholders are negatively impacted by the significant net loss and decline in revenue, but positively impacted by the ongoing share repurchase program and management's stated commitment to shareholder value.
• Investors in the Great Elm Credit Income Fund are negatively impacted by the orderly wind-down of the fund due to recent portfolio events and market conditions.
• Customers and partners of GECC may experience changes as the BDC undergoes portfolio optimization and re-underwriting initiatives.

Next Steps

• Host a conference call on February 5, 2026, at 8:30 a.m. ET to discuss results.
• Leverage the balance sheet to find new investments.
• Grow assets under management and fee revenue.
• Deliver sustained, long-term value for shareholders.
• GECC management to continue re-underwriting and diversifying its portfolio to rebuild in calendar 2026.
• Actively market the third Monomoy build-to-suit development property.

Key Dates

Recommendation

While Great Elm Group reported a significant net loss driven by unrealized investment losses and a decline in revenue, the company is actively managing its portfolio, growing fee-paying AUM, and executing a substantial share repurchase program. The strategic consolidation of real estate ventures and the successful CoreWeave investment distributions provide some underlying strength. However, the overall financial performance for the quarter is weak, and the wind-down of the Credit Income Fund is a concern. A 'hold' recommendation is appropriate as investors should monitor the effectiveness of GECC's portfolio re-underwriting and the performance of new real estate developments against continued market volatility before making further investment decisions.

Keywords

Great Elm Group, GEG, Alternative Asset Manager, Financial Results, Q2 2026, Net Loss, AUM, FPAUM, Share Repurchase, CoreWeave, Real Estate Ventures, Monomoy BTS, Industrial Outdoor Storage, IOS, GECC, Business Development Company, Investment Losses, Adjusted EBITDA