Great Elm Group, Inc. (GEG) Q1 2026 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call reveals several negative indicators: a net loss of $7.9 million, unrealized losses in investments, and an adjusted EBITDA loss. Despite revenue growth and a stock repurchase program, the debt refinancing increases overall debt. The Q&A session highlights concerns about unclear management responses and lack of guidance on Monomoy REIT. These factors suggest a negative market reaction, likely between -2% to -8%.
Key Financial Performance
Fee-paying assets under management (AUM) Grew 9% year-over-year to approximately $594 million or 10% on a pro forma basis to approximately $601 million. The growth was driven by strategic partnerships and investments, including Kennedy Lewis Investment Management's commitment of up to $150 million in leverageable capital to Monomoy REIT.
Revenue Fiscal first quarter revenue was $10.8 million compared to $4 million for the prior year period, marking a significant increase. The rise was primarily driven by $7.4 million in revenue recognized from the sale of the second Monomoy BTS build-to-suit property.
Net loss Reported a net loss of $7.9 million for the quarter versus net income of $3 million a year ago. The loss was primarily due to unrealized losses on GEG's investments in GECC common stock and the CoreWeave-related investment.
Adjusted EBITDA Adjusted EBITDA for the quarter was a loss of $0.5 million compared to a gain of $1.3 million in the prior year period. This decline was attributed to unrealized losses on investments.
Cash balance Ended the quarter with approximately $53.5 million in cash, providing flexibility to support growth initiatives and take advantage of opportunities.
Monomoy BTS property sale Sold its second build-to-suit development property in Canton, Mississippi for over $7 million, generating a gain of over $0.5 million.
Monomoy Construction Services revenue Contributed approximately $700,000 in revenue during its second full quarter since inception.
Investment management and property management fees Increased 12% over the prior year period, driven by growth in fee-paying AUM and growing rental income.
GECC equity proceeds Raised approximately $28 million in equity proceeds, including $15 million from a private placement and $13 million through its at-the-market equity program.
GECC debt refinancing Refinanced $40 million of 8.75% notes due in September '28 with $57.5 million of 7.75% notes due in December '30, reducing annual cash interest expense by 100 basis points and extending debt maturity.
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Operating Highlights
Monomoy BTS property sale: Sold its second build-to-suit development property in Canton, Mississippi for over $7 million, generating a gain of over $0.5 million.
Monomoy Construction Services: Completed its second full quarter since inception, contributing approximately $700,000 in revenue.
CoreWeave-related investment: Received over 100% of the initial $5 million investment in distributions to date, with meaningful upside potential despite recent volatility.
Partnership with Kennedy Lewis Investment Management: Committed up to $150 million in leverageable capital to Monomoy REIT to accelerate real estate platform expansion.
Woodstead Value Fund investment: Purchased 4 million newly issued shares of GEG common stock at $2.25 per share, raising approximately $9 million in equity capital.
Monomoy REIT property acquisitions: Deployed over $13 million to acquire 7 new properties at attractive cap rates and acquired a land parcel for tenant expansion under a new 10-year lease.
Fee-paying AUM growth: Increased 9% year-over-year to approximately $594 million, or 10% on a pro forma basis to $601 million.
GECC refinancing: Refinanced $40 million of 8.75% notes with $57.5 million of 7.75% notes, reducing annual cash interest expense by 100 basis points and extending debt maturity.
Stock repurchase program: 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.
Expansion of credit and real estate platforms: Focused on growing fee-paying AUM and scaling platforms to create enduring shareholder value.
Integration of construction capabilities: Fully integrated construction capabilities in-house to offer tenants turnkey solutions and capture more value through the property life cycle.
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Risk or Challenges
Exposure to First Brands bankruptcy: GECC held exposure to First Brands through syndicated loans, which traded down sharply before filing for bankruptcy. This negatively impacted NAV and led to placing First Brands investments on nonaccrual.
Unrealized losses in CoreWeave investment: Recent volatility in CoreWeave stock price contributed to unrealized losses, impacting GEG's net loss for the quarter.
Net loss for the quarter: GEG reported a net loss of $7.9 million, primarily due to unrealized losses on investments in GECC common stock and CoreWeave-related investments.
Adjusted EBITDA loss: Adjusted EBITDA for the quarter was a loss of $0.5 million compared to a gain of $1.3 million in the prior year period, indicating operational challenges.
Debt refinancing risks: GECC refinanced $40 million of 8.75% notes with $57.5 million of 7.75% notes, reducing interest expense but increasing overall debt levels.
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Guidance & Outlook
Fee-paying Assets Under Management (AUM): Expected to grow as the company focuses on expanding its credit and real estate platforms.
Real Estate Platform Expansion: Monomoy REIT to accelerate expansion with up to $150 million in leverageable capital from Kennedy Lewis Investment Management.
Build-to-Suit (BTS) Development: Construction on the third BTS property nearing completion with a robust pipeline of development opportunities.
Alternative Credit Business: GECC positioned to invest in income-generating opportunities in the coming quarters due to strong balance sheet and ample deployable cash.
Stock Repurchase Program: Expanded by $5 million to $25 million in total, with $14.1 million remaining capacity as of November 11.
Fiscal 2026 Focus: Company remains focused on growing fee-paying AUM, scaling credit and real estate platforms, and translating strategic progress into sustained financial performance.
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Shareholder Return Plan
Stock Repurchase Program: In July, the Board expanded the stock repurchase program by $5 million to $25 million in total. Through November 11, the company 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 continued confidence in the company's long-term value and are considered a highly accretive use of capital.
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Key Q&A
Q:What is the current overhead and expense structure of Great Elm Group, and where is the company in its growth trajectory?
A:Jason Reese stated that the company has built the necessary back-office infrastructure, which involves high fixed costs and low marginal costs going forward. The bulk of fixed costs are already in place, and the focus is now on growth. The company has made significant moves in real estate and capital raising for the REIT and BDC, and they do not anticipate needing to grow costs significantly in the future. They are positioned to leverage their current structure for growth.
Q:What information is available about the Monomoy REIT, and how can one learn more about it?
A:Jason Reese explained that Monomoy REIT is a private REIT with limited public information. It focuses on industrial outside storage space and has been operating for approximately 11 years, owning over 150 buildings. The REIT's largest tenants are United Rentals and Sunbelt Rentals. The company has also integrated a construction business to handle property development in-house. While it could become a public vehicle in the future, it is not yet at the desired scale. Reese offered to arrange a separate call for more in-depth information.
Q:Review of Unclear Management Responses
A:Management avoided providing specific details about the Monomoy REIT's financial performance or timeline for potentially going public. The response included general information about the business but lacked clarity on key metrics or strategic plans.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
AUM credit
AUM income
Brands bankruptcy
Brands investment
Brands loan
CEO today
Canton Mississippi
Conference Instructions
Construction BTS
CoreWeave stock
Elm credit
Elm progress
Elm warrant
Estate Ventures
GEG Monomoy
GEG stock
Group Conference
Woodstead
ability
basis point
capacity
credit estate
date
debt
equity capital
equity program
estate platform
expansion
inception
interest
investment vehicle
market equity
note
offer solicitation
price
rate
repurchase
share GEG
sheet cash
GEG Transcript
Great Elm Group, Inc. (GEG) Q3 2026 Earnings Call Transcript
Unknown5-8
The company's earnings call presents mixed signals. Positives include a strong share repurchase program and revenue growth. However, significant risks such as increased net loss, negative adjusted EBITDA, and decreased AUM pose concerns. The lack of Q&A suggests possible avoidance of scrutiny. Overall, the balance between strategic initiatives and financial challenges results in a neutral sentiment.
Great Elm Group, Inc. (GEG) Q2 2026 Earnings Call Prepared Remarks Transcript
Unknown2-5
Despite a focus on growth initiatives and a significant share repurchase program, the company faces challenges. Revenue declined, and there were substantial unrealized losses due to market volatility, particularly affecting investments in GECC and CoreWeave. The net loss and adjusted EBITDA loss further highlight financial struggles. While the share repurchase program is positive, the overall financial health and market conditions suggest a negative sentiment, likely leading to a stock price decrease in the coming weeks.
Great Elm Group, Inc. (GEG) Q1 2026 Earnings Call Transcript
Unknown11-13
The earnings call reveals several negative indicators: a net loss of $7.9 million, unrealized losses in investments, and an adjusted EBITDA loss. Despite revenue growth and a stock repurchase program, the debt refinancing increases overall debt. The Q&A session highlights concerns about unclear management responses and lack of guidance on Monomoy REIT. These factors suggest a negative market reaction, likely between -2% to -8%.
Great Elm Group, Inc. (GEG) Q4 2025 Earnings Call Transcript
Positive9-3
The earnings call highlights several positive developments: a strong increase in net income, a 140% revenue growth excluding one-time sales, increased dividends, and a robust stock repurchase program. The strategic partnership and credit business expansion further boost prospects. Despite potential market risks, the absence of Q&A concerns suggests confidence in management. The positive financial performance and strategic initiatives suggest a likely stock price increase of 2% to 8% over the next two weeks.
GEG Slides
Great Elm Group Q2 2026 slides: $16.5M loss amid strategic platform expansion2026-02-04
Great Elm Group Q1 2026 slides: Revenue doubles despite swing to net loss2025-11-12
Great Elm Group Q4 2025 slides: Record results amid strategic partnerships2025-09-02
Great Elm Group Q3 2025 slides: 15% revenue growth amid strategic expansion2025-05-07
GEG Report
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