Q3 2025 Great Elm Group Inc Earnings Call

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Speaker Change: Ladies and gentlemen, greetings and welcome to the great arm group fiscal 2025 third quarter conference call. At this time, all participants are in a listen on emotes. A brief question and answer session will follow the formal presentation.

Speaker Change: If anyone should require operator assistance during the conference, please press star and zero on your telephone keypad. As a reminder, this conference call is being recorded.

Speaker Change: It is now my pleasure to introduce your host, Adam Yates, managing director, please go ahead.

Speaker Change: Good morning, everyone. Thank you for joining us for Great Elm Group's fiscal third quarter 2025 earnings conference call. As a reminder, this conference call is being recorded on Thursday, May 8, 2025.

Speaker Change: If you would like to be added to our distribution list, you can email G-E-G Investor Relations at GreatOMCAP.com where you can sign up for alerts directly on our website www.GreatOMGroup.com.

Speaker Change: A link to the webcast is also available on our website as well as in the press release that was disseminated to announce the quarterly results.

Speaker Change: Today's conference call includes forward-looking statements and we ask that you refer to great-owned groups' filings with the SEC for important factors that could cause actual results to differ materially from these statements.

Speaker Change: Great Ong Group does not undertake to update its forward-looking statements unless required by law.

Speaker Change: In addition, during today's call, management will refer to certain non-GAAP financial measures. Reconciliation to the most comparable financial measures are included in our earnings release.

Speaker Change: Today's commons do not constitute an offer to sell or solicitation of an offer to buy interest in any investment vehicle managed by Great Elm or its affiliates.

Speaker Change: Any such offer or solicitation will only be made pursuant to the applicable offering documents for such investment vehicle.

Speaker Change: On the call today, we have Jason Reese, CEO , Adam Kleinman, President and General Counsel, Nicole Mills, COO, and Keri Davis, CFO . I'll now turn the call over to Jason Reese, CEO .

Speaker Change: Welcome, everyone, and thank you for joining us today. We delivered a solid fiscal third quarter 25 marked by significant year over year growth in both assets under management and revenues across our businesses.

Speaker Change: This momentum reflects our continued evolution into a streamlined alternative asset management business and strengthens our position to expand our core credit and real estate platforms as we execute on our long-term growth strategy.

Speaker Change: Among our recent highlights, in February , we launched the Minimally Construction Services, an Integrated, Full-Service Construction Business.

Speaker Change: with the Strategic Acquisition of Greenfield, CRE, a leading construction management company which was combined with our existing Monomoi BTS construction management business.

Speaker Change: We continue to grow our assets under management, increasing our fee-paying AUM by 15% on a year over your basis.

Speaker Change: We closed on the land purchase for our third built to sue property and made meaningful progress on our fourth project.

Speaker Change: We continued to repurchase shares at a meaningful discount to book value executing our $20 million by-back program.

Speaker Change: and we ended the quarter in a strong fiscal position with approximately $32 million in cash available to facilitate continued growth across our asset management platforms.

Speaker Change: Diving into the corridor in more detail, fee-paying assets under management continue to grow and reach the approximately $565 million representing a 15% increase over the prior year period.

Speaker Change: Primarily driven by our BDC Greydown Capital Corp, which raised approximately $147 million dollars through equity and debt issuances in calendar 2024.

Speaker Change: Notably, GEG has participated in three equity raises at GECC with a combined investment of approximately $12 million, facilitating an increase in fee-paying AUM at GECC of over 40%

Speaker Change: GECC also delivered strong results to kick off the first quarter of 2025 generating record total investment income of 12 and a half million dollars.

Speaker Change: driven by cash flows from its CLOJV with net investment income that exceeded its recently increased quarterly distribution.

Speaker Change: Notably, it was also the highest cash income quarter in the company's history, a testament to the strategic portfolio enhancements undertaken in the last two years.

Speaker Change: As you may have seen, this week, GECC launched an at-the-market offering to sell common shares at NAVER Better, which we expect will provide an additional avenue for growth in assets under management.

Overall, GECC's recent successes.

Speaker Change: further reinforce our growth strategy. The increased capital-based expands our fee-paying AUM, driving both higher recurring management fees and incentive fee potential.

Speaker Change: Notably, our base management fees from GECC grew over 40% year over year to $1.3 million and GECC is well-positioned to pay meaningful fees in the coming quarters.

Speaker Change: We're very pleased with the performance of GECC, marked by continued portfolio growth and increased cash distributions.

Speaker Change: GECC continues to deliver significant value to shareholders by expanding and diversifying its portfolio while leveraging its institutional quality infrastructure.

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Speaker Change: Chifting to our other products, Great Home Credit Income Fund, a private credit fund has delivered returns on the invested capital of approximately 13.9% net of fees since inception through March 2025. With these returns in track record, we are favorably positioned for future growth in the fund.

Speaker Change: Meanwhile, our real estate business, Monopoly, continues to execute and we're pleased to have closed on the land purchase for a third built to suit property, which we expect to complete during the county year.

Speaker Change: We also made meaningful progress on our fourth project as we progress through our growing pipeline of opportunities.

Speaker Change: Looking ahead, we anticipate continued profitability across the Monomoid platform as we remain committed to executing on these development projects to drive profitability and deliver value for both our tenants and shareholders.

Speaker Change: Further, building on the strategic growth initiatives, in February , we significantly expanded our real estate capabilities to the acquisition of Greenfield CRE, a leading construction management company and a longstanding partner of monomite.

Speaker Change: Greenfield has deep knowledge of our development projects, a strong understanding of our tenant needs and expectations, an approving track record of delivering on

Speaker Change: In connection with this transaction, we launched Monomoi Construction Services, or MCS, and combined the assets of Greenfield with the assets of our Monomoi BTS construction management consulting business.

Speaker Change: MCS meaningfully bolsters our real estate platform by creating a fully integrated full service construction vertical to serve our existing asset management entities. Our close relationship with the Greenfield team has made for a seamless integration with Monument.

Speaker Change: MCS also expands our owner-rept consulting services with third parties, a majority of which are sourced from existing relationships within the Monomoi ecosystem.

Speaker Change: This adds a creative revenue opportunities and enhances operational efficiencies through the economies of scale, delivering revenue and operational synergies from Greenfield

Speaker Change: With a large backlog and existing civil engineering and land planning talent, we are now able to offer an expanded range of services and fortify our overall real estate value proposition to our investors and clients.

Speaker Change: Additionally, Monomor Reed continues to execute and maintain solid activity throughout the quarter. We acquired a property for approximately $3 million during the quarter and continue to maintain a strong pipeline of transaction opportunities and open requirements from our tenants.

Speaker Change: Outside of our core businesses we've made significant progress in repurchasing GEG shares under our $20 million by that program.

Speaker Change: Through May 6th, 2025, we have repurchased approximately 4.8 million shares for $8.7 million at an average cost of $1.84 per share, representing approximately a 15% discount to the quarter in book value per share of $2.14.

Speaker Change: Before Keri reviews our financial results in more detail, I would like to note that the net loss in the quarter was primarily driven by unrealized losses related to our investments in core weave and G-E-C-C shares, both marked the lower quarter end amid broader market volatility.

Speaker Change: We remain highly confident in these investments and fully expect the losses to reverse over time as market conditions stabilize.

Speaker Change: While uncertainty can drive asset price volatility in the near term, it can also create very attractive entry points into investment opportunities.

Speaker Change: Our strong liquidity position with approximately $32 million of cash at quarter-end.

puts us in an advantageous position when market volatility presents.

Speaker Change: In addition, unique investments like the Convertible Preferred Financing, we provided for Core, we've prior to its public listing, and the Private Fund, managed by Stone Ridge Asset Management, a best-in-class re-inference manager, are a testament to the strength of our source and capabilities.

Speaker Change: Both through our experience, Board of Directors, and our network of investment partners more broadly.

Speaker Change: Our ample liquidity combined with our unique sourcing capabilities enables us to support future growth initiatives across our alternative asset management platform.

Speaker Change: Inclosing, we're pleased with the performance of our credit and real estate businesses this quarter. The acquisition of Greenfield C.R.H. Crankins are real estate capabilities while providing revenue and cost synergies.

and GECC's continued growth demonstrates a momentum in credit.

As always, we remain focused on our core objectives

Enhance in financial performance, expanding our platform and growing AUM.

Speaker Change: Looking ahead, we will continue to evaluate strategic opportunities to expand our businesses and add accretive differentiated product offerings with attractive risk-adjusted return profiles. With that, I'll turn it over to Keri.

Keri: Thank you Jason. I'll provide a brief overview of the quarter and of course welcome all of you to review our filings in greater detail or reach out to our team with any question.

Keri: fiscal third quarter revenues grew 15% to $3.2 million from the prior year period, primarily driven by increased revenues from real estate project management fees and rental income, as well as increased management fees from GECC, attributable to a fee paying AUM growth.

Keri: AUM and fee-paying AUM totaled approximately $768 million and $565 million, respectively up 12% and 15%, respectively from the prior year quarter end.

Keri: Radome Group's generated net loss of 4.5 million for the quarter as compared to net loss of 2.9 million for the prior year period. The net loss was primarily driven by unrealized losses related to certain investment positions marked down at quarter end, which we expect to reverse over time as market conditions stabilized.

Keri: Adjusted EBITF for the quarter with $0.5 million compared to $1.2 million in the prior year period.

Keri: As of March 31st, we had approximately $32 million in cash on our balance sheet to deploy across our growing alternative asset management platform. Please refer to slide 6 that provides an overview of our financial positions and highlights that book value per share of approximately $2.14.

Keri: This concludes my financial review of the quarter. With that, we will turn the call over to the operator to open for question.

Speaker Change: Thank you. Ladies and gentlemen, we will now be conducting a question and answer session. If you would like to ask a question, please press star and one on your telephone keypad.

Speaker Change: A confirmation tone will indicate your line is in the question queue.

Speaker Change: You may press star and two if you would like to remove your questions from the queue.

Speaker Change: For participants using speaker equipment which may be necessary to pick up your handset before pressing the star keys.

Speaker Change: Ladies and gentlemen, we will wait for a moment while we poll for questions.

Speaker Change: As there are no questions, I would now like to hand the conference over to Jason Reese, CEO for closing comments.

Speaker Change: Thank you again for joining us today. We look forward to speaking with you in the future.