Q2 2026 Great Elm Group Inc Earnings Call
Second quarter conference call.
Operator: Greetings, welcome to the Great Elm Group fiscal 2026 Q2 Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star 0 on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Adam Yates, Managing Director. Thank you, sir. You may begin.
At this time all participants are in a listen only mode.
A question and answer session will follow the formal presentation.
Anyone should require operator assistance during the conference. Please press star zero on your telephone keypad as.
As a reminder, this conference is being recorded it is now my pleasure to introduce your host Adam Yates managing director. Thank you Sir you may begin.
Good morning, everyone. Thank you for joining us for Great Elm group's fiscal 2026 second quarter earnings Conference call. As a reminder, this conference call is being recorded on Thursday February five 2026.
Adam Yates: Good morning, everyone. Thank you for joining us for Great Elm Group's fiscal 2026 Q2 Earnings Conference Call. As a reminder, this conference call is being recorded on Thursday, 5 February 2026. If you would like to be added to our distribution list, you can email geginvestorrelations@greatelmcap.com. You can sign up for alerts directly on our website, www.greatelmgroup.com. The slide presentation accompanying today's conference call and webcast can be found on our website under Events and Presentations. 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. Today's conference call includes forward-looking statements. We ask that you refer to Great Elm Group's filings with the SEC for important factors that could cause actual results to differ materially from these statements.
If you'd like to be added to our distribution list you can email <unk> investor relations at Great Uncapped Dot Com, where you can sign up for alerts directly on our website Www Dot Greyhound group dotcom.
The slide presentation accompanying today's conference call and webcast can be found on our website under events and presentations 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.
Today's conference call includes forward looking statements and we ask that you refer to great Elm group's filings with the SEC for important factors that could cause actual results to differ materially from these statements.
<unk> group does not undertake to update its forward looking statements unless required by law.
In addition, during today's call management will refer to certain non-GAAP financial measures.
Adam Yates: Great Elm Group does not undertake to update its forward-looking statements unless required by law. In addition, during today's call, management will refer to certain non-GAAP financial measures. Reconciliations to the most comparable financial measures are included in our earnings release. To obtain copies of our SEC filings, please visit Great Elm Group's website under Financial Information and select SEC Filings. Today's comments do not constitute an offer to sell or a solicitation of an offer to buy interests in any investment vehicle managed by Great Elm or its affiliates. Any such offer or solicitation will only be made pursuant to the applicable offering documents for such investment vehicle. On the call today, we have Jason Reese, CEO; Adam Kleinman, President and General Counsel; Nichole Milz, COO; and Keri Davis, CFO. I will now turn the call over to Jason Reese, CEO.
Reconciliations to the most comparable financial measures are included in our earnings release.
To obtain copies of our SEC filings. Please visit Greyhound group's website under financial information and select SEC filings.
Today's comments do not constitute an offer to sell or solicitation of an offer to buy interest in any investment vehicle managed by <unk> or its affiliates.
Any such offer or solicitation will only be made pursuant to the applicable offering documents for such investment vehicle.
On the call today, we have Jason Riis, CEO, Adam Kleinman, President and General Counsel, Nicole Mills, COO and carry Davis CFO I will now turn the call over to Jason Riis CEO.
Good morning, and thank you for joining us today.
<unk> made meaningful progress during the quarter to advance our strategic goals and want to acknowledge the reality of the environment. We operated in during the quarter.
Jason Reese: Good morning. Thank you for joining us today. While Great Elm made meaningful progress during the quarter to advance our strategic goals, I want to acknowledge the reality of the environment we operated in during the quarter. Fiscal Q2 2026 unfolded against a challenging backdrop for BDCs, marked by heightened volatility, meaningful pressure on public valuations, and concerns over private credit quality deterioration. As a result, we recorded significant unrealized losses during the quarter, particularly related to our investment in GECC common stock, investments in special purpose vehicles related to GECC common stock, and our CoreWeave-related investment. While these valuation changes materially impacted our reported results for the quarter, it's important to emphasize that they were primarily non-cash in nature and driven by market-based movements.
Fiscal second quarter, 'twenty, six unfolded against a challenging backdrop for bdcs marked by.
Heightened volatility meaningful pressure on public valuations and concerns over private credit quality deterioration.
As a result, we recorded significant unrealized losses during the quarter, particularly related to our investment in GE ECC common stock investments in special purpose vehicles related to GE ECC common stock and our core <unk> related investment.
While these valuation changes materially impacted our reported results for the quarter. It is important to emphasize that there were primarily noncash in nature and driven by market based movements.
Liquidity across the platform remained strong and our balance sheets at the holding company and both of our primary investment vehicles are well positioned to grow our platform and invest opportunistically as we move forward.
Jason Reese: Liquidity across the platform remains strong, and our balance sheets at the holding company and both of our primary investment vehicles are well-positioned to grow our platform and invest opportunistically as we move forward. Against that backdrop, Great Elm has executed operationally. We continued to advance our alternative asset management platform, expanding both our real estate and credit businesses, and grew fee-paying assets under management on a year-over-year basis. At the end of December, estimated assets under management stood at $740 million, while estimated fee-paying assets under management grew 4% year over year to approximately $561 million. Great Elm Real Estate Ventures had another strong quarter, marked by continued execution across the Monomoy platform.
Against that backdrop <unk> has executed operationally, we continued to advance our alternative asset management platform expanding both our real estate and credit businesses and grew fee paying assets under management on a year over year basis.
At the end of December estimated assets under management stood at $740 million, while estimated fee paying assets under management grew 4% year over year to approximately $561 million.
<unk> real estate ventures had another strong quarter marked by continued execution across the <unk> platform <unk> Bts completed its third design build property located in Florida and has begun actively marketing the property for sale with an expected exit in the second half of fiscal 2026.
Jason Reese: Monomoy BTS Corp. completed its third design build property located in Florida and has begun actively marketing the property for sale, with an expected exit in H2 of fiscal 2026. We are also engaged with a high-quality tenant on a fourth design build project and continue to see a robust and expanding pipeline of development opportunities supported by a broader tenant base. Monomoy Construction Services, LLC completed its third full quarter of operations, contributing approximately $400,000 in revenue. With construction capabilities now fully integrated in-house, we're able to deliver comprehensive turnkey solutions for tenants, capture additional value across the property lifecycle, and support disciplined execution as our project pipeline continues to scale. At Monomoy CRE, LLC, total investment management and property management fees increased over 15% from the prior year period, driven by the growth in fee-paying AUM and higher gross rents.
We are also engaged with a high quality tenant on a fourth design build project and continue to see a robust and expanding pipeline of development opportunities supported by a broader tenant base.
Mana mine construction services completed its third full quarter of operations contributing approximately $400000 in revenue.
With construction capabilities now fully integrated in house were able to deliver comprehensive turnkey solutions for tenants capture additional value across the property lifecycle and support disciplined execution as our project pipeline continues to scale.
As <unk> CRE total investment management and property management fees increased over 15% from the prior year period, driven by the growth in fee paying AUM and higher gross rents.
During the quarter motto mortgage REIT acquired three properties at attractive cap rates for approximately $8 $9 million, including development costs, while continuing renovations and design build initiatives further enhanced by the capabilities of Mcs.
Jason Reese: During the quarter, Monomoy REIT acquired three properties at attractive cap rates for approximately $8.9 million, including development costs, while continuing renovations and design build initiatives further enhanced by the capabilities of MCS. Turning to our alternative credit business, it's important to acknowledge that the BDC experienced a challenging finish to calendar 2025, driven largely by CoreWeave stock declining nearly 50% in the quarter, CLO equity underperforming the broader credit markets in the quarter, and continued dispersion in leveraged credit, including first-lien impacts. GECC plans to report earnings in early March and will provide additional details at that time. That said, we believe we have taken actions to position the platform for success as we move into 2026.
Turning to our alternative credit business, it's important to knowledge that the BDC experienced a challenging finish to calendar 'twenty five driven largely by core restock declining nearly 50% in the quarter CLO equity underperforming the broader credit markets in the quarter and continued dispersion in leverage credit, including first brand impact.
<unk>.
<unk> plans to report earnings in early March and we will provide additional details at that time.
That said, we believe we have taken actions to position the platform for success as we move into 'twenty six.
Fortified the team in September by hiring a new head of research with over 25 years of credit analysis experience.
Jason Reese: We fortified the team in September by hiring a new head of research with over 25 years of credit analysis experience. During the quarter, the investment team re-underwrote the entire portfolio and continued to work deliberately to further diversify our investments, with a particular focus on senior secured opportunities. The team worked to optimize the portfolio to improve overall credit quality, trimming or exiting high-risk positions. These steps were taken with a long-term mindset and position the BDC with a stronger foundation from which to rebuild in 2026. While syndicated credit spreads remain near historic heights, we have redoubled our effort to shift the portfolio towards private transactions that offer stronger lender protections, tighter covenants, and reduce the risk of liability management transactions. We believe this approach is increasingly important given the lender-on-lender violence and structural erosion we continue to see in broadly syndicated markets.
During the quarter the investment team and re underwrote the entire portfolio and continue to work deliberately to further diversify our investments with a particular focus on senior secured opportunities.
The team worked to optimize the portfolio to improve overall credit quality trimming or exiting higher risk positions.
These steps were taken with a long term mindset and position the BDC with a stronger foundation from which to rebuild in 2026.
While syndicated credit spreads remain near historic tight.
We have redoubled, our efforts to shift the portfolio towards private transactions that offer stronger lender protections tighter covenants and reduce the risk of liability management transactions. We believe this approach is increasingly important given the lingering lender violence and structural erosion, we continue to see in broadly syndicated markets.
The BDC maintained significant liquidity, providing ample flexibility as opportunities arise as a reminder, in the prior quarter GE ECC materially lowered its cost of capital through the refinancing of its highest cost debt.
Jason Reese: The BDC maintains significant liquidity, providing ample flexibility as opportunities arise. As a reminder, in the prior quarter, GECC materially lowered its cost of capital through the refinancing of its highest cost debt. Taken together, these initiatives leave GECC in a position of strength with a healthy balance sheet, meaningful deployable cash, and additional capacity to invest in attractive income-generating opportunities. In our private credit strategy, the Great Elm Credit Income Fund, launched in November 2023, began an orderly wind down in response to recent portfolio events and market conditions. As the fund had not yet reached scale, we decided to begin monetizing investments in a disciplined manner. The fund recorded a net return of over 20% for the 26 months from inception through December 31st, 2025.
Taken together these initiatives leave GE, ECC and a position of strength with a healthy balance sheet meaningful deployable cash and additional capacity to invest in attractive income generating opportunities.
In our private credit strategy the great Elm credit income fund launched in November 'twenty, three began an orderly wind down in response to recent portfolio, a bench and market conditions.
As the fund had not yet reached scale, we decided to begin monetizing investments in a disciplined manner.
<unk> recorded a net return of over 20% for the 26 months from inception through December 31 2025.
Outside of our core business, our core <unk> related investment continues to be a compelling success. Despite significant market volatility during the quarter from September 30 to December 31, <unk> common stock declined nearly 50%.
Jason Reese: Outside of our core business, our CoreWeave related investment continues to be a compelling success despite significant market volatility during the quarter. From 30 September to 31 December, CoreWeave's common stock declined nearly 50%, resulting in market-based valuation movements that generated $6.7 million of unrealized losses in our investment, offset by $2.2 million of realized gains from distributions. Notwithstanding this volatility, we have received distributions totaling approximately 115% of our original $5 million investment to date, and we continue to believe there is meaningful upside potential based on current trading levels. Since 31 December, CoreWeave stock price has rebounded significantly, reinforcing our conviction in the long-term value of the investment. In addition, we recorded net unrealized mark-to-market losses of $4 million and $3 million in our GECC common stock and related SPV investments, respectively.
<unk> and market based valuation movements that generated $6 7 million of unrealized losses in our investment.
Offset by $2 $2 million of realized gains from distributions.
Notwithstanding this volatility we've received distributions totaling approximately 115% of our original $5 million investment to date and we continue to believe there is meaningful upside potential based on current trading levels.
Since December 31 core restock prices rebounded significantly reinforcing our conviction in the long term value of the investment.
In addition, we recorded net unrealized mark to market losses of $4 million and $3 million and our gene ECC common stock and related SPV investments respectively.
These valuation changes echo border market trading levels for Bdcs, and we expect recovery in time, AEG ECC rebuilds its NAV.
Jason Reese: These valuation changes echo broader market trading levels for BDCs. We expect recovery in time as GECC rebuilds its NAV. We also continue to deploy capital in a disciplined manner to enhance shareholder value. Our share repurchase program has been highly effective since inception, underscoring our conviction in the intrinsic value of the business and our long-term outlook. During the quarter, we repurchased approximately 1.1 million shares of GEG stock at an average price of $2.47 per share. From inception of the program through 3 February, Great Elm has repurchased approximately 6.4 million shares at an average price of $1.99 per share, representing a total capital deployment of $12.7 million. In aggregate, these repurchases equate to nearly 20% of our shares outstanding, materially enhancing per share value for shareholders.
We also continued to deploy capital in disciplined manner to enhance shareholder value our share repurchase program has been highly effective since inception, underscoring our conviction in the intrinsic value of the business and our long term outlook.
During the quarter, we repurchased approximately one 1 million shares of GE GE stock at an average price of $2 47 per share.
From inception of the program through February three great home has repurchased approximately $6 4 million shares at an average price of $1 99 per share representing a total capital deployment of $12 $7 million.
In aggregate these repurchases equate to nearly 20% of our shares outstanding.
They are really enhancing per share value for shareholders.
As we enter the second half of fiscal 2026, Graham is well positioned with $51 $2 million in cash providing us with ample flexibility to support our growth initiatives and take advantage of attractive opportunities sourced via our sophisticated network.
Jason Reese: As we enter the H2 of fiscal 2026, Great Elm is well-positioned with $51.2 million in cash, providing us with ample flexibility to support our growth initiatives and take advantage of attractive opportunities sourced via our sophisticated network. We remain focused on growing fee-paying AUM, scaling our alternative credit and real estate businesses, and sourcing new investment opportunities. Looking ahead, we seek to expand our platform and add accretive, differentiated product offerings with attractive risk-adjusted return profiles. With that, I'll now turn the call over to our CFO, Keri Davis.
We remain focused on growing fee paying AUM scaling our alternative credit and real estate businesses and sourcing new investment opportunities looking ahead, we seek to expand our platform and accretive differentiated product offerings with attractive risk adjusted return profiles.
With that I'll now turn the call over to our CFO Terry Davis.
Thank you Jason I will provide a brief overview of the quarter and of course welcome all of you to review our filings in greater detail our reach out to our team with any questions.
Keri Davis: Thank you, Jason. I will 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 questions. Fiscal second quarter revenue was $3 million compared to $3.5 million for the prior year period. The decrease was primarily driven by $0.6 million in property sales and $0.5 million of incentive fees in the prior year period that were not recognized in the current quarter, offset by $0.4 million in new construction management revenue from MCS acquired in February 2025. Estimated AUM and fee-paying AUM totaled approximately $740 million and $561 million, respectively, with fee-paying AUM up 4% from the prior year quarter end.
Fiscal second quarter revenue was $3 million compared to $3 5 million for the <unk>.
Prior year period. The decrease was primarily driven by zero point $6 million from property sales and <unk> 5 million.
<unk> in the prior year period that were not recognized in the current quarter offset by <unk> four.
$4 million in.
New construction management revenue from SCS acquired in February 2025.
Estimated AUR and fee paying AUM totaled approximately $740 million.
$61 million, respectively with be paying AUR up 4% from the prior year quarter Ed.
We reported a net loss of $16 5 million for the quarter.
About $1 million a year.
Keri Davis: We reported a net loss of $16.5 million for the quarter versus net income of $1.4 million a year ago. Our loss for the quarter was primarily driven by unrealized losses of $14.4 million and realized gains of $2.2 million from GEG's investments, including the company's investments in consolidated funds. This compares to an unrealized gain from the company's investments in the prior year period of $2.4 million, including its investments in consolidated funds.
Check out our loss for the quarter was primarily driven by unrealized losses of $14 4 million and realized gains of $2 $2 million.
Absolutely.
Including the company investments and consolidated product.
This compares to an unrealized gain from the company's investments in the prior year period at $2 4 million.
Including that principal.
Holiday and five.
The unrealized losses from Get's investments in the recent quarter were largely it's going to be the volatile market based valuation movements, including $4 million related to GEC Carnival stock $3 million related to special purpose vehicle.
Keri Davis: The unrealized losses from GEG's investments in the recent quarter were largely attributable to market-based valuation movements, including $4 million related to GECC common stock, $3 million related to special purpose vehicles invested in GECC common stock, and $6.7 million related to our CoreWeave related investment. Adjusted EBITDA for the quarter was a loss of -$1.6 million compared to a gain of $1 million in the prior year period. As of 31 December 2025, we held approximately $51.2 million of cash on our balance sheet to deploy across our growing alternative asset management platform. Please refer to slide 6 for a summary of our financial position and book value per share of approximately $0.79. This concludes my financial review of the quarter. With that, we will turn the call over to the operator to open for questions.
The common stock and $6 million related to our core <unk> related investments.
Adjusted EBITDA for the quarter was a loss of $1 6 million compared to a gain of $1 million in the prior year period.
As of December 31, 2025, we held approximately $51 $2 million of cash on our balance sheet to deploy across our growing alternative asset management platform.
Please refer to slide six for a summary of our financial position and book value per share of approximately $1 79.
This concludes my financial review of the quarter with that we will turn the call over to the operator to open for questions.
Thank you we will now conduct a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad.
Operator: Thank you. We will now conduct a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Once again, that's star one to ask a question at this time. One moment while we poll for questions. Once again, ladies and gentlemen, to ask a question, please press star one on your telephone keypad. There are no questions at the moment. I would like to turn it back to management for closing comments.
Confirmation tone will indicate your line is in the question queue you.
You May press star two to remove yourself from the queue.
For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
Once again Thats star one to ask a question at this time.
One moment, while we poll for questions.
Once again, ladies and gentlemen to ask a question. Please press star one on your telephone keypad.
Yeah.
There are no questions at the moment I would like to turn it back to management for closing comments.
Thank you again for joining us today, we remain confident in the strategic direction of our business. We continue to advance our credit and real estate platforms strengthen our balance sheet and deliver sustained value for our shareholders over time, we look forward to keeping you updated on our progress. Thank you for your time.
Jason Reese: Thank you again for joining us today. We remain confident in the strategic direction of our business. We continue to advance our credit and real estate platforms, strengthen our balance sheet, and deliver sustained value for our shareholders over time. We look forward to keeping you updated on our progress. Thank you for your time and continued support.
Continued support.
This concludes today's teleconference. You may disconnect. Your lines at this time. Thank you for your participation and have a great day.
Operator: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a great day.