Great Elm Group, Inc. (GEG) Q1 2024 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by. My name is Cheryl, and I'll be your conference operator today. At this time, I'd like to welcome everyone to the Great Elm Capital Group Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions] Thank you. I would now like to turn the call over to Adam Yates. Please go ahead.

Good morning, everyone. Thank you for joining us for Great Elm Group's Fiscal First Quarter 2024 Earnings Conference Call. As a reminder, this conference call is being recorded on Thursday, November 9, 2023. If you would like to be added to our distribution list, you can e-mail geginvestorrelations@greatelmcap.com or 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, 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. 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. 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.

Welcome, everyone, and thank you for joining us. Great Elm Group had a strong start to fiscal 2024. We continue to grow our fee-paying assets under management on both a sequential quarter and year-over-year basis. We generated net income of nearly $3 million and more than doubled our EBITDA on a year-over-year basis. We also ended the quarter with over $75 million in cash and marketable securities to deploy across our growing alternative asset management platform. In particular, I want to highlight that this is our first clean quarter of reporting as a streamlined asset management business. In the fiscal first quarter, we have a clear year-over-year comparison that includes the results of managing the Monomoy Properties REIT vehicle acquired in May 22. Additionally, we no longer see the impact of our divested businesses. Going forward, investors can easily measure our progress toward our strategic growth plans. With legacy operations behind us, our team is purely focused on asset management in the first fiscal quarter. Working to expand the platform, we made great strides organically to launch a private credit fund in fiscal second quarter and continued the execution of our novel build-to-suit projects in our Monomoy BTS business. Inorganically, we continue to actively evaluate multiple strategic M&A opportunities and have a robust pipeline due diligence in the second quarter. Focusing on our two anchor vehicles, Monomoy and GECC, we have driven both fee revenue growth and AUM growth at both platforms. We will continue to accelerate the momentum at these core businesses and are pleased with our strong performance during the quarter. GECC once again had a milestone quarter, generating an ROE of approximately 8.5% in the quarter and 25% over the first nine months of 2023. As a result, GECC will pay incentive fees to GEG for the second consecutive quarter of $1.3 million and remains well positioned to continue paying GEG incentive fees moving forward. Also, net asset value at GECC grew to $12.88 per share, up 5% from last quarter and up over 15% calendar year-to-date. It has been a remarkable transformation at GECC and a testament to the successful portfolio repositioning that Matt Kaplan and his team have accomplished over the past 18 months. Meanwhile, Monomoy remained very active in the quarter as the REIT closed on two properties with key tenants totaling nearly $6 million, amended four existing tenant leases for meaningful term extensions and executed five-year renewal options at three properties. In addition, our build-to-suit business continued development of its first two projects in Florida and Mississippi. We expect to complete these projects within this fiscal year. With a significant pipeline of over 130 property requirements, a new build-to-suit project specifications from key customers, we remain excited for Monomoy REIT and BTS to continue growing profitably in fiscal 2024. During the fiscal first quarter, we saw our book value grow to approximately $2.25 per share. At current market prices, the Board of Directors and I believe our stock is undervalued and as such, I'm pleased to announce that our Board has approved a $10 million common stock repurchase program. Moving ahead, the three goals we outlined in May remain clear, improve our profitability, expand our platform and grow our AUM. As you can see from our fiscal first quarter 2024 performance, we are making progress on all fronts. We remain focused to scale our core business, launch new fund products and utilize our strong liquid balance sheet to deploy capital into new platform opportunities with compelling risk-adjusted returns. With that, I'll turn it over to 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 questions. In review of continuing operations, quarter-to-date revenues grew 78% year-over-year to $3.3 million, driven by increased fee-paying assets under management related to GECC and Monomoy as well as the recognition of incentive fees from GECC for the second consecutive quarter, which were approximately $1.3 million for the first fiscal quarter. AUM of $641 million as of September 30, 2023, was up modestly from the prior quarter end and up 3% from prior year quarter end, while fee paying AUM grew to $451 million, up 1% quarter-to-date and up 5% from the prior year quarter-end. For the quarter, Great Elm Group generated net income from continuing operations of $2.8 million compared to a net loss from continuing operations of $9.5 million in the prior year period. Adjusted EBITDA for the quarter was $1.7 million, more than double the $0.7 million generated in the prior year period. As of September 30, Great Elm Group had approximately $76 million of combined cash and marketable securities 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 position and highlights our book value per share of approximately $2.25, up from $2.16 as of June 30. This concludes my financial review of the quarter. With that, we will turn the call over to the operator to open for questions.

[Operator Instructions] : :

It looks like there's no questions at this time. I would like to turn the call back over to Jason Reese.

Thank you again for joining us today, and we look forward to speaking with you in the future.

Ladies and gentlemen, that concludes today's call. You may now disconnect. Thank you.