Great Elm (GEG) - 2026 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Fiscal second quarter revenue was $3 million, down from $3.5 million in the prior year, primarily due to $0.6 million in property sales and $0.5 million of incentive fees not recognized in the current quarter [14] - The company reported a net loss of $16.5 million for the quarter compared to a net income of $1.4 million a year ago, driven by unrealized losses of $14.4 million [15] - Adjusted EBITDA for the quarter was a loss of $1.6 million compared to a gain of $1 million in the prior year period [15] - Estimated assets under management (AUM) stood at approximately $740 million, with fee-paying AUM up 4% year-over-year to approximately $561 million [14][15] Business Line Data and Key Metrics Changes - Great Elm Real Estate Ventures had a strong quarter, with total investment management and property management fees increasing over 15% from the prior year, driven by growth in fee-paying AUM and higher gross rents [7] - Monomoy Construction Services contributed approximately $400,000 in revenue during its third full quarter of operations [7] - The alternative credit business faced challenges, particularly with CoreWeave stock declining nearly 50% in the quarter, impacting overall performance [8] Market Data and Key Metrics Changes - The fiscal second quarter unfolded against a challenging backdrop for Business Development Companies (BDCs), marked by heightened volatility and pressure on public valuations [4] - CoreWeave's Common Stock declined nearly 50%, resulting in significant unrealized losses, although distributions received totaled approximately 115% of the original investment [11] Company Strategy and Development Direction - The company is focused on growing fee-paying AUM, scaling alternative credit and real estate businesses, and sourcing new investment opportunities [13] - Great Elm aims to expand its platform and add differentiated product offerings with attractive risk-adjusted return profiles [13] - The company has fortified its team and is optimizing its portfolio to improve overall credit quality, focusing on senior secured opportunities [9] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenging environment for BDCs and emphasized that unrealized losses were primarily non-cash and driven by market movements [4] - The company remains confident in its strategic direction and is focused on advancing its credit and real estate platforms while strengthening its balance sheet [18] Other Important Information - The share repurchase program has been effective, with approximately 1.1 million shares repurchased at an average price of $2.47 per share during the quarter [12] - As of December 31, 2025, the company held approximately $51.2 million in cash, providing flexibility for growth initiatives [15] Q&A Session Summary - There were no questions during the Q&A session, and management reiterated confidence in the strategic direction of the business and commitment to delivering sustained value for shareholders [17][18]