Great Elm Group, Inc. (GEG) Q3 2026 Earnings Call Transcript

Access earnings results, analyst expectations, report, slides, earnings call, and transcript.

Overview

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.

Key Financial Performance

Revenue Fiscal third quarter revenue was $3.4 million compared to $3.2 million in the prior year period, a 7% increase, driven primarily by growth in MCS construction management fees.

Fee-paying AUM Estimated fee-paying AUM was $528 million as of March 31, 2026, representing a decrease of 7% compared to the prior year period.

AUM Estimated AUM was $744 million as of March 31, 2026, representing a decrease of 3% compared to the prior year period.

Net Loss We reported a net loss of $13.5 million for the quarter compared to a net loss of $4.5 million a year ago. The change was primarily driven by $9.8 million of unrealized losses, including consolidated funds, the majority of which were associated with the company's investments in GECC common stock and related SPVs.

Adjusted EBITDA Adjusted EBITDA for the quarter was negative $1.6 million compared to positive $0.5 million in the prior year period.

Cash and Cash Equivalents As of March 31, 2026, we held approximately $45.5 million of cash and cash equivalents on our balance sheet to deploy across our growing alternative asset management platform.

Monomoy CRE Investment and Property Management Fees Monomoy CRE generated approximately $1 million of investment and property management fees in the quarter, growing more than 20% from the prior year period.

Monomoy REIT Acquisitions Monomoy REIT closed on 5 acquisitions in the quarter, deploying approximately $28 million and surpassing its full year 2025 acquisition activity.

Monomoy Construction Services Revenue Monomoy Construction Services completed its fourth full quarter of operations, adding $0.7 million in total revenue.

CoreWeave-related Investment Distributions Cumulative distributions of $6.8 million to date, exceeding the initial $5 million investment.

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Operating Highlights

Great Elm Credit Income Fund: The fund, launched in November 2023, began an orderly wind down last quarter. Third-party investors exited the fund, leaving Great Elm Group's $7 million investment. The fund generated a net return of over 20% from inception through March 31, 2026.

Monomoy BTS: Delivered a third development property in Florida to an investment-grade tenant with rent commencing in March. Advanced its fourth design-build project in Texas following the land acquisition.

Portfolio Rotation Strategy: Exiting select investments and redeploying capital into predominantly senior secured positions. First lien investments now comprise nearly 75% of GECC's corporate credit portfolio, the highest level in recent history.

Proprietary Sourcing Effort: Closed 3 transactions sourced through institutional partners during the quarter, with another proprietary private investment closed in April and an additional investment expected soon.

Balance Sheet Strengthening: Substantially delevered the capital structure by calling and repurchasing all near-term funded debt, leaving no debt maturities until 2029. This reduces refinancing risk and enhances disciplined capital deployment.

Real Estate Ventures: Monomoy CRE generated $1 million in investment and property management fees, growing over 20% from the prior year. Monomoy REIT closed on 5 acquisitions, deploying $28 million, surpassing 2025 acquisition activity.

Capital Allocation: Board approved a $15 million increase in stock repurchase program, bringing total authorization to $40 million. Repurchased 1.4 million shares during the quarter, representing over 4% of shares outstanding.

Leadership Changes: Jason Reese assumed the role of Executive Chairman in March and was appointed CEO on May 4. Focus shifted to protecting and growing NAV, strengthening oversight, and reinforcing accountability.

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Risk or Challenges

Heightened volatility in the BDC sector: The company faced significant volatility in the BDC sector, driven by broader concerns around private credit quality, resulting in $9.8 million of unrealized losses primarily related to holdings in GECC common stock and related SPVs.

Decreased fee-paying AUM and AUM: Fee-paying AUM and AUM decreased by 7% and 3%, respectively, compared to the prior year period, which could impact revenue generation and growth potential.

Net loss increase: The company reported a net loss of $13.5 million for the quarter, a significant increase from the $4.5 million loss in the prior year period, primarily due to unrealized losses.

Negative adjusted EBITDA: Adjusted EBITDA for the quarter was negative $1.6 million, compared to positive $0.5 million in the prior year period, indicating operational challenges.

Private credit fund wind-down: The Great Elm Credit Income Fund began an orderly wind-down, with third-party investors exiting the fund, leaving only the company's $7 million investment, which may limit future income from this fund.

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Guidance & Outlook

Capital Structure and Debt Management: GECC has delevered its capital structure by calling and repurchasing all near-term funded debt, resulting in no debt maturities until 2029. This enhances the company's ability to deploy capital opportunistically.

Portfolio Strategy: The company is advancing its portfolio rotation strategy by exiting select investments and increasing portfolio quality. First lien investments now comprise nearly 75% of GECC's corporate credit portfolio, the highest level in recent history.

Proprietary Sourcing and Investments: Great Elm closed three transactions through institutional partners and one proprietary private investment in April. Another investment is expected to close soon. The focus remains on rigorous underwriting, portfolio diversification, and increasing cash-generative secured credit investments.

Real Estate Expansion: Monomoy REIT closed on five acquisitions in the quarter, deploying approximately $28 million. The platform is building a robust pipeline of build-to-suit opportunities, supported by strong execution and tenant satisfaction.

Capital Allocation and Share Repurchase: The Board approved a $15 million increase in the stock repurchase program, bringing total authorization to $40 million. Approximately $24.4 million of capacity remains, and the company intends to remain active in repurchasing shares at current valuation levels.

Future Growth Focus: The company aims to grow fee-paying AUM, scale alternative credit and real estate businesses, and source new investment opportunities. It seeks to expand its platform with differentiated investment solutions offering attractive risk-adjusted returns.

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Shareholder Return Plan

Share Repurchase Program: The Board approved a $15 million increase in the stock repurchase program, bringing the total authorization to $40 million. This marks the 10th consecutive quarter of share repurchases. During the quarter, approximately 1.4 million shares were repurchased, representing over 4% of shares outstanding, at an average price of $2.04 per share. Since inception, approximately 7.8 million shares have been repurchased at an average price of $2 per share, totaling $15.6 million deployed. Approximately $24.4 million of remaining capacity is available, and the company intends to remain active under the program at current valuation levels.

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Key Q&A

Q:Were there any questions asked during the Q&A session?

A:No, there were no questions asked during the Q&A session.

Q:What did Jason Reese emphasize in his closing comments?

A:Jason Reese emphasized confidence in the strategic direction of the business, the execution of credit and real estate platforms, the strength of the balance sheet, and disciplined actions for long-term success.

Q:Review of Unclear Management Responses

A:There were no questions asked during the Q&A session, so management did not avoid answering any questions.

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Earnings Word Cloud

The most frequently occurring keywords in this quarter's earning call

GEG Transcript

Great Elm Group, Inc. (GEG) Q3 2026 Earnings Call Transcript

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Great Elm Group, Inc. (GEG) Q2 2026 Earnings Call Prepared Remarks Transcript

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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

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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

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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 expansion

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Great Elm Group Q1 2026 slides: Revenue doubles despite swing to net loss

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Great Elm Group Q4 2025 slides: Record results amid strategic partnerships

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Great Elm Group Q3 2025 slides: 15% revenue growth amid strategic expansion

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GEG Report

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