Great Elm Group, Inc. (GEG) had a strong fiscal year 2024, with significant growth in assets under management (AUM) and revenue. The company’s fiscal fourth quarter earnings call highlighted strategic milestones, including capital raises for its business development company (BDC), Great Elm Capital Corp (GECC), and successful new platform businesses. Despite a net loss for the year due to accounting rules on investments, the management team expressed confidence in the temporary nature of these losses. Key takeaways included a tripling of revenue year-over-year to $9 million in the fiscal fourth quarter, growth in fee-paying AUM by 22%, and a net loss of $0.6 million for the quarter. Adjusted EBITDA was $1.2 million for the quarter, and the company ended the year with approximately $58 million in cash and marketable securities.
Looking ahead, Great Elm Group expects continued profitability and growth in its real estate platform, particularly with the build-to-suit (BTS) business. The company aims to accelerate growth in fiscal 2025 by leveraging its core alternative credit and real estate businesses. The management team remains focused on expanding the platform and increasing AUM with attractive risk-adjusted returns in mind.
Notable achievements include the raising of over $90 million in fresh capital for Great Elm Capital Corp, a gain of over $1 million from the Monomoy BTS platform’s first property sale, and a solid start for the Great Elm Credit Income Fund (GECIF).
However, the company recorded a net loss of $0.9 million for the year due to unrealized losses on investments. Financial accounting rules led to marking the company’s $9 million investment in SPVs to a lesser value, contributing to the net loss. The Q&A session provided further insights into the company’s strategic initiatives and financial performance.
Great Elm Group’s fiscal 2024 achievements reflect a strategic focus on expanding its asset management business and driving shareholder value. With a strong balance sheet and a clear vision for growth, the company is well-positioned to capitalize on its alternative credit and real estate platforms in the coming fiscal year.
Investors should consider a comprehensive view of the company’s financial health and market performance. GEG’s market capitalization is $54.3 million, with positive revenue growth but a low gross profit margin. The company’s price performance has seen a decline over the past year, and it is not profitable over the last twelve months. Investors should be aware of these factors when evaluating GEG’s financials and market performance. I am excited to share a number of significant achievements from this fiscal year. Our BDC, Great Elm Capital Corp, successfully raised over $90 million in fresh capital between February and July 2024, resulting in a nearly 30% growth in fee-paying assets under management compared to the previous year. These capital raises were made possible by an innovative structure that provided $36 million of equity capital for GECC. The success of these capital raises can be attributed to our strategic relationships with institutional investors and GECC’s improved performance.
In February, GECC raised $24 million of equity capital through Great Elm Strategic Partnership I, LLC, with GEG and institutional investors contributing $6 million and $18 million, respectively. This was followed by a second equity capital raise in June, where GECC raised $12 million at NAV through Prosper Peak Holdings, LLC, with GEG and other institutional investors contributing $3 million and $9 million, respectively. Additionally, in April, GECC completed an underwritten public offering of $34.5 million of 5-year notes and subsequently issued an additional $22 million of notes through a registered direct offering in July.
These successful capital raises have allowed us to expand GEG’s ability to earn fee revenue from GECC, leading to substantial recurring asset management fee revenue and potential incentive fee revenue from the incremental capital. Furthermore, GECC’s completion of an underwritten public offering of $34.5 million of 5-year notes at improved financing rates demonstrates our commitment to further scaling GECC.
Looking ahead, we believe that our BDC is well-positioned to generate attractive risk-adjusted returns for its shareholders and to continue raising capital in fiscal 2025. Our real estate platform, Monomoy BTS, also had a milestone fourth quarter, with the completion of two inaugural properties and a successful property sale in June. We anticipate continued profitability in fiscal 2025 as we focus on selling our second property and developing our third contracted design-build project.
In addition to these achievements, Great Elm launched complementary products and businesses to expand its alternative credit and real estate platform offerings. The launch of the Great Elm Credit Income Fund (GECIF) in November 2023 has shown promising results, and we plan to raise capital for the fund in fiscal 2025. We also launched Monomoy BTS Construction Management to meet tenant demand and have already begun earning fees from this business.
Overall, Great Elm Group experienced a strong fiscal fourth quarter in 2024, with growth in fee-paying assets under management, revenue, and adjusted EBITDA. We ended the quarter with nearly $60 million in cash and marketable securities, which we plan to deploy across our growing alternative asset management platform. We are pleased with the performance of our credit and real estate verticals and look forward to further accelerating momentum in these key businesses. The Joint Venture (JV) is starting to receive significant distributions from Collateralized Loan Obligation (CLO) investments, indicating a source of growing income for Great Elm Capital Group (GECC) in the upcoming quarters. GECC’s performance in fiscal 2024 enabled the payment of $2.7 million in incentive fees to Great Elm Group (GEG) over the last year. With successful portfolio repositioning and expansion into CLO products, GECC is well-positioned to continue generating fee revenues for GEG, contributing to increased fee revenue as the Business Development Company (BDC) expands.
Monomoy Real Estate Investment Trust (REIT) demonstrated strong performance in fiscal 2024. The REIT deployed $25 million to acquire 13 properties, amended 16 tenant leases, executed renewal options, and saw rental rate increases in 70% of its portfolio. Additionally, Monomoy successfully refinanced a debt facility, freeing up $10 million for growth capital. The build-to-suit (BTS) business achieved a milestone with its first property sale, with plans for a second sale in fiscal 2025 and a third project under development, indicating growth potential for GEG in BTS and construction management.
As Great Elm Group works towards enhancing financial performance, expanding its platform, and growing assets under management, the achievements in fiscal 2024 reflect a commitment to repositioning in the alternative asset management space. With a focus on core alternative credit and real estate businesses, the addition of differentiated products, and evaluation of strategic initiatives, GEG is poised for growth in fiscal 2025. The fiscal fourth quarter saw a tripled revenue year-over-year, an increase in assets under management, and positive adjusted EBITDA, indicating progress towards these goals.
In conclusion, Great Elm Group is optimistic about its future and remains focused on accelerating growth in fiscal 2025. The financial review for the quarter highlighted a net loss from continuing operations, driven by an unrealized loss on an investment, and an increase in AUM and fee-paying AUM. With cash and marketable securities on hand for deployment, GEG is well-positioned for future opportunities. Thank you for joining us today, and we look forward to continued discussions in the future.