GEGGL: Diversified Alternative Asset Manager Delivering Steady Growth

Published on September 24, 2024 | Ticker: GEGGL

Great Elm Group, Inc. (NASDAQ: GEGGL) is a diversified alternative asset management company that has been steadily growing its platform and delivering solid financial results. The company focuses on building a scalable portfolio of long-duration and permanent capital vehicles across credit, real estate, specialty finance, and other alternative strategies.

Business Overview

At the core of Great Elm Group's business are two key investment management platforms - Great Elm Capital Corp. (NASDAQ: GECC), a publicly-traded business development company, and Monomoy UpREIT, a private real estate investment trust with a portfolio of diversified net leased industrial assets. As of March 31, 2024, the combined assets under management of these entities was approximately $688.0 million.

Great Elm Group demonstrated its ability to grow its fee-paying assets under management, which reached $461 million as of March 31, 2024, up 5% from the prior year quarter. This growth translated into strong financial performance, with the company reporting total revenues of $8.9 million for the nine months ended March 31, 2024, a 58% increase compared to the same period in the prior year.

Financials

The company's net income for the nine months ended March 31, 2024 was $32.9 million, while its operating cash flow was -$2.4 million and free cash flow was -$2.4 million for the same period. Great Elm Group's balance sheet remained strong, with approximately $69 million in combined cash and marketable securities as of March 31, 2024, providing ample liquidity to support its growth initiatives.

One of the key drivers of Great Elm Group's recent performance was the strong performance of its GECC platform. GECC continued to generate incentive fees for Great Elm Group, with the company recording $2.7 million in incentive fees from GECC for the nine months ended March 31, 2024. GECC's net asset value grew to $12.99 per share as of December 31, 2023, and the BDC declared a special dividend in the quarter.

Great Elm Group's Monomoy UpREIT platform was also a source of steady growth, with the REIT acquiring three new properties and extending leases with existing tenants during the fiscal second quarter. The company's build-to-suit real estate development business also continued to make progress on its two construction projects in Florida and Mississippi, which are expected to be completed within the current fiscal year.

Recent Developments

In addition to its core investment management platforms, Great Elm Group actively expanded its alternative asset management capabilities. During the fiscal second quarter, the company launched the Great Elm Credit Income Fund, a private fund focused on direct lending, syndicated credit, and special situations. The company seeded the fund with a $6 million investment, and is focused on raising third-party capital to grow the platform.

Great Elm Group's management team also actively evaluated strategic M&A opportunities to further expand the company's alternative asset management capabilities. The recent $24 million equity capital raise at GECC, which included a $6 million investment by Great Elm Group, is a testament to the company's ability to leverage its strong balance sheet and relationships to drive growth.

Outlook

Looking ahead, Great Elm Group remains focused on its three key strategic priorities: enhancing its financial performance, broadening its platform, and increasing its assets under management. The company's solid execution on these fronts, combined with its strong liquidity position and pipeline of growth opportunities, position it well to continue delivering value for shareholders.

Conclusion

Overall, Great Elm Group's diversified alternative asset management platform, strong financial performance, and strategic initiatives make it an interesting investment opportunity in the rapidly evolving alternative asset management space.

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