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Operator
Ladies and gentlemen, thank you for standing by, and a welcome to the Great Elm Group Fiscal 2022 First Quarter Financial Results Conference Call. At this time, all participants are in a listen-only mode, and at the speaker presentation, there will be a question-and-answer session. At this time, I will turn the call over to the company's representative, Adam Pryor, so you may begin.
Adam Pryor
Thank you. Good morning, everyone. Thank you for joining us for the Great Elm Group's fiscal first quarter 2022 earnings conference call. As a reminder, this conference call is being recorded on Friday, November 12, 2021. If you would like to be added to our distribution list, you can email investorrelations at greatelmcap.com, or you can sign up for alerts directly on our website at 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 is the press release that was disseminated to announce the quarterly results. I'd like to call your attention to the customary Safe Harbor language regarding forward-looking information. Also, please note that nothing in today's call constitutes an offer to sell or solicitation of offers to purchase our securities. Today's conference call includes forward-looking statements and projections, 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 projections. Great Elm Group does not undertake to update its forward-looking statements unless required by law. To obtain copies of SEC filings, please visit Great Elm Group's website under financial information and select SEC filings. For those of you who might not be familiar with Great Elm Group, I'd like to take a moment to review a general structure and strategy. Great Elm is a holding company, and our objective is to create shareholder value through the collective efforts driving our two verticals, operating companies and investment management, each of which employ a distinct strategy. In operating companies, we currently manage Great Elm Durable Medical Equipment, or DME, a distributor of respiratory care equipment and supplies. In investment management, we seek to increase the assets under management both in Great Elm Capital Corp., the publicly traded BBC, and in other investment vehicles managed by Great Elm Capital Management, or GECM. Hosting this call today is Peter Reed, Great Elm Group's Chief Executive Officer. With that, I'd like to turn the call over to Peter. Please go ahead, Pete. Welcome, everyone, and thank you for joining us today. I'm joined this morning by our President and COO, Adam Kleinman, and our CFO, Brent Pearson. I will begin with a general overview and key highlights for the quarter, and Brent will discuss our financial results in greater detail, and then I'll return for closing remarks. This was a solid quarter for Great Elm Group. We increased sales and reported profits within our operating company business at DME, grew assets under management in the investment management business, and continued to make progress on building a specially financed continuum of lending at GECC. After a period of investment into the DME platform, we were pleased to announce the AMPM acquisition in March. In addition, we completed the acquisition of MedOne in August and reported strong quarterly results for our DME business despite the challenges of a relatively slow return to normal for our operations following the pandemic conditions over the past year. On the investment management side, revenue for the quarter was slightly higher due to increases in the average assets on which such fees are calculated. At quarter end, GECC had total invested assets of $246.7 million, with $99.4 million of net asset value, or $3.70 per share. GECC declared a quarterly cash dividend of $0.10 per share for its first quarter ending March 31, 2022, which represents a yield of 10.8% on September 30, NAV. GECC deployed over $179 million in new investments in the first nine months of 2021 with an increasingly diversified investment mix as we seek to rotate the portfolio into what we believe to be higher quality credits, primarily comprised of secured loans, bonds, and preferred equity, as well as investments in specially financed businesses uncorrelated to the corporate credit portfolio. Importantly, The strategy of building a continuum of lending continued during the quarter with the acquisition of Lenders Funding, which purchases, participations, and factoring in asset-based lending transactions. Lenders Funding has over 20 years of experience providing capital to lenders in the specially financed space, increasing our visibility into the broader specially financed market, as well as providing proprietary overflow opportunities for GECC. We are constantly analyzing the most effective methods to grow our specially financed platform further, given the results produced by our specially financed investments to date. For the first time since GECM took over management of the BDC, specially financed represented the largest percentage of the overall portfolio. Our overall goal is to create an ecosystem where we can provide solutions to small businesses at varying stages in their development. Finally, we made a strategic minority investment in Sharp Alpha, which is a private fund seeking to address a large addressable market for sports betting companies seeking to buy and license technology. We feel this was an excellent opportunity to benefit from a dynamic and growing sector. With that, I'll turn it over to Brent to discuss our financial results for the quarter in more detail, and then I'll return for a few closing remarks. Brent?
Peter Reed
Thanks, Pete. I'll provide a brief overview and, of course, welcome all of you to review our filings in greater detail or reach out to our team with questions you may have. Before I get started, I wanted to highlight the adoption of recent accounting guidance, which we believe enhances the usefulness of our financial reporting. We adopted ASU 2020-06 on July 1st, 2021. Among other changes, this ASU simplifies the accounting for convertible instruments by eliminating the separation of the cash conversion feature on our convertible notes that were issued in February 2020. Under the full retrospective method of adoption, we have recast our previously reported financial information in accordance with the new standard, which eliminated approximately $700,000 in annual non-cash interest expense and improves the usefulness of our financial statements. The footnotes in our recently filed Form 10-Q provide additional information on this accounting change. Moving on to our results. During the quarter ended September 30th, 2021, we reported consolidated revenue of $16.5 million, net income from continuing operations of $0.1 million, and adjusted EBITDA of $4.3 million. For the same period last year, we reported consolidated revenue of $15.4 million, net loss from continuing operations of $3.8 million, and adjusted EBITDA of $1.9 million. Bradelm reports the results of each of our two operating segments, including operating companies and investment management, as well as unallocated general corporate activity. We'll begin the review with operating companies. For the fiscal first quarter, DME generated $15.6 million in revenue compared to $14.6 million for the same period last year. The increase in revenues was driven by strong and continued organic growth in resupply sales, as well as from contributions from recent acquisitions AMPM and MedOne. Great Elm's DME operations reported net income of $2.1 million in comparison to a net loss of $0.5 million in the prior year period. This comparison is impacted by 2.3 million in employee retention credits claimed under the CARES Act during the current quarter, whereas no CARES Act stimulus was received in the prior comparable quarter. In addition, gross margins increased through the favorable sales mix, vendor pricing, and efficiency initiatives. Adjusted EBITDA was 5.1 million compared to 2.8 million in the same period last year. Next. turning to investment management. For the fiscal first quarter, investment management reported total revenue of $1.0 million compared to $0.8 million during the same period in the prior year. Revenue for the quarter was slightly higher due to increases in the average assets on which such fees are calculated. Adjusted EBITDA was $0.1 million in the fiscal 2022 first quarter compared to $0.2 million during the same period in the prior year. Adjusted EBITDA for the quarter was impacted primarily by increased employee-related costs and professional fees related to investment management growth initiatives. Moving on to our general corporate segment. For the fiscal first quarter, Great Elm's general corporate segment recognized $0.2 million in revenue compared to $0.1 million in revenue during the same period in the prior year. Revenue increased as a result of increased management fees earned from DME, along with management fees earned from GEG's majority-owned subsidiary, Forest Investments Inc., under a management agreement that was put into place in connection with the JPMorgan financing transactions in December 2020. General corporate adjusted EBITDA for the current quarter was negative 1.0 million compared to negative 1.1 million during the same period in the prior year. Great Elm continues to focus on rationalizing our corporate overhead to put us in the best position to execute our strategy. We ended the quarter with a healthy liquidity position, including $21.8 million in cash. This concludes my financial review of the quarter, and I'll turn it back to Pete for closing remarks.
Adam Pryor
Thanks, Brent. Overall, our first quarter has been a positive start for the fiscal year for Great Elm. We believe that the solid performance of our operating company and investment management businesses, together with our corporate simplification efforts, leave us well positioned for future growth. In closing, I will comment on a topic that many of you who have been following us know well, and that is the extent to which our team is aligned with our shareholders and their ownership of Great Elm. Employees and directors, including funds under their management, collectively own or manage 8.1 million shares, or approximately 30% of Great Elm's outstanding shares. With that, we will turn the call over to the operator to open for questions.
Operator
Thank you, sir. At this time, I would like to remind everyone to ask a question, please press star and then 1 on your telephone keypad. And again, that is star 1, and we will pause for a moment to compile the Q&A roster. And the first question will come from the line of Brian Alexich of Granite Investments.
Brian Alexich
Good morning, guys. How are you today? Good morning, Brian. Doing well, thank you. Good. Just a quick question on, you know, how we should, you know, think about what GEG is going to be doing going forward, right? Your call is always focus on everything that has already happened, which, you know, I guess is great, but, you know, I think shareholders, certainly me, are curious about, you know, just what strategy or what to expect going forward. And I think, you know, if you look at the stock price, right, the market is kind of reflecting that nobody knows what to expect. Is there anything you can share with us today about You know, what are you doing differently since you've exited the real estate segment, kind of where you're going to focus your capital allocation, et cetera?
Adam Pryor
Sure. We're pretty restricted as to what we can say there, but I'll do my best. So I think if you look at the two, we had three segments when we started the calendar year. Now we have two. Of those two segments, our DME business, after a long period of investment to build out a platform, has resumed acquisitions and is growing organically post coming out of the pandemic. We believe we've significantly increased the value of our business, and we're keenly aware that that does not seem to be reflected in the share price. We are focused on maximizing the value of that business, and that could include more organic growth. It could include, we expect that it will, could include more attractive add-on acquisitions, but we believe we've built something there that's very valuable, and we're focused on maximizing that. In the investment management business, similar concept. We're focused on growing GECC and adding other vehicles that have long-duration capital into our management to increase the scale, revenue, and profits of that business. That's probably as close to what we can say, but slightly different approaches, but looking to maximize value of both of those segments, albeit potentially in different ways.
Brian Alexich
So, you know, as we think about profit or, sorry, about maximizing value, right, for something like DME, I mean, is it going to be the sort of thing where you just kind of keep rolling up, you know, related businesses until, you know, someone, you know, you know, comes along and scoops up your business? Or, I mean, do you expect that business will IPO at some point once it gets to a certain size?
Adam Pryor
It's tough to say in the future. I don't think that we would anticipate standing that up as a separate publicly owned company. I think our team's done a good job of increasing value there. And I think that at some point someone will recognize that value.
Brian Alexich
Okay. Then if I can ask one more on your investment management segment. You know, you say that you're looking at, you know, long-duration capital opportunities. I mean, does that mean you guys are looking at, you know, starting new sorts of funds, or that you're looking at acquiring management rights to – either BDCs or closed-end funds or, you know, other existing investment managers?
Adam Pryor
Yes, to both of those. We're focused on doing both of those. Okay. We think that's a really attractive business and certainly enhanced by our tax attributes as we can get that through a certain point of scale.
Brian Alexich
Are you able to comment on, you know, what your sort of pipeline looks like quarter to quarter? Nothing specific, but, you know, how many deals are you guys looking at? How many, you know, you maybe, you know, how many of those get kind of tossed out right away, what your criteria might be, and then, you know, how much you guys actually do a significant amount of due diligence on?
Adam Pryor
I probably can't go into all of the specifics there, but we are very busy right now looking at transaction opportunities.
Brian Alexich
Okay. All right. I guess that will have to do. Thanks for taking my questions, and have a good rest of the day.
Adam Pryor
Thank you, Brian. Take care.
Operator
And again, ladies and gentlemen, please press star 1 for questions at this time. And at this time, sir, there are no further questions in the queue. Would you like to proceed with closing remarks?
Adam Pryor
Thank you again for joining us today. We look forward to speaking to you again next quarter.
Operator
This concludes today's conference call. Thank you for your participation.
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