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spk03: Thank you for standing by. My name is Rochelle and I will be your conference operator today. At this time, I would like to welcome everyone to the Great Elm Group's fiscal third quarter 2024 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. Thank you. I would now like to turn the call over to Adam Yates, Managing Director. Please go ahead.
spk01: Hello, everyone. Thank you for joining us for Great Elm Group's Fiscal Third Quarter 2024 Earnings Conference Call. As a reminder, this conference call is being recorded on Thursday, May 9, 2024. If you would like to be added to our distribution list, You can email GEGInvestorRelations at GreatElmCap.com, or you can sign up for alerts directly on our website, 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 well as in the press release that was disseminated to announce the quarterly results. Today's conference call includes forward-looking statements, 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 statements. Great Elm Group does not undertake to update its forward-looking statements unless required by law. In addition, during today's call, management will refer to certain non-GAAP financial measures. Reconciliations to the most comparable financial measures are included in our earnings release. To obtain copies of our SEC filings, please visit Great Owned Group's website under Financial Info and select SEC Filings. On the call today, we have Jason Reese, CEO, Adam Kleinman, President and General Counsel, Nicole Mills, COO, and Kerry Davis, CFO. I will now turn the call over to Jason Reese, CEO.
spk02: Welcome, everyone, and thank you for joining us today. Before discussing third quarter results, I want to highlight several milestone achievements in our alternative credit and real estate platform businesses where we are growing assets and driving increased profitability. First, our BDC Great Own Capital Corp. accomplished two capital raising initiatives. In February, GECC raised $24 million of equity capital at net asset value from an SPV. GEG supported this capital raise by investing $6 million in conjunction with an institutional investor's $18 million investment in a special purpose vehicle, which in turn invested $24 million of new GECC common shares. We are working with our SPV partner to broaden their relationship with Gradome, which we believe will provide strategic benefits over time for both parties. As I have noted before, accomplishing this capital raise at NAV was a huge success for Great Elm Grove and clear evidence of our commitment to further scale GECC. In April, GECC completed an underwritten public offering of $34.5 million of five-year notes at a more than 50 basis point spread improvement as compared to GECC's August 2023 note issuance. Overall, these actions have resulted in our BDC raising nearly $60 million of fresh capital, contributing to significant growth in our assets under management. Importantly, these capital raises increase GEG's basis for earning fees from GECC and enable us to receive both significant recurring asset management fee revenue as well as potential incentive fee revenue on this incremental capital. The innovative investment structure embedded in this transaction, specifically utilizing an SPV to purchase equity in the BDC, also provides us with a template for future capital-raising endeavors and investment opportunities. It should be noted that the financial accounting rules guided us to mark our $6 million investment in the SPV to a material lesser value. This unrealized loss is the source of the vast majority of our net losses quarter. We believe this unrealized loss is temporary and will reverse over time as the SPV receives distributions from the BDC. Subsequent to quarter end, our real estate platform business, Monomoy BTS, signed a contract to sell its first ill-to-see property. This sale is expected to close in the fiscal fourth quarter and will create value for our shareholders. We believe that Monomoy BTS will be able to generate additional shareholder value over time through our anticipated sale of our second build-to-suit property in the fiscal first quarter of 2025 and by executing on our considerable BTS pipeline. Also in April, in response to tenant demand, we launched Monomoy BTS Construction Management, a consulting business that allows our customers to leverage our seasoned team to oversee in-house construction projects through owner representative services. This new business provides an accretive revenue stream to Great Elm without adding significantly to our operating costs. We are encouraged by the initial demand and growth opportunities for this new venture. In addition to these key strategic developments, Great Elm Group had a solid fiscal third quarter of 2024. We continue to grow our fee-paying assets under management on both a sequential quarter and year-over-year basis, including the net proceeds from GECC's April capital raising initiatives. Fee-paying AUM and AUM increased 19% and 14% from the prior year quarter ends, respectively. We generated total revenues of $2.8 million, a 47% increase from the prior year period. an adjusted EBITDA of $1.2 million compared to an adjusted EBITDA loss of $0.3 million for the prior year period. We ended the quarter with nearly $70 million in cash and marketable securities to deploy across our growing alternative asset management platform. Moving to our two anchor fee-paying vehicles, GECC and Monomoy, we have increased AUM and sustained fee revenue across both platforms. We are pleased with the continued performance of both during the quarter and seek to further accelerate the momentum at these key businesses. GECC had another strong quarter with NII exceeding the regular quarterly dividend. GECC will pass $700,000 of incentives to GEG the fourth consecutive quarter of incentive fees, bringing GEG's cash incentive fees from GECC to approximately $3.7 million over the last 12 months. Total fees earned by GEG from GECC in the quarter were $1.6 million. GECC remains well positioned to continue delivering fee revenues to GEG on the back of its capital raising initiatives successful portfolio repositioning, and the recent expansion into CLO products. Combined, these initiatives should drive increased fee revenue as the BDC continues to grow and perform. Monomoy REIT also continues to make significant progress. Calendar year to date, the REIT deployed $11.6 million of capital to acquire six properties with in-place leases, amended two existing tenant leases for meaningful term extensions and expansion projects, and executed renewal options at six properties with key tenants. Lastly, Monomoy successfully refinanced a sizable debt facility without any material impact to the annual debt service and freed up an additional $10 million of capital for portfolio growth. As referenced earlier, our built-to-suit business continues to make meaningful progress on its two construction projects in Florida and Mississippi. With our inaugural two BTS projects nearing completion, we have developed a considerable pipeline of future BTS projects. We're extremely encouraged by Great Elm's future growth with BTS and construction management and its potential for creating shareholder value in fiscal 2025 and beyond. I'd like to conclude my comments by tying back to the three driving goals we've consistently outlined in prior quarters. Enhance our fiscal performance, expand our platform, and grow our AUM. I am extremely pleased with our continued progress towards these goals. Our accomplishments underscore our commitment to reposition Great Elm in the alternative asset management space by growing our core businesses and adding accretive products. Additionally, we continue to actively evaluate multiple strategic initiatives. Moving ahead, we remain steadfast in pursuing opportunities to expand our businesses and allocate capital to promising new platform opportunities, offering attractive risk-adjusted returns. We remain very excited for the future of Gradome. With that, I'll turn it over to Kerry.
spk05: Thank you, Jason. I'll provide a brief overview of the quarter and, of course, welcome all of you to review our filings in greater detail or reach out to our team with any questions. Fiscal third quarter revenues grew by 47% year-over-year to $2.8 million, driven by increased fee-paying assets under management related to GECC and Monomoy and the recognition of incentive fees from GECC for the fourth consecutive quarter, generating approximately $0.7 million during the fiscal third quarter. AUM of $688 million as of March 31st was up 5% from the prior quarter end and up 9% from the prior year quarter end, while fee paying AUM grew to $493 million, up 7% quarter to date and up 13% from the prior year quarter end. Inclusive of the net proceeds from GECC's April capital raising initiative, AUM was $716 million, up 9% from December 31st, and 14% from the prior year quarter end in fee-paying AUM was $521 million, up 13% from December 31, and 19% from prior year quarter end. Great Elm Group generated a net loss from continuing operations of $2.9 million for the quarter as compared to half a million dollars for the prior year period. As previously mentioned, this quarter's loss was primarily due to the unrealized loss of Great Elm's investment in Great Elm Strategic Partnerships. Adjusted EBITDA for the quarter was $1.2 million compared to an adjusted EBITDA loss of $0.3 million in the prior year period. As of March 31st, we had approximately $69 million of combined cash and marketable securities on our balance sheet to deploy across our growing alternative asset management platform. Please refer to slide six that provides an overview of our financial position and highlights our book value per share of approximately $2.15. This concludes my financial review of the quarter. With that, we will turn the call over to the operator to open up for questions.
spk03: Thank you. We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star 1 again. If you are called upon to ask your question and are listening via loudspeaker on your device, Please pick up your handset and ensure that your phone is not on mute when asking your question. Once again, please press star 1 to join the queue.
spk04: Once again, if you would like to ask a question, please press star 1 on your telephone keypad.
spk03: It seems that we don't have any questions from the line. I will now turn the conference back over to Jason Reif, CEO, for the closing remarks.
spk02: Thank you again for joining us today. We remain extremely excited about Great Elm's future and look forward to speaking with you.
spk03: Thank you. That concludes today's conference call. Thank you all for joining. You may now disconnect. Thank you. That concludes today's conference call.
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