Great Elm Group Revenue Falls to $3.3 Million as Net Loss Narrows

Revenue at Great Elm Group (NASDAQ: GEG) fell to roughly $3.3 million in its fiscal 2027 first quarter from $10.8 million a year earlier, a 69% decline driven almost entirely by the roll-off of a one-time property sale. The net loss narrowed to approximately $4.1 million from $7 million, according to CFO Keri Davis, who attributed the improvement primarily to lower net realized and unrealized investment losses.

CEO Jason Reese acknowledged on the November 5 earnings call that results fell short of expectations. He was more diplomatic in his formal remarks: "We remain encouraged by the underlying momentum across our businesses and confident in our strategic direction."

Why did revenue collapse while losses shrank?

The arithmetic is straightforward. The prior-year quarter included about $7.4 million in revenue from the sale of a build-to-suit property, Davis said. Strip that out and the underlying business looks less dramatic, though not exactly buoyant. Fee-paying assets under management stood at approximately $564 million as of September 30, down 5% year over year. Total assets under management fell 3% to about $760 million. The company ended the quarter with $43.2 million in cash and cash equivalents.

What is pressuring the credit business?

Great Elm Capital Corp., the company's business development company (a listed vehicle that lends to mid-sized businesses), remains focused on rebuilding net asset value. GECC's net asset value declined by $0.55 per share during the quarter to $7.40, including a $3.3 million reduction in the fair value of its collateralized loan obligation (a structured fund holding pooled leveraged loans) joint venture investment.

Reese did not sugarcoat it: "We're not satisfied with these results and remain committed to strengthening portfolio quality, preserving liquidity, and improving investment performance."

The balance sheet tells a more disciplined story. GECC held roughly $50 million of liquidity at quarter end, consisting of $6 million in cash and money market investments plus $44 million available under its revolving credit facility. It retired $6.5 million of its highest-cost debt during the quarter, bringing calendar-year-to-date debt reduction to nearly $40 million. No debt maturities loom until 2029, which buys management time.

Can Monomoy carry the growth story?

In real estate, Monomoy REIT completed four property acquisitions during the quarter, deploying approximately $8 million of committed capital including estimated future capital expenditures and tenant improvements. Reese said the REIT has built its largest acquisition pipeline to date, representing nearly $90 million in potential investments. Great Elm is pursuing capital-raising initiatives for the vehicle; if successful, these efforts could accelerate acquisitions and lift fee-paying assets and recurring fee revenue.

The fee line is already moving. Monomoy CRE generated approximately $1.1 million in investment and property management fees during the quarter, up about 18% year over year. Reese said recurring fees should become a more important contributor to earnings as the REIT grows.

The build-to-suit business is nearing completion of its fourth development project and acquired two properties during the quarter for roughly $4 million, followed by a third after quarter end for approximately $5 million. Monomoy Construction Services generated about $700,000 in quarterly revenue.

What about distributions and buybacks?

Great Elm received approximately $700,000 in distributions from its CoreWeave-related investment during the quarter. Cumulative distributions now total roughly $8.6 million against an original $5 million investment — a return the credit team presumably wishes it could replicate at scale.

The company repurchased approximately 266,000 shares at an average price of $2.20 per share, its 12th consecutive quarter of buybacks. As of October 30, it had repurchased approximately 8.4 million shares for nearly $17 million, leaving about $23 million under its $40 million authorization. Reese said management will continue weighing repurchases against other investment opportunities, with priorities including growing assets under management, improving investment performance and scaling the credit and real estate businesses.

Great Elm Group is a diversified holding company focused on asset management, specialty finance and related investment activities. The verdict for the quarter: smaller revenue, smaller loss, and a pipeline that now has to do the talking.