Great Elm Group Inc
For the period ended Mar 31, 2024. Filed May 8, 2024.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Mar 31, 2024 · Filed May 8, 2024
GEG$2.18+1.4%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2023-12-31; filed 2024-02-13.
0000950170-24-014659
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-03-31; filed 2024-05-08.
0000950170-24-055820
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 29 previous paragraphs and 29 current paragraphs.
15 unchanged; 10 reworded; 4 added; 4 removed; 0 previous and 0 current paragraphs rearranged.
Tables are not compared: 1 previous and 1 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (4)
Current report
Revenues for the three months ended March 31, 2024 increased $0.9 million as compared to the three months ended March 31, 2023 primarily due to the recognition of $0.7 million in incentive fees earned from GECC in the current quarter whereas there were no corresponding incentive fees in the prior year period under the revenue recognition criteria. Revenues for the nine months ended March 31, 2024 increased $3.3 million as compared to the nine months ended March 31, 2023 primarily due to the recognition of $2.7 million in incentive fees earned from GECC in the current year to date period whereas there were no corresponding incentive fees in the prior year period under the revenue recognition criteria. In addition, administration and service fee revenues increased by $0.3 million for the nine months ended March 31, 2024 as compared to the nine months ended March 31, 2023 as a result of changes in organizational structure including additional personnel.
Current report
Investment management expenses, excluding non-cash compensation, for the nine months ended March 31, 2024 increased $1.2 million as compared to the corresponding period in the prior year. Increases in investment management expenses, excluding non-cash compensation, were primarily attributable to compensation-related costs as the Company has shifted focus to the investment management business after the sale of the DME business in prior year. These increases are partially offset by the decreases in other selling, general and administrative costs of $0.1 million and -$0.3 million, respectively, for the three and nine months ended March 31, 2024 as compared to the corresponding periods in the prior year.
Current report
Other income (expense), net includes dividend and interest income and net realized and unrealized gains and losses. For the three and nine months ended March 31, 2024, dividend and interest income was $2.4 million and $6.4 million, respectively, as compared to $1.5 million and $4.4 million, respectively for the three and nine months ended March 31, 2023. The increases in dividend and interest income are primarily attributable to new investments in private funds and marketable securities. Net realized and unrealized gains and losses generally consist of unrealized mark-to-market adjustments on investments and the gain or loss realized on the sale of investments. In addition, during the three and nine months ended March 31, 2023, the Company recognized a gain on the sale of its controlling interest in Forest in December 2022 of $10.5 million and gain on the January 2023 sale of its remaining non-controlling interest in Forest of $24.4 million.
Current report
Cash used in financing activities of our continuing operations for the nine months ended March 31, 2023 were $42.4 million, which consisted of principal payments of $38.1 million on the promissory note issued to Forest on December 29, 2022 and fully repaid by January 3, 2023, and principal payments of $3.7 million on the Seller Note, as well as distributions to non-controlling interests in GESOF of $0.6 million. Cash flows used in financing activities of our discontinued operations for the nine months ended March 31, 2023 of $5.2 million were primarily attributed to distributions to non-controlling interests upon Sale of HC LLC of $5.9 million.
Removed paragraphs (4)
Previous report
Revenues for the three and six months ended December 31, 2023 increased $0.9 million and $2.4 million, respectively, as compared to the corresponding periods in the prior year. The increase is primarily attributable to the incentive and other fees due from GECC.
Previous report
Operating costs and expenses for the three and six months ended December 31, 2023 increased $0.8 million and $1.8 million, respectively, as compared to the corresponding periods in the prior year. Increases in investment management expenses, excluding non-cash compensation, were primarily attributable to compensation-related costs, and increases in other selling, general and administrative expenses were driven by additional personnel costs and professional fees associated with strategic initiatives.
Previous report
During the three and six months ended December 31, 2023, the Company recognized $3.5 million and $8.8 million of other income (net), respectively, comprised of net realized and unrealized gain on investments of $1.2 million and $4.5 million and dividends and interest income of $2.1 million and $4.1 million, respectively, along with $0.2 million in net realized and unrealized gains on investments and interest and other income from consolidated funds. During the three and six months ended December 31, 2022, the Company recognized $34.2 million and $28.9 million of other income (net), respectively, comprised of gain on sale of controlling interest in Forest in December 2022 of $10.5 million, unrealized gain on the investment in the remaining non-controlling or 19% interest in Forest of $24.4 million recognized in December 2022, and dividends and interest income of $1.4 million and $2.9 million, respectively, partially offset by net realized and unrealized loss on investments of $22.2 million and $15.4 million, respectively.
Previous report
Cash flows used in financing activities of our continuing operations for the six months ended December 31, 2022 were $19.0 million representing principal payments on long-term debt of $18.4 million and distributions to non-controlling interests in GESOF of $0.6 million, while cash flows provided by financing activities of our discontinued operations for the same period were $0.6 million.
Reworded paragraphs (10)
Previous wording
GEG is a publicly-traded alternative asset management company focused on growing a scalable and diversified portfolio of long-duration and permanent capital vehicles across credit, real estate, specialty finance, and other alternative strategies. GEG and its subsidiaries currently manage GECC, a publicly-traded business development company, and Monomoy UpREIT, an industrial-focused real estate investment trust, in addition to other investments. The combined assets under management of these entities at December 31, 2023 was approximately $654.5 million.
Current wording
GEG is a publicly-traded alternative asset management company focused on growing a scalable and diversified portfolio of long-duration and permanent capital vehicles across credit, real estate, specialty finance, and other alternative strategies. GEG and its subsidiaries currently manage GECC, a publicly-traded business development company, and Monomoy UpREIT, an industrial-focused real estate investment trust, in addition to other investments. The combined assets under management of these entities at March 31, 2024 was approximately $688.0 million.
Previous wording
The discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires our management to make significant estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. These items are monitored and analyzed by our management for changes in facts and circumstances, and material changes in these estimates could occur in the future. During the three and six months ended December 31, 2023 we did not make material changes in our critical accounting policies or underlying assumptions as disclosed in our Annual Report on Form 10-K for the fiscal year ended June 30, 2023 as it relates to normal and recurring transactions.
Current wording
The discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires our management to make significant estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. These items are monitored and analyzed by our management for changes in facts and circumstances, and material changes in these estimates could occur in the future. During the three and nine months ended March 31, 2024 we did not make material changes in our critical accounting policies or underlying assumptions as disclosed in our Annual Report on Form 10-K for the fiscal year ended June 30, 2023 as it relates to normal and recurring transactions.
Previous wording
The historical results of the Durable Medical Equipment (DME) business, primarily consisting of HC LLC and its subsidiaries, sold on January 3, 2023 and related activity have been presented in the accompanying unaudited condensed consolidated statements of operations for the three and six months ended December 31, 2022 and cash flows for the six months ended December 31, 2022 as discontinued operations. Further, the historical segment information was recast to reflect our ongoing business as a single reportable segment and to remove the activity of discontinued operations. Unless otherwise specified, disclosures in these condensed consolidated financial statements reflect continuing operations only.
Current wording
The historical results of the Durable Medical Equipment (DME) business, primarily consisting of HC LLC and its subsidiaries, sold on January 3, 2023 and related activity have been presented in the accompanying unaudited condensed consolidated statements of operations for the three and nine months ended March 31, 2023 and cash flows for the nine months ended March 31, 2023 as discontinued operations. Further, the historical segment information was recast to reflect our ongoing business as a single reportable segment and to remove the activity of discontinued operations. Unless otherwise specified, disclosures in these condensed consolidated financial statements reflect continuing operations only.
Previous wording
Interest expense for the three and six months ended December 31, 2023 decreased by $0.9 million and $1.8 million, compared to the corresponding periods in the prior year, as there was no interest expense related to the 35,010 shares of preferred stock issued by Forest Investments, Inc. (Forest) to J.P. Morgan Broker-Dealer Holdings Inc. after the sale of controlling interest in Forest on December 30, 2022 or the $6.3 million promissory note issued to Imperial Capital Asset Management, LLC which was fully repaid in February 2023.
Current wording
Interest expense for the nine months ended March 31, 2024 decreased by $1.8 million compared to the corresponding period in the prior year, as there was no interest expense related to the 35,010 shares of preferred stock issued by Forest Investments, Inc. (Forest) to J.P. Morgan Broker-Dealer Holdings Inc. after the sale of controlling interest in Forest on December 30, 2022 or the $6.3 million promissory note issued to Imperial Capital Asset Management, LLC which was fully repaid in February 2023.
Previous wording
Cash flows used in operating activities of our continuing operations for the six months ended December 31, 2023 were $19.9 million. The adjustments to reconcile our net income from continuing operations of $2.5 million to net cash used in operating activities included add-backs for various non-cash charges, such as $1.3 million of stock-based compensation expense, $1.1 million of non-cash interest and amortization of capitalized issuance costs, $0.6 million of depreciation and amortization, and $0.1 million of realized loss on our investments, which was offset by deduction of $4.6 million of unrealized gain on our investments, and the net negative change in our operating assets and liabilities of $17.2 million, including the impact of changes related to consolidated funds.
Current wording
Cash used in operating activities of our continuing operations for the nine months ended March 31, 2024 were $18.5 million. The adjustments to reconcile our net income from continuing operations of -$0.4 million to net cash used in operating activities included add-backs for various non-cash charges, such as $1.8 million of stock-based compensation expense, $1.7 million of non-cash interest and amortization of capitalized issuance costs, and $0.8 million of depreciation and amortization, which was offset by deduction of $1.8 million of unrealized gain on our investments, and the net negative change in our operating assets and liabilities of $11.6 million, including the impact of changes related to consolidated funds.
Previous wording
Cash flows used in operating activities of our continuing operations for the six months ended December 31, 2022 were $1.6 million. The adjustments to reconcile our net income from continuing operations of $20.2 million to net cash used in operating activities included add-backs for various non-cash charges, such as $19.7 million of realized loss on our investments, $1.4 million of stock-based compensation expense, and $0.6 million of depreciation and amortization, which was offset by deduction of $35.2 million of unrealized gain on our investments, $10.5 million of gain on sale of controlling interest in Forest in December 2022, and the net negative change in our operating assets and liabilities of $0.8 million. Further, we received $1.6 million attributed to sales of investments by Great Elm SPAC Opportunity Fund, LLC (GESOF). Cash flows provided by operating activities of our discontinued operations for the six months ended December 31, 2022 were $2.9 million.
Current wording
Cash used in operating activities of our continuing operations for the nine months ended March 31, 2023 were $3.6 million. The adjustments to reconcile our net income from continuing operations of $19.7 million to net cash used in operating activities included add-backs for various non-cash charges, such as $2.0 million of stock-based compensation expense, $1.7 million of non-cash interest and amortization of capitalized issuance costs, and $0.9 million of depreciation and amortization, which was offset by deduction of $12.8 million of unrealized gain on our investments, $4.7 million of realized gain on our investments, $10.5 million of gain on Sale of Controlling Interest in Forest in December 2022, and the net negative change in our operating assets and liabilities of $2.0 million. During the nine months ended March 31, 2023 we also received $1.6 million attributed to sales of investments by Great Elm SPAC Opportunity Fund, LLC (GESOF). Cash flows provided by operating activities of our discontinued operations for the nine months ended March 31, 2023 were $0.8 million.
Previous wording
Cash flows used in investing activities of our continuing operations for the six months ended December 31, 2023 were $7.7 million, which is attributed to investments in portfolio funds of $6.6 million, net purchases of held-to-maturity securities of $4.3 million, purchases of trading securities of $4.5 million, partially offset by the proceeds from sale of investments of $1.8 million. Cash flows used in investing activities of our discontinued operations for the six months ended December 31, 2023 were $0.4 million, which represents the payment made to the buyer of our DME business in September 2023 following finalization of the working capital adjustment.
Current wording
Cash used in investing activities of our continuing operations for the nine months ended March 31, 2024 were $3.7 million, which includes investment purchases of $59.8 million partially offset by the proceeds from sale of investments of $56.8 million. Cash flows used in investing activities of our discontinued operations for the nine months ended March 31, 2024 were $0.9 million, which represents the payments made to the buyer and former minority interest holders of our durable medical equipment business in connection with working capital adjustment and escrow payments.
Previous wording
Cash flows used in investing activities of our continuing operations for the six months ended December 31, 2022 were $14.7 million, which is attributed to the proceeds from sale of controlling interest in Forest, net of cash sold, of $17.7 million, partially offset by investments in portfolio funds of $3.0 million. Cash flows used in investing activities of our discontinued operations for the six months ended December 31, 2022 were $4.1 million.
Current wording
Cash provided by investing activities of our continuing operations for the nine months ended March 31, 2023 were $41.1 million which is attributed to the combined proceeds from sale of Forest, net of cash sold, of $44.3 million, partially offset by purchases of investments of $3.1 million. Cash flows provided by investing activities of our discontinued operations for the nine months ended March 31, 2023 of $67.2 million were primarily attributed to the cash proceeds from the Sale of HC LLC, net of cash sold and before transaction costs and distributions to non-controlling interests, of $71.3 million, partially offset by other investing activities of our DME Business.
Previous wording
Cash flows provided by financing activities of our continuing operations for the six months ended December 31, 2023 were $6.9 million related to capital activity of Consolidated Funds.
Current wording
Cash provided by financing activities of our continuing operations for the nine months ended March 31, 2024 were $7.1 million related to capital activity of Consolidated Funds.
Previous wording
As of December 31, 2023, we had an unrestricted cash balance of $39.1 million and $29.7 million in marketable securities. We also held 1,520,560 shares of GECC common stock with an estimated fair value of $16.2 million as of December 31, 2023. We believe we have sufficient liquidity available to meet our short-term and long-term obligations for at least the next 12 months.
Current wording
As of March 31, 2024, we had an unrestricted cash balance of $44.1 million and $24.8 million in marketable securities. We also held 1,518,162 shares of GECC common stock with an estimated fair value of $16.8 million as of March 31, 2024. We believe we have sufficient liquidity available to meet our short-term and long-term obligations for at least the next 12 months.