Great Elm Capital Group, Inc. (NASDAQ: GEC, “Great Elm”) announced
its financial results for the quarter ended March 31, 2019. Great
Elm will host a conference call and webcast on Friday, May 10, 2019
at 8:00 a.m. Eastern Time to discuss its third quarter 2019
financial results. Please see below for details.
Select highlights from the third fiscal quarter
of 2019 include:
- Operating Company growth:
- $3.2 million of adjusted EBITDA for the three months ended
March 31, 2019
- Potential DME acquisition candidate currently under LOI
- Continue to diligence operating company opportunities across
multiple industries
- Investment Management growth:
- For the three months ended March 31, 2019, year-over-year
management fees approximately unchanged
- For the nine months ended March 31, 2019, year-over-year
management fee growth of approximately 19.7%
- For the three and nine months ended March 31, 2019,
year-over-year adjusted EBITDA growth of approximately 62.0% and
20.7%, respectively
“The market for CPAP and BiPAP continues to grow
and Great Elm DME is growing faster than the market,” remarked
Peter A. Reed, Great Elm’s Chief Executive Officer. “We will
continue to invest in the business to support its ongoing growth,
and we intend to supplement this organic growth with add-on
acquisitions.”
Alignment of Interest
The employees of Great Elm and Great Elm Capital
Management, Inc. (“GECM”) collectively own over 1.8 million shares
of GEC stock, representing greater than 7% of its outstanding
shares.1 Additionally, the directors of Great Elm collectively own
or manage greater than 11% of Great Elm’s shares.1 Altogether,
insiders collectively own or manage greater than 18% of the
company’s outstanding shares, which Great Elm believes fosters a
strong alignment of interest between employees, directors and the
company’s shareholders.
BUSINESS OVERVIEW
Great Elm is a diversified, publicly-traded
holding company that seeks to build long-term shareholder value
across three verticals: Operating Companies, Investment Management
and Real Estate.
Operating Companies
In the third quarter of 2019, DME generated $3.2
million of adjusted EBITDA. Performance in the quarter was
negatively impacted by approximately $382 thousand due to temporary
delays in filling prescriptions related to the integration of
Valley Healthcare Group and Northwest Medical.
The DME operating team is aggressively working
to realize potential synergies by the end of calendar year 2019.
The team is also pursuing potential M&A opportunities with
complementary product profiles that increase market penetration and
extend existing geographic markets.
In addition to the DME business, the Great Elm
team continues to evaluate acquisition opportunities across
multiple industries in partnership with industry experts and/or
operating executives.
Investment Management
Great Elm’s management team believes the
Investment Management business is scalable, offers attractive
margins and, when coupled with growth in assets under management,
provides for the potential to generate incremental EBITDA.
Great Elm intends to grow assets under
management through capital raises and M&A. Growth in assets
under management is expected to result in increased management fee
revenue for GECM.
Alongside Great Elm Capital Corp. (“GECC”),
Great Elm Opportunities Fund I, LP (“GEOF”) and existing separately
managed accounts, we continue to seek avenues for growth,
potentially launching additional private funds and pursuing
opportunistic acquisitions in the business development company
space.
Real Estate
Great Elm continues to focus on credit tenant
lease financings and ground lease structures across a variety of
commercial, government and other properties. Great Elm’s
substantial tax assets can make it a value-added partner or
lessor.
FINANCIAL REVIEW: SEGMENT
FINANCIALS
As of March 31, 2019, Great Elm had four
operating segments: Durable Medical Equipment, Investment
Management, Real Estate and General Corporate.
Durable Medical Equipment
Three Months Ended March 31, 2019:
Revenue:
- During the three months ended March 31, 2019, Great Elm
recognized $11.8 million in total revenue.
Net Income (Loss):
- During the three months ended March 31, 2019, Great Elm
recognized a $0.5 million net loss.
Adjusted EBITDA:
- During the three months ended March 31, 2019, Great Elm
recognized $3.2 million in adjusted EBITDA.
Investment Management
Three Months Ended March 31, 2019:
Revenue:
- During the three months ended March 31, 2019, Great Elm
recognized management fee revenue of $0.7 million vs. $0.7 million
during the same period the prior year.
- During the three months ended March 31, 2019, Great Elm
recognized total investment management revenue of $1.1 million vs.
($0.8) million during the same period the prior year.
Net Income (Loss):
- During the three months ended March 31, 2019, Great Elm
recognized a net loss of $0.2 million vs. a net loss of $2.1
million during the same period the prior year.
Adjusted EBITDA:
- During the three months ended March 31, 2019, Great Elm
recognized adjusted EBITDA of $1.0 million vs. $0.6 million during
the same period the prior year.
Real Estate
Three Months Ended March 31, 2019:
Revenue:
- During the three months ended March 31, 2019, Great Elm
recognized $1.3 million in rental revenue vs. $0.3 million during
the same period in the prior year.2
Net Income (Loss):
- During the three months ended March 31, 2019, Great Elm
recognized $38 thousand in net income vs. $23 thousand during the
same period in the prior year.2
Adjusted EBITDA:
- During the three months ended March 31, 2019, Great Elm
recognized $1.1 million in adjusted EBITDA vs. $0.3 million during
the same period in the prior year.2
General Corporate
Three Months Ended March 31, 2019:
Revenue:
- During the three months ended March 31, 2019, Great Elm
recognized ($5) thousand in revenue vs. no revenue during the same
period the prior year.
Net Income (Loss):
- During the three months ended March 31, 2019, Great Elm
recognized $4.8 million in net income vs. a net loss of $2.4
million during the same period the prior year.
Adjusted EBITDA:
- During the three months ended March 31, 2019, Great Elm
recognized ($1.5) million in adjusted EBITDA vs. ($1.4) million
during the same period the prior year.
Conference Call &
Webcast
Great Elm will host a conference call and
webcast on Friday, May 10, 2019 at 8:00 a.m. Eastern Time to
discuss its third quarter 2019 financial results.
All interested parties are invited to
participate in the conference call by dialing +1 (844) 559-0750;
international callers should dial +1 (647)
689-5386. Participants should enter the Conference
ID 7295023 when asked. For a copy of the slide presentation that
will be referenced during the course of our conference call, please
visit:
https://www.greatelmcap.com/events-and-presentations/default.aspx.
The conference call will be webcast simultaneously at:
https://event.on24.com/wcc/r/1956505/39A034ACA0616C00AB12692934026DC2.
About Great Elm Capital Group,
Inc.
Great Elm is a publicly-traded holding company
that is seeking to build a business across three operating
verticals: Operating Companies, Investment Management and Real
Estate. Great Elm’s website can be found at
www.greatelmcap.com.
Safe Harbor Statement under the Private
Securities Litigation Reform Act of 1995
Statements in this press release that are
“forward-looking” statements, including statements regarding
expected growth, involve risks and uncertainties that may
individually or collectively impact the matters described herein.
Investors are cautioned not to place undue reliance on any such
forward-looking statements, which speak only as of the date they
are made and represent Great Elm’s assumptions and expectations in
light of currently available information. These statements
involve risks, variables and uncertainties, and Great Elm’s actual
performance results may differ from those projected, and any such
differences may be material. For information on certain factors
that could cause actual events or results to differ materially from
Great Elm’s expectations, please see Great Elm’s filings with the
SEC, including its most recent annual report on Form 10-K and
subsequent reports on Forms 10-Q and 8-K. Additional information
relating to Great Elm’s financial position and results of
operations is also contained in Great Elm’s annual and quarterly
reports filed with the SEC and available for download at its
website www.greatelmcap.com or at the SEC website www.sec.gov.
Non-GAAP Financial Measures
The SEC has adopted rules to regulate the use in
filings with the SEC, and in public disclosures, of financial
measures that are not in accordance with US GAAP, such as adjusted
earnings before interest, taxes, depreciation and amortization
(“Adjusted EBITDA”). Adjusted EBITDA is derived from methodologies
other than in accordance with US GAAP. Great Elm believes that
Adjusted EBITDA is an important measure for investors to use in
evaluating Great Elm’s businesses. In addition, Great Elm’s
management reviews Adjusted EBITDA as they evaluate acquisition
opportunities.
Adjusted EBITDA has limitations as an analytical
tool, and you should not consider it either in isolation from, or
as a substitute for, analyzing Great Elm’s results as reported
under US GAAP. Non-GAAP financial measures reported by Great Elm
may not be comparable to similarly titled amounts reported by other
companies.
Set forth below is a reconciliation of Adjusted
EBITDA to the most directly comparable US GAAP financial measure,
net income. The information in the table below includes forecasts,
projections and other predictive statements that represent Great
Elm’s assumptions and expectations in light of currently available
information. These forecasts, projections and other predictive
statements involve risks, variables and uncertainties. Great Elm’s
actual performance results may differ from those projected in in
the table below, and any such differences may be material.
|
|
For the three months ended March 31, 2019 |
|
(Dollar amounts in thousands) |
|
Durable Medical Equipment(1) |
|
Investment Management |
|
Real Estate |
|
General
Corporate(2) |
|
Total |
|
Net income (loss) - GAAP |
|
$ |
(517 |
) |
|
$ |
(163 |
) |
|
$ |
38 |
|
$ |
4,843 |
|
|
$ |
4,201 |
|
|
EBITDA: |
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) - GAAP |
|
$ |
(517 |
) |
|
$ |
(163 |
) |
|
$ |
38 |
|
$ |
4,843 |
|
|
$ |
4,201 |
|
|
Net income from discontinued operations |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
(3,879 |
) |
|
|
(3,879 |
) |
|
Interest |
|
|
998 |
|
|
|
47 |
|
|
|
667 |
|
|
- |
|
|
|
1,712 |
|
|
Taxes |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
(1,229 |
) |
|
|
(1,229 |
) |
|
Depreciation and amortization |
|
|
2,275 |
|
|
|
180 |
|
|
|
436 |
|
|
- |
|
|
|
2,891 |
|
|
EBITDA |
|
$ |
2,756 |
|
|
$ |
64 |
|
|
$ |
1,141 |
|
$ |
(265 |
) |
|
$ |
3,696 |
|
|
Adjusted EBITDA: |
|
|
|
|
|
|
|
|
|
|
|
EBITDA |
|
$ |
2,756 |
|
|
$ |
64 |
|
|
$ |
1,141 |
|
$ |
(265 |
) |
|
$ |
3,696 |
|
|
Stock based compensation |
|
|
- |
|
|
|
19 |
|
|
|
- |
|
|
83 |
|
|
|
102 |
|
|
Dividend income from GECC |
|
|
(198 |
) |
|
|
- |
|
|
|
- |
|
|
(292 |
) |
|
|
(490 |
) |
|
Unrealized (gain) loss on investment in GECC |
|
|
599 |
|
|
|
- |
|
|
|
- |
|
|
(1,406 |
) |
|
|
(807 |
) |
|
Unrecognized incentive fees earned(3) |
|
|
- |
|
|
|
696 |
|
|
|
- |
|
|
- |
|
|
|
696 |
|
|
Severance costs |
|
|
- |
|
|
|
219 |
|
|
|
- |
|
|
205 |
|
|
|
424 |
|
|
Location start up expense |
|
|
58 |
|
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
58 |
|
|
Durable medical equipment management and monitoring fees |
|
|
(5 |
) |
|
|
- |
|
|
|
- |
|
|
5 |
|
|
|
- |
|
|
Acquisition related costs(4) |
|
|
7 |
|
|
|
- |
|
|
|
- |
|
|
191 |
|
|
|
198 |
|
|
Adjusted EBITDA |
|
$ |
3,217 |
|
|
$ |
998 |
|
|
$ |
1,141 |
|
$ |
(1,479 |
) |
|
$ |
3,877 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the nine months ended March 31, 2019 |
|
(Dollar amounts in thousands) |
|
DurableMedicalEquipment(1) |
|
Investment Management |
|
Real Estate |
|
General
Corporate(2) |
|
Total |
|
Net income (loss) - GAAP |
|
$ |
(91 |
) |
|
$ |
(859 |
) |
|
$ |
127 |
|
$ |
(1,261 |
) |
|
$ |
(2,084 |
) |
|
EBITDA: |
|
|
|
|
|
|
|
|
|
|
|
Net loss - GAAP |
|
$ |
(91 |
) |
|
$ |
(859 |
) |
|
$ |
127 |
|
$ |
(1,261 |
) |
|
$ |
(2,084 |
) |
|
Net income from discontinued operations |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
(3,786 |
) |
|
|
(3,786 |
) |
|
Interest |
|
|
2,365 |
|
|
|
135 |
|
|
|
1,995 |
|
|
- |
|
|
|
4,495 |
|
|
Taxes |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
(1,229 |
) |
|
|
(1,229 |
) |
|
Depreciation and amortization |
|
|
4,840 |
|
|
|
453 |
|
|
|
1,298 |
|
|
- |
|
|
|
6,591 |
|
|
EBITDA |
|
$ |
7,114 |
|
|
$ |
(271 |
) |
|
$ |
3,420 |
|
$ |
(6,276 |
) |
|
$ |
3,987 |
|
|
Adjusted EBITDA: |
|
|
|
|
|
|
|
|
|
|
|
EBITDA |
|
$ |
7,114 |
|
|
$ |
(271 |
) |
|
$ |
3,420 |
|
$ |
(6,276 |
) |
|
$ |
3,987 |
|
|
Stock based compensation |
|
|
- |
|
|
|
601 |
|
|
|
- |
|
|
343 |
|
|
|
944 |
|
|
Dividend income from GECC |
|
|
(629 |
) |
|
|
- |
|
|
|
- |
|
|
(1,312 |
) |
|
|
(1,941 |
) |
|
Unrealized (gain) loss on investment in GECC |
|
|
1,010 |
|
|
|
- |
|
|
|
- |
|
|
917 |
|
|
|
1,927 |
|
|
Unrecognized incentive fees earned(3) |
|
|
- |
|
|
|
2,044 |
|
|
|
- |
|
|
- |
|
|
|
2,044 |
|
|
Severance costs |
|
|
- |
|
|
|
219 |
|
|
|
- |
|
|
205 |
|
|
|
424 |
|
|
Location start up expense |
|
|
58 |
|
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
58 |
|
|
Durable medical equipment management and monitoring
fees |
|
|
65 |
|
|
|
- |
|
|
|
- |
|
|
(65 |
) |
|
|
- |
|
|
Acquisition related costs(4) |
|
|
551 |
|
|
|
- |
|
|
|
- |
|
|
1,650 |
|
|
|
2,201 |
|
|
Adjusted EBITDA |
|
$ |
8,169 |
|
|
$ |
2,593 |
|
|
$ |
3,420 |
|
$ |
(4,538 |
) |
|
$ |
9,644 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended March 31, 2018 |
|
(Dollar amounts in thousands) |
|
DurableMedicalEquipment(1) |
|
Investment Management |
|
Real Estate(5) |
|
General
Corporate(2) |
|
Total |
|
Net income (loss) - GAAP |
|
$ |
- |
|
|
$ |
(2,056 |
) |
|
$ |
23 |
|
|
$ |
(2,356 |
) |
|
$ |
(4,389 |
) |
|
EBITDA: |
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) - GAAP |
|
$ |
- |
|
|
$ |
(2,056 |
) |
|
$ |
23 |
|
|
$ |
(2,356 |
) |
|
$ |
(4,389 |
) |
|
Net loss from discontinued operations |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
155 |
|
|
|
155 |
|
|
Interest |
|
|
- |
|
|
|
39 |
|
|
|
186 |
|
|
|
- |
|
|
|
225 |
|
|
Taxes |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(182 |
) |
|
|
(182 |
) |
|
Depreciation and amortization |
|
|
- |
|
|
|
136 |
|
|
|
113 |
|
|
|
- |
|
|
|
249 |
|
|
EBITDA |
|
$ |
- |
|
|
$ |
(1,881 |
) |
|
$ |
322 |
|
|
$ |
(2,383 |
) |
|
$ |
(3,942 |
) |
|
Adjusted EBITDA: |
|
|
|
|
|
|
|
|
|
|
|
EBITDA |
|
$ |
- |
|
|
$ |
(1,881 |
) |
|
$ |
322 |
|
|
$ |
(2,383 |
) |
|
$ |
(3,942 |
) |
|
Stock based compensation |
|
|
- |
|
|
|
618 |
|
|
|
- |
|
|
|
300 |
|
|
|
918 |
|
|
Dividend income from GECC |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(490 |
) |
|
|
(490 |
) |
|
Unrealized loss on investment in GECC |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,219 |
|
|
|
1,219 |
|
|
Unrecognized incentive fees earned, net of related cost
adjustments(6) |
|
|
- |
|
|
|
1,879 |
|
|
|
- |
|
|
|
- |
|
|
|
1,879 |
|
|
Non-reimbursable MAST Capital expenses |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
Re-measurement of warrant liability |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
Adjusted EBITDA |
|
$ |
- |
|
|
$ |
616 |
|
|
$ |
322 |
|
|
$ |
(1,354 |
) |
|
$ |
(416 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the nine months ended March 31, 2018 |
|
(Dollar amounts in thousands) |
|
DurableMedical Equipment(1) |
|
Investment Management |
|
Real Estate(5) |
|
General
Corporate(2) |
|
Total |
|
Net loss - GAAP |
|
$ |
- |
|
|
$ |
(3,532 |
) |
|
$ |
23 |
|
|
$ |
(5,465 |
) |
|
$ |
(8,974 |
) |
|
EBITDA: |
|
|
|
|
|
|
|
|
|
|
|
Net loss - GAAP |
|
$ |
- |
|
|
$ |
(3,532 |
) |
|
$ |
23 |
|
|
$ |
(5,465 |
) |
|
$ |
(8,974 |
) |
|
Net loss from discontinued operations |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
155 |
|
|
|
155 |
|
|
Interest |
|
|
- |
|
|
|
174 |
|
|
|
186 |
|
|
|
- |
|
|
|
360 |
|
|
Taxes |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(182 |
) |
|
|
(182 |
) |
|
Depreciation and amortization |
|
|
- |
|
|
|
449 |
|
|
|
113 |
|
|
|
- |
|
|
|
562 |
|
|
EBITDA |
|
$ |
- |
|
|
$ |
(2,909 |
) |
|
$ |
322 |
|
|
$ |
(5,492 |
) |
|
$ |
(8,079 |
) |
|
Adjusted EBITDA: |
|
|
|
|
|
|
|
|
|
|
|
EBITDA |
|
$ |
- |
|
|
$ |
(2,909 |
) |
|
$ |
322 |
|
|
$ |
(5,492 |
) |
|
$ |
(8,079 |
) |
|
Stock based compensation |
|
|
- |
|
|
|
2,889 |
|
|
|
- |
|
|
|
713 |
|
|
|
3,602 |
|
|
Dividend income from GECC |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(1,862 |
) |
|
|
(1,862 |
) |
|
Unrealized loss on investment in GECC |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
2,753 |
|
|
|
2,753 |
|
|
Unrecognized incentive fees earned, net of releated cost
adjustments(6) |
|
|
- |
|
|
|
1,879 |
|
|
|
- |
|
|
|
- |
|
|
|
1,879 |
|
|
Non-reimbursable MAST Capital expenses |
|
|
- |
|
|
|
281 |
|
|
|
- |
|
|
|
128 |
|
|
|
409 |
|
|
Re-measurement of warrant liability |
|
|
- |
|
|
|
8 |
|
|
|
- |
|
|
|
- |
|
|
|
8 |
|
|
Adjusted EBITDA |
|
$ |
- |
|
|
$ |
2,148 |
|
|
$ |
322 |
|
|
$ |
(3,760 |
) |
|
$ |
(1,290 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Our durable medical equipment business began in September
2018 and there was no related activity prior to that date.(2)
General Corporate net loss includes net loss attributable to
discontinued operations.(3) Unrecognized incentive fees earned
include amounts earned under investment management agreements which
are not recognized under US GAAP.(4) Acquisition related costs
include transaction costs and change in the fair value of the
contingent consideration liability since the initial valuation at
the acquisition date.(5) Our real estate business began in March
2018 and there was no related activity prior to that date.(6)
Amount represents $2.7 million of unrecognized incentive fees
earned, net of $0.8 million of unrecognized related bonus
compensation expense.
Media & Investor
Contact:
Great Elm Capital Group,
Inc.Investor Relations+1 (617)
375-3006investorrelations@greatelmcap.com_____________________________________________
1 This includes restricted shares that are subject to both
performance and service vesting and is based on the share count pro
forma for the vesting of such restricted shares.
2 Great Elm completed an acquisition to begin its real estate
business in March 2018 and, therefore, the three months ended March
31, 2018 was not a complete quarter.
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