geg-ex991_24.htm

WALTHAM, Mass., November 12, 2021 -- Great Elm Group, Inc. (“we,” “us,” “our,” “GEG,” or “Great Elm”) (NASDAQ: GEG), a diversified holding company, today announced financial results for its fiscal first quarter ended September 30, 2021.

Peter A. Reed, Chief Executive Officer, stated, “We reported an excellent period in DME despite the challenges of a relatively slow return to normal operations following the pandemic conditions over the past year. DME completed the acquisition of MedOne during the period, which marks the second completed acquisition during calendar 2021. We also have good momentum in IM, growing assets under management during the period and completing the acquisition by GECC of a majority ownership stake in Lenders Funding, which purchases participations in factoring and asset-based lending transactions. We are building upon our strategy at GECC of creating a portfolio of specialty finance solutions with the ability to service the liquidity needs of small businesses at varying stages of their development and are pleased with our pipeline of further growth opportunities in this space.”

A distinct attribute of Great Elm is the particularly strong alignment of interest among shareholders and the employees, directors, and other insiders of Great Elm. As of September 30, 2021, Great Elm’s employees and directors (including funds under their management) collectively own or manage approximately 30% of GEG’s total outstanding shares.

Discussion of Financial Results by Segment for the Fiscal Quarter ended September 30, 2021

Great Elm is a holding company with two operating segments: Operating Companies and Investment Management, with General Corporate representing unallocated costs and activity to arrive at consolidated operations.

During the three months ended September 30, 2021, DME reported $15.6 million in total revenue, compared to $14.6 million during the same period in the prior year. The increase in revenues was due to organic growth in resupply sales and the impact of acquisitions.

During the three months ended September 30, 2021, DME reported net income of $2.1 million, compared to net loss of $0.5 million for the same period in the prior year. Net income increased largely due to $2.3 million in employee retention credits claimed under the CARES Act in the current quarter.

During the three months ended September 30, 2021, DME Adjusted EBITDA, was $5.1 million, compared to $2.8 million in the prior-year period.

During the three months ended September 30, 2021, IM 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.

During the three months ended September 30, 2021, IM recognized a net loss of $0.1 million, compared to a net loss of $1.5 million during the same period in the prior year, which was driven primarily by unrealized losses on our investment in GECC in the prior period due to COVID-19-related volatility.

During the three months ended September 30, 2021, IM Adjusted EBITDA was $0.1 million, 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.

During the three months ended September 30, 2021, General Corporate recognized $0.2 million in revenue compared to $0.1 million in revenue during the same period in the prior year. Revenue increased slightly as

a result of Forest management fees which commenced in December 2020 in connection with our holding company reorganization.

During the three months ended September 30, 2021, General Corporate recognized a net loss from continuing operations of $1.8 million, compared to $1.8 million during the same period in the prior year.

During the three months ended September 30, 2021, General Corporate recognized ($1.0) million in Adjusted EBITDA, compared to Adjusted EBITDA of ($1.1) million during the same period in the prior year. Great Elm made significant progress on reducing its corporate overhead, driven by lower audit fees due to a change in auditors in the prior fiscal year and other decreases in professional service expense.

Great Elm Group, Inc. (NASDAQ: GEG) is a publicly-traded holding company that is building a business across two operating verticals: operating companies and investment management. Great Elm Group, Inc.’s website can be found at www.greatelmgroup.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 revenue, Adjusted EBITDA, expected growth, profitability, acquisition opportunities and outlook 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.greatelmgroup.com or at the SEC website www.sec.gov.

Please note that previously reported amounts below have been recast to 1) reflect the operations of our real estate business as discontinued operations; 2) reflect the full retrospective adoption of ASU 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity; and 3) conform with current segment organization.

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.

Included in the financial tables below is a reconciliation of Adjusted EBITDA to the most directly comparable US GAAP financial measure, net income.

ASSETS	September 30, 2021		June 30, 2021
Current assets:
Cash and cash equivalents	$	21,791	$	24,382
Accounts receivable		5,544		6,518
Related party receivables		1,895		1,665
Investments, at fair value (cost $44,647 and $45,326, respectively)		24,008		24,044
Inventories		1,071		1,066
Prepaid and other current assets		5,169		3,791
Assets of consolidated funds
Investments, at fair value (cost $26,955 and $26,814, respectively)		26,541		26,490
Prepaid expenses and other assets		574		578
Total current assets		86,593		88,534
Property and equipment, net		885		981
Equipment held for rental, net		7,230		7,391
Identifiable intangible assets, net		8,509		8,928
Goodwill		52,463		50,536
Right of use assets		5,184		5,241
Other assets		256		258
Total assets	$	161,120	$	161,869
LIABILITIES, NON-CONTROLLING INTEREST AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	5,108	$	5,521
Accrued expenses and other liabilities		5,534		6,955
Deferred revenue		3,279		4,438
Current portion of lease liabilities		2,171		1,920
Current portion of capitalized equipment financing		2,927		1,974
Liabilities of consolidated funds- accrued expenses and other		11,940		12,197
Total current liabilities		30,959		33,005
Lease liabilities, net of current portion		3,281		3,596
Convertible notes (face value $34,346, including $16,231 held by related parties)		33,362		33,333
Equipment financing debt, net of current portion		42		67
Redeemable preferred stock of subsidiaries (held by related parties, face value $37,018)		35,584		35,529
Other liabilities		1,254		915
Total liabilities		104,482		106,445
Commitments and Contingencies (Note 20)
Contingently redeemable non-controlling interest		2,844		2,639
Stockholders' equity

Preferred stock, $0.001 par value; 5,000,000 authorized and zero outstanding		-			-
Common stock, $0.001 par value; 350,000,000 shares authorized and 26,692,033 shares issued and 26,093,185 outstanding at September 30, 2021; and 26,613,913 shares issued and 25,948,100 outstanding at June 30, 2021		26			26
Additional paid-in-capital		3,308,194			3,307,613
Accumulated deficit		(3,264,603	)		(3,264,403	)
Total Great Elm Group, Inc. stockholders' equity		43,617			43,236
Non-controlling interests		10,177			9,549
Total stockholders' equity		53,794			52,785
Total liabilities, non-controlling interest and stockholders' equity	$	161,120		$	161,869

	For the three months ended September 30,
	2021			2020
Revenues:
Durable medical equipment sales and services revenue	$	10,076		$	9,213
Durable medical equipment rental income		5,479			5,397
Investment management revenues		983			773
Total revenues		16,538			15,383

Operating costs and expenses:
Cost of durable medical equipment sold and services		4,060			4,207
Cost of durable medical equipment rentals¹		1,850			1,915
Durable medical equipment other operating expenses²		6,253			7,680
Investment management expenses		1,187			726
Depreciation and amortization		562			591
Selling, general and administrative³		1,573			1,413
Expenses of consolidated funds		52			-
Total operating costs and expenses		15,537			16,532
Operating income (loss)		1,001			(1,149	)
Dividends and interest income		653			529
Net realized and unrealized loss on investment		(14	)		(1,902	)
Net realized and unrealized loss on investments of consolidated funds		(189	)		-
Interest expense		(1,362	)		(1,145	)
Other income, net		16			(2	)
Income (loss) from continuing operations, before income taxes		105			(3,669	)
Income tax benefit (expense)		1			(99	)
Income (loss) from continuing operations		106			(3,768	)
Discontinued operations:
Income from discontinued operations, net of tax		-			67
Net income (loss)	$	106		$	(3,701	)
Less: net income (loss) attributable to non-controlling interest, continuing operations		306			(120	)
Less: net income attributable to non-controlling interest, discontinued operations		-			13
Net loss attributable to Great Elm Group, Inc.	$	(200	)	$	(3,594	)

Basic and diluted income (loss) per share from:
Continuing operations	$	(0.01	)	$	(0.14	)
Discontinued operations		-			0.00
Net loss	$	(0.01	)	$	(0.14	)
Weighted average shares outstanding
Basic		25,982			25,576
Diluted		25,982			25,576

⁽¹⁾ Includes depreciation expense of:		1,688			1,748
⁽²⁾ Net of CARES Act Stimulus of:		2,321			-
⁽³⁾ Net of CARES Act Stimulus of:		84			-


	For the three months ended September 30, 2021
$ in thousands	Durable Medical Equipment	Investment Management	Corporate	Consolidated

EBITDA:
Income (loss) from continuing operations - GAAP	$ 2,082	$ (140)	$ (1,836)	$ 106
Interest expense	1,287	24	1,269	2,581
Interest income from preferred stock	-	-	(1,218)	(1,218)
Depreciation & amortization	2,142	109	-	2,251
Tax expense	-	-	(1)	(1)
EBITDA	5,511	(7)	(1,786)	3,717
Adjusted EBITDA
Non-cash compensation	-	396	372	768
Change in contingent consideration	(163)	-	-	(163)
Dividend income	-	(554)	(99)	(653)
(Gains) / losses on investments	-	305	(102)	203
Other (income) expense	(560)	-	544	(16)
Transaction and integration costs⁽²⁾	219	-	184	403
DME management and monitoring fees	130	-	(130)	-
Adjusted EBITDA	$ 5,137	$ 140	$ (1,017)	$ 4,260


	For the three months ended September 30, 2020
$ in thousands	Durable Medical Equipment	Investment Management ⁽¹⁾	Corporate ⁽¹⁾	Consolidated

EBITDA:
Income (loss) from continuing operations - GAAP	$ (458)	$ (1,485)	$ (1,825)	$ (3,768)
Interest expense	709	26	409	1,144
Interest income from preferred stock	-	-	-	-
Depreciation & amortization	2,211	128	-	2,339


Tax expense	-	-	99	99
EBITDA	2,462	(1,331)	(1,317)	(186)
Adjusted EBITDA
Non-cash compensation	-	194	235	429
Change in contingent consideration	-	-	-	-
Dividend income	-	(524)	-	(524)
(Gains) / losses on investments	-	1,902	-	1,902
Other (income) expense	3	-	-	3
Transaction and integration costs ⁽²⁾	139	-	32	171
Pharmacy closure	54	-	-	54
DME management and monitoring fees	116	-	(91)	25
Adjusted EBITDA	$ 2,774	$ 241	$ (1,141)	$ 1,874

⁽¹⁾ Previously reported non-operating activity including dividend income and unrealized gains/losses related to managed investments has been reclassified from General Corporate to Investment Management to conform with current segment organization

⁽²⁾ Transaction and integration related costs include costs to acquire and integrate acquired businesses.