Great Elm Capital Group Reports Fourth Quarter and Full Year 2019 Financial Results

9/13/19

WALTHAM, Mass., Sept. 13, 2019 (GLOBE NEWSWIRE) -- Great Elm Capital Group, Inc. (NASDAQ: GEC) announced its financial results for the quarter and year ended June 30, 2019. Great Elm will host a conference call and webcast on Friday, September 13, 2019 at 8:00 a.m. Eastern Time to discuss its fourth quarter 2019 financial results. Please see below for details.

Select highlights from the fourth quarter and full fiscal year 2019 include:

  • Operating Companies:
    º For the three months ended June 30, 2019, $12.9 million of revenue, $1.0 million of net loss and $2.8 million of adjusted EBITDA
    º For the approximately 10 months ended June 30, 2019, $41.9 million of revenue, $1.1 million of net loss and $10.4 million of adjusted EBITDA
    º The acquisition of the respiratory assets of Midwest Respiratory Care, Inc.
    º Invested heavily in people, processes and technology to enhance our scalable infrastructure, capable of supporting multiple acquisitions per year
    º Successfully consolidated the billing platform and implemented financial management software
    º Management team has identified a large number of potential acquisition targets with strong product fit and geographic adjacency
    º Outlook for continued growth in fiscal year 2020 underpinned by key performance indicators
  • Investment Management:
    º For the three months ended June 30, 2019, year-over-year management fees approximately unchanged
    º For the 12 months ended June 30, 2019, year-over-year management fee growth of approximately 13.5%
    º For the three and 12 months ended June 30, 2019, net loss of approximately $0.1 million and $1.0 million, respectively
    º For the three and 12 months ended June 30, 2019, adjusted EBITDA of approximately $0.8 million and $3.2 million, respectively
    º Outlook for free cash flow growth in fiscal year 2020 based on an increase in management fee revenue and the termination of the Full Circle consulting agreement

“We will continue to invest in the DME business to support ongoing organic growth as well as to pursue the numerous identified acquisition opportunities that we believe offer a compelling strategic fit,” remarked Peter A. Reed, Great Elm’s Chief Executive Officer. “Furthermore, with a positive trend in management fee revenue, we believe our Investment Management business is poised for free cash flow growth in the coming year.”

Alignment of Interest

The employees of Great Elm and Great Elm Capital Management, Inc. (“GECM”) collectively own approximately 2.0 million shares of GEC stock, representing approximately 8% 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 approximately 19% 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 three and approximately 10 months ended June 30, 2019, DME generated $2.8 million and $10.4 million, respectively, of adjusted EBITDA. During the fourth quarter, DME experienced approximately 19.8% growth in PAP patient setups and meaningful revenue growth in major product categories. Management anticipates growth in both revenue and adjusted EBITDA in fiscal year 2020, supported by encouraging key performance indicators.

In June 2019, a subsidiary of Great Elm DME, Inc. acquired the respiratory assets of Midwest Respiratory Care, Inc. (“MRC”) for approximately $6.3 million or 4.6x MRC’s EBITDA less capital expenditures for the twelve months ended April 30, 2019. The team continues to pursue 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. This increase in management fee revenue should drive future free cash flow generation, aided by the termination of the Full Circle consulting agreement in November 2019.

Alongside Great Elm Capital Corp., Great Elm Opportunities Fund I, LP and existing separately managed accounts, Great Elm continues 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 June 30, 2019, Great Elm had four operating segments: Durable Medical Equipment, Investment Management, Real Estate and General Corporate.

Durable Medical Equipment

Three and Approximately 10 Months Ended June 30, 2019:

Revenue:

  • During the three and approximately 10 months ended June 30, 2019, Great Elm recognized $12.9 million and $41.9 million, respectively, in total revenue.

Net Income (Loss):

  • During the three and approximately 10 months ended June 30, 2019, Great Elm recognized net loss of $1.0 million and $1.1 million, respectively.

Adjusted EBITDA:

  • During the three and approximately 10 months ended June 30, 2019, Great Elm recognized $2.8 million and $10.4 million, respectively, in adjusted EBITDA.

Investment Management

Three and 12 Months Ended June 30, 2019:

Revenue:

  • During the three and 12 months ended June 30, 2019, Great Elm recognized management fee revenue of $0.74 million and $3.0 million, respectively, vs. $0.75 million and $2.6 million, respectively, during the same periods in the prior year.
  • During the three and 12 months ended June 30, 2019, Great Elm recognized total investment management revenue of $0.9 million and $3.8 million, respectively, vs. $0.6 million and $4.1 million, respectively, during the same periods in the prior year.

Net Income (Loss):

  • During the three and 12 months ended June 30, 2019, Great Elm recognized a net loss of $0.1 million and $1.0 million, respectively, vs. a net loss of $1.4 million and $4.9 million, respectively, during the same periods in the prior year.

Adjusted EBITDA:

  • During the three and 12 months ended June 30, 2019, Great Elm recognized adjusted EBITDA of $0.8 million and $3.2 million, respectively, vs. $0.5 million and $0.8 million, respectively, during the same periods in the prior year.

Real Estate

Three and 12 Months Ended June 30, 2019:

Revenue:

  • During the three and 12 months ended June 30, 2019, Great Elm recognized $1.3 million and $5.5 million, respectively, in rental revenue vs. $1.5 million and $1.9 million, respectively, during the same periods in the prior year2.

Net Income (Loss):

  • During the three and 12 months ended June 30, 2019, Great Elm recognized $64,000 and $191,000, respectively, in net income vs. $60,000 and $83,000, respectively, in net income during the same periods in the prior year2.

Adjusted EBITDA:

  • During the three and 12 months ended June 30, 2019, Great Elm recognized $1.2 million and $4.6 million, respectively, in adjusted EBITDA vs. $1.2 million and $1.5 million, respectively, during the same periods in the prior year2.

General Corporate

Three and 12 Months Ended June 30, 2019:

Revenue:

  • During the three and 12 months ended June 30, 2019, Great Elm recognized $58,000 and $123,000, respectively, in revenue vs. no revenue during the same periods the prior year.

Net Income (Loss):

  • During the three and 12 months ended June 30, 2019, Great Elm recognized $41,000 in net income and $1.2 million in net loss, respectively, vs. net loss of $1.2 million and $6.7 million, respectively, during the same periods the prior year.

Adjusted EBITDA:

  • During the three and 12 months ended June 30, 2019, Great Elm recognized $(1.6) million and $(6.1) million, respectively, in adjusted EBITDA vs. $(1.2) million and $(4.3) million, respectively, during the same periods the prior year.

About Great Elm Capital Group, Inc.

Great Elm is a publicly-traded holding company that seeks 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.