WALTHAM, Mass., May 12, 2020 (GLOBE NEWSWIRE) -- Great Elm Capital Group, Inc. (NASDAQ: GEC) announced its financial results for the quarter ended March 31, 2020. Great Elm will host a conference call and webcast on Tuesday, May 12, 2020 at 8:00 a.m. Eastern Time to discuss its fiscal third quarter 2020 financial results. Please see below for details.

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.

During the quarter ended March 31, 2020, we issued $30 million in aggregate principal amount of unsecured convertible notes, bringing our cash balance to approximately $39 million. This capital raise enhances our ability to pursue new investment opportunities.

Select highlights from the fiscal third quarter 2020 include:

• Operating Companies:
  • DME’s investments in people, process and technology have been critical in adapting to uncertain business conditions caused by the COVID-19 pandemic. DME continues to operate and serve patients in all markets
  • Continued to invest heavily in building a scalable infrastructure capable of supporting multiple acquisitions per year. Completed consolidation of multiple billing databases, implemented mobile delivery technology and upgraded payment processing technology
  • Towards the end of the quarter ended March 31, 2020, physician referrals started to decline in response to shelter-in-place orders. The decline in referrals continued post quarter end
  • For the three months ended March 31, 2020, generated $14.1 million of revenue, $1.4 million of net loss and $2.5 million of adjusted EBITDA
  • Revenue and profitability were negatively impacted by revenue reserves of $1.1 million, approximately $0.8 million of which is associated with receivables older than nine months
• Investment Management:
  • For the three months ended March 31, 2020, generated $0.8 million of revenue, net income of $0.5 million and $0.3 million of adjusted EBITDA
  • For the three months ended March 31, 2020, generated management fees of approximately $0.7 million, roughly unchanged year-over-year

“Our DME business has been meaningfully impacted by the COVID-19 pandemic. Nevertheless, DME’s scalable platform has enabled it to adapt to challenging market conditions,” remarked Peter A. Reed, Great Elm’s Chief Executive Officer. “Our Investment Management business had a challenging quarter. In managing Great Elm Capital Corp. (“GECC”), we are focused on preserving liquidity, strengthening its balance sheet and positioning the portfolio to capitalize on attractive potential investment opportunities amid credit market dislocations.”

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 7% of its outstanding shares. Additionally, the directors of Great Elm collectively own or manage approximately 20% of Great Elm’s shares. Altogether, insiders collectively own or manage approximately 27% of the company’s outstanding shares, which Great Elm believes fosters a strong alignment of interest between employees, directors and the company’s shareholders.

Operating Companies

In the three months ended March 31, 2020, DME generated $2.5 million of adjusted EBITDA. During the quarter, DME experienced meaningful growth in new patient setups in major product categories, including 19.0% in the key PAP segment, year-over-year.

Toward the end of the quarter ended March 31, 2020, local government measures taken to curb the spread of COVID-19 negatively impacted the referral pipeline for sleep studies and new equipment setups.

To date, the investments we’ve made to enhance our scalable platform have helped DME adjust to difficult market conditions and should help position it for further growth in a more normalized environment.

Investment Management

In the three months ended March 31, 2020, Investment Management generated $0.3 million of adjusted EBITDA1, approximately flat year over year. We continue to focus on operational efficiency to drive free cash flow generation.

The first half of 2020 has been characterized by remarkable volatility in the leveraged credit markets, driven by the impact of the COVID-19 pandemic and violent swings in asset prices. The fair value of managed portfolio investments, primarily at GECC, was negatively impacted by this volatility. All GECC portfolio companies are operating in a highly uncertain environment. Nevertheless, a majority of these portfolio companies are weathering the difficult economic environment with resilient business models and sustainable cash flows.

We believe that prudent cash management is paramount during bouts of market volatility. As such, in managing GECC, we remain focused on maintaining significant liquidity and strengthening its balance sheet.

Real Estate

In the three months ended March 31, 2020, Real Estate generated $1.3 million in rental revenue and $1.2 million of adjusted EBITDA.

FINANCIAL REVIEW: SEGMENT FINANCIALS

As of March 31, 2020, Great Elm had four operating segments: Durable Medical Equipment, Investment Management, Real Estate and General Corporate.

Durable Medical Equipment

Three Months Ended March 31, 2020:

Revenue:

• During the three months ended March 31, 2020, Great Elm recognized $14.1 million in total revenue vs. $11.8 million during the same period in the prior year.

Net Income (Loss):

• During the three months ended March 31, 2020, Great Elm recognized a net loss of $1.4 million vs. a net loss of $0.5 million during the same period in the prior year.

Adjusted EBITDA:

• During the three months ended March 31, 2020, Great Elm recognized $2.5 million of adjusted EBITDA vs. $3.2 million during the same period in the prior year.

Investment Management

Three Months Ended March 31, 2020:

Revenue:

• During the three months ended March 31, 2020, Great Elm recognized total investment management revenue of $0.8 million vs. $1.1 million during the same period in the prior year.
• During the three months ended March 31, 2020, Great Elm recognized management fee revenue of $0.7 million, approximately flat year-over-year.

Net Income (Loss):

• During the three months ended March 31, 2020, Great Elm recognized net income of $0.5 million vs. a net loss of $0.2 million during the same period in the prior year.

Adjusted EBITDA1:

• During the three months ended March 31, 2020, Great Elm recognized adjusted EBITDA of $0.3 million vs. $0.3 million during the same period in the prior year.

Real Estate

Three Months Ended March 31, 2020:

Revenue:

• During the three months ended March 31, 2020, Great Elm recognized $1.3 million in rental revenue vs. $1.3 million during the same period in the prior year.

Net Income (Loss):

• During the three months ended March 31, 2020, Great Elm recognized $0.07 million in net income vs. $0.04 million in net income during the same period in the prior year.

Adjusted EBITDA:

• During the three months ended March 31, 2020, Great Elm recognized $1.2 million in adjusted EBITDA vs. $1.1 million during the same period in the prior year.

General Corporate

Three Months Ended March 31, 2020:

Revenue:

• During the three months ended March 31, 2020, Great Elm recognized $0.03 million in revenue vs. approximately no revenue during the same period in the prior year.

Net Income (Loss):

• During the three months ended March 31, 2020, Great Elm recognized $11.1 million in net loss vs. $4.8 million in net income during the same period in the prior year.
  • $9.8 million of the $11.1 million net loss during the quarter derived from an unrealized loss on our investment in GECC stock, partially driven by market volatility related to COVID-19

Adjusted EBITDA:

• During the three months ended March 31, 2020, Great Elm recognized $(1.4) million in adjusted EBITDA vs. $(1.5) million during the same period in 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.