Good morning, everyone. Thank you for joining us for Great Elm Group's Fiscal 2026 Second Quarter Earnings Conference As a reminder, this conference call is being recorded on Thursday, February 5, 2026. If you would like to be added to our distribution list, you can email GEGInvestorRelations at greatelmcap.com, or you can sign up for alerts directly on our website, www.greatelmgroup.com. The slide presentation accompanying today's conference call and webcast can be found on our website under Events and Presentations. A link to the webcast is also available on our website, as well as in the press release that was disseminated to announce the quarterly results. Today's conference call includes forward-looking statements, and we ask that you refer to Great Elm Group's filings with the SEC for important factors that could cause actual results to differ materially from these statements. Great Elm Group does not undertake to update its forward-looking statements unless required by law. In addition, during today's call, management will refer to certain non-GAAP financial measures. Reconciliations to the most comparable financial measures are included in our earnings release. To obtain copies of our SEC filings, please visit Great Elm Group's website under Financial Information and select SEC Filings. Today's comments do not constitute an offer to sell or solicitation of an offer to buy interest in any investment vehicle managed by Great Elm or its affiliate. Any such offer or solicitation will only be made pursuant to the applicable offering documents for such investment vehicle. On the call today, we have Jason Reese, CEO, Adam Kleinman, President and General Counsel, Nicole Mills, COO, and Kerry Davis, CFO. I will now turn the call over to Jason Reese, CEO.
Good morning, and thank you for joining us today. While Great Elm made meaningful progress during the quarter to advance our strategic goals, I want to acknowledge the reality of the environment we operated in during the quarter. Thank you. Fiscal second quarter 26 unfolded against a challenging backdrop for DVCs, marked by heightened volatility, meaningful pressure on public valuations, and concerns over private credit quality deterioration. As a result, we recorded significant unrealized losses during the quarter, particularly related to our investment in GECC common stock, investments in special purpose vehicles related to GECC common stock, and our CoreWeave-related investment. While these valuation changes purely impacted our reported results for the quarter, it's important to emphasize that they were primarily non-cash in nature and driven by market-based movements. Liquidity across the platform remains strong, and our balance sheets at the holding company and both of our primary investment vehicles are well-positioned to grow our platform and invest opportunistically as we move forward. Against that backdrop, Great Elm has executed operationally. We continued to advance our alternative asset management platform, expanding both our real estate and credit businesses, and grew fee-paying assets under management on a year-over-year basis. At the end of December, estimated assets under management stood at $740 million, while estimated fee-paying assets under management grew 4% year-over-year to approximately $561 million. Great-owned real estate ventures had another strong quarter, marked by continued execution across the Monomoy platform. Monomoy BTS completed its third design-build property located in Florida and has begun actively marketing the property for sale, with an expected exit in the second half of fiscal 2026. We are also engaged with a high-quality tenant on a fourth design-build project and continue to see a robust and expanding pipeline of development opportunities supported by a broader tenant base. Monomoy Construction Services completed its third full quarter of operations, contributed approximately $400,000 in revenue. With construction capabilities now fully integrated in-house, we're able to deliver comprehensive turnkey solutions for tenants, capture additional value across the property lifecycle, and support discipline execution as our project pipeline continues to scale. At Monomoy CRE, total investment management and property management fees increased over 15% from the prior year period, driven by the growth in fee-paying AUM and higher gross rents. During the quarter, Monomoy Reit acquired three properties at attractive cap rates for approximately $8.9 million, including development costs, while continuing renovations and design-build initiatives further enhanced by the capabilities of MCS. Turning to our alternative credit business, it's important to acknowledge that the BDC experienced a challenging finish to calendar 25, driven largely by Corweave stock declining nearly 50% in the quarter, CLO equity underperforming the broader credit markets in the quarter, and continued dispersion in leveraged credit, including first grant impacts. GECC plans to report earnings in early March and will provide additional details at that time. That said, we believe we have taken actions to position the platform for success as we move to 26. We fortified the team in September by hiring a new head of research with over 25 years of credit analysis experience. During the quarter, the investment team re-underwrote the entire portfolio and continued to work deliberately to further diversify our investments, with a particular focus on senior secured opportunities. The team worked to optimize the portfolio to improve overall credit quality, trimming or exiting high-risk positions. These steps were taken with a long-term mindset and positioned the BDC with a stronger foundation from which to rebuild in 2026. While syndicated credit spreads remain near historic tights, we have redoubled our effort to shift the portfolio towards private transactions that offer stronger lender protections, tighter covenants, and reduce the risk of liability management transactions. We believe this approach is increasingly important given the lender-on-lender violence and structural erosion we continue to see in broadly syndicated markets. The BDC maintains significant liquidity, providing ample flexibility as opportunities arise. As a reminder, in the prior quarter, GECC materially lowered its cost of capital through the refinancing of its highest-cost debt. Taken together, these initiatives leave GECC in a position of strength. with a healthy balance sheet, meaningful deployable cash, and additional capacity to invest in attractive income-generating opportunities. In our private credit strategy, the Great Elm Credit Income Fund, launched in November 23, began an orderly wind-down in response to recent portfolio events and market conditions. As the fund had not yet reached scale, we decided to begin monetizing investments in a disciplined manner. The fund recorded a net return of over 20% for the 26 months from inception through December 31st, 2025. Outside of our core business, our Corwin-related investment continues to be a compelling success despite significant market volatility during the quarter. From September 30th to December 31st, Corwin's common stock declined nearly 50%, percent, resulting in market-based valuation movements that generated a $6.7 million of unrealized losses in our investment, offset by $2.2 million of realized gains from distributions. Notwithstanding this volatility, we have received distributions totaling approximately 115 percent of our original $5 million investment to date, and we continue to believe there is meaningful upside potential based on current trading levels. Since December 31, Coru's stock price has rebounded significantly, reinforcing our conviction in the long-term value of the investment. In addition, we recorded net unrealized mark-to-market losses of $4 million and $3 million in our GECC common stock and related SPV investments, respectively. These valuation changes echo broader market trading levels for BDCs, and we expect recovery in time as GECC rebuilds its NAV. We also continue to deploy capital in a disciplined manner to enhance shareholder value. Our share repurchase program has been highly effective since inception, underscoring our conviction in the intrinsic value of the business and our long-term outlook. During the quarter, we repurchased approximately 1.1 million shares of GEG stock at an average price of $2.47 per share. From inception of the program through February 3rd, Great Elm has repurchased approximately 6.4 million shares at an average price of $1.99 per share, representing a total capital deployment of $12.7 million. In aggregate, these repurchases equate to nearly 20% of our shares outstanding, materially enhancing per share value for shareholders. As we enter the second half of fiscal 2026, Gratom is well-positioned with $51.2 million in cash, providing us with ample flexibility to support our growth initiatives and take advantage of attractive opportunities sourced via our sophisticated network. We remain focused on growing fee-paying AUM, scaling our alternative credit and real estate businesses, and sourcing new investment opportunities. Looking ahead, we seek to expand our platform and add accretive, differentiated product offerings with attractive, risk-adjusted return profiles. With that, I'll now turn the call over to our CFO, Carrie Davis.
Thank you, Jason. I will provide a brief overview of the quarter and, of course, welcome all of you to review our filings in greater detail or reach out to our team with any questions. Fiscal second quarter revenue was $3 million compared to $3.5 million for the prior year period. The decrease was primarily driven by $0.6 million in property sales and $0.5 million of incentive fees in the prior year period that were not recognized in the current quarter, offset by $0.4 million in new construction management revenue from MCS acquired in February 2025. Estimated AUM and fee-paying AUM totaled approximately $740 million and $561 million respectively, with fee-paying AUM up 4% from the prior year quarter end. We reported a net loss of $16.5 million for the quarter versus net income of $1.4 million a year ago. Our loss for the quarter was primarily driven by unrealized losses of $14.4 million and realized gains of $2.2 million from GEG's investments, including the company's investments in consolidated funds. This compares to an unrealized gain from the company's investments in the prior year period of $2.4 million, including its investments in consolidated funds. The unrealized losses from GEG's investments in the recent quarter were largely attributable to market-based valuation movements, including $4 million related to GECC common stock, $3 million related to special purpose vehicles invested in GECC common stock, and $6.7 million related to our core weave related investment. Adjusted EBITDA for the quarter was a loss of $1.6 million compared to a gain of $1 million in the prior year period. As of December 31, 2025, we held approximately $51.2 million of cash on our balance sheet to deploy across our growing alternative asset management platform. Please refer to slide 6 for a summary of our financial position and book value per share of approximately $1.79. This concludes my financial review of the quarter. With that, we will turn the call over to the operator to open for questions.
