• Adjusted Net Investment Income (NII): $0.23 per share.
• Total Assets: Approximately $1.1 billion, up from $869 million in the prior quarter.
• New Capital Deployed: Over $187 million, marking the largest investment quarter.
• Monthly Distribution: $0.08 per share, or $0.96 per share annually.
• Supplemental Distribution: $0.70 per share paid during the quarter.
• Total Investment Income: $21.4 million, down from $22.6 million in the prior quarter.
• Net Expenses: $20.2 million, up from $15.3 million in the prior quarter.
• Net Asset Value (NAV): Increased to $13.30 per share from $12.49 per share in the prior quarter.
• New Publicly Traded Notes Issued: $126.5 million in 7.875% notes maturing in 2030.
• Credit Facility Upsized: Total commitment levels increased to $250 million.
• Asset Coverage Ratio: 185.9% as of December 31, 2024.

• Warning! GuruFocus has detected 7 Warning Sign with GAIN.

Release Date: February 13, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Gladstone Investment Corp (NASDAQ:GAIN) reported consistent positive quarterly results with an increase in total assets to approximately $1.1 billion, up from $869 million in the prior quarter.
• The company successfully acquired three new companies and deployed over $187 million of new capital, marking its largest investment quarter.
• GAIN maintained its monthly distribution to shareholders at $0.08 per share and paid a supplemental distribution of $0.70 per share, reflecting its commitment to rewarding shareholders.
• The company issued $126.5 million in new publicly traded 7.875% notes maturing in 2030, strengthening its balance sheet with low leverage and positive liquidity.
• GAIN's net asset value (NAV) increased to $13.30 per share from $12.49 per share in the prior quarter, driven by net unrealized appreciation on investments and net investment income.

Negative Points

• Total investment income decreased to $21.4 million from $22.6 million in the prior quarter, primarily due to a decrease in dividend and interest income.
• Net expenses rose to $20.2 million from $15.3 million in the prior quarter, largely due to increased capital gains-based incentive fees.
• Adjusted net investment income per share slightly decreased to $0.23 from $0.24 in the prior quarter.
• Four portfolio companies remained on non-accrual status, although improvements were noted in two of these companies.
• The company faced a competitive M&A market with upward pressure on valuations, which could impact future acquisition opportunities.

Q & A Highlights

Q: What changes at Nocturne, E3, and SFEG drove the unrealized appreciation in the quarter? A: Dave Dullum, President, explained that Nocturne saw an increase in both EBITDA and multiple due to strong performance and a strategic acquisition. E3 experienced a significant increase in EBITDA, while SFEG's EBITDA improved due to successful add-on acquisitions, although its multiple remained unchanged.

Q: What caused the depreciation at Educators, PSI, and Galaxy Technologies, and what is the outlook for these companies? A: Dave Dullum noted that Galaxy Technologies had a slight decrease in EBITDA despite a slight increase in multiple. PSI experienced higher costs due to facility moves, impacting EBITDA. Educators saw minor declines in both multiple and EBITDA but remains a solid business with a strong management team.

Q: How might NII per share change in the current quarter, considering new investments, higher leverage, and declining portfolio yields? A: Taylor Ritchie, CFO, stated that NII was lower due to a large capital gains incentive fee. While yields may decrease slightly, significant interest income is expected due to high interest rates. Fee credits from the Adviser are tied to new investment activity and may fluctuate.

Q: Could you elaborate on the credits from the Adviser and their potential reversal in future quarters? A: Taylor Ritchie explained that fee credits from the Adviser are linked to new investment activity. As the portfolio expands, these credits will remain elevated, though fluctuations may occur depending on investment levels.

Q: Are there any concerns regarding the portfolio companies on non-accrual status? A: Taylor Ritchie mentioned that four portfolio companies remain on non-accrual status, but there are no credit concerns. Improvement is noted in two companies, which are now generating profits.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.