NASDAQ:GAIN Gladstone Investment Q4 2024 Earnings Report $13.87 +0.05 (+0.36%) As of 12:02 PM Eastern This is a fair market value price provided by Polygon.io. Learn more. Earnings HistoryForecast Gladstone Investment EPS ResultsActual EPS$0.24Consensus EPS $0.26Beat/MissMissed by -$0.02One Year Ago EPSN/AGladstone Investment Revenue ResultsActual Revenue$23.65 millionExpected Revenue$22.94 millionBeat/MissBeat by +$710.00 thousandYoY Revenue GrowthN/AGladstone Investment Announcement DetailsQuarterQ4 2024Date5/8/2024TimeN/AConference Call DateThursday, May 9, 2024Conference Call Time8:30AM ETUpcoming EarningsGladstone Investment's Q4 2025 earnings is scheduled for Tuesday, May 13, 2025, with a conference call scheduled on Wednesday, May 14, 2025 at 8:30 AM ET. Check back for transcripts, audio, and key financial metrics as they become available.Conference Call ResourcesConference Call AudioConference Call TranscriptPress Release (8-K)Annual Report (10-K)Earnings HistoryCompany ProfilePowered by Gladstone Investment Q4 2024 Earnings Call TranscriptProvided by QuartrMay 9, 2024 ShareLink copied to clipboard.There are 7 speakers on the call. Operator00:00:00Greetings and welcome to the Gladstone Investment Corporation 4th Quarter and Year End Earnings Conference Call. At this time, all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, David Gladstone, Chief Executive Officer. Operator00:00:25Thank you, sir. You may begin. Speaker 100:00:28Okay. Thank you, Latonya. That's a very nice introduction and good morning to you all. This is David Gladstone, Chairman of Gladstone Investment. This is the Q4 fiscal year end March 31, 2024 earnings conference call for shareholders and analysts of Gladstone Investment. Speaker 100:00:46We are listed on NASDAQ under the trading symbol GAIN for the common stock and then we have 3 preferred stocks Gainin, Gain Z and Gain L, 3 other registered notes. So I'll turn it over now to our Michael LiCalsi, our General Counsel, and he'll warm me up with some no, he's just going to give you the warning. Go ahead, Michael. Speaker 200:01:18Thanks, David. Good morning, everybody. Today's call may include forward looking statements under the Securities Act of 1933 and the Securities Exchange Act of 1934, including those regarding our future performance. And these forward looking statements involve certain risks and uncertainties and other factors, even though they're based on our current plans, which we believe to be reasonable. Many factors may cause our actual results to be materially different from any future results expressed or implied by these forward looking statements, including all risk factors listed in our Forms 10Q, 10 ks and other documents we file with the SEC. Speaker 200:01:51You can find them on the Investors page of our website, gladstoneinvestment.com, or on the SEC's website, which is www.sec.gov. And we undertake no obligation to publicly update or revise any forward looking statements, whether as a result of new information, future events or otherwise, except as required by law. And please also note that past performance or market information is not a guarantee of any future results. Please take the opportunity to visit our website. Once again, that's gladstoneinvestment.com. Speaker 200:02:21You can sign up for our email notification service there. Can also find us on Twitter GladstoneComps is the keyword and on Facebook, the keyword is the Gladstone Companies. Today's call is simply an overview of our results through March 31, 2024, so we ask you to review our press release and Form 10 ks both issued yesterday for more detailed information. With that, I'll turn it back to Dave Dullum, President. Speaker 300:02:44Hi, Mike. Thanks very much, and good morning to all that's on the call. First, obviously, we are very pleased that we're able to report gain again produced very good results for the 4th quarter and for the fiscal year ending in March 2024, which follows on the previous solid very 1st few quarters we had for this fiscal year. So for the fiscal year, which did end threethirty onetwenty four, we generated adjusted NII of $1 per share and increased the total fair value of our portfolio to $921,000,000 which is up pretty significantly from $754,000,000 at the prior year end. Now this growth, it's a net result really of increasing our assets through new buyout activity and incremental financings for add ons to existing portfolio companies, while being reduced by one successful exit where we generated a significant realized capital gain of $43,500,000 So for the fiscal year 'twenty four, to make up to get to that net number, we invested a total of $184,000,000 which is up from $134,000,000 in the prior year. Speaker 300:03:53Now of this amount, roughly $61,000,000 was invested in 2 new buyouts and an additional $123,000,000 is invested as part of add on investments or recapitalization event at some existing portfolio companies. Now just for clarification, these recap events are not were not for bad reasons. They were actually for opportunities for us to, in fact, take some cap gains, little bit of income and still maintain a significant ownership interest in that particular portfolio company. There were actually on the buyouts I mentioned, there were 2 new companies there. And on this recap and add ons, there were actually 4 companies that were made of that grouping. Speaker 300:04:36So we continue to pursue add on opportunities as they do allow us to increase our investment in companies where we do know the management teams and obviously have a pretty strong knowledge of the business with a strong belief in its future and therefore are able to continue building value for future equity gains. So you should expect that we will continue to do these add on opportunities going forward. And during the year, we did maintain our monthly distribution to shareholders, which was $0.08 per share or $0.96 per share on an annual basis. We also paid a total of $1.24 per share in supplemental distributions, so therefore, we aggregate annual distributions to shareholders of $2.20 per share for the fiscal year. Now clearly, these large supplemental distributions, which we've been able to build actually on over the years, demonstrates that we're actually having success with our buyout strategy, which allows us to reward shareholders with these supplemental distributions coming from the realized capital gains on the exits that we take in addition, obviously, to the income which we generate from our monthly distributions. Speaker 300:05:44As our portfolio has matured, we've been at this since 2,005, and the equity values have increased, we clearly will be able to continue to constructively harvest these gains for the benefit of shareholders. As you all know, we are able to because of our model being some of these companies for a long period of time and really it's the benefit of shareholders that we're not having to exit companies too rapidly, unable to maintain them. So, we will continue to balance the timing of the exits, while maintaining the level of our assets that produce the income that we need to support the monthly dividend levels that we currently are able to have and hopefully over time continue to grow them. So actually since our inception in 2,005 and through this threethirty onetwenty four period, we've actually invested in 58 buyout portfolio companies for an aggregate of approximately 1,700,000,000 exited 31 of these companies. And this has resulted in our total assets growing to the $921,000,000 I mentioned earlier, while we generated approximately $290,000,000 in net realized gains and about $42,000,000 in other income on the exits of these companies, again reinforcing our goal and our function as a fundamental private equity type fund, but providing monthly distributions to shareholders as well as additional capital gains. Speaker 300:07:06Our balance sheet is strong. We got low leverage. You'll hear more about this from Rachel. And we will continue providing support to our portfolio companies for the add ons I mentioned, any interim financing if the need arises, while we obviously continue growing the assets through the new buyouts. So quickly looking at the outlook, I would say, deal flow is strong. Speaker 300:07:27The backlog of new opportunities has been building, and we actually been hearing from the investment bankers and the other folks that we deal with in finding new opportunities that backlogs are building. I'd say the quality we're seeing is okay, frankly, but the volume is clearly back to levels that we were seeing before. So right now, we're actively working on some new buyout deals, including add ons, as I mentioned. And these are in varying stages of our buyout process, which is where we put out what we call initial indications of interest. We then go on to what we call a letter of intent and LOI and then obviously move into due diligence. Speaker 300:08:09And as right now, I would say, we're in pretty good phases with each of those, and we may, in fact, hopefully have something we'll be closing in the next, say, 3 months or so. So there is significant liquidity though in the market, and it is a strong competitive environment. So as everyone knows on call, we are pretty conservative. We've done it well over the years, and we're going to stick with that. So while we're going to be aggressively competing for new acquisitions, we are going to be careful in terms of what values that we are prepared and willing to pay. Speaker 300:08:40And our portfolio, frankly, is in a position that we can really do that carefully. So I feel very good right now about where our momentum is and the nature of the company. So in summing up the quarter and the fiscal year and looking forward, we believe that the state of our portfolio, as I mentioned, is very good. We have a strong liquid balance sheet, an active level of buyout activity, continued prospect of very good earnings and distributions over the next year. In other words, we have the pieces in place to really maintain our performance. Speaker 300:09:09So with that, I'll turn it over to Rachel Easton, our CFO, and she can give you some more detail on the actual performance. Rachel? Speaker 400:09:16Thank you, David, and good morning to everyone on the call. Looking at our operating performance, we finished fiscal year 2024 strong, generating total investment income of $87,300,000 up from $81,500,000 in the prior fiscal year. This was driven by an increase in the weighted average yield on our debt investments to 14.4% for the year as well as interest income earned on new investments made during the year. This increase in interest income was partially offset by lower dividend and success fee income, which can be variable in timing and was due to amounts that did not recur in the current year. Additionally, we ended the year with adjusted net investment income of $34,500,000 or $1 per share, down slightly from $36,700,000 or 1 point $1.0 per share in the prior fiscal year, although still more than enough to cover our annual regular monthly distribution of $0.96 per share. Speaker 400:10:05Focusing just on the Q4 of FY 'twenty four, we generated total investment income of $23,600,000 up from $23,100,000 in the prior quarter. This was primarily due to an increase in success fee income, the timing of which can be variable as I mentioned. Net expenses for the 4th quarter were $18,300,000 up from $13,300,000 in the prior quarter. The increase is primarily due to a $4,100,000 increase in accrued capital gains incentive fees due to the net impact of realized and unrealized gains and losses as required to be recorded under U. S. Speaker 400:10:38GAAP. This resulted in net investment income for the quarter of 5,300,000 dollars compared to $9,700,000 in the prior quarter. The fluctuation is primarily due to that large accrued capital gains based incentive fees recognized in the current quarter. Adjusted net investment income, which is net investment income exclusive of any accrued capital gains based incentive fees Operator00:10:57for the Speaker 400:10:58quarter was $8,800,000 or $0.24 per share, down slightly from $9,100,000 or $0.26 per share in the prior quarter. We do continue to believe that adjusted net investment income is a useful and representative indicator of our ongoing operations. During the quarter ended March 31, 2024, the number of portfolio companies on non accrual was reduced to 2 companies from 3 upon the dissolution of 1 investment. We will continue working with the remaining 2 companies to get back on accrual status when possible. We believe that maintaining liquidity and flexibility to support and grow our portfolio are key elements of our success. Speaker 400:11:34With our 3 public note issuances, we have long term fixed rate capital in place. And as of yesterday's release, we had $135,000,000 available on our $200,000,000 credit facility. Additionally, we are very successful on our common stock ATM program this quarter, raising approximately $19,000,000 in net proceeds on the sale of over 1,300,000 shares of our common stock, with all shares being accretive and above NAV. Overall, our leverage remains low, with an asset coverage ratio at March 31, 2024 of 2 19 percent, providing plenty of cushion to the required 150 percent coverage. Our NAV increased this quarter to 13.43 dollars per share compared to $13.01 per share in the prior quarter. Speaker 400:12:14The increase was primarily driven by $0.88 per share of net unrealized appreciation of investments and $0.15 of net investment income. These amounts were partially offset by $0.41 per share of realized losses on investments and $0.24 per share of distributions paid to common shareholders during the quarter. Consistent with prior quarters, distributable book earnings to shareholders remained strong. The end of the fiscal year was $20,100,000 or $0.55 per share in spillover and our monthly distribution remains consistent at $0.08 per share for an annual run rate of $0.96 per share. During the fiscal year, we've seen an aggregate $1.24 per share in supplemental distributions. Speaker 400:12:52As Dave mentioned, we look to continue funding future supplemental distributions as we recognize realized capital gains on the equity portion of our assets. In the aggregate, we paid $2.20 per share in regular monthly and supplemental distributions during this fiscal year, which is a yield of about 15.5% using yesterday's closing price of 14.16 dollars This covers my part of today's call. Back to you, David. Speaker 100:13:15Okay. Thank you. That's very nice, Rachel, and nice report by Dave and Michael. It's good information for our shareholders. This call and the 10 ks filed with the SEC yesterday should bring everyone up to date at this point in time. Speaker 100:13:31The team has reported solid results for the quarter and the year ending March 31, 2024, including the investment and exit activity associated with those net realized gains. We believe the team is in a great position to continue this success for the next fiscal year, which will less than a year away, we believe the Gladstone investment is an attractive investment for investors seeking monthly distributions as well as supplemental distributions from potential capital gains and other income. The team hopes to continue to show you a good solid return as we go forward with this new year. Now let's have some questions from our shareholders and analysts that are on the line. Latoya? Operator00:14:20Thank you. We will now be conducting a question and answer session. Our first question comes from Mickey Schleien with Ladenburg Thalmann. Please proceed. Speaker 500:14:52Yes. Good morning, everyone. Dave, your fund reported a very nice unrealized gain of $0.88 per share. Apart from the reversal for the Mountain, can you highlight what drove that and any themes that would help us understand what caused that appreciation? Speaker 300:15:18Sure. Mickey, I'll let Rachel have a quick stab in and I'll, if it's all right, come in and fill in some thoughts behind that. Speaker 400:15:25Sounds great. Good morning, Mickey. Looking at the portfolio as a whole, from an unrealized appreciation perspective, it was almost entirely due to performance at many of the portfolio companies. We did see decreased multiples across the portfolio. This was offset by decreased performance at a handful of companies, but it was really performance driving the unrealized appreciation we saw. Speaker 400:15:49There was a bit in there that was due to the reversal of unrealized depreciation of the mountain as we realized that this quarter with the final dissolution. But really it was performance at many of our companies. And Dave, if you want to fill in any holes there. Yes. Speaker 300:16:03And I think as we reported in our K, where we show the individual breakdown portfolio companies for the year ended, you will notice that a good number of those are appreciated relatively significantly. There is a small handful that are off by $1,000,000 here and a couple of million here, so to speak. A fair amount of that, and I can tell you based on the portfolio, my personal view and knowledge with the individual portfolio companies that those that are slightly off with the exception of couple that have been in our portfolio for a while that are all actually performing better and I feel like we're headed in the right direction on most of them. Obviously, and as Rachel said, some of it is a function of EBITDA being down a little bit in some cases, at the same time multiples being down. But by and large, I'd say there are no major issues in there just overall fundamentally just good performance and frankly a good handful of these companies performing at a very high level generating fairly significant individual net gains. Speaker 300:17:13I think that's really the best I can address on it. Speaker 500:17:18Thanks for that, Dave. So given what you just said with some strong performers in the portfolio, there's so much demand in private equity for acquisition of good performing companies. And I know in the past you've always told me you're sort of I don't know reluctant is the right word, but it's hard for you to make the a decision to sell something because then you have to replace it. But your phone must be ringing with some pretty good offers for some of these investments. For this coming fiscal year, is it reasonable to assume that you're going to harvest some of those unrealized gains? Speaker 300:17:59Well, no, you make very good points and I think you hit it right. We've always said, I always like to say and it's really true that when we look to exit a business, a lot of it honestly is driven by the management teams, the folks that we're invested with. And if they come to us and say, guys, you know what, we need some liquidity ourselves or anything, the time has come, which indeed is which a couple of the exits we had this past year, Council Press being 1, which is very successful. And so we listen to that, but we generally, again, because as you well know, our model is really in a good position to allow us to maintain and hold these companies. And to exactly the point, if we exit something while it's a really good realized gain, we have to, as you say, go and replace it. Speaker 300:18:44So we really take a hard look at either where we're getting, as you point out, these calls are the investment bankers coming at us to take our companies to market and what have you, really almost that reinvestment decision approach, right? So we think about it. And if we really like the business and the people, why not reinvest? And we do that on a pretty regular basis as we look at the portfolio. Having said all of that, it's also important to the model to us to generate realized gains, as we say, for supplementals. Speaker 300:19:14So the best I can say there is, it would be more likely over the next year or so that we might have a pretty good exit versus not having one. And we'd be very cautious in which and how we do that, at the same time maintaining our level of assets to keep generating the income for monthly distribution. So it's kind of a balance and it's a really good question and it's one that obviously we struggle with. We're in a good position with that. But I think that's I would add to that, Mickey. Speaker 500:19:47That's really helpful, Dave. And one last question for me. You and your affiliated companies in the Gladstone universe have a track record of fixing problem investments. Sometimes we see situations like the mountain that just don't work out, but I can think of others where you've merged companies or you've replaced managements, you've recapitalized businesses. So with that in mind, can you tell us what you're doing with Edge and Hobbs, which if I'm not mistaken, have both been on non accrual for a while and I'm sure you'd like to rectify those? Speaker 300:20:26Yes. So, Hobbs first, I think and you benefited by being at our meeting last September. I think you got to see some of the management teams. And we really have a very good management team at Hobbs. They actually, without going into detail, are on a positive performance track right now, which is a function of a couple of things. Speaker 300:20:48One of the things that really affected them somewhat is they grew so rapidly with new business and new contracts. And frankly, the pricing of those contracts were perhaps not as good as they should have been. So when certain somewhere were fixed price contracts and these are percentage of completion basically. So over time, they were actually we're losing money on some of those contracts. So we've been able, we believe, to wash most, if not all of those out. Speaker 300:21:15And right now, they've actually reduced the volume. So the top line number in revenue is lower than it was, say, a year ago. But having said that, the margin and therefore the EBITDA, if you will, is now positive and headed in the right direction. So and again, the team is really good team. We've got good folks on the board. Speaker 300:21:35So we'll just keep working on that one. And with any hopefully by a year or so or maybe less, we might be back frankly on accrual with that one. Edge has a couple of components to it. Some things are going on with that right now, not negative. We've made some changes there recently with one aspect of that business. Speaker 300:21:56And I don't feel I can comment any more detail on that other than to say that we're working with it and again with any luck we might see some positive effect there, but that's where those 2 are. Speaker 500:22:12Thanks for that, Dave, and congratulations to you and your team on the end of a very good fiscal year for Gladstone. Speaker 300:22:20Thank you, sir. I hope you're feeling better by Speaker 500:22:22the way and hope we get to some of you. Thanks a lot. Take care. Thanks. Speaker 100:22:27More questions? Operator00:22:37There are no further questions in queue. Mr. Gladstone, I'll turn it back to you. We do have a question just came in from Bryce Rowe with B. Riley. Operator00:22:44Please proceed. Speaker 600:22:47Thanks. Good morning. Busy BDC morning for all of us analysts here. So glad to have an opportunity to ask a question. David, just wanted to ask about a comment you made in your prepared remarks. Speaker 600:23:02It sounded like maybe opportunities, the volume of opportunities was up and in a good spot, but maybe the quality of those opportunities was a little more spotty, if you will. Just any thoughts around kind of where that comment came from and what in particular you're seeing with deals that maybe makes them a little less attractive than you'd like them to be? Speaker 300:23:30Right. So thanks, Bryce. And by the way, I'm happy you're able to get on. We're going to miss you. I would say, look, you know from the Investment Banking side, and we definitely are, I think, companies that were being put on the holding near the end of last year are now starting to flow back into the backlog. Speaker 300:23:50And there's this I feel like a fair number of new deals that are coming and we are seeing them. And obviously, we have to be very selective in where we spend our time as we look at new deals. So the ones that we spend our time on are generally companies that we believe we're going to be able to frankly buy for around anywhere from 6 to maybe 7, 7.5 times EBITDA. And while we've been clearly in some processes where when we feel like that's a good value, we're not even getting to go to a management meeting because there are other people out there that are 8 to 9 times. And so that's part of my comment, frankly. Speaker 300:24:31And honestly, while those companies look good on the surface, I'm sure they are, we don't understand how one, so to speak, really pays that kind of multiple. So it's really more around a bit of our how our model works with what we're seeing. And as you use the word, it's kind of spotty, the quality. It's a little bit so many. Their companies have looked on the surface, but they're smaller. Speaker 300:24:56The EBITDA are less consistent. The general positions in the marketplace it's not clear they have much of a differentiator, so to speak, but they're fundamentally decent businesses, but not something that we feel we could get our arms around. And as you know, if we're doing 3 or 4, even 5 new deals a year, that's pretty good for us. So we have to be really, really selective. But the activity level, the main part is if activity level is up and we are able to actually make some conscientious decisions on how we spend our time to try to get new deals on the books over the next say 9 months or so. Speaker 600:25:36That's great. Appreciate the color there and the time. Speaker 300:25:40Okay, man. Take care. Thanks. Speaker 100:25:43Bryce, just to mention that some of our folks are saying that everybody and his mother is trying to put together deals. And so there are a lot of what they call independent sponsors out there trying to take a company and call it a beginning roll up. And we don't believe in some of these fictitious numbers that come through. And so from that standpoint, we're just seeing a lot that we don't like. We may see 5 or 6 and then pick 1 of the best of the lot. Speaker 100:26:16There's another thing going on in the marketplace now that not been mentioned and that is inflation. Inflation helps everybody out who wants capital gains because things go up in 5 years and you get a chance to sell it at a very, very attractive price compared to where you bought it. So we've seen some of that. So don't count out inflation because inflation is here for a a good amount of time. And that's all. Speaker 100:26:48Do we have any other questions? Operator00:26:51There are no further questions in queue. I'll turn it back to you for closing comments. Speaker 100:26:55Okay. Thank you, Latoya. And you guys didn't come up with enough questions this time. Would you please work on that before you come to next meeting? Thank you very much for attending and that's the end of this conference call. Operator00:27:09This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation and have a great day.Read morePowered by Conference Call Audio Live Call not available Earnings Conference CallGladstone Investment Q4 202400:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsPress Release(8-K)Annual report(10-K) Gladstone Investment Earnings HeadlinesGladstone Inv Stock Dividends | NASDAQ:GAIN | BenzingaApril 10, 2025 | benzinga.comNeed More Passive Income? Buy These 2 High-Yield Dividend Stocks NowApril 7, 2025 | 247wallst.comShocking AI play that’s beats Nvidia by a country mileYou’ve seen the headlines about Nvidia. Now Tim Sykes is sounding the alarm — because what CEO Jensen Huang is about to announce could change the AI market once again. Experts already predict the total addressable market could climb past $20 trillion. But Sykes believes most investors have missed what’s coming next. He’s tracking a new shift — and says the biggest gains are still ahead.May 7, 2025 | Timothy Sykes (Ad)Gladstone Capital: A Reliable Income PowerhouseMarch 31, 2025 | seekingalpha.com3 Ultra High-Yield Dividend Stocks That Can Pay Your Rent Every MonthMarch 22, 2025 | 247wallst.comGladstone Alternative Income Fund makes initial portfolio company investmentsFebruary 27, 2025 | markets.businessinsider.comSee More Gladstone Investment Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like Gladstone Investment? Sign up for Earnings360's daily newsletter to receive timely earnings updates on Gladstone Investment and other key companies, straight to your email. Email Address About Gladstone InvestmentGladstone Investment (NASDAQ:GAIN) is business development company, specializes in lower middle market, mature stage, buyouts; refinancing existing debt; senior debt securities such as senior loans, senior term loans, lines of credit, and senior notes; senior subordinated debt securities such as senior subordinated loans and senior subordinated notes; junior subordinated debt securities such as subordinated notes and mezzanine loans; limited liability company interests, and warrants or options. The fund does not invest in start-ups. The fund seeks to invest in manufacturing, consumer products and business/consumer services sector. It seeks to invest in small and mid-sized companies based in the United States. The fund prefers to make debt investments between $5 million and $30 million and equity investments between $10 million and $40 million in companies. The fund seeks to invest in companies with revenue between $20 million and $100 million. The fund invests in companies with EBITDA from $3 million to $20 million. It seeks minority equity ownership and prefers to hold a board seat in its portfolio companies. It also prefers to take majority stake in its portfolio companies. The fund typically holds the investments for seven years and exits via sale or recapitalization, initial public offering, or sale to third party.View Gladstone Investment ProfileRead more More Earnings Resources from MarketBeat Earnings Tools Today's Earnings Tomorrow's Earnings Next Week's Earnings Upcoming Earnings Calls Earnings Newsletter Earnings Call Transcripts Earnings Beats & Misses Corporate Guidance Earnings Screener Earnings By Country U.S. Earnings Reports Canadian Earnings Reports U.K. Earnings Reports Latest Articles Archer Stock Eyes Q1 Earnings After UAE UpdatesFord Motor Stock Rises After Earnings, But Momentum May Not Last Broadcom Stock Gets a Lift on Hyperscaler Earnings & CapEx BoostPalantir Stock Drops Despite Stellar Earnings: What's Next?Is Eli Lilly a Buy After Weak Earnings and CVS-Novo Partnership?Is Reddit Stock a Buy, Sell, or Hold After Earnings Release?Warning or Opportunity After Super Micro Computer's Earnings Upcoming Earnings Monster Beverage (5/8/2025)Coinbase Global (5/8/2025)Brookfield (5/8/2025)Anheuser-Busch InBev SA/NV (5/8/2025)ConocoPhillips (5/8/2025)Shopify (5/8/2025)Cheniere Energy (5/8/2025)McKesson (5/8/2025)Enbridge (5/9/2025)Petróleo Brasileiro S.A. - Petrobras (5/12/2025) Get 30 Days of MarketBeat All Access for Free Sign up for MarketBeat All Access to gain access to MarketBeat's full suite of research tools. Start Your 30-Day Trial MarketBeat All Access Features Best-in-Class Portfolio Monitoring Get personalized stock ideas. Compare portfolio to indices. Check stock news, ratings, SEC filings, and more. Stock Ideas and Recommendations See daily stock ideas from top analysts. Receive short-term trading ideas from MarketBeat. Identify trending stocks on social media. Advanced Stock Screeners and Research Tools Use our seven stock screeners to find suitable stocks. Stay informed with MarketBeat's real-time news. Export data to Excel for personal analysis. Sign in to your free account to enjoy these benefits In-depth profiles and analysis for 20,000 public companies. Real-time analyst ratings, insider transactions, earnings data, and more. Our daily ratings and market update email newsletter. Sign in to your free account to enjoy all that MarketBeat has to offer. Sign In Create Account Your Email Address: Email Address Required Your Password: Password Required Log In or Sign in with Facebook Sign in with Google Forgot your password? Your Email Address: Please enter your email address. Please enter a valid email address Choose a Password: Please enter your password. Your password must be at least 8 characters long and contain at least 1 number, 1 letter, and 1 special character. Create My Account (Free) or Sign in with Facebook Sign in with Google By creating a free account, you agree to our terms of service. This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.
There are 7 speakers on the call. Operator00:00:00Greetings and welcome to the Gladstone Investment Corporation 4th Quarter and Year End Earnings Conference Call. At this time, all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, David Gladstone, Chief Executive Officer. Operator00:00:25Thank you, sir. You may begin. Speaker 100:00:28Okay. Thank you, Latonya. That's a very nice introduction and good morning to you all. This is David Gladstone, Chairman of Gladstone Investment. This is the Q4 fiscal year end March 31, 2024 earnings conference call for shareholders and analysts of Gladstone Investment. Speaker 100:00:46We are listed on NASDAQ under the trading symbol GAIN for the common stock and then we have 3 preferred stocks Gainin, Gain Z and Gain L, 3 other registered notes. So I'll turn it over now to our Michael LiCalsi, our General Counsel, and he'll warm me up with some no, he's just going to give you the warning. Go ahead, Michael. Speaker 200:01:18Thanks, David. Good morning, everybody. Today's call may include forward looking statements under the Securities Act of 1933 and the Securities Exchange Act of 1934, including those regarding our future performance. And these forward looking statements involve certain risks and uncertainties and other factors, even though they're based on our current plans, which we believe to be reasonable. Many factors may cause our actual results to be materially different from any future results expressed or implied by these forward looking statements, including all risk factors listed in our Forms 10Q, 10 ks and other documents we file with the SEC. Speaker 200:01:51You can find them on the Investors page of our website, gladstoneinvestment.com, or on the SEC's website, which is www.sec.gov. And we undertake no obligation to publicly update or revise any forward looking statements, whether as a result of new information, future events or otherwise, except as required by law. And please also note that past performance or market information is not a guarantee of any future results. Please take the opportunity to visit our website. Once again, that's gladstoneinvestment.com. Speaker 200:02:21You can sign up for our email notification service there. Can also find us on Twitter GladstoneComps is the keyword and on Facebook, the keyword is the Gladstone Companies. Today's call is simply an overview of our results through March 31, 2024, so we ask you to review our press release and Form 10 ks both issued yesterday for more detailed information. With that, I'll turn it back to Dave Dullum, President. Speaker 300:02:44Hi, Mike. Thanks very much, and good morning to all that's on the call. First, obviously, we are very pleased that we're able to report gain again produced very good results for the 4th quarter and for the fiscal year ending in March 2024, which follows on the previous solid very 1st few quarters we had for this fiscal year. So for the fiscal year, which did end threethirty onetwenty four, we generated adjusted NII of $1 per share and increased the total fair value of our portfolio to $921,000,000 which is up pretty significantly from $754,000,000 at the prior year end. Now this growth, it's a net result really of increasing our assets through new buyout activity and incremental financings for add ons to existing portfolio companies, while being reduced by one successful exit where we generated a significant realized capital gain of $43,500,000 So for the fiscal year 'twenty four, to make up to get to that net number, we invested a total of $184,000,000 which is up from $134,000,000 in the prior year. Speaker 300:03:53Now of this amount, roughly $61,000,000 was invested in 2 new buyouts and an additional $123,000,000 is invested as part of add on investments or recapitalization event at some existing portfolio companies. Now just for clarification, these recap events are not were not for bad reasons. They were actually for opportunities for us to, in fact, take some cap gains, little bit of income and still maintain a significant ownership interest in that particular portfolio company. There were actually on the buyouts I mentioned, there were 2 new companies there. And on this recap and add ons, there were actually 4 companies that were made of that grouping. Speaker 300:04:36So we continue to pursue add on opportunities as they do allow us to increase our investment in companies where we do know the management teams and obviously have a pretty strong knowledge of the business with a strong belief in its future and therefore are able to continue building value for future equity gains. So you should expect that we will continue to do these add on opportunities going forward. And during the year, we did maintain our monthly distribution to shareholders, which was $0.08 per share or $0.96 per share on an annual basis. We also paid a total of $1.24 per share in supplemental distributions, so therefore, we aggregate annual distributions to shareholders of $2.20 per share for the fiscal year. Now clearly, these large supplemental distributions, which we've been able to build actually on over the years, demonstrates that we're actually having success with our buyout strategy, which allows us to reward shareholders with these supplemental distributions coming from the realized capital gains on the exits that we take in addition, obviously, to the income which we generate from our monthly distributions. Speaker 300:05:44As our portfolio has matured, we've been at this since 2,005, and the equity values have increased, we clearly will be able to continue to constructively harvest these gains for the benefit of shareholders. As you all know, we are able to because of our model being some of these companies for a long period of time and really it's the benefit of shareholders that we're not having to exit companies too rapidly, unable to maintain them. So, we will continue to balance the timing of the exits, while maintaining the level of our assets that produce the income that we need to support the monthly dividend levels that we currently are able to have and hopefully over time continue to grow them. So actually since our inception in 2,005 and through this threethirty onetwenty four period, we've actually invested in 58 buyout portfolio companies for an aggregate of approximately 1,700,000,000 exited 31 of these companies. And this has resulted in our total assets growing to the $921,000,000 I mentioned earlier, while we generated approximately $290,000,000 in net realized gains and about $42,000,000 in other income on the exits of these companies, again reinforcing our goal and our function as a fundamental private equity type fund, but providing monthly distributions to shareholders as well as additional capital gains. Speaker 300:07:06Our balance sheet is strong. We got low leverage. You'll hear more about this from Rachel. And we will continue providing support to our portfolio companies for the add ons I mentioned, any interim financing if the need arises, while we obviously continue growing the assets through the new buyouts. So quickly looking at the outlook, I would say, deal flow is strong. Speaker 300:07:27The backlog of new opportunities has been building, and we actually been hearing from the investment bankers and the other folks that we deal with in finding new opportunities that backlogs are building. I'd say the quality we're seeing is okay, frankly, but the volume is clearly back to levels that we were seeing before. So right now, we're actively working on some new buyout deals, including add ons, as I mentioned. And these are in varying stages of our buyout process, which is where we put out what we call initial indications of interest. We then go on to what we call a letter of intent and LOI and then obviously move into due diligence. Speaker 300:08:09And as right now, I would say, we're in pretty good phases with each of those, and we may, in fact, hopefully have something we'll be closing in the next, say, 3 months or so. So there is significant liquidity though in the market, and it is a strong competitive environment. So as everyone knows on call, we are pretty conservative. We've done it well over the years, and we're going to stick with that. So while we're going to be aggressively competing for new acquisitions, we are going to be careful in terms of what values that we are prepared and willing to pay. Speaker 300:08:40And our portfolio, frankly, is in a position that we can really do that carefully. So I feel very good right now about where our momentum is and the nature of the company. So in summing up the quarter and the fiscal year and looking forward, we believe that the state of our portfolio, as I mentioned, is very good. We have a strong liquid balance sheet, an active level of buyout activity, continued prospect of very good earnings and distributions over the next year. In other words, we have the pieces in place to really maintain our performance. Speaker 300:09:09So with that, I'll turn it over to Rachel Easton, our CFO, and she can give you some more detail on the actual performance. Rachel? Speaker 400:09:16Thank you, David, and good morning to everyone on the call. Looking at our operating performance, we finished fiscal year 2024 strong, generating total investment income of $87,300,000 up from $81,500,000 in the prior fiscal year. This was driven by an increase in the weighted average yield on our debt investments to 14.4% for the year as well as interest income earned on new investments made during the year. This increase in interest income was partially offset by lower dividend and success fee income, which can be variable in timing and was due to amounts that did not recur in the current year. Additionally, we ended the year with adjusted net investment income of $34,500,000 or $1 per share, down slightly from $36,700,000 or 1 point $1.0 per share in the prior fiscal year, although still more than enough to cover our annual regular monthly distribution of $0.96 per share. Speaker 400:10:05Focusing just on the Q4 of FY 'twenty four, we generated total investment income of $23,600,000 up from $23,100,000 in the prior quarter. This was primarily due to an increase in success fee income, the timing of which can be variable as I mentioned. Net expenses for the 4th quarter were $18,300,000 up from $13,300,000 in the prior quarter. The increase is primarily due to a $4,100,000 increase in accrued capital gains incentive fees due to the net impact of realized and unrealized gains and losses as required to be recorded under U. S. Speaker 400:10:38GAAP. This resulted in net investment income for the quarter of 5,300,000 dollars compared to $9,700,000 in the prior quarter. The fluctuation is primarily due to that large accrued capital gains based incentive fees recognized in the current quarter. Adjusted net investment income, which is net investment income exclusive of any accrued capital gains based incentive fees Operator00:10:57for the Speaker 400:10:58quarter was $8,800,000 or $0.24 per share, down slightly from $9,100,000 or $0.26 per share in the prior quarter. We do continue to believe that adjusted net investment income is a useful and representative indicator of our ongoing operations. During the quarter ended March 31, 2024, the number of portfolio companies on non accrual was reduced to 2 companies from 3 upon the dissolution of 1 investment. We will continue working with the remaining 2 companies to get back on accrual status when possible. We believe that maintaining liquidity and flexibility to support and grow our portfolio are key elements of our success. Speaker 400:11:34With our 3 public note issuances, we have long term fixed rate capital in place. And as of yesterday's release, we had $135,000,000 available on our $200,000,000 credit facility. Additionally, we are very successful on our common stock ATM program this quarter, raising approximately $19,000,000 in net proceeds on the sale of over 1,300,000 shares of our common stock, with all shares being accretive and above NAV. Overall, our leverage remains low, with an asset coverage ratio at March 31, 2024 of 2 19 percent, providing plenty of cushion to the required 150 percent coverage. Our NAV increased this quarter to 13.43 dollars per share compared to $13.01 per share in the prior quarter. Speaker 400:12:14The increase was primarily driven by $0.88 per share of net unrealized appreciation of investments and $0.15 of net investment income. These amounts were partially offset by $0.41 per share of realized losses on investments and $0.24 per share of distributions paid to common shareholders during the quarter. Consistent with prior quarters, distributable book earnings to shareholders remained strong. The end of the fiscal year was $20,100,000 or $0.55 per share in spillover and our monthly distribution remains consistent at $0.08 per share for an annual run rate of $0.96 per share. During the fiscal year, we've seen an aggregate $1.24 per share in supplemental distributions. Speaker 400:12:52As Dave mentioned, we look to continue funding future supplemental distributions as we recognize realized capital gains on the equity portion of our assets. In the aggregate, we paid $2.20 per share in regular monthly and supplemental distributions during this fiscal year, which is a yield of about 15.5% using yesterday's closing price of 14.16 dollars This covers my part of today's call. Back to you, David. Speaker 100:13:15Okay. Thank you. That's very nice, Rachel, and nice report by Dave and Michael. It's good information for our shareholders. This call and the 10 ks filed with the SEC yesterday should bring everyone up to date at this point in time. Speaker 100:13:31The team has reported solid results for the quarter and the year ending March 31, 2024, including the investment and exit activity associated with those net realized gains. We believe the team is in a great position to continue this success for the next fiscal year, which will less than a year away, we believe the Gladstone investment is an attractive investment for investors seeking monthly distributions as well as supplemental distributions from potential capital gains and other income. The team hopes to continue to show you a good solid return as we go forward with this new year. Now let's have some questions from our shareholders and analysts that are on the line. Latoya? Operator00:14:20Thank you. We will now be conducting a question and answer session. Our first question comes from Mickey Schleien with Ladenburg Thalmann. Please proceed. Speaker 500:14:52Yes. Good morning, everyone. Dave, your fund reported a very nice unrealized gain of $0.88 per share. Apart from the reversal for the Mountain, can you highlight what drove that and any themes that would help us understand what caused that appreciation? Speaker 300:15:18Sure. Mickey, I'll let Rachel have a quick stab in and I'll, if it's all right, come in and fill in some thoughts behind that. Speaker 400:15:25Sounds great. Good morning, Mickey. Looking at the portfolio as a whole, from an unrealized appreciation perspective, it was almost entirely due to performance at many of the portfolio companies. We did see decreased multiples across the portfolio. This was offset by decreased performance at a handful of companies, but it was really performance driving the unrealized appreciation we saw. Speaker 400:15:49There was a bit in there that was due to the reversal of unrealized depreciation of the mountain as we realized that this quarter with the final dissolution. But really it was performance at many of our companies. And Dave, if you want to fill in any holes there. Yes. Speaker 300:16:03And I think as we reported in our K, where we show the individual breakdown portfolio companies for the year ended, you will notice that a good number of those are appreciated relatively significantly. There is a small handful that are off by $1,000,000 here and a couple of million here, so to speak. A fair amount of that, and I can tell you based on the portfolio, my personal view and knowledge with the individual portfolio companies that those that are slightly off with the exception of couple that have been in our portfolio for a while that are all actually performing better and I feel like we're headed in the right direction on most of them. Obviously, and as Rachel said, some of it is a function of EBITDA being down a little bit in some cases, at the same time multiples being down. But by and large, I'd say there are no major issues in there just overall fundamentally just good performance and frankly a good handful of these companies performing at a very high level generating fairly significant individual net gains. Speaker 300:17:13I think that's really the best I can address on it. Speaker 500:17:18Thanks for that, Dave. So given what you just said with some strong performers in the portfolio, there's so much demand in private equity for acquisition of good performing companies. And I know in the past you've always told me you're sort of I don't know reluctant is the right word, but it's hard for you to make the a decision to sell something because then you have to replace it. But your phone must be ringing with some pretty good offers for some of these investments. For this coming fiscal year, is it reasonable to assume that you're going to harvest some of those unrealized gains? Speaker 300:17:59Well, no, you make very good points and I think you hit it right. We've always said, I always like to say and it's really true that when we look to exit a business, a lot of it honestly is driven by the management teams, the folks that we're invested with. And if they come to us and say, guys, you know what, we need some liquidity ourselves or anything, the time has come, which indeed is which a couple of the exits we had this past year, Council Press being 1, which is very successful. And so we listen to that, but we generally, again, because as you well know, our model is really in a good position to allow us to maintain and hold these companies. And to exactly the point, if we exit something while it's a really good realized gain, we have to, as you say, go and replace it. Speaker 300:18:44So we really take a hard look at either where we're getting, as you point out, these calls are the investment bankers coming at us to take our companies to market and what have you, really almost that reinvestment decision approach, right? So we think about it. And if we really like the business and the people, why not reinvest? And we do that on a pretty regular basis as we look at the portfolio. Having said all of that, it's also important to the model to us to generate realized gains, as we say, for supplementals. Speaker 300:19:14So the best I can say there is, it would be more likely over the next year or so that we might have a pretty good exit versus not having one. And we'd be very cautious in which and how we do that, at the same time maintaining our level of assets to keep generating the income for monthly distribution. So it's kind of a balance and it's a really good question and it's one that obviously we struggle with. We're in a good position with that. But I think that's I would add to that, Mickey. Speaker 500:19:47That's really helpful, Dave. And one last question for me. You and your affiliated companies in the Gladstone universe have a track record of fixing problem investments. Sometimes we see situations like the mountain that just don't work out, but I can think of others where you've merged companies or you've replaced managements, you've recapitalized businesses. So with that in mind, can you tell us what you're doing with Edge and Hobbs, which if I'm not mistaken, have both been on non accrual for a while and I'm sure you'd like to rectify those? Speaker 300:20:26Yes. So, Hobbs first, I think and you benefited by being at our meeting last September. I think you got to see some of the management teams. And we really have a very good management team at Hobbs. They actually, without going into detail, are on a positive performance track right now, which is a function of a couple of things. Speaker 300:20:48One of the things that really affected them somewhat is they grew so rapidly with new business and new contracts. And frankly, the pricing of those contracts were perhaps not as good as they should have been. So when certain somewhere were fixed price contracts and these are percentage of completion basically. So over time, they were actually we're losing money on some of those contracts. So we've been able, we believe, to wash most, if not all of those out. Speaker 300:21:15And right now, they've actually reduced the volume. So the top line number in revenue is lower than it was, say, a year ago. But having said that, the margin and therefore the EBITDA, if you will, is now positive and headed in the right direction. So and again, the team is really good team. We've got good folks on the board. Speaker 300:21:35So we'll just keep working on that one. And with any hopefully by a year or so or maybe less, we might be back frankly on accrual with that one. Edge has a couple of components to it. Some things are going on with that right now, not negative. We've made some changes there recently with one aspect of that business. Speaker 300:21:56And I don't feel I can comment any more detail on that other than to say that we're working with it and again with any luck we might see some positive effect there, but that's where those 2 are. Speaker 500:22:12Thanks for that, Dave, and congratulations to you and your team on the end of a very good fiscal year for Gladstone. Speaker 300:22:20Thank you, sir. I hope you're feeling better by Speaker 500:22:22the way and hope we get to some of you. Thanks a lot. Take care. Thanks. Speaker 100:22:27More questions? Operator00:22:37There are no further questions in queue. Mr. Gladstone, I'll turn it back to you. We do have a question just came in from Bryce Rowe with B. Riley. Operator00:22:44Please proceed. Speaker 600:22:47Thanks. Good morning. Busy BDC morning for all of us analysts here. So glad to have an opportunity to ask a question. David, just wanted to ask about a comment you made in your prepared remarks. Speaker 600:23:02It sounded like maybe opportunities, the volume of opportunities was up and in a good spot, but maybe the quality of those opportunities was a little more spotty, if you will. Just any thoughts around kind of where that comment came from and what in particular you're seeing with deals that maybe makes them a little less attractive than you'd like them to be? Speaker 300:23:30Right. So thanks, Bryce. And by the way, I'm happy you're able to get on. We're going to miss you. I would say, look, you know from the Investment Banking side, and we definitely are, I think, companies that were being put on the holding near the end of last year are now starting to flow back into the backlog. Speaker 300:23:50And there's this I feel like a fair number of new deals that are coming and we are seeing them. And obviously, we have to be very selective in where we spend our time as we look at new deals. So the ones that we spend our time on are generally companies that we believe we're going to be able to frankly buy for around anywhere from 6 to maybe 7, 7.5 times EBITDA. And while we've been clearly in some processes where when we feel like that's a good value, we're not even getting to go to a management meeting because there are other people out there that are 8 to 9 times. And so that's part of my comment, frankly. Speaker 300:24:31And honestly, while those companies look good on the surface, I'm sure they are, we don't understand how one, so to speak, really pays that kind of multiple. So it's really more around a bit of our how our model works with what we're seeing. And as you use the word, it's kind of spotty, the quality. It's a little bit so many. Their companies have looked on the surface, but they're smaller. Speaker 300:24:56The EBITDA are less consistent. The general positions in the marketplace it's not clear they have much of a differentiator, so to speak, but they're fundamentally decent businesses, but not something that we feel we could get our arms around. And as you know, if we're doing 3 or 4, even 5 new deals a year, that's pretty good for us. So we have to be really, really selective. But the activity level, the main part is if activity level is up and we are able to actually make some conscientious decisions on how we spend our time to try to get new deals on the books over the next say 9 months or so. Speaker 600:25:36That's great. Appreciate the color there and the time. Speaker 300:25:40Okay, man. Take care. Thanks. Speaker 100:25:43Bryce, just to mention that some of our folks are saying that everybody and his mother is trying to put together deals. And so there are a lot of what they call independent sponsors out there trying to take a company and call it a beginning roll up. And we don't believe in some of these fictitious numbers that come through. And so from that standpoint, we're just seeing a lot that we don't like. We may see 5 or 6 and then pick 1 of the best of the lot. Speaker 100:26:16There's another thing going on in the marketplace now that not been mentioned and that is inflation. Inflation helps everybody out who wants capital gains because things go up in 5 years and you get a chance to sell it at a very, very attractive price compared to where you bought it. So we've seen some of that. So don't count out inflation because inflation is here for a a good amount of time. And that's all. Speaker 100:26:48Do we have any other questions? Operator00:26:51There are no further questions in queue. I'll turn it back to you for closing comments. Speaker 100:26:55Okay. Thank you, Latoya. And you guys didn't come up with enough questions this time. Would you please work on that before you come to next meeting? Thank you very much for attending and that's the end of this conference call. Operator00:27:09This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation and have a great day.Read morePowered by