Gladstone Investment Corporation Q1 FY2026 earnings call

• GAIN produced adjusted NII of $0.24 per share, covering monthly distributions, with assets up to ~$1.1 billion. Had 2 new buyouts in Q1 and closed a third post-quarter end, with 28 portfolio companies. Invested ~$130 million in 3 new portfolio companies in FY26 YTD.
• Maintained monthly distribution of $0.08 per share and paid a supplemental distribution of $0.54 per share in June from realized gains. Since inception in 2005, invested in 64 buyout portfolio companies, exited 33, with current investments valued at ~$1 billion and net realized gains of ~$353 million.
• Taylor Ritchie discussed total investment income decrease due to non-recurring success fees, increase in interest income, decrease in net expenses, adjusted net investment income, NAV decrease due to distributions and unrealized depreciation, $151 million availability on line of credit, and raised ~$19.3 million under ATM program.

For the first quarter of fiscal year '26, total investment income was $23.5 million, down from $27.5 million in the prior quarter. Net expenses were $14.5 million, down from $20.3 million. Net investment income for the quarter was $9.1 million compared to $7.2 million in the prior quarter. Adjusted net investment income was $8.9 million or $0.24 per share, down from $9.4 million or $0.26 per share in the prior quarter. NAV decreased to $12.99 per share compared to $13.55 per share at the end of the previous quarter.

• Optimistic about continued buyout activity in FY26. Anticipate one portfolio company to return to accrual status next quarter. Will continue raising equity via ATM program while prices remain accretive to NAV. Monitor interest rate environment and evaluate debt financing opportunities.

• Uncertainty due to tariffs and slowing economy impacting acquisitions and portfolio company performance. Supply chain disruptions and tariff costs affecting consumer-focused companies' margins, with caution needed regarding demand and margins.

Q: There's been discussion about weakness in the M&A market, but Gladstone acquired 3 companies since May. Is it idiosyncratic or better deal flow?

A: It's about good quality deal flow in the $5M to $12M EBITDA range. Competitive but seeing good quality deals; valuations are tricky but active.

Q: Any signs of weakening performance across portfolio companies due to economy slowdown?

A: Not generally, but consumer-side companies have margin squeeze from tariffs, with modest EBITDA decline but not threatening debt servicing.

Q: On Diligent Delivery Systems, any color?

A: It's a company owned years ago, took back paper, working with senior bank on restructuring; will roll the investment and get out when debt is paid.

Q: Yield on interest-bearing investments increased. What drove it and outlook?

A: Primarily collection of $1.5M past-due interest from nonaccrual status. Excluding that, yield was 13.1%. New deals have 13.5% floors, cushioning against SOFR changes.

Q: Competition in market for new deals, any structure changes?

A: No direct BDC competitors; competing with private equity. Focus on enterprise value of businesses. Gladstone has 0 PIK income and exit fees, setting it apart. ImageWorks had fair value increase due to EBITDA and multiple increase.