Gladstone Investment Corporation 4.875% Notes due 2028 Q4 FY2025 earnings call

Key Points

• Fiscal year generated adjusted NII of $0.97 per share, covering $0.96 per share annual dividend.
• Portfolio fair value at 03/31/2025 was $979 million, up from prior year end but down from prior quarter due to new buyouts and exit of a portfolio company generating $19.8 million in realized capital gains.
• Invested $221 million in the year, up from $184 million prior year, including new portfolio companies, add-on investments, and a dividend recap of Educators Resource.
• Maintained monthly distribution of $0.08 per share, paid supplemental distributions totaling $1.66 per share for the year, and declared an additional $0.54 per share supplemental distribution in April.
• Since inception in 2005, invested in 62 buyout portfolio companies totaling ~$2 billion, exited 33, with current portfolio valued at $979 million, generating ~$353 million in net realized gains and $45 million in other income on exit.
• Added experienced talent to investing team, current portfolio has 25 operating companies.
• Liquidity in M&A market is good but competitive, with tariffs impacting analysis; expect to close two new acquisitions shortly, with new opportunities in review.
• Cautious on consumer-focused portfolio companies due to tariff costs, working on supply chain alternatives.

For the fiscal year, Gladstone Investment generated adjusted NII of $0.97 per share, covering the $0.96 per share annual dividend. The total fair value of the portfolio at 03/31/2025 was $979 million, up from $921 million at the prior year end but slightly lower than the prior quarter. Total investment income for the year was $93.7 million, up from $87.3 million in the prior year. In the fourth quarter, total investment income was $27.5 million, up from $21.4 million in the prior quarter. Adjusted net investment income for the year was $35.5 million or $0.97 per share, fully covering the annual regular monthly distribution.

Forward-Looking Statements

• Expect to close two new acquisitions shortly.
• Cautiously optimistic on new buyout activity during the year.
• Believe available capital from recently issued notes, additional availability on line of credit ($214 million as of yesterday), and ability to raise equity capital through common stock ATM will support portfolio growth and weather economic uncertainties.

Risks

• Tariffs impacting costs, customer demand, and supply chain dynamics across portfolio companies.
• Uncertainty in economic landscape affecting portfolio performance.
• Four portfolio companies on non-accruals status, though three are profitable and expected to improve.

Question and Answer

• Q: How much of portfolio has exposure to tariff risk?

A: Most portfolio companies have some exposure to tariffs, but only a few directly producing almost exclusively in China, which are working on supply chain alternatives.

• Q: Exposure of consumer sector to lower income customers?

A: No significant exposure to lower income customers in consumer products; impact of tariff costs on consumer prices is manageable.

• Q: Outlook for Hobbs and other non-accruals?

A: Hobbs is profitable and expected to be brought back on accrual by the end of the year; other non-accrual companies are profitable and moving in the right direction.

• Q: Components of cautiously optimistic buyout activity?

A: Good backlog of companies in initial review and close to closing, but cautious due to market volatility and economic uncertainty; evaluating companies while factoring in tariff impacts.

• Q: Rationale for Educators Resource dividend recap and other recap opportunities?

A: Dividend recap of Educators Resource was due to management team liquidity, good fundamentals, and reinvestment decision; no immediate other recap opportunities seen, but evaluating continuously.