GLADSTONE INVESTMENT CORPORATION\DE Q1 FY2025 earnings call

• The GAIN team produced good results for Q1 FY25 with adjusted NII of $0.24 per share and total assets of $914 million.
• Active in new investment opportunities and managing existing portfolio companies; no new acquisitions in Q1 but $18.5 million invested post-quarter end.
• Maintained monthly distribution at $0.08 per share ($0.96 annual) and intends to continue rewarding shareholders with supplemental distributions from realized capital gains.
• Balance sheet is strong with low leverage and $113 million available on $200 million credit facility.
• Four companies on non-accrual, but two are profitable and expected back to accrual in the next year.
• Increasing opportunities for new acquisitions with growing deal momentum; actively working on new bios in due diligence.

In the first quarter of fiscal year '25, Gladstone Investment generated total investment income of $22.2 million, down slightly from $23.6 million in the prior quarter. Net expenses were $9.8 million, down from $18.3 million prior quarter, resulting in net investment income of $12.4 million (up from $5.3 million prior quarter). Adjusted net investment income was $8.6 million or $0.24 per share, slightly down from prior quarter. Total assets were $914 million. NAV decreased to $13.01 per share from $13.43 per share prior quarter. Four companies were on non-accrual, representing about 7.8% of the fair value of debt investments in the portfolio, with two of these companies being profitable and expected back to accrual within the next year.

• Anticipate continuing good earnings and distributions.
• Actively working on new acquisitions, aiming to close 3-5 new deals in a 12-month period.
• Plan to fund supplemental distributions from realized capital gains on exits.

• Forward-looking statements involve risks and uncertainties.
• Two portfolio companies on non-accrual, though not indicative of portfolio-wide concerns.
• Valuation multiples and performance at some portfolio companies can cause NAV fluctuations.
• Competitive M&A environment with upward pressure on valuations.

Q: Concern about NII declining below dividend, levers to avoid?

A: No expected decline, supplement with other income, debt portfolio has floors, and harvest equity dividends.

Q: Pipeline for new acquisitions?

A: Working on 15-16 companies, process involves IOI, LOI, due diligence, aiming to close 3-5 in year.

Q: Credit quality of certain companies?

A: Nth Degree, Mason West, Horizon have EBITDA, slight multiple and market softness, but profitable; Diligent and B&T issues temporary, both profitable.

Q: G&A increase?

A: One-time hit from bad debt expense related to write-off of prior period income.

Q: Fee income source?

A: Success fee income from portfolio companies, one company prepaid $1.6M.

Q: Timing of non-accrual companies?

A: Placed on non-accrual April 1, excluded from Q1 interest income.

Q: Competitive conditions for new deals?

A: Deal flow picked up, but still competitive with high multiples.