Gladstone Capital Corporation Reports Financial Results for Its Second Quarter Ended March 31, 2024

Rhea-AI Summary

Gladstone Capital reported its financial results for the second fiscal quarter ended March 31, 2024. Total investment income increased by 3.3%, with net investment income per common share decreasing by 7.4%. The company had a net asset value per common share of $9.90. Portfolio activity included investments in new and existing companies, with a focus on first lien assets. Total investment income rose due to higher interest income, while expenses increased mainly due to a rise in management fees. The net asset increase from operations was $23.6 million, driven by net unrealized appreciation. Subsequent events included investments in Total Access Elevator, and the payoff of debt investments in Giving Home Healthcare, and Gray Matter Systems, The company completed a reverse stock split, doubling its NAV per share to $19.80. Distributions were declared to common and preferred stockholders for the quarter.

Positive

• Increased total investment income by 3.3% for the quarter ended March 31, 2024.

• Net asset value per common share increased to $9.90, a 3.0% jump from the previous quarter.

• Portfolio activity included investments in new and existing companies, focusing on first lien assets.

• Net increase in net assets resulting from operations was $23.6 million, driven by net unrealized appreciation.

• Completed a reverse stock split, doubling the NAV per share to $19.80.

Negative

• Net investment income per common share decreased by 7.4%.

• Total expenses increased by 17.1% quarter over quarter mainly due to a rise in management fees.

Insights

Financial Analyst

Gladstone Capital Corporation's recent financial report for Q2 2024 indicates a mixed set of outcomes. On the positive side, we observe a modest growth in total investment income, which ticked up by 3.3%, predominantly due to increased interest income. Increases in income streams are generally favorable, as they suggest an expanding portfolio and effective interest-earning assets. However, a 17.1% jump in total expenses is a potential red flag, especially since it outpaces income growth. The increase was mainly attributed to a rise in base management fees, which may warrant investigation into the fee structure and its impact on net earnings. From a shareholder perspective, the net investment income per share decline of 7.4% is concerning, indicating that expenses are eroding profits. Additionally, the constant cash distribution per share suggests a cautious approach by the company in managing its cash reserves. For income-focused investors, stable or increasing dividends are typically more attractive. The relatively high weighted average yield on debt investments is notable, standing at 14.0%. This suggests a high-return, albeit potentially high-risk, investment strategy by the company. The net asset value (NAV) per common share increased by 3.0%, which is a positive indicator of the company's intrinsic value. Any increase in NAV is typically viewed favorably, as it implies growth in the underlying assets' value. The reverse stock split is a structural change that doesn't affect company value directly but might be intended to adjust the stock price for strategic reasons, such as improving marketability and investor perception. Overall, there are positive aspects, such as increased investment income and NAV per share, but the rise in expenses and the static dividend payout ratio could cause concerns among investors prioritizing net earnings growth and cash returns.

Market Research Analyst

Delving into the portfolio activity and mix, Gladstone's decision to maintain a majority of its debt investments in secured first lien assets, which exceed 70% of their debt investments at cost, reflects a strategic emphasis on securing their investments. While this may limit the upside potential compared to unsecured or equity investments, it also typically reduces risk by ensuring priority claims on assets in the event of default. The addition of new and existing portfolio investments and the subsequent payoff of debts such as those from Total Access Elevator, LLC and Giving Home Healthcare, LLC, suggest active portfolio management and liquidity in their investments. Notably, the payoff from Giving Home included a prepayment penalty, indicating a potentially favorable return scenario for Gladstone. For investors, such portfolio churn could signal a dynamic investment strategy that can adapt to changing market conditions. However, the significant decrease in total invested and repayments (22.9% and 31.4%, respectively) could point to a more conservative approach or a shift in market opportunities. Investors should consider how these movements align with their own risk tolerance and investment goals. Furthermore, the increase in the committed facility amount by $10.0 million demonstrates enhanced credit facility availability, which could support future growth initiatives or provide a buffer against potential liquidity constraints.

MCLEAN, VA / ACCESSWIRE / May 1, 2024 / Gladstone Capital Corporation (Nasdaq:GLAD) (the "Company") today announced earnings for its second fiscal quarter ended March 31, 2024. Please read the Company's Quarterly Report on Form 10-Q filed today with the U.S. Securities and Exchange Commission (the "SEC"), which is available on the SEC's website at www.sec.gov and the investors section of the Company's website at www.GladstoneCapital.com.

Summary Information (dollars in thousands, except per share data) (unaudited):

For the Quarter Ended:		March 31, 2024				December 31, 2023				Change				% Change
Total investment income		$	23,997			$	23,221			$	776				3.3	%
Total expenses, net of credits			(13,220	)			(11,287	)			(1,933	)			17.1
Net investment income			10,777				11,934				(1,157	)			(9.7	)
Net investment income per common share			0.25				0.27				(0.02	)			(7.4	)
Cash distribution per common share			0.2475				0.2475				(0.00	)			(0.0	)
Net realized gain (loss)			2,168				262				1,906				727.5
Net unrealized appreciation (depreciation)			10,695				7,805				2,890				37.0
Net increase (decrease) in net assets resulting from operations			23,632				20,001				3,631				18.2
Weighted average yield on interest-bearing investments			14.0	%			13.9	%			0.1	%			0.7
Total invested		$	44,735			$	57,998			$	(13,263	)			(22.9	)
Total repayments and net proceeds			15,146				22,066				(6,920	)			(31.4	)
As of:		March 31, 2024				December 31, 2023				Change				% Change
Total investments, at fair value		$	791,588			$	749,985			$	41,603				5.5	%
Fair value, as a percent of cost			100.1	%			98.7	%			1.4	%			1.4
Net asset value per common share		$	9.90			$	9.61			$	0.29				3.0

Second Fiscal Quarter 2024 Highlights:

• Portfolio Activity: Invested $15.0 million in one new portfolio company and $29.7 million in existing portfolio companies.
• Portfolio Mix: Secured first lien assets continue to be over 70% of our debt investments, at cost, while the weighted average yield on debt investments was consistent at 14.0%.
• Credit Facility Availability: Increased the committed facility amount by $10.0 million to $243.7 million and ended the quarter with availability in excess of $100 million.

Second Fiscal Quarter 2024 Results:

Total investment income increased by $0.8 million, or 3.3%, for the quarter ended March 31, 2024, compared to the prior quarter ended December 31, 2023, driven by a $0.7 million increase in interest income. The increase in interest income was driven by a 3.5% increase in the weighted average principal balance of our interest-bearing investments from $657.6 million during the quarter ended December 31, 2023 to $680.4 million during the quarter ended March 31, 2024.

Total expenses increased by $1.9 million, or 17.1%, quarter over quarter primarily due to a $1.4 million increase in the net base management fee, driven mainly by a decrease in portfolio company fee credits from new deal originations quarter over quarter.

Net investment income for the quarter ended March 31, 2024 was $10.8 million, or $0.25 per share.

The net increase in net assets resulting from operations was $23.6 million, or $0.54 per share, for the quarter ended March 31, 2024, compared to $20.0 million, or $0.46 per share, for the quarter ended December 31, 2023. The current quarter increase was primarily driven by $10.7 million of net unrealized appreciation recognized during the quarter.

Subsequent Events: Subsequent to March 31, 2024, the following significant events occurred:

• Portfolio Activity: In April 2024, we invested $7.3 million in Total Access Elevator, LLC ("Total Access") through secured first lien debt and equity. We also extended Total Access a $3.0 million line of credit commitment and a $2.5 million delayed draw term loan commitment, both of which were unfunded at close.
• Portfolio Activity: In April 2024, our debt investment in Giving Home Healthcare, LLC ("Giving Home") paid off at par for net cash proceeds of $29.7 million including a $0.9 million prepayment penalty. We also received a $2.5 million distribution related to our warrant position in Giving Home.
• Portfolio Activity: In May 2024, our debt investment in Gray Matter Systems, LLC paid off at par for net cash proceeds of $14.0 million including a $0.2 million prepayment penalty.
• Reverse Stock Split: On April 4, 2024, we completed a 1-for-2 reverse stock split (the "Reverse Stock Split") of the Company's issued and outstanding common stock, par value $0.001 per share ("Common Stock"), by the filing of Articles of Amendment with the State Department of Assessments and Taxation of Maryland pursuant to the Maryland General Corporation Law. The Reverse Stock Split became effective at 4:05 p.m. Eastern Time on April 4, 2024. The Reverse Stock Split was effective for purposes of trading as of the opening of business on the Nasdaq Global Select Market on April 5, 2024. As a result of the Reverse Stock Split, every two shares of Common Stock issued and outstanding were automatically combined into one new share of Common Stock. Additionally, following the Reverse Stock Split, our NAV per share approximately doubled to $19.80 per share.
• Distributions and Dividends Declared: In April 2024, our Board of Directors declared the following distributions to common and preferred stockholders:

Record Date	Payment Date		Distribution per Common Share
April 19, 2024	April 30, 2024		$	0.165
May 17, 2024	May 31, 2024			0.165
June 19, 2024	June 28, 2024			0.165
Total for the Quarter			$	0.495

Record Date	Payment Date		Distribution per Series A Preferred Stock
April 22, 2024	May 3, 2024		$	0.130208
May 23, 2024	June 5, 2024			0.130208
June 25, 2024	July 5, 2024			0.130208
	Total for the Quarter		$	0.390624

Conference Call for Stockholders: The Company will hold its earnings release conference call on Thursday, May 2, 2024, at 8:30 a.m. Eastern Time. Please call (866) 424-3437 to enter the conference call. An operator will monitor the call and set a queue for any questions. A replay of the conference call will be available through May 9, 2024. To hear the replay, please dial (877) 660-6853 and use playback conference number 13744826. The replay of the conference call will be available beginning approximately one hour after the call concludes. The live audio broadcast of the Company's quarterly conference call will also be available online at www.GladstoneCapital.com. The event will be archived and available for replay on the investors section of the Company's website.

About Gladstone Capital Corporation: Gladstone Capital Corporation is a publicly-traded business development company that invests in debt and equity securities, consisting primarily of secured first and second lien term loans to lower middle market businesses in the United States. Information on the business activities of Gladstone Capital and the other publicly-traded Gladstone funds can be found at www.GladstoneCompanies.com.

To obtain a paper copy of the Company's most recent Form 10-Q, please contact the Company at 1521 Westbranch Drive, Suite 100, McLean, VA 22102, ATTN: Investor Relations. The financial information above is not comprehensive and is without notes, so readers should obtain and carefully review the Company's Form 10-Q for the quarter ended March 31, 2024, including the notes to the consolidated financial statements contained therein.

Investor Relations Inquiries: Please visit www.gladstonecompanies.com or (703) 287-5893.

Forward-looking Statements:

The statements in this press release about future growth and shareholder returns are "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements inherently involve certain risks and uncertainties in predicting future results and conditions. Although these statements are based on our current plans that are believed to be reasonable as of the date of this press release, a number of factors could cause actual results and conditions to differ materially from these forward-looking statements, including those factors described from time to time in our filings with the U.S. Securities and Exchange Commission. The Company undertakes no obligation to publicly release the result of any revisions to these forward-looking statements that may be made to reflect any future events or otherwise, except as required by law.

SOURCE: Gladstone Capital Corporation

View the original press release on accesswire.com

FAQ

What was the total investment income for the quarter ended March 31, 2024?

Total investment income for the quarter ended March 31, 2024, was $23,997.

What was the net investment income per common share for the quarter?

The net investment income per common share for the quarter ended March 31, 2024, was $0.25.

What was the change in net asset value per common share from the previous quarter?

The net asset value per common share increased to $9.90, a $0.29 change from the previous quarter.

What were the key highlights for the second fiscal quarter of 2024?

The key highlights included portfolio activity, an increase in total investment income, and a rise in net asset value per common share.

What significant events occurred subsequent to March 31, 2024?

Subsequent events included investments in Total Access Elevator, , and the payoff of debt investments in Giving Home Healthcare, and Gray Matter Systems,

When did the company complete a reverse stock split?

The company completed a reverse stock split on April 4, 2024, doubling the NAV per share.

When will the distributions to common and preferred stockholders be paid?

Distributions to common and preferred stockholders will be paid on specified payment dates in April, May, and June 2024.