RichVintage Co-authored with Hidden Opportunities In today's dynamic financial landscape, investors are constantly seeking avenues to optimize returns while mitigating risks. Enter baby bonds, a less understood (and, as a result, overlooked) yet profoundly attractive asset class, particularly in the current high interest-rate environment. Baby bonds, also known as exchange-traded debt securities, offer a compelling proposition for income investors seeking stable returns with relatively lower risk exposu ...

da-kuk Welcome to another installment of our BDC Market Weekly Review, where we discuss market activity in the Business Development Company ("BDC") sector from both the bottom-up - highlighting individual news and events - as well as the top-down - providing an overview of the broader market. We also try to add some historical context as well as relevant themes that look to be driving the market or that investors ought to be mindful of. This update covers the period through the second week of April. Mar ...

Adam Gault Welcome to another installment of our BDC Market Weekly Review, where we discuss market activity in the Business Development Company ("BDC") sector from both the bottom-up - highlighting individual news and events - as well as the top-down - providing an overview of the broader market. We also try to add some historical context as well as relevant themes that look to be driving the market or that investors ought to be mindful of. This update covers the period through the first week of April. ...

Hiroshi Watanabe In December last year, I wrote an article on Gladstone Capital (NASDAQ:GLAD) issuing a buy rating due to truly defensive portfolio and attractive yield generation. In a nutshell, the thesis boiled down to the following drivers: Solid track record - Based on the historical performance, we can identify GLAD's ability to deliver outsized returns even in upwards trending markets, where theoretically BDCs that are heavily skewed towards defense should underperform the overall BDC space. Heal ...

Pixelimage Gladstone Capital Corporation (NASDAQ:GLAD) reported decent dividend payout metrics for the most recent quarter and managed to grow its net asset value by $0.22 per share as well. The business development company has a growing loan portfolio, concentrated in First Liens, and Gladstone Capital's originations got a boost in the last quarter from higher net new investment activity. The dividend seems to be well-covered here with net investment income, but I am on the fence with regard to the BDC's n ...

Colleen Michaels/iStock Editorial via Getty Images I rated Gladstone Capital (NASDAQ:GLAD) as a buy when I last covered the business development company. Total returns since then have been marginally positive, at just over 6%. The BDC just reported fiscal 2024 first-quarter earnings, ending December 31st, 2023, with total and net investment income underperforming versus consensus estimates. Total investment income for the first quarter at $23.2 million dipped by $600,000 sequentially but grew by 20.4% o ...

DNY59 Being an income investor can be rewarding in many ways. While I now have a fair amount of income from investments to cover a good portion of my monthly recurring expenses like utilities, food, and entertainment, it would have been daunting if that was my goal from the outset. That's why I'd always recommend to start small, like being able to cover daily meals or the cost of gas/EV charging, and build from there. By setting mini goals like these, one may be surprised to find how quickly these achieveme ...

Portfolio Overview - Gladstone Capital's portfolio reached $750 million in fair value, diversified across 51 companies and 12 industries as of December 31, 2023[11, 43] - The investment portfolio is conservatively structured, with 90% in secured loans and 73% in lower-risk 1st lien loans[11, 34] - The weighted average leverage across the core proprietary loan portfolio is approximately 40x EBITDA[11, 34, 44] - The portfolio generates an attractive weighted average yield of 139% and supports an annual cash distribution of $099 per share[11] Financial Performance - New investments totaled $58 million during the quarter, including $47 million in add-on investments to existing portfolio companies[31] - Net originations for the quarter were strong at $36 million[31, 35] - Net investment income (NII) for the quarter increased 86% to $119 million, or $0274 per share, covering the current recurring common stock distribution by over 110%[34] - Total assets increased to $7666 million, with $750 million in investments at fair value as of December 31, 2023[58] Strategy and Market Dynamics - Gladstone Capital targets companies with $3-25 million in EBITDA and investments of $8-40 million[10, 24] - Approximately 78% of the portfolio is backed by private equity sponsors as of December 31, 2023[24] - Over 90% of private debt funds raised exceed $1 billion and are managed by firms focused on larger borrowers (>$25 million EBITDA)[30]

Investment Portfolio - As of December 31, 2023, the investment portfolio consisted of approximately 90.6% debt investments and 9.4% equity investments, at cost[158]. - During the three months ended December 31, 2023, the company invested $11.0 million in a new portfolio company and extended $47.0 million to existing portfolio companies, resulting in a total portfolio increase of $37.4 million at cost since September 30, 2023[165]. - The company has made 646 different loans or investments totaling approximately $2.7 billion since its initial public offering in August 2001[165]. - The company focuses on lower middle market companies with annual earnings before interest, taxes, depreciation, and amortization of $3 million to $25 million[159]. - As of December 31, 2023, the company had loans and equity investments in 51 companies with an aggregate cost basis of approximately $759.6 million, up from $722.3 million as of September 30, 2023[189]. Financial Performance - Investment income increased by 20.4% to $23.2 million for the three months ended December 31, 2023, compared to $19.3 million in the prior year[175]. - Interest income rose by 25.2% to $23.0 million, driven by an 11.5% increase in the weighted average principal balance of interest-bearing investments to $657.6 million[176]. - Net investment income for the three months ended December 31, 2023, was $11.9 million, a 36.8% increase from $8.7 million in the prior year[175]. - The net realized gain on investments was $0.3 million, a significant decrease from $9.3 million in the same period last year[183][184]. - Net unrealized appreciation of investments amounted to $7.8 million, reflecting improved financial performance of several portfolio companies[185]. Expenses and Distributions - Total expenses, net of credits, increased by 6.8% to $11.3 million, primarily due to a $0.8 million rise in the incentive fee earned by the Adviser[179]. - The net base management fee decreased by 30.5% to $1.7 million, attributed to increased credits for new deal origination fees[181]. - The company declared a total distribution of $0.2475 per common share for the quarter ending March 2024[172]. - Monthly cash distributions for the three months ended December 31, 2023, were $0.0825 per common share, totaling $10.8 million, compared to $0.07 per share and $7.4 million for the same period in 2022[193]. - The company paid distributions to common stockholders totaling approximately $469.8 million or $23.02 per share from inception through December 31, 2023[193]. Debt and Financing - The company has a total commitment amount of $233.7 million under its Credit Facility, which has been extended to October 2025[167]. - The effective interest rate on the Credit Facility increased to 12.7% from 6.9% year-over-year, influenced by rising interest rates[180]. - Net cash provided by financing activities for the three months ended December 31, 2023, was $26.4 million, primarily from $37.2 million in net borrowings on the Credit Facility[191]. - The Credit Facility had a total commitment amount of $233.7 million as of December 31, 2023, with an accordion feature allowing an increase to $350.0 million[201]. - Interest expense on debt obligations is estimated at $77.682 million over the contractual obligation periods[216]. Market and Risk Factors - The company is exposed to interest rate risk, which could materially affect its net investment income due to borrowing costs[227]. - The average risk rating for proprietary loans in the portfolio was 7.2 as of December 31, 2023, compared to 7.1 as of September 30, 2023[221]. - As of December 31, 2023, the portfolio of debt investments consisted of 88.3% variable rates and 11.7% fixed rates[228]. - There have been no material changes in the quantitative and qualitative market risk disclosures for the three months ended December 31, 2023[228]. Asset Coverage and Valuation - As of December 31, 2023, the asset coverage on senior securities representing indebtedness was 219.3%[171]. - The total portfolio investment at fair value increased to $749.985 million as of December 31, 2023, up from $621.739 million at the end of December 31, 2022[190]. - As of December 31, 2023, the company had a net worth of $670.1 million and an asset coverage ratio of 219.3% for senior securities representing indebtedness[207]. - The company anticipates issuing equity securities to obtain additional capital in the future, with the ability to issue up to an additional $151.1 million in securities under its shelf registration statement as of December 31, 2023[197]. Other Financial Metrics - The company recorded net unrealized depreciation of investments totaling $12.6 million for the three months ended December 31, 2022, mainly due to the exit of the investment in Targus Cayman HoldCo, Ltd.[186]. - The loan to Edge Adhesives Holdings, Inc. remained on non-accrual status with a cost basis of $6.1 million, representing 0.9% of the total debt investments[177]. - The average total assets subject to the base management fee increased to $741.7 million from $646.6 million year-over-year[182]. - The company completed an offering of $57.0 million aggregate principal amount of 7.75% Notes due 2028, with net proceeds of approximately $55.1 million[208]. - Total contractual obligations as of December 31, 2023, amount to $419.682 million, including $22.406 million due within one year[216].

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 __________________________ FORM 10-K __________________________ (Mark One) x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended September 30, 2023 OR o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _________ to __________ Commission file number 814-00237 __________________________ GLADSTON ...