Gladstone Capital (US:GLAD)2025-02-11 21:10Investment Portfolio - As of December 31, 2024, the investment portfolio consisted of approximately 90.6% debt investments and 9.4% equity investments, at cost[163] - The company focuses on investing in lower middle market companies with annual earnings before interest, taxes, depreciation, and amortization of $3 million to $25 million[164] - The company has made 683 different loans or investments totaling approximately $2.9 billion since its initial public offering in August 2001[170] - The investment portfolio at fair value increased to $799.5 million as of December 31, 2024, compared to $749.9 million as of December 31, 2023[200] - The company had loans, syndicated participations, or equity investments in 51 companies with an aggregate cost basis of approximately $816.1 million as of December 31, 2024, up from 49 companies and $771.0 million as of September 30, 2024[199] Financial Performance - Investment income decreased by 5.4% to $21.96 million for the three months ended December 31, 2024, compared to $23.22 million in the prior year[180] - Interest income fell by 7.3% to $21.32 million, while other income surged by 184.4% to $640,000 due to increased prepayment fees[180][184] - Total expenses decreased by 4.9% to $10.74 million, primarily due to a reduction in incentive fees and interest expenses[180][186] - Net investment income declined by 5.9% to $11.22 million for the three months ended December 31, 2024[180] - The company recorded a net realized gain on investments of $57.72 million, significantly up from $259,000 in the prior year[191][192] - Net unrealized depreciation of investments amounted to $41.89 million, driven by the reversal of unrealized appreciation from the exit of an investment[194] Cash Flow and Distributions - Net cash provided by operating activities for the three months ended December 31, 2024 was $24.0 million, a significant increase from net cash used of $26.2 million in the same period of 2023, primarily due to an increase in principal repayments and net proceeds from sales[198] - The company declared a total distribution of $0.495 per common share for the quarter ending March 31, 2025[177] - The company paid monthly cash distributions of $0.165 per common share for each month during the three months ended December 31, 2024, along with a supplemental distribution of $0.40 per common share in December 2024[203] Debt and Credit Facilities - The total commitment amount of the Credit Facility with KeyBank is $293.7 million, with the revolving period extended to October 2025[172] - As of December 31, 2024, the company had a net worth of $733.8 million and asset coverage of 250.8% for senior securities representing indebtedness[216] - The effective interest rate on the Credit Facility rose to 19.1% from 12.7% year-over-year, despite a decrease in the average balance outstanding[187] - The company had 33 obligors in its Credit Facility's borrowing base as of December 31, 2024, and was in compliance with all Credit Facility covenants[216] - The company’s Credit Facility contains covenants that restrict distributions to stockholders to the sum of net investment income, net capital gains, and amounts elected to have been paid during the prior year[214] Investment Strategy and Risk Management - The company has co-invested with affiliates under the Co-Investment Order since 2012, enhancing its investment strategies[165] - The primary risk exposed is interest rate risk, affecting net investment income based on the difference between borrowing and investment rates[235] - As of December 31, 2024, 91.1% of the debt investments are variable-rate, while 8.9% are fixed-rate[236] - The average risk rating for proprietary loans in the company's portfolio was 8.1 as of December 31, 2024, indicating a moderate level of credit risk[230] - The company has identified its investment valuation policy as a critical accounting policy, impacting the reported amounts of assets and liabilities[226] Future Outlook - The company anticipates issuing equity securities to obtain additional capital in the future, although the timing and terms remain uncertain[209] - New investments during the three months ended December 31, 2024 amounted to $107.2 million, compared to only $11.0 million in the same period of 2023[200] - 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[217] - The company completed a private placement of $50.0 million aggregate principal amount of 3.75% Notes due 2027, with net proceeds of approximately $48.5 million[218] Market Conditions - On December 31, 2024, the closing market price of the common stock was $28.44 per share, representing a 32.2% premium to the NAV per share of $21.51[174] - The weighted average yield on interest-bearing investments decreased to 13.1% from 13.9% year-over-year[181] - There have been no material changes in market risk disclosures for the three months ended December 31, 2024, compared to the Annual Report[236] - Total contractual obligations as of December 31, 2024, amount to $369.693 million, excluding unused line of credit commitments of $54.1 million[225]