Gladstone Investment(GAIN) - 2026 Q1 - Quarterly Report

Item 1. Financial Statements (Unaudited) This section presents the unaudited consolidated financial statements, including assets, operations, cash flows, and investment schedules Consolidated Statements of Assets and Liabilities Total assets increased to $1,053,909 thousand by June 30, 2025, while liabilities also rose, decreasing net assets and NAV per share to $12.99 | Metric (in thousands) | June 30, 2025 | March 31, 2025 | | :-------------------- | :------------ | :------------- | | ASSETS | | | | Investments at fair value | $1,036,745 | $979,320 | | Cash and cash equivalents | $4,118 | $14,298 | | Total Assets | $1,053,909 | $1,006,404 | | LIABILITIES | | | | Total borrowings | $518,625 | $455,709 | | Total Liabilities | $568,605 | $507,320 | | NET ASSETS | | | | Total Net Assets | $485,304 | $499,084 | | Net Asset Value Per Share | $12.99 | $13.55 | Consolidated Statements of Operations Total investment income increased to $23,544 thousand, but higher expenses reduced net investment income, though net assets from operations turned positive due to significantly lower net unrealized depreciation | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | | Total investment income | $23,544 | $22,178 | | Total expenses, net of credits | $14,456 | $9,764 | | Net investment income | $9,088 | $12,414 | | Net realized gain | $0 | $2 | | Net unrealized depreciation | $(1,316) | $(18,942) | | Net increase (decrease) in net assets from operations | $7,772 | $(6,526) | | Basic and Diluted EPS (Net investment income) | $0.25 | $0.34 | | Basic and Diluted EPS (Net increase (decrease) in net assets) | $0.21 | $(0.18) | Consolidated Statements of Changes in Net Assets Net assets decreased by $13,780 thousand, driven by distributions offset by a net increase from operations and capital activity | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | | Net Assets, March 31 | $499,084 | $492,711 | | Net increase (decrease) in net assets from operations | $7,772 | $(6,526) | | Net decrease in net assets from distributions | $(28,788) | $(8,805) | | Net increase in net assets from capital activity | $7,236 | $0 | | Net decrease in net assets | $(13,780) | $(15,331) | | Net Assets, June 30 | $485,304 | $477,380 | Consolidated Statements of Cash Flows Operating activities used $50,181 thousand in cash due to increased investment purchases, while financing activities provided $40,382 thousand, resulting in a net decrease in cash | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | | Net cash (used in) provided by operating activities | $(50,181) | $12,321 | | Net cash provided by (used in) financing activities | $40,382 | $(12,351) | | Net decrease in cash, cash equivalents, restricted cash, and restricted cash equivalents | $(9,799) | $(30) | | Cash, cash equivalents, restricted cash, and restricted cash equivalents, end of period | $5,355 | $3,190 | Consolidated Schedules of Investments The investment portfolio's fair value increased to $1,036,745 thousand, with new investments and a restructuring of PSI Molded Plastics, Inc | Investment Type | June 30, 2025 (Cost) | June 30, 2025 (Fair Value) | March 31, 2025 (Cost) | March 31, 2025 (Fair Value) | | :---------------- | :------------------- | :------------------------- | :-------------------- | :-------------------------- | | Secured first lien debt | $625,596 (62.7%) | $557,057 (53.7%) | $584,026 (62.2%) | $514,334 (52.5%) | | Secured second lien debt | $93,340 (9.4%) | $93,340 (9.0%) | $103,956 (11.1%) | $103,580 (10.6%) | | Total debt | $718,936 (72.1%) | $650,397 (62.7%) | $687,982 (73.3%) | $617,914 (63.1%) | | Preferred equity | $229,005 (23.0%) | $325,997 (31.5%) | $201,487 (21.5%) | $302,163 (30.9%) | | Common equity/equivalents | $49,597 (4.9%) | $60,351 (5.8%) | $49,597 (5.2%) | $59,243 (6.0%) | | Total equity/equivalents | $278,602 (27.9%) | $386,348 (37.3%) | $251,084 (26.7%) | $361,406 (36.9%) | | Total investments | $997,538 (100.0%) | $1,036,745 (100.0%) | $939,066 (100.0%) | $979,320 (100.0%) | - The top 5 portfolio investments by fair value as of June 30, 2025, including SFEG Holdings, Inc., Detroit Defense, Inc., The E3 Company, LLC, Nielsen-Kellerman Acquisition Corp., and Brunswick Bowling Products, Inc., collectively comprised $403.1 million, or 38.9%, of the total investment portfolio[82] | Industry Classification | June 30, 2025 (Fair Value) | Percentage of Total Investments | | :---------------------- | :--------------------------- | :------------------------------ | | Diversified/Conglomerate Services | $188,845 | 18.2% | | Home and Office Furnishings, Housewares, and Durable Consumer Products | $150,749 | 14.5% | | Machinery (Non-Agriculture, Non-Construction, and Non-Electronic) | $109,985 | 10.6% | | Aerospace and Defense | $105,170 | 10.1% | | Leisure, Amusement, Motion Pictures, and Entertainment | $79,588 | 7.7% | | Oil and Gas | $72,286 | 7.0% | | Electronics | $71,334 | 6.9% | | Buildings and Real Estate | $69,075 | 6.7% | | Chemicals, Plastics, and Rubber | $54,980 | 5.3% | | Healthcare, Education, and Childcare | $48,197 | 4.6% | | Mining, Steel, Iron and Non-Precious Metals | $43,505 | 4.2% | | Cargo Transport | $13,000 | 1.3% | | Printing and Publishing | $12,611 | 1.2% | | Other < 2.0% | $17,420 | 1.7% | | Total investments | $1,036,745 | 100.0% | - New investments in Q2 2025 included Smart Chemical Solutions, LLC for $49.5 million (secured first lien debt: $35.7 million, preferred equity: $13.8 million), a provider of production chemicals for onshore oil and gas operators[84] - Another new investment was Sun State Nursery and Landscaping, LLC for $12.8 million (secured first lien debt: $9.8 million, preferred equity: $3.1 million), a commercial landscaping installation and maintenance provider[84] - PSI Molded Plastics, Inc. restructured $10.6 million of debt into preferred equity in June 2025[84] Notes to Consolidated Financial Statements The notes provide detailed disclosures on organization, accounting policies, investment valuation, related party transactions, borrowings, capital, distributions, and commitments Note 1. Organization This note details the company's structure as a BDC and RIC, outlining its investment objectives and target portfolio composition - Gladstone Investment Corporation is an externally managed, closed-end, non-diversified management investment company, elected to be treated as a Business Development Company (BDC) and a Regulated Investment Company (RIC)[42] - Investment objectives include achieving and growing current income from debt securities and providing long-term capital appreciation from equity securities[42] - Target investment portfolio composition is approximately 75.0% debt and 25.0% equity at cost, with the current portfolio at 72.1% debt and 27.9% equity as of June 30, 2025[42] Note 2. Summary of Significant Accounting Policies This note outlines interim financial statement preparation, fair value investment valuation, revenue recognition, and segment reporting policies - Interim financial statements are prepared in accordance with GAAP for interim financial information and SEC Regulation S-X requirements[45] - Investments are recorded at fair value in accordance with FASB ASC Topic 820 and the 1940 Act, with the Board of Directors overseeing the valuation designee for fair value determinations[49][50][51] - Revenue recognition policies include accruing interest income to the extent expected to be collected, placing loans 90 days or more past due on non-accrual status, recognizing success fees upon cash receipt, and accruing dividend income if expected to be collected in cash[60][63][64] - The company adopted ASU 2023-07 (Segment Reporting) as of March 31, 2025, and has one reporting segment with the Chief Executive Officer as the Chief Operating Decision Maker (CODM)[68][69] Note 3. Investments This note details investment valuation using Level 3 inputs, fair value measurements, unobservable inputs for debt, and changes in fair value measurements - All investments were valued using Level 3 inputs within the ASC 820 fair value hierarchy as of June 30, 2025 and March 31, 2025, except for the investment in Gladstone Alternative Income Fund, which was valued using NAV as a practical expedient[72] | Fair Value Measurements (in thousands) | June 30, 2025 | March 31, 2025 | | :------------------------------------- | :------------ | :------------- | | Secured first lien debt | $557,057 | $514,334 | | Secured second lien debt | $93,340 | $103,580 | | Preferred equity | $325,997 | $302,163 | | Common equity/equivalents | $55,341 | $54,268 | | Total investments at fair value using Level 3 inputs | $1,031,735 | $974,345 | | Unobservable Input (Secured first lien debt) | Range / Weighted-Average as of June 30, 2025 | | :------------------------------------------- | :------------------------------------------- | | EBITDA multiple | 3.7x – 8.0x / 6.0x | | EBITDA (in thousands) | $408 – $25,038 / $11,738 | | Revenue multiple | 0.3x – 0.6x / 0.4x | | Revenue (in thousands) | $21,248 – $94,874 / $75,263 | | Changes in Level 3 Fair Value Measurements (in thousands) | Secured First Lien Debt | Secured Second Lien Debt | Preferred Equity | Common Equity/Equivalents | Total | | :---------------------------------------- | :---------------------- | :----------------------- | :--------------- | :------------------------ | :------ | | Fair value as of March 31, 2025 | $514,334 | $103,580 | $302,163 | $54,268 | $974,345 | | Net unrealized appreciation (depreciation) | $1,152 | $376 | $(3,683) | $1,073 | $(1,082) | | Issuances / originations | $45,941 | $0 | $16,901 | $0 | $62,842 | | Settlements / repayments | $(4,370) | $0 | $0 | $0 | $(4,370) | | Transfers | $0 | $(10,616) | $10,616 | $0 | $0 | | Fair value as of June 30, 2025 | $557,057 | $93,340 | $325,997 | $55,341 | $1,031,735 | Note 4. Related Party Transactions This note details base management and incentive fees paid to the Adviser, including credits, administration fees, and related party fees due - The company pays Gladstone Management Corporation (the "Adviser") a base management fee (2.0% annual rate on average gross assets) and an incentive fee (income-based and capital gains-based)[92][95] - The Adviser non-contractually, unconditionally, and irrevocably credits 100% of certain fees received for managerial assistance services against the base management fee[93] - Loan servicing fees paid to the Adviser (2.0% annual fee on monthly aggregate outstanding balance of loans pledged under the Credit Facility) are 100% credited back to the company[94] | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | | Base management fee | $5,080 | $4,618 | | Credits to fees from Adviser - other | $(1,399) | $(627) | | Net base management fee | $3,681 | $3,991 | | Loan servicing fee | $2,672 | $2,222 | | Credits to base management fee - loan servicing fee | $(2,672) | $(2,222) | | Net loan servicing fee | $0 | $0 | | Total incentive fee | $(209) | $(3,788) | - Administration fees paid to Gladstone Administration, LLC were $0.4 million for Q2 2025 and $0.5 million for Q2 2024[101] | Related Party Fees Due (in thousands) | June 30, 2025 | March 31, 2025 | | :------------------------------------ | :------------ | :------------- | | Base management and loan servicing fee due to Adviser, net of credits | $1,696 | $2,027 | | Incentive fee due to Adviser | $39,115 | $41,663 | | Total related party fees due | $41,885 | $44,584 | Note 5. Borrowings This note details the Credit Facility terms, outstanding borrowings, availability, compliance with covenants, and notes payable - The Credit Facility has a total commitment of $270.0 million with an accordion feature up to $300.0 million, a revolving period ending October 30, 2026, and final maturity on October 30, 2028[106] - Advances bear interest at 30-day Term SOFR (floor 0.35%, 10 bps credit spread adjustment) plus a margin of 3.15% (increasing to 3.40% and 3.65% thereafter), with unused commitment fees ranging from 0.50% to 1.00%[107] | Credit Facility Metric (in thousands) | June 30, 2025 | March 31, 2025 | | :------------------------------------ | :------------ | :------------- | | Commitment amount | $270,000 | $270,000 | | Borrowings outstanding at cost | $62,000 | $0 | | Availability | $208,000 | $270,000 | - The company was in compliance with all Credit Facility covenants as of June 30, 2025, including a net worth of $940.4 million (minimum $416.6 million) and asset coverage of 189.8% (minimum 150%)[109][213] | Notes Payable (in thousands) | Principal Amount | Unamortized Discounts | Notes Payable, Net | | :--------------------------- | :--------------- | :-------------------- | :----------------- | | 5.00% Notes due 2026 | $127,938 | | | | 4.875% Notes due 2028 | $134,550 | | | | 8.00% Notes due 2028 | $74,750 | | | | 7.875% Notes due 2030 | $126,500 | | | | Total as of June 30, 2025 | $463,738 | $(7,382) | $456,356 | | Total as of March 31, 2025 | $463,738 | $(8,029) | $455,709 | Note 6. Registration Statement and Common Equity Offerings This note details the registration statement for securities issuance and activity under the 2024 Common Stock ATM Program - A registration statement on Form N-2, effective April 18, 2024, permits the issuance of up to $450.0 million in various securities, with $314.1 million of this capacity remaining as of June 30, 2025[130] - Under the 2024 Common Stock ATM Program, the company sold 515,295 shares for $7.3 million gross proceeds (weighted-average gross price of $14.23 per share) during the three months ended June 30, 2025, with $65.6 million capacity remaining[131][133] Note 7. Net Increase (Decrease) in Net Assets Resulting From Operations Per Weighted-Average Common Share This note presents the net increase or decrease in net assets from operations per weighted-average common share | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :---------------------------------------------------- | :------------------------------- | :------------------------------- | | Net increase (decrease) in net assets from operations | $7,772 | $(6,526) | | Weighted-average common shares outstanding | 36,908,943 | 36,688,667 | | Basic and diluted net increase (decrease) in net assets per share | $0.21 | $(0.18) | Note 8. Distributions to Common Stockholders This note outlines the company's RIC distribution requirements, declared distributions for Q2 2025, and aggregate cash distributions - To qualify as a RIC, the company must distribute at least 90% of its Investment Company Taxable Income, with distributions determined by the Board based on estimated taxable income and net long-term capital gains[136][137] | Declaration Date | Record Date | Payment Date | Distribution per Common Share (Q2 2025) | | :--------------- | :---------- | :----------- | :-------------------------------------- | | April 8, 2025 | April 21, 2025 | April 30, 2025 | $0.08 | | April 8, 2025 | May 21, 2025 | May 30, 2025 | $0.08 | | April 8, 2025 | June 4, 2025 | June 13, 2025 | $0.54 (Supplemental) | | April 8, 2025 | June 20, 2025 | June 30, 2025 | $0.08 | | Total for Q2 2025 | | | $0.78 | - Aggregate cash distributions to common stockholders were $28.8 million for Q2 2025, compared to $8.8 million for Q2 2024[140] Note 9. Commitments and Contingencies This note addresses legal proceedings, escrow holdbacks, and unused line of credit commitments - The company is party to certain legal proceedings but does not believe loss contingencies will have a material adverse effect on financial condition, results of operations, or cash flows[145] - Escrow holdbacks for investment exits are recorded in Restricted cash and cash equivalents or Other assets, net, with reserves against escrow amounts of $1.0 million as of June 30, 2025 and March 31, 2025[146] | Commitment (in thousands) | June 30, 2025 | March 31, 2025 | | :------------------------ | :------------ | :------------- | | Unused line of credit commitments | $3,596 | $3,440 | Note 10. Financial Highlights This note provides per common share data, including net asset value, investment income, distributions, and key financial ratios | Per Common Share Data | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | | Net asset value at beginning of period | $13.55 | $13.43 | | Net investment income | $0.25 | $0.34 | | Net unrealized depreciation | $(0.04) | $(0.52) | | Total from investment operations | $0.21 | $(0.18) | | Cash distributions to common stockholders from net investment income | $(0.27) | $(0.24) | | Cash distributions to common stockholders from net realized gains | $(0.51) | $0 | | Net asset value at end of period | $12.99 | $13.01 | | Total investment return | 12.76% | (0.08)% | | Common stock outstanding at end of period | 37,352,676 | 36,688,667 | | Ratios/Supplemental Data | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :----------------------- | :------------------------------- | :------------------------------- | | Ratio of net expenses to average net assets – annualized | 11.72% | 8.01% | | Ratio of net investment income to average net assets – annualized | 7.37% | 10.18% | Note 11. Unconsolidated Significant Subsidiaries This note confirms the absence of unconsolidated significant subsidiaries during the reporting period - The company did not have any unconsolidated subsidiaries that met the significance conditions under Rule 1-02(w)(2) of SEC's Regulation S-X as of or during the three months ended June 30, 2025 and 2024[150] Note 12. Subsequent Events This note details a new investment in Global GRAB Technologies, Inc., declared monthly distributions, and common stock sales under the ATM program - In July 2025, the company invested $67.6 million in a new portfolio company, Global GRAB Technologies, Inc., consisting of $46.5 million in secured first lien debt and $21.1 million in preferred equity[151] - The Board of Directors declared monthly distributions of $0.08 per common share for July, August, and September 2025, totaling $0.24 for the quarter[152] - Subsequent to June 30, 2025, the company sold 866,554 shares of common stock under its 2024 Common Stock ATM program, raising approximately $12.1 million in net proceeds at a weighted-average gross price of $14.14 per share[153] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's discussion and analysis of the company's financial condition and results of operations Overview Gladstone Investment Corporation operates as a BDC and RIC, focusing on debt and equity investments in U.S. lower middle market private businesses - Investment strategy focuses on lower middle market private businesses (EBITDA $4 million-$15 million) in the U.S., seeking management buyouts and growth capital[159] - From inception through June 30, 2025, the company invested in 64 companies for approximately $2.1 billion and exited 33 portfolio companies, generating $353.4 million in net realized gains and $45.4 million in other income[163][165] - As of June 30, 2025, unrecognized, contractual success fees totaled $55.6 million, or $1.49 per common share[164] - The company's asset coverage ratio on senior securities representing indebtedness was 189.8% as of June 30, 2025, exceeding the 150% requirement[171] - As of June 30, 2025, the common stock closing market price was $14.27 per share, a 9.9% premium to its NAV of $12.99 per share[167] Results of Operations Total investment income increased, but higher expenses reduced net investment income, though net assets from operations turned positive due to significantly lower net unrealized depreciation | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change ($) | Change (%) | | :-------------------- | :------------------------------- | :------------------------------- | :--------- | :--------- | | Total investment income | $23,544 | $22,178 | $1,366 | 6.2% | | Total expenses, net of credits | $14,456 | $9,764 | $4,692 | 48.1% | | Net investment income | $9,088 | $12,414 | $(3,326) | (26.8)% | | Net realized gain on investments | $0 | $2 | $(2) | (100.0)% | | Net unrealized depreciation | $(1,316) | $(18,942) | $17,626 | (93.1)% | | Net increase (decrease) in net assets from operations | $7,772 | $(6,526) | $14,298 | NM | - Interest income increased by $1.0 million (5.0%) due to a higher weighted-average principal balance of interest-bearing investments ($610.0 million vs. $571.0 million)[176][177] - Weighted-average yield on interest-bearing investments decreased to 14.1% from 14.5%[178] - Dividend and success fee income increased by $0.3 million (22.1%), consisting of $1.1 million dividend income and $0.8 million success fee income[181] - Interest expense increased by $2.0 million (31.2%) due to the issuance of 7.785% 2030 Notes and an increase in the effective interest rate on the Credit Facility (14.0% vs. 10.8%), despite decreased borrowings[184] - Net unrealized depreciation of investments was $1.0 million for Q2 2025, a significant improvement from $18.9 million in Q2 2024, primarily due to a decrease in the performance of certain portfolio companies, partially offset by increased performance of others and higher transaction multiples[188][189] Liquidity and Capital Resources Operating activities used significant cash due to investment purchases, while financing activities provided cash, with the company maintaining compliance with debt covenants - Net cash used in operating activities was $50.2 million for Q2 2025, compared to $12.3 million provided in Q2 2024, mainly due to increased investment purchases ($62.8 million vs. $0.6 million)[192][193] - Net cash provided by financing activities was $40.4 million for Q2 2025, primarily from $62.0 million net borrowings under the Credit Facility and $7.3 million from common stock issuance, partially offset by $28.8 million in distributions[196] - The company paid monthly cash distributions of $0.08 per common share and a supplemental distribution of $0.54 per common share in June 2025[198] - As of June 30, 2025, the Credit Facility had $62.0 million outstanding and $208.0 million in adjusted availability[213] | Contractual Obligations (in thousands) | Total | Less than 1 Year | 1-3 Years | 3-5 Years | More than 5 Years | | :----------------------------------- | :-------- | :--------------- | :-------- | :-------- | :---------------- | | Credit Facility | $62,000 | $0 | $0 | $62,000 | $0 | | Notes payable | $463,738 | $127,938 | $0 | $335,800 | $0 | | Interest payments on obligations | $114,704 | $34,701 | $59,125 | $20,878 | $0 | | Total | $640,442 | $162,639 | $59,125 | $418,678 | $0 | - The Adviser's proprietary risk rating system for debt securities uses a scale of 0 to >10, with >10 being the lowest probability of default[232] - The weighted-average risk rating for the loan portfolio was 7.7 as of June 30, 2025 and March 31, 2025[233] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is interest rate risk, with its loan portfolio entirely at variable rates with a floor - Primary market risk is interest rate risk, affecting net investment income due to differences between variable borrowing rates (Credit Facility) and fixed/variable investment rates[237] - Target portfolio composition is approximately 90% variable-rate loans (with floor) and up to 10% fixed-rate loans[238] | Rates | June 30, 2025 | March 31, 2025 | | :------------ | :------------ | :------------- | | Variable rates with a floor | 100.0 % | 100.0 % | | Fixed rates | — % | — % | | Total | 100.0 % | 100.0 % | Item 4. Controls and Procedures Disclosure controls and procedures were effective as of June 30, 2025, with no material changes in internal control over financial reporting - Disclosure controls and procedures were evaluated as effective at a reasonable assurance level as of June 30, 2025[239] - No material changes in internal control over financial reporting occurred during the three months ended June 30, 2025[240] PART II. OTHER INFORMATION: This section covers legal proceedings, risk factors, equity sales, defaults, mine safety, other information, and exhibits Item 1. Legal Proceedings The company is not subject to any material legal proceedings or threatened legal proceedings - No material legal proceedings are currently active or threatened against the company[241] Item 1A. Risk Factors For a comprehensive discussion of risks, refer to the Annual Report on Form 10-K for the fiscal year ended March 31, 2025 - Refer to the "Risk Factors" section in the Annual Report on Form 10-K for the fiscal year ended March 31, 2025, for a discussion of business risks[242] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This item is not applicable for the reporting period Item 3. Defaults Upon Senior Securities This item is not applicable for the reporting period Item 4. Mine Safety Disclosures This item is not applicable for the reporting period Item 5. Other Information No officers or directors adopted or terminated Rule 10b5-1 trading arrangements during the reporting period - No officers or directors adopted or terminated Rule 10b5-1 trading arrangements or non-Rule 10b5-1 trading arrangements during Q2 2025[246] Item 6. Exhibits This section lists all exhibits filed with the Quarterly Report on Form 10-Q, including corporate documents and XBRL data - Exhibit list includes Amended and Restated Certificate of Incorporation, Bylaws, Specimen Stock Certificate, Indentures for various Notes, and Certifications (CEO, CFO)[248] - XBRL Instance Document and Taxonomy Extension files are attached as Exhibit 101[248] SIGNATURE The report is duly signed by Taylor Ritchie, Chief Financial Officer and Treasurer, on August 12, 2025 - Report signed by Taylor Ritchie, Chief Financial Officer and Treasurer, on August 12, 2025[253]