Gladstone Investment(US:GAIN)2023-02-02 17:00Financial Data and Key Metrics Changes - Net investment income for the quarter ended December 31, 2022, declined to $8.6 million or $0.26 per share from $11.4 million or $0.34 per share in the prior quarter [11] - Adjusted net investment income increased to $10 million or $0.30 per share, up from $9.7 million or $0.29 per share in the prior quarter [60] - Total investment income rose to $21.6 million, compared to $20.8 million in the prior quarter, primarily due to increased yields on debt investments [61] - NAV per share increased to $13.43 at December 31, 2022, from $13.31 at September 30, 2022 [84] Business Line Data and Key Metrics Changes - The company invested an additional $8.4 million for an add-on acquisition during the quarter [28] - Total investments at fair value increased to $760 million from $738 million at the end of the previous quarter [58] Market Data and Key Metrics Changes - The weighted average yield increased to 13.4% due to rising interest rates, reflecting the impact of LIBOR increases [81][84] - The company noted a decline in valuation multiples across the portfolio, despite increases in EBITDA for many portfolio companies [35] Company Strategy and Development Direction - The company aims to maintain liquidity and flexibility to support and grow its portfolio, with over $150 million available on its credit facility [11] - The strategy includes being selective in acquisitions while actively seeking new buyout opportunities [18] - The company plans to continue funding supplemental distributions from realized capital gains and future exits [59] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the portfolio's credit quality and the potential for good earnings and distributions in the upcoming year [29] - The management acknowledged challenges due to rising interest rates and inflation but noted that portfolio companies are managing these challenges effectively [83] - There is an expectation of stable EBITDA moving forward, with potential for slight increases [16] Other Important Information - The company increased its monthly distribution to $0.08 per share, resulting in an annual run-rate of $0.96 per share, with supplemental distributions also planned [38][59] - The company raised approximately $3 million in net proceeds under its common stock ATM program [84] Q&A Session All Questions and Answers Question: Are there improvements in opportunities available given the current market risks? - Management noted that while the market remains competitive, there are still good companies available, and they expect to pursue several decent deals this year [42] Question: What is the outlook for the company on non-accrual status? - Management indicated that they hope to bring some companies back to accrual status in the next few quarters, but some may remain on non-accrual for a while [44][45] Question: How are portfolio companies adjusting to higher rate environments? - Management stated that overall, portfolio companies are not experiencing significant stress, and most have debt with floors that protect against rising rates [50] Question: What is the rationale behind the recapitalization of Old World Christmas? - The recapitalization was seen as an opportunity to increase investment in a strong company with low leverage, allowing for capital gains and distributions to shareholders [51] Question: How does the company plan to manage supplemental distributions? - Management emphasized that supplemental distributions will depend on the ability to manage exits and capital gains, rather than being on a fixed schedule [89]