Gladstone Investment(GAIN) - 2025 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - For the fiscal year ended 03/31/2025, the company generated adjusted net investment income (NII) of $0.97 per share, covering the annual dividend of$0.96 per share [5][6] - The total fair value of the portfolio increased to $979 million from approximately$921 million at the prior year end, although it was slightly lower than the $1.1 billion reported at the end of the last quarter [6][9] - Total investment income for the fiscal year was$93.7 million, up from $87.3 million in the prior year, primarily due to increases in dividend and success fee income [13][14] Business Line Data and Key Metrics Changes - The company invested a total of$221 million during the year, an increase from $184 million in the prior year, which included investments in four new portfolio companies and add-on investments [7][8] - The company maintained a monthly distribution to shareholders of$0.08 per share, aggregating to 1.66 per share for the year, including supplemental distributions [8][20] Market Data and Key Metrics Changes - The company noted good liquidity in the M&A market, although it is a competitive environment impacted by tariffs affecting cost, customer demand, and supply chain dynamics [9][10] - The company is cautiously optimistic about new acquisitions, expecting to close two new acquisitions shortly [10][11] Company Strategy and Development Direction - The company aims to continue its buyout strategy while being cautious in assessing risks related to tariffs and their impact on portfolio companies [10][12] - The management team has added experienced talent to support portfolio growth and manage the current portfolio of 25 operating companies [7] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the current portfolio's performance and the potential for continued earnings and distributions despite economic uncertainties [12][19] - The recent pause on tariffs was seen as a relief, but management remains cautious about the long-term implications [11][12] Other Important Information - The company ended the fiscal year with 55.3 million in spillover, sufficient to cover current monthly distributions and the recently declared supplemental distribution [19][55] - The company has four portfolio companies on non-accrual status, with three of them being profitable and showing improvement [17][32] Q&A Session Summary Question: How much of the portfolio has exposure to tariff risk? - Management indicated that most companies have some exposure, particularly those producing in China, but they are not overly concerned as they have been proactive in managing inventory and supply chains [25][26] Question: What is the exposure to lower-income customers in the consumer sector? - Management stated that the consumer products in the portfolio are not primarily targeted at lower-income customers, and the impact of tariff costs is relatively small [28][30] Question: Update on non-accrual companies, specifically Hobbs? - Management remains optimistic about Hobbs and expects it to return to accrual status by the end of the year, with improvements in profitability noted [31][32] Question: What is the rationale for the dividend recap with Educators Resource? - The dividend recap was seen as a reinvestment decision, allowing the management team to gain liquidity while the company continues to perform well [49][52] Question: Current spillover amount? - The company ended the year with $55.3 million in spillover, which covers the current monthly distribution and the supplemental distribution to be paid in June [54][55]