Gladstone Capital (US:GLAD)2025-05-07 13:32Financial Data and Key Metrics Changes - Fundings totaled $46 million, with exits and repayments at $81 million, resulting in net originations of negative $35 million [6] - Interest income remained unchanged at $21.3 million, while the weighted average portfolio yield fell to 12.6% due to a decline in SOFR rates [7][12] - Net investment income was $11.2 million, with net realized gains of $7.7 million for the quarter [8][13] - Total assets decreased to $777 million, with net assets declining to $478 million [13][14] - NAV per share fell from $21.51 to $21.41, reflecting unrealized depreciation [14] Business Line Data and Key Metrics Changes - The portfolio turnover did not materially impact the investment mix, with senior debt representing 71% of the fair value of the portfolio [8] - Non-earning asset investments remained unchanged at four companies totaling $53.7 million at cost [9] Market Data and Key Metrics Changes - The company experienced a surge in portfolio liquidity events totaling $289 million, representing approximately 36% of the portfolio exited [10] - The current pipeline of expected fundings is healthy, with anticipated growth in the portfolio [10] Company Strategy and Development Direction - The company continues to focus on investing in growth-oriented lower middle market businesses with strong management [18] - The strategy includes supporting midsized private equity funds in buyouts and growth opportunities [18] - The company aims to increase leverage to reach $1 billion in total assets under management [57] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the portfolio's resilience despite market volatility and widening credit spreads [21][22] - The company is optimistic about the performance of its investments in sectors like precision manufacturing and lab testing, expecting improvements over the year [46][51] - Management noted that domestic-focused businesses are benefiting from changes in supply chains due to tariffs [25][26] Other Important Information - Monthly distributions for May and June will be $0.165 per common share, with an annual run rate of $1.98 per share [15] - The company maintains a conservative leverage position with debt at 62.5% of NAV [11] Q&A Session Summary Question: How do you see the portfolio and NAV performing with both broadly syndicated loan and private credit spreads widening in April? - Management indicated that they do not have syndicated loans and expect minimal degradation in value due to their portfolio's leverage profile and yield [21][22] Question: How do you see SeaLink and RPM freight performing as tariffs impact shipping volumes? - Management noted that domestically focused companies are adapting well to changes, with RPM's business actually up due to their responsiveness [25][26] Question: How much direct exposure is there to tariffs within the manufacturing segment? - Management highlighted that their investments in domestic manufacturing are performing well, with some companies expanding capacity despite facing tariff issues [28][30] Question: Is the EG's restructuring going to generate a realized loss? - Management anticipates a very small loss from the restructuring, with a significant equity investment going forward [34] Question: Can you provide an update on the pipeline and its size relative to three months ago? - Management reported a healthy backlog with 8 to 10 deals in advanced stages, potentially totaling $100 million to $150 million [39][40] Question: Do you have any exposure to government contracts given potential cuts? - Management stated they do not have significant exposure to government contracts, focusing instead on defense-oriented suppliers and healthcare [42][45] Question: Where do you see leverage going for the rest of the year? - Management aims to increase leverage towards 90% to 100% over the next few quarters, working to reach $1 billion in total assets [57][58]