Gladstone Investment Corporation (Nasdaq: GAIN) (the “Company”)
today announced earnings for its third quarter ended December 31,
2019. Please read the Company’s Quarterly Report on Form 10-Q filed
today with the U.S. Securities and Exchange Commission (the “SEC”),
which is available on the SEC’s website at www.sec.gov or the
investor relations section of the Company’s website at
www.gladstoneinvestment.com.
Summary Information: (dollars
in thousands, except per share data (unaudited)):
|
|
December 31,2019 |
|
|
September 30,2019 |
|
|
Change |
|
|
%Change |
|
For the quarter ended: |
|
|
|
|
|
|
|
|
|
|
|
|
Total investment income |
|
$ |
15,996 |
|
|
$ |
16,636 |
|
|
$ |
(640 |
) |
|
(3.8 |
)% |
Total expenses, net(A) |
|
9,838 |
|
|
10,053 |
|
|
(215 |
) |
|
(2.1 |
) |
Net investment income(A) |
|
6,158 |
|
|
6,583 |
|
|
(425 |
) |
|
(6.5 |
) |
Net realized gain |
|
34,005 |
|
|
21,144 |
|
|
12,861 |
|
|
60.8 |
|
Net unrealized depreciation |
|
(26,845 |
) |
|
(16,723 |
) |
|
(10,122 |
) |
|
60.5 |
|
Net increase in net assets resulting from operations(A) |
|
13,318 |
|
|
11,004 |
|
|
2,314 |
|
|
21.0 |
|
Net investment income per weighted-average common share(A) |
|
0.19 |
|
|
0.20 |
|
|
(0.01 |
) |
|
(5.0 |
) |
Adjusted net investment income per weighted-average common
share(B) |
|
0.23 |
|
|
0.23 |
|
|
— |
|
|
— |
|
Net increase in net assets resulting from operations per
weighted-average common share(A) |
|
0.41 |
|
|
0.34 |
|
|
0.07 |
|
|
20.6 |
|
Cash distribution per common share from net investment income |
|
0.20 |
|
|
0.16 |
|
|
0.04 |
|
|
25.0 |
|
Cash distribution per common share from realized gains(C) |
|
0.09 |
|
|
0.07 |
|
|
0.02 |
|
|
28.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average yield on interest-bearing investments |
|
12.6 |
|
|
15.0 |
|
|
(2.4 |
) |
|
(16.0 |
) |
Total dollars invested |
|
$ |
23,924 |
|
|
$ |
20,150 |
|
|
$ |
3,774 |
|
|
18.7 |
|
Total dollars repaid and collected from sales |
|
78,532 |
|
|
46,985 |
|
|
31,547 |
|
|
67.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of: |
|
|
|
|
|
|
|
|
|
|
|
|
Total investments, at fair value |
|
$ |
560,836 |
|
|
$ |
608,336 |
|
|
$ |
(47,500 |
) |
|
(7.8 |
)% |
Fair value, as a percent of cost |
|
97.8 |
% |
|
102.5 |
% |
|
(4.7 |
)% |
|
(4.6 |
) |
Net assets |
|
$ |
410,498 |
|
|
$ |
406,830 |
|
|
$ |
3,668 |
|
|
0.9 |
|
Net asset value per common share |
|
12.51 |
|
|
12.39 |
|
|
0.12 |
|
|
1.0 |
|
Number of portfolio companies |
|
28 |
|
|
29 |
|
|
(1 |
) |
|
(3.4 |
) |
(A) |
|
Inclusive of $1.4 million, or $0.04 per weighted-average common
share, and $0.9 million, or $0.03 per weighted-average common
share, of capital gains-based incentive fees accrued during the
three months ended December 31, 2019 and September 30, 2019,
respectively. These fees were accrued in accordance with United
States generally accepted accounting principles (“U.S. GAAP”). As
of December 31, 2019, only a portion of total capital gains-based
inventive fees accrued under GAAP were contractually due under the
terms of the investment advisory agreement. Refer to Note 4 –
Related Party Transactions in Form 10-Q for further information.
Also see discussion under Non-GAAP Financial Measure – Adjusted Net
Investment Income below. |
(B) |
|
See Non-GAAP Financial Measure —
Adjusted Net Investment Income below for a description of this
non-GAAP measure and a reconciliation from Net investment
income to Adjusted net investment income, including on a
weighted-average per share basis. The Company uses this non-GAAP
financial measure internally in analyzing financial results and
believes that this non-GAAP financial measure is useful to
investors as an additional tool to evaluate ongoing results and
trends for the Company. |
(C) |
|
Estimates of tax characterization
made on a quarterly basis may not be representative of the actual
tax characterization of distributions for the full year. Estimates
made on a quarterly basis are updated as of each interim reporting
date. |
Highlights for the Quarter: During the
quarter ended December 31, 2019, the following significant events
occurred:
- Portfolio Activity:
- Exited one investment, which resulted in dividend income of
$2.7 million, success fee income of $0.2 million, repayment of our
debt investments of $13.3 million at par, a realized gain of $47.9
million, and a continuing common stock investment;
- Exited one investment, which resulted in a realized loss of
$14.5 million; and
- Invested $23.9 million in existing portfolio companies, of
which $10.0 million was repaid in December 2019.
- Distributions and Dividends:
- Paid the following monthly cash distributions to common
stockholders and dividends to preferred stockholders for each of
October, November, and December 2019:
- $0.068 per common share;
- $0.13020833 per share to holders of our 6.25% Series D
Cumulative Term Preferred Stock (“Series D Term Preferred
Stock”);
- $0.13281250 per share to holders of our 6.375% Series E
Cumulative Term Preferred Stock (“Series E Term Preferred Stock”);
and
- Paid a $0.09 per common share supplemental distribution in
December 2019.
Third Quarter Results: Net
investment income for the quarters ended December 31, 2019 and
September 30, 2019 was $6.2 million, or $0.19 per weighted-average
common share, and $6.6 million, or $0.20 per weighted-average
common share, respectively. This decrease was primarily a result of
a decrease in total investment income, partially offset by a
decrease in total expenses, net of credits, quarter over
quarter.
Total investment income during the quarters ended December 31,
2019 and September 30, 2019 was $16.0 million and $16.6 million,
respectively. The slight quarter over quarter decrease was due to a
$2.0 million decrease in interest income, primarily driven by the
collection of past-due amounts upon the exit of one portfolio
company in the prior quarter, which was partially offset by a $1.4
million increase in other income, as the timing of dividend and
success fee income can be variable.
Total expenses, net of credits, during the quarters ended
December 31, 2019 and September 30, 2019, were $9.8 million and
$10.1 million, respectively. The quarter over quarter decrease was
primarily due to a $0.7 million decrease in other expenses, largely
due to a decline in tax expense, a $0.2 million increase in credits
to expenses, and a $0.2 million decrease in interest expense, which
were partially offset by $1.3 million increase in incentive
fees.
Net asset value per common share as of December 31, 2019
increased to $12.51, compared to $12.39 as of September 30, 2019.
The quarter over quarter increase was primarily due to $34.0
million, or $1.04 per common share, of net realized gains on
investments mostly resulting from the exits of two portfolio
companies, and $6.2 million, or $0.19 per common share, of net
investment income, partially offset by $27.0 million, or $0.82 per
common share, of net unrealized depreciation of investments,
including reversals upon exits, and $9.7 million, or $0.29 per
common share, of distributions paid to common shareholders.
Subsequent Events: After December 31,
2019, the following significant events occurred:
- Significant investment activity:
- In January 2020, we exited our investment in Meridian Rack
& Pinion, Inc., with a fair value of $0 as of December 31,
2019, and recorded a realized loss of $13.0 million.
- In January 2020, we invested an additional $4.4 million into
Edge Adhesives Holdings, Inc. in the form of preferred
equity.
- At-the-market (“ATM”) program activity:
Through February 3, 2020, we sold 227,004 shares of our common
stock under the ATM program with Wedbush Securities, Inc. at a
weighted-average gross price of $13.80 per share and raised
approximately $3.1 million of gross proceeds. The
weighted-average net price per share, after deducting commissions
and offering costs borne by us, was $13.55 and resulted in total
net proceeds of approximately $3.1 million. These sales were above
our then current estimated NAV per share.
- Distributions and dividends: In January 2020,
our Board of Directors declared the following monthly cash
distributions to common stockholders and monthly dividends to
holders of our series of term preferred stock:
Record Date |
|
Payment Date |
|
Distribution perCommon Share |
|
Dividend perShare
ofSeries D TermPreferred Stock |
|
Dividend perShare
ofSeries E TermPreferred Stock |
January 24, 2020 |
|
January 31, 2020 |
|
$ |
0.07 |
|
$ |
0.13020833 |
|
$ |
0.13281250 |
February 19, 2020 |
|
February 28, 2020 |
|
0.07 |
|
0.13020833 |
|
0.13281250 |
March 20, 2020 |
|
March 31, 2020 |
|
0.07 |
|
0.13020833 |
|
0.13281250 |
|
|
Total for the Quarter: |
|
$ |
0.21 |
|
$ |
0.39062499 |
|
$ |
0.39843750 |
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP Financial Measure — Adjusted Net Investment
Income: On a supplemental basis, the Company discloses
Adjusted net investment income, including on a per share basis,
which is a financial measure that is calculated and presented on a
basis of methodology other than in accordance with U.S. GAAP
(“non-GAAP”). Adjusted net investment income represents net
investment income, excluding capital gains-based incentive
fees. The Company uses this non-GAAP financial measure
internally in analyzing financial results and believes that this
non-GAAP financial measure is useful to investors as an additional
tool to evaluate ongoing results and trends for the Company. The
Company’s investment advisory agreement provides that a capital
gains-based incentive fee is determined and paid annually with
respect to realized capital gains (but not unrealized appreciation)
to the extent such realized capital gains exceed realized capital
losses and unrealized depreciation on investments for such year.
However, under U.S. GAAP, a capital gains-based incentive fee is
accrued if realized capital gains and unrealized appreciation of
investments exceed realized capital losses and unrealized
depreciation of investments. Refer to Note 4 – Related Party
Transactions in our Quarterly Report on Form 10-Q for further
discussion. The Company believes that Adjusted net investment
income is a useful indicator of operations exclusive of any capital
gains-based incentive fees, as net investment income does not
include realized or unrealized investment activity associated with
the capital gains-based incentive fee.
The following table provides a reconciliation of net investment
income (the most comparable U.S. GAAP measure) to Adjusted net
investment income for the periods presented (dollars in thousands,
except per share amounts; unaudited):
|
|
For the quarter ended |
|
|
December 31, 2019 |
|
September 30, 2019 |
|
|
Amount |
|
Per ShareAmount |
|
Amount |
|
Per ShareAmount |
Net investment income |
|
$ |
6,158 |
|
$ |
0.19 |
|
$ |
6,583 |
|
$ |
0.20 |
Capital gains-based incentive
fee |
|
|
1,358 |
|
|
0.04 |
|
|
858 |
|
|
0.03 |
Adjusted net investment
income |
|
$ |
7,516 |
|
$ |
0.23 |
|
$ |
7,441 |
|
$ |
0.23 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted net investment income may not be comparable to similar
measures presented by other companies, as it is a non-GAAP
financial measure that is not based on a comprehensive set of
accounting rules or principles and therefore may be defined
differently by other companies. In addition, Adjusted net
investment income should be considered in addition to, not as a
substitute for, or superior to, financial measures determined in
accordance with U.S. GAAP.
Conference Call: The Company will hold
its earnings release conference call on Wednesday, February 5,
2020, at 8:30 a.m. EST. Please call (855) 376-7516 to enter the
conference. An operator will monitor the call and set a queue for
any questions. A replay of the conference call will be available
through February 12, 2020. To hear the replay, please dial (855)
859-2056 and use the playback conference number 2571289. The replay
will be available beginning approximately one hour after the call
concludes. The live audio broadcast of the Company’s quarterly
conference call will also be available online at
www.gladstoneinvestment.com. The event will be archived and
available for replay on the Company’s website through April 5,
2020.
About Gladstone Investment
Corporation: Gladstone Investment
Corporation is a publicly traded business development company that
seeks to make secured debt and equity investments in lower middle
market businesses in the United States in connection with
acquisitions, changes in control and recapitalizations. Information
on the business activities of all the Gladstone funds can be found
at www.gladstonecompanies.com.
To obtain a paper copy of our Quarterly Report on Form 10-Q,
filed today with the SEC, please contact the Company at 1521
Westbranch Drive, Suite 100, McLean, VA 22102, ATTN: Investor
Relations. The financial information above is not comprehensive and
is without notes, so readers should obtain and carefully review the
Company’s Form 10-Q for the three months ended December 31, 2019,
including the notes to the consolidated financial statements
contained therein.
Source: Gladstone Investment Corporation
Investor Relations Inquiries:
Please visit ir.gladstoneinvestment.com, or
+1-703-287-5893.
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