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GI

GLADSTONE INVESTMENT CORPORATION\DE (GAIN)·Q1 2026 Earnings Summary

Executive Summary

  • Q1 FY2026 delivered higher net investment income per share ($0.25) despite lower total investment income ($23.5M), driven by sharply lower expenses; Adjusted NII per share was $0.24, covering the monthly dividend .
  • EPS (NII/share) beat S&P Global consensus ($0.25 vs. $0.226*) while revenue (total investment income) modestly missed ($23.54M vs. $24.27M*), as success/dividend fees declined vs. Q4; management collected $1.5M past-due interest and benefited from lower incentive fees .
  • NAV/share fell to $12.99 from $13.55, primarily from $0.78/share of distributions (including $0.54 supplemental) and $0.04/share net unrealized depreciation, partially offset by $0.25/share of NII and $0.01/share accretion from ATM sales .
  • Pipeline and deployment accelerated: two new buyouts closed intra-quarter (Smart Chemical $49.5M; Sun State $12.8M) and one subsequent (Global GRAB $67.6M); three recent deals have 13.5% interest rate floors, mitigating SOFR cuts risk .

What Went Well and What Went Wrong

  • What Went Well
    • Deployment momentum and portfolio growth: “two new buyouts during the current quarter” and a third subsequent; total invested $62.8M in Q1 and $67.6M post-quarter .
    • Expense relief and fee dynamics: NII rose to $9.1M as capital-gains and income-based incentive fees decreased; interest expense declined with lower credit facility borrowings .
    • Structural protection: new loans carry 13.5% floors; “they’re going to stay at 13.5% despite any changes in SOFR,” supporting yield resilience .
  • What Went Wrong
    • Revenue mix volatility: total investment income fell QoQ due to $3.5M less success fees and $0.7M less dividend income; timing is variable and didn’t repeat this quarter .
    • NAV pressure from distributions and marks: NAV/share decreased $0.56, primarily from $0.78/share distributions and $0.04/share net unrealized depreciation .
    • Macro/tariff headwinds: management flagged margin squeeze at certain consumer-exposed companies and broader uncertainty from tariffs/slowdown risk .

Financial Results

MetricQ3 2025Q4 2025Q1 2026
Total Investment Income ($USD Thousands)$21,371 $27,548 $23,544
Net Investment Income ($USD Thousands)$1,161 $7,229 $9,088
Net Investment Income per Share ($)$0.03 $0.20 $0.25
Adjusted NII per Share ($)$0.23 $0.26 $0.24
Weighted-Avg Yield on Interest-Bearing Investments (%)14.0% 13.2% 14.1%
NAV per Share ($)$13.30 $13.55 $12.99
Total Expenses, net ($USD Thousands)$20,210 $20,319 $14,456
Net Increase in Net Assets Resulting from Operations per Share ($)$1.05 $0.49 $0.21
NII Margin (%) = NII/TII5.4% 26.3% 38.6%

Notes: Q1 yield benefited from a one-time $1.5M past-due interest collection; excluding this, underlying portfolio yield was ~13.1% (management) .

Vs. Estimates (Q1 FY2026)

MetricActualConsensusSurprise
EPS (NII/share)$0.25 $0.226*+$0.024; +10.6%
Total Investment Income (“Revenue”)$23.544M $24.273M*-$0.729M; -3.0%

Values retrieved from S&P Global.*

KPIs and Portfolio Activity

KPIQ3 2025Q4 2025Q1 2026
Total Investments at Fair Value ($USD Thousands)$1,072,230 $979,320 $1,036,745
Number of Portfolio Companies (period-end)26 25 27
Total Dollars Invested (Quarter) ($USD Thousands)$187,094 $14,024 $62,842
Dollars Repaid/Collected (Quarter) ($USD Thousands)$5,500 $117,579 $4,370
Asset Coverage Ratio (%)185.9% 204% 189%

No reportable operating segments; GAIN is a BDC investing in lower middle market companies via debt and equity .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Monthly common dividendApr–Jun 2025$0.08 per month; plus $0.54 supplemental on Jun 13, 2025 ——
Monthly common dividendJul–Sep 2025—$0.08 per month (total $0.24 for quarter) Maintained monthly rate

Management provided no formal revenue/EPS guidance; dividend policy continues emphasizing regular monthlies and opportunistic supplemental payouts funded by realized gains .

Earnings Call Themes & Trends

TopicQ3 2025 (Dec-24)Q4 2025 (Mar-25)Q1 2026 (Jun-25)Trend
M&A/deal flow & valuationsLargest investment quarter; competitive valuations; active pipeline “Cautiously optimistic”; 2 near closing; pipeline healthy 2 buyouts closed; 1 subsequent; ~$130M invested YTD; still competitive Activity sustained; disciplined on price
Tariffs/macroCompetitive market; not yet a major drag Explicit tariff caution; some relief from “pause” Tariffs and potential slowdown could pressure margins/demand Cautious; monitoring pass-through and supply chains
Credit quality/nonaccruals4 on nonaccrual; improvements in 2 4 on nonaccrual; improvements continue 4 on nonaccrual; expect 1 to return to accrual next quarter Gradual improvement
Yield management (floors)Blended ~11.5%; focus on high floors —New deals with 13.5% floors; protect yields vs. SOFR cuts Rising floors, cushion for falling rates
Distributions/spillover$0.70 supplemental paid; run-rate $0.96 Spillover $55.3M ($1.50/sh); $0.54 supplemental declared Implied ~10.6% annualized yield (monthly + FY supplemental) Capacity to maintain monthlies; supplementals opportunistic

Management Commentary

  • Strategic model: “Acquire operating companies at attractive valuations with a combination of equity and debt… generate capital gains on the equity and operating income from the debt to fund monthly dividends” .
  • Portfolio momentum: “To date for fiscal 2026, we’ve invested approximately $130 million in three new portfolio companies” .
  • Macro caution: “Tariffs… may impact demand and margins… we’re evaluating supply chain alternatives and production strategies” .
  • Yield protection: “Our three most recent new deals… have 13.5% floors… they’re going to stay at 13.5% despite any changes in SOFR” .
  • Credit stance: “Consistent with the prior quarter, we continue to have four portfolio companies on non‑accrual… anticipate that one… will return to accrual status during the next quarter” .

Q&A Highlights

  • Deal flow vs. competitive valuations: management is seeing “good quality of deals,” remains disciplined where others pay ~9x EBITDA vs. GAIN’s 7–7.5x thresholds .
  • Tariff impact: not broadly weakening performance; more margin squeeze than top-line; debt service ability remains intact .
  • Nonaccrual/issuer specifics: improvements continue; one expected back on accrual next quarter; discussed Diligent Delivery restructuring and approach .
  • Yield floors and PIK: recent loans include 13.5% floors; “one of the few… that has zero PIK income,” with exit fees recognized only when collected .

Estimates Context

  • EPS (NII/share) beat S&P Global consensus ($0.25 vs. $0.226*), aided by lower incentive fees and one-time interest collection; Revenue slightly missed ($23.54M vs. $24.27M*), reflecting lower variable success/dividend fees .
  • Given the stronger NII and resilient underlying yields (floors), Street NII/EPS estimates may drift modestly higher, while revenue estimates should reflect continued variability in success/dividend fees .

Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Earnings quality improved: higher NII and lower expenses offset lower fee income; adjusted NII covered the monthly dividend .
  • Structural yield protection via 13.5% floors should cushion SOFR declines, supporting forward NII stability .
  • Active deployment and pipeline (three buyouts since May) should expand interest income base, though success/dividend fees remain timing‑dependent .
  • NAV pressure in Q1 was largely distribution-driven; ongoing realized gains (when exits occur) underpin the supplemental dividend framework .
  • Credit remains manageable with improvements on nonaccruals and strong asset coverage (189%) and liquidity ($151M facility availability) .
  • Monitor tariff/macro impacts on consumer‑exposed names for margin compression and valuation marks; management is actively mitigating via supply chain strategies .

Appendix: Q1 FY2026 Press Release and Other Items

  • Q1 FY2026 press release summary table and reconciliation (Adjusted NII to NII) .
  • Declared dividends for Jul–Sep 2025: $0.08/month; total $0.24 for the quarter .
  • Prior quarter context: Q4 FY2025 showed strong realized gains (Nocturne exit) and higher fee income; Q3 FY2025 was the largest investment quarter and included the $0.70 supplemental distribution .