Sign in

You're signed outSign in or to get full access.

GI

GLADSTONE INVESTMENT CORPORATION\DE (GAIN)·Q2 2026 Earnings Summary

Executive Summary

  • Mixed quarter: Total investment income beat consensus while GAAP NII/share missed on a sizable capital gains-based incentive fee accrual; adjusted NII/share held flat at $0.24 and covered the monthly dividend. NAV/share rose 4.2% q/q to $13.53 on $54.5M of net unrealized gains, despite a $29.9M realized loss on the J.R. Hobbs restructuring . Revenue: $25.28M vs $24.58M consensus; GAAP EPS (NII/share): $0.11 vs $0.23 consensus* [functions.GetEstimates].
  • Portfolio health improved: non‑accruals fell to 3.9% of cost (1.7% of fair value) following the Hobbs restructure; liquidity remained strong with $174M of revolver availability, 193% asset coverage, and $31.1M raised via ATM above NAV .
  • Capital deployment robust: $71.0M invested in Q2, including a $67.6M new platform (Global GRAB); weighted‑average yield 13.4% (floors embedded to mitigate lower SOFR) .
  • Dividends maintained: $0.08 monthly declared for Oct–Dec; management intends to continue supplementals when exits generate realized gains (spillover started the year at $1.50/share) .

What Went Well and What Went Wrong

  • What Went Well

    • Revenue beat and portfolio appreciation drove a 4.2% q/q NAV/share increase to $13.53; net unrealized gains of $54.5M included $19.1M reversal tied to the Hobbs restructure .
    • Adjusted NII/share of $0.24 covered the $0.08 monthly dividend for the quarter; CFO: “Adjusted net investment income remains a meaningful measure…as it removes the impact of the capital gains-based incentive fee” .
    • Active pipeline and accretive capital access: $31.1M ATM proceeds above NAV; “activity keeps me somewhat optimistic for closing on some new buyouts during the balance of our fiscal year” (President) .

  • What Went Wrong

    • GAAP NII/share fell to $0.11 from $0.25 q/q on a $4.9M capital gains-based incentive fee accrual; total expenses rose 45% q/q to $21.0M (higher incentive fees and interest expense) .
    • Realized loss of $29.9M on the J.R. Hobbs restructuring, though it returned to accrual status with a new $20M term loan; management still expects long-term improvement .
    • Macro/valuation headwinds persist: lower valuation multiples and tariff/supply chain caution; management remains vigilant around consumer exposure and government-related timing risks .

Financial Results

MetricQ2 2025 (YoY comp)Q1 2026 (Prior Q)Q2 2026 (Reported)
Total investment income ($USD Thousands)$22,565 $23,544 $25,279
Total expenses, net ($USD Thousands)$15,274 $14,456 $21,000
Net investment income ($USD Thousands)$7,291 $9,088 $4,279
Net investment income per share (GAAP)$0.20 $0.25 $0.11
Adjusted NII per share (non‑GAAP)$0.24 $0.24 $0.24
Net increase in net assets from operations per share$0.42 $0.21 $0.75
Weighted‑avg yield on interest‑bearing investments14.5% 14.1% 13.4%
NII Margin % (NII/TII)32.3% 38.6% 16.9%

Vs. Estimates

MetricQ1 2026 ConsensusQ1 2026 ActualQ2 2026 ConsensusQ2 2026 Actual
Total investment income ($USD)$24.27M*$23.54M $24.58M*$25.28M
Primary EPS (GAAP NII/share)$0.226*$0.25 $0.228*$0.11

Values marked with * retrieved from S&P Global.

KPIs and Balance Sheet

KPIQ2 2025Q1 2026Q2 2026
NAV per share$12.49 $12.99 $13.53
Total investments at fair value ($USD Thousands)$853,307 $1,036,745 $1,130,859
Fair value as % of cost101.6% 103.9% 109.0%
Portfolio companies (count)22 27 28
Dollars invested ($USD Thousands)$19,500 $62,842 $71,036
Repayments/collections ($USD Thousands)$73,522 $4,370 $1,436
Non‑accruals (% of cost / % of FV)——3.9% / 1.7%
Credit facility availability—$151M $174M
Asset coverage ratio—189% 193%
ATM net proceeds in period—~$7.2M ~$31.1M

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Monthly common distributionOct–Dec 2025$0.08/month (run‑rate) $0.08/month for Oct, Nov, Dec (total $0.24) Maintained
Supplemental distributionsFY 2026Opportunistic based on realized gains Will seek to continue as exits generate gains Maintained qualitative posture
Capital raising via ATMOngoingOpportunistic when accretive Continue while price > NAV; used post‑Q2 as accretive Maintained

No formal revenue/EPS/expense guidance was provided .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2025, Q1 2026)Current Period (Q2 2026)Trend
M&A pipeline and activity“Cautiously optimistic” with multiple deals in diligence; invested $221M in FY25; $151M credit availability Strong activity, three new investments YTD FY26; optimistic for additional buyouts Improving
Tariffs/supply chainTariff pause offered “a bit of relief”; continued caution on consumer margins Cautious; some consumer names unaffected due to demand; mitigation via alternative sourcing Stable cautious
Interest rate floors—New deals with ~13.5% floors to cushion lower SOFR Floors broadly embedded; ex‑non‑accrual, floor ~12%
Credit quality / non‑accruals4 on non‑accrual; some improving; Hobbs expected to return Non‑accruals down to 3; Hobbs restructured and on accrual; no broad credit concerns Improving
Valuations/multiplesMixed: higher multiples offset some EBITDA softness Aggregate unrealized gains $54.5M; multiples lower but company performance drove gains Mixed
Liquidity/capital$214M revolver availability; notes issued; ATM used $174M availability; 193% asset coverage; ongoing ATM Solid

Management Commentary

  • President David Dullum: “We ended the second quarter with adjusted NII of $0.24 per share, which is sufficient to cover our monthly distributions… and our total assets of $1.1 billion are up $90 million from the end of the prior quarter.”
  • CFO Taylor Ritchie on fee impact and adjusted NII: “Adjusted net investment income…remains a meaningful measure…as it removes the impact of the capital gains-based incentive fee” .
  • On JR Hobbs: “This reduction [in non‑accruals] reflects the restructuring…which resulted in a $29.9 million realized loss while establishing a new $20 million term loan that is now paying interest” .
  • On rates and floors: “Excluding non‑accrual investments, the weighted average interest rate floor of our current debt portfolio was 12%…position us well to mitigate potential compression” .
  • On the outlook: “Our activity level is strong…somewhat optimistic for closing on some new buyouts during the balance of our fiscal year” .

Q&A Highlights

  • Sector performance and valuation drivers: Gains were broad-based across traditional sectors; EBITDA growth offset multiple compression in several names .
  • JR Hobbs restructuring details: GAIN remains the only investor; business refocused on profitable contracts with ~$100M revenue run‑rate; now positive EBITDA/cash flow .
  • ATM cadence: Post‑quarter issuance depends on trading sufficiently above NAV including commission/cushion thresholds; fewer eligible trading days explained slower pace .
  • Pipeline/competition: Active funnel across IOIs/LOIs; GAIN competes more with PE sponsors (as buyer) than BDC lenders; seeking slightly larger companies for better value creation .
  • Tariffs: Alternative sourcing has mitigated pressures; selective consumer products saw sustained demand despite tariff increases .

Estimates Context

  • Q2 2026 vs Street: Revenue beat ($25.28M vs $24.58M consensus); GAAP EPS (NII/share) missed ($0.11 vs $0.23 consensus) as capital gains-based incentive fee accrual depressed NII. Adjusted NII/share was $0.24 (no published consensus) [functions.GetEstimates].
  • Q1 2026 vs Street: Revenue missed ($23.54M vs $24.27M), while GAAP EPS beat ($0.25 vs $0.23) [functions.GetEstimates].
  • Implications: Expect models to adjust lower on GAAP NII sensitivity to quarterly capital gains fee accruals, but revenue (TII) and adjusted NII trajectory remain supported by new originations and embedded rate floors .
    Values retrieved from S&P Global.

Key Takeaways for Investors

  • Revenue momentum and portfolio appreciation are offsetting GAAP NII volatility from non‑cash, mark‑to‑model fee accruals; the underlying cash earnings power (adjusted NII) continues to cover the monthly dividend .
  • Credit quality trend improved: non‑accruals down, Hobbs returned to accrual; no portfolio‑wide credit concerns flagged .
  • Rate‑floor strategy should cushion NII against SOFR declines, stabilizing yields as deployment continues .
  • NAV accretion is being driven by both unrealized appreciation and accretive ATM issuance above NAV; continued use of ATM when pricing allows .
  • Near‑term catalysts: potential new buyout closings, further portfolio markups, and any exit‑driven supplemental dividends; risks include tariff volatility, valuation multiple compression, and expense pressure from incentive fees/interest expense .
  • For trading: headline GAAP EPS miss may create dislocations; focus on adjusted NII coverage, NAV trajectory, and deployment pace as the drivers of dividend sustainability and valuation .