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GI

GLADSTONE INVESTMENT CORPORATION\DE (GAIN)·Q4 2025 Earnings Summary

Executive Summary

  • Q4 FY2025 total investment income was $27.55M, up 28.9% QoQ, driven by higher dividend/success fee income and interest income; Net investment income (NII) per share rose to $0.20 vs $0.03 in Q3 .
  • Revenue vs estimates: $27.55M actual vs $25.89M consensus → beat; EPS vs estimates: $0.20 actual vs $0.234 consensus → miss*. Drivers: stronger fee/dividend income and higher interest income offset by higher interest expense and reduced adviser credits .
  • NAV per share increased to $13.55 from $13.30 on realized gains ($0.57/share) and NII ($0.20/share), partly offset by net unrealized depreciation ($0.28/share) and distributions ($0.24/share) .
  • Liquidity and capital: credit facility upsized to $270M; $214M availability; asset coverage ratio at 204%, positioning GAIN to pursue new buyouts and fund supplemental distributions .
  • Subsequent events: Board declared monthly $0.08 distributions for Apr/May/Jun and a $0.54 supplemental distribution paid June 13, 2025; spillover earnings of $55.3M ($1.50/share) cover current distributions .

What Went Well and What Went Wrong

What Went Well

  • Exit of Nocturne generated $19.8M realized gain, $3.5M success fee income, and $85.6M debt repayment at par, supporting higher investment income and realized gains in Q4 .
  • Adjusted NII per share improved to $0.26 (from $0.23), reflecting stronger ongoing operations excluding capital gains-based incentive fee accruals .
  • Management reiterated robust pipeline and near-term closing expectations, despite tariff uncertainty: “we are very far along and expect to close 2 new acquisitions shortly” .

What Went Wrong

  • Capital gains-based incentive fees, while lower QoQ, continue to create volatility in GAAP NII (non-cash accrual methodology), depressing GAAP comparability vs Adjusted NII .
  • Tariffs: majority of portfolio could be impacted to varying degrees, particularly consumer-focused names; management is working supply-chain alternatives but flagged margin/demand risks .
  • Nonaccruals: four companies remain on nonaccrual (though three profitable and improving); Horizon’s mark reflects prior EBITDA dip and leverage from dividend recap despite profitability .

Financial Results

Quarterly Performance (Q2 → Q3 → Q4 FY2025)

MetricQ2 2025Q3 2025Q4 2025
Total Investment Income ($USD Millions)$22.565 $21.371 $27.548
Total Expenses, net ($USD Millions)$15.274 $20.210 $20.319
Net Investment Income ($USD Millions)$7.291 $1.161 $7.229
NII per Share ($USD)$0.20 $0.03 $0.20
Adjusted NII per Share ($USD)$0.24 $0.23 $0.26
NAV per Share ($USD)$12.49 $13.30 $13.55
Weighted-Average Yield on Interest-Bearing Investments14.5% 14.0% 13.2%

Actuals vs Consensus (Quarterly)

MetricQ2 2025 ActualQ2 2025 ConsensusQ3 2025 ActualQ3 2025 ConsensusQ4 2025 ActualQ4 2025 Consensus
EPS ($USD)$0.20 $0.248*$0.03 $0.238*$0.20 $0.234*
Revenue ($USD Millions)$22.565 $22.669*$21.371 $22.883*$27.548 $25.894*

Values with “*” retrieved from S&P Global.

Annual Results (FY2025 vs FY2024)

MetricFY 2024FY 2025
Total Investment Income ($USD Millions)$87.306 $93.662
Total Expenses, net ($USD Millions)$65.529 $65.567
Net Investment Income ($USD Millions)$21.777 $28.095
NII per Share ($USD)$0.63 $0.76
Adjusted NII per Share ($USD)$1.00 $0.97
Net Increase in Net Assets from Operations ($USD Millions)$85.305 $65.319
NAV per Share ($USD)$13.43 $13.55
Total Investments, at Fair Value ($USD Millions)$920.504 $979.320

KPIs and Portfolio Activity (Q4 FY2025)

KPIQ3 2025Q4 2025
Total Dollars Invested ($USD Thousands)$187,094 $14,024
Total Dollars Repaid/Collected ($USD Thousands)$5,500 $117,579
Fair Value as % of Cost104.9% 104.3%
Net Assets ($USD Thousands)$490,053 $499,084
Number of Portfolio Companies26 25

Guidance Changes

MetricPeriodPrevious Guidance/StatusCurrent Guidance/StatusChange
Monthly Distribution per ShareQ2/Q3 FY2025$0.08/month (Oct–Dec) $0.08/month (Apr, May, Jun 2025) Maintained
Supplemental Distribution per ShareFY2025$0.70 paid Oct 15, 2024 $0.54 declared (Record: Jun 4; Pay: Jun 13, 2025) Raised (new supplemental)
Credit Facility SizeQ3 FY2025Increased to $250M (Feb 10, 2025) Increased to $270M Raised
Asset Coverage RatioQ3 FY2025185.9% (as of Dec 31, 2024) 204% (as of Mar 31, 2025) Improved
Liquidity AvailabilityQ3 FY2025~$160M availability on $250M facility ~$214M availability on line of credit Improved
Public Notes IssuedQ3 FY2025$126.5M 7.875% Notes due 2030 issued Dec 2024 No change; notes outstanding Maintained

Earnings Call Themes & Trends

TopicQ2 FY2025 (Nov 2024)Q3 FY2025 (Feb 2025)Q4 FY2025 (May 2025)Trend
Tariffs/MacroMonitoring tariff impacts; some supply shifts; not seeing major immediate issues Continued diligence on tariff effects; portfolio-wide caution Majority of portfolio could be impacted; working supply chain alternatives; pause offers near-term relief Heightened vigilance; operational mitigation ongoing
M&A Pipeline/Buyouts“Extremely active” pipeline, higher quality/size; pursuing new buyouts Investing momentum; evaluating dividend recaps; strong availability Expect to close 2 acquisitions shortly; multiple opportunities under review Strong and building
Nonaccruals/Credit4 on nonaccrual; one now profitable (Hobbs); floors at ~12% protect yields 4 on nonaccrual; two improving; no portfolio-wide concerns 4 on nonaccrual; three profitable; Hobbs likely back on accrual by year-end Gradual improvement
Distributions/SpilloverMonthly $0.08; $0.70 supplemental declared; spillover $0.55/share at FY start Monthly $0.08; strong distributable earnings Monthly $0.08; $0.54 supplemental; spillover $1.50/share Sustained support for payouts
Leverage/Liquidity$160M availability; conservative balance sheet Notes issued; facility upsized; asset coverage 185.9% Facility to $270M; $214M availability; asset coverage 204% Strengthening capacity
Yield FloorsWeighted avg floors ~12%; mitigate SOFR declines Weighted avg yield 14.0% Weighted avg yield 13.2% Yield compression modest; floors provide cushion

Management Commentary

  • “We are again pleased to report that GAIN did produce very positive results for the fourth quarter and the fiscal year ended March 31, 2025…we reduced [assets] by the successful exit of one of our existing portfolio companies…generated significant realized capital gains of $19.8 million.” — President Dave Dullum .
  • “Adjusted net investment income…was $9.4 million or $0.26 per share…We continue to believe that adjusted net investment income is a useful and representative indicator of our ongoing operations.” — CFO Taylor Ritchie .
  • “We ended the fiscal year with $55.3 million or $1.50 per share in spillover…sufficient to cover our current monthly distribution of $0.08 per share… and the recently declared $0.54 per share supplemental.” — CFO Taylor Ritchie .
  • “We are very far along and expect to close 2 new acquisitions shortly…we are competing effectively for new acquisitions…while we’re being careful in assessing that risk and forecasting the tariff impact.” — President Dave Dullum .

Q&A Highlights

  • Tariff exposure: Majority of portfolio may be impacted to varying degrees; limited direct China production exposure with mitigation underway (inventory build, supply-chain adjustments) .
  • Consumer exposure: Management does not view products as skewed to lower-income consumers; tariff-driven price increases per item expected to be modest .
  • Nonaccruals: Hobbs now profitable; management “hopeful” for accrual by year-end; other nonaccruals improving; Horizon profitable despite mark reflecting prior EBITDA dip and leverage .
  • Buyout activity: “Cautiously optimistic” given near-term closings and funnel strength; valuation discipline amid volatility .
  • Dividend recap rationale (Educators Resource): Management liquidity and incremental debt income; reinvestment decision based on confidence in team/business .
  • Spillover and distributions: $55.3M spillover ($1.50/share) covers monthlies and $0.54 supplemental .

Estimates Context

  • Q4 FY2025: Revenue $27.55M vs $25.89M consensus → beat; EPS $0.20 vs $0.234 consensus → miss*. Miss tied to GAAP incentive fee dynamics and higher interest expense (7.875% 2030 notes), while revenue benefited from success fee/dividend income and interest income .
  • Q3 FY2025: Revenue $21.37M vs $22.88M consensus → miss; EPS $0.03 vs $0.238 consensus → miss*, primarily due to higher capital gains-based incentive fee accruals .
  • Q2 FY2025: Revenue $22.57M vs $22.67M consensus → slight miss; EPS $0.20 vs $0.248 consensus → miss* .

Values with “*” retrieved from S&P Global.

Key Takeaways for Investors

  • Supplemental distributions are underpinned by realized gains (Nocturne $19.8M) and spillover ($55.3M, $1.50/share), supporting near-term payout visibility .
  • Liquidity strengthened: facility upsized to $270M with $214M availability and asset coverage ratio at 204%, enabling deal execution and portfolio support through macro uncertainty .
  • Earnings quality: Adjusted NII per share rose to $0.26 (vs $0.23), highlighting stronger core operations; GAAP NII remains volatile due to capital gains-based incentive fee accrual mechanics .
  • Pipeline momentum: management expects near-term closings; disciplined on valuations; watch for incremental investment income and potential future supplemental distributions from exits .
  • Tariff risk manageable: broad exposure but mitigation actions underway (supply-chain alternatives, inventory timing); monitor consumer-facing names for demand elasticity .
  • Credit improvement: three of four nonaccruals are profitable; Hobbs targeted for accrual re-entry by year-end, which could incrementally support interest income .
  • Trading implications: Positive revenue surprise and NAV build are supportive; EPS miss reflects GAAP fee accruals rather than cash operations—focus on Adjusted NII trajectory and exit realization cadence .

Additional Notes

  • Other Q4 press releases: None found beyond the 8‑K and embedded Exhibit 99.1 earnings release .
  • Prior quarter comparison sources: Q2 FY2025 8‑K and call (Nov 2024) -; Q3 FY2025 8‑K and call (Feb 2025) - -.
  • Non-GAAP: Adjusted NII excludes capital gains-based incentive fee accruals; reconciliations provided in 8‑K .