Fiscal Year Ended 2021 Results:
Total investment income during the years ended September 30, 2021 and September 30, 2020 was $53.8 million and $48.0 million, respectively. The year over year increase was primarily due to a $3.9 million increase in interest income, driven by $1.1 million in payments of past due interest from a portfolio company previously on non-accrual status, as well as an increase in the average principal balance of our interest-bearing investment portfolio of $44.8 million, or 10.7%, year over year.
Expenses, net of any non-contractual, unconditional and irrevocable credits to fees from the Adviser, increased $4.9 million, or 21.4%, for the year ended September 30, 2021, as compared to the prior year. This increase was primarily due to a $2.1 million decrease in credits to fees from the Adviser, a $1.5 million increase in interest expense on borrowings, and a $1.1 million increase in the gross base management fee.
Net investment income for the year ended September 30, 2021 was $26.1 million, an increase of 3.8%, as compared to the prior year, or $0.79 per share.
The net increase in net assets resulting from operations was $84.3 million, or $2.54 per share, for the year ended September 30, 2021, compared to the net decrease in net assets resulting from operations of $1.9 million, or $0.06 per share, for the year ended September 30, 2020. The current year increase was driven by net investment income, $3.2 million in net realized gains, and $55.0 million in net appreciation, due to improvement in the financial and operational performance across our portfolio companies.
Subsequent Events: Subsequent to September 30, 2021, the following significant events occurred:
| | • | | In October 2021, we invested $26.3 million in Engineering Manufacturing Technologies, LLC through secured first lien debt and equity. |
| | • | | In November 2021, our investment in Medical Solutions Holdings, Inc. paid off at par for net proceeds of $6.0 million. |
| | • | | In November 2021, our investment in Lignetics, Inc. was sold, which resulted in success fee income of $1.6 million. In connection with the sale, we received net cash proceeds of approximately $47.2 million, including the repayment of our debt investment of $29.0 million at par. |
| | • | | In November 2021, our investment in Prophet Brand Strategy paid off at par for net proceeds of $13.1 million. In conjunction with the payoff, we received a prepayment fee of $0.1 million. |
| | • | | Debt Offering: In November 2021, we completed a private placement of 3.75% notes due 2027 with an aggregate principal amount outstanding of $50.0 million. |
| | • | | Debt Redemption: On November 1, 2021, we voluntarily redeemed our 5.375% notes due in 2024 with an aggregate principal amount outstanding of $38.8 million. |
| | • | | Distributions and Dividends Declared: In October 2021, our Board of Directors declared the following monthly distributions to common stockholders: |
| | | | | | | | |
Record Date | | Payment Date | | | Distribution per
Common Share | |
October 22, 2021 | | | October 29, 2021 | | | $ | 0.065 | |
November 19, 2021 | | | November 30, 2021 | | | | 0.065 | |
December 23, 2021 | | | December 31, 2021 | | | | 0.065 | |
| | | | | | | | |
Total for the Quarter | | | | | | $ | 0.195 | |
| | | | | | | | |
Comments from Gladstone Capital’s President, Bob Marcotte: “We are pleased to report that our portfolio has continued to perform well as reflected in last quarter’s appreciation which lifted our net asset value by 8.9% and our cumulative ROE for the last two years to 16.5% while maintaining our conservative leverage position. We believe these results affirm the resilience and attraction of our lower middle market investment strategy, and while our shareholders should benefit from this NAV appreciation, it also provides support for our continuing to scale the portfolio and grow our net investment income and shareholder distributions.”
-3-
