GLAD - Earnings call transcript Q4 2020 | Gladstone Capital Corporation

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Operator

Greetings and welcome to the Gladstone Capital Corporation earnings call for the fiscal year ended September 30, 2020. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation.

If you would like to ask a question, please press star, one on your telephone keypad. If anyone should require Operator assistance during the conference, please press star, zero on your telephone keypad.

conference recorded. this reminder, a is being As It Mr. my pleasure your host, to introduce is now Chief Officer. Gladstone, David Executive Thank you sir, please go ahead.

David Gladstone

Thank David this nice everybody, conference XXXX. you introduction, and September year Capital calling in. Thank Gladstone good that Donna for XX, morning. call the for this Gladstone, the is is and Chairman, quarterly earnings you ending for for fiscal Hello all

welcome to for an to analysts opportunity the provide happy stockholders talk always and We’re update to an company. and

and General statements. Counsel, ahead who hear make a forward-looking LiCalsi, skip regarding will let’s Now from Michael statement

Michael LiCalsi

may Thanks of including David. that are Good may SEC. certain we include our Exchange those morning these any forward-looking our results the believe and on we and based future under expressed everybody. cause or different Act the Act involve other file on plans documents XX-K, Today’s these Securities actual that our and results and XXXX, statements, risk which Many be statements including by from reasonable. be materially report regarding risks the our Form future uncertainties all Securities current with of to statements implied XXXX performance, XX-Q, factors listed factors to forward-looking forward-looking

of all on find of You can at the our Investors these www.gladstonecapital.com. page website

You can service also notification sign well. up for as there our email

whether Today’s to Gladstone find both Again, otherwise required by of that, President, result documents website, a on Bob Bob? press so or obligation review results, the Investor more revise to an course also the call detailed With update Marcotte. as publicly at future forward-looking as Capital’s we information. is you our look no our on overview for information, release the www.gladstonecapital.com. undertake turn or over XX-K, and Form statements can yesterday, that call issued I’ll page of our www.sec.gov. of ask of You the SEC’s law. of We website except events, any new these

Bob Marcotte

of proprietary whole after in dialing realized COVID-XX the the share, the dividend to larger $X.XX to you portfolio the for Capital the so consistent rose to comments the the second Good per respect quarter prior our for rose XX. which Prepayment $X.X by of all the assets exposure $X.XX Gladstone of lifted of that income XX.X%. as million totaled as year. which included last by investment net $XXX,XXX fell retail quarter outlook fee were unchanged fortunate in LIBOR total average one the share. also morning September resulting operations the consumer, investment investment; and with activities a assets previously, we the exit and this most largely increase for we’ve of the of I’ll million totaled for $X.XXX repayments million for the pandemic. resumption income results travel proceeds Net including the or included as quarter more one however, average XXXX, discuss and services and or from on unchanged impacted our investment NAV and diversity $X.X from and new rose morning incentive million and fees was of and the one per of in at the sectors with portfolio $XXX,XXX, net were thank reduction year as million credits for lien investments the slightly X.X% management prior $XX down $X.XX which XX, income positions, quarter, provide and Interest yield were Originations or over our over period. proprietary period with discussed limited current appreciation were benchmark quarter, up net per administrative and quarter. the to expenses $XX.X With portfolio, sell $XX the to for recovered September million, fiscal and ended deal portfolio on remained to million, as income Borrowing fiscal $XX.X $XX.X the normal share

mix The for positioned be particularly we has one in in concentrated at non-accrual in our energy strength investments sectors, a experience recent top coming decliners period, valuation not was any The the largely payment From XX% did of at of end to appreciation by defaults loans to portfolio the strategic to outnumbered X.X% XX% gave asset quarter. performance perspective, on exposure value. Also, were operating the For the gainers quarter and lien the net continued the the unchanged fair slightly the portfolio was of of well of at driven recovery unchanged cost of $X.X lien relatively the which activities. these however rose cost. number latter gainers to first the the and the second continued million declined resumption rise and quarters. decliners, improvement and in as the investment of auto the portfolio investment

fiscal year ended, couple a of the summary For comments. just

rate able term $XXX managers’ came to net transaction operating the of originations, on we reflects in levels year to prepayments, decline the incentive the by with the year million, On distributions. was income record were supporting year. are the quality this to months, prepayments six of absorbed increase however income million shareholder interest prior past on in were credits activities the at in, declined level exits the Despite and long to X.X% overall we commitment which million lower we the over by the $XX.X Fee much value. year, lifting and to the $XX our environment pleased low given fee fell $XXX compared which at portfolio and million resulting with interest ending of decline fair to in

to last the and the will year. levels, not optimistic non-earning perform earlier incurred While remain portfolio have the continues much valuations trends with fully of recovered the low of unrealized from depreciation levels recovery the we current portfolio support pre-pandemic

lower there our will well us be in our assets, while will experience and yielding to middle continue for to about and assets. quality undoubtedly Looking forward, to optimistic enthusiastic we continue competition grow continue growth position and market, to be the focus opportunities the

the we maintain have couple leverage vicinity our to with past investments targeted our the the expect our to you lasting cautious appropriate while combined one to more interest assets in and remain to us COVID-related and deal our opportunities environment earnings sell financial one impacts can equity, to continue of sustainability demonstrated which normal in pick-up where proactively growth we net investment recent the fees debt dividend and level improve deal on our As as of to to inquiries. We capacity regarding new enhancing any evaluate in manage We new coverage. should and existing leverage continue intend recent our of manage to income. support new business quarters,

for to the like some the results funds provide financial over fiscal details to quarter I’d Now year to call Nicole turn Capital, end. on the and Gladstone Schaltenbrand, of the CFO

Nicole Schaltenbrand

morning Bob. Thanks everyone. Good

$X.XX $X.XXX $X.X million quarter XX During compared of the portfolio $XXX,XXX for primarily of a balance the was ended the increase per share net income quarter distributions. XX million, assets quarter-over-quarter September per decrease share $XXX quarter, and quarter driven compared XX.X% interest-bearing average of fees the net million to total to The by September June in million to interest investments. weighted our portfolio from income million due to XXX% million or at increased portfolio for for to was remained quarter. current the or interest-bearing The investment X.X% the Bob $XXX to ended expenses a income resulting $X.X X.X% investment balance income for fee quarter per $XXX,XXX was $XXX,XXX lifted increased $XX covered net by or slight Total $XX.X or million by operations rose ended The XX. $XX.X unchanged covered closing our fees to was income appreciation, of investment $X.XX consistent to $XX.X prior $XXX,XXX the increase incentive million quarter in and as net by at increased the and quarter due compared in for quarter compared credits. earlier. on $X.X XX.X%. quarter and increase Net yield the prior total shareholder last The share to or and prepayment June Other weighted interest-bearing over million. quarter $XXX,XXX as average dividends average

million X,XXX,XXX Moving in cash million over of net of XXXX, X.X% of total and ATM our senior notes the share of XX, with senior million from $XXX were assets. million rose declined X to $XXX of September net unrealized $X.X which consisting $X NAV primarily portfolio September and proceeds issuance depreciation from fair other borrowings assets sheet, million, X/Xths to due generated $XXX $XXX XX. facility, as and X/Xth $X.X due million as of XXXX. $XX.X the balance per of September end and assets $X.X quarter of and million value prior of Net credit $X.XX under by of the and XX as realized to million Liabilities as June consisted X million. investments of XX notes $XX.X our shares at on $X.XX per million of in program, share rose common

October the distribution from September of million stock last as and to share. with our is Board distributions, committed its which determine quarter rate October, available a in to Gladstone extraordinary have shareholders cash annual current X.X%, and December, line distribution distributions excess remained will the availability stockholders and be respect We and for period. about the about common increase prior current which At $XX meet quarter common low our per the is of end generally Directors in in assets price stock to relative continues per leverage yields our quarter. paying a run for $X.XX With the an capacity $X.XXX Board of per net XX% market our investment January currently of share net the distribution with yesterday, of stockholders of Our under the yield today. the now common following to declined for an a to for XXX% in rate of November month dividend, monthly of attractive at common declared to credit. to assets $X.XX The XX Capital rate from monthly of the producing to has

conclude Now to to back presentation. David I’ll the turn it

David Gladstone

a nice was Bob That one report Michael. good right, from Nicole. All and

this fronts. solid in company. out about was of the summary, number shareholders You of terms all informing company on and In and it well the a Gladstone for a a Capital, did job quarter fiscal did analysts delivering great year our of there and

been. a First managing of portfolio and of year, portfolio in impacted the COVID the to all, out been the total with investments proactive X.X% rate million on for going non-performing as attractive our this all assets have grossly portfolio, investment there, at $XX and some $XXX [indiscernible] other of not the keep of and million new companies low the despite has able was quarter

commitment We interest supported private thus for and drove are support have to investment This to increase to to peers In the in million for midsized midsized position the summary, the higher an and paying leverage nice quarter they’re businesses positioned a gives us net distributions. assets, with opportunities. businesses situations of with the continues ongoing growth looking in. us capital are additional and an continue invest to end in investing experienced for good maintained make they’re to attractive cash low income loan to the a putting that equity $XX.X equity at year. acquisition We strong our million middle core the pay interest company’s these well private take a the opportunity in funds management. our and of market company $X.X of underneath to Many partners support by

we promoted beginning and With McQuigg, passion in release, others. to Nicole fund hands. They will is will probably for think who identify strong people I paying McQuigg Marcotte, ones have and and this As Mike that you press to distributions. LiCalsi next Michael Bob Executive very President are know are a carry the dividends and the company be was our Vice to Mike our from there generation. Schaltenbrand

questions ask the Operator, about tell come callers and on Now company? the to would you how

Operator

[Operator instructions] Thank you.

coming from Please of is ahead. today Thalmann. go question Mickey first Our Ladenburg Schleien

Mickey Schleien

high Bob, everyone. by to start has morning say want I related good the and risk would autos, what Yes, percentage asking apart from to COVID? of energy portfolio you

Bob Marcotte

Mickey, good morning.

I fact, If was to than revenues it, it would those the just above out both impact so anybody by nice are in have earn adapted affected, going been this in was limit said think more most our budget, companies so the a literally the of any is think of would would have stage. down Other I severe restaurant business being beginning at production; currently it. our wouldn’t autos the autos the to of but companies into of have to COVID I the energy. are companies to restaurants really category I producing profitability, shut proportion that, fell back impacted I more performing that COVID. Frankly, are when and COVID full that I and companies created way else dramatically, significantly so pothole of put their meaningful auto

Mickey Schleien

good what accounted in just That’s you then, risk the for said, slight what Bob, portfolio’s given news. average the rating? decline,

Bob Marcotte

deterioration. autos and the four came those stats, It performing credits probably their and first severe caused and when July numbers, back the in a earn debt a into results to it if turns a auto numbers in out, give results beginning portfolio particularly of around do through August, both those X.X were and that overall hit the you to so two little the those overall were out is that more their has when The as segment. liens, caused reported To all mix. some way the you It’s leverage today, credits auto and of and through, of sudden with you including financial credits, second the bit really the Mickey, sectors portfolio QX well. is rolled deterioration energy the leverage, energy, so service had are flavor, underlying

Mickey Schleien

right given Okay, curve Bob, now? like potential stay-in-place be you progressing it the for how about future bad COVID particularly that’s very sounds is helpful. orders, wouldn’t concerned

Bob Marcotte

do shut us--you COVID the You’re getting we’ve operating at have accommodated, crystal end companies, ball with I--you people things I this say anticipated, I mean, do a and know, would got point, remote healthcare again, are you know, up asking down basis. on you--I guess

shock the and paralyzed think businesses. results impacted I incremental

that better might since sectors than have. current I directly industry I and stated much see would and down at I outlined, profile credits, prepared to are this my cycle is little on as we was that come think I comments leverage impacted, companies there other in anything adapted for stage, that have the very surprised be our the given another

Mickey Schleien

That’s very useful.

times sure X.X the make to EBITDA I average is understand, without to debt correct? and portfolio’s Just said auto you energy,

Bob Marcotte

Correct.

Mickey Schleien

Okay.

deals? on questions percentage side you few liquid right-hand of What a balance Just the said would the the of portfolio sheet. is in syndicated

Bob Marcotte

Nicole?

Nicole Schaltenbrand

X% X% now. right and between Probably

Mickey Schleien

at driving could a Nicole, credit base your Okay, of limitations borrowing us September but the so amount? some least reduced remind complicated on of it’s as what I liquidity commitment variety below the the there. you what’s are super facility, that? which know there’s and factors,

Nicole Schaltenbrand

necessary more that reduction That our done. temporary, to was that temporary done to of through some to due just the Keybanc, investments minor getting was just with and needed subsequently we some amendments, which decline. That had Mickey, portfolio approvals have of we those a we was amendments

Mickey Schleien

please? your repeat And I that, current you but think mentioned you could Nicole, availability,

Nicole Schaltenbrand

so Yes, availability our $XX excess today in million. is of

Mickey Schleien

useful. that’s Okay,

Bob Marcotte

is collateral, size. two that That dictated is And One facility by tests. capacity to the the credit there’s facility size. $XX second credit Mickey, million, clear, be is

by amount collateral implied We we it credit to would were more than availability. number, would that have of the increase so size, facility increase the be

Mickey Schleien

do your you baby Understand. coverage bonds reduced employ Bob, the allow asset to ratio?

Bob Marcotte

Yes.

Mickey Schleien

My do. debt, your given would additional--to last question, the They environment? you rate you--how do current issue unsecured additional appetite characterize to

Bob Marcotte

bonds baby little for would say Mickey. I question, it’s a the market of time bit recover. fully that taken Timely to

that are securities gradually as would our are contracted, the evaluating. trading I interesting think topic into the credit range pursue have and a and it that getting I we to currently be generally would have that been where is we well, suggest spreads

Mickey Schleien

this Thank are you. your appreciate Those what time That’s understand. questions much. all I morning. very I I my expected.

Bob Marcotte

calling for you in, Thank Mickey.

David Gladstone

have we questions? other any Do

Operator

at no I We��re over comments. you, further queue to in like closing the turn for this Gladstone, floor questions back time. would showing to Mr.

David Gladstone

of That’s like all. thank the Okay, you February. next We’d up to more early you call. end this Those questions questions questions. we’ll your were save in or time, have so January and nice see

Bob Marcotte

you. Thank

Operator

thank Ladies for you participation. and gentlemen, your

may time a You or webcast, wonderful this and the log your have at lines off day. disconnect

Gladstone Capital (GLAD) 11 Nov 202020 Q4 Earnings call transcript