GAIN - Earnings call transcript Q1 2018 | Gladstone Investment Corporation

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Operator

Good day, ladies and gentlemen and welcome to the Gladstone Investment Corporation's First Quarter Ended June 30, 2018 Earnings Call and Webcast. [Operator Instructions].

As a reminder, this conference is being recorded. I would now like to turn the conference over to David Gladstone.

You may begin.

David Gladstone

thank all and today. calling Sonia, you, you for to in Thank under and is call preferred common Gladstone NASDAQ conference quarterly stock stocks symbol shareholders on This GAINN earnings of out for there, the and versions have we three and GAINO, analysts traded the of GAIN, GAINM. Investment,

you outside calls hello. your please our all potential by forward-looking you shareholders He'll and Gladstone Wish have as and an for you and we're President to brief more to analysts, thank come statements. by this Administration, now provides of shareholders and And been Secretary, companies. And again, see is a serves a often. invitation us funds and our D.C., on business could always just Michael and we stop where in Washington, of General with regarding course, an happy say in of statement related which the investment So make hear we Also do located calling. environment. all to company the public we'll from McLean, who've Michael giving do update these view Counsel Michael? of and current Gladstone administrator open LiCalsi. so the Virginia are

Michael LiCalsi

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

www.gladstoneinvestment.com, required any or these a new And except or also which all statements no update which Relations as you past forward-looking not on performance opportunity for information, to page, of to take up on the these any is We our undertake guarantee documents a market website, is events revise notification Please is results. or www.sec.gov. of website, of information by SEC's as future future sign publicly note or specifically also once gladstoneinvestment.com, website, otherwise, service. we can You result whether visit find to that Investor the obligation law. ask our e-mail the again, our

the of XXXX. XX, We're the today's also us simply results keyword handle Twitter, @GladstoneComps. is an You Gladstone Facebook, there our also The can is on ended quarter through And find on is overview there call Companies. June

information. we for issued detailed ask you our press XX-Q, both more So release yesterday Form to and review

have Virtual In addition to will we this also Stockholders Actual earnings Meeting our later today. call,

be If you vote to at haven't already done shares so, your sure meeting. please the

turn Gladstone over I'll President, Dave? Dullum. David Now presentation Investment's the to

David Dullum

an our report purchase and we were investment net for your existing to net quarter, one from able very gain you And also at inclusive during realized investment ended company at adjusted Creek income, portfolio X/XX/XX, income we Drew increase versus of were in $X.XX able also the which net of of Bassett quarter, made pleased last our new the to everyone. this a and Foam, significant thank increase called we obviously morning, asset that to exited company, X/XX/XX quarter. am much Mike, good where was this during $XX.XX, to a fund. I $X.XX and portfolio value $XX.XX we

share common we as X% were look an April, to increase our to distribution year share. ended forward, the $X.XX for we from and and a over annual results in a $X.XX to rate these all on in based able, So X/XX/XX announce stockholders

We of to these program, in portion of common will a that be a made a which payment distributions our $X.XX certainly per XXXX. significant continuation gains. from expect June is of distribution supplemental share, also capital were supplemental able with of made We announce semiannual hope and

have where to as June the of actually was compares this BDC seen around our by our price we favorably fact, total Wells dividends year. was one-year further we're is for in of XXXX put which total of increase that a versus and XX%, decline also the that such addition, around and inclusive XX%. In stock And X% Fargo, return increase proud that out of index the June XX% for return, our was quarter-over-quarter, the quarter XX, index

trying the to feel increased also because and company. this component with the and the your recognizing what believe to continuing that community us our So income stock we're of frankly, of the and we encouraged buyout growth of distribution value equity do model price we - the thesis therefore, encouraging the our it of investor business supports this is is because

XX% from secured to their the cost. have buyouts or EBITDA you'll generally equity model, investment investment And we significant do the and about investment. to for the a portfolio in a the consists could a compares equity we typically where with portfolios, see companies of capital of ownership debt. as depreciation our credit-oriented XX% equity BDC, equity call percent And be around or interest, EBITDA, particular million. between this structure we for in it, and that debt of in $XX of that differentiated second us use and differentiates in combination funding around These and in XX-or-greater the for buyouts. a investments amortization have And of credit-oriented lien $X and BDCs, debt the our XX% taxes, million in position, generally to these direct business of consist debt proportion investments most before first at a debt one definitely this Now our equity traditional in any strategy majority earnings

XXXX. an $X.XX And and the share pay grow capital distributions the our we as portfolio share fees distributed to our an debt the $X.XX along which other transactions XXXX, company will income common to and increase approach teams private influence provide investment majority then investments and steady distributions, we and be in success most equity that an interaction supplemental lenders This equity traditional of in limit very management to of have and only gains And this direction our our of equity similar in capital involvement June annually. fund. management these to stockholders to interest company, close upon other in December the investing. and provides company, made and This important over the the point, stockholders potential each planned we three with BDCs we gains the of the a income significant and relationship with risk also debt some per time, differentiated June life advantage will the that not is then may investment amount a being of of frankly, refinanced, of of approach debt for in portion the form such with our increasing I value with These currently mentioned then we've with therefore, the the of using the working about that or but to at supplemental a own somewhat that that significant over being our value this so the comes distributions. our exit. a income positions feature we strategy the recently, year, of gives in provider monthly typical earlier look and in the is the So Thus, buy. to and common on credit-oriented equity, of us and provides

performance also our earlier, we'll And which we've that information, look I'd this you mentioned is done. form to from scorecard. to in We've a at talking you our graphic take find a the so have our us website, most on you quarterly at get done keep like www.gladstoneinvestment.com. on will before. or it look X/XX/XXXX let a in our I be and X/XX/XXXX, presentation, as going investor up-to-date historical Mike posted Now can - about which quick to how LiCalsi on mentioned I'm to of this

per in growth done which on? XXXX cost the about $XXX grown $X.XX value. has portion regular rate $XXX million of to common to million since from grown total run million about about about from grown went at million. $XXX The from portfolio million, at share, almost annual $XXX we've per our share have about in Well, assets equity monthly from April $XXX has XXXX. share $X.XX of to at our So fair we to distributions fiscal per our what million so what and supports $XXX XXXX cost is The since debt portion which

to Our look those exits achieved same NAV, From approximately XX share this XXXX is per has an that's which We aggregate period. inception net X/XX/XX. in and actually $XX.XX of we've exit equity to period equity through from continue exits capital assets, allowed $XX this our objective X.Xx, from that at value, asset $X.XX on the realized million investments of in in other somewhat almost what target. course, activity over exit future. companies our actually us $XXX generated which to increased equity gains had forward in we the per these our portfolio in the generating of of our have on our and and XX income growth portion These deliver X/XX/XX, is portion in gains buyout exited the about It million net companies of the share is, exit. of on of cash-on-cash return

the a generated equity realized strategy capital So as which gain of Foam with and XXXX, also point, with $XX.X called buyouts, mentioned, going portion exited gains these will Drew sales portfolio company forward, this providing of about portfolio. And I in capital our we for investment from exits June new build to consistent manage of that's a our companies as million. us we of of we portfolio our or

market investment to the this we'll it risk and monthly preserving to continuing I be is exit always what because we our assets assess portfolio of versus opportunity an the will for to distributions. As remain return and say, to the our conditions, meaning guided income sensitive will by continue produces hold

investment develop middle-market actually adherence investments our In believe a have other supplemental our we've to that and high a sponsors, platform. the the in both with been $XX investment process investment opportunities independent new to provide I regular are businesses which enabled for the to as about help a make able form that first distributions mentioned different we and make. to our Bassett on monthly to have To management acquired also that restoration needed and team we distributions as to called groups and space. course activities the Inc., this group look investment the at, returns due Creek we operating an some strict partnering new as This million us of a business J.R. opportunities Generally, exit, simultaneously proprietary. buyout a consistent acquisition in have number generation platform business. fundamentals Restoration, shareholder sources this as company diligence services we Johnson that also which very our regard, priority. of we quarter, include we called is can renovation invested in thorough the in somewhat of the our that well the banking of in we create firms But number if also new previously, obviously investments, call So folks, it's

So in pursuing we our addition, for acquisitions, investments, diligence some new we'll new of conducting existing a further own. assets, these potential companies, continue to on make standalone from add-on to also we of to, and existing we continues actively already these companies. that - these accretive investments and while portfolio number reviewing portfolio us are accelerating value This it companies creation some time building investments the allows of time, in so of due

given competition returns. very this will where say a that financial for challenging investments, it frankly, approach us conservative I very purchase paid high makes new price investments to environment, being expected the Now still close operating elevated, and value new buyout our in and we're is the for is

to to be say, we an buyout the it spreads. and months. may might And low we're a in our is a when it's to would, primarily could and And a introduced where value transaction, portfolio we're X to actually for potential if to we as that it closing loans, Now new any lead driven X building investments, in this to not however, to quality at anywhere the make time yield keep in any point process build that appearance both in for we be volume from rate mind one we're sensitive line equity, of quite investment from opportunity of were important time income that acquisition long. striving time, production keep of be on mind

but So it and portfolio. working at takes we building diligently this our time, keep

We continue investments our Xx and are equity carry the provide to to and to equity investment, balance secured returns distribution return producing the generally primarily our a low yield cash-on-cash And debt debt is of loans yield, which target cash minimum that first for lien of the investments, mid-teens. supports cash in current X a our which again, this a stockholder portion blended cash what expectations. these typically

consumer continue and flow, specialty be maybe companies in and a EBITDA, products So continue aerospace potential also limited from what's investments we products to with these and of to with into interest our and seek time to investment services, circumstances. focus? specialty expand industrial in light, operating Well, to energy manufacturing, consistent cash services, EBITDA areas time,

look as executing we forward, our plan. we on So continue will

We distribution We investments to a exits income-generating stockholders. distributions grow capital and potential the which the portfolio portfolio continues paying to will both be for are anticipate we the maximizes realize we increases to mature exits, and as while gains. portion adding able supplemental our semiannual and manage the portion position assets, and to of accretive equity

expected these mentioned, investment gains are distributions to generally net income. made from I undistributed and As net undistributed be capital

this more quarter. all Julia? of Julia on financial she Ryan, actual to past turn So can a give our performance the for I'll little with CFO, and over it that, detail

Julia Ryan

Thanks, good everybody. morning, Dave, and

in As of million million we at included had value. in June assets, $XXX XX, investments $XXX fair which

in stock a at of credit consist outstanding Our $XXX.X value. million of terms on facility borrowings liquidation primarily of liabilities in million about preferred our and $XXX

$X.XX Our net of and $XXX increase is of net or is assets and XX primarily per result from June share unrealized XX, of March totaled million which realized as gains. a an appreciation $XX.XX

relatively the result of quarter, in of million the flat the the will remained the investment in and Interest of net prior small total over quarter, June And opposed difference a was quarter-over-quarter. prior quarter, other principally quarter. was of million income Moving this accrual moment. to incentive compared required million which to investment as the million expenses $XX.X I $XX.X discuss prior $X.X to income were consistent capital statement $X.X income quarter. the for in net prior compared fees, to credits, Similar gains-based a leaving GAAP income further to

agreement to unrealized determined not realized advisory of with last exceed unrealized such annually is appreciation The gains-based accrual capital the So accrued was and fee increased realized GAAP incentive gains, which $X.X provides quarter's result advisory if this capital net gains-based contractually realized agreement. expenses losses of quarter but that $X.X million be respect the required compares capital investment $X.X paid and depreciation. capital gains is to our due not a in by current and This investment fee, which that million. was of to including primarily incentive million under under

gains-based a of losses exceed capital realized incentive realized unrealized appreciation GAAP, capital the fee is accrued capital sum under gains if unrealized and However, plus depreciation.

if is point it "as view. increase quarter incremental of really appreciation today" The this So in unrealized this an accrual. triggered liquidated

income exclude Current a of the investment result accrual, quarter. adjusted compared in investment per the income decreased to $X.XX common income quarter. net share believe factors, As net been investment adjusted $X.XX incentive average these that our net net gains-based current capital have is fee When prior and investment prior would investment realized include with adjusting We this income to in investment weighted representative margin. investment current indicator income unrealized income or fee of net and distributions adjusted of significant annual activity covered the net incentive gains-based again associated exclusive and and capital this from period net does a income operations useful any a fee. not as by our investment

While incentive be of not proceeds gain, paid. a may due capital $XX of accrued our this this If payment line million a and to net portion generally such currently the roughly investment gains-based has sheet accrued actual reflect is or realization distributions. meaning titled a would overdistributed to balance direct cover follow been be paid, thereof fee of item us when that but income, to such result is fees a will

As common $XX gains or per of realized net XXXX, and totaled million June XX, share. income $X.XX undistributed

income We gains continue realized to over actively with and manage our net the and to undistributed our to goal cover shareholders. increase distributions time

Let's assets. turn to and unrealized realized our changes in

we to portfolio fair which primarily an increasing Drew three of use unrealized of quarter, was During equity operating Foam, portfolio net an The this comparables value was additional representing this appreciation loans comparable companies. that and X% valuation investments. performance information of recorded specialist the our total external a certain quarter, of cost about million, continue we to Certain significant $XX.X to and regarding market provide investments. $XX.X value our to party certain XXX% debt are and fair predominantly more gain result we multiples million, other and our third of of data of related due realized improved of to points the to companies nonaccrual

We with companies an these liquidity. to are working in improve actively performance effort operating and

yield minimum debt interest-bearing a average Our weighted June having floor at equity X%, excludes investments. between portfolio of debt and this as cash with rate fees is was success about and our increases, debt XX% positioned variable and securities interest for XX. XX% rates or well equity The our investments approximate was any having This remaining on yield fixed with portfolio's on of cost loans debt XX% debt the XX% allocation The rates. quarter.

the during June For would it success quarter. been component, the fee to were purposes, include if XX.X% have comparison yield the

our able all success success and back priority XX% any million that no $X.XX remaining to the are to the of be fee company. or credit capital today's collect There or first about perspective, of these a you, XXX% we guarantee common part And fees priority per over of From share. my covers unrecognized is secured, having second $XX As have a the contractual control of structure any XX% June or totaled having portfolio will call. the lien priority respective This timing. a in this of loans with lien XX, David.

David Gladstone

second XX. you the some into success get I and team reports. quarter one All my I quarter. to and The before believe mention ending Dave continue thank in September rest reported Julia this of can our Michael. we wanted great during our accomplishments Good thing right, I just going presentation.

at at the look one reason income, you that share strange accounting reason fee for it's the that If the that's net $X.XX accruing per adjusted quarter, investment small again in potential is is and $X.XX change, but last today versus not due this profession. a some we're the

take change. versus common $X.XX a was look That's income last per per net at XX% which share change, Let's $X.XX $X.XX share about quarter. a is a operating

So value, up again, net gone $XX see which has of another can that strong. And million versus investing Net items all quarter. income, about you moving into strong up the the to $XX.XX, indication the $X.XX operating X.X%, company's a forward. share, very that million takes last account asset $XX.X

is the cranking pace. So good company very a at along

balance one of unforeseen economy is very We is things happen, of our might I we're being a dividends don't seeking very way we're any knowing primary the future, sheet, have today any stronger. course, goals. the think of counter build strong paying to to careful that much so getting

This size and the same Now that delivered of always think back continues we'll the be I XXXX invest even for middle-market in regulations out U.S. XXXX, ones going businesses. The businesses think question very code as reduction and size businesses, tax XXXX is a on we I that the time strong changes of tariffs and is great in there. maybe the are in. the to middle-market year, the administration has look at

any We in of haven't seen any companies. big impact our

from in our monthly October an July, are run we've distribution September. to additional middle love, distributions that I world, distributions, is largest fund. ones. strengths Board The of today. June distribution call, stockholders is excited to in supplemental founding of United three the for stockholders XXXX. did distributions in will Distributions. by August new the declared the middle out board of sequential share regular market we per the today this made December the each business about and market probably quarter and carved itself. in of this date, third States made We common The we that middle-market. additionally benefit common date we we declare July Directors $X.XX a when since is three of to ending and the the about that And that environment XXXX, It's booming been a now. as the economy the XXX Annual company have rate $X.XXX market - at is month our to in cash monthly will yearly several the Through supplemental And share. hope make our look meeting. of XX, the half this in

X% distributions of $X.XX look common As then share company a million, XX, number X%, make but on the The the shares you on supplemental right money make And of those total this sure making supplemental that, of that's $X.XX pay common company distributions. usually taxes in $XX.XX avoid time stockholders most has you to its distributed I solid it note know, be and and out If distributions. we least pays simple current common yield goal of giving year continues the with as that to that earnings at assure distribution a that in regular regulated $X.XX that we out payer each in annual want a order at as per folks to the about government. were XXXX, dividend out to be year, did the of distributions per at than stock. payout's on to the payments a the no common two that's company assumptions you the paying an investment to of X% stock, are pay at outstanding little but terms, holding to paid, central rate per all less $XXX made these to and more pay the is company it of the before very as will position. This the XX% there's future will June we about share and company, it. based guarantee we is Please trading like or last share stock the for the our we've

For was those little we March of the current but helpful XX, gains pay calendar to about you estimate distribution there, to June taxes. XXXX, to get at we our XXXX, capital a That's any a year going XX%. capital portion way gains before change can bit most get which who likely little of of is in

stocks preferred of series per value, yielding about series. share above trading on three depending their which X.X% par X.X%, to $XX Our are

to we'll in $XX. keep up. on the returns Gladstone which distributions investment strong capital fund. monthly supplemental this for XX% We above show able is summary, distribution some company, we you an So gains, them XX% continue investors building potential this attractive very reap to the Hopefully, Investment, In investment be from also to and future. continuous to seeking hope

questions to let's be analysts on shareholders of that from Now and have some the call. happen our the any

operator, tell a on, to ask them and how come So question.

Operator

Instructions]. [Operator

from question first Kyle comes Jefferies. Joseph Our of

Kyle Joseph

of portfolio? the the starting bit. is Or up that see a looks Is shift portfolio yield wanted you a more to It like yield guys benefit year-over-year. to sequentially in rising of on rates I that into and trended the the are a - spreads in portfolio? your has little dig mix

Julia Ryan

mix two. of definitely a of LIBOR now our component in the is it's It's Kyle, the most above loans as set those are floor. kicking

would absent future. malperformance, in that up you increases the LIBOR credit any as going So see

Kyle Joseph

quarter, And outflows Were nonaccruals give And weakness? inflows on the these little are issues? the on color quarter? the just nonaccruals any then of in sort to the a both of company seeing just and industry-specific one-off you in us bit

David Gladstone

nothing for so. and I through, company issues variety as work Kyle, to damaging of Dave. that talk say do - to little having are worked a these I'd be would we'll the it's to it's that things either then say a specific to from certainly time through it time reasons, whether We've portfolio. but we we more is management continue

where not too concerned So about I'm these. are we with

David Dullum

Next question.

Operator

And Instructions]. Gladstone no further turn the am call like further I over this at now for questions remarks. I time. any [Operator would back to to showing David

David Gladstone

all quarter. the end Thank for you, you Sonia, you That's and calling call. of We'll see in. this thank next

Operator

Ladies today's participating today's conference. you in thank for and This gentlemen, concludes program.

have great all disconnect. Everyone, may a You day.

Gladstone Investment (GAIN) 2 Aug 182018 Q1 Earnings call transcript