Gladstone Investment Corporation Reports Financial Results for its Third Quarter Ended December 31, 2018
February 05 2019 - 4:05PM
Gladstone Investment Corporation (NASDAQ: GAIN) (the “Company”)
today announced earnings for its third quarter ended December 31,
2018. Please read the Company’s Quarterly Report on Form 10-Q filed
today with the U.S. Securities and Exchange Commission (the “SEC”),
which can be retrieved from the SEC’s website at www.sec.gov or
from the investor relations section of the Company’s website at
www.gladstoneinvestment.com.
Summary Information:
(dollars in thousands, except per share data (unaudited)):
|
|
December 31,2018 |
|
|
September
30,2018 |
|
|
Change |
|
|
%Change |
|
For the quarter ended: |
|
|
|
|
|
|
|
|
|
|
|
|
Total investment
income |
|
$ |
14,965 |
|
|
$ |
13,091 |
|
|
$ |
1,874 |
|
|
14.3 |
% |
Total
expenses, net(A) |
|
8,943 |
|
|
17,085 |
|
|
(8,142 |
) |
|
(47.7 |
) |
Net
investment income (loss)(A) |
|
6,022 |
|
|
(3,994 |
) |
|
10,016 |
|
|
250.8 |
|
Net
realized gain (loss) |
|
76,804 |
|
|
(4,543 |
) |
|
81,347 |
|
|
NM |
|
Net
unrealized (depreciation) appreciation |
|
(66,335 |
) |
|
38,901 |
|
|
(105,236 |
) |
|
NM |
|
Net
increase in net assets resulting from operations(A) |
|
16,491 |
|
|
30,364 |
|
|
(13,873 |
) |
|
(45.7 |
) |
Net
investment income (loss) per weighted-average common share(A) |
|
0.18 |
|
|
(0.12 |
) |
|
0.30 |
|
|
250.0 |
|
Adjusted
net investment income per weighted-average common share(B) |
|
0.24 |
|
|
0.10 |
|
|
0.14 |
|
|
140.0 |
|
Net
increase in net assets resulting from operations per
weighted-average common share(A) |
|
0.50 |
|
|
0.93 |
|
|
(0.43 |
) |
|
(46.2 |
) |
Cash
distribution per common share from net investment income |
|
0.14 |
|
|
0.20 |
|
|
(0.06 |
) |
|
(30.0 |
) |
Cash
distribution per common share from realized gains(C) |
|
0.12 |
|
|
— |
|
|
0.12 |
|
|
NM |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average yield on interest-bearing investments |
|
13.0 |
% |
|
12.9 |
% |
|
0.10 |
% |
|
0.8 |
% |
Total
dollars invested |
|
$ |
53,259 |
|
|
$ |
900 |
|
|
$ |
52,359 |
|
|
NM |
|
Total
dollars repaid andcollected from sales |
|
121,003 |
|
|
743 |
|
|
120,260 |
|
|
NM |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As
of: |
|
|
|
|
|
|
|
|
|
|
|
|
Total
investments, at fair value |
|
$ |
607,024 |
|
|
$ |
665,117 |
|
|
$ |
(58,093 |
) |
|
(8.7 |
)% |
Fair
value, as a percent of cost |
|
100.8 |
% |
|
111.9 |
% |
|
(11.10 |
)% |
|
(9.9 |
) |
Net
assets |
|
$ |
411,399 |
|
|
$ |
403,574 |
|
|
$ |
7,825 |
|
|
1.9 |
|
Net asset
value per common share |
|
12.53 |
|
|
12.30 |
|
|
0.23 |
|
|
1.9 |
|
Number of
portfolio companies |
|
30 |
|
|
32 |
|
|
(2 |
) |
|
(6.3 |
) |
(A) |
|
Inclusive of $2.1
million, or $0.06 per weighted-average common share, and $7.1
million, or $0.22 per weighted-average common share, of capital
gains-based incentive fees accrued during the three months ended
December 31, 2018 and the three months ended September 30, 2018,
respectively. These fees were accrued in accordance with United
States generally accepted accounting principles (“U.S. GAAP”),
where such amounts are not contractually due under the terms of the
investment advisory agreement for the respective periods. Also see
discussion under Non-GAAP Financial Measure – Adjusted Net
Investment Income below. |
(B) |
|
See Non-GAAP Financial
Measure — Adjusted Net Investment Income below for a description of
this non-GAAP measure and a reconciliation from Net investment
income to Adjusted net investment income, including on a
weighted-average per share basis. The Company uses this non-GAAP
financial measure internally to analyze financial results and
believes that this non-GAAP financial measure is useful to
investors as an additional tool to evaluate ongoing results and
trends for the Company. |
(C) |
|
Estimates of tax
characterization made on a quarterly basis may not be
representative of the actual tax characterization of distributions
for the full year. Estimates made on a quarterly basis are updated
as of each interim reporting date. |
|
|
|
NM = Not
Meaningful |
Highlights for the Quarter: During the
quarter ended December 31, 2018, the following significant events
occurred:
- Portfolio Activity:
- Exited three investments at significant realized gains, which
together resulted in dividend and success fee income of $1.2
million, repayment of our debt investments of $30.2 million at par,
and realized gains of $84.1 million;
- Exited one equity investment, which resulted in a realized loss
of $7.7 million and success fee income of $1.0 million;
- Invested $28.6 million through a combination of secured first
lien debt and preferred equity into one new portfolio company;
and
- Invested $24.7 million into existing portfolio
companies.
- Distributions and Dividends:
- Paid the following monthly cash distributions to common
stockholders and dividends to preferred stockholders for each of
October, November and December 2018:
- $0.068 per common share, per month;
- $0.13020833 per share to holders of our 6.25% Series D
Cumulative Term Preferred Stock (“Series D Term Preferred Stock”);
and
- $0.13281250 per share to holders of our 6.375% Series E
Cumulative Term Preferred Stock (“Series E Term Preferred
Stock”).
- Paid a $0.06 per common share supplemental distribution in
December 2018.
Third Quarter Results: Net
investment income for the quarter ended December 31, 2018 was $6.0
million, or $0.18 per weighted-average common share, while net
investment loss for the quarter ended September 30, 2018 was $4.0
million, or $0.12 per weighted-average common share. This increase
was a result of the increase in total investment income and the
decrease in total expenses, net of credits, quarter over
quarter.
Total investment income during the quarters ended December 31,
2018 and September 30, 2018 was $15.0 million and $13.1 million,
respectively. The quarter over quarter increase was due to a $0.6
million increase in interest income and a $1.3 million increase in
other income, as the timing of dividend and success fee income can
be variable.
Total expenses, net of credits, during the quarters ended
December 31, 2018 and September 30, 2018, were $8.9 million and
$17.1 million, respectively. The quarter over quarter decrease was
primarily due to a $5.0 million decrease in the capital gains-based
incentive fee, a $1.0 million decrease each in bad debt and tax
expense, and a $2.8 million increase in credits to fees from
Adviser, partially offset by a $2.0 million increase in the
income-based incentive fee. The capital gains-based incentive fees
are accrued under U.S. GAAP, but payment is not contractually due
under the terms of our investment advisory agreement. See
discussion under Non-GAAP Financial Measure – Adjusted Net
Investment Income below.
Net asset value per common share as of December 31, 2018
increased to $12.53 compared to $12.30 as of September 30, 2018.
The quarter over quarter increase was primarily due to $76.8
million, or $2.34 per common share, of net realized gains on
investments, partially offset by unrealized depreciation of
investments of $66.3 million, or $2.02 per common share,
principally resulting from the reversal of previously recorded net
unrealized appreciation upon the exit of investments.
Subsequent Events: After
December 31, 2018, the following significant events occurred:
- Significant Investment Activity:
- In January 2019, we restructured two of our first lien term
loans to SOG Specialty Knives & Tools, LLC (“SOG”) with a total
cost basis of $18.4 million into a new $8.4 million first lien term
loan, which resulted in a realized loss of $10.0 million. The new
term loan has a stated interest rate of the London Interbank
Offering Rate + 4.0% and matures in August 2022. In addition, we
invested $1.0 million of preferred equity in SOG.
- Distributions and Dividends Declared: In
January 2019, our Board of Directors declared the following monthly
distributions to common stockholders and monthly dividends to
holders of our two series of term preferred stock:
Record Date |
|
Payment Date |
|
Distribution per Common Share |
|
Dividend perShare
ofSeries D Term Preferred Stock |
|
Dividend perShare
ofSeries E Term Preferred Stock |
January 18, 2019 |
|
January 31, 2019 |
|
$ |
0.068 |
|
$ |
0.13020833 |
|
$ |
0.13281250 |
February 20, 2019 |
|
February 28, 2019 |
|
0.068 |
|
0.13020833 |
|
0.13281250 |
March,
20, 2019 |
|
March
29, 2019 |
|
0.068 |
|
0.13020833 |
|
0.13281250 |
|
|
Total for the Quarter: |
|
$ |
0.204 |
|
$ |
0.39062499 |
|
$ |
0.39843750 |
Non-GAAP Financial Measure — Adjusted Net Investment
Income: On a supplemental basis, the Company discloses
Adjusted net investment income, including on a per share basis,
which is a financial measure that is calculated and presented on a
basis of methodology other than in accordance with U.S. GAAP
(“non-GAAP”). Adjusted net investment income represents net
investment income, excluding the capital gains-based incentive
fee. The Company uses this non-GAAP financial measure
internally in analyzing financial results and believes that this
non-GAAP financial measure is useful to investors as an additional
tool to evaluate ongoing results and trends for the Company. The
Company’s investment advisory agreement provides that a capital
gains-based incentive fee is determined and paid annually with
respect to realized capital gains (but not unrealized appreciation)
to the extent such realized capital gains exceed realized capital
losses and unrealized depreciation of investments for such year.
However, under U.S. GAAP, a capital gains-based incentive fee is
accrued if realized capital gains and unrealized appreciation of
investments exceed realized capital losses and unrealized
depreciation of investments. Refer to Note 4 — Related Party
Transactions in our Quarterly Report on Form 10-Q for further
discussion. The Company believes that Adjusted net investment
income is a useful indicator of operations exclusive of any capital
gains-based incentive fee, as net investment income does not
include realized or unrealized investment activity associated with
the capital gains-based incentive fee.
The following table provides a reconciliation from net
investment income (the most comparable GAAP measure) to Adjusted
net investment income for the periods presented:
|
|
For the quarter ended |
|
|
December 31, 2018 |
|
September 30, 2018 |
|
|
Amount |
|
Per Share Amount |
|
Amount |
|
Per ShareAmount |
Net investment income
(loss) |
|
$ |
6,022 |
|
$ |
0.18 |
|
$ |
(3,994 |
) |
|
$ |
(0.12 |
) |
Capital gains-based
incentive fee |
|
|
2,106 |
|
|
0.06 |
|
|
7,125 |
|
|
|
0.22 |
|
Adjusted net investment
income |
|
$ |
8,128 |
|
$ |
0.24 |
|
$ |
3,131 |
|
|
$ |
0.10 |
|
Adjusted net investment income may not be comparable to similar
measures presented by other companies, as it is a non-GAAP
financial measure that is not based on a comprehensive set of
accounting rules or principles and therefore may be defined
differently by other companies. In addition, Adjusted net
investment income should be considered in addition to, but not as a
substitute for or superior to financial measures determined in
accordance with U.S. GAAP.
Conference Call: The Company will hold
its earnings release conference call on Wednesday, February 6,
2019, at 8:30 a.m. EST. Please call (855) 376-7516 to enter the
conference. An operator will monitor the call and set a queue for
any questions. A replay of the conference call will be available
through February 13, 2019. To hear the replay, please dial (855)
859-2056 and use the playback conference number 9166677. The replay
will be available beginning approximately one hour after the call
concludes. The live audio broadcast of the Company’s quarterly
conference call will also be available online at
www.gladstoneinvestment.com. The event will be archived and
available for replay on the Company’s website through April 6,
2019.
About Gladstone Investment
Corporation: Gladstone Investment
Corporation is a publicly traded business development company that
seeks to make secured debt and equity investments in lower middle
market businesses in the United States in connection with
acquisitions, changes in control, and recapitalizations. The
Company has paid 163 consecutive monthly cash distributions on its
common stock. Information on the business activities of all the
Gladstone funds can be found at www.gladstonecompanies.com.
To obtain a paper copy of our Quarterly Report on Form 10-Q,
filed today with the SEC, please contact the Company at 1521
Westbranch Drive, Suite 100, McLean, VA 22102, ATTN: Investor
Relations. The financial information above is not comprehensive and
is without notes, so readers should obtain and carefully review the
Company’s Form 10-Q for the period ended December 31, 2018,
including the notes to the consolidated financial statements
contained therein.
Source: Gladstone Investment Corporation
Investor Relations Inquiries:
Please visit www.gladstone.com or +1-703-287-5893.
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