Gladstone Investment Corporation (NASDAQ: GAIN) (the “Company”)
today announced earnings for its fourth quarter and fiscal year
ended March 31, 2019. Please read the Company’s Annual Report on
Form 10-K filed today with the U.S. Securities and Exchange
Commission (the “SEC”), which is available on the SEC’s website at
www.sec.gov or the Company’s website at
www.gladstoneinvestment.com.
Summary Information:
(dollars in thousands, except per share data (unaudited)):
|
|
March 31, 2019 |
|
December 31,2018 |
|
Change |
|
%Change |
For the quarter ended: |
|
|
|
|
|
|
|
|
Total investment income |
|
$ |
16,103 |
|
$ |
14,965 |
|
$ |
1,138 |
|
7.6% |
Total expenses, net(A) |
|
10,648 |
|
8,943 |
|
1,705 |
|
19.1 |
Net investment income(A) |
|
5,455 |
|
6,022 |
|
(567) |
|
(9.4) |
Net realized (loss) gain |
|
(19,500) |
|
76,804 |
|
(96,304) |
|
NM |
Taxes on deemed distribution of long-term capital gains |
|
(13,500) |
|
— |
|
(13,500) |
|
NM |
Net unrealized appreciation (depreciation) |
|
29,953 |
|
(66,335) |
|
96,288 |
|
NM |
Net increase in net assets resulting from operations(A) |
|
2,408 |
|
16,491 |
|
(14,083) |
|
(85.4) |
Net investment income per weighted-average common share(A) |
|
0.17 |
|
0.18 |
|
(0.01) |
|
(5.6) |
Adjusted net investment income per weighted-average common
share(B) |
|
0.23 |
|
0.24 |
|
(0.01) |
|
(4.2) |
Net increase in net assets resulting from operations per
weighted-average common share(A) |
|
0.06 |
|
0.50 |
|
(0.44) |
|
(88.0) |
Cash distribution per common share from net investment income |
|
0.14 |
|
0.14 |
|
— |
|
— |
Cash distribution per common share from realized gains(C) |
|
0.07 |
|
0.12 |
|
(0.05) |
|
(41.7) |
|
|
|
|
|
|
|
|
|
Weighted-average yield on interest-bearing investments |
|
13.0 |
|
13.0 |
|
— |
|
— |
Total dollars invested |
|
$ |
7,725 |
|
$ |
53,259 |
|
$ |
(45,534) |
|
(85.5) |
Total dollars repaid andcollected from sales |
|
843 |
|
121,003 |
|
120,160 |
|
(99.3) |
|
|
|
|
|
|
|
|
|
As of: |
|
|
|
|
|
|
|
|
Total investments, at fair value |
|
$ |
624,172 |
|
$ |
607,024 |
|
$ |
17,148 |
|
2.8% |
Fair value, as a percent of cost |
|
105.8% |
|
100.8% |
|
5.0% |
|
5.0 |
Net assets |
|
$ |
407,110 |
|
$ |
411,399 |
|
$ |
(4,289) |
|
(1.0) |
Net asset value per common share |
|
12.40 |
|
12.53 |
|
(0.13) |
|
(1.0) |
Number of portfolio companies |
|
30 |
|
30 |
|
— |
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2019 |
|
March 31, 2018 |
|
Change |
|
%Change |
For the year ended: |
|
|
|
|
|
|
|
|
|
|
Total investment income |
|
$ |
59,663 |
|
$ |
58,355 |
|
$ |
1,308 |
|
2.2% |
Total expenses, net(A) |
|
52,122 |
|
36,395 |
|
15,727 |
|
43.2 |
Net investment income(A) |
|
7,541 |
|
21,960 |
|
(14,419) |
|
(65.7) |
Net realized gain |
|
66,869 |
|
1,336 |
|
65,533 |
|
NM |
Taxes on deemed distribution of long-term capital gains |
|
(13,500) |
|
— |
|
(13,500) |
|
NM |
Net unrealized appreciation |
|
20,680 |
|
37,391 |
|
(16,711) |
|
(44.7) |
Net increase in net assets resulting from operations(A) |
|
81,590 |
|
60,687 |
|
20,903 |
|
34.4 |
Net investment income per weighted-average common share(A) |
|
0.23 |
|
0.68 |
|
(0.45) |
|
(66.2) |
Adjusted net investment income per weighted-average common
share(B) |
|
0.77 |
|
0.82 |
|
(0.05) |
|
(6.1) |
Net increase in net assets resulting from operations per
weighted-average common share(A) |
|
2.49 |
|
1.88 |
|
0.61 |
|
32.4 |
Cash distribution per common share from net investment income |
|
0.69 |
|
0.84 |
|
(0.15) |
|
(17.9) |
Cash distribution per common share from realized gains(C) |
|
0.24 |
|
0.05 |
|
0.19 |
|
380.0 |
|
|
|
|
|
|
|
|
|
|
Weighted-average yield on interest-bearing investments |
|
13.0 |
|
13.1 |
|
(0.1) |
|
(0.8) |
Total dollars invested |
|
$ |
91,936 |
|
$ |
98,539 |
|
$ |
(6,603) |
|
(6.7) |
Total dollars repaid andcollected from sales |
|
154,651 |
|
39,859 |
|
114,792 |
|
288.0 |
|
|
|
|
|
|
|
|
|
|
|
As of: |
|
|
|
|
|
|
|
|
|
|
Total investments, at fair value |
|
$ |
624,172 |
|
$ |
599,147 |
|
$ |
25,025 |
|
4.2% |
Fair value, as a percent of cost |
|
105.8% |
|
102.4% |
|
3.4% |
|
3.3 |
Net assets |
|
$ |
407,110 |
|
$ |
354,200 |
|
$ |
52,910 |
|
14.9 |
Net asset value per common share |
|
12.40 |
|
10.85 |
|
1.55 |
|
14.3 |
Number of portfolio companies |
|
30 |
|
33 |
|
(3) |
|
(9.1) |
(A) |
Inclusive of $2.1 million, or $0.06 per weighted-average common
share, of capital gains-based incentive fees accrued during each of
the three months ended March 31, 2019 and December 31, 2018, and
$17.8 million, or $0.54 per weighted-average common share, and $4.4
million, or $0.14 per weighted-average common share, of capital
gains-based incentive fees accrued during the year ended March 31,
2019 and the year ended March 31, 2018, respectively. These fees
were accrued in accordance with United States generally accepted
accounting principles (“U.S. GAAP”), where such amounts were 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 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. |
(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 March 31, 2019, the following significant events
occurred:
- Portfolio Activity:
- Invested $7.7 million in existing portfolio companies; and
- Restructured existing term loans of two portfolio companies
with a combined cost basis of $40.1 million into two new term loans
with a combined cost basis of $20.1 million, resulting in a
combined realized loss of $20.0 million.
- Distributions and Dividends:
- Paid the following monthly cash distributions to common
stockholders and dividends to preferred stockholders for each of
January, February, and March 2019:
- $0.068 per common share;
- $0.13020833 per share to holders of our 6.25% Series D
Cumulative Term Preferred Stock (“Series D Term Preferred
Stock”);
- $0.13281250 per share to holders of our 6.375% Series E
Cumulative Term Preferred Stock (“Series E Term Preferred Stock”);
and
- Declared a deemed distribution of long-term capital gains to
common stockholders of $50.0 million, or $1.52 per common share,
and incurred related federal taxes on behalf of common stockholders
of $10.5 million, or $0.32 per common share.
Fourth Quarter Results: Net
investment income for the quarters ended March 31, 2019 and
December 31, 2018 was $5.5 million, or $0.17 per weighted-average
common share, and $6.0 million, or $0.18 per weighted-average
common share, respectively. This slight decrease was primarily a
result of higher total expenses, net of credits, partially offset
by an increase in total investment income, quarter over
quarter.
Total investment income during the quarters ended March 31, 2019
and December 31, 2018 was $16.1 million and $15.0 million,
respectively. The quarter over quarter increase was principally due
to a $1.6 million increase in other income, as the timing of
dividend and success fee income can be variable, partially offset
by a slight decrease in interest income.
Total expenses, net of credits, during the quarters ended March
31, 2019 and December 31, 2018, were $10.6 million and $8.9
million, respectively. The quarter over quarter increase was
primarily due to a $2.7 million decrease in credits to fees from
adviser, partially offset by a decrease in the income-based
incentive fee of $0.7 million and a decrease in interest expense of
$0.6 million.
Net asset value per common share as of March 31, 2019 decreased
to $12.40 compared to $12.53 as of December 31, 2018. The quarter
over quarter decrease was primarily due to $19.5 million, or $0.59
per common share, of realized losses, and $13.5 million, or $0.41
per common share, of taxes on deemed distribution of long-term
capital gains, partially offset by $30.0 million, or $0.91 per
common share, of net unrealized appreciation of investments,
principally resulting from the reversal of previously recorded
unrealized depreciation upon the restructure of investments and
unrealized appreciation related to improved performance of certain
portfolio companies.
Fiscal Year End Results: Net investment income
for the fiscal years ended March 31, 2019 and 2018 was $7.5
million, or $0.23 per weighted-average common share, and $22.0
million, or $0.68 per weighted-average common share, respectively.
The decrease in net investment income was primarily due to higher
total expenses, net of credits, partially offset by an increase in
total investment income, year over year.
Total investment income during the years ended March 31, 2019
and March 31, 2018 was $59.7 million and $58.4 million,
respectively. The year over year increase was due to a $0.8 million
increase in interest income and a $0.5 million increase in other
income, as the timing of dividend and success fee income can be
variable.
Total expenses, net of credits, during the years ended March 31,
2019 and March 31, 2018, were $52.1 million and $36.4 million,
respectively. The year over year increase was primarily due to a
$13.4 million increase in the capital gains-based incentive fee, a
$2.1 million increase in interest expense, a $2.0 million increase
in the base management fee, and a $1.4 million increase in bad debt
expense, partially offset by a $1.8 million decrease in the
income-based incentive fee and a $1.8 million increase in credits
to fees from adviser. The capital gains-based incentive fees are
accrued under U.S. GAAP, but payment is not contractually due under
the terms of the investment advisory agreement. See discussion
under Non-GAAP Financial Measure – Adjusted Net Investment Income
below.
Net asset value per common share as of March 31, 2019 increased
to $12.40 compared to $10.85 as of March 31, 2018. The year over
year increase was primarily due to $68.6 million, or $2.09 per
common share, of net realized gains on investments, and $20.2
million, or $0.61 per common share, of net unrealized appreciation
of investments, principally resulting from improved performance of
certain portfolio companies and an increase in comparable multiples
used to estimate the fair value of certain portfolio companies,
partially offset by the reversal of previously recorded net
unrealized appreciation upon the exit or restructure of
investments. These increases were partially offset by the accrual
of $17.8 million, or $0.54 per common share, of capital gains-based
incentive fees under U.S. GAAP, and $13.5 million, or $0.41 per
common share, of taxes on deemed distribution of long-term capital
gains.
Subsequent Events: After March 31, 2019,
the following significant events occurred:
- Significant Investment Activity:
- In April 2019, we sold our investment in Tread Corporation,
which had a cost basis and fair value of $7.7 million and $4.4
million, respectively, as of March 31, 2019. In connection with the
sale, we received net cash proceeds of $4.4 million, including the
repayment of our debt investment of $3.2 million at par.
- In April 2019, we sold our investment in Jackrabbit, Inc.,
which had a cost basis and fair value of $14.7 million and $19.2
million, respectively, as of March 31, 2019. In connection with the
sale, we received net cash proceeds of $19.7 million, including the
repayment of our debt investment of $11.0 million at par.
- In April and May 2019, we extended a line of credit to J.R.
Hobbs Co. – Atlanta, LLC with a total commitment amount of $10.0
million at a stated interest rate of London Interbank Offered Rate
+ 10.25%, which matures in October 2019.
- Distributions and Dividends Declared: In April
2019, our Board of Directors declared the following monthly and
supplemental cash distributions to common stockholders and monthly
dividends to holders of our 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 |
April 22, 2019 |
|
April 30, 2019 |
|
$ |
0.068 |
|
$ |
0.13020833 |
|
$ |
0.13281250 |
May 22, 2019 |
|
May 31, 2019 |
|
0.068 |
|
0.13020833 |
|
0.13281250 |
June 5, 2019 |
|
June 14, 2019 |
|
0.090 |
(A) |
— |
|
— |
June 19, 2019 |
|
June 28, 2019 |
|
0.068 |
|
0.13020833 |
|
0.13281250 |
|
|
Total for the Quarter: |
|
$ |
0.294 |
|
$ |
0.39062499 |
|
$ |
0.39843750 |
|
(A) Represents a supplemental distribution to common
stockholders. |
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 capital gains-based incentive
fees. 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 on 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 Annual Report on Form 10-K for further
discussion. The Company believes that Adjusted net investment
income is a useful indicator of operations exclusive of any capital
gains-based incentive fees, 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 of net investment
income (the most comparable U.S. GAAP measure) to Adjusted net
investment income for the periods presented (dollars in thousands,
except per share amounts; unaudited):
|
|
For the quarter ended |
|
|
March 31, 2019 |
|
December 31, 2018 |
|
|
Amount |
|
Per Share Amount |
|
Amount |
|
Per ShareAmount |
Net investment income |
|
$ |
5,455 |
|
$ |
0.17 |
|
$ |
6,022 |
|
$ |
0.18 |
Capital gains-based incentive
fee |
|
|
2,098 |
|
|
0.06 |
|
|
2,106 |
|
|
0.06 |
Adjusted net investment
income |
|
$ |
7,553 |
|
$ |
0.23 |
|
$ |
8,128 |
|
$ |
0.24 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the year ended |
|
|
March 31, 2019 |
|
March 31, 2018 |
|
|
Amount |
|
Per Share Amount |
|
Amount |
|
Per ShareAmount |
Net investment income |
|
$ |
7,541 |
|
$ |
0.23 |
|
$ |
21,960 |
|
$ |
0.68 |
Capital gains-based incentive
fee |
|
|
17,835 |
|
|
0.54 |
|
|
4,399 |
|
|
0.14 |
Adjusted net investment
income |
|
$ |
25,376 |
|
$ |
0.77 |
|
$ |
26,359 |
|
$ |
0.82 |
|
|
|
|
|
|
|
|
|
|
|
|
|
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, 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 Tuesday, May 14, 2019, at
8:30 a.m. EDT. 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 May 21, 2019. To hear the replay, please dial (855)
859-2056 and use the playback conference number 8984449. 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 July 14,
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. Information
on the business activities of all the Gladstone funds can be found
at www.gladstonecompanies.com.
To obtain a paper copy of our Annual Report on Form 10-K 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-K for the year ended March 31, 2019, 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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