Gladstone Capital (GLAD) 15 Nov 222022 Q4 Earnings call transcript

Greetings. Welcome to the Gladstone Capital Corporation Fourth Quarter and Year-End Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions]. is conference this note being recorded. Please

now Chief Executive will turn the Gladstone, David to over Officer. conference I Thank you.

You may begin.

That opportunity is -- September XX, Thank morning, the quarter for Sharron. was year introduction, for nice you, ending update follow fiscal and XXXX. you calling Gladstone everybody. Capital This for talk our all Again, we us. to the earnings And shareholders David the Chairman an our and and in. Gladstone, conference to to welcome company. the thank for analysts call We're that a provide good always happy

And with now, from regarding Counsel, General statement forward-looking Who certain Michael Michael? statements. LiCalsi. we'll hear to a will make our

Act of and Exchange Good believe including regarding are of to be risks Securities morning, those plans, XXXX XXXX, Many Today's our Act that uncertainties we David. certain future based statements include involve everybody. on forward-looking Securities current factors performance. forward-looking and These our may the Thanks, the report statements reasonable. under which cause statements, you file in materially of expressed other these Investor XX-Q, we actual and by from SEC. factors the website, implied our or any them future forward-looking results XX-K may to all in gladstonecapital.com. different our results documents find can Forms page risk find with And including be the our Relations

which www.sec.gov. there. can also you is And find also can service the an up sign SEC's on notification You website, e-mail for them

information, whether as events publicly except to a or obligation no revise new of by forward-looking undertake or future law. required as We any these result of update statements, otherwise,

press for can Investors them detailed ask XX-K so yesterday information. Again, that our overview the an is release of more today's Now results, our on of issued we you Form our website. and page you find review call

Gladstone Bob to President, Now, Bob? over Capital's Marcotte. the call I'll turn

and this the Good conclude all, cover year ended thank for in morning. and XX quarter Thank September forward you fiscal market into we commentary all dialing as you, Michael. ‘XX. last and I'll look with highlights some for morning the fiscal

to results and Schaltenbrand, CFO liquidity over Before financial position. turning our the review period call the to the Nicole our capital and for

quarter's rose million and So on $XX three add repayments totaled beginning existing investments included $XX of income to at $XX investments $XX included so for new yield strong approximately companies. the the loan XX% to results, the the XX.X%. $XX the points $XX.X rose and with quarter average quarter X.X% of platform Interest million, million to million quarter. basis million investment quarter for were origination Amortization net originations weighted balance XXX was for or last average as million, were which the for portfolio up

fees exits, absence the prepayment to $XXX,XXX. and of In income declined material fee

to total and increased or XX% as credit LIBOR as investment borrowings income for well rose increase our million rates, facility However, bank by $XX.X to costs XX%with the still $XXX,XXX associated Borrowing fees with commitments. quarter. the million rose higher $XX

record margin However, net our by a interest quarter. million or million to $XX.X for XX% $X.X the jumped

incentive fees performance unchanged, and quarter. with by depreciation of a incentive higher in absence equity increase rose of $XXX,XXX and anticipation investment the legacy with compared increase of management associated $X.X to $XXX,XXX costs portfolio. Net rose The portfolio share. however, to came million net income favorable $X.X or million, operating were prior in the yields million credits period $X.XX $X.X the couple unrealized exit the largely outpaced at on Administrative credits the the per investment realized the of a the markdown the to on net loan and for in generally losses assets, fee subsequent as valuation fees of

$X.XX $X.XX XX. as declined NAV share million result, September to a As per of

a did report perform we not our the modest as last XX.X% our the continues begun over metrics experience to the to income generated our quarter. rates, we're realize with portfolio, leverage only net pleased return benefit higher respect net And past With favorable any to year. liquidity. such, well prepayments on portfolio generally to interest we've of assets interest While cumulative and

Edge at end the events include an as cumulative the equity the the our positions distributions of in discounts LP in quarter, in quarter by liquidating rise of Targus offset million more our stock depreciation notable for investment sale our anticipation soft a in $X.X operating in Depreciation associated number exit. of Targus the legacy of Leeds of with And investments, Adhesives. the loan reduction yield and totaled common closed position recently from was -- investment in equity the performance portfolio driven Since several Capital. the Novamark on common than position the debt appreciation

In with. reflecting comments 'XX what fiscal performance on there and is like of leave now you for fiscal 'XX, couple to are our our outlook I'd a

broadened rigor investments. to in portfolio our heavily have $XXX to XX our are our maintaining maintained the weighted still towards growth During is the 'XX, net investing and companies. million over fiscal portfolio to the to past our $XXX while year private XX.X% which originations of million, XX% We've focus equity middle our year, increased originations almost risen secured which fortunate companies network oriented we've over have in lower senior process. for lifted our market by and Today, on our our loans underwriting

referenced. look as forward. range our the range our that our times we XX.X% maintain of be have on the growth we'll of to balance to Secured in XXX% asset leverage the leveraged grow elevated assets of year, to X.X to total past under going cumulative modestly investments investments debt we leverage sheet core and of target to EBITDA. the previously XX% continues Based we've as NAV at And increased portfolio

tighter with asset our While well of currently the net the the more full as interest leverage environment. metrics and increased with may do quarter growth interest credit rates, we our leverage the profile, current our rise moderate income to conservative of spreads expect impact as

to the on this pace floating rates floating rate With interest investments range to quarter. approximately million exceeding and about up the floating the and quarter, be be a in in for expect Based our $XXX basis net realized, points in margin interest quarters. our distributions rate our XXX current would net consider million by we the income of the portfolio the position is in shareholder be as to coming the up to performance increase we expect on $X.XX liabilities

financial And provide Nicole? the Capital over the CFO now, turn for details call quarter. Gladstone performance on some the the Nicole for I'll to to fund's Schaltenbrand, more

all. Bob. Good Thanks, morning,

investment During balance million increased the increase assets rate. X.X% earning to which compared up in the $XX weighted to total million on $X an million quarter, million as rose portfolio was based average income XX $XXX quarter. September both as interest prevailing The $XX.X XX.X% to June or or well

interest at income our XXX with increase $XXX,XXX rose $XXX,XXX. floating to The in bearing Other weighted portfolio portfolio to the basis that floating rates rates. on has average investment XX.X% the on points declined of carried the yield XX% by

However, reduced rose $XXX,XXX fees million total by as incentive increased management Total $XX.X for fee million interest XX.X% quarter. rose assets, increase investment income driven higher $X.X we expenses still by quarter-over-quarter or in increased the and $X.X expenses had a million yields average net by credits. and to $XXX,XXX

ended an of share our to than the by $XXX,XXX operations September from quarter $X.XX increase income share distributions. quarter or ended as XX, realized was by in and assets covered prior The was for resulting compared Bob shareholder $X.XX net valuation which million the $X.X XXX% increase XX of quarter investment or and December depreciation the earlier. net per unrealized covered per impacted for Net $X.X the million, was more

the to sheet. over balance Moving

As million value of September XX, cash $XXX total to at X were consisted of due XXXX, million quarter and our X/X% of $XX fair senior senior and January as million in XXXX, $XXX million million. under million (ph) X/X%] notes assets the and $XXX and May of Liabilities end line other [X to of advances assets. credit consisting $XXX investments of of $XX of notes rose increased in primarily million of the $XXX due

with our depreciation, XX, of ATM prior quarter from by unrealized September realized million. $X.X program offset common was million share $X.X and the of As rose assets the under issuance net end by which valuation

by as $X.XX $X.X June of XX September share XX. of declined NAV to as per share per

with to assets the leverage year as rose in Our increase of end of assets. total net the XXX% the of

we borrowing availability current at the facility we of commitments line And line. end, amended million our our increase $XX to quarter $XXX quarter, million. of credit of under the to had During an excess

Following we total the quarter, the added facility, end of the another to bringing million. bank commitment $XXX our to

effective to distributions $X.XX distributions, respect for the increased $X.XX common monthly an The now price stock distribution which and the common the about October, for share rate in the rate the of January distribution share following our a is to per monthly of December, meet month distribution at will determine of per Board per common November stockholders with With share. annual At to to to stockholders stock yield producing the about run common is rate yesterday, and for $XX.XX X.X%. quarter. our

And to turn to conclude. it now, David I'll back

you. you did know Thank at as of our letting comments going company and job appreciate Michael, good I a the what's Nicole, shareholders on well. Bob, your

investments capital another interest Gladstone up structure. the increase of $XXX closed the and total a which as an $XX Interest well. portfolio to XX% of rates company year. million last capped for was quarter year income million The just add-on stellar of summary, solid or In for quarter which new for investments the lifted company Capital, the on million, company's the over existing in represents $XX higher favorable XX% which the based company,

to and support distributions in quarters. in the our this the We current rates coming expect common momentum increases sustain potential

growth experienced and invested. commitment equity middle acquisition investments us business This market pay by continues attractive to growth mid-sized gives ongoing an to in are our good supported the over And partner and looking an summary, opportunity support support the to they they're funds. make distributions of company to time In lower to Many its of private shareholders. businesses oriented for interest the are paying loans strategy investing that with an stick these cash of to the management.

to ask I'm going line. some come on now from operator and get the people and questions Sharron? on analyst that other are we'll stop to the the and

Instructions] [Operator from proceed. with you. Our question Please Schleien is Mickey Ladenburg Thank Thalmann. first

in the your the Yes. Bob, SOFR and the portfolio? where climb? average their you mentioned at leverage, cash Good borrower's and margins you attractive ratio of your the which service to discuss portfolio's sense and LIBOR coverage debt as And morning, revenues everyone. an interest abilities figure. trends lies Could is

focus The than to related market consumer closely anything now in oriented that focused we're might would or where be impacted. are demand coverage, I or most interest folks flux. turns. and obviously, businesses There point say certainly the above is end the Well, right is solid. as average out, credit the pullback the X.X the on sure profile of of leverage liquidity some and that. the businesses you less line making But really is are leverage

We nice most to those seeing the things oriented manufacturers where But the areas and seeing bringing business priority, areas of of spend back Most a of where are many seeing manufacturing being definitely production and our part managing the services also the or businesses. part, be is we're sustaining of for are investments have of the are business logistics domestic. marketing some growth issue. that might in associated domestic trend business on a are impacted, we are that any those is segments the continuation only with that domestic to discretionary

turns covenant obviously, we regard, And X.X associated to lines of interest maintenance any they we've also particular stage, of turns I which of we in coverage At so respect think against have That's that covenant even plenty covenants the this X.X typically have draws feel the leverage, we require had of all overall credit. in of coverage. with portfolio coverage. issues very any deals, to our has level leverage So our don't that are. defaults or at always few

and we've like profile their the the the the seen very against liquidity draws COVID, businesses, much when we little So situation they're managing appropriately. PPP liquidity of of saw onset

past, few more rates watching it The see those, obviously, in this of last it change about sponsored play at stage closely. Obviously, don't I XX% short start the to in but are we significant And we're closely. increase quarter, any in deals. the material we're as going quarters monitor deals interest term. through before to that we're have to we in interest our I've So in issues anticipate has said the coverage, not a concerned.

structures investors and equity that obviously of cases, out us have support Did funds I Mickey? capital managing process we below leave on the in many anything So that, businesses. underlying those are and in the

No, no, Thank you. that was great.

Just Bob. one follow-up,

the pipeline, about the most that supply still wants view in second how You recurring terms capital rates, interesting to other? when and the the But election companies highly demand capital? see revenues the rising sought dynamics. first has concern comments just after. debt deceleration or Clearly, those of the where mentioned and industries do out, everyone the the for some private you economy, markets deals where think securities, market turn are some overall, and I'm with for operate. whether software invest risk about has you demand lien curious of in And about you in reward slowed your lien, would how you

a lot but less market There's think folks broader in I market. There's down given certainly framework the the lot of discounts plenty in simple opportunities syndicated are there, is, coming a there up marketplace.

their own coming The guys matters. commercial there's paused a it's or for whether have banks of So regulatory portfolio lot down. not big

or aren't in balance position to capital and So additional -- a folks constraints. sheet you are raise -- somewhat that have

broad So the have at opportunities. those definitely to fewer field on where might process, it the been take players competitive moment there's up a

a sponsors we a their people things. capital they growth or requirements, folks automation full the getting than technologies of businesses reducing equipment places of result, there kind there's few The see on more where in go. tending second And is, well and are is, into see knowing lot leaning to oriented outlook interested seeing closed labor we're around improving shopping might It performance What field. only as be continued where expansion. a aren't deals to are those are for an

getting be enabled manufacturing probably think more down. And probably up, closing more we sectors. are are certainly I after. products, select in deals terms our And sectors. is, us do is were attractive in that's of defensive what more our of related instances, situations kind what Contract are from certain is in I Those and we the perspective, go rates say defensive. healthcare of selective segments to food that would businesses Leverage so in that attractive but pricing

With respect lot fundings. up chew and unitranches leverage off playing. to we're where how trade and a is we're framework for sheet It today, balance playing capacity the a of

So may look in opportunities. unitranche folks pursue we asset fairly at We selectively very team second a a did with we quarter or other attractive the type close to will up large pricing. unitranches at lien

may that going kind So I sector, to bit and think it's of where is that but the see be business. instances underlying in on a leverage we highly inflict senior senior obviously dependent the in second certain is because lenders in going portfolio, pursue we upon want right down lien what's market, our and are we don't to that the taking grow undue might risk

would that probably we're and getting seeing to portfolio. growth in us sense I now, diversify pricing the the being say of more nice for some bit right makes So defensive sectors fair

Those are you, I Thank helpful. really time. That's all Bob. your questions. my appreciate

Mickey. in Thanks for dialing

So, next question.

[Operator Instructions] There this questions time. are at no more

the over for conference hand management So I will back closing comments. to

you're having this in. you see next quarter. very I That's of hope you thank a the calling call. today and all we'll you end good much, for Thank and day

conference. That you. today's Thank conclude will

may disconnect thank this and you lines your participation. your time You for at