Q3 2022 Gladstone Investment Corp Earnings Call
Speaker 1: Greetings and welcome to Gladstone Investment Corporation's third quarter earnings conference.
Greetings and welcome to Gladstone investment Corporation's third quarter earnings Conference call.
Speaker 1: At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star-zero on your telephone keypad. As a reminder...
At this time all participants are in.
Listen only mode.
A question and answer session will follow the formal presentation.
If anyone should require operator assistance during the conference. Please.
Star Zero on your telephone keypad.
As a reminder, this conference is being recorded.
I would now like to turn the conference or what are your host.
David <unk> Chief Executive Officer.
Speaker 2: All right, thank you, Peter. Good morning, everybody. This is David Gladstone, Chairman of Gladstone Investment. This is the third quarter of our fiscal year ending March 31, 2022. This is the earnings conference call for shareholders and analysts of Gladstone Investment. Companies listed on NASDAQ under the trading symbol DAIN.
Alright. Thank you Peter Good morning, everybody. This is David Gladstone Chairman of Gladstone investment. This is the third quarter of our fiscal year ending March 31, 2022. This is the earnings conference call for shareholders and analysts of Gladstone investment.
Companies listed on NASDAQ under the trading symbol G. A I N for the common stock and we have two preferreds G. A I N.
Speaker 2: common stock and we have two prefers GAI
Speaker 2: N and GAINZ for the registered note.
And G. A I N Z for the registered notes.
Speaker 2: Thank you all for calling in. We're always happy to provide updates of our shareholder analysts and...
You all for calling in we're always happy to provide updates of our shareholders analysts and.
Speaker 2: The view of the current business environment, our two goals here.
The view of the current business environment on two goals here.
Speaker 2: to help you understand what has happened and also give you our best guess of the current views of the future.
To help you understand what has happened and also give you our best guess of current views of the future and now we'll hear from our General Counsel and Secretary Michael accounts say, Michael Thanks, Dave and good morning, everybody. Today's call May include forward looking statements under the Securities Act of $19 33, and the Securities Exchange Act 19.
Speaker 2: And now we're here from our general counsel and seconder Michael Lecowski. Michael? Thanks, David. Good morning, everybody. Today's call may include forward-looking statements under the Securities Act of 1933 and the Securities Exchange Act.
Speaker 3: 1934, including those regarding our future performance. These forward-looking statements involve certain risks and uncertainties and other factors, even though they're based on our current plans, which we believe to be reasonable. The many factors may cause our actual results.
34, including those regarding our future performance. These forward looking statements involve certain risks and uncertainties and other factors, even though they are based on our current plans, which we believe to be reasonable and many factors may cause our actual results to be materially different from any future results expressed or implied by these forward looking statements, including all risk factors.
Speaker 3: to be materially different from any future results expressed or implied by these forward-looking statements, including all risk factors listed in our forms 10-Q and 10-K and other documents that we filed with the SEC.
And listed on our forms 10-Q, and 10-K and other documents that we filed with the SEC.
Speaker 3: Find all these on the Investors page of our website at Gladstoneinvestment.com or the SEC's website at www.scc.gov. Now we undertake no obligation to publicly update or revise any of these forward-looking statements whether as a result of new information future events or otherwise.
Find all these on the investors page of our website, that's Gladstone investment dot com or the SEC's website, Thats Www Dot SEC <unk> now we undertake no obligation to publicly update or revise any of these forward looking statements, whether as a result of new information future events or otherwise.
Speaker 3: except as required by law. Now please also note that pest performance or market information is not a guarantee of any future results. We ask everybody to take the opportunity to visit our website, it's again, GladstoneInvestment.com. Sign up for our email notification service. You can also find us on Twitter at GladstoneCamps and on Facebook, keyword, the Gladstone Companies. Today's call is simply an overview of our results through 1231-2021. So we ask that you review our press release.
Sept as required by law. Please also note that past performance or market information is not a guarantee any future results. We ask everybody to take the opportunity to visit our website. Once again Gladstone investment Dot com sign up for our email notification service you can also find us on Twitter at Gladstone comps and on Facebook key.
Word the Gladstone companies and today's call is simply an overview of our results through 12 31 2021. So we ask that you review our press release and Form 10-Q , both issued yesterday for more detailed information and with that we'll turn it over to Dave <unk> President of Gladstone investment, Dave Hey, Mike Thanks, very much and so good morning.
Speaker 3: Form 10Q both issued yesterday for more detailed information. Now with that, we'll turn it over to Dave Dullen, President of Gladstone National. Dave? Hey, Mike. Thanks very much. And so good morning to all our shareholders and analysts.
To all of our shareholders and analysts and first I wish to welcome our CFO , Rachel Easton, who joined our team in December very happy to have her with US and this is our first quarterly call and you will hear from her shortly.
Speaker 3: And first, I wish to welcome our CFO Rachel Easton, who joined our team in December . Very happy to have her with us, and this is her first quarterly call. And you will hear from her shortly.
Speaker 4: So as we know, there are many challenges facing our economy, labor shortages, supply chain delays, increased material costs, as well as inflationary trends.
So as we know there are many challenges facing our economy labor shortages supply chain delays increased material costs as well as inflationary trends.
Speaker 4: And while most of our portfolio companies have experienced most of those, we did make good progress towards pre-COVID operating status, and as a result, I'm very happy to report on another very good quarter for Glazone Invest.
And while most of our portfolio companies have experienced most of those we did make good progress towards pre COVID-19 operating status and as a result, I am very happy to report on another very good quarter for Gladstone investment.
Speaker 4: In that, we ended the third quarter of Fiscal 22 with adjusted NII of $0.26 per share, which continues the progress and what we expect will be a strong finish for Fiscal Year 331-22 and our future earnings.
We ended the third quarter of fiscal 'twenty, two with adjusted NII of <unk> 26 per share, which continues to progress and what we expect will be a strong finish for fiscal year of $3 31, 22, and our future earnings. The total assets of 12, 31, though decreased to $736 million.
Speaker 4: The total assets of 1231, though, decreased to 736 million.
Speaker 4: from 746 million at 930-21. And this really is primarily due to the successful exits of two portfolio companies during that period. And as a result of that, obviously, these assets.
From $746 million at $930 21, and this really is primarily due to the successful exits of two portfolio companies during that period and as a result of that obviously these assets were taken off of the balance sheet. If you will but that's partially offset by a few add ons to existing portfolio companies.
Speaker 4: taken off of the balance sheet, if you will, but that's partially offset by a few add-ons to existing portfolio companies and also, most importantly, the continued recovery of the values of our equity holdings.
And also most importantly, the continued recovery of the values of our equity holdings, which today make up around 23% of our portfolio at cost. We also were able to maintain a monthly distribution of $7 <unk> per share or <unk> 90 per share on an annual basis, and we were able to pay a.
Speaker 4: which today make up around 23% of our portfolio at cost.
Speaker 4: We also, though, were able to maintain a monthly distribution of 7.5 cents per share, or 90 cents per share on an annual basis. And we were able to pay a supplemental distribution of 9 cents per share in December 2021. And subsequent to quarter end, we declared another supplemental distribution of 12 cents per share to be paid in February , which is this month in 2022.
Supplemental distribution of <unk> <unk> per share in December 2021, and subsequent to quarter end, we declared another supplemental distribution of <unk> 12 per share to be paid in February which is this month in 2022.
Speaker 4: So during this quarter of fiscal year 22, the two portfolio companies that we exited resulted in a net realized gain of 22 million and success fee income of 3.4 million. We also, as mentioned, invested 37 million in existing portfolio companies, which supported add-on acquisition for those companies, which is a positive...
So during this quarter of fiscal year 'twenty two the two portfolio companies that we exited resulted in a net realized gain of $22 million and success fee income of $3 4 million.
We also as mentioned invested $37 million in existing portfolio companies, which supported add on acquisition for those companies, which is a positive event our strategy as a buyout focused entity. Therefore continues to successfully generate both the income for increasing monthly distributions to shareholders and also capital gains on equity.
Speaker 4: Our strategy as a biode focus entity therefore continues to successfully generate both the income for increasing monthly distribution to shareholders and also capital gains on equity from our supplemental distributions based on our capital gains. Appreciate it.
From our supplemental distributions based on our capital gains.
Appreciation.
Speaker 4: Our balance sheet continues to be strong with very low leverage and a very positive equity position. So this allows us to continue providing support to our portfolio companies for add-on acquisitions and interim financing at the Neeterisers while actively seeking new biode opportunities and continuing to grow our assets and in.
Our balance sheet continues to be strong with very low leverage and a very positive liquidity position. So this allows us to continue providing support to our portfolio companies for add on acquisitions and interim financing if the need arises while actively seeking new buyout opportunities and continuing to grow our assets and income.
Speaker 4: So in that, the outlook really for the new acquisition market, unfortunately, continues to exhibit very high purchase value expectations. And there is a very strong competition from new acquisitions given the amount of capital that's out there in the phi of marks.
The outlook really for the new acquisition market. Unfortunately continues to exhibit very high purchase value expectations and there was a very strong competition from new acquisitions, given the amount of capital that's out there in the marketplace.
Speaker 4: But as a result of this dynamite, though, we remain patient and selective in our diligence and review process, while we aggressively continue seeking new biode opportunities.
But as a result of this dynamic, though we remain patient and selective in our diligence and review process. While we aggressively continue seeking new buyout opportunities. So in summing up the quarter and looking forward. The state of our portfolio is very good we have a strong and liquid balance sheet and active level of buyout activity and the <unk>.
Speaker 4: So in summing up the quarter and looking forward, the state of our portfolio is very good. We have a strong and liquid balance sheet, an active level of biodeactivity, and the prospect of good earnings and distributions during the fiscal year and beyond. So now I'll turn it over to Rachel Easton and have her give some more detail on those specifics, Rachel. Thanks Dave. As far as operating performance for the quarter, we continue to see...
Prospect of good earnings and distributions during this fiscal year and beyond so now I'll turn it over to Rachel Eaton and have her give some more detail on those specifics Rachel.
As far as operating performance for the quarter, we continue to see improvement from the ongoing impact.
On our portfolio.
Speaker 5: We've generated adjusted NII of 8.8 million or 26 cents per share, and increased compared to adjusted NII of 7.8 million or 23 cents per share in the prior quarter. We continue to believe that adjusted net investment income, which is net investment income, exclusive of any capital gains based on sensitivities, is a useful and representative indicator of ongoing operation.
We generated adjusted NII of $8 8 million 26 cents per share an increase compared to adjusted NII of $7 8 million or 23.
Last quarter, we continue to believe that adjusted net investment income, which is net investment income exclusive of any capital gains based incentive fee is a useful and representative indicator of ongoing operation.
Speaker 5: Total investment income decreased quarter over quarter, primarily due to a relative decrease in interest income, as we had collected past due interest in the prior quarter, which did not recur to the same extent in current quarter, as well as lower dividend income from portfolio companies, the timing of which is variable. Consistent with our prior quarter, at 1231-21, three of our portfolio companies continue to be a non-acrual status.
Total investment income decreased quarter over quarter, primarily due to a relative decrease in interest income as we have collected past due interest in the prior quarter, which did not recur to the same.
As well as lower dividend income from portfolio companies, the timing of which is very long.
With our prior partner at 12, 31, 'twenty one three of our portfolio companies continue to be on non accrual status.
Speaker 5: Census decreased by 8 million this quarter, which was primarily driven by a 4.8 million decrease in capital gains based on centrifuge due to the net impact of Realized in unrealized gains as required under US gap as well as an increase in fee credit.
Expenses decreased by $8 million this quarter, which was primarily driven by a $4 $8 million decrease in capital gains based incentive fees due to the net impact of realized and unrealized gains as required under U S. GAAP as well as an increase in fee credit.
Speaker 5: We believe that maintaining liquidity and flexibility to support and grow our portfolio are key elements of our access to
We believe that maintaining liquidity and flexibility to support and grow our portfolio are key elements of our success.
Speaker 5: With a successful issuance of our 2028 notes and related redemption of the series E term preferred stock in the prior quarter, in successful exits in December 2021, we have long term capital in place and the full 180 million available under our credit facility. Our leverage is low with an asset coverage ratio at 1231 of 259.5 for one.
With the successful issuance of our 2028 notes and related redemption of the series a term preferred stock in the prior quarter and successful exits in December 2021, we have long term capital in place and all $180 million available under our credit facility. Our leverage is low with an asset coverage ratio at 12 31 of 259, 5%.
Speaker 5: Our NAB remained consistent at $13.27 per common share compared to the fire quarter. Although no net change, the reversal of unreliased appreciation on exit was offset by realized gains and unreliased appreciation of invest.
Our <unk> remained consistent at $13 27 per common share compared to the prior quarter. Although note that changed the reversal of unrealized depreciation on assets was offset by realized gains and unrealized depreciation of investments.
Speaker 5: And system with fire quarters, it's a reasonable book earnings to shareholders remain solid, especially when considering that book earnings have been reduced by 28.7 million of capital gains
Distributable earnings to shareholders remains solid, especially when considering the bulk earnings have been reduced by $28 7 million of capital gains based incentive fee, which equates to about <unk> 86 per common share of which only $5 $3 million is currently.
Speaker 5: So, J'quais still about 86 in her common share, of which only $5.3 million is current.
Speaker 5: With that in mind and has previously announced in January 2022, our Board of Directors declared another supplemental distribution to common shareholders of 12 cents to be paid out this month in February of 2020.
With that in mind and as previously announced in January 2022, our board of directors declared another supplemental distribution to common shareholders of $12 to be paid out this month in February of 2022.
Speaker 5: Assuming the current monthly distribution run rate of 90 cents per share per year and 30 cents per share per year in supplemental distribution.
Assuming the current monthly distribution run rate of 95 per share per year, and <unk> 30 per share per year in supplemental distributions for the 2022 fiscal year in total our annual distributions totaled $1 20.
Speaker 5: for the 2022 fiscal year in total. Our annual distributions with total $1.27 per common share were a yield of about 7.5% using yesterday's closing price of $15.90.
Common share or a yield of about seven 5% using yesterday's closing price of $15.
Sure.
Speaker 2: covers my part of today's call back to you, David. All right, thank you, Rachel. That was a nice presentation, Rachel. We're looking forward to you being on all of these calls going forward.
Covers my part of todays call back to you alright. Thank you Rachel and that was a nice presentation Rachel.
We're looking forward to you being on all of these calls going forward.
Speaker 2: And Dave, you and Michael both gave good information to our shareholders. And that presentation plus the 10Q filed with the SEC yesterday should bring everyone up to date.
And Dave you and Michael both gave good information to our shareholders in that presentation, plus the 10-Q filed with the SEC yesterday should bring everyone up to date.
Speaker 2: Team has reported solid results for this quarter, ending December 31st, and the exits and add-on investments are nice to hear. We believe the team is in a great position to continue these successes through the remainder of the fiscal year, ending March 31st, 2022.
<unk> has reported solid results for this quarter, ending December 31, and the exits and add on investments or nice to hear.
We believe the team is in a great position to continue these successes through the remainder of the fiscal year ending March 31 2022.
And.
I think the team.
Speaker 2: would concur with me that Gladstone Investment is an attractive investment for investors seeking continuous monthly distributions and supplemental distributions from potential capo gains and other income. The team hosts the continue to show you a strong return on your investment in this fund. And now let's bring on Peter and we'll have some questions from all of you out there listening in.
I would concur with me that Gladstone investment is an attractive investment for investors seeking continuous monthly distributions and supplemental distributions from potential capital gains and other income.
Team hopes to continue.
So you a strong return on your investment in this fund and now let's bring on Peter and we will have some questions from <unk>.
All of you out there listening in.
Thank you.
Speaker 1: At this time, we will be conducting a question-answer session.
At this time, we will be conducting a question and answer session.
Speaker 1: If you would like to ask a question, please press star 1 on your telephone.
I would like to ask a question. Please press star one on your telephone keypad.
Speaker 1: confirmation tone will indicate your line is in the crystal.
A confirmation tone will indicate your line is in the question queue.
Speaker 1: You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment.
You May press star two if he would like to remove your question from the queue.
For participants using speaker equipment it.
May be necessary to pick up your handset before pressing the star keys.
One moment, please while we poll for questions.
Okay.
The first question is from Mickey Schlein with Ladenburg. Please go ahead.
Speaker 3: Yes, good morning, everyone. Dave, when we look at your portfolios breakdown by industry, the largest segment is diverse.
Yes, good morning, everyone.
Dave when we look at your portfolio breakdown by industry. The largest segment is diversified services, which is a pretty broad description and then there is consumer durables.
Speaker 3: which is a pretty broad description and then there's consumer durables. In your repair remarks, you mentioned inflation. I'd like to ask you how you feel about those companies and those sectors ability to pass on inflation and protect their margins.
In your prepared in your prepared remarks, you mentioned.
Inflation I'd like to ask you how you feel about those companies in those sectors ability to pass on inflation and protect their margins.
So making good morning, good to hear from you.
Speaker 4: Basically, where first part of that question might be, where is inflation impacting us? And what we're seeing there is somewhat is obviously in labor, cost increases.
Basically we are the first part of that question might be where our whereas inflation impacting us and what we're seeing there somewhat is obviously in labor cost increases.
Speaker 4: And certainly in the consumer products area, because of raw material costs, etc., and transportation costs in particular, you know, when products coming in from overseas and so on, that's where we're seeing the impact.
And certainly in the in the consumer products area.
Because of raw material costs et cetera, and transportation costs in particular.
When products coming in from overseas and so on that's where we're seeing the impact what we have been experiencing specifically to your question is the ability now indeed to pass on some of those costs. So for arguments sake, and some of our customer base. As an example, a Wal Mart, which is one of the customers we'd have for some of our port.
Speaker 4: What we have been experiencing, specifically to your question, is the ability now indeed to pass on some of those costs. So for argument's sake.
Folio of companies in the consumer space, they actually are accepting.
Speaker 4: consumer space, they actually are accepting price increases from us and indeed are passing those on through to the customer. So it's all a function of just being very aggressive, frankly, in that regard and sticking to our guns and pushing hard with the customer set that we have. So some of them have already started putting those through. We've been seeing a positive trend in that regard and certainly hope it will, you know, we can continue doing that. Thanks Dave. Is there any sense that you can give us about the portfolio's average interest?
Price increases from us and indeed are passing those on through to the to the customers. So it's all a function of just being very aggressive frankly in that regard and sticking to our guns and pushing hard with the with the customer set that we have so some of them have already started putting those through we have been seeing a positive trend.
In that regard and certainly hope it will we can continue doing that.
Speaker 4: Thanks Dave. Is there any sense that you can give us about the portfolio's average interest coverage?
Thanks, Dave.
Is there any.
Since that you can give us about the portfolios average interest coverage.
Speaker 4: average interest coverage. It's helped me with exactly what you mean by that. You know what, we'll do that one offline if that's okay with you. Okay. Dave, as you mentioned in your...
Average interest coverage.
Me with exactly what you mean by that.
What we will do that one offline if that's okay with you.
Okay.
<unk>.
As you mentioned in your.
Speaker 4: prepared remarks, you know, multiples in the Mark M&A multiples are elevated and it doesn't look like that's likely to come down anytime soon when you think about how much capital is chasing deals.
Our prepared remarks multiples in the M&A multiples are elevated and it doesn't look like that's likely to come down anytime soon when you think about how much capital is chasing deals.
Speaker 4: So how would you describe your interest to possibly pay higher multiples for interesting businesses than you've maybe paid historical?
How would you describe your interest to possibly pay higher multiples for interesting businesses than you've maybe paid historically for those types of businesses.
Speaker 4: Yeah, well, whether I would like to do it or not, Mr. David Gladstone may not let us do that, but...
Yes.
Whether I would like to do it or not Mr. David Gladstone may not let us do that but.
Speaker 4: No, we are, we look at it hard, obviously it's a function clearly. And you mentioned in the service sector type of companies and so on. That's where we do see, tend to see higher multiples, you know, of valuations.
No. We are we look at it hard obviously its a function clearly and you mentioned in the service sector type of companies and so on that's where we do see tend to see higher multiples.
Evaluations.
Speaker 4: And we are slowly modeling out where if we do increase it from where we would normally think we could as long as it works for our model, which is the most important thing, which as you know is coverage.
And we are slowly.
<unk> out where if we do increase it from where we would normally think we could as long as it works for our model, which is the most important thing which is you know as coverage of interest the fixed charge coverage on these companies and so on so the short answer is probably slowly we will see some increase on multiples that we will have to pay on some of these <unk>.
Speaker 4: of interest, the fixed charge coverage on these companies.
Speaker 4: and so on. So the short answer is it probably slowly will see some increase on multiples that we will have to pay on some of these companies, but we're still going to keep our constraints on the returns that we're looking for.
But we're still going to keep our constraints on the returns that we're looking for and.
Speaker 4: and uh... you know it's a competitive environment so we have to find other ways as an example couple of companies that we invested in last year very good companies uh... in one case it's essentially up you know buying a smaller business and adding on and building out the platform and where we can get
It's a competitive environment. So we have to find other ways. As an example, a couple of the companies that we invested in last year very good companies.
One case, it's essentially.
Buying a smaller business and adding on and building out the platform and we can get accretion as a result of the multiples that we pay for the add on acquisitions in that regard. So we'll do stuff like that and then we just have to be be very firm in what were willing to pay going forward, but it's definitely some pressure to pay a little bit more than wed like to.
Speaker 4: accretion as a result of the multiples that we pay for the add-on acquisitions in that regard So we'll do stuff like that and then you know, we just have to be be very firm in what we're willing to to pay going forward But it's definitely some pressure to pay a little bit more than we'd like
Speaker 4: And Dave, this quarter, your new investments were focused on follow-on.
And Dave this quarter your new investments were focused on on follow ons was that the type of deals you. Just described in other words was it tuck in acquisitions or what was what are you what are your customers your portfolio companies using that money for this quarter.
Speaker 4: Was that the type of deal you just described? In other words, was it tuck-in acquisitions or what was...
Speaker 3: What are your, what are your, your, your portfolio companies using that money for?
Speaker 4: Yeah, this quarter, that's exactly right. We had a couple of companies where we had really good opportunity to do some add-ons and so we were able to provide the capital to the companies to help them do that, which is a positive thing for us, obviously. Right, thank you. I have a couple more questions. I'll get back in the queue and follow up. Thank you. Okay. Thanks.
That's exactly right.
We had a couple of companies, where we had really good opportunity to do some add ons and so we were able to provide the capital to the companies.
To to help them do that which is a positive thing for US obviously, yes right. Thank you I have a couple more questions I will get back into queue and follow up. Thank you. Okay. Thanks.
Speaker 1: Next question. Thank you. Ladies and gentlemen, again, if you have a question, please press star one on your telephone.
Yes.
Next question.
Thank you, ladies and gentlemen, again, if you have a question. Please press star one on your telephone keypad.
Speaker 1: The next question is from Adrian Dre with Adrian Day Asset Management.
Yeah.
The next question is from Adrian day, with Adrian Day asset management. Please go ahead.
Speaker 6: Yes, good morning. Two questions if I made just a sort of quick follow up to the last discussion on competition evaluation.
Yes, good morning.
Two questions. If I may just a quick follow up to the last discussion on competition with emulation.
Speaker 6: You know, it used to be many years ago that your sort of segment of the lending market, I want to say you had to yourself, but there was a lot less competition than in larger companies.
It used to be many years ago.
You all sub segments of the lending market I.
I want to say you have to yourself, but there was a lot less competition than larger companies is do you think the competition Youre seeing is is purely due to the increase in money. Obviously, we all know about that and so is that the main reason or are you just seeing new competitors who are.
Speaker 6: Do you think the competition you're seeing is purely due to the increase in money? Obviously, we all know about that. Is that the main reason or are you just seeing new competitors who are going to hang around in your space? What I'll call your space?
Going to hang around in your space, what are called Youll space.
Speaker 4: Yeah, the middle market or slash lower middle market. Yeah. Yeah. Yeah. So Adrian, I would say yes, it's probably a much of function of more folks coming into the business, but clearly as a result also, as you said, of more capital. So not only are the, let's call it, who are our main competitors, our private equity funds, right? That's who we compete with, buying businesses.
Yeah, the middle market are slashed lower middle market, Yeah, Yeah, Yeah. So Adrian I would say, yes, it's probably as much a function of more folks coming into the business, but clearly as a result also as you said of more capital. So not only are the let's call. It who are our main competitors are private equity funds right, that's who we compete.
With buying businesses and not only do they have a lot of capital that they have to deploy but also the ability to generate leverage or get leverage from third party lenders right banks. Other bdcs that are lending bdcs and so on and clearly that Leverages. We know has also been pretty relatively speaking inexpensive.
Speaker 4: and not only do they have a lot of capital that they have to deploy but also the ability to generate leverage or get leverage from you know third-party lenders right banks other bdc's that are lending bdc's and so on
Speaker 4: and clearly that leverages we know has also been pretty relatively speaking inexpensive.
Speaker 4: So yeah, just a function of both of those. And of course, we assume that the expected returns.
So yes, it's just a function of both of those and of course, we had assumed that the expected returns that some of those firms are factoring in I have got to be lower than historically, because otherwise I don't know how theyre paying those those kind of prices now whether or not increasing interest rates, which clearly are going to start occurring and have started occurring although youre going from a <unk>.
Speaker 4: that some of those firms are factoring in have got to be lower than historically because otherwise you know i don't know how they're paying those those kind of prices now whether or not increasing interest rates which clearly are going to start occurring and have started occurring although you're going from a relatively low base right so so it not like we're getting back to to the high rates we used to see back many many years ago
Relatively low base right. So so it's not like we're getting back to the high rates, we used to see back many many years ago.
Speaker 4: You know, that might have some impact a bit frankly on leverage and maybe that will help mitigate it a bit. But I think it's a function of us just as many more folks in the market.
That might have some impact a bit frankly on leverage and maybe that will help mitigated a bit but I think it's a function of us just as many more folks in the market.
Speaker 4: The supply side by the way the number of deals
Supply side by the way the number of deals that.
Speaker 4: that came to market last year was pretty high also.
That came to market last year was pretty high also so so.
Speaker 4: So, you know, and so far this year we're seeing a little bit of a slowdown in deal supply, but we think we're going to start seeing a pickup of that again, talking to the investment bankers.
So far this year, we're seeing a little bit of a slowdown in deal supply, but we think we're going to start seeing a pickup of that again talking to the investment bankers. So it's just.
Speaker 4: So it's just getting out there and slugging every day is what we have to focus on.
It's just getting out there and slugging everyday is what we have to focus on.
Speaker 6: Okay, and then listen, my second question if I may, I was just a little bit confused. I don't know if you can help me. When you say that your total investment income was affected by the declining collections of past due interest from companies previously on non-accrual. So a little bit confused by that. You mean the companies on non-accrual were previously you were able to collect from?
Okay and then my second question, if I May I was just a little bit confused I don't know if you can help me.
When you say that your total investment income was.
The decline in collections of past due interest from companies previously on nonaccrual.
So I'm a little bit confused by that you mean, the company has a long look through well previously you were able to collect from.
So thats exactly right.
Speaker 5: It's collections that occurred from past amount of rules. This took place, we had about 1.6 million us collections on the prior quarter, and we did not see that same in flux take place this quarter. And they would be from the same companies.
<unk> that occurred from past nonaccrual.
We had about $1 6 million up collections on the prior quarter, we did not see that same influx take place this quarter.
And they would be from the same companies.
And there was some.
Speaker 4: now that's a little i think about what rachel said is correct that the good it's a good news thing right so to extent we had some companies that run on a cruel last quarter we were able to they because of performance in what have you able to take them off a non-accrual we also are able to get some of that paid back so just the timing of how that occurred in that quarter from a comparative basis we did not
No not necessarily.
Rachel said is correct. The good it's a good news thing right. So to extent, we had some companies that were on nonaccrual last quarter, we were able to because of performance and what have you. We were able to take them off of non accrual. We also were able to get some of that paid back. So just the timing of how that occurred in that quarter.
Comparative basis, we did not have those we didn't neither those companies or other companies necessarily paying any additional.
Speaker 4: those we didn't neither those companies are other companies necessarily paying any additional interest that was accrued so we just had our normal interest payments in this quarter relative to the comparative the prior quarter where we had additional interest if you want to think about it that way that came as a result of collecting from non-negotiable i got it okay thank you thank you
Interest that was accrued so we just had our normal interest payments in this quarter relative to the comparative the prior quarter, where we had additional influence if you want to think about it that way that came as a result of collecting from now on I got it I got it okay. Thank you Sir.
Thank you.
Yes.
Speaker 1: Next question. Thank you. Ladies and gentlemen, again, if you have a question, then please press star one on your telephone keypad. The next question is.
Next question.
Ladies and gentlemen, again, if you have a question. Please press star one on your telephone keypad.
The next question is from Mickey Schlein with Ladenburg. Please go ahead.
Speaker 4: Dave, to follow up, what drove the large markup of the Brunswick Boeing preferred shares? And does that represent an exit potential on that investment?
Dave to follow up.
What drove the large markup of the Brunswick bowling preferred shares and does that represent.
Exit potential on that investment.
Yes.
Speaker 4: No, well, no. The valuation methodology was consistent with what we've always done. Part of it is that the business frankly really coming back very strong. Rachel, you want to touch on that? Yeah, absolutely. So that was definitely due to an uptick and performance. You know, we are.
Hello.
No well no.
The valuation methodology was consistent with what we've always done part of it is that the business frankly.
Really coming back very strong Rachel you want to touch on that yes, absolutely. So that was definitely due to an.
In our tech and performance.
And you're going to see them.
Speaker 4: Not related to any exit activity or anything like that.
Improve Matt.
Ongoing impact of the pandemic.
<unk>, EBITDA, which really led to that.
<unk> of the investment that's not related to any exit.
Activity or anything like that does a really good company. We're excited that it's back to almost pre.
Speaker 4: right in the 2019 timeframe as a result of we'd also made an acquisition that ended that year of a competitive bowling ball company. So we really have a large share now bowling balls if you will and the run up at the end of 2019 is very positive. Of course we saw a decline because of COVID through 2020 now picking back up to We're pretty close to where we were at the end of 2019 and that's all that reflects
Rail right into 2019 timeframe as a result of we had also made an acquisition that end of that year of a competitive bowling ball company. So we really have a large share now bowling balls. If you will in the run up at the end of 2019 was very positive of course, we saw a decline because of Covid through 2020, and now picking back up they were pretty close to where.
We were at the end of 2019 and Thats all that reflects that's good news Dave Rachel.
Speaker 4: That's good news Dave. Rachel, welcome, first of all, and a couple of more modeling questions.
Welcome first of all and couple of more modeling questions. What is the debt portfolio's average LIBOR floor.
Speaker 4: What is the dead portfolios average?
Speaker 4: So our assets that we have are a live or floor. Most of them are, you know, it's live or plus, but we also put a, we put a, our own floor on it. So it's generally around 10%. Okay.
So our assets that we have our LIBOR floor most of them are <unk>.
<unk> plus but we also put a we put of our own floor on it so it's generally around 10%.
Okay and.
Speaker 4: Dave or Rachel, can you give us a little bit of color on the large credit from the advisor to the base management fee? It was particularly big this quarter. What was the nature of that and what is the outlook for that line?
Dave or Rachel can you give us a little bit of color on the large credit from the adviser to the base management fee It was particularly big.
Big this quarter, what was the nature of that and what is the outlook for that line item.
Speaker 5: Yes, absolutely. So that fee, this quarter was primarily due to a few paid to the advisor associated with the exit of Pioneer Square Brand. And then that's being credited against our fees due. So that is not really comparable quarter over quarter. It's going to be.
Yes, absolutely so.
That.
This quarter was primarily due to a fee paid to the adviser associated with the exit of pioneer square brand and then that being credited against our feet steel so.
That is not really comparable quarter over quarter.
Al.
Speaker 4: Yeah, Mickey, as you know, the way we do this is when we both make an acquisition and also when we exit a company, if we generate a fee,
Yes, Mickey as you know the way we do this is when we both make an acquisition and also when we exit a company if we generate a fee.
Speaker 4: for the transaction because of the interaction with the advisor, we have a relationship where the advisor would collect...
The transaction because of the interaction with the advisor we have a relationship where the adviser would collect.
Speaker 4: Some of quote some of that fee and then they credit that back to us through our actual management fee from the advisor to gain. So again as Rachel said, you know, it's inconsistent, right? It's going to occur both when we have acquisitions and we have Dispositions if we generate a fee and so it's a again, it's a positive overall. It's just a function of the advisor
Some of some of that fee and then they credit that back to us through our actual management fee from the advisor to <unk>.
Gains so again as Rachel said.
It's inconsistent right, it's going to occur both when we have acquisitions and we have have dispositions, if we generate a fee and so it's again, it's a positive overall, it's just a function of the advisor collecting essentially getting the money in the transaction and credited back to us through our management fee paid to them.
Speaker 4: collecting you know essentially getting the money in the transaction and credit it back to us Through our management fee paid to them
Speaker 4: Yeah, I understand the accounting, David. It was just that number was pretty.
Yes, I understand the accounting David It was just down number was pretty large.
Speaker 4: uh... what the good exit yeah no it was a congratulations it was a very good exit and and what is your estimated uh... uh... distributed taxable income following these exits can you give us any insight on that how you expect to distribute
Well, it's a good exit yeah no. It wasn't congratulations it was a very good exit.
And.
What is your estimated undistributed taxable income. Following these exits can you give us any insight on that and how you expect to distribute that.
Speaker 5: Well, so right now we have 17.4 million, and this is the gap undistributed and come on the balance sheet. So obviously we do have some book to tax differences there, but these amounts are available for distributions and do, I don't know if you want to speak more to kind of, our boards outlook there, but.
Well, so right now we have <unk>.
$19 4 million and this is the GAAP undistributed income on the balance sheet. Obviously, we do have some book to tax differences there.
These amounts are available for distributions and Dave I don't know if you want to speak Mark Hill.
For the outlook there.
Speaker 4: Yeah, I think we'll make you, first of all, as you know, our general, I don't know what we call it, policy approach plan is, you know, first we focus on the monthly distributions, which we've been able to get up to seven and a half cents per share, 90 cents on an annual basis. You know, we never want to get ahead of ourselves.
Yes, I think we're making first of all as you know our general call.
Call. It policy approach plan is first we focus on the monthly distributions, which have been able to get up to seven five cents per share 90 on an annual basis.
Want to get ahead of ourselves.
Speaker 4: trying not to anyway but we will keep trying to increment that as slowly as possible. It's been a good model for all of the Gladstone companies by and large.
Try not to anyway, but we will keep trying to increment that as slowly as possible has been a good model for all of the Gladstone companies by and large and we would we certainly want to do that so we were able to increase out a little bit last year, and we focus on that mainly coming out of operating income now having said that the distributions that we make on the supplemental has again come as a result.
Speaker 4: and we would, you know, we certainly want to do that. So we were able to increase that a little bit last year. And we focused on that mainly coming out of operating income. Now, having said that, the distributions that we make on the supplemental again come as a result of the capital gains that we've been generating. And then we start getting into, again, a good thing. And I'm getting a little bit over my head in this regard. But now we start having a clarify.
The capital gains that we've been generating and then we start getting into again a good thing.
Getting a little bit over my head in this regard but.
Now we start having claris classification of income that might be sitting there a bolt from cap gains are from ordinary income and as we look forward, we might be able to consider taking an increasing our monthly distribution, but some of that might be coming from this crude.
Speaker 4: classification of income that might be sitting there a bolt that's just from calf gains or for their income and as we look forward We might be able to consider Taking an increasing our monthly distribution, but some of that might be coming from this
Speaker 4: crude, you know, income and then from sort of have would have a destination is capital gain. So it's to be a blend of those going forward, but right now we don't have any any suggested change to that. Just keep doing a good job on our monthly distribution sort of from operations and our continuing increasing as much as we can or supplemental distributions as a result of cap gains.
Income and then sort of have would have a designation as capital gains. So it will be a blend of those going forward, but right. Now we don't have any any suggested change to that just keep doing a good job on our monthly distributions sada from operations and our continuing increasing as much as we can our supplemental distributions.
As a result of cap gains.
Speaker 4: Yeah, that was what is it referring to, David? Thanks for that explanation. Those are all my questions. I appreciate your time and congratulations on a strong quarter. Thanks for your questions.
That was what is it referring to David Thanks for that explanation and those are all my questions. I. Appreciate your time and congratulations on a strong quarter. Thanks for your questions.
We have any other questions.
Speaker 1: There are no further questions ladies and gentlemen. We have reached the end of
There are no further questions, ladies and gentlemen, we have reached the end of <unk>.
Speaker 1: question and answer session and I would like to turn the call back to Mr. David Glass to info closing.
The question and answer session and I would like to turn the call back to Mr. David Gladstone for closing remarks.
Speaker 2: Well, thank you all for tuning in. Now, I had a great quarter. I think we'll have a good quarter this time, and we'll see you next quarter. That's the end of the call.
Well. Thank you all for tuning in and had a great quarter I think we will have a good quarter. This time and we will see you next quarter. That's the end of the call.
Speaker 1: This concludes today's concerns. You may disconnect your lines at this time. Thank you for your participation.
Thank you. This concludes today's conference you may disconnect. Your lines at this time. Thank you for your participation.
Okay.
Yeah.
[music].
Speaker 7: The.