Gladstone Investment Q3 2026 Gladstone Investment Corp Earnings Call | AllMind AI Earnings | AllMind AI
Q3 2026 Gladstone Investment Corp Earnings Call
[Company Representative] (Gladstone Investment Corporation): I'm asleep. I need marching music.
Operator: I'm asleep. I need marching music.
Operator: Greetings and welcome to the Gladstone Investment Corporation Third-Quarter Earnings Call. 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 a conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr. David Gladstone, Chief Executive Officer. Thank you, sir. You may begin.
Operator: Greetings and welcome to the Gladstone Investment Corporation Third-Quarter Earnings Call. 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 a conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr. David Gladstone, Chief Executive Officer. Thank you, sir. You may begin.
Speaker #1: Marching . .
Speaker #2: welcome to the Gladstone Investment Corporation . Third quarter earnings call . this time , all At in a participants are listen A question and mode .
Speaker #2: welcome to the Gladstone Investment Corporation . Third quarter earnings call . this time , all At in a participants are listen Greetings and only session will answer follow the formal presentation .
Speaker #2: If anyone require should assistance operator during a please conference , press Star Zero on your telephone keypad . As a this conference is reminder , recorded .
David Gladstone: Well, thank you, Latonya, and good morning to everybody. This is David Gladstone, chairman of Gladstone Investment, and this is the earnings conference call for Q3 ending 31 December 2025, for the 2026 fiscal year. That is the 31 March year. We hope we get all of our shareholders on board, and analysts in order to tell you about the future of the company. We're listed on NASDAQ under the trading symbol GAIN for the common stock, and then we have three preferred stocks: Gain N, Gain Z, and Gain I. Three different registered notes. Hey, thank you all for calling in. We're always happy to provide updates to our shareholders and analysts and provide a view of the current business and the environment that we're in.
David Gladstone: Well, thank you, Latonya, and good morning to everybody. This is David Gladstone, chairman of Gladstone Investment, and this is the earnings conference call for Q3 ending 31 December 2025, for the 2026 fiscal year. That is the 31 March year. We hope we get all of our shareholders on board, and analysts in order to tell you about the future of the company. We're listed on NASDAQ under the trading symbol GAIN for the common stock, and then we have three preferred stocks: Gain N, Gain Z, and Gain I. Three different registered notes. Hey, thank you all for calling in. We're always happy to provide updates to our shareholders and analysts and provide a view of the current business and the environment that we're in.
Speaker #2: It is now a pleasure to introduce to you my host, Mr. David Gladstone, Executive Chairman. Thank you, sir. You may begin, Chief.
Speaker #1: Well , thank you , LaTonya , This is David , chairman of everybody . Gladstone Investment . And this is the earnings conference conference call the third quarter ending for December 31st , morning to For 2025 .
Speaker #1: the 2026 fiscal year that is , the all of our hope March 31st year . we get And we shareholders on in to board in order analysts and tell order to you about future of the company listed on the under the trading G , symbol for Nasdaq the common then we have three preferred stock .
Speaker #1: gain stocks gain Z gain . in and And and registered notes three different . thank you Hey all for calling We're in . happy to provide updates always to our shareholders and and provide a analysts view of the current business environment that we're and the in .
David Gladstone: Two goals of this call are to help you understand what happened to us during the last quarter and give you our current view of the future. Now we'll hear from Catherine Gerkis, our Director of Investor Relations and ESG, to provide a brief disclosure regarding certain regulatory matters concerning this call. Catherine, go ahead.
David Gladstone: Two goals of this call are to help you understand what happened to us during the last quarter and give you our current view of the future. Now we'll hear from Catherine Gerkis, our Director of Investor Relations and ESG, to provide a brief disclosure regarding certain regulatory matters concerning this call. Catherine, go ahead.
Speaker #1: Two goals of this are to help you call to us happened during the last give you quarter . understand our current what view of future .
Speaker #1: And now we'll here And from the Catherine Gerkis , our Director of Investor ESG and Relations , to provide a brief regulatory certain concerning this Catherine , go matters ahead call .
Catherine Gerkis: Good morning, everyone. Today's call may include forward-looking statements which are based on management estimates, assumptions, and projections. There are no guarantees of future performance, and actual results may differ materially from those expressed or implied in these statements due to various uncertainties, including the risk factors set forth in our SEC filing, which you can find on the investors' page of our website, gladstoneinvestment.com. We assume no obligation to update any of these statements unless required by law. Please visit our website for a copy of our Form 10-Q, an earnings press release, for more detailed information. You can also sign up for our email notification service and find information on how to contact our investor relations department. We are also on X @gladstonecomps, as well as Facebook and LinkedIn. Keyword for both is the Gladstone Companies.
Catherine Gerkis: Good morning, everyone. Today's call may include forward-looking statements which are based on management estimates, assumptions, and projections. There are no guarantees of future performance, and actual results may differ materially from those expressed or implied in these statements due to various uncertainties, including the risk factors set forth in our SEC filing, which you can find on the investors' page of our website, gladstoneinvestment.com. We assume no obligation to update any of these statements unless required by law. Please visit our website for a copy of our Form 10-Q, an earnings press release, for more detailed information. You can also sign up for our email notification service and find information on how to contact our investor relations department. We are also on X @gladstonecomps, as well as Facebook and LinkedIn. Keyword for both is the Gladstone Companies.
Speaker #1: .
Speaker #3: morning everyone . Today's call may include
Speaker #3: which are based on management's estimates , assumptions and projections . There are no of future performance and guarantees may differ actual results materially from those expressed or implied in these to statements due various uncertainties , including the risk
Speaker #3: can find filings , which you SEC forth on the website , page of investors . no regarding update disclosure any of these unless by required law .
Speaker #3: Please visit our website for our statements, earnings 10-Q, and press release. For more detailed information, you can also sign up for our email notification service and find information on how to contact the Investor Relations department.
Speaker #3: We are also on X at our Gladstone comps, as well as Facebook and LinkedIn. The 'as' is Gladstone Company. Now I will turn the call over to the president, David Dullum, Gladstone Investment.
Speaker #3: We are on also X at our Gladstone comps , well as Facebook and LinkedIn . the as is Gladstone Company . Now I will turn the call over to president of David Dullum , Gladstone Investment .
Catherine Gerkis: Now I will turn the call over to David Dullum, President of Gladstone Investment.
Catherine Gerkis: Now I will turn the call over to David Dullum, President of Gladstone Investment.
David Dullum: Thanks, Catherine, and good morning to everybody. So I'm pleased to report, again, that the third quarter of fiscal year 2026, which, as David Gladstone mentioned, ends in March 31, that GAIN continued to build on the prior quarters' very strong performance in this fiscal year, driven by our continued growth in the portfolio and the results of our existing portfolio companies. So we ended the third quarter with an adjusted NII of $0.21 per share, total assets of about $1.2 billion, which is up about $92 million from the end of the prior quarter. Now, this increase quarter-over-quarter in assets resulted from 1 new buyout investment during the current quarter, along with fairly significant appreciation of our investment portfolio. So with the new buyout investment, we currently have 29 operating companies and a very healthy pipeline for new acquisitions.
David Dullum: Thanks, Catherine, and good morning to everybody. So I'm pleased to report, again, that the third quarter of fiscal year 2026, which, as David Gladstone mentioned, ends in March 31, that GAIN continued to build on the prior quarters' very strong performance in this fiscal year, driven by our continued growth in the portfolio and the results of our existing portfolio companies. So we ended the third quarter with an adjusted NII of $0.21 per share, total assets of about $1.2 billion, which is up about $92 million from the end of the prior quarter. Now, this increase quarter-over-quarter in assets resulted from 1 new buyout investment during the current quarter, along with fairly significant appreciation of our investment portfolio. So with the new buyout investment, we currently have 29 operating companies and a very healthy pipeline for new acquisitions.
Speaker #4: good morning Catherine , and
Speaker #4: I'm Thanks , pleased to again report that the third . So year 26 , fiscal which as mentioned , David Gladstone both that we gained in March 31st , continue build on the to prior very in this performance fiscal year , driven by our continued growth in the and the results of our existing employee portfolio companies .
Speaker #4: So we ended the with an NII third quarter quarter of of $0.21 per share . of assets about quarters , a 1.2 billion , which is up about adjusted 92 million from the strong end of Total quarter prior now .
Speaker #4: This increase quarter quarter in over assets resulted one new buyout investment current quarter , along with fairly appreciation of our investment from . So with the new buyout investment , we currently have during the portfolio very healthy pipeline significant new acquisitions in this to date , the for fiscal 26 , we've invested and a for 163 million , approximately which is in four new regard companies , which portfolio compares to 221 million that we about invested for all of fiscal year 25 .
David Dullum: In this regard, to date for fiscal 2026, we've invested approximately $163 million, which is in four new portfolio companies, which compares to about $221 million that we invested for all of fiscal year 2025. These new investments are consistent, of course, with the buyout strategy where we grow the portfolio through the acquisition of operating companies at attractive valuations and where we generally are the majority economic owner. We also make our acquisitions through a combination of equity and debt, and with the equity providing the potential upside through capital gains upon exit and the debt securities, of course, generating the operating income which supports our monthly distributions to shareholders. That is a very important aspect of our portfolio.
David Dullum: In this regard, to date for fiscal 2026, we've invested approximately $163 million, which is in four new portfolio companies, which compares to about $221 million that we invested for all of fiscal year 2025. These new investments are consistent, of course, with the buyout strategy where we grow the portfolio through the acquisition of operating companies at attractive valuations and where we generally are the majority economic owner. We also make our acquisitions through a combination of equity and debt, and with the equity providing the potential upside through capital gains upon exit and the debt securities, of course, generating the operating income which supports our monthly distributions to shareholders. That is a very important aspect of our portfolio.
Speaker #4: These new investments are consistent , of course , with the buyout where we strategy , grow the through the portfolio of operating companies at attractive valuations and where we generally are the majority economic acquisition We owner .
Speaker #4: also make our acquisitions through a combination of equity and debt . And with the providing equity the potential upside through capital gains upon exit and securities , of course , generating the operating income , which supports distributions to is a very And that shareholders .
David Dullum: Now, this is one of the factors that, in fact, differentiates us from other traditional credit BDCs, the aspect that we provide both the debt and the equity when we make an acquisition. So from our operating income, we maintained our monthly distribution to shareholders of 8 cents per share or 96 cents per share on an annual basis. Put this in perspective, since inception in 2005 and through 31 December 2025, we've invested in 66 buyout portfolio companies for an aggregate of approximately $2.2 billion and exited 33 of these companies. This resulted in the total investments currently being valued at $1.2 billion while generating approximately $353 million in net realized gains, and $45 million in other income on exit. So as we look forward, what we are finding is there is very good liquidity in the M&A market.
David Dullum: Now, this is one of the factors that, in fact, differentiates us from other traditional credit BDCs, the aspect that we provide both the debt and the equity when we make an acquisition. So from our operating income, we maintained our monthly distribution to shareholders of 8 cents per share or 96 cents per share on an annual basis. Put this in perspective, since inception in 2005 and through 31 December 2025, we've invested in 66 buyout portfolio companies for an aggregate of approximately $2.2 billion and exited 33 of these companies. This resulted in the total investments currently being valued at $1.2 billion while generating approximately $353 million in net realized gains, and $45 million in other income on exit. So as we look forward, what we are finding is there is very good liquidity in the M&A market.
Speaker #4: important of our portfolio the debt . Now , aspect one of the factors that in fact differentiates us from traditional other credit . BDCs .
Speaker #4: The provide that we both aspect the debt and the equity when we acquisition . So from our operating income , we maintained our monthly distribution to shareholders of $0.08 per share , $0.96 per share , on or annual an basis , put this in perspective , make an since inception in 2005 and through 25 , 1231 we've invested in 66 buyout portfolio an companies for aggregate of 2.2 billion and exited 33 of these companies .
Speaker #4: This resulted in a total investments currently being valued at 1.2 billion , while generating approximately 353 million in net realized gains and 45 million in other income .
David Dullum: This creates a very competitive environment for new acquisitions, certainly at what we would consider reasonable valuations. Now, while this is challenging, we do seem to be able to compete effectively, as I mentioned, the investments we've made in this fiscal year. So we're out there working hard, effectively competing for these acquisitions that do indeed fit our model. And again, this is where we're providing both the equity and the debt to complete the acquisition. And one of the things that we do in looking at the debt securities that we do, we need a meaningful, what we call, fixed charge coverage and income yield on our total investments. So that is indeed in excess of our cost of capital. And as I mentioned earlier, we closed on four new investments during the first nine months of the fiscal year.
David Dullum: This creates a very competitive environment for new acquisitions, certainly at what we would consider reasonable valuations. Now, while this is challenging, we do seem to be able to compete effectively, as I mentioned, the investments we've made in this fiscal year. So we're out there working hard, effectively competing for these acquisitions that do indeed fit our model. And again, this is where we're providing both the equity and the debt to complete the acquisition. And one of the things that we do in looking at the debt securities that we do, we need a meaningful, what we call, fixed charge coverage and income yield on our total investments. So that is indeed in excess of our cost of capital. And as I mentioned earlier, we closed on four new investments during the first nine months of the fiscal year.
Speaker #4: . So On exit as we look forward , what we're finding is there good is very M&A creates a market . This competitive environment for new very acquisitions .
Speaker #4: Certainly at what we would consider reasonable valuations. This is now, while challenging, we do seem to be able to compete effectively.
Speaker #4: As I mentioned , the we've made in fiscal this . So year we're out there working hard competing for these that do indeed fit our acquisitions model .
Speaker #4: And again , this is where we're providing both the debt to equity and the the acquisition . And one of the things that we do in looking the debt securities that we do , we need a what we call fixed meaningful charge at coverage and income yield on our total .
David Dullum: We are continuing to be in varying stage diligence on some possible new opportunities, including accretive add-on acquisitions to existing portfolio companies, and we're in review and negotiation with a number of other new opportunities. I would just like to elaborate on the add-on acquisitions that I mentioned. Given the way in which we manage our portfolio, it's not unusual for us to be constantly looking for acquisitions to add to existing portfolio companies, and indeed are able to grow the value of our overall investments and portfolio by this add-on activity. So this activity all could lead to closing on new buyout investments during the balance of the fiscal year. As it relates to the income that's generated for the portfolio, there is one word and question that seems to keep coming up, we hear about what we call spread compression.
David Dullum: We are continuing to be in varying stage diligence on some possible new opportunities, including accretive add-on acquisitions to existing portfolio companies, and we're in review and negotiation with a number of other new opportunities. I would just like to elaborate on the add-on acquisitions that I mentioned. Given the way in which we manage our portfolio, it's not unusual for us to be constantly looking for acquisitions to add to existing portfolio companies, and indeed are able to grow the value of our overall investments and portfolio by this add-on activity. So this activity all could lead to closing on new buyout investments during the balance of the fiscal year. As it relates to the income that's generated for the portfolio, there is one word and question that seems to keep coming up, we hear about what we call spread compression.
Speaker #4: opportunities , including accretive add on acquisitions to portfolio companies . And review and we're in negotiation with a number of other new I would just to elaborate on like the add on acquisitions .
Speaker #4: mentioned Given the way in which that I we manage our portfolio , it's not unusual for us to be constantly for acquisitions to add to existing portfolio companies indeed are able and the value of our looking overall investments and portfolio by by this this add on activity .
Speaker #4: So this activity all could lead to new buyout closing on balance of the fiscal year . And as it relates to the income that's generated for the portfolio , there is one word and question keep that seems to coming up .
David Dullum: And given that interest rates, generally given SOFR coming down and so on, that these interest rates may be declining. I want to, again, emphasize that one differentiator for GAIN from other credit-oriented BDCs is that we put floors on our debt securities while we have a stated rate, which indeed is a spread over SOFR. Now, so while we may have seen a decline in yield because SOFR has come down, granted that's coming down from a higher level, we still have the protection of the floors. And I think this is a very important point that we need to stress, and you'll hear more about this from Taylor Ritchie, our CFO, in a little bit. So again, this floor is usually set high enough, which establishes an effective yield on our total investments, which does help to mitigate this "spread compression" or the decline in SOFR over time.
David Dullum: And given that interest rates, generally given SOFR coming down and so on, that these interest rates may be declining. I want to, again, emphasize that one differentiator for GAIN from other credit-oriented BDCs is that we put floors on our debt securities while we have a stated rate, which indeed is a spread over SOFR. Now, so while we may have seen a decline in yield because SOFR has come down, granted that's coming down from a higher level, we still have the protection of the floors. And I think this is a very important point that we need to stress, and you'll hear more about this from Taylor Ritchie, our CFO, in a little bit. So again, this floor is usually set high enough, which establishes an effective yield on our total investments, which does help to mitigate this "spread compression" or the decline in SOFR over time.
Speaker #4: What we hear about, we call spread compression. And interest rates generally, given that, given SOFR coming down, these may be declining on that.
Speaker #4: I want to again that one and so for from other emphasize credit oriented that we BDCs is put gain floors our debt on securities while we have a stated rate , which indeed is a spread sulfur over So while we may seen a a set decline in because sulfur has come down , that's coming down higher level , from a we yield the of the floors .
Speaker #4: And protection I think this is a important very point that we need to stress . And you'll hear about this more from from Taylor Ritchie .
Speaker #4: Our CFO , in a little bit . So again , this is usually set enough , which high now . establishes an effective floor on our total yield investments , which does mitigate help to this spread .
David Dullum: As for our existing portfolio, most of the companies have experienced very good results to date, and this is reflected in a very significant increase in our net asset value. Though we continue to be cautious due to supply chain disruption, tariff costs, and other issues going on in the economy, we feel very good about where we are with our portfolio companies. We are working with all of our companies and evaluating things such as supply chain alternatives, other cost efficiencies that we need to help navigate the current environment. In summing up the quarter and looking forward to the rest of the fiscal year, our current portfolio is in good shape. We have a strong, liquid balance sheet, a good level of buyout activity with the prospect of continued good earnings and distributions over the next year.
David Dullum: As for our existing portfolio, most of the companies have experienced very good results to date, and this is reflected in a very significant increase in our net asset value. Though we continue to be cautious due to supply chain disruption, tariff costs, and other issues going on in the economy, we feel very good about where we are with our portfolio companies. We are working with all of our companies and evaluating things such as supply chain alternatives, other cost efficiencies that we need to help navigate the current environment. In summing up the quarter and looking forward to the rest of the fiscal year, our current portfolio is in good shape. We have a strong, liquid balance sheet, a good level of buyout activity with the prospect of continued good earnings and distributions over the next year.
Speaker #4: Compression or the decline in sulfur . You time , over know , as to our existing portfolio . Most of the companies have experienced very good results to date , and this is reflected in significant increase in our net a very asset value .
Speaker #4: And though we continue to be cautious due to supply chain disruption , tariff costs and other issues other in the economy , we we feel very good about are with where we our portfolio companies .
Speaker #4: We are all of our working with companies and evaluating things such as supply chain alternatives , other cost efficiencies that we need to help current So environment .
Speaker #4: in summing up the quarter and navigate the fiscal year , our current portfolio is in good shape . We have forward to strong a balance sheet of good activity with the prospect of continued good level of distributions over the next year .
David Dullum: So, with all of that, while we hopefully navigate the challenges of this uncertain economic landscape, I'll turn it over to our CFO, Taylor Ritchie, and he can tell us a bit more detail. Taylor?
David Dullum: So, with all of that, while we hopefully navigate the challenges of this uncertain economic landscape, I'll turn it over to our CFO, Taylor Ritchie, and he can tell us a bit more detail. Taylor?
Speaker #4: So with all of that , while we hopefully challenges of this uncertain navigate the economic landscape , so I'll turn it over to our CFO , Taylor Ritchie .
Taylor Ritchie: Thank you, Dave, and good morning, everyone. Looking at our operating performance for Q3, we generated total investment income of $25.1 million, down slightly from $25.3 million in the prior quarter. The decrease was primarily driven by a decrease in dividend and success fee income, partially offset by additional interest income resulting from the continued growth of our debt investment portfolio. The weighted average principal balance of our interest-bearing investments was $699 million in the current quarter, representing an increase of $30 million compared to prior quarter. After adjusting for the prior quarter's collection of past due interest income from investments that were previously on non-accrual status, our portfolio's weighted average yield decreased modestly from 13.2% to 12.9%.
Taylor Ritchie: Thank you, Dave, and good morning, everyone. Looking at our operating performance for Q3, we generated total investment income of $25.1 million, down slightly from $25.3 million in the prior quarter. The decrease was primarily driven by a decrease in dividend and success fee income, partially offset by additional interest income resulting from the continued growth of our debt investment portfolio. The weighted average principal balance of our interest-bearing investments was $699 million in the current quarter, representing an increase of $30 million compared to prior quarter. After adjusting for the prior quarter's collection of past due interest income from investments that were previously on non-accrual status, our portfolio's weighted average yield decreased modestly from 13.2% to 12.9%.
Speaker #4: And he can tell us a bit more detail . Taylor . Thank you , Dave , and morning , good Looking at our operating performance for the third quarter , we total generated investment income of down slightly from 25.1 million , 25.3 million in the prior The decrease was primarily quarter .
Speaker #4: decrease in dividend and success fee partially income , offset by additional interest income resulting from the continued growth of our debt investment portfolio .
Speaker #4: weighted The average principal balance of our interest bearing investments 699 million . In the current quarter , was representing an increase of 30 million compared to prior quarter .
Speaker #4: After adjusting for the prior collection of past due interest income from investments that were previously on Nonaccrual status , are portfolio is weighted average yield decreased modestly from 13.2% to 12.9% .
Taylor Ritchie: This 24-basis-point decrease is in line with the 32-basis-point decrease in SOFR during the quarter and was mitigated by the interest rate floors included in each of our debt investments. Excluding non-accrual investments and revolving lines of credit, the weighted average interest rate floor for our debt portfolio was 12.1% as of 31 December. We continued to underwrite our new debt investments with elevated interest rate floors in the 13% to 13.5% range to mitigate potential declines in SOFR. With over half of our debt portfolio currently at their interest rate floors, we believe our yield is well protected against future rate declines. Further, the overall interest rate floors will offset higher interest expense that will result from the future refinancing of our low-cost, long-term debt that will be maturing in the coming quarters and years.
Taylor Ritchie: This 24-basis-point decrease is in line with the 32-basis-point decrease in SOFR during the quarter and was mitigated by the interest rate floors included in each of our debt investments. Excluding non-accrual investments and revolving lines of credit, the weighted average interest rate floor for our debt portfolio was 12.1% as of 31 December. We continued to underwrite our new debt investments with elevated interest rate floors in the 13% to 13.5% range to mitigate potential declines in SOFR. With over half of our debt portfolio currently at their interest rate floors, we believe our yield is well protected against future rate declines. Further, the overall interest rate floors will offset higher interest expense that will result from the future refinancing of our low-cost, long-term debt that will be maturing in the coming quarters and years.
Speaker #4: This 24 basis point is in line with the 32 basis point decrease in Sofr during the quarter , and was mitigated by the decrease interest rate floors included in each of our debt investments Nonaccrual .
Speaker #4: investments in lines of credit . Excluding revolving The weighted average interest rate floor for our debt portfolio was 12.1% as of December 31st .
Speaker #4: We continue to underwrite our new debt, elevated rate interest investments with floors in the 13 to 13.5% range to mitigate potential declines in SOFR. Over half of our portfolio debt is currently at their interest floors.
Speaker #4: We believe our rate yield is well protected against future rate declines. Further, the overall interest rate floors will offset higher interest expense that will result from the future refinancing of our low-cost, long-term debt that is maturing in the quarters and years to come.
Taylor Ritchie: Additionally, dividend and success fee income declined by $0.4 million quarter-over-quarter. Dividend income from our equity investments is dependent on the portfolio company's ability to pay the distribution while also having sufficient earnings and profits to support the characterization of the distribution as dividend income. Success fee income is derived from an interest rate associated with our debt investment that accrues off-balance sheet for both GAIN and the portfolio company and is not contractually due until a change of control event. However, similar to dividend income, a portfolio company may elect to prepay a portion of this accrual from time to time. Given that collection of both dividend income and success fee income is dependent on multiple factors, the timing of this income will be variable. Net expenses for the quarter were $31.6 million, up from $21 million in the prior quarter.
Taylor Ritchie: Additionally, dividend and success fee income declined by $0.4 million quarter-over-quarter. Dividend income from our equity investments is dependent on the portfolio company's ability to pay the distribution while also having sufficient earnings and profits to support the characterization of the distribution as dividend income. Success fee income is derived from an interest rate associated with our debt investment that accrues off-balance sheet for both GAIN and the portfolio company and is not contractually due until a change of control event. However, similar to dividend income, a portfolio company may elect to prepay a portion of this accrual from time to time. Given that collection of both dividend income and success fee income is dependent on multiple factors, the timing of this income will be variable. Net expenses for the quarter were $31.6 million, up from $21 million in the prior quarter.
Speaker #4: Additionally , dividend and success fee income declined by quarter 0.4 million quarter over . Dividend income from our equity investments is dependent on the portfolio company's ability to pay the distribution , while also having sufficient earnings and profits to support the characterization of the distribution as dividend income .
Speaker #4: Success fee income derived from an interest rate associated with our debt investment that accrues off balance sheet for both Gain and the portfolio company, and is not contractually due until a change of control event.
Speaker #4: However , similar dividend to income , a portfolio company may elect to prepay a this accrual from time to time . Given that collection of portion of both dividend income successful income is and dependent on multiple factors , the timing of this income will be variable .
Taylor Ritchie: The increase was primarily due to $9.9 million, a $9.9 million increase in the accrual of capital gains-based incentive fees. Base management fee expense increased by $0.5 million compared to the prior quarter as a result of new buyout investment activity and the significant increase in unrealized appreciation of our investments. Fee credits from advisor, the level of which is correlated to the timing and volume of new originations, declined $0.4 million quarter-over-quarter. Interest expense decreased $0.2 million in the current quarter due to the timing of the issuance of our 6.875% notes, the reduction of our 8% notes, and new investment activity. This resulted in a net investment loss of $6.5 million compared to net investment income of $4.3 million in the prior quarter. Overall, portfolio company valuations in the aggregate increased to $70.2 million.
Taylor Ritchie: The increase was primarily due to $9.9 million, a $9.9 million increase in the accrual of capital gains-based incentive fees. Base management fee expense increased by $0.5 million compared to the prior quarter as a result of new buyout investment activity and the significant increase in unrealized appreciation of our investments. Fee credits from advisor, the level of which is correlated to the timing and volume of new originations, declined $0.4 million quarter-over-quarter. Interest expense decreased $0.2 million in the current quarter due to the timing of the issuance of our 6.875% notes, the reduction of our 8% notes, and new investment activity. This resulted in a net investment loss of $6.5 million compared to net investment income of $4.3 million in the prior quarter. Overall, portfolio company valuations in the aggregate increased to $70.2 million.
Speaker #4: expenses for the quarter Net were 31.6 million , up from 21 million in the prior quarter . The increase was primarily due to 9.9 million , a 9.9 million increase in the accrual of capital gains based incentive fees based management fee expense increased by 0.5 million compared to the prior quarter .
Speaker #4: As a result of new investment buyout activity in the significant increase in unrealized appreciation of our , fee credits from advisor . The level of which is investments timing and volume of new originations declined quarter 0.4 million quarter over .
Speaker #4: Interest expense decreased 0.2 million in the current due to the quarter timing of the issuance of our 6.875% notes , the resumption of our 8% notes and new investment activity .
Speaker #4: This resulted in a net investment loss of 6.5 million compared to net investment income of 4.3 million in the prior quarter . portfolio Overall company valuations in the aggregate increased 70.2 million .
Taylor Ritchie: This unrealized appreciation was driven by both increased performance at some of our portfolio companies, along with higher valuation multiples across the portfolio. The increase was partially offset by decreased performance at other portfolio companies. Adjusted net investment income, which represents net investment income or loss excluding any accrued or reversed capital gains-based incentive fees, was $8.2 million or $0.21 per share compared to $9.2 million or $0.24 per share in the prior quarter. We believe that adjusted net investment income remains an indicative metric of our ongoing and core performance as it removes the impact of capital gains-based incentive fees, which is an expense recorded under US GAAP each quarter but is not yet contractually due. For the current quarter, we continue to have three portfolio companies on non-accrual status.
Taylor Ritchie: This unrealized appreciation was driven by both increased performance at some of our portfolio companies, along with higher valuation multiples across the portfolio. The increase was partially offset by decreased performance at other portfolio companies. Adjusted net investment income, which represents net investment income or loss excluding any accrued or reversed capital gains-based incentive fees, was $8.2 million or $0.21 per share compared to $9.2 million or $0.24 per share in the prior quarter. We believe that adjusted net investment income remains an indicative metric of our ongoing and core performance as it removes the impact of capital gains-based incentive fees, which is an expense recorded under US GAAP each quarter but is not yet contractually due. For the current quarter, we continue to have three portfolio companies on non-accrual status.
Speaker #4: This appreciation was unrealized, driven by both increased performance at some of our portfolio companies, along with higher valuation multiples across the portfolio.
Speaker #4: The increase was partially offset decreased performance by at other portfolio companies . Adjusted net investment income , which represents net income or loss excluding accrued any or reversed capital gains based incentive fees , investment was 8.2 million , or $0.21 per share .
Speaker #4: Compared to 9.2 million , or $0.24 per share , in the prior quarter . We believe that adjusted net investment income remains an indicative metric of our ongoing and core performance , as removes the impact of capital based incentive gains which is an expense it under GAAP US each quarter but is not yet contractually due for the current quarter .
Taylor Ritchie: We have been working closely with each of these three companies, working alongside their management teams to support efforts to return to accrual status or pursuing exits where appropriate. Our non-accrual investments represent 3.8% of our total portfolio at cost and 1.5% at fair value. Our NAV increased to $14.95 per share compared to $13.53 per share at the end of the prior quarter. The increase was primarily a result of $1.77 per share of net unrealized appreciation and $0.09 per share of net realized gains. These increases were partially offset by $0.24 per share of distributions to common shareholders, $0.16 per share of net investment loss, and $0.03 per share of realized losses associated with the redemption of our 8% notes.
Taylor Ritchie: We have been working closely with each of these three companies, working alongside their management teams to support efforts to return to accrual status or pursuing exits where appropriate. Our non-accrual investments represent 3.8% of our total portfolio at cost and 1.5% at fair value. Our NAV increased to $14.95 per share compared to $13.53 per share at the end of the prior quarter. The increase was primarily a result of $1.77 per share of net unrealized appreciation and $0.09 per share of net realized gains. These increases were partially offset by $0.24 per share of distributions to common shareholders, $0.16 per share of net investment loss, and $0.03 per share of realized losses associated with the redemption of our 8% notes.
Speaker #4: We continue to have three portfolio companies on Nonaccrual status . We have been working closely with each of these three companies , working alongside their management teams to support efforts to return to accrual status or pursuing exits where appropriate .
Speaker #4: Our Nonaccrual investments represent 3.8% of our total portfolio at cost , 1.5% at fair value . Our and increased to $14.95 per share .
Speaker #4: Compared to $13.53 per share at the end of the prior quarter. The increase was primarily a result of $1.77 per share of net unrealized appreciation and realized $0.09 per share of gains.
Speaker #4: These increases net $0.24 per share of distributions to common shareholders , $0.16 per share of net investment loss , and $0.03 per share of realized losses associated with the redemption .
Taylor Ritchie: Moving on to our balance sheet, our ability to maintain sufficient liquidity, financial flexibility, and managing a fluctuating interest rate environment is essential to supporting and growing our portfolio. As part of our proactive balance sheet management, we redeemed the full $74.8 million outstanding balance of our 8% notes using proceeds from the recently issued $60 million 6.875% notes and borrowings under our line of credit. This redemption and new debt issuance reduced our interest burden for $75 million of debt capital by approximately 110 basis points. Further, we expanded our credit facility to include City National Bank with a $30 million commitment level. As a result of this expansion, we now have a total commitment level of $300 million under our facility, and as of yesterday's release, we had approximately $171 million in our remaining scalability.
Taylor Ritchie: Moving on to our balance sheet, our ability to maintain sufficient liquidity, financial flexibility, and managing a fluctuating interest rate environment is essential to supporting and growing our portfolio. As part of our proactive balance sheet management, we redeemed the full $74.8 million outstanding balance of our 8% notes using proceeds from the recently issued $60 million 6.875% notes and borrowings under our line of credit. This redemption and new debt issuance reduced our interest burden for $75 million of debt capital by approximately 110 basis points. Further, we expanded our credit facility to include City National Bank with a $30 million commitment level. As a result of this expansion, we now have a total commitment level of $300 million under our facility, and as of yesterday's release, we had approximately $171 million in our remaining scalability.
Speaker #4: 8% of our notes. Moving on to our balance sheet, our ability to maintain sufficient liquidity, financially managing flexibility, and fluctuating interest rates are essential to the environment supporting and growing our portfolio as part of our strategy.
Speaker #4: proactive As balance sheet management , we redeemed the full 74.8 million outstanding balance of our 8% notes using proceeds from the recently issued 60 million , 6.875% notes and borrowings on our credit line of .
Speaker #4: This redemption and new debt issuance reduced our interest burden for $75 million of debt capital by approximately 110 basis points. Further, we expanded our credit facility to include City National Bank with a $30 million commitment.
Speaker #4: As a result of this expansion, we now have a total commitment level of $300 million under our facility, and as of yesterday's release, we had approximately $131 million in remaining ability.
Taylor Ritchie: During the quarter, we raised approximately $3.2 million in net proceeds through common stock program issuances, while the price level of our common stock limited the number of days we were active on the ATM. We will look to sell under our ATM program in the future when prices are accretive to NAV. We believe that we are in a sufficiently strong liquidity position with our ability to access the debt capital markets and, when possible, the equity markets to support both the refinancing of upcoming debt maturities and our pipeline of new buyout opportunities. Overall, our leverage remains in a strong position with an asset coverage ratio as of 31 December 2025 of 201%, providing what we believe to be ample cushion to the required 150% coverage ratio.
Taylor Ritchie: During the quarter, we raised approximately $3.2 million in net proceeds through common stock program issuances, while the price level of our common stock limited the number of days we were active on the ATM. We will look to sell under our ATM program in the future when prices are accretive to NAV. We believe that we are in a sufficiently strong liquidity position with our ability to access the debt capital markets and, when possible, the equity markets to support both the refinancing of upcoming debt maturities and our pipeline of new buyout opportunities. Overall, our leverage remains in a strong position with an asset coverage ratio as of 31 December 2025 of 201%, providing what we believe to be ample cushion to the required 150% coverage ratio.
Speaker #4: During the quarter , we raised approximately 3.2 million in net proceeds through common stock begin program issuances . While the price common of our limited the stock days we number of the were .
Speaker #4: will We look to active on sell under our ATM program in the future . When accretive prices are to Nav . We believe that we are a sufficiently strong liquidity position with our ability to access the debt capital markets and when possible , the equity markets to support both the refinancing of upcoming debt maturities and our pipeline of new buyout opportunities .
Speaker #4: Overall , our leverage remains in a strong position with an asset coverage ratio . As of December 31st , 2025 , of 201% , providing what we believe to be ample cushion to the required 50% coverage ratio .
Taylor Ritchie: Focusing on our distributions to shareholders, we ended the prior fiscal year with $55.3 million or $1.50 per share in spillover, sufficient to cover our current monthly distribution of $0.08 per share for an annual run rate of $0.96 per share, as well as the $0.54 per share supplemental distribution we paid in June. As of December 31, our estimated spillover was approximately $22.9 million or $0.58 per share. We ended the quarter with total distributable income of $108.7 million or $2.73 per share. Total distributable income primarily consists of the net unrealized appreciation of our investments as well as the gap-adjusted balance of our spillover presented on our balance sheet.
Taylor Ritchie: Focusing on our distributions to shareholders, we ended the prior fiscal year with $55.3 million or $1.50 per share in spillover, sufficient to cover our current monthly distribution of $0.08 per share for an annual run rate of $0.96 per share, as well as the $0.54 per share supplemental distribution we paid in June. As of December 31, our estimated spillover was approximately $22.9 million or $0.58 per share. We ended the quarter with total distributable income of $108.7 million or $2.73 per share. Total distributable income primarily consists of the net unrealized appreciation of our investments as well as the gap-adjusted balance of our spillover presented on our balance sheet.
Speaker #4: Focusing on our distributions to shareholders , we ended the prior fiscal year or with 55.3 million , $1.50 per share , in spillover cover , sufficient to our current monthly distribution of $0.08 per share for an run annual rate of $0.96 per share , as well as the $0.54 per share supplemental distribution we paid in June .
Speaker #4: As of December 31st , our estimated spillover was approximately 22.9 million , or $0.58 per share . We ended the quarter with total distributable income of 108.7 million , or $2.73 per share .
Speaker #4: Total distributable income , primarily consists of the net unrealized appreciation of our investments , as well as a GAAP adjusted balance of our spillover presented on our balance sheet , including the $0.54 supplemental distribution in the current fiscal year .
Taylor Ritchie: Including the $0.54 supplemental distribution in the current fiscal year, we paid an aggregate of $3.26 per share across 13 supplemental distributions over the last five fiscal years, in addition to the $4.68 per share of monthly distributions during this time. This track record reflects our ability to maintain a stable monthly dividend while also delivering incremental returns to shareholders, underscoring the strength and consistency of our focused, equity-oriented investment strategies. Looking ahead, we expect supplemental distributions to remain an important component of our overall shareholder return strategy, with the amount and timing of future payments driven by realized capital gains on our equity investments along with other capital allocation considerations. This covers my part of today's call. I'll now hand it back over to you, David, to wrap us up.
Taylor Ritchie: Including the $0.54 supplemental distribution in the current fiscal year, we paid an aggregate of $3.26 per share across 13 supplemental distributions over the last five fiscal years, in addition to the $4.68 per share of monthly distributions during this time. This track record reflects our ability to maintain a stable monthly dividend while also delivering incremental returns to shareholders, underscoring the strength and consistency of our focused, equity-oriented investment strategies. Looking ahead, we expect supplemental distributions to remain an important component of our overall shareholder return strategy, with the amount and timing of future payments driven by realized capital gains on our equity investments along with other capital allocation considerations. This covers my part of today's call. I'll now hand it back over to you, David, to wrap us up.
Speaker #4: We paid an aggregate of $3.26 per share across distributions over the last five fiscal years, in addition to the $4.68 per share of monthly distributions during this time.
Speaker #4: Record reflects our ability to stably maintain a monthly, also delivering incremental returns to shareholders, underscoring the strength and consistency of our focus.
Speaker #4: Equity oriented investment strategy . Looking ahead , we expect supplemental distributions to remain an important component of our overall shareholder return strategy , with the amount and timing of future payments driven by realized capital gains on our equity investments , along with other capital allocation considerations .
David Gladstone: Well, thank you. Very nice, Taylor, and nice to Dave Dullum and Catherine Gerkis as well. This will tide over our shareholders until the next call, which will be at the end of March, which will be our annual as well as quarter. The call and Form 10-Q should bring everyone up to date. The team has reported solid results for the quarter ending 31 December 2025, including new investment activity and strong liquidity position to grow the portfolio throughout the fiscal year. We believe Gladstone Investment is a very attractive investment for investors seeking continued monthly distribution and some supplemental distributions from potential capital gains and other income. The team hopes to continue to show you a strong return on investment in our funds. Now let's open for some questions from the analyst and other shareholders. Please come on, Rafael.
David Gladstone: Well, thank you. Very nice, Taylor, and nice to Dave Dullum and Catherine Gerkis as well. This will tide over our shareholders until the next call, which will be at the end of March, which will be our annual as well as quarter. The call and Form 10-Q should bring everyone up to date. The team has reported solid results for the quarter ending 31 December 2025, including new investment activity and strong liquidity position to grow the portfolio throughout the fiscal year. We believe Gladstone Investment is a very attractive investment for investors seeking continued monthly distribution and some supplemental distributions from potential capital gains and other income. The team hopes to continue to show you a strong return on investment in our funds. Now let's open for some questions from the analyst and other shareholders. Please come on, Rafael.
Speaker #4: This covers my part of today's call . I'll now hand it back over to you , David , to wrap up .
Speaker #1: Well , thank you . Very nice . Taylor . And nice by David Dullum and Catherine Gerkis as well . This will tidy over our shareholders until the next call , which will be at the end of March , which will be our annual as as well our reporter .
Speaker #1: The the call and form 10-q should bring everyone up to date . Team has reported solid results for the quarter ending December 31st , 2025 , including new investment activity and liquidity strong position to grow the portfolio throughout the fiscal year , we believe Gladstone Investment is very attractive investment for investors seeking continued monthly distribution and some supplemental distributions from potential capital gains and other income .
Speaker #1: The team hopes to continue to show you a strong return on investment in our funds . Now , let's stop for some questions from the analyst and other shareholders .
Operator: Thank you. We will now conduct a question-and-answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Once again, that's star 1 at this time. One moment while we pull for our first question. The first question comes from Mickey Schleien with Clear Street. Please proceed.
Operator: Thank you. We will now conduct a question-and-answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Once again, that's star 1 at this time. One moment while we pull for our first question. The first question comes from Mickey Schleien with Clear Street. Please proceed.
Speaker #1: Please come on before you.
Speaker #2: you . Thank We will now conduct a question and answer would like session . a to ask question , please press star one on your telephone keypad .
Speaker #2: A confirmation tone will indicate your line is in the question queue . For participants in speaking equipment , it may be necessary to pick up your handset before pressing the star keys .
Speaker #2: Once again , that's star one at this time . One moment while we pose for our first question . The first question comes from Mickey Schleien with Clear Street .
Mickey Schleien: Yes. Good morning, everyone. Dave, a good portion of the appreciation in NAV this quarter came from three investments: Schylling, Old World, and SFEG. Can you discuss the operational or valuation changes that drove that appreciation for each of those companies?
Mickey Schleien: Yes. Good morning, everyone. Dave, a good portion of the appreciation in NAV this quarter came from three investments: Schylling, Old World, and SFEG. Can you discuss the operational or valuation changes that drove that appreciation for each of those companies?
Speaker #2: Please proceed .
Speaker #5: Yes . morning Good everyone . Dave , a good portion of the appreciation Nav in this quarter came from three investments shilling Old World and SFE .
Speaker #5: Can you discuss the operational or valuation changes that drove that appreciation for each of those companies ? Sure . Hi .
David Dullum: Sure. Hi, Mickey. Nice to chat with you. Yeah, and actually, we had a pretty significant those three you mentioned were large numbers, but we have a number of other companies, indeed, also that had, relatively speaking, pretty significant increases as well. But fundamentally, all the ones that were these large increases were fundamentally no multiple change but pretty much all because of EBITDA increase, which is obviously the best situation. So yeah, that was true of all three of those that you specifically mentioned.
David Dullum: Sure. Hi, Mickey. Nice to chat with you. Yeah, and actually, we had a pretty significant those three you mentioned were large numbers, but we have a number of other companies, indeed, also that had, relatively speaking, pretty significant increases as well. But fundamentally, all the ones that were these large increases were fundamentally no multiple change but pretty much all because of EBITDA increase, which is obviously the best situation. So yeah, that was true of all three of those that you specifically mentioned.
Speaker #6: Nikki , nice to chat with you . Yeah . And actually , we had a pretty significant those three you mentioned were large numbers , but we have a number of other companies indeed .
Speaker #6: Also that that had , relatively speaking , pretty significant increase as well . But fundamentally , all the ones that were these large increases were fundamentally no multiple change .
Speaker #6: But pretty much all because of EBITDA increase . So , you know , which is best , obviously the best situation . yeah , that was true of all three of those that you specifically mentioned .
Mickey Schleien: That's interesting.
Mickey Schleien: That's interesting.
David Dullum: So the EBITDA was just, yeah. Sorry, go ahead.
David Dullum: So the EBITDA was just, yeah. Sorry, go ahead.
Mickey Schleien: So that's interesting. I don't know if it's pronounced Schylling or Schilling, but Schylling and Old World are obviously consumer-oriented companies, and we're reading so much about the K-shaped economy. So what's sort of different about those two companies that's allowing them to grow their EBITDA even with the headwinds in the consumer sector?
Mickey Schleien: So that's interesting. I don't know if it's pronounced Schylling or Schilling, but Schylling and Old World are obviously consumer-oriented companies, and we're reading so much about the K-shaped economy. So what's sort of different about those two companies that's allowing them to grow their EBITDA even with the headwinds in the consumer sector?
Speaker #6: That's interesting . Yeah . Sorry .
Speaker #5: Go ahead . That's interesting . I don't know if it's shilling pronounced or shilling , but but shilling and old shilling and old World are obviously consumer oriented companies .
Speaker #5: And reading we're so much about the K shaped . So what sort of different about those two companies that that's allowing them to , to grow EBITDA their , even with the headwinds in the consumer sector ?
David Dullum: Yeah, I think the only answer I can give is the products that they make and sell, obviously. Schylling is a very interesting business, and they have a very unique product which makes up a reasonable portion of their overall revenue, something called NeeDoh. It's one of these things where you squeeze for a variety of reasons, and they have different types of that. And that product has had huge demand even with, as you point out, forget consumer demand generally, but the whole tariff increases that we've seen in their products; of course, a significant portion comes from the Far East. So even with that, they have literally been able to maintain a level of demand that just, frankly, has allowed the company to perform at an exceptionally high level. Old World Christmas, obviously, Christmas tree ornaments; you're familiar with those, I think. You've seen them.
David Dullum: Yeah, I think the only answer I can give is the products that they make and sell, obviously. Schylling is a very interesting business, and they have a very unique product which makes up a reasonable portion of their overall revenue, something called NeeDoh. It's one of these things where you squeeze for a variety of reasons, and they have different types of that. And that product has had huge demand even with, as you point out, forget consumer demand generally, but the whole tariff increases that we've seen in their products; of course, a significant portion comes from the Far East. So even with that, they have literally been able to maintain a level of demand that just, frankly, has allowed the company to perform at an exceptionally high level. Old World Christmas, obviously, Christmas tree ornaments; you're familiar with those, I think. You've seen them.
Speaker #6: Yeah , I think the only answer I can give is the products that they make and sell . Obviously , shilling is a very interesting business , you know , and they have a very unique product which makes up a reasonable portion of their of their overall revenue , something called Nido .
Speaker #6: It's one of these things where you squeeze for variety of a reasons , and they different types of that and that , that product has had huge demand , even with , as you point out , forget consumer demand generally , but the whole tariff increases that we've seen in their products , of course , are significant .
Speaker #6: Portion comes from the Far East . So even with that , they have literally been able to maintain a level of demand that just frankly has has allowed the company to perform an exceptionally high level over Christmas .
David Dullum: And again, they're a well-run business. All these companies are very well run. We've got great management teams on pretty much, frankly, all of our portfolio companies right now, and they've just been able to outperform, I guess, really the consumer demand side of things, as you say. I don't have any further specific real insights to that other than, again, good management, quality products, and being able to manage through the tariff impacts.
David Dullum: And again, they're a well-run business. All these companies are very well run. We've got great management teams on pretty much, frankly, all of our portfolio companies right now, and they've just been able to outperform, I guess, really the consumer demand side of things, as you say. I don't have any further specific real insights to that other than, again, good management, quality products, and being able to manage through the tariff impacts.
Speaker #6: Obviously , Christmas tree ornaments , you're familiar with those ? I think you've seen them . And again , they're well-run business . All of these companies are very well run .
Speaker #6: We've got great management on pretty much teams frankly , all of our portfolio companies right now , and they've just been able to , you know , to outperform , I guess really the consumer demand side of things , as you say , I don't have any further specific real insights to that other than , again , good , good management , quality products and been able to manage through the the tariff impacts .
Mickey Schleien: That's really good to hear. Dave, you also recently invested in Rowan Energy. Can you walk us through how you underwrote that deal, particularly how you assessed the cyclicality in the energy equipment, fracking, sand filtration sector, and what assumptions you made about where Rowan stands in its business cycle?
Mickey Schleien: That's really good to hear. Dave, you also recently invested in Rowan Energy. Can you walk us through how you underwrote that deal, particularly how you assessed the cyclicality in the energy equipment, fracking, sand filtration sector, and what assumptions you made about where Rowan stands in its business cycle?
Speaker #5: That's that's really good to hear . Dave , you also recently invested in Rowan Energy . Can you walk us through how you underwrote that deal , particularly how you assess the cyclicality in the energy equipment , fracking , sand filtration sector and what are some assumptions you made about where Rowan stands in its business cycle ?
David Dullum: That's the answer I can give you, Mickey. We can certainly chat about this offline if you need, and bring some of the other folks involved that were more directly involved in those companies. But as you know, we have a couple of investments now that are in the energy-related sector. One company in particular, E3, which also had a very interesting and nice increase in valuation. And what we have there is a quality and experienced team running that, particularly E3, and that, frankly, helps us to move off into and be able to evaluate companies such as what you mentioned. Smart Chemical is another one. And so we have knowledge and experience within our portfolio to help properly evaluate that.
David Dullum: That's the answer I can give you, Mickey. We can certainly chat about this offline if you need, and bring some of the other folks involved that were more directly involved in those companies. But as you know, we have a couple of investments now that are in the energy-related sector. One company in particular, E3, which also had a very interesting and nice increase in valuation. And what we have there is a quality and experienced team running that, particularly E3, and that, frankly, helps us to move off into and be able to evaluate companies such as what you mentioned. Smart Chemical is another one. And so we have knowledge and experience within our portfolio to help properly evaluate that.
Speaker #6: Best answer I can give you , Mickey . We can certainly chat about this offline if you need . And , you know , bring some of the other folks involved that were more directly involved in those companies .
Speaker #6: But as you know , we have a couple of investments now that are in the energy related sector . One company in particular , E3 , which also had a very interesting and nice increase in valuation and what we have is there , a quality and experienced team running that particular frankly and that E3 helps us to move off into and be able to evaluate companies such as , you know what you mentioned , smart chemical is another one .
Speaker #6: And so we have we have knowledge and experience within our portfolio to help properly evaluate that . So right now and through those lenses , we feel like where these guys are in their cycle , that we still have upside and we're able to manage it through valuations .
David Dullum: So right now, and through those lenses, we feel like where these guys are in their cycle, that we still have upside, and we've been able to manage it through valuations, frankly, that also are at a level that aren't really. I'll use the words carefully, but overpaying, so to speak. But anyway, it's one that we can talk about in more detail if you really want to later on.
David Dullum: So right now, and through those lenses, we feel like where these guys are in their cycle, that we still have upside, and we've been able to manage it through valuations, frankly, that also are at a level that aren't really. I'll use the words carefully, but overpaying, so to speak. But anyway, it's one that we can talk about in more detail if you really want to later on.
Speaker #6: that Frankly , also are at a level that that aren't really I'll use the words carefully , but overpaying , so to speak .
Mickey Schleien: I appreciate that. Dave or maybe Taylor, if I look at the table in the press release regarding floor rates, I want to make sure I understand it. Is it correct to say that about half the portfolio has about 80 basis points of downside in average yields?
Mickey Schleien: I appreciate that. Dave or maybe Taylor, if I look at the table in the press release regarding floor rates, I want to make sure I understand it. Is it correct to say that about half the portfolio has about 80 basis points of downside in average yields?
Speaker #6: But anyway, it's one that we can talk about in more detail if you really want us to. Later on.
Speaker #5: I appreciate that , Dave . Or maybe Taylor , if I look at the table in the press release regarding flow rates , I want to make sure I understand it .
Speaker #5: Is it correct to say that the half about about portfolio 80 basis points , 80 basis points of downside in average yields ?
David Dullum: Yes, but the way for us to get there, we would need significant decreases in SOFR. So it wouldn't just be 80 basis points would get to that level of 12.1% floor. We would need closer to 210 basis points to be able to bring SOFR down to a level where the other portfolio companies would then hit their floors. So there's some wiggle room. And as you can see, with the fact that the basis point decrease right below that table there, the 25, 50, 75, 100 basis point decreases in SOFR, you can see as that decrease occurs, the decrease to the overall rate is not one-for-one. And that's because we start hitting the interest rate floors of more of the portfolio companies.
David Dullum: Yes, but the way for us to get there, we would need significant decreases in SOFR. So it wouldn't just be 80 basis points would get to that level of 12.1% floor. We would need closer to 210 basis points to be able to bring SOFR down to a level where the other portfolio companies would then hit their floors. So there's some wiggle room. And as you can see, with the fact that the basis point decrease right below that table there, the 25, 50, 75, 100 basis point decreases in SOFR, you can see as that decrease occurs, the decrease to the overall rate is not one-for-one. And that's because we start hitting the interest rate floors of more of the portfolio companies.
Speaker #4: Yes , but the the way for us to get there , we would need . Significant decreases in sofr . So it wouldn't just be 80 basis points would get to that level of 12.1% .
Speaker #4: Floor. We would need closer to 210 basis points to be able to bring SOFR down to a level where the other portfolio companies then would hit their floors.
Speaker #4: So there's there's some wiggle room . And as you can see with the fact that the basis point decrease right below that table there , the 25 , 50 , 75 , 100% or 100 basis point decreases .
Speaker #4: And so you can see as that decrease occurs , the decrease to the overall rate not is one . And one for that's because we start hitting the interest rate floors of more of the portfolio companies .
Mickey Schleien: Okay. Yeah, I understand. And lastly, given sort of the typical portfolio companies that you are attracted to, is it reasonable to say that there's sort of limited risk from AI in the portfolio? And how are you looking at that in terms of the pipeline?
Mickey Schleien: Okay. Yeah, I understand. And lastly, given sort of the typical portfolio companies that you are attracted to, is it reasonable to say that there's sort of limited risk from AI in the portfolio? And how are you looking at that in terms of the pipeline?
Speaker #5: Okay . Yeah I understand . And lastly , you know , given sort of the typical portfolio companies that you are to attracted , is it reasonable to that say there's sort of limited risk from AI in the portfolio ?
David Dullum: Yeah, that terminology, of course, is pretty broad, right? AI. I guess what I would say is that most of our companies, to the extent that AI is important, they're actually using it to some degree. And I think you, in fact, if you recall, coming out to our conference last year, we had a fair amount of stuff on that, and I think you heard some of that as well. So a number of our portfolio companies are utilizing various aspects of AI, which is enhancing either their efficiency in whether it be designing some of the product you mentioned, Schylling. Again, actually, for a couple of years now, they've been using some aspect of AI in helping them to really design efficiently some of their products and so on.
David Dullum: Yeah, that terminology, of course, is pretty broad, right? AI. I guess what I would say is that most of our companies, to the extent that AI is important, they're actually using it to some degree. And I think you, in fact, if you recall, coming out to our conference last year, we had a fair amount of stuff on that, and I think you heard some of that as well. So a number of our portfolio companies are utilizing various aspects of AI, which is enhancing either their efficiency in whether it be designing some of the product you mentioned, Schylling. Again, actually, for a couple of years now, they've been using some aspect of AI in helping them to really design efficiently some of their products and so on.
Speaker #5: And how are you looking at that in terms of the pipeline ? Yeah .
Speaker #6: that I terminology , of pretty right ? course , is broad , yeah , AI I guess what I say would is that our most of companies are extent that AI is important , they're actually using it to some degree .
Speaker #6: And I think if you, in fact, recall coming out to our conference last year, we had a fair amount of stuff on that.
Speaker #6: And I think you heard some of that as well . So a number of our portfolio companies are utilizing various aspects of AI , which is enhancing , you know , their either their efficiency in whether it be designing some of the products you mentioned shilling again , actually for a they couple of years now , they've been using some aspect of AI in helping them to to really design efficiently some of their products and so on .
David Dullum: So I would say, yeah, we're more a beneficiary to some extent than necessarily, as you point out, where we have a tech company that might be directly in that space, and there may be real competition for that. I would say we don't have that in our portfolio. So you're correct.
David Dullum: So I would say, yeah, we're more a beneficiary to some extent than necessarily, as you point out, where we have a tech company that might be directly in that space, and there may be real competition for that. I would say we don't have that in our portfolio. So you're correct.
Speaker #6: So I would say , yeah , we're more beneficiary to some extent than than necessarily , as you point out , where we have a tech company that might be directly in that space , and there may be real competition for that .
Mickey Schleien: Okay. That's good to hear. Those are all my questions. I appreciate your time this morning. Thank you.
Mickey Schleien: Okay. That's good to hear. Those are all my questions. I appreciate your time this morning. Thank you.
Speaker #6: I would say we don't have that in our portfolio, so you're correct. Yeah.
David Dullum: Thank you.
David Dullum: Thank you.
Speaker #5: That's good to hear . Those are all my questions . I appreciate your time this morning . Thank you .
Mickey Schleien: Who's up next?
Mickey Schleien: Who's up next?
Operator: The next question comes from Christopher Nolan with Ladenburg Thalmann. Please proceed.
Operator: The next question comes from Christopher Nolan with Ladenburg Thalmann. Please proceed.
Speaker #6: Thank you .
Mickey Schleien: Hi. Thanks for taking my question. As a follow-up to the unrealized gains, were those mostly related to equity gains in the portfolio?
Mickey Schleien: Hi. Thanks for taking my question. As a follow-up to the unrealized gains, were those mostly related to equity gains in the portfolio?
Speaker #1: Who's up next ?
Speaker #2: The next question comes from Christopher Nolan with Ladenburg Thalmann . Please proceed .
Speaker #5: Hi . Thanks for taking my question . As a follow up to the unrealized gains , were those related to mostly equity gains in the portfolio ?
David Dullum: Yes. They were predominantly equity. We did have a handful of portfolio companies that experienced debt fair value increases, as the overall TEV for that portfolio company was increasing as a result of both multiple increases and EBITDA increases. But the bulk of it, yes, it is equity-driven.
David Dullum: Yes. They were predominantly equity. We did have a handful of portfolio companies that experienced debt fair value increases, as the overall TEV for that portfolio company was increasing as a result of both multiple increases and EBITDA increases. But the bulk of it, yes, it is equity-driven.
Speaker #4: Yes , they were predominantly equity . We did have a portfolio companies that experienced or debt debt fair value increases as the overall TV for that portfolio company was increasing as a both result of multiple increases and EBITDA increases .
Mickey Schleien: And then in the comments section, you guys said there's good liquidity in the M&A market. I've heard from other managements where credit is widely available to a lot of these middle-market companies, but equity is less, though. Do you have a different take on that? And if equity is less prevalent, does that give you a competitive advantage?
Mickey Schleien: And then in the comments section, you guys said there's good liquidity in the M&A market. I've heard from other managements where credit is widely available to a lot of these middle-market companies, but equity is less, though. Do you have a different take on that? And if equity is less prevalent, does that give you a competitive advantage?
Speaker #4: But the bulk of it, yes, it is equity driven.
Speaker #5: And then in the comments section , you guys said there's good liquidity in the M&A market . I've heard from other managements where is widely available to all of these credit market companies , but equity is less so do you have a different take on that ?
David Dullum: Yeah. So I guess, Chris, my response to that might be, from my experience, our experience, I think maybe the folks that, let's say, we compete with a traditional BDC, excuse me, traditional private equity guys, to the extent that they're able to access leverage at more attractive rates, I think that's why if they can put less equity in and slightly higher leverage at lower rates, they're doing some of that. I think this gives us an advantage as well because we're bringing, again, the equity and the debt, and we can moderate that. So we get the leverage on our own equity. But I would say that it's competitive, frankly, with the direct M&A shops because valuations, while we're seeing some elevation, frankly, on elevations, the fact that they can get leverage at lower rates, relatively speaking, makes them pretty competitive as well.
David Dullum: Yeah. So I guess, Chris, my response to that might be, from my experience, our experience, I think maybe the folks that, let's say, we compete with a traditional BDC, excuse me, traditional private equity guys, to the extent that they're able to access leverage at more attractive rates, I think that's why if they can put less equity in and slightly higher leverage at lower rates, they're doing some of that. I think this gives us an advantage as well because we're bringing, again, the equity and the debt, and we can moderate that. So we get the leverage on our own equity. But I would say that it's competitive, frankly, with the direct M&A shops because valuations, while we're seeing some elevation, frankly, on elevations, the fact that they can get leverage at lower rates, relatively speaking, makes them pretty competitive as well.
Speaker #5: And if equity is less prevalent , does that give you a competitive advantage ?
Speaker #6: Yeah . So I guess Chris , my response to that might be from my experience , our experience , I think maybe our the folks that let's say we compete with the traditional BD , excuse me , traditional private equity guys , to the extent that they're able to access leverage at more attractive rates , I you think that's where , know why .
Speaker #6: can put If they less and equity in slightly higher leverage or lower rates , they're doing some of that . this think I gives us an advantage , though , as well , because we're bringing , again , the equity and the debt , and we can moderate that .
Speaker #6: So we get the leverage on our own equity . But I would say that it's competitive , frankly , with the M&A , direct shops M&A , because valuations , while we're seeing elevation some , frankly , on elevations , the fact that they can get , you leverage at lower rates , relatively speaking , makes them pretty as well .
David Dullum: So to your point, they might put in less equity, put in a bit more leverage, and be competitive with us even though we're doing the debt and the equity. So it gives us a slight advantage in that when we deal with a management team and we're trying to buy the business, we at least are speaking for the whole capital stack, and we have a bit more certainty there versus, say, a traditional firm that might have to go out and try to raise the debt, whereas we at least can speak for all of it. So it gives us a slight edge. But yeah, there's a fair amount of capital out there in both, I'd say, certainly the debt market and clearly on the equity side, from our experience.
David Dullum: So to your point, they might put in less equity, put in a bit more leverage, and be competitive with us even though we're doing the debt and the equity. So it gives us a slight advantage in that when we deal with a management team and we're trying to buy the business, we at least are speaking for the whole capital stack, and we have a bit more certainty there versus, say, a traditional firm that might have to go out and try to raise the debt, whereas we at least can speak for all of it. So it gives us a slight edge. But yeah, there's a fair amount of capital out there in both, I'd say, certainly the debt market and clearly on the equity side, from our experience.
Speaker #6: your competitive So to point , that might put in less equity , put in a bit more leverage and be competitive , even with us though we're debt and the doing the equity .
Speaker #6: So gives us a slight it advantage in that when we deal with a management team and we're trying to business , we at least are speaking buy the for the whole stack and we have capital more certainty there a bit versus say , say , a traditional that firm might have to go try to out and raise the debt , whereas we at least can speak for So it gives us all of it .
Speaker #6: a slight edge . yeah , it's But there's a fair amount of out there capital in both it . I'd that market say and certainly the debt clearly on the equity side from our experience , great ,
Mickey Schleien: Great. Great. Final question. Given the decline in base rates over the last year or so, will that have any positive effect in the discount rate used in your fair value calculations for your portfolio companies going forward?
Mickey Schleien: Great. Great. Final question. Given the decline in base rates over the last year or so, will that have any positive effect in the discount rate used in your fair value calculations for your portfolio companies going forward?
Speaker #5: Great question . And final , given the decline in base rates over the last year or so , have will that any positive effect in fair rate used in evaluation discount value calculations for your portfolio companies going forward ?
David Dullum: Okay. Clarify that question again for me, Chris. Say it again.
David Dullum: Okay. Clarify that question again for me, Chris. Say it again.
Mickey Schleien: Sure. Sure. Yeah. The risk-free rate's gone down when the Fed cuts rates. And does that affect the discount rate used in your discounted cash flow valuations when you're fair valuing an investment?
Mickey Schleien: Sure. Sure. Yeah. The risk-free rate's gone down when the Fed cuts rates. And does that affect the discount rate used in your discounted cash flow valuations when you're fair valuing an investment?
Speaker #7: Okay .
Speaker #4: Clarify that question again for me , Chris . Say it again .
Speaker #5: Yeah . The risk free rate has gone down when the fed cuts rates and does that affect the discount rate used in your discount cash flow evaluations when your fair valuing an investment ?
David Dullum: Well, most of our investments are being fair valued using a TEV valuation. So we're really looking at what EBITDA is times the multiple that we're setting for that portfolio company. So using a DCF model isn't as prevalent for our overall valuation approach. But yes, you are correct. In theory, that would improve it, but that's not how we're really valuing the bulk of our investments.
David Dullum: Well, most of our investments are being fair valued using a TEV valuation. So we're really looking at what EBITDA is times the multiple that we're setting for that portfolio company. So using a DCF model isn't as prevalent for our overall valuation approach. But yes, you are correct. In theory, that would improve it, but that's not how we're really valuing the bulk of our investments.
Speaker #4: most of our Well , investments are being fair valued using a TeV valuation . So we're really looking what at EBITDA is times the multiple that we're setting for that portfolio company .
Speaker #4: So the using a DCF model isn't as prevalent for our overall valuation approach . But yes , you are correct . In theory that would improve it .
Mickey Schleien: Great. Great quarter. They're unusual in terms of the dynamics. You guys have a super gap EPS profit and an NII EPS loss and super jump in that per share. But good show. Thank you.
Mickey Schleien: Great. Great quarter. They're unusual in terms of the dynamics. You guys have a super gap EPS profit and an NII EPS loss and super jump in that per share. But good show. Thank you.
Speaker #4: that's not how we're But really valuing the bulk of our investments .
Speaker #5: Great . Great quarter . Very unusual in terms of the dynamics . You know , you a guys have super GAAP EPs profit and a NII , EPs loss and super jump and not per share , but on good show .
David Dullum: Thanks, Chris.
David Dullum: Thanks, Chris.
Mickey Schleien: Oh, yeah. You have another question?
Mickey Schleien: Oh, yeah. You have another question?
Operator: The next question comes from Eric Zweig with Lucid Capital. Please proceed.
Operator: The next question comes from Eric Zweig with Lucid Capital. Please proceed.
Speaker #5: Thank you
Speaker #5: . Thanks ,
Speaker #6: .
Speaker #1: You have question Chris another .
Operator: Thanks. Good morning. This is Justin. I'm for Eric today. Just wondering if you could speak on the current state of underwriting conditions and specifically if you're seeing any pressure on terms or structure given the tighter spread environment.
Operator: Thanks. Good morning. This is Justin. I'm for Eric today. Just wondering if you could speak on the current state of underwriting conditions and specifically if you're seeing any pressure on terms or structure given the tighter spread environment.
Speaker #2: next question comes from The Lucid Eric Zwick with Please proceed Capital .
Speaker #2: .
Speaker #8: Thanks . Justin . I'm This is Eric today Good morning . . Just wondering if you for could speak on the state of current underwriting conditions and if you're specifically seeing any pressure on structure terms or given the tighter spread environment .
David Dullum: Yeah. For us, I would say, Justin, probably not. As I mentioned earlier, because of availability of lower leverage. So when we're competing for a deal, for us, we still try to stick with our formula. Typically, it's about 70% of our assets or the investment that we make is in debt. In the debt security, 30% roughly is in the equity security. So when we combine those, we're driving for an effective yield on the total dollars relative to our essentially cost of capital, being very cognizant of the income aspect of it for dividend distribution. But likewise, we look for on the upside, we always try to see a way to, say, 2 times cash on cash on the equity side of things. So our model really hasn't changed.
David Dullum: Yeah. For us, I would say, Justin, probably not. As I mentioned earlier, because of availability of lower leverage. So when we're competing for a deal, for us, we still try to stick with our formula. Typically, it's about 70% of our assets or the investment that we make is in debt. In the debt security, 30% roughly is in the equity security. So when we combine those, we're driving for an effective yield on the total dollars relative to our essentially cost of capital, being very cognizant of the income aspect of it for dividend distribution. But likewise, we look for on the upside, we always try to see a way to, say, 2 times cash on cash on the equity side of things. So our model really hasn't changed.
Speaker #6: Yeah , I us , for I would say , probably Justin not . You as I earlier , because of mentioned know , availability of leverage , lower leverage .
Speaker #6: when we're competing for a So deal for us , we still try to stick with our formula . it's Typically about 70% of our assets or the investment that we make is in debt .
Speaker #6: And the debt security 30% roughly is in the equity security . So when we combine those , we're driving for an effective yield on the total dollars relative to our essential cost of capital , being very cognizant of , you know , the income aspect of it dividend to for distribution .
Speaker #6: But likewise , we look for , you know , on the upside , we always try to see a to way pay cash on two times cash on the equity side of So our things .
David Dullum: What we have found, yes, indeed, there have been a couple of deals that we've been working on that we liked and we're bidding on, if you will. And we were a couple of turns off on the multiple. But we stay pretty disciplined. And given what we're seeing out there, I don't see us having to change too dramatically our model. I mean, if we saw something we really liked and we could, say, put a bit more debt on it and generate more income so long as we weren't sacrificing too significantly the equity side of things, we will do that. But that's not necessarily because of the market, it's just because of the way we might look at the deal itself, if that helps.
David Dullum: What we have found, yes, indeed, there have been a couple of deals that we've been working on that we liked and we're bidding on, if you will. And we were a couple of turns off on the multiple. But we stay pretty disciplined. And given what we're seeing out there, I don't see us having to change too dramatically our model. I mean, if we saw something we really liked and we could, say, put a bit more debt on it and generate more income so long as we weren't sacrificing too significantly the equity side of things, we will do that. But that's not necessarily because of the market, it's just because of the way we might look at the deal itself, if that helps.
Speaker #6: model really hasn't changed what we have found . Yes , indeed . There have been a couple of deals that we've been working on that we liked and we're , you know , we're bidding on , if you will .
Speaker #6: And we were , you know , a couple of turns off on , on the multiple . But , you know , we stay pretty disciplined and given what we're seeing out there , I don't see us having to change to dramatically our , our if we model .
Speaker #6: saw I mean , something we really liked and we could say put a bit more debt on it and generate more income , so long as we weren't sacrificing two significantly , the the equity side of things , we will do that .
Speaker #6: But that's not necessarily because of the market . It's just because of the way we might look at look at the deal itself , if that helps .
Operator: Yeah. Thanks. And Dave, in your prepared remarks, you described the pipeline as very healthy. Can you talk about how it's looking compared to maybe a year ago? And are there any specific sectors where you're seeing better deals than others?
Operator: Yeah. Thanks. And Dave, in your prepared remarks, you described the pipeline as very healthy. Can you talk about how it's looking compared to maybe a year ago? And are there any specific sectors where you're seeing better deals than others?
Speaker #8: Thanks . Yeah . And Dave , in your prepared remarks , you describe the pipeline as very healthy . Can you talk about how it's looking year compared to maybe ago , and are there any specific you're sectors where seeing better deals than others ?
David Dullum: Yeah. I'd say compared to a year ago, probably similar. Certainly not lower. We're seeing them really across all sectors. We have seen recently a few areas. The consumer side of things, as actually Mickey was asking earlier, even though our portfolio and our consumer companies are doing really well, consumer side of things are a little bit, obviously, slower, a great part because, again, we talk about tariffs. And so when we look at a new deal that's consumer-driven, you have to really be very sensitive to the cost of product because of tariffs and so on. And that has some effect there, certainly. It's business services. We're seeing reasonably good things in the business service area, interestingly enough. On the manufacturing side, seeing things I just kind of reflected in our portfolio, kind of in the aerospace and defense area.
David Dullum: Yeah. I'd say compared to a year ago, probably similar. Certainly not lower. We're seeing them really across all sectors. We have seen recently a few areas. The consumer side of things, as actually Mickey was asking earlier, even though our portfolio and our consumer companies are doing really well, consumer side of things are a little bit, obviously, slower, a great part because, again, we talk about tariffs. And so when we look at a new deal that's consumer-driven, you have to really be very sensitive to the cost of product because of tariffs and so on. And that has some effect there, certainly. It's business services. We're seeing reasonably good things in the business service area, interestingly enough. On the manufacturing side, seeing things I just kind of reflected in our portfolio, kind of in the aerospace and defense area.
Speaker #6: Yeah , I'd say compared to a year ago , probably similar . Certainly not . lower . Not We're seeing them really across all sectors .
Speaker #6: We have seen recently a few areas , consumer side of things is actually Mickey was earlier , even though our experience with a portfolio and our consumer companies are doing really well , consumer side things are a of little bit slower .
Speaker #6: A great part because again , we talk about tariffs . And so when we look at a new deal , let's say consumer driven , you have to really be be very sensitive to the to the cost of product because of so on .
Speaker #6: And tariffs and that has effect . some There certainly business services we're seeing reasonably good things in the business service area . Interestingly enough , on on the manufacturing side , seeing things just kind of reflected in portfolio our , kind of in the in , space and the air defense area .
David Dullum: There are certainly aspects with what government's doing, etc. So we've seen somewhat of a pickup in that area. So generally speaking, I'd say pretty much across the board, everything is looking, we're seeing about the same, certainly, as about a year ago. And if there's any one area that might be a little weaker in terms of looking forward, it might be somewhat in the consumer area.
David Dullum: There are certainly aspects with what government's doing, etc. So we've seen somewhat of a pickup in that area. So generally speaking, I'd say pretty much across the board, everything is looking, we're seeing about the same, certainly, as about a year ago. And if there's any one area that might be a little weaker in terms of looking forward, it might be somewhat in the consumer area.
Speaker #6: they're certainly You know , of with aspects what we've government's doing . So seen somewhat of a of a pickup in that area .
Speaker #6: So I'd say speaking , much pretty generally everything across the board looking you seeing same certainly is is about the know , we're And if there ago .
Speaker #6: is any one area that might be about a year a little of be somewhat in terms looking forward , might weaker in consumer the area .
Operator: Other questions?
Operator: Other questions?
[Analyst] (Lucid Capital Markets): Okay. Thanks. And.
Operator: Okay. Thanks. And.
David Dullum: Thank you, Justin.
David Dullum: Thank you, Justin.
[Analyst] (Lucid Capital Markets): It was good to see, sorry. I just got one more.
David Dullum: It was good to see, sorry. I just got one more.
David Dullum: No, go ahead.
David Dullum: No, go ahead.
[Analyst] (Lucid Capital Markets): Yes, sir. It was good to see that you're non-accrualists with stable quarter-over-quarter. Just wondering if you could talk about your current outlook for asset quality and if there's any near-term opportunities to resolve any of the remaining names that are on non-accrual.
David Dullum: Yes, sir. It was good to see that you're non-accrualists with stable quarter-over-quarter. Just wondering if you could talk about your current outlook for asset quality and if there's any near-term opportunities to resolve any of the remaining names that are on non-accrual.
Speaker #1: The questions Jeff .
Speaker #6: Thank
Speaker #6: you ,
Speaker #6: Justin .
Speaker #8: . Sorry , see I just got Thanks one . It
Speaker #8: Go ahead . was good to you're see that It was good to with cruelest not a and . stable quarter over quarter outlook Yes , sir .
Speaker #8: for . Just about your for wondering if you could talk quality and if there's asset opportunities any near-term remaining names that to current are on Non-accrual .
David Dullum: Yeah. I would say this. The ones that are currently on non-accrual, in differing degrees, I feel better about them, honestly, today than if you'd asked me that question perhaps a year ago, in part because we're taking some actions. Again, they're all generating, actually, positive EBITDA. There are some structural reasons why we don't have them back yet on accrual. But between some of the things that we're doing with them, we might even see a potential exit and certainly improvement to the point where we actually will be able to get them back on accrual. So I see it as a positive looking forward versus it being a negative. No, I agree. And where we stand with these three companies, there's no, or it doesn't feel like we are in a next quarter it will change, but the outlook is much more positive.
David Dullum: Yeah. I would say this. The ones that are currently on non-accrual, in differing degrees, I feel better about them, honestly, today than if you'd asked me that question perhaps a year ago, in part because we're taking some actions. Again, they're all generating, actually, positive EBITDA. There are some structural reasons why we don't have them back yet on accrual. But between some of the things that we're doing with them, we might even see a potential exit and certainly improvement to the point where we actually will be able to get them back on accrual. So I see it as a positive looking forward versus it being a negative. No, I agree. And where we stand with these three companies, there's no, or it doesn't feel like we are in a next quarter it will change, but the outlook is much more positive.
Speaker #6: say
Speaker #6: this . The I would Yeah , ones that are currently on Non-accrual in differing the I feel better degrees , about them . today Honestly , than if ask me that you'd question .
Speaker #6: Perhaps a year , in ago part because we're taking some actions again , they're all generating actually positive EBITDA . are some There structural why we reasons don't back On on yet .
Speaker #6: have them accrual between some of the things that we're them , doing with we might even see a potential exit . And certainly improvement to the point where we actually will be able to get them back on accrual .
Speaker #6: So I see it as a as a positive forward looking versus it being a negative . No .
Speaker #4: I agree , and .
Speaker #6: I .
Speaker #4: Where we stand with these three companies , there's no or it doesn't feel like we are in a next quarter . It will change .
David Dullum: In every quarter, it looks more positive. So we are encouraged by where each of the three are trending.
David Dullum: In every quarter, it looks more positive. So we are encouraged by where each of the three are trending.
Speaker #4: But the outlook is much more positive in every quarter it looks more positive . So we are encouraged by where each of the three are trending .
Operator: Great. Thanks for the call, Eric. That's all for me today.
Operator: Great. Thanks for the call, Eric. That's all for me today.
David Dullum: Okay. Thanks, sir.
David Dullum: Okay. Thanks, sir.
Mickey Schleien: Well, Latonya, any other questions?
Mickey Schleien: Well, Latonya, any other questions?
Operator: There are no further questions at this time. I would like to turn it back to you, Mr. Gladstone, for closing comments.
Operator: There are no further questions at this time. I would like to turn it back to you, Mr. Gladstone, for closing comments.
Speaker #8: Thanks for the color . That's all for Great . me today .
Speaker #6: Okay . Thanks , sir .
Speaker #1: LaToya , any other questions ?
Mickey Schleien: Okay. Well, thank you. We appreciate all those questions. We hope they're at least double questions next time. We always like to answer your questions because that shows a light on all the things we're doing. And you have to remember that these are not just portfolio companies. These are platforms. And we are getting people that are coming in and getting money from us because they're getting some of their money that they've made over the years back now, but they have equity in going forward. So it's a bite now and a bite later of income for people who are joining us. And we're all oriented toward these platform companies. And thank you all for appreciating that. It's a different way of running our business, but one, it works for us. So thank you all for calling.
Mickey Schleien: Okay. Well, thank you. We appreciate all those questions. We hope they're at least double questions next time. We always like to answer your questions because that shows a light on all the things we're doing. And you have to remember that these are not just portfolio companies. These are platforms. And we are getting people that are coming in and getting money from us because they're getting some of their money that they've made over the years back now, but they have equity in going forward. So it's a bite now and a bite later of income for people who are joining us. And we're all oriented toward these platform companies. And thank you all for appreciating that. It's a different way of running our business, but one, it works for us. So thank you all for calling.
Speaker #2: no further There are questions at this time . I would like to turn it back to you . Mr. Gladstone , for closing comments .
Speaker #1: Okay . thank Well , you . We appreciate all those questions . We hope there are at least double questions next time . We always like to answer your questions because that shows a light on all the things we're doing .
Speaker #1: And you have to remember that these are not just portfolio companies . These are platforms . And we're getting people that are coming in and getting us because they're getting some of their money that they've made over the years back now .
Speaker #1: But they have equity in going forward. So it's a bite now and a bite later of income for people who are joining us.
Speaker #1: And we're all oriented toward these platform companies . And thank you all appreciating for It's it's a that . different way of running our business .
Mickey Schleien: Next time, we'll see you in April at the end of.
Mickey Schleien: Next time, we'll see you in April at the end of.
Speaker #1: But one , it works for us . So thank you all for calling . And next time see you in we'll in April .
Operator: Thank you. This does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a great day.
Operator: Thank you. This does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a great day.
Speaker #1: At the end .
Speaker #2: Thank you . This does conclude today's teleconference . You may disconnect your lines at this time . Thank you for your participation and have a great day .
