Gladstone Investment Corporation 4.875% Notes due 2028 2027 Q1 Earnings Call

Well, thank you for that nice introduction. This is David Gladstone, Chairman. This is the earnings conference call for the first quarter ending June 30, 2026. This is for our shareholders and for any of the analysts that are on the line for Gladstone Investments. It's listed on Nasdaq trading symbol GAIN. Easy to remember because we're always triggering capital gains. You can keep up with us by listening to this and following us online. As for the common stock, we do have some registered notes, three of them. You can buy our notes as well. This is a multifaceted company, and I want to thank you all for calling in. We're happy to provide updates to our shareholders and analysts and provide our view of the current business environment.

The two goals really are to help you understand what just happened to us and what's happened to us over the last so many months, and also give you a current view of the future. Now we'll hear from Katherine Girgis. She's Director of Investor Relations as well as any ESG, and provides a brief disclosure regarding the certain regulatory matters that she keeps us from violating.

Katherine, jump online. Thank you, David, and good morning, everyone.

Today's call may include forward-looking statements, which are based on management's 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 filings, 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 and 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.

I will turn the call over to David Dullum, Chief Executive Officer and President of Gladstone Investment.

Thanks, Katherine, and welcome to everyone on the phone call. I am happy to report that GAIN again produced solid quarter results, this time for this first quarter ended June 30, 2026. We generated adjusted NII of $0.26 per share, which is sufficient to cover the monthly dividend distributions for the quarter, and we also ended with a total portfolio fair value of $1.3 billion. This was a pretty busy quarter. Very much so with deal-related activity. During the quarter, we actually entered into an agreement to acquire one new portfolio company called Extrude Hone. We aim to close this in the coming weeks, and it's subject really to obtaining some required regulatory approvals, which should not be an issue. It's just a timing thing. Subsequent to the quarter end, of course, a lot of this activity began during the quarter.

We entered into an agreement to sell the operating entity in our investment of SFEG Holdings. This sale, again, subject to various regulatory approvals. This is a multinational company, and there are various approvals necessary in certain countries. We hope that and expect that this will close in the coming months. When we do, we expect to receive a full repayment of our investment, along with a very significant capital gain. In July, we also finalized the acquisition of another new portfolio company, DHE Computer Systems. We also made an accretive add-on acquisition to one of our existing investments called Global GRAB Technologies. With all this activity and with the pending new deals that we've mentioned here, we will have invested an aggregate of at least $116 million within the first six months of this fiscal year.

That's relevant because it compares very nicely to the approximate $183 million that we have averaged over the last three fiscal years. These new investments and certainly the exit activity are consistent, as I always like to say, with our buyout strategy, which is growing the portfolio through the acquisition of operating companies at attractive valuations. This, again, where we are generally the majority economic owner. We make these acquisitions through a combination of equity and debt investments. Of course, main reason, given our thesis for GAIN, the equity provides a potential upside of additional dividend payouts through capital gains, as we would anticipate clearly in this SFEG exit. The debt securities generate operating income to support our monthly distributions to shareholders. This is definitely one factor that differentiates us from most of the other traditional credit BDCs.

In this regard, from our operating income, we maintain our monthly distribution to shareholders of $0.08 per share or $0.96 per share on an annual basis. At this point, I'd like to turn it over to Erika Highland, who as mentioned before, will take over as President on October 1st. Erika, would you like to discuss the outlook and the current pipeline of the new investments?

Absolutely. Thank you, Dave. There continues to be ample liquidity in the M&A market, creating a competitive environment for new acquisitions at reasonable valuations. While challenging, we have been able to compete effectively for acquisitions that fit our model.

Our model is where we provide both debt and equity to complete the transaction with a meaningful fixed charge coverage and an interest income yield on our total investment in excess of our cost of capital. As mentioned earlier, we have closed or have an agreement in place to acquire two new portfolio companies. We continue to be in varying stages of diligence on additional possible new opportunities, including both accretive add-on acquisitions to existing portfolio companies, and we are in review and negotiation with a number of other new opportunities. As to our existing portfolio, most of the companies have experienced positive results to date, though we continue to be cautious due to macroeconomic factors such as elevated energy prices, potential supply chain disruption, and tariff costs, and therefore the impact on demand and margins.

We are working with all of our companies in evaluating cost efficiencies and growth initiatives as we continue to navigate the current environment. In this regard, a couple companies to highlight here. Galaxy Technologies, they've experienced very positive growth in the aerospace and industrial sectors. Diligent Delivery Systems' new management team has stabilized the business and is generating very positive EBITDA, which gives us some encouragement that we will get it back to accrual status. Finally, Pyrotech has been acquisitive and experiencing growth with existing and new artists and their entertainment schedules. I'll turn it back to you, Dave.

Thanks, Erika. Again, in summing up the year, the current portfolio is in solid shape. Just to touch on this, Erika said that we're working with all of our companies, and that's something that we do. We're very proactive with our operating companies. When we say that, it's not just in passing. We actually do work at it. We feel very good about where we are. We have a strong liquid balance sheet, a very good level of potential portfolio activity with the prospect of continued strong earnings and the distributions over the next year. While we continue to navigate the challenge of an uncertain economic landscape. With that, let's turn it over to our CFO, Taylor Ritchie, and he'll give you a lot more of the detail of where we are and what to look forward to.