Gladstone Capital Corporation

Q3 2021 Earnings Conference Call


spk_0: hello and welcome to the gladstone capital third quarter earnings conference call web curve at this time off the cliff prince regular said only mode if anyone should require operator assistance please pro star zero on your telephone keypad a question and answer session will follow the formal presentation as a reminder this corporate to be recorded it was my pleasure to trigger pull over to ceo david gladstone please go ahead
spk_1: no thank you kevin nice introduction and this is the quarterly earnings call that we do the end of each quarter gladstone capital third quarter ends june thirty and twenty twenty one thank you for calling in we're always happy to talk with shareholders and analyst and welcome the opportunity to provide an update for this company an investment portfolio we always start with our general counsel michael accounts he he'll make some statements regarding certain forward looking statements michael thanks david good morning everybody today's report include forward looking statements from the securities act that nineteen thirty three and the securities exchange act of nineteen thirty four including those regarding our future perform
spk_2: and these forward looking statements and certain risks and uncertainties replace that our current plans which we believe to be reasonable know many factors may cause our actual result to be materially different from any future results expressed or implied that these forward looking statements floating all risk factors listed on are formed ten q ten k and other document that he followed the fcc need to find them on the investor page of our website at www dot gladstone capital dot com or you can also sign up for email notification service or you can find the money as to she's website which is w w w dot se si dot jovi now we undertake no obligation to publicly update or revise as any of these forward looking statements whether as result of your information future events or otherwise except as required by law that today's cause an overview of our result so yes the era of your press release and for tank you both issued yesterday from more detailed information again you can find them on the investors page of our website i know what that alternately call over the gladstone capital president bob market bob thank you michael good morning and thank you all for dialing in this morning to discuss the results for gladstone capital for the quarter ended june thirty
spk_3: let's get into it originations for the quarter were strong totaling fifty three million including three proprietary investments and add ons to existing investments
spk_1: however as anticipated we had three exits which contributed to lifting prepayments and exits to fifty four million for the period
spk_3: interest income rose seven point two percent to twelve point seven million over the prior quarter driven by the collection of the six hundred thousand dollars of path to interest on the hundred earning credit other income fell slightly however total investment income rose to thirteen point seven million
spk_1: barring cost increase two hundred thousand with the full quarter of the fifty million dollar add onto her senior notes and an increase in unused fees paid our line of credit which we expect to be
spk_3: as our floating rate bars were borrowings rise with as a growth and the potential redemption of are higher costs your notes do and twenty twenty four later this year administrative costs and expenses rose two hundred thousand with no fees associated with the renewal and extension of our bank line of credit in the quarter and net management fees on the quarter increased but the incentive fees however net investment income rose to six point six million were nineteen and a half cents a share net assets from operations came in and eighteen million or fifty three cents a share which included six point five million of realize game and four point eight million of unreal i his portfolio appreciation on the quarter as a result for the period now rose to forty one sense rose forty one cents a share or five point one percent eight dollars and fifty two cents per share as of june thirty with respect to the portfolio our portfolio continues to form well and for the quarter we did not experience any payment fault and are one non accrual investment has continued to recover which supported the collection of most of the accumulated path to interest and that credit now has been moved to a cruel status we exited to see the second lien and equity co investments last quarter associate with a trucking and a p r g which generated six point four million of after tax gains for the quarter the bulk of the portfolio appreciation was driven by six equity investment positions in a variety of industries most of which are experiencing strong operating performance and in total the easily outpaced the few decliners and generated net appreciation of thirteen million dollars make on the purple your performance and loan market recovery the cumulative gain in portfolio appreciation of past four quarters have exceeded the covert related markdowns of the march twenty twenty quarter by thirty two percent and contributed to the five point four percent increase the nav since december bert thirty one two thousand and nineteen the at that mix as of the end of the quarter continue to shift in favor of firstly loans
spk_1: as the private equity community is continue to favor the flexibility and certain tv a loans and the majority that repayments were second leaner equity exit as result personally now thats rose to sixty six percent of the portfolio cost while second lien exposure declined to twenty five percent of the portfolio cost
spk_3: despite this ship the nasa mix we've been able to maintain an average yield are loan portfolio ten point five percent
spk_2: looking forward last quarter was active for originations and we absorb most to the expected repayments and we expect much the same in the near term as the private private market liquidity is driving an elevated level of refinancing and recapitalisation activity
spk_3: as we have reiterated in the past couple of quarters would continue to target a one the one get equity leverage however based on the magnitude of the poor fully appreciation last quarter and the pace repayments or levers continues to believe the below our target range and seventy six percent at equity despite the modest leverage we are pleased to report that are cumulative return on equity for the twenty twenty twenty and twenty one period inclusive inclusive of the challenging coven markdowns in twenty twenty as he approached eleven point three percent based on arm modest leverage position and are reduced secured line borrowings we have an unprecedented level of debt the path to take on additional yielding a assets to further enhance are earnings from diverge coverage in the coming quarters and now i'd like to turn the call liberty and course alton brown the theater for glad some capital to provide some more details on the funds financial performance
spk_4: nicole
spk_5: good morning everyone during the june quarter total and to thing coming three hundred thousand or seven point three percent to twelve point seven nine and the collection of six hundred thousand path through entering additionally the investment portfolio weighted average balance increase by nine and a half million or two point one percent at four hundred and sixty three point six million compared to the my oct thirty first twenty twenty one quarter of the contributing to the entry in create an interesting come and weighted average the other into thank her polio declined by can be point for ten point five percent compared to the prior quarter associated with increased population at large and our portfolio other and compelled i have any nine thousand and compared to last quarter when the that and total investment income acquire increase to three thirteen point seven million total expenses are out of my six hundred thousand quarter over quarter given by the increase in thick band professional field including the poking fun at management and that winning him for the quarter ended june thirtieth with thick point six million which is an increase of two hundred thousand compared to the prior quarter or nineteen and a half a cent per share and covered one hundred percent of our shareholder distribution the net increase the net assets resulting from operation to and eighteen million or fifty three cents per share a quarter ended june thirty eight compared to twenty one point three million or sixty five cents per share for the quarter ended march thirty first twenty twenty one hacker a quarter increase driven by after tax gained and six and a half million as well as four point eight nine and of net unrealized portfolio appreciation moving over to the balancing as of june thirty eight total assets throw to five hundred and fourteen million cancer thing at five hundred and six million in investment that fort hare value and eight million in cash either asset i believe declined to two hundred and twenty two million as of june thirty yet and consisted primarily of one hundred and fifty million of newly issued five and anything senior note do twenty twenty think thirty eight point eight million to five and three internet to twenty twenty four and at the end of the quarter a advances under a line of credit were only twenty three million that i had threatened by twenty one and a half million from the prior quarter and with eleven point four million net realized an unrealized are falling appreciation and the issue and of approximately nine hundred and eight thousand common shares under i can program but degenerated net proceeds and ten point one million for the quarter and he point seven million and access nab or a hand of appreciation narrow five point one percent from a dollars and eleven cents per share that march thirty for thirty dollars and fifty two cents per share that june thirty at twenty twenty one our leverage over the end of the court declined with increase in that from the prior quarter and seventy six percent of met at that we currently have an excess of one hundred and thirty million of borrowing availability and are recently renewed line of credit and part of the line of credit amendment be successfully extended their evolving period october thirty first twenty twenty three with respect to distribution them capital has remained committed to paying and stockholders the cash distribution and in july or board of directors declared monthly distribution to a common stock holders of fixing to have been per common share per month or july august and september which is an annual rate of seventy eight cents per share the board will meet enough tobar to determine the monthly distribution to common stock holders for the following order at the current distribution rate for a common stock and with the common stock price at about eleven dollars and fifty cents per share yesterday for distribution run rate of now producing a yield of about thick point eight percent which continue to be attractive relative to the extraordinary low yields generally available in the market today
spk_6: and now i'll try and back to the david to conclude my bag you unicode you and mom and michael all did a great job of bringing people along in terms of analysis of her good company
spk_1: if you take what you said today and added to the ten que filed a new can read that ten q and debbie dividend clenched i'm glad to glad glanced and dot com so we got a strong opportunity here i continue to grow we had a solid quarter for the for the period ending june thirty we're off to a good start where we are today follow solid originations asda fifty three million very attractive really priced investments we've generated net investment income to cover the current dividends so we're not supporting that some other way between realize gains appreciation and a creative stock issuance lifted the net asset value to forty one sense it's up about five point one percent for the last quarter and enhance the ability and stability of the company to make sure we pay those dividends every sure that's our goal in life here this company so in summary the company continues to invest in growth oriented middle market businesses with good management many of these investments are supported by mid size private equity funds that are looking for experience partners like the team that cheer and so we've been able to fund relationships in the market good interest paying loans to support our ongoing commitment to pay cash distributions to stockholders some it was a very good quarter now or have some questions so operator of if you're come on and tell a quarter hollers how they can ask questions
spk_7: absolutely
spk_0: it's allegedly the questions you please press star what are your telephone keypad a confirmation tone an indicator light is have a question do you may press start to remove your question from the queue for participants the speaker equipment or have your foes i'm you may be necessary to pick up your handset or take your photo of you before pressing star one one moment please while we pull request once again that star won't replace the question
spk_1: ricky okay folks you need the ask questions or will hang up and wait for next quarter
spk_0: a broader questions that have you ever need for their and problems are now that's all we had a great order not surprised that we don't have a lot of questions it was a great quarter with not many differences that the aren't shown up than are and all of our pilings so thank you very much everybody for calling in and see you next

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