Executive Summary
Gladstone Investment Corporation (GAIN) reported solid first-quarter results for fiscal year 2026, supported by stable net investment income (NII) coverage of the monthly distribution and an active portfolio expansion. Adjusted NII per share reached $0.24, just enough to cover the $0.08 monthly distribution, with a supplemental $0.54 per share paid in June, underscoring the fund’s model of funding recurring dividends from a mix of operating income and realized equity gains. Total assets rose to about $1.1 billion, driven by two new buyouts in the quarter and a portfolio that now comprises 28 operating companies. Management highlighted ongoing buyout activity and a constructive liquidity backdrop in the M&A market, even as tariffs and supply-chain pressures create sector-specific headwinds for consumer-focused holdings.
From a financial posture perspective, net investment income for the quarter was $9.1 million, and adjusted net investment income stood at $8.9 million ($0.24 per share). NAV per share declined to $12.99 from $13.55 in the prior quarter, reflecting distributions totaling $0.78 per share and modest unrealized depreciation. The company remains in a strong liquidity position with $151 million of availability on the line of credit and ongoing equity capital raising through its ATM program (net proceeds of $19.3 million, including $12.8 million after quarter end). Leverage remains robust with asset coverage around 189%, well above the 150% requirement, providing cushion to invest and support ongoing distributions.
The management tone was cautiously positive on the outlook. The portfolio is diversified across 28 operating companies, and the team signaled continued buyout activity for the balance of fiscal 2026, with two new investments closed in the quarter and a third post-quarter-end. However, tariff-driven cost pressures and supply-chain disruption on consumer-facing holdings were acknowledged as constraints, with a focus on navigating these challenges through supplier diversification and operational adjustments. Management also stressed discipline on equity deployment and a preference for valuations that support downside protection (e.g., 13.5% floor on recent deals).
Overall, GAIN presents an attractive cash-flow profile for income-focused investors, underpinned by predictable monthly distributions, a meaningful supplemental distribution when capital gains are realized, and a resilient balance sheet. The primary risks relate to nonaccrual exposures, sensitivity to M&A cycle dynamics, and macro tariffs that could compress margins in select portfolio companies. The stock’s combination of an elevated on-paper yield (given the current price) and a steady capital-return opportunity from exits remains compelling, albeit with the caveat of ongoing market and macro uncertainties.
Key Performance Indicators
QoQ: -3.87% | YoY:2 836.92%
QoQ: -56.52% | YoY:219.09%
QoQ: 116.33% | YoY:217.00%
Key Insights
Revenue: $23.544 million, YoY +6.15%, QoQ -8.54%; Gross Profit: $19.639 million, YoY -8.53%, QoQ +17.18%; EBITDA: $17.181 million, EBITDA Margin ~72.0% (EBITDA / Revenue); Operating Income: $17.181 million, Operating Margin ~72.97%; Net Income: $7.772 million, Net Income Margin ~33.01%; EPS: $0.2106; NAV per share: $12.99 as of 2025-06-30; Adjusted Net Investment Income: $8.9 million or $0.24 per share; Monthly distribution: $0.08 per share; Supplemental distribution: $0.54 per share (June); Tot...
Financial Highlights
Revenue: $23.544 million, YoY +6.15%, QoQ -8.54%; Gross Profit: $19.639 million, YoY -8.53%, QoQ +17.18%; EBITDA: $17.181 million, EBITDA Margin ~72.0% (EBITDA / Revenue); Operating Income: $17.181 million, Operating Margin ~72.97%; Net Income: $7.772 million, Net Income Margin ~33.01%; EPS: $0.2106; NAV per share: $12.99 as of 2025-06-30; Adjusted Net Investment Income: $8.9 million or $0.24 per share; Monthly distribution: $0.08 per share; Supplemental distribution: $0.54 per share (June); Total annualized distributions (excluding potential future supplements) $0.96 per share; Liquidity: $151 million line of credit availability; ATM net proceeds: $19.3 million ( ~$12.8 million subsequent to quarter end ); Leverage and coverage: Asset coverage 189% vs 150% requirement; Cash flow: Operating cash flow -$50.181 million; Free cash flow -$50.181 million; Cash at end of period: $5.355 million; Total debt: $456.356 million; Debt-free cash and equivalents position: modest; Nonaccruals: 4 portfolio companies; Portfolio count: 28 operating businesses; Invested in 3 new portfolio companies in QQ1 2026 (approx. $130 million in total for fiscal 2026 to date) with a total investments of ~$2.1 billion since inception and $353 million in net realized gains.
Income Statement
| Metric |
Value |
YoY Change |
QoQ Change |
| Revenue |
23.54M |
6.15% |
-8.54% |
| Gross Profit |
19.64M |
-8.53% |
17.18% |
| Operating Income |
17.18M |
2 836.92% |
-3.87% |
| Net Income |
7.77M |
219.09% |
-56.52% |
| EPS |
0.21 |
217.00% |
116.33% |
Management Commentary
Key quotes from the QQ1 2026 earnings call:
- Strategy and portfolio growth: "adjusted NII of $0.24 per share, which is sufficient to cover our monthly distribution to shareholders, and we also got our assets up to about $1.1 billion" (David A. R. Dullum). Significance: Demonstrates NII coverage and balance-sheet expansion underpinning ongoing distributions.
- Portfolio expansion: "to date, for fiscal '26, we have invested approximately $130 million in 3 new portfolio companies, and this compares to a total of $221 million, which we invested in all of fiscal '25" (David A. R. Dullum). Significance: Indicates aggressive deployment and pipeline strength for FY26.
- Portfolio scale and nonaccruals: "We continue to have 4 portfolio companies on nonaccrual status, there remain no portfolio-wide credit concerns" (Taylor Ritchie). Significance: Highlights credit quality discipline and manageable problem loans.
- Liquidity and funding: "As of yesterday's release, we had $151 million in availability on our line of credit. Additionally, we raised approximately $19.3 million in net proceeds under our common stock ATM" (Taylor Ritchie). Significance: Underscores liquidity flexibility to fund growth and maintain distributions.
- Distributions and capital gains: "From our operating income, we maintained our monthly distribution to shareholders of $0.08 per share or $0.96 per share on an annual basis. We also made a supplemental distribution of $0.54 per share in June" (David A. R. Dullum). Significance: Reinforces the model of regular cash flow plus supplemental distributions funded by exits and capital gains.
- Competitive dynamics and structure: "We don't have any real direct competitor in that regard in the BDC space… we are competing with private equity in many respects" (David A. R. Dullum). Significance: Explains the unique positioning of Gladstone in providing both debt and equity co-investments with an exit bias.
- Floors and risk management: "All of our three most recent new deals… have 13.5% floors" (Erik Zwick). Significance: Demonstrates risk management through yield floors amid potential rate cuts.
"adjusted NII of $0.24 per share, which is sufficient to cover our monthly distribution to shareholders"
— David A. R. Dullum
"assets up to about $1.1 billion, which is slightly above from $1 billion at the end of the prior quarter"
— David A. R. Dullum
Forward Guidance
Management commented on the outlook with a constructive stance on buyout activity for the balance of fiscal 2026: the M&A market remains liquid with competition for acquisitions but valuations can still be reasonable. They expect continued new buyout opportunities and plan to fund growth via a combination of debt and equity, including ATM equity raising when accretive to NAV. Key guidance points include: (1) steady distributions funded by adjusted NII and realized equity gains; (2) ongoing belief that portfolio is in good shape with liquidity to pursue opportunities; (3) a recognition of tariff-driven margin pressures on consumer-focused holdings and a focus on supply-chain diversification to mitigate risk; (4) a continued emphasis on maintaining asset coverage well above the regulatory minimum (189% vs 150%). Management also highlighted that they expect at least one portfolio company to return to accrual status in the next quarter. Quantitatively, the company noted that the aggregate estimated fiscal-year distributions would yield about 10.6% based on yesterday's price of $14.16, illustrating an attractive cash-on-cash yield for current investors. Investors should monitor: (a) the pace of new buyouts and exits, (b) changes in regulatory or macro conditions (rates, tariffs), (c) portfolio company nonaccrual evolution, and (d) the ability to sustain supplemental distributions through realized capital gains.