EPS of $-1.29 decreased by 304.8% from previous year
Gross margin of 65.1%
Net income of 17.87M
""adjusted net investment income of $35.5 million or $0.97 per share, fully covering our annual regular monthly distribution of $0.96 per share"" - Taylor Ritchie
Gladstone Investment Corporation (GAIN) QQ4 2025 Results Summary and Investment Outlook – Solid NII Coverage, NAV Expansion, and Strategic Buyout Activity
Executive Summary
Gladstone Investment Corporation (GAIN) delivered a constructive QQ4 2025 performance with meaningful year-over-year improvements in operating metrics and a resilient capital structure aligned to its buyout-focused, yield-driven strategy. For the fiscal year ended March 31, 2025, the company reported adjusted net investment income (NII) of $0.97 per share, comfortably covering the annual dividend of $0.96 per share, and increased the fair value of its portfolio to $979 million. Realized gains from exits contributed to portfolio value dynamics, while ongoing portfolio management and disciplined liquidity management supported a structurally robust balance sheet.
Net income: $17.873 million; YoY -20.9%, QoQ -53.6%
EPS (GAAP): -$1.29; YoY -304.8%, QoQ -222.9%
Financial Highlights
- Revenue (Q4 2025): $25.741 million; YoY +186.0%, QoQ -38.8%
- Gross profit: $16.759 million; YoY +1,412.4%, QoQ -53.0%
- Operating income: $17.873 million; YoY -39.8%, QoQ -53.6%
- Net income: $17.873 million; YoY -20.9%, QoQ -53.6%
- EPS (GAAP): -$1.29; YoY -304.8%, QoQ -222.9%
- Adjusted NII (FY end): $35.5 million or $0.97 per share; fully covers $0.96 annual distribution
- NAV per share at 3/31/2025: $13.55 vs. $13.30 prior quarter
- NAV growth drivers: net realized gains of $0.57 per share and $0.20 per share from net investment income; offset by $0.28 share unrealized depreciation
- Spillover cash (spillover): $55.3 million or $1.50 per share; supports current monthly distribution of $0.08 and a $0.54 supplemental distribution
- Liquidity: $214 million available on line of credit; $126.5 million notes issued; total debt to capitalization ~0.477; asset coverage 204%
- Distributions: annual run rate of $0.96 per share plus supplemental distributions; estimated FY distributions yield ~11.3% at a $14.05 close price
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
25.74M
186.04%
-38.81%
Gross Profit
16.76M
1 412.37%
-53.04%
Operating Income
17.87M
-39.83%
-53.56%
Net Income
17.87M
-20.86%
-53.56%
EPS
-1.29
-304.76%
-222.86%
Key Financial Ratios
currentRatio
0.05
grossProfitMargin
65.1%
operatingProfitMargin
69.4%
netProfitMargin
69.4%
returnOnAssets
1.78%
returnOnEquity
3.58%
debtEquityRatio
0.91
operatingCashFlowPerShare
$3.13
freeCashFlowPerShare
$3.13
dividendPayoutRatio
292%
priceToBookRatio
0.98
priceEarningsRatio
6.86
Net Income vs. Revenue
Expense Breakdown
Management Commentary
Key management takeaways from the QQ4 2025 earnings call highlighted the strength of earnings coverage, portfolio management, and near-term growth opportunities:
- 'For the fiscal year we generated adjusted NII of $0.97 per share, which is earning our $0.96 per share annual dividend' (Dave Dullum). This underscores durable income coverage and anchors the dividend policy around recurring NII rather than solely capital gains.
- 'NAV increased to $13.55 per share compared to $13.30 per share at the end of the prior quarter' (Taylor Ritchie).NAV growth was driven by realized gains and steady net investment income, signaling ongoing value creation within the portfolio.
- 'Exits generated approximately $19.8 million in realized gains' (Dave Dullum). Realized gains contributed to portfolio rebalancing and helped support supplemental distributions funded by capital gains.
- 'We ended the 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 and the $0.54 supplemental distribution to be paid in June' (Taylor Ritchie). Spillover strengthens distribution resilience and reflects capital gain monetization.
- 'We expect to close two new acquisitions shortly' and 'we are cautiously optimistic for buyout activity during the year' (David Dullum). The portfolio is positioned for growth, with a pipeline and near-term deal activity expected to contribute to earnings and NAV upside.
- 'Educators Resource dividend recap' commentary: management described recurring use of dividend recaps to provide liquidity to sponsors and to create incremental income opportunities while maintaining operating income growth.
"adjusted net investment income of $35.5 million or $0.97 per share, fully covering our annual regular monthly distribution of $0.96 per share"
— Taylor Ritchie
"NAV increased to $13.55 per share compared to $13.30 per share at the end of the prior quarter"
— Taylor Ritchie
Forward Guidance
Management guidance centers on disciplined growth through selective buyouts and disciplined capital deployment amid tariff-related uncertainty. Near-term traction includes an expected close of two new acquisitions by the end of the current quarter and continued diligence on a number of opportunities. Key guidance themes:
- Acquisition cadence: Close two new buyouts shortly; maintain a scalable pipeline with active indications of interest and due diligence progress, aiming for a level of activity in the low-to-mid double digits in terms of new investments per year, aligned with capital availability.
- Capital allocation: Maintain liquidity runway via the upsized $270 million credit facility and a $214 million line of credit availability; equity capital via ATM remains a tool to fund growth when accretive to NAV.
- Dividend policy: Continuation of monthly distributions of $0.08 per share, complemented by supplemental distributions funded by realized capital gains from exits; the cadence and size of supplements will depend on realized gains and portfolio exits.
- Tariff and macro risk: Tariff volatility remains a material variable to forecast; management is actively modeling tariff impacts on cost of goods, pricing, and demand across portfolio companies and will adjust diligence and valuations accordingly.
- Monitoring indicators for investors: NAV per share progress, spillover levels, portfolio non-accrual changes, leverage metrics (asset coverage >150%), and liquidity headroom as primary dashboards.
Assessment: The cadence of planned buyouts, coupled with strong NII coverage and a robust liquidity framework, supports a cautiously optimistic outlook. The main risks are tariff-driven demand dynamics and the possibility of continued non-accruals; however, management’s emphasis on earnings stability, diversified cash flow, and disciplined capital deployment mitigates near-term risk.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
GAIN Focus
65.11%
69.40%
3.58%
6.86%
PFLT
62.70%
42.10%
2.43%
9.99%
HRZN
1.00%
-72.70%
-3.70%
-6.53%
SCM
33.40%
29.10%
2.35%
10.88%
PSEC
18.50%
96.40%
0.56%
19.73%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
GAIN remains positioned as a disciplined asset manager with a buyout-centered, lower-middle-market focus. The combination of durable NII coverage, growing NAV, a strong liquidity backbone, and a visible pipeline of two near-term acquisitions supports a constructive longer-term outlook. The company’s strategy to fund supplemental distributions from realized gains while growing distributions from operating income provides a balanced framework for income-oriented investors. Key factors to monitor include tariff trajectory and its impact on portfolio cash flows, the pace and success of announced acquisitions, and the evolution of non-accruals. On a relative basis, GAIN’s asset coverage and liquidity metrics are competitive within the mid-market BDC space, and the near-term upside from buyouts and potential dividend recaps could contribute to NAV growth and yield expansion, albeit with sensitivity to exit timing and multiple levels.
Key Investment Factors
Growth Potential
Near-term growth potential is anchored in the acquisition of 2 new portfolio companies in the near term, ongoing add-on investments, and potential dividend recaps that can unlock additional cash flow from the equity portfolio while preserving operating income stability. The ATM and credit facility upsize provide funding flexibility for portfolio expansion without compromising liquidity.
Profitability Risk
Tariff exposure and macroeconomic volatility affecting consumer demand and input costs; ongoing four non-accruals with mixed improvement; execution risk around closing two acquisitions in the near term; reliance on realized capital gains to fund supplemental distributions; potential valuation sensitivity to multiple Compression and EBITDA volatility.
Financial Position
Strong liquidity and balance sheet health: asset coverage 204%, total debt to capitalization approximately 0.477, NAV per share of $13.55, spillover $55.3 million ($1.50 per share), and line of credit availability of $214 million. Cash flow durability is highlighted by operating cash flow of $115.082 million and free cash flow of $115.082 million, supporting a sustainable monthly distribution and supplemental distributions.
SWOT Analysis
Strengths
Stable monthly distributions supported by NII coverage of $0.97 per share for the year and a strong liquidity position
Portfolio of 25 operating companies with managed exit activity contributing $19.8 million in realized gains for 2025
NAV per share growth to $13.55 and portfolio value of $979 million as of 03/31/2025
Access to capital and liquidity (line of credit available $214 million; $126.5 million notes issued) enabling growth and resilience through market volatility
Disciplined buyout focus with a long-dated value creation track record (since 2005) and recurring supplemental distributions tied to realized gains
Weaknesses
Near-term earnings volatility (Q4 2025 quarterly EPS of -$1.29) and four portfolio non-accruals indicating some credit risk
High reliance on capital gains for supplemental distributions; potential sensitivity to exit markets and valuation multiples
Tariff-related cost and demand uncertainties impacting consumer-focused portfolio companies
Opportunities
Two acquisitions expected to close in the near term; potential additional acquisition opportunities from robust deal flow and diligence activity
Dividend recap opportunities in the portfolio pathway that could unlock liquidity and income growth, subject to risk controls
ATM equity issuance and debt facilities to fund growth and counter cyclicality; potential debt refinancing if rates/terms improve
Threats
Tariff policy volatility and global trade tensions affecting input costs, pricing, and demand
Continued non-accruals or deterioration in certain portfolio companies despite near-term improvements
Market competition for buyouts and exits potentially compressing valuations or increasing deal diligence timelines
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