Gladstone Capital Corporation (GLAD) delivered a solid QQ2 2024 performance with meaningful net income and a robust NAV build driven by portfolio appreciation, despite ongoing macro and credit-market headwinds. For the quarter ended March 31, 2024, GLAD reported revenue of $26.17 million and net income of $23.64 million, implying earnings per share of $1.09. The quarter featured notable portfolio appreciation, with net gains of $12.9 million contributing to a quarterly ROE of 22.3% per management commentary, and a last-twelve-month ROE of about 17% as highlighted by management. NAV per share rose to $9.90 as of 3/31/2024, and after a 1-for-2 reverse stock split, estimated ongoing NAV per share is about $19.80, with monthly distributions of $0.165 per share, translating to an implied yield around 9.1% at the recent stock price of approximately $21.77. The portfolio continued to scale, crossing the $800 million mark, with senior debt representing a majority of the portfolio and two non-earning debt investments totaling roughly $20.4 million at cost.
Management reiterated a disciplined, value-driven approach: growth via add-ons and selective refinancings, concentration in lower middle-market credits, and ability to rebalance into higher-quality, cash-flow-generative opportunities as market dynamics permit. The call also underscored some near-term risks, including potential spread compression in lower middle-market lending and a nonaccrual on a consumer-oriented credit (Xcel WB), which the firm is actively repositioning. The company projects an uptick in prepayments for larger credits and signaled ongoing deployment opportunities through new proprietary investments and add-ons, while maintaining leverage discipline (just below 89% of NAV) and ample facility capacity. Overall, GLAD’s QQ2 2024 results reinforce its positioning as a yield-focused BDC with a scalable, diversified portfolio and a trajectory of NAV appreciation, albeit with attention to credit quality and macro headwinds.