Company: GAINI
Filing Date: 2025-08-12
Form Type: 10-Q
Source: 0001321741-25-000018
Chunk: 96

Company: GLADSTONE INVESTMENT CORPORATION\DE
Filing Date: 2025-08-12
Form: 10-Q
Item: Part I, Item 2
Chunk 96
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Portfolio and Investment Activity

While the business environment remains competitive, we continue to see new investment opportunities consistent with our investment strategy of providing a combination of debt and equity in support of management and independent sponsor-led buyouts of Lower Middle Market companies in the U.S. During the three months ended June 30, 2025, we invested in two new portfolio companies. From our initial public offering in June 2005 through June 30, 2025, we have invested in 64 companies, excluding investments in syndicated loans, for a total of approximately $2.1 billion, before giving effect to principal repayments and divestitures.

The majority of the debt securities in our portfolio have a success fee component, which enhances the yield on our debt investments. Unlike paid-in-kind (“PIK”) income, we generally do not recognize success fees as income until payment has been received. Due to the contingent nature of success fees, there are no guarantees that we will be able to collect any or all of these success fees or know the timing of any such collections. As a result, as of June 30, 2025, we had unrecognized, contractual success fees of $55.6 million, or $1.49 per common share. Consistent with accounting principles generally accepted in the U.S. (“GAAP”), we have not recognized success fee receivables and related income in our accompanying Consolidated Financial Statements until earned.

From inception through June 30, 2025, we exited our investments in 33 portfolio companies that we acquired under our buyout strategy. In the aggregate, these sales have generated $353.4 million in net realized gains and $45.4 million in other income upon exit, for a total increase to our net assets of $398.8 million. We believe, in aggregate, these transactions were equity-oriented investment successes and exemplify our investment strategy of striving to achieve returns through current income on the debt portion of our investments and capital gains from the equity portion. The 33 liquidity events have offset any realized losses since inception, which were primarily incurred during the 2008-2009 recession in connection with the sale of performing syndicated loans at a realized loss to pay off a former lender. The successful exits, in part, enabled us to increase the monthly distribution by 100.0% from March 2011 through June 30, 2025, and allowed us to declare and pay 24 supplemental distributions to common stockholders through June 30, 2025