The following is a summary of the Gladstone Capital (GLAD) Q3 2024 Earnings Conference Call Transcript:

Financial Performance:

• Gladstone Capital reported a modest increase in total interest income, rising by $200,000 or 1% to $23.4 million for the quarter despite unchanged average earning assets and weighted average yield.

• Net investment income declined by $1.4 million, a decrease of 12%, resulting in $11 million for the quarter.

• The company achieved a notable 21.5% Return on Equity (ROE), benefiting from $21 million in realized and unrealized gains on the portfolio.

• The net increase in net assets resulting from operations reached $31.8 million, or $1.46 per share for the quarter, driven primarily by portfolio appreciation.

• NAV per share rose from $20.18 as of June 30th to $21.18 as of September 30th, with leverage at 73% of net assets.

Business Progress:

• Gladstone Capital exited its investments in ARA with significant equity proceeds, resulting in impending capital gains based distributions to shareholders.

• Continued focus on growth-oriented lower middle market investments, leveraging relationships with midsize private equity funds to support business acquisition and expansion.

• Actively pursuing refresh and reinvestment of proceeds to maintain an active portfolio, notably expecting an especially robust Q4 of turnover and funding activity.

Opportunities:

• Proactive management of portfolio exits and contingent re-investments positions the company to benefit from a dynamic lower middle market sector.

• The reduction in short-term rates by the Fed may indirectly benefit financing costs, enhancing investment income potential.

Risks:

• The company noted challenges in the restaurant industry and particular investments like EGs, indicating potential sector-specific risks.

• An extensive turnover of portfolio assets could disrupt income streams if new investments fail to compensate for matured or sold positions.

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