Gladstone Investment Raises Net Asset Value After Unrealized Gains

The Tip Desk · November 12, 2026 · 4 min read

Net investment income was $4.8 million, or $0.12 a share, as success fees fell and capital-gains incentive-fee accruals rose.

Gladstone Investment Corporation (GAIN), a publicly traded business development company that makes secured debt and equity investments in lower middle market U.S. businesses, reported a $17.1 million increase in net assets resulting from operations for the second fiscal quarter ended September 30, 2026, or $0.43 a share, after an $11.9 million decrease, or $0.30 a share, in the quarter ended June 30.

The swing followed a $9.0 million net realized loss in the prior quarter and $12.2 million of net unrealized appreciation, which reversed $18.8 million of unrealized depreciation. Net asset value per common share rose to $16.43 from $16.24 as of June 30. The company said the increase was primarily due to the $12.2 million of net unrealized appreciation, or $0.31 a share, and $4.8 million, or $0.12 a share, of net investment income, partly offset by $9.6 million, or $0.24 a share, of distributions paid.

Net investment income was $4.8 million, or $0.12 a weighted-average common share, compared with $15.9 million, or $0.40 a share, in the prior quarter. Total investment income fell to $24.2 million from $28.4 million. The company attributed the decline primarily to a $5.6 million decrease in success fee income, the timing of which it said can be variable, partly offset by a $1.4 million increase in interest income.

Total expenses, net of credits, rose to $19.3 million from $12.4 million. The company said the increase was primarily due to an $8.0 million increase in accruals for capital gains-based incentive fees, reflecting the net impact of realized and unrealized gains and losses, and a $1.0 million increase in interest expense from higher Credit Facility borrowings, partly offset by a $0.5 million decrease in other expenses. Those fees were accrued under U.S. GAAP even though they were not contractually due under the advisory agreement.

Adjusted net investment income, which excludes capital gains-based incentive fees, declined to $7.3 million, or $0.18 a share, from $10.4 million, or $0.26 a share. The cash distribution from net investment income held at $0.24 a share, matching the prior quarter.

Deployment resumed after a near-idle first quarter. Total dollars invested were $156.5 million versus $0.6 million in the quarter ended June 30. In July, the company invested $56.4 million in new portfolio company DHE Computer Systems Acquisition, Inc., a technology solutions provider, as $40.3 million of secured first lien debt and $16.1 million of preferred equity. It also added $5.1 million to Global GRAB Technologies for an add-on. In September it put $15.8 million more into Global GRAB, $18.6 million into Detroit Defense for an add-on, and $58.6 million into new company Extrude Hone LLC, a precision surface-finishing provider, as $43.2 million of secured first lien debt and $15.4 million of preferred equity. Dollars repaid and collected from sales and recapitalizations were $19.9 million.

Total investments at fair value increased to $1.43 billion from $1.28 billion, and the number of portfolio companies rose to 31 from 29. Fair value as a percent of cost slipped to 121.1% from 122.7%. The weighted-average yield on interest-bearing investments edged up to 13.0% from 12.9%.

As of September 30, Credit Facility borrowings outstanding at cost were $299.8 million against a $405.0 million commitment, with $105.2 million of availability and $80.4 million of adjusted availability. Notes payable totaled $421.1 million. The weighted-average interest rate of debt investments was 13.1% with a 12.3% floor; 59.6% of debt investments were at the floor, and 100% were variable-rate with a floor indexed to 30-day SOFR. Estimated spillover declined to $19.9 million, or $0.50 a share, from $22.5 million, or $0.56 a share.

After quarter-end, SFEG Holdings sold a subsidiary; Gladstone received $54.6 million from repayment at par of its debt investment plus $0.5 million of success-fee income. Proceeds for its remaining equity stake, including return of capital and related gains, are expected during the third or fourth quarter of the current fiscal year, subject to final dissolution and escrow settlements. The company also invested $3.7 million in Smart Chemical Solutions and $56.1 million in new company McFarlane Toys, Inc. The board declared $0.08 monthly common distributions for October, November and December 2026, totaling $0.24 for the quarter.