glad-20240630

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark one):


ý			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2024


o			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM ______ TO _______

COMMISSION FILE NUMBER: 814-00237

GLADSTONE CAPITAL CORPORATION

(Exact name of registrant as specified in its charter)


Maryland			54-2040781
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

1521 WESTBRANCH DRIVE, SUITE 100			22102
McLean, Virginia			(Zip Code)
(Address of principal executive office)

(703) 287-5800

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year,

if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class

Trading Symbol(s)

Name of Each Exchange on Which Registered

Common Stock, $0.001 par value per share

GLAD

The Nasdaq Stock Market LLC

7.75% notes due 2028

GLADZ

The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ý No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	o	Accelerated filer	o
Non-accelerated filer	x	Smaller reporting company	o
Emerging growth company	o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No ý

The number of shares of the issuer’s common stock, $0.001 par value per share, outstanding as of August 6, 2024 was 21,754,449.

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GLADSTONE CAPITAL CORPORATION

TABLE OF CONTENTS


PART I.	FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)

	Consolidated Statements of Assets and Liabilities as of June 30 , 2024 and September 30, 2023	2
	Consolidated Statements of Operations for the three and nine months ended J une 30 , 2024 and 2023	3
	Consolidated Statements of Changes in Net Assets for the nine months ended June 30 , 202 4 and 2023	4
	Consolidated Statements of Cash Flows for the nine months ended June 30 , 202 4 and 2023	5
	Consolidated Schedules of Investments as of June 30 , 2024 and September 30, 2023	6
	Notes to Consolidated Financial Statements	18

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	44
	Overview	44
	Results of Operations	48
	Liquidity and Capital Resources	56

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	63

Item 4.	Controls and Procedures	64

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings	65

Item 1A.	Risk Factors	65

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	65

Item 3.	Defaults Upon Senior Securities	65

Item 4.	Mine Safety Disclosures	65

Item 5.	Other Information	65

Item 6.	Exhibits	65

SIGNATURES		68

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Part I. Financial information

Item 1 Financial Statements (Unaudited)

GLADSTONE CAPITAL CORPORATION

CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES

(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

(UNAUDITED)


	June 30, 2024		September 30, 2023
ASSETS
Investments, at fair value:
Non-Control/Non-Affiliate investments (Cost of $700,125 and $671,397, respectively)	$	710,261	$	663,544
Affiliate investments (Cost of $16,746 and $16,746, respectively)	9,892		10,421
Control investments (Cost of $36,392 and $34,126, respectively)	37,592		30,850
Cash and cash equivalents	1,136		1,306
Restricted cash and cash equivalents	110		95
Interest receivable, net	5,339		6,100
Due from administrative agent	5,922		2,936
Deferred financing costs, net	1,150		1,335
Other assets, net	3,686		2,911
TOTAL ASSETS	$	775,088	$	719,498
LIABILITIES
Line of credit at fair value (Cost of $65,800 and $47,800, respectively)	$	65,800	$	47,800
Notes payable, net of unamortized deferred financing costs of $3,126 and $3,886, respectively	253,874		253,114
Accounts payable and accrued expenses	986		1,006
Interest payable	4,296		2,956
Fees due to Adviser(A)	4,163		3,872
Fee due to Administrator(A)	831		479
Other liabilities	465		1,576
TOTAL LIABILITIES	$	330,415	$	310,803
Commitments and contingencies(B)
Preferred Stock, $0.001 par value per share, 6,000,000 and 6,000,000 shares authorized, respectively, and 249,517 and 0 shares issued and outstanding, respectively	$	5,595	$	—
NET ASSETS
Common stock, $0.001 par value per share, 44,000,000 and 44,000,000 shares authorized, respectively, and 21,754,449 and 21,754,449 shares issued and outstanding, respectively(C)	$	44	$	44
Capital in excess of par value	481,478		481,480
Cumulative net unrealized appreciation (depreciation) of investments	4,482		(17,454)
Under (over) distributed net investment income	6,140		4,741
Accumulated net realized losses	(53,066)		(60,116)
Total distributable loss	(42,444)		(72,829)
TOTAL NET ASSETS	$	439,078	$	408,695
NET ASSET VALUE PER COMMON SHARE(C)	$	20.18	$	18.79

(A)Refer to Note 4—Related Party Transactions in the accompanying Notes to Consolidated Financial Statements for additional information.

(B)Refer to Note 10—Commitments and Contingencies in the accompanying Notes to Consolidated Financial Statements for additional information.

(C)Issued and outstanding shares of common stock and net asset value per share have been adjusted on a retroactive basis to reflect the 1-for-2 reverse stock split (the “Reverse Stock Split”) effected on April 4, 2024. Refer to Note 2—Summary of Significant Accounting Policies in the accompanying Notes to Consolidated Financial Statements for additional information.

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS.

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GLADSTONE CAPITAL CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

(UNAUDITED)


	Three Months Ended June 30,				Nine Months Ended June 30,
	2024		2023		2024		2023
INVESTMENT INCOME
Interest income
Non-Control/Non-Affiliate investments	$	21,393	$	19,183	$	64,223	$	52,051
Affiliate investments	—		1,023		—		2,865
Control investments	277		736		1,313		2,134
Cash and cash equivalents	45		29		97		93
Total interest income (excluding PIK interest income)	21,715		20,971		65,633		57,143
PIK interest income
Non-Control/Non-Affiliate investments	1,400		629		4,030		1,980
Affiliate investments	—		139		—		415
Control investments	84		77		247		223
Total PIK interest income	1,484		845		4,277		2,618
Total interest income	23,199		21,816		69,910		59,761
Success fee income
Non-Control/Non-Affiliate investments	295		335		295		935
Dividend income
Non-Control/Non-Affiliate investments	1,050		42		1,235		830
Control investments	—		362		—		691
Total dividend income	1,050		404		1,235		1,521
Other income	1,145		268		1,467		461
Total investment income	25,689		22,823		72,907		62,678
EXPENSES
Base management fee(A)	3,459		3,106		10,143		8,833
Loan servicing fee(A)	2,250		2,069		6,638		5,866
Incentive fee(A)	3,076		2,919		8,729		7,508
Administration fee(A)	477		417		1,400		1,237
Interest expense	5,509		5,553		16,273		15,091
Amortization of deferred financing costs	453		405		1,323		1,164
Professional fees	263		271		771		784
Other general and administrative expenses	659		402		1,792		1,110
Expenses, before credits from Adviser	16,146		15,142		47,069		41,593
Credit to base management fee - loan servicing fee(A)	(2,250)		(2,069)		(6,638)		(5,866)
Credits to fees from Adviser - other(A)	(600)		(1,926)		(2,628)		(3,082)
Total expenses, net of credits	13,296		11,147		37,803		32,645
NET INVESTMENT INCOME	12,393		11,676		35,104		30,033
NET REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss):
Non-Control/Non-Affiliate investments	1,417		(789)		1,636		9,949
Control investments	—		3,700		259		2,684
Other	1,898		44		3,850		322
Total net realized gain (loss)	3,315		2,955		5,745		12,955
Net unrealized appreciation (depreciation):
Non-Control/Non-Affiliate investments	3,396		2,394		17,989		(11,012)
Affiliate investments	(490)		(228)		(529)		2,017
Control investments	530		(4,752)		4,476		(4,425)
Other	—		(161)		—		—
Total net unrealized appreciation (depreciation)	3,436		(2,747)		21,936		(13,420)
Net realized and unrealized gain (loss)	6,751		208		27,681		(465)
PREFERRED STOCK DIVIDENDS	88		—		96		—
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS	$	19,056	$	11,884	$	62,689	$	29,568
BASIC AND DILUTED PER COMMON SHARE:
Net investment income(B)	$	0.57	$	0.62	$	1.61	$	1.65
Net increase (decrease) in net assets resulting from operations(B)	$	0.88	$	0.63	$	2.88	$	1.62
WEIGHTED AVERAGE SHARES OF COMMON STOCK OUTSTANDING: Basic and Diluted(B)	21,754,456		18,840,233		21,754,451		18,246,084

(A)Refer to Note 4—Related Party Transactions in the accompanying Notes to Consolidated Financial Statements for additional information.

(B)Per share amounts and weighted average common shares outstanding have been adjusted on a retroactive basis to reflect the Reverse Stock Split effected on April 4, 2024. Refer to Note 2—Summary of Significant Accounting Policies in the accompanying Notes to Consolidated Financial Statements for additional information.

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS.

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GLADSTONE CAPITAL CORPORATION

CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS

(DOLLAR AMOUNTS IN THOUSANDS)

(UNAUDITED)


	2024		2023
NET ASSETS, SEPTEMBER 30	$	408,695	$	315,487
OPERATIONS
Net investment income	11,934		8,725
Net realized gain (loss) on investments	259		9,319
Net realized gain (loss) on other	3		253
Net unrealized appreciation (depreciation) of investments	7,805		(12,599)
Net increase (decrease) in net assets resulting from operations	20,001		5,698
DISTRIBUTIONS
Distributions to common stockholders from net investment income ($0.49 per share and $0.42 per share, respectively)(A)(B)	(10,768)		(7,398)
Net decrease in net assets from distributions	(10,768)		(7,398)
CAPITAL TRANSACTIONS
Issuance of common stock	—		10,721
Discounts, commissions and offering costs for issuance of common stock	—		(182)
Net increase (decrease) in net assets resulting from capital transactions	—		10,539
NET INCREASE (DECREASE) IN NET ASSETS	9,233		8,839
NET ASSETS, DECEMBER 31	$	417,928	$	324,326
OPERATIONS
Net investment income	10,777		9,632
Net realized gain (loss) on investments	219		403
Net realized gain (loss) on other	1,949		25
Net unrealized appreciation (depreciation) of investments	10,695		1,765
Net unrealized depreciation of other	—		161
Preferred stock dividends	(8)		—
Net increase (decrease) in net assets resulting from operations	23,632		11,986
DISTRIBUTIONS
Distributions to common stockholders from net investment income ($0.50 per share and $0.45 per share, respectively)(A)(B)	(10,769)		(8,257)
Net decrease in net assets from distributions	(10,769)		(8,257)
CAPITAL TRANSACTIONS
Issuance of common stock	—		13,993
Discounts, commissions and offering costs for issuance of common stock	—		(237)
Net increase (decrease) in net assets resulting from capital transactions	—		13,756
NET INCREASE (DECREASE) IN NET ASSETS	12,863		17,485
NET ASSETS, MARCH 31	$	430,791	$	341,811
OPERATIONS
Net investment income	12,393		11,676
Net realized gain (loss) on investments	1,417		2,911
Net realized gain (loss) on other	1,898		44
Net unrealized appreciation (depreciation) of investments	3,436		(2,586)
Net unrealized appreciation of other	—		(161)
Preferred stock dividends	(88)		—
Net increase (decrease) in net assets resulting from operations	19,056		11,884
DISTRIBUTIONS
Distributions to common stockholders from net investment income ($0.50 per share and $0.48 per share, respectively)(A)(B)	(10,769)		(9,082)
Net decrease in net assets from distributions	(10,769)		(9,082)
CAPITAL TRANSACTIONS
Issuance of common stock	—		13,565
Discounts, commissions and offering costs for issuance of common stock	—		(232)
Net increase (decrease) in net assets resulting from capital transactions	—		13,333
NET INCREASE (DECREASE) IN NET ASSETS	8,287		16,135
NET ASSETS, JUNE 30	$	439,078	$	357,946

(A)Refer to Note 9 – Distributions to Common Stockholders in the accompanying Notes to Consolidated Financial Statements for additional information.

(B)Per share amounts have been adjusted on a retroactive basis to reflect the Reverse Stock Split effected on April 4, 2024. Refer to Note 2—Summary of Significant Accounting Policies in the accompanying Notes to Consolidated Financial Statements for additional information.

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS.

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GLADSTONE CAPITAL CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(DOLLAR AMOUNTS IN THOUSANDS)

(UNAUDITED)


	Nine Months Ended June 30,
	2024		2023
CASH FLOWS FROM OPERATING ACTIVITIES
Net increase (decrease) in net assets resulting from operations	$	62,689	$	29,568
Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash provided by (used in) operating activities:
Purchase of investments	(149,122)		(148,084)
Principal repayments on investments	120,946		66,200
Net proceeds from sale of investments	6,536		18,296
Increase in investments due to PIK interest or other	(4,060)		(2,779)
Net change in premiums, discounts and amortization	451		193
Net realized loss (gain) on investments	(1,895)		(12,633)
Net realized loss (gain) on other	(3,850)		(322)
Net unrealized depreciation (appreciation) of investments	(21,936)		13,420
Amortization of deferred financing costs	1,323		1,164
Changes in assets and liabilities:
Decrease (increase) in interest receivable, net	761		(1,500)
Decrease (increase) in funds due from administrative agent	(2,986)		(1,100)
Decrease (increase) in other assets, net	(775)		(509)
Increase (decrease) in accounts payable and accrued expenses	(20)		569
Increase (decrease) in interest payable	1,340		1,790
Increase (decrease) in fees due to Adviser(A)	291		409
Increase (decrease) in fee due to Administrator(A)	352		273
Increase (decrease) in other liabilities	(1,111)		1,315
Net cash provided by (used in) operating activities	8,934		(33,730)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from line of credit	179,500		123,000
Repayments on line of credit	(161,500)		(101,000)
Financing costs	(378)		(1,559)
Proceeds from issuance of common stock	—		38,279
Proceeds from issuance of preferred stock	5,595		—
Discounts, commissions and offering costs for issuance of common stock	—		(574)
Distributions paid to common stockholders	(32,306)		(24,737)
Net cash provided by (used in) financing activities	(9,089)		33,409
NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS, RESTRICTED CASH, AND RESTRICTED CASH EQUIVALENTS	(155)		(321)
CASH, CASH EQUIVALENTS, RESTRICTED CASH, AND RESTRICTED CASH EQUIVALENTS, BEGINNING OF PERIOD	1,401		2,107
CASH, CASH EQUIVALENTS, RESTRICTED CASH, AND RESTRICTED CASH EQUIVALENTS, END OF PERIOD	$	1,246	$	1,786
CASH PAID FOR INTEREST	$	14,933	$	13,301
NON-CASH ACTIVITIES(B)	$	—	$	2,416

(A)Refer to Note 4—Related Party Transactions in the accompanying Notes to Consolidated Financial Statements for additional information.

(B)Non-cash activities relate to the October 2022 exit of our investment in Targus Cayman HoldCo Ltd., which was sold for net proceeds of approximately $8.0 million, resulting in a realized gain of approximately $5.9 million. As part of the proceeds, we received an interest in B. Riley Financial, Inc. 6.75% senior notes in the amount of $2.4 million.

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS.

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GLADSTONE CAPITAL CORPORATION CONSOLIDATED SCHEDULE OF INVESTMENTS JUNE 30, 2024 (UNAUDITED) (DOLLAR AMOUNTS IN THOUSANDS)
Company and Investment(A)(B)(K)(Q)	Principal/ Shares/ Units(J)(I)		Cost		Fair Value
NON-CONTROL/NON-AFFILIATE INVESTMENTS(M) – 161.8%
Secured First Lien Debt – 120.1%
Aerospace and Defense – 21.1%
Antenna Research Associates, Inc. – Term Debt (S + 10.0%, 15.3% Cash, 4.0% PIK, Due 11/2026)(E)	$	30,949	$	30,949	$	30,949
Ohio Armor Holdings, LLC – Term Debt (S + 8.0%, 13.3% Cash, Due 2/2026)(C)	16,856		16,856		16,856
SpaceCo Holdings, LLC – Line of Credit, $50 available (S + 6.4%, 11.7% Cash, Due 12/2025)(C)(H)	1,950		1,950		1,948
SpaceCo Holdings, LLC – Term Debt (S + 6.4%, 11.7% Cash, Due 12/2025)(C)(H)	43,054		42,601		43,002
			92,356		92,755
Beverage, Food, and Tobacco – 17.0%
Café Zupas – Line of Credit, $700 available (S + 7.5%, 12.8% Cash, Due 12/2027)(C)	1,050		1,050		1,061
Café Zupas – Delayed Draw Term Loan, $4,200 available (S + 7.5%, 12.8% Cash, Due 12/2027)(C)	6,300		6,300		6,363
Café Zupas – Term Debt (S + 7.5%, 12.8% Cash, Due 12/2027)(C)	26,250		26,063		26,513
Eegee’s LLC – Line of Credit, $500 available (S + 7.8%, 13.1% Cash, Due 6/2026)(C)	1,500		1,500		1,446
Eegee’s LLC – Delayed Draw Term Loan, $0 available (S + 7.8%, 8.0% Cash, 5.1% PIK, Due 6/2026)(C)	3,105		3,105		2,992
Eegee’s LLC – Term Debt (S + 7.8%, 8.0% Cash, 5.1% PIK, Due 6/2026)(C)	17,594		17,594		16,958
Salt & Straw, LLC – Line of Credit, $2,000 available (S + 9.1%, 14.4% Cash, Due 9/2027)(C)	—		—		—
Salt & Straw, LLC – Delayed Draw Term Loan, $3,500 available (S + 9.1%, 14.4% Cash, Due 9/2027)(C)	10,850		10,682		10,959
Sokol & Company Holdings, LLC – Term Debt (S + 6.8%, 12.1% Cash, Due 8/2027)(C)	8,500		8,500		8,500
			74,794		74,792
Buildings and Real Estate – 0.5%
GFRC 360, LLC – Line of Credit, $95 available (S + 8.0%, 13.3% Cash, Due 9/2024)(C)	1,355		1,355		1,359
GFRC 360, LLC – Term Debt (S + 8.0%, 13.3% Cash, Due 9/2024)(C)	1,000		1,000		1,003
			2,355		2,362
Diversified/Conglomerate Manufacturing – 25.7%
Engineering Manufacturing Technologies, LLC – Line of Credit, $3,000 available (S + 8.3%, 13.6% Cash, Due 10/2026)(E)	—		—		—
Engineering Manufacturing Technologies, LLC – Term Debt (S + 8.3%, 10.0% Cash, 3.6% PIK, Due 10/2026)(E)	22,027		22,027		18,381
NeoGraf Solutions LLC – Line of Credit, $4,500 available (S + 7.0%, 11.0% Cash, 1.3% PIK, Due 1/2028)(C)	—		—		—
NeoGraf Solutions LLC – Term Debt (S + 7.0%, 11.0% Cash, 1.3% PIK, Due 1/2028)(C)	27,431		27,431		25,953
OCI, LLC – Term Debt (S + 7.5%, 12.8% Cash, Due 5/2028)(C)	18,500		18,500		18,685
Salvo Technologies, Inc. – Term Debt (S + 9.5%, 14.8% Cash, Due 4/2027)(C)	12,178		12,156		12,237
Unirac Holdings, Inc. – Line of Credit, $1,244 available (S + 6.5%,