Gladstone Investment Corporation (NASDAQ:GAIN) Q3 2023 Earnings Call Transcript

Mickey Schleien: Understand. And I see that you recapitalized Mountain, which has been on non-accrual for a while, but it’s still on non-accrual? Can you give us any insight into the outlook for that company?

Dave Dullum: Yes, I don’t think that we will come back on accrual frankly for a while. What we did was we essentially, as you well know, that has been effectively from a valuation perspective been written down for quite a while. So what we did was essentially restructure the debt at a slightly different valuation and if allowed us to therefore €œwrite-off for all purposes, including tax purposes some of the debt.€ So that’s how we manage that one, but I would not honestly anticipate that coming back on accrual for some time.

Mickey Schleien: And does that €“ I mean their end user is consumers? Is it just weakness in the consumer at the Mountain and is that something we are seeing elsewhere in the portfolio?

Dave Dullum: On their particular products, we have seen a little bit of softness in the December timeframe interestingly enough January, which is generally a slow month by the way for them as well. So that’s not necessarily unusual. Looking forward, we are seeing a slight, we think a slight uptick in February, but certainly, the customer base that they have are generally these specialty stores, also places like the zoos, the institutions like Smithsonian and what have you. And there clearly has been some drop-off in activity at those levels. So, the company is kind of holding its own honestly. We have had €“ I think I have reflected on this over the years. We have had probably more issues around management with that particular company than we have had with some others. And that’s as much frankly a part of it, but we are very intensively working on it and doing the things that we need to do to get the best outcome as possible.

Mickey Schleien: I appreciate that. Dave, you mentioned in your prepared remarks that on a net basis the decline in €“ or the unrealized depreciation in the portfolio outside of Old World and the Mountain was driven mostly by multiples. Is that the case at Horizon Facilities which was driven down €“ which was marked down relatively meaningfully or there are company performance issues there as well?

Rachael Easton: So, Horizon specifically was both a decline in multiples and a decline in EBITDA.

Mickey Schleien: Okay. That’s it from me this morning. I appreciate your time. Thank you.

Dave Dullum: But just one last thing on Horizon though, that company is very solid, very strong. And even though we have a slight decline in EBITDA and multiple you get us kind of a double whammy, but that company is, that’s doing very €“ that’s a really good company, very well managed and one that we feel very, very good about, just to be clear.

Mickey Schleien: Thanks.

Operator: Thank you. Our next question has come from the line of Kyle Joseph with Jefferies. Please proceed with your question.

Kyle Joseph: Hey, good morning, guys. Thanks for taking my question. Just on the credit side of things, can you give us a sense for how your companies have been able to adjust to the higher rate environment and higher debt servicing costs and kind of how that’s impacted the overall leverage of your portfolio?