GLADSTONE CAPITAL CORP

RESULTS OF OPERATIONS

Comparison of the Three Months Ended December 31, 2024 to the Three Months Ended December 31, 2023

NM - Not Meaningful

Investment Income

Interest income decreased by 7.3% for the three months ended December 31, 2024, as compared to the prior year period. Generally, the level of interest income from investments is directly related to the principal balance of our interest-bearing investment portfolio outstanding during the period multiplied by the weighted-average yield. The weighted average principal balance of our interest-bearing investment portfolio for the three months ended December 31, 2024 was $642.4 million, compared to $657.6 million for the three months ended December 31, 2023, a decrease of $15.2 million, or 2.3%. The weighted average yield on our interest-bearing investments is based on the current stated interest rate on interest-bearing investments, which decreased to 13.1% for the three months ended December 31, 2024, compared to 13.9% for the three months ended December 31, 2023, inclusive of any allowances on interest receivables made during those periods. The decrease in the weighted average yield was driven mainly by decreases in interest rates.

As of December 31, 2024, our loans to B+T Group Acquisition, Inc., Edge Adhesives Holdings, Inc., Eegee’s LLC, and WB Xcel Holdings, LLC were on non-accrual status with a cost basis of $52.7 million, or 7.1% of the cost basis of all debt investments in our portfolio, and a fair value of $28.5 million, or 4.0% of the fair value of all debt investments in our portfolio. As of September 30, 2024, our loans to B+T Group Acquisition, Inc., Edge Adhesives Holdings, Inc., and WB Xcel Holdings, LLC were on non-accrual status with a cost basis of $28.3 million, or 4.1% of the cost basis of all debt investments in our portfolio, and a fair value of $12.8 million, or 1.9% of the fair value of all debt investments in our portfolio.

Other income increased by 184.4% during the three months ended December 31, 2024, as compared to the prior year period, primarily due to an increase in prepayment fees received period over period, partially offset by a decrease in dividend income period over period.

As of December 31, 2024, no single investment represented greater than 10% of the total investment portfolio at fair value. As of September 30, 2024, our investment in Antenna Research Associates, Inc. represented 11.4% of the total investment portfolio at fair value.

Expenses

Expenses, net of any non-contractual, unconditional and irrevocable credits to fees from the Adviser, decreased $0.6 million, or 4.9%, for the three months ended December 31, 2024, as compared to the prior year period. This decrease was primarily due to a $0.5 million decrease in the net incentive fee earned by the Adviser and a $0.3 million decrease in interest expense, partially offset by a $0.4 million increase in other expenses.

Total interest expense on borrowings and notes payable decreased by $0.3 million, or 5.7%, during the three months ended December 31, 2024, driven by a decrease in the weighted average balance outstanding on our Credit Facility, partially offset by an increase in the effective interest rate on our Credit Facility. Interest expense on our Credit Facility decreased by $0.3 million due primarily to a decrease in the weighted average balance outstanding which was $26.2 million during the three months ended December 31, 2024, as compared to $48.6 million in the prior year period, a decrease of 46.1%. The effective interest rate on our Credit Facility, including unused commitment fees incurred, but excluding the impact of deferred financing costs, was 19.1% during the three months ended December 31, 2024, compared to 12.7% during the prior year period. The increase in the effective interest rate was driven primarily by a $0.2 million increase in unused commitment fees during the three months ended December 31, 2024 as compared to the prior year period.

The net base management fee earned by the Adviser decreased by $0.2 million, or 13.0%, for the three months ended December 31, 2024, as compared to the prior year period, resulting from an increase in credits to the base management fee from the Adviser for new deal origination fees period over period, partially offset by an increase in average total assets subject to the base management fee.

The base management, loan servicing and incentive fees, and associated non-contractual, unconditional and irrevocable credits, are computed quarterly, as described under“Transactions with the Adviser” in Note 4—Related Party Transactions of the Notes to Consolidated Financial Statements and are summarized in the following table:

(A)Average total assets subject to the base management fee is defined as total assets, including investments made with proceeds of borrowings, less any uninvested cash or cash equivalents resulting from borrowings, valued at the end of the applicable quarters within the respective periods and adjusted appropriately for any share issuances or repurchases during the periods.

(B)Reflected, on a gross basis, as a line item on our Consolidated Statements of Operations.

Net Realized Gain (Loss) on Investments

For the three months ended December 31, 2024, we recorded a net realized gain on investments of $57.7 million, which resulted from a $59.3 million realized gain recognized on the sale of our investment in Antenna Research Associates, Inc. and a $2.5 million realized gain recognized on our investment in Salt & Straw, LLC, partially offset by a $4.1 million realized loss recognized on the sale of our investment in DKI.

For the three months ended December 31, 2023, we recorded a net realized gain on investments of $0.3 million, which resulted from a $0.3 million realized gain recognized on the sale of our investment in PIC 360, LLC in November 2023.

Net Unrealized Appreciation (Depreciation) of Investments

During the three months ended December 31, 2024, we recorded net unrealized depreciation of investments in the aggregate amount of $41.9 million. The net realized gain (loss) and unrealized appreciation (depreciation) across our investments for the three months ended December 31, 2024 were as follows:

The primary driver of net unrealized depreciation of $41.9 million for the three months ended December 31, 2024 was the

reversal of unrealized appreciation from the exit of our investment in Antenna Research Associates, Inc., partially offset by the increase in the financial and operational performance of several of our other portfolio companies.

During the three months ended December 31, 2023, we recorded net unrealized appreciation of investments in the aggregate amount of $7.8 million. The net realized gain (loss) and unrealized appreciation (depreciation) across our investments for the three months ended December 31, 2023 were as follows:

The primary driver of net unrealized appreciation of $7.8 million for the three months ended December 31, 2023 was the

increase in the financial and operational performance of several of our portfolio companies, partially offset by the decrease in comparable transaction multiples used to estimate the fair value of certain of our other portfolio companies, and the decline in the financial and operational performance of certain of our other portfolio companies.