GLADSTONE CAPITAL CORP

For the period ended Mar 31, 2025. Filed May 6, 2025.

About this filing

A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.

Mar 31, 2025 · Filed May 6, 2025

GLAD$19.52+0.7%Stored close · as of Nov 9, 2026

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Contents

Item 2. Results of Operations

RESULTS OF OPERATIONS

Comparison of the Three Months Ended March 31, 2025 to the Three Months Ended March 31, 2024

	Three Months Ended March 31,
	2025	2024	$ Change	% Change
INVESTMENT INCOME
Interest income	$21,338	$23,715	$(2,377)	(10.0)%
Success fee, dividend, and other income	231	282	(51)	(18.1)
Total investment income	21,569	23,997	(2,428)	(10.1)
EXPENSES
Base management fee	3,441	3,439	2	0.1
Loan servicing fee	2,278	2,260	18	0.8
Incentive fee	2,407	2,669	(262)	(9.8)
Administration fee	462	469	(7)	(1.5)
Interest expense on line of credit and notes payable	5,019	5,732	(713)	(12.4)
Amortization of deferred financing costs	527	441	86	19.5
Other expenses	614	916	(302)	(33.0)
Expenses, before credits from Adviser	14,748	15,926	(1,178)	(7.4)
Credit to base management fee – loan servicing fee	(2,278)	(2,260)	(18)	0.8
Credits to fees from Adviser – other	(2,146)	(446)	(1,700)	NM
Total expenses, net of credits	10,324	13,220	(2,896)	(21.9)
NET INVESTMENT INCOME	11,245	10,777	468	4.3
NET REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on investments	7,702	219	7,483	NM
Net realized gain (loss) on other	4	1,949	(1,945)	(99.8)
Net unrealized appreciation (depreciation) of investments	(9,914)	10,695	(20,609)	NM
Net unrealized appreciation of other	(49)	—	(49)	NM
Net gain (loss) from investments and other	(2,257)	12,863	(15,120)	NM
PREFERRED STOCK DIVIDENDS	191	8	183	NM
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS	$8,797	$23,632	$(14,835)	(62.8)%

NM - Not Meaningful

Investment Income

Interest income decreased by 10.0% for the three months ended March 31, 2025, 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 March 31, 2025 was $682.6 million, compared to $680.4 million for the three months ended March 31, 2024, an increase of $2.2 million, or 0.3%. The weighted average yield on our interest-bearing investments is based on the current stated interest rate on interest-bearing investments, which decreased to 12.6% for the three months ended March 31, 2025, compared to 14.0% for the three months ended March 31, 2024, 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 March 31, 2025, 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 $53.7 million, or 7.5% of the cost basis of all debt investments in our portfolio, and a fair value of $29.8 million, or 4.3% 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.

Success fee, dividend and other income decreased by 18.1% during the three months ended March 31, 2025, as compared to the prior year period, primarily due to an decrease in prepayment fees received period over period.

As of March 31, 2025, 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 $2.9 million, or 21.9%, for the three months ended March 31, 2025, as compared to the prior year period. This decrease was primarily due to a $1.6 million decrease in the net incentive fee earned by the Adviser, a $0.7 million decrease in interest expense, and a $0.4 million decrease in the net base management fee earned by the Adviser.

Total interest expense on borrowings and notes payable decreased by $0.7 million, or 12.4%, during the three months ended March 31, 2025, 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 $0.7 million due primarily to a decrease in the weighted average balance outstanding which was $53.7 million during the three months ended March 31, 2025, as compared to $90.3 million in the prior year period, a decrease of 40.5%. The effective interest rate on our Credit Facility, including unused commitment fees incurred, but excluding the impact of deferred financing costs, was 11.4% during the three months ended March 31, 2025, compared to 9.9% during the prior year period. The increase in the effective interest rate was driven primarily by a $0.3 million increase in unused commitment fees during the three months ended March 31, 2025 as compared to the prior year period.

The net base management fee earned by the Adviser decreased by $0.4 million, or 12.0%, for the three months ended March 31, 2025, 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.

The income-based incentive fee decreased by $0.3 million, or 9.8%, for the three months ended March 31, 2025, primarily due to lower pre-incentive fee net investment income as compared to the prior year period. During the three months ended March 31, 2025 and 2024, our Board of Directors accepted non-contractual, unconditional and irrevocable credits from the Adviser of $1.4 million and $0.1 million, respectively, to reduce the income-based incentive fee to the extent net investment income did not cover 100.0% of distributions to common stockholders.

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:

	Three Months EndedMarch 31,
	2025	2024
Average total assets subject to base management fee(A)(B)	$786,514	$786,057
Multiplied by prorated annual base management fee of 1.75%	0.4375%	0.4375%
Base management fee(C)	$3,441	$3,439
Portfolio company fee credit	(712)	(325)
Syndicated loan fee credit	(11)	(27)
Net Base Management Fee	$2,718	$3,087
Loan servicing fee(C)	2,278	2,260
Credit to base management fee - loan servicing fee(C)	(2,278)	(2,260)
Net Loan Servicing Fee	$—	$—
Incentive fee(C)	2,407	2,669
Incentive fee credit	(1,423)	(94)
Net Incentive Fee	$984	$2,575
Portfolio company fee credit	(712)	(325)
Syndicated loan fee credit	(11)	(27)
Incentive fee credit	(1,423)	(94)
Credits to Fees From Adviser - other(C)	$(2,146)	$(446)

(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)Excludes our investment in Gladstone Alternative valued at the end of the applicable quarters within the respective periods.

(C)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 March 31, 2025, we recorded a net realized gain on investments of $7.7 million, which resulted primarily from a $4.7 million realized gain recognized on the partial sale of our common equity investment in Sokol and a $3.0 million realized gain recognized on our investment in MCG Energy Solutions, LLC.

For the three months ended March 31, 2024, we recorded a net realized gain on investments of $0.2 million, which resulted primarily from a $0.2 million realized gain recognized on our investment in Trowbridge Chicago, LLC.

Net Unrealized Appreciation (Depreciation) of Investments

During the three months ended March 31, 2025, we recorded net unrealized depreciation of investments in the aggregate amount of $9.9 million. The net realized gain (loss) and unrealized appreciation (depreciation) across our investments for the three months ended March 31, 2025 were as follows:

Portfolio Company	Realized Gain (Loss)	Unrealized Appreciation (Depreciation)	Reversal of Unrealized (Appreciation)Depreciation	Net Gain (Loss)
Encore Dredging Holdings, LLC	$—	$2,471	$—	$2,471
Giving Home Health Care, LLC	—	1,563	—	1,563
Canopy Safety Brands, LLC	—	1,188	—	1,188
TNCP Intermediate HoldCo, LLC	—	735	—	735
Torrent Photonics Holdco LLC	—	630	—	630
NeoGraf Solutions, LLC	—	573	—	573
Sokol & Company Holdings, LLC	4,748	656	(4,870)	534
MCG Energy Solutions, LLC	2,954	—	(2,976)	(22)
Leadpoint Business Services, LLC	—	(313)	—	(313)
HH-Inspire Acquisition, Inc.	—	(1,166)	—	(1,166)
Technical Resource Management, LLC	—	(2,030)	—	(2,030)
Lonestar EMS, LLC	—	(2,067)	—	(2,067)
Engineering Manufacturing Technologies, LLC	—	(4,029)	—	(4,029)
Other, net (<$500)	—	(279)	—	(279)
Total:	$7,702	$(2,068)	$(7,846)	$(2,212)

The primary driver of net unrealized depreciation of $9.9 million for the three months ended March 31, 2025 was the

reversal of unrealized appreciation from the partial sale of our common equity investment in Sokol and the sale of our investment in MCG Energy Solutions, LLC, partially offset by the increase in the financial and operational performance of certain of our other portfolio companies.

During the three months ended March 31, 2024, we recorded net unrealized appreciation of investments in the aggregate amount of $10.7 million. The net realized gain (loss) and unrealized appreciation (depreciation) across our investments for the three months ended March 31, 2024 were as follows:

Portfolio Company	Realized Gain (Loss)	Unrealized Appreciation (Depreciation)	Reversal of Unrealized (Appreciation)Depreciation	Net Gain (Loss)
Lonestar EMS, LLC	$—	$5,729	$—	$5,729
Salt & Straw, LLC	—	2,958	—	2,958
Giving Home Health Care, LLC	—	2,009	—	2,009
MCG Energy Solutions, LLC	—	1,381	—	1,381
Antenna Research Associates, Inc.	—	1,305	—	1,305
Springfield, Inc.	—	666	—	666
Encore Dredging Holdings, LLC	—	520	—	520
Leadpoint Business Services, LLC	—	510	—	510
NeoGraf Solutions, LLC	—	495	—	495
Axios Industrial Group, LLC	—	493	—	493
8th Avenue Food & Provisions, Inc.	—	405	—	405
Trowbridge Chicago, LLC	219	43	111	373
TNCP Intermediate HoldCo, LLC	—	337	—	337
ENET Holdings, LLC	—	(530)	—	(530)
FES Resources Holdings LLC	—	(828)	—	(828)
Eegee's LLC	—	(833)	—	(833)
Edge Adhesives Holdings, Inc.	—	(892)	—	(892)
HH-Inspire Acquisition, Inc.	—	(916)	—	(916)
WB Xcel Holdings, LLC	—	(2,524)	—	(2,524)
Other, net (<$500)	—	99	157	256
Total:	$219	$10,427	$268	$10,914

The primary driver of net unrealized appreciation of $10.7 million for the three months ended March 31, 2024 was the

improvement in the financial and operational performance of Lonestar EMS, LLC, partially offset by the decline in the financial and operational performance of WB Xcel Holdings, LLC.

Comparison of the Six Months Ended March 31, 2025 to the Six Months Ended March 31, 2024

	Six Months Ended March 31,
	2025	2024	$ Change	% Change
INVESTMENT INCOME
Interest income	$42,658	$46,711	$(4,053)	(8.7)%
Success fee, dividend, and other income	871	507	364	71.8
Total investment income	43,529	47,218	(3,689)	(7.8)
EXPENSES
Base management fee	6,993	6,684	309	4.6
Loan servicing fee	4,456	4,388	68	1.5
Incentive fee	5,111	5,653	(542)	(9.6)
Administration fee	936	923	13	1.4
Interest expense on line of credit and notes payable	9,762	10,764	(1,002)	(9.3)
Amortization of deferred financing costs	1,045	870	175	20.1
Other expenses	1,704	1,641	63	3.8
Expenses, before credits from Adviser	30,007	30,923	(916)	(3.0)
Credit to base management fee – loan servicing fee	(4,456)	(4,388)	(68)	1.5
Credits to fees from Adviser – other	(4,491)	(2,028)	(2,463)	NM
Total expenses, net of credits	21,060	24,507	(3,447)	(14.1)
NET INVESTMENT INCOME	22,469	22,711	(242)	(1.1)
NET REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on investments	65,426	478	64,948	NM
Net realized gain (loss) on other	94	1,952	(1,858)	(95.2)
Net unrealized appreciation (depreciation) of investments	(51,806)	18,500	(70,306)	NM
Net unrealized appreciation of other	(49)	—	(49)	NM
Net gain (loss) from investments and other	13,665	20,930	(7,265)	(34.7)
PREFERRED STOCK DIVIDENDS	362	8	354	NM
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS	$35,772	$43,633	$(7,861)	(18.0)%

NM - Not Meaningful

Investment Income

Interest income decreased by 8.7% for the six months ended March 31, 2025, 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 six months ended March 31, 2025 was $662.3 million, compared to $669.0 million for the six months ended March 31, 2024, a decrease of $6.7 million, or 1.0%. The weighted average yield on our interest-bearing investments is based on the current stated interest rate on interest-bearing investments, which decreased to 12.9% for the six months ended March 31, 2025, compared to 13.9% for the six months ended March 31, 2024, 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.

Other income increased by 71.8% during the six months ended March 31, 2025, 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.

Expenses

Expenses, net of any non-contractual, unconditional and irrevocable credits to fees from the Adviser, decreased $3.4 million, or 14.1%, for the six months ended March 31, 2025, as compared to the prior year period. This decrease was primarily due to a $2.1 million decrease in the net incentive fee earned by the Adviser, a $1.0 million decrease in interest expense, and a $0.6 million decrease in the net base management fee earned by the Adviser.

Total interest expense on borrowings and notes payable decreased by $1.0 million, or 9.3%, during the six months ended March 31, 2025, 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 $1.0 million due primarily to a decrease in the weighted average balance outstanding which was $39.8 million during the six months ended March 31, 2025, as compared to $69.3 million in the prior year period, a decrease of 42.6%. The effective interest rate on our Credit Facility, including unused commitment fees incurred, but excluding the impact of deferred financing costs, was 13.9% during the six months ended March 31, 2025, compared to 10.9% during the prior year period. The increase in the effective interest rate was driven primarily by a $0.5 million increase in unused commitment fees during the six months ended March 31, 2025 as compared to the prior year period.

The net base management fee earned by the Adviser decreased by $0.6 million, or 12.3%, for the six months ended March 31, 2025, 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 income-based incentive fee decreased by $0.5 million, or 9.6%, for the six months ended March 31, 2025, primarily due to lower pre-incentive fee net investment income as compared to the prior year period. During the six months ended March 31, 2025 and 2024, our Board of Directors accepted non-contractual, unconditional and irrevocable credits from the Adviser of $1.7 million and $0.1 million, respectively, to reduce the income-based incentive fee to the extent net investment income did not cover 100.0% of distributions to common stockholders.

	Six Months EndedMarch 31,
	2025	2024
Average total assets subject to base management fee(A)	$799,200	$763,886
Multiplied by prorated annual base management fee of 1.75%	0.8750%	0.8750%
Base management fee(B)	$6,993	$6,684
Portfolio company fee credit	(2,808)	(1,876)
Syndicated loan fee credit	(21)	(58)
Net Base Management Fee	$4,164	$4,750
Loan servicing fee(B)	4,456	4,388
Credit to base management fee - loan servicing fee(B)	(4,456)	(4,388)
Net Loan Servicing Fee	$—	$—
Incentive fee(B)	5,111	5,653
Incentive fee credit	(1,662)	(94)
Net Incentive Fee	$3,449	$5,559
Portfolio company fee credit	(2,808)	(1,876)
Syndicated loan fee credit	(21)	(58)
Incentive fee credit	(1,662)	(94)
Credits to Fees From Adviser - other(B)	$(4,491)	$(2,028)

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

Net Realized Gain (Loss) on Investments

For the six months ended March 31, 2025, we recorded a net realized gain on investments of $65.4 million, which resulted from a $59.3 million realized gain recognized on the sale of our investment in Antenna Research Associates, Inc., a $4.7 million realized gain recognized on the partial sale of our common equity investment in Sokol, a $3.0 million realized gain recognized on our investment in MCG Energy Solutions, LLC, 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 Ventures, LLC.

For the six months ended March 31, 2024, we recorded a net realized gain on investments of $0.5 million, which resulted from a $0.3 million realized gain recognized on the sale of our investment in PIC 360, LLC and a $0.2 million realized gain recognized on the sale of our investment in Trowbridge Chicago, LLC.

Net Unrealized Appreciation (Depreciation) of Investments

During the six months ended March 31, 2025, we recorded net unrealized depreciation of investments in the aggregate amount of $51.8 million. The net realized gain (loss) and unrealized appreciation (depreciation) across our investments for the six months ended March 31, 2025 were as follows:

Portfolio Company	Realized Gain (Loss)	Unrealized Appreciation (Depreciation)	Reversal of Unrealized (Appreciation)Depreciation	Net Gain (Loss)
Sokol & Company Holdings, LLC	$4,748	$6,386	$(4,870)	$6,264
Antenna Research Associates, Inc.	59,348	—	(55,140)	4,208
Giving Home Health Care, LLC	—	2,493	—	2,493
Encore Dredging Holdings, LLC	—	2,489	—	2,489
NeoGraf Solutions, LLC	—	2,310	—	2,310
Torrent Photonics Holdco LLC	—	2,222	—	2,222
Arc Drilling Holdings LLC	—	2,140	—	2,140
Lonestar EMS, LLC	—	1,376	—	1,376
TNCP Intermediate HoldCo, LLC	—	1,203	—	1,203
Canopy Safety Brands, LLC	—	1,181	—	1,181
Quality Environmental Midco, Inc.	—	810	—	810
Triple H Food Processors, LLC	—	554	—	554
MCG Energy Solutions, LLC	2,954	(4)	(2,976)	(26)
Salt & Straw, LLC	2,450	74	(2,607)	(83)
HH-Inspire Acquisition, Inc.	—	(503)	—	(503)
DKI Ventures, LLC	(4,074)	—	3,422	(652)
Eegee's LLC	—	(737)	—	(737)
Technical Resource Management, LLC	—	(1,824)	—	(1,824)
Defiance Integrated Technologies, Inc.	—	(2,096)	—	(2,096)
WB Xcel Holdings, LLC	—	(2,549)	—	(2,549)
Engineering Manufacturing Technologies, LLC	—	(5,089)	—	(5,089)
Other, net (<$500)	—	(387)	316	(71)
Total:	$65,426	$10,049	$(61,855)	$13,620

The primary driver of net unrealized depreciation of $51.8 million for the six months ended March 31, 2025 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 certain of our other portfolio companies.

During the six months ended March 31, 2024, we recorded net unrealized appreciation of investments in the aggregate amount of $18.5 million. The net realized gain (loss) and unrealized appreciation (depreciation) across our investments for the six months ended March 31, 2024 were as follows:

Portfolio Company	Realized Gain (Loss)	Unrealized Appreciation (Depreciation)	Reversal of Unrealized (Appreciation)Depreciation	Net Gain (Loss)
Antenna Research Associates, Inc.	$—	$8,074	$—	$8,074
Lonestar EMS, LLC	—	6,860	—	6,860
MCG Energy Solutions, LLC	—	3,486	—	3,486
Salt & Straw, LLC	—	2,934	—	2,934
Engineering Manufacturing Technologies, LLC	—	1,993	—	1,993
Giving Home Health Care, LLC	—	1,473	—	1,473
TNCP Intermediate HoldCo, LLC	—	896	—	896
8th Avenue Food & Provisions, Inc.	—	820	—	820
Café Zupas	—	763	—	763
Viva Railings, L.L.C.	—	704	—	704
Leadpoint Business Services, LLC	—	611	—	611
OCI, LLC	—	590	—	590
Ohio Armor Holdings, LLC	—	555	—	555
SpaceCo Holdings, LLC	—	554	—	554
Encore Dredging Holdings, LLC	—	465	—	465
Canopy Safety Brands, LLC	—	454	—	454
Axios Industrial Group, LLC	—	450	—	450
Fix-It Group, LLC	—	411	—	411
NeoGraf Solutions, LLC	—	(522)	—	(522)
Edge Adhesives Holdings, Inc.	—	(958)	—	(958)
HH-Inspire Acquisition, Inc.	—	(1,609)	—	(1,609)
B+T Group Acquisition Inc.	—	(2,411)	—	(2,411)
WB Xcel Holdings, LLC	—	(3,329)	—	(3,329)
FES Resources Holdings LLC	—	(4,545)	—	(4,545)
Other, net (<$500)	478	(204)	(15)	259
Total:	$478	$18,515	$(15)	$18,978

The primary driver of net unrealized appreciation of $18.5 million for the six months ended March 31, 2024 was the improvement in the financial and operational performance of Antenna Research Associates, Inc. and Lonestar EMS, LLC, partially offset by the decline in the financial and operational performance of FES Resources Holdings LLC and WB Xcel Holdings, LLC.

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