GLADSTONE INVESTMENT CORPORATIONDE
For the period ended Dec 31, 2023. Filed Feb 6, 2024.
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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.
Dec 31, 2023 · Filed Feb 6, 2024
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Item 2. Results of Operations
RESULTS OF OPERATIONS
Comparison of the Three Months Ended December 31, 2023 to the Three Months Ended December 31, 2022
| For the Three Months Ended December 31, | ||||
|---|---|---|---|---|
| 2023 | 2022 | $ Change | % Change | |
| INVESTMENT INCOME | ||||
| Interest income | $21,699 | $16,067 | $5,632 | 35.1% |
| Dividend and success fee income | 1,382 | 5,527 | (4,145) | (75.0)% |
| Total investment income | 23,081 | 21,594 | 1,487 | 6.9% |
| EXPENSES | ||||
| Base management fee | 4,602 | 3,789 | 813 | 21.5% |
| Loan servicing fee | 2,332 | 2,080 | 252 | 12.1% |
| Incentive fee | 1,667 | 3,945 | (2,278) | (57.7)% |
| Administration fee | 450 | 410 | 40 | 9.8% |
| Interest expense | 6,520 | 4,074 | 2,446 | 60.0% |
| Amortization of deferred financing costs and discounts | 589 | 452 | 137 | 30.3% |
| Other | 1,302 | 1,111 | 191 | 17.2% |
| Expenses before credits from Adviser | 17,462 | 15,861 | 1,601 | 10.1% |
| Credits to fees from Adviser | (4,125) | (2,836) | (1,289) | 45.5% |
| Total expenses, net of credits to fees | 13,337 | 13,025 | 312 | 2.4% |
| NET INVESTMENT INCOME | 9,744 | 8,569 | 1,175 | 13.7% |
| REALIZED AND UNREALIZED GAIN (LOSS) | ||||
| Net realized gain | 43,461 | 3,844 | 39,617 | NM |
| Net unrealized (depreciation) appreciation | (46,626) | 3,366 | (49,992) | NM |
| Net realized and unrealized (loss) gain | (3,165) | 7,210 | (10,375) | NM |
| NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS | $6,579 | $15,779 | $(9,200) | NM |
| WEIGHTED-AVERAGE SHARES OF COMMON STOCK OUTSTANDING | ||||
| Basic and diluted | 34,351,597 | 33,316,055 | 1,035,542 | 3.1% |
| BASIC AND DILUTED PER COMMON SHARE: | ||||
| Net investment income | $0.28 | $0.26 | $0.02 | 7.7% |
| Net increase in net assets resulting from operations | $0.19 | $0.47 | $(0.28) | (59.6)% |
NM - Not meaningful
Investment Income
Total investment income increased $1.5 million, or 6.9%, for the three months ended December 31, 2023, as compared to the prior year period, primarily due to an increase in interest income, partially offset by a decrease in dividend and success fee income.
Interest income from our investments in debt securities increased $5.6 million, or 35.1%, for the three months ended December 31, 2023, 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 during the three months ended December 31, 2023 was $594.3 million, compared to $474.1 million for the prior year period. This increase was primarily due to the $117.9 million of follow-on debt investments in existing portfolio companies and the origination of $46.8 million of new debt investments, partially offset by $31.8 million of pay-offs, restructurings, or write-offs of debt investments, and $9.2 million of loans placed on non-accrual status after September 30, 2022, and their respective impact on the weighted-average principal balance when considering timing of new investments, pay-offs, restructurings, write-offs, and accrual status changes, as applicable.
The weighted-average yield on our interest-bearing investments, excluding cash and cash equivalents and receipts recorded as dividend and success fee income, was 14.4% for the three months ended December 31, 2023, compared to 13.4% for the prior year period. The weighted-average yield may vary from period to period, based on the current stated interest rate on interest-bearing investments, coupled with any collection of past due interest during the period.
As of December 31, 2023, our loans to Edge Adhesives Holdings, Inc. ("Edge"), J.R. Hobbs Co. – Atlanta, LLC ("J.R. Hobbs") and The Mountain Corporation ("The Mountain") were on non-accrual status, with an aggregate debt cost basis of $66.9 million. As of December 31, 2022, our loans to Edge, J.R. Hobbs and The Mountain were on non-accrual status, with an aggregate debt cost basis of $66.6 million.
Dividend and success fee income for the three months ended December 31, 2023 decreased $4.1 million, or 75.0%, from the prior year period. During the three months ended December 31, 2023, dividend and success fee income consisted of $1.4 million of success fee income. During the three months ended December 31, 2022, dividend and success fee income consisted of $4.5 million of dividend income and $1.1 million of success fee income.
As of December 31, 2023, SFEG represented 10.2% of the total investment portfolio at fair value. As of March 31, 2023, no single investment represented greater than 10% of the total investment portfolio at fair value.
Expenses
Total expenses, net of any non-contractual, unconditional, and irrevocable credits from the Adviser, increased $0.3 million, or 2.4%, during the three months ended December 31, 2023, as compared to the prior year period, primarily due to an increase in interest expense and base management fee, partially offset by a decrease in incentive fees and an increase in credits from the Adviser.
In accordance with GAAP, during the three months ended December 31, 2023, we recorded a $0.6 million reversal of previously accrued capital gains-based incentive fee compared to a capital gains-based incentive fee of $1.4 million during the three months ended December 31, 2022. The capital gains-based incentive fee is a result of the net impact of net realized gains and net unrealized appreciation (depreciation) on investments during the respective periods. The income-based incentive fee decreased by $0.2 million, for the three months ended December 31, 2023, as compared to the prior year period, primarily due to a decrease in pre-incentive fee net investment income and an increase in net assets, which drives the hurdle rate.
The base management fee, loan servicing fee, incentive fee, and their related non-contractual, unconditional, and irrevocable credits are computed quarterly, as described under“Transactions with the Adviser”in Note 4 —Related Party Transactions in the accompanying Notes to Consolidated Financial Statements and are summarized in the following table:
| Three Months Ended December 31, | ||
|---|---|---|
| 2023 | 2022 | |
| Average total assets subject to base management fee(A) | $920,400 | $757,800 |
| Multiplied by prorated annual base management fee of 2.0% | 0.5% | 0.5% |
| Base management fee(B) | $4,602 | $3,789 |
| Credits to fees from Adviser - other(B) | (1,793) | (756) |
| Net base management fee | $2,809 | $3,033 |
| Loan servicing fee(B) | $2,332 | $2,080 |
| Credits to base management fee - loan servicing fee(B) | (2,332) | (2,080) |
| Net loan servicing fee | $— | $— |
| Incentive fee – income-based | $2,282 | $2,503 |
| Incentive fee – capital gains-based(C) | (615) | 1,442 |
| Total incentive fee(B) | $1,667 | $3,945 |
| Credits to fees from Adviser - other(B) | — | — |
| Net total incentive fee | $1,667 | $3,945 |
(A)Average total assets subject to the base management fee is defined in the Advisory Agreement 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 as a line item on our Consolidated Statements of Operations.
Interest expense increased $2.4 million, or 60.0%, during the three months ended December 31, 2023, as compared to the prior year period, primarily due to interest expense related to the 8.00% 2028 Notes issued in May 2023 and increased borrowings on the Credit Facility, partially offset by a decrease in the effective interest rate. The weighted-average balance outstanding under the Credit Facility during the three months ended December 31, 2023 was $77.4 million, compared to $26.1 million in the prior year period. The effective interest rate on the Credit Facility, excluding the impact of deferred financing costs, during the three months ended December 31, 2023 was 9.2%, as compared to 12.8% in the prior year period. The decrease in the effective interest rate on the Credit Facility was primarily a result of the decrease in the unused fee associated with the undrawn portion of the Credit Facility, partially offset by an increase in interest rates.
Other expenses increased $0.2 million, or 17.2%, during the three months ended December 31, 2023, as compared to the prior year period, due to an increase in bad debt expense and and professional fees.
Realized and Unrealized Gain (Loss)
The realized gains (losses) and unrealized appreciation (depreciation) across our investments for the three months ended December 31, 2023 and 2022 were as follows:
| Portfolio Company | Realized Gain (Loss) | Unrealized Appreciation (Depreciation) | Reversal of Unrealized (Appreciation) Depreciation | Net Gain (Loss) |
|---|---|---|---|---|
| Dema/Mai Holdings, Inc. | $— | $5,655 | $— | $5,655 |
| Nth Degree Investment Group, LLC | — | 3,274 | — | 3,274 |
| Educators Resources, Inc. | — | 2,229 | — | 2,229 |
| Brunswick Bowling Products, Inc. | — | 1,319 | — | 1,319 |
| ImageWorks Display and Marketing Group, Inc. | — | 1,205 | — | 1,205 |
| Counsel Press, Inc. | 43,459 | — | (43,566) | (107) |
| Horizon Facilities Service, Inc. | — | (1,204) | — | (1,204) |
| Home Concepts Acquisition, Inc. | — | (1,565) | — | (1,565) |
| Nocturne Villas Rentals, Inc. | — | (2,420) | — | (2,420) |
| Mason West, LLC | — | (2,484) | — | (2,484) |
| PSI Molded Plastics, Inc. | — | (4,401) | — | (4,401) |
| B+T Group Acquisition, Inc. | — | (4,811) | — | (4,811) |
| Other, net (<$1.0 million, net) | 2 | 235 | — | 237 |
| Total | $43,461 | $(2,968) | $(43,566) | $(3,073) |
| Portfolio Company | Realized Gain (Loss) | Unrealized Appreciation (Depreciation) | Reversal of Unrealized (Appreciation) Depreciation | Net Gain (Loss) |
|---|---|---|---|---|
| Brunswick Bowling Products, Inc. | $— | $7,275 | $— | $7,275 |
| Mason West, LLC | — | 5,281 | — | 5,281 |
| Old World Christmas, Inc. | 13,371 | (8,601) | — | 4,770 |
| Dema/Mai Holdings, Inc. | — | 3,877 | — | 3,877 |
| Nth Degree Investment Group, LLC | — | 3,845 | — | 3,845 |
| Schylling, Inc. | — | 2,977 | — | 2,977 |
| PSI Molded Plastics, Inc. | — | 2,976 | — | 2,976 |
| The Mountain Corporation | (10,000) | — | 10,000 | — |
| ImageWorks Display and Marketing Group, Inc. | — | (920) | — | (920) |
| Educators Resources, Inc. | — | (1,299) | — | (1,299) |
| J.R. Hobbs Co. - Atlanta, LLC | — | (2,398) | — | (2,398) |
| Galaxy Technologies Holding, Inc. | — | (3,255) | — | (3,255) |
| B+T Group Acquisition, Inc. | — | (3,747) | — | (3,747) |
| Nocturne Villas Rentals, Inc. | — | (4,182) | — | (4,182) |
| Horizon Facilities Service, Inc. | — | (8,267) | — | (8,267) |
| Other, net (<$1.0 million, net) | 473 | (197) | 1 | 277 |
| Total | $3,844 | $(6,635) | $10,001 | $7,210 |
Net Realized Gain (Loss)
During the three months ended December 31, 2023, we recorded net realized gains on investments of $43.5 million, primarily due to a $43.5 million realized gain from the exit of Counsel Press. During the three months ended December 31, 2022, we recorded net realized gains on investments of $3.8 million, primarily due to a $13.4 million realized gain from the recapitalization of Old World and $0.5 million of realized gains related to prior period exits of certain investments, partially offset by the $10.0 million realized loss recognized in conjunction with the replacement of our existing investment in The Mountain.
Net Unrealized Appreciation (Depreciation)
Net unrealized depreciation of investments of $46.5 million for the three months ended December 31, 2023 was primarily due to the reversal of unrealized appreciation of Counsel Press upon exit, a decrease in transaction multiples used to estimate the fair value of certain of our portfolio companies and a decrease in performance of certain of our portfolio companies. These decreases were partially offset by increased performance of certain of our other portfolio companies.
Net unrealized appreciation of investments of $3.4 million for the three months ended December 31, 2022 was primarily due to the reversal of unrealized depreciation of our investment in The Mountain upon the replacement of the existing investment, partially offset by net unrealized depreciation across our portfolio. The net unrealized depreciation was driven by decreased performance of certain of our portfolio companies and decreased comparable transaction multiples used to estimate the fair value of certain of our portfolio companies. These amounts were partially offset by increased performance of certain of our other portfolio companies, driven partially by the reversal of the impact of COVID-19 on certain of our portfolio companies and the markets in which they operate. In part, the performance of certain of our portfolio companies was driven by the impact COVID-19, and its variants, has had on our portfolio companies and the markets in which they operate, including government restrictions on the portfolio companies’ ability to operate under historical conditions, current and future shutdowns and reopening restrictions, operating challenges, including but not limited to, labor shortages, supply chain delays, increased material costs and demand for their products, and general economic outlook, or the reversal of such impact towards pre-COVID-19 levels.
Across our entire investment portfolio, we recorded net unrealized depreciation of$33.9 million on ourequity positions and net unrealized depreciation of $12.6 million on our debt positions for thethree months ended December 31, 2023. As of December 31, 2023, the fair value of our investment portfolio was more than the cost basis by $34.3 million, as compared to September 30, 2023, when the fair value of our investment portfolio was more than the cost basis by $80.8 million, representing net unrealized depreciation of$46.5 million for thethree months ended December 31, 2023. Our entire portfolio had a fair value of 103.9% of cost as of December 31, 2023.
Comparison of the Nine Months Ended December 31, 2023 to the Nine Months Ended December 31, 2022
| For the Nine Months Ended December 31, | ||||
|---|---|---|---|---|
| 2023 | 2022 | $ Change | % Change | |
| INVESTMENT INCOME | ||||
| Interest income | $60,369 | $43,045 | $17,324 | 40.2% |
| Dividend and success fee income | 3,289 | 18,641 | (15,352) | (82.4)% |
| Total investment income | 63,658 | 61,686 | 1,972 | 3.2% |
| EXPENSES | ||||
| Base management fee | 12,874 | 10,965 | 1,909 | 17.4% |
| Loan servicing fee | 6,829 | 5,754 | 1,075 | 18.7% |
| Incentive fee | 15,401 | 7,722 | 7,679 | 99.4% |
| Administration fee | 1,306 | 1,352 | (46) | (3.4)% |
| Interest expense | 17,598 | 11,715 | 5,883 | 50.2% |
| Amortization of deferred financing costs and discounts | 1,708 | 1,350 | 358 | 26.5% |
| Other | 3,434 | 4,357 | (923) | (21.2)% |
| Expenses before credits from Adviser | 59,150 | 43,215 | 15,935 | 36.9% |
| Credits to fees from Adviser | (11,946) | (8,885) | (3,061) | 34.5% |
| Total expenses, net of credits to fees | 47,204 | 34,330 | 12,874 | 37.5% |
| NET INVESTMENT INCOME | 16,454 | 27,356 | (10,902) | (39.9)% |
| REALIZED AND UNREALIZED GAIN (LOSS) | ||||
| Net realized gain | 44,905 | 10,598 | 34,307 | 323.7% |
| Net unrealized appreciation (depreciation) | 1,362 | (7,065) | 8,427 | NM |
| Net realized and unrealized gain (loss) | 46,267 | 3,533 | 42,734 | NM |
| NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS | $62,721 | $30,889 | $31,832 | 103.1% |
| WEIGHTED-AVERAGE SHARES OF COMMON STOCK OUTSTANDING | ||||
| Basic and diluted | 33,921,300 | 33,246,811 | 674,489 | 2.03% |
| BASIC AND DILUTED PER COMMON SHARE: | ||||
| Net investment income | $0.49 | $0.82 | $(0.33) | (40.2)% |
| Net increase in net assets resulting from operations | $1.85 | $0.93 | $0.92 | 98.9% |
NM = Not Meaningful
Investment Income
Total investment income increased $2.0 million, or 3.2%, for the nine months ended December 31, 2023, as compared to the prior year period, primarily due to an increase in interest income, partially offset by a decrease in dividend and success fee income.
Interest income from our investments in debt securities increased $17.3 million, or 40.2%, for the nine months ended December 31, 2023, 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 during the nine months ended December 31, 2023 was $544.6 million, compared to $457.9 million for the prior year period. This increase was primarily due to $119.8 million of follow-on debt investments in existing portfolio companies, the origination of $85.8 million of new debt investments, and $14.9 million of loans returned to accrual status, partially offset by $84.9 million of pay-offs, restructurings, or write-offs of debt investments and $9.2 million of loans placed on non-accrual status after March 31, 2022, and their respective impact on the weighted-average principal balance when considering timing of new investments, pay-offs, restructurings, write-offs, and accrual status changes, as applicable.
The weighted-average yield on our interest-bearing investments, excluding cash and cash equivalents and receipts recorded as dividend and success fee income, was 14.5% for the nine months ended December 31, 2023, compared to 12.5% for the prior year period. The weighted-average yield may vary from period to period, based on the current stated interest rate on interest-bearing investments, coupled with any collection of past due interest during the period. During the nine months ended December 31, 2023 and 2022, we had no collections of past due interest.
As of December 31, 2023, our loans to Edge, J.R. Hobbs and The Mountain were on non-accrual status, with an aggregate debt cost basis of $66.9 million. As of December 31, 2022, our loans to Edge, J.R. Hobbs and The Mountain were also on non-accrual status, with an aggregate debt cost basis of $66.6 million.
Dividend and success fee income for the nine months ended December 31, 2023 decreased $15.4 million, or 82.4% from the prior year period. During the nine months ended December 31, 2023, dividend and success fee income consisted of $1.9 million of dividend income and $1.4 million of success fee income. During the nine months ended December 31, 2022, dividend and success fee income consisted of $10.8 million of dividend income and $7.8 million of success fee income.
As of December 31, 2023, SFEG represented 10.2% of the total investment portfolio at fair value. As of March 31, 2023, no single investment represented greater than 10% of the total investment portfolio at fair value.
Expenses
Total expenses, net of any non-contractual, unconditional, and irrevocable credits from the Adviser, increased $12.9 million, or 37.5%, during the nine months ended December 31, 2023, as compared to the prior year period, primarily due to an increase in incentive fees, interest expense and base management fee, partially offset by an increase in credits from the Adviser.
In accordance with GAAP, we recorded a $9.3 million capital gains-based incentive fee during the nine months ended December 31, 2023, compared to a $0.7 million capital gains-based incentive fee recorded during the nine months ended December 31, 2022. The capital gains-based incentive fee was a result of the net impact of net realized gains and net unrealized appreciation (depreciation) on investments during the respective periods. The income-based incentive fee decreased by $0.9 million for the nine months ended December 31, 2023, as compared to the prior year period, primarily due to a decrease in pre-incentive fee net investment income and an increase in net assets, which drives the hurdle rate.
The base management fee, loan servicing fee, incentive fee, and their related non-contractual, unconditional, and irrevocable credits are computed quarterly, as described under“Transactions with the Adviser”in Note 4 —Related Party Transactions in the accompanying Notes to Consolidated Financial Statements and are summarized in the following table:
| Nine Months Ended December 31, | ||
|---|---|---|
| 2023 | 2022 | |
| Average total assets subject to base management fee(A) | $858,267 | $731,000 |
| Multiplied by prorated annual base management fee of 2.0% | 1.5% | 1.5% |
| Base management fee(B) | $12,874 | $10,965 |
| Credits to fees from Adviser - other(B) | (5,117) | (3,131) |
| Net base management fee | $7,757 | $7,834 |
| Loan servicing fee(B) | $6,829 | $5,754 |
| Credits to base management fee - loan servicing fee(B) | (6,829) | (5,754) |
| Net loan servicing fee | $— | $— |
| Incentive fee – income-based | $6,142 | $7,016 |
| Incentive fee – capital gains-based(C) | 9,259 | 706 |
| Total incentive fee(B) | $15,401 | $7,722 |
| Credits to fees from Adviser - other(B) | — | — |
| Net total incentive fee | $15,401 | $7,722 |
(A)Average total assets subject to the base management fee is defined in the Advisory Agreement 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 as a line item on our Consolidated Statements of Operations.
Interest expense increased $5.9 million, or 50.2%, during the nine months ended December 31, 2023, as compared to the prior year period, primarily due to interest expense related to the 8.00% 2028 Notes issued in May 2023 and increased borrowings on the Credit Facility, partially offset by a decrease in the effective interest rate. The weighted-average balance outstanding on the Credit Facility during the nine months ended December 31, 2023 was $57.1 million as compared to $12.6 million in the prior year period. The effective interest rate on the Credit Facility, excluding the impact of deferred financing costs, during the nine months ended December 31, 2023 was 10.2%, as compared to 19.8% in the prior year period. The decrease in the effective interest rate on the Credit Facility was primarily a result of a decrease in unused commitment fees on the undrawn portion of the Credit Facility, partially offset by an increase in interest rates on the drawn portion of the Credit Facility.
Other expenses decreased $0.9 million, or 21.2%, during the nine months ended December 31, 2023, as compared to the prior year period, due to a decrease in professional fees, bad debt expense and tax expense.
Realized and Unrealized Gain (Loss)
The realized gains (losses) and unrealized appreciation (depreciation) across our investments for the nine months ended December 31, 2023 and 2022 were as follows:
| Portfolio Company | Realized Gain (Loss) | Unrealized Appreciation (Depreciation) | Reversal of Unrealized (Appreciation) Depreciation | Net Gain (Loss) |
|---|---|---|---|---|
| Counsel Press, Inc. | $43,459 | $22,676 | $(43,566) | $22,569 |
| Nth Degree Investment Group, LLC | — | 15,951 | — | 15,951 |
| Educators Resource, Inc. | — | 12,792 | — | 12,792 |
| Brunswick Bowling Products, Inc. | — | 9,630 | — | 9,630 |
| Mason West, LLC | — | 9,206 | — | 9,206 |
| SFEG Holdings, Inc. | — | 7,325 | — | 7,325 |
| Dema/Mai Holdings, Inc. | — | 3,780 | — | 3,780 |
| Galaxy Technologies Holdings, Inc. | — | 3,539 | — | 3,539 |
| The Maids International, LLC | — | 3,190 | — | 3,190 |
| Utah Pacific Bridge & Steel, Ltd. | — | 1,833 | — | 1,833 |
| Ginsey Home Solutions, Inc. | — | 1,476 | — | 1,476 |
| Gladstone SOG Investments, Inc | 882 | — | (93) | 789 |
| J.R. Hobbs Co. - Atlanta, LLC | — | (741) | — | (741) |
| Nocturne Luxury Villas, Inc. | — | (806) | — | (806) |
| Old World Christmas, Inc. | 273 | (1,394) | — | (1,121) |
| Diligent Delivery Systems | — | (1,207) | — | (1,207) |
| Home Concepts Acquisition, Inc. | — | (1,565) | — | (1,565) |
| PSI Molded Plastics, Inc. | — | (5,635) | — | (5,635) |
| Horizon Facilities Services, Inc. | — | (6,963) | — | (6,963) |
| Schylling, Inc. | — | (8,546) | — | (8,546) |
| ImageWorks Display and Marketing Group, Inc. | — | (9,071) | — | (9,071) |
| B+T Group Acquisition, Inc. | — | (10,107) | — | (10,107) |
| Other, net (<$1.0 million, net) | 291 | (313) | — | (22) |
| Total | $44,905 | $45,050 | $(43,659) | $46,296 |
| Portfolio Company | Realized Gain (Loss) | Unrealized Appreciation (Depreciation) | Reversal of Unrealized (Appreciation) Depreciation | Net Gain (Loss) |
|---|---|---|---|---|
| Brunswick Bowling Products, Inc | $— | $13,770 | $— | $13,770 |
| Nth Degree Investment Group, LLC | — | 11,525 | — | 11,525 |
| Old World Christmas, Inc. | 13,371 | (2,815) | — | 10,556 |
| Horizon Facilities Service, Inc. | 2,218 | 5,461 | — | 7,679 |
| Nocturne Villa Rentals, Inc. | — | 4,635 | — | 4,635 |
| Dema/Mai Holdings, Inc. | — | 3,877 | — | 3,877 |
| SFEG Holdings, Inc. | — | 3,505 | — | 3,505 |
| Mason West, LLC | — | 3,343 | — | 3,343 |
| Counsel Press, Inc. | — | 2,165 | — | 2,165 |
| Schylling Inc. | — | 1,633 | — | 1,633 |
| Utah Pacific Bridge & Steel, Ltd. | — | (1,206) | — | (1,206) |
| Educators Resources, Inc. | — | (1,614) | — | (1,614) |
| The Maids International, LLC | — | (2,679) | — | (2,679) |
| The Mountain Corporation | (10,000) | (2,930) | 10,000 | (2,930) |
| Ginsey Home Solutions, Inc. | — | (3,263) | — | (3,263) |
| ImageWorks Display and Marketing Group, Inc. | — | (3,273) | — | (3,273) |
| Galaxy Technologies Holdings, Inc. | — | (4,804) | — | (4,804) |
| Edge Adhesives Holdings, Inc | — | (5,395) | — | (5,395) |
| Bassett Creek Services, Inc. | 5,188 | — | (12,250) | (7,062) |
| B+T Group Acquisition, Inc | — | (13,014) | — | (13,014) |
| J.R. Hobbs Co. – Atlanta, LLC | — | (13,966) | — | (13,966) |
| Other, net (<$1.0 million, net) | (179) | 244 | (14) | 51 |
| Total | $10,598 | $(4,801) | $(2,264) | $3,533 |
Net Realized Gain (Loss)
During the nine months ended December 31, 2023, we recorded net realized gains on investments of $44.9 million, primarily due to a $43.5 million realized gain from the exit of Counsel Press, $1.2 million of realized gains related to certain prior period exits and $0.3 million of realized gain from the recapitalization of Old World. During the nine months ended December 31, 2022, we recorded net realized gains on investments of $10.6 million, primarily due to a $13.4 million realized gain from the recapitalization of Old World, $5.2 million of realized gains from the exit of Bassett Creek, of which $0.5 million was received in the three months ended December 31, 2022, and a $2.2 million realized gain from the recapitalization of Horizon. These amounts were partially offset by the $10.0 million realized loss recognized in conjunction with the replacement of the existing investment in The Mountain and $0.2 million of net realized losses related to prior period exits of certain investments.
Net Unrealized Appreciation (Depreciation)
Net unrealized appreciation of investments of $1.4 million for the nine months ended December 31, 2023 was primarily due to increased performance of certain of our portfolio companies and an increase in transaction multiples used to estimate the fair value of certain of our portfolio companies. These increases were partially offset by a reversal of unrealized appreciation of Counsel Press upon exit and decreased performance of certain of our other portfolio companies.
Net unrealized depreciation of investments of $7.1 million for the nine months ended December 31, 2022 was primarily due to the net unrealized depreciation across our portfolio as well as the reversal of unrealized appreciation of our investment in Bassett Creek upon its exit and the reversal of unrealized depreciation of our investment in The Mountain upon the replacement of our existing investment. The net depreciation was driven primarily by decreased performance of certain of our other portfolio companies and decreased comparable transaction multiples used to estimate the fair value of certain of our portfolio companies. These decreases were partially offset by increased performance of certain of our portfolio companies, driven partially by the reversal of the impact of COVID-19 on certain of our portfolio companies and the markets in which they operate. In part, the performance of certain of our portfolio companies was driven by the impact COVID-19, and its variants, has had on our portfolio companies and the markets in which they operate, including government restrictions on the portfolio companies’ ability to operate under historical conditions, current and future shutdowns and reopening restrictions, operating challenges, including but not limited to, labor shortages, supply chain delays, increased material costs and demand for their products, and general economic outlook, or the reversal of such impact towards pre-COVID-19 levels.
Across our entire investment portfolio, we recorded net unrealized appreciation of $11.1 million on ourequity positions and depreciation of $9.7 million on our debt positions, for thenine months ended December 31, 2023. As of December 31, 2023, the fair value of our investment portfolio was more than the cost basis by$34.3 million, as compared to March 31, 2023, when the fair value of our investment portfolio was more than the cost basis by $32.9 million, representing net unrealized appreciation of $1.4 million for thenine months ended December 31, 2023. Our entire portfolio had a fair value of 103.9% of cost as of December 31, 2023.
The text of this filing, as the company filed it with the SEC, without its images or exhibits. This is not investment advice.