Gladstone Investment (GAIN) Investor Day presentation summary

Overview and objectives

• Founded in 2001, operates as part of a group with two BDCs and two REITs, with $1.7B+ invested since 2005 IPO and $914M in assets at fair value as of 6/30/2024.

• Differentiated by a buyout-focused strategy, acting as lead sponsor and turnkey provider of both equity and debt, targeting lower middle market U.S. companies with EBITDA of $4–$15M.

• Evergreen fund structure allows for long-term alignment and flexibility, with active board participation and diversified investments across 23 companies, 18 states, and 15 industries.

• Portfolio mix is approximately 33% equity, 52% first lien debt, and 15% second lien debt, with a 3.8x average cash-on-cash equity return on buyout exits since inception.

• Consistent monthly distributions since IPO, with regular annual distribution doubling from $0.48/share in FY11 to $0.96/share for FY25, and history of supplemental distributions from realized gains.

Investment strategy and value creation

• Focuses on stable, cash-flow positive lower middle market companies, typically investing up to $75M per deal with a 25% equity/75% debt mix.

• Sourcing is regionally focused, leveraging relationships with investment banks, M&A advisors, and industry executives, with a typical due diligence period of 45–60 days.

• Provides all required capital for buyouts, enabling speed and certainty of close, and maintains a long-term investment horizon without fund life constraints.

• Drives value through board participation, strategic planning, add-on acquisitions, and operational initiatives, with recent examples including Nocturne Luxury Villas and Specialized Fabrication Equipment Group.

• Has executed multiple roll-up and add-on strategies, supporting management and leveraging industry expertise to enhance portfolio company performance.

Portfolio, exits, and market update

• Portfolio is diversified across manufacturing, business/consumer services, and consumer products, with recent investments in Home Concepts Holdings and The E3 Company.

• Geographic diversification spans 18 states, with 45 new investments and 31 exits totaling $920.8M in proceeds from 2010 to 6/30/2024.

• Recent exits include Counsel Press and Nth Degree, generating significant realized gains and demonstrating the ability to recycle capital.

• Market conditions show increased deal flow as buyers and sellers adjust to higher interest rates, with a focus on recurring revenue businesses and roll-up strategies.

• Speed and certainty of close are increasingly valued by intermediaries, aligning with the firm's one-stop capital solution.