INVESTMENTS

9 Months Ended

Dec. 31, 2023

Investments, Debt and Equity Securities [Abstract]

INVESTMENTS

INVESTMENTS

Fair Value

In accordance with ASC 820, the fair value of our investments is determined to be the price that would be received for an investment in a current sale, which assumes an orderly transaction between willing market participants on the measurement date. This fair value definition focuses on exit price in the principal, or most advantageous, market and prioritizes, within a measurement of fair value, the use of market-based inputs over entity-specific inputs. ASC 820 also establishes the following three-level hierarchy for fair value measurements based upon the transparency of inputs to the valuation of a financial instrument as of the measurement date.

•Level 1 — inputs to the valuation methodology are quoted prices (unadjusted) for identical financial instruments in active markets;

•Level 2 — inputs to the valuation methodology include quoted prices for similar financial instruments in active or inactive markets, and inputs that are observable for the financial instrument, either directly or indirectly, for substantially the full term of the financial instrument. Level 2 inputs are those in markets for which there are few transactions, the prices are not current, little public information exists, or instances where prices vary substantially over time or among brokered market makers; and

•Level 3 — inputs to the valuation methodology are unobservable and significant to the fair value measurement. Unobservable inputs are those inputs that reflect assumptions that market participants would use when pricing the financial instrument and can include the Valuation Team’s assumptions based upon the best available information.

When a determination is made to classify our investments within Level 3 of the valuation hierarchy, such determination is based upon the significance of the unobservable factors to the overall fair value measurement. However, Level 3 financial instruments typically include, in addition to the unobservable, or Level 3, inputs, observable inputs (or components that are actively quoted and can be validated to external sources). The level in the fair value hierarchy within which the fair value measurement falls is determined based on the lowest level input that is significant to the fair value measurement.

As of December 31, 2023 and March 31, 2023, all of our investments were valued using Level 3 inputs within the ASC 820 fair value hierarchy, except for our investment in Funko Acquisition Holdings, LLC (“Funko”), which was valued using Level 2 inputs.

We transfer investments in and out of Level 1, 2 and 3 of the valuation hierarchy as of the beginning balance sheet date, based on changes in the use of observable and unobservable inputs utilized to perform the valuation for the period. There were no transfers in or out of Level 1, 2 and 3 during the nine months ended December 31, 2023 and 2022, respectively.

As of December 31, 2023 and March 31, 2023, our investments, by security type, at fair value were categorized as follows within the ASC 820 fair value hierarchy:

			Fair Value Measurements
	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
As of December 31, 2023:
Secured first lien debt	$	476,126	$	—	$	—		$	476,126
Secured second lien debt	137,480		—		—			137,480
Preferred equity	214,664		—		—			214,664
Common equity/equivalents	74,538		—		22		(A)	74,516
Total Investments as of December 31, 2023	$	902,808	$	—	$	22		$	902,786

			Fair Value Measurements
	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
As of March 31, 2023:
Secured first lien debt	$	437,517	$	—	$	—		$	437,517
Secured second lien debt	75,734		—		—			75,734
Preferred equity	222,585		—		—			222,585
Common equity/equivalents	17,707		—		27		(A)	17,680
Total Investments as of March 31, 2023	$	753,543	$	—	$	27		$	753,516

(A)Fair value was determined based on the closing market price of shares of Funko, Inc. (our units in Funko can be converted into common shares of Funko, Inc.) at the reporting date less a discount for lack of marketability, as our investment was subject to certain restrictions.

The following table presents our investments, valued using Level 3 inputs within the ASC 820 fair value hierarchy, and carried at fair value as of December 31, 2023 and March 31, 2023, by caption on our accompanying Consolidated Statements of Assets and Liabilities, and by security type:

	Total Recurring Fair Value Measurements Reported in Consolidated Statements of Assets and Liabilities Valued Using Level 3 Inputs
	December 31, 2023		March 31, 2023
Non-Control/Non-Affiliate Investments
Secured first lien debt	$	324,528	$	279,748
Secured second lien debt	93,340		50,842
Preferred equity	164,241		164,534
Common equity/equivalents(A)	38,207		1,724
Total Non-Control/Non-Affiliate Investments	620,316		496,848
Affiliate Investments
Secured first lien debt	147,354		157,769
Secured second lien debt	44,140		24,892
Preferred equity	50,423		58,051
Common equity/equivalents	36,309		15,243
Total Affiliate Investments	278,226		255,955
Control Investments
Secured first lien debt	4,244		—
Secured second lien debt	—		—
Preferred equity	—		—
Common equity/equivalents	—		713
Total Control Investments	4,244		713
Total investments at fair value using Level 3 inputs	$	902,786	$	753,516

(A)Excludes our investment in Funko with a fair value of $22 thousand and $27 thousand as of December 31, 2023 and March 31, 2023, respectively, which was valued using Level 2 inputs.

In accordance with ASC 820, the following table provides quantitative information about our investments valued using Level 3 fair value measurements as of December 31, 2023 and March 31, 2023. The table below is not intended to be all-inclusive, but rather provides information on the significant Level 3 inputs as they relate to our fair value measurements. The weighted-average calculations in the table below are based on the principal balances for all debt-related calculations and on the cost basis for all equity-related calculations for the particular input.

	Quantitative Information about Level 3 Fair Value Measurements
	Fair Value as of				Valuation Technique/ Methodology	Unobservable Input	Range / Weighted-Average as of
	December 31, 2023		March 31, 2023				December 31, 2023	March 31, 2023
Secured first lien debt	$	476,126	$	432,126	TEV	EBITDA multiple	4.0x – 9.0x / 6.5x	4.4x – 7.7x / 6.4x
						EBITDA	$1,100–$22,168 / $10,884	$4,251 – $19,083 / $10,764
						Revenue multiple	0.3x – 0.6x / 0.4x	0.3x – 0.6x / 0.3x
						Revenue	$15,332 – $98,136 / $73,695	$15,483 – $109,615 / $94,957
	—		5,391		Yield Analysis	Discount Rate	N/A	19.4% – 19.9% / 19.7%
Secured second lien debt	112,595		62,750		TEV	EBITDA multiple	5.1x – 10.9x /  6.5x	5.4x – 6.6x / 6.2x
						EBITDA	$5,839 – $8,771 / $7,706	$4,112 – $6,379 / $5,501
	24,885		12,984		Yield Analysis	Discount Rate	14.0% – 14.0% / 14.0%	14.0% – 14.0% / 14.0%
Preferred equity	214,664		222,585		TEV	EBITDA multiple	4.0x – 9.0x / 6.1x	4.4x – 7.7x / 5.9x
						EBITDA	$3,135 – $22,168 / $9,974	$4,251 – $19,083 / $9,486
						Revenue multiple	0.3x – 0.6x / 0.4x	0.3x – 0.6x / 0.4x
						Revenue	$15,332 – $98,136 / $56,766	$15,483 – $109,615 / $69,247
Common equity/ equivalents(A)	74,516		17,680		TEV	EBITDA multiple	5.0x – 10.9x / 6.0x	4.7x – 7.2x / 6.4x
						EBITDA	$1,100 – $60,199 / $14,476	$1,105 – $30,833 / $6,273
Total	$	902,786	$	753,516

(A)Fair value as of both December 31, 2023 and March 31, 2023 excludes our investment in Funko with a fair value of $22 thousand and $27 thousand, respectively, which was valued using Level 2 inputs.

Fair value measurements can be sensitive to changes in one or more of the valuation inputs. Changes in discount rates, EBITDA or EBITDA multiples (or revenue or revenue multiples), each in isolation, may change the fair value of certain of our investments. Generally, an increase/(decrease) in discount rates or a (decrease)/increase in EBITDA or EBITDA multiples (or revenue or revenue multiples) may result in a (decrease)/increase in the fair value of certain of our investments.

Changes in Level 3 Fair Value Measurements of Investments

The following tables provide our portfolio’s changes in fair value, broken out by security type, during the three and nine months ended December 31, 2023 and 2022 for all investments for which the Adviser determines fair value using unobservable (Level 3) inputs.

Fair Value Measurements Using Significant Unobservable Inputs (Level 3)

	Secured First Lien Debt		Secured Second Lien Debt		Preferred Equity		Common Equity/ Equivalents		Total
Three Months ended December 31, 2023:
Fair value as of September 30, 2023	$	508,504	$	102,747	$	267,596	$	36,767	$	915,614
Total gain (loss):
Net realized gain (loss)(A)	—		—		43,459		—		43,459
Net unrealized appreciation (depreciation)(B)	(7,040)		(4,267)		4,911		3,428		(2,968)
Reversal of previously recorded (appreciation) depreciation upon realization(B)	(1,338)		—		(42,228)		—		(43,566)
New investments, repayments and settlements(C):
Issuances / originations	3,500		39,000		—		25,700		68,200
Settlements / repayments	(27,500)		—		—		—		(27,500)
Sales	—		—		(50,453)		—		(50,453)
Transfers(E)	—		—		(8,621)		8,621		—
Fair value as of December 31, 2023	$	476,126	$	137,480	$	214,664	$	74,516	$	902,786

	Secured First Lien Debt		Secured Second Lien Debt		Preferred Equity		Common Equity/ Equivalents		Total
Nine Months Ended December 31, 2023
Fair value as of March 31, 2023	$	437,517	$	75,734	$	222,585	$	17,680	$	753,516
Total gain (loss):
Net realized gain (loss)(A)	—		—		43,732		882		44,614
Net unrealized appreciation (depreciation)(B)	(6,153)		(2,254)		35,234		18,228		45,055
Reversal of previously recorded (appreciation) depreciation upon realization(B)	(1,338)		—		(42,228)		(93)		(43,659)
New investments, repayments and settlements(C):
Issuances / originations	73,600		64,000		14,688		30,700		182,988
Settlements / repayments	(27,500)		—		—		—		(27,500)
Sales(D)	—		—		(50,726)		(1,502)		(52,228)
Transfers(E)	—		—		(8,621)		8,621		—
Fair value as of December 31, 2023	$	476,126	$	137,480	$	214,664	$	74,516	$	902,786

	Secured First Lien Debt		Secured Second Lien Debt		Preferred Equity		Common Equity/ Equivalents		Total
Three Months ended December 31, 2022:
Fair value as of September 30, 2022	$	420,907	$	76,751	$	229,430	$	10,789	$	737,877
Total gain (loss):
Net realized gain (loss)(A)	—		(10,000)		13,372		—		3,372
Net unrealized appreciation (depreciation)(B)	(2,516)		(266)		(7,656)		3,829		(6,609)
Reversal of previously recorded (appreciation) depreciation upon realization(B)	—		10,001		—		—		10,001
New investments, repayments and settlements(C):
Issuances / originations	29,900		1,183		—		380		31,463
Settlements / repayments	(800)		(1,500)		—		—		(2,300)
Sales(D)	—		—		(13,372)		—		(13,372)
Transfers	—		—		—		—		—
Fair value as of December 31, 2022	$	447,491	$	76,169	$	221,774	$	14,998	$	760,432

	Secured First Lien Debt		Secured Second Lien Debt		Preferred Equity		Common Equity/ Equivalents		Total
Nine Months Ended December 31, 2022:
Fair value as of March 31, 2022	$	425,087	$	67,958	$	217,599	$	3,678	$	714,322
Total gain (loss):
Net realized gain (loss)(A)	—		(10,000)		20,318		—		10,318
Net unrealized appreciation (depreciation)(B)	(21,328)		(4,800)		10,405		10,940		(4,783)
Reversal of previously recorded (appreciation) depreciation upon realization(B)	—		10,001		(12,250)		—		(2,249)
New investments, repayments and settlements(C):
Issuances / originations	106,950		5,188		21,000		380		133,518
Settlements / repayments	(48,800)		(6,596)		—		—		(55,396)
Sales(D)	—		—		(35,298)		—		(35,298)
Transfers(E)	(14,418)		14,418		—		—		—
Fair value as of December 31, 2022	$	447,491	$	76,169	$	221,774	$	14,998	$	760,432

Included in net realized gain (loss) on investments on our accompanying Consolidated Statements of Operations for the respective periods ended December 31, 2023 and 2022.

(B)Included in net unrealized appreciation (depreciation) of investments on our accompanying Consolidated Statements of Operations for the respective periods ended December 31, 2023 and 2022.

(C)Includes increases in the cost basis of investments resulting from new portfolio investments, the amortization of discounts and other non-cash disbursements to portfolio companies, as well as decreases in the cost basis of investments resulting from principal repayments or sales, the amortization of premiums and acquisition costs, and other cost-basis adjustments.

(D)The nine months ended December 31, 2023 includes $0.3 million of proceeds from the recapitalization of Old World Christmas, Inc. ("Old World"). The three and nine months ended December 31, 2022 include $13.4 million of proceeds from the recapitalization of Old World. The nine months ended December 31, 2022 also includes $12.3 million return of equity cost basis from Horizon Facilities Services, Inc.

(E)2023: Transfers represent preferred equity of SFEG Holdings, Inc. ("SFEG") with a total cost basis and fair value of $4.8 million and $8.6 million, respectively, which was converted to common equity in October 2023.

2022: Transfers represent (1) secured second lien debt of Ginsey Home Solutions, Inc. with a total cost basis and fair value of $12.2 million, which was converted into secured first lien debt in August 2022 and (2) secured first lien debt of PSI Molded Plastics, Inc. with a total cost basis and fair value of $26.6 million, which was converted into secured second lien debt in September 2022.

Investment Activity

During the nine months ended December 31, 2023, the following significant transactions occurred:

•In May 2023, we invested $15.3 million in a new portfolio company, Home Concepts Acquisition, Inc. ("Home Concepts"), in the form of $12.0 million of secured first lien debt and $3.3 million of preferred equity. Home Concepts, headquartered in Santa Barbara, California, is a leading home improvement advertising publication focusing on connecting homeowners to high-quality residential repair and remodeling businesses.

•In June 2023, we recapitalized our existing investment in Old World and invested an additional $2.5 million in the form of secured first lien debt. In connection with this investment, we received proceeds of $2.2 million, of which $1.9 million was recognized as dividend income and $0.3 million was recognized as a realized gain.

•In June 2023, we invested an additional $30.0 million in the form of $25.0 million of secured second lien debt and $5.0 million of common equity in Nth Degree Investment Group, LLC to fund an add-on acquisition.

•In June 2023, we received a $1.5 million escrow settlement in connection with our December 2021 exit of SOG Specialty Knives & Tools, LLC, of which $0.6 million was recognized as a return of cost basis and $0.9 million as a realized gain. As a result of the escrow release, there are no remaining assets held by Gladstone SOG Investments, Inc.

•In August 2023, we invested an additional $18.7 million in the form of secured first lien debt in Nocturne Villa Rentals, Inc. ("Nocturne") to fund an add-on acquisition.

•In September 2023, we invested $46.0 million in a new portfolio company, The E3 Company, LLC ("E3"), in the form of $34.8 million of secured first lien debt and $11.2 million of preferred equity. E3, headquartered in Kilgore, Texas, is a market leader in advanced pressure management solutions for oil and gas well completions.

•In October 2023, we invested an additional $64.7 million in the form of $39.0 million of secured second lien debt and $25.7 million of common equity in SFEG to fund an add-on acquisition. In connection with the investment, our existing preferred equity with a cost basis of $4.8 million was converted to common equity.

•In October 2023, we exited our investment in Counsel Press, Inc., which resulted in success fee income of $1.4 million, a realized gain of $43.5 million and the repayment of our debt investment of $27.5 million at par.

Investment Concentrations

As of December 31, 2023, our investment portfolio consisted of investments in 25 portfolio companies located in 18 states across 16 different industries with an aggregate fair value of $902.8 million. Our investments in SFEG, Nocturne, Old World, Brunswick Bowling Products, Inc. and Dema/Mai Holdings, Inc. represented our five largest portfolio investments at fair value and collectively comprised $380.9 million, or 42.2%, of our total investment portfolio at fair value as of December 31, 2023.

The following table summarizes our investments by security type as of December 31, 2023 and March 31, 2023:

	December 31, 2023								March 31, 2023
	Cost				Fair Value				Cost				Fair Value
Secured first lien debt	$	517,539	59.6	%	$	476,126	52.7	%	$	471,439	65.4	%	$	437,517	58.1	%
Secured second lien debt	148,158		17.0	%	137,480		15.2	%	84,158		11.7	%	75,734		10.1	%
Total debt	665,697		76.6	%	613,606		67.9	%	555,597		77.1	%	513,251		68.2	%
Preferred equity	151,969		17.5	%	214,664		23.8	%	149,099		20.7	%	222,585		29.5	%
Common equity/equivalents	50,838		5.9	%	74,538		8.3	%	15,934		2.2	%	17,707		2.3	%
Total equity/equivalents	202,807		23.4	%	289,202		32.1	%	165,033		22.9	%	240,292		31.8	%
Total investments	$	868,504	100.0	%	$	902,808	100.0	%	$	720,630	100.0	%	$	753,543	100.0	%

Investments at fair value consisted of the following industry classifications as of December 31, 2023 and March 31, 2023:

	December 31, 2023				March 31, 2023
	Fair Value		Percentage of Total Investments		Fair Value		Percentage of Total Investments
Diversified/Conglomerate Services	$	255,141	28.3	%	$	268,954	35.7	%
Home and Office Furnishings, Housewares, and Durable Consumer Products	155,897		17.3	%	143,685		19.1	%
Machinery (Non-Agriculture, Non-Construction, and Non-Electronic)	92,293		10.2	%	20,088		2.7	%
Hotels, Motels, Inns, and Gaming	80,557		8.9	%	58,713		7.8	%
Buildings and Real Estate	64,352		7.1	%	60,571		8.0	%
Healthcare, Education, and Childcare	50,237		5.6	%	37,445		5.0	%
Oil and Gas	45,983		5.1	%	—		—	%
Leisure, Amusement, Motion Pictures, and Entertainment	38,356		4.2	%	47,616		6.3	%
Mining, Steel, Iron and Non-Precious Metals	27,831		3.1	%	25,998		3.5	%
Aerospace and Defense	25,754		2.9	%	22,215		2.8	%
Chemicals, Plastics, and Rubber	19,256		2.1	%	24,891		3.3	%
Printing and Publishing	15,210		1.7	%	—		—	%
Cargo Transport	13,500		1.5	%	14,707		2.0	%
Telecommunications	8,881		1.0	%	18,987		2.5	%
Other < 2.0%	9,560		1.0	%	9,673		1.3	%
Total investments	$	902,808	100.0	%	$	753,543	100.0	%

Investments at fair value were included in the following geographic regions of the U.S. as of December 31, 2023 and March 31, 2023:

	December 31, 2023				March 31, 2023
Location	Fair Value		Percentage of Total Investments		Fair Value		Percentage of Total Investments
South	$	326,849	36.2	%	$	171,056	22.7	%
West	228,407		25.3	%	197,989		26.3	%
Northeast	213,403		23.6	%	266,612		35.4	%
Midwest	134,149		14.9	%	117,886		15.6	%
Total investments	$	902,808	100.0	%	$	753,543	100.0	%

The geographic region indicates the location of the headquarters for our portfolio companies. A portfolio company may have additional business locations in other geographic regions.

Investment Principal Repayments

The following table summarizes the contractual principal repayment and maturity of our investment portfolio by fiscal year, assuming no voluntary prepayments, as of December 31, 2023:

		Amount
For the remaining three months ending March 31, 2024		$	33,918
For the fiscal years ending March 31:
	2025	100,470
	2026	204,919
	2027	162,746
	2028	38,250
	Thereafter	125,394
	Total contractual repayments	$	665,697
	Investments in equity securities	202,807
	Total cost basis of investments held as of December 31, 2023:	$	868,504

Receivables from Portfolio Companies

Receivables from portfolio companies represent non-recurring costs that we incurred on behalf of portfolio companies. Such receivables, net of any allowance for uncollectible receivables, are included in Other assets, net on our accompanying Consolidated Statements of Assets and Liabilities. We generally maintain an allowance for uncollectible receivables from portfolio companies when the receivable balance becomes 90 days or more past due or if it is determined, based upon management’s judgment, that the portfolio company is unable to pay its obligations. We write off accounts receivable when we have exhausted collection efforts and have deemed the receivables uncollectible. As of December 31, 2023 and March 31, 2023, we had gross receivables from portfolio companies of $2.3 million and $2.2 million, respectively. As of both December 31, 2023 and March 31, 2023, the allowance for uncollectible receivables was $1.6 million.