Gladstone Investment Corporation (GAINI) Q3 2017 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and welcome to the Gladstone Investment Corporation's Third Quarter Earnings ended 12/31/2017 Earnings Call and Webcast. At this time all lines are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will be given at that time. [Operator Instructions] And as a reminder, this conference is going to be recorded. Now, I would like to turn the conference over to Mr. Gladstone. You may begin.

Thank you, James. And good morning to all of you out there that have called in. This is David Gladstone, the Chairman and this is the quarterly earnings conference call for shareholders and the many analyst that follow Gladstone Investment's common stock traded on NASDAQ, GAIN and we do have three preferred stocks GAINO and N and M, so three of those that's out there that you can choose from. Thank you all for calling in. We're always happy to talk to our shareholders and potential shareholders and analysts. I'd like to give an update on the company and its investments and the current business environment. I wish we could do this more often, but we only get to do it once a quarter. Also, you have an invitation that if you're in the McClean, Virginia area, we're just outside of Washington D.C. Please stop by and say hello. We have over 60 people and its fine business environment, just come by and say hello. Now we hear from our General Counsel and Secretary, Michael LiCalsi. Michael is also President of Gladstone Administration, which serves as the administrator for all the Gladstone public funds and related companies. He'll make a brief statement regarding forward-looking statements. Michael?

Thanks, David. Today's call may include forward-looking statements under the Securities Act of 1933 and the Securities Exchange Act of 1934, including those with regard to our future performance. These forward-looking statements involve certain risks and uncertainties and other factors, even though they're based on our current plans, which we believe to be reasonable. Many factors may cause our actual results to be materially different from any future results expressed or implied by these forward-looking statements, including all Risk Factors in our Forms 10-Q, 10-K and other documents that we file with the SEC. Also these can be found on the investor relations page of our website, www.gladstoneinvestment.com and on the SEC's website, www.sec.gov. We undertake no obligation to publicly update or revise any of these forward-looking statements whether as a result of new information, future events or otherwise, except of course as required by law. We also note that past performance or market information in today's presentation is not a guarantee of any future results. We ask that you visit our website, gladstoneinvestment.com, so that you can sign up for e-mail notification service. We can also be found on Twitter. Our Twitter handle is @GladstoneComps and on Facebook, the keyword there is The Gladstone Companies. Today's call is simply an overview of our results through December 31, 2017. So, we remind everybody to review our press release and Form 10-Q, both issued yesterday for more detailed information. Now let's turn the presentation over to Gladstone Investments' President, David Dullum. Dave?

Thanks, Mike and good morning go all the shareholders and analysts. I appreciate you being here. So, I'm pleased to report that we had another strong fiscal quarter which ended December 31 for Gladstone Investment. Our net investment income increased to $0.23 per share to $0.23 from $0.18 per share last quarter and we also closed on a new buyout investment. The net asset value, which of course is our book value increased by $0.27 per share to $10.37 from $10.10 the last quarter. So based on our results, in October we were also able to announce an increase of over 1.5% in our monthly distribution rate to our common stockholders going from $0.064 per share or roughly $0.77 on an annual basis $0.065 per share or $0.78 per share on an annual basis. We also paid another supplemental distribution of $0.06 per common share in December, which indeed was our second planned semiannual supplemental distribution. Now, we expect that a significant portion of these supplemental distributions actually will be made from c capital gains. Our stock price actually increased to $11.16 and was trading above the NAV at $10.37 as of December 31. This is an increase of $0.270 or 30% over our stock price of $0.0846 at the end of last year. Now, while the market has been in turmoil for this past week and we actually closed at $9.40 yesterday, this increased stock price at quarter end is encouraging. At least to me, as I believe that we're beginning to receive recognition for the value of the equity component in our buyout business model and actually even from a year perspective with the annual run rate of monthly distribution now at $0.78 and the $0.12 supplemental in other words the total of about $0.90 per share would still provide a yield of almost 8% when the stock is around $11 a share. So what is our business model that's producing these results? Well, as we know we focus on the buyouts of US businesses with annual earnings before interest, taxes, depreciation and amortization, otherwise known as EBITDA, generally the amounts for that is between $3 million and $20 million and the structure that we use for funding our buyouts consists of secured first or second lien debt, in combination with a direct equity investment for a significant ownership position. So this means that we are different from the traditional credit oriented BDCs in that the target proportion of the equity to debt for the investments in our portfolio is around 25% in equity and about 75% in the debt at cost. And when you compare this to most other credit oriented BDCs, you'll see that typically their portfolios are more like around 10% equity and 90% debt. So our model, we believe leads to a stockholder value proposition. Clearly it's different and it's as follows. First, the debt portion of our investments provides the steady income to pay and we think over time obviously grow our monthly distributions. As I mentioned earlier in this regard, we increased our monthly distributions to an annual run rate of $0.78 per share. Secondly, along with the debt investment, we purchase equity securities and therefore we own significant equity positions in each portfolio company. So an increase in the equity value provides capital gains and other income over the life of the investment or upon the exit. These potential gains and the other income may then be distributed to our stockholders in the form of supplemental distributions. And to this point, again we paid the first two of such planned supplemental distributions in the amount of $0.06 per share to common stockholders in each of June and December, 2017. And third, we are a provider of a large portion of the equity, usually the majority and most of the debt in our transactions. Therefore, we have an advantage I believe, to credit BDCs and lenders and that we could exercise influence on the companies we buy, not only by limiting the risk of our debt being refinanced, but also our participation and involvement with the management teams, which provides an interaction with the company similar to a traditional private equity fund and as we are significant owners in the business. So let's talk about some performance. Last May we made an initial scorecard report on the results of our performance with the fiscal year ended March 31, 2010 being the starting point. Now from time to time we will continue to provide these highlights of our relative performance on a quarterly basis and I'll touch on it now for this quarter. The highlights from March 31, 2010 through December 31, 2017 were as follows. One, we had excellent growth in net assets, increasing our NAV per share by $1.63, from $8.74 at March 31, 2010 to $10.37 at December 31, 2017. We increased the annual run rate of our regular monthly distributions per common share by $0.30, going from about $0.48 in 2010 to $0.78 per share in October, 2017. And we also delivered on our buyout strategy. So from March 31, 2010 through December 31, 2017, we have actually exited 11 buyout investments generating significant net capital gains. Now, while exiting we've also been obviously making new acquisitions. So even with this rotation if you will, we today have 34 companies in the portfolio. So it's a process of making acquisitions, good exits and also continuing to continue to make additional acquisitions. So we maintain a level of portfolio breadth if you will. And further the exit activity has allowed us to pay these first two supplemental distributions of $0.06 per common share, each of June and December 2017, and we expect to continue these supplemental distributions on a semiannual basis. So let's look about going forward on exits, since I talk a lot about that and as we continue with new buyouts and the building of our investment portfolio, as we must, we also managed the sale, the turnover if you will or the exit in the portfolio, consistent with the strategy of providing these realized capital gains from the equity portion of the portfolio. We clearly would be guided by market conditions, assessing the risk return in continuing to hold an investment versus exiting and to remain sensitive to preserving our portfolio of assets, which does produce that income for our monthly distributions. Regarding that from inception in 2005 through December 2017, our buyout liquidity events exits have achieved an aggregate cash-on-cash return on the equity portion of those investments of approximately 3.4 times, which created a total increase to our net assets of about $107 million. Now on the new deal side, our new buyout generation activity continues to have obviously a very high priority and so to develop these new investment opportunities, our deal team cost on the independent sponsors as we call them, middle market investment bankers and other sources that help to create somewhat of a proprietary investment list of opportunities. Generally, our investments include partnering with management teams in the purchase of a business, and we believe that financing package, which we provide and includes both secure debt and the majority of the equity, is a competitive advantage as it gives the seller and the management team a high degree of comfort that the purchase will occur from the financing perspective once we've agreed on the primary terms. So we believe that our strict adherence to investment fundamentals and thorough due diligence process have enabled us to provide the shareholder returns that we've provided in both our consistent regularly monthly distributions as well as these supplemental distributions. We are actively reviewing and conducting due diligence on a number of new potential investments and we certainly look forward to new investment announcements. In addition to new standalone acquisitions, we're actively pursuing what we call accretive add on investments for some of our existing portfolio companies. This is important because this does allow for the billing of assets while accelerating the value creation of these companies. During this period we had an opportunity to increase our investment in Brunswick Bowling, which we took and subsequent to the quarter end, we made further investments in two other companies, Schylling and Nth Degree both to fund important accretive add on for those companies. So, but we're still operating in a buyout environment where the competition for new investments is elevated and the purchase prices being paid are high from a historic perspective, which increases the challenge really of closing deals, given the nature of our conservative value approach and expected financial returns. In this regard though our latest acquisition ImageWorks, which we closed in November, was at a value, which we believe is consistent with our expectation of returns. So what are those returns? Well, the target for our equity investment is a minimum two to three time's cash-on-cash and the debt investments which are generally secured and primarily first lien loans typically carry a cash yield in the low to mid teens. These debt cash returns balance the equity portion of our investment which produces a blended current cash yield to support the stockholder distribution expectations. The debt typically also has a success fee component which is a yield enhancement that is generally contingent on change of controls such as the sale on exit of the business. However, in certain circumstances these success fees could be paid in advance and generally it's the portfolio company's option. Our investment focus, generally we invest in companies with consistent EBITDA and operating cash flow and certainly with a potential to grow and expand. The areas of interest that we generally like and that we continue to operate in are light and specialty manufacturing, specialty consumer products and services, Industrial products and services, we do have some in the aerospace area and energy we will look at, but we don't really have anything there right now. So quick recap of the fund investment activity, for the quarter ending December 31, we closed one new investment opportunity at $31 million which is the buyout of ImageWorks, which is a company in the point of purchase display business with a variety of brands and consumer product end markets, very exciting. And we also invested as I mentioned, approximately $8 million in existing portfolio. So from the standpoint of where we're going in the outlook, we will continue executing our plan, adding accretive investments to grow both the income generating portion and the equity portion of our assets, while we position the portfolio for the exits thus maximizing distributions to shareholders. We anticipate paying semiannual supplemental distributions as the portfolio continues to mature and we're able to manage the exits and realize capital gains. The distributions are generally expected to be made from undistributed net capital gains and undistributed net investment income. We and our Board of Directors will evaluate the amount and timing of these semiannual supplemental distributions as we continue to execute our strategy. So I'll now pass it over to Julia Ryan, our CFO to give a bit more detail on the funds financial performance for the quarter. Julia?

Thanks, Dave and good morning. So starting with the balance sheet, at the end of December, we had over 580 million in assets, which included about 566 million in investments at fair value. On the liability side, they consisted 96.6 million in borrowings outstanding on our credit facility and about 139 million in terms of our stock liquidation value and other liabilities leaving over 337 million in net assets. So our net asset value for share was $10.37 at the end of the quarter, which is an increase of $0.27 compared to the prior quarter and that primarily resulted from net unrealized appreciation of 9.8 million in our investment portfolio. Now, moving over to the income statement for the December quarter, total investment income was 16.2 million compared to the 13.1 million in the prior quarter. Total expenses net of credit was 8.6 million compared to 7.4 million in the prior quarter, leaving net investment income of 7.5 million this quarter compared to 5.8 million in the prior quarter. Interest income in the current quarter included 1.4 million of payments from one of our portfolio companies which was previously on non-accrual and which we had mentioned was in a workout stage at the end of last quarter. Other income was approximately 16% of total investment income, which is consistent with last quarter. And as a remainder, other income usually is composed of dividend and success fee income and is a meaningful component of total income, but will be variable between quarters. Net expenses increased by 1.3 million in the current quarter, which was primarily driven by $1.5 million increase in incentive fees and partially offset by 0.6 million decrease in other expenses including a reduction in bad debt expense. The incentive fee includes 0.8 million of capital gains based incentive fees, which are new this quarter and which were required to be accrued under US GAAP, but those are not contractually due under our advisory agreement at the current time and may actually never become payable. As a result of these factors, our net investment income per share increased to $0.23 in the current from $0.18 in the prior quarter. Excluding the capital gain faced incentive fee that is not currently contractually due, net investment income for weighted average common share would have been $0.25. Current and prior period net investment income again covered current quarter distributions from net investment income by a significant margin, as reflected in our distributions coverage ratio of over a 177% this quarter. At the end of this quarter undistributed income and net realized gains totaled approximately 12 million or $0.38 per common share. We continue to actively manage our undistributed income and net realized gains with the goal to cover and overtime increase distribution to stockholders. Besides our regular monthly distributions which are generally made up from operating income, we expect to make supplemental distributions like the ones we paid this past June and December. Now let's turnover to realized and unrealized changes on our assets, we recorded 9.8 million of net unrealized appreciation on investments in the current quarter, which was predominantly due to improved operating performance and as Dave mentioned that generally EBITDA and an increase in comparable multiples of certain portfolio companies. Overall, our fair value to cost was over 99%. We continue to use an external third party evaluation specialist to provide additional data points regarding market comparables and other information related to certain of our more significant equity investments. Certain loans of two portfolio companies are non-accrual, representing about 3% of the fair value and 4% of the cost basis of our total debt investment at December 31. We are actively working with these companies in an effort to improve operating performance and liquidity and our hopeful they will return to accrual status in the near term. Our portfolios approximate allocation between debt and equity securities was 73% debt to 27% equity at cost at the end of the quarter. Our debt portfolio is well positioned for any interest rate increases with about 97% of our loans having variable rates with a minimum overflow and the remaining 3% having fixed rates. The weighted average cash yield on interest bearing debt investment was 14.2% this quarter and as I mentioned earlier that included $1.4 million interest payment related to a loan that was previously on non-accrual and this yield excludes success fees on our debt investment. From comparison purposes, if we had accrued the success fees as awarded allocating interest, the weighted average yield in our total debt investment was approximate 15.8% this quarter. At the end of this quarter, unrecognized contractual fixed exits totaled about 26 million or $0.18 per share consistent with prior quarter. There's no guarantee that we will be able to collect any or all assets at exit or have any control over the timing of collection. From a credit priority perspective, 100% of our loans fixed, with 74% having a first lien priority and the remaining 26% having a second lien priority in the capital structure of the respective portfolio companies. Overall, Gladstone Investment had another quarter of consistently strong operating performance, as well as investment transaction success. With that I'll turn the call back over to David Gladstone.

Alright, thank you Julia and Dave and Michael, you all did a good job providing summary information to our stockholders on operations of the company. And I would encourage all of you to read the 10-Q and the Press Release to get more information on the company those are on our website and on the SEC website as well. Just to summarize again, in addition to the one buyout of $31 million and an additional 8 million on our existing portfolio, this quarter was another good quarter. And at the beginning of December quarter, the dividend was raised $0.06 to $0.065 per share per month from $6.4. We had a full quarter increase of the regular monthly distribution and it's continued that. The payment in December of another supplement distribution to common stockholders that was $0.06 per share, that's the second one during that year, so it's got another $0.12 about $0.90 on a run rate basis. And what's more amazing here is the continued strong performance of the companies we invest in, resulting in an increased in net asset value of about $0.27 per share for the quarter, $0.42 for the year-to-date, so it's got a strong basis which will project out really nice. I think the team can continue the success going forward in the fourth fiscal year end quarter that's the quarter that's going to end on March 31, 2018 and it wouldn't be surprising to me to see the calendar year of December 2018 be a strong period for this wonderful dividend paying company. I believe economy is even stronger than it was last quarter, there's some craziness in the stock market, but remember the stock market is not an indicator of the economy. The economy is strong, strong as I've seen it in the last 20 years and all that selling in the equity markets I believe is just programmed selling people who have made debts on things being the same for the next year or so have had to cover those debts. Now, as the administration has delivered on the change in the tax code, and continue to reduce their regulations on businesses, I think the US midsize businesses like the ones we finance, will have even stronger performance during 2018. We are excited about the new business environment in the US and look forward to this company continue to grow at a strong pace. In January 2018, our Board of Directors declared the monthly distribution of common stock at $0.065 per share per month for January, February and March of 2018, that's an annual run rate of $0.78 and I think Dave Dullum and his team will keep working to increase the dividend certainly to be ahead of inflation. And don't forget that their paying an additional supplemental distribution, this is a stock owned, if you want to keep your buying power because they keep raising the dividend. If all goes well, we'll see them raise the regular distribution rate, obviously there's no guarantee of dividends, but that's the goal of the company. Through the date of this call, we've made 151 sequential monthly cash distributions on the common shareholders, in addition we've made several supplemental distributions, that's over 12.5 years now of continue to pay monthly dividends. As of December 31, 2017, Gladstone Investment had distributed total of $213 million at $8.99 a share on a common stockholder and based on the number of shares outstanding at the time of payment of each of those dividend distributions. At the current distribution rate, the common stock with a common stock price of $9.40 yesterday, the yield on the $0.78 per share is 8.3% yield, little less than 8.3 but right at that number and if you add that $0.12 in supplemental, you are up to about 9.6%. This is really a high yield and you can get on comparable risk level investment in my opinion. The three series of preferred stocks, they are all yielding somewhere between 6.1% and 6.7% currently depending on the series. Good place to put money, if you just want a good straight forward dividend. In summary, Gladstone Investment is an attractive investment for investors seeking continuous monthly distributions and supplemental distributions from potential capital gain. I expect to see a good fourth quarter or the fiscal year ending March 31, 2018 and hope to continue to show you strong returns on the investment in our funds. James, if you'll come on now, we'll get some questions from the analysts and shareholders out there.

Yes, sir [Operator Instructions]. Our first question comes from Mickey Schleien with Ladenburg. Your line is open.

Leading you on a very good quarter, now we're certainly seeing some disappointment amongst some other BDC'S. So, it's nice to see your business performing this well. I have just a couple of sort of housekeeping questions. The $1.4 dollar interest income I think was from precision, it looks like about $1million of that was some sort of retroactive accrual. Is that a correct estimate?

Mickey, this is Julia. The 1.4 million represented the accrual that was not taken in prior quarters because the investment was non-accrual, so that was the past due interest if you will.

Okay, so that's sort of a non-recurring number and the success fee income this quarter, was that driven mostly by the merger of GI in precision or was it something else?

It was not driven by the merger, it was the amount that Dave refers to on these calls that a portfolio company may choose to pre-pay the success fees and that's happened to be the case this quarter.

Okay, and my last question is, can you remind us what your target leverage multiple is and whether you are considering upsizing the size of your credit facility and that's it for me?

Yeah, thanks Mickey. This point no, we are not planning to upsize the facility. We've got capacity in the facility and we've got capability and availability right now and depending on some things coming down the line, may be with exits cash generation, I think we are in pretty decent shape in the current time.

And, your target leverage, Dave?

It's going to be around 65% somewhere in that range, may be 70%.

Okay, appreciate your time this morning, thank you.

Alright, James. Next question?

Thank you. Our next question comes from Henry Coffey with Wedbush. Your line is open.

Yes, good morning everyone. And thanks for taking my call. The most interesting part of the business I guess to me and probably the most troublesome to you all, is when we look at the bottom side of the portfolio, I mean how many opportunities like precision are there where either by the strength of the economy or the work that you can do with the company, are we likely to see gains in investments that have been under pressure as of late?

Just trying to understand the question, Henry, so, each of our portfolio companies and as you saw - when Mickey sort of touched on it, where we actually merged a couple of portfolio companies. We did that for the right reasons. And that, those companies function in a similar product category if you will, allows us to consolidate management and so on. And I think what may be to the point, what this addresses is the way which we think about our business and the companies that we are invested in and frankly which we own. We think of this as a portfolio of operating businesses. We do get involved in working with these companies; which is why you have a PSI that for a while might have gone in non-accrual, we keep working with it, we can get it back off a non-accrual. And over the years we have been in business since '05, we've actually I think only had one company really for a variety of other reasons, that can truthfully, just was completely a loss, if you will, we actually are able to redeem something out of that. So, it's more around, we work at these companies and I think fundamentally - and it reflects itself in the valuations that we see which is we know is partly quarter-to-quarterly for a variety of reasons. But, I think fundamentally the portfolio overall is in good shape and we keep working on creating value by again we merge two or we made add on acquisitions and overtime we are going to exit those and I think the valuations reflects that they are underlined games built in to these companies. I don't know if that answers anywhere near the question you asked, but if not come at me again.

Well, let me just think of it from a different perspective. If I look forward over the next 12 or 18 months and I look not at all the companies that are working so well and have positive fair value to cost ratios, but I look at the companies you've been writing down. What are the prospects that some of those companies see improving fundamentals or improving value given either, what you can do or what –the strength of the economy? How likely are we to see positive gains from the companies that are under pressure right now?

Yeah, I would say, I get the question. So I would say pretty reasonable with most of them. There are one or two that are going to take, I would say, a little bit longer. If you gave me a time frame of the next 12 months, I would tell you that probably - because I know sort of what's happening with some of those companies right now. Most of them, with one or two exceptions are going take a little bit longer, but they are not things that we are worried about that Jesus, they are not going to take the turn, whether be a result of a change in the management team sort of - is most of which we have already done and those are now starting to get traction, overtime I think we are going to see good results frankly form virtually all of them.

And then just in looking at the portfolio at cost, there was the level of secured first lien stay held at about the same. You did have a big jump up in second lien, so can you talk about that a little bit between September and the December quarter?

Henry, this is Julia. As you know sometimes we will restructure that investment from first to second for various reasons sometimes because a senior lender is coming in to take over the line of credit facility position and that was the case this quarter, so nothing pending for the quarter.

Thank you very much.

Our next comes from Kyle Joseph with Jefferies. Your line is open.

Good morning guys. Thanks for taking my questions and again congrats on a solid quarter. I just wanted to step back a little bit and get your perspective on tax reform changes and any potential impacts on your business, on your portfolio companies specifically and demands for buyouts more broadly?

Yeah. Hi Kyle, Dave. As we looked at it as we understand the changes et cetera and trying to evaluate it within our existing portfolio, the general results I would say are tend to be positive. And the reason for that, as you look at it and it's interesting with most of our companies especially the ones that are at a level where the EBITDA is growing, even though you've got the 30% cap et cetera, you find because of the lower tax rate that actually the cash flow, the net cash flow if you will these companies actually is improving in some cases. The ones where you'll have some impact, not huge impact, but some impact might be on those companies that aren't quite performing as well as they should or obviously we have them a little higher levered at the current time for some reason. But, net-net we are not seeing it as going to have any certainly negative impact on our portfolio. If any, it might be a slight positive again because of the cash flow. In terms of going forward and we certainly keep running our models, we've tried to really properly understand it from a competitive perspective. I think given the size of companies that we are looking at, the type of business we are looking at, I think it probably will make the environment a bit more competitive because the company's doing well and growing. It's showing off now perhaps on more cash on an after tax basis. So there may be cases where you know some of our competition might be able to either lever them up a little bit more or may be put a little bit more equity and get the cash up. But, I think it's going to probably stay about the same. You might see some of the much higher performing companies might demand a slightly higher premium, even relative to where deals are today, in terms of multiple EBITDA. But, I don't know that we are going to see a huge impact on the market space that we operate in, besides our assessment based on in our assets we've done so far.

Yeah, that's a great color and helpful. And, I think Henry may have touched on this, but just a quick modeling question. In terms of originations in the quarter there's a little disconnect between the Press Release in Page 29 of your Q, was that due to the investments that I think Henry just referred to or could you help me with the disconnect there?

We've to say what the disconnect is, what page is it?

Sure, on the Press Release there's a total dollars investors worth 39 and change and then on Page 29, at the Q total issuances and originations in the quarter was 73 million.

Right the - so prior to this quarter the 10-Q include any non-cash transactions and the merger of PSI and GST would fall in that category, so that's why you see the disconnect.

Okay, perfect that makes sense. Thanks a lot for answering my questions.

Thank you. Okay, James, next question.

Yes sir, [Operator Instructions] Our next question comes from Andy Stapp with Hilliard Lyons. Your line is open.

Good morning, nice quarter.

Thanks, Andy.

You enjoyed some nice valuation gains in some of your preferred most notably in [indiscernible] J.R. Hobbs and Cambridge. Just wondering if you could provide some color on the drivers of these gains?

Sure, most of the drivers are coming from improved performance in these companies. Just quarter-to-quarter we are seeing improvements in EBITDA across the board on a number of our companies and we actually in some cases, I don't have the detail right here in front of me frankly, but we actually saw slight declines in multiples on EBITDA. So, it kind of got offset by improved performance. So overall - and those companies the ones that you mentioned are all companies that are getting to a size and doing some things that are pretty interesting and pretty exciting, so majority of it is performance related.

Okay, could you talk about the historic - the pipeline for mew investments, just wondering if it's supportive of some of the production that you experienced in the most recent quarter?

Yeah, I would say so. As I mentioned it continues to be a challenge as I say the expression I choose its shoe leather and we would continue to push hard, we have to be out there. And all our guys are out calling on the investment bankers, the M&A types et cetera. We've got a number of companies that we are in process on, working on, meaning we've put out indications of interest at value ratios that we think makes some sense. Some of those are not just, as I mentioned standalone new acquisitions but also, but also add on type acquisitions for some of our existing portfolio companies. That again, makes sense and it will help to give accretive to those companies. So, I would say, it's representative of about where it's been, it still continues to be challenging, if we you know, our goals, we could do three, four really good new quality acquisitions in a year. That's a good target for us.

Okay, and lastly would you talk about the outlook for success fees?

Talk about the outlook, so, if you are asking e have success fees as we mentioned built-in to each of our portfolio companies, which can be taken, again either when we exit or actually in cash because, we only take it when cash is paid or if the company chooses to prepay to and so like. The best I could tell you on this is, it's an area that we look at very carefully, it falls into that line item called other income, on our income statement and it is one that is important to us. And, we work with our portfolio companies and the management so that we can sort of look ahead and plan it and manage it. So the best I can tell you is we continue to get them, and we will continue to get them at courses as Julia mentioned. We have a pretty significant dollar amount and per share amount if you want to call it accrued off balance sheet. For that we just have to keep taking it out as we are able to working with our portfolio companies. But, it's a positive income stream for us.

Okay, thank you.

Okay, do we have another question James?

I am showing no further questions in queue. So, I would like to turn it back over to you Mr. Gladstone for closing remarks.

Alright, thank you all for calling in and we appreciate all the good questions. And we'll see you next quarter, at the end of this call.