Good day, ladies and gentlemen, and welcome to the Gladstone Investment Corporation's Fourth Quarter and Year Ended March 31, 2015, Earnings Call and Webcast. [Operator Instructions] And as a reminder, this conference call is being recorded. I would now like to turn the call over to David Gladstone. Please begin.

All right. Thank you, Latoya. Nice introduction. Hello, and good morning, everybody. This is David Gladstone, the Chairman, and this is the quarterly and year-end conference call for shareholders and analysts of Gladstone Investment Corporation. Common stock is traded on NASDAQ under the symbol GAIN. We do have 3 preferred stocks that trade as well. There's GAINO, GAINP and GAINN. So there are 3 other securities for this company that are traded. We thank you, all, for calling in. We love this time we have with our shareholders and potential shareholders. We like to give updates on our company and our portfolio and our business environment. I wish there were more often opportunities. And by the way, there is an invitation open to all of you to stop by the offices in McLean. We're just outside Washington, D.C. You'll see some very happy people here. We have a team of about 60 people now and some of the finest people in the business. And now we hear from our General Counsel and Secretary. He's also President, the administrator of the fund, Michael LiCalsi. He'll make a statement regarding forward-looking statements and some other important information. Michael?

Good morning, everyone. This conference call may include statements that may constitute forward-looking statements within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934, including statements with regard to the future performance of the company. These forward-looking statements inherently involve certain risks and uncertainties and other factors, even though they are based on our current plans, which we believe to be reasonable. And many of these forward-looking statements can be identified by the use of words such as anticipate, believes, expects, intends, will, should, may and similar expressions. There are many factors that may cause our actual results to be materially different from any future results that are expressed or implied by these forward-looking statements, including those factors listed under the caption Risk Factors in our Form 10-K filing and our registration statement as filed with the SEC, all of which can be found in our website, www.gladstoneinvestment.com or the SEC's website, www.sec.gov. The company undertakes no obligation to publicly update or revise any forward-looking statements whether as a result of new information, future events or otherwise after the date of this conference call, except as required by law. And please also note that past performance or market information are not a guarantee of future results. Please take the opportunity to visit our website, gladstoneinvestment.com, and sign up for our email notification service. You can also find us on Facebook, keyword The Gladstone Companies, and on Twitter, at keyword GladstoneComps. The presentation today will be an overview, so we ask that you read our press release issued yesterday and also to review our Form 10-K for the year-end March 31, 2015, again, filed yesterday with the SEC. You can access the press release and the 10-K on our website, www.gladstoneinvestment.com. Now let's turn over to the President of the fund, David Dullum, to get an update on the fund's performance and outlook.

Thank you, Mike, and good morning, everyone. Happy to report for this quarter and for the year-end March 31, 2015. It's been a good year. Gladstone Investment, of course, is a fund which is focused on the buyout of middle market U.S. businesses with annual sales that are generally between $20 million to $100 million. Our funding structure in any buyout is comprehensive in that it usually consists of secured first and second lien debt in combination with a significant direct equity investment. So this combination of debt and equity produces the mix of assets, which is a basis of the strategy for Gladstone Investment, whereby the debt portion of our investments will provide the income to pay and grow our monthly distributions, and then we look to the equity portion of these investments to increase in value and over time, provide the capital gains that we all look forward to. So with our continued growth in the operating income and the periodic realized gains that we've had and recognized in April of this year, our board declared a common share distribution of $0.0625 per share per month for April, May and June, which is a run rate of $0.75 per share per annum, which represents a bit more than a 4% increase year-over-year. Additionally, we also were able to have a onetime distribution of $0.05 per share, which was made in December of 2014, and this actually represents the third calendar year in a row that a onetime cash distribution to common stockholders has been paid. So we're very happy with that. So -- and really, how are we different from other BDCs and other finance-type companies or private equity firms? So generally, as we've talked before, we take large equity positions in the companies that we purchase, and…

Thanks, Dave, and good morning, everybody. The big news this quarter, as Dave mentioned, is that we originated 2 new deals totaling $43 million, and we raised 27.5 million in new common stock, including an over-allotment that closed subsequent to year-end. In addition, we raised 40 million of new Series C term preferred stock in May 2015. This additional capital has enabled us to expand our balance sheet and to raise capital for future new deals that Dave alluded to earlier. Through this use origination, together with highly successful [indiscernible] last year, we achieved our best year of operating performance with over $41 million in total investment income and over $19 million in net investment income. We were also really pleased with our net unrealized appreciation during the period, which totaled almost $30 million, and was driven by improvements in operating performance as well as increases in market comparables on certain portfolio companies. The cumulative effect of these positive trends in opening performance of the fund resulted in NAV of $19.18 per share or a 10% increase over last year's NAV per share. Turning to the balance sheet. The balance sheet position at the end of March had $484 million in assets, consisting of $466 million in investments at fair value, $5 million in cash and cash equivalents and $13 million in other assets. Our portfolio's allocation net cost is currently $370 million in debt securities and $135 million in equity securities or a 73%-27% split. As for our liabilities and equity at March 31, we had $190 million in borrowings outstanding on our credit facility, $81 million in term preferred stock, $10 million in other liabilities and $273 million in equity. Listeners will remember that in June and September 2014, we amended our credit facility to, one, increase the…

All right. Thank you, Julia. That was Julia's first time through, and she did a great job. And we've heard from Michael and Dave, and they had great reports as well. During this fiscal year, we're able to report some great accomplishments, such as strong originations, increased valuations, several successful financing activities and most of all, including an expansion of our line of credit and selling common and preferred stock. This increases our net investment income. And in addition, we declared special dividends, and then we increased the dividends. So this company is cruising along in a good pace now. In the fourth quarter, we closed 2 new investments for $43 million. We invested cash in existing portfolio companies of about $10.6 million, and we had our net asset value rise substantially to $9.18, a 7.4% increase. After the end of the quarter, our board took a look at the projected earnings and raised the run rate on our monthly dividend by 4%. I just think that we're going to continue to see success going into fiscal 2016. That's -- March 2016 will be our year-end. We're already off to a good start. We raised the monthly dividend and -- by about $0.03 per share annually. So we will not have to declare, perhaps, an extra dividend. Or perhaps we will have a small extra dividend this year. And the issuance of $40 million of our Series C term preferred stock gives funding, and we really needed to do that because we have several investments that are in the final diligence and documentation phases and target to close before June 30, 2015. I always feel it's a great time to invest in small businesses during these sort of choppy periods. The middle market companies like the ones we invest in…

[Operator Instructions] And we have a question from Mickey Schleien of Ladenburg.

A question for Dave -- a couple of questions for Dave Dullum. Dave, I understand your comments at the beginning of the call regarding acquiring new companies versus selling, but I wanted to perhaps get a little bit more color on that. How are you balancing the opportunity to sell at these elevated multiples that we have, given that we're deep into the economic cycle versus your interest and willingness to continue to acquire companies? In other words, is there some sort of arbitrage that you're trying to affect? And my second question, a little more straightforward. Can you just discuss any changes you've made to your valuation processes?

Okay, Mickey. First question, I wish I could tell you it was as sophisticated as some arbitrage. You will know the kinds of businesses that we buy, that we own, that we manage are smaller and medium-sized companies. And being able to just run out and sell one, if you will, is not always easy. A lot of factor is involved, not the least of which will be the management teams and so on. I think the way we think of it, as I tried to really describe, is 2 things. One, we are, obviously, going to be more sensitive, I'll say, to the idea that with a portfolio of company -- and depending on how long it's been in the portfolio and given what I would consider certainly a somewhat robust marketplace around valuations and interest in acquiring good businesses like we have, that if it makes sense from the standpoint of taking a realized gain, especially for our shareholders, relative to the idea of thinking through do we hold it for a longer period of time because, obviously, we're generating current income, and we still think there's upside on the equity. We -- it's kind of that classic take a look and do I want to continue owning this business and buying it again, so to speak. So we really think about that carefully. That, frankly, I would say, is not tied directly, obviously, to the acquisition of new investments, which is our fundamental business. So I hope that helps answer the question. I mean, we really obviously don't really take a holistic view overall. But we're very -- but we're sensitive to -- I don't just want to run out and sell a business for the sake of selling it. If it makes sense, we will. And I'm going to -- we're going to be more thoughtful around that part of the process because I think capital gains are important. And I think we touched on the fact, and David Gladstone also reiterated, we have a couple that potentially could happen this year, this fiscal year. At the same time, we obviously are working hard. I think we've done a really good job in finding opportunities to acquire that fit our model, that are valuations that make some sense. It's hard work. It's not easy. But I think that's the best answer, Mickey, I can frankly give you on that one. As it relates to the valuation methodology, what I'd like to do is turn it over to perhaps our finance folks and ask, perhaps, Julia. She touched on it. She mentioned briefly what we did. If she would like to elaborate on that part of the process.

Sure, Dave. Mickey, there really hasn't been a change in the valuation process per se. We've merely consulted with an external specialist in the field evaluation to provide additional data points and market comparables to include in our internal models. And this really is an industry practice used by many other BDCs and market participants, and we believe that this makes our internal process stronger. And we really plan to cycle most of our significant equity investments through this external review. And obviously, we will continue to use S&P for our debt investment.

I apologize if I didn't catch that on the prepared remarks. But Julia, did you -- what proportion of the portfolio did you apply the -- that new third-party valuation firm to?

We strive to do about 4 to 6 a quarter.

That's roughly a quarter every quarter?

Yes, we do -- we did a little more this quarter just because it was a startup mode. We had, Mickey, before relied on our internal review as well as touching base with a couple of people on the outside. We -- our Chief Valuation Officer, she looked at what everybody else was doing and suggested that we hire somebody to look at the equity portion more carefully and help us through that. Quite frankly, it's actually increased the valuation by using external folks. They seem to have a better handle on the multiples that are being paid in the marketplace and...

Right. And I understand, that's why I asked because I'm wondering if there's -- how much more upside there might be to NAV as this process is applied to the rest of the equity positions.

I can't answer that until we get around to doing 4, 5 or 6 and maybe more each quarter. And the hope would be that it's more accurate as opposed to hoping that it always goes up in situations. It could just as easily be taken down. As you probably know, Pricewaterhouse, our accountants, have to go through all of these valuations as well. And so we are well analyzed in terms of our portfolio of companies. But I can tell you from experience, things can change very quickly, and values can change very quickly as well. And on your point on -- talking about the acquisitions. The acquisitions occur in companies that we think we can build up as well. And then when they're built up, usually, they can attract much lower-cost debt. So keeping us on as a low-cost debt provider is not very good for us. And so when they finally grow up, so to speak, and are able to tap the regular marketplace where debt is much cheaper, it becomes obvious to us at that time that we just have an equity holding, which is not producing any income to speak of. And that pressures us to think about selling off that company. So our goal is always to buy a company and perhaps add more companies to it or just to internal growth. And at some point in time, the management, many times, will come to us and say, "We like to sell the company." And sometimes, we go to management and say, "You should think about selling it because you've grown this company to a point that it may be difficult to grow it much further." So there...

I agree with you, David. And given what you just said and how deep we are into the economic cycle, multiple years of GDP growth, I imagine what you've just described has gone on with many of your portfolio investments. It would just seem to me to be a time to take some money off the table. I do understand that it's difficult to replace those deals. But in the end, that's sort of the business model. So I'm having a hard time understanding why you don't monetize some of those gains and let the market come back to you down the road.

Well, we...

Let me -- if I can weigh in again, Mickey. I think this whole question, I think the key, though, is you've got to -- again, I use the word holistically. We have a portfolio that we're going to gradually build over time. Again, as David Gladstone touched on and I mentioned earlier, the management teams of these companies are partners with us, and the monetizing is important. But I -- remember, we're not in a debt business, right, just pure debt, we -- that we know. We have the debt portion, and we have the equity. And so we're going to take what I would call a sensible approach to evaluating whether we've received an equity gain, we -- potential equity gain on a business that we think makes sense to equitize it. And I -- frankly, I don't -- there's no magic to this. But given the size of our portfolio, given the nature of our portfolio, if we have the ability and could see through selling 1 or 2 companies a year, as an example, for the reasons you mentioned, that's probably kind of where it ought to be. Because again, the objective is, as we grow and build the business, we still want to keep that base of income to continue growing our dividend distributions, et cetera. So I think -- I wouldn't want to get into a mode of saying, "Let's rush out and sell a whole bunch of companies." We got to look at each company individually again and appreciate whether or not yet, where it fits in the exit strategy at the time from obviously a realized value perspective.

But Dave, why focus so much on a stable regular dividend? It's now -- if valuations are attractive, it's a sellers' market now, why are you opposed to, okay, let's try to monetize some of these gains that we have. And if that means we have to lower the regular dividend until the market comes back to us, so be it. But you're still -- that would seem to me to end up being a better place than writing everything on down. If the economy starts to contract, the valuations will come down. That will be reflected in a NAV. You'll have pressures if you do that as well. So why this focus on a stable regular dividend as opposed to generating the best total returns that you can?

Yes, well, in all due respect, finding the kinds of companies we acquire isn't easy, right? And I think that's a very important ingredient of this thing. So what I -- the way I would, frankly, answer that from our shareholders perspective, unless we felt -- again I got to say this, each company has its own characteristics. And we have to look at where it is, even though the overall market may be, using my word, a bit frothy or what have you, not every company, depending on industry and various other aspects, are going to be able to quote at the point in time gets, say, the maximum or what we might perceive to be the maximum value. So what I'd not want to do, which I think would be harmful to the shareholders, frankly, would be to just to go and try to sell a business for the sake of selling it if we still fundamentally believe that it's got opportunity for continued growth. You're right, there's always opportunity for cycles and down cycle, but we valuate that on the same basis that we're actually going out doing the work to find new companies. So again, we don't do many -- get in many of these very high multiple auctions. That's not the business we're in. It takes hard work to even make like we did this past year with the 5 new assets that we acquired at really relatively good multiples, given the marketplace today. I'm very proud of that. And so that -- it's -- again, it's a management process. And so the best way I would give you an answer again is simply, look, we're doing as far as I'm concerned thinking through now how we manage exits because it makes sense to exit when we're exiting. We're not insensitive to the marketplace today, may be advantaged to do that. And that's what we are doing it. That is -- as we mentioned, we're going to -- looking at a couple and then for the right reasons, for exactly what you said. But to then sort of go to think through selling off a bunch of all this probably is not in the best interest of the shareholders while we're still looking to acquire good solid businesses.

Okay, I appreciate that insight, Dave. And I will follow up with you, I think, off-line to get a little bit more background.

The next question is from Mitchel Penn of Janney.

Just a real quick one. What is your target leverage?

We don't have a target leverage other than the one that the government imposes on us. And the idea is to not get very close to that. We don't want to ever trip the 1:1 kind of ratio. But we do like leverage. This is a low-leverage business that we're in, in the sense that we can't go above 1:1. As you know, most banks are 10:1. So the goal is to be in the at least at 50% leverage and maybe as much as 75% or 80%, but we don't want to get up around 90% or 95%. And if we do, then it's time to have an equity offering.

So today, are you guys at around 75%?

75%.

And so with the new deals that you guys just discussed that might close in, like, by June, should we assume anything that happens might temporarily spike leverage and over time, you'd get back to the 75%?

Two things going on. Yes, if the capital gains that we're expecting from one of our transactions happens first, then leverage would go down. On the other hand, if the closing happens first, leverage would go up. We are expecting, perhaps, before the end of this quarter, but most likely in July or August, a substantial transaction. And then as Dave Dullum mentioned, we have another one on the agenda to get sold hopefully later in the year. So it depends on what you trigger. We do get payoffs, as you probably know. We sometimes like payoffs, depending on how the company's doing. If it's doing extremely well, it's not welcome. If they are just chugging along, it's a good idea to get it back, put it to work again. So there are projected payoffs that would lower the debt level as well. Other questions?

[Operator Instructions] There are no further questions at this time. I'll turn the call back over to David for closing remarks.

All right. Thank you, all, for calling in. We had a great quarter. Good questions. Thank you, all, for calling in, and that's the end of this conference call.

Thank you.

Thank you. Ladies and gentlemen, this concludes today's conference. You may now disconnect. Good day.