GBDC Golub Capital BDC

David Golub Chief Executive Officer
Gregory Robbins Managing Director
Ross Teune Chief Financial Officer, Treasurer
Finian O'Shea Wells Fargo
Ryan Lynch KBW
Robert Dodd Raymond James
Call transcript
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Welcome to the Golub Capital BDC, Inc. December 31, 2019 quarterly earnings conference call.

Before we begin, I would like to take a moment to remind our listeners that remarks made during this call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Statements other than statements of historical facts made during this call may constitute forward-looking statements and are not guarantees of future performance or results and involve a number of risks and uncertainties. Actual results may differ materially from those in the forward-looking statements as a result of a number of factors, including those described from time to time in Golub Capital BDC, Inc.'s filings with the Securities and Exchange Commission.

at intends visit to on the of company's company conference today's the the on the please click call, Investor website materials, to link. on refer earnings homepage the For Events/Presentations and Resources tab release Golub section. on the Investor also company's Capital is available in website BDC's the earnings Resources

call this reminder, for a being recorded replay purposes. As is

I Golub Capital of Chief Executive will now Officer turn the call over to David Golub, BDC.

David Golub

Financial Ross Officer, for joining Robbins us I Teune, Thanks our both Hello by Chief Simmons, at everyone. Thanks Jon Christine. here Golub Greg am and today. Directors joined Managing Capital.

morning, our ended website. an Yesterday we in the we presentation for earnings press quarter the XX posted and issued earnings our release on December

that throughout referring call. be to will We presentation today's

investment on and to private resilient strong For has been equity first inception providing middle strategy by is loans those who market GBDC, of you to focus since partnership-oriented sponsors. senior are lien secured new backed healthy companies our to

to today result GBDC's is in Gregory those market close overview and of the more review first with of for detail results on I start Ross then outlook. our update quarter will going XXXX. will an with an

Let so fiscal said me ended quarter GCIC. going do does or and consistent reflect XX you We items accounting quarter it merger for Golub we headline. it expected will the performance we just our to the with of solid results quarter, fundamental XXXX continue and GAAP beginning GBDC's another more Capital first believe Corporation, we will Investment by economic income forward. GBDC's start net GBDC. Last that in to believe reported clearly one-time, non-cash The quarter recall was GAAP December complicated with were related to

by quarter and GAAP distributions of net excess realized fiscal share net solid results our driven investment unrealized $X.XX of EPS first gains. regular in a and income per strong quarter, post-merger $X.XX Our per share of show

details. go begin With to over Gregory will who the that, I through will turn to the call

Gregory Robbins

Thank you, David.

in make measures These premium that to financial further addition as investor note financial have financial easier adjusted out merger please in purchase our amortization the post-GCIC details, we referred the to through presentation, to measures measures, GAAP write-off GBDC's to non-GAAP and go our I Before merger-related the compare measures, seek in strip results and earnings the certain of impact the the appendix are pre-merger results. to described presentation. of to non-GAAP provided

We to think as will adjusted they measures where are the indicators of refer appropriate we performance. better

it, let's the the was or context, December to turn that share, the look net compares for quarter. as unrealized of With and gain we per unrealized to income net adjusted results realized share call per Adjusted compares per credit This three XX, before net losses quarter. at to share investment $X.XX. income gain Adjusted September XXXX for ended This quarter. slide $X.XX of $X.XX adjusted per investment to for the net realized share the prior income $X.XX. was XXth and for quarter

the Earnings and Xfirst, share per per $X.XX. December adjusted were XXXX for quarter share ended earnings

premium purchase per ended in quarter, of any from depreciation the remain share equal earnings per unchanged Xfirst, reversal prior merger. of should loans expect amortization for forward will last the per communicated Adjusted the share we offset GCIC going As from $X.XX corresponding adjusted the XXXX we the earnings share a acquired be quarter by earnings on as unrealized December quarter.

of acquisition. distribution GCIC before quarterly of a $X.XX an the per paid we XXXX, Xfirst, increase from $X.XX share, December On

a NAV we $XX.XX as have the per of addition, from year paid December increased in XXth. of special share declined distribution, share Primarily to a In special distribution consecutive quarter. our we share, this special $XX.XX paid a September per special Xfirst, fourth as of would have of this as our result XXXX distribution, Absent distribution. which our NAV also calendar per $X.XX

Xth. fourth, on XXth, declared record per XXXX of our quarterly stockholders to share on March payable Finally, of Board March as of a which distribution February is $X.XX XXXX,

over I will call now the details. to to hand Ross go more through

Ross Teune

Thanks Great. Gregory.

Turning million total contributing of $XXX.X of sales X.X% slide to and $XXX.X originations net funds and four, our investments during quarter. of to of exits million total this slide growth the $XXX.X or million, highlights

quarter. the average As table, was shown in with bottom of X.X% new the quarter weighted consistent investments the on rate this prior

and quarter. In rate rate floating on the on addition, all average the investments new were of weighted average average that received weighted of off X.X% on fee relatively of with new the spread X.X% X.X%, prior over the investments weighted paid investments LIBOR consistent

interest investments on is reminder, new contractual the the average a time the based at on weighted rate As rate funding. of

the rate over of using rate impact be LIBOR any and loans, LIBOR, For would spread the floor. LIBOR current calculated variable contractual the

slide quarter-over-quarter top consistent $XX.X by of that total type GBDC's bottom loans fair continuing investment at has shows XX, of investment average our XX%. represent size to investment value. five of mix as December slide overall with shows or The portfolio portfolio at that remained our the on The million remained the one-stop largest based of category X.X%

slide to Turn six.

in and remains industries. to portfolio defensively predominantly in what loans resilient investment invested floating be debt rate believe positioned Our we

slide to portfolio summarizes the graph for investment yields seven, this and Turning net quarter. spreads

ended X.X% and the interest the investments, origination premium. not XX CLO blue and over which until amortization by to the than amount LIBOR the on aqua amortization to weighted did continued decreased impact quarters, reset by decreased basis LIBOR. the smaller this the line, Focusing by income fees income XXXX. or first includes the blue to XX. primarily basis or few contracts during yields XX yield points points price the basis was including fees to blue excluding the portfolio X% in decline on due line, The points as decline the or income earned contracts liabilities the dark and which line light reset. to to due represents of continues for of in as fee discounts, average The debt actual a income December decreased This rate purchase past declining quarter the LIBOR LIBOR change X.X%, XX the early some upfront of quarter yield, also but cost investment interest line, of yield, our The on

our debt, As cost between line, which a result, by and to average difference yield declined of the is the the weighted investment the investment XX net green spread, income basis X.X%. points

of performance Flipping slides. to quality higher the strong, Xfirst. two remains investments the over of or Fundamental of credit having next in four an rating portfolio as XX% our December with internal

investments During December Xfirst. non-accrual X.X% were investments of as the and cost seven investments to of X.X%, quarter, respectively, increased of value and number a percentage non-accrual the total fair at investments as and

approximately reminder, value investments each As quarter. valuation XX% of firms our independent a

$X.X Reviewing sheet on $XXX.X ended with billion, of slides income Total we and restricted cash the fair assets and and total the quarter debt at cash balance statement of total billion. XX, XX which $X.X in investments million value through total $X.X of securitization issued rate per floating was of billion our debt asset net includes share our facilities. $XXX.X vehicles, million Total revolving $XX.XX. in and $X.X fixed debt billion rate debentures credit outstanding value of was $XXX million and

times range within equity recent target Our quarters GAAP and our to ratio X.XX, consistent X.XX to times. X.XX was of with debt

were December total XXXX, investment comparisons are statement operations. September expenses quarter Total the the of to which Xfirst the and for the $XX.X acquisition GCIC, not expenses investment of of prior million. and ended total XXth, income to was quarter Due for closed $XX.X total million meaningful. Flipping income on

impact prior share the and investment the amortization, quarter. with of per respectively premium Excluding GCIC share net income $X.XX and adjusted adjusted the $X.XX, purchase per earnings consistent of were

history our of illustrates Turning long XX. our since per share steady This to graph slide in NAV growth IPO.

per NAV both we For including presented historical comparison special purposes, distributions. and excluding share have

to averaged past on on equity of in regular bottom XX. well our X.X%. summarizes special The graph each years, four years. on Turn distributions the summarizes annualized over our our has graph average past distributions paid the the five which slide quarterly The the as top as return

increase quarterly ended In $X.XX distribution from highlights XX. the the quarter December quarter in addition, $X.XX our share for XXth to ended per share for the September per it

for XX. be reporting our funds. senior financial two This to slide the final provides senior This on funds. will some investments in Turn slide loan our highlights our loan

in interests the an XX.X% to As interest filing from minority our on into we remaining agreement reported entered equity SLFs of the January the X-K we first, LLC in partners. XXXX, an purchase

the X, XXXX. January of GBDC's the into liabilities statements consolidated will or As on and financial a be after SLFs ending assets for result, the periods

SBIC The and summarizes restricted investment of our as next unrestricted cash, slide our revolving credit of and our subsidiaries. December liquidity capacity debentures Xfirst through form available the on facilities and availability in

debt XX long diversified, on and well capital. the our December stable of debt as our of as sources Xfirst terms facilities as Slide summarizes focus term of

XX share to Board Lastly, a declared on $X.XX on March X. of slide record regular our payable of as shareholders March per distribution XX, of

it David turn remarks. will back I With that, closing some for to

David Golub

Thanks Ross.

small was up, updates very two Net So remained another the in good, we close solid had see investment topics. to want quarter. income consistent. was portfolio diversified. Credit GBDC I a with non-accruals. uptick on although And well to sum investment did

First, update what an on XXXX. our the industry calendar second, our GCIC strategy with mean merger and for BDC may for

for small the Let our think will We merger transaction to believe it's the a only interesting, with number stockholders. stockholders GCIC that growth did it's our the believe a merger. new doubled the model we potential But of BDCs. size available me new we the industry. terms for win-win-win GBDC of model it The start with were on and so essentially and a a company, BDC existing represents that be

this. explain me mean Let I what by

followed principal strategies you BDCs of one have think historically, three growth. If for

through done follow-on strategy its to to a equity is prior but periods involves when When slow. pursued That GCIC with first and necessarily it's quickly right, the to merger. raises has strategy able proceeds. to expects episodic pace manager the a The it's small, timed for growing company win-win the stockholders, deploy be at GBDC the coincide measured the

The involves second follow-ons. strategy larger

NAV that existing but industry been offerings either seen been of or caused they Typically Some for dilution earnings for have good in stockholders. have both. larger have the dilution good rarely or these have we managers,

have A The significant. acquiring are this successfully execution third but BDCs value stockholders attractive available portfolios. way, quite created targets and rarely the for strategy involves risks few are

and to that rewarded available view with BDCs premium because isn't a the time The performing BDCs access by potential at at a consistent Our other has merger key strategy. value affiliated existing to stockholders. everyone. words, to is creating premiums private the may new on of making strategy stockholders stockholders fourth trade form the That acquirer that for that represents growth better trade involves for In NAV. they We new compelling GCIC growth. work strategy acquiring have consistently think over shareholder that this to get accretive the math are growth for terms is

believe we Which what have is BDC premium before, consistently returns. heard to And trade at a competitive that to the enables with answer access answer produce to leaves sustainable me BDC which the you consistent a a platform to permit NAV? in next question, premium to my a logical advantages to this turn

back us the look XXXX, scale, the deals topic: capital expertise structure, on we we answer And backed helped the boringly of market competitive the My financing the years: breadth of this the of me lean advantages reliability, resilient industry market-leading incumbencies, equity for of offer on sponsor same were wanted sponsors, calendar many these the we we for to XXXX? a what's and proportion Golub the to our by familiar. strategy solutions brings top win. able sponsors our relationships, the and to high one platform. at will It's middle strong stay companies second of be focus healthy, If followed Capital win all on private

We same the expect XXXX. more calendar in of

thank can if questions. you open And for let partnership. the please for for your your and today that, you With Christine, time line


of ahead. comes line first the our Please Fargo. go question And with Instructions]. Finian [Operator from Wells O'Shea

Finian O'Shea

Appreciate be here that X? And timing think Hi. Golub any differently, the of there the Good capital, have and my morning. raise we take first the Thanks on just BDC any do we question. whether GCIC about? the commentary. any David, new should perhaps for anything away of comments on would would new you means taking to size, merger then it appreciating new is structures

David Golub

is of BDC, we through Golub very can Capital X And mode a right X. can't after for as I go with merged are Golub aren't is GBDC, private Sure, parties. it Investment And ramp-up very you with private promise from a publicly many the CEO private created Capital to you the into merger for what Capital what BDC, anything context, perspective, with happen parties seems recently called figuring to Golub about And in GCIC GBDC, is there we appropriate BDC, X Capital's will XX-Ks. its its me public creatively so my so the all you BDC those Golub factors respect because many Golub with out a Capital by XX-Qs way that familiar BDC filed who path Corp., successful created have progress second tell BDC to been I of the speaking merger, and know now. that, GCIC as and for filer, chart but from is what which can

logical And so repeat I would us potentially respect we the look GCIC. it opportunities to for approach to be with think that at undertook to

Finian O'Shea

Thank context quarter. on follow you to portfolio there. this for that And just credits the

to moved two you recovery to the but were these have these usually means and on at extent, much. seem non-accrual putting the of the say, reasonable new reassessed that marked discounts, With as XX-ish, credits names marks non-accruals, the have, some

is as you there onto very and narrow placement context sensitive the non-accrual So any us understanding situations, to provide are markdowns? there could the there

David Golub

me provide some let again context. So

at value Whenever non-accruals most non-accruals, feel recent fair and to cost a right. X.X%, in the we think concern, we and increased X.X% about So degree quarter of respectively.

We are everything. worry worriers. about naturally We

of worry that everyone though, appropriate non-accruals. about in to things keeps context. make sure, we One our I the concerns want is

our on chart important strong time. So that the each record share and per indicator metric so think performance. realized GBDC most generating time, credit gains of net presentation over the over much focus the is, of positive on track NAV earnings continued first, depicting our And this That's its we we that's in why quarter in unrealized presentation quarter investments.

in look a way at look A we on quarter-over-quarter overall great in deal credit to And and ratings, is a if think credit show of results, row. quarterly most for again, based they risk quality many ratings. the stability respect we risk second at quarters and recent I

we the industry and still with the latest the even point we in this I are are end our the in cost. range indicate that is non-accruals range third increase, of make the that low contextual in of respect And will historical figures small of at

it's it any So I more dramatic sound is. make to want like don't of this than

are of With path good we on a with situations, of companies that get recoveries. details good two into of of that both I say is, non-accrual this can hard quarter on we respect the cautiously can't said, what we working but companies, put managements and I the am optimistic in the two are either I toward the that

Finian O'Shea

all Okay. for Thank you for the context. That's me.


you. Thank

with comes next KBW. line the from Our Ryan go Please Lynch question of ahead.

Ryan Lynch

Thanks Good taking questions. Hi. morning. my for

possible The is having that MMan about what do first does. one any information any to just to has were to business? difficulty business what provide with finding on nature actually of Acquisition Co. actually Is We the it background that a

David Golub

and information you said about will Having policy company on as that. credits is talk specific a this about that, matter, earnings believe I links We, don't to calls. some public our to back Ryan, there get we with

Ryan Lynch

another quarter one's around helpful. But obviously be Street would and there some That been healthcare, then this Holdings, different healthcare Oliver are Okay. dental, then roll-up markdown strategies. non-accrual was status. Dental know on two still obviously accrual know, dermatology. that And Those investment has businesses, one's on you Dermatology particularly you I had concerns got

these either two that part similarities we of look healthcare pressuring any are both one practice? are So across them? of And can are roll-up businesses these sort of businesses potentially of a different there that

David Golub

And businesses. would a is and is are preface each describe middle-market One your to I different not are are there we about syndicated that entirely They talked across land calls. general on them idiosyncratic really that in in strategies industry practice well broadly think confronting on is them. of as roll-up healthcare roll-up. physician as do which land. I as prior this are I and in pressures seeing issues right, is specific one the that the

roll-up think years my strategies to to say, healthcare thought harder in execute fair a I few than it's opinion, people are ago. that

Ryan Lynch

then of kind a And Okay. one higher level question. question,

trying with period. a a sponsors, forward as is have and time those conversations, uncertainty activity which any deals talk move come draws you done sponsors roll big heard election? any conversations Have and Have of XXXX always surrounding discussions? significant election potentially of amount deal As XXXX had into you along year, the heard guys before about, you to you or obviously get that

David Golub

discussion of you to the of later schedule a election heard heard me of about It negative effort firms that some describing, private happens. we have election processes about to in wouldn't before A of M&A the I now, have see I divisiveness don't equity done processes not what has concerns the six push lines by anything the But if right along. American to up the campaigns. the about private lot right that private is of been that the about activity move the we months. folks in an I coming equity now, is to out happen phenomenon which take are a M&A equity have in desire of are get along early. XX months about too of surprise politics some commentary in Ryan, M&A year. think typical four some

think we are too even see I we to year. later kind pattern, in going So if are of early that to it the see

Ryan Lynch

then more. Strategies. Risk guys $X.X facility And Okay November, a billion that's In to provided you helpful. one

that big what billion you MRI recently $X.X those you about able how facility the talk Those of financings? just deals also, loan loan syndicated processes And obviously Software. Can choose platform were market two and the versus, those of the your avenues, another more those tapped. there you broadly guys speaking. route? a deals Just were assume, secure size wins partner firm particularly obviously those they could and unitranche to syndicated win broadly going have very traditional choose your to companies Why provided thought other market, to maybe to Golub did for are versus I platform, the broadly Golub they like maybe would the is

David Golub


and Risk MRI So one-stop executions. were both Strategies

down cases, preferred a in one-stops that for a variety ease facilitates expansions one-stop a sponsor acquisition, second of involved reasons syndicated scalability, flexibility, along of was to have preferable number made by they historically handle approach. to lien/ broadly lines. first the parties line, reasons, both smaller capacity changes thought of which closing, lien/ a So traditional including decision more that those Sponsors gracefully the

a what we of not tracked XXXX, In And that led one-stops product relatively XX. the one-stop And a XX product. market of leader Ryan, market executions were that's Capital clear have recently, XXXX course over of been Until is changed. has in and market middle million. larger XX $XXX executions. or the excess We these co-led happened, in Golub

led than we more co-led of or competitors So our all combined.

The capacity And significant executions hold bring a alternative industry. portion we transactions in I to over sponsors both is traditional partners. unmatched think transactions that combined for the XXXX, markets done, built larger capacity in course first these are lien. what to to the of lien/ is proven meet considering to these and we We that we a one-stops in have have capability capital worth as an larger second the of one-stop the

is they them. I in think larger these also finding seeing we like that try what are they sponsors do are one-stops as executions,

adoption are of curve. at And in the opinion, my the so, we beginning

shareholders grows. GBDC, one-stop of represent we very believe believers good our market that to of we thing good the very maintain positioned We the to risk/rewards because remotely that's I at And Capital Golub investors. are are And well not these as this leadership are think market gaining one-stops strong of even for of share one-stops. very conclusion larger I for close a

Ryan Lynch

and that doubt in deal Well, that's has be access player unique to the large I shareholders very premier is flow. benefits these yes, GBDC been And some there for of definitely able see no the helpful color. to that one-stops that Golub

So those are the I today. questions appreciate my all time.


Thank you. [Operator Instructions].

from question Our ahead. comes Raymond Dodd with of the Robert next line Please James. go

Robert Dodd

guys. Hi

the country, dermatological sometimes constrained. much idiosyncratic that in I if potential are two, credit, I means in one same anything a that? thematic mean of obviously, second sometimes deterioration, any the I if credit or Is like can like cleaner, sponsor industrial for with be turn to businesses. completely floor the back your I a theme, general, into there identify opinion going practice, But anything more parts can one Just something between can mean, I the can, is, mean not completely broad-based. of different just book, my different spreading they non-accruals. but

can it you that interesting. color be front, any on would So really give

David Golub

I said portfolio if themes credit period, some are as experienced earlier, Robert, portfolio credit. I am my the what that recent in I seeing threads our idiosyncratic it. vantage from across point, very of not have issues am the to credit From weakness or there is in seeing common different are that companies

Robert Dodd

Got it. It's I Okay. tough. that. appreciate

but the pricing and your the environment kind response. can, coming have spreads on market. seen decline in the got be anything, again in I market, slightly continuing have to LIBOR don't board incredibly curves competitive but January widening floors of if per in we we On in out was seemingly forward If there, LIBOR boarder not book se, down to seem

may So favorable some I obviously, where environment And it put expected in the have other right be is, the to But a are it having you the the do more like evolving risk/reward would seems in pricing be shape moving going your and think spreads words direction. curve broadly, one-stop. say forward things now? is with more mouth, to you to

discussed have not the think on we call I far this last seen so just that. quarter, was but

environment to So in a move to do anything get going you think spread really given more the of the there LIBOR? is direction direction favorable that's

David Golub

LIBOR I meaningful changes spreads. changes don't to in drive think are likely

perceived risk I of in think come we to a recoveries. changes changes and go-forward as to likely spreads of changes defaults in in environment are credit consequence meaningful in particular, response the in and, see

environment our reported continues index very to we economy, strong. market middle in economy, middle that which particularly an the So in Capital now, U.S. we in January. And are look the results in Golub right early market

associated see of we the of continued kind reasonable salutary to seeing couple economic to as with in the and long that environment, be we likely spread in expectation are continue as credit we last to think activity I have They as a environment by and been risks, for we are for continue job pick not that, As robust historical as to credits standards, as we have managers likely us be not like, but would pay terrible. they These I the not us conviction years. you back. are is credit as that good selective are are terrible. And to and very are of

Robert Dodd

it. Got can. appreciate if last that I One color. I one,

Given it and accessing et institutional discussion now the cost entity where do is cetera, size debt combined now? of BDCs? result -- move nicely et market think is pricing for of the one material the attractive debt now, right the seems and of about any the capital, where of time think overall tell the out the versus that but for the can at be capital, now, cetera. the lower size in points XX can market, right pretty way roughly was you you drive initiating you the maybe BDC pretty do there us Obviously What to which a you as you merger it's right can bond bond

David Golub

look have on our that. concluded potential we to that issuance, for actively explore avenues me front, includes give quarter, but well. that Too at what As expressly us looking we expressly of you right-hand early balance are post-merger debt as strategies optimize all available sheet to other is one mentioned structure bond GBDC. looking a rundown includes last at to I of of are side and on to That that at the activities capital the the the of to carefully

Robert Dodd

Appreciate Okay. you. Thank it.


there no [Operator questions Instructions]. are at this time. And further

David Golub

and thanks everyone Thank joining you, for today. Christine us

always, appreciate As and we questions. your your time

please have would next issues come And you that not that free to today's you forward you any reach out. to to look like to talk in case, about, call did quarter. on we any up If feel talking again


you That ask today. disconnect lines. please the call We participation conference thank and conclude for you your that for your does