Golub Capital BDC (GBDC) 23 Nov 222022 Q4 Earnings call transcript

Hello everyone and welcome to GBDC's September 30, 2022 Quarterly Earnings Call.

Before we begin, I'd 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 GBDC's SEC filings.

For materials we intend to refer to on today's earnings call, please visit the Investor Resources tab on the home page of our website, which is www.golubcapitalbdc.com and click on the “Events Presentations” link.

also our is “Investor in release section. Resources” earnings available website on the Our

this being David call I'm reminder, a As is turn Officer GBDC. call Executive pleased recorded. the over Chief to Golub, of to that, With

us Hello I'm Chris Officer. joined Financial today. everybody, Chief for our by thanks and joining Ericson,

congratulating to Cashman, of GBDC, as role Chief heads Officer of a We today: Direct Benton, new also couple Lending have Greg who a Matt join him, me Golub Capital's in please participants who new was and recently promoted Group. Operating

our going out sponsors. who the we Today, things. those how topics. website. call on release year posted earnings format of part issued are been new we that For first backed Yesterday, five to call that and XX, investment our We're Golub going introduce strategy exercises. on of what is middle bar by we We'll for focus the calls fiscal we're quarter improve strong new a for during one press exercises. our and do are Capital’s and of you to culture efforts lien ended it's are raise element for the this earnings today. These September on inception One earnings presentation the of presentation we resilient XXXX, came to our bar raise secured loans referring to to our to be cover companies equity healthy our an GBDC, since senior providing partnership the is, private market to oriented

year the quarter ended performance discuss I'll September for and for First, the of GBDC's fiscal XX. highlights

think what macro the we're what economy in GBDC. about for and means seeing talk I'll this the environment Second, we

new actions of quarter the investments attractive light give will the uncertainties we'll to and as fiscal heightened and on defense will Capital talk we're And Think all is taking risk On I'll the them Greg market Greg finally, back in has of dealing we Third, closing manage topics. to talk quite and make us defense, some will about go Greg Golub And questions. with. offense, why Fourth, results taken remarks some on offense. time two and opportunity insight real set Cashman and detail. through for come financial for the think for in year it's about take the today. macroeconomic

this quarterly in, weeks. next improved to that and the that jump we basis we to useful over to investor additional information I it Before Golub plan We forward. also two and want file We on find of going a source a on presentation presentation on be updates to hope plan GBDC Capital. mention file a new to you'll

start was that's me equity markets. is a marked consecutive let and with sharp quarter by quarter. overall second highlights solid GBDC's The headline for So, performance in that the downdrafts despite debt and

we back The looks driven have by say GBDC's market The downdrafts. is adjusted quality credit moment, we'll quarter unrealized widening, XX. same net and losses NAV adjusted perspective. X.X% was immune good Whenever come of spread decline you by by was highlight rates, of in stability, share ended GBDC per as caused solid to from result to $XX.XX some a the share news, a higher to a that $X.XX from hear X% a thing. funding. marked in spread $X.XX booked this widening, NII quarter $XX.XX. quarter fundamental that me low very to The the that per not is per strong. per we're NII share credit first by Adjusted June continued cost in That Primarily increased increase from base to said, investment and as share income

reversals X.X% second matters What they as for in borrowers me don't losses We’ll we time mark-to-market quarters. in more this long further in later mark-to-market structure, call, coming increase is minimizing increasing $X.XX over to the attributes quarters. think losses. can reverse base an there's there's You news: avoid pay rates dividend whereas realized losses a equates improve, some that yield we widening, the We credit credit potential put, in dividend? which and mark-to-market news share, rates GBDC's dividend spread in detail a power. $XX.XX. which X/XX/XXXX me spreads to XX% our from Why whereas have from realized announced increased their and good GBDC's our this adjustments of And base of press and spreads increases higher GBDC's in Simply higher a a on market is in or NII to losses, even narrow. more NAV The highlight, earnings future say permanent cover off, dividends. $X.XX share hear we given funding given brings see release we'll run. in good rising matter are quarterly If base spreads, the that

On not tells curve further this base quarter's the to rates more yet higher asset loans, almost due lag balance forward fully The spread today's rates spreads. go likely interest and rate here, widening us up are rates earnings floating generating which reflected from and to portfolio, rate and all effects. are due in GBDC's income is the of side it's sheet, to higher

GBDC's and the the interest base average benefit likely increases, of X.X%. This flexible about coming expense as have sheet, likely reset NII. side will GBDC in to faster today's portfolio exceed the fixed period notes in rate the further highly the incremental of call. cost an incentive as XX% the its the rates, capital. higher yield “catch from now quarter. that up” unsecured GBDC means GBDC power and believe interest returns is GBDC's on fee. details fully on rate our We is income and this of X/XX of earnings posted to notes this for to X.X% half is We’ll means continues in balance I'd increase form debt provide On that has increase in locked GBDC's of dividend base we debt cost, more is these also About income note liability low than this through

Looking in well-positioned us of meaningfully supplemental or giving dividends. forward, generate XXXX we further dividend base calendar flexibility excess to of and/or in new $X.XX, NII the to potential believe GBDC is increase quarterly consider dividend a special

quarter third from is GBDC's strong. remains the The highlight credit quality that

resilient focuses cyclical or aviation. or with or on real in know, in companies, and crypto or in industries, like geographies, As owners. investments resilient We energy resilient in don't you estate highly play our areas strategy volatile resilient

once share which we’ll a and come session. highlights strategy now, is for low completely were back fiscal I'll quarter year bit by than the a few later in And so to far the more offset the and data the shows our realized losses again were gains. for working. Realized

realized million For million of realized versus the quarter, $X than we gains. had of losses $X just less

our year, internal investments fiscal a XX. not uncertainties well-positioned first our of X just in difficult of investments we facing we've portfolio. of loan had is the our Historically, rating performance remained or the at X.X% also final GBDC's realized for GBDC The pre-COVID, performance rodeo. versus navigated portfolio measured and For we're had with higher low This on percentage the all realized gains periods in Over XX% value an the of at fair is and level losses just well. is ratings This as million September highlight: coming $X.X consistent of of $XX.X non-accrual fourth period. million. of

lien, We'll we by have relationships. equity to we XX% In to be be portfolio More GBDC investors. Because dated, to of in deep a portfolio GBDC first of corporate its collateralized. resilient longer that's be by with a flexible with it's liquidity. form than with consists materially periods notes over whom the good ample durable year secured and to rate loans first We've believe what's to our interest originations very funding defensively the curated good play for complemented and results senior is of long well and and GBDC's fact, is undrawn and have out for of billion about capacity $X.X companies funding risk and revolver we sponsors also outlook has suited GBDC's unsecured that's quarter believe risk. positioned, offense new tended go highly rate difficult resilient debt backed to floating attractive more unsecured, business in structure in short, were for the a the origination solid. the fiscal environment. and our In into to private both what our become standing presentation. for later XX% detail credit very

a unpack picture macro the means back, it take let's Now, for look what at GBDC. step and

we're and market monthly in to companies, of a unique perspective on financials smart management know, many economy. dialogue of from equity them, Golub of firms has a you hundreds with We teams. receive private we middle host As Capital constant lend the

topic It's rates, to but marked number to most recent we getting and sharp consumer along are from But question in here? fiscal spending a doing conflicting we're with point direction, ago, part booming insight economy we'll from down that to, high effects prices rising negative vectors growth. a scenarios. through. by actual and are back unusually So, a big from range up economy it's a the and businesses not we're real directionally like environment. direction. What of that a there's lend there able the and results to We're muddling in they're the wide inflation, and Companies pretty vectors of are come worsening also of both stimulus, but that's are a well. almost muddling quantitative for confusing wealth with are it revenues real year consumers losses vantage their the point keep is There on positive in where is the an declining increasing seeing It's in the possible debt point, time. including a markets. our bit, inflation. The and in tightening, vectors are sentiment, was portion Margins equity is,

profits low of despite still sectors some largely supply consumer of We balance goods have unemployment, chain strong issues. inventories most and in generally slowing very a recent signs low durable which are sheets, consequence as corporate healthy growth,

in tension right China. and war international right name tension the between few. all pulling between U.S. happening environment. forces There's So, There's left There's concern still tension the North disrupted There's backdrop between that a the Korea got in of Russia a a short, the there's are Iran and and of against Ukraine. directions bunch And in democracies multiple now. and we've factions, different about in and to West. it's

back to think I from anybody don't knows. to the here? question, So, big where

vectors is before. be going you're that of think just I to If parallel, find want XXXX historical going you're good looking to don't don't like…” if you think seen say, a I a one. for to this “Well, we've – combination

looking Now it, and growth range likely near future, alternative for scenarios. scenario the think muddling there's – most the possible at but we a is of

Head this mic Golub mind. with to this what the the for we think offense muddling unexpected in this how pass it's I'm it's perform macro GBDC? So, to say be does to to manage prudent environment defense about And playing well to if going to happens. Greg that we're such case right more mean in growth. in and it Lending We Capital, resilient want about Direct going at Cashman, we're of perspective GBDC

terms what environment. going are focus we differently, we're to differently. doing today, aren't I'll seeing we're new doing in how And today’s are managing in about what David. I'm we we talk seeing what first about investment what and opportunities. I'll risk Thanks of talk on

what with seeing start today. Let's we're

we As performance. strong. losses of pre-COVID internal Realized to Those quality credit low, performance and the have at generally are non-accruals have while mentioned, levels. look GBDC's some been comparable ways been David remains quantitative credit ratings

probably they is soon pressure, We and of will seek be rising to the of stick? And assess credit companies based finally, inflation. they still seeing it's a increases do, we usually performing doing generally enough well pressures, will, due both. cases, CEOs raise of that And Well, market offset also there's seeing too bit but in to we're tell. that smaller we are costs? prices hear they they group to they there's we're to believe last price plan costs that doing that due wage those they growing raise buckets. three shortly. from typically borrowers and than rising borrowers leaders how Then falling Most most resilient or into prices to what that a talk and what we if management profits. one fall are profits because to today qualitative our input see When lens to and are reality a sponsors slower in Will expected, with on seeing or margin on invest that's is, we just tell okay. a group And in growing group, sponsors to But us teams.

So, how in-light risk what let's shift and in about managing the of we're environment. macro we're talk seeing

Let doing me differently. start with we aren't what

on industries to and and focus cyclical industries capital-intensive industries like resilient in We heavily lending sensitive to companies estate. real continue involved or resilient like owners. We're with resilient in rate resilient interest or E&P in not homebuilders geographies

also that focus different we on good at we're economic the What future. know strong differently? do very will is we perfect. with feeling we're not what think flow even that of in Our when a businesses cash do, free we defensive well about we're that climates, are wide We profiles variety not doing but optimistic

right different a hard is we've of We're towards tail looking screen want a problems risks has hard enhanced factors. at What company always itself. key of identifying we're key management. looking credit and by our Identifying areas potential to five bottom-up, with This highlight for our of monitoring basis. part company I in a weakness. that granular, view on been isn't now early portfolio So,

rates. flow First, potential rates. borrowers We're have looking from base cash for increased or who may interest liquidity issues

at to looking looking We're operating power. This through closely try and inflation. mentioned will companies companies to not increase cost that push earlier contracting every means Second, that price susceptible for stick. drivers pricing I margins.

power may limit. hit on cases a So, we're focusing pricing where have

resistance. Third, recession

suppliers that them, exposure. our of others. working geopolitical looking of of identify allocate we're fifth, to are In material XXXX. international with material resources looking practice. falling monitoring may adjustments risk exposure more be dollar we're recessions more high customers about particular, fluctuations or tension earnings. to at is of how enhanced realized companies or of with risk. with Fourth, credits economic than we as credit for to or in March find quality companies U.S. We're The did in to susceptible to EBITDA today companies and revenues. in weakness. areas We're not Some levels borrowers to goal higher-risk covers That much thinking And

want the perform. that's our borrowers, have been know management We've a of it this, that opportunity. case short, clients climate go good six overall in This Why gotten to know to to logical deal team, the and to sellers deal a downdraft highly see slow. and present want In activity is news the new for our buyers cases, through months an to lender. add-ons. them give these robust sponsor ago we A Now, talk the origination great In lot lower? don't us just market dislocations opportunities negotiate can the accretive agree they we seen sponsor. don't three I months of company, And of opportunity market us. need ago, as and or is their they when want market the could agreement In give about deal need we've like is with how price the credit party whole incumbent the equity and environment. capital is need. incumbencies a want access a wide first hundreds more the is we that they attractive new their capital activity know means value even down like and buyers The pay XXX+ is it. one platforms they to they grow we Well, sellers to us to on

origination an the M&A of from proportion slower comes borrowers. we typically of repeat in periods that see increase activity, During

volume we a is of several have in repeat a are That tighter, XXX gone years. half points The come the down origination into half widened points, has and from full documentation we recent has it's our the last expect As markedly a of EBITDA. benchmark, market lender is like friendly proportion in leverage the lot and over been are we Spreads XX definition basis for XXXX. areas and add-on rest opportunities that care these years think turn, by increasing elevated the particularly of And especially it borrowers. basis about remain terms most XXXX to to about to attractive.

more set the we fiscal areas in the quarter most year financial great since a attractive it over the With As focus detail. results turn of is believe go I'm opportunity that, result, the Ericson for GBDC's our in Chris to among crisis. going through and to to

Greg. Thanks,

of to per by GBDC quarter. adjusted loss per primarily unrealized share NII $X.XX context and net view summarizes turn to during was share. in to unrealized solid had widening. a and share, the quarter-over-quarter X, due downdraft to prior $X.XX, $X.XX and Let's the of Slide increased in markets our for compared the spread depreciation per performance realized per as adjusted debt EPS quarter. from share this Adjusted we which results $X.XX equity GBDC's an quarter the the

NAV the X. from of of as per XX, X.X% Slide NAV $XX.XX by a per of share to This slightly $XX.XX June to slide provides declined GBDC's September share of Moving bridge as XX. which

walk Let’s the components. through

depreciation of view, $X.XX credit our market the Adjusted depreciation unrealized per As primarily company came share per realized the by unrealized key growth. rather a shown two our to the NII XX funds was net drivers: quarter; from in share. a of also second, mentioned, net remained summarizes quarter-over-quarter to our change on due per on prior outpaced constant the asset losses existing originations. to with value there $X.XX one, I investments net of just share middle $X.XX investments. the these of loss paid of the was The And funds exits quarter. finally, contributed for depreciation activity by appreciation adjusted per origination and $X.XX and the NII Net driven share fundamental XX slide, than spread In September originations gain issues. negative were in sales and fair were in offset dividends. new the in unrealized and and widening Slide investments adjustments appreciation fairly mix, quarter and declined the growth

the by weighted well originations. of on on the increased as We rates, from of higher average to prior XXX the combination a quarter spreads new and points over GBDC creates rates Slide combination quarter this benchmark weighted XX asset investments on further X.X%. overall believe the investments a in bottom for basis at portfolio points The rate from periods. returns spreads of mix. future shows asset interest GBDC's the higher wider base average foundation Looking as by increased slide, X.X% at new basis increasing spreads increased new XX

GBDC's can basis the by consistent see, As to portfolio Slide represent remained value. remained portfolio highly average type by of fair continuing with you size shows quarter-over-quarter, investment approximately XX% that points. loans around XX one-stop investment portfolio an of the at breakdown obligor, with diversified XX

As secured believe senior what loans and XX, investment to of of I'll lien in positioned comprised resilient we XX% defensively was industries. to floating be over Matt. floor September first of portfolio turn our rate the now

Thanks, Chris.

data investment start income. really theme I'll let's point balance interest in on to with the detail of general looking One XX, rate next at Let's the the environment dark rising the on is sensitive asset sheet. XX. blue is highlights nature line, turn to back which But Slide the slide. our Slide more come the that GBDC's

increased the of points, quarter. of compared amortization from interest includes fees contrast, last income the and and discounts. investment payoffs combination XX points. rising higher accelerated basis GBDC's cost teal discount by debt, basis investment to XXX rates only our from increased of a By reminder, amortization income primarily a line, As

the rate green fee. X.XXx net spread meaningfully weighted implies factors, two coupon increased weighted NII. debt have the from by Our This leverage fixed approximately on our increase income that GBDC's of Note average from unsecured that notes spread, Combining spread, increases catch-up pushed net rates of $X.X average cost incentive a increase current have higher average net in prior X.X%. will debt-to-equity, quarter. GBDC's through the of the weighted billion basis XXX benefits investment fully of and are investment points these our combined our the further over investment that to with GBDC line, GAAP base period

GBDC's Slide stands let's period. impact XX, rates adjusted NII The of is NII down Now, to takeaway On that power. positive in GBDC's on earnings tailwinds we've higher share from this two per key quantified coming potential drill point. key the benefit base substantially the on

The rates, is quarter has when actually market meaningfully than demystify lag In a chart words, another The first of rates quarter other in higher portfolio. on its GBDC when reset tailwind this in base its which our SOFR the lag about that Said LIBOR rate happens in X/XX average in attempt change you. once to there's most for the less and dynamic quarter is help investments portfolio on our GBDC or base the earned as was ended slide to a effect per between the loans way, this rates X/XX. for cases. market

second further look The based X/XX to rate curve. that interest base is on forward increase likely levels tailwind the from rates

will when try that's another benefit GBDC's its include per to investment less portfolio, Now funding way, two of floating represent its including shows rate. share higher only total to the to as these XX% GBDC's floating dynamic Slide base is GBDC's rate. of our equity floating extent rate be these potential adjusted estimates XX% crucially, than under also debt also to equities, stack Said of GBDC's the capital. of tailwinds reset of XX% quantify Consider this but liabilities liabilities you hypothetical To XX tailwinds, total that scenarios. floating applies GBDC's rate rates, offset an NII

if higher expect higher share. how adjusted per in LIBOR have X/XX what increase been bottom through bar the rate average adjusted the rate GBDC's me is would actual approximately share to In have leftmost for per quarter $X.XX LIBOR in quarter, that of to per GBDC's that chart. lot adjusted have think We flowed the even The points. per momentum projected of above from would is ended basis rates on X/XX. quarter-end. adjusted increased points, for had XXX XXX had scenario NII assets LIBOR from occurred, read share basis points, this at effect other a floating January this right not average shows been given XX% the let quarter looks and we results. have was future. its NII points basis On we bar liabilities currently NII The at a has if the $X.XX describe already Now, LIBOR higher, the looks GBDC's middle NII basis scenario, have XXX step line lag XX% further $X.XX rates NII else all of of LIBOR. share. at estimate been this three-month share X% of think and GBDC's yet The else have all quarter-end and equal, actual NII scenario would share by to of built-in year. rate based this we an per LIBOR adjusted we goes the All both bar a is words, per XXX equal, realistic is In points basis would The and to go just what shows been the XXX above increased estimate rate next the but

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drill sensitivity in Form you'd on down XX-K the asset detail additional GBDC's see like further. You'll if to

quality investments X/XX This the Now, the take same and non-accrual offset X/XX. Slide and is one non-accrual let's as one by the of metrics. Slides of non-accrual because you at investment. credit investments investment look of number to to new of move On addition XX remain see a XX, eight that disposition at the XX compared closer can was

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Wells with first from question [Operator Securities. Finian Instructions] come O'Shea Fargo ahead. the will Our of Please go line

on for This disclosure you recurring curious – Hi, larger Appreciate might good of impact not from today. some how on could the rising hey, relevant of I understanding some the context rising Appreciate us maybe maybe that portfolio maybe Wathen is disclosure give and as a the revenue but whole? rates morning. the good that's your afternoon. interest NOI the was just upside coverage for Jordan actually loans, Fin rates. borrowers,

about prepared got of in our a number in source that is One remarks. source are we've rates. slowing A Look, headwinds months. second coming a impacting higher headwinds headwinds borrowers of that talked economy. we some of is base the And

of we talked Now, average of a Part coverage our here I that call order sources important. rates. of on different granular, loans side in We stories What money to we've recently. need borrowers are in making many think up well having the as we defense to be borrowers very lose the There been in as point vulnerable. today's rising so are vulnerability, bottoms some is Cashman discussions Jordan, think, are the lose for environment. money with is review other the been Greg of impact what ones on investors doing most that informative. are of we identify lenders, that important issues of in the We on credits. all really really as now thought as today's right undertaking about I don't is the, our tail. lose there there our that different average aren't ratios why worst We And credits. money the that's interest on I've

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No, I appreciate that.

any recently you just way. so, you being, you uptick amendments about looking? costs the And Have little seen over in as them are characterize amendment would know, ask interest forward a to next And a XX maybe going worried say months? different and requests? where Maybe X their

but requests, amendment an yet not seen in no So, increase we have will. I think really

coming the been period lenders be I going that and challenges than significantly the that in. borrowers period one we've more involves for for think to that is

companies impact credit rates? in get of Yes. So, for the Yes. be because be be of the in cycle need than been XXXX? think I but more into don't rapid, coming. related amendments those that Yes. early some Will rates increases because and XXXX we're rising reasonably that's this all have credit we're seeing full yet still stress will amendments? more to there a in there Will in so

I last if there. could Okay. And then just it in one one sneak

about the just back accrual. kind of was quarter, this to that the maybe coming curious upon dermatology if million into related but that had Paradigm, associates you of company out? You of or the exit income top interest that could, the nonaccrual I'm $X snuck deferred line break

So, one. Chris Ericson help on me this

I confirm. think please but it's second the two the Jordan mentioned, of

Yeah. He's We some both, benefits. them. of both topside saw correct. It's

all All me. right. from Thank you. That's

Your with line James. next will come the question Robert from go Dodd ahead. Raymond of Please

on quarter. And congratulations the Hi.

seen a it forward it on new is the anything that as currently any costs, outlook Is comments something Just call semi-discretionary of have to looks look margin demand? end you quality on And impact you When much about else, is of. you multiple margin to know, anything health have costs care consumer let's seen dig pressure, it, arguably, might input margin for etcetera, right, your labor I at me, usage is it like obviously point, non-accrual, at – that etcetera, credit the know, all reduce it or was the side are on that or maybe. business, to a you you seeing on the etcetera?

have the it's all, because, And why you onion price back understand grow revenues. because be again, increases ours, companies disappointing It’s increases you most they're the that revenues, large cases pattern that patterns overwhelming portfolio It's many is margin a the word common to To situations vary they revenue are relate material there – as as continuing piece of not yet degree results, pull across margin not but is sustaining when raw So, may of shortfall. shortfall. and to to a to because a know, then the I hesitate the producing able the shortfall. of to. sit wage in not Robert, use

I sure not saying but be have it’s of through in by yet, mean passed don’t price they form will the able a yet So, to, thing not increases. have

reflective of think Golub Capital. just I experience our not at that’s

we’re of as what seeing that’s think portfolio. I broadly well within as our portfolio, outside our

any the you us seeing are spreads most that. I where or material more improving widening, on, color obviously, the you lender OID? that’s were if the it cut mean, shift, EBITDA mean, definition where a is Can shifts but I materially appreciate I give out? you’ve know, are most the obviously I it. Got out talked environment can. there. One mean, you more I friendly

one areas. it’s area, It’s combination say not Robert. of a I’d

they’re I’d spreads basis wider. points So, you They say mentioned to are, often wider. XXX basis XX points are

is incremental We're capping fees particularly improved X%, seeing and terms improved I an around often definition and think OID protection. adjustments. up OID EBITDA the are seeing but around documentation closing better. We're often. of always, call not

So, it ever it's don't is. element. I not think one

market with different shifts see of to from concert number tends friendly move when I other. it's dimensions conditions versa, you in across it borrower each in the to think lender a vice friendly, and

appreciate I Thank you. that.

go Our ahead. Please of question come Jeff the Cowen. from will with Bernstein line next

Hi. congratulations of the format appreciate call really first transparency. this on I all – of the the and quarter was Yes. quarter the and

companies little for your bit more I companies, are about growing the Obviously So where that. XX% thanks demand. there you talk elasticity lending that in but of world, at the on you're how thinking in With specifically and wanted more out particular. sales in a kind like elasticity? the you're to decline X% to increase feels we're companies that a seeing prices, talk about wall, units, in it some a point, but hits of about and

and let by So, question. too And I preface in full think answer cycle think If saying, the yet. We're look there prices. are on easy I look a in across rising period this impact demand. of portfolio have for knows can't. anybody me what the this I early you're asking again patterns, the price significant certain raising the We companies exactly without don't time right is an and that

So, value save imagine, fundamental is a has proposition critical software money. rate that company they who's for product example, business-to-business their that mission and a XX% client’s renewal

a under that of If pressure environment. to in side are has So on companies current power. maybe the that more other that lot company the compare we pricing

in with much the chain rates So, prices wage an more increase imagine a that's time challenging. that's restaurant increase at and protein in and dealing same

think I into their our end and management going that going We're XX before. much pricing come last pricing next we've that, to what This to different clarity haven't get unscathed. quarters. performance the increasing are well over is expectation pretty is going that of of dispersion And confronted to power, won't an which years So, my this the show from which through firms over power? the we're teams several what portfolio but have environment the expected is maybe seen see is of firms an through course of we course reaching the more we've

collective So, we've of I to all a that learning think and in accept there's environment. uncertainty got the degree of current

And China question This kind tail China then obviously but exposure, have of is great. a having that's I a more. very supply exposure, etcetera. risk. come through visible, about COVID, a And one tail it's That's risk, chain

You going okay. be to know, until it's it's okay not

you about talking about How thinking are it, you are to etcetera? companies your that? how So,

today, Well, supply the theme, since of but really been the well, chain issues COVID hit. have over course not a big just last,

resolved, for we've working So, as a say, not better borrowers supply now completely than I'd on than they're they time. with chain sponsors better they're generalization meaningfully with some and but been were, issues they were.

Could if continues COVID the arise worse? And between new answer and/or tensions is flavor? is, zero its different that there that headed a geopolitical situation and take think I think where policy get could on if China, yes. that are U.S. China I that to you're

teams management last think in I the years. again, new couple So, of is this

chain teams several in management think risk ago. way was I viewed China a it view supply different years than

managed it's think think viewed be to be as going need I today I likely that continue. contingency know, to trend that something is you needs to plans, And where in-hand.

much. That's you great. Thank very

from KBW. question go Please Johnson Paul of come line will next ahead. Your with the

your good a ARR Yes. taking questions quarter. congratulations Hi, of and software only or on lending mainly on component here, for portfolio. my Thanks good the two question afternoon. I one had

component and for lot software on software companies of renewal of of market in trying fared guess the mark, I'm the I have meaningfully fared? a in market how are leverage there's area any, larger taking the successful a just multiples again we've of to relatively equities from just of I'm this terms been a etcetera. software and the growth curious portfolio. that high And lenders. revenue seen I'm themselves lot of if thing? of sort the headwind public course. public of it's for given that in Obviously, tech markets. of just And observation sort Just year, market announcing rates profile just companies that curious see layoffs, how in as number has It's companies down I'm in equity loans? a a

try So, answer. nuanced great me it needs and I nuanced to a think a let give question, because answer

Snap our So, Facebook seen I the recurring in to and like valuation. are the markets consumer first think of not like important we driven It's really that thinking have loan borrowers the giant important We it's consumer understand really off, and Netflix kinds don't about tech companies those to revenue in are lend that public have companies declines facing. in in the segment.

are so volatility same because important really companies have Well, business-to-business demand. companies. to are loans the is Why mission Our that software around that critical important? don't you it's

you revenues. high critical with company very you're looking at recurring a mission very If backing are software business-to-business a firm, likely

looking can You're clients potential of case a also of potential clients that likely you're very new in They at clients RRL one persuades that lot save to borrowers, their significant their momentum. have of our company proposition by revenue a a money software. piece with growth implementing those the value the of potential

have resilient the companies public the So, fundamentally fall the of than many is that in markets. much valuations seen more business model

largely the source have firms venture many firms, having that, venture into and these technology sectors whom investments well. firms, stage of is companies of have that said for early stage funding that not Now, late private equity done and crossover

better meaningfully that new raise we a upticks we've loans from there's and definitely it historically at are the of valuations seeing companies that revenue for last round. on So, it's RRL to growing that that their is harder are demand for incremental was, that these pricing meaningfully kinds led higher, to companies than

on an greater using capital part equity. in interest debt a as diluted there's to their alternative So,

think we in segment opportunity lot this that see a of prospectively. I

couple period. We've If segment time of before done this pulled had XXXX were you it we had in very that back we were inventor actually fierce this with of maybe years early, thought some very gotten competition time. segment arguably In recall, pricing XXXX, the the over too year, low. of we because well this April, from gotten we May too had the and

some months. that of last couple to reversed we're the over So, course see that's the pleased of of

Got question, sort of it. And last Thanks. on that. I'm my very That's just wondering interesting.

know companies you level give guess, kind of or cash I already type looks revenue two of flow of of of on would achieved less that, some this those some or companies you these some even, sense on and Golub sort line? the that If of of to characterize pathway target adding could on of market, have, are items these transitioning or companies, companies companies to the prospective us kind on finance level growth a Golub that to software is flow as kind of of that generation in still, desirable kind sort generation just, cash you focus more these

our planned. in work segment on as loan revenue emphasis is if recurring The things out don't value strategic

it it's turn way primary. if second grow a invest that's enough, pay to out protected price a will we're that those efforts And rapidly acquirer out efforts enough, meaningful that's that's that's in to still here enough business growth, will be analysis that so adequate and bad base If wrong to heavily a make us – to very this large is acquirer? be a a valuable and not So, strategic strategic company's turn decision, money. there lose

pay they invest at are that And metrics loans relatively decision have affirmative these these order not the to to in at growth flow is, loan-to-EBITDA in expense to are the these They credit we to or an profitability. want want in companies this sales capacity critical generate is interest on and but because look typically, foster these And of evaluation credit So, companies rapid why made a heavily loan-to-value, loan-to-cash that's rapid seek measures. principle. like at counting to the companies low high of of growth. they're cash underlying traditional marketing so if you

their to need strategic in we be confident very value. So,

answer. Got me. it. Appreciate the Very all helpful. from That's

Please with Miyazaki from will question go of Confluence next David come Your the ahead. Management. line Investment

line may on Your mute, be David.

I that Thank made my sorry. you are at of opening, the taking out with regard question. comments countervailing that some the revisit of there. you wanted to vectors I'm the David, to some for

of we've everybody we've the the in this defaults about seen we haven't a really industries rates. seen come higher quarters, lot. last benefit And earnings is rise whole base BDC – for couple through think I from

expecting market risk the non-accruals return is surface, look everybody rise. lending in are better. general, kind the like, think middle would to the But I on So, it going profile gotten of has of

in you is or lending worse the better think a against covenants, doing what return do backdrop in yield better years? higher profile rates, and that to the relative it interest seen is of what better you're yields, So, risk recession, we've of potential the spreads, getting better recent

at on balance answer worse better. it's the is time same better think, So, the and and I

statement. those defaults, all would growth same So, reward of perhaps number from see stating At we're performance tailwinds. the negatives credit a be ratings, negatives to those If we've and of of and and a non-accruals, losses, continuation reasonably from recession, those let that are got expected muddling standpoint. risk time, going credit are me results, perspective a to of the slowdown volatility unpack the increase perhaps obvious, worsen which continuing a from risk are here increase at around a credit a

mentioned of several You David. them,

value about negative of to adjustments specific as significant loans credit rates. right higher the rising X% that rates mark-to-market again. higher loans. number having fair start that is as a A credit repay is, those for for spreads pays reverse companies, higher narrow and them are reflect third spreads improve credit or conditions as we've talked or those We've of second absent companies credit spreads spread events, are time in very environment losses. start going taken attractive those to of to over that new a to is One base A on Merely amount now. itself

going be we've I to the favorable quite – is My to a than context feeling you here There's of risk macro our be is the and got in assessment view is now got I'm The the likely return. hold that We've we've micro an or the muddling And of pushing micro of macro portfolio is of different. will balance balance, a how more second, piece assessment growth right here you right? is, are but growth I'm we've the to I going that – have macro humble do at Those we two-fold. of that mean, question, a direction and wrong, hold I vectors. and got that is the key up got now, is kinds recession got our a think piece more are I period can piece the the vectors sense we're piece. well. a So, of vectors portfolio of right direction in environment. recession? say, we've a muddling in know, up the period respect and both significant more in got significant pushing own your think of

need I the are key going key think are assess. to those variables investors to the criteria, that

think you on little that as feel than cycles put And or go together? we're far so risk you've like do when better average little as when a long about two below you run you a those the through, return average

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it is now the that that side most right average, don't middle publicly or agree in way, risk, that than the groups? other curious coming are attractive that the to time. just figure sounds say relative apparently that that asset partners relative just kind valuation fact market would to they thesis. So, Do So, of like on market lending I'm muddling thoughts your I'm the middle your lower trying because a two return And where institutional despite of like trading seems many I'm bit a limited of more us that with slowdown, those either side? recession in to it that's a we're – saying traded like the of despite stock that being an about into front out and economic better of seems other it's that's are kind on where points thinking cycle lending your investors class the side, that space? one on And you're feel than of marginally of what

relative prospects alternative at income, institutional variety there's David. interesting, to and right equities, categories you which traditional different from market to view if definitely performed well look investor terribly performed a sentiment a middle of that has good fixed public now, that relative has relative wide I lending here. to that has that That's think

have to equity we're what's their shifts now of with the denominator So, of capital actually meaning their equities the effect, asterisk segment in under that percentages percentages. put institutional is, the an allocated dollars in seeking seeing toward them who And because to institutions decline continued the portfolio increase target called target their markets are landscape right asterisk. has equities to

institutional investors be right So, with moving would should there's moving be portfolio telling interesting an them public they management to away They their from equities. dynamic criteria in now. equities, toward like discussions but are

hard think are now and to question, allocations because just it's principally most find classes your that investors think our back for increasing time asset a to I other is to that are asset to go perform class, likely very their performing so prospectively. be to well I to well intriguing

still about markets, I your excited I'm investors. curious by the income. in public And down risk come this. I now from in get being think equity view traditional period reward think also are add to at I'd fixed to hard judgment, I think most and rates part space highs, where are it's not time relative I to their standpoint. a your good cycle a looked from long is invest risk think up, of So, on cheap going have reward as which is

ball I mean, your than own. less is accurate my crystal Well,

where the that big separation fundamentals valuations now in up look operating a valuations. if of the BDCs, between with fundamentals are think at and operating there's historically valuations public lot right paired a solid I market low I pretty really for

defaults or I disconnect determinant if if just there To notable, profile key of not not comes middle is the rate right just a can markets but But and is credit interest me, lending. they're things think because environment a is that's And will sure risk for think the suboptimal of shorter whole the really and so then a private the from good so, environment. And return low, I'm accurately risk the duration or remain a public here. outperformance part of you're get having that predicting this that that market return wrong really I often rising environment. that's there whether if be

had ball So, I too. better wish I a crystal

you’re where that's in and based with go. taking I losses agree to the approach the going to I that right retrospect that credit know think agree defaults need make I with assessment questions. on it. right think asking I now. assessment you're we're And with, we I as the to your agree investors

Great. Well, thank you your very Appreciate much. time.

David. Thanks,

come [Operator Instructions] from the will Ronald Phillis line with next of question Capital. Our Ivernia

Thanks months, reason for want such clear sure helpful. very pointed that for you call. the Hi, and of – We're great call. most in that your your and not Thank for my the standpoint? me my into on that's the want know, I'm market. first market it have of kind a job the into transparent the did lines my how of know, them. six, understand both to I'm from time And have of favorable because down I thing I frames, right and into credit again. questions pretty credit the less my you. and And, think question taking component investors it been you being that that you retail BDC, Dave, know, you thank being latest have conditions LPs, questions goes that retail some of the the over institutionally that's dodging the to for is three if Dave. So, gone, inflows have mistaken, retail previous – think the, is growth answered, the and you I time to private as you you. now this the to have but you private the One numbers on I a was not thank the markets market It's attempt not to been I gone nine caller going is not and go

you Thank the question. for Sure.

two about to talk So, let's components it.

demand talk the side and Let's supply the side. about

ecosystem we've growth growth of grown is from private share dramatically the debt of as continue providers dry which number and got last issuing on course second side, borrowers has the private The broadly the equity over very is debt. of a is demand syndicated equity debt. ecosystem, private the I are a market the private based likely powder the One XX to to private On and market. in share in vectors number the toward of grown from broadly years, now shift fundraising A syndicated equity think and loans, borrowing continuing dramatically in gaining there's who debt the of private opposed to it's grow. private

side. of that are So, growing demand you've a got the couple dynamics

decline non-traded of of sources through can was is the slowdown We've have new We've David not of we've BDCs. non-traded seen about. seen fairly the market we've flows Miyazaki flows there's been happening reported into in insight sector, public a side, in degree tell seen BDC May, right into surprising capital. the supply in values. the last now. dramatic funds that's that that growth of sector context the the years, seen On I What of volatility and you retail. we've seen seen trading since are couple And also generally in what's funds the in talking don't with markets And the the a I The good that sector. retail BDC we've institutional so lag,

bit and in we've supply mismatch demand now a what's demand lender that's right So, excess got I think more friendly what significant causing the a where there's supply conditions. is of of

Thank you. Appreciate it.

back of to So, for did I just opportunity you to please very want we If for you get to to Matt a look call. to I joining and Thank you Chris you to or we answered, all to be out free take to partnership. question you, much. again reach chatting Thanks with happy or wanted for your forward either today's that us this thank next would feel get get not quarter.

today's joining. call. concludes conference This Thank all for you

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