Goldman Sachs BDC (GSBD) 29 Feb 242023 Q4 Earnings call transcript

Good morning. This is Austin Neri, a member of the Investor Relations team for Goldman Sachs BDC Inc., and I would like to welcome everyone to the Goldman Sachs BDC, Inc. Fourth Quarter 2023 Earnings Conference Call. [Operator Instructions] Before we begin today's call, I would like to remind our listeners that today's remarks may include forward-looking statements. These statements represent the company's belief regarding future events that, by their nature, are uncertain and outside of the company's control. factors, and indicated may as the in of number results from possibly a company's actual from a is described what those of SEC company's filings. financial time differ, condition materially, result time The to those in including forward-looking statements This is of copyright Goldman BDC, Inc. audio cast material Sachs may duplicated, or reproduced and rebroadcast without not be our consent.

with supplemental the can closed, earnings website under press page to posted includes the call a Yesterday, be our an is SEC. recorded release measures the These conjunction This today, which reconciliations of GAAP on issued measures. being after with XXXX, XX, earnings Thursday, the the at both documents company yesterday should the home section market company's purposes. of annual Investor of non-GAAP found presentation, Form for and the and directly reviewed www.goldmansachsbdc.com, on replay in Resources most conference be report which February comparable filed XX-K

turn the Inc. I'll BDC, Chi, Officer Sachs call Executive Alex now Goldman of over to Co-Chief

discuss to and providing call David then by then to providing market more brief portfolio current describe overview Austin. Good morning, fourth a I'll Miller, private for Chief begin before the our our an Co-Chief David for fiscal our today activity Tucker you, and Officer; Goldman Officer. of quarter our Chief here and thank Greene, and turn platform Officer; the over Stan detail. update and Executive Matuszewski, XXXX I'm us and earnings the on environment quarter credit call fourth joining results Tucker year-end performance. our you with Operating Financial conference everyone, Sachs I'll call. Thank our the in

us Stan, And Before to financial Q&A. open we'll through it results. handing the line for to our off finally, then take

next and like proud positive I'd week XX platform brief update as that, track single that a years of as This over it. to business. being pools management on to all platform various origination capabilities We're the GSBD underwriting asset endeavor credit with impact private the integration second our well anniversary and our process. capital Goldman stretch part of private brought of announce under a Sachs provide records that credit within roof marks with the of back of Goldman So Sachs' of

majority served GSBD the billion of with on our I'd a scale ecosystem. XXXX. agent of GSBD As well The including recall, platform Goldman private deployed. as upon these improve you distinct operated and majority side advantage to full taking the a origination on of has remained examples. rest Amidst and of above and firm the origination credit may Furthermore, enhance advantage take take lead platform BDC the XXXX. muted capabilities, and Lending the new years, the comprised scale, the underwriting the capabilities public historically, able broader Sachs was and in credit volatile few of highlight In being like X market environment, deals Goldman and that private short active our part complex, its could GSBD, of house off activity been $X not separate the Sachs from to of or $XX capabilities. infrastructure the advantage platform of over the billion deploying Americas its walled our broader in Direct platform the lender deal full as of

portfolio has team years the upgrading actively X quality. Second, past the spent GSBD's

of loans, value figure comprised the the at At of XXXX, prior X.X% only the in versus of quarter loans fourth the XXXX, value. quarter fourth up in and reference, fair fourth XX.X% of liens where whereas made at lien lien stood X.X% to first that GSBD second fair a value the quarter point quarter of XXXX, at XX.X% second fourth integration, secured value. had As just fair the XXXX senior at of portfolio same time, fair of at the as

previous discussed capital result into quarters, proactively and junior repayments whereby us took a actions allowed to in higher structure, redeploy positions in and is have This lien marks we on attractive junior up capital of we opportunities, positions. the legacy

Finally, funnel lending direct has overall more allowed expansion of deal GSBD. provide and our integration for for unique our significant the opportunities to proprietary

market Private wireless with no to XXXX, billion credit leading deploying date. since close the to to example, has Goldman been losses $X Sachs of tower For the capital lender sector, middle

but senior Founded continues set financing new financing as by a a the one. of multiple opportunities wireless in During the which made from XXX -- a of the example XXXX, portfolio quarter, first to relationship operator efforts. secured available long-standing portfolio. Skyways resulting Skyway. the the tower is Goldman credit arranger to followed with of its its facility tower Skyway before sale with Sachs Florida-based of is team, American to the served integration XXXX Goldman portfolios, Skyway a including began one towers current Tower, lead the in GSBD, investment with platform This on The facility our in private Sachs subsequent a

broader the that Harrington is to win provide industry the served sponsor as example sectors. precision for we allow of and a lead commitment fluid arranger. of an is variety distributor specialty quarter asset, facility of the senior entire to products the GSBD of direct where lending across a California-based utilized in control the a Harrington another investment the scale platform

lenders integrated in We the private we've leveraging and quarters platform the of are for the been to broader we shareholders and GSBD shareholders ahead. we the to years committed capitalize remain proud credit thesis communicated benefit we able that GSBD, that and our on to when

share shareholders after we the the company's in March per $XX.XX per MMLC. XX, consecutive $X.XX record first XXth share our This merger dividend XXXX a quarter a announced as special Board IPO, we post declared since marks share As with yesterday, of excluding closed XXXX. market the paid to $X.XX dividends our dividend payable per totaling of quarter of the

asset quarterly by our unrealized Net dividend, investment primarily XX, to XXXX. realized per offset and as share attributable was of was income losses This partially value exceeding $XX.XX December net increase net confidence in the as for the year as quarter. trend continued had fourth quarter the the did indeed it previously expressed third quarter. progressed and volumes that deal the would We in increase

the upon deployed fourth expand our Americas levels, XXX During as a and across quarter, at reviewed David bit. more investment than platform strong opportunities we direct will lending in capital

lending deal months. tightening from volumes While over we the also resulting in the several acknowledge in greater direct recent quarters, witnessed improved recent lows the past have competition space, spread in several past we've that

to environment same syndicated supply demand the broadly has more overall market credit upper private also middle deal of tighter a line We whereas premiums for that's more underwriting middle lending loan and that cap reopened, private dynamic core worth to in support GSBD this will historical align it's experience. considering anticipate the is impactful improves, the the although time, the while the with that At credit is spread as focused to market segments for primarily near-term larger market. refinancings, on terms

turn David me Miller. it let that, to my over Co-CEO, With

Alex. Thanks,

repayment of equity exit of lien-oriented the capital full which quality of new to portfolio, $XXX X the exit portfolio XX companies. continue activity originated we During the new million, to million first us and junior totaled the quarter, continue in investments full pleased and new Sales companies. repayment in redeploying will portfolio two and existing investment we to driven In of one with the into are repayment position, X we commitments as primarily $XXX.X lean an allow by particular, positions, opportunities. upgrade

Turning to portfolio composition.

comprised As debt. in of December investments were XX, secured lien XX.X% first fair including last senior lien, and X.X% in unitranche value, X.X% out total our portfolio XXXX, loans, of at billion first XX.X% second lien in $X.X

amount preferred as in and and debt a stock unsecured in a common warrants. of negligible X% well As and combination

was of our cost As income-producing portfolio XX.X% total at The company weighted investments as debt operating at in across to of our QX. the of The weighted yield the investments QX prior quarter compared end XX the and at yield industries. at the of end, from average average of XXX XX.X% companies at amortized portfolio cost held investment different end remained XX.X% quarter.

will quality. I to to turn discuss now our Greene call over Tucker the overall credit

in The quarter. to we X.Xx a This in from debt-to-EBITDA EBITDA, single third during companies onetime attributable primarily a weighted that position which portfolio is believe you, nature. the investment increase increased in average X.Xx net to Thank of dip the David. is our had

X.Xx. onetime this been Excluding move, weighted net would debt-to-EBITDA have average

Importantly, our have basis. year-over-year portfolio companies EBITDA line on and weighted growth growth a both average top

at the very of in quarter. companies portfolio X.Xx investment at end for our rates The decreased as remained interest SOFR the flat quarter weighted slightly coverage average

has The growth, provided name underlying for sensitivity We monitor investments combined underwrite lower rate to with continue increases the interest new coverage coverage in the to EBITDA borrowers portfolio. ratio. and stability for each at

turning quality. to asset finally, And

was due Dental, a in portfolio Black, XX, to LCG, of than placed due Specialty which company improvement performance. nonaccrual and certain on first position, companies Further, representing value. LLC, XXXX, were to As nonaccrual, less of of fair removed lien investments were December one status, two X as from also X% portfolio known Vardiman in repayment one

XX, to portfolio XXXX, XX, portfolio fair December compared consistent X.X% as amortized the decreased and X.X% remained investment value at at as XXXX. September X.X% of from the total of cost to September of As XXXX, on XX, of X.X% at investment of investments nonaccrual total status

of workout includes is that embedded our currently in our originated With resources to and an worth address platform of restructuring aforementioned team expertise experience. respect has the to workout prior the average that Of it industry underperforming credits upgraded also integration. to portfolio, the underperforming years predominantly were credits note, XX noting

turn financial Stan will to now results. call to Now through I walk the over our Matuszewski

with $X.X at net fourth We outstanding and Thank quarter $X.X $X.X the investments you, ended fair billion. debt of total portfolio value billion, of of XXXX assets of billion Tucker.

our of net QX ending the debt equity leverage end to which of of as below be was target continues ratio Our to X.XXx, X.XXx.

approximately end, principal outstanding was of million in and total amount quarter credit available secured revolving XX% $XXX debt our debt, unsecured had capacity facility. under the of company's we At of

we May mentioned, credit maturity our secured previously the of XXXX October from to revolving quarter, extension executed an XXXX. of the As during facility

two reminder, February a January unsecured separate notes and have XXXX due XXXX, respectively. we As

we address As last maturities at these on to time. we mentioned plan call, appropriate quarter's the

easier results. Before GAAP to from discount to will reference company's non-GAAP purchase results measures. financial certain also continuing impact we in to measures the our financial These reminder, to make results to prior or addition MMLC. merger non-GAAP financial statement, October This to amortization remove intended with our compare is measures, the income a adjusted the XXXX as

For $XX.X QX, and and compared were as prior in GAAP million income to adjusted respectively, quarter. net and $XX.X $XX.X investment the million, after-tax $XX.X respectively, million, million

was net On $X.XX. basis, per GAAP a investment share income

income investment with of per value merger net the for share, adjusted with net yield was Excluding to of book quarter the MMLC, investment on $X.XX in impact XX%. connection income an asset equating acquisition accounting the annualized

we despite decrease resulting fourth driven repayment income income. note declined that investment investment while would third from between Importantly, by in an decline related lower a activity the was total the income, and in increase recurring investment quarters, nonrecurring

total the single and slightly Finally, the our per decreased PIK investment $X.XX digits. Distributions consistent quarter of slightly in up remained is at percentage only remaining share. the quarter-over-quarter year-over-year, income during

spillover provides per believe we Our on a share or taxable dividend which consistent on $X.XX million per is approximately inception. our income continued $XXX stability since share basis,

As net last was per XXXX, to value $XX.XX as December share compared quarter. Alex on XX, mentioned, asset $XX.XX

turn I'll remarks. back for to With it closing Alex that,

into for joining open deployment of attractive portfolio, for our let's optimistic Q&A. the the We thanks, call. line current performance and earnings about everyone, the remain that, opportunities. With environment outlook Stan, and Thanks, for our

We'll Instructions] first Wells to Finian Securities. [Operator O'Shea Fargo with go

your were credit we some integration on earlier interested Alex, private the comments on of in...

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So Alex, X of are some interested comments there we the your on credit strategies. were historically in franchises integration initial distinct with

-- strategy about into there or the like does works? way this all mean collapsed Or one what's is now? So new platform else, the it's

and all it's X had arms we years And again, then point, were historical of we the X That's reasons, to platform direct credit a now. just in private all for good ago, together. Goldman Sachs And brought one part business question. your lending it that of different

continue their various to have, distinct With we own they vehicles the respect to strategies. pursue that

et and middle pockets of other core that large-cap the on focus for have lending GSBD market. that then we has other that senior space, on pockets So sits, to drop And earned focus of and on example, special capital cetera. continue capital mez, we continues. will hybrid have the

the on And all together. It's so all it side private brings here it at Goldman.

origination and take ecosystem, full it sponsors it that we just one army us full get of I talked the it of proprietary and allows about team. to the just just can of weight a and and we where the wide single to the broader mentioned, firm, so advantage day, strong have sourcing same of us all talking have, and benefit the And companies deals to At bankers really the as of and a just it's due brings diligence. benefit time, the we've funnel the allows every

we don't teams. have X So different

So in have various and investment, when they're the core it's that where and then the And we go we investment know upon about have. vehicles origination a exactly based source U.S., the and we XX deal, going focused we professionals, strategies underwriting. on all an to

clients. direct be provider lending to to borrowing our want just we So solutions a

like a have within lead the much helps capital -- drive what the do deal? to market -- or middle of How what's strategies, above, of other a ahead, the say, like sure. terms core and benefit the all you like Sure. more deal How go

No, it's question. a great

So firm, wanted just $XX a originated million first just do it deal it was of that cap. the large GSBD we for refer before all, allowed We if small to, couldn't focus not it call to. was of EBITDA. large of could core GSBD -- we It weren't pocket too area, cap was just to even if the was the what

GSBD On has it, So as as vehicle top when that you know. collapsed about, capital, also it's obviously gets we've as own of talked now we the its that, of GSBD origination. benefit

environment, But that where example, Harrington competitive matters, when increasingly about. in deal scale we're the just talked an for I

entirety. in capital pockets its deal We have other of speak that that can for

at the that. got an a So deal that can to entire allowed that for auction. give go you so go to entire GSBD a and commitment And allocation you platform financing, underwrite what to as that's sell-side win sponsor can we the say, us exactly we did.

And so market that's how now. we go to

Okay.

in if take and combine -- up mean I the were as this, deals, commentary, move also a I you credit. Does in you the you're So a in pre-integration do this if going I larger to you meaningful like EBITDA can flagged nonaccrual think way?

that GSBD, EBITDA with we to something to as the stuck we of could the really some to at up But Now point look, million. that's explore the terms mentioned, I for in in future. $XXX it's criteria up for businesses size of

quarter, haven't so the for the around portfolio seen GSBD. move ticked and why it's EBITDA that's little meaningfully. still bit And $XX just It really within $XX a up you range million up but in the million, EBITDA in fourth the

We always the as time. that capital be is be at same on on cap of as focused continue we'll to focused well can we'll pockets GSBD pursue the other have -- market. mid-market just -- large

BDC Okay. bank? to come The into going the -- that bank the we source one the sourced That's fold, thread. to cetera. does franchise, last helpful. Is me investment that are on from origination from And now for sponsor investment this leverage finance, et Group's coverage, going historically that

So in from certainly directly still, all, the amount from that have off opportunities an appreciate largest first referrals on family originated that the the the get a banking, of Having deals really it's that, enterprises cover majority bank, us. of of to platform. advantage they're said in they investment of Wealth, originating we've the the vast that we come I are But Private investment tremendous world. investment

within roughly advantage look we at new talk this deals the of of that Goldman the year, year as about. X/X we had one of over we'll benefit Sachs came you from course just If the did GSBD, full the of integration, where

banking provides choose it relying to investment about more certainly upon do. certainly be additional but us and So us, we flow for source allows a we're to lot to not selective what

We'll to Citi. go next Arren Cyganovich with

a you mentioned direct is you seeing you're up to in tighten. expectations activity expecting reentering remarks to for I seeing, think kind are Or it you Are competing this you're that primarily spreads from that banks lenders into with? prepared still pick lending? your standpoint, in just competitive of

BSO we're seeing reopening. the So certainly market

certainly within department we're finance phenomena. that's leverage own banking cap But our active. a is that's also what seeing have large really that We

that and So competitive vehicles, own pressure have our we're from we large-cap standpoint. additional seeing certainly

In we back not of addition just the capital large core middle been overall. really seen to the amount into where raised that's But private banks which is get had plays. market, GSBD

we've So although been on not the a bit business. the of over have quarter-over-quarter, what it and magnitude the seen large of of compression year side cap has we spread the the course seen to of

I companies, you EBITDA continued had or had perspective something? you in growth? portfolio starting in And that from that that broader you EBITDA dip then a Okay. had to think seeing is company Or one mentioned are slow your

continued growth. seeing certainly EBITDA We're

if XX.X%. X.X%. for at on top line at to certainly their look average EBITDA price So you a look an you also And seeing is quarter passing if what's about margins on basis, basis, an we're But companies customers. how along our the EBITDA LTM portfolio fourth weighted quarter-over-quarter, grew grew it increases interesting portfolio the about our basis, on are

So actually expanded the about EBITDA XXX over in third. fourth basis margin points quarter the

really we happy see to were that. So

Truist. next Hughes to go We'll with Mark

quality, that's -- given it's coverage stabilize then environment, rate of of movement? account economy? given just here little higher it looking that in X, but What it it, kind worse. looking the think do you the from the bit And Just How a would you interest bit portfolio, kind see bit of should X the interest issue? hit of for a a little little that? your percentage do just Is longer, spread through erosion. kind at of of of the there, for at the of rating, still movement Is high

name. the overall But some to we It's to respect might movements the from really of the haven't quality terms movement. with quite of there in portfolio, seen much think portfolio, name actually stable. be I

we name mark and particular that you number based well of we X But saw, those performance. a investments, one, we on upon exit X of two reading another position. we and on As names put moved reading them accrual, as we of which took nonaccrual is moved as a off good X, to actually, also back

about call really upon just our So based anything idiosyncratic that out It's wouldn't dynamics quarter-to-quarter the I portfolio. we've talked about. just

decent activity had out then do of And Is repayment How lately. investment that's push term? looking at, going of that? here shake net think on that ahead your to like opportunities still some get when activity to in the near Understood. more it you're sounds do you or a you've you start kind

there. Look, in But private second by terms factors, space. different other in add-on of quite from you've of dry activity. really Lots of half of activity, optimistic the which sure of as driven the year. to we known, amount well I'm buyouts, equity managers remain about that's private be as this well out leverage heard It's powder activity, credit just sheer continues us

In significant that addition, second distributions from is owned to century. to lowest just private have the really firms there of be company last in that by monetized, amount their LPs a quarter private was it year, are amount believe equity of a equity firms

capital. for firms their equity next going order to have distribute fund, they're in really private to So raise to

of they the to just that will to firms, and continues they've just So companies who bankers sit back near mandated to record sell Fin's at many our the sell investment the at tell companies backlog of same us speaking private question, equity we to that with benefit levels. time, going been had

more If should all the confidence. start those later down remain come for do we optimistic. to in signal year, So that reasons, rates

M&A more will that and get so a also of share we our open that. floodgates the bit will And just on activity,

James. question go from [Operator Dodd Robert next We'll with Raymond Instructions] to our

fees effort cetera, the quarter, obviously, you was On have just is of encourage rotation to -- that of I this lower significant, was et to but some the by the in part any or repayment assets, down. would the pretty were migrate the accelerated of activity OID mean, that coincidental or Was OID, a the the repayment which coincidence? older out portfolio? just accelerated there

some quarter, we amount larger coincidence. merger was Robert, large over say of exited investments unamortized a that investments MMLC balances, had that just some come OID, and this We driving and really had coincidentally yes, that unamortized that still I'd interest with just last last did had quarter, wasn't some that it's in what income investments greater deals that it quarter. the was were the the quarter see nonrecurring but amortization was of of kind with larger up to unamortized. with repayment accelerated the some last balances related magnitude handful income which

it. you of they produce to leverage Or now. are, I up up it. on little it to -- rates relatively you in below mean leverage intent is right come where pushing on should On market activity with offset target slower as rapid or and down ramp Got dividend. mean, obviously, to are well that the But I excess to don't Got is a envelope be rates kind the -- ramp earnings of the we need rapidly? expect leverage, be factor? the half so it to to depending the is as going maybe as

Robert, see I us increase. I think going No, slightly. think it's up you'll see a you're don't that to take rapid David.

target As our leverage. it's you X.XXx know, is

future level a little it's the bounce that up our target but down So and from I see approach think portfolio. going depending around us bit you'll activity probably in to quarters, in level, on

would for But market historic unsecured looking you with stay -- 'XX, increase your exposure until if to you then last the to mix that the going maybe fixed? it. Got the swap what, potentially on be be if of you Or pattern a manage do up fixed this that And maturities to fix be would on year pre-refund did one rate to would But to you looking rate did, how or would obviously, 'XX. that to at looking differentials? space you to have it unsecured the your 'XX? don't come be to or rate? that in are opens side, me And unsecured you

have you maturities. we're the look, XXXX mean, out, we actively I as monitoring point some market Yes.

think I address the us time. see those right you'll at So

going based to the what's when versus and fixed floating, evaluate at a on where that as depending is far a transaction. As we're investors, execute on curve our to time we most beneficial

There other this at questions time. are no

Thank you very much, everybody.

Thank you. it. Appreciate

conclude your for you today's does participation. conference This call. Thank

You may disconnect. now