Goldman Sachs BDC (GSBD) 9 Aug 242024 Q2 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.

Second Quarter 2024 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 copyrighted Goldman BDC, Inc. audio cast material Sachs may duplicated, or reproduced and rebroadcast without not be our consent.

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

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

Austin. Good morning, second Officer; for our Greene, Co-Executive for conference Miller, Operating you, XXXX Chief and Stan David Chief thank Officer; our Financial and our Officer. earnings with us I'm quarter joining call. Tucker you our Matuszewski, here everyone, today Thank

call activity portfolio to quarter us finally, our open Q&A. we'll With I'll let's turn our the before for off then performance of the our to to discuss our environment. market to second results. by results. financial describe overview begin providing an then the handing it call second then I'll And Stan current quarter results the and and get Tucker through to over line take that,

$XX.XX, income quarter previous decrease up investment a share from was of value asset was net the $X.XX, per X%. approximately the share per Our quarter. Net X.X% for

in the was quarter, the Lithium in NAV. quarter. related net quarter in Our led placed to our unrealized dividend, Lithium offset to decrease the within the during income the portfolio, which Pluralsight XX% unrealized the of Technologies, excess Zipari. status were the net Both again exceeded markdowns losses losses in but nonaccrual Pluralsight were and quarterly and on More than X investments by investment and realized

to that working recovery with the and we Lithium, relates believe we're orderly recurring towards contribute our maximizing Pluralsight, restructuring, it Pluralsight an As investors. revenue lenders currently will recognize We other Zipari loans. towards for software are which

we selective, platform, GSBD believe that broader their invest following As the best-in-class display software revenue focusing in growth very customers of with profitable, are mission-critical environment. the integration it scaled the borrowers we into remain who on how economic strong credit and products of regardless technology private and Sachs relates to highly we loans recurring for Goldman are

investment current implement on have experience, as as have platform, new engineering best-in-class the where software we When of leverage where the both day. software who investments sector dedicated engineers professionals we every evaluating expertise team's well our Goldman software we Sachs, of to evaluate technology thousands and broader the

seasoned have annualized believe for credit contributes professionals towards private maximizing with assists work resources investment the decades. this expertise handle platform to is and dedicated and X required to knowing investing our we We our Sachs ratios names. that's worth with it teams that to underperforming recoveries restructurings Goldman nearly low across Finally, again the with loss been

very as originations that our the pleased continue front, we capital forward, aim new quarter. we're new bolster compelling recycle repayments Moving we originations. to with and with to this portfolio relieve On

GSBD more all As the XXXX. investments second originated in of than in quarter

Goldman business Sachs being ago the to when integration Sachs was of over level the platform. the of advantage private quarter this credit of private credit able GSBD take fact, broader origination years In highest just since Goldman marks X the part activity of

fair bias structure. assets our the primarily our loan quarter which first maintaining as first a with all prior June to reflects exposure of basis, And ticked On this consistent substantially XX, of in higher loans to capital up XX% new quarters, lien lien to were investments commitments higher value to that are credits.

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

second growth Bank. number the of in respect significant through origination the market Goldman the both continues platform discussing expansive quarters. with benefit capabilities to franchise, that the including environment and been a in our also reflects potential GSBD the opportunities from Investment originations Now to quarter for broader Sachs the broader conditions, we've M&A improving

of on States. a this, example acted Collision, GSBD Classic repair United acquire helped within the collision lending the the largest in administrative as agent fourth another which that As loan multisite direct of platform, and led is centers quarter, operator TPG our including

Banking a Classic move the a financing provide evaluate engaged be Collision sell-side for by opportunity, TPG and selected proposal as by acquisition financing highly to adviser, division Investment quickly Our was competitive the ultimately in us which environment. helped

services Signal, long-standing sector of and the U.S. in we in to firm's the quarter, X colocation operating expertise center the hybrid leaned lead the data a the provider, cloud Upper During centers financing Midwest. data into

able take a speed to execution, we to diligence our hold Given awarded were and larger size with move in the transaction. agent and to position lead ability were

Tucker our our credit Chief that, new Officer, over quality. overall to this investments Greene, discuss and quarter With let me it turn to Operating

Alex. Thanks,

new activity and versus integration is of early million this full XX existing mentioned, in of half quarter new relatively Xx repayment level X companies. and activity we repayment XXXX fiscal XXXX, primarily million, first up as And and nearly the companies. of a Alex During commitments Xx and platform half platform portfolio originated investments indeed highest on Americas XXXX. the investment for a deal first Through our and to lending despite activity. of basis, the direct Sales $XXX restructuring the since during flat driven portfolio Sachs of the quarter, is the in in Goldman GSBD $XXX.X the XX by originations dollar across basis our totaled M&A investment on

to Turning portfolio composition.

unitranche unsecured and As stock. X.X% as of second June lien, XX, a X.X% portfolio and fair our X.X% were total lien first XXXX, in comprised at investments combination in debt lien in including common XX% billion as XX.X% secured $X.XX debt, a amount and preferred in of in loans, first value of negligible last-out well and in senior

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

coverage weighted compared Importantly, in portfolio on weighted end second line The growth average X.Xx average companies the first investment interest the at both remained had at our current of quarter. quarter top our growth EBITDA basis. and flat in quarter-over-quarter portfolio as companies a the quarter and year-over-year to

And quality. finally, turning to asset

on nonaccrual both placed and mentioned Lithium and earlier, quarter, status. as Alex were Pluralsight the During

In lien addition, the a position, Thrasio debt a nonaccrual. which common term first second-out loan and loan first remain nonaccrual The equity second-out on position. was into lien restructured restructured was term

from investment of at as to fair and As of value status total from XX, investment of X.X% total portfolio XX, of amortized June XXXX. investments nonaccrual portfolio at the as X.X% XX, XXXX, March March on of the XXXX, increased X.X% cost X.X%

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

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

to At revolving we debt principal end, XX.X% the in our facility. credit was unsecured quarter our outstanding of $X as ending of below amount total Our available end billion of company's secured the ratio the X.XXx, had was of to quarter and debt, net be debt target approximately equity X.XXx. of under which continues second of leverage capacity

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

and $XX compared second quarter. and and basis, million, investment per as the income $XX.X On to investment GAAP prior million share For $XX.X the income net quarter, after-tax $X.XX. million, net $XX.X GAAP were a million respectively, was respectively, in adjusted

$XXX.X net impact value $X.XX investment the on in equating total was during a XX, primarily of with June per due the quarter. an accounting underperformance share, income income adjusted XXXX, nonaccrual for connection of yield income acquisition Excluding income merger with XXXX, XX, book investment investments for as being quarter March the The Total the months in on investment status million $XXX.X asset net X investment to of MMLC, annualized XX.X%. placed million, was and to ended decrease respectively. was result and the

that also total note income in consistent a quarter-over-quarter. a decrease percentage per quarter at as during saw remained of $X.XX investment would income share. We we the slight PIK Distributions

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

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

and Thanks, call. earnings for everyone, joining Stan, our thanks,

remain to portfolio platform. determined the deploying attractive quarters most the by capital while quality the of Sachs ahead, of opportunities using capital optimistic breadth this by quarter's all full the recycle maximizing the While markdowns, we're in disappointed the continuing into about Goldman value we to shareholder and bolster

let's that, the With line Q&A. open for

Fargo O'Shea [Operator take we'll Securities. first Instructions] Wells from question our Finian And with

for or or if like? high the in event to credit Is -- an say EBITDA they those does flip I X generally EBITDA reckoning like flip on that on wall beginning. the look the in the the on years what name? the And or appreciate Would years? X so I wanted of is you commentary catalyzes ask loans what underperforming structures ARR your were nonaccruals it otherwise, sort a level.

for question, thanks it's joining, for and the Alex. Fin, thanks

seen leads the then with a technology, investing EBITDA back be approaching to and spend, back was potentially flips EBITDA, we've order approaching or EBITDA technology, the as to in of factor. And be spend example, to company an flips these flip, ARR cut marketing So could all EBITDA underperformance. potentially investing respect the churn cutting R&D to that and competitors where in some some on loans, company started on in in new sales for which might generate their new in while names some

factor. but And so factor one be could it's that a only

mission-critical, problems ARR and very case. the choose that may Other just and at look where of have. was are that or for at the seen, when also products fact be have Under base some on the a And platform, best-in-class the technology. look these also not we With companies economic customers these have leverage we're companies you factors just too environment. regardless that other technology really of much could bit loans the current as to companies were critical their operations low the selective that underlying we've and much the rates this our taken products

helpful. That's Okay.

I Sorry, myself us, on you strong. origination mute. put Can remind was

what's credit target prefer where the down this let or think you sort to leverage profile? it bit, Are of bit? a to run you now the be a little little I impacted want

been X.XXx. has around leverage target our So

that. finished We below the We at are still X.XXx. quarter

potentially So to we make cushion additional need as capacity as extent some well we to some it. the to have provide still loans new

X.XXx. So target at still our is

with next our Hughes take We'll Mark Truist. question from

cautious might their a to Maybe unique high-level are model there just in is the loans. that you revenue you future Or on another basis? about? the recurring at question you those kind into incorporate of this is that be Yes. business differently to think do perhaps Pluralsight, looking -- something underwriting go-forward Is on company? anything And

Yes.

more So than loans, that terms how recurring changed ago. couple in has since we we've of not of years started the platform approach a revenue managing

have best-in-class customers. we So profitable we to to look want we mission-critical look continue companies also margins, have sustainable also mentioned that because these are to sure that make companies their I But growth. at highly and at technology,

fits you we've the all if we different and those more look made It So are selective we choose to profiles. the recently about in at revenue loans again, it. very recurring where that do space,

the at But have time, seen of good as result. that Pluralsight, product. the spending, some investment, is is at negative pulled we've what their as time look product underperformance you and also at the on margins seen same If at this has company a was back the a company customers

Understood.

You M&A context had mentioned -- on deal that? Or the of was what flow up Could clarify steady. flow, Xx Xx relatively comment deal even to that then the think the the was? I And that selectivity. what on expand you on maybe as

your you the just flow? This function more liked do of case? success a quarter, that in this was see deal more Or you

and tick EBITDA So increased. saw also a seen growth, number than last up We've the quality about this that the last how, been again we flow, quarter. year. significantly businesses line has originations that talked But healthy the past also this growth we've versus certainly seen seen of we've in same of saw we top amount the couple of year-to-date we've quarters, that of higher period has the

So there's more flow. been

Tucker So in mentioned, we've a up that just is double, terms deals function the of Xx. comp capital as of we the have, but number been as it's that had of up deal also

share. taking respect the that we shows it's our deals in look percentage, which if as we and done we've versus of selective clearly that at we're to the number just a again you But the originations, mid-single-digit broad are with so originations percentage it of terms a how funnel is see. how still And

Has of there X.Xx. you in are the any interest on then the X been ratio below? that mentioned Any overall out at change And or coverage Understood. tail? that proportion the sense steady

to mid-single digit that No, still there's change percentage. and in no been remains the

move Bank We'll next of Hewett to Derek with America.

mentioned basis, PIK revenue, roughly XX% had still a is you above moderately lower peer it's but BDC of quarter-over-quarter that average. So was slightly the on which

current we over So your with XX at higher it PIK talk potentially XX the comfort see could next months? And about to could level you drift levels?

Yes, certainly. is This Stan speaking.

we percentage decline investment due So bp see period-over-period. onetime we've the PIK Certainly, PIK total we had monitor portfolio. other period, the think been a about a saw again, in QX always to as this XX onetime item. items. did income -- monitoring that in restructures the or We items of quarter, some And I onetime some the a we

that, So I'd it. and that sub-XX%. for And continue think have to monitor normalized comfortable PIK we we been would say, we're that with

went cost in Okay. quarter-over-quarter anything yield caused And there of looked particular basis down points. portfolio a basis, XX terms XX, then that in Was the that a on on like it decline basis?

it's nonaccruals the No, our I'd to say yield due for for the -- the of out portfolio, most in coming reduction part, the on income.

So that's driver. the primary

closing we questions. no additional to to like Alex any I'd for this At time, it turn Chi further or remarks. have back

with look Please you, after call. summers, thank Well, joining speaking of next Great. enjoy the our we and everyone, rest your forward to you for again quarter. our

conference. today's concludes participation. This your you. you Thank We thank for

lines time. at your may disconnect You this