Golub Capital BDC, Inc., a business development company (Nasdaq: GBDC), today announced its financial results for its fourth fiscal quarter ended September 30, 2022.
Except where the context suggests otherwise, the terms "we," "us," "our," and "Company" refer to Golub Capital BDC, Inc. and its consolidated subsidiaries. "GC Advisors" refers to GC Advisors LLC, our investment adviser.
SELECTED FINANCIAL HIGHLIGHTS (in thousands, expect per share data) September 30, 2022 June 30, 2022 Investment portfolio, at fair value $ 5,446,356 $ 5,613,550 Total assets $ 5,681,224 $ 5,770,195 Net asset value per share $ 14.89 $ 15.14 Quarter Ended September 30, 2022 June 30, 2022 Net investment income per share $ 0.32 $ 0.32 Amortization of purchase premium per share 0.01 0.02 Adjusted net investment income per share1 $ 0.33 $ 0.34 Accrual (reversal) for capital gain incentive fee per share — (0.03) Adjusted net investment income before accrual for capital gain incentive fee per share1 $ 0.33 $ 0.31 Net realized/unrealized gain/(loss) per share $ (0.27) $ (0.23) Reversal of realized / unrealized loss resulting from the purchase premium per share (0.01) (0.02) Adjusted net realized/unrealized gain/(loss) per share1 $ (0.28) $ (0.25) Earnings/(loss) per share $ 0.05 $ 0.09 Adjusted earnings/(loss) per share1 $ 0.05 $ 0.09 Net asset value per share $ 14.89 $ 15.14 Distributions paid per share $ 0.30 $ 0.30
1 On September 16, 2019, the Company completed its acquisition of Golub Capital Investment Corporation ("GCIC"). The merger was accounted for under the asset acquisition method of accounting in accordance with Accounting Standards Codification 805-50, Business Combinations — Related Issues. Under asset acquisition accounting, where the consideration paid to GCIC's stockholders exceeded the relative fair values of the assets acquired, the premium paid by the Company was allocated to the cost of the GCIC assets acquired by the Company pro-rata based on their relative fair value. Immediately following the acquisition of GCIC, the Company recorded its assets at their respective fair values and, as a result, the purchase premium allocated to the cost basis of the GCIC assets acquired was immediately recognized as unrealized depreciation on the Company's Consolidated Statement of Operations. The purchase premium allocated to investments in loan securities acquired from GCIC will amortize over the life of the loans through interest income with a corresponding reversal of the unrealized depreciation on such loans acquired through their ultimate disposition. The purchase premium allocated to investments in equity securities will not amortize over the life of the equity securities through interest income and, assuming no subsequent change to the fair value of the GCIC equity securities acquired and disposition of such equity securities at fair value, the Company will recognize a realized loss with a corresponding reversal of the unrealized depreciation upon disposition of the GCIC equity securities acquired. As a supplement to U.S. generally accepted accounting principles ("GAAP") financial measures, the Company is providing the following non-GAAP financial measures that it believes are useful for the reasons described below: • "Adjusted Net Investment Income" and "Adjusted Net Investment Income Per Share" - excludes the amortization of the purchase premiumfrom net investment income calculated in accordance with GAAP. • "Adjusted Net Investment Income Before Accrual for Capital Gain Incentive Fee" - Adjusted Net Investment Income excluding the accrual or reversal for the capital gain incentive fee required under GAAP; • "Adjusted Net Realized and Unrealized Gain/(Loss)" and "Adjusted Net Realized and Unrealized Gain/(Loss) Per Share" - excludes the unrealized loss resulting from the purchase premium write-down and the corresponding reversal of the unrealized loss from the amortization of the premium from the determination of realized and unrealized gain/(loss) in accordance with GAAP. • "Adjusted Net Income/(Loss)" and "Adjusted Earnings/(Loss) Per Share" - calculates net income and earnings per share based on Adjusted Net Investment Income and Adjusted Net Realized and Unrealized Gain/(Loss). The Company believes that excluding the financial impact of the purchase premium write down in the above non-GAAP financial measures is useful for investors as it is a non-cash expense/loss resulting from the acquisition of GCIC and is one method the Company uses to measure its financial condition and results of operations. In addition, the Company believes excluding the accrual of the capital gain incentive fee under GAAP is useful as a portion of such accrual is not contractually payable under the terms of the Company's investment advisory agreement with GC Advisors.
FourthFiscal Quarter 2022 Highlights
-- Net investment income per share for the quarter ended September 30, 2022 was $0.32 as compared to $0.32 for the quarter ended June 30, 2022. Excluding $0.01 per share in purchase premium amortization from the GCIC acquisition and $0.00 per share of reversal for the capital gain incentive fee under GAAP, Adjusted Net Investment Income Before Accrual for Capital Gain Incentive Fee1 for the quarter ended September 30, 2022 was $0.33. This compares to Adjusted Net Investment Income Before Accrual for Capital Gain Incentive Fee1 of $0.31 for the quarter ended June 30, 2022 when excluding $0.02 per share in purchase premium amortization from the GCIC acquisition and $0.03 per share in the reversal for the capital gain incentive fee under GAAP.
-- Net realized and unrealized loss per share for the quarter ended September 30, 2022 was $0.27. Adjusted Net Realized and Unrealized Loss Per Share1 was $0.28 when excluding the $0.01 per share reversal of net realized loss and unrealized depreciation resulting from the amortization of the purchase premium. The Adjusted Net Realized and Unrealized Loss Per Share1 for the quarter ended September 30, 2022 primarily resulted from unrealized losses on our portfolio of investments driven by continued credit spread widening in the market. For additional analysis, please refer to the Quarter Ended 9.30.2022 Earnings Presentation available on the Investor Resources link on the homepage of the Company's website (www.golubcapitalbdc.com) under Events/Presentations. The Earnings Presentation was also filed with the Securities and Exchange Commission as an Exhibit to a Form 8-K. These results compare to net realized and unrealized loss per share of $0.23 during the quarter ended June 30, 2022. Adjusted Net Realized and Unrealized Loss Per Share1 for the quarter ended June 30, 2022 was $0.25 when excluding the $0.02 per share reversal of net realized loss and unrealized loss resulting from the amortization of the purchase premium.
-- Earnings per share for the quarter ended September 30, 2022 was $0.05 as compared to $0.09 for the quarter ended June 30, 2022. Adjusted Earnings Per Share1 for the quarter ended September 30, 2022 was $0.05 as compared to $0.09 for the quarter ended June 30, 2022.
-- Net asset value per share decreased to $14.89 at September 30, 2022 from $15.14 at June 30, 2022.
-- On September 29, 2022, we paid a quarterly distribution of $0.30 per share and on November 18, 2022, our board of directors increased our base dividend by 10% and declared a quarterly distribution of $0.33 per share, which is payable on December 29, 2022 to stockholders of record as of December 9, 2022.
-- During the three months ended September 30, 2022, the Golub Capital Employee Grant Program Rabbi Trust (the "Trust") purchased approximately $17.2 million, or 1,271,865 shares of our common stock for the purpose of awarding incentive compensation to employees of Golub Capital. Through the first three calendar quarters of 2022, the Trust purchased $40.4 million, or 2,898,170 shares of our common stock.
Portfolio and Investment Activities
As of September 30, 2022, the Company had investments in 331 portfolio companies with a total fair value of $5,446.4 million. This compares to the Company's portfolio as of June 30, 2022, as of which date the Company had investments in 328 portfolio companies with a total fair value of $5,613.6 million. Investments in portfolio companies as of September 30, 2022 and June 30, 2022 consisted of the following:
As of September 30, 2022 As of June 30, 2022 Investments Percentage of Investments Percentage of at Fair Value Total at Fair Value Total Investment Type (In thousands) Investments (In thousands) Investments Senior secured $ 472,873 8.7% $ 568,502 10.1% One stop 4,668,609 85.7 4,721,739 84.1 Junior debt* 27,055 0.5 44,025 0.8 Equity 277,819 5.1 279,284 5.0 Total $ 5,446,356 100.0% $ 5,613,550 100.0%
* Junior debt is comprised of second lien and subordinated debt.
The following table shows the asset mix of our new investment commitments for the three months ended September 30, 2022:
For the three months ended September 30, 2022 New Investment Commitments Percentage of (In thousands) Commitments Senior secured $ 11,789 6.7% One stop 160,920 91.1 Equity 4,019 2.2 Total new investment commitments $ 176,728 100.0%
Total investments in portfolio companies at fair value were $5,446.4 million at September 30, 2022. As of September 30, 2022, total assets were $5,681.2 million, net assets were $2,544.5 million and net asset value per share was $14.89.
Consolidated Results of Operations
For the fourth fiscal quarter of 2022, the Company reported GAAP net income and Adjusted Net Income1 of $8.1million or $0.05 per share.GAAP net investment income was $54.0million or $0.32 per share and Adjusted Net Investment Income Before Accrual for Capital Gain Incentive Fee 1 was $56.5million or $0.33 per share. GAAP net realized and unrealized gain/(loss) was $(45.8) million or $(0.27) per share and Adjusted Realized and Unrealized Gain/(Loss)1 was $(48.4) million or $(0.28) per share.
Net income can vary substantially from period to period due to various factors, including the level of new investment commitments, the recognition of realized gains and losses and unrealized appreciation and depreciation. As a result, quarterly comparisons of net income may not be meaningful.
1 See footnote 1 to 'Selected Financial Highlights' above.
Liquidity and Capital Resources
The Company's liquidity and capital resources are derived from the Company's debt securitizations (also known as collateralized loan obligations, or CLOs), unsecured notes, revolving credit facilities and cash flow from operations. The Company's primary uses of funds from operations include investments in portfolio companies and payment of fees and other expenses that the Company incurs. The Company has used, and expects to continue to use, its debt securitizations, unsecured notes, revolving credit facilities, proceeds from its investment portfolio and proceeds from offerings of its securities and its dividend reinvestment plan to finance its investment objectives.
As of September 30, 2022, we had cash, cash equivalents and foreign currencies of $124.1million, restricted cash, cash equivalents and foreign currencies of $56.4million and $3,093.6million of debt outstanding. As of September 30, 2022, subject to leverage and borrowing base restrictions, we had approximately $544.9million of remaining commitments and availability, in the aggregate, on our revolving credit facility with JPMorgan. In addition, as of September 30, 2022, we had $100.0million of remaining commitments and availability on our unsecured line of credit with GC Advisors.
On September 2, 2022, we amended our revolving credit facility with JP Morgan to, among other things, amend the interest rate on borrowings to SOFR + 1.75% from LIBOR + 1.75%. The SOFR interest rate is subject to an additional spread adjustment rate ranging between 0.11448% and 0.42826%, depending on applicable tenor. In addition, we entered into an agreement on September 16, 2022 to increase the aggregate commitments outstanding under the JP Morgan facility to $1.2375 billion from $1.1875 billion as of June 30, 2022.
On September 16, 2022, all amounts outstanding under our credit facility with Morgan Stanley were repaid, following which the agreements governing our credit facility with Morgan Stanley were terminated.
Portfolio and Asset Quality
GC Advisors regularly assesses the risk profile of each of the Company's investments and rates each of them based on an internal system developed by Golub Capital and its affiliates. This system is not generally accepted in our industry or used by our competitors. It is based on the following categories, which we refer to as GC Advisors' internal performance ratings:
Internal Performance Ratings Rating Definition 5 Involves the least amount of risk in our portfolio. The borrower is performing above expectations, and the trends and risk factors are generally favorable. 4 Involves an acceptable level of risk that is similar to the risk at the time of origination. The borrower is generally performing as expected, and the risk factors are neutral to favorable. 3 Involves a borrower performing below expectations and indicates that the loan's risk has increased somewhat since origination. The borrower could be out of compliance with debt covenants; however, loan payments are generally not past due. 2 Involves a borrower performing materially below expectations and indicates that the loan's risk has increased materially since origination. In addition to the borrower being generally out of compliance with debt covenants, loan payments could be past due (but generally not more than 180 days past due). 1 Involves a borrower performing substantially below expectations and indicates that the loan's risk has substantially increased since origination. Most or all of the debt covenants are out of compliance and payments are substantially delinquent. Loans rated 1 are not anticipated to be repaid in full and we will reduce the fair market value of the loan to the amount we anticipate will be recovered.
Our internal performance ratings do not constitute any rating of investments by a nationally recognized statistical rating organization or represent or reflect any third-party assessment of any of our investments. For additional analysis on the Company's internal performance ratings as of September 30, 2022, please refer to the Quarter Ended 9.30.2022 Earnings Presentation available on Investors Resources link on the homepage of the Company's website (www.golubcapitalbdc.com) under Events/Presentations.
The following table shows the distribution of the Company's investments on the 1 to 5 internal performance rating scale at fair value as of September 30, 2022 and June 30, 2022:
September 30, 2022 June 30, 2022 Internal Investments Percentage of Investments Percentage of Performance at Fair Value Total at Fair Value Total Rating (In thousands) Investments (In thousands) Investments 5 $ 252,572 4.6% $ 330,123 5.9% 4 4,725,988 86.8 4,815,603 85.7 3 398,625 7.3 413,477 7.4 2 69,171 1.3 53,359 1.0 1 — — 988 0.0 * Total $ 5,446,356 100.0% $ 5,613,550 100.0%
* Represents an amount less than 0.1%.
The Company will host an earnings conference call at 1:00 pm (Eastern Time) on Tuesday, November22, 2022 to discuss the quarterly financial results. All interested parties may participate in the conference call by dialing (888) 330-3529 approximately 10-15 minutes prior to the call; international callers should dial +1 (646) 960-0656. Participants should reference Golub Capital BDC, Inc. when prompted. For a slide presentation that we intend to refer to on the earnings conference call, please visit the Investor Resources link on the homepage of our website (www.golubcapitalbdc.com) and click on the Quarter Ended 9.30.2022 Earnings Presentation under Events/Presentations. An archived replay of the call will be available shortly after the call until 11:59 p.m. (Eastern Time) on December6, 2022. To hear the replay, please dial (800) 770-2030. International dialers, please dial +1 (647) 362-9199. For all replays, please reference program ID number 5111111.
Golub Capital BDC, Inc. and Subsidiaries Consolidated Statements of Financial Condition (In thousands, except share and per share data) September 30, 2022 June 30, 2022 Assets (audited) (unaudited) Investments, at fair value (cost of $5,569,604 and $5,656,202, respectively) $ 5,446,356 $ 5,613,550 Cash and cash equivalents 117,290 81,444 Unrestricted foreign currencies (cost of $7,021 and $3,777, respectively) 6,847 3,755 Restricted cash and cash equivalents 56,416 34,891 Restricted foreign currencies (cost of $0 and $1,106, respectively) — 1,090 Interest receivable 20,794 20,569 Other assets 33,521 14,896 Total Assets $ 5,681,224 $ 5,770,195 Liabilities Debt $ 3,093,603 $ 3,154,673 Less unamortized debt issuance costs 17,211 18,988 Debt less unamortized debt issuance costs 3,076,392 3,135,685 Interest payable 20,384 20,255 Management and incentive fees payable 33,430 19,743 Accounts payable and accrued expenses 6,518 6,826 Total Liabilities 3,136,724 3,182,509 Net Assets Preferred stock, par value $0.001 per share, 1,000,000 shares authorized, zero shares issued and outstanding as of September 30, 2022 and June 30, 2022, respectively. — — Common stock, par value $0.001 per share, 350,000,000 shares authorized, 170,895,670 issued and outstanding as of September 30, 2022 and June 30, 2022, respectively. 171 171 Paid in capital in excess of par 2,676,674 2,677,424 Distributable earnings (132,345) (89,909) Total Net Assets 2,544,500 2,587,686 Total Liabilities and Total Net Assets $ 5,681,224 $ 5,770,195 Number of common shares outstanding 170,895,670 170,895,670 Net asset value per common share $ 14.89 $ 15.14
Golub Capital BDC, Inc. and Subsidiaries Consolidated Statements of Operations (In thousands, except share and per share data) Three months ended September 30, 2022 June 30, 2022 (unaudited) (unaudited) Investment income Interest income $ 119,925 $ 97,568 GCIC acquisition purchase price premium amortization (2,561) (3,036) Dividend income 312 52 Fee income 1,972 1,042 Total investment income 119,648 95,626 Expenses Interest and other debt financing expenses 28,989 23,278 Base management fee 19,321 19,025 Incentive fee 14,109 (4,096) Professional fees 940 1,039 Administrative service fee 1,750 1,980 General and administrative expenses 506 472 Total expenses 65,615 41,698 Net investment income before tax 54,033 53,928 Income tax 72 — Net investment income after tax 53,961 53,928 Net gain (loss) on investment transactions Net realized gain (loss) from: Investments 3,101 1,554 Foreign currency transactions (156) (123) Forward currency contracts — 1,080 Net realized gain (loss) in investment transactions 2,945 2,511 Net change in unrealized appreciation (depreciation) from: Investments (48,528) (38,995) Translation of assets and liabilities in foreign currencies (18,392) (13,482) Forward currency contracts 18,184 11,922 Net change in unrealized appreciation (depreciation) on investment transactions (48,736) (40,555) Net gain (loss) on investments (45,791) (38,044) Provision for taxes on realized gains on investments (302) — Provision for taxes on unrealized appreciation on investments 215 (478) Net increase (decrease) in net assets resulting from operations $ 8,083 $ 15,406 Per Common Share Data Basic and diluted earnings (loss) per common share $ 0.05 $ 0.09 Dividends and distributions declared per common share $ 0.30 $ 0.30 Basic and diluted weighted average common shares outstanding 170,895,670 170,895,670
ABOUT GOLUB CAPITAL BDC, INC.
Golub Capital BDC, Inc. ("GBDC") is an externally-managed, non-diversified closed-end management investment company that has elected to be treated as a business development company under the Investment Company Act of 1940. GBDC invests primarily in one stop and other senior secured loans to middle market companies that are often sponsored by private equity investors. GBDC's investment activities are managed by its investment adviser, GC Advisors LLC, an affiliate of the Golub Capital LLC group of companies ("Golub Capital").
ABOUT GOLUB CAPITAL
Golub Capital is a market-leading, award-winning direct lender and experienced credit asset manager. The firm specializes in delivering reliable, creative and compelling financing solutions to companies backed by private equity sponsors. Golub Capital's sponsor finance expertise also forms the foundation of its Late Stage Lending, Broadly Syndicated Loan and Credit Opportunities investment programs. Golub Capital nurtures long-term, win-win partnerships that inspire repeat business from private equity sponsors and investors.
As of July 1, 2022, Golub Capital had over 675 employees and over $55 billion of capital under management, a gross measure of invested capital including leverage. The firm has lending offices in Chicago, New York, San Francisco and London. For more information, please visit golubcapital.com.
This press release may contain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Statements other than statements of historical facts included in this press release 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 expressed or implied in the forward-looking statements as a result of a number of factors, including those described from time to time in filings with the Securities and Exchange Commission. Golub Capital BDC, Inc. undertakes no duty to update any forward-looking statement made herein. All forward-looking statements speak only as of the date of this press release.
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