Financial Data and Key Metrics Changes - GBDC reported an adjusted net investment income (NII) per share of $0.51, the highest quarterly adjusted NII per share to date, with an adjusted NII return on equity (ROE) of 13.5% on an annualized basis [14][21] - Adjusted earnings per share reached $0.55, corresponding to an adjusted ROE of 14.6% on an annualized basis [17][21] - Net asset value (NAV) per share increased by $0.09 to $15.12, representing a 2.65% increase year-over-year [17][23] - The distribution coverage ratio was 131% on the increased regular quarterly distribution of $0.39 per share [24] Business Line Data and Key Metrics Changes - Approximately 87% of GBDC's investments were rated 4 or 5, indicating performance as expected or better, while loans rated 1 and 2, which are likely to see significant credit impairment, remained low at 50 basis points of the portfolio [2] - The proportion of loans rated 3 decreased from 13.7% to 12.3% sequentially [2] Market Data and Key Metrics Changes - The investment income yield increased modestly by 20 basis points to 12.8% [7] - The cost of debt increased by 10 basis points to 5.5%, while the weighted average net investment spread increased slightly to 7.3% [30][32] Company Strategy and Development Direction - GBDC's strategy focuses on core middle market companies rather than large companies, which is seen as a competitive advantage in the current market environment [3] - The company anticipates that origination strength will become a larger source of differentiation among managers [5] - GBDC is positioned to benefit from the pending merger with GBDC 3, which is expected to close in the second calendar quarter of 2024 [18][35] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about GBDC's resilience post-merger, despite challenges in the broader market, including spread compression and slow M&A activity [3][36] - The company noted that while the M&A market is recovering, it is still weak compared to historical norms [36] - Management highlighted the importance of maintaining discipline in originations to avoid pressure to accept unattractive risk-reward situations [74] Other Important Information - GBDC's liquidity position remains strong, with approximately $1.9 billion in liquidity from unrestricted cash and undrawn commitments [34] - The company has reduced its base management fee from 1.375% to 1% per annum, effective July 1, 2023, which is expected to enhance shareholder alignment [18] Q&A Session Summary Question: Comments on spread compression - Management noted that spread compression is more pronounced in the larger market, with a range of 50 to 100 basis points observed [64][79] Question: Trends in credit quality - Management indicated that the recent non-accruals were small and did not reflect a broader trend, with challenges primarily in healthcare and software sectors [68][69] Question: Changes in portfolio yield - The weighted average upfront fee decreased slightly, and management acknowledged that borrower-friendly conditions are impacting documentation and structure [70][72]

18 Apr-10Jun-10Sep-10Dec-10Mar-11Jun-11Sep-11Dec-11Mar-12Jun-12Sep-12Dec-12Mar-13Jun-13Sep-13Dec-13Mar-14Jun-14Sep-14Dec-14Mar-15Jun-15Sep-15Dec-15Mar-16Jun-16Sep-16Dec-16Mar-17Jun-17Sep-17Dec-17Mar-18Jun-18Sep-18Dec-18Mar-19Jun-19Sep-19Dec-19Mar-20Jun-20Sep-20Dec-20Mar-21Jun-21Sep-21Dec-21Mar-22Jun-22Sep-22Dec-22Mar-23Jun-23Sep-23Dec-23Mar-24 19 – JPM Credit Facility – As of March 31, 2024, subject to leverage and borrowing base restrictions, we had $1,487.5 million of remaining commitments and availabilit ...

Golub Capital BDC (GBDC) came out with quarterly earnings of $0.51 per share, missing the Zacks Consensus Estimate of $0.52 per share. This compares to earnings of $0.42 per share a year ago. These figures are adjusted for non-recurring items.This quarterly report represents an earnings surprise of -1.92%. A quarter ago, it was expected that this business development company would post earnings of $0.51 per share when it actually produced earnings of $0.50, delivering a surprise of -1.96%.Over the last four ...

[Part I. Financial Information](index=3&type=section&id=Part%20I.%20Financial%20Information) [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) The unaudited statements for the period ended March 31, 2024, show increased assets and NAV per share, improved net income, and detailed portfolio composition [Consolidated Statements of Financial Condition](index=3&type=section&id=Consolidated%20Statements%20of%20Financial%20Condition) Total assets grew to $5.94 billion and NAV per share increased to $15.12 as of March 31, 2024 Financial Condition (In thousands) | Financial Metric | March 31, 2024 | September 30, 2023 | | :--- | :--- | :--- | | Total Investments, at fair value | $5,394,737 | $5,516,613 | | Total Assets | $5,942,626 | $5,733,472 | | Total Liabilities | $3,348,986 | $3,185,594 | | Total Net Assets | $2,593,640 | $2,547,878 | | Net Asset Value per common share | $15.12 | $15.02 | [Consolidated Statements of Operations](index=4&type=section&id=Consolidated%20Statements%20of%20Operations) Net increase in net assets from operations rose to $93.6 million for the quarter, a significant year-over-year improvement Results of Operations | Metric (In thousands, except per share data) | Three Months Ended Mar 31, 2024 | Three Months Ended Mar 31, 2023 | Six Months Ended Mar 31, 2024 | Six Months Ended Mar 31, 2023 | | :--- | :--- | :--- | :--- | :--- | | Total investment income | $164,230 | $146,953 | $329,000 | $283,830 | | Net investment income - after tax | $86,533 | $70,206 | $170,068 | $131,869 | | Net increase in net assets from operations | $93,558 | $58,503 | $169,334 | $84,084 | | Basic and diluted EPS | $0.55 | $0.34 | $1.00 | $0.49 | - An incentive fee of **$5,157 thousand** was waived for the three and six months ended March 31, 2024, with no such waiver in the prior year periods[12](index=12&type=chunk) [Consolidated Statements of Changes in Net Assets](index=5&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Net%20Assets) Total net assets increased by $45.8 million to $2.59 billion, driven by operations and offset by distributions - Net assets increased from **$2,547,878 thousand** at September 30, 2023, to **$2,593,640 thousand** at March 31, 2024[14](index=14&type=chunk) - Key changes in net assets for the six months ended March 31, 2024 included: net investment income of **$170,068 thousand**, net realized loss of **$(12,722) thousand**, and distributions of **$(153,092) thousand**[14](index=14&type=chunk) [Consolidated Statements of Cash Flows](index=6&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Net cash from operations increased significantly to $313.0 million, resulting in a total net cash increase of $322.0 million Cash Flow Summary | Cash Flow Activity (In thousands) | Six Months Ended Mar 31, 2024 | Six Months Ended Mar 31, 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $313,014 | $82,703 | | Net cash provided by (used in) financing activities | $8,993 | $(125,656) | | Net change in cash and equivalents | $322,007 | $(42,953) | [Consolidated Schedules of Investments](index=8&type=section&id=Consolidated%20Schedules%20of%20Investments) The investment portfolio's fair value was $5.39 billion, concentrated in debt investments across diversified industries Investment Portfolio Summary (In thousands) | Investment Category | Fair Value (Mar 31, 2024) | Percentage of Net Assets | | :--- | :--- | :--- | | Non-controlled/non-affiliate company investments | $5,277,008 | 203.5% | | Non-controlled/affiliate company investments | $105,956 | 4.0% | | Controlled affiliate company investments | $11,773 | 0.5% | | **Total investments** | **$5,394,737** | **208.0%** | - The total amortized cost of the investment portfolio was **$5.44 billion** as of March 31, 2024, compared to a fair value of **$5.39 billion**, indicating a net unrealized depreciation[133](index=133&type=chunk) [Notes to Consolidated Financial Statements](index=98&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) Notes detail the pending GBDC 3 merger, a reduced management fee, debt composition, and subsequent events - On January 16, 2024, the Company entered into an Agreement and Plan of Merger with Golub Capital BDC 3, Inc, subject to stockholder approval and other closing conditions[250](index=250&type=chunk)[425](index=425&type=chunk) - Effective July 1, 2023, the base management fee rate was reduced from **1.375% to 1.0%** of average adjusted gross assets, and the Investment Adviser agreed to waive incentive fees in excess of **15%** pending the GBDC 3 merger[296](index=296&type=chunk)[308](index=308&type=chunk) - Subsequent to quarter-end, the Company redeemed all **$500 million** of its 3.375% Notes due 2024 and declared a quarterly distribution of **$0.39 per share** and a supplemental distribution of **$0.06 per share**[430](index=430&type=chunk)[432](index=432&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=137&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses performance, a $5.4 billion portfolio, strong credit quality, and the pending GBDC 3 merger [Overview](index=139&type=section&id=Overview) The company is an externally managed BDC investing in U.S. middle-market loans via the Golub Capital platform - The company's investment objective is to generate current income and capital appreciation by investing primarily in **one stop and other senior secured loans** of U.S. middle-market companies[440](index=440&type=chunk) - The investment strategy relies on accessing the loan origination channels of Golub Capital, which managed over **$65.0 billion** in capital as of January 1, 2024[440](index=440&type=chunk) [Recent Developments](index=145&type=section&id=Recent%20Developments) Post-quarter end, the company redeemed $500.0 million in notes and declared quarterly and supplemental distributions - On April 8, 2024, the company redeemed all **$500.0 million** of its 2024 Notes[459](index=459&type=chunk) - The Board declared a quarterly distribution of **$0.39 per share** and a supplemental distribution of **$0.06 per share**[461](index=461&type=chunk) [Consolidated Results of Operations](index=145&type=section&id=Consolidated%20Results%20of%20Operations) Q2 2024 net investment income was $86.5 million, with net assets increasing by $93.6 million due to gains and a fee waiver Quarterly and Six-Month Operational Results | Metric (In thousands) | Q2 2024 | Q1 2024 | 6 Months Ended Mar 31, 2024 | 6 Months Ended Mar 31, 2023 | | :--- | :--- | :--- | :--- | :--- | | Total investment income | $164,230 | $164,770 | $329,000 | $283,830 | | Net expenses | $77,127 | $80,735 | $157,862 | $149,529 | | Net investment income after taxes | $86,533 | $83,535 | $170,068 | $131,869 | | Net gain (loss) on investments | $6,675 | $(7,736) | $(1,061) | $(48,076) | | Net increase in net assets | $93,558 | $75,776 | $169,334 | $84,084 | - The base management fee decreased year-over-year primarily due to the fee rate reduction to **1.0% from 1.375%** effective July 1, 2023[481](index=481&type=chunk) - The income incentive fee decreased quarter-over-quarter due to a **$5.2 million waiver** related to the pending GBDC 3 merger[483](index=483&type=chunk) [Liquidity and Capital Resources](index=152&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains strong liquidity with $292.8 million in cash and a debt-to-equity ratio of 1.28x - As of March 31, 2024, the company had **$292.8 million in cash** and cash equivalents and **$1.49 billion available** on its JPM Credit Facility[500](index=500&type=chunk)[501](index=501&type=chunk) - The asset coverage ratio was **177.9%**, and the GAAP debt-to-equity ratio was **1.28x**[515](index=515&type=chunk) - Outstanding commitments to fund investments totaled **$144.1 million** as of March 31, 2024[517](index=517&type=chunk) [Portfolio Composition, Investment Activity and Yield](index=156&type=section&id=Portfolio%20Composition%2C%20Investment%20Activity%20and%20Yield) The $5.4 billion portfolio is concentrated in one stop loans with a 12.4% yield and high credit quality Portfolio Overview | Metric | March 31, 2024 | September 30, 2023 | | :--- | :--- | :--- | | Total Investments at Fair Value | $5.4 billion | $5.5 billion | | Number of Portfolio Companies | 366 | 342 | | One Stop Loans (% of Total) | 85.3% | 84.8% | | Non-Accrual (% of Debt at Fair Value) | 0.9% | 1.2% | Internal Performance Ratings | Internal Performance Rating | % of Total Investments (Fair Value) | | :--- | :--- | | 5 (Least Risk) | 2.3% | | 4 (Performing as Expected) | 84.9% | | 3 (Performing Below Expectations) | 12.3% | | 2 (Materially Below Expectations) | 0.5% | | 1 (Substantially Below Expectations) | 0.0% | [Distributions](index=160&type=section&id=Distributions) The company makes quarterly distributions, has an "opt out" DRIP, and must distribute 90% of taxable income - The company has an **"opt out" dividend reinvestment plan (DRIP)**, meaning cash distributions are automatically reinvested unless a stockholder elects to receive cash[538](index=538&type=chunk) [Related Party Transactions](index=160&type=section&id=Related%20Party%20Transactions) Agreements with GC Advisors and the pending GBDC 3 merger constitute key related party transactions - Key related parties include **GC Advisors (Investment Adviser)** and **Golub Capital LLC (Administrator)**[539](index=539&type=chunk)[543](index=543&type=chunk) - GC Advisors has agreed to **waive incentive fees in excess of 15%** during the pendency of the GBDC 3 merger[539](index=539&type=chunk) - Potential conflicts of interest exist as GC Advisors manages other similar funds (GBDC 3, GDLC, etc.), which are addressed through an **allocation policy**[541](index=541&type=chunk) [Critical Accounting Policies](index=162&type=section&id=Critical%20Accounting%20Policies) Policies focus on the Board's fair value determination for Level 3 assets using methods like enterprise value analysis - The Board of Directors is solely responsible for the good faith determination of fair value for investments without readily available market quotations (**Level 3 assets**)[547](index=547&type=chunk) - The valuation process for Level 3 assets involves a **multi-step quarterly review** by GC Advisors, senior management, the audit committee, and at least one annual review by an independent valuation firm[547](index=547&type=chunk)[553](index=553&type=chunk) - Primary valuation methods for Level 3 investments include **enterprise value analysis** (using EBITDA multiples) and **market interest rate yield analysis**[554](index=554&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=165&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The primary market risk is interest rates, with a 100 bps rate change impacting net investment income by ~$35.2 million Interest Rate Sensitivity Analysis | Change in Interest Rates | Annualized Net Increase (Decrease) in Net Investment Income (In thousands) | | :--- | :--- | | Down 200 basis points | $(70,338) | | Down 100 basis points | $(35,169) | | Up 100 basis points | $35,169 | | Up 200 basis points | $70,338 | [Controls and Procedures](index=166&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective with no material changes to internal controls - Management concluded that **disclosure controls and procedures were effective** as of the end of the period covered by the report[573](index=573&type=chunk) - **No changes in internal controls** over financial reporting occurred during the quarter that materially affected, or are reasonably likely to materially affect, such controls[574](index=574&type=chunk) [Part II. Other Information](index=167&type=section&id=Part%20II.%20Other%20Information) [Legal Proceedings](index=167&type=section&id=Item%201.%20Legal%20Proceedings) The company is not currently subject to any material legal proceedings - The company, its adviser, and affiliates are **not currently subject to any material legal proceedings**[576](index=576&type=chunk) [Risk Factors](index=167&type=section&id=Item%201A.%20Risk%20Factors) No material changes to previously disclosed risk factors were reported for the quarter - **No material changes to risk factors** were reported for the three months ended March 31, 2024[577](index=577&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=167&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) No unregistered sales of equity securities were reported during the period - None[578](index=578&type=chunk) [Defaults Upon Senior Securities](index=167&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) No defaults upon senior securities were reported during the period - None[579](index=579&type=chunk) [Mine Safety Disclosures](index=167&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - None[580](index=580&type=chunk) [Other Information](index=167&type=section&id=Item%205.%20Other%20Information) No directors or officers adopted or terminated Rule 10b5-1 trading plans during the quarter - **No directors or executive officers adopted or terminated** any Rule 10b5-1 trading plans during the quarter[581](index=581&type=chunk) [Exhibits](index=168&type=section&id=Item%206.%20Exhibits) Filed exhibits include the GBDC 3 merger agreement, debt indentures, and officer certifications - Exhibits filed include the **GBDC 3 Merger Agreement**, a supplemental indenture for the **6.000% Notes due 2029**, and officer certifications[583](index=583&type=chunk)

[Summary of Financial Results](index=3&type=section&id=Summary%20of%20Financial%20Results) This section provides an overview of GBDC's financial performance, highlighting key earnings, portfolio, and balance sheet metrics [Q2 FY2024 Earnings Review](index=4&type=section&id=FY%202024%20Q2%20Earnings%20Review%20%28Quarter%20Ended%203%2F31%2F24%29) GBDC reported strong Q2 FY2024 earnings with Adjusted NII per share of $0.51, driving NAV growth to $15.12 and total distributions of $0.45 Q2 FY2024 Key Performance Indicators | Category | Metric | Value/Observation | | :--- | :--- | :--- | | **Earnings** | Adjusted NII per share | $0.51 (up $0.01 QoQ, up $0.09 YoY) | | | Adjusted Earnings per share | $0.55 (Adjusted ROE over 14%) | | **Portfolio & Credit** | New Investment Commitments | $22.1 million | | | Credit Quality | Non-accruals decreased to 0.9% of total debt investments at fair value | | **Balance Sheet** | Net Asset Value (NAV) per share | $15.12 (up $0.09 from prior quarter) | | | Net Debt-to-Equity | 1.15x | | | Total Available Liquidity | $1.9 billion | | **Dividends** | Declared Quarterly Distribution (Q3) | $0.39 per share | | | Declared Supplemental Distribution (Q2) | $0.06 per share | | | Total Announced Distributions | $0.45 per share | [Financial Results vs. Prior Quarter](index=5&type=section&id=Summary%20of%20Financial%20Results%20vs.%20Prior%20Quarter) This section reconciles GAAP to Adjusted financial measures for Q2 FY2024 versus Q1 FY2024, detailing key income and gain components Q2 FY24 vs Q1 FY24 Per Share Results Comparison | Metric | Q1 2024 (ended 12/31/23) | Q2 2024 (ended 3/31/24) | | :--- | :--- | :--- | | **Adjusted Net Investment Income** | **$0.50** | **$0.51** | | Net Realized/Unrealized Gain (Loss) | ($0.04) | $0.05 | | **Adjusted Earnings (Loss)** | **$0.45** | **$0.55** | | Net Asset Value | $15.03 | $15.12 | [GBDC Performance Drivers](index=6&type=section&id=GBDC%20Performance%20Drivers) This section analyzes the key factors influencing GBDC's financial performance, including NAV changes, quarterly trends, and portfolio characteristics [NAV Per Share Bridge Analysis](index=7&type=section&id=NII%20Drove%20a%20NAV%20Per%20Share%20Increase%20from%20December%2031%2C%202023) NAV per share increased by $0.09 to $15.12, primarily driven by Adjusted Net Investment Income of $0.51 per share, offsetting distributions - The NAV per share bridge illustrates that the **$0.51** in Adjusted NII was the primary contributor to NAV growth, partially offset by **$0.46** in total distributions paid and a net realized/unrealized gain of **$0.04**[15](index=15&type=chunk)[16](index=16&type=chunk) [Summary of Quarterly Results](index=8&type=section&id=Summary%20of%20Quarterly%20Results) The company shows consistent performance with Adjusted NII per share increasing and NAV per share growing over the past five quarters Per Share Performance Trend (Last 5 Quarters) | Quarter Ended | Adjusted NII | Adjusted Earnings | NAV | Distributions Paid | | :--- | :--- | :--- | :--- | :--- | | Mar 31, 2023 | $0.42 | $0.34 | $14.73 | $0.33 | | Jun 30, 2023 | $0.44 | $0.43 | $14.83 | $0.33 | | Sep 30, 2023 | $0.50 | $0.60 | $15.02 | $0.41 | | Dec 31, 2023 | $0.50 | $0.45 | $15.03 | $0.44 | | Mar 31, 2024 | $0.51 | $0.55 | $15.12 | $0.46 | [Portfolio Highlights](index=10&type=section&id=Portfolio%20Highlights) The portfolio is defensively positioned with $5.4 billion in first lien, senior secured loans, showing strong credit quality [New Originations and Portfolio Rotation](index=10&type=section&id=Portfolio%20Highlights%20-%20New%20Originations) New investment commitments in Q2 2024 were $22.1 million, primarily One Stop loans, with positive portfolio rotation from higher rates on new investments Q2 FY2024 Origination and Rotation | Metric | Q2 2024 (ended 3/31/24) | | :--- | :--- | | New Investment Commitments | $22.1M | | Exits and Sales of Investments | $121.1M | | Net Funds Reduction | ($49.0M) | | W.A. Rate on New Investments | 11.0% | | W.A. Rate on Paid-off Investments | 10.4% | [Investment Mix and Diversity](index=11&type=section&id=Portfolio%20Highlights%20%E2%80%93%20Investment%20Mix) The $5.4 billion portfolio is highly diversified across 366 companies, primarily in First Lien and One Stop floating rate loans - The portfolio is heavily weighted towards senior secured debt, with **93%** in First Lien loans[30](index=30&type=chunk) - **99%** of the loan portfolio is floating rate, providing a natural hedge in a rising rate environment[30](index=30&type=chunk) - The portfolio is diversified across **366** companies with an average investment size of **0.3%**[29](index=29&type=chunk) [Economic Analysis and Spreads](index=13&type=section&id=Portfolio%20Highlights%20%E2%80%93%20Economic%20Analysis) The quarter's investment income yield was 11.9% with a weighted average cost of debt of 5.5%, yielding a strong net investment spread of 6.4% Key Yields and Spreads (Q2 2024) | Metric | Value | | :--- | :--- | | Investment income yield | 11.9% | | Weighted average cost of debt | 5.5% | | Weighted average net investment spread | 6.4% | | 3-Month SOFR | 5.3% | [Credit Quality and Portfolio Ratings](index=14&type=section&id=Portfolio%20Highlights%20-%20Credit%20Quality) Credit quality remained strong with non-accrual investments decreasing to 0.9% and over 87% of the portfolio performing as expected Non-Accrual Investment Trend (at Fair Value) | Quarter Ended | Non-Accrual % of Total Debt | | :--- | :--- | | Mar 31, 2023 | 1.7% | | Jun 30, 2023 | 1.5% | | Sep 30, 2023 | 1.2% | | Dec 31, 2023 | 1.1% | | Mar 31, 2024 | 0.9% | - As of March 31, 2024, **87.4%** of the portfolio at fair value had an internal performance rating of 4 or 5, indicating strong fundamental credit quality[38](index=38&type=chunk)[39](index=39&type=chunk) [Financial Statements](index=16&type=section&id=Financial%20Statements) This section presents GBDC's key financial statements, including the balance sheet and income statement, for the reported period [Quarterly Statements of Financial Condition](index=16&type=section&id=Quarterly%20Statements%20of%20Financial%20Condition) As of March 31, 2024, GBDC's total assets were $5.7 billion, with investments at $5.4 billion, resulting in NAV per share of $15.12 Balance Sheet Summary (as of March 31, 2024) | Account | Amount (in thousands) | | :--- | :--- | | Total Investments, at fair value | $5,394,737 | | Total Assets | $5,699,890 | | Total Debt | $3,032,400 | | Total Liabilities | $3,135,998 | | **Total Net Assets** | **$2,563,892** | | **Net Asset Value per Share** | **$15.12** | | GAAP debt-to-equity, net | 1.15x | [Quarterly Operating Results](index=17&type=section&id=Quarterly%20Operating%20Results) For Q2 FY2024, GBDC generated $165.3 million in total investment income, resulting in $85.4 million Net Investment Income after tax Income Statement Summary (for Quarter Ended March 31, 2024) | Account | Amount (in thousands) | | :--- | :--- | | Total Investment Income | $165,339 | | Total Expenses | $80,000 | | **Net Investment Income after Tax** | **$85,339** | | Net Gain on Investments | $9,362 | | **Net Increase in Net Assets** | **$94,701** | | **Earnings Per Share** | **$0.55** | | Adjusted NII Per Share | $0.51 | [Shareholder Returns and Performance](index=18&type=section&id=Shareholder%20Returns%20and%20Performance) This section highlights GBDC's commitment to shareholder value through consistent distributions and strong long-term returns [Historical Financial Performance](index=18&type=section&id=Financial%20Performance%20Highlights) GBDC demonstrates a consistent track record of delivering returns, with regular and supplemental distributions enhancing shareholder return - The company has consistently paid and grown its regular quarterly distribution over the past five years, adding supplemental distributions in recent periods of strong earnings[47](index=47&type=chunk) [Long-Term Shareholder Returns](index=19&type=section&id=Long%20History%20of%20Strong%20Shareholder%20Returns) Since its 2010 IPO, GBDC has generated a 9.5% IRR on NAV for initial investors, driven by NAV growth and distributions - Investors in GBDC's 2010 IPO have achieved a **9.5%** IRR on NAV, demonstrating strong long-term value creation[52](index=52&type=chunk) - The total return to shareholders is composed of NAV per share appreciation combined with cumulative regular, special, and supplemental distributions[51](index=51&type=chunk) [Liquidity and Capital Structure](index=20&type=section&id=Liquidity%20and%20Capital%20Structure) This section details GBDC's financial flexibility, including its available liquidity, debt funding mix, and investment-grade credit ratings [Liquidity and Investment Capacity](index=20&type=section&id=Liquidity%20and%20Investment%20Capacity) As of March 31, 2024, GBDC had $1.9 billion in total available liquidity, actively managing its balance sheet - Total available liquidity was approximately **$1.9 billion** as of March 31, 2024, from cash and undrawn credit facilities[9](index=9&type=chunk)[54](index=54&type=chunk) - In February 2024, the company issued **$600.0 million** of 6.248% Unsecured Notes due 2029 and entered into an interest rate swap to convert the fixed rate to a floating rate[54](index=54&type=chunk) - Subsequent to quarter-end, on April 8, 2024, the company redeemed **$500 million** of its 3.375% Notes due in 2024[54](index=54&type=chunk) [Debt Capital Structure and Ratings](index=21&type=section&id=GBDC%20Has%20a%20Stable%2C%20Highly%20Flexible%20and%20Low-Cost%20Funding%20Structure) GBDC maintains a stable, flexible funding structure with a 5.5% weighted average cost of debt and investment-grade ratings - **66%** of debt funding is from unsecured notes, providing financial flexibility[57](index=57&type=chunk) - The company holds investment-grade credit ratings from three major agencies: Fitch (**BBB**), Moody's (**Baa3**), and S&P (**BBB-**)[56](index=56&type=chunk) Debt Capital Structure Summary (as of March 31, 2024) | Funding Source | Debt Commitment ($M) | Outstanding Par ($M) | | :--- | :--- | :--- | | Securitizations | $814.3 | $814.3 | | Unsecured Notes | $2,500.0 | $2,500.0 | | Bank Facilities | $1,587.5 | $0.0 | | **Totals** | **$4,901.8** | **$3,314.3** | [Common Stock and Distributions](index=22&type=section&id=Common%20Stock%20and%20Distribution%20Information) This section provides details on GBDC's common stock performance and its distribution policies, including the supplemental distribution framework [Common Stock Price and Distribution History](index=22&type=section&id=Common%20Stock%20Price%20Data) The report details recent stock prices and declared distributions, including quarterly and supplemental amounts for Q2 FY2024 Recent Distributions Declared | Type | Amount Per Share | Record Date | Payment Date | | :--- | :--- | :--- | :--- | | Quarterly | $0.39 | March 1, 2024 | March 29, 2024 | | Quarterly | $0.39 | May 2, 2024 | June 21, 2024 | | Supplemental | $0.06 | May 16, 2024 | June 14, 2024 | [Supplemental Distribution Framework](index=23&type=section&id=Quarterly%20Variable%20Supplemental%20Distribution%20Framework) The company outlines its framework for calculating the quarterly variable supplemental distribution based on prior quarter's excess adjusted NII Calculation for Q2 FY24 Supplemental Distribution (based on Q1 FY24 results) | Description | Value per Share | | :--- | :--- | | Q1 FY24 Adjusted NII | $0.50 | | (-) Q1 FY24 Quarterly Distribution Paid | ($0.37) | | Excess Adjusted NII | $0.13 | | (x) 50% of Excess | $0.065 | | **Quarterly Variable Supplemental Distribution** | **$0.07** (rounded) | [Appendix](index=24&type=section&id=Appendix%3A%20Endnotes) This section contains supplementary information, including endnotes, definitions, and detailed reconciliations of financial measures [Endnotes](index=25&type=section&id=Endnotes) The appendix provides detailed endnotes, definitions, and reconciliations for non-GAAP financial measures and debt capital structure - This section provides definitions and reconciliations for non-GAAP financial measures, which are adjusted to exclude the financial impact of the purchase premium from the 2019 GCIC acquisition[73](index=73&type=chunk)[77](index=77&type=chunk) - Detailed footnotes are provided for the economic analysis, clarifying the calculation of metrics like investment income yield and weighted average cost of debt[78](index=78&type=chunk)[80](index=80&type=chunk) - The endnotes offer specific details on the debt capital structure, including terms of unsecured notes, credit facilities, and associated interest rate swap agreements[81](index=81&type=chunk)[83](index=83&type=chunk)

8vFanI Rising interest rates have been a boon to Business Development Companies, known as BDC's, over the past 1 year-plus. Several of them have reported record earnings, including Golub Capital BDC (NASDAQ:GBDC), which saw 55% growth in Investment Income and 49% growth in Net Investment Income, NII in its fiscal year ending 9/30/23. 99% of its debt investments are at floating rates. Company Profile: Golub Capital BDC is an externally managed, closed-end, non-diversified management investment company th ...

Lemon_tm In this article, we catch up on the latest quarterly results of the Golub Capital BDC (NASDAQ:GBDC). The company delivered a good quarterly result with a 3.1% total NAV return. It trades at an 11.6% total dividend yield and a 5% premium to book. Its net income yield is 12.6%. The company's loan portfolio targets primarily floating-rate first-lien loans and is very well diversified with over 300 positions. Top sectors include software and healthcare. GBDC Quarter Update Adjusted net income for the q ...

Part I [Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) Golub Capital BDC, Inc.'s financial statements detail its December 31, 2023 position and operational results, showing slight asset decrease, increased net assets, and improved income [Consolidated Statements of Financial Condition](index=4&type=section&id=Consolidated%20Statements%20of%20Financial%20Condition) As of December 31, 2023, total assets slightly decreased to **$5.70 billion**, while total net assets increased to **$2.56 billion**, with NAV per share rising to **$15.03** Financial Condition Highlights (as of) | Metric | December 31, 2023 | September 30, 2023 | | :--- | :--- | :--- | | Total Investments, at fair value | $5,443.4 million | $5,516.6 million | | Total Assets | $5,699.9 million | $5,733.5 million | | Total Liabilities | $3,136.0 million | $3,185.6 million | | Total Net Assets | $2,563.9 million | $2,547.9 million | | Net Asset Value per common share | $15.03 | $15.02 | [Consolidated Statements of Operations](index=5&type=section&id=Consolidated%20Statements%20of%20Operations) For Q4 2023, total investment income increased to **$164.8 million**, with net investment income after tax rising to **$83.5 million**, and net assets increasing by **$75.8 million** Statement of Operations Highlights (Three months ended December 31) | Metric | 2023 | 2022 | | :--- | :--- | :--- | | Total Investment Income | $164.8 million | $136.9 million | | Total Expenses | $80.7 million | $73.0 million | | Net Investment Income - after tax | $83.5 million | $61.7 million | | Net gain (loss) on investment transactions | $(7.7) million | $(36.3) million | | Net Increase in Net Assets | $75.8 million | $25.6 million | | Basic and diluted EPS | $0.45 | $0.15 | [Consolidated Statements of Changes in Net Assets](index=6&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Net%20Assets) Net assets increased by **$16.0 million** for the quarter ended December 31, 2023, driven by **$75.8 million** from operations, partially offset by **$74.6 million** in distributions Changes in Net Assets (Three months ended December 31, 2023) | Description | Amount (in thousands) | | :--- | :--- | | Balance at September 30, 2023 | $2,547,878 | | Net increase from operations | $75,776 | | Stock issued via dividend reinvestment plan | $14,886 | | Distributions from distributable earnings | $(74,622) | | **Balance at December 31, 2023** | **$2,563,918** | [Consolidated Statements of Cash Flows](index=7&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Net cash provided by operating activities was **$163.6 million** for Q4 2023, leading to a **$32.8 million** net increase in cash and cash equivalents despite **$130.8 million** used in financing Cash Flow Summary (Three months ended December 31) | Cash Flow Activity | 2023 | 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $163.6 million | $52.9 million | | Net cash used in financing activities | $(130.8) million | $(67.5) million | | **Net change in cash and cash equivalents** | **$32.8 million** | **$(14.6) million** | [Consolidated Schedule of Investments](index=9&type=section&id=Consolidated%20Schedule%20of%20Investments) As of December 31, 2023, the **$5.44 billion** investment portfolio, comprising 357 companies, is primarily **85.7%** one stop loans and **8.1%** senior secured loans Investment Portfolio Composition by Type (as of Dec 31, 2023) | Investment Type | Fair Value (in thousands) | Percentage of Total | | :--- | :--- | :--- | | Senior secured | $438,837 | 8.1% | | One stop | $4,662,636 | 85.7% | | Second lien | $32,449 | 0.6% | | Subordinated debt | $8,444 | 0.2% | | Equity | $301,061 | 5.4% | | **Total** | **$5,443,427** | **100.0%** | - The total investment portfolio consisted of investments in **357 portfolio companies** as of December 31, 2023[427](index=427&type=chunk) Investment Portfolio by Control Type (as of Dec 31, 2023) | Category | Fair Value (in thousands) | | :--- | :--- | | Non-controlled/non-affiliate | $5,351,550 | | Non-controlled affiliate | $79,073 | | Controlled affiliate | $12,804 | | **Total Investments** | **$5,443,427** | [Notes to Consolidated Financial Statements](index=97&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes detail accounting policies, the **$5.44 billion** investment portfolio, **$3.08 billion** debt structure, and subsequent events including a proposed merger and new **$600 million** unsecured note issuance - The company is an externally managed, closed-end, non-diversified management investment company regulated as a **Business Development Company (BDC)** and a **Regulated Investment Company (RIC)**[242](index=242&type=chunk) - Effective July 1, 2023, the base management fee paid to the Investment Adviser was reduced from **1.375% to 1.0%** of average adjusted gross assets[288](index=288&type=chunk) - Subsequent to quarter-end, the company announced a proposed merger with Golub Capital BDC 3, Inc., issued **$600 million** of **6.000% unsecured notes** due 2029, and declared a quarterly distribution of **$0.39 per share** plus a supplemental distribution of **$0.07 per share**[404](index=404&type=chunk)[411](index=411&type=chunk)[412](index=412&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=133&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management's discussion highlights a stable quarter with a **$5.4 billion** investment portfolio, increased investment income, and key developments including a proposed merger and new **$600 million** bond issuance [Overview](index=140&type=section&id=Overview) Golub Capital BDC primarily invests in one stop and senior secured loans of U.S. middle-market companies, with its **$5.4 billion** portfolio largely composed of these debt types - The company's investment objective is to generate current income and capital appreciation by investing in U.S. middle-market companies, primarily through **one stop** and **senior secured loans**[419](index=419&type=chunk) Portfolio Composition by Investment Type (as of Dec 31, 2023) | Investment Type | Fair Value (in thousands) | Percentage of Total | | :--- | :--- | :--- | | Senior secured | $438,837 | 8.1% | | One stop | $4,662,636 | 85.7% | | Second lien | $32,449 | 0.6% | | Subordinated debt | $8,444 | 0.2% | | Equity | $301,061 | 5.4% | | **Total** | **$5,443,427** | **100.0%** | [Recent Developments](index=144&type=section&id=Recent%20Developments) Recent developments include a proposed merger with Golub Capital BDC 3, Inc., an incentive fee waiver, a new **$600 million** unsecured note issuance, and increased shareholder distributions - On January 16, 2024, the company entered into a merger agreement with **Golub Capital BDC 3, Inc. (GBDC 3)**[437](index=437&type=chunk) - The Investment Adviser agreed to waive incentive fees in excess of **15%** effective January 1, 2024, pending the merger with GBDC 3[438](index=438&type=chunk) - On February 1, 2024, the company issued **$600 million** of **6.000% unsecured notes** due 2029[439](index=439&type=chunk) - The Board declared a quarterly distribution of **$0.39 per share** and a supplemental distribution of **$0.07 per share**[439](index=439&type=chunk)[440](index=440&type=chunk) [Consolidated Results of Operations](index=144&type=section&id=Consolidated%20Results%20of%20Operations) Q4 2023 saw total investment income rise to **$164.8 million** and net investment income after tax increase to **$83.5 million**, with a reduced net loss on investments of **$7.7 million** Quarterly Operating Results Comparison (in thousands) | Metric | Q4 2023 | Q3 2023 | Q4 2022 | | :--- | :--- | :--- | :--- | | Total investment income | $164,770 | $164,540 | $136,877 | | Total expenses | $80,735 | $79,849 | $73,014 | | Net investment income after taxes | $83,535 | $83,441 | $61,663 | | Net gain (loss) on investments | $(7,736) | $18,391 | $(36,328) | | Net increase in net assets | $75,776 | $101,564 | $25,581 | - The base management fee decreased by **$5.1 million** year-over-year due to a rate reduction from **1.375% to 1.0%** effective July 1, 2023[460](index=460&type=chunk) - Net unrealized depreciation for Q4 2023 was **$8.8 million**, a significant improvement from **$39.6 million** in Q4 2022, driven by spread tightening and improved portfolio performance[468](index=468&type=chunk)[470](index=470&type=chunk)[471](index=471&type=chunk) [Liquidity and Capital Resources](index=150&type=section&id=Liquidity%20and%20Capital%20Resources) As of December 31, 2023, the company maintained strong liquidity with **$70.7 million** cash and **$1.17 billion** available credit, alongside a **1.21x** GAAP debt-to-equity ratio - As of December 31, 2023, the company had **$70.7 million** in cash and cash equivalents and **$1,167.8 million** of availability on its JPM Credit Facility[474](index=474&type=chunk)[475](index=475&type=chunk) - The asset coverage ratio was **182.4%**, and the GAAP debt-to-equity ratio was **1.21x** as of December 31, 2023[486](index=486&type=chunk) - Outstanding commitments to fund investments totaled **$163.9 million** as of December 31, 2023[488](index=488&type=chunk) [Portfolio Composition, Investment Activity and Yield](index=154&type=section&id=Portfolio%20Composition%2C%20Investment%20Activity%20and%20Yield) The **$5.4 billion** investment portfolio, with **357** companies, saw **$58.6 million** in new commitments, a **12.2%** weighted average income yield, and **1.1%** non-accrual loans New Investment Commitments (by Quarter) | Investment Type | Q4 2023 (in thousands) | Percentage | | :--- | :--- | :--- | | Senior secured | $7,500 | 12.8% | | One stop | $49,317 | 84.1% | | Equity & Other | $1,827 | 3.1% | | **Total** | **$58,644** | **100.0%** | - The weighted average income yield on earning portfolio investments for the quarter was **12.2%**, up from **10.0%** in the prior year quarter[428](index=428&type=chunk) Portfolio Quality by Internal Rating (as of Dec 31, 2023) | Rating | Definition | % of Portfolio (Fair Value) | | :--- | :--- | :--- | | 5 | Performing above expectations | 2.6% | | 4 | Performing as expected | 83.3% | | 3 | Performing below expectations | 13.7% | | 2 | Performing materially below | 0.4% | | 1 | Substantially below / Impaired | 0.0% | - As of December 31, 2023, non-accrual investments represented **1.1%** of the total debt portfolio at fair value[495](index=495&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=160&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company's primary market risk is interest rate risk, with a **100 basis point** increase or decrease in rates impacting annual net investment income by approximately **$38.4 million** Interest Rate Sensitivity Analysis (Annualized Impact) | Change in Interest Rates | Net Increase (Decrease) in Investment Income | | :--- | :--- | | Up 100 basis points | $38,419 thousand | | Down 100 basis points | $(38,419) thousand | - As of December 31, 2023, **97.9%** of the loan portfolio at fair value was subject to an interest rate floor, providing some protection against falling rates[452](index=452&type=chunk) [Controls and Procedures](index=161&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of December 31, 2023, with no material changes to internal controls over financial reporting during the quarter - Management concluded that disclosure controls and procedures were **effective** as of the end of the period covered by the report[542](index=542&type=chunk) - No changes in internal controls over financial reporting occurred during the quarter that materially affected, or are reasonably likely to materially affect, these controls[543](index=543&type=chunk) Part II [Legal Proceedings](index=162&type=section&id=Item%201.%20Legal%20Proceedings) The company is not currently subject to any material legal proceedings that would adversely affect its financial statements - The company is not currently subject to any **material legal proceedings**[545](index=545&type=chunk) [Risk Factors](index=162&type=section&id=Item%201A.%20Risk%20Factors) New risk factors relate to the proposed merger with Golub Capital BDC 3, Inc., including potential stock price declines, ownership dilution, and failure to realize anticipated benefits - New risk factors have been introduced related to the proposed merger with **Golub Capital BDC 3, Inc. (GBDC 3)**[546](index=546&type=chunk)[548](index=548&type=chunk) - Merger-related risks include potential stock price declines from post-merger share sales, **dilution of ownership** for existing stockholders, and the risk of not achieving anticipated synergies and cost savings[548](index=548&type=chunk)[549](index=549&type=chunk)[552](index=552&type=chunk) [Other Items (Items 2, 3, 4, 5 & 6)](index=165&type=section&id=Other%20Items) The company reported no unregistered equity sales, senior security defaults, mine safety disclosures, or Rule 10b5-1 trading plan adoptions/terminations during the quarter - There were no **unregistered sales of equity securities**, defaults upon senior securities, or mine safety disclosures to report[564](index=564&type=chunk)[565](index=565&type=chunk)[566](index=566&type=chunk) - No directors or executive officers adopted or terminated any **Rule 10b5-1 trading plans** during the fiscal quarter ended December 31, 2023[567](index=567&type=chunk)

Merger Overview - GBDC will acquire 100% of GBDC 3 in a stock-for-stock transaction, with the exchange ratio determined at merger close based on NAV and market price[109] - The combined company will have approximately $8.5 billion in total assets and investments in 343 portfolio companies[108] - The merger is expected to close in CQ2 2024, subject to stockholder approvals and customary conditions[108] Financial Benefits - The merger consideration structure provides an opportunity for NAV per share accretion at GBDC[109] - The incentive fee rate will be reduced to 15%, becoming permanent upon closing of the merger[108] - Potential annual operational synergies of approximately $1.2 million are expected from the elimination of duplicative expenses[9] Portfolio and Strategy - Over 99% of GBDC 3's portfolio company investments overlap with those of GBDC[9] - The investment strategy will remain consistent, focusing on first lien, senior secured loans[9] - Pro forma GAAP debt-to-equity is estimated to be approximately 1.10x[108] Fee Structure and NII - The incentive fee reduction from 20% to 15% is estimated to result in approximately $0.13 per share annually increase in adjusted net investment income[69] - The adjusted NII ROAE is estimated to increase to 14.3% with the 1% management fee and 15% incentive fee in effect[69]

Financial Performance - Adjusted net investment income per share was $0.50, resulting in a 13.3% NII ROE [10] - Adjusted earnings per share reached $0.60, representing a 16.0% Adjusted ROE [10] - Adjusted net realized/unrealized gain per share was $0.10 [10] - Net asset value per share increased by 1.3% from $14.83 as of June 30, 2023, to $15.02 [10] Portfolio & Credit Quality - New investment commitments totaled $129.6 million, with $71.5 million funded at close [10] - Net funds reduction amounted to $8.4 million [10] - Non-accruals decreased to 1.2% of total debt investments at fair value [10] Distributions - A quarterly distribution of $0.37 per share was declared for FY 2024 Q1, with a strong distribution coverage of 135% [10] - A supplemental distribution for FY 2023 Q4 of $0.07 per share was declared [10] - Total announced distributions amounted to $0.44 per share, yielding an 11.7% dividend on the 9/30/23 NAV [10] Liquidity & Leverage - Total available liquidity stood at $873 million [10] - Leverage (net of available cash) was 1.21x, with 46% of the debt funding mix being unsecured debt [10]