Golub Capital BDC (NASDAQ:GBDC) Q1 2023 Earnings Conference Call February 9, 2023 1:00 PM ET Company Participants David Golub - Chief Executive Officer Greg Cashman - Head, Direct Lending Group Matt Benton - Chief Operating Officer Chris Ericson - Chief Financial Officer Conference Call Participants Jordan Wathen - Wells Fargo Securities Robert Dodd - Raymond James Ryan Lynch - KBW Operator Hello everyone and welcome to GBDC's December 31st 2022 Quarterly Earnings Call. Before we begin, I'd like to take a m ...

Financial Performance - Net investment income per share increased from $0.32 to $0.36 from September 30, 2022 to December 31, 2022[10] - Adjusted net investment income per share increased from $0.33 to $0.37 from September 30, 2022 to December 31, 2022[10] - Earnings per share increased from $0.05 to $0.15 from September 30, 2022 to December 31, 2022[10] - Net asset value per share decreased from $14.89 to $14.71 from September 30, 2022 to December 31, 2022[10] - The company declared a quarterly dividend of $0.33 per share, with dividend coverage increasing to 112%[15] Portfolio Composition and Credit Quality - As of December 31, 2022, 85% of the investment portfolio was in first lien one stop loans[44, 46] - As of December 31, 2022, non-accrual investments represented 1.8% of total debt investments at fair value[63] - The fair value of total debt investments as a percentage of principal was 96% as of December 31, 2022[62] Investment Activity - New investment commitments were $247 million for the quarter ended December 31, 2022[41] - Exits and sales of investments totaled $253.8 million for the quarter ended December 31, 2022[41] - The weighted average rate on new investments increased to 11.1% for the quarter ended December 31, 2022[41] Liquidity and Capital Structure - As of December 31, 2022, the company had $103.2 million in unrestricted cash and cash equivalents[87] - As of December 31, 2022, the company had $538.9 million of remaining commitments and availability on its revolving credit facility with JPMorgan[88]

Part I. Financial Information [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents Golub Capital BDC, Inc.'s unaudited consolidated financial statements for the quarter ended December 31, 2022, detailing financial condition, operations, changes in net assets, cash flows, and investment schedules [Consolidated Statements of Financial Condition](index=4&type=section&id=Consolidated%20Statements%20of%20Financial%20Condition) As of December 31, 2022, total assets slightly decreased to **$5.67 billion**, total net assets declined to **$2.51 billion**, and net asset value per common share decreased to **$14.71** Financial Condition Summary | Financial Metric (in thousands, except per share data) | December 31, 2022 (unaudited) | September 30, 2022 | | :--- | :--- | :--- | | **Total Investments, at fair value** | **$5,451,946** | **$5,446,356** | | Total Assets | $5,665,751 | $5,681,224 | | Total Liabilities | $3,152,066 | $3,136,724 | | **Total Net Assets** | **$2,513,685** | **$2,544,500** | | Common shares outstanding | 170,895,670 | 170,895,670 | | **Net asset value per common share** | **$14.71** | **$14.89** | [Consolidated Statements of Operations](index=5&type=section&id=Consolidated%20Statements%20of%20Operations) For the three months ended December 31, 2022, total investment income significantly increased to **$136.9 million**, resulting in **$61.7 million** net investment income, but a net loss on investment transactions led to a net increase in net assets from operations of **$25.6 million** Operations Summary | Metric (In thousands, except per share data) | Three months ended Dec 31, 2022 | Three months ended Dec 31, 2021 | | :--- | :--- | :--- | | **Total investment income** | **$136,877** | **$86,567** | | Total expenses | $73,014 | $41,777 | | **Net investment income - after tax** | **$61,663** | **$44,790** | | Net gain (loss) on investment transactions | ($36,328) | $18,783 | | **Net increase in net assets from operations** | **$25,581** | **$63,078** | | Basic and diluted earnings per common share | $0.15 | $0.37 | | Dividends and distributions declared per common share | $0.33 | $0.30 | [Consolidated Statements of Changes in Net Assets](index=6&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Net%20Assets) For the three months ended December 31, 2022, net assets decreased by **$30.8 million**, as distributions to stockholders of **$56.4 million** exceeded the **$25.6 million** net increase from operations Changes in Net Assets Summary | Description (In thousands) | Three months ended Dec 31, 2022 | | :--- | :--- | | Balance at September 30, 2022 | $2,544,500 | | Net increase in net assets from operations | $25,581 | | Distributions from distributable earnings | ($56,396) | | **Total decrease for the period** | **($30,815)** | | **Balance at December 31, 2022** | **$2,513,685** | [Consolidated Statements of Cash Flows](index=7&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) For the three months ended December 31, 2022, net cash provided by operating activities was **$52.9 million**, while net cash used in financing activities was **$67.5 million**, resulting in a **$14.6 million** net decrease in cash and cash equivalents Cash Flows Summary | Cash Flow Activity (In thousands) | Three months ended Dec 31, 2022 | Three months ended Dec 31, 2021 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $52,918 | ($181,734) | | Net cash provided by (used in) financing activities | ($67,494) | $238,893 | | **Net change in cash and cash equivalents** | **($14,576)** | **$57,159** | | Cash and cash equivalents, end of period | $166,033 | $301,477 | [Consolidated Schedules of Investments](index=9&type=section&id=Consolidated%20Schedules%20of%20Investments) As of December 31, 2022, the investment portfolio totaled **$5.45 billion**, primarily comprising one stop loans (**85.4%**) and senior secured loans (**9.0%**), diversified across 332 companies Investment Categories by Fair Value | Investment Category | Fair Value (in thousands) | Percentage of Total | | :--- | :--- | :--- | | Non-controlled/non-affiliate company investments | $5,389,908 | 98.9% | | Non-controlled affiliate company investments | $47,556 | 0.9% | | Controlled affiliate company investments | $14,482 | 0.2% | | **Total investments, at fair value** | **$5,451,946** | **100.0%** | Investment Types by Fair Value | Investment Type | Fair Value (in thousands) | Percentage of Total | | :--- | :--- | :--- | | One stop | $4,658,030 | 85.4% | | Senior secured | $491,529 | 9.0% | | Equity | $274,264 | 5.0% | | Second lien | $24,120 | 0.5% | | Subordinated debt | $4,003 | 0.1% | | **Total** | **$5,451,946** | **100.0%** | Top 5 Industries by Fair Value | Top 5 Industries by Fair Value | Percentage of Total | | :--- | :--- | | Software | 26.5% | | Health Care Providers & Services | 8.2% | | Specialty Retail | 5.9% | | Automobiles | 4.9% | | IT Services | 4.7% | [Notes to Consolidated Financial Statements](index=108&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) This section details the company's significant accounting policies, fair value measurements, related party transactions, investment composition, borrowings, commitments, financial highlights, earnings per share, and dividend distributions - The company has elected to be regulated as a **Business Development Company (BDC)** and treated as a **Regulated Investment Company (RIC)** for tax purposes, focusing its investment strategy on one stop and senior secured loans to U.S. middle-market companies[277](index=277&type=chunk)[278](index=278&type=chunk) - The Investment Adviser, GC Advisors LLC, receives a base management fee of **1.375%** of average adjusted gross assets and an incentive fee based on performance, including income and capital gains components[320](index=320&type=chunk)[321](index=321&type=chunk)[328](index=328&type=chunk) - As of December 31, 2022, the company had total debt outstanding of **$3.1 billion** across various facilities, with an overall asset coverage ratio of **180.4%**[383](index=383&type=chunk)[384](index=384&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=142&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's financial condition and operational results, highlighting increased investment income, portfolio composition, investment activity, liquidity, capital resources, and the impact of the GCIC acquisition and LIBOR to SOFR transition [Overview](index=144&type=section&id=Overview) Golub Capital BDC, an externally managed BDC and RIC listed on Nasdaq as GBDC, aims to generate income and capital appreciation by investing primarily in one stop and senior secured loans of U.S. middle-market companies - The company's investment objective is to generate current income and capital appreciation by investing in one stop and other senior secured loans of U.S. middle-market companies[439](index=439&type=chunk) - As of December 31, 2022, the portfolio was primarily composed of **one stop loans (85.4%)** and **senior secured loans (9.0%)**[445](index=445&type=chunk) [Consolidated Results of Operations](index=148&type=section&id=Consolidated%20Results%20of%20Operations) For Q4 2022, total investment income rose to **$136.9 million**, leading to **$61.7 million** net investment income, but a **$39.6 million** net unrealized depreciation resulted in a **$25.6 million** net increase in net assets from operations Consolidated Results of Operations Summary | Metric (In thousands) | Dec 31, 2022 | Sep 30, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | :--- | | Total investment income | $136,877 | $119,648 | $86,567 | | Total expenses | $73,014 | $65,615 | $41,777 | | Net investment income after taxes | $61,663 | $53,961 | $44,790 | | Net gain (loss) on investment transactions | ($36,328) | ($45,791) | $18,783 | | **Net increase (decrease) in net assets** | **$25,581** | **$8,083** | **$63,078** | - The increase in investment income was primarily due to rising **LIBOR** and **SOFR** interest base rates[476](index=476&type=chunk)[477](index=477&type=chunk) - Unrealized depreciation for the quarter was primarily due to decreases in fair value across portfolio investments from incremental spread widening in the market[497](index=497&type=chunk) [Liquidity and Capital Resources](index=155&type=section&id=Liquidity%20and%20Capital%20Resources) As of December 31, 2022, the company had **$96.4 million** in cash, **$3.1 billion** total debt, a GAAP debt-to-equity ratio of **1.24x**, and **$200.2 million** in outstanding investment commitments - The company's GAAP debt-to-equity ratio was **1.24x** and its asset coverage ratio was **180.4%** as of December 31, 2022[511](index=511&type=chunk) - As of December 31, 2022, the company had **$538.9 million** of availability on its JPM Credit Facility and **$100.0 million** on its Adviser Revolver[502](index=502&type=chunk)[503](index=503&type=chunk) - Outstanding commitments to fund investments totaled **$200.2 million** as of December 31, 2022[513](index=513&type=chunk) [Portfolio Composition, Investment Activity and Yield](index=158&type=section&id=Portfolio%20Composition%2C%20Investment%20Activity%20and%20Yield) As of December 31, 2022, the **$5.5 billion** investment portfolio had a weighted average income yield of **10.0%**, with **$247.0 million** in new commitments, and **89.3%** of investments performing at or above expectations Weighted Average Yields | Metric | Dec 31, 2022 | Sep 30, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | :--- | | Weighted average income yield | 10.0% | 8.4% | 7.1% | | Weighted average investment income yield | 10.5% | 9.2% | 7.7% | Internal Performance Rating Distribution | Internal Performance Rating | % of Total Investments (Fair Value) | | :--- | :--- | | 5 (Least Risk) | 2.8% | | 4 (Acceptable Risk) | 86.5% | | 3 (Below Expectations) | 9.4% | | 2 (Materially Below) | 1.3% | | 1 (Substantially Below) | 0.0% | - New investment commitments for the three months ended December 31, 2022, totaled **$247.0 million**[518](index=518&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=168&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company is exposed to interest rate risk, with a hypothetical **100 basis point** increase in base rates estimated to increase annual net investment income by **$37.2 million**, and **98.0%** of loans having interest rate floors Sensitivity to Interest Rate Changes | Change in Interest Rates | Net Increase (Decrease) in Investment Income (in thousands) | | :--- | :--- | | Up 200 basis points | $74,402 | | Up 100 basis points | $37,201 | | Down 100 basis points | ($37,201) | | Down 200 basis points | ($74,322) | - Many portfolio loans have floating interest rates, typically based on **LIBOR** or **SOFR**, and are subject to minimum base rate floors, with a weighted average floor of **0.83%** as of December 31, 2022[568](index=568&type=chunk) [Controls and Procedures](index=169&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were effective as of December 31, 2022, with no material changes in internal controls over financial reporting during the quarter - Management concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by the report[572](index=572&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[573](index=573&type=chunk) Part II. Other Information [Legal Proceedings](index=170&type=section&id=Item%201.%20Legal%20Proceedings) The company, its investment adviser, and its administrator are not currently subject to any material legal proceedings - The company, its investment adviser, and its administrator are not currently subject to any material legal proceedings[575](index=575&type=chunk) [Risk Factors](index=170&type=section&id=Item%201A.%20Risk%20Factors) No material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the year ended September 30, 2022, were reported - No material changes to the risk factors discussed in the Annual Report on Form 10-K for the year ended September 30, 2022, were reported for the three months ended December 31, 2022[576](index=576&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=170&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reported no unregistered sales of equity securities or use of proceeds during the period - None[577](index=577&type=chunk) [Defaults Upon Senior Securities](index=170&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reported no defaults upon its senior securities during the period - None[579](index=579&type=chunk) [Mine Safety Disclosures](index=170&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable as the company has no mine safety disclosures to report - None[580](index=580&type=chunk) [Other Information](index=170&type=section&id=Item%205.%20Other%20Information) The company reported no other information for the period - None[581](index=581&type=chunk) [Exhibits](index=171&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the quarterly report, including CEO and CFO certifications and Inline XBRL documents List of Exhibits | Number | Description | | :--- | :--- | | 31.1 | Certification of Chief Executive Officer pursuant to Rule 13a-14 | | 31.2 | Certification of Chief Financial Officer pursuant to Rule 13a-14 | | 32.1 | Certification pursuant to 18 U.S.C. Section 1350 (Sarbanes-Oxley Act) | | 101 | Inline XBRL Instance Document and related taxonomy files | | 104 | Cover Page Interactive Data File (Inline XBRL) |

Financial Data and Key Metrics Changes - Adjusted net investment income (NII) per share increased by 6% to $0.33 from $0.31 per share in the previous quarter [12][50] - NAV per share declined by 1.7% from $15.14 to $14.89 due to unrealized losses primarily from spread widening [13][51] - The company announced a 10% increase in the quarterly base dividend from $0.30 to $0.33 per share, equating to an 8.9% dividend yield [16][19] Business Line Data and Key Metrics Changes - GBDC's portfolio is almost entirely composed of floating rate loans, which are generating more interest income due to higher base rates [17][56] - The weighted average rate on new investments increased by 120 basis points, with weighted average spreads on new investments rising from 5.8% to 6.2% [54][60] - Over 90% of investments had an internal performance rating of 4 or higher, indicating strong credit quality [22][71] Market Data and Key Metrics Changes - The overall deal activity in the market is down, but the origination environment is considered highly attractive due to wider spreads and tighter documentation terms [48][49] - The company has a robust access to opportunities through its existing relationships, with a significant increase in origination from repeat borrowers [45][47] Company Strategy and Development Direction - GBDC focuses on providing first lien senior secured loans to resilient middle market companies backed by strong private equity sponsors [7][24] - The company is positioned to navigate uncertainties and is well-suited to capitalize on attractive new origination opportunities [23][25] - GBDC's funding structure is flexible and low-cost, providing a competitive advantage in the current market [74] Management's Comments on Operating Environment and Future Outlook - The macroeconomic environment is characterized by muddling growth, with companies generally maintaining revenues despite margin pressures [27][31] - Management anticipates challenges ahead, including rising rates and potential credit stress, but believes the company is well-prepared [84][92] - The company expects to see further increases in NII due to rising base rates and the lag effect of loan resets [62][66] Other Important Information - GBDC's credit quality remains strong, with low realized losses and a low percentage of investments on non-accrual [21][70] - The company has significant liquidity, with almost $800 million available from unrestricted cash and undrawn commitments [73] Q&A Session Summary Question: Impact of rising rates on interest coverage of borrowers - Management noted that average interest coverage ratios are not very informative and emphasized a granular review of loans to identify vulnerabilities [78][80] Question: Increase in amendment requests - Management has not yet seen an increase in amendment requests but anticipates that challenges for borrowers will lead to more amendments in the future [84] Question: Margin pressure and end demand - The majority of companies are sustaining revenues, with margin shortfalls primarily due to wage and raw material price increases [91] Question: Lender-friendly environment shifts - Management indicated that spreads are wider, OID and closing fees are improving, and documentation terms are tightening [93] Question: Elasticity of demand among borrowers - Management highlighted that some companies can raise prices without significant demand impact, while others face challenges [100] Question: China supply chain exposure - Supply chain issues have improved but remain a concern, and management is working with borrowers on contingency plans [102] Question: Software ARR lending component - Management clarified that they lend to mission-critical B2B software companies, which have more stable demand compared to consumer-driven tech companies [106][108]

GOLUB CAPITAL BDC, INC. Confidential | for discussion purposes only EARNINGS PRESENTATION QUARTER ENDED SEPTEMBER 30, 2022 Disclaimer Some of the statements in this presentation constitute forward-looking statements, which relate to future events or our future performance or financial condition. The forward-looking statements contained in this presentation involve risks and uncertainties, including statements as to: our future operating results; our business prospects and the prospects of our portfolio comp ...

TABLE OF CONTENTS UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 ______________________________________________________________________________________________________ Form 10-K ______________________________________________________________________________________________________ (Mark One) ý ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended September 30, 2022 or o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SEC ...

Golub Capital BDC (NASDAQ:GBDC) Q3 2022 Earnings Conference Call August 11, 2022 11:00 AM ET Company Participants David Golub - Chief Executive Officer Gregory Robbins - Senior Managing Director Jon Simmons - Managing Director Chris Ericson - Chief Financial Officer Conference Call Participants Finian O'Shea - Wells Fargo Securities Paul Johnson - KBW Robert Dodd - Raymond James Operator Welcome to GBDC's June 30, 2022 Quarterly Earnings Call. Before we begin, I'd like to take a moment to remind our listene ...

[FORM 10-Q Cover Page](index=1&type=section&id=FORM%2010-Q) [Filing Information](index=1&type=section&id=Filing%20Information) This section identifies the document as a Quarterly Report on Form 10-Q for the period ended June 30, 2022, filed by Golub Capital BDC, Inc. (GBDC), confirming its SEC compliance and large accelerated filer classification - The document is a Quarterly Report on Form 10-Q for the period ended June 30, 2022[2](index=2&type=chunk) - Golub Capital BDC, Inc. (GBDC) is the registrant, with Commission File Number 814-00794[3](index=3&type=chunk) Filer Status | Indicator | Status | | :--- | :--- | | Filed all required reports in preceding 12 months | Yes | | Subject to filing requirements for past 90 days | Yes | | Submitted Interactive Data File (Rule 405) | No | | Filer Classification | Large accelerated filer | | Shell Company | No | [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) This section presents the unaudited consolidated financial statements of Golub Capital BDC, Inc. and its subsidiaries for the period ended June 30, 2022, including the Statements of Financial Condition, Operations, Changes in Net Assets, Cash Flows, and Schedules of Investments, along with accompanying notes detailing accounting policies, related party transactions, investment specifics, fair value measurements, borrowings, commitments, financial highlights, earnings per share, and dividends [Consolidated Statements of Financial Condition](index=4&type=section&id=Consolidated%20Statements%20of%20Financial%20Condition) The Consolidated Statements of Financial Condition provide a snapshot of the company's assets, liabilities, and net assets as of June 30, 2022, compared to September 30, 2021, highlighting increases in total investments and debt, while cash and cash equivalents decreased Consolidated Statements of Financial Condition (in millions) | Metric | June 30, 2022 (unaudited) | September 30, 2021 | | :--- | :--- | :--- | | Total Investments, at fair value | $5,613.6 | $4,894.9 | | Cash and cash equivalents | $81.4 | $175.6 | | Total Assets | $5,770.2 | $5,164.9 | | Debt | $3,154.7 | $2,569.2 | | Total Liabilities | $3,182.5 | $2,582.2 | | Total Net Assets | $2,587.7 | $2,582.7 | | Net asset value per common share | $15.14 | $15.19 | - Total investments at fair value increased by **$718.7 million** (14.68%) from September 30, 2021, to June 30, 2022[10](index=10&type=chunk) - Debt increased by **$585.4 million** (22.79%) from September 30, 2021, to June 30, 2022[10](index=10&type=chunk) [Consolidated Statements of Operations](index=5&type=section&id=Consolidated%20Statements%20of%20Operations) The Consolidated Statements of Operations show the company's financial performance for the three and nine months ended June 30, 2022, compared to the same periods in 2021, with increased total investment income and net investment income, but a significant net loss on investment transactions for the three-month period due to unrealized depreciation Consolidated Statements of Operations (in millions) | Metric | 3 months ended June 30, 2022 | 3 months ended June 30, 2021 | 9 months ended June 30, 2022 | 9 months ended June 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | Total investment income | $95.6 | $75.8 | $268.2 | $226.0 | | Total expenses | $41.7 | $33.7 | $127.9 | $104.6 | | Net investment income | $53.9 | $42.1 | $142.2 | $121.4 | | Net realized gain (loss) on investment transactions | $2.5 | $5.6 | $17.4 | $3.3 | | Net change in unrealized appreciation (depreciation) | $(40.6) | $35.2 | $(13.2) | $144.0 | | Net gain (loss) on investment transactions | $(38.0) | $40.8 | $4.3 | $147.3 | | Net increase (decrease) in net assets from operations | $15.4 | $82.9 | $145.4 | $268.6 | | Basic and diluted EPS | $0.09 | $0.49 | $0.85 | $1.60 | | Dividends declared per common share | $0.30 | $0.29 | $0.90 | $0.87 | - Total investment income increased by **$19.9 million** (26.21%) for the three months ended June 30, 2022, compared to the same period in 2021[12](index=12&type=chunk) - Net investment income increased by **$11.9 million** (28.20%) for the three months ended June 30, 2022, compared to the same period in 2021[12](index=12&type=chunk) - The company experienced a net loss on investment transactions of **$(38.0) million** for the three months ended June 30, 2022, primarily due to a significant net change in unrealized depreciation of **$(40.6) million**[12](index=12&type=chunk) [Consolidated Statements of Changes in Net Assets](index=6&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Net%20Assets) This statement details the changes in net assets for the three and nine months ended June 30, 2022 and 2021, showing a **$5.0 million** increase for the nine months ended June 30, 2022, driven by net investment income and realized gains, but partially offset by unrealized depreciation and distributions to stockholders Consolidated Statements of Changes in Net Assets (in millions) | Metric | 9 months ended June 30, 2022 | 9 months ended June 30, 2021 | | :--- | :--- | :--- | | Balance at beginning of period | $2,582.7 | $2,396.2 | | Net investment income | $142.2 | $121.4 | | Net realized gain (loss) on investments | $17.4 | $3.3 | | Net change in unrealized appreciation (depreciation) | $(13.2) | $144.0 | | Distributions from distributable earnings | $(153.5) | $(145.8) | | Total increase (decrease) for the period | $5.0 | $150.7 | | Balance at end of period | $2,587.7 | $2,546.9 | - For the nine months ended June 30, 2022, net assets increased by **$5.0 million**, a significant decrease compared to the **$150.7 million** increase in the prior year, primarily due to lower net change in unrealized appreciation[15](index=15&type=chunk) - Distributions to stockholders from distributable earnings increased to **$153.5 million** for the nine months ended June 30, 2022, from **$145.8 million** in the prior year[15](index=15&type=chunk) [Consolidated Statements of Cash Flows](index=7&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) The Consolidated Statements of Cash Flows show a net decrease in cash and equivalents of **$122.9 million** for the nine months ended June 30, 2022, primarily due to significant cash used in operating activities for funding investments, partially offset by cash provided by financing activities through debt borrowings Consolidated Statements of Cash Flows (in millions) | Metric | 9 months ended June 30, 2022 | 9 months ended June 30, 2021 | | :--- | :--- | :--- | | Net increase (decrease) in net assets from operations | $145.4 | $268.6 | | Net cash provided by (used in) operating activities | $(575.4) | $80.7 | | Net cash provided by (used in) financing activities | $452.5 | $(30.0) | | Net change in cash and cash equivalents, etc. | $(122.9) | $50.6 | | Cash and cash equivalents, etc., end of period | $121.2 | $234.8 | - Cash used in operating activities significantly increased to **$(575.4) million** for the nine months ended June 30, 2022, compared to **$80.7 million** provided in the prior year, mainly due to higher fundings of investments[18](index=18&type=chunk) - Cash provided by financing activities was **$452.5 million** for the nine months ended June 30, 2022, a reversal from the **$(30.0) million** used in the prior year, driven by increased debt borrowings[18](index=18&type=chunk) [Consolidated Schedules of Investments](index=9&type=section&id=Consolidated%20Schedules%20of%20Investments) The Consolidated Schedules of Investments provide a detailed breakdown of the company's investment portfolio as of June 30, 2022, and September 30, 2021, primarily composed of debt investments across various industries, with a significant portion in non-controlled/non-affiliate company investments, highlighting a shift towards more one-stop loans and an increase in total investments Investment Portfolio by Type (Fair Value, in millions) | Investment Type | June 30, 2022 | September 30, 2021 | | :--- | :--- | :--- | | Non-controlled/non-affiliate company debt investments | $5,266.1 | $4,642.2 | | Non-controlled/non-affiliate company equity investments | $267.2 | $173.1 | | Non-controlled/affiliate company debt investments | $52.4 | $49.0 | | Non-controlled/affiliate company equity investments | $12.1 | $12.3 | | Controlled affiliate company debt investments | $15.8 | $17.9 | | Controlled affiliate company equity investments | $0.0 | $0.3 | | Total investments | $5,613.6 | $4,894.9 | - As of June 30, 2022, the largest portion of investments were in non-controlled/non-affiliate company debt investments, totaling **$5.27 billion** at fair value[109](index=109&type=chunk) - The total fair value of investments increased by **$718.7 million** from September 30, 2021 (**$4.89 billion**) to June 30, 2022 (**$5.61 billion**)[142](index=142&type=chunk)[258](index=258&type=chunk) [Notes to Consolidated Financial Statements](index=101&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The Notes to Consolidated Financial Statements provide detailed explanations of the accounting policies, financial instruments, and transactions presented in the financial statements, covering the company's organization as a BDC and RIC, significant accounting policies, related party transactions, detailed investment breakdowns, forward currency contracts, borrowings, commitments, financial highlights, earnings per share, dividends, and subsequent events [Note 1. Organization](index=102&type=section&id=Note%201.%20Organization) Golub Capital BDC, Inc. (GBDC) is an externally managed, closed-end, non-diversified management investment company regulated as a Business Development Company (BDC) and elected to be treated as a Regulated Investment Company (RIC) for U.S. federal income tax purposes, with an investment strategy focused on one-stop and other senior secured loans to U.S. middle-market companies - GBDC is an externally managed, closed-end, non-diversified management investment company regulated as a BDC under the 1940 Act[266](index=266&type=chunk) - GBDC has elected to be treated as a RIC under Subchapter M of the Internal Revenue Code for U.S. federal income tax purposes[266](index=266&type=chunk) - The company's investment strategy primarily involves one-stop and other senior secured loans to U.S. middle-market companies, with selective investments in second lien, subordinated loans, warrants, and minority equity securities[267](index=267&type=chunk) [Note 2. Significant Accounting Policies and Recent Accounting Updates](index=102&type=section&id=Note%202.%20Significant%20Accounting%20Policies%20and%20Recent%20Accounting%20Updates) This section outlines the significant accounting policies, including the basis of presentation in accordance with GAAP for investment companies, fair value measurements (ASC Topic 820), use of estimates, consolidation principles, and accounting for cash, foreign currencies, restricted cash, forward currency contracts, and revenue recognition, also detailing policies for non-accrual loans, purchase accounting from the GCIC acquisition, and income taxes for RICs and taxable subsidiaries - The company applies fair value to all financial instruments in accordance with ASC Topic 820, categorizing them into a three-level hierarchy based on input observability[270](index=270&type=chunk) - Interest income is accrued based on outstanding principal and contractual terms, with loan origination fees, original issue discount, and market discount/premium capitalized and amortized over the loan's life[284](index=284&type=chunk)[285](index=285&type=chunk) - For the nine months ended June 30, 2022, interest income included **$16.6 million** of accretion of discounts and **$14.7 million** of capitalized PIK interest[285](index=285&type=chunk)[286](index=286&type=chunk) - Loans are placed on non-accrual status when 90 days or more past due or when collectibility is doubtful, reversing unpaid interest and ceasing discount accretion[293](index=293&type=chunk) - The GCIC acquisition was accounted for under the asset acquisition method, with a purchase premium allocated to acquired assets and immediately recognized as unrealized depreciation, amortizing over the life of loans[294](index=294&type=chunk)[295](index=295&type=chunk) [Note 3. Related Party Transactions](index=108&type=section&id=Note%203.%20Related%20Party%20Transactions) This note details transactions with related parties, primarily GC Advisors LLC (the 'Investment Adviser') and Golub Capital LLC (the 'Administrator'), outlining the base management fee (1.375% of average adjusted gross assets) and the Incentive Fee structure, including a fee limitation and the income and capital gain components, also covering administrative service fees, other reimbursed expenses, and an unsecured revolving credit facility with the Investment Adviser - The Investment Adviser receives a base management fee at an annual rate of **1.375%** of average adjusted gross assets, excluding cash and cash equivalents, and voluntarily excludes assets funded with secured borrowing proceeds[308](index=308&type=chunk) - The Incentive Fee includes an Income Incentive Fee and a Capital Gain Incentive Fee, subject to an Incentive Fee Cap to ensure cumulative fees do not exceed **20.0%** of Cumulative Pre-Incentive Fee Net Income Per Share[311](index=311&type=chunk)[312](index=312&type=chunk) Related Party Fees (in millions) | Fee Type | 3 months ended June 30, 2022 | 9 months ended June 30, 2022 | | :--- | :--- | :--- | | Base management fee incurred (net of waiver) | $19.0 | $52.6 | | Income Incentive Fee incurred | $0.7 | $3.6 | | Capital gain incentive fee accrual (reversal) | $(4.8) | $0.0 | | Administrative service fee | $2.0 | $5.4 | | Total expenses reimbursed to Administrator | $0.9 | $5.2 | - The Investment Adviser irrevocably waived **$1.9 million** of base management fees during the three months ended March 31, 2022, impacting the nine-month total[310](index=310&type=chunk) [Note 4. Investments](index=112&type=section&id=Note%204.%20Investments) This note provides a detailed breakdown of the company's investment portfolio by asset class, geographic region, and industry as of June 30, 2022, and September 30, 2021, primarily consisting of one-stop and senior secured loans, with a significant concentration in U.S. middle-market companies across various industries, highlighting the growth and diversification of the investment portfolio Investment Portfolio by Type (Fair Value, in millions) | Investment Type | June 30, 2022 | September 30, 2021 | | :--- | :--- | :--- | | Senior secured | $568.5 | $784.8 | | One stop | $4,721.7 | $3,882.3 | | Second lien | $40.3 | $41.9 | | Subordinated debt | $3.7 | $0.2 | | Equity | $279.3 | $185.7 | | Total | $5,613.6 | $4,894.9 | Investment Portfolio by Geographic Region (Fair Value, in millions) | Geographic Region | June 30, 2022 | September 30, 2021 | | :--- | :--- | :--- | | United States (total) | $5,013.3 | $4,117.8 | | Canada | $211.2 | $176.0 | | United Kingdom | $237.1 | $185.6 | | Australia | $16.6 | $3.3 | | Luxembourg | $24.6 | $8.5 | | Netherlands | $56.0 | $49.6 | | Total | $5,613.6 | $4,894.9 | Top 5 Industries by Fair Value (in millions) | Top 5 Industries | June 30, 2022 | September 30, 2021 | | :--- | :--- | :--- | | Software | $1,367.3 | $1,084.9 | | Healthcare Providers and Services | $456.6 | $532.5 | | Specialty Retail | $378.1 | $292.4 | | Health Care Technology | $197.1 | $150.6 | | Commercial Services and Supplies | $187.9 | $99.6 | | Total (all industries) | $5,613.6 | $4,894.9 | [Note 5. Forward Currency Contracts](index=117&type=section&id=Note%205.%20Forward%20Currency%20Contracts) The company uses forward currency contracts to economically hedge foreign currency exposure on investments, reporting net unrealized appreciation of **$14.1 million** as of June 30, 2022, a significant increase from **$0.1 million** as of September 30, 2021, with Macquarie Bank Limited as the primary counterparty and risk mitigation through ISDA Master Agreements - The company utilizes forward currency contracts to economically hedge currency exposure associated with foreign-denominated investments[281](index=281&type=chunk)[340](index=340&type=chunk) Unrealized Appreciation/Depreciation on Forward Currency Contracts (in millions) | Metric | June 30, 2022 | September 30, 2021 | | :--- | :--- | :--- | | Unrealized appreciation on forward currency contracts | $14.7 | $2.7 | | Unrealized depreciation on forward currency contracts | $(0.5) | $(2.6) | | Net unrealized appreciation (depreciation) | $14.1 | $0.1 | Realized Gain/Loss and Change in Unrealized Appreciation/Depreciation on Forward Currency Contracts (in millions) | Metric | 3 months ended June 30, 2022 | 9 months ended June 30, 2022 | | :--- | :--- | :--- | | Realized gain (loss) on forward currency contracts | $1.1 | $1.1 | | Change in unrealized appreciation (depreciation) | $11.9 | $14.1 | - The average outstanding daily notional volume for forward currency contracts increased to **$248.0 million** for the three months ended June 30, 2022, from **$81.1 million** in the prior year[349](index=349&type=chunk) [Note 6. Fair Value Measurements](index=119&type=section&id=Note%206.%20Fair%20Value%20Measurements) This note details the company's fair value measurement policies, adhering to ASC Topic 820, which categorizes financial instruments into a three-level hierarchy based on input observability, with most investments classified as Level 3, requiring significant management judgment and independent valuation firm review, and showing significant unrealized depreciation on Level 3 assets for the nine months ended June 30, 2022 - The company categorizes financial instruments into Level 1 (quoted prices in active markets), Level 2 (observable inputs for similar assets), and Level 3 (significant unobservable inputs requiring judgment)[351](index=351&type=chunk)[352](index=352&type=chunk)[353](index=353&type=chunk) - All investments, except money market funds (Level 1) and forward currency contracts (Level 2), were valued using Level 3 inputs as of June 30, 2022, and September 30, 2021[355](index=355&type=chunk)[559](index=559&type=chunk) Level 3 Fair Value Assets (in millions) | Asset Type | June 30, 2022 | September 30, 2021 | | :--- | :--- | :--- | | Debt investments | $5,334.3 | $4,709.1 | | Equity investments | $279.2 | $185.2 | | Total Level 3 Assets | $5,613.5 | $4,894.4 | - For the nine months ended June 30, 2022, the net change in unrealized appreciation (depreciation) on Level 3 assets was **$(41.7) million**, primarily due to unrealized depreciation on debt investments[362](index=362&type=chunk) - Significant unobservable inputs for Level 3 investments include market interest rates (**4.0%-21.8%** for senior secured loans), EBITDA multiples (**4.5x-40.0x** for equity), and revenue multiples (**2.0x-29.0x** for equity)[364](index=364&type=chunk)[366](index=366&type=chunk)[369](index=369&type=chunk) [Note 7. Borrowings](index=125&type=section&id=Note%207.%20Borrowings) This note details the company's various borrowing arrangements, including debt securitizations, revolving credit facilities, and unsecured notes, with an asset coverage ratio of **181.5%** as of June 30, 2022, above the 150% requirement, and total borrowings increasing significantly with a shift towards unsecured notes and increased utilization of the JPM Credit Facility - As of June 30, 2022, the company's asset coverage for borrowed amounts was **181.5%**, exceeding the 150% requirement under the 1940 Act[373](index=373&type=chunk) Debt Instruments (Carrying Value, in millions) | Debt Instrument | June 30, 2022 | September 30, 2021 | | :--- | :--- | :--- | | 2018 Debt Securitization | $408.2 | $408.2 | | GCIC 2018 Debt Securitization | $545.5 | $546.5 | | MS Credit Facility II | $49.0 | $0.0 | | JPM Credit Facility | $705.1 | $472.1 | | 2024 Notes | $502.5 | $400.0 | | 2026 Notes | $597.8 | $400.0 | | 2027 Notes | $346.6 | $0.0 | | Adviser Revolver | $0.0 | $0.0 | | Total Debt | $3,154.7 | $2,569.2 | - The average total debt outstanding increased to **$3.10 billion** for the three months ended June 30, 2022, from **$2.14 billion** in the prior year[423](index=423&type=chunk) - The effective annualized average interest rate on total debt was **3.0%** for the three months ended June 30, 2022, up from **2.8%** in the prior quarter, primarily due to rising LIBOR rates[424](index=424&type=chunk)[490](index=490&type=chunk) [Note 8. Commitments and Contingencies](index=136&type=section&id=Note%208.%20Commitments%20and%20Contingencies) As of June 30, 2022, the company had outstanding commitments to fund investments totaling **$268.6 million**, including **$42.9 million** for undrawn revolvers, and utilizes derivative instruments which carry off-balance sheet market and credit risk, while management believes it has sufficient liquidity to cover future obligations and expects the risk of future obligations under general indemnifications to be remote Commitments (in millions) | Commitment Type | June 30, 2022 | September 30, 2021 | | :--- | :--- | :--- | | Total outstanding commitments to fund investments | $268.6 | $340.7 | | Commitments on undrawn revolvers | $42.9 | $42.2 | - The company utilizes derivative instruments, such as forward currency contracts, which involve off-balance sheet market and credit risk[428](index=428&type=chunk) - Management believes current assets and liquidity are sufficient to cover future unfunded commitments, based on historical drawing rates, cash balances, and available credit facilities[426](index=426&type=chunk)[526](index=526&type=chunk) [Note 9. Financial Highlights](index=137&type=section&id=Note%209.%20Financial%20Highlights) This note presents key financial highlights for the nine months ended June 30, 2022, and 2021, showing a slight decrease in Net Asset Value (NAV) per share and a negative total return based on market value for the current period, contrasting with positive returns in the prior year, while the asset coverage ratio remains strong at **181.50%** Financial Highlights | Metric | 9 months ended June 30, 2022 | 9 months ended June 30, 2021 | | :--- | :--- | :--- | | Net asset value at beginning of period | $15.19 | $14.33 | | Net investment income per share | $0.83 | $0.72 | | Net realized gain (loss) on investment transactions per share | $0.10 | $0.02 | | Net change in unrealized appreciation (depreciation) per share | $(0.08) | $0.86 | | Net asset value at end of period | $15.14 | $15.06 | | Per share market value at end of period | $13.77 | $15.42 | | Total return based on average net asset value | 7.45% | 14.61% | | Total return based on market value | (12.90)% | 14.90% | | Asset coverage ratio | 181.50% | 224.37% | | Net assets at end of period (in millions) | $2,587.7 | $2,546.9 | - Net asset value per share decreased slightly from **$15.19** at the beginning of the period to **$15.14** at the end of the nine months ended June 30, 2022[431](index=431&type=chunk) - Total return based on market value was **(12.90)%** for the nine months ended June 30, 2022, a significant decline from **14.90%** in the prior year[431](index=431&type=chunk) [Note 10. Earnings Per Share](index=138&type=section&id=Note%2010.%20Earnings%20Per%20Share) This note provides the computation of basic and diluted earnings per share (EPS) for the three and nine months ended June 30, 2022, and 2021, showing a significant decrease for both periods compared to the prior year, reflecting a lower net increase in net assets resulting from operations Earnings Per Share (in millions, except per share data) | Metric | 3 months ended June 30, 2022 | 3 months ended June 30, 2021 | 9 months ended June 30, 2022 | 9 months ended June 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | Earnings available to stockholders | $15.4 | $82.9 | $145.4 | $268.6 | | Basic and diluted weighted average shares outstanding | 170,895,670 | 168,251,930 | 170,600,061 | 167,597,440 | | Basic and diluted earnings per share | $0.09 | $0.49 | $0.85 | $1.60 | - Basic and diluted EPS decreased from **$0.49** to **$0.09** for the three months ended June 30, 2022, compared to the same period in 2021[433](index=433&type=chunk) - Basic and diluted EPS decreased from **$1.60** to **$0.85** for the nine months ended June 30, 2022, compared to the same period in 2021[433](index=433&type=chunk) [Note 11. Dividends and Distributions](index=138&type=section&id=Note%2011.%20Dividends%20and%20Distributions) This note summarizes the company's dividend declarations and distributions for the nine months ended June 30, 2022, and 2021, showing a consistent quarterly distribution of **$0.30** per share in 2022, with a portion reinvested through the Dividend Reinvestment Plan (DRIP), primarily through open market purchases of shares Dividends and Distributions (in millions, except per share data) | Declaration Date | Record Date | Payment Date | Amount Per Share | Cash Distribution | DRIP Shares Issued | DRIP Shares Value | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | 11/19/2021 | 12/10/2021 | 12/30/2021 | $0.30 | $38.3 | 837,158 | $12.7 | | 02/04/2022 | 03/04/2022 | 03/29/2022 | $0.30 | $37.4 | 29,928 | $13.9 | | 05/06/2022 | 06/03/2022 | 06/29/2022 | $0.30 | $39.3 | — | $11.9 | | **Total 9 months ended June 30, 2022** | | | **$0.90** | **$115.0** | **867,086** | **$38.6** | | 11/20/2020 | 12/11/2020 | 12/30/2020 | $0.29 | $33.8 | — | $14.7 | | 02/05/2021 | 03/05/2021 | 03/30/2021 | $0.29 | $34.3 | 972,196 | $14.2 | | 05/07/2021 | 06/11/2021 | 06/29/2021 | $0.29 | $35.1 | 920,150 | $13.7 | | **Total 9 months ended June 30, 2021** | | | **$0.87** | **$103.3** | **1,892,346** | **$42.5** | - For the nine months ended June 30, 2022, total distributions declared were **$0.90** per share, compared to **$0.87** per share in the prior year[434](index=434&type=chunk) - In 2022, DRIP shares were primarily purchased in the open market at an average price of **$15.24** (December 2021) and **$13.00** (June 2022), with a small issuance of new shares in March 2022[434](index=434&type=chunk) [Note 12. Subsequent Events](index=139&type=section&id=Note%2012.%20Subsequent%20Events) On August 5, 2022, the company's board of directors declared a quarterly distribution of **$0.30** per share, payable on September 29, 2022, to stockholders of record as of September 2, 2022 - On August 5, 2022, the Board declared a quarterly distribution of **$0.30** per share[435](index=435&type=chunk) - The distribution is payable on September 29, 2022, to holders of record as of September 2, 2022[435](index=435&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=138&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial condition and operating results, including an overview of its investment strategy, revenue and expense drivers, and key financial performance metrics, also discussing significant events and risks such as the GCIC acquisition, the COVID-19 pandemic, and the LIBOR transition, along with a detailed analysis of investment income, expenses, and net realized and unrealized gains and losses [Forward-Looking Statements](index=138&type=section&id=Forward-Looking%20Statements) This section highlights that the report contains forward-looking statements regarding future events, performance, and financial condition, which involve inherent risks and uncertainties, covering various aspects such as operating results, investment prospects, economic conditions, and regulatory changes, emphasizing that actual results may differ materially from projections - The report contains forward-looking statements related to future events, performance, and financial condition, including operating results, investment prospects, and economic factors[438](index=438&type=chunk) - These statements involve risks and uncertainties, and actual results could differ materially due to factors like the COVID-19 pandemic, inflation, market conditions, and regulatory changes[438](index=438&type=chunk)[439](index=439&type=chunk) - Readers are advised to consult additional disclosures filed with the SEC for more information on risk factors[440](index=440&type=chunk) [Overview](index=142&type=section&id=Overview) Golub Capital BDC, Inc. (GBDC) is an externally managed BDC and RIC, listed on The Nasdaq Global Select Market (GBDC), with an investment objective to generate current income and capital appreciation by primarily investing in one-stop and other senior secured loans to U.S. middle-market companies, leveraging Golub Capital's established origination channels and disciplined underwriting standards, with a portfolio fair value of **$5.6 billion** across 328 companies as of June 30, 2022, with **84.1%** in one-stop loans - GBDC is an externally managed BDC and RIC, listed on The Nasdaq Global Select Market under the symbol 'GBDC'[442](index=442&type=chunk) - The investment objective is to generate current income and capital appreciation by primarily investing in one-stop and other senior secured loans of U.S. middle-market companies[443](index=443&type=chunk) Investment Portfolio by Type (Fair Value, in millions) | Investment Type | Fair Value | Percentage of Total Investments | | :--- | :--- | :--- | | Senior secured | $568.5 | 10.1% | | One stop | $4,721.7 | 84.1% | | Second lien | $40.3 | 0.7% | | Subordinated debt | $3.7 | 0.1% | | Equity | $279.3 | 5.0% | | Total | $5,613.6 | 100.0% | - As of June 30, 2022, the portfolio had debt and equity investments in **328 portfolio companies**, with a total fair value of **$5.6 billion**[453](index=453&type=chunk) [Revenues](index=144&type=section&id=Revenues) The company generates revenue primarily from interest and fee income on debt investments, and capital gains/distributions on equity investments, with debt investments typically having 3-7 year terms with fixed or floating rates, and additional revenue from various fees and prepayment premiums, while realized gains/losses are based on net proceeds versus amortized cost, and fair value changes are reported as unrealized appreciation/depreciation - Revenue is generated from interest and fee income on debt investments, and capital gains/distributions on equity investments[456](index=456&type=chunk) - Debt investments typically have 3-7 year terms with fixed or floating interest rates, often including deferred or PIK interest features[456](index=456&type=chunk) - Additional revenue comes from various fees (commitment, origination, amendment, etc.) and prepayment premiums on loans[456](index=456&type=chunk) [Expenses](index=144&type=section&id=Expenses) The company's primary operating expenses include base management fees and incentive fees paid to GC Advisors, along with interest expense on outstanding debt, with other expenses covering administrative services, professional fees, and various operational costs, and collateral management fees paid to GC Advisors by securitization vehicles being offset against the base management fee, all indirectly borne by common stockholders - Primary operating expenses include base management fees and incentive fees paid to GC Advisors, and interest expense on outstanding debt[457](index=457&type=chunk) - GC Advisors receives collateral management fees from securitization vehicles (e.g., 2018 Issuer, GCIC 2018 Issuer), which are offset against the base management fee payable under the Investment Advisory Agreement[460](index=460&type=chunk)[461](index=461&type=chunk)[462](index=462&type=chunk)[464](index=464&type=chunk) - Other expenses include administrative fees, professional fees, registration and listing costs, taxes, directors' fees, and various direct administrative costs[458](index=458&type=chunk) [GCIC Acquisition](index=146&type=section&id=GCIC%20Acquisition) On September 16, 2019, the company acquired Golub Capital Investment Corporation (GCIC) through a merger, converting each GCIC common stock share into **0.865** shares of the company's common stock, resulting in the issuance of **71,779,964** shares, with the acquisition accounted for using the asset acquisition method - The company acquired Golub Capital Investment Corporation (GCIC) on September 16, 2019, through a merger[466](index=466&type=chunk) - Each outstanding share of GCIC's common stock was converted into **0.865** shares of the company's common stock[466](index=466&type=chunk) - An aggregate of **71,779,964** shares of the company's common stock were issued to former GCIC stockholders[466](index=466&type=chunk) [COVID-19 Pandemic](index=146&type=section&id=COVID-19%20Pandemic) The COVID-19 pandemic has led to widespread business disruptions and governmental restrictions, impacting portfolio companies' operations and financial results, with resurgences and new variants posing ongoing risks, and the company and GC Advisors continuing to monitor the situation, acknowledging the unpredictable duration and extent of the pandemic's impact on the U.S. economy and their business - The COVID-19 pandemic has caused governmental restrictions, business closures, and supply chain disruptions, impacting portfolio companies' operating results[467](index=467&type=chunk) - The company cannot predict the duration of disruptions or the full impact of COVID-19 on its operations and financial condition[467](index=467&type=chunk) - Ongoing monitoring of the pandemic and public health guidance is in place, with concerns about continued economic impacts from resurgences and new variants[468](index=468&type=chunk) [LIBOR Transition](index=146&type=section&id=LIBOR%20Transition) The discontinuation of LIBOR by June 30, 2023, for USD settings, and its cessation for non-USD settings as of January 1, 2022, poses significant risks to credit markets and the company's portfolio, with the transition to alternative reference rates like SOFR and SONIA underway, but differences in calculation and market adoption could cause disruptions, negatively impacting investment values and net investment income, while the company has amended credit facilities to include fallback language and is working to transition portfolio company debt, and fixed-rate notes remain unaffected - The one-week and two-month U.S. dollar LIBOR settings ceased publication on December 31, 2021, and remaining U.S. dollar LIBOR settings will cease on June 30, 2023[469](index=469&type=chunk)[470](index=470&type=chunk)[473](index=473&type=chunk) - The discontinuation of LIBOR could cause disruptions in credit markets, negatively impact the market value and transferability of portfolio investments, and decrease net investment income[472](index=472&type=chunk) - The company has amended the JPM Credit Facility and MS Credit Facility II to include fallback language for SOFR and other foreign alternative reference rates, and fixed-rate notes (2024, 2026, 2027) will not be affected[474](index=474&type=chunk) [Recent Developments](index=148&type=section&id=Recent%20Developments) On August 5, 2022, the company's board of directors declared a quarterly distribution of **$0.30** per share, payable on September 29, 2022, to holders of record as of September 2, 2022 - On August 5, 2022, the board of directors declared a quarterly distribution of **$0.30** per share[475](index=475&type=chunk) - The distribution is payable on September 29, 2022, to holders of record as of September 2, 2022[475](index=475&type=chunk) [Consolidated Results of Operations](index=148&type=section&id=Consolidated%20Results%20of%20Operations) The consolidated operating results for the three and nine months ended June 30, 2022, show an increase in total investment income and net investment income compared to prior periods, but a significant net loss on investment transactions was recorded for the three-month period due to unrealized depreciation, with non-GAAP financial measures provided to exclude the impact of purchase premium amortization and capital gain incentive fee accruals Consolidated Results of Operations (in millions) | Metric | 3 months ended June 30, 2022 | 3 months ended March 31, 2022 | 9 months ended June 30, 2022 | 9 months ended June 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | Total investment income | $95.6 | $86.0 | $268.2 | $226.0 | | Total net expenses | $41.7 | $42.5 | $126.0 | $104.6 | | Net investment income | $53.9 | $43.4 | $142.2 | $121.4 | | Net gain (loss) on investment transactions | $(38.0) | $23.5 | $4.3 | $147.3 | | Net increase (decrease) in net assets from operations | $15.4 | $66.9 | $145.4 | $268.6 | - Net investment income increased by **$10.5 million** from the three months ended March 31, 2022, to June 30, 2022, and by **$20.8 million** for the nine months ended June 30, 2022, compared to the prior year[477](index=477&type=chunk) - The company reported a net loss on investment transactions of **$(38.0) million** for the three months ended June 30, 2022, a significant decrease from a net gain of **$23.5 million** in the preceding quarter[477](index=477&type=chunk) - Non-GAAP measures like 'Adjusted Net Investment Income' and 'Adjusted Net Realized and Unrealized Gain' are provided to exclude the impact of purchase premium amortization and capital gain incentive fee accruals[480](index=480&type=chunk) [Investment Income](index=150&type=section&id=Investment%20Income) Investment income increased by **$9.7 million** from Q1 2022 to Q2 2022, driven by a **$294.2 million** increase in average earning debt investments and rising floating base rates, along with higher fee and accretion income from portfolio company payoffs, and for the nine months ended June 30, 2022, investment income rose by **$42.1 million** year-over-year, also benefiting from a decrease in GCIC acquisition purchase price premium amortization, with income yields on one-stop and senior secured loans increasing in Q2 2022 due to higher fees and rising LIBOR/SOFR rates - Investment income increased by **$9.7 million** from Q1 2022 to Q2 2022, primarily due to a **$294.2 million** increase in average earning debt investments and rising floating base rates[483](index=483&type=chunk) - For the nine months ended June 30, 2022, investment income increased by **$42.1 million** year-over-year, partly due to a decrease in GCIC acquisition purchase price premium amortization[484](index=484&type=chunk) Annualized Income Yield by Debt Security Type | Debt Security Type | 3 months ended June 30, 2022 | 9 months ended June 30, 2022 | | :--- | :--- | :--- | | Senior secured | 6.3% | 5.9% | | One stop | 7.2% | 7.2% | | Second lien | 8.8% | 8.9% | | Subordinated debt | 12.3% | 12.0% | - Over **98.0%** of the loan portfolio at fair value is subject to an interest rate floor, with a weighted average base rate floor of **0.85%** as of June 30, 2022[484](index=484&type=chunk) [Expenses](index=151&type=section&id=Expenses) Total net expenses decreased by **$0.8 million** from Q1 2022 to Q2 2022, but increased by **$21.4 million** for the nine months ended June 30, 2022, compared to the prior year, primarily driven by higher interest and other debt financing expenses due to increased average debt outstanding and rising floating rates, with the effective annualized average interest rate on total debt increasing to **3.0%** in Q2 2022 from **2.8%** in Q1 2022, mainly due to rising LIBOR rates Expense Categories (in millions) | Expense Category | 3 months ended June 30, 2022 | 3 months ended March 31, 2022 | 9 months ended June 30, 2022 | 9 months ended June 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | Interest and other debt financing expenses | $23.3 | $19.3 | $60.4 | $46.4 | | Base management fee, net of waiver | $19.0 | $16.1 | $52.6 | $45.6 | | Income incentive fee | $0.7 | $0.0 | $3.6 | $2.9 | | Capital gain incentive fee | $(4.8) | $4.4 | $0.0 | $0.0 | | Professional fees | $1.0 | $0.7 | $2.7 | $3.1 | | Administrative service fee | $2.0 | $1.6 | $5.4 | $5.5 | | General and administrative expenses | $0.5 | $0.4 | $1.2 | $1.2 | | Total net expenses | $41.7 | $42.5 | $126.0 | $104.6 | - Interest and other debt financing expenses increased by **$4.0 million** from Q1 2022 to Q2 2022, driven by a **$271.2 million** increase in average debt outstanding and rising LIBOR/SOFR rates[488](index=488&type=chunk) - The effective annualized average interest rate on total debt increased from **2.8%** in Q1 2022 to **3.0%** in Q2 2022, primarily due to rising LIBOR rates on floating-rate debt facilities[489](index=489&type=chunk)[490](index=490&type=chunk) [Management Fee](index=152&type=section&id=Management%20Fee) The base management fee, net of waiver, increased from Q1 2022 to Q2 2022 due to a waiver executed in Q1 2022, and for the nine months ended June 30, 2022, the fee increased year-over-year due to higher average adjusted gross assets, partially offset by the same waiver, with GC Advisors changing its practice regarding administrative agent fees effective April 1, 2022, leading to a **$1.9 million** waiver of base management fees in Q1 2022 - The base management fee, net of waiver, increased from Q1 2022 to Q2 2022 due to a **$1.9 million** waiver executed during Q1 2022[493](index=493&type=chunk)[495](index=495&type=chunk) - For the nine months ended June 30, 2022, the base management fee, net of waiver, increased year-over-year due to higher average adjusted gross assets, partially offset by the waiver[494](index=494&type=chunk) - Effective April 1, 2022, GC Advisors changed its practice of retaining administrative agent fees, resulting in a **$1.9 million** waiver of base management fees for the three months ended March 31, 2022[495](index=495&type=chunk) [Incentive Fees](index=152&type=section&id=Incentive%20Fees) The Income Incentive Fee increased by **$0.7 million** from Q1 2022 to Q2 2022, and also year-over-year for the nine months ended June 30, 2022, driven by higher Pre-Incentive Fee Net Investment Income and net funds growth, with no Capital Gain Incentive Fee payable under the Investment Advisory Agreement as of June 30, 2022, or September 30, 2021, but a GAAP-required reversal of **$4.8 million** for capital gain incentive fee accrual was recorded in Q2 2022 due to unrealized depreciation on investments - The Income Incentive Fee increased by **$0.7 million** from Q1 2022 to Q2 2022, and for the nine months ended June 30, 2022, due to increased Pre-Incentive Fee Net Investment Income and net funds growth[497](index=497&type=chunk) - The Income Incentive Fee as a percentage of Pre-Incentive Fee Net Investment Income was **1.4%** for Q2 2022 and **2.5%** for the nine months ended June 30, 2022[498](index=498&type=chunk) - No Capital Gain Incentive Fee was payable under the Investment Advisory Agreement as of June 30, 2022, or September 30, 2021, but a GAAP-required reversal of **$4.8 million** for capital gain incentive fee accrual was recorded in Q2 2022 due to unrealized depreciation on portfolio company investments[499](index=499&type=chunk) [Professional Fees, Administrative Service Fee, and General and Administrative Expenses](index=153&type=section&id=Professional%20Fees%2C%20Administrative%20Service%20Fee%2C%20and%20General%20and%20Administrative%20Expenses) Combined professional fees, administrative service fees, and general and administrative expenses increased by **$0.7 million** from Q1 2022 to Q2 2022 due to higher professional and administrative costs, but decreased by **$0.4 million** for the nine months ended June 30, 2022, compared to the prior year, primarily due to lower professional fees, with the Administrator reimbursing **$0.9 million** in expenses during Q2 2022 and **$5.2 million** for the nine months ended June 30, 2022 - Combined professional fees, administrative service fees, and general and administrative expenses increased by **$0.7 million** from Q1 2022 to Q2 2022[501](index=501&type=chunk) - These expenses decreased by **$0.4 million** for the nine months ended June 30, 2022, compared to the prior year, primarily due to lower professional fees[501](index=501&type=chunk) - The Administrator reimbursed **$0.9 million** in expenses during Q2 2022 and **$5.2 million** for the nine months ended June 30, 2022[502](index=502&type=chunk) [Net Realized and Unrealized Gains and Losses](index=153&type=section&id=Net%20Realized%20and%20Unrealized%20Gains%20and%20Losses) The company recorded a net realized gain of **$2.5 million** in Q2 2022, primarily from a forward currency contract settlement and equity investment sales, and for the nine months ended June 30, 2022, net realized gain was **$17.4 million** from similar activities, but a net change in unrealized depreciation of **$(40.6) million** occurred in Q2 2022, mainly due to wider credit spreads and fair value decreases across most portfolio investments, with net unrealized depreciation of **$(13.2) million** for the nine months ended June 30, 2022, a significant shift from **$144.0 million** in unrealized appreciation in the prior year, reflecting adverse economic effects and market uncertainty Net Realized and Unrealized Gains and Losses (in millions) | Metric | 3 months ended June 30, 2022 | 3 months ended March 31, 2022 | 9 months ended June 30, 2022 | 9 months ended June 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | Net realized gain (loss) on investment transactions | $2.5 | $0.4 | $17.4 | $3.3 | | Net change in unrealized appreciation (depreciation) on investment transactions | $(40.6) | $23.2 | $(13.2) | $144.0 | - Net realized gain of **$2.5 million** in Q2 2022 was primarily from a forward currency contract settlement and equity investment sales[505](index=505&type=chunk) - Net unrealized depreciation of **$(40.6) million** in Q2 2022 was mainly due to wider credit spreads and fair value decreases across most portfolio investments[506](index=506&type=chunk)[507](index=507&type=chunk) - For the nine months ended June 30, 2022, net unrealized depreciation was **$(13.2) million**, a significant shift from **$144.0 million** in unrealized appreciation in the prior year, reflecting adverse economic effects and market uncertainty[508](index=508&type=chunk) [Liquidity and Capital Resources](index=154&type=section&id=Liquidity%20and%20Capital%20Resources) For the nine months ended June 30, 2022, the company experienced a net decrease in cash and equivalents of **$122.9 million**, primarily due to **$575.4 million** used in operating activities (driven by investment fundings) partially offset by **$452.5 million** from financing activities (debt borrowings), with **$81.4 million** in cash and equivalents and **$34.9 million** in restricted cash as of June 30, 2022, an asset coverage ratio of **181.5%**, and a GAAP debt-to-equity ratio of **1.23x**, as the company aims to fund growth through securities offerings and borrowings, while managing unfunded commitments and market risks - For the nine months ended June 30, 2022, net cash and equivalents decreased by **$122.9 million**, with **$575.4 million** used in operating activities (primarily investment fundings) and **$452.5 million** provided by financing activities (debt borrowings)[509](index=509&type=chunk) Liquidity and Capital Resources (in millions) | Metric | June 30, 2022 | September 30, 2021 | | :--- | :--- | :--- | | Cash and cash equivalents | $81.4 | $175.6 | | Restricted cash and cash equivalents | $34.9 | $61.8 | | Total outstanding commitments to fund investments | $268.6 | $340.7 | | Asset coverage ratio | 181.5% | 224.4% | | GAAP debt-to-equity ratio | 1.23x | 0.85x | - The company intends to fund investment portfolio growth through future securities offerings and borrowings, targeting a GAAP debt-to-equity ratio between **0.85x** to **1.25x**[524](index=524&type=chunk)[528](index=528&type=chunk) [Revolving Debt Facilities](index=154&type=section&id=Revolving%20Debt%20Facilities) The company utilizes several revolving debt facilities to manage liquidity, with **$49.0 million** outstanding under the MS Credit Facility II (with **$26.0 million** available) and **$705.1 million** outstanding under the JPM Credit Facility (with **$482.4 million** available) as of June 30, 2022, and the Adviser Revolver, with a **$100.0 million** capacity, had no outstanding amounts, with these facilities subject to leverage and borrowing base restrictions Revolving Debt Facilities (in millions) | Facility | Outstanding Debt as of June 30, 2022 | Remaining Commitments as of June 30, 2022 | | :--- | :--- | :--- | | MS Credit Facility II | $49.0 | $26.0 | | JPM Credit Facility | $705.1 | $482.4 | | Adviser Revolver | $0.0 | $100.0 | - The MS Credit Facility II allows borrowing up to **$75.0 million**, and the JPM Credit Facility allows up to **$1.19 billion**, both subject to leverage and borrowing base restrictions[512](index=512&type=chunk)[514](index=514&type=chunk) - The Adviser Revolver, with a **$100.0 million** capacity, is intended for short-term borrowings, typically repaid within 30-45 days[515](index=515&type=chunk) [Debt Securitizations](index=155&type=section&id=Debt%20Securitizations) The company utilizes debt securitizations, including the 2018 Debt Securitization and the GCIC 2018 Debt Securitization, to finance its investments, with **$408.2 million** outstanding under the 2018 Debt Securitization and **$546.5 million** under the GCIC 2018 Debt Securitization as of June 30, 2022, which are secured obligations of their respective issuers, backed by diversified loan portfolios, and subject to 1940 Act restrictions and U.S. risk retention rules - As of June 30, 2022, **$408.2 million** was outstanding under the 2018 Debt Securitization[516](index=516&type=chunk) - As of June 30, 2022, **$546.5 million** was outstanding under the GCIC 2018 Debt Securitization, which was assumed as a result of the Merger[517](index=517&type=chunk) - These securitizations are secured obligations of their respective issuers, backed by diversified loan portfolios, and are subject to 1940 Act restrictions and U.S. risk retention rules[518](index=518&type=chunk) [2024 Notes](index=155&type=section&id=2024%20Notes) As of June 30, 2022, the company had **$500.0 million** in outstanding aggregate principal amount of 2024 Notes, initially issued in October 2020 (**$400.0 million**) with an additional issuance in October 2021 (**$100.0 million**) - As of June 30, 2022, **$500.0 million** in aggregate principal amount of 2024 Notes were outstanding[519](index=519&type=chunk) - The initial issuance of **$400.0 million** occurred in October 2020, with an additional **$100.0 million** issued in October 2021[519](index=519&type=chunk) [2026 Notes](index=155&type=section&id=2026%20Notes) As of June 30, 2022, the company had **$600.0 million** in outstanding aggregate principal amount of 2026 Notes, initially issued in February 2021 (**$400.0 million**) with an additional issuance in October 2021 (**$200.0 million**) - As of June 30, 2022, **$600.0 million** in aggregate principal amount of 2026 Notes were outstanding[521](index=521&type=chunk) - The initial issuance of **$400.0 million** occurred in February 2021, with an additional **$200.0 million** issued in October 2021[521](index=521&type=chunk) [2027 Notes](index=156&type=section&id=2027%20Notes) As of June 30, 2022, the company had **$350.0 million** in outstanding aggregate principal amount of 2027 Notes, which were issued on July 27, 2021 - As of June 30, 2022, **$350.0 million** in aggregate principal amount of 2027 Notes were outstanding[522](index=522&type=chunk) - These notes were issued on July 27, 2021[522](index=522&type=chunk) [Equity Distribution Agreement](index=156&type=section&id=Equity%20Distribution%20Agreement) On May 28, 2021, the company entered into an Equity Distribution Agreement to sell up to **$250.0 million** of common stock through an 'at the market' program, with no common stock issued under this agreement as of June 30, 2022 - On May 28, 2021, the company entered into an Equity Distribution Agreement to sell up to **$250.0 million** of common stock[523](index=523&type=chunk) - The sales are conducted through an 'at the market offering' program[523](index=523&type=chunk) - As of June 30, 2022, no common stock has been issued under this agreement[523](index=523&type=chunk) [Asset Coverage, Contractual Obligations, Off-Balance Sheet Arrangements and Other Liquidity Considerations](index=156&type=section&id=Asset%20Coverage%2C%20Contractual%20Obligations%2C%20Of%20-Balance%20Sheet%20Arrangements%20and%20Other%20Liquidity%20Considerations) As of June 30, 2022, the company maintained an asset coverage ratio of **181.5%** (above the 150% requirement) and a GAAP debt-to-equity ratio of **1.23x**, targeting a range of **0.85x** to **1.25x**, with outstanding commitments to fund investments totaling **$268.6 million**, including **$42.9 million** in unfunded revolvers, and uses derivative instruments which carry off-balance sheet market and credit risk, while management believes it has sufficient liquidity to cover future obligations and plans to fund growth through securities offerings and borrowings, optimizing returns from repayments if capital raising is challenging - As of June 30, 2022, the asset coverage ratio was **181.5%**, exceeding the 150% requirement, and the GAAP debt-to-equity ratio was **1.23x**[524](index=524&type=chunk) - Outstanding commitments to fund investments totaled **$268.6 million** as of June 30, 2022, including **$42.9 million** in unfunded revolvers[526](index=526&type=chunk) - The company uses derivative instruments, which expose it to off-balance sheet market and credit risk[527](index=527&type=chunk) - Management believes it has sufficient liquidity to cover future obligations and plans to fund growth through securities offerings and borrowings, while optimizing returns from repayments if capital raising is challenging[526](index=526&type=chunk)[528](index=528&type=chunk) [Portfolio Composition, Investment Activity and Yield](index=158&type=section&id=Portfolio%20Composition%2C%20Investment%20Activity%20and%20Yield) As of June 30, 2022, the company's portfolio comprised **328 investments** with a fair value of **$5.6 billion**, primarily in one-stop loans, with new investment commitments for the nine months ended June 30, 2022, totaling **$1.64 billion**, with **90.3%** in one-stop loans, a weighted average rate of new investment fundings of **7.0%**, and a weighted average spread of **5.8%**, while non-accrual loans represented **1.5%** of total debt investments at cost, the portfolio median EBITDA was **$44.4 million**, and internal performance ratings indicate that **85.7%** of investments had an acceptable level of risk - As of June 30, 2022, the portfolio had **328 investments** with a total fair value of **$5.6 billion**[530](index=530&type=chunk) New Investment Commitments (in millions) | Investment Type | 9 months ended June 30, 2022 | Percentage | | :--- | :--- | :--- | | Senior secured | $52.9 | 3.2% | | One stop | $1,481.8 | 90.3% | | Second lien | $0.6 | 0.0% | | Subordinated debt | $1.0 | 0.1% | | Equity | $104.2 | 6.4% | | Total | $1,640.5 | 100.0% | Investment Funding Metrics | Metric | 9 months ended June 30, 2022 | | :--- | :--- | | Weighted average rate of new investment fundings | 7.0% | | Weighted average spread of new floating rate investment fundings | 5.8% | | Weighted average fees of new investment fundings | 1.1% | | Weighted average rate of sales and payoffs | 6.3% | - As of June 30, 2022, non-accrual loans represented **1.5%** of total debt investments at cost and **1.1%** at fair value[533](index=533&type=chunk) - The portfolio median EBITDA for portfolio companies was **$44.4 million** as of June 30, 2022[535](index=535&type=chunk) Internal Performance Rating (Fair Value, in millions) | Internal Performance Rating | June 30, 2022 | Percentage of Total Investments | | :--- | :--- | :--- | | 5 (Least risk) | $330.1 | 5.9% | | 4 (Acceptable risk) | $4,815.6 | 85.7% | | 3 (Increased risk) | $413.5 | 7.4% | | 2 (Materially increased risk) | $53.4 | 1.0% | | 1 (Substantially increased risk) | $1.0 | 0.0% | | Total | $5,613.6 | 100.0% | [Distributions](index=161&type=section&id=Distributions) The company intends to make quarterly distributions to stockholders, determined by the board of directors, subject to asset coverage requirements and tax regulations for RICs, which may differ from GAAP, and stockholders can opt out of the dividend reinvestment plan (DRIP) to receive cash, but distributions, whether cash or reinvested shares, are generally subject to U.S. federal income tax - The company intends to make quarterly distributions to stockholders, subject to board approval and asset coverage requirements under the 1940 Act[540](index=540&type=chunk)[541](index=541&type=chunk) - Distributions must meet certain percentages of income annually to maintain RIC tax status, otherwise adverse U.S. federal income tax consequences may occur[541](index=541&type=chunk) - The company has an 'opt out' dividend reinvestment plan; distributions, whether cash or reinvested shares, are generally subject to U.S. federal income tax[544](index=544&type=chunk) [Related Party Transactions](index=161&type=section&id=Related%20Party%20Transactions) The company engages in various business relationships with affiliated parties, including GC Advisors and Golub Capital LLC, encompassing an Investment Advisory Agreement with GC Advisors for management services, an Administration Agreement with Golub Capital LLC for administrative services, and a license agreement for using the 'Golub Capital' name, with GC Advisors also managing other investment funds with similar mandates, potentially leading to side-by-side investments, subject to allocation policies and regulatory compliance, and the company has a formal code of ethics governing conduct and officers/directors are subject to 1940 Act duties - The company has an Investment Advisory Agreement with GC Advisors and an Administration Agreement with Golub Capital LLC for management and administrative services, respectively[545](index=545&type=chunk) - GC Advisors manages other investment funds with similar mandates, potentially leading to side-by-side investments, subject to an allocation policy and regulatory compliance[547](index=547&type=chunk) - The company has a formal code of ethics, and its officers and directors are subject to duties under the 1940 Act and Delaware law[548](index=548&type=chunk) [Critical Accounting Policies](index=162&type=section&id=Critical%20Accounting%20Policies) The company's critical accounting policies involve significant estimates and judgments, particularly in fair value measurements for investments without readily available market values, with investments categorized into a three-level hierarchy, most being Level 3 and valued using methods like enterprise value (EBITDA multiples), discounted cash flow, and market interest rate approaches, with independent valuation firm review, and revenue recognition policies detailing interest, fee, and dividend income accrual, as well as non-accrual loan criteria, while income tax policies adhere to RIC requirements, with consolidated subsidiaries subject to corporate-level taxes - Fair value measurements for investments without readily available market values are critical, involving subjective judgments and estimates by the board of directors, with independent valuation firm review[550](index=550&type=chunk)[551](index=551&type=chunk)[552](index=552&type=chunk) - Investments are categorized into Level 1, 2, or 3, with most being Level 3, valued using market rate, market comparable companies (EBITDA/revenue multiples), and collateral analysis approaches[554](index=554&type=chunk)[555](index=555&type=chunk)[556](index=556&type=chunk)[559](index=559&type=chunk)[560](index=560&type=chunk) - Revenue recognition policies cover interest, fee, and dividend income accrual, including capitalization of origination fees and PIK interest, and criteria for placing loans on non-accrual status[566](index=566&type=chunk)[568](index=568&type=chunk) - Income tax policies adhere to RIC requirements, necessitating timely distribution of at least **90%** of taxable income to avoid federal income taxes, with consolidated subsidiaries subject to corporate-level taxes[569](index=569&type=chunk)[570](index=570&type=chunk)[572](index=572&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=165&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company is exposed to financial market risks, particularly interest rate fluctuations, as many of its loans and borrowings have floating interest rates, with a hypothetical analysis showing that a **50 basis point** increase in interest rates would result in an **$18.5 million** net increase in investment income, while a **25 basis point** decrease would lead to a **$9.1 million** net decrease, and the company may use hedging instruments to mitigate these risks - The company is subject to financial market risks, primarily from changes in interest rates, as many loans and borrowings have floating interest rates (LIBOR, SOFR, etc.) with reset provisions[575](index=575&type=chunk) Impact of Interest Rate Changes on Investment Income (in millions) | Change in interest rates | Increase (decrease) in interest income | Increase (decrease) in interest expense | Net increase (decrease) in investment income | | :--- | :--- | :--- | :--- | | Down 25 basis points | $(13.3) | $(4.2) | $(9.1) | | Up 50 basis points | $26.9 | $8.3 | $18.5 | | Up 100 basis points | $53.9 | $16.7 | $37.2 | | Up 150 basis points | $81.0 | $25.0 | $55.9 | | Up 200 basis points | $108.1 | $33.4 | $74.7 | - The weighted average floor on loans subject to floating interest rates was **0.85%** as of June 30, 2022[575](index=575&type=chunk) - The company may use hedging instruments like interest rate swaps, futures, options, and forward contracts to manage interest rate fluctuations[578](index=578&type=chunk) [Item 4. Controls and Procedures](index=168&type=section&id=Item%204.%20Controls%20and%20Procedures) As of June 30, 2022, management, including the CEO and CFO, evaluated the effectiveness of the company's disclosure controls and procedures and concluded they were effective, providing reasonable assurance that required information is recorded, processed, summarized, and reported timely, with no material changes to internal controls over financial reporting occurring during the period - As of June 30, 2022, disclosure controls and procedures were evaluated and deemed effective[580](index=580&type=chunk) - These controls provide reasonable assurance for timely and accurate reporting of information required by SEC rules[580](index=580&type=chunk) - No material changes to internal controls over financial reporting occurred during the period[580](index=580&type=chunk) [Part II. Other Information](index=167&type=section&id=Part%20II.%20Other%20Information) [Item 1. Legal Proceedings](index=167&type=section&id=Item%201.%20Legal%20Proceedings) The company, GC Advisors, and Golub Capital LLC may be involved in legal and regulatory proceedings in the normal course of business, however, none of these entities believe they are currently subject to any material legal proceedings - The company, GC Advisors, and Golub Capital LLC may be involved in legal and regulatory proceedings[582](index=582&type=chunk) - None of these entities believe they are currently subject to any material legal proceedings[582](index=582&type=chunk) [Item 1A. Risk Factors](index=167&type=section&id=Item%201A.%20Risk%20Factors) This section advises readers to carefully consider various risk factors, including those detailed in previous annual and quarterly reports, with a new risk factor highlighting that inflation may adversely affect portfolio companies' business, results of operations, and financial condition, potentially impacting their ability to pay interest and principal, and reducing the fair value of investments - Readers should consider risk factors from previous annual and quarterly reports, as well as new risks presented[583](index=583&type=chunk) - Inflation may adversely affect portfolio companies' business, results of operations, and financial condition[584](index=584&type=chunk) - Inability to pass on increased costs or risi

Golub Capital BDC (NASDAQ:GBDC) Q2 2022 Earnings Conference Call May 11, 2022 3:00 PM ET Company Participants David Golub - Chief Executive Officer Greg Robbins - Senior Managing Director Jon Simmons - Managing Director Chris Ericson - Chief Financial Officer Conference Call Participants Finian O'Shea - Wells Fargo Securities Ryan Lynch - KB Robert Dodd - Raymond James Operator Hello everyone and welcome to GBDC's Earnings Call for the Quarter Ended March 31st. Before we begin, I'd like to take a moment to ...

| --- | --- | --- | --- | --- | |------------------------------|-------|-------|-------|-------| | | | | | | | | | | | | | | | | | | | | | | | | | GOLUB CAPITAL BDC, INC. | | | | | | | | | | | | INVESTOR PRESENTATION | | | | | | QUARTER ENDED MARCH 31, 2022 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Disclaimer Some of the statements in this presentation constitute forward-looking statements, which relate to future events or our future performance or financial condition. The forward-looking st ...