Goldman Sachs BDC(US:GSBD)2023-02-23 21:54Investment Overview - The company has originated over $6.91 billion in aggregate principal amount of debt and equity investments from its formation in 2012 through December 31, 2022[365]. - As of December 31, 2022, the total investments amounted to $3,691.04 million, an increase from $3,506.22 million as of December 31, 2021[383]. - The company primarily invests in U.S. middle-market companies, defined as those with annual EBITDA between $5 million and $200 million[368]. - The portfolio includes $3,174.53 million in first lien/senior secured debt, $120.25 million in first lien/last-out unitranche, and $255.35 million in second lien/senior secured debt as of December 31, 2022[383]. - The number of portfolio companies increased to 134 as of December 31, 2022, compared to 121 as of December 31, 2021[386]. - The total investments as of December 31, 2022, were valued at $3,506.22 million, an increase from $3,478.44 million as of December 31, 2021[394]. - The company has a diversified investment portfolio across various sectors, including software, healthcare, and construction[490]. Financial Performance - The company generates revenues primarily through interest income from investments, with additional income from various fees and capital gains[375]. - Total investment income increased to $357.45 million in 2022 from $346.98 million in 2021, driven by higher interest income[402]. - Net investment income after taxes decreased to $228.57 million in 2022 from $237.38 million in 2021, reflecting a decline in net realized and unrealized gains[401]. - The net increase in net assets from operations was $55,003,000 in 2022, compared to $192,427,000 in 2021, reflecting a decline in operational performance[464]. - The company reported a net realized gain of $19,005,000 in 2022, contrasting with a net loss of $(40,485,000) in 2021[464]. - The company incurred total expenses of $136,152 thousand in 2022, a slight decrease from $139,900 thousand in 2021, reflecting a reduction of 2.00%[459]. Investment Quality - Performing investments accounted for 97.9% of total investments at an amortized cost of $3,613.76 million as of December 31, 2022, compared to 97.5% at $3,418.82 million in the previous year[395]. - Non-accrual investments decreased to $77.28 million, representing 2.1% of total investments as of December 31, 2022, down from $88.97 million or 2.5% in the prior year[395]. - The investment performance grading system showed that 97.1% of investments were rated Grade 2 as of December 31, 2022, compared to 94.9% in the previous year[394]. - The weighted average yield on debt and income-producing investments at amortized cost rose to 11.7% as of December 31, 2022, from 8.4% in the previous year[386]. - The median EBITDA of portfolio companies increased to $49.62 million as of December 31, 2022, compared to $38.97 million as of December 31, 2021[386]. Debt and Leverage - The company’s leverage strategy includes a senior secured revolving credit agreement and notes due in 2025 and 2026, allowing for increased yield[381]. - The weighted average leverage (net debt/EBITDA) improved to 6.1x as of December 31, 2022, down from 6.4x as of December 31, 2021[386]. - The company has a total of $1,695.00 million committed borrowing amount under the Revolving Credit Facility, with an uncommitted accordion feature allowing an increase to $2,250.00 million[422]. - Interest and other debt expenses rose to $79.46 million in 2022 from $58.99 million in 2021, attributed to increased debt borrowing and rising interest rates[405]. Tax and Regulatory Compliance - The company expects to qualify annually for tax treatment as a regulated investment company (RIC) under the Internal Revenue Code[365]. - The company must distribute at least 90% of its investment company taxable income annually to maintain its RIC status, which includes net ordinary income and excess short-term capital gains[556]. - The company recognizes tax positions in its consolidated financial statements only when it is more likely than not that the position will be sustained upon examination[553]. - The company is subject to potential examination by various taxing authorities, and its tax positions are subject to ongoing interpretation of laws and regulations[554]. Market Conditions and Risks - The company expects that a 300 basis point increase in interest rates could result in a net income increase of $53.03 million, while a 300 basis point decrease could lead to a net income decrease of $52.80 million[437]. - The financial underperformance of National Spine and Pain Centers, LLC and Zep Inc. contributed significantly to the net change in unrealized appreciation (depreciation) for 2022[409]. - The company anticipates entering into hedging transactions to manage interest rate risk, subject to regulatory compliance[429]. - The company operates as a "limited derivatives user," which may restrict its ability to use derivatives and enter into certain financial contracts[430]. Shareholder Returns and Distributions - The company declared a quarterly distribution of $0.45 per share on February 22, 2023, payable on April 27, 2023, to holders of record as of March 31, 2023[433]. - Distributions to stockholders from distributable earnings amounted to $184,315 thousand in 2022, compared to $198,332 thousand in 2021, a decrease of 7.06%[462]. - The company has a voluntary dividend reinvestment plan (DRIP) that allows stockholders to automatically reinvest cash distributions into additional shares unless they opt out[559]. Operational Efficiency - The company anticipates general and administrative expenses to remain stable or decline as a percentage of total assets during periods of asset growth[380]. - Adjusted net investment income after taxes increased to $215.10 million in 2022 from $194.93 million in 2021, reflecting improved operational efficiency[401]. - The company’s management and incentive fees compensate the Investment Adviser for investment-related activities, impacting overall expenses[377].