Golub Capital(GBDC) - 2024 Q2 - Quarterly Results

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