Golub Capital(US:GBDC)2025-11-19 16:02Financial Data and Key Metrics Changes - For the fiscal quarter ending September 30, 2025, adjusted net investment income (NII) per share was $0.39, translating to an adjusted NII return on equity (ROE) of 10.4% [4] - Adjusted net income per share was $0.36 for an adjusted ROE of 9.6% [4] - Cumulative distributions for fiscal year 2025 totaled $1.65 per share, representing 10.9% of end-of-year net asset value per share [4] - The net asset value per share at the end of fiscal year 2025 was $14.97, which is 34 cents above the net asset value per share at its IPO in 2010 [5] Business Line Data and Key Metrics Changes - Approximately 90% of GBDC's investment portfolio at fair value remains in the highest-performing internal rating categories [10] - Investments on non-accrual status decreased to 0.3% of the total investment portfolio at fair value, well below the BDC peer industry average [10] - GBDC's investment income yield was 10.4%, a sequential decline of 20 basis points [11] - The weighted average rate on new investments was 8.9%, a decline of 30 basis points from the prior quarter [18] Market Data and Key Metrics Changes - The private credit direct lending market is facing headwinds, including narrowed spreads and a credit cycle with an unusual level of defaults and credit stress [6][7] - The overall credit performance remained solid, but the market is experiencing tighter spreads across various debt categories [5][6] Company Strategy and Development Direction - GBDC's investment strategy focuses on providing first-lien senior-secured loans to middle-market companies backed by strong private equity sponsors [3] - The company plans to approach dividend questions with a strategy aimed at maintaining stable net asset value per share, minimizing excise taxes, and adjusting base distribution levels infrequently [8] - GBDC aims to leverage its existing sponsor relationships and portfolio company incumbencies for origination volume while remaining selective in underwriting [13] Management's Comments on Operating Environment and Future Outlook - The U.S. economy shows surprising resilience, but there are signs of weakness, particularly among lower-end consumers [25][26] - Elevated credit stress is expected to persist, impacting different BDCs in varying ways, with a widening gap between successful and struggling managers [26][27] - Management emphasizes the importance of cautious portfolio examination and early intervention to mitigate potential credit losses [28] Other Important Information - GBDC's investment portfolio decreased modestly to just under $8.8 billion at fair value due to repayments and exits [12] - The company repurchased 368,000 shares during the quarter, totaling 2.9 million shares or $40.6 million for the fiscal year [16] Q&A Session Summary Question: Changes in availability of equity co-invest - Management stated that there have been no meaningful changes in their approach or the availability of equity co-investments over the past years [31][32] Question: Themes in the economy and cost inflation - Management expressed optimism about capital spending due to new provisions but raised concerns about stress among subprime consumers [36][37] Question: Compression of spreads and future outlook - Management clarified that the compression of private credit spreads is not solely due to supply-demand imbalances and emphasized the need for a broad change in investor sentiment for spreads to change [39][40]