Golub Capital BDC, Inc. Announces Preliminary Fiscal Year 2024 First Quarter Financial Results and Declares Increased Quarterly Distribution to $0.39 Per Share
- Increased base quarterly distribution to $0.39 per share from $0.37 per share
- Reduced income and capital gain incentive fee rates from 20.0% to 15.0%
- Originated $58.6 million in new middle-market investment commitments
- Decreased GAAP debt-to-equity ratio to 1.21x as of December 31, 2023
- Board of directors increased quarterly base distribution by over 5% and declared a quarterly distribution of $0.39 per share
- None.
Insights
Golub Capital BDC, Inc.'s (GBDC) preliminary financial results for the first fiscal quarter ending December 31, 2023, reveal a strategic maneuver that may signal an optimistic outlook to investors. The increase in the base quarterly distribution from $0.37 to $0.39 per share represents a shareholder-friendly action that could reflect confidence in the company's ability to sustain or increase earnings. Moreover, the unilateral decision by GC Advisors LLC to reduce the income and capital gain incentive fee rates from 20.0% to 15.0% could be viewed as an alignment of interests with shareholders, potentially leading to an improved perception of the company's governance.
From a financial perspective, the reported increase in Adjusted Net Investment Income per share and stable credit quality are positive indicators. However, the mention of a decrease in total investments at fair value and the static number of non-accrual investments warrants attention. While the debt-to-equity ratio has decreased, indicating a potentially lower risk profile, the impact of these investments on future earnings is an area that requires monitoring. The ability to maintain a stable net asset value per share in conjunction with increased distributions may be seen as a positive sign of financial health and operational efficiency.
Investors should consider the implications of these preliminary results on GBDC's valuation and future earnings potential, taking into account the company's investment strategy, the quality of its investment portfolio and the broader market context in which it operates.
Analyzing the broader market implications of GBDC's preliminary financial results, the increased base quarterly distribution could be an attempt to enhance the company's attractiveness to income-focused investors, particularly in a competitive yield environment. The sector of business development companies (BDCs) is sensitive to economic cycles and GBDC's performance in originating new middle-market investment commitments, despite a decrease in total investments at fair value, may reflect resilience or selective investment criteria.
The mix of new investments, predominantly in one-stop loans, highlights GBDC's strategic focus. One-stop loans, which provide a combination of senior and subordinated debt in one package, suggest a preference for deals that may offer higher yields but also come with greater risk. This strategy, along with the company's effective management of its debt-to-equity ratio, could position GBDC favorably in the BDC space, provided that the underlying credit quality of investments does not deteriorate.
Investors and analysts should evaluate GBDC's preliminary estimates in the context of industry trends, including the performance of peer BDCs, interest rate movements and the health of the middle-market segment, which can be a barometer for the broader economy.
The disclosure of preliminary financial results and the subsequent actions by GBDC and its investment adviser, GC Advisors LLC, must be navigated within the regulatory framework governing corporate disclosures and fiduciary responsibilities. The decision to waive a portion of incentive fees and the increase in shareholder distributions are likely to be scrutinized for compliance with the Investment Company Act of 1940, which governs BDC operations.
The legal implications of these preliminary financial results hinge on the accuracy and completeness of the disclosures. Should the final audited results materially differ from these estimates, GBDC could face regulatory scrutiny and investor skepticism. It is also important to consider the legal context of the incentive fee waiver; such waivers are not uncommon in the industry but must be clearly communicated to shareholders and reflected accurately in financial statements.
From a legal standpoint, the company's adherence to accounting standards, particularly those related to the amortization of purchase premiums and the treatment of non-GAAP financial measures, is critical. These accounting practices must be transparent and justifiable to satisfy both regulatory standards and investor due diligence.
“GBDC’s strong preliminary results for the quarter validate our confidence in the Company’s earnings power. GBDC continued to generate record Adjusted Net Investment Income per share and credit quality remained strong. GBDC’s increased profitability, coupled with strong credit results, allowed NAV to increase even as distributions to shareholders also increased,” said Chief Executive Officer David Golub.
Except where the context suggests otherwise, the terms “GBDC”, “we,” “us,” “our,” and “Company” refer to Golub Capital BDC, Inc. and its consolidated subsidiaries. “GC Advisors” refers to GC Advisors LLC, our investment adviser.
Set forth in the table below are certain preliminary estimates of our financial condition and results of operations for the three months ended December 31, 2023. These estimates are subject to the completion of financial closing procedures and are not a comprehensive statement of the Company’s financial results for the three months ended December 31, 2023. Actual results may differ materially from these estimates as a result of the completion of our financial closing procedures, final adjustments and other developments arising between now and the time that financial quarterly results for the three months ended December 31, 2023 are finalized. These preliminary estimates have been prepared by, and are the responsibility of, management. Our independent registered public accounting firm has not audited, reviewed, compiled or performed any procedures with respect to such preliminary estimates, and, accordingly, does not express an opinion or any other form of assurance with respect thereto.
PRELIMINARY ESTIMATES OF CERTAIN FINANCIAL RESULTS |
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(In thousands, expect per share data) |
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Estimated Ranges for the three months
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Net Investment Income Per Share |
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Net investment income per share |
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$ |
0.48 |
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$ |
0.50 |
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Amortization of purchase premium per share1 |
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0.01 |
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0.01 |
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Adjusted net investment income per share1 |
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0.49 |
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0.51 |
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Accrual (reversal) for capital gain incentive fee per share |
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— |
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— |
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Adjusted net investment income before accrual for capital gain incentive fee per share1 |
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0.49 |
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0.51 |
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Net realized/unrealized gain/(loss) per share |
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Net realized/unrealized gain/(loss) per share |
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(0.05 |
) |
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(0.03 |
) |
Reversal of unrealized loss resulting from the purchase premium per share1 |
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(0.01 |
) |
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(0.01 |
) |
Adjusted net realized/unrealized gain/(loss) per share1 |
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(0.06 |
) |
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(0.04 |
) |
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Earnings/(loss) per share |
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Earnings per share |
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0.43 |
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0.47 |
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Adjusted earnings/(loss) per share1 |
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0.43 |
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0.47 |
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Return on Equity |
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Adjusted net investment income return on equity2 |
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13.1 |
% |
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13.6 |
% |
Adjusted return on equity3 |
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11.5 |
% |
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12.5 |
% |
Based on the estimated range of earnings per share in the table above, the Company is estimating a net asset value per share between
Net Asset Value Per Share |
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Actual net asset value per share, September 30, 2023 |
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$ |
15.02 |
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$ |
15.02 |
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Estimated Earnings per share for the three months ended December 31, 2023 |
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0.43 |
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0.47 |
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Supplemental Distribution paid on December 15, 2023 |
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(0.07 |
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(0.07 |
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Quarterly Distribution paid on December 29, 2023 |
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(0.37 |
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(0.37 |
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Estimated net asset value per share, December 31, 2023 |
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$ |
15.01 |
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$ |
15.05 |
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Other First Fiscal Quarter 2024 Preliminary Estimates
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During the three months ended December 31, 2023, the Company originated
$58.6 million 84% of the new middle-market investment commitments were one stop loans,13% were senior secured loans,3% were equity securities and less than1% were second lien loans. Of the new middle-market investment commitments,$36.4 million $72.9 million - The Company estimates that our GAAP debt-to-equity ratio decreased to 1.21x as of December 31, 2023 and our effective GAAP debt-to-equity ratio, which reduces total debt by cash, cash equivalents and foreign currencies, decreased to 1.18x as of December 31, 2023.
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The Company estimates that the number of non-accrual investments remained at nine investments as of December 31, 2023. Additionally, as of December 31, 2023, the Company estimates that non-accrual investments as a percentage of total investments at fair value approximated
1.1% and that non-accrual investments as a percentage of total investments at cost approximated1.7% . -
Based on the earnings power of the Company and the waiver by GC Advisors that resulted in new incentive fee rates, on January 16, 2024, GBDC’s board of directors increased GBDC’s quarterly base distribution by over
5% and declared a quarterly distribution of$0.39
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1 On September 16, 2019, the Company completed its acquisition of Golub Capital Investment Corporation (“GCIC”). The merger was accounted for under the asset acquisition method of accounting in accordance with Accounting Standards Codification 805-50, Business Combinations — Related Issues. Under asset acquisition accounting, where the consideration paid to GCIC’s stockholders exceeded the relative fair values of the assets acquired, the premium paid by the Company was allocated to the cost of the GCIC assets acquired by the Company pro-rata based on their relative fair value. Immediately following the acquisition of GCIC, the Company recorded its assets at their respective fair values and, as a result, the purchase premium allocated to the cost basis of the GCIC assets acquired was immediately recognized as unrealized depreciation on the Company's Consolidated Statement of Operations. The purchase premium allocated to investments in loan securities acquired from GCIC will amortize over the life of the loans through interest income with a corresponding reversal of the unrealized depreciation on such loans acquired through their ultimate disposition. The purchase premium allocated to investments in equity securities will not amortize over the life of the equity securities through interest income and, assuming no subsequent change to the fair value of the GCIC equity securities acquired and disposition of such equity securities at fair value, the Company will recognize a realized loss with a corresponding reversal of the unrealized depreciation upon disposition of the GCIC equity securities acquired.
The Company believes that excluding the financial impact of the purchase premium write down in the above non-GAAP financial measures is useful for investors as it is a non-cash expense/loss resulting from the acquisition of GCIC and is one method the Company uses to measure its financial condition and results of operations. In addition, the Company believes excluding the accrual of the capital gain incentive fee under GAAP is useful as a portion of such accrual is not contractually payable under the terms of the Company’s investment advisory agreement with GC Advisors.
2 Adjusted net investment income return on equity is calculated as (1) (a) the adjusted net investment income per share (b) annualized by multiplying by four and (2) divided by the estimated net asset value per share.
3 Adjusted return on equity is calculated as (1) (a) the adjusted earnings/(loss) per share (b) annualized by multiplying by four and (2) divided by the estimated net asset value per share. |
Conference Call
The Company will host an earnings conference call at 1:00 pm (Eastern Time) on Tuesday, February 6, 2024 to discuss the quarterly financial results. All interested parties may participate in the conference call by dialing (888) 330-3529 approximately 10-15 minutes prior to the call; international callers should dial +1 (646) 960-0656. Participants should reference Golub Capital BDC, Inc. when prompted. For a slide presentation that we intend to refer to on the earnings conference call, please visit the Investor Resources link on the homepage of our website (www.golubcapitalbdc.com) and click on the Quarter Ended 12.31.2023 Earnings Presentation under Events/Presentations. An archived replay of the call will be available shortly after the call until 11:59 p.m. (Eastern Time) on February 20, 2024. To hear the replay, please dial (800) 770-2030. International dialers, please dial +1 (647) 362-9199. For all replays, please reference program ID number 5111111.
ABOUT GOLUB CAPITAL BDC, INC.
Golub Capital BDC, Inc. (“GBDC”) is an externally-managed, non-diversified closed-end management investment company that has elected to be treated as a business development company under the Investment Company Act of 1940. GBDC invests primarily in one stop and other senior secured loans to middle market companies that are often sponsored by private equity investors. GBDC’s investment activities are managed by its investment adviser, GC Advisors LLC, an affiliate of the Golub Capital LLC group of companies ("Golub Capital").
ABOUT GOLUB CAPITAL
Golub Capital is a market-leading, award-winning direct lender and experienced credit asset manager. The firm specializes in delivering reliable, creative and compelling financing solutions to companies backed by private equity sponsors. Golub Capital’s sponsor finance expertise also forms the foundation of its Broadly Syndicated Loan and Credit Opportunities investment programs. Golub Capital nurtures long-term, win-win partnerships that inspire repeat business from private equity sponsors and investors.
As of January 1, 2024, Golub Capital had over 850 employees and over
FORWARD-LOOKING STATEMENTS
This press release may contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Statements other than statements of historical facts included in this press release may constitute forward-looking statements and are not guarantees of future performance or results and involve a number of risks and uncertainties. Actual results may differ materially from those expressed or implied in the forward-looking statements as a result of a number of factors, including those described from time to time in filings with the Securities and Exchange Commission. Golub Capital BDC, Inc. undertakes no duty to update any forward-looking statement made herein. All forward-looking statements speak only as of the date of this press release.
View source version on businesswire.com: https://www.businesswire.com/news/home/20240117458375/en/
Christopher Ericson
312-212-4036
cericson@golubcapital.com
Source: Golub Capital BDC, Inc.
FAQ
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