Golub Capital BDC, Inc.

Welcome to the GBDC's March 31, 2021 Quarterly Earnings Conference Call. Before we begin, I would like to take a moment to remind our listeners that remarks made during this call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Statements other than statements of historical facts may during this call may constitute forward-looking statements and are not guarantees of the future performance or results and involve a number of risks and uncertainties. Actual results may differ materially from those in the forward-looking statement as a result of a number of factors, including those described from time to time in GBDCs filing with the SEC. For materials the company intends to refer to on today's earnings call, please visit the Investor Resource tab on the home page of the company's website, www.golubcapitalbdc.com, and click on the event presentation link. GBDC's earnings release is also available on the company's website in the Investor Resource section. As a reminder, this call is being recorded for replay purposes. I would now like to hand the call over to David Golub, Chief Executive Officer of Golub Capital BDC. Thank you, sir. Please go ahead.

Thank you, operator. Hello, everybody, and thanks for joining us today. I'm joined by Chief Financial Officer Ross Tooney, Senior Managing Director Greg Robbins, and Managing Director John Simmons. Yesterday in the afternoon, we issued our earnings press release for the quarter-ended March 31st, and we posted an earnings presentation on our website. We're going to be referring to this presentation throughout the call today. For those of you who are new to GBDC, our investment strategy today is, and since inception it has been, to focus on providing first lien senior secured loans to healthy, resilient middle market companies that are backed by strong partnership-oriented private equity sponsors. The headline for the quarter ended March 31st is that GBDC's results were strong. GBDC had both strong net investment income and continued strong credit performance. We'll discuss these topics in greater detail as we go through today's presentation. Gregory's going to start. He's going to provide a brief overview of GBDC's performance for the March 31st quarter, and then he's going to hand it off to John and Ross for a more detailed review of the quarter's results. I'll then come back at the end to provide some closing commentary, and I'll open the line for questions. With that, Gregory, let's take a closer look at GBDC's results for the quarter and the key drivers of those results.

Thank you, David. Turning to slide four, for the quarter ended March 31st, GBDC's adjusted NII per share was $0.29, adjusted EPS was $0.55, and ending NAV per share was $14.86. The key drivers of those strong results are summarized on slide six. First, our portfolio companies generally continue to perform well. This won't come as a surprise if you happen to see the Golub Capital middle market report from March 31, which we published about a month ago based on actual financial data from Golub Capital's middle market borrowers. The report for calendar Q1 showed the highest rate of year-over-year profit growth since we began tracking data in 2013. Strong earnings growth across GBDC's portfolio was reflected in the four positive credit quality trends listed on the right-hand side of the slide. We'll go into them in more detail shortly. Second, GBDC took advantage of attractive market conditions to continue to optimize its balance sheet. We executed a second unsecured bond issuance, building on the success of our inaugural offering last year. We also closed a new corporate revolver. These financings are consistent with the strategy you've heard us discuss before, low-cost, flexible financing with limited near-term maturities. Finally, middle market new deal activity was solid. It wasn't a record origination quarter like the December quarter, but it was meaningfully improved from last year's June and September quarters. Let's drill down on the four positive credit quality trends listed on the right-hand side of the slide, starting with our internal performance ratings. Slide 7 summarizes the positive trends in the internal performance ratings of GBDC's portfolio in the post-COVID period. Specifically, since March 31, 2020, we've seen essentially no increase in the percentage of the portfolio performing materially below expectations in categories 1 and 2. Those two categories constituted only 1.1% of the portfolio at quarter end. We have seen upward credit migration. A steady increase in categories four and five, and a corresponding decrease in category three. To remind folks, categories four and five are loans performing at or better than our expectations at underwriting, and category three are loans that are performing or expected to perform below expectations. In the quarter ended March 31, categories four and five increased from 81% of the portfolio as of 12-31 to 86.9% of the portfolio as of 3-31. Category 3 decreased from 17.9% to 12% over the same period. The proportion of the portfolio rated 3 as of 3-31 was pretty close to our pre-COVID normal of around 10%. A second key indicator of continued credit improvement is the fact that non-accruals remain very low. In fact, Non-accruals declined quarter over quarter from 1.2% to 1% as a percentage of investments at fair value at 331 and are now back to pre-COVID levels. We'll come back to this point in our usual discussion of GBDC's financial results. Slide 8 shows two other indicators of improving credit quality, no net realized losses and solid net unrealized gains. This slide provides a bridge from GBDC's $14.60 NAV per share as of 12-31 to its increased $14.86 NAV per share as of 3-31. Let's walk through the bridge. First, adjusted NII per share was $0.29 in line with our quarterly dividend. Second, no realized losses were recorded during the quarter. Third, net unrealized gains were $0.26 per share. These unrealized gains reflect the continued reversal of unrealized losses incurred in the March 2020 quarter. In fact, our strong unrealized gains through the post-COVID period have driven reversals of over 85% of the March 2020 unrealized losses on a price basis. Let's now take a closer look at our results for the quarter ended March 31st. For that, let me hand the call over to John Simmons to walk you through the results in more detail. John?