Golub Capital BDC, Inc.

Welcome to GBDC's August 10, 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 made during this call 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 in the forward-looking statements as a result of a number of factors, including those described from time to time in GBDC's filings with the SEC. For materials, the company intends to refer to on today's earnings conference call. Please visit the investor resources tab on the homepage of the company's website, www.golubcapitalbdc.com, and click on the events presentations link. GBDC's earnings release is also available on the company's website in the investor resources section. As a reminder, this call is being recorded for replay purposes. I will now turn the call over to David Golub, Chief Executive Officer of Golub Capital BDC.

Thanks, Operator. Hello, everybody, and thanks for joining us today. I'm joined by Ross Tooney, our Chief Financial Officer, Gregory Robbins, Senior Managing Director, and John Simmons, Managing Director. Yesterday afternoon, we issued our earnings press release for the quarter ended June 30th, and we posted an earnings presentation on our website. We'll be referring to that presentation throughout the call today. For those of you who are new to GBDC, I want to briefly describe our investment strategy. Our investment strategy is, and since inception, it's 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 June 30th is that GBDC's results were very strong. GBDC had solid net investment income, continued strong credit performance, and robust new deal activity. We'll be discussing each of these topics in greater detail as we go through today's presentation. Gregory's going to start by providing a brief overview of GBDC's performance for the June 30th quarter, and then he'll hand it off to John and Ross for a more detailed review of those results. I'll then provide some closing commentary, and then we'll open the line for questions. With that, let's take a closer look at GBDC's results for the quarter and the key drivers of those results. Gregory?

Thank you, David. Turning to slide four, for the quarter ended June 30th, GBDC's adjusted NII per share was 29 cents, adjusted EPS was 49 cents, and ending that per share was $15.06. The key drivers of those strong results are summarized on slide six. Two key themes I want to highlight. First, our portfolio continued to perform well. The Golub Capital Middle Market Report, or GCMMR, for June 30th, which we published about a month ago, reflected this strength. The GCMMR normally looks at year-over-year revenue and profit growth of Golub Capital middle market borrowers, but our approach for June 30th was a bit different. We didn't think year-over-year comparisons were particularly informative as they would be comparing the lockdown economy of April and May 2020 to the booming economy of April and May 2021. We thought it would be more informative to compare 2021 to the pre-COVID economy of April and May 2019. And the results are striking. The median EBITDA growth from 2019 to 2021 exceeded 30%. 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, middle market new deal activity was strong. The quarter ended June 30th was a new record for Golub Capital origination volume. You may recall that the quarter ended December 31, 2020 was a record breaker at the time. Well, we beat that record by 30% in the June quarter. While the impact on GBDC's portfolio growth was muted by elevated repayments in the June quarter, we think the key takeaway is that GBDC is delivering strong originations amidst a robust M&A environment by leveraging the competitive advantages of the Golub Capital platform. Let's now drill down on the four positive credit quality trends listed on the right-hand side of this slide, starting with our internal performance ratings. Slide seven summarizes the positive trends in the internal performance ratings of GBDC's portfolio in the post-COVID period. Two key trends continued through the quarter ended June 30th. First, portfolio companies performing materially below expectations in categories one and two remain very few in number, Those two categories constituted only 1.1% of the portfolio at fair value at quarter end. We've also seen continued upward migration in credit quality, a steady increase in categories four and five. Those are loans performing at or better than our expectations at underwriting, and a corresponding decrease in category three. Those are loans that are performing or expected to perform below expectations. Specifically, in the quarter ended June 30th, Categories 4 and 5 increased from 86.9% of the portfolio as of 3-31 to 89.4% of the portfolio as of June 30th, an improvement of 13.4 percentage points year over year. Category 3 decreased from 12% of the portfolio as of 3-31 to 9.5% of the portfolio as of 6-30. The proportion of the portfolio rated 3 as of 6-30 was right in line with our pre-COVID normal of around 10%, as you can see from the fiscal year end 2018 and 2019 data at the far left of the slide. A second key indicator of continued credit improvement is the fact that non-accruals remain very low, just 1% of investments at fair value at quarter end. The non-accrual rate was unchanged quarter over quarter, but about 50% lower year over year. 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, net realized gains and net unrealized gains. This slide provides a bridge from GBDC's $14.86 NAV per share as of 3-31 to its increased $15.06 NAV per share as of 6-30. Let's walk through the bridge. Adjusted NII per share was 29 cents in line with our quarterly dividend. Thank you for joining us. Finally, slide 9 shows that the continued strength and quality of GBDC's portfolio enabled us to further optimize the company's debt capital structure post-quarter rent. On August 3, 2021, GBDC completed its third unsecured bond offering. The $350 million issuance of new unsecured notes mature in February 2027 and have a fixed interest rate of 2.05%. The lowest coupon ever achieved by a BDC at the time. Performer for the August offering, unsecured debt represents approximately 50% of GBDC's debt capital stack. You can see from the chart on the right-hand side of the slide that GBDC is expected to have no contractual debt maturities until 2024 and the vast majority of GBDC's funding matures in 2025 or later. In short, we believe GBDC's balance sheet is stronger and more flexible than ever. Let's now take a closer look at our results for the quarter ended June 30th. And for that, let me hand the call over to John Simmons to walk you through the results in more detail. John?