Golub Capital BDC, Inc.

Welcome to GBDC's September 30, 2021 Quarterly Earnings Conference Call. Before we begin, I'd 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 call, please visit the Investor Resources tab on the homepage of the company's website. David Golub, Chief Executive Officer of Golub Capital BDC

Thank you, everybody, and thanks for joining us today. I'm joined by Chris Ericson, our Chief Financial Officer, Greg Robbins, Senior Managing Director, and John Simmons, Managing Director here at Golub Capital. Before we begin, I want to welcome Chris Ericson. Chris has been a key member of the Golub Capital team for over a decade. He's deeply familiar with GBDC. He was instrumental in driving a number of Key strategic initiatives, including the company's merger with Golub Capital Investment Corporation in 2019. We're delighted to promote Chris to the company's leadership team. And I also would be remiss if I didn't at the same time thank outgoing CFO Ross Tooney for his many contributions to our shared success over the last 13 years. With that, let's get started. Yesterday afternoon, we issued our earnings press release for the quarter and fiscal year ended September 30th. We posted an earnings presentation on our website. We're going to be referring to that presentation throughout today's call. For those of you who are new to GBDC, our investment strategy is, and since inception it has been, to focus on providing first lien senior secured loans to healthy, resilient middle market companies backed by strong partnership-oriented private equity sponsors. The headline for this quarter is that GBDC had another strong quarter, capping off a strong fiscal year. for the quarter adjusted NII per share was 30 cents, adjusted EPS was 42 cents, and ending NAV per share rose to $15.19. The Board also approved an increase in GBDC's quarterly distribution to 30 cents per share, up from 29 cents previously. Slide five describes three key themes that contributed to GBDC's success, both in the quarter ended September 30th and for the full fiscal year. These three key themes They probably sound familiar because we discussed them in our last several learnings calls. I'm going to summarize the themes now and we'll go into greater detail on them later in the presentation. The first theme is strong portfolio performance. Credit metrics improved consistently over the last 12 months and we're now back to pre-COVID levels. The second theme is continued balance sheet optimization. In my view, the company's liquidity position and balance sheet flexibility has never been better. The third theme is robust origination. The Gold Capital platform is having its best year ever from an origination perspective, even as we remain highly selective on credit, and that's led to robust portfolio growth at GBDC. Now I'll hand the floor to Gregory, John, and Chris to elaborate on GBDC's performance for the quarter and for the fiscal year. Following that, I'm going to come back and provide some closing commentary, and then we'll open the line for questions. Gregory, over to you.

Thank you, David. Let me elaborate on the key drivers of GBDC's strong results. I'm going to start on slide seven. Two key themes I want to highlight. First, our portfolio continued to perform well. I'd call your attention to the Golub Capital Middle Market Report, or GCMMR, for September 30th, which we published several weeks ago. The GCMMR compared the revenue and earnings of Golub Capital middle market borrowers in July and August 2021 to those same companies' results in July and August 2019. The results were once again striking. The median revenue and EBITDA growth rates from 2019 to 2021 exceeded 20%, which we believe are remarkable levels given the strength of the economy back in Q3 2019. 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 remained strong across the Golub Capital platform. As you will see later in the presentation, record middle market loan originations at Golub Capital, and by extension at GBDC, drove robust net funds growth at the company. Importantly, Golub Capital remained highly selective throughout the year, closing less than 4% of new deal opportunities reviewed on a calendar year-to-date basis. Let's now drill down on the four positive credit quality trends listed on the right-hand side of the slide, starting with our internal performance ratings on slide eight. We've seen continued upward migration in credit quality, a steady increase in categories four and five, which are loans performing at or better than our expectations at underwriting, and a corresponding decrease in category three, which are loans that are performing or expected to perform below expectations. Categories four and five increased to 90.9% of the portfolio as of 9-30, an improvement of 12 percentage points year over year, and right in line with fiscal year end 2019. Similarly, Category 3, which represented 8.1% of the portfolio as of 9-30, is right in line with our pre-COVID normal of around 10%, as you can see from the fiscal year-end 2018 and 2019 data on the far left of the slide. Equally important, portfolio companies performing materially below expectations in Categories 1 and 2 remain very few in number. Those two categories constituted only 1% of the portfolio at fair value as of 9-30. 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 40% lower year over year. We'll come back to this point in our usual discussion of GBDC's financial results. Slide 9 shows two other indicators of improving credit quality, net realized gains as well as net unrealized gains. This slide provides a bridge from GBDC's $15.06 NAV per share as of 6-30 to its increased $15.19 NAV per share as of 9-30. Let's walk through the bridge. Adjusted NII per share was 30 cents in line with the increased quarterly dividend that David mentioned earlier. No net realized losses were recorded during the quarter. In fact, there were two cents per share of net realized gains. And net unrealized gains were 13 cents per share, reflecting the continued reversal of unrealized losses incurred in the March 2020 quarter. Let's now take a closer look at our results for the quarter. And for that, let me hand the call over to John to walk you through the results in more detail. John? Thanks, Gregory.