Goldman Sachs BDC, Inc.

Good morning. This is Austin Neary, a member of the Investor Relations Team for Goldman Sachs BDC, Inc., and I would like to welcome everyone to the Goldman Sachs BDC, Inc. Second Quarter 2023 Earnings Conference Call. Please note that all participants will be in listen-only mode until the end of the call, when we will open up the line for questions. Before we begin today's call, I would like to remind our listeners that today's remarks may include forward-looking statements. These statements represent the company's belief, regarding future events that, by their nature, are uncertain and outside of the company's control. The company's actual results and financial condition may differ, possibly materially, from what is indicated in these results and forward-looking statements as a result of a number of factors, including those described from time to time in the company's SEC filings. This audio cast is copyrighted material of Goldman Sachs BDC, Inc. and may not be duplicated, reproduced, or rebroadcast without our consent. Yesterday, after the market closed, the company issued an earnings press release and posted a supplemental earnings presentation, both of which can be found on the homepage of our website at www.goldmansaxbdc.com under the investor relations section, and which include reconciliations of non-GAAP measures to the most directly comparable GAAP measures. These documents should be reviewed in conjunction with the company's quarterly report on Form 10-Q filed yesterday with the SEC. This conference call is being recorded today, Friday, August 4th, 2023, for replay purposes. I'll now turn the call over to Alex Chee, Co-Chief Executive Officer of Goldman Sachs BDC, Inc.

Thank you, Austin. Good morning, everyone, and thank you for joining us for our second quarter 2023 earnings conference call. I'm here today with David Miller, my Co-Chief Executive Officer, Tucker Green, our Chief Operating Officer, and David Pessa, our Chief Financial Officer. I'll begin the call by providing a brief overview of our second quarter results before discussing the current market environment in more detail. I'll then turn the call over to David Miller to describe our portfolio activity before we hand it off to David Pessa to take us through our financial results. And then finally, we'll open the line for Q&A. So with that, let's get to our second quarter results. Our net investment income per share for the quarter was 59 cents, an increase of 28.3% from the prior quarter. Excluding the impact of asset acquisition accounting in connection with the merger with MMLC, adjusted net investment income for the quarter was $0.58 per share, equating to an annualized net investment income yield on book value of 15.9%. The increase in returns is largely a reflection of the increase in base rates during the quarter. As we announced after the market closed yesterday, our board declared a 45 cent per share dividend payable to shareholders of record as of September 30th, 2023. This marks the company's 34th consecutive quarter of a 45 cent per share dividend, totaling $15.30 per share since our IPO, excluding the special dividends we paid in 2021 post the merger with MMLC. Net asset value per share increased to $14.59 per share as of June 30, 2023, an increase of approximately 1% from the end of the first quarter. This increase was primarily attributable to the increase of net investment income as well as a modest increase in unrealized gains for the quarter. On a fair value basis, first lien loans are 92.6% of the investment portfolio as of June 30, 2023, which speaks to our continued focus on maintaining a higher quality portfolio. This quarter, we continue to invest only in directly originated first lien senior secured debt with no participation in the secondary market for broadly syndicated loans. In the first quarter, we expressed confidence that we will see increased deal volumes as the year progresses with visible green shoots in M&A markets, a resurgence of take privates, and refinancings as sponsors reengage private markets to address upcoming maturities. During the second quarter, some of those expectations came to fruition, as we saw increased deal activity, mainly towards the tail end of the quarter, and a higher level of activity has continued into the second half of the year to date. Of note, GSBD participated in the refinancing and recapitalization of Fullsteam, an existing GSBD borrower. The Goldman Sachs private credit platform has been involved with the company since 2019. In 2021, our initial investment was repaid as part of a broader recapitalization of the company in which GSBD participated. GSBD participated again in the company's most recent $1 billion recapitalization that is expected to close this quarter. This serves as an example of our incumbency, allowing us to reset economics and terms to match the current market environment. Fullsteam is a holding company of verticalized software businesses that provide core business management software and payment capabilities to small and medium-sized customers. Superior Environmental Solutions is another example of a new origination in the second quarter where the Goldman Sachs private credit platform had an existing incumbent position and GSBD was able to participate in financing the buyout of the business by a new financial sponsor. In general, we're pleased that we're able to take advantage of the additional investment capacity that was created through our equity offering this past March and higher repayment activity during the second quarter. We're more confident now that despite overall economic uncertainties that continue to persist, deal volumes will continue to grow as companies seek more strategic opportunities and sponsors look to deploy what has grown to more than $1 trillion of dry powder. So with that, let me turn it over to my co-CEO, David Miller.

Thanks, Alex. During the quarter, we originated $86.0 million in new investment commitments to four new and five existing portfolio companies. Our new investment commitments were 100% in first lien senior secured loans. Sales and repayment activity totaled $24.9 million, primarily driven by the full repayment of investments in two portfolio companies. We are particularly pleased with the visibility we have to date of additional anticipated repayments in the second half of the year across a handful of portfolio companies. Two of these will further reduce our junior lien positions currently in the portfolio, and more importantly, allow us to redeploy capital in the new first lien-oriented opportunities while remaining well within our leverage targets. Turning to portfolio composition. As of June 30, 2023, total investments in our portfolio were $3.6 billion at fair value. comprised of 97.5% senior secured loans, including 89.3% first lien, 3.3% first lien last out unit tranche, and 4.9% second lien debt, as well as a negligible amount of unsecured debt, and 2.3% in a combination of preferred and common stock and warrants. We also had $366.1 million of unfunded commitments as of June 30th, 2023, bringing total investments at fair value and commitments to $3.9 billion. As of quarter end, the company held investments in 135 portfolio companies operating across 36 different industries. The weighted average yield of our investment portfolio at cost at the end of Q2 was 11.9%, as compared to 11.6% from the prior quarter. The weighted average yield of our total debt and income producing assets at amortized cost increased to 12.6% at the end of Q2 from 12.2% at the end of Q1. Turning to credit quality, the weighted average net debt to EBITDA of the companies in our investment portfolio declined slightly quarter over quarter to 5.9 times compared to 6.0 times in the first quarter. Given the level of existing base rates, we would anticipate that future originations and transactions should reflect lower leverage metrics. Just as importantly, in response to questions some of you have had in regard to macro headwinds of the past few quarters, our portfolio companies had both top line and EBITDA growth year over year and quarter over quarter on a weighted average basis. We remain selective from a credit and risk adjusted return perspective, and maintain a long-term strategic view on capital deployment that is insulated by our orientation to first lien credit risk. The weighted average interest coverage of the companies in our investment portfolio at quarter end was 1.6 times, which was flat yet again as compared to Q1 23 and Q4 22, despite an increase in the overall silver yield curve. It is important to note that we calculate our coverage ratios based on current quarter metrics rather than a trailing or LTM basis. Were we to use the LTM calculation, then our interest coverage of the companies in our investment portfolio would be 1.9 times. And finally, turning to asset quality. As of June 30th, 2023, despite two positions that were designated as grade three last quarter being placed on non-accrual during Q2, investments on non-accrual status amounted to 0.8% and 1.8% of the total investment portfolio at fair value and amortized costs respectively, versus 0.6% and 1.6% at fair value and amortized costs respectively as of March 31st, 2023. I will now turn the call over to David Pessa to walk through our financial results.