Goldman Sachs BDC, Inc.

Good morning. This is John Silas, a member of the Investor Relations Team for Goldman Sachs BDC, Inc. I would like to welcome everyone to the Goldman Sachs BDC, Inc. Third Quarter 2025 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 those 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 rebroadcasted 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 Resources section, and which includes 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, November 7, 2025, for replay purposes. I will now hand over the call to Vivek Bhantwal, co-CEO of Goldman Sachs BDC, Inc.

Thank you, John. We will begin the call with our perspective on recent performance in light of a gradually improving macro environment. Next, we will discuss our investing activity and outline GSBD's positioning heading into the fourth quarter. Shortly after, David Miller and Tucker Green will provide a detailed review of portfolio activity and performance before handing it over to Stan Matyszewski to take us through the financial results. We will conclude by opening the line for Q&A. The M&A market has continued to remain resilient despite uncertainty that persisted in the first half of the year, as total M&A dollar volumes in Q3 2025 were 40.9% higher year over year compared to Q3 2024. This surge is attributed mainly to a renewed risk-on sentiment among investors, lower borrowing costs, greater market clarity, and a reset on valuation expectations between buyers and sellers in the market. As David will discuss later in the call, this pickup in activity has directly benefited GSBD, as our new investment commitments and repayments during the quarter reached the highest level since the integration of the platform in 2022. Recent Bates rate cuts, with additional expected through year-end into 2026, should accelerate deal activity. Albeit spreads remain tight across the middle market and large cap, juxtaposed against a tight spread environment in the public markets. Our proactive decision earlier this year to adjust our dividend policy and cut the base dividend positions as well in what will be a lower yield environment, where emphasis on credit selection will be paramount. Additionally, during times of increased competition for deal flow and high quality deals, our proximity to our investment banking franchise serves as a competitive advantage for our platform to remain highly selective in evaluating opportunities. Broader credit dynamics remain top of mind for investors amid recent headlines concerning what we believe to be idiosyncratic issues versus a broader systematic concern. We remain comfortable with risk dynamics in the private credit space given the overall health of portfolio fundamentals. We continue to evaluate the impacts of tariffs, ability for companies to service debt, and risks involved with software investing particularly with the recent growth of AI investing. We recognize the transformative potential of AI, but our primary focus remains on downside risk mitigation. We have developed a proprietary framework to assess both software and AI disruption risk that we had implemented in our underwriting for over two years. We remain focused on mission-critical, market-leading companies with core systems of record across all our software deals. turning to our third quarter results. Our net investment income per share for the quarter was 40 cents and net asset value per share was $12.75 as of quarter end, a decrease of 2.1% relative to the second quarter NAV, which was partially due to the 16 cent per share special dividend with some markdowns to previously underperforming names. This quarter marks the last of three special dividends that were announced earlier this year along with changes to our dividend policy. The Board declared a third quarter 2025 supplemental dividend of 4 cents per share payable on or about December 15, 2025 to shareholders of record as of November 28, 2025. Adjusted for the impact of the supplemental dividend related to the third quarter's earnings, the company's third quarter adjusted NAF per share is $12.71 which I would note is a non-GAAP financial measure introduced as a result of the dividend policy change. The board also declared a fourth quarter base dividend per share of 32 cents to shareholders of record as of December 31st, 2025. We ended the quarter with a net debt to equity ratio of 1.17 as of September 30th, 2025, as compared to 1.12 as of June 30th, 2025. With that, let me turn it over to my co-CEO, David.

Thanks, Vivek. During the quarter, we made new investment commitments of approximately $470.6 million across 27 portfolio companies, comprised of 13 new and 14 existing portfolio companies. This marks the highest level of new investment commitments since Q4 of 2021. which demonstrates our unique position in a competitive deal environment where we can be selective on credit quality and exhibit discipline where we want to lean in. 100% of our originations during the quarter were in first lien loans, reflecting our continued bias in maintaining exposure to the top of the capital structure. Of the 13 new portfolio companies, we served as lead on seven, which is a tangible indication of the power of the GS platform. The impact of the GS franchise was on full display through our financing of the acquisition of Shields Health Solutions. This was part of the broader take private of Walgreens, of which four silos were financed uniquely with GS private credit participating only in the Shields transaction. This is a deal where investment banking colleagues advise the sponsor. Shields Health Solutions is one of the largest specialty pharmacy operators in the U.S. At the time of the investment, the transaction represented one of the largest take privates of all time. Another notable investment this past quarter was to support NewTek Merchant Solutions, a wholly owned subsidiary of the publicly traded bank holding company NewTek, which offers a range of financial service products to small and medium-sized businesses. Our financing package was used to support the refinancing of existing debt and to fund a payment to increase the bank holding capital base. Due to continued relationship with the CEO, GS Private Credit was able to secure the role of admin agent and sole lender to the company. The integration of our platform in 2022 allowed us to evaluate and invest in more high quality opportunities that span from the middle market to large caps. And these two examples shine a light on our continued ability to do so at attractive pricing. We believe our platform is well positioned by the unique opportunities that channels the Goldman Sachs ecosystem to take advantage of an active environment. With that, let me turn it over to our president and chief operating officer, Tucker, to discuss portfolio repayments, fundamentals, and credit quality.

Thanks, David. For our portfolio companies as of September 30, 2025, total investments at fair value were $3.2 billion, comprising of 98.2% in senior secured loans, 1.5% in a combination of preferred and common stock, and a negligible amount in warrants. We continue to see increased repayment activity with $374.4 million for the quarter. 86% of these repayments in the quarter were from pre-2022 investments, leaving less than 50% of our current portfolio at fair value in legacy assets. This rotation remains a key focus for the GSBD portfolio as it recycles into new credits. One notable payoff during the quarter was total vision. GS first invested in the company in 2021 and financed an acquisition in 2022. Total Vision owns and operates optometry practices across California, which provide professional and retail services to patients. We received full repayment of the credit facility and equity co-investment. This illustrates the power of our platform and our team's enhanced management capabilities in the healthcare space. Throughout this past quarter, we utilized our 10B51 stock repurchase plan during the quarter. We repurchased north of 2.1 million shares for 25.1 million, which was NAV accretive. At the end of the quarter, total investments at fair value and unfunded commitments in our portfolio were $3.8 billion in 171 portfolio companies operating across 40 different industries. The weighted average yield of our debt and income-reducing investments at amortized cost at the end of the third quarter was 10.3% as compared to 10.7% at the end of the second quarter. Despite a modest tightening in portfolio yield quarter-over-quarter, our portfolio companies had both top-line growth and EBITDA growth quarter-over-quarter and year-over-year on a weighted average basis. Our weighted average net debt to EBITDA remained flat quarter-over-quarter at 5.8 times, and our interest coverage increased quarter-over-quarter at 1.9 times from 1.8 times. As of September 30, 2025, we placed one position from an existing portfolio company on non-accrual status. However, our overall investments on non-accrual status decreased to 1.5% of fair value from 1.6% as of the end of the second quarter. I will now turn the call over to Stan to walk through our financial results.

Thank you, Tucker. We ended the third quarter of 2025 with total portfolio investments of fair value and commitments of $3.8 billion, outstanding debt of $1.8 billion, and net assets of $1.5 billion. Our ending net debt to equity ratio at the end of the third quarter was 1.17 times, which continues to be below our target leverage of 1.25 times. At quarter end, approximately 70% of our total principal amount of debt outstanding was in unsecured debt. As of September 30th, 2025, the company had approximately $1,143,000,000 of borrowing capacity remaining under the revolving credit facility. Given the tightening of credit spreads we've observed in the market, we continue to look for ways to optimize the pricing of our financing sources. During the quarter, we issued $400 million of a five-year investment grade on SecuredNote with a coupon of 5.65%. We also hedged the issuance by swapping the coupon from fixed to floating to match GSBD's floating rate investments. Over 50 investors participated in the company's day of live marketing, which resulted in the peak order book being four times oversubscribed. Before continuing to the income statement, as a reminder, in addition to GAAP financial measures, we also reference certain non-GAAP or adjusted measures. This is intended to make our financial results easier to compare to results prior to our October 2020 merger with Goldman Sachs Middle Market Lending Corp., or MMLC. These non-GAAP measures remove the purchase discount amortization impact from our financial results. For the third quarter, GAAP and adjusted after-tax net investment income was $45.3 million and $44.8 million respectively, as compared to $44.5 million and $43.5 million respectively in the prior quarter. On a per-share basis, GAAP net investment income was $0.40. Adjusted net investment income for the quarter in connection with the merger with MMLC was unchanged at $0.40 per share. equating to an annualized net investment income yield on book value of 12.5%. Total investment income for the three months ended September 30th, 2025 and June 30th, 2025 was 91.6 million and 91 million respectively. We observed PIC as a percent of total investment income decreased marginally to 8.2% for the third quarter from 8.3% in the second quarter of 2025. With that, I'll turn it back to David for closing remarks.

Thanks, Dan, and thanks, everyone, for joining our earnings call. Although the perception of risk embedded within the credit market has changed, we continue to apply our staunch underwriting philosophy and remain focused around the maintenance of our dividend that we proactively addressed. In light of a lower-yielding environment, we believe fund managers will be rewarded for their credits selection. With that, let's open the line for Q&A.

Thank you. If you would like to ask a question, please signal by pressing star 1 on your telephone keypad. If you're using a speakerphone, please make sure your mute function is turned off to allow your signal to reach your equipment. Again, please press star 1 to ask a question.

We'll pause for just a moment.

We'll go first to Aaron Siganovich with Truist Securities.

Thanks. In your comments, you had mentioned the M&A activity to a level that you had not seen for a few years. You know, maybe you could just talk to us about, you know, your thoughts about sustaining into next year and, you know, whether or not this is kind of more of a shorter term or maybe sort of a longer-term trend here.

Thank you for the question. Yeah, listen, we think this is the start of a longer-term trend. This was, in our minds, really a question of when, not if, because when you look at, A, the sort of cumulative amount of sort of dry powder in the private equity community, and you juxtapose that with the capital that's invested in existing investments that have now been kind of, you know, sort of in portfolio for a period of time. And then you think about the fact that these more recent private equity vintages from a DPI perspective is really behind historical vintages. And so there's kind of a growing, you know, kind of need for private equity firms to A, exit existing portfolios, and then B, given the dry powder, sort of invest in new portfolios. So when you sort of look at all of those metrics, you know, it speaks to the need for kind of more M&A on the forward. The question then became sort of when. We started to see some signs of that early this year. Obviously, as you kind of got into April, there was sort of a pullback. You saw kind of broader volatility and, you know, focus on tariffs and the like. And what we've seen more recently, is really kind of back to that risk on sentiment where people are, you know, looking to kind of do things strategically. And so we're seeing that in the sponsor community, but we're also seeing that in the corporate community in terms of M&A activity. And so we think we're in the early stages of that. And we think that as we get into 2026, we'll see more of that.

Okay, thanks. And I guess with

How much of the increase in activity would you have to see for spreads maybe to start to widen out a little bit, you know, basically with supply, enough supply essentially to offset some of the high demand?

Look, that's a little hard question to say.

We're not really anticipating spreads to widen much. We're hopeful that that might happen with the pickup M&A, but given the dry powder, we're not planning on that in the near term. I think what we like about our platform is we continue to see a bunch of unique originations that we can get higher spreads because of that unique origination platform and being tied to Goldman Sachs. But, you know, your regular way, A-plus credit, we don't think it's going to have meaningful spread winding anytime soon.

And then on credit, you had one new investment on accrual at Dental Brains. I think that's been kind of a watch list for a bit. Maybe you should talk a little bit about the performance there in Non-accruals were relatively stable, and you had some unrealized and realized losses in the quarter. Were there any impacts from some of your prior non-accruals in there?

I mean, as you mentioned, this had been in the portfolio for some time. We had had some more junior securities that were already risk-rated for. As a result of underperformance in a previous restructuring, you know, the company continues to underperform our expectations. So we put a more senior tranche on non-accrual now. So it's not a new name. It's been risk-rated for for some time. But the good news is this is a tiny position in this fund. I think it's sub $800,000 of exposure. doesn't meaningfully move the needle for us from overall non-recruals. And as Tucker mentioned in his prepared comments, you know, it did take down slightly from 1.6% to 1.5% as a percentage of fair value. So, you know, we feel overall portfolio quality has been stable. Where we've seen continued write-downs is on the more legacy names where, you know, we're not seeing a big turnaround. So we took additional markdowns there. on those names. But outside of those legacy names, we feel pretty good about the portfolio.

Great. Appreciate that, Tyler. Thank you.

As a reminder, that is star one if you would like to ask a question. We'll pause for just a moment. The question and answer portion has concluded. I would now like to turn the call back over to Vivek for any closing comments.

Thanks everyone for their time this morning. And if more questions come up, feel free to contact our team. Thank you everyone and have a great week.