Goldman Sachs BDC, Inc.

Good morning, and thank you for joining us. My name is Haylene Even, head 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 2026 earnings conference call. Please note that all participants will be in listen-only mode until the end of the call, when we will open 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 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.goldmansachsbdc.com under the investor resources section and which include reconciliations of non-GAAP measures, to the most directly comparable gap 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 7th, 2026 for replay purposes. I'll now turn the call over to Vivek Bantwal, Co-Chief Executive Officer of Goldman Sachs BDC, Inc. Vivek Bantwal, Co-Chief Executive Officer of Goldman Sachs BDC, Inc. Vivek Bantwal, Co-Chief Executive Officer of Goldman Sachs BDC, Inc.

Thank you, Hailey. Good morning, everyone. Thank you for joining us for our second quarter earnings conference call. Before we begin today, I have an announcement. My co-CEO of GSBD and head of America's direct lending platform, David Miller, has decided to step down as co-CEO of GSBD effective December 31st of this year. At that point, I will become the sole CEO. David has worked at Goldman Sachs for 22 years and has 34 years in the private credit industry. Thank you for joining us today. In connection with this transition, Justin Betson has stepped into the role of co-president and co-COO alongside Tucker Greene. Justin is currently a vice president of GSBD and has held several positions within GSAM, and he is currently a managing director and senior underwriter in GSAM private credit in the Americas. Justin initially joined Goldman Sachs in 2006. The platform will also continue to be supported by a deep bench of experienced investment professionals Thanks, Vivek.

I'm incredibly proud of what we've accomplished together and what this broader platform has achieved over the years. Looking back, I've seen the industry navigate multiple credit cycles, the ups and the downs, and I've watched the resiliency of the Goldman Sachs platform prove itself time and again. I've had the privilege of working alongside an exceptionally talented group of people. I know this fund and this platform are in great hands. and I have full confidence in my colleagues' leadership and continued success. I also want to thank the board of directors for their partnership and support, our investors for their continued trust, and finally, my colleagues and team for their hard work and dedication in making this platform the best place to work throughout these years. It has been an honor to work with you all and I'm excited to see your future success. I'll now turn the call back over to Vivek.

Now let's discuss GSBD's second quarter results. Along with David, I'm here today with Tucker Greene, our President and Chief Operating Officer, and Stan Matuszewski, our Chief Financial Officer. We'll start by offering our perspective on the current market environment. Then I will discuss our portfolio positioning and how the scale of Goldman Sachs' private credit ecosystem continues to translate into a competitive advantage for our shareholders. David and Tucker will walk you through portfolio activity and credit quality, and Stan will cover the financial results. We will then open the line for some Q&A. In the second quarter, GSBD generated net investment income of 38 cents per share, representing an annualized yield on book value of approximately 12.6%. This increase reflects both higher total investment income and lower total expenses, which benefited from our shareholder-aligned incentive fee structure. Stan will discuss this in more detail later on. We ended the quarter with net asset value of $12.06 per share, down modestly just under 1% from $12.17 in the first quarter. Given these results, the Board has declared a third quarter 2026 base dividend of $0.32 per share payable to shareholders of record as of September 30, 2026, as well as a second quarter 2026 supplemental dividend of $0.03 Thank you for joining us. Taking a step back to contextualize these results, let me start with the M&A environment. Deal activity has remained subdued during the second quarter of 2026, with overall private equity deal volumes down 38% quarter over quarter and sponsored loan issuance down 33%. For our business, that means the pace of new deployment opportunities has been slower. But what matters most is the quality of the deals coming to market and the terms available to lenders. As available capital in the direct lending market has contracted, driven in part by BDC redemptions and tighter fundraising conditions, borrowers and sponsors are accepting wider spreads, lower leverage, and stronger documentation. That dynamic is directly benefiting the economics on every new investment we underwrite. Simultaneously, AI disruption concerns and geopolitical uncertainty have added complexity to the backdrop. We continue to monitor how these dynamics are affecting business models across our portfolio. Tucker will discuss how our borrowers are navigating this when he covers credit quality. I'd also point out that uncertainty means lenders are being compensated more for providing capital, and we are capitalizing on that. Post-quarter end, we have also seen a pickup in M&A activity and deal flow, which positions us well to deploy into this attractive spread environment as we move through the second half of this year. Across our borrower base, performance is differentiated. The majority of our portfolio continues to perform as anticipated. Companies with pricing power, mission-critical products, and manageable leverage are executing well. Where we see stress is in a small number of companies carrying elevated leverage or facing sector-specific headwinds. These are the complex situations where our workout capabilities become most important. Tucker and David will walk you through a few recent outcomes that demonstrate What our platform and our process are designed to produce. David, let me turn it over to you for some perspective on what this means for our business.

Thanks, Vivek. This evolving landscape you just described is creating the kind of environment where our advantages are most pronounced. To put this in context, our platform manages over $150 billion in private credit, supported by more than 250 dedicated investment professionals and the relationships of over 3,000 Goldman Sachs investment bankers across our global M&A and capital markets franchise. Goldman Sachs has been investing in private credit for over 30 years. That depth of experience across multiple credit cycles informs every underwriting decision we make. We're focused on deploying capital selectively into the best risk adjusted opportunities available. When deal flow is abundant and capital is plentiful, Every lender looks similar. When deal flow slows and capital becomes scarcer, the differentiation becomes clear in the competitive landscape shifts. Borrowers need lenders who can provide certainty of execution, underwrite complex situations quickly, and have the scale to deliver full capital structure solutions. That's where our platform stands out. In June, our private credit platform closed a $455 million senior secured first lien term loan to Burgess Pigment Company, a leading specialty minerals processor. Goldman Sachs served as both agent and sole lender on this transaction. Given its scale, the borrower required a financing partner capable of underwriting the full commitment without the need for syndication. GSBD participated alongside other vehicles in our private credit ecosystem, and that multi-vehicle capacity is exactly what allowed us to win this on a bilateral basis. is a clear illustration of how the breadth of our platform translates into differentiated deal flow for GSBD shareholders. Transactions like Burgess reflect the type of selective deployment we are prioritizing, and the spread environment today means the economics on these opportunities are more attractive than what was available in prior quarters. But we remain patient and disciplined, investing only into the highest conviction opportunities while we focus on bringing leverage towards the lower end of our target range.

Thanks, David. Private credit has drawn significant attention in the first half of this year, and we are not immune to the headlines. But this is the environment where the actions managers take create the largest differentiation in outcomes. How you underwrite, how you manage workouts, the stability of your capital base, and the discipline of your deployment are what will ultimately separate outcomes as this cycle plays out. The steps we've taken are designed to put GSBD on the right side of that divide. With that, Tucker, could you walk us through our deployment activity, the opportunities we're seeing in the market, and how these dynamics are reflected in our portfolio composition?

Yeah, sure. So our deployment approach this quarter was intentionally selective, not because of a lack of opportunity, but because we are prioritizing balance sheet management and credit selection. As our leverage comes down and we create additional capacity, We expect to deploy more actively into this attractive spread environment. To elaborate on Vivek's comments regarding new deployment opportunities, we are seeing a meaningful shift in sectors where deal activity is concentrated. Software originations have showed across the industry, while we've seen increased activity in healthcare, business services, and industrials. All of our new commitments this quarter were outside of software, not because we are avoiding the sector, but because the most compelling risk-adjusted opportunities this quarter were elsewhere. We continue to actively evaluate software deals and remain confident in our ability to underwrite the sector. When the right opportunity presents itself under the right terms, we will invest. GSBD's portfolio companies span across 39 industries and 173 borrowers, giving us the breadth to invest across the full opportunity set rather than depending on any single sector. During the second quarter, we made new commitments of approximately $12.9 million across nine portfolio companies, two of which are new borrowers. We also funded approximately $114 million of previously unfunded commitments. While the commitment level in the second quarter was modest, the quality and economics of what we deployed were improved. The weighted average spread on our second quarter originations was 511 basis points, wider than what we were originating six months ago. The weighted average loan-to-value on new deals was 37.4%, reflecting conservative entry points in the current valuation environment. On the repayment and sales side, we received $146 million in total proceeds during the quarter. Net repayments exceeded new deployments, allowing us to use excess proceeds to reduce leverage. Our net debt to equity ratio is 1.35 times at quarter end, but is now currently below our target of 1.25 times, primarily due to repayment and sales activity since quarter end. This is a meaningful shift that creates capacity for new deployment and positions us to reactivate our stock repurchase program. At the end of the quarter, total investments in our portfolio were $3.2 billion of fair value comprised of 98.6% in senior secured loans with the residual asset mix in the form of preferred and common stock as well as unsecured debt. The weighted average yield of our total debt and income producing investments at amortized cost decreased to 9.5% compared to the first quarter. weighted average net leverage and interest coverage remained slightly or rose slightly to 6.2 times from six times last quarter and interest coverage increased to two times from 1.9 respectively. Turning to credit quality, an area of significant focus for the team, we ended the second quarter with non-accruals of approximately 2.9% at fair value compared to 3.2% in the prior quarter. The number of companies in non-accrual decreased from 11 to 10 during the quarter as one portfolio company was restored to accrual status. As mentioned on previous calls, we believe these non-accrual names are idiosyncratic situations. They don't share a single cause and they are not indicative of a broader portfolio trend. The large majority of our portfolio companies continue to perform well with continued revenue and EBITDA growth quarter over quarter and year over year across our borrower base. What we believe differentiates managers in this environment is the ability to identify problems early and manage through them effectively. Within our Direct Lending Americas platform, workout and restructuring efforts are supported by a dedicated team that is embedded within the broader investment group. This includes select investment professionals supported by several senior professionals with extensive workout experience who are actively involved in managing complex situations. Critically, when faced with portfolio company distress, Original deal captains remain closely engaged throughout the restructuring process, leveraging their longstanding knowledge of the borrower and the investment thesis from origination. They work in coordination with the dedicated restructuring team to ensure continuity, alignment, and accountability. These team members are engaged proactively and frequently with sponsors and co-lenders to help maximize recoveries. David, let me hand it to you on a couple of situations that played out this quarter.

Let me share two examples that demonstrate our workout team's capabilities in action. First is Thrasio, an Amazon e-commerce aggregator, which I'm sure is a name many of you recognize. Following its emergence from bankruptcy in 2024, our workout team has remained highly engaged. Through engagement with the board, working closely with co-lenders, engaging deeply with management, and leveraging the broader Goldman Sachs platform, We have focused on maximizing recovery value. Specifically, the team capitalized on the value of Thrasio's individual brands through a series of successful investments. This proactive approach resulted in a full pay down of our senior loan and over 75% pay down of a second out position at par in this quarter, with full repayment expected in the second half of 2026. Another example is Seneca Holdings. a specialty industrial door manufacturer we have held in our portfolio since 2018. Performance has continued to improve following a restructuring in 2020. And in advance of upcoming maturities, our team engaged with a sponsor on a maturity extension to provide runway to further ramp performance and enhance our recoveries. Through this process, we successfully negotiated two and a half year maturity extension from the first lien lenders and elevated Goldman subordinated notes within the cap stack, gaining higher seniority and increased cash pay component. Today, Seneca is in a much more stable footing with the right size capital structure positioned to support its ongoing operations and future growth. To further this point, the first out-term loan we hold was moved to accrual status within this quarter. Both examples demonstrate our ability to maximize recovery through proactive engagement Working collaboratively with sponsors, co-lenders, and management, and drawing on the broader Goldman Sachs platform when it creates value. With that, Stan, walk us through the financial results.

For the second quarter, GAAP and adjusted after-tax net investment income were $42.2 million and $41.5 million, respectively, which is a material increase from $24.8 million and $24.7 million in the prior quarter. On a per share basis, GAAP net investment income was $0.38, equating to an annualized net investment income yield on book value of 12.6%. As Vivek noted, total investment income rose to $83.7 million this quarter from $78.8 million last quarter, primarily as a result of restoring certain investments to accrual status and repayment activity. As we've previously discussed, there can be variability in our incentive fee. Due to the three-year total return lookback, which ties our advisors' compensation directly to the cumulative economic value delivered to shareholders, including both income and the impact of gains and losses, rather than income alone. The lookback, in combination with the current period total return, resulted in an incentive fee that was outsized last quarter, but no fee earned in the current quarter. collectively the higher top line and lack of incentive fee expense contributed to higher NII. Net investment income covered our dividend this quarter and we hold approximately $100.3 million or 89 cents per share of undistributed taxable income at quarter end. Turning to our balance sheet, we believe the strength of our liability structure is a deliberate competitive advantage, particularly in volatile markets. When certain lenders face pressure on their own financing, Having committed long-dated facilities with established banking partners provides meaningful stability and reliability. Our revolving credit facility is committed across 12 bank lenders with no mark-to-market provisions. As of quarter end, we had approximately $796 million of borrowing capacity remaining under the facility and approximately $1.9 billion in outstanding debt across our entire financing package. Additionally, approximately 64% of our total principal amount of debt outstanding was in unsecured debt, which excludes the netting of unamortized debt issuance costs and cumulative hedging adjustments for those borrowings that are designated in a fair value hedging relationship. Our net debt-to-equity ratio was 1.35 times as of June 30, 2026. While this leverage level is within our operating range, it is at the upper end of it. As Tucker noted, our pro forma leverage now stands below the 1.25 times target, which provides us flexibility to repurchase stock under our 10B51 program. As announced on our last earnings call, the board approved and authorized a new 10B51 stock repurchase program to allow the fund to repurchase up to 75 million of shares of common stock, subject to certain limitations, including leverage. Taken together, these developments support a clear path toward lower leverage and the ability to make new investments and return capital to shareholders. We will continue to update investors on our progress each quarter.

Thanks, Dan. In closing, although the private credit market continues to face headwinds, the fundamentals of our platform are strong. We remain focused on reducing leverage, making new investments in attractive economics, and returning capital to shareholders. Thank you all for joining us today. Let's open the line for questions.

Thank you. If you would like to ask a question, please signal by pressing star 1 on your telephone keypad. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. And again, press star 1 to ask a question. We'll pause for just a moment to allow everyone an opportunity to signal for questions. And we'll take our first question from Erin Signovic with Truist Securities.

Thanks. First, I guess I'd like to say congrats to those that are changing roles. And David, I enjoyed working with you. So good luck in your future and hopefully we'll cross paths again.

Absolutely. I'll be here till year end and then on investment committee thereafter. So I'll be around for a while yet. Thank you.

Sounds good. From an investing environment standpoint, M&A picking up post-quarter, how are you thinking about that in terms of this vehicle? And are you seeing enough activity where it may create enough turnover in the vehicle that you can start to see some pickup in activity for GSBD?

Yeah, it's a good question. Thanks for asking that. And then as you sort of allude to, there's a couple things going on here. So first is, as you point out, the activity that we're seeing, remember, there's always a lag between when we sign up deals and when we fund deals. And so When you think about this most recent quarter for GSBD, the flow of new origination was on the slower side, in part because the kind of lag effect of the M&A environment earlier in the year was quiet, coupled with the fact that, as you know, post last quarter, our leverage was running higher than our target. And so the combination of those two things led to a quieter period on a relative basis from an origination perspective. When you think about where we are, I think two things are different. One is, as you point out, the M&A environment is picking up again in this part of the market. So sponsor activity has picked up, and we are actively involved in and have actually been signing up recently kind of deals sort of in different parts of the platform. And then the second piece of it is, as we noted, our leverage has kind of backed down, particularly post-quarter end, Thank you for joining us. Leverage is kind of where we want it to be and sort of deal volume is picking up. We'll still be able to kind of add some of the newer originations that reflect the new kind of integrated go forward platform. And over time, that'll continue to dilute the legacy names.

Thanks. In the investments that you highlighted that it's kind of shifting industries a bit in what I found interesting was that you said you're not Ignoring the software sector, I would imagine that your bar is probably a bit higher now. Are you seeing any activity on the software side that would be kind of, I don't know if you want to call it green shoots for an industry that used to do a lot of activity, but maybe some positive aspects that might unlock some activity in that sector going forward?

Yeah, so I'd say a few things. There have been a couple of transactions, both in the US and in Europe, in the broadly syndicated market that I think are useful data points to just think about where public credit is kind of willing to price these software names. And so I think that that is just kind of constructive in terms of price discovery and knowing that that option is out there for borrowers. From a private credit perspective, we've been Pretty quiet. There has not been, as you can imagine, a lot of new software activity. I think that's less about lending and more about just bid-ask because I think that one of the unresolved questions in and around AI is really around terminal value. And so even if your loan is well covered, if a company used to be worth 30 times and now it's worth 20 times or 18 times, That might not impact how you think about your loan that's levered at six times, but that's a pretty big bid ask from an equity valuation perspective. And so I think new deal activity continues to be on the quiet side. We have seen some smaller add-ons, and I think that there is starting to emerge a market for kind of smaller sort of tuck-in add-ons that sponsors are starting to do, point one. And then point two is, I think that in terms of how software is actually performing, I think when you think about our AI framework that we've talked about, that we've had in place now, elements of it really going back to 2023, I think what we're seeing has kind of been consistent with that platform, which is for incumbent software providers that are verticalized in their industry, that own their customers with high switching costs and own their data, so proprietary data angle. Those companies are actually performing quite well. And in fact, those companies are actually kind of performing better than sort of the book as a whole. And so I think that, you know, and you see this in kind of public market pricing, both in equity and credit, which is now versus February, I think there's a much more, much better appreciation around the fact that not all software is created equally. And I think the market is kind of had some more time to dig into, you know, kind of pricing different software providers based on kind of their characteristics, which I think is also a good step forward.

All right. That's helpful. And then lastly, just a kind of quick one on the quarter. The interest income rebounded nicely. I think I saw in the release that there was partly attributed to putting one of your non-accruals back onto accrual status after it had better performance. Is there a sort of like a catch-up amount of interest income that was booked in the quarter that was related to that?

Hey, this is Dan. Yes, that's right. So restoring two of our names to a cool status, particularly Thrasio, did include a pickup in income, and we accelerated some of our OID as we were paid on certain names, including Thrasio, partial repayment.

Is there any way you can frame what that would be from a one-time perspective versus is that going to carry forward into the next quarter at the same level?

We had around $5 million of income, I would say, from one-time items. Like I said, the accelerated OID as well as a pickup from the restoration to accrual status that we wouldn't necessarily... expect to recur. However, you know, given the pickup in M&A, as we may see other repayments, we could continue to see similar activity. Got it.

Okay. Thank you very much.

Thank you. And next we'll go to Finian O'Shea with Wells Fargo Securities.

Hey, everyone. Good morning. I echo the Sentiment Sword, David, and hope you stick around for time to come. So on the sort of new framing on maybe leverage and buybacks or at least a little bit shifted downward on the leverage side, can you put some, I guess, sort of meat on the bone there? What do you want? Leverage to sort of go down to, and then how aggressively you be on buybacks. And then I guess tie in there, if so, sort of why now with the sort of legacy issues, you know, pretty consistently playing out as a headwind.

Yeah, hey Finn, it's David. Yeah, from a leverage perspective, look, we came down at quarter end, we're at 135. Post quarter end, due to some repayments and sales, we're under the 1.25 times, you know, probably closer to 1.2 today. You know, with that level, you know, we do anticipate reactivating some buyback. Look, we want to mix that between the stock buybacks and new opportunities that we see in the market and deployment. So it's going to be a mix between that. We do think, given where the portfolio is, senior secured, we think we're hopefully behind the worst of it from some of the legacy assets in the markdown. That's a comfortable level going forward. In addition to that, I think you've seen some pickup in the repayment activity. The BSL market has picked up. So post-quarter end, we've seen additional repayments, which will allow us to reinvest in new deals and support that stock buyback activity.

Okay, it's helpful. And I guess on the mix of leverage, are there implications there on the dividend that's still declared into the third quarter, but seeing if there's color on the path forward?

Sure. So, hey, Finn, it's Stan. We continue to discuss this with our board of directors. I'd say that we intend to maintain the current $0.32-based dividend in the near term. That is something, obviously, we continue to assess. We think that that dividend coverage is going to be helped in part by the fact that the incentive fee that we expect to accrue over the next couple of quarters is going to be more muted as a result of that look back. But we'll continue to assess, especially given the portfolio's predominantly floating rate. You know, as we watch changes in the SOFR curve or the base rates, as well as trends in what kind of spreads we'll get on new originations.

Very good. All for me. Thank you, everybody. Thank you. Thank you.

Thank you. And next, we'll go to Healy Sheath with Raymond James. Please go ahead.

Good morning. Thanks for the question. Going back to deal activity being concentrated in specific sectors, I believe you said healthcare, business services, and industrials. Are you seeing anything different with origination spread than pricing in those sectors relative to other sectors?

Yeah, look, I'd say that it depends on kind of what you're comparing to and sort of reference points. So I'd say if you think about spreads relative to and to keep it apples to apples, let's think about large cap sponsor just as one benchmark. If you think about large cap sponsor spreads since the end of last year where at some point in the fourth quarter we had gotten to kind of a local tight point, spreads are wider than that. There was a period in March and April where spreads had kind of widened out sort of really into the fives, low fives, maybe even a few deals in sort of mid fives. And I think that things have kind of settled out now, sort of depends on the type of deal, but it's settled out in the 475 to 500 range for, again, depending on the credit in large cap sponsor land, middle market will come at a little bit of a premium to that. But I'd say that's kind of where the market is. And then within that, in terms of industry differentiation, I wouldn't say that there's necessarily a, A difference in sort of spreads across industries. I think it's more the leverage that we think about is really specific to the business. And obviously, the macro of the industry plays into what type of leverage we think is appropriate for any particular business.

Got it. That's helpful. And then on the portfolio as a whole... Any incremental detail into what we should expect in terms of the pacing of originations and repayments throughout the rest of the year? Obviously, there were elevated repayments relative to originations for this quarter. Is that something we should continue to expect?

Yeah, look, I think we've seen, you know, into the third quarter, certainly some elevated, you know, repayment We talked about that's kind of why our leverage has come down here. A little hard to predict how that plays out the rest of the year. We're going to have to wait and see. But we do see with elevated BSL activity, the M&A pickup that Vivek talked about, that we do anticipate that those repayments are going to be higher, which will just give us a chance to rotate that money into new deals that we're seeing across the platform today.

Got it. Thanks for the call.

Thank you.

We'll next go to Ethan Kay with Lucid Capital Markets. Please go ahead.

Hey, good morning, guys. Just hoping you can kind of characterize the unrealized depreciation during the quarter, right? Like how much of that was mark-to-market driven versus kind of specific name driven? And then given your, you know, recent commentary just now on kind of spread stabilization, are you seeing any You know, pull to par reversal here as loans progress towards maturity.

Sure. So I'd say that, you know, a portion of it was driven by was more broad brushed throughout the quarter, maybe about half. And then I'd say the other half was coming from investments that we've talked about, you know, in the past names that have either gone through a workout or restructuring. You know, where we continue to see some pressure in the performance.

Great. Thank you.

Thank you. And I'd now like to turn the call back over to Vivek for any closing or final remarks.

Great. Thank you, everyone, for joining us. We appreciate your support, and we'll talk to you soon. Have a good day.