Hello everyone, and welcome to GBDC's Earnings Call for the Fiscal Quarter Ended December 31, 2024. 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 SEC filings. For materials we intend to refer to on today's earnings call, please visit the Investor Resources tab on the homepage of our website, which is www.golubcapitalbdc.com and click the Events Presentations link. Our earnings release is also available on our website in the Investor Resources section. As a reminder, this call is being recorded. With that, I am pleased to turn the call over to David Golub, Chief Executive Officer of GBDC.

Hello, everybody, and thanks for joining us today. I'm joined by Chris Ericson, our CFO; and Matt Benton, our Chief Operating Officer. For those of you who are new to GBDC, our investment strategy is focused on providing first lien senior secured loans to healthy, resilient middle market companies that are backed by strong partnership-oriented private equity sponsors. So yesterday, we issued our earnings press release for the December 31 quarter, and we posted an earnings presentation on our website. We'll be referring to that presentation during today's call. I'm going to start as usual with headlines, and then Matt and Chris are going to go through our operating and financial performance for the quarter in more detail. And finally, I'll wrap up with our outlook for the coming period, and we'll open the floor for some questions. So headlines. The headline is that GBDC had a strong quarter and a strong start to fiscal year 2025. We hit our aspiration to be good boring. Here are the highlights. Adjusted NII per share was $0.39. This corresponds to an adjusted NII return on equity of 10.1%. If you exclude the impact of some non-cash interest expense that was related to our interest rate swap, adjusted NII for the quarter was actually $0.40 per share. Adjusted net income per share was $0.42 per share. This corresponds to an adjusted return on equity of 11%. Adjusted net income per share included $0.03 of adjusted net realized and unrealized gains. The vast majority of GBDC's portfolio has been performing well and continues to perform well in the December 31 quarter. In fact, we saw a nice lift in GBDC's overall portfolio credit metrics this quarter. And we also saw nice growth in GBDC's investment portfolio. New deal activity continued to pick up in the market, and GBDC was able to find attractive investment opportunities, while remaining highly selective, enabling us to get back to our target leverage. With that, let me pass the call over to Matt Benton to discuss the quarter in more detail.

Thanks, David. I'm going to start on Slide 4. GBDC's earnings were driven by three key factors. First, overall credit performance was solid. We recognized some realized losses on three non-accrual investments that were restructured in the quarter. These investments were all on non-accrual as of September 30, 2024, but these losses were more than offset by gains elsewhere. Overall, we're pleased with the credit picture at GBDC, and we'll share how the progress is visible in GBDC's quarter-end credit metrics. Second, earnings continue to be supported by high base rates and attractive spreads, consistent with recent quarters. Having said this, we did see some reduction in yields this quarter, primarily from a decrease in SOFR and to a lesser extent, from some continued spread compression. The spread compression was more pronounced and visible in new investments, but we have seen some repricing of existing investments, particularly in the large market of our portfolio. Repricing dynamics in the core middle market are less prolific than the large market where drive-by repricings are more common. At quarter end, we analyzed GBDC's portfolio in the context of current market spreads and believe there is limited repricing risk left within the existing loan book. Third, we realized a reduction in borrowing costs in the quarter, both from base rate decline and because of the funding cost benefits associated with the November 2024 funding structure initiatives that we discussed on last quarter's earnings call. We didn't get a full quarter's benefit of those lower funding costs. We'll get that in the March 31st quarter. Fourth, earnings continue to benefit from lower expenses due to GBDC's fee structure. And fifth, earnings were negatively impacted in the quarter by $0.01 per share related to non-cash interest expense associated with interest rate swaps on our fixed-rate unsecured notes. Adding back the $0.01 per share impact on adjusted NII from non-cash interest expense implies approximately $0.40 of adjusted NII per share. Let me summarize portfolio activity and credit quality in the quarter. Gross originations were $1.2 billion, up from last quarter as we sought to continue to increase leverage post-merger. After factoring in repayments and unfunded commitments associated with originations, net funds increased by $450 million sequentially. This represented net portfolio growth of approximately 5.5% quarter-over-quarter. GBDC did not receive the full benefit of the earnings power of this portfolio growth because a lot of the growth was back-end weighted. Last quarter, I said the lending environment was getting more borrower-friendly across all credit markets. This continued in the December 31 quarter, especially in the large market segment where we saw more spread compression, looser deal documentation, and higher leverage. Despite this, Golub Capital's origination stats in calendar Q4 continued to depict our conservatism. One, a selectivity rate of less than 4%; two, a repeat borrower percentage in excess of 70%; three, Golub acted as the lead or sole book runner in 88% of our transactions; four, our average LTVs at the time of origination have generally been in the mid-30% to mid-40% range; and five, given the risk-adjusted pricing dynamics we see across the entire middle market, we are choosing to primarily play in the core middle market. The median EBITDA for our calendar Q4 2024 originations was $53 million. We believe this is a nice differentiator for Golub versus many of our peers solely focused on the large borrower market. Credit statistics improved quarter-over-quarter. Investments in Ratings category 4 and 5 increased to nearly 90% of the portfolio at fair value as of December 31, 2024, from approximately 87% the prior quarter. For context, this marks the highest combined level of four and five rated investments at GBDC since the September 2022 quarter. Investments in rating Category 3 declined from 11.6% of the portfolio at fair value as of September 30, 2024, to 8.8%. And investments in rating categories 1 and 2 remain very low, representing just 1.3% of the total portfolio at fair value. As a percentage of total investments at fair value, non-accrual investments declined from a very low 1.2% at September 30, 2024, to just 50 basis points, the lowest level at GBDC since 2019. In the quarter, the number of non-accrual investments decreased to nine, following the restructuring of three former non-accrual investments. Continuing on Slide 4, let me briefly summarize distributions paid and certain balance sheet changes in the quarter. Total distributions paid in the quarter were $0.48 per share. This included: one, the quarterly base distribution of $0.39 per share; two, a $0.04 per share quarterly variable supplemental distribution that we declared in November 2024; and finally, the final $0.05 per share special distribution declared in June 2024 in conjunction with the GBDC three merger closing. NAV per share decreased by $0.06 on a sequential basis to $15.13, primarily because distributions paid, including the special distribution exceeded earnings. Net debt to equity increased quarter-over-quarter to 1.19 turns. This reflects leverage net of available cash and cash trapped and debt securitizations for the purposes of paying down principal on outstanding notes. Similar to last quarter, the increase in net leverage largely happened in the last few weeks of the 12/31 quarter. GBDC's average net leverage during the quarter was just 1.14 turns. As a result, we expect GBDC to recognize the full run rate profitability benefit of its larger investment portfolio next quarter. Further, we expect GBDC to maintain average net leverage near our current target of 1.15 turns. In November 2024, we executed a series of debt funding-related transactions we expect to drive down GBDC's weighted average cost of debt, including a $2.2 billion GBDC term debt securitization with AAA notes priced at SOFR plus 158 basis points. In conjunction with the CLO pricing, we redeemed some higher-cost debt securitizations and debt facilities. We expect to recognize the full run rate profitability benefit from these transactions in the March 31, 2025 quarter, which we believe will add incremental adjusted NII that we think will be a valuable forward profitability cushion to the extent that we get further base rate or investment spread reductions. There are several other drivers of higher profits that we are working on, including further borrowing cost optimization as we look across our existing funding structure. GBDC was upgraded by Moody's this quarter to a Baa2 rating with a stable outlook, which we believe enhances our ability to issue low-cost unsecured debt. Portfolio rotation. We believe the successful monetization of certain non-earning equity investments and low-yielding loans associated with prior restructured names with the subsequent redeployment of those proceeds into new core middle market originations could generate incremental NII. I'll include the obvious caveat that we have work to do to successfully resolve these names, and it won't all happen overnight, but we have the skills and resources to do this.

Thanks, Matt. Turning to Slide 7. You can see how the earnings drivers Matt just described and excess distributions paid in the quarter translated into GBDC's December 31, 2024 NAV per share of $15.13. Adjusted NII per share of $0.39 per share was below the $0.48 per share of aggregate distributions paid out during the quarter. Net realized and unrealized gains were $0.03 per share. Together, these results drove a net asset value per share decrease to $15.13, down $0.06 per share from the prior quarter. If we turn to Slide 10, which details our origination activity for the quarter, net funds quarter-over-quarter increased by $450 million, representing a 5.5% increase in total portfolio size versus September 30, 2024. Looking at the bottom of the slide, the weighted average rate on new investments was 9.4%. Investments that repaid in the quarter were at a weighted average rate of 11.3%. And as David and Matt described at the outset, this contributed to a lower investment yield on the portfolio from prior quarters. Slide 11 shows GBDC's overall portfolio mix. As you can see, the portfolio breakdown by investment type remained consistent quarter-over-quarter with one-stop loans continuing to represent around 87% of the portfolio at fair value. And Slide 12 shows that GBDC's portfolio remains highly diversified by portfolio company with an average investment size of approximately 30 basis points, consistent with prior quarters. Additionally, our largest borrower represents just 1.5% of the debt investment portfolio and our top 10 largest borrowers represent below 13% of the portfolio. We are big believers in modulating credit risk through position size, which we believe has served GBDC well in previous credit cycles. As of December 31, 2024, 92% of our investment portfolio consisted of first lien senior secured floating rate loans to borrowers across a diversified range of what we believe to be resilient industries. The economic analysis on Slide 13 highlights the drivers of the change in GBDC's net investment spread to 5%. Let's walk through this slide in detail. We'll start with the dark blue line, which is our investment income yield. As a reminder, the investment income yield includes the amortization of fees and discounts. GBDC's investment income yield fell 80 basis points sequentially to 11.2%. And as Matt highlighted, this was predominantly the result of a 99% floating rate investment portfolio re-indexing in the quarter to lower three month and one month SOFR reference rates and to a much lesser extent, lower weighted average spread on debt investments in the portfolio, which was driven via net originations at lower spreads and some repricing activity in the existing portfolio. Our cost of debt, the teal line, decreased 60 basis points to 6.2%, reflecting our 81% floating rate debt funding structure. As Matt described earlier, we expect further improvement in GBDC's weighted average cost of debt next quarter as we see a full quarter impact from the transactions we executed in November and December 2024. Net-net, our weighted average net investment spread, the gold line, decreased 20 basis points sequentially to 5%. I'll turn the floor back over to Matt now.

Thanks, Chris. Let's move on to Slides 14 and 15 and take a closer look at the improving credit quality metrics. On Slide 14, you can see the non-accruals decreased by 70 basis points to 0.5% of total investments at fair value, the lowest level since September 2019. Slide 15 shows the trend in internal performance ratings I highlighted earlier. Of note, investments rated three, signaling a borrower could be out of compliance with debt covenants decreased materially to just 8.8% of the total investment portfolio. The proportion of loans rated one and two, which are the loans we believe are most likely to see significant credit impairment remained very low at just 1.3% of the portfolio at fair value. As we usually do, we're going to skip past Slide 16 through 19. These slides have more detail on GBDC's financial statements, dividend history and other key metrics. I'll wrap up this section by reviewing GBDC's liquidity and investment capacity on Slides 20 through 22. First, let's focus on the key takeaways on Slide 22. Our weighted average cost of debt this quarter was 6.2%, materially down from the prior quarter, reflecting the debt funding structure transactions we executed. 44% of our debt funding is in the form of unsecured notes with no upcoming maturities in 2025 and well-laddered through 2029. The fixed rate notes coming due in 2026 and 2027 were issued with a weighted average coupon of 2.3%. And as you've heard us say on prior occasions, we did not swap them out for floating rate exposure. The remainder of GBDC's total debt funding is floating rate or swapped to floating. Again, this dynamic contributes to GBDC being less asset sensitive than it was a year ago. Following quarter end, Moody's upgraded GBDC's corporate credit rating and senior unsecured shelf rating to Baa2 stable from Baa3 positive. With this upgrade, GBDC is one of just three publicly traded BDCs with both a Baa2 from Moody's and a BBB from Fitch. We encourage investors to read the Moody's report, but we believe the upgrade was the result of the collection of GBDC's differentiating qualities that we consistently discuss on our earnings calls, namely a highly diverse and first lien-oriented portfolio, solid liquidity and capital management and a track record of stellar, that’s Moody's word, not ours, credit performance extending back to our IPO in 2010. Overall, our liquidity position remains strong, and we ended the quarter with approximately $1.1 billion of liquidity from unrestricted cash, undrawn commitments on our meaningfully over-collateralized corporate revolver and the unused unsecured revolver provided by our adviser. Now I'll hand it back over to David for closing remarks and Q&A.

Thanks, Matt. So to sum up, GBDC had a strong first quarter and a strong start to the fiscal year. I want to touch briefly on our outlook before we open the line for questions. So one of the market dynamics we talked a lot about in 2024 was spread compression. We saw spread compression across all credit markets from investment grade to high yield to the broadly syndicated market and to our markets. In our markets, this impacted both new deals and some existing deals that saw repricing amendments. Spread compression has been much more pronounced in the broadly syndicated market than it has been in the private credit market. Within private credit, it's been more pronounced in the large side of the market than in the core middle market, but no segment of the credit market has been completely immune. If we look beyond spread compression and look through a wider lens across all risk assets, markets today are pricing in considerable optimism about the business climate. So I think that raises an interesting question. Is that optimism justified? If you've listened to our earnings calls before, you probably can predict that I'm not going to make some bold forecasts. Our mantra is very consistently to stay humble about making macro predictions, both because we're not macroeconomists and because consensus expectations generally have been so wrong so consistently over the course of the last couple of years. That said, I do want to offer a few observations. First observation, the U.S. economy is doing quite well. Our Golub Capital middle market report highlighted how this last quarter was the ninth in a row showing very solid revenue and EBITDA growth. We do not see signs of an impending slowdown in our data. A second observation, private equity sponsors are voting with their wallets. Transaction volume continued to pick up in calendar Q4, and I think it seems likely to increase further through 2025. Dealmakers seem to be more excited about deregulation than they are concerned about tariffs. Both of these observations are consistent with the optimistic view. But let's look at the other side. At the same time that there are these reasons for optimism, there are also clear signs of elevated credit stress across the market. In the BSL market, the LSTA publishes data about defaults adjusted for liability management transactions. I think that's the right way to look at it. And their data shows that we're now looking at a rate of about 4.7% for the 12 months ended December 31st. That's more than double the 20-year average. It's a little hard to get apples-to-apples historical comparisons now that we've entered the era of liability management transactions, but I think that's about right. It's about double. Signs of rising credit stress also show up in reports from the major rating agencies, including S&P and Fitch and from major law firms that are covering restructurings and bankruptcies. So there are cross currents in the market that warrant both optimism and concern. We think this is the type of environment that historically has separated lenders with strong businesses, lenders with real competitive advantages from the newbies, the firms that lack the characteristics to be successful long-term players. It's not surprising to us that in the last five quarters, we've seen increased dispersion in performance among BDC managers, and we expect to see more of this in the coming period. We believe Golub Capital and GBDC will once again be on the good side of this performance dispersion spectrum and we'll be delivering more good boring results for our shareholders. With that, let's open the line for questions.

Thank you. We will now begin the question-and-answer session. Your first question today comes from the line of Ray Cheesman from Anfield Capital. Your line is open.

Good morning, David, and congratulations on managing things well during this time of change. My questions this morning are about the strong rally of the dollar since the new administration took over. There have been efforts to reduce regulations, and tariffs seem to fluctuate frequently. We now have only one of the three candidates left as we approach the end of this week. I'm curious how you believe the portfolio will respond amidst all this uncertainty. I understand that you primarily focus on domestic manufacturing and service entities, so I'm assuming the impact might be minimal, but I'm very interested in your perspective.

We certainly live in interesting times right now. Thank you for the question. First, we're relatively insulated from fluctuations in foreign exchange rates and tariffs due to our portfolio's construction. Most of our borrowers are U.S. companies serving other U.S. companies, with a large portion being service providers, including software companies. While we do have a significant minority in Europe, these are European companies interacting with other European companies, not doing business in the U.S. We are underweight in manufacturing and sectors with commodity exposure. We have been assessing our vulnerability to tariffs, and it's wise for everyone to plan for that possibility following the election. A positive aspect of our business is that we collaborate with knowledgeable private equity sponsors and skilled management teams who are also attuned to these issues. Based on our work thus far, I don't anticipate significant vulnerability to tariffs at a first-order level. However, I want to express caution because the second, third, and fourth-order impacts are uncertain, and a trade war could be detrimental for everyone. Therefore, I believe it's important to approach this period with caution, focusing on resilient strategies that can thrive across different macroeconomic scenarios. These are principles that are already familiar to Golub Capital, so we don't need to change our approach.

Hi, everyone. Good morning. Maybe they're not really continuing there, but on your closing remarks and a discussion. Sorry, could you hear me well, I had to speak loud?

Yes, better now. Thanks.

Thanks. I wanted to follow up on the loss environment that David mentioned earlier, specifically in direct lending. Can you explain how the situation has evolved over time and what the current competitive landscape looks like? I'm particularly interested in how changes in terms, such as leverage covenants, are affecting the expected loss rate in the direct lending asset class. We can observe that, as you noted, losses are rising in the leveraged finance markets, which are more transparent and immediate. However, these changes unfold more slowly in private lending. Do you have any general guidance on this? Thanks.

Sure. So in today's environment, we have an interesting real-time experiment in looking at how credit stress is showing up in the more liquid, broadly syndicated loan market and how it's showing up in private credit markets. And I think it's very instructive to look at both at the same time. One difference is your point, Fin, that there's more information about what's going on in the broadly syndicated market, and we're seeing the signals of credit stress in the form of higher default rates, higher levels of liability management transactions, more CCC credits. One interesting element of the difference is the second piece. We're seeing liability management transactions. We really aren't seeing those transactions in the private credit market, and liability management transactions are proving bad for recoveries in the broadly syndicated market. I think they're largely a transfer of value from lenders to lawyers and restructuring advisers because they certainly aren't working for private equity firms. There have been very few successful turnarounds of companies that have undertaken liability management transactions. Virtually all of them end up going through restructurings. They just delay the inevitable, and they end up costing credit or significant amounts through that delay. In the private market, we are seeing indicia of more credit stress. It's not broad; it's a tail. And it's not everywhere. It's more concentrated in the portfolios of some players than in others. One of the characteristics that we're seeing in the private credit market that's similar to the broadly syndicated market is that when companies hit real difficulties, it's often because of liquidity issues as opposed to because of covenant issues, and that's particularly true in the larger end of the market. That means that by the time lenders get into the picture and are able to take over control of situations that the company has had time to deteriorate significantly. Those can be harder turnarounds to effect. One of the reasons I strongly prefer the core middle market is that we tend to be either the sole lender or we tend to be one of a small number of lenders. We tend to have stronger documentation terms, and we're able to address problems in our borrowers much earlier. So I think what we're going to see in the coming period is a continuing playing out of this tail of companies that are less good at addressing higher interest rates, have less pricing power, and haven't grown over the course of the last couple of years. We're going to see the mettle of a number of private credit players who haven't been tested in prior cycles. And two things are going to be tested. One is how good are they at underwriting? And the second is how good are they at managing and turning around underperformers? And both of those are critical skills for successful private credit players over time. I think we'll fare very well in that evaluation.

That's helpful information. I have a follow-up regarding the platform. You mentioned in your closing remarks about some of the newer players. Can you explain how this is potentially influencing Golub and driving faster growth? It seems like Golub is expanding its presence in the insurance and retail sectors, where much of the capital is currently being raised. How much faster, if at all, is Golub's fundraising and origination progressing in response to today's competition? Thank you.

We are not accelerating our pace because of competitors. Our strategy has always focused on establishing strong competitive advantages within a specific area. We specialize in private credit and sponsor finance during a time when many are diversifying into alternative asset management. We have not altered our focus. A few years back, while several competitors aimed to expand into the large private credit markets, we opted to double down on the core middle market. I’m pleased with that choice, as we are now one of the leading players in that space, which I believe is a more favorable business model. We continue to follow our unique path, which differs from others in the industry, and we believe it is the right approach for us.

Good morning, everyone. I have a couple of questions regarding the liability and asset sides. For the liability side, you mentioned in the presentation that the weighted average cost in the December quarter was 6.2%, and it hasn't reflected the full impact of the activity conducted during the quarter. Could you elaborate on the potential scale of relative cost savings or rate savings that we might expect once it fully takes effect for a complete quarter? How significant would that cost saving be on the liability side?

So I'm really glad you asked the question, Robert, because I think how firms manage the right-hand side of the balance sheet is just so critically important to long-term success. And we've got a great team that focuses on that. I'm going to hand the mic to Matt Benton to describe in more detail the steps that we've undertaken in the last few months to take advantage of reduced spreads in liability markets and how that's going to be impacting our profitability on a go-forward basis.

Hi, Robert. How are you? It's a good question. Look, I think the easiest way to think about it is look at Page 22 of our investor presentation, which shows our debt stack, the benefits of the funding structure initiatives, which we talked a lot about, right, issuing the inexpensive CLO, taking out higher cost debt facilities didn't really take effect until later in the quarter. So we closed the $2.2 billion CLO that had a blended interest expense of SOFR plus 158 basis points on November 18. We took out at that time some of the more expensive legacy debt facilities that we had, but we weren't, for example, able to call the GBDC 3 2022-2 Securitization until December 16, and recall that was $225 million of third-party notes priced at SOFR plus 260 basis points. So that 6.2% weighted average cost of debt that you see on the slide reflects, again, the weighted average cost over the entire quarter, which includes operating for a good chunk of the quarter with those higher-cost legacy facilities. If you look at where we are today, the easiest way to think about it would be the current in-place weighted average cost of funds for GBDC would be to apply a 4.3% current SOFR base rate through that debt stack and apply the weighted average spread on the page to that, which would give you around a 5.5% weighted average cost of debt today. That's in place, that's where it is today. One other point that I would mention is there's obviously always a lot of moving parts when you think about the right and left side of the balance sheet here, for the CLOs, both of which comprise almost $1.6 billion of outstanding par, those did not reset their reference base rates lower until post-quarter end. So they reset in January. So again, that's where you start to see some of the big differences. And again, my simple math there doesn't include amortizing fees into it, but that's the way to think about it.

Got it. Very helpful. Thank you for that. I have a follow-up regarding the JPMorgan facility. It’s an appealing facility with attractive pricing, but it wasn't established under your current credit ratings. What is your assessment of the potential for that facility? It certainly has many years left if you choose to leave it as is. However, at the time it was structured, your rating was BBB-, and now it’s equivalent to BBB flat.

Yes, that's a great question. We believe there is potential for improvement as we observe what some of our competitors have accomplished in the market. By examining how our nearby peers have adjusted their existing facilities, we can gain insights. At the time we established that facility, we secured competitive pricing. We have strong relationships with banks and a long, successful history that we can draw upon. Therefore, you can assume that we are closely assessing this situation, and if we are able to make changes, there could be significant benefits beyond the current spread of 175 basis points.

Got it. Thank you. If I can switch to the asset side, I understand you have addressed the performance details. However, it seems that around 90% of our top-performing assets are exceeding expectations. In light of the market becoming more active, does this pose a risk? Could these well-performing assets become targets for acquisition in a more dynamic market? Additionally, what risk do you anticipate regarding significant portfolio changes as we approach 2025, especially if the fourth-quarter activity continues to increase?

So it's a great question. If you look at overall levels of portfolio turnover in the last couple of years, they've been below normal levels, Robert. And that's for the obvious reason that M&A activity post May, June of 2022 in response to the interest rate hikes, M&A activity fell very significantly. So logic would tell you if our loans have a typical five or six-year maturity and the usual average life of one of our loans is three years, and we've gone through a period when M&A activity and repayments have been lighter than usual. But at some point, that's going to shift into an environment where M&A activity and portfolio turnover is going to be higher than normal. The good news is that when that happens, I think there will also be a lot of activity available for us in the new loan category. So my expectation would be that two things would happen at the same time. We'd see both higher new originations and higher repayments. And I think that's the pattern that we've seen in the past when we've seen this kind of pattern. I think that will make the period of higher portfolio turnover manageable.

Just one additional question on that. Do you foresee a shift in the potential mix between large and core middle market if that activity increases? Could you anticipate a change in churn that might require a focus on larger transactions, given that most of the activity is in that area? Do you think there is a possibility for a shift in the mix or something similar?

So one of the great strengths of the platform, Robert, is that we participate in transactions that range from quite small, $20 million EBITDA companies to large companies to companies that have hundreds of millions of dollars in EBITDA and to whom we have across the platform, multibillion-dollar loans. So we have an ability to move our origination to where we see the most attractive opportunities. I will tell you to reiterate something that Matt said in our comments at the start of this call, we have seen the most attractive opportunities in the recent period in the core middle market. And my expectation is that that's going to continue in large measure because that's where our competitive advantages are strongest. That's where we're a dominant player. That's where our relationships and our incumbencies and our expertise are particularly valuable. But having said that, I think being able to play the breadth of companies across different size ranges gives us the capacity to adjust if we're in an environment along the lines of what you're describing. If we're in an environment in which most of the new M&A activity is in larger companies, I don't think that's what's going to happen. I think when we start to see more activity, it's going to be across the spectrum. In fact, it may even be disproportionately middle market. But if it happened the way you described, I think that would be fine.

David, thanks for the follow-up. I was wondering, software has been a very attractive place for BDCs, including yours to put money to work and earn great returns. How do you feel about the category possibly being impacted going forward as artificial intelligence adjusts not only the hardware side with the NVIDIA story, but now it's getting into software with Deep Seek supposedly doing a lot more with software than it's ever done with hardware. So I'm just wondering, do you see the category possibly being a different kind of bucket going forward?

So you're right that software has been a very favorable industry for Golub Capital. We were very early in identifying software as being an industry with a lot of good credits almost 15 years ago now when we started being a large software lender. But a couple of comments. One is software has never been a no-brainer. They're good software companies and there are bad software companies. And we've learned how to be a very good software lender. Not all lenders are good software lenders. It takes a lot of skill and expertise to be able to understand the credit characteristics and strategic positioning of different software companies. On a go-forward basis, I think that act of being able to distinguish between good software companies and less good ones is going to be even more important and harder. And one of the reasons for that is AI. Some software companies are going to be able to use AI as a means of enhancing the value proposition for their clients. And some other software companies are going to see situations arise where AI challenges their historical incumbencies. So I think this is a very important area for firms to have really strong, internal expertise in order to evaluate and distinguish between the firms that are going to be winners and the firms that are going to be losers as a consequence of AI. Now AI is not the only thing that's going to distinguish winners and losers in software. There are many, many other factors at play as well. And I think firms that are good at software lending are going to need to be very good at evaluating those other factors as well.

And that concludes our question-and-answer session. I will now turn the call back over to David Golub for closing remarks.

Well, thank you all for joining us today. I appreciate your attention and your time. As always, if you have further questions or issues that we didn't cover today, please feel free to reach out. And we look forward to talking to you next quarter.

This concludes today's conference call. Thank you for your participation. You may now disconnect.