8-K
GOLUB CAPITAL BDC, Inc. (GBDC)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of report (Date of earliest event reported): August 7, 2023
GOLUB CAPITAL BDC, INC.
(Exact name of Registrant as Specified in Its Charter)
| Delaware | 814-00794 | 27-2326940 |
|---|---|---|
| (State or Other Jurisdiction of Incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
__ 200 Park Avenue, 25th Floor, New York, NY 10166_ _
(Address of Principal Executive Offices) (Zip Code)
Registrant’s telephone number, including area code: (212) 750-6060
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
|---|---|
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| --- | --- |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| --- | --- |
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
| --- | --- |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol | Name of each exchange on which registered |
|---|---|---|
| Common Stock, par value $0.001 per share | GBDC | The Nasdaq Global Select Market |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 or Rule 12b- 2 of the Securities Exchange Act of 1934.
Emerging growth company o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
| Item 2.02. Results of Operations and Financial Condition. |
|---|
On August 8, 2023, Golub Capital BDC, Inc. will host a conference call to discuss (i) its financial results for its third fiscal quarter ended June 30, 2023 and (ii) the announcement of a permanent reduction in the base management fee rate that Golub Capital BDC, Inc. pays its investment adviser, GC Advisors LLC. In connection therewith, Golub Capital BDC, Inc. provided (i) an earnings presentation and (ii) a management fee reduction announcement presentation on its website at http://www.golubcapitalbdc.com. A copy of the earnings presentation and management fee reduction announcement presentation are attached hereto as Exhibit 99.1 and Exhibit 99.2.
The information in Item 2.02 of this Current Report on Form 8-K, including Exhibit 99.1 and Exhibit 99.2 furnished herewith, is being furnished and shall not be deemed “filed” for any purpose of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of such Section. The information in this Current Report on Form 8-K shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.
| Item 9.01. Financial Statements and Exhibits. | | --- || (d) Exhibits. | | | --- | --- | | 99.1 | Golub Capital BDC, Inc. Third Quarter 2023 Earnings Presentation | | 99.2 | Golub Capital BDC, Inc. Management Fee Reduction Announcement Presentation | | SIGNATURES | | --- |
Pursuant to the requirements of the Securities Exchange Act of 1934, Golub Capital BDC, Inc. has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| GOLUB CAPITAL BDC, INC. | ||
|---|---|---|
| Date: | August 7, 2023 | By: /s/ Christopher C. Ericson |
| Name: Christopher C. Ericson | ||
| Title: Chief Financial Officer |
gbdcq3fy2023earningspres
Confidential | for discussion purposes only GOLUB CAPITAL BDC, INC. EARNINGS PRESENTATION QUARTER ENDED JUNE 30, 2023
2 Such forward-looking statements may include statements preceded by, followed by or that otherwise include the words “may,” “might,” “will,” “intend,” “should,” “could,” “can,” “would,” “expect,” “believe,” “estimate,” “anticipate,” “predict,” “potential,” “plan” or similar words. We have based the forward-looking statements included in this presentation on information available to us on the date of this presentation. Actual results could differ materially from those anticipated in our forward-looking statements and future results could differ materially from historical performance. We undertake no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise. You are advised to consult any additional disclosures that we make directly to you or through reports that we have filed or in the future file with the Securities and Exchange Commission (“SEC”), including annual reports on Form 10-K, registration statements on Form N-2, quarterly reports on Form 10-Q and current reports on Form 8-K. This presentation contains statistics and other data that have been obtained from or compiled from information made available by third-party service providers. We have not independently verified such statistics or data. In evaluating prior performance information in this presentation, you should remember that past performance is not a guarantee, prediction, or projection of future results, and there can be no assurance that we will achieve similar results in the future. Some of the statements in this presentation constitute forward-looking statements, which relate to future events or our future performance or financial condition. The forward-looking statements contained in this presentation involve risks and uncertainties, including statements as to: our future operating results; our business prospects and the prospects of our portfolio companies, including our and their ability to achieve our respective objectives due to disruptions, including those caused by global health pandemics, such as the COVID-19 pandemic, or other large scale events; the effect of investments that we expect to make and the competition for those investments; our contractual arrangements and relationships with third parties; actual and potential conflicts of interest with GC Advisors LLC ("GC Advisors"), our investment adviser, and other affiliates of Golub Capital LLC (collectively, "Golub Capital"); the dependence of our future success on the general economy and its effect on the industries in which we invest; the ability of our portfolio companies to achieve their objectives; the use of borrowed money to finance a portion of our investments; the adequacy of our financing sources and working capital; the timing of cash flows, if any, from the operations of our portfolio companies; general economic and political trends and other external factors, changes in political, economic or industry conditions, the interest rate environment or conditions affecting the financial and capital markets that could result in changes to the value of our assets, elevating levels of inflation, and its impact on us, on our portfolio companies and on the industries in which we invest;; the ability of GC Advisors to locate suitable investments for us and to monitor and administer our investments; the ability of GC Advisors or its affiliates to attract and retain highly talented professionals; the ability of GC Advisors to continue to effectively manage our business due to disruptions, including those caused by global health pandemics, such as the COVID-19 pandemic, or other large scale events; turmoil in Ukraine and Russia, including sanctions related to such turmoil, and the potential for volatility in energy prices and other supply chain issues and any impact on the industries in which we invest; our ability to qualify and maintain our qualification as a regulated investment company and as a business development company; the impact of information technology systems and systems failures, including data security breaches, data privacy compliance, network disruptions, and cybersecurity attacks; general price and volume fluctuations in the stock markets; the impact on our business of the Dodd-Frank Wall Street Reform and Consumer Protection Act and the rules and regulations issued thereunder and any actions toward repeal thereof; and the effect of changes to tax legislation and our tax position. Disclaimer
Summary of Financial Results 01
FY 2023 Q3 Earnings Review (Quarter Ended 6/30/23) • GBDC is reducing its base management fee to 1.0% from 1.375%, a reduction that permanently increases earnings power (will be implemented during the 9/30/23 quarter) • Enhances the existing market leading attributes of GBDC’s fee structure (among the industry’s highest hurdle rates, cumulative since inception incentive fee cap) Management Fee Reduction Announcement • Adjusted net investment income of $0.44 per share, or an 11.9% NII ROAE, an increase of $0.02 from $0.42 for the quarter ended March 31, 2023 • Net income of $0.43 per share, an increase of $0.09 from $0.34 for the quarter ended March 31, 2023 • Net asset value of $14.83 per share, an increase of $0.10 from $14.73 as of March 31, 2023 Earnings Summary • Net funds growth of $38.7 million, including $110.7MM in new investment commitments • Credit performance was solid in general; non-accruals decreased to 1.5% of total debt investments at fair value, and internal performance ratings remained stable1 • Total available liquidity of $898 million • Effective leverage, net of available cash was 1.22x; 46% of debt funding mix is unsecured debt Portfolio & Balance Sheet Update • Quarterly distribution increased by $0.04 to $0.37 per share; quarterly distribution coverage remains strong at 119%2 • Declared supplemental distribution for FY 2023 Q3 of $0.04 per share, consistent with intention for new variable supplemental distribution framework going forward • Total announced distributions of $0.41 / share (11.1% dividend yield on 6/30/23 NAV) Dividend Policy Change 1. Please see page titled, “Portfolio Highlights – Portfolio Ratings”. 2. Represents adjusted net investment income before accrual (reversal) for capital gain incentive fee per share divided by base quarterly distribution declared per share. 4
5 Quarter Ended March 31, 2023 June 30, 2023 Net Investment Income Per Share Net investment income per share $0.41 $0.43 Amortization of purchase premium per share1 0.01 0.01 Adjusted net investment income per share2 $0.42 $0.44 Accrual (reversal) for capital gain incentive fee per share — — Adjusted net investment income before accrual for capital gain incentive fee per share3 $0.42 $0.44 Net Realized/Unrealized Gain (Loss) Per Share Net realized/unrealized gain (loss) per share ($0.07) $0.00* Net reversal of realized/unrealized loss resulting from the purchase price premium per share1 (0.01) (0.01) Adjusted net realized/unrealized gain (loss) per share2 ($0.08) ($0.01) Earnings Per Share Earnings (loss) per share $0.34 $0.43 Adjusted earnings (loss) per share2 $0.34 $0.43 Net Asset Value Per Share $14.73 $14.83 Summary of Financial Results vs. Prior Quarter A • Represents an amount less than $0.01. 1. On September 16, 2019, Golub Capital BDC, Inc. (“we”, “us”, “our”, the “Company” or “GBDC”) completed the acquisition of Golub Capital Investment Corporation (“GCIC”). Purchase premium refers to the premium paid by GBDC to acquire GCIC in excess of the fair value of the assets acquired. 2. Due to the purchase accounting for the GCIC acquisition, as a supplement to U.S. generally accepted accounting principles (“GAAP”) financial measures, the Company is providing additional non-GAAP measures. See the slide titled “Endnotes - Non-GAAP Financial Measures” at the end of this presentation for further description on the non-GAAP financial measures. 3. The Company believes providing Adjusted Net Investment Income before the accrual for capital gain incentive fee per share under GAAP is a useful non-GAAP financial measure as a portion of such capital gain incentive fee accrual is not contractually payable under the terms of the Company’s Investment Advisory Agreement. See the slide titled “Endnotes - Non-GAAP Financial Measures” at the end of this presentation for further description on the non-GAAP financial measures. B A B+
GBDC Performance Drivers 02
7 $14.73 $0.43 $0.01 ($0.33) ($0.24) $0.24 ($0.01) $14.83 March 31, 2023 NAV Net Investment Income Reversal of Amortization of Purchase Premium Dividends Paid During June 30, 2023 Quarter Net Realized Gain (Loss) on Investments Net Change in Unrealized Appreciation (Depreciation) on Investments Net Reversal of Realized/Unrealized Loss Resulting from the Purchase Premium June 30, 2023 NAV NII Drove a NAV Per Share Increase from March 31, 2023 NAV Per Share Bridge Adjusted Net Realized & Unrealized Loss: ($0.01) 1. As a supplement to GAAP financial measures, the Company is providing additional non-GAAP measures. See the slide titled “Endnotes - Non-GAAP Financial Measures” at the end of this presentation for further description on the non-GAAP financial measures. 1 Adjusted NII: $0.441 1
Updated Dividends Reflective of Expanding Profitability Quarterly Distribution ◦ Board declared a FY 2023 Q4 quarterly distribution of $0.37 per share ▪ Increased by $0.04 per share from $0.33 per share in response to expanding profitability and NAV stability ▪ Payable on September 29, 2023 to shareholders of record as of September 1, 2023 Quarterly Variable Supplemental Distribution Framework ◦ Board declared an initial supplemental distribution for the FY 2023 Q3 period of $0.04 per share ▪ Payable on September 15, 2023 to shareholders of record as of August 18, 2023 ◦ Implementing new formula-based quarterly supplemental distribution framework ▪ 50% of the excess of quarterly adjusted net investment income above the quarterly distribution, subject to NAV stability requirements Dividend Changes Annualized Dividend Yield on NAV (% of 6/30/2023 Net Asset Value per Share) 1. Based on FY 2023 Q3 declared quarterly distribution $0.33 per share paid on June 29, 2023 to shareholders of record as of June 2, 2023. 1 8 $0.33 $0.37 $0.41 $0.33 $0.37 $0.37 $0.04 Quarterly Distribution Quarterly Supplemental Distribution Current Increased Quarterly Distribution Increased Quarterly Distribution & Quarterly Supplemental Distribution Dividend Yield on NAV 10.0% 11.1% 8.9%
Summary of Financial Results for the Quarter Ended June 30, 2023 03
10 Summary of Quarterly Results Quarter Ended June 30, 2022 September 30, 2022 December 31, 2022 March 31, 2023 June 30, 2023 Net Investment Income Per Share Net investment income per share $0.32 $0.32 $0.36 $0.41 $0.43 Amortization of purchase premium per share1 0.02 0.01 0.01 0.01 0.01 Adjusted net investment income per share1 $0.34 $0.33 $0.37 $0.42 $0.44 Accrual (reversal) for capital gain incentive fee per share (0.03) 0.00 0.00 0.00 0.00 Adjusted net investment income before accrual (reversal) for capital gain incentive fee per share1 $0.31 $0.33 $0.37 $0.42 $0.44 Net Realized/Unrealized Gain (Loss) Per Share Net realized/unrealized gain (loss) per share ($0.23) ($0.27) ($0.21) ($0.07) $0.00* Net reversal of realized/unrealized loss resulting from the purchase premium per share1 (0.02) (0.01) (0.01) (0.01) (0.01) Adjusted net realized/unrealized gain (loss) per share1 $(0.25) ($0.28) ($0.22) ($0.08) ($0.01) Earnings (Loss) Per Share Earnings (loss) per share $0.09 $0.05 $0.15 $0.34 $0.43 Adjusted earnings (loss) per share1 $0.09 $0.05 $0.15 $0.34 $0.43 Net Asset Value Per Share $15.14 $14.89 $14.71 $14.73 $14.83 Distributions paid per share $0.30 $0.30 $0.33 $0.33 $0.33 A B A B+ • Represents an amount less than $0.01. 1. As a supplement to GAAP financial measures, the Company is providing additional non-GAAP measures. See the slide titled “Endnotes - Non-GAAP Financial Measures” at the end of this presentation for further description on the non-GAAP financial measures.
11 Portfolio Highlights - New Originations Quarter Ended June 30, 2022 September 30, 2022 December 31, 2022 March 31, 2023 June 30, 2023 Select Portfolio Funds Roll Data (in millions) New Investment Commitments $449.6 $176.7 $247.0 $157.4 $110.7 Exits and Sales of Investments 171.2 305.6 253.8 140.2 113.2 Net Funds Growth1 187.4 (167.2) 5.6 34.4 38.7 Asset Mix of New Investments Senior Secured 2% 7% 3% 0% 1% One Stop 93% 91% 93% 98% 99% Junior Debt2 0% 0% 0%* 0% 0% Equity and Other Investments 5% 2% 4% 2% 0%* Portfolio Rotation - Debt Investments Weighted average rate on new investments3 7.8% 9.0% 11.1% 11.8% 12.0% Weighted average spread over the applicable base rate of new floating rate investments4 5.8% 6.2% 6.7% 7.1% 6.6% Weighted average interest rate on investments that paid-off5 6.9% 7.5% 9.0% 10.3% 10.3% Weighted average fees on new investments 1.1% 1.2% 1.8% 1.8% 1.6% * Represents an amount less than 1% 1. Net funds growth includes the impact of new investments and exits of investments as noted in the table above, as well as other variables such as net funding on revolvers, net change in unamortized fees, net change in unrealized appreciation (depreciation), etc. 2. Junior debt is comprised of subordinated debt and second lien loans. 3. Weighted average interest rate on new loan investments is based on the contractual interest rate at the time of funding. For variable rate loans that have a Secured Overnight Financing Rate (“SOFR”), Prime or an applicable foreign base rate for loans denominated in foreign currency, the contractual rate is calculated using the current applicable base rate, the spread over the applicable base rate and the impact of any floor. For positions that have a SOFR and Prime rate option, the contractual rate is calculated using current SOFR at the time of funding, the spread over SOFR and the impact of any SOFR floor. For fixed rate loans, the contract rate is the stated fixed rate. 4. Weighted average spread over the applicable base rate of new floating rate loan investments is based on the contractual interest rate spread at the time of funding. Applicable base rates include SOFR, Prime and applicable foreign base rates for loans denominated in foreign currency. For variable rate loans that have a SOFR and Prime rate option, the SOFR spread was used in the calculation. For variable rate loans that only have a Prime rate option, the Prime spread was used. 5. Excludes the write-off of non-accrual assets. During the quarter ended March 31, 2023, the weighted average interest rate on investments that paid-off was elevated due to the payoff of an investment with a higher interest rate. – Total investments at fair value increased by approximately 0.7%, or $38.7 million, during the three months ended June 30, 2023.
12 $5,613,550 $5,446,356 $5,451,946 $5,486,352 $5,525,009 June 30, 2022 September 30, 2022 December 31, 2022 March 31, 2023 June 30, 2023 $0 $500,000 $1,000,000 $1,500,000 $2,000,000 $2,500,000 $3,000,000 $3,500,000 $4,000,000 $4,500,000 $5,000,000 $5,500,000 $6,000,000 Portfolio Highlights – Investment Mix – The portfolio continues to be focused on first lien, senior secured loans to what we believe to be healthy, resilient middle market companies backed by strong, partnership-oriented private equity sponsors. Historical Investment Portfolio ($000) Equity Junior Debt1 First Lien Traditional Senior 1. Junior Debt is comprised of second lien and subordinated debt. 10% 84% 5% 1% 9% 85% 5% 1% 9% 85% 5% 1% 8% 86% 5% 1% 9% 85% 5% 1% First Lien One Stop
13 Software 27% Healthcare Providers and Services 8% Specialty Retail 5% Diversified Consumer Services 5%Automobiles 5%IT Services 5% Insurance 4% Health Care Technology 4% Portfolio Highlights – Portfolio Diversity as of June 30, 2023 Investment Portfolio $5,525mm | 333 Investments | Average Size 0.3% * Represents an amount less than 0.5%. 1. Junior debt is comprised of second lien and subordinated debt. 2. The percentage of fixed rate and floating rate loans is calculated using total debt investments at fair value and excludes equity investments. 3. Based on S&P 2018 industry code. The ten largest industries represented as a percentage of the portfolio at fair value are labeled. All other industry segments are each below 3%. Diversification by Obligor Equity Junior Debt1 First Lien One Stop First Lien Traditional Senior Top 25 Investments 30% Remaining 308 Investments 70% Top 10 Investments 15% Avg Size 0.3% Portfolio Composition by Interest Rate Type on Loans2 Diversification by Industry3 39 industries below 3% 5% 9% 85% 1% Portfolio Composition by Seniority Floating, 100% Fixed, 0% 94% First Lien *
14 See the slide titled “Endnotes - Portfolio Highlights Economic Analysis” at the end of this presentation for footnotes. Portfolio Highlights – Economic Analysis: Positioned for Higher Interest Rates 7.7% 7.7% 7.3% 7.5% 9.2% 10.5% 11.5% 11.9% 7.2% 7.1% 6.9% 7.1% 8.4% 10.0% 11.1% 11.6% 4.9% 5.0% 4.5% 4.5% 5.5% 6.1% 6.7% 6.8% 2.8% 2.7% 2.8% 3.0% 3.7% 4.4% 4.8% 5.1% 0.1% 0.1% 0.7% 2.1% 3.6% 4.6% 4.9% 5.3% Investment income yield³ Income yield Weighted average net investment spread Weighted average cost of debt 3-Month Secured Overnight Financing Rate (“SOFR”) September 30, 2021¹ December 31, 2021 March 31, 2022 June 30, 2022 September 30, 2022² December 31, 2022 March 31, 2023 June 30, 2023 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% 9.0% 10.0% 11.0% 12.0% 13.0% 4 65
15 Portfolio Highlights - Credit Quality Quarter Ended June 30, 2022 September 30, 2022 December 31, 2022 March 31, 2023 June 30, 2023 Non-Accrual - Debt Investments Non-accrual investments at amortized cost (000s) $80,791 $96,956 $145,572 $142,432 $97,658 Non-accrual investments / total debt investments at amortized cost 1.5% 1.8% 2.7% 2.6% 1.8% Non-accrual investments at fair value (000s) $60,263 $65,125 $92,224 $88,581 $80,362 Non-accrual investments / total debt investments at fair value 1.1% 1.3% 1.8% 1.7% 1.5% Fair Value of Debt Investments Fair value of total debt investments as a percentage of principal (loans) 97.5% 96.6% 96.0% 95.9% 97.0% 1. Please see Internal Performance Ratings definitions on the following page. – Fundamental credit quality as of June 30, 2023 remained strong with 86% of the investments in our portfolio at fair value having an Internal Performance Rating1 of 4 or higher as of June 30, 2023. – Non-accrual investments at June 30, 2023 as a percentage of total debt investments at cost and fair value decreased from the prior quarter to 1.8% and 1.5%, respectively. – During the quarter ended June 30, 2023, the number of non-accrual investments increased to nine investments from eight as of March 31, 2023, as the disposition of one portfolio company investment for proceeds slightly higher than the fair value as of March 31, 2023, was offset by the addition of two portfolio company investments.
16 Portfolio Highlights – Portfolio Ratings * Represents an amount less than 0.1%. Internal Performance Ratings (% of Portfolio at Fair Value) Internal Performance Rating Definitions At Fiscal Year End At Quarter End Rating 2018 2019 2020 2021 2022 December 31, 2022 March 31, 2023 June 30, 2023 5 6.4% 2.7% 6.1% 10.2% 4.6% 2.8% 1.1% 1.6% 4 81.6% 88.2% 72.8% 80.7% 86.8% 86.5% 85.9% 84.4% 3 11.0% 7.9% 19.7% 8.1% 7.3% 9.4% 11.8% 13.7% 2 1.0% 1.2% 1.4% 1.0% 1.3% 1.3% 1.2% 0.3% 1 0.0%* 0.0%* 0.0%* 0.0%* 0.0% 0.0%* 0.0%* 0.0% Grand Total 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% Rating Definition 5 Borrower is performing above expectations and the trends and risk factors are generally favorable 4 Borrower is generally performing as expected and the risk factors are neutral to favorable 3 Borrower may be out of compliance with debt covenants; however, loan payments are generally not past due 2 Borrower is performing materially below expectations and the loan’s risk has increased materially since origination 1 Borrower is performing substantially below expectations and the loan’s risk has substantially increased since origination
17 Quarterly Statements of Financial Condition As of (Dollar amounts in 000s, except share and per share data) June 30, 2022 September 30, 2022 December 31, 2022 March 31, 2023 June 30, 2023 (unaudited) (audited) (unaudited) (unaudited) (unaudited) Assets Investments, at fair value $5,613,550 $5,446,356 $5,451,946 $5,486,352 $5,525,009 Cash, cash equivalents and foreign currencies 85,199 124,137 103,207 87,473 91,724 Restricted cash, cash equivalents and foreign currencies 35,981 56,416 62,826 50,223 79,314 Other assets 35,465 54,315 47,772 47,702 40,788 Total Assets $5,770,195 $5,681,224 $5,665,751 $5,671,750 $5,736,835 Liabilities Debt $3,154,673 $3,093,603 $3,100,057 $3,116,857 $3,168,906 Unamortized debt issuance costs (18,988) (17,211) (15,641) (19,154) (17,217) Interest payable 20,255 20,384 24,942 23,574 26,175 Management and incentive fee payable 19,743 33,430 35,081 36,653 37,854 Other liabilities 6,826 6,518 7,627 7,675 5,199 Total Liabilities 3,182,509 3,136,724 3,152,066 3,165,605 3,220,917 Total Net Assets 2,587,686 2,544,500 2,513,685 2,506,145 2,515,918 Total Liabilities and Net Assets $5,770,195 $5,681,224 $5,665,751 $5,671,750 $5,736,835 Net Asset Value per Share $15.14 $14.89 $14.71 $14.73 $14.83 GAAP leverage 1.23x 1.22x 1.24x 1.25x 1.27x Effective leverage, net of available cash1 1.19 x 1.17 x 1.19 x 1.21 x 1.22 x Asset coverage2 181.5% 181.7% 180.4% 179.8% 178.7% Number of shares of common stock outstanding 170,895,670 170,895,670 170,895,670 170,144,126 169,599,992 1. Effective leverage, net of available cash is calculated as (a) total debt reduced by cash, cash equivalents and foreign currencies divided by (b) total net assets. 2. Following stockholder approval of the application of the reduced asset coverage requirements available to business development companies to the Company, the minimum asset coverage ratio applicable to the Company decreased to 150% from 200% effective February 6, 2019.
18 Quarterly Operating Results Quarter Ended (Dollar amounts in 000s, except share and per share data) June 30, 2022 September 30, 2022 December 31, 2022 March 31, 2023 June 30, 2023 (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) Investment Income Interest income $97,568 $119,925 $134,350 $143,661 $151,937 GCIC acquisition purchase premium amortization (3,036) (2,561) (2,135) (1,652) (1,570) Dividend and fee income 1,094 2,284 4,662 4,944 4,353 Total Investment Income $95,626 $119,648 $136,877 $146,953 $154,720 Expenses Interest and other debt financing expenses $23,278 $28,989 $34,245 $36,256 $39,487 Base management fee 19,025 19,321 19,062 18,688 18,997 Incentive fee – net investment income 718 14,109 16,011 17,976 18,857 Incentive fee – capital gains (4,814) — — — — Other operating expenses 3,491 3,196 3,696 3,595 3,601 Total Expenses 41,698 65,615 73,014 76,515 80,942 Income and excise taxes — 72 2,200 232 — Net Investment Income after Tax $53,928 $53,961 $61,663 $70,206 $73,778 Net Gain (Loss) on Investments and Foreign Currency Net realized gain (loss) on investments and foreign currency transactions $2,511 $2,945 $3,294 ($4,762) ($41,923) Net unrealized appreciation (depreciation) on investments and foreign currency translation (43,618) (51,308) (41,853) (8,741) 39,384 Net unrealized appreciation (depreciation) from the GCIC acquisition purchase premium write-down 3,063 2,572 2,231 1,755 1,666 Net gain (loss) on investments and foreign currency (38,044) (45,791) (36,328) (11,748) (873) Provision for taxes on realized gain and unrealized appreciation on investments (478) (87) 246 45 78 Net Increase (Decrease) in Net Assets Resulting from Operations $15,406 $8,083 $25,581 $58,503 $72,983 Per Share Data Net Investment Income Per Share $0.32 $0.32 $0.36 $0.41 $0.43 Adjusted Net Investment Income before accrual (reversal) for capital gain incentive fee per share1 $0.31 $0.33 $0.37 $0.42 $0.44 Earnings (Loss) Per Share $0.09 $0.05 $0.15 $0.34 $0.43 Adjusted Earnings (Loss) Per Share1 $0.09 $0.05 $0.15 $0.34 $0.43 Distributions Paid $0.30 $0.30 $0.33 $0.33 $0.33 Weighted average shares of common stock outstanding 170,895,670 170,895,670 170,895,670 170,835,435 169,980,131 1. As a supplement to GAAP financial measures, the Company is providing additional non-GAAP measures. See the slide titled “Endnotes - Non-GAAP Financial Measures” at the end of this presentation for further description on the non-GAAP financial measures.
19 Financial Performance Highlights * The quarterly return on equity for the periods up to and including the quarter ended June 30, 2019 are calculated as (a) the net increase in net assets resulting from operations (i.e., net income) for the period presented divided by (b) the daily average of total net assets during the period. The quarterly return on equity for the periods after June 30, 2019 are calculated as (a) Adjusted Net Income for the period, as defined on the slide titled “Endnotes - Non-GAAP Financial Measures” at the end of this presentation, divided by (b) the daily average of total net assets during the period. Adjusted Net Income is a non-GAAP measure and the Company believes this non-GAAP measure is useful as it excludes the non-cash expense/loss from the purchase premium as further described on the slide titled “Endnotes- Non-GAAP Financial Measures” at the end of this presentation. These returns do not represent an actual return to any investor in the Company. Quarterly Return on Equity and Quarterly Distributions (Last 5 Years) $0.32 $0.32 $0.32 $0.32 $0.32 $0.33 $0.33 $0.29 $0.29 $0.29 $0.29 $0.29 $0.29 $0.30 $0.30 $0.30 $0.30 $0.33 $0.33 $0.33 $0.12 $0.13 1.6% 1.9% 1.9% 2.0% 2.2% 2.1% (10.5)% 6.7% 4.0% 3.9% 3.8% 3.3% 2.8% 2.4% 2.6% 0.6% 0.3% 1.0% 2.4% 2.9% Regular Distribution Special Distribution Quarterly Return on Equity* Sep-18 Dec-18 Mar-19 Jun-19 Sep-19 Dec-19 Mar-20 Jun-20 Sep-20 Dec-20 Mar-21 Jun-21 Sep-21 Dec-21 Mar-22 Jun-22 Sep-22 Dec-22 Mar-23 Jun-23 $0.44 $0.46
20 Long History of Strong Shareholder Returns 1. The 9.3% internal rate of return (“IRR”) on NAV is calculated using beginning of period NAV, distributions paid during the period and ending period NAV. Period beginning June 30, 2010 and ending June 30, 2023. GBDC made its initial public offering on April 15, 2010. GBDC’s 1-, 5- and 10-Year net IRRs are 6.7%, 7.0% and 9.0%, respectively. Note: Amounts presented represent per share amounts for a hypothetical shareholder that purchased one share in GBDC’s initial public offering (“IPO”) on April 15, 2010. For illustrative purposes only; does not reflect the actual returns of a specific GBDC investor. Past performance does not guarantee future results. Sources: SEC filings and Golub Capital analysis NAV Per Share Cumulative Regular Distributions Per Share Cumulative Special Distributions Per Share Ap r- 10 Ju n- 10 Se p- 10 D ec -1 0 M ar -1 1 Ju n- 11 Se p- 11 D ec -1 1 M ar -1 2 Ju n- 12 Se p- 12 D ec -1 2 M ar -1 3 Ju n- 13 Se p- 13 D ec -1 3 M ar -1 4 Ju n- 14 Se p- 14 D ec -1 4 M ar -1 5 Ju n- 15 Se p- 15 D ec -1 5 M ar -1 6 Ju n- 16 Se p- 16 D ec -1 6 M ar -1 7 Ju n- 17 Se p- 17 D ec -1 7 M ar -1 8 Ju n- 18 Se p- 18 D ec -1 8 M ar -1 9 Ju n- 19 Se p- 19 D ec -1 9 M ar -2 0 Ju n- 20 Se p- 20 D ec -2 0 M ar -2 1 Ju n- 21 Se p- 21 D ec -2 1 M ar -2 2 Ju n- 22 Se p- 22 D ec -2 2 M ar -2 3 Ju n- 23 $14.63 $32.06 $0.58 $16.65 $14.83 As of June 30, 2023 Investors in GBDC’s 2010 IPO have achieved a 9.3% IRR on NAV1
21 Liquidity and Investment Capacity Cash and Cash Equivalents – Unrestricted cash and cash equivalents and foreign currencies totaled $91.7 million as of June 30, 2023. – Restricted cash and cash equivalents totaled $79.3 million as of June 30, 2023. Restricted cash is held in our securitization vehicles and our revolving credit facilities and is reserved for quarterly interest payments and is also available for new investments that qualify for reinvestment by these entities. Debt Facilities – Availability – JPM Credit Facility – As of June 30, 2023, subject to leverage and borrowing base restrictions, we had approximately $706.6 million of remaining commitments and availability, in the aggregate, on our revolving credit facility with JPMorgan. – GC Advisors Revolver – As of June 30, 2023, we had $100.0 million of remaining commitments and availability on our unsecured line of credit with GC Advisors. Debt Facility Amendments – On June 30, 2023, we entered into a supplemental indenture to amend the 2018 Debt Securitization to, among other things, replace three-month LIBOR as the interest rate benchmark for the notes issued in the 2018 Debt Securitization with three-month term SOFR1, effective as of the start of the first interest accrual period commencing after June 30, 2023. – On June 30, 2023, we entered into a supplemental indenture to amend the GCIC 2018 Debt Securitization to, among other things, replace three-month LIBOR as the interest rate benchmark for the notes issued in the GCIC 2018 Debt Securitization with three- month term SOFR1, effective as of the start of the first interest accrual period commencing after June 30, 2023. 1. The three month SOFR interest rate is subject to an additional spread adjustment rate of 0.26161%.
22 GBDC Has a Stable, Highly Flexible and Low-Cost Funding Structure GBDC Debt Capital Structure* Funding Source Debt Commitment Outstanding Par Undrawn Commitment Reinvestment Period Stated Maturity Interest Rate1 Securitizations: 2018 Debt Securitization $403,380 $403,380 $— January 20, 2023 January 20, 2031 3 Month LIBOR + 1.64% GCIC 2018 Debt Securitization 537,872 537,872 — January 20, 2023 January 20, 2031 3 Month LIBOR + 1.51% Unsecured Notes: 2024 Unsecured Notes 500,000 500,000 — N/A April 15, 2024 3.375% 2026 Unsecured Notes 600,000 600,000 — N/A August 24, 2026 2.500% 2027 Unsecured Notes 350,000 350,000 — N/A February 15, 2027 2.050% Bank Facilities: JPMorgan Credit Facility 1,487,500 780,889 706,611 March 17, 2027 March 17, 20282 1 Month SOFR + 1.75%3 GC Advisors Revolver 100,000 — 100,000 N/A June 15, 2025 Applicable Federal Rate Totals: $3,978,752 $3,172,141 $806,611 5.1%4 * Information is presented as of June 30, 2023. 1. Interest rate for securitizations represents the weighted average spread over 3-month LIBOR for the various tranches of issued notes, excluding tranches retained by the Company. The weighted average interest rate for the GCIC 2018 Debt Securitization excludes a $38.5 million note that has a fixed interest rate of 2.50%. For bank facilities, the interest rate represents the interest rate as stated in the applicable credit agreement. 2. One non-extending lender with a total commitment of $37.5 million has a commitment termination date of February 11, 2025 and final maturity date of February 11, 2026. 3. The interest rate on the JPMorgan Credit Facility ranges from 1 month SOFR + 1.75% to 1 month SOFR + 1.875%. The rate displayed corresponds to the interest rate incurred on the most recent borrowing. SOFR borrowings are subject to an additional spread adjustment of 0.10%. 4. Represents the weighted average cost of debt, which is calculated as (a) the actual amount of expenses incurred on debt obligations divided by (b) the daily average of total debt obligations. GBDC’s Investment Grade Ratings Profile Improves Access to Attractive Unsecured Debt Funding Structure Key Takeaways Current Rating Current Rating BBB- Positive Baa3 Stable BBB- Stable • Weighted average cost of debt 5.1% • 46% of debt funding from long-date, fixed rate unsecured notes with a 2.7% weighted average coupon and well laddered maturities (earliest maturity in 2024) • Total available liquidity of $898 million • Available liquidity 5.3x unfunded asset commitments
23 Common Stock and Distribution Information Date Declared Record Date Payment Date Amount Per Share Frequency Total Amount (in 000s) August 6, 2021 September 8, 2021 September 29, 2021 $0.29 Quarterly $49,055 November 19, 2021 December 10, 2021 December 30, 2021 $0.30 Quarterly $51,008 February 4, 2022 March 4, 2022 March 29, 2022 $0.30 Quarterly $51,260 May 6, 2022 June 3, 2022 June 29, 2022 $0.30 Quarterly $51,269 August 5, 2022 September 2, 2022 September 29, 2022 $0.30 Quarterly $51,269 November 18, 2022 December 9, 2022 December 29, 2022 $0.33 Quarterly $56,396 February 7, 2023 March 3, 2023 March 29, 2023 $0.33 Quarterly $56,396 May 5, 2023 June 2, 2023 June 29, 2023 $0.33 Quarterly $56,066 August 3, 2023 August 18, 2023 September 15, 2023 $0.04 Supplemental $6,7842 August 3, 2023 September 1, 2023 September 29, 2023 $0.37 Quarterly $62,752² Distributions Data Fiscal Year Ending September 30, 2022 High Low End of Period First Quarter $15.99 $14.86 $15.44 Second Quarter $16.10 $14.70 $15.21 Third Quarter $15.48 $12.67 $12.96 Fourth Quarter $14.35 $12.21 $12.39 Fiscal Year Ending September 30, 2023 High Low End of Period First Quarter $14.25 $12.46 $13.16 Second Quarter $14.09 $12.38 $13.56 Third Quarter $13.55 $13.02 $13.50 Common Stock Price Data1 1. Based on closing stock price on the Nasdaq Global Market Select. 2. Estimated based on 169,599,992 shares outstanding as of June 30, 2023.
- For the quarter ended June 30, 2023, the quarterly variable supplemental distribution declared by our board of directors was based, in part, on the quarterly distribution declared on August 3, 2023 of $0.37 per share that is payable on September 29, 2023 rather than the $0.33 per share quarterly distribution paid during the quarter ended June 30, 2023. In subsequent quarters, the quarterly variable supplemental distribution declared will be based on adjusted net investment income per share earned and the quarterly distribution paid in the previous quarter. 2. In subsequent quarters, the net asset value per share subject to the Net Asset Value Stability Requirement will be adjusted to reflect supplemental distributions paid. For instance, the adjusted net asset value per share as of June 30, 2023 will be $14.79 to adjust for the FY 23 Q3 supplemental distribution of $0.04 per share. Quarterly Variable Supplemental Distribution Framework FY 2023 Q3 Quarterly Variable Supplemental Distribution Quarter Ended June 30, 2023 Quarterly Variable Supplemental Distribution Adjusted net investment income per share $0.44 (-) Quarterly distribution paid1 (0.37) Excess adjusted net investment income per share over quarterly distribution paid $0.07 (x) 50.0% of excess 0.035 Quarterly variable supplemental distribution (rounding 50.0% of excess to nearest $0.01 per share) $0.04 Net Asset Value Stability Requirement Net asset value per share (as of June 30, 2023)2 $14.83 Net asset value per share (as of December 31, 2023) $14.71 Net asset value per share appreciation/(depreciation) over prior two quarters $0.12 (-) Quarterly variable supplemental distribution (0.04) Net asset value per share appreciation/(depreciation) over prior two quarters Note: must be no lower than 1% of $14.71 or ($0.15) $0.08 ◦ Expected reduction in variable supplemental distribution amount if such distribution would cause a decline in net asset value over the prior two quarters (inclusive of the impact of the variable supplemental distribution) greater than 1% 24
25 Endnotes - Non-GAAP Financial Measures 1. On September 16, 2019, the Company completed its acquisition of GCIC. The merger was accounted for under the asset acquisition method of accounting in accordance with Accounting Standards Codification (“ASC”) 805-50, Business Combinations — Related Issues. Under asset acquisition accounting, where the consideration paid to GCIC’s stockholders exceeded the relative fair values of the assets acquired, the premium paid by GBDC was allocated to the cost of the GCIC assets acquired by GBDC pro-rata based on their relative fair value. Immediately following the acquisition of GCIC, GBDC recorded its assets at their respective fair values and, as a result, the purchase premium allocated to the cost basis of the GCIC assets acquired was immediately recognized as unrealized depreciation on the Company's Consolidated Statement of Operations. The purchase premium allocated to investments in loan securities will amortize over the life of the loans through interest income with a corresponding reversal of the unrealized depreciation on the GCIC loans acquired through their ultimate disposition. The purchase premium allocated to investments in equity securities will not amortize over the life of the equity securities through interest income and, assuming no subsequent change to the fair value of the GCIC equity securities acquired and disposition of such equity securities at fair value, the Company will recognize a realized loss with a corresponding reversal of the unrealized depreciation upon disposition of the GCIC equity securities acquired. As a supplement to U.S. generally accepted accounting principles (“GAAP”) financial measures, the Company has provided the following non-GAAP financial measures: • “Adjusted Net Investment Income” and “Adjusted Net Investment Income Per Share” - excludes the amortization of the purchase premium from net investment income calculated in accordance with GAAP. • “Adjusted Net Realized and Unrealized Gain/(Loss)” and “Adjusted Net Realized and Unrealized Gain/(Loss) Per Share” - excludes the unrealized loss resulting from the purchase premium write-down and the corresponding reversal of the unrealized loss resulting from the amortization of the premium on loans or from the sale of equity investments from the determination of realized and unrealized gain/(loss) in accordance with GAAP. • “Adjusted Net Income” and “Adjusted Earnings/(Loss) Per Share” – calculates net income and earnings per share based on Adjusted Net Investment Income and Adjusted Net Realized and Unrealized Gain/(Loss). The Company believes that excluding the financial impact of the purchase premium in the above non-GAAP financial measures is useful for investors as this is a non-cash expense/ loss and is one method the Company uses to measure its financial condition and results of operations. In addition to the non-GAAP financial measures above, the Company has provided the non-GAAP financial measure “Adjusted Net Investment Income Before Accrual for Capital Gain Incentive Fee” and “Adjusted Net Investment Income Before Accrual for Capital Gain Incentive Fee Per Share”, which excludes the accrual for the capital gain incentive fee required under GAAP (including the portion of such accrual that is not payable under GBDC’s investment advisory agreement) from Adjusted Net Investment Income. The Company believes excluding the accrual of the capital gain incentive fee as a non-GAAP financial measure is useful as a portion of such accrual is not contractually payable under the terms of either the Company’s current investment advisory agreement with GC Advisors, which was effective September 16, 2019, or its prior investment advisory agreement with GC Advisors, (each an, “Investment Advisory Agreement”). In accordance with GAAP, the Company is required to include aggregate unrealized appreciation on investments in the calculation and accrue a capital gain incentive fee on a quarterly basis as if such unrealized capital appreciation were realized, even though such unrealized capital appreciation is not permitted to be considered in calculating the fee actually payable under either Investment Advisory Agreement. As of June 30, 2023, there was no cumulative capital gain incentive fee accrued by the Company in accordance with GAAP, and none was payable as a capital gain incentive fee pursuant to the current Investment Advisory Agreement as of June 30, 2023. Any payment due under the terms of the current Investment Advisory Agreement is based on the calculation at the end of each calendar year or upon termination of the Investment Advisory Agreement. The Company paid capital gain incentive fees in the amounts of $1.2 million and $1.6 million calculated in accordance with its prior Investment Advisory Agreement as of December 31, 2017 and 2018, respectively. The Company did not pay any capital gain incentive fee under the Investment Advisory Agreement for any period ended prior to December 31, 2017. Although these non-GAAP financial measures are intended to enhance investors’ understanding of the Company’s business and performance, these non-GAAP financial measures should not be considered an alternative to GAAP. Refer to slide ‘Summary of Quarterly Results’ for a reconciliation to the nearest GAAP measures. 2. Purchase premium refers to the premium paid by GBDC to acquire GCIC in excess of the fair value of the assets acquired.
Appendix: Endnotes A
27 Endnotes - Portfolio Highlights Economic Analysis 1. The weighted average cost of debt and weighted average net investment spread presented for the quarter ended September 30, 2021 exclude $3.6 million of accelerated capitalized debt issuance costs that resulted from the August 26, 2021 early redemption of notes issued by the 2020 Debt Securitization and the September 1, 2021 redemption of debentures issued by GC SBIC VI, LP, one of our small business investment company subsidiaries. The weighted average cost of debt and weighted average net investment spread were 3.3% and 4.4%, respectively, when including the $3.6 million of accelerated capitalized debt issuance costs. 2. The income yield presented for the quarter ended September 30, 2022 excludes the one-time recognition of $2.0 million of previously deferred interest income resulting from the repayment and refinancing of former non-accrual loans, which are included in the calculation of the investment income yield for the quarter ended September 30, 2022. The income yield was 8.6% for the quarter ended September 30, 2022 when including the $2.0 million of interest income. 3. Investment income yield is calculated as (a) the actual amount earned on earning investments, including interest and fee income, accrued PIK/non-cash dividend income, and amortization of capitalized fees and discounts, divided by (b) the daily average of total earning investments at fair value. Investment income yield excludes any amortization of purchase price premium as further described in the Endnotes at the end of the presentation. 4. Income yield is calculated as (a) the actual amount earned on earning investments, including interest and fee income and accrued PIK/non-cash dividend income but excluding amortization of capitalized fees and discounts, divided by (b) the daily average of total earning investments at fair value. Income yield excludes any amortization of purchase price premium as further described in the Endnotes at the end of the presentation. 5. The weighted average net investment spread is calculated as (a) the investment income yield less (b) the weighted average cost of debt. 6. The weighted average cost of debt is calculated as (a) the actual amount of expenses incurred on debt obligations divided by (b) the daily average of total debt obligations.
shareholderalignedmanage
GOLUB CAPITAL BDC, INC. ANNOUNCES MANAGEMENT FEE REDUCTION AUGUST 2023 © 2023 GOLUB CAPITAL LLC
Disclaimer 2 Some of the statements in this presentation constitute forward-looking statements, which relate to future events or our future performance or financial condition. The forward-looking statements contained in this presentation involve risks and uncertainties, including statements as to: our future operating results; our business prospects and the prospects of our portfolio companies, including our and their ability to achieve our respective objectives due to disruptions, including those caused by global health pandemics, such as the COVID-19 pandemic, or other large scale events; the effect of investments that we expect to make and the competition for those investments; our contractual arrangements and relationships with third parties; actual and potential conflicts of interest with GC Advisors LLC ("GC Advisors“ or the “Adviser”), our investment adviser, and other affiliates of Golub Capital LLC (collectively, "Golub Capital"); the dependence of our future success on the general economy and its effect on the industries in which we invest; the ability of our portfolio companies to achieve their objectives; the use of borrowed money to finance a portion of our investments; the adequacy of our financing sources and working capital; the timing of cash flows, if any, from the operations of our portfolio companies; general economic and political trends and other external factors, including the COVID-19 pandemic; changes in political, economic or industry conditions, the interest rate environment or conditions affecting the financial and capital markets that could result in changes to the value of our assets; elevating levels of inflation, and its impact on us, on our portfolio companies and on the industries in which we invest; the ability of GC Advisors to locate suitable investments for us and to monitor and administer our investments; the ability of GC Advisors or its affiliates to attract and retain highly talented professionals; the ability of GC Advisors to continue to effectively manage our business due to disruptions, including those caused by global health pandemics, such as the COVID-19 pandemic or other large scale events; turmoil in Ukraine and Russia, including sanctions related to such turmoil, and the potential for volatility in energy prices and other supply chain issues and any impact on the industries in which we invest; our ability to qualify and maintain our qualification as a regulated investment company, or RIC, and as a business development company; the impact of information technology systems and systems failures including data security breaches, data privacy compliance, network disruptions, and cybersecurity attacks; general price and volume fluctuations in the stock markets; the impact on our business of the Dodd-Frank Wall Street Reform and Consumer Protection Act and the rules and regulations issued thereunder and any actions toward repeal thereof; and the effect of changes to tax legislation and our tax position. Such forward-looking statements may include statements preceded by, followed by or that otherwise include the words “may,” “might,” “will,” “intend,” “should,” “could,” “can,” “would,” “expect,” “believe,” “estimate,” “anticipate,” “predict,” “potential,” “plan” or similar words. The forward-looking statements contained in this presentation involve risks and uncertainties. Our actual results could differ materially from those implied or expressed in the forward-looking statements for any reason, including the factors set forth as “Risk Factors” in our annual reports on our Form 10-K, registration statements on Form N-2, and quarterly reports on Form 10-Q. We have based the forward-looking statements included in this presentation on information available to us on the date of this presentation. Actual results could differ materially from those anticipated in our forward-looking statements and future results could differ materially from historical performance. You are advised to consult any additional disclosures that we may make directly to you or through reports that we have filed or in the future file with the Securities and Exchange Commission (“SEC”), including annual reports on Form 10-K, registration statements on Form N-2, quarterly reports on Form 10-Q and current reports on Form 8-K. This presentation contains statistics and other data that have been obtained from or compiled from information made available by third-party service providers. We have not independently verified such statistics or data. In evaluating prior performance information in this presentation, you should remember that past performance is not a guarantee, prediction, or projection of future results, and there can be no assurance that we will achieve similar results in the future.
Enhancing GBDC’s Industry-Leading Fee Structure 3 GBDC Fee Structure (Current) GBDC Fee Structure (New) Change Base Management Fee 1.375% (Gross Assets, ex. Cash) 1.0% (Gross Assets, ex. Cash) (0.375%) Incentive Fee on Income & Capital Gains 20.0% 20.0% No Change Incentive Fee Hurdle Rate 8.0% 8.0% No Change Incentive Fee Cap Cumulative, since inception Cumulative, since inception No Change Golub Capital BDC, Inc. Investment Advisory Agreement Key Terms – GBDC is reducing its base management fee from 1.375% to 1.0% – The reduction permanently increases GBDC’s earnings power and enhances the existing market leading attributes of GBDC’s fee structure (among the highest industry hurdle rates, cumulative since inception incentive fee cap) – New base management fee rate is intended to share with investors the Adviser’s efficiency gains from GBDC’s scale – We believe a lower base management fee makes GBDC’s value proposition in today’s environment even more compelling
Base Management Fee Reduction Permanently Increases GBDC’s Earnings Power 4 1. All figures are calculated on the basis of average balances as of March 31, 2023 and June 30, 2023. 2. Total operating expenses include professional fees, administrative service fees, director fees and other general and administrative expenses. 3. Due to the purchase accounting for the GCIC acquisition, as a supplement to U.S. generally accepted accounting principles ("GAAP") financial measures, the Company is providing additional non-GAAP measures. See the slide titled "Endnote - Non-GAAP Financial Measures" at the end of this presentation for further description of the non-GAAP financial measures. Quarter Ended (shown on annualized basis)1 June 30, 2023 June 30, 2023 (Pro Forma for Fee Change) Net Investment Income Return on Equity Total investment income (% of average total assets) 10.8% 10.8% Interest and other debt financing expenses (% of average total debt) (5.0%) (5.0%) GAAP leverage (average total debt and average total net assets) 1.25x 1.25x Net investment income return on equity (before operating expenses and advisory fees)2 18.2% 18.2% Base management fee, net of waiver (% of average total net assets) (3.0%) (2.2%) Incentive fee – net investment income (% of average total net assets) (3.0%) (3.1%) Operating expenses (% of average total net assets)2 (0.6%) (0.6%) Net investment income return on equity (% of average total net assets) 11.6% 12.3% Net Investment Income Per Share Net investment income per share $0.43 $0.45 Amortization of purchase premium per share $0.01 $0.01 Adjusted net investment Income per share3 $0.44 $0.46 Annualized adjusted net investment income per share3 $1.75 $1.86 – We believe the fee reduction increases pro forma adjusted net investment income by between $0.02 - $0.03 per share quarterly, or over $0.10 per share annualized – Base management fee reduction increases GBDC’s profitability profile across market and interest rate cycles
Reduced Management Fee Rate Reflects Benefits of GBDC’s Scale 5 (Reference period) Post-Initial Public Offering (Quarter ended December 31, 2010) Today (Quarter ended June 30, 2023) Benefits From Increased Scale Investments, at fair value ($MM) $382 $5,525 Scaled and granular portfolio with investment focus on floating rate, senior secured loans Strong, long-term track record of low credit losses First lien senior secured % 85% 94% Number of obligors / avg. size of investment (% of total portfolio) 98 / 0.9% 333 / 0.3% Cumulative adj. net realized & unrealized gain/(loss) on investments rate1 -- 0.18% GAAP leverage 0.75x 1.27x Low-cost and flexible funding, including meaningful unsecured debt and large syndicated corporate revolver with significant undrawn capacity Unsecured debt (% of total debt) -- 46% Credit ratings -- BBB-/Baa3/BBB- (S&P/Moody’s/Fitch) Total liquidity2 ($MM) / % of investment portfolio $97 / 25% $898 / 16% Adj. net investment income per share3 ($) / ROAE (% of NAV)4 $0.30 / 8.1% $0.465 / 12.3%5 Enhanced total return potential with a higher ROAE4 relative to GBDC’s historical profile Quarterly distribution per share / distribution coverage from adj. net investment income3 $0.31 / 97% $0.376 / 126%5,6 Portfolio & Credit Profitability Capital & Funding – GBDC has grown markedly since its IPO; the Company’s increased scale has generated efficiencies for the Adviser – The Adviser is reducing the management fee rate to share the benefits of GBDC’s scale with investors See the slide titled “Endnotes – Reduced Management Fee Rate Reflects Benefits of GBDC’s Scale” at the end of this presentation for footnotes. See the slide titled “Endnotes – Non-GAAP Financial Measures” at the end of this presentation for further description of non-GAAP financial measures.
GBDC’s Value Proposition Today: the Right Strategy, Experienced Credit Manager, an Attractive Fee Structure, and Flexible Funding 6 Right Strategy − Meaningful competitive advantages from Golub Capital’s scale, relationships and incumbencies − Wide range of sponsor finance solutions across the entire middle market spectrum − Lead lender in approximately 90% of deals − Incumbent lender to over 300 middle market companies Experienced Credit Manager − History of strong underwriting and low credit losses over multiple market cycles − 170+ investment professionals with in-depth knowledge and experience across a variety of industry subsectors − Track record of low default rates believed to be sustainable because of Golub Capital’s underwriting, focus on risk management and industry expertise Attractive Fee Structure − One of the lowest base management fees in the public BDC sector1 − Attractive fee structure with among the highest industry hurdle rates1 − Strong alignment with manager and lifetime cumulative incentive fee lookback − Strong insider ownership of GBDC stock2 Flexible Funding − Low-cost and flexible debt capital structure with minimal near-term debt maturities − Significant available liquidity3 − We believe our strong track record allows access to diversified mix of long-term debt financing including financing securitizations, bank facilities, unsecured notes and other funding sources Strong risk-adjusted returns on equity, Stable and well-covered dividend, NAV growth over time 1. Source: SEC filings. 2. As of March 31, 2023. Insider ownership defined as the sum of shares held directly or indirectly by interested directors and shares held by certain Golub Capital affiliated and non-affiliated but controlled entities, and shares held by the Golub Capital Employee Grant Program Rabbi Trust, a trust that purchases shares of GBDC stock for the purpose of awarding incentive compensation to employees of Golub Capital. 3. Total liquidity includes undrawn commitments under the JPMorgan Credit Facility and GC Advisors Revolver, as well as unrestricted cash and cash equivalents.
Endnotes - Reduced Management Fee Rate Reflects Benefits of GBDC’s Scale 7 1. Represents the geometric average of quarterly gain/(loss) rates since inception (December 31, 2009), where quarterly gain/(loss) rate represents (i) the sum of unrealized appreciation/(depreciation) and realized gain/(loss) on investments excluding the impact of foreign currency translation and the impact of unrealized appreciation/(deprecation) on investments from the GCIC purchase premium, divided by (ii) the investment portfolio value at cost at the end of the respective measurement period. 2. Total liquidity includes undrawn commitments under the JPMorgan Credit Facility and GC Advisors Revolver, as well as unrestricted cash and cash equivalents. 3. As a supplement to GAAP financial measures, the Company is providing additional non-GAAP measures. See the slide titled “Endnotes - Non-GAAP Financial Measures” at the end of this presentation for further description on the non-GAAP financial measures. 4. “ROAE” represents the return on average equity, calculated as the adjusted net investment income per share divided by the average net asset value per share as of quarter end for the two most recently completed quarters, and annualized by multiplying by four. 5. Represents an estimate of pro forma adjusted net investment income per share utilizing reported financial results for the period ending June 30, 2023 and making appropriate adjustments assuming a 1.0% base management fee was in effect for the period, see slide titled “Base Management Fee Reduction Permanently Increases GBDC’s Earnings Power” for additional detail. 6. Based on FY 2023 Q4 quarterly distribution of $0.37 per share payable in FY 2023 Q4 that was declared by the GBDC Board of Directors on August 3, 2023.
Endnotes - Non-GAAP Financial Measures 8 1. On September 16, 2019, the Company completed its acquisition of GCIC. The merger was accounted for under the asset acquisition method of accounting in accordance with Accounting Standards Codification (“ASC”) 805-50, Business Combinations — Related Issues. Under asset acquisition accounting, where the consideration paid to GCIC’s stockholders exceeded the relative fair values of the assets acquired, the premium paid by GBDC was allocated to the cost of the GCIC assets acquired by GBDC pro-rata based on their relative fair value. Immediately following the acquisition of GCIC, GBDC recorded its assets at their respective fair values and, as a result, the purchase premium allocated to the cost basis of the GCIC assets acquired was immediately recognized as unrealized depreciation on the Company's Consolidated Statement of Operations. The purchase premium allocated to investments in loan securities will amortize over the life of the loans through interest income with a corresponding reversal of the unrealized depreciation on the GCIC loans acquired through their ultimate disposition. The purchase premium allocated to investments in equity securities will not amortize over the life of the equity securities through interest income and, assuming no subsequent change to the fair value of the GCIC equity securities acquired and disposition of such equity securities at fair value, the Company will recognize a realized loss with a corresponding reversal of the unrealized depreciation upon disposition of the GCIC equity securities acquired. As a supplement to U.S. generally accepted accounting principles (“GAAP”) financial measures, the Company has provided the following non-GAAP financial measures: • “Adjusted Net Investment Income” and “Adjusted Net Investment Income Per Share” - excludes the amortization of the purchase premium from net investment income calculated in accordance with GAAP. • “Adjusted Net Realized and Unrealized Gain/(Loss)” and “Adjusted Net Realized and Unrealized Gain/(Loss) Per Share” - excludes the unrealized loss resulting from the purchase premium write-down and the corresponding reversal of the unrealized loss resulting from the amortization of the premium on loans or from the sale of equity investments from the determination of realized and unrealized gain/(loss) in accordance with GAAP. • “Adjusted Net Income” and “Adjusted Earnings/(Loss) Per Share” – calculates net income and earnings per share based on Adjusted Net Investment Income and Adjusted Net Realized and Unrealized Gain/(Loss). The Company believes that excluding the financial impact of the purchase premium in the above non-GAAP financial measures is useful for investors as this is a non-cash expense/loss and is one method the Company uses to measure its financial condition and results of operations. In addition to the non-GAAP financial measures above, the Company has provided the non-GAAP financial measure “Adjusted Net Investment Income Before Accrual for Capital Gain Incentive Fee” and “Adjusted Net Investment Income Before Accrual for Capital Gain Incentive Fee Per Share”, which excludes the accrual for the capital gain incentive fee required under GAAP (including the portion of such accrual that is not payable under GBDC’s investment advisory agreement) from Adjusted Net Investment Income. The Company believes excluding the accrual of the capital gain incentive fee as a non-GAAP financial measure is useful as a portion of such accrual is not contractually payable under the terms of either the Company’s current investment advisory agreement with GC Advisors, which was effective September 16, 2019, or its prior investment advisory agreement with GC Advisors, (each an, “Investment Advisory Agreement”). In accordance with GAAP, the Company is required to include aggregate unrealized appreciation on investments in the calculation and accrue a capital gain incentive fee on a quarterly basis as if such unrealized capital appreciation were realized, even though such unrealized capital appreciation is not permitted to be considered in calculating the fee actually payable under either Investment Advisory Agreement. As of June 30, 2023, there was no cumulative capital gain incentive fee accrued by the Company in accordance with GAAP, and none was payable as a capital gain incentive fee pursuant to the current Investment Advisory Agreement as of June 30, 2023. Any payment due under the terms of the current Investment Advisory Agreement is based on the calculation at the end of each calendar year or upon termination of the Investment Advisory Agreement. The Company paid capital gain incentive fees in the amounts of $1.2 million and $1.6 million calculated in accordance with its prior Investment Advisory Agreement as of December 31, 2017 and 2018, respectively. The Company did not pay any capital gain incentive fee under the Investment Advisory Agreement for any period ended prior to December 31, 2017. Although these non-GAAP financial measures are intended to enhance investors’ understanding of the Company’s business and performance, these non-GAAP financial measures should not be considered an alternative to GAAP. Refer to slide ‘Summary of Quarterly Results’ for a reconciliation to the nearest GAAP measures. 2. Purchase premium refers to the premium paid by GBDC to acquire GCIC in excess of the fair value of the assets acquired.
Important Investor Information Golub Capital (including its various affiliates) creates and manages multiple investment funds. Two of its control affiliates, GC Advisors LLC (“GC Advisors”) and GC OPAL Advisors LLC (“GC OPAL Advisors”, and together with GC Advisors, the “Registered Advisers”) are registered investment advisers with the United States Securities and Exchange Commission (the “SEC”). A number of other investment advisers, such as GC Investment Management LLC and OPAL BSL LLC (Management Series) (collectively, the “Relying Advisers”) are registered in reliance upon GC OPAL Advisors’ registration. The Registered Advisers and the Relying Advisers (collectively, the “Advisers”) manage certain of Golub Capital’s affiliated funds and accounts. For a detailed description of the Advisers and each of their investment advisory fees, please see the Registered Advisers’ Form ADV Part 1 and 2A on file with the SEC. Registration is not an endorsement by the SEC, nor does it mean that a government agency approves an advisor or reviews its qualifications. Registration does not imply a certain level of skill or training, nor does it guarantee success or future performance. Past performance does not guarantee future results. The performance results are presented for Golub Capital’s managed funds or accounts as indicated. The performance presented does not necessarily represent the return of any individual investor. An investor’s return could be significantly lower or higher than the returns shown due to differences in the timing of the investment and other factors. Gross returns shown do not reflect the deduction of management fees and/or incentive fees. Such fees, if charged, will reduce an investor’s return. Net returns reflect the deduction of all fund expenses, including performance and investment advisory fees. Each fund’s investment manager and its affiliates have the discretion to waive all or part of the management fee, incentive allocation, and other fees and expenses that they are entitled to receive, whether directly from such fund or indirectly from payments or distributions that would have otherwise been paid or distributed to the investment manager or its affiliates from holding companies, investment vehicles or other entities managed by them. Further, each fund’s investment manager and its affiliates are permitted to reduce, waive or absorb all or part of the fees or costs otherwise due by such fund or its subsidiaries. Such reductions, waivers and absorptions of fees and costs have occurred in past periods and resulted in higher returns to investors than investors would have received if full fees and costs had been charged. There is no guarantee that such reductions, waivers or absorptions will occur in the future, and such reductions, waivers and absorptions are entirely at the discretion of the investment manager. Additional information on past reductions or waivers of management fees and incentive allocations is available upon request. For more detailed financial information, please refer to the financial statements that are provided as part of the standard reporting package each quarter. Golub Capital investments are valued at each quarter-end at their fair value consistent with ASC Topic 820 and Golub Capital’s valuation policies and procedures. The Internal Rate of Return (“IRR”) is the annualized effective compound rate of return and is based on starting capital accounts, distributions, capital calls, and ending capital accounts. The IRR performance calculation includes historical cash flows (in the case of investments, this includes the initial investment, interest and principal received, and any additional receipts or payments, and in the case of funds, this includes all capital contributions and distributions) as well as the current fair value of each portfolio loan or other investment still outstanding. The current fair value of outstanding portfolio loans or other investments that are not actively traded is determined in accordance with the valuation policies and procedures as summarized in the Registered Advisers’ Form ADV Part 2A. The determination of the current fair value of each portfolio loan or other investment is based on several inputs, including, among other factors, scheduled payments and comparable market yields. Because many of the loans or other investments are not actively traded, this determination of current fair value is a material factor in determining IRR performance. Actual amounts subsequently realized on an investment could differ materially from the current fair value, and accordingly the actual IRR performance could differ materially from that stated herein. The value of investments and the income derived from investments can go down as well as up. Future returns are not guaranteed, and a loss of principal could occur. An investment in any Golub Capital affiliated fund will be subject to a variety of risks (which are described in that affiliated fund’s confidential offering memorandum), and there can be no assurance that any Golub Capital affiliated fund will meet its investment objective or that any such fund will not incur losses. Certain statements herein constitute forward-looking statements, which relate to future events, future performance or financial condition, and are subject to change for any reason. Actual results could differ materially from those implied or expressed in such forward-looking statements for any reason, and future results could differ materially from historical performance. 9