Golub Capital Bdc, Inc. · NASDAQ:GBDC
Golub Capital Bdc — Q2 2020 Earnings Presentation
40 slides from Golub Capital Bdc's earnings presentation, May 11, 2020
Slide 1: Golub Capital BDC, Inc. Investor Presentation
GOLUB CAPITAL BDC, INC. INVESTOR PRESENTATION QUARTER ENDED MARCH 31, 2020
Slide 2: Disclaimer
Disclaimer Some of the statements in this presentation constitute forward-looking statements, Such forward-looking statements may include statements preceded by, followed by which relate to future events or our future performance or financial condition. The or that otherwise include the words “may,”
Slide 3: Summary of Financial Results vs. Preliminary Estimates
Summary of Financial Results vs. Preliminary Estimates 01
Slide 4: Summary of Financial Results vs. Preliminary Estimates
Summary of Financial Results vs. Preliminary Estimates Q2 2020 Preliminary Estimate Range Q2 2020 Actual (Filed April 13, 2020) Net Investment Income Per Share Net investment income per share $0.24 $0.22 $0.26 Amortization of purchase premium per share1 0.09 0.10 0.08 Adjusted net investment income
Slide 5: COVID-19 Impact Update: Economy & Markets
COVID-19 Impact Update: Economy & Markets 02
Slide 6: The U.S. Economy Hit a COVID-19 Wall in March…
The U.S. Economy Hit a COVID-19 Wall in March… Quarterly Change in GDP Unemployment Rate 3.5% 3.5% 3.2% 3.1% 2.9% 14.7% 2.5% 2.2% 2.3% 2.2% 2.0% 1.9% 2.0% 2.0% 2.1% 2.1% 1.1% 4.9% 4.7% 4.1% 4.0% (4.8%) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2016 2017 2018 2019 April 2020 2016 2016 2016 2
Slide 7: …And Financial Markets Responded Accordingly
…And Financial Markets Responded Accordingly Performance of Select Market Indices Q1 2020 Total Return 10.0% 5.0% 0.0% -5.0% -10.0% BSL (13.0%) -15.0% HY Bonds (13.9%) -20.0% Large Cap Stocks (19.6%) -25.0% -30.0% Small Cap Stocks (30.6%) -35.0% Retail Stocks (35.0%) -40.0% Bank Stocks (41.8%) -45.0
Slide 8: COVID-19 Impact Update: GBDC
COVID-19 Impact Update: GBDC 03
Slide 9: GBDC's Diversified Portfolio Is Focused on Recession-Resistant Industries
GBDC’s Diversified Portfolio Is Focused on Recession-Resistant Industries Expected to be More Insulated from COVID-19 GBDC Industry Subsegments Less Exposed to COVID-19 Key Portfolio Statistics >75% of Portfolio1 Software & Technology $4.2 billion At Fair Value (>45% of Portfolio1) Business Financia
Slide 10: GBDC's Portfolio Has Minimal Exposure to Areas Most Impacted by COVID-19
GBDC’s Portfolio Has Minimal Exposure to Many of the Areas Expected to Be Most Significantly Impacted by COVID-19… Industries with Minimal GBDC Exposure Asset Classes with Minimal GBDC Exposure <1% of Portfolio1 <1% of Portfolio1 Airlines & Metals & Mining Aircraft Finance Non-Sponsored Loans Boatin
Slide 11: …However, GBDC's Portfolio Is Not Expected to Be Immune from COVID-19
…However, GBDC’s Portfolio Is Not Expected to Be Immune from COVID-19 GBDC Industry Subsegments with Most Significant COVID-19 Exposure <20% of Portfolio1 Mitigating Factors Focus on multi-unit quick-serve restaurants and fast Restaurants casual proven brands Dental Care Focus on market-leading regi
Slide 12: COVID-19 Drove a Downward Migration in GBDC's Risk Ratings
COVID-19 Drove a Downward Migration in GBDC’s Risk Ratings Internal Performance Rating Migration % of Portfolio at Fair Value 71.5% 90.8% Increase driven by investments most impacted by COVID-19 26.5% 7.2% +19.3% 2.0% 2.0% December 31, 2019 March 31, 2020 Internal Performance Ratings 4-5 Internal Pe
Slide 13: COVID-19 Also Drove Spread Widening, Causing Higher Unrealized Losses
COVID-19 Also Drove Spread Widening, Which Caused Higher Unrealized Losses in FQ2 2020 Drivers of Net Change in Unrealized Depreciation Per Share Net Change in % of Net Change Weighted Average Price1 Unrealized in Unrealized Category Depreciation on Depreciation on Primary Driver 12/31/19 3/31/20 In
Slide 14: High Unrealized Losses Drove a Meaningful Decline in NAV Per Share
High Unrealized Losses Drove a Meaningful Decline in NAV Per Share NAV Per Share Bridge Net Realized & Unrealized Loss: ($1.95) $0.24 $0.09 ($0.33) $16.66 ($0.03) Adjusted NII: $0.33 1 ($2.06) $0.14 ($0.09) $14.62 $14.62 12/31/19 Net Investment Reversal of FQ2 2020 Net Realized Net Change in Other C
Slide 15: COVID-19 Strategic Response
COVID-19 Strategic Response 04
Slide 16: COVID-19 Strategic Response
COVID-19 Strategic Response How is GBDC navigating the COVID-19 crisis? Proactively managing its highly diversified, first lien, senior secured investment portfolio Fortifying the balance sheet to support existing investments and create future opportunities 16
Slide 17: Proactive Portfolio Management
Proactive Portfolio Management Golub Capital has taken measures to address the economic and market impact of COVID-19 on GBDC’s portfolio companies Phase 1: Gather Information Phase 2: Develop Strategic Plans Phase 3: Execute Strategic Plans • Open lines of communication with • Work with sponsors to
Slide 18: The Rights Offering Was Designed to Fortify GBDC's Balance Sheet
The Rights Offering Was Designed to Fortify GBDC’s Balance Sheet Heading into an Uncertain Environment GBDC intends to use the rights offering proceeds to: 1) Repay outstanding indebtedness and otherwise support our financing subsidiaries 2) Make credit-enhancing incremental investments in existing
Slide 19: Balance Sheet Flexibility Will Allow GBDC to Capitalize on Attractive Opportunities
Balance Sheet Flexibility Will Allow GBDC to Capitalize on Attractive Opportunities We believe recent market events will likely lead to a sustained lender-friendly environment – much like we saw after the last recession Global Financial Crisis Today Debt to EBITDA: Institutional Middle Market (“MM”)
Slide 20: GBDC Is Well-Positioned to Navigate COVID-19
GBDC Is Well-Positioned to Navigate COVID-19 1. Managed by Golub Capital, a platform with over $30 billion of capital under management and over a 25-year history of successful investing in the middle market 2. Conservative investment strategy focused on first lien, senior secured loans to resilient
Slide 21: Summary of Financial Results for the Quarter Ended March 31, 2020
Summary of Financial Results for the Quarter Ended March 31, 2020 05
Slide 22: Summary of Quarterly Results
Summary of Quarterly Results Pre-Acquisition Post-Acquisition1 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 Net Investment Income Per Share Net investment income per share $0.33 $0.32 $0.37 $0.24 $0.24 Amortization of purchase premium per share2 - - 0.02 0.09 0.09 Accrual for (reversal of) capital gain i
Slide 23: Portfolio Highlights – New Originations
Portfolio Highlights – New Originations New Originations Data and Net Funds Growth − Total investments at fair value decreased by approximately 5.4%, or $238.1 million, during the three months ended March 31, 2020. − Net Funds Growth of ($238.1) million includes the impact of $30.8 million of net fu
Slide 24: Portfolio Highlights – Portfolio Diversity as of March 31, 2020
Portfolio Highlights – Portfolio Diversity as of March 31, 2020 Pre-Acquisition Post-Acquisition Investment Portfolio Statistics Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 Investments in Portfolio Companies at Fair Value (000s) $1,883,271 $1,851,079 $4,169,287 $4,329,238 $4,210,215 Investments in Senio
Slide 25: Portfolio Highlights – Portfolio Diversity as of March 31, 2020
Portfolio Highlights – Portfolio Diversity as of March 31, 2020 Investment Portfolio $4,210mm // 257 Investments – Average Size <0.4% Portfolio Composition by Seniority Diversification by Obligor Top 10 1% 2% Investments 18% 15% First Lien Traditional Senior First Lien 97% One Stop Top 25 First Lien
Slide 26: Portfolio Highlights – Economic Analysis
Portfolio Highlights – Economic Analysis Economic Analysis 10.00% 9.3% 9.2% 9.2% 9.1% 9.1% 8.8% 9.00% 8.4% 8.2% 8.8% 8.8% 8.00% 8.5% 8.6% 8.6% 8.4% 8.0% 7.8% 7.00% 6.00% 5.0% 5.0% 5.0% 5.0% 4.8% 4.8% 5.00% 4.5% 4.5% 4.00% 4.1% 4.3% 4.3% 4.2% 4.2% 4.0% 3.9% 3.7% 3.00% 2.8% 2.00% 2.6% 2.3% 2.4% 2.3% 2
Slide 27: Portfolio Highlights – Credit Quality
Portfolio Highlights – Credit Quality Credit Quality – Investment Portfolio − Non-accrual investments at March 31, 2020 as a percentage of total investments at cost and fair value were 2.3% and 1.6%, respectively. During the quarter ended March 31, 2020, the number of non-accrual investments increas
Slide 28: Portfolio Highlights – Portfolio Ratings
Portfolio Highlights – Portfolio Ratings Credit Quality – Investment Portfolio − Due primarily to the effects of the COVID-19 outbreak, the percentage of risk rated “3” investments increased to 26.5% of the portfolio at fair value as of March 31, 2020. Internal Performance Ratings (% of Portfolio at
Slide 29: Quarterly Statements of Financial Condition
Quarterly Statements of Financial Condition Pre-Acquisition Post-Acquisition March 31, 2019 June 30, 2019 September 30, 2019 December 31, 2019 March 31, 2020 (Dollar amounts in 000s, except per share data) (unaudited) (unaudited) (audited) (unaudited) (unaudited) Assets Investments, at fair value $1
Slide 30: Quarterly Operating Results
Quarterly Operating Results For the three months ended Pre-Acquisition Post Acquisition March 31, June 30, September 30, December 31, March 31, 2019 2019 2019 2019 2020 (Dollar amounts in 000s, except share and per share data) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) Investment In
Slide 31: Financial Performance Highlights
Financial Performance Highlights NAV Per Common Share $17.50 $17.21 $17.24 $17.00 $16.43 $16.76 $16.50 $16.33 $16.66 $15.96 $16.00 $15.80 $16.08 $16.10 $15.96 $15.55 $15.80 $15.50 $15.21 $15.55 $15.21 $15.20 $15.00 $14.71 $14.63 $14.60 $14.56 $14.71 $14.50 $14.63 $14.60 $14.62 $14.56 $14.00 IPO Q4 Q
Slide 32: Financial Performance Highlights (Continued)
Financial Performance Highlights (Continued) Quarterly Return on Equity and Quarterly Distributions (Last 5 Years) 2.3% 2.4% 2.5% 1.8% 2.3% 1.9% 2.2% 2.4% 2.2% 2.3% 2.2% 2.4% 2.3% 1.9% 1.9% 2.0% 2.2% 2.1% 1.6% $0.57 (10.5%) $0.46 $0.44 $0.40 $0.32 $0.32 $0.32 $0.32 $0.32 $0.32 $0.32 $0.32 $0.32 $0.3
Slide 33: Liquidity and Investment Capacity
Liquidity and Investment Capacity Cash and Cash Equivalents − Unrestricted cash and cash equivalents and foreign currencies totaled $24.4 million as of March 31, 2020. − Restricted cash, cash equivalents and foreign currencies totaled $94.8 million as of March 31, 2020. Restricted cash is held in ou
Slide 34: Debt Capital Structure
Debt Capital Structure * Key Funding Vehicles Debt Outstanding Undrawn Funding Source Commitment Par Commitment Reinvestment Period Stated Maturity Interest Rate1 Securitizations: 2014 Debt Securitization $ 102,447 $ 102,447 $ - April 28, 2018 April 25, 2026 3 Month LIBOR + 1.08% 2018 Debt Securitiz
Slide 35: Common Stock and Distribution Information
Common Stock and Distribution Information Common Stock Data1 Fiscal Year Ended September 30, 2019 High Low End of Period First Quarter $19.01 $16.38 $16.49 Second Quarter $18.65 $16.62 $17.88 Third Quarter $18.43 $17.34 $17.80 Fourth Quarter $18.97 $17.72 $18.84 Fiscal Year Ending September 30, 2020
Slide 36: Appendix: Endnotes and Illustration of the Purchase Accounting for the GCIC Acquisition
A Appendix: Endnotes and Illustration of the Purchase Accounting for the GCIC Acquisition
Slide 37: Endnotes – Non-GAAP Financial Measures
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 805-50, Business Combinations — Related Issues. Under ass
Slide 38: Endnotes – NAV Per Share Bridge
Endnotes – NAV Per Share Bridge 1. Due to the purchase accounting for the GCIC acquisition, as a supplement to GAAP financial measures, the Company is providing additional non-GAAP measures. See the Endnotes at the end of this presentation for further description on the non-GAAP financial measures a
Slide 39: Accounting Treatment of the Purchase Premium
Accounting Treatment of the Purchase Premium Recognize One- Acquisition of Determine GBDC’s Time Write-Down GCIC Assets at a Cost Basis in of Purchase Premium Acquired Assets Premium Write Down to Fair Value One-Time Purchase Unrealized Loss Premium on Purchase Premium GBDC Cost Basis = Purchase Pre
Slide 40: Illustrative Income Statement Impact and Supplemental Non-GAAP Financial Measures
Illustrative Income Statement Impact and Supplemental Non- GAAP Financial Measures As a supplement to U.S. generally accepted accounting principles (“GAAP”) financial measures, the Company is providing the following non- GAAP financial measures: A B Expected to be equal and offsetting amounts A Purc