Q1 2022 Golub Capital Bdc Inc Earnings Call

Speaker 1: Welcome to the conference center. Please hold for the next available operator. Music

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Speaker 2: David Brown, D. A. B. I. D. B. R. O. W. N. your company name. I. R. R. A. I.

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Speaker 2: two one two nine six zero 3, six nineseven.

Thank you joining you know thank you John and Hello, everybody and thanks for joining US today I'm joined here by Chris Erickson, Our Chief Financial Officer, Gregory Robbins, Senior managing director and Jon Simmons, managing director at Golub capital on behalf of <unk>.

Speaker 3: Thank you. Joining you now. Thank you, John . Hello, everybody, and thanks for joining us today. I'm joined here by Chris Erickson, our Chief Financial Officer, Gregory Robbins, Senior Managing Director, and John Simmons, Managing Director at Gallup Capital. On behalf of our whole team, we hope the new year is off to a great start for you.

All team, we hope the new years off to a great start for you.

Yesterday afternoon, we issued our earnings press release for the quarter ended December 31, and we posted an earnings presentation on the website.

Speaker 3: Yesterday afternoon, we issued our earnings press release for the quarter ended December 31. We posted an earnings presentation on the website. We're going to be referring to this presentation throughout the call today.

To be referring to this presentation throughout the call today.

For those of you who are new to <unk>, our investment strategy is and since inception. It has been to focus on providing first lien senior secured loans to healthy resilient middle market companies that are backed by strong partnership oriented private equity sponsors.

Speaker 3: For those of you who are new to GBDC, our investment strategy is, and since inception it has been, to focus on providing personally senior secured loans to healthy, resilient middle market companies that are backed by strong, partnership-oriented private equity response.

The headline for today is that GBT C had another strong consistent quarter for.

Speaker 3: The headline for today is that GBDC had another strong, consistent quarter. For the quarter ended December 31st, adjusted NII per share was $0.31, adjusted EPS was $0.37, and ending NAV rose to $15.26 per share.

For the quarter ended December 31st adjusted NII per share was 31 cents. Adjusted EPS was 37 cents and ending NAV rose to $15 26 per share.

Speaker 3: During the quarter GBDC made a quarterly distribution of 30 cents per share. And you'll recall that the board decided in November 2021 to raise GBDC's dividend in light of the company's sustained strong performance. Now I'll hand the floor to Gregory, John , and Chris to elaborate on GBDC's performance for the quarter. And following that, I'll provide some closing commentary and then open the line for questions. And with that, we'll start now with session 4 deal. Dr. Greg Fincah about intimate

During the quarter Gbt's. He made a quarterly distribution of <unk> 30 per share and you'll recall that the board decided in November 2021 to raise GBP six dividend in light of the company's sustained strong performance now I'll hand, the Florida, Gregory John and Chris to elaborate on <unk> performance for the quarter and following that.

I will provide some closing commentary and then open the line for questions.

Gregory over to you.

Thank you David.

Slide six describes two key themes that contributed to GBT see success in the quarter ended December 31.

Speaker 3: Slide 6 describes two key themes that contributed to GBDC's success in the quarter end of December 30th.

Speaker 3: We've discussed these themes on our last several earnings calls, and we've said that we expected them to continue. In our view, more of the same is a good thing.

We have discussed these themes on our last several earnings calls and we've said that we expected them to continue in.

In our view more of the same as a good thing.

The first theme is strong portfolio performance I'd call your attention to the Golub capital Middle market report or <unk> for December 31, which we published several weeks ago.

Speaker 3: call your attention to the Gallup Capital Middle Market Report, or GCMMR, for December 31st, which we published several weeks ago.

Speaker 3: The median revenue and EBITDA growth rates in October and November from the pre-COVID period in 2019 to the same period in 2021 exceeded 20% for the third consecutive year.

The median revenue and EBITDA growth rates in October and November from the pre Covid period in 2019 to the same period in 2021 exceeded 20% for the third consecutive quarter.

Strong earnings growth across G. Bdc's portfolio was reflected in the continued improvements of key credit metrics.

Speaker 3: Strong earnings growth across GBDC's portfolio was reflected in the continued improvement of key credit metrics.

The second theme is robust origination.

The Golub capital platform had its best year ever from an origination perspective in calendar 2021, and calendar Q4 was particularly strong.

Speaker 4: The Gallup Capital Platform had its best year ever from an origination perspective in calendar 2021, and calendar Q4 was particularly strong. This led to the very strong portfolio of people who were able to make a difference in the world.

This led to the very strong portfolio growth at GBT.

Importantly, we believe that portfolio growth came in the form of very attractive new investments.

Speaker 4: Importantly, we believe that portfolio growth came in the form of very attractive new and

We'll take a closer look at the data on credit metrics and portfolio growth later in the presentation.

Speaker 4: We'll take a closer look at the data on credit metrics and portfolio growth later in the presentation.

Turning to slide seven let's walk through how our two key themes contributed to growth in NAV per share relative to the quarter ended September 30.

Speaker 4: Turning to slide seven, let's walk through how our two key themes contributed to growth in NAV per share relative to the quarter ended September 3rd.

Speaker 4: As you can see, GBDC out-earned its now higher quarterly dividend with 31 cents of adjusted NI

As you can see GBT see out earned its now a higher quarterly dividend with 31 cents of adjusted NII per share.

In addition, adjusted net realized and unrealized gains totaled <unk> <unk> per share, reflecting the excellent credit quality of <unk> portfolio.

Speaker 4: In addition, adjusted net realized and unrealized gains totaled $0.06 per share, reflecting the excellent credit quality of GBDC's portfolio.

Let's now take a closer look at our results for the quarter for that let me hand, the call over to John Simmons to walk you through the results in more detail.

Speaker 4: For that, let me hand the call over to John Simmons to walk you through the results and more to tell.

John .

Thank you Gregory.

Speaker 3: Slide 9 summarizes our results for the last several quarters during which GBDC achieved consistent and expanding adjusted NII, as well as strong adjusted net realized and unrealized gains, EPS, and distributions.

Slide nine summarizes our results for the last several quarters during which G. BDC achieved consistent and expanding adjusted NII as well as strong adjusted net realized and unrealized gains EPS and distributions.

Turning to slide 10. This was another strong quarter for originations at G. BDC.

Speaker 3: This is another strong quarter for originations at GBDC, with new investment commitments totaling $867.7 million.

With new investment commitments totaling $867 $7 million.

After factoring in total exits and sales of investments of $661.8 million as well as unrealized appreciation and other portfolio activity.

Speaker 3: After factoring in total exits and sales of investments of $661.8 million, as well as unrealized appreciation and other portfolio activity.

Speaker 3: Total investments at fair value increased by 5.1% for $251.9 million.

Total investments at fair value increased by five 1% or $251 $9 million during the quarter.

As of December 31, 2021.

Speaker 3: As of December 31st, 2021, GBDC has $41 million of undrawn revolver commitment.

<unk> had $41 million of Undrawn revolver commitments and $267 $2 million of Undrawn commitments on delayed draw term loans.

Speaker 3: $267.2 million of undrawn commitments on delayed draw term.

These are both relatively small commitments in the context of G bdc's balance sheet and liquidity position.

Speaker 3: These are both relatively small commitments in the context of GBDC's balance sheet and liquidity position.

Speaker 3: As shown in the bottom of the table, both the weighted average rate and spread over LIBOR on new investments increased a bit quarter...

As shown in the bottom of the table, both the weighted average rate and spread over LIBOR on new investments increased a bit quarter over quarter.

Speaker 3: Slide 11 shows that GBDC's portfolio mix by investment type remain consistent, with one-stop loans continuing to represent approximately 80% of the portfolio at fair value.

11 shows that G bdc's portfolio mix by investment type remained consistent with one stop loans continuing to represent approximately 80% of the portfolio at fair value.

Flipping to slide 12. This slide shows that our portfolio remained highly diversified by obligor with an average investment size of less than 30 basis points.

Speaker 3: Flipping to slide 12, this slide shows that our portfolio remained highly diversified by Obligor, with an average investment size of less than 30.

As of December 31, 94% of our portfolio was comprised of first lien senior secured floating rate loans and defensively positioned in what we believe to be resilient industries.

Speaker 3: As of December 31st, 94% of our portfolio was comprised of first-lean, senior-secured floating-rate loans.

Speaker 3: and defensively positioned in what we believe to be resilient.

Turning to slide 13, this graph summarizes portfolio yields and net investment spreads for the quarter and over the past several quarters.

Speaker 3: Turning to slide 13, this graph summarizes portfolio yields and net investment spreads for the quarter and over the past several...

Speaker 3: focusing first on the light blue line. This line represents the income yield or the actual amount earned on the investments, including interest in fee income, but excluding the amortization of upfront origination fees and purchase price previous.

Focusing first on the light Blue line. This line represents the income yield or the actual amount earned on the investments, including interest and fee income, but excluding the amortization of upfront origination fees and purchase price premium.

The income yield decreased by 10 basis points to seven 1% for the quarter ended 12 31.

Speaker 3: The income yield decreased by 10 basis points to 7.1% for the quarter ended 12-30.

Speaker 3: The investment income yield, or the dark blue line, which includes the amortization of fees and discounts, remained flat at 7.7% for the quarter. Our weighted average cost of debt, or the aqua blue line.

The investment income yield or the dark Blue line, which includes the amortization of fees and discounts remained flat at seven 7% for the quarter.

Our weighted average cost of debt or the Aqua Blue line.

Creased by 10 basis points to two 7%.

And then finally, our net investment spread or the Green line, which is the difference between the investment income yield and the weighted average cost of debt increased by 10 basis points to 5%.

Speaker 3: And then finally, our net investment spread, or the green line, which is the difference between the investment income yield and the weighted average cost of debt, increased by 10 basis points to 5%.

Speaker 3: With that, I'll hand the call over to Chris to continue the discussion of our quarterly results. Chris?

With that I'll hand, the call over to Chris to continue the discussion of our quarterly results Chris.

Thanks, Chad.

Speaker 5: Flipping to the next two slides, non-accrual investments as a percentage of total debt investments at cost and fair value remain low at 1.2% and 0.9% respectively as of December 31.

Flipping to the next few slides nonaccrual investments as a percentage of total debt investments at cost and fair value remained low at one 2% and 0.9% respectively.

On December 31.

In the quarter the number of nonaccrual investments declined from six to five due to the disposition of one portfolio company investments.

Speaker 5: During the quarter, the number of non-accrual investments declined from six to five due to the disposition of one portfolio company.

Speaker 5: As Gregory discussed in his opening commentary as a result of continued strong portfolio company performance, the percentage of investments rated 3. Meaning companies performing or expected to perform. Below our expectations that under.

As Gregory discussed in his opening commentary as a result of continued strong portfolio company performance the percentage of investments rated three.

<unk> companies performing or expected to perform below our expectations at underwriting.

Speaker 5: on our internal performance rating scale decreased to 6.6% of the portfolio at fair value as up to sample quality.

On our internal performance rating scale decreased to six 6% of the portfolio at fair value as of December 31.

As a reminder, independent valuation firms value at least 25% of our investments each quarter.

Speaker 5: As a reminder, independent valuation firms value at least 25% of our investments each quarter.

Slides 16, and 17 provide further details on our balance sheet and income statement as of and for the three months ended December 31 2021.

Speaker 5: Slide 16 and 17 provide further details on the balance sheet and income statement as of and for the three months ended December 31, 2021.

Turning to slide 18.

Speaker 5: Turning to slide 18, the graph on the top summarizes our quarterly returns on equity over the past five years. And the graph on the bottom summarizes our regular quarterly distributions. As well as our special distributions over the same time.

On the top summarizes our quarterly returns on equity over the past five years.

On the bottom summarizes our regular quarterly distributions as well as our special distributions over the same timeframe.

Turning to slide 19, this graph illustrates our long history of strong shareholder returns since our IPO.

Speaker 5: Turning to slide 19, this graph illustrates our long history of strong shareholder returns since our IPO.

As illustrated investors and GBP since 2010, IPO have achieved a 10% IRR on NAV since inception, and a bit higher than that based on our current stock price.

Speaker 5: As illustrated, investors in GBDC's 2010 IPO have achieved a 10% IRR on NAB since inception, and a bit higher than that based on our current stock.

Slide 20 summarizes our liquidity and investment capacity as of December 31.

Speaker 5: Slide 20 summarizes our liquidity and investment capacity as of December 31st, which remains strong with over $1.2 billion of capital available through cash, restricted cash, and availability in our various credit facilities.

Which remained strong with over $1 2 billion of capital available through cash restricted cash and availability in our various credit facilities.

We also highlight our continued progress in optimizing the right hand side of our balance sheet.

Speaker 5: We also highlight our continued progress in optimizing the right-hand side of our balance sheet.

Two key highlights.

First on October 13th 15th respectively, We issued an additional $200 million of 2026 unsecured notes.

Speaker 5: 1st, on October 13th and 15th, respectively, we issued an additional 200 million of 2026 unsecured notes at a price resulting in a yield to maturity of 2.667% and an additional 100 million of 2024 unsecured notes at a price resulting in a yield to maturity of 1.809%.

Price, resulting in a yield to maturity of 266, 7% and an additional $100 million of 2020 for unsecured notes at a price, resulting in a yield to maturity of 180, 9%.

Second on November 19, we amended our revolving credit facility with J P. Morgan primarily to increase the accordion feature which now allows us to increase the facility up to one 5 billion from $712 5 million.

Speaker 5: Second, on November 19th, we amended our revolving credit facility with JP Morgan, primarily to increase the accordion feature, which now allows us to increase the facility up to $1.5 billion from $712.5 billion.

In addition, we entered into a series of agreements. Most recently on December 17 to increase the aggregate commitments outstanding under the Jpmorgan facility to $1, one $875 billion from $475 million as of September 32021.

Speaker 5: In addition, we entered into a series of agreements most recently on December 17th to increase the aggregate commitments outstanding under the JP Morgan facility, $1.1875 billion from $475 million as of September 30th, 2021.

Slide 21 summarizes the terms of our debt facilities.

Speaker 5: 521 summarizes the terms of our debt facilities as of December 31st, 2021.

31 2021.

Slide 22 summarizes our recent distributions to stockholders. Most recently our board declared a quarterly distribution of <unk> 30 per share payable on March 29, 2020 to stockholders of record as of March 4th totaled 22.

Speaker 5: Slide 22 summarizes our recent distributions to stockholders. Most recently, our board declared a quarterly distribution of $0.30 per share payable on March 29, 2022 to stockholders of record as of March 4, 2022. With that, I will turn it over to you,

With that I will turn it over to David for some closing remarks.

Thanks, Chris so to sum up <unk> had a strong quarter for the period ended December 31 adjusted.

Speaker 3: Thanks, Chris. So to sum up, GBDC had a strong quarter for the period ended December 31st. Adjusted net investment income exceeded our recently increased dividend, realized and unrealized gains were solid, we added additional low-cost and highly flexible unsecured borrowings, and we had robust new originations that enabled the portfolio to grow nicely. Let's talk briefly about our outlook before I open the line for questions.

Adjusted net investment income exceeded our recently increased dividend.

Realized and unrealized gains were solid we added additional low cost and highly flexible unsecured borrowings.

And we had robust new originations that enabled the portfolio to grow nicely, let's talk briefly about our outlook before I open the line for questions.

We remain optimistic about the prospects for Golub capital and G. B D C. In the coming period to borrow a phrase Gregory used earlier, our overall outlook is we expect more of the same.

Speaker 3: We remain optimistic about the prospects for Gallup capital and GBDC in the coming period. To borrow a phrase Gregory used earlier, our overall outlook is we expect more of the same.

We appointed in recent quarters to one tailwind, which is the strength of G. D. C portfolio. Our internal performance ratings are in line with pre COVID-19 levels non accruals are low and we're seeing net realized and unrealized gains rather than losses, all that means we won't be distracted by needing to play defense on a troubled portfolio.

Speaker 3: pointed in recent quarters to one tailwind, which is the strength of GBDC's portfolio. Our internal performance ratings are in line with pre-COVID levels, non-accruals are low, and we're seeing net realized and unrealized gains rather than losses. All that means we won't be distracted by needing to play defense on a troubled portfolio.

Speaker 3: A second tailwind is the strength and flexibility of GBDC's balance.

Our second tailwind is the strength and flexibility of G. B D CS balance sheet.

Speaker 3: Chris alluded to this in his comments. Low-cost, highly flexible, and fixed-rate unsecured debt now constitutes more than half of GBDC's debt fund.

Chris alluded to this in his comments low cost highly flexible in fixed rate unsecured debt now constitutes more than half of G. B D CS debt funding.

Speaker 3: A third tailwind is the continued growth of the private equity ecosystem.

A third tailwind is the continued growth of the private equity ecosystem.

Speaker 3: based on growth in private equity fundraising and the current level of private equity dry powder, we think the private equity ecosystem is on a flight path to double in size over the next 3-5 years.

Based on growth in private equity fund raising in the current level of private equity dry powder, we think the private equity.

Do you think the private equity ecosystem is on a flight path to to double in size over the next three to five years.

Speaker 3: And that means the sponsor finance business will be in a position to grow along with it. In other words, we think Gallup Capital is a leader in an attractive growing market. Finally, we believe the changes in the private equity ecosystem play to our competitive advantages. The biggest and strongest players in our market are getting bigger and stronger as leading private equity firms consolidate their relationships among a select few lenders.

And that means the sponsor finance business will be in a position to grow along with it.

In other words, we Didnt go up capital So a leader in an attractive growing market. Finally, we believe the changes in the private equity ecosystem play to our competitive advantages the biggest and strongest players in our market are getting bigger and stronger as leading private equity firms consolidate their relationships among a select few lenders.

Speaker 3: What those lenders have in common? They have the scale, capabilities, the expertise, and the long-term track record to be strategic partners on a wide range of transactions.

Those lenders, having common they have the scale capabilities the expertise and the long term track record to be strategic partners on a wide range of transactions.

Speaker 3: We expect these four tailwinds are going to continue for the foreseeable future. As always, our optimism is tempered by caution. We worry about Russian adventurism, about the potential for the Fed to raise rates too fast, about inflation, and about supply chain issues.

We expect these four tail winds are going to continue for the foreseeable future.

As always our optimism is tempered by caution we worry about Russian adventurism about the potential for the fed to raise rates too fast about inflation and about supply chain issues.

But we're optimistic based on the strength of the Golub capital platform and the proven resilience of G. D. C portfolio. They were gonna be able to continue to serve shareholders well over the course of the coming period.

Speaker 3: But we're optimistic based on the strength of the Gallup Capital platform and the proven resilience of GBDC's portfolio that we're going to be able to continue to serve shareholders well over the course of the coming period.

With that operator, please open the line for questions.

At this time I would like to remind everyone in order to ask a question Press Star then the number one on your telephone keypad.

Speaker 6: At this time, I would like to remind everyone, in order to ask a question, press bar then the number 1 on your telephone keypad. We'll pause for just a moment to compile the Q&A roster.

Well pause for just a moment to compile the Q&A roster.

Your first question comes from the line of Finian O'shea.

Speaker 6: Your first question comes from the line of Finian O'Shea with Greco blinding.

Wells Fargo Securities.

Hi, Good afternoon. This is Jordan was number one for today, we wanted to ask about your late stage lending book It looks like it grew pretty solidly in the fourth quarter, even though there is a little bit of volatility in public software and SaaS names.

Speaker 7: Good afternoon. This is Jordan Watson on the line for today. We want to ask about your

Speaker 7: It looks like it grew pretty solidly in the fourth quarter, even though there was a little bit of volatility in the fourth quarter.

Speaker 7: I'm curious how you kind of describe the demand for this capital when public markets take a breather and maybe whether or not you've seen a change in demand for these ones maybe.

Curious how you kind of describe the demand for this capital in public markets take a breather and maybe whether or not you're seeing a change in demand for us.

Loans, maybe say like November and January .

Sure so to give context for those who are on the phone who may not be as familiar as Jordan news.

Speaker 3: Sure. So to give context for those who are on the phone who may not be as familiar as Jordan is, when we talk about our late stage lending or growth lending business, we're talking about loans to software companies that are in a rapid growth mode and have made the decision to invest heavily in

When we talk about our late stage lending or or gross lending business. We're talking about loans to software companies that are in a rapid growth mode and have made the decision to invest heavily in our selling and marketing expenses.

Speaker 3: selling and marketing expenses at the expense of profitability during a period of rapid growth. We look at these companies using a different set of credit metrics because of the stage of development that they're at and because of this.

The expense of profitability during a period of rapid growth. We look at these companies using a different set of of credit metrics because of the stage of development that they're at and because of this.

Speaker 3: affirmative decision by the management teams and owners of these companies to focus on growth at the expense of profitability. It's been a long-standing strategy of Gallup Capital. We've been doing this for more than eight years. It's been a very successful strategy. Our credit losses in our late-stage lending business have been very, very low.

Affirmative decision by the manage management teams and owners of these companies to focus on on on growth at the expense of profitability.

It's been a long standing strategy of gobs of capital we've been doing this for more than eight years, it's been a very successful strategy or our credit losses in our late stage lending business has been a very very low.

When.

Speaker 3: The venture market and the IPO market are particularly strong. It puts a damper on our late-stage lending business because...

The venture market and the the the IPO market are particularly strong it puts a damper on our late stage lending business because.

Speaker 3: the companies that we're lending to have choices and among the choices they have are issuance of equity as an alternative to issuance of debt. So during periods in which valuations are really high and venture firms are eager to deploy capital, it's harder to find attractive place-safe lending.

But the companies that where we are.

We're lending to have choices and among the choices they have our issuance of equity as an alternative to issuance of debt. So during periods in which valuations are really high and venture firms are eager to deploy capital it's harder to find attractive late stage lending opportunities.

So the fourth quarter was one of those periods. It was it was a period of relatively high.

Speaker 3: So the fourth quarter was one of those periods. It was a period of relatively high stock prices, relatively robust venture fundraising and venture deployment.

Stock prices relatively robust.

Venture fund raising and venture deployment.

Speaker 3: So I describe it as a relatively unfavorable period for our late-stage lending business in terms of new lending activity.

I describe it is as a relative be unfavorable period for our late stage lending business in terms of new lending activity.

Speaker 3: We have, as you point out, seen a drop in stock market prices in the tech sector in January . That drop was particularly significant for young tech companies. So I'm cautiously optimistic that we're going to see a pickup in our late-stage lending business in calendar 2022.

We have as you point out seen a drop in in stock market prices in the tech sector and in January that that drop was particularly significant for young tech companies. So I'm cautiously optimistic that we're going to see a pickup in our late stage lending business in our <unk>.

Calendar 2022.

You know first quarter always tends to be a bit seasonally slow, but it it looks like we're headed into a period thats more favorable for this piece of our business.

Speaker 3: First quarter always tends to be a bit seasonally slow, but it looks like we're headed into a period when it's more favorable for this piece of our business.

Answer to your question Jordan.

Yeah. It does that's helpful and good to know.

Speaker 7: Yeah, it does. It's helpful and good to know. So just to move on to another topic.

So just to move on to another topic.

You guys can easily have probably one of the best fee structures in the industry are whats. Your total return hurdle and we can think of a lot of bdcs, they would've been better for shareholders.

Speaker 7: You guys easily have probably one of the best fee structures in the industry with your total return hurdle. We can think of a lot of BD&Bs that would have done better for shareholders if they had it and not many that would have done worse with it. So given the BDC trades now, do you think the market's really given you credit for the fee or have you thought about maybe reorienting it in a way that can really make the value of that structure show through?

I mean, it would have been the worst with it so.

There were the BDC traded now do you think the market is really giving you credit for the B.

Or have you thought about maybe reorienting. It in a way that you know to really make the value of that structure shows.

It's a good question I think maybe one we need to give some more thought to I would tell you that in my mind, a key part of our fee structure that that we.

Speaker 3: It's a good question. I think it may be one we need to give some more thought to. I would tell you that in my mind a key part of our fee structure that we...

We think is really important in addition to the the feature you mentioned this is the hurdle rate, we have an 8% hurdle.

Speaker 3: we think is really important in addition to the feature you mentioned is the hurdle rate. We have an 8% hurdle rate before the manager begins to receive a total hurdle rate.

Hurdle rate before the manager begins to.

Receive a net investment income and our incentive fee and I think that's a really important part of the structure as well.

Speaker 3: net investment income incentive fee. And I think that's a really important part of the structure as well. I do think it's a very favorable overall structure from a shareholder perspective and I think it has over the course of the almost 12 years we've been public, I think it's done a nice job of aligning incentives between manager and shareholders.

I do think it's a very.

Very favorable overall structure from a.

From a shareholder perspective, and I think it is.

Over the course of the almost 12 years, we've been public I think it's done a nice job of aligning incentives between manager and and shareholders.

Great. Thanks, so much.

Your next question comes from the line of Ryan Lynch with can be temporary.

Speaker 6: Your next question comes from the line of Ryan Lynch with KBW.

Speaker 7: Hey, good afternoon and thanks for taking my questions. First one, there's been a lot of investor interest recently on the impact of rising rates on on BBC operating earnings, but I wanted to kind of flip the other side of that and talk about the portfolio companies or borrower.

Hey, good afternoon, thanks for taking my questions.

The first one there's been a lot of investor interest recently on the.

The impact of rising rates on Bdcs operating earnings, but I wanted to kind of flip to the other side of that I'm talking about the portfolio of companies or borrowers.

Speaker 3: You know, right now today they're facing, you know, this is from a high-level standpoint, obviously, but facing higher labor costs, facing higher raw material input costs.

You know right now today, they're facing you know this is from a high level standpoint, obviously, but good facing higher labor cost facing higher raw material input costs.

And so to the extent that the fed and James Bullard Instead, President came out today and said they wanted to give rates above 1% by July <unk> to the extent that rates increased quick enough to get above the floor interest rate floors that most loans have today.

Speaker 7: to the extent that the Fed and James Buller and the Fed president came out today and said they want to give rates above, you know, 1% by July . So the extent that that rates increase quick enough to get above the floor interest rate floors that that most loans have today, you know, how do you think credit quality is going to be able to hold up in your portfolio and can your borrowers support paying higher interest rates?

How do you think credit quality is going to be able to hold up in your portfolio and tenured borrowers support paying higher interest rates in.

Speaker 8: you know, in addition to managing these other costs that are there.

In additional in addition to managing these other costs that are there for them through their business.

Oh, Thanks for your question Ryan So.

Speaker 3: Thanks for your question Ryan. So if we look at...

If if we'd look at.

Speaker 3: the world from the perspective of our borrowers right now.

The world from the perspective of our borrowers right now.

There are tailwind and headwinds that they're facing and I think it's worth talking about both of them putting putting this all in constant in context on the tailwind side B economy continues to grow nicely.

Speaker 3: There are tailwinds and headwinds that they're facing. And I think it's worth talking about both in putting the solve in context.

Speaker 3: On the tailwind side, the economy continues to grow nicely. And if you look at the Gallup Capital Middle Market Index results from the most recent quarter, you'll note that median company revenue and EBITDA for the first two months of the fourth quarter were well up year over year and over 2019 over the pre-COVID impact period.

And if you look at the Golub capital Middle market Index results from the most recent quarter, you'll note that our median company revenue and EBITDA for the first two months of of the fourth quarter were.

We're well up year over year and over 2019 over the the the the pre Covid impact period.

So one of the important components of.

Speaker 3: One of the important components of the situation that management teams are facing right now is one

The situation that the management teams are facing right now is is one.

That includes growth and robust consumer spending.

Speaker 3: that includes growth and robust consumer spending.

On the tail on the headwind side.

Speaker 3: On the headwind side, they're facing...

They are facing rising costs inflation is in particular, hitting our wages in many markets and across many different industries.

Speaker 3: rising costs. Inflation is in particular hitting wages in many markets and across many different industries. In some sectors we're also seeing other input costs go up significantly. I think right now those inflationary increases in costs are a much more significant headwind than

In some sectors were also seeing other input costs go up significantly.

I think right now those inflationary increases in costs are a much more significant.

Headwind, then rising interest rates.

Speaker 3: You're right, Ryan, that the Fed's recent announcements would indicate a reasonably high likelihood that we're going to see LIBOR rise above floor levels. But the overall levels that we're talking about, the overall quantum of increased interest expense that we're talking about is still relatively small.

Youre right.

Ryan that that the fed's recent announcements would indicate a reasonably high likelihood that that we're going to see a LIBOR rise above floor levels.

But the overall levels that we're talking about the overall quantum of increased interest expense that we're talking about is still relatively small.

So I don't think we're going to see an environment in which rising rates in and of themselves have a meaningful impact on on credit performance. I think there are two principal risks to credit performance in the coming period.

Speaker 3: So I don't think we're going to see an environment in which rising rates

Speaker 3: in and of themselves have a meaningful impact on credit performance.

Speaker 3: I think there are two principal risks to credit performance in the coming period.

Speaker 3: The first is that companies that don't have pricing power.

The first is that companies that don't have pricing power and one of the things we underwrite for US is companies with pricing power. So I don't think this is gonna be a big factor for our portfolio, but I think it's gonna be a big factor for the economy generally a.

Speaker 3: One thing we underwrite for is companies with pricing power. So I don't think this is going to be a big factor for our portfolio, but I think it's going to be a big factor for the economy generally. Companies that don't have pricing power are going to see shrinking margins. They're not going to be able to raise prices quickly as their costs are going up. I think that's going to be a significant factor across the economy.

Companies that don't have pricing power are going to see shrinking shrinking tricking margins there, they're not going to be able to raise prices quickly as their costs are going up I think that's going to be a significant factor across the economy.

The second risk is that the fed moves to news too quickly.

Speaker 3: The second risk is that the Fed moves too quickly. In retrospect, I think most people would agree that the Fed to date has moved too slowly. We're actually still seeing the Fed implementing a quantitative easing program, purchasing securities in workload.

In retrospect I think most people would agree that the fed to date has moved too slowly right and where we're actually still seeing the fed implementing a quantitative easing program purchasing our purchasing securities in <unk>.

Speaker 3: February and I think it's supposed to end now in March, but it's kind of hard to believe, scratch your head and believe it's the right thing to be doing for the Fed to still be expanding its balance sheet in February of 2022. But that's what it's doing.

February and and and I think it's supposed to and now in March, but but it's kind of hard to believe scratch your head and believe it's the right thing to be doing for the fed to still be expanding its balance sheet in February of 2022, but that's what it's doing.

So so.

Speaker 3: Having gone through a period where it moved too slowly, the second risk is it may move too quickly and it may reverse the recent growth in the size of its balance sheet. It may raise rates too fast.

Having gone through a period, where it moved too slowly there. The second risk is it may move too quickly and it may.

Reversed the recent growth in the size of its balance sheet. It.

It may raise rates too fast.

And over shoot the effort to.

Speaker 3: and overshoot the effort to

Speaker 3: lower inflationary pressures in the economy to the point where we see a significant weakening of the economy. Those are the two keys we're thinking about right now and watching very carefully. I'm much more concerned about those two than I am about increased interest expense in the P&L's of our borrowers.

Lower inflationary.

Pressures in the economy to.

To the point, where we're we see a significant weakening of the economy. Those are the two keys, we're thinking about right now in and watching very carefully I'm much more concerned about those two than I am about about you know in increased interest expense in the P&L of our book.

Our hours.

I understand that that's really good insight I appreciate that.

Speaker 8: your scale that's really good insight and I appreciate that.

Speaker 8: a very wholesome conversation about all the puts and takes that are going on right now in our standard position.

Very wholesome conversation about all of that all the puts and takes that are going on right now and understand your position.

Speaker 8: what you think. Kind of another higher level question.

So what do you think.

Kind of about another higher level question.

Speaker 8: know, on just kind of market activity. And your prepared remarks, you know, and which I would agree with, you talk about kind of the private equity ecosystem potentially doubling over the next three to five years and what that could mean for, you know, private credit and direct lenders, in particular, those lenders who have, you know, large scale platforms like yourselves. I'm just curious, though, in the near term, kind of, you know, revisiting back to, you know, the comments on

You know or I'm, just kind of market activity.

In your prepared remarks, you know and which I would agree with you can you talk about kind of the private equity ecosystem and potentially doubling over the next three to five years and what that could mean for.

Private credit and direct lenders in particular, those those lenders who have you know large scale platforms like yourselves I'm just curious, though in the near term kind of.

Revisiting back to the comments on rising rates, we've already seen rising rates pushed down multiples in the public markets I would assume that that has or is about to trickle down in the private market valuations and I would say you know sponsors who have transacted over the last several years at certain multiples.

Speaker 8: We've already seen rising rates push down multiples in the public markets. I would assume that that has or is about to trickle down into private market valuations. And I would think, you know, sponsors who have transacted over the last several years at certain multiples, you know, depending on where those multiples go, if they come down meaningfully, they may want to transact much less frequent or hold those positions longer until multiples potentially resume. So you know.

Depending on where those multiples go if they come down meaningfully they may want to transact much less frequent or hold those positions longer until multiples potentially resume so.

Can you kind of hear your comments with you know overall expanding total addressable market you know, what's nice secular tailwind for that with the potential I would say maybe for some headwinds on multiples and sponsors willing to transact.

Speaker 8: Can you kind of pair your comments with overall expanding total addressable market? You know, my secular tailwind for that with the potential, I would say maybe for some headwinds on multiples and sponsors wind.

So.

Speaker 3: So it's a really interesting question. So let's think about this a couple of different ways. Right now there are three different principal

It's a really interesting question. So so let's let's think about this a couple of different ways right now there are three different principal.

Kinds of ownership of middle market companies in the U S. There are family owned businesses, they're publicly owned businesses and their private equity.

Speaker 3: kinds of ownership of middle market companies in the US. They're family owned businesses, they're publicly owned businesses and they're private equity.

Baxter businesses, so if youre right and there's a period of multiple contraction.

Speaker 3: So if you're right and there's a period of multiple contraction.

What impact would that have on likelihood of of M&A activity stemming from each of those different.

Speaker 3: what impact would that have on likelihood of M&A activities stemming from each of those different

There's different forms of ownership I think it would likely increase the amount of public to private activity, because we'd see public market valuations go down and when we see public market valuations go down we typically see.

Speaker 3: I think it would likely increase the amount of public to private activity because we'd see public market valuations go down. And when we see public market valuations go down, we typically see, you know, a degree of mispricing of some companies and their stocks and that in turn catalyzes some activity. So for public companies, I think that'd be a plus from an M&A activity standpoint.

A degree of a mispricing of some of some companies and and their stocks and that in turn catalyze some activity. So so.

For public companies I think that'd be a plus from an M&A activity standpoint.

For family owned businesses, it might be both a plus and a minus.

Speaker 3: For family-owned businesses, it might be both a plus and a minus. A plus because it might drive a need for liquidity. A minus because families might see that

Plus because it might drive a need for.

For liquidity, a minus because families might see that they'd be better off waiting and selling in a in a better environment.

Speaker 3: they'd be better off waiting and selling in a better environment.

Speaker 3: And I kind of see the same dynamic happening in the private equity ecosystem, where it's both a plus and a minus. You're right that it might lead some private equity firms to want to hold some portfolio companies longer to grow and to...

And I kind of see the same dynamic happening in the private equity ecosystem, where it's both a plus and the minus youre right that it might lead some private equity firms to want to hold some portfolio companies longer to to grow and to.

In essence generate a better dollar return on their investment.

Speaker 3: in essence generate a better dollar return on their investment.

Speaker 3: by just taking longer. On the other hand, you know, the pressure on sponsors to show good rates of return is a is a mitigant to this longer holding period pattern. Longer holding periods make it harder to achieve the rates of return that private equity firms seek.

Bye bye, just taking longer and on the other hand, you know that the pressure on sponsors to show good rates of return is a is a mitigate to this.

Longer holding period pattern.

Longer holding periods make it harder to achieve the rates of return that private equity firms seek.

Speaker 3: So I think it's complicated. I'm not sure.

So so I I think it's complicated I don't I'm not I'm not sure.

Speaker 3: I'm not sure how I see this all netting out. I come back to the main point which is you've got

I'm not sure how I see this all netting out I come back to the main point, which is you've got.

Existing unused capital that the private equity firms, having their coffers and need to spend within a defined time period. There's enormous fundraising that's been going on for the last several quarters a record after record being broken.

Speaker 3: existing unused capital that the private equity firms have in their coffers and need to spend within a defined time period. There's enormous fundraising that's been going on for the last several quarters, record after record being broken.

Speaker 3: So I think both of those argue for robust new private equity spending. So I think on balance, I still think even if we see an equity market decline, you're likely on balance still to see a robust private equity backed M&A environment.

So I I think I think both of those argue for robust new pre.

Private equity spending.

So I think on balance I still think even if we see a in equity market decline, you're you're you're likely on balance still to see a robust private equity backed M&A environment.

Yeah, that's helpful and David I'll give you a pass on not being able to see the the future work with you know complete clarity.

Speaker 8: That's helpful and David, I'll give you a pass on not being able to see the.

Speaker 8: the future with, you know, complete clarity, you know. That's all right. One last one, if I can. And this is just kind of a small minor one on GBDC. But if I look at your guys' equity portfolio, it's still very, very small, relative to the overall size of your portfolio. But it has been rolling over the last several quarters. And, you know, if we look at the commitment, you know, it's been rolling over the last several quarters. And, you know, if we look at the commitment,

Right.

One last one if I can and this is just kind of a small minor one in D C. But if I look at your guys' equity portfolio, it's still very very small relative to the overall size of your portfolio, but it has been growing over the last several quarters and you know if we look at the commitments.

Speaker 8: Again, still a very small portion of your portfolio, but commitment size on a quarterly basis as a percentage of investments in a quarter has increased pretty materially, 5%, 2 quarters ago, 3%, a quarter ago, and 8% on new commitments. So,

<unk> still a very small portion of your portfolio, but it you know.

Commitment size on a quarterly basis as a percentage of of of investments in a quarter. You know it has increased pretty materially 5% two quarters ago, 3% a quarter ago and 8% on new commitments. So.

Any insights you can provide into that I know, it's still really small and it's not a huge change but that was something that stood out a little bit to me.

Speaker 8: you know, any insights you could provide into that. I know it's still really small and it's not a huge change, but that was something that stood out.

Speaker 3: Yeah, I think it's a good point. It is still small. We plan for it to continue to be small, but we have seen some, what we think are very attractive opportunities in some, what we call yield-oriented preferreds. These are preferreds in mostly software companies that...

Yeah, I think it's a good point it is still small we plan for it to continue to be small, but we have seen some what we think are very attractive opportunities in some what we call yield oriented preferreds. These are these are preferreds in mostly software software companies are but.

Speaker 3: nest themselves between the the debt and the equity. They're relatively low attachment point on a loan to value basis and in companies that we know well and have a lot of conviction in so so we have we have done more of those in the last several quarters that we've done historically and and we see it as an attractive new part of the portfolio.

NES themselves between the but the debt and the equity they're relatively low attachment point on a loan to value basis and and.

And companies that we know well and have a lot of conviction and so so we have we have.

Done more of those in the last several quarters that we than we've done historically and and and we see it as an attractive new part of the portfolio.

Okay understood.

Speaker 8: Okay, understood. I appreciate the comments today.

I appreciate the comments.

Your next question comes from the line of Robert Dodd with Raymond James.

Speaker 6: Your next question comes from the line of Robert Dodd with Raymond James.

Speaker 9: Hi guys and congrats on the quarter and almost a follow-up but from a different direction.

Hi, guys and congrats on the quarter and almost a follow up from a different direction to Ryan's question on the P. Ecosystem. I mean, we have seen a lot of growth we continue to see growth but.

Speaker 9: Ryan's question on the PE ecosystem. I mean, we have seen a lot of growth, we continue to see growth. But at

A relatively large element of that is of course, a big of funds or bigger platforms doing larger and larger funds, which kind of necessitates a larger and larger deals for them. So do you think there's I mean, obviously the private credit market is growing and gaining share doing more we talked about this last quarter you had a larger larger unitranche deal.

Speaker 9: relatively large element of that. It's of course bigger funds or bigger platforms doing larger and larger.

Speaker 9: which kind of necessitates larger and larger deals for them. So do you think there's, I mean, obviously the private credit market is growing, gaining share, doing more, we talked about this last quarter, larger unit trench deals, and those are still expected to grow. But do you think that growth in the PE ecosystem and your target of participating in that growth, is that going to require you to do a larger?

And those are still expected to grow but do you think that growth.

In the Pea ecosystem and your target of participating in that quote is that going to require.

To do a larger and larger share of these.

Speaker 9: extremely large deals with that might be you know the two plus billion dollar.

Extremely large deals with that might be you know the two plus billion dollar.

Speaker 9: unit trenches that may or may not be cover light, et cetera. Is that segment of your book going to grow as you go?

Unit trenches that may or may not be called et cetera is that that segment of your book Gonna grow.

As a percentage of the mix.

It's a it's a great question and I don't know well, we'll see I think that element of the market is going to continue to grow and our participation in it is gonna be a function of whether we think the opportunities are attractive, but I want to make a really important point, which sometimes.

Speaker 3: It's a great question, Bob, and I don't know. We'll see. I think that element of the market is going to continue to grow and our participation in it is going to be a function of whether we think the opportunities are attractive. But I want to make a really important point, which sometimes is a very difficult question.

Speaker 3: sometimes isn't understood. While Gallup Capital's a market leader in these mega unitronches, I think in 2021 calendar 2021, we were leader co-lead in roughly half of them. It's not.

Sometimes isn't understood while gollop capsules.

A market leader in these Mega unit tranches I think in 2021 calendar 2021, we were lead or co lead in in roughly half of them. It's not most of what we do if you. If you were to to do are carving of the G. B D C portfolio by level of EBITDA.

Speaker 3: most of what we do. If you were to do a carving of the GBDC portfolio by level of EBITDA, the vast preponderance of the portfolio in the neighborhood of 80% is in the form of loans to companies with less than $75 million of EBITDA. So we're not

The the vast preponderance of the portfolio and.

And in in the neighborhood of 80% is in the form of loans to companies with less than $75 million of EBITDA. So we're not.

Speaker 3: committed to this, you know, large market strategy as the only source of deal flow for us or even the main source of deal flow for us. It's a part of our business when we see attractive opportunities in that area, we're going to take advantage of them. But if that market got overheated, if that market shrunk in size unexpectedly, it's really not a big problem.

Committed to this large market strategy as.

The only source of deal flow for us or even the main source of deal flow for us. It's a part of our business when we see attractive opportunities in that area, where we're going to take advantage of them.

But if that market got overheated, if that market shrunk in size unexpectedly, it's really not a big problem.

Understood.

Speaker 9: I'm just yeah, to be fair, I mean, I think you gave this last quarter was 15 to 20% of your portfolio last quarter, the question was whether it's going to grow rather than how significant it is today. But I appreciate that, that color. Come on, if I can kind of.

I think you gave us last quarter, it was 15% to 20%.

Of your portfolio last quarter. The question was whether it's going to cause I love how significant it is today, but I appreciate that.

That color one more if I can kind of.

Without asking necessarily about volume I mean in it as we get into 2022 and LIBOR facing how.

Speaker 9: without asking necessarily about volume. I mean, as we get into 2022 and LIBOR's facing out, how has that less about the existing deals in the book and more potentially pipeline, is the transition to SOFA going, SOFA plus a CSA going to as expected or any?

That trends.

Less about the existing deals in the book or more potentially pipeline and you know it is the transition to to sofa going sofa, plus a C. S E going to <unk>.

As expected or any.

Any stickiness to LIBOR still out there that we're still LIBOR deals being done in January from what I heard so I'm just curious.

Speaker 9: any, you know, stickiness to LIBOR still out there. There were still LIBOR deals being done in January from what I heard. So just queuing.

Speaker 3: My sense is that the transition market-wide is going very smoothly. I think an enormous amount of work was done by the industry to prepare for this. And sure, there will be some grindiness given the scope and nature of the transition. There will be some issues that arise. But from my vantage point to date, it's going exceptionally smoothly.

My sense is that the transition market wide is going very smoothly I think an enormous amount of work was done.

I b industry to prepare for this.

And.

Sure there will be some some grinding this given the scope and nature of the of the transition, though there'll be some issues that arise.

But from from my Vantage point to date, it's it's going exceptionally smoothly.

Appreciate that thank you.

Your next question comes from the line of Erie Cheesman as any capital.

Speaker 6: Your next question comes from the line of Ray Teesman of Enfield Capital.

Thank you for taking my question you guys have built a very high.

Speaker 5: Thank you for taking my question. You guys have built a very high quality mousetrap, tremendous stable results over many cycles, high quality credit portfolio. I'm wondering, you started by saying that the big guys are getting bigger and succeeding as the other side of the equation has been reducing the number of people they do business with. And the question is kind of a corollary to Robert's before.

High quality mouse trap, a tremendous stable results over many cycles, our high quality credit for portfolio. I'm wondering you started by saying that the big guys are getting bigger and succeeding as the other.

The other side of the equation has been reducing the number of people. They do business with and the question is kind of a corollary to Roberts before.

Do you think that your platform at 5 billion or a little bit better and the growth path. You're currently on is optimal or or should you be bigger or the risk is if your bigger does that kind of force you to do deals you might not want to do.

Speaker 5: Do you think that your platform at 5 billion or a little bit better and the growth path you're currently on is optimal or should you be bigger or the risk is if you're bigger, does that kind of force you to do deals you might not want to do?

So what's.

Speaker 3: What's the right size for Gallup Capital? It's a really interesting question, one that we wrestle with regularly.

What's the right size for golf Capital's a really interesting question one that we wrestle with regularly again, let me put it in context G. B D. C is one of the vehicles that we manage are at Golub capital. We also manage a series of private funds and several private bdcs overall the across.

Speaker 3: Again, let me put it in context. GBDC is one of the vehicles that we manage at Gallup Capital. We also manage a series of private funds.

Speaker 3: and several private BDCs. Overall across the platform, we manage about $45 billion. So we are one of the largest of the players in this sponsor finance marketplace.

The platform, we manage about $45 billion. So we are one of the largest of the players in this sponsor finance marketplace I think being one of the largest players creates a lot of important advantages we have a broad product suite, we can help.

Speaker 3: I think being one of the largest players creates a lot of important advantages.

Speaker 3: We have a broad product suite. We can help private equity firms with both small companies and large company financings. We have a broad product suite.

Private equity firms with both small companies and large company financings, we have one one of the largest if not the largest investment team over 160 people that enables us to have really deep domain expertise in a wide variety of different industries that makes it easier from a private equity firm standpoint.

Speaker 3: one of the largest, if not the largest, investment team, over 160 people. That enables us to have really deep domain expertise in a wide variety of different industries. That makes it easier from a private equity firm standpoint for us to get up to speed and add value through a diligence process or after diligence in an ownership process.

For us to get up to speed and add value through our diligence process or after diligence in an ownership process. We have market leadership in this one stop or unit tranche product, where we were a pioneer and we've proven time and again that it's really effective way for sponsors who.

Speaker 3: We have market leadership in this one-stop or Unitron product where we were a pioneer and we've proven time and again that it's really effective way for sponsors who want to do buy-in builds to scale up their...

Wanna do buy in builds to skill up there there.

Right hand side of the balance sheet through a series of transactions Ah as they're growing so there are a whole series of things that we can do that in many ways are are a result of or are enabled by our scale. When I made those comments earlier, what I had in mind is that many of the most success.

Speaker 3: right hand side of the balance sheet through a series of transactions as they're growing. So there are a whole series of things that we can do that...

Speaker 3: in many ways are a result of or are enabled by our scale.

Speaker 3: When I made those comments earlier, what I had in mind is that many of the most successful private equity firms who

Full private equity firms who.

It's true Robert is right that that in some cases those firms are doing larger deals. They're also doing more deals they're there they're larger firms and they they they just do more things in a given year. My point is that those really successful winning private equity firms have developed a.

Speaker 3: It's true, Robert Dodd is right, that in some cases those firms are doing larger deals. They're also doing more deals. They're larger firms and they just do more things in a given year. My point is that those really successful winning private equity firms have developed a...

Pattern and the pattern is they have a capital markets group that developed a relationship with a small group of lenders that they go back to over and over again.

Speaker 3: pattern and the pattern is they have a capital markets group that develops a relationship with a small group of lenders that they go back to over and over again.

Speaker 3: And so if you think about what's important to them, it's about partnership orientation, it's about reliability, it's about reputation, it's about track record, but it's also about capabilities. And those capabilities are much more robust.

And and so if you think about what's important to them. It's about partnership orientation. It's about reliability. It's about reputation its about track record, but it's also about capabilities and those capabilities are much more robust if you're like golub capital a large scale player with a broad product suite.

Speaker 3: You're like Golub Capital, a large scale player with a broad product suite and a big underwriting team.

And in it and a big a big underwriting team. So I think that trend is very likely going to continue going into the future I think the private equity industry already has a cohort of a winning firms that are gaining share in that are.

Speaker 3: So I think that trend is very likely going to continue going into the future. I think the private equity industry already...

Speaker 3: a cohort of winning firms that are gaining share and that are...

Doing you know doing really well relative to the industry as a whole I think that's going to continue and I and I think the private debt industry is also going to consolidate around a relatively small group of leading players that.

Speaker 3: doing really well relative to the industry as a whole, I think that's going to continue.

Speaker 3: And I think the private debt industry is also going to consolidate around a relatively small group of leading players.

The leading private equity firms view as strategically important partners. So what does that mean in terms of your question. What does that mean in terms of what is what is our optimal size I think we have room to grow from here.

Speaker 3: the leading private equity firms view as strategically important partners.

Speaker 3: So what does that mean in terms of your question? What does that mean in terms of what is our optimal size? I think we have room to grow from here. And part of that is based on a view that the private equity ecosystem is going to grow.

And part of that is based on a view that the private equity ecosystem is going to grow and.

Speaker 3: You heard me earlier, I think it's going to roughly double over the next three to five years.

You heard me earlier, I think it's going to roughly double over the next three to five years, but I also think we have an opportunity to gain share I think the industry is as I mentioned consolidating and and that consolidation gives it gives us an opportunity not just to grow with the industry, but also to grow a bit faster than the industry now we're not gonna.

Speaker 3: But I also think we have an opportunity to gain share. I think the industry is, as I mentioned, consolidating. And that consolidation gives us an opportunity not just to grow with the industry, but also to grow a bit faster than the industry.

Speaker 3: Now we're not going to do anything super fast. We're we're we're big believers in in methodical growth and planned, careful, disciplined, methodical growth. And that's what we've done over the course of the period that GBDC has been public. And that's going to be our game plan going forward. Thank you.

To do anything Super fast.

We're we're we're big believers in in methodical growth and planned careful disciplined methodical growth and that's what we've done over the course of the period. The G. P. D. C has been public and and that's going to be our game plan going forward. Thank.

Thank you for a very robust answer.

There are no further questions at this time I would like to turn the call back over to the presenters.

Speaker 6: There are no further questions at this time. I would like to turn the call back over to the presenters.

Great. Thank you everyone for joining us today are very much appreciate your time and attention and as always if you have questions.

Speaker 3: Great. Thank you everyone for joining us today. I very much appreciate your time and attention. And as always, if you have questions, feel free to reach out to us. Otherwise, we look forward to talking again next quarter.

Feel free to reach out to us otherwise, we look forward to talking again next quarter.

This concludes today's conference call you may now disconnect.

Speaker 6: This concludes this conference call. You may now disconnect.

Speaker 10: be what's next!

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