Q4 2023 Golub Capital BDC Inc Earnings Call

Hello, everyone and welcome to the G. P. D C S earnings call for the fiscal year and quarter ended September 30th 2023, before we begin I'd like to take a moment to remind our listeners that remarks made during this call may contain forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995.

Statements other than statements of historical facts made during this call may constitute forward looking statements and are not guarantees of future performance or results and involve a number of risks and uncertainties.

Actual results may differ materially from those in the forward looking statements as a result of a number of factors, including those described from time to time in G. P. D. C is our SEC filings.

For materials, we intend to refer to on today's earnings call. Please visit the Investor resources tab on the homepage of our website, which is www dot Golub capital BDC Dot com and click on the events presentations like our earnings release is also available on our website in the Investor resources section.

As a reminder, this call is being recorded with that I'm pleased to turn the call over to David Golub, Chief Executive Officer of G. B D C.

Hello, everybody and thanks for joining us today I'm joined today by Chris Erickson, Our Chief Financial Officer, and by Matt <unk>, Our Chief operating officer.

For those of you who are new to G. B D. C. Let me start with a quick recap on our investment strategy. Our investment strategy is and since inception has been to focus on providing first lien senior secured loans to healthy resilient middle market companies generally companies that are backed by strong partnership oriented private equity sponsors.

Yesterday, we issued our earnings press release for the quarter and fiscal year ended September 30, and we posted an earnings presentation on our website will.

We will be referring to this presentation during today's call.

I'm going to start as usual with some headlines and I'm going to then lead into a summary of performance for the quarter, then Matt and Chris are going to go through financial results for the quarter in more detail and finally, I'll wrap up with our outlook for the coming period after that we'll take some questions.

The headline is the G. P. D. C had an excellent fiscal fourth quarter, you got a glimpse of this in the preliminary fiscal Q4 results that <unk> announced on October 17th Let me touch on some of the highlights adjusted net investment income per share was <unk> 57.

Our record also of note. This represented an adjusted NII return on average equity of 13, 3%.

Adjusted earnings per share came to <unk> 60.

This corresponds to an adjusted return on equity of 16%.

Credit results were very strong we had net realized and unrealized gains for the quarter of 10 cents per share. We saw a decrease in non accruals and we saw stable internal performance ratings.

These factors all together drove a 19% increase quarter over quarter and NAV per share a sequential increase of one 3%, bringing NAV per share to $15 <unk> as of September 30.

<unk> excellent results for the quarter capped off a very strong fiscal 2023 over the year. We saw a $1 73 of adjusted NII per share of $1 52 of adjusted earnings per share of $1 40 per share of distributions paid you'll recall that <unk> increased our base quarterly distribution by.

Seven cents per share during the fiscal year and introduced a new variable supplemental distribution framework. We saw strong credit results I view fiscal 2023 is one of <unk> best years ever from a credit perspective.

<unk> investment manager during the year permanently reduced its base management fee rate from $1, 375% to 1.0% per annum that was effective July one.

In short we executed on our investment strategy, we leveraged the competitive advantages of the Golub capital platform and we raised the bar for shareholders.

With that let me hand, the floor to Matt to walk through our results in more detail.

Thanks, David I'm going to start on slide four.

And as David just previewed G. Bdcs earnings for the quarter ended September 30 were record setting.

NII per share was 55% to 13% increase from the prior quarter's 44 cents per share or adjusted.

This corresponds to an adjusted NII ROE a 13, 3%.

Net income per share increased to 60.

<unk> 43 per share in the prior quarter and represented an adjusted ROE of 16%.

<unk> record profitability was driven by three key factors first and foremost Brian.

<unk> had a net realized and unrealized gain on investments of 10 cents per share. This gain was due to both strong credit fundamentals and tightening credit spreads.

The second key driver was continued higher base rates.

Finally fiscal Q4 benefited from the previously announced reduction of <unk> base management fee rate to 1%.

The portfolio of balance sheet update generally reflects the continuation of trends from the June 32023 quarter net funds declined by $8 four lines.

Well, we saw a modest uptick in deal activity in calendar Q3 relative to the first half of the year the pace of new investments remained muted.

This is perfectly fine for T. Vec its model doesn't depend on fee income from new originations or repayments to drive strong returns.

The overall credit performance of DVD sees investment portfolio remained strong.

Non accruals continued to decrease.

Non accruals as a percentage of total debt investments at cost decreased to one 6% from one 8% at 632023.

As a percentage of total debt investments at fair value non accrual decreased to one 2% from one 5% at 630 23.

To put this in context non accruals are now back where they were in March and June of 2020.

Turning to internal performance ratings. These also remains strong.

Investments in rating categories. One two represented 30 basis points of the total portfolio at fair value.

This is the lowest level of it wasn't too since March 2018.

NAV per share increased by 130 basis points on a sequential basis to $15 <unk>.

<unk> NAV per share is now more than 200 basis points higher start of the year, even as the BDC delivered higher distributions to shareholders. During this period.

Higher profitability and higher now we obviously I think this is a good topic.

And finally net leverage declined modestly to $1 two one times.

Turning now to distributions.

Board declared a regular quarterly distribution of <unk> 37 per share payable on December 29, 2023 to shareholders of record as of December 2023.

Youll recall that the board increased <unk> based distribution from <unk> 33 per share of $2 37 per share in the quarter ended 630.

Adjusted NII per share significantly exceeded the company's regular quarterly distributions, resulting in a distribution coverage ratio of 135%.

Moreover, based on the new variable supplemental distribution framework, we discussed last quarter.

<unk> also authorized a supplemental distribution of <unk> <unk> per share payable on December 15, 2023 to shareholders of record as of December one 2023.

As a reminder goal the variable supplemental distribution framework is to give shareholders a clear line of sight into how we plan to balance the likelihood that <unk> will continue to generate excess income all else equal on the one hand with our focus on NAV growth and resilience on the other.

You can find additional detail about the variable supplemental distribution framework on page 23 of the earnings presentation.

In total the board approved 44 per share of distributions in respect of fiscal Q4 performance.

This corresponds to an annualized dividend yield of approximately 11, 7% based on <unk> NAV per share as of September 32020.

I'm going to turn it over to Chris to provide more detail on our results.

Thanks, Matt.

Turning to slide seven you can see how the key earnings drivers, Matt just described translated into solid growth in NAV per share.

The combination of high short term interest rates attractive credit spreads and Jimmy six locked in low cost leverage profile drove record adjusted NII per share of <unk> 50.

Ah level meaningfully higher than dividends paid out.

In addition, the reversal of prior unrealized depreciation on investments contributed to <unk> 10 per share, while adjusted net realized and unrealized gains.

Together these results drove a net asset value per share increased to $15 <unk>.

Up 19 per share from the prior quarter.

Let's now go through the details of <unk> financial results for the quarter ended September 32023.

We've already covered the key points on slide nine so we will start on slide 10, which summarizes our origination activity for the quarter net.

Net funds growth quarter over quarter was modestly negative as fundings of new investment commitments delayed draw term loan fundings and positive fair value changes of existing investments were outpaced by exits and sales of investments.

Market wide deal activity has been slow since last year and remained slow in the September 30 quarter.

While we saw a modest uptick in deal activity in calendar Q3, and in our pipeline for calendar Q4.

Our sense is that a significant rebound is more likely to be a 2024 events.

Amid this relatively slow new deal environment Gallo capital has remained highly selective closing approximately one 4% of deals reviewed calendar year to date.

That's meaningfully lower than our typical 2% to 4% selectivity rate and reflects our focus on quality over quantity.

The asset mix of new investments shown in the middle of the slide remained predominantly one stop loans.

Looking at the bottom of the slide the weighted average rate on new investments decreased by 20 basis points this quarter.

The decrease was primarily due to tighter spreads on new investments, which tightened by 50 basis points sequentially.

This is generally consistent with what we are seeing in the market.

Spreads on new transactions have tightened since earlier in the year, but they're still relatively attractive, especially in the context of other deal terms like EBITDA definitions equity leakage and leverage still remaining more lender friendly.

Slide 11 shows <unk> overall portfolio mix as you can see the portfolio breakdown by investment type remained consistent quarter over quarter with one stop loans continuing to represent around 85% of the portfolio at fair value.

Slide 12 shows that <unk> portfolio remained highly diversified by obligor with an average investment size of approximately 30 basis points.

We are big believers in moderating asymmetric credit risks through position size, which we believe has served <unk> well in previous credit cycles, and we will continue to be important in the context of future credit cycles.

As of September 32023, 94% of our investment portfolio consisted of first lien senior secured floating rate loans to borrowers across a diversified range of what we believe to be resilient industries.

The economic analysis on slide 13 continues to showcase the asset sensitive nature of <unk> balance sheet and in an environment of rising interest rates.

Let's walk through how to interpret the chart.

Start with the dark Blue line, which is our investment income yield.

As a reminder, investment income yield includes the amortization of fees and discounts.

<unk> investment income yields increased by 60 basis points, primarily from rising interest rates and recognizing previously deferred interest from one former non accrual investment returning to accrual status during the quarter.

By contrast, our cost of debt the Teal line only increased 10 basis points.

As a result, our weighted average net investment spread the gold line increased by 50 basis points over the prior quarter.

With that I will turn the floor back over to Matt.

Thanks, Chris let's move on to slides 14, and 15 and take a closer look at credit quality metrics.

The overall message is that credit trends remain solid and stable on slide 14, you can see the non accruals decreased by 30 basis points sequentially to one 2% of total debt investments at fair value.

We returned one investment to accrual status, which was offset by the addition of one investments on nonaccrual status in fiscal Q4.

Slide 15 shows the trend in internal performance ratings on GE Bdcs investments.

As of September 32023 around 85% of <unk> investments were rated four or five which means they are performing as expected or better than expected at underwriting.

The proportion of loans rated one two which are the loans. We believe are most likely to see significant credit impairment.

Main very low at 30 basis points of the portfolio at fair value.

The proportion of loans rated three increased modestly to 14, 6% Youll recall in our prior conversations that category three loans were performing below expectations or expected to perform below expectations.

When alone migrates to category, three and automatically triggers heightened scrutiny and oversight. It doesn't mean that we necessarily expected default will loss gear.

Given today's uncertain environment, we think it's prudent to be proactive about moving products down to category with.

We'd rather have false positives than miss opportunities for early intervention.

This idea of erring on the side of enhanced scrutiny was also the motivation for the portfolio resiliency work that we first described in Q4 2002.

Youll recall that this work was designed to screen, our middle market portfolio for potential vulnerability on a number of dimensions for example interest rates inflation quality earnings.

And to focus our resources on shoring up credits that appeared more vulnerable.

We didn't see meaningful surprises in our recent quarterly portfolio Resiliency review and haven't seen meaningful new problem credits year to date.

As we've discussed in prior quarters, we don't believe that backward looking average credit metrics are particularly useful for identifying fraud issues.

We believe our approach of evaluating risks obligor by obligor on multiple forward looking dimensions is a more rigorous foundation for managing the portfolio, respectively as opposed to review or interest coverage ratios and historical financial results.

That said in the spirit of providing some additional context around our portfolio and based on the information from portfolio companies available to US as of September 32023, we did want to provide some specific portfolio level credit statistics Robert.

Let's start with interest coverage.

The weighted average interest coverage ratio four gvhd borrowers is one nine times.

And eight 3% of GBT seed portfolio company investments at fair value of our portfolio interest coverage below one times.

We also wanted to share how interest coverage might change in the context of even higher base rates.

When we adjust for potential higher rates 50 basis points above current base rates again based on information currently available to us and as of September 32023, we would expect the proportion of our portfolio at fair value with sub one times interest coverage to grow only to 10%.

We attribute the stability to our focus on lending to resilient borrowers in resilient industries.

Finally, we wanted to share underlying portfolio.

The weighted average loan to value for the portfolio was 46% based upon the fair value of the portfolio as of September 32020.

As a reminder, these credit metrics are based on financial information received from and that are the responsibility of our portfolio companies. It is often provided on a lag as compared to the periods presented.

Okay, we're going to skip past slide 16 through 19 decides to have more detail on <unk> financial statements dividend history and other key metrics.

I'll wrap up this section by reviewing <unk> liquidity and investment capacity on slide 20.

Let's focus on the key takeaways on slide 20.

Our weighted average cost of debt for the quarter ended September 32023 was five 2%, which we believe is among the lowest in our peer group.

46% of our debt funding is in the form of unsecured notes the majority of which have maturities in 2006 and <unk> 47.

We issued these fixed rate notes with a weighted average coupon of two 7% and did not swap any of them out for floating rate exposure.

We ended the quarter with almost $875 million of liquidity from unrestricted cash undrawn commitments on our meaningfully over collateralized book rollover.

And the unused unsecured revolver provided by our advisors.

<unk> robust liquidity represents four six times its current unfunded commitments and almost two times the amount of our unsecured notes due in April of 2024.

The diversification flexibility and low cost of GBP six funding structure.

He is an important element that underpins our three investment grade credit ratings from Fitch Moodys and S&P.

I would highlight on the ratings from Moodys upgraded gcc's outlook to positive in early October as.

As a reminder, Fitch also has two bdcs outlook is positive we think this puts <unk> in select company in this regard.

Now I'll hand, it back over to David for closing remarks and Q&A.

Thanks, Matt so to sum up <unk> had an excellent quarter and an excellent fiscal year ended September 30.

Higher rates helped our lower base management fee also helped but the key driver was strong credit results.

And do you maybe see strong credit results didn't just happen. They were the result of Golub capital's processes working again.

Over the last 13 years that <unk> has been a public company. It's credit results have been best in class in fiscal 'twenty three was no different our origination team found us opportunities to lend to resilient businesses in resilient industries backed by top quality sponsors our underwriting teams. They carefully selected borrowers that were likely to pay us back.

Across a wide range of different scenarios developed capital selectivity ratio of just one 4% on a year to date basis. It shows the deal teams are prioritizing quality over quantity.

And our portfolio monitoring it always emphasize as early intervention after careful name by name portfolio reviews.

Let me wrap up by talking about our outlook.

Overall I'm cautiously optimistic.

To talk some more about both the reason for the optimism and the reason for the cautiousness.

Talk about the optimism for the economy.

<unk> continues to surprise to the upside that's a positive.

We're also seeing some improvement in middle market M&A activity. That's also a positive.

The competitive position of Golub capital's really never been stronger that's such a third positive.

From a credit perspective, there are also some good signs as Matt reported the vast preponderance of the portfolio is performing well and while high rates at a higher fixed charge burden for borrowers, but the flip side is extra interest income for GBC and this gives us a greater margin of safety.

Finally, we now have over a year's worth of data about how our portfolio companies are handling higher rates and so we think we have a good handle on where vulnerabilities are most likely to emerge and where we see that we're on it.

Okay. So that's the reason for optimism.

Now about the cautiousness why the cautiousness.

Just because I don't know.

Trust anybody's macro predictions these days.

Consensus was wrong in thinking we'd see a recession. This year. It was also wrong about the post pandemic boom was wrong about inflation being transitory and then it was wrong about inflation being stubborn it's been wrong a lot lately.

By implication I think we need to be very humble. These days when we make predictions Yogi Berra had it right. When he said predicting things as hard, especially about the future I think that's especially true today.

Having said this the very unpredictability of the environment that we're in it leads me to think that investors today on a particularly value resilience investments.

By resilient investments I mean investments that will do well across a range of different macro scenarios I.

I think <unk> is exactly this kind of resilient investments.

Our resiliency is partially attributable to the detailed company by company Resiliency analysis that we've previously discussed which we now run on a quarterly basis. We have also stepped up our engagement with sponsors and management teams, where we see potential for issues arising.

From an earnings power perspective, <unk> asset sensitive balance sheet positions the company very well for a high interest rate environment like the one we're in.

<unk>, new lower base management fee rate permanently raises <unk> ROE profile in any interest rate environment and GBT six new variable supplemental distribution policy paves the way for more of this earnings power to be distributed to shareholders when prudent to do so.

Now don't mistake me for some kind of pollyanna, I think optimism and caution they actually go hand in hand in uncertain environments like the one we're in right now but.

But <unk> always done well by staying laser focused on credit and by continually raising the bar for shareholders. That's what we're doing now that's what we did in 2023 and Thats, how we plan to navigate the coming period.

With that let me open the floor for questions.

Thank you if you have a question. It is star one on your telephone keypad to withdraw your question simply press Star one again.

Your first question comes from the line of Finian O'shea with Wells Fargo. Your line is open.

Hey, everyone. Good morning.

David I appreciate some of the macro commentary at the end.

Just wanted to drill into that a bit it sounds like there are green shoots in M&A, which should be good for activity, but can you.

Juxtapose that against the.

Meaningful direct lending and the flows we're seeing in the non the non traded perpetual.

Beat each BDC channel.

How is that impacting the terms and spreads we're seeing today and do you think there is.

Enough M&A to go around in light of this very powerful fundraising. Thank you.

Thanks fin so.

It's interesting we are seeing some countervailing forces right now.

On the one hand, we.

We started off say summer of 'twenty two.

Particularly lender friendly.

Under friendly environment. The BSL market was was dislocated as a consequence of the rise in interest rates and the swoon in equity and debt markets generally it wasn't.

Robust ability for borrowers to get new deals done in the broadly syndicated market.

And consequently, there was a lot of demand in private market and private credit markets, even though M&A was relatively slow that meant there was.

There was there was a robust pool of deals for our Austin for other for other private credit players to choose from.

In the last I would say.

Six weeks, we've seen a pretty significant increase in the level of M&A activity and I think from an origination standpoint, Q4 will be a markedly higher quarter for us and for the industry than the last several quarters have been.

Having said that to your point, we've seen a lot of fundraising in direct lending strategies aimed at very large deals.

Aimed at this BSL replacement market.

Play in that market, but thats.

I don't know its about 20% of what we do whereas we have a whole series of competitors, where it's basically a 100% of what they do.

We've seen some very significant spread compression and shift toward more borrower friendly.

Terms.

And activity in that space.

And thats been a trend for months now, but I do think that it's accelerated.

In the last in the last six weeks or so.

For us this is not a great problem because our focus is on the traditional middle market.

I do think youre going to start to see.

Indonesia of spread compression in next quarter's earnings reports from the players who focus on the larger market.

That's helpful. Thank you.

Also.

Appreciate the color you gave on interest coverage.

For the the names that have.

Tighter interest coverage I am sure Thats sort of a spectrum.

To what extent are you seeing sponsors.

Put money in.

If not very much.

Do you see 24 2024 as sort of a.

Make or break timeframe in the.

The need for the sponsor to come up with money in.

Capital as these companies.

That is if interest rates.

Remain high just any color on that topic. Thank you.

So.

The question is what about companies that are tightened on interest coverage or fixed charge coverage how are they managing that in EMEA answers, we're seeing a number of different approaches we're absolutely seeing sponsors step up and put incremental equity in.

A large number of cases.

We're also seeing companies.

Undertake other strategies in order to create liquidity, sometimes thats the creation of our holdco notes or or a new pik preferred issuance.

Sometimes it's also growth.

Growth.

John a good job for many of our borrowers.

Creating more free cash flow generation that's enabled.

But.

The former lead tight ratios to look better.

So we're seeing different companies approach. This in a variety of different ways. I don't think there is one clear patterns of point to.

I do think that private equity sponsors are in general being pretty constructive.

<unk>.

In addressing.

Liquidity needs and their portfolio companies.

Awesome. Thanks, so much.

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

Hi, guys, congratulations on the quarter and our credit quality. So two questions one kind of a follow on to <unk>.

And David your comments, there that you've seen some spread compression.

In the upper end of the market and also the terms are shifting to a little bit more.

Follow a friendly at that end of the market and I think it was Chris or making that in my prepared remarks.

You've seen this.

Overall spread compression, but the EBITDA definitions and total leverage was still favorable overall and so I would tend to imply that you hadn't seen that shifting the bulk of the 80% of the other stuff.

Now.

Confident are you that the terms, we'll continue to diverge between the top end of the market in the more core middle market.

As we go into <unk>.

2024, or do you think thats going to converge in 2024, even in the core middle market is going to going to shift to a much more.

Paul will walk friendly set of structure hopefully that question Scott.

Yes.

Here's how I would describe it Robert.

Always think of it as a pendulum, there's always a swinging between more borrower friendly and more lender friendly conditions.

And the swing tends to happen first in the broadly syndicated market today that market is not terribly active.

So the first place we're really seeing it is in.

<unk>.

The BSO replacement market the larger end.

The direct lending market.

And to <unk> point, that's the place that has seen the most for most inflows those capital inflows through these non traded BDC structures.

Yes.

I don't think the middle market and the <unk>.

Larger market are disconnected I think.

Things tend to happen in the middle market with a lag and do a more modulator degree and I think thats. The pattern, we will see again in 2024.

Got it. Thank you and then the second one unrelated to that.

The unsecured notes you didn't have an April 24 maturity I mean, you've got plenty of liquidity on the revolver.

If you wanted to but can you give us the thought.

That is with a positive outlook I presume you don't want your unsecured mix too.

Shrink too much positive outlook regulating agencies that is so can you give us some thoughts.

Obviously borrowing costs are higher today on fixed rate, but would you be looking to.

To swap or anything like that on that if you were to refinance that.

So all good questions that were actively looking at I think your statement is correct that over time, we want to.

Maintaining unsecured.

Meaningful.

The right hand side of the <unk> balance sheet.

And we're going to always be looking at when when's, the right time to issue in connection with issuing whether the right. The right decision is to swap into floating or not I think these are all under active consideration.

Thank you.

Your next question comes from the line of Ryan Lynch with <unk>. Your line is open.

Hey, good morning.

My first question I had was just related to credit quality when I look at your overall credit statistics or non accruals loss in your portfolio. They have been really really good on a bottom line standpoint.

But I'm just curious when I look at your.

Youre kind of portfolio.

Monitoring and rating scale, there's been a pretty meaningful uptick maybe sort of a doubling of those rated three credits over the last year.

Those are credits that are significantly underperforming, but there is maybe some some worrisome there. So how should investors think about overall credit has been fantastic thus far but those rated three credits that have maybe doubled over the last year, how should investors think about that.

So it's a great question Ryan.

It's one that's a little challenging for us it's challenging because we are.

Naturally conservative so we.

And Matt talked about this to a degree.

We have an internal.

Modus operandi.

Downgrading credits to three may be earlier than some of our peers and we do that because it's part of our process. It's part of what what happens after that is it it triggers a higher level of monitoring and shrink earnings.

Our level of involvement with management teams and with sponsors.

Triggers a whole series of activities that we think are integral to our sustaining that long term favorable track record that you just alluded to.

The place, where we see the greatest correlation with future credit losses as in category, one and two credits.

You didn't mention it but I will it's actually fallen over the course of the last year. Its gone from one 3% up <unk>, 3% Thats, an exceptionally low number so I think you've got to look at the whole picture.

Anybody who says that debt.

The increase in interest rates that we've seen is irrelevant from a credit perspective doesn't know mask.

<unk> does make.

Interest coverage fixed charge coverage much harder at todays interest levels than they were in 2021, all things being equal and our rating system reflects this our approach to it.

Credit decision, making and credit monitoring reflects this.

Okay.

As helpful background on all of that.

The other question I had was.

You mentioned <unk>.

Spreads sort of compressing and maybe some of this is more focused on some of the upper middle market, but certainly spreads compressing a little bit maybe some borrower friendly terms more in the upper middle market, we'll see if that translates to them.

Kind of a core middle market, but my question is kind of why why is that occurring just because if you go from a high level and thats not something thats.

On the commentary you've heard from others as well, but I'm just curious is.

There's been a lot of capital raised and it's been I feel like pretty consistent throughout 2023 as you know from from from.

Private credit looking to deploy but now that it seems that there is starting to become some increases in <unk>.

Deal flow and deal activity that you see now there's a pretty big supply potentially coming out of a marketplace of guys looking for.

Additional credit out there and so it seems like that would actually better balance the supply and demand.

Issue, but it seems that that now that there is actually an increase in deal flow and activity. It seems that thats actually becoming more borrower friendly, which seems a little bit counterintuitive as more people are coming to the market looking for credit. It seems like that would maybe work a little bit more in the favor of of the lender side. So I'd love to just share.

Hear you explain what.

What youre seeing and why.

I don't have an answer for you on that I think you're correct in your description of what we're seeing.

<unk>.

I have a better explanation than you do on the why.

Dynamics like this tend to be a function of supply and demand. So.

I think we'll get a better sense for for those those dynamics over the course of the coming months.

I think.

I think it may get worse.

From a from a spread standpoint.

Wouldn't shock.

Got it.

Okay.

And just the last question I had was.

I know you and others have talked about kind of seeing a little bit of green shoots in maybe a pickup in activity.

In order for that activity you were talking about maybe a little bit of a rebound now in the end of the year and then potentially a bigger pickup in activity in the 2024 I'm just curious.

In order for that deal activity to actually cross the finish line and come to fruition.

Do you get the sense that market conditions, just have to sort of stay the same and stabilize right around here or does there anything have to change like a cut in base rates are much stronger sort of a growing economy or do you think if we just kind of stabilize right around these sort of levels from an economic Stan.

Point do you think that Youll continue to see a big uptick in deals crossing the finish line in 2024.

I think the.

Things that reduce uncertainty.

Withheld.

So by way of example, if we get more data, suggesting that the economy is continuing to grow that inflation is continuing to grind lower.

That would be helpful. If.

If we got internationally some some good news in respect of the.

The two wars that are underway that would be helpful.

I think the biggest obstacle right now too.

Seeing a significant rebound of significant and sustained rebound in deal activity is the level of uncertainty out there.

Having said that I think.

Had a fair bit of time go by since.

June 'twenty two when the M&A.

M&A environment took a sudden slowdown in the context of of higher rates and thus the swoons in both equity and credit markets and I think thats helped a lot and recalibrating valuation.

Expectations on the part of both buyers and sellers.

There is still in many cases, a gap, but I think that gap has narrowed and I think continued reduction in uncertainty was helping and further narrowing.

Okay.

Understood. That's all for me today I appreciate the time.

Thanks, Brian.

There are no further questions at this time I will turn the call back to Mr. David <unk> for closing remarks.

Hello, and thank you all for giving us a bit of your time today I Hope you found this call helpful.

Look forward to talking to you next quarter and as always if you have any questions in the interim please feel free to reach out.

Right, Thanks getting everybody.

This concludes today's conference call. We thank you for joining you may now disconnect your lines.

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