Q2 2024 Goldman Sachs BDC Inc Earnings Call

August 9, 2024

Good morning. This is Austin near a member of the Investor Relations team for Goldman Sachs BDC, Inc, and I would like to welcome everyone to the Goldman Sachs BDC, Inc. Second quarter 2024 earnings Conference call. Please note that all participants will be in listen only mode until the end of the call and we will open up the line for quest.

Austin Neri: Good morning. This is Austin Neri, a member of the investor relations team for Goldman Sachs BDC, Inc., and I would like to welcome everyone to the Goldman Sachs BDC second quarter 2024 earnings conference call. Please note that all participants will be in listen-only mode until the end of the call, when we will open up the line for questions. Before we begin today's call, I would like to remind our listeners that today's remarks may include forward-looking statements.

Austin Neri: This is Austin Neri and a member of the Investor Relations team for Goldman Sachs BDC, Inc. And I would like to welcome everyone to the Goldman Sachs BDC, Inc. Second quarter, 2024 earnings conference call. Please note that all participants will be in listen-only mode until the end of the call, when we will open up the line for questions.

Speaker Change: Before we begin today's call I would like to remind our listeners that today's remarks may include forward looking statements. These statements represent the company's belief regarding future events that by their nature are uncertain and outside of the company's control the company's actual results and financial condition may differ possibly materially from what is indicated in his forward.

Austin Neri: Before we begin today's call, I would like to remind our listeners that today's remarks may include four looking statements. These statements represent the company's belief regarding future events that, by their nature, are uncertain and outside of the company's control. The company's actual results and financial condition may differ possibly materially from what is indicated in this four looking statements as a result of a number of factors, including those described from time to time in the company's SEC filings.

Austin Neri: These statements represent the company's belief regarding future events that, by their nature, are uncertain and outside of the company's control. The company's actual results and financial condition may differ, possibly materially, from what is indicated in those forward-looking statements as a result of a number of factors, including those described from time to time in the company's SEC filings.

Speaker Change: Looking statements as a result of a number of factors, including those described from time to time in the company's SEC filings.

Austin Neri: This audio cast is copyrighted material of Goldman Sachs BDC, Inc. and may not be duplicated, reproduced, or rebroadcast without our consent.

Austin Neri: Yesterday, after the market closed, the company issued an earnings press release and posted a supplemental earnings presentation, both of which can be found on the homepage of our website at www.goldmansachsbdc.com, under the investor resources section, and which include reconciliations of non-GAAP measures to the most directly comparable GAAP measures. These documents should be reviewed in conjunction with the company's quarterly report on Form 10-Q filed yesterday with the SEC. This conference call is being recorded today, Friday, August 9th, 2024, for replay purposes. I'll now turn the call over to Alex Chi, Co-Chief Executive Officer of Goldman Sachs BDC, Inc.

Speaker Change: Audiocast is copyrighted material of Goldman Sachs, BDC, Inc, and may not be duplicated reproduced or rebroadcast without our consent yes.

Austin Neri: Yesterday, after the market closed, the company issued an earnings press release and posted a supplemental earnings presentation, both of which can be found on the homepage of our website at www.g Goldman Sachs BDC.com, under the Investor Resources section, and which include the reconciliation of non-GAAP measures to the most directly comparable GAAP measures. These documents should be reviewed in conjunction with the company's quarterly report on Form 10-Q filed yesterday with the SEC.

Speaker Change: Yesterday after the market close the company issued an earnings press release and posted a supplemental earnings presentation, both of which can be found on the homepage of our website at www Dot Goldman Sachs BDC Dot com under the Investor Resources section. How much include reconciliations of non-GAAP measures to the most directly comparable.

Speaker Change: GAAP measures.

Speaker Change: These documents should be reviewed in conjunction with the company's quarterly report on Form 10-Q filed yesterday with the SEC.

Austin Neri: This conference call is being recorded today, Friday, August 9, 2024, for replay purposes.

Speaker Change: This conference call is being recorded today Friday August 9th 'twenty 'twenty four for replay purposes, I will now I'll turn the call over to Alex Chi Co Chief Executive Officer of Goldman Sachs BDC, Inc.

Austin Neri: I'll now turn the caller over to Alex G. Co-Chief Executive Officer of Goldman Sachs BDC, Inc.

Alex Chi: Thank you, Austin. Good morning, everyone. And thank you for joining us for our second quarter 2024 earnings conference call. I'm here today with David Miller, our Co-Chief Executive Officer, Tucker Greene, our Chief Operating Officer, and Stan Matuszewski, our Chief Financial Officer. I'll begin the call by providing an overview of our second quarter results and then discussing the current market environment. I'll then turn the call over to Tucker to describe our portfolio activity and performance before handing it off to Stan to take us through our financial results. And then, finally, we'll open the line for Q&A.

Alex G.: Thank you, Austin. Good morning, everyone, and thank you for joining us for our second quarter 2024 earnings conference call. I'm here today with David Miller, our Co-Chief Executive Officer, Tucker Green, our Chief Operating Officer, and Stan Medishevsky, our Chief Financial Officer. I'll begin the call by providing an overview of our second quarter results, and then discuss the current market environment. I'll then turn the call over to Tucker to describe, with portfolio activity and performance, before handing it off to Stan to take us through our financial results, and then finally, we'll open the line for Q&A.

Alex Chi: Thank you Austin.

Speaker Change: Morning, everyone and thank you for joining us for our second quarter 2024 earnings Conference call.

Speaker Change: I'm here today with David Miller, our co Chief Executive Officer, Tucker Green, our Chief operating officer, and standby Schatsky, our Chief Financial Officer.

Speaker Change: I'll begin the call by providing an overview of our second quarter results and then discuss the current market environment.

Speaker Change: I'll, then turn the call over to Tucker to describe our portfolio activity and performance before handing it off to Stan to take us through our financial results and then finally, we'll open the line for Q&A.

Alex G.: With that, let's get to our second quarter results. Our net investment income per share for the quarter was 59 cents, up 7.3% from the previous quarter. Net asset value per share was $13.67, a decrease of approximately 6%. Our net investment income, again, exceeded our quarterly dividend, but the excess was offset by net realized and unrealized losses during the quarter, which led to the decrease in NAF. More than 70% of the unrealized losses in the quarter were related to markdowns in three investments within the portfolio. Lithium Technologies, Pluralsight and Zapari. Both Lithium and Pluralsight replaced a non-CROL status in the quarter.

Speaker Change: With that let's get to our second quarter results.

Alex Chi: With that, let's get to our second quarter results. Our net investment income per share for the quarter was $0.59, up 7.3% from the previous quarter. The net asset value per share was $13.67, a decrease of approximately 6%. Our net investment income, again, exceeded our quarterly dividend, but the excess was offset by net realized and unrealized losses during the quarter, which led to the decrease in NAF. More than 70% of the unrealized losses in the quarter were related to markdowns in three investments within the portfolio—Lithium Technologies, Pluralsight, and Zipari. Both Lithium and Pluralsight were placed on nonaccrual status in the quarter.

Stan: Net investment income per share for the quarter with 59 cents up seven 3% from the previous quarter.

Stan: Asset value per share was $13 67.

Speaker Change: A decrease of approximately 6%.

Speaker Change: Our net investment income again exceeded our quarterly dividend, but the excess was offset by net realized and unrealized losses during the quarter, which led to the decrease in NAV.

Speaker Change: More than 70% of the unrealized losses in the quarter were related to markdowns and three investments within the portfolio lithium technologies.

Speaker Change: Laurel site and as a party.

Speaker Change: Both lithium and cross site placed on non accrual status in the quarter.

Alex G.: As it relates to Pluralsight, we're currently working with the other lenders towards an orderly restructuring, which we believe will contribute towards maximizing recovery for our investors. We recognize that lithium, Pluralsight and Zapari are recurring revenue software loans. As it relates to how we invest in recurring revenue loans following the integration of GSBD into the broader Goldman Sachs Private Credit platform, we remain very selected. Focusing on borrowers who we believe are highly profitable, scaled, and display strong growth with best-in-class technology and software products that are mission-critical for their customers, regardless of the economic environment. When evaluating new software investments on the current platform, we leverage both our investment teams' experience, where we have professionals dedicated to the software sector, as well as the broader engineering expertise of Goldman Sachs, where we have thousands of software engineers who evaluate and implement best-in-class technology every day.

Alex Chi: As it relates to Pluralsight, we're currently working with the other lenders towards an orderly restructuring which we believe will contribute towards maximizing recovery for our investors. We recognize that Lithium, Fluorocyte, and Zapari are recurring revenue software loans. As it relates to how we invest in recurring revenue loans following the integration of GSBD into the broader Goldman Sachs private credit platform, we remain very selective, focusing on borrowers who we believe are highly profitable, scaled, and display strong growth with best-in-class technology and software products that are mission critical for their customers, regardless of the economic environment.

Speaker Change: As it relates to PURA site. We're currently working with the other lenders towards an orderly restructuring, which we believe will contribute towards maximizing recovery for our investors.

Speaker Change: We recognized that lithium Florida site in Safari, a recurring revenue software allowance.

Speaker Change: As it relates to how we invest in recurring revenue loans. Following the integration of G. S. P D into the broader Goldman Sachs private credit platform.

Speaker Change: We remain very selective.

Speaker Change: Casino and borrowers who we believe are highly profitable scaled and display strong growth with best in class technology sulfur products that are mission critical for their customers regardless of the economic environment.

Speaker Change: When evaluating new software and investments on the credit platform, we leverage both our investment team's experience, where we have professionals dedicated to the software sector as well as the broader engineering expertise a Goldman Sachs, where we have thousands of software engineers, who evaluate and implement best in class technology every day.

Alex Chi: When evaluating new software investments on the current platform, we leverage both our investment team's experience, where we have professionals dedicated to the software sector, as well as the broader engineering expertise of Goldman Sachs, where we have thousands of software engineers who evaluate and implement best-in-class technology every day. Finally, it is worth noting again that we have seasoned professionals dedicated to restructurings, with the resources and expertise required to work with our investment teams to handle underperforming names.

Alex G.: Finally, it is worth knowing again that we have seasoned professionals dedicated towards restructurings, with the resources and expertise required to work with our investment teams to handle underperforming names. We believe this assists with maximizing recoveries and contributes to our low annualized loss ratios across the Goldman Sachs Private Credit platform that's been investing for nearly three decades. Moving forward, we aim to continue to recycle capital as we receive repayments and bolster the portfolio with compelling new originations.

Speaker Change: Finally, it is worth noting again that we have seasoned professionals dedicated towards restructurings, but the resources and expertise required to work with our investment teams to handle underperforming games.

Alex Chi: We believe this assists with maximizing recoveries and contributes to our low annualized loss ratios across the Goldman Sachs private credit platform that's been investing for nearly three decades. Moving forward, we aim to continue to recycle capital as we receive repayments and bolster the portfolio with compelling new origination.

Speaker Change: We believe this assists with maximizing recoveries and contributes to our low annualized loss ratios across the Goldman Sachs private credit platform, that's been investing for nearly three decades.

Speaker Change: Moving forward, we aim to continue to recycle capital as we receive or payments and bolster the portfolio with compelling new originations.

Alex G.: On that front, we're very pleased with our new originations this quarter as GSBD originated more investments in the second quarter than in all of 2023. In fact, this quarter marks the highest level of origination activity since the integration of the Goldman Sachs private credit business just over two years ago, when GSBD was able to take advantage of being part of the broader Goldman Sachs private credit platform. On a fair-of-value basis, firstly, in loans ticked higher to 97 percent of our assets as of June 30th, which reflects our bias to maintaining exposure primarily to investments that are higher up in the capital structure.

Alex Chi: On that front, we're very pleased with our new originations this quarter, as GSBD originated more investments in the second quarter than in all of 2023. In fact, this quarter marks the highest level of origination activity since the integration of the Goldman Sachs private credit business just over two years ago, when GSBD was able to take advantage of being part of the broader Goldman Sachs private credit platform. On a fair value basis, first lien loans ticked higher to 97% of our assets as of June 30th, which reflects our bias to maintaining exposure primarily to investments that are higher up in the capital structure. Consistent with prior quarters, substantially all new loan commitments this quarter were to first lien credits.

Speaker Change: On that front, we're very pleased with our new originations this quarter as G. S. P. D originated more investments in the second quarter than in all of 2023.

Speaker Change: In fact, this quarter marks the highest level of origination activity since the integration of the Goldman Sachs private credit business just over two years ago. When G. S. P. D was able to take advantage of being part of the broader Goldman Sachs private credit platform.

Speaker Change: On a fair value basis, first lien loans ticked higher to 97% of our assets as of June 30th which reflects our bias to maintaining exposure primarily to investments that are higher up in the capital structure.

Alex G.: And consistent with prior quarters, substantially all new loan commitments this quarter were to first-wing credits.

Speaker Change: And consistent with prior quarters.

Speaker Change: Naturally all new loan commitments this quarter with the first lien credits.

Alex Chi: As we announced after market close yesterday, our board declared a third quarter dividend of 45 cents per share payable to shareholders of record as of September 30th, 2024. This marks the company's 38th consecutive quarter of a $0.45 per share dividend totaling $17.10 per share since our IPO, excluding the special dividends we paid in 2021 following the merger with MMLC.

Speaker Change: As we announced after market closed yesterday, our board declared a third quarter dividend of 45 cents per share payable to shareholders of record as of Sept September 30 of 2024.

Speaker Change: This marks the company's 38th consecutive quarter of 45 cents per share dividend totaling $17.10 per share since our IPO, excluding the special dividends, we paid in 2021 following the merger with Eminase.

Alex Chi: Now, with respect to broader market conditions, the significant growth in our originations in the second quarter reflects both the improving M&A environment and the expansive platform capabilities that we've been discussing for a number of quarters. GSBD also continues to benefit from potential origination opportunities through the broader Goldman Sachs franchise, including the investment bank. As another example of this, within the quarter, our direct lending platform, including GSBD, led and acted as an administrative agent on a loan that helped TPG acquire Classic Collision, which is the fourth largest multi-site operator of collision repair centers in the United States.

Speaker Change: Now with respect to broader market conditions.

Alex G.: Now, with respect to broader market conditions, the significant growth in our originations in the second quarter reflects both the improving M&A environment and expansive platform capabilities that we've been discussing for a number of quarters. GSBD also continues to benefit from potential origination opportunities through the broader Goldman Sachs franchise, including the Investment Bank. As another example of this within the quarter, our direct lending platform, including GSBD, led and acted as administrative agent on a loan that helped TPG acquire Classic Collision, which is the fourth largest multi-site operator of collision repair centers in the United States. Our Investment Banking Division was engaged by Classic Collision as cell-side advisor, which helped us move quickly to evaluate the opportunity, provide a financing proposal, and ultimately be selected by TPG for the acquisition of financing in a highly competitive environment.

Speaker Change: Growth in originations in the second quarter reflects both the improving M&A environment and expansive platform capabilities that we've been discussing for a number of quarters.

Speaker Change: G. S. P. D also continues to benefit from potential origination opportunities through.

Speaker Change: The broader Goldman Sachs franchise, including the investment bank.

Speaker Change: That's another example of this within the quarter, our direct lending platform, including G. SPD led and acted as administrative agent and along that helped the TPG acquired classic collision.

Speaker Change: Which is the fourth largest multistate operator, a collision repair centers in the United States.

Alex Chi: Our Investment Banking Division was engaged by Classic Collision as a sell-side advisor, which helped us move quickly to evaluate the opportunity, provide a financing proposal, and ultimately be selected by TPG for the acquisition financing in a highly competitive environment. During the quarter, we leaned into the firm's longstanding expertise in the data center sector to lead the financing of USSignal, a hybrid co-location and cloud services provider operating nine data centers in the upper Midwest.

Speaker Change: Our investment banking division was engaged by classic collision a sell side adviser, which helped us move quickly to evaluate the opportunity provided financing proposal and ultimately be selected by TPG, where the acquisition financing in a highly competitive environment.

Alex G.: During the quarter, we leaned into the firm's long standing expertise in the data center sector to lead the financing of U.S. signal, a hybrid co-location in cloud services provider operating nine data centers in the upper Midwest. Given our ability to move its speed through diligence and execution, we were able to take lead agent position and were awarded a larger hold size in the transaction.

Speaker Change: During the quarter, we leaned into the firm's long standing expertise and the data center sector to lead the financing of U S signal the hybrid Colocation and cloud services provider operating nine data centers and the upper Midwest.

Alex Chi: Given our ability to move with speed through diligence and execution, we were able to take the lead agent position and were awarded a larger hold size in the transaction. With that, let me turn it over to our Chief Operating Officer, Tucker Greene, to discuss new investments this quarter and our overall credit quality.

Speaker Change: Given our ability to move with speed due diligence and execution, we were able to take lead agent position they were.

Speaker Change: Wanted a larger hold size in the transaction.

Tucker Greene: With that, let me turn it over to our Chief Operating Officer, Tucker Greene, to discuss new investments as quarter in overall credit quality. Thanks, Alex. During the quarter, we originated 440 million in new investment commitments to 10 new and 15 existing portfolio companies. And as Alex mentioned, this is indeed the highest level of originations for GSBD during the fiscal quarter since the integration of our platform in early 2022. To the first half of 2024, investment activity across Goldman Sachs' direct lending America's platform is up nearly four times on a dollar basis and two times on a deal basis versus the first half of 2023, despite relatively flat M&A activity.

Tucker Green: With that let me turn it over to our Chief operating Officer Tucker Green to discuss new investments this quarter and our overall credit quality.

Tucker Greene: Thanks, Alex. During the quarter, we originated $440 million in new investment commitments to 10 new and 15 existing portfolio companies. And as Alex mentioned, this is indeed the highest level of originations for GSBD during the fiscal quarter since the integration of our platform in early 2022. For the first half of 2024, investment activity across Goldman Sachs Direct Lending America's platform is up nearly four times on a dollar basis and two times on a deal basis versus the first half of 2023, despite relatively flat M&A activity.

Tucker Green: Thanks, Alex during the quarter we originated.

Tucker Green: $440 million in new investment commitments to 10, new and 15 existing portfolio companies and as Alex mentioned. This is indeed, the highest level of originations for G. S. P D. During our fiscal quarter since the integration of our platform in early 2022 through the first half of 'twenty 'twenty four investment activity.

Cross.

Speaker Change: Goldman Sachs direct lending Americas platform is up nearly four times on a dollar basis and two times on a deal basis.

Speaker Change: The first half of 2023, despite relatively flat M&A activity.

Tucker Greene: Sales and repayment activity totaled 226.5 million, primarily driven by the full repayment in restructuring of our investments in six portfolio companies. Turning to portfolio composition, as of June 30, 2024, total investments in our portfolio were 3.52 billion at fair value, comprised of 98% in senior secured loans, including 92.3% in first lien, 4.6% in first lien last out unit tranche, and 1.1% in second-lien debt, as well as a negligible amount in unsecured debt and 1.8% in a combination of preferred and common stock. As of June 30, 2024, the company held investments in 155 portfolio companies operating across 38 different industries.

Tucker Greene: Sales and repayment activity totaled $226.5 million, primarily driven by the full repayment and restructuring of our investments in six portfolio companies. Turning to portfolio composition as of June 30, 2024. Total investments in our portfolio were $3.52 billion at fair value, comprised of 98% in senior secured loans, including 92.3% in first lien, 4.6% in first lien last out unit tranche, and 1.1% in second lien debt, as well as a negligible amount in unsecured debt and 1.8% in a combination of preferred and common stock. As of June 30, 2024, the company held investments in 155 portfolio companies operating across 38 different industries.

Speaker Change: Sales and repayment activity.

Speaker Change: Totaled $226 5 million, primarily driven by the full repayment and restructuring of our investments in six portfolio companies.

Speaker Change: Turning to portfolio composition as of June.

Speaker Change: June 30, 'twenty 'twenty four.

Speaker Change: Investments in our portfolio were 3.52 billion at fair value comprised of 98% in senior secured loans.

Speaker Change: Including 92, 3% in first lien four 6% in first lien last out unit tranche and 1.1% in second lien debt as well as a negligible amount.

Speaker Change: In unsecured debt and one 8% and a combination of preferred and common stock.

Speaker Change: As of June 30, 'twenty 'twenty four the company held investments in 155 portfolio companies operating across.

Speaker Change: 38 different industries, the weighted average yield of our investment portfolio at amortized cost at the end of the second quarter was 11% as compared to 11, 9% from the prior quarter.

Tucker Greene: The weighted average yield of our investment portfolio to amortize cost at the end of the second quarter was 11% as compared to 11.9% from the prior quarter. The weighted average yield of our total debt and income-producing investments at amortized cost at the end of the second quarter was 12.3% as compared to 12.7% at the end of Q1. The weighted average net debt to evita of the companies in our investment portfolio remained flat at 6.1 times during the second quarter as compared to the first quarter. Importantly, our portfolio companies had both top line growth and evita growth, quarter over quarter and year over year on a weighted average basis.

Stan Matuszewski: The weighted average yield of our investment portfolio at amortized cost at the end of the second quarter was 11% as compared to 11.9% from the prior quarter. The weighted average yield of our total debt and income-producing investments at amortized cost at the end of the second quarter was 12.3% as compared to 12.7% at the end of Q1. The weighted average net debt to EBITDA of the companies in our investment portfolio remained flat at 6.1 times during the second quarter as compared to the first quarter.

Speaker Change: The weighted average yield of our total debt and income producing investments at amortized cost at the end of the second quarter was 12, 3% as compared to 12, 7% at the end of Q1.

Speaker Change: The weighted average net debt to EBITDA of the companies in our investment portfolio remained flat at.

Speaker Change: At six one times during the second quarter as compared to the first quarter importantly, our portfolio of companies had both topline growth and EBITDA growth quarter over quarter and year over year on a weighted average basis.

Stan Matuszewski: Importantly, our portfolio companies had both top line growth and EBITDA growth quarter over quarter and year over year on a weighted average basis. However, the current weighted average interest coverage of the companies in our investment portfolio quarter end remained flat at 1.5 times in the second quarter as compared to the first quarter. And finally, turning to asset quality. During the quarter, and as Alex mentioned earlier, lithium and pluralsate were both placed on nonaccrual status.

Tucker Greene: The current weighted average interest coverage of the companies in our investment portfolio quarter and remained flat at 1.5 times in the second quarter as compared to the first quarter.

Speaker Change: The current weighted average interest coverage of the companies in our investment portfolio at quarter end remained flat at 1.5 times in the second quarter as compared to the first quarter.

Tucker Greene: And finally, turning to asset quality. During the quarter, and as Alex mentioned earlier, lithium and Plural site were both placed on nonaccrual status. In addition, the Thrasio first lane debt position, which was on nonaccrual, was restructured into a first lane second out-term loan in a common equity position. The restructured second out-term loan remained on nonaccrual. As of June 30, 2024, investments on nonaccrual status increased to 3.4% of the total investment portfolio at fair value from 1.6% as of March 31, 2024. In 7.6% of the total investment portfolio at amortized cost from 3.3% as of March 31, 2024.

Speaker Change: And finally, turning to asset quality during the quarter and as Alex mentioned earlier lithium and poor old site were both placed on nonaccrual status.

Stan Matuszewski: In addition, the Thrasio first lien debt position, which was on non-accrual, was restructured into a first lien, second out term loan, and a common equity position. The restructured second out term loan remained on non-accrual. As of June 30, 2024, investments on nonaccrual status increased to 3.4% of the total investment portfolio at fair value from 1.6% as of March 31, 2024, and 7.6% of the total investment portfolio at amortized costs from 3.3% as of March 31, 2024. I'll now turn the call over to Stan Matuszewski to walk through our financial results.

Speaker Change: In addition, the thrasher a first lien debt position, which was on nonaccrual was restructured into a first lien second out term loan and a common equity position. The restructured second out term loan remained on non accrual.

Speaker Change: As of June 30, 'twenty 'twenty four investments on nonaccrual status increased to three 4% of the total investment portfolio at fair value from one 6%.

Speaker Change: As of March 31, 'twenty, 'twenty, four and seven 6% of the total investment portfolio at amortized cost from three 3% as of March 31, 2024, I'll now turn the call over to stand motor Schatsky to walk through our financial results.

Stan Medishevsky: I'll now turn the call over to Stan Medachevsky to walk through our financial results. Thank you, Tucker. We ended the second quarter of 2024 with total portfolio investments at fair value of 3.5 billion, outstanding debt of 2 billion, and net assets of 1.6 billion. Our ending net debt to equity ratio as of the end of the second quarter was 1.19 times, which continues to be below our target leverage of 1.25 times. At quarter end, approximately 64.4% of the company's total principal amount of debt outstanding was unsecured debt, and we had 1 billion of capacity available under our secured revolving credit facility.

Stan Matuszewski: Thank you, Tucker. We ended the second quarter of 2024 with total portfolio investments at a fair value of $3.5 billion, outstanding debt of $2 billion, and net assets of $1.6 billion. Our ending net debt to equity ratio as of the end of the second quarter was 1.19 times, which continues to be below our target leverage of 1.25 times. At quarter end, approximately 64.4% of the company's total principal amount of debt outstanding was in unsecured debt, and we had $1 billion of capacity available under our secured revolving credit facility.

Speaker Change: Thank you Tucker we ended the second quarter of 2024 with total portfolio investments at fair value of $3 5 billion outstanding debt of 2 billion and net assets of $1 6 billion or.

Our ending net debt to equity ratio as of the end of the second quarter was 1.19 times, which continues to be below our target leverage of 125 times at.

Speaker Change: At quarter end, approximately 64.4% of the company's total principal amount of debt outstanding with an unsecured debt and we had 1 billion of capacity available under our secured revolving credit facility.

Stan Medishevsky: Before continuing to the income statement, as a reminder, in addition to GAAP financial measures, we will also reference certain non-GAAP or adjusted measures. This is intended to make the company's financial results easier to compare to the results prior to our October 2020 merger with Goldman Sachs Middle Market Lending Court or MMLC. These non-GAAP measures remove the purchase discount amortization impact from our financial results. But the second quarter gap and adjusted after tax net investment income were 67 million and 65.2 million, respectively, as compared to 60.8 million and 59.5 million, respectively, in the prior quarter. On a per share basis, gap net investment income was 59 cents.

Stan Matuszewski: Before continuing to the income statement, as a reminder, in addition to GAAP financial measures, we will also reference certain non-GAAP or adjusted measures. This is intended to make the company's financial results easier to compare to the results prior to our October 2020 merger with Goldman Sachs Middle Market Lending Corp. These non-GAAP measures remove the purchase discount amortization impact from our financial results.

Speaker Change: Before continuing to the income statement as a reminder, in addition to GAAP financial measures. We will also reference certain non-GAAP or adjusted measures.

Speaker Change: This is intended to make the company's financial results easier to compare to the results prior to October 2020, and merger with Goldman Sachs Middle market lending Corp, or M. MLC. These non-GAAP measures remove the purchase discount amortization impact from our financial results.

Stan Matuszewski: For the second quarter, gap and adjusted after tax net investment income were $67 million and $65.2 million, respectively, as compared to $60.8 million and $59.5 million, respectively, in the prior quarter. On a per share basis, GAAP net investment income was $0.59. Excluding the impact of asset acquisition accounting in connection with the merger with MMLC, adjusted net investment income for the quarter was $0.57 per share, equating to an annualized net investment income yield on book value of 16.7%.

Speaker Change: For the second quarter GAAP and adjusted after tax net investment income were $67 million and $65 2 million, respectively, as compared to $60 8 million and $59 5 million respectively in the prior quarter.

Speaker Change: On a per share basis GAAP net investment income was 59 cents, excluding the impact of asset acquisition accounting in connection with the merger with MLC adjusted net investment income for the quarter was 57 per share equating to an annualized net investment income yield on book value of 16, 7%.

Stan Medishevsky: Excluding the impact of asset acquisition accounting in connection with the merger with MMLC, adjusted net investment income for the quarter was 57 cents per share, equating to an annualized net investment income yield on book value of 16.7%. Total investment income for the three months ended June 30th, 2024, and March 31st, 2024, was 108.6 million and 111.5 million, respectively. The decrease in total investment income was primarily due to investments being placed on non-equal status as a result of underperformance during the quarter. We would also note that we saw a slight decrease in pick income as a percentage of total investment income quarter over quarter.

Stan Matuszewski: Total investment income for the three months ended June 30, 2024, and March 31, 2024, was $108.6 million and $111.5 million, respectively. The decrease in total investment income was primarily due to investments being placed on nonaccrual status as a result of underperformance during the quarter. We would also note that we saw a slight decrease in PIC income as a percentage of total investment income quarter over quarter. However, distributions during the quarter remain consistent at $0.45 per share.

Speaker Change: Investment income for the three months ended June 30th 'twenty 'twenty four and March 31, 2024 was $108 6 million and $111 5 million respectively. The decrease in total investment income was primarily due to investments being placed on non accrual status as a result of underperformance during the quarter.

Speaker Change: We would also note that we saw a slight decrease in pik income as a percentage of total investment income quarter over quarter.

Speaker Change: Distributions during the quarter remained consistent at 45 per share.

Stan Medishevsky: Distributions during the quarter remain consistent at 45 cents per share. Our spillover taxable income is approximately 143.3 million or $1.23 cents on a per share basis, which we believe provides continued stability on our consistent dividends and inception.

Stan Matuszewski: Our spillover taxable income is approximately $143.3 million, or $1.23 on a per share basis, which we believe provides continued stability on our consistent dividends since inception. With that, I'll turn it back to Alex for closing remarks.

Alex Chi: Our spillover taxable income is approximately $143 3 million or $1 23 on a per share basis, which we believe provides continued stability on our consistent dividend since inception with that I'll turn it back to Alex for closing remarks.

Alex G.: With that, I'll turn it back to Alex for closing remarks. Thanks, Dan, and thanks everyone for joining our earnings call. While we're disappointed by this quarter's markdowns, we remain determined and optimistic about maximizing shareholder value in the quarters ahead, all while continuing to recycle capital to bolster the quality of the portfolio by deploying capital into the most attractive opportunities using the full breadth of the Goldman Sachs platform.

Alex Chi: Thanks, Dan, and thanks, everyone, for joining our earnings call. While we're disappointed by this quarter's markdowns, we remain determined and optimistic about maximizing shareholder value in the quarters ahead, all while continuing to recycle capital to bolster the quality of the portfolio by deploying capital into the most attractive opportunities using the full breadth of the Goldman Sachs platform. With that, I'll open the line for Q&A. Thank you.

Alex Chi: Thanks, Dan.

Alex Chi: Thanks, everyone for joining our earnings call.

Speaker Change: We are disappointed by this quarter's markdowns, we remain determined and optimistic about maximizing shareholder value in the quarters ahead, all while continuing to recycle capital to bolster the quality of the portfolio by deploying capital into the most attractive opportunities using the full breadth of the Goldman Sachs platform.

Austin Neri: With that, let's open a line for Q&A. Thank you. If you'd like to ask a question, please signal by pressing star 1 on your telephone keypad. If you're using a speaker phone, please make sure your mute function is turned off to allow your signal to reach our equipment. Once again, that is star 1 to signal for a question, and we'll pause just briefly to a similar Q.

Speaker Change: That let's open the line for Q&A.

Speaker Change: Thank you if you'd like to ask a question. Please signal by pressing star one on your telephone keypad.

Operator: Thank you. If you'd like to ask a question, please signal by pressing star 1 on your telephone keypad. If you're using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Once again, that is Star 1 to signal for a question, and we'll pause just briefly to assemble our queue. And we'll take our first question from Finian O'Shea with Wells Fargo Security. Please go ahead.

Speaker Change: Using a speaker phone. Please make sure your mute function is turned off to allow your signal to reach our equipment. Once again that is star one to signal for a question.

Speaker Change: And we'll pause briefly to assemble our queue.

Phineon O'Shea: And we'll take our first question from Phineon O'Shea with Wells Fargo Security. Please go ahead. Hey, everyone. Good morning.

Finian O'shea: And we'll take our first question from Finian O'shea with Wells Fargo Securities. Please go ahead.

Finian O'shea: Hey, everyone. Good morning.

Operator: I appreciate your commentary on the non-accruals in the beginning. I wanted to ask about ARR loans. On a high level, would you say that the EBITDA flip in those structures is what sort of catalyzes the reckoning or the credit event for underperforming names? And if so, or otherwise, but like, what does the EBITDA flip wall look like? Is it were were they generally four years or five years? Thank you. Eiffel tower

Alex G.: On the appreciate your commentary on the notic roles in the beginning. I wanted to ask on ARR loans on a high level. Would you say that the EBITDA flip in those structures is what sort of catalyzes the reckoning or the credit event for underperforming name? And if so, or otherwise, what does the EBITDA flip wall look like? Is it, were they generally four years or five years? Thank you.

Speaker Change: On the appreciate your commentary on the non accruals in the beginning.

Finian O'shea: I wanted to ask on on our loans.

Speaker Change: So at a high level.

Speaker Change: Would you say that the the EBIT a slip in those structures.

Speaker Change: Is what what sort of catalyzes the reckoning or the credit event.

Speaker Change: For underperforming name.

Speaker Change: And if so or otherwise.

Speaker Change: But like what is the EBIT does slip wall look like as it were they generally four years or five years.

Speaker Change: <unk>.

Speaker Change: Yeah.

Alex G.: If in thanks for the question and thanks for joining. It's Alex. So with respect to the ARR loans. EBITDA flips or approaching EBITDA flips could be a factor. And we've seen that in some of these names where, as the company was approaching an EBITDA flip. The company started to potentially cut back on R&D spent, for example, on investing in new technology. That you're cutting back on sales and marketing spend in order to generate EBITDA, all while their competitors might be investing in new technology. Which then leads to some churn and some underperformance. And so that could be a factor, but it's only one factor.

Alex Chi: Hey, Finn. Thanks for the question. And thanks for joining us. It's Alex.

Speaker Change: Thanks for the question and thanks for joining.

Speaker Change: It's Alex so with respect to the our loans.

Speaker Change:

Alex Chi: So with respect to the AR loans, Epitaph Clips or approaching Epitaph Clips could be a factor. And we've seen that in some of these names, where as the company was approaching an EBITDA flip, the company started to potentially cut back on R&D spend, for example, on investing in new technology, essentially cutting back on sales and marketing spend in order to generate EBITDA, all while their competitors might be investing in new technology, which then leads to some churn and some underperformance.

Speaker Change: EBITDA slips are approaching it but that could be a factor.

Speaker Change: And we've seen that in some of these names where as the company was approaching an EBITDA flip.

Speaker Change: The company started to potentially cut back on R&D spend for example on investing in new technology.

Speaker Change: You're cutting back on sales and marketing spend in order to generate EBITDA all while their competitors might be investing in new technology, which then leads to some some churn and some underperforming so that could be a factor, but it's only one factor and other factors could also just be the fact that.

Alex Chi: And so that could be a factor, but it's only one factor. Other factors could also just be the fact that companies may have just taken on a bit too much leverage when base rates were low. Also, you really have to look at the underlying products and the technology that these companies have. Under our current platform, we're very selective, and we choose ARL loans and companies where the products are mission critical, best in class technology, and the customers look at this as critical for their operations, regardless of the economic environment. With some of these other problems that we've seen, that was not the case.

Alex G.: Other factors could also just be the fact that companies may have just taken on a bit much too much leverage when base rates are low. Or also, you really have to look at the underlying products and the technology that these companies have. Under our current platform, we're very selective, and we choose ARR loans and companies where the products are mission critical, best in class technology. And the customers look at this as critical for their operations, regardless of the economic environment. With some of these other problems that we've seen, that was not the case.

Companies may have just taken on a bit too much leverage when base rates were low.

Speaker Change: We're also.

Speaker Change: You really have to look at the underlying products and in technology that these companies have.

Speaker Change: Under our current platform.

Speaker Change: Selected and we choose airlines in companies, where their products are mission critical.

Speaker Change: Best in class technology.

Speaker Change: And the customers look at this as critical for their operations, regardless of the economic environment.

With some of these other problems that we've seen.

Speaker Change: That was not the case.

Phineon O'Shea: Okay. Thanks. That's helpful.

Speaker Change: Okay. Thanks, that's helpful. Sorry, I had myself on.

Finian O'shea: Okay, thanks. That's all full. Sorry, I had myself on mute.

Phineon O'Shea: Sorry, I had myself unmute. To your mind, this, you know, origination was strong. I think the credit impacts this a little bit. What's the target leverage profile? Are you sort of where you want to be now, or prefer to let it run down a little bit? So our target leverage has been around one and a quarter times. We are still below that. We finished a quarter at 1.09. So we still have some additional capacity to make new loans, as well as to actually provide some cushion to extent we need it. So, so our target is still at one and a quarter.

Speaker Change: On mute.

Okay.

Alex Chi: Can you remind us, origination was strong, I think the... Credit impacts this a little bit. What's the target leverage profile? Are you sort of where you want to be now or prefer to let it run down a little bit?

Speaker Change: Can you remind us are there.

Speaker Change: Origination was strong I think the.

Speaker Change: Credit impacts of this a little bit.

Speaker Change: What's the target.

Speaker Change:

Average profile.

Speaker Change: Are you sort of where you want to be now or.

Speaker Change: Prefer to let it run down a little bit.

Speaker Change: So I would target leverage has been around one and a quarter times.

Alex Chi: So our target leverage has been around one and a quarter times. We are still below that; we finished the quarter at 1.19, so we still have some additional capacity to make new loans, as well as to provide some cushion to the extent we need it, so our target is still at 1.25.

Speaker Change: We are still below that we finished the quarter at 1.9, so we still have some additional capacity to.

Speaker Change: To make you always has lost between cheap.

Speaker Change: Christian takes that need it so so our target is still at one and a quarter.

Phineon O'Shea: Very good.

Finian O'shea: Very good. Thank you so much.

Speaker Change: Very good thank you so much.

Phineon O'Shea: Thank you so much.

Mark Hughes: Thanks, Finn. We'll take our next question from Mark Hughes with Truist. Please go ahead.

Phineon O'Shea: Excellent.

Excellent.

Mark Hughes: We'll take our next question from Mark Hughes with Truth. Please go ahead. Yeah, thank you. Good morning. Maybe another one. One other question on the recurring revenue loans.

Speaker Change: Well take our next question from Mark Hughes with tourists. Please go ahead.

Mark Hughes: Yes, Thank you and good morning.

Mark Hughes: Yeah, thank you. Good morning. Um, maybe another high-level question on the recurring recurring revenue loans. Is there a, Are you perhaps looking at those differently on a go-forward basis, and, you know, anything in the plural site, their business model that you might incorporate into future underwriting is kind of something to be cautious about, or do you think this is just unique to that company?

Mark Hughes: Maybe another one a couple of question on the recurring revenue loans is there.

Alex G.: Are you perhaps looking at the differently on the go-forward basis and anything in the plural site, their business model that you might incorporate into future underwriting is kind of a something to be cautious about or do you think this is just unique to that company? Yeah, thanks for the question. So, in terms of how the approach to recurring revenue loans, that has not changed since we started managing the platform more than a couple of years ago. So we continue to look at, as I mentioned, companies that have business class technology, mission critical to their customers, but we also look at margins.

Mark Hughes: Okay.

Speaker Change: Are you, perhaps looking at those differently on a go forward basis and.

Speaker Change: Anything in the plural site.

Speaker Change: Their business model, but you may.

Speaker Change: Incorporated into our future underwriting as a kind of a so I'm going to be cautious about or do you think this is a.

Speaker Change: Just unique to to that company.

Speaker Change: Yeah. Thanks for the question. So in terms of how we approach recurring revenue that has not changed since we started managing the platform.

Alex Chi: Thanks for the question. So, in terms of how we approach recurring revenue loans, that has not changed since we started managing the platform more than a couple years ago. So we continue to look at, as I mentioned, companies that have best-in-class technology that is mission critical to their customers. But we also look at margins; we want to make sure that these companies are highly profitable and also have sustainable growth. If you look at the loans that we've made more recently in the recurring revenue space, and again, we are very selective about where we choose to do it, it fits all those different profiles.

Speaker Change: Well there are a couple of years ago. So we continue to look at because I mentioned companies that have best in class technology mission critical to their customers, but we also look at <unk>.

Speaker Change: Margins, we want to make sure that these companies are highly profitable and also has a sustainable growth.

Alex G.: We want to make sure that these companies are highly profitable and also have sustainable growth. If you look at the loans that we've made more recently in the recurring revenue space, and again, we are very selective about where it's used to do it, it fits all those different profiles.

Speaker Change: If you look at the loans that we've made them more recently and the recurring revenue space and again, we are very selective where we choose to do it it fits all of those different profiles.

Alex G.: If you look at the pull-out site at the time of investment, the company was at negative margins, and also the product is a good product, but at the same time, what we've seen is that as their customers have pulled back on spending, this company has seen some underperformance as a result. Understood.

Alex Chi: If you looked at the prolo site, at the time of investment, the company was at negative margins. And also, the product is a good product. But at the same time, what we've seen is that as their customers have pulled back on spending, this company has seen some underperformance as a result.

Speaker Change: If you looked at all of the site.

Speaker Change: At the time of investment.

Speaker Change: The company wise.

Speaker Change: At negative margins and also the product is a good product, but at the same time, what we've seen is that as their customers have pulled back on spending. This company has seen some under performance as a result.

Speaker Change: Understood.

Alex Chi: Understood. Um, you had mentioned the deal flow, I think deal flow was up four times even as M&A was relatively steady. Could you expand on that? Or clarify what the four times was, and then maybe comment in the context of that on selectivity this quarter? Was your success more a function of the deal flow? Or did you just see more that you liked, in this case,

Mark Hughes: You had mentioned the deal flow. I think the deal flow up four times, even as M&A was relatively steady.

Speaker Change: You had mentioned the deal flow I think.

Speaker Change: The deal flow up four times, even as.

Speaker Change: M&A was relatively steady could you expand on that a or b.

Alex G.: Could you expand on that, or clarify what the four times was, and then maybe comment in the context of that on selectivity? This quarter was your success more a function of the deal flow, or do you just see more than you liked in this case? We certainly saw a healthy amount of flow. The number of originations that we've seen this year to date has been not significantly versus the same period last year, but also the quality of the businesses that we've seen has also increased. We've talked about how, in the last couple of quarters, we've seen EBITDA growth take higher than top line growth.

Speaker Change: Clarify what that are four times was and then maybe comment in the context of that.

Speaker Change: Selectivity.

Speaker Change: This quarter.

Speaker Change: Was your success is more a function of the deal flow or do you just see more of that you liked in the in this case.

Speaker Change: So we certainly saw a healthy amount of flow.

Alex Chi: So we certainly saw a healthy amount of flow. The number of originations that we've seen this year to date has been up significantly versus the same period last year, but also, the quality of the businesses that we've seen has also increased. We've talked about how in the last couple of quarters, we've seen EBITDA growth tick higher than top-line growth, and we saw that again this past quarter. So there's been more flow

Speaker Change: The number of originations that we've seen.

Speaker Change: This year to date.

Not significantly versus the same period last year, but also the quality of the businesses that we've seen has also increased.

Speaker Change: <unk> talked about how in the last couple of quarters, we've seen EBITDA growth.

Speaker Change: Tick higher than top line growth and we saw that again this past quarter, So theres big workflow.

Alex G.: We saw that again this past quarter. There's been more flow. As Tucker mentioned, the number of deals, in terms of deal count that we've had, is up double, but also just as a function of the capital that we have, it's been up four times. And so we're clearly taking share. But if you look at it as a percentage in terms of the deal that we've done versus the number of originations, it's still a mid-single-digit percentage, which again just shows how selective we are and how broad our funnel is with respect to the originations that we see.

Alex Chi: So as... As Tucker mentioned, the number of deals in terms of deal count that we've had is double. But also, just as a function of the capital that we have, it's been up four times. And so we're clearly taking share, but if you look at it as a percentage in terms of the deals that we've done versus the number of originations, it's still a mid-single-digit percentage, which again just shows how selective we are and how broad our funnel is with respect to the originations that we see.

Speaker Change: As.

Speaker Change: I could mention.

Speaker Change: The number of deals in terms of deal cost that we've had is that a double.

Speaker Change: But also just as a function of the capital that we have been up four times. So we're clearly taking share.

Speaker Change: But if you look at it as a.

Speaker Change: Percentage in terms of the deals that we've done versus the number of originations.

Speaker Change: It's still mid single digit percentage, which again just shows how selective we are and how broad our funnel is with respect to the originations that we see.

Mark Hughes: Understood.

Speaker Change: Understood and then.

Mark Hughes: And then, uh... You mentioned the overall interest coverage steady at 1.5 times. Any sense of the, You know, the proportion that are at one or below, has there been any change in that ratio out on the tail?

Mark Hughes: And then you mentioned the overall interest coverage steady 1.5 times. Any sense of the, you know, the proportion that are at one or below, has it been any change in that ratio out on the tail? Now, there's been no change to that and still remains in the mid-single-digit percentage. Okay, thank you very much.

Speaker Change: You mentioned the overall interest coverage steady one five times.

Speaker Change: Any sense of the.

Speaker Change: You know the proportion that are one or below is there been any change in that.

Speaker Change: Ratio out on the tail.

Speaker Change: No theres been no change to that.

Alex Chi: Now, there's been no change to that, and it still remains in the mid-single-digit percentage.

Speaker Change: And it still remains in the mid single digit percentage.

Speaker Change: Okay. Thank you very much.

Mark Hughes: Okay, thank you very much.

Derek Hewett: Thank you. We'll move next to Derek. Derek Hewett with Bank of America. Your line is open. Good morning. So, you had mentioned that PIC was slightly lower on a quarter-over-quarter basis, but it's still roughly 11% of revenue, which is moderately above the BDC period average.

Speaker Change: Thank you.

Derek Hewett: We'll move next to Derek Hewett with the Bank of America. Your line is open.

Derek Hewett: Well move next to Derrick Derek Hewett with Bank of America. Your line is open.

Derek Hewett: Good morning. You mentioned that PIC was slightly lower on a quarter-over-quarter basis, but it's still roughly 11% of revenue, which is moderately above the BDC per year average. So could you talk about your comfort level with PIC at current levels, and could we see it potentially drift higher over the next 12 to 18 months?

Speaker Change: Good morning, So you had mentioned that pick was slightly lower.

Speaker Change: On a quarter over quarter basis, but it's still roughly 11% of revenue.

Which is moderately above the BDC peer average so could you talk about your comfort level with what tick at current levels and could we see it potentially drift higher.

Stan Medishevsky: So, could you talk about your comfort level with TIC at current levels, and could we see it potentially drip higher over the next 12 to 18 months? Yeah, certainly this is a stance-begging. So, we've been monitoring the, you know, we always monitor the PIC as a percentage of the total investment income in the portfolio. So, certainly, I think, you know, we saw about a 50-bit decline period over period. We had some one-time PIC items in the Q1 period, some due to, you know, restructures or other one-time items. And again, at this quarter, we did see a one-time item.

Speaker Change: Over the next 12 to 18 months.

Speaker Change: Yeah. Certainly this is a stand speaking so we've been monitoring that you know we always monitor the pic as a percentage of the total investment income in the portfolio.

Stan Matuszewski: Yeah, certainly, this is Stan speaking. So we've been monitoring that. You know, we always monitor the PIC as a percentage of the total investment income in the portfolio. Certainly, I think, you know, we saw about a 50 BIP decline, period over period; we had some one-time PIC items in the Q1 period, some due to, you know, restructuring or other one-time items. And again, this quarter, we did see a one-time item. So I'd say normalized for that, you know, PICC would have been sub-10%, and we think that, you know, that we're comfortable with that, and we'd continue to monitor it.

Speaker Change: Certainly I think you know we saw about a 50 bps decline period over period, we had some one time items in the Q1 period.

Speaker Change: Some due to you know restructures or other.

Speaker Change: One time items and again this quarter, we did see a one time item so I'd say.

Stan Medishevsky: So, I'd say normalize for that. You know, PIC would have been sub-10%. And we think that, you know, that we're comfortable with that, and we continue to monitor it.

Speaker Change: Normalized for that pick would've been sub 10%.

Speaker Change: And we think that you know that.

Speaker Change: We're comfortable with that and we continue to monitor it.

Stan Medishevsky: Okay. And then, in terms of the portfolio yield on a cost basis, we look like it went down 30, 40 basis points. Was there anything in particular that caused that decline on a quarter basis? You know, I'd say for the most part, it's due to the yield on, for our non-acrolls coming out of the portfolio, the reduction in income. So, that's the primary driver. Okay. Thank you.

Speaker Change: Okay and then.

Derek Hewett: Okay, and then in terms of the portfolio yield on a cost basis, it looks like it went down 30-40 basis points. Was there anything in particular that caused that decline on a quarter-over-quarter basis?

Speaker Change: And in terms of the portfolio yield on a cost basis looked like it went down.

Speaker Change: 30, 40 basis points, what was there anything in particular.

Speaker Change:

Speaker Change: That that caused that decline on a quarter over quarter basis.

Speaker Change: No I'd say for the most part it's due to the yield.

Stan Matuszewski: No, I'd say for the most part, it's due to the yield on our non-accruals coming out of the portfolio, the reduction in income. So that's the primary driver.

Derek Hewett: Okay, thank you.

Speaker Change: The yield on or non accruals coming out of the portfolio. The reduction in income. So that's the primary driver.

Speaker Change: Okay. Thank you.

Speaker Change: Thank you.

Unknown Executive: At this time, we have no further questions.

Operator: At this time, we have no further questions. I'd like to turn it back to Alex Chi for any additional or closing remarks.

Speaker Change: At this time, we have no further questions I'd like to turn it back to Alex Chi for any additional or closing remarks.

Alex G.: I'd like to turn it back to Alex Chi for any additional or closing remarks. Great. Well, thank you everyone for joining our call. Please enjoy the rest of your summers. And we look forward to speaking with you again after our next quarter. Thank you. Goodbye.

Great well. Thank you everyone for joining our call. Please enjoy the rest of your summer and we look forward to speaking with you again after our next quarter.

Alex Chi: Great. Well, thank you, everyone, for joining us on our call. Please enjoy the rest of your summers, and we look forward to speaking with you again after our next quarter. Thank you. Goodbye. This concludes today's conference. We thank you for your participation. You may disconnect your lines at this time.

Speaker Change: Thank you goodbye.

Unknown Executive: This concludes today's conference. We thank you for your participation. You may disconnect your lines at this time.

Speaker Change: This concludes today's conference we thank you for your participation you may disconnect your lines at this time.

Operator: Thank you. Goodbye. This concludes today's conference. We thank you for your participation. You may disconnect your lines at this time.

Speaker Change: Okay.

Speaker Change: Yeah.

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Operator: Stanley Matuszewski, David Pessah, Mark Hughes, Robert Dodd, Derek Hewett, Alex Chi, David Hughes, Robert Dodd, Mark Hughes, Mark Hughes, Robert Dodd, Mark Hughes, Robert Dodd, Robert

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Austin Neri: Good morning. This is Austin Neri and member of the Investor Relations team for Goldman Sachs BDC, Inc. And I would like to welcome everyone to the Goldman Sachs BDC, Inc. Second quarter, 2024 earnings conference call. Please note that all participants will be in listen only mode until the end of the call when we will open up the line for questions.

Austin Neri: Before we begin today's call, I would like to remind our listeners that today's remarks may include four looking statements. These statements represent the company's belief regarding future events that by their nature are uncertain and outside of the company's control. The company's actual results and financial condition may differ possibly materially from what is indicated in this four looking statements as a result of a number of factors, including those described from time to time in the company's SEC finals.

Austin Neri: This audio cast is copyrighted material of Goldman Sachs BDC, Inc, and may not be duplicated, reproduced or rebroadcast without our consent. Yesterday, after the market closed, the company issued an earnings press release and posted a supplemental earnings presentation, both of which can be found on the homepage of our website at www.g Goldman Sachs BDC.com, under the Investor Resources section, and which include the reconciliation of non-GAT measures to the most directly comparable GAT measures. These documents should be reviewed in conjunction with the company's quarterly report on Form 10Q filed yesterday with the SEC. This conference call is being recorded today, Friday, August 9, 2024 for replay purposes.

Alex G.: I'll now turn the caller over to Alex G.

Alex G.: Co-Chief Executive Officer of Goldman Sachs BDC, Inc. Thank you, Austin.

Alex G.: Good morning, everyone, and thank you for joining us for our second quarter, 2024 earnings conference call. I'm here today with David Miller, our Co-Chief Executive Officer, Tucker Green, our Chief Operating Officer, and Stan Medishevsky, our Chief Financial Officer. I'll begin the call by providing an overview of our second quarter results, and then discuss the current market environment. I'll then turn the call over to Tucker to describe, with portfolio activity and performance, before handing it off to Stan to take us through our financial results, and then finally, we'll open the line for Q&A.

Alex G.: Lithium technologies, Pluralsight and Zapari. Both Lithium and Pluralsight replaced a non-crol status in the quarter. As it relates to Pluralsight, we're currently working with the other lenders towards an orderly restructuring, which we believe will contribute towards maximizing recovery for our investors. We recognize that Lithium, Pluralsight and Zapari are recurring revenue software loans. As it relates to how we invest in recurring revenue loans following the integration of GSBD into the broader Goldman Sachs private credit platform, we remain very selected.

Alex G.: Focusing on borrowers who we believe are highly profitable, scaled, and display strong growth with best-in-class technology and software products that are mission-critical for their customers regardless of the economic environment. When evaluating new software investments on the current platform, we leverage both our investment teams' experience where we have professionals dedicated to the software sector as well as the broader engineering expertise of Goldman Sachs, where we have thousands of software engineers who evaluate and implement best-in-class technology every day.

Alex G.: Finally, it is worth knowing again that we have seasoned professionals dedicated towards restructurings, with the resources and expertise required to work with our investment teams to handle underperforming names. We believe this assists with maximizing recoveries and contributes to our low annualized loss ratios across the Goldman Sachs private credit platform that's been investing for nearly three decades. Moving forward, we aim to continue to recycle capital as we receive repayments and bolster the portfolio with compelling new originations.

Alex G.: On that front, we're very pleased with our new originations this quarter as GSBD originated more investments in the second quarter than in all of 2023. In fact, this quarter marks the highest level of origination activity since the integration of the Goldman Sachs private credit business just over two years ago, when GSBD was able to take advantage of being part of the broader Goldman Sachs private credit platform. On a fair-of-value basis, firstly in loans ticked higher to 97 percent of our assets as of June 30th, which reflects our bias to maintaining exposure primarily to investments that are higher up in the capital structure. And consistent with prior quarters, substantially all new loan commitments this quarter were to first-wing credits.

Alex G.: As we announced after Market�l yesterday, our board declared a third quarter dividend of $0.45 per share, payable to shareholders of record as of September 30th, 2024. This marks the company's 38th consecutive quarter of a $0.45 per share dividend totaling $17.10 per share since our IPO, excluding the special dividends we paid in 2021 following the merger with MMLC. Now with respect to broader market conditions, the significant growth in our originations in the second quarter reflects both the improving M&A environment and expansive platform capabilities that we've been discussing for a number of quarters.

Alex G.: GSBD also continues to benefit from potential origination opportunities through the broader Goldman Sachs franchise, including the Investment Bank. As another example of this within the quarter, our direct lending platform, including GSBD led and acted as administrative agent on a loan that helped TPG acquire classic collision, which is the fourth largest multi-site operator of collision repair centers in the United States. Our Investment Banking Division was engaged by classic collision as cell-side advisor, which helped us move quickly to evaluate the opportunity, provide a financing proposal, and ultimately be selected by TPG for the acquisition of financing in a highly competitive environment.

Alex G.: During the quarter, we leaned into the firm's long standing expertise in the data center sector to lead the financing of U.S, signal, a hybrid co-location in cloud services provider operating nine data centers in the upper Midwest. Given our ability to move its speed through diligence and execution, we were able to take lead agent position and were awarded a larger hold size in the transaction.

Tucker Greene: With that, let me turn it over to our chief operating officer, Tucker Greene, to discuss new investments as quarter in overall credit quality. Thanks, Alex. During the quarter, we originated 440 million in new investment commitments to 10 new and 15 existing portfolio companies. And as Alex mentioned, this is indeed the highest level of originations for GSBD during the fiscal quarter since the integration of our platform in early 2022. To the first half of 2024, investment activity across Goldman Sachs direct lending America's platform is up nearly four times on a dollar basis and two times on a deal basis versus the first half of 2023, despite relatively flat M&A activity.

Tucker Greene: Sales and repayment activity totaled 226.5 million, primarily driven by the full repayment in restructuring of our investments in six portfolio companies. Turning to portfolio composition, as of June 30, 2024, total investments in our portfolio were 3.52 billion at fair value, comprised of 98% in senior secured loans, including 92.3% in first lane, 4.6% in first lane last out unit range, and 1.1% in second-leam debt, as well as a negligible amount in unsecured debt in 1.8% in a combination of preferred and common stock.

Tucker Greene: As of June 30, 2024, the company held investments in 155 portfolio companies operating across 38 different industries. The weighted average yield of our investment portfolio to amortize cost at the end of the second quarter was 11% as compared to 11.9% from the prior quarter. The weighted average yield of our total debt and income-producing investments at amortize cost at the end of the second quarter was 12.3% as compared to 12.7% at the end of Q1.

Tucker Greene: The weighted average net debt to evita of the companies in our investment portfolio remained flat at 6.1 times during the second quarter as compared to the first quarter. Importantly, our portfolio companies had both top line growth and evita growth, quarter over quarter and year over year on a weighted average basis. The current weighted average interest coverage of the companies in our investment portfolio quarter and remained flat at 1.5 times in the second quarter as compared to the first quarter.

Tucker Greene: And finally, turning to asset quality. During the quarter, and as Alex mentioned earlier, Lithium and Plural site were both placed on nonaccural status. In addition, the Thrasio first lane debt position, which was on nonaccural, was restructured into a first lane second out-term loan in a common equity position. The restructured second out-term loan remained on nonaccural. As of June 30, 2024, investments on nonaccural status increased to 3.4% of the total investment portfolio at fair value from 1.6% as of March 31, 2024. In 7.6% of the total investment portfolio at amortize cost from 3.3% as of March 31, 2024.

Stan Medishevsky: I'll now turn the call over to Stan Medachevsky to walk through our financial results. Thank you, Tucker. We ended the second quarter of 2024 with total portfolio investments at fair value of 3.5 billion outstanding debt of 2 billion and net assets of 1.6 billion. Our ending net debt to equity ratio as of the end of the second quarter was 1.19 times, which continues to be below our target leverage of 1.25 times at quarter end approximately 64.4% of the company's total principal amount of debt outstanding was an unsecured debt and we had 1 billion of capacity available under our secured revolving credit facility.

Stan Medishevsky: Before continuing to the income statement as a reminder, in addition to gap financial measures, we will also reference certain non-gap or adjusted measures. This is intended to make the company's financial results easier to compare to the results prior to our October 2020 merger with Goldman Sachs middle market lending court or MMLC. These non-gap measures remove the purchase discount amortization impact from our financial results. But the second quarter gap and adjusted after tax net investment income were 67 million and 65.2 million respectively as compared to 60.8 million and 59.5 million respectively in the prior quarter.

Stan Medishevsky: On a per share basis gap net investment income was 59 cents. Excluding the impact of asset acquisition accounting in connection with the merger with MMLC, adjusted net investment income for the quarter was 57 cents per share equating to an annualized net investment income yield on book value of 16.7%. Total investment income for the three months ended June 30th, 2024 and March 31st, 2024 was 108.6 million and 111.5 million respectively. The decrease in total investment income was primarily due to investments being placed on non-equal status as a result of underperformance during the quarter.

Stan Medishevsky: We would also note that we saw a slight decrease in pick income as a percentage of total investment income quarter over quarter. Distributions during the quarter remain consistent at 45 cents per share. Our spillover taxable income is approximately 143.3 million or $1.23 cents on a per share basis, which we believe provides continued stability on our consistent dividends and inception.

Unknown Executive: With that, let's open a line for Q&A. Thank you. If you'd like to ask a question, please signal by pressing star 1 on your telephone keypad. If you're using a speaker phone, please make sure your mute function is turned off to allow your signal to reach our equipment. Once again, that is star 1 to signal for a question, and we'll pause just briefly to a similar Q.

Phineon O'Shea: And we'll take our first question from Phineon O'Shea with Wells Fargo Security. Please go ahead. Hey, everyone. Good morning. On the appreciate your commentary on the notic roles in the beginning. I wanted to ask on ARR loans on a high level. Would you say that the EBITDA flip in those structures is what sort of catalyzes the reckoning or the credit event for underperforming name? And if so, or otherwise, what does the EBITDA flip wall look like? Is it, were they generally four years or five years? Thank you.

Alex G.: If in thanks for the question and thanks for joining. It's Alex. So with respect to the ARR loans. EBITDA flips or approaching EBITDA flips could be a factor. And we've seen that in some of these names where as the company was approaching an EBITDA flip. The company started to potentially cut back on R&D spent, for example, on investing in new technology. That you're cutting back and sales and marketing spend in order to generate EBITDA all while their competitors might be investing in new technology.

Alex G.: Which then leads to some some churn and some underperformance. And so that could be a factor, but it's only one factor. Other factors could also just be the fact that companies may have just taken on a bit much too much leverage when base rates are low. Or also, you really have to look at the underlying products and the technology that these companies have. Under our current platform, we're very selective and we choose ARR loans and companies where the products are mission critical, best in class technology. And the customers look at this as critical for their operations, regardless of the economic environment. With some of these other problems that we've seen, that was not the case.

Phineon O'Shea: Okay. Thanks. That's helpful. Sorry, I had myself unmute. To your mind, this, you know, origination was strong. I think the credit impacts this a little bit. What's the target leverage profile? Are you sort of where you want to be now or prefer to let it run down a little bit? So our target leverage has been around one and a quarter times. We are still below that. We finished a quarter at 1.09. So we still have some additional capacity to make new loans, as well as to actually provide some cushion to extent we need it. So, so our target is still at one and a quarter.

Phineon O'Shea: Very good. Thank you so much.

Unknown Executive: Excellent.

Mark Hughes: We'll take our next question from Mark Hughes with truth. Please go ahead. Yeah, thank you.

Mark Hughes: Good morning. Maybe another one. One other question on the recurring revenue loans. Are you perhaps looking at the differently on the go-forward basis and anything in the plural site, their business model that you might incorporate into future underwriting is kind of a something to be cautious about or do you think this is just unique to that company? Yeah, thanks for the question. So in terms of how the approach to recurring revenue loans, that has not changed since we started managing the platform more than a couple years ago.

Mark Hughes: So we continue to look at, as I mentioned, companies that have business class technology, mission critical to their customers, but we also look at margins. We want to make sure that these companies are highly profitable and also have sustainable growth. If you look at the loans that we've made more recently in the recurring revenue space, and again, we are very selective about where it's used to do it, it fits all those different profiles.

Mark Hughes: If you look at pull-out site at the time of investment, the company was at negative margins, and also the product is a good product, but at the same time, what we've seen is that as their customers have pulled back on spending, this company has seen some underperformance as a result. Understood. You had mentioned the deal flow. I think the deal flow up four times even as M&A was relatively steady. Could you expand on that, or clarify what the four times was, and then maybe comment in the context of that on selectivity?

Mark Hughes: This quarter was your success more a function of the deal flow, or do you just see more than you liked in this case? We certainly saw a healthy amount of flow. The number of originations that we've seen this year to date has been not significantly versus the same period last year, but also the quality of the businesses that we've seen has also increased. We've talked about how in the last couple quarters, we've seen EBITDA growth take higher than top line growth.

Mark Hughes: We saw that again this past quarter. There's been more flow. As Tucker mentioned, the number of deals, in terms of deal count that we've had is up double, but also just as a function of the capital that we have, it's been up four times. And so we're clearly taking share. But if you look at it as a percentage in terms of the deal that we've done versus the number of originations, it's still a mid single digit percentage, which again just shows how selective we are and how broad our funnel is with respect to the originations that we see.

Mark Hughes: Understood. And then you mentioned the overall interest coverage steady 1.5 times any sense of the You know, the proportion that are at one or below, has it been any change in that ratio out on the tail? Now, there's been no change to that, and still remains in the mid-single-digit percentage. Okay, thank you very much.

Mark Hughes: Thank you.

Derek Hewett: We'll move next to Derek. Derek Hewett with Bank of America. Your line is open.

Derek Hewett: Good morning. So, you had mentioned that PIC was slightly lower on a quarter over quarter basis, but it's still roughly 11% of revenue, which is moderately above the BDC period average. So, could you talk about your comfort level with TIC at current levels, and could we see it potentially drip higher over the next 12 to 18 months? Yeah, certainly this is a stance-begging. So, we've been monitoring the, you know, we always monitor the PIC as a percentage of the total investment income in the portfolio.

Derek Hewett: So, certainly, I think, you know, we saw about a 50-bit decline period over period. We had some one-time PIC items in the Q1 period, some due to, you know, restructures or other one-time items. And again, at this quarter, we did see a one-time item. So, I'd say normalize for that. You know, PIC would have been sub-10%. And we think that, you know, that we're comfortable with that, and we continue to monitor it.

Derek Hewett: Okay. And then in terms of the portfolio yield on on a cost basis, we look like it went down 30, 40 basis points. What was there anything in particular that caused that decline on a quarter basis? You know, I'd say for the most part, it's due to the yield on, for our non-acrolls coming out of the portfolio, the reduction in income. So, that's the primary driver.

Derek Hewett: Okay.

Derek Hewett: Thank you.

Unknown Executive: At this time, we have no further questions.

Alex Chi: I'd like to turn it back to Alex Chi for any additional or closing remarks. Great. Well, thank you everyone for joining our call.

Alex Chi: Please enjoy the rest of your summers. And we look forward to speaking with you again after our next quarter. Thank you. Goodbye.

Unknown Executive: This concludes today's conference. We thank you for your participation. You may disconnect your lines at this time. [inaudible]

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