Q3 2025 Goldman Sachs BDC Inc Earnings Call

Speaker #1: Please stand by . The conference will begin shortly .

Speaker #2: Good morning . This is John Silas , a member of the Investor relations team for Goldman . I would like to welcome everyone to the Goldman Sachs BDC , Inc. .

Speaker #2: Third quarter 2020 Earnings Conference call . Please note that all participants will be in listen only mode until the end of the call .

Speaker #2: 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 .

Speaker #2: These statements represent the company's belief . Regarding future events that , by their nature , are uncertain and outside of the company's control .

Speaker #2: 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 #2: This audiocast is copyrighted material of Goldman 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 .

Speaker #2: Both of which can be found on the home page of our website at WW Goldman Sachs BDC, Inc. . Under the Investor Resources section , and which includes reconciliations of non-GAAP measures to the most directly comparable GAAP measures .

Speaker #2: 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 , November 7th , 2025 for replay purposes .

Speaker #2: I will now hand over the call to Vivek Bantwal , co-CEO of Goldman .

Speaker #3: Thank you , John . We will begin the call with our perspective on recent performance in light of a gradually improving macro environment .

Speaker #3: Next , we will discuss our investing activity and outline Gsb's positioning heading into the fourth quarter . Shortly after , David Miller and Tucker Greene will provide a detailed review of portfolio activity and performance before handing it over to Stanley Matuszewski to take us through the financial results .

Speaker #3: We will conclude by opening the line for Q&A. The M&A market has continued to remain resilient despite the uncertainty that persisted in the first half of the year, as total M&A dollar volumes in Q3 2025 were 40.9% higher year over year compared to Q3 2024.

Speaker #3: This surge is attributed mainly to a renewed risk-on sentiment among investors. Lower borrowing costs, greater market clarity, and a reset on valuation expectations between buyers and sellers in the market.

Speaker #3: As David will discuss later in the call , this pickup in activity has directly benefited GSB as our new investment commitments and repayments during the quarter reached the highest level since the integration of the platform in 2022 .

Speaker #3: Recent rate cuts with additional expected through year end into 2026 should accelerate deal activity , albeit spreads remain tight across the middle market and large cap juxtaposed against a tight spread environment in the public markets .

Speaker #3: Our proactive decision earlier this year to adjust our dividend policy and cut the base dividend positions , as well in what will be a lower yield environment where emphasis on credit selection will be paramount .

Speaker #3: Additionally , during times of increased competition for deal flow and high quality deals are proximity to our investment banking franchise serves as a competitive advantage for our platform to remain highly selective in evaluating opportunities .

Speaker #3: Broader credit dynamics remain top of mind for investors amid recent headlines concerning what we believe to be idiosyncratic issues versus a broader , systemic concern .

Speaker #3: We remain comfortable with risk dynamics in the private credit space , given the overall health of portfolio fundamentals . We continue to evaluate the impacts of tariffs , ability for companies to service debt , and risks involved with software investing , particularly with the recent growth of AI investing .

Speaker #3: We recognize the transformative potential of AI , but our primary focus remains on downside risk mitigation . We have developed a proprietary framework to assess both software and AI disruption risk that we had implemented in our underwriting for over two years .

Speaker #3: We remain focused on mission critical , market leading companies with core systems of record across all our software deals . Now , turning to our third quarter results .

Speaker #3: Our net income, or net investment income per share for the quarter, was $0.40, and net asset value per share was $12.75. As of quarter-end, this represents a decrease of 2.1% relative to the second quarter.

Speaker #3: Nav , which was partially due to the $0.16 per share special dividend , with some markdowns to previously underperforming names . This quarter marks the last of three special dividends that were announced earlier this year , along with changes to our dividend policy .

Speaker #3: The board declared a third quarter 2025 supplemental dividend of $0.04 per share , payable on or about December 15th , 2025 , to shareholders of record as of November 28th , 2025 .

Speaker #3: Adjusted for the impact of the supplemental dividend related to the third quarter's earnings , the company's third quarter adjusted Nav per share is $12.71 , which I would note is a non-GAAP financial measure introduced as a result of the dividend policy change .

Speaker #3: The board also declared a fourth quarter dividend per share of $0.32 to shareholders of record as of December 31st , 2025 . We ended the quarter with a net to net debt to equity ratio of 1.17 .

Speaker #3: As of September 30th , 2025 , as compared to 1.12 as of June 30th , 2025 , with that , let me turn it over to my co-CEO , David .

Speaker #4: Thanks , Vivek . During the quarter , we made new investment commitments of approximately 470.6 million across 27 portfolio companies , comprised of 13 new and 14 existing portfolio companies .

Speaker #4: This marks the highest level of new investment commitments since Q4 of 2021 , which demonstrates our unique position in a competitive deal environment where we can be selective on credit quality and exhibit discipline , where we want to lean in 100% of our originations during the quarter were in first line loans , reflecting our continued bias in maintaining exposure to the top of the capital structure of the 13 new portfolio companies .

Speaker #4: We served as lead on seven , which is a tangible indication of the power of the GIS platform . The impact of the GIS franchise was on full display through our financing of the acquisition of Shields Health Solutions .

Speaker #4: This was part of the broader take private of Walgreens , of which four silos were financed uniquely with GS private credit participating only in the shields transaction .

Speaker #4: This is a deal where investment banking colleagues advised the sponsor , Shields Health Solutions is one of the largest specialty pharmacy operators in the US .

Speaker #4: At the time of the investment . The transaction represented one of the largest take privates of all time . Another notable investment this past quarter was to support new tech merchant solutions , a wholly owned subsidiary of the publicly traded bank holding company Newtech , which offers a range of financial service products to small and medium sized businesses .

Speaker #4: Our financing package was used to support the refinancing of existing debt and to fund a payment to increase the bank holding capital base due to our continued relationship with the CEO.

Speaker #4: GE's private credit was able to secure the role of admin agent and sole lender to the company . The integration of our platform in 2022 allowed us to evaluate and invest in more high quality opportunities that span from the middle market to large cap , and these two examples shine a light on our continued ability to do so at attractive pricing .

Speaker #4: We believe our platform is well positioned by the unique opportunities that channel through Goldman Sachs ecosystem to take advantage of an active environment with .

Speaker #4: With that , let me turn it over to our president and chief Operating officer Tucker , to discuss portfolio repayments , fundamentals and credit quality .

Speaker #5: Thanks , David . For our portfolio companies , as of September 30th , 2025 , total investments at fair value were 3.2 billion , comprising of 98.2% in senior secured loans , 1.5% in a combination of preferred and common stock and a negligible amount in warrants .

Speaker #5: We continue to see increased repayment activity , with 374.4 million for the quarter , 86% of these repayments in the quarter were from pre 2022 investments , leaving less than 50% of our current portfolio at fair value in legacy assets .

Speaker #5: This rotation remains a key focus for the GSB portfolio as it recycles into new credits . One notable payoff during the quarter was Total Vision , first invested in the company in 2021 and financed an acquisition in 2022 .

Speaker #5: Total vision owns and operates optometry practices across California , which provide professional and retail services to patients . We received full repayment of the credit facility and equity co-investment .

Speaker #5: This illustrates the power of our platform and our team's enhanced management capabilities in the healthcare space . Throughout this past quarter , we utilized our ten B51 stock repurchase plan during the quarter , we repurchased north of 2.1 million shares for 25.1 million , which was Nav accretive at the end of the quarter .

Speaker #5: Total investments at fair value and unfunded commitments in our portfolio were 3.8 billion in 171 portfolio companies operating across 40 different industries . The weighted average yield of our debt and income producing investments at amortized cost at the end of the third quarter was 10.3% .

Speaker #5: As compared to 10.7% at the end of the second quarter . Despite a modest tightening in portfolio yield , quarter over quarter , our portfolio companies had both top line growth and EBITDA growth quarter over quarter and year over year on a weighted average basis .

Speaker #5: Our weighted average net debt to EBITDA remained flat quarter over quarter at 5.8 times , and our interest coverage increased quarter over quarter at 1.9 times from 1.8 times as of September 30th , 2025 .

Speaker #5: We placed one position from an existing portfolio company on Nonaccrual status . However , our overall investments on Nonaccrual status decreased to 1.5% of fair value from 1.6% as of the end of the second quarter .

Speaker #5: I'll now turn the call over to Stan to walk through our financial results.

Speaker #6: Thank you .

Speaker #5: Tucker .

Speaker #6: We ended the third quarter of 2025 with total portfolio investments at fair value , and commitments of 3.8 billion , outstanding debt of 1.8 billion , and net assets of 1.5 billion .

Speaker #6: Our ending net debt to equity ratio at the end of the third quarter was 1.17 times , which continues to be below our target leverage of 1.25 times at quarter end .

Speaker #6: Approximately 70% of our total principal amount of debt outstanding was in unsecured debt . As of September 30th , 2025 . The company had approximately 1,143,000,000 of borrowing capacity remaining under the revolving credit facility .

Speaker #6: Given the tightening of credit spreads , we've observed in the market , we continue to look for ways to optimize the pricing of our financing sources .

Speaker #6: During the quarter , we issued 400 million of a five year investment grade unsecured note with a coupon of 5.65% . We also hedged the issuance by swapping the coupon from fixed to floating to match floating rate investments .

Speaker #6: Over 50 investors participated in the company's day of live marketing , which resulted in the peak order book being four times oversubscribed . Before continuing to the income statement as a reminder , in addition to GAAP financial measures , we also reference certain non-GAAP or adjusted measures .

Speaker #6: This is intended to make our financial results easier to compare to results prior to our October 2020 merger with Goldman Sachs . Middle market Lending Corp , or Emlc .

Speaker #6: These non-GAAP measures remove the purchase discount , amortization impact from our financial results for the third quarter . GAAP and adjusted after tax net investment income was 45.3 million and 44.8 million , respectively , as compared to 44.5 million and 43.5 million , respectively , in the prior quarter .

Speaker #6: On a per share basis, GAAP net investment income was $0.40. Adjusted net investment income for the quarter in connection with the merger with EMLC was unchanged at $0.40 per share, equating to an annualized net investment income.

Speaker #6: Yield on book value of 12.5% . Total investment income for the three months ended September 30th , 2025 and June 30th , 2025 was 91.6 million and 91 million , respectively .

Speaker #6: We observed Pic as a percent of total investment income , decreased marginally to 8.2% for the third quarter , from 8.3% in the second quarter of 2025 , with that , I'll turn it back to David for closing remarks .

Speaker #4: Thanks , Dan , and thanks , everyone , for joining our earnings call . Although the perception of risk embedded within the credit market has changed , we continue to apply our staunch underwriting philosophy and remain focused around the maintenance of our dividend that we proactively addressed in light of a lower yielding environment we believe fund managers will be rewarded for their credit selection .

Speaker #4: With that , let's open the line for Q&A .

Speaker #7: Thank you . If you would like to ask a question , please signal by pressing star one 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 .

Speaker #7: Again , please press Star one to ask a question . We'll pause for just a moment . We'll go first to Aaron Ciganovic with Truist Securities .

Speaker #8: Thanks. In your comments, you mentioned that the M&A activity is at a level that you had not seen for a few years.

Speaker #8: You know , maybe you could just talk to us about your thoughts of that sustaining into next year and , you know , whether or not this is kind of more of a shorter term or maybe sort of a , longer term trend here .

Speaker #3: Thank you for the question . Yeah . Listen , we think this is a start of a longer term trend . This was , in our minds , really a question of when , not if .

Speaker #3: Because when you look at a the sort of cumulative amount of sort of dry powder in the private equity community . And you juxtapose that with the capital , that's invested in existing investments that have now been kind of , you know , sort of in portfolio for a period of time .

Speaker #3: And then you think about the fact that these more recent private equity vintages, from a DPI perspective, are really behind historical vintages.

Speaker #3: And so there's kind of a growing kind of need for private equity firms to a exit existing portfolios and then be given the dry powder sort of invest in new portfolios .

Speaker #3: So when you sort of look at all of those metrics , you know , it speaks to the need for kind of more M&A on the forward .

Speaker #3: The question then became sort of when we started to see some signs of that early this year , obviously , as you kind of got into April , there was sort of a pullback as you saw kind of broader volatility and , you know , focus on tariffs and the like .

Speaker #3: And what we've seen more recently is really kind of back to that risk-on sentiment, where people are looking to kind of do things strategically.

Speaker #3: And so we're seeing that in the sponsor community . But we're also seeing that in the corporate community in terms of M&A activity .

Speaker #3: And so we think we're in the early stages of that . And we think that as we get 2026 , we'll see more of that .

Speaker #8: Okay . Thanks . And I guess with how how much of the increase in activity would you have to see for spreads maybe to

Speaker #8: start to widen out a little bit ? You know , basically with supply enough supply essentially to offset some of the high demand .

Speaker #9: Look , that's a little hard . Hard question to say . You know , we're not really anticipating into spreads to widen much .

Speaker #9: You know , we're we're hopeful that that might happen with the pickup M&A . But given the dry powder you know we're not planning on that in the near term .

Speaker #9: I think what we like about our platform is we continue to see a bunch of unique originations that allow us to achieve higher spreads because of that unique origination platform.

Speaker #9: And being tied to Goldman Sachs . But you know , your regular way , a plus credit . We don't think is going to have meaningful spread widening anytime soon .

Speaker #8: And then on credit , you had had one new investment on Non-accrual at dental brands . I think that's been kind of a watch list for a bit .

Speaker #8: Is maybe you just talk a little bit about the performance there in Non-accruals were relatively stable . And you had some unrealized and realized losses in the quarter .

Speaker #8: Were there any , you know , impacts from from some of your prior non-accruals in there ?

Speaker #9: Well , look , I mean , as you as you mentioned , this had been in the portfolio for some time . You know , we had had some more junior securities that were already risk rated for as a result of underperformance in a previous restructuring .

Speaker #9: You know , the the company continues to underperform our expectations . So we put a more senior tranche on Non-accrual now . So it's not a new name .

Speaker #9: It's been risk rated for for some time . But the good news is this is a tiny position in this fund . I think at some $800,000 of exposure .

Speaker #9: So it doesn't meaningfully move the needle for us from an overall non-accruals . And as Tucker mentioned in his prepared comments , you know , it did take down slightly from 1.6 to 1.5% as a percentage of fair value .

Speaker #9: So , you know , we feel over overall portfolio quality has been stable where we've seen a continued write downs is on the more legacy names where , you know , we're not seeing a big turnaround .

Speaker #9: So we took additional markdowns there on those names . But other than outside of those legacy names , we feel pretty good about the portfolio .

Speaker #8: Great . Appreciate the color . Thank you .

Speaker #7: As a reminder , that is star one . If you would like to ask a question , we'll pause for just a moment .

Speaker #7: The question and answer portion has concluded . I would now like to turn the call back over to Vivek for any closing comments .

Speaker #3: Thanks everyone for their time this morning . And if more questions come up , feel free to contact our team . Thank you everyone and have a great weekend .