Golub Capital BDC, Inc. Declares Fiscal Year 2018 Third Quarter Distribution of $0.32 Per Share and Announces Fiscal Year 2018 Second Quarter Financial Results
NEW YORK, May 7, 2018 /PRNewswire/ -- Golub Capital BDC, Inc., a business development company (NASDAQ: GBDC), today announced its financial results for its second fiscal quarter ended March 31, 2018.
Except where the context suggests otherwise, the terms "we," "us," "our," and "Company" refer to Golub Capital BDC, Inc. and its consolidated subsidiaries. "GC Advisors" refers to GC Advisors LLC, our investment adviser.
SELECTED FINANCIAL HIGHLIGHTS | |||||||
(in thousands, expect per share data) | |||||||
March 31, 2018 | December 31, 2017 | ||||||
Investment portfolio, at fair value | $ | 1,759,807 | $ | 1,723,372 | |||
Total assets | $ | 1,816,033 | $ | 1,807,327 | |||
Net asset value per share | $ | 16.11 | $ | 16.04 | |||
Quarter Ended | |||||||
March 31, 2018 | December 31, 2017 | ||||||
Investment income | $ | 36,897 | $ | 36,450 | |||
Net investment income | $ | 18,528 | $ | 18,511 | |||
Net gain (loss) on investments | $ | 4,504 | $ | 2,804 | |||
Net increase in net assets resulting from operations | $ | 23,032 | $ | 21,315 | |||
Earnings per share | $ | 0.39 | $ | 0.36 | |||
Net gain (loss) on investments per share | $ | 0.08 | $ | 0.05 | |||
Net investment income per share | $ | 0.31 | $ | 0.31 | |||
Accrual for capital gain incentive fee per share | $ | 0.01 | $ | 0.01 | |||
Net investment income before capital gain incentive fee accrual per share (1) | $ | 0.32 | $ | 0.32 | |||
(1) As a supplement to U.S. generally accepted accounting principles ("GAAP") financial measures, the Company has provided this non-GAAP financial measure. The Company believes that this non-GAAP financial measure is useful as it excludes the accrual of the capital gain incentive fee, including the portion of such accrual that is not contractually payable under the terms of the Company's investment advisory agreement with GC Advisors. (the "Investment Advisory Agreement"). As of March 31, 2018, the capital gain incentive fee accrued by the Company in accordance with GAAP is $7.2 million, of which $0.0 million was payable as a capital gain incentive fee pursuant to the Investment Advisory Agreement as of March 31, 2018. Any payment due under the terms of the Investment Advisory Agreement is calculated in arrears as of the end of each calendar year or upon termination of the Investment Advisory Agreement. The Company paid a $1.2 million capital gain incentive fee calculated in accordance with the Investment Advisory Agreement as of December 31, 2017. The Company did not pay any capital gain incentive fee under the Investment Advisory Agreement for any period ended prior to December 31, 2017. Although this non-GAAP financial measure is intended to enhance investors' understanding of the Company's business and performance, this non GAAP financial measure should not be considered an alternative to GAAP. | |||||||
Second Fiscal Quarter 2018 Highlights
- Net increase in net assets resulting from operations for the quarter ended March 31, 2018 was $23.0 million, or $0.39 per share, as compared to $21.3 million, or $0.36 per share, for the quarter ended December 31, 2017;
- Net investment income for the quarter ended March 31, 2018 was $18.5 million, or $0.31 per share, as compared to $18.5 million, or $0.31 per share, for the quarter ended December 31, 2017;
- Net investment income for the quarter ended March 31, 2018, excluding a $0.8 million accrual for the capital gain incentive fee under GAAP, was $19.3 million, or $0.32 per share, as compared to $19.2 million, or $0.32 per share, excluding a $0.7 million accrual for the capital gain incentive fee under GAAP, for the quarter ended December 31, 2017;
- Net gain on investments for the quarter ended March 31, 2018 was $4.5 million, or $0.08 per share, as compared to a net gain of $2.8 million, or $0.05 per share, for the quarter ended December 31, 2017; and
- Our board of directors declared on May 4, 2018 a quarterly distribution of $0.32 per share payable on June 28, 2018 to stockholders of record as of June 8, 2018.
Portfolio and Investment Activities
As of March 31, 2018, the Company had investments in 189 portfolio companies with a total fair value of $1,664.8 million and had investments in Senior Loan Fund LLC ("SLF") with a total fair value of $95.0 million. This compares to the Company's portfolio as of December 31, 2017, as of which date the Company had investments in 190 portfolio companies with a total fair value of $1,631.8 million and investments in SLF with a total fair value of $91.6 million. Investments in portfolio companies as of March 31, 2018 and December 31, 2017 consisted of the following:
As of March 31, 2018 | As of December 31, 2017 | |||||||||||||
Investments | Percentage of | Investments | Percentage of | |||||||||||
Investment | at Fair Value | Total | at Fair Value | Total | ||||||||||
Type | (In thousands) | Investments | (In thousands) | Investments | ||||||||||
Senior secured | $ | 198,138 | 11.3 | % | $ | 193,459 | 11.2 | % | ||||||
One stop | 1,403,395 | 79.7 | 1,380,000 | 80.1 | ||||||||||
Second lien | 9,435 | 0.5 | 9,435 | 0.6 | ||||||||||
Subordinated debt | 62 | 0.0 | * | 60 | 0.0 | * | ||||||||
LLC equity interests in SLF | 94,991 | 5.4 | 91,591 | 5.3 | ||||||||||
Equity | 53,786 | 3.1 | 48,827 | 2.8 | ||||||||||
Total | $ | 1,759,807 | 100.0 | % | $ | 1,723,372 | 100.0 | % | ||||||
* Represents an amount less than 0.1%. | ||||||||||||||
The following table shows the asset mix of our new investment commitments for the three months ended March 31, 2018:
For the three months ended March 31, 2018 | ||||||
New Investment | ||||||
Commitments | Percentage of | |||||
(In thousands) | Commitments | |||||
Senior secured | $ | 27,383 | 19.8 | % | ||
One stop | 106,456 | 76.9 | ||||
LLC equity interests in SLF | 3,062 | 2.2 | ||||
Equity | 1,519 | 1.1 | ||||
Total new investment commitments | $ | 138,420 | 100.0 | % | ||
Overall, total investments at fair value increased by 2.1%, or $36.4 million, during the three months ended March 31, 2018 after factoring in debt repayments, sales of securities, net fundings on revolvers and net change in unrealized gain (loss). Total investments at fair value held by SLF decreased by 8.5%, or $23.8 million, after factoring in debt repayments, sales of securities, net fundings on revolvers and net change in unrealized gain (loss).
For the three months ended March 31, 2018, the weighted average annualized investment income yield (which includes interest and fee income and amortization of capitalized fees and discounts) and the weighted average annualized income yield (which excludes income resulting from amortization of capitalized fees and discounts) on the fair value of earning portfolio investments on the Company's portfolio were 8.8% and 8.2%, respectively.
Consolidated Results of Operations
Total investment income for the quarters ended March 31, 2018 and December 31, 2017 was $36.9 million and $36.5 million, respectively. This $0.4 million increase was primarily attributable to an increase in London Interbank offered Rate ("LIBOR") and an increase in the average earning investment balance. These increases were partially offset by a decline in dividend income from equity investments, excluding our investment in SLF.
Total expenses for the quarters ended March 31, 2018 and December 31, 2017 were $18.4 million and $17.9 million, respectively. This $0.5 million increase was primarily attributable to higher interest and other debt financing expenses caused by an increase in the weighted average of outstanding borrowings and an increase in LIBOR.
During the quarter ended March 31, 2018, the Company recorded a net realized loss of $0.6 million and recorded net unrealized appreciation of $5.1 million. The net realized loss was primarily due to the write off of one non-accrual portfolio company investment which was partially offset by the sale of an equity investment. The net unrealized appreciation was due to the reversal of unrealized depreciation associated with the write off of the portfolio company investment coupled with the rise in market prices on several middle market debt and equity investments.
Liquidity and Capital Resources
The Company's liquidity and capital resources are derived from the Company's debt securitizations (also known as collateralized loan obligations), U.S. Small Business Administration ("SBA") debentures, revolving credit facilities and cash flow from operations. The Company's primary uses of funds from operations include investments in portfolio companies and payment of fees and other expenses that the Company incurs. The Company has used, and expects to continue to use, its debt securitizations, SBA debentures, revolving credit facilities, proceeds from its investment portfolio and proceeds from offerings of its securities and its dividend reinvestment plan to finance its investment objectives.
As of March 31, 2018, the Company had cash and cash equivalents of $5.9 million, restricted cash and cash equivalents of $42.5 million and $835.2 million of debt outstanding. As of March 31, 2018, the Company had $63.3 million of remaining commitments and $63.3 million available for additional borrowings on its senior secured revolving credit facility with Wells Fargo Bank, N.A., as lender and administrative agent, subject to leverage and borrowing base restrictions. As of March 31, 2018, through our licensees, we had $37.5 million of SBA debenture commitments, of which $9.5 million was available to be drawn, subject to customary SBA regulatory requirements.
On May 4, 2018, the Company's Board of Directors declared a quarterly distribution of $0.32 per share, payable on June 28, 2018 to holders of record as of June 8, 2018.
Related Party Stock
During the first calendar quarter of 2018, the Golub Capital Employee Grant Program Rabbi Trust (the "Trust") purchased approximately $7.2 million, or 396,099 shares, of our common stock, for the purpose of awarding incentive compensation to employees of GC Advisors LLC and its affiliates.
Portfolio and Asset Quality
GC Advisors regularly assesses the risk profile of each of the Company's investments and rates each of them based on an internal system developed by Golub Capital and its affiliates. This system is not generally accepted in our industry or used by our competitors. It is based on the following categories, which we refer to as GC Advisors' internal performance ratings:
Internal Performance Ratings | ||
Rating | Definition | |
5 | Involves the least amount of risk in our portfolio. The borrower is performing above expectations, and the trends and risk factors are generally favorable. | |
4 | Involves an acceptable level of risk that is similar to the risk at the time of origination. The borrower is generally performing as expected, and the risk factors are neutral to favorable. | |
3 | Involves a borrower performing below expectations and indicates that the loan's risk has increased somewhat since origination. The borrower may be out of compliance with debt covenants; however, loan payments are generally not past due. | |
2 | Involves a borrower performing materially below expectations and indicates that the loan's risk has increased materially since origination. In addition to the borrower being generally out of compliance with debt covenants, loan payments may be past due (but generally not more than 180 days past due). | |
1 | Involves a borrower performing substantially below expectations and indicates that the loan's risk has substantially increased since origination. Most or all of the debt covenants are out of compliance and payments are substantially delinquent. Loans rated 1 are not anticipated to be repaid in full and we will reduce the fair market value of the loan to the amount we anticipate will be recovered. | |
Our internal performance ratings do not constitute any rating of investments by a nationally recognized statistical rating organization or represent or reflect any third-party assessment of any of our investments.
The following table shows the distribution of the Company's investments on the 1 to 5 internal performance rating scale at fair value as of March 31, 2018 and December 31, 2017:
March 31, 2018 | December 31, 2017 | |||||||||||||
Internal | Investments | Percentage of | Investments | Percentage of | ||||||||||
Performance | at Fair Value | Total | at Fair Value | Total | ||||||||||
Rating | (In thousands) | Investments | (In thousands) | Investments | ||||||||||
5 | $ | 219,056 | 12.4 | % | $ | 137,146 | 8.0 | % | ||||||
4 | 1,362,836 | 77.4 | 1,411,330 | 81.9 | ||||||||||
3 | 174,033 | 9.9 | 170,010 | 9.9 | ||||||||||
2 | 2,702 | 0.2 | 3,720 | 0.2 | ||||||||||
1 | 1,180 | 0.1 | 1,166 | 0.0* | ||||||||||
Total | $ | 1,759,807 | 100.0 | % | $ | 1,723,372 | 100.0 | % | ||||||
* Represents an amount less than 0.1%. | ||||||||||||||
Conference Call
The Company will host an earnings conference call at 11:00 a.m. (Eastern Time) on Tuesday, May 8, 2018 to discuss the quarterly financial results. All interested parties may participate in the conference call by dialing (800) 736-4610 approximately 10-15 minutes prior to the call; international callers should dial (212) 231-2911. Participants should reference Golub Capital BDC, Inc. when prompted. For a slide presentation that we intend to refer to on the earnings conference call, please visit the Investor Resources link on the homepage of our website (www.golubcapitalbdc.com) and click on the Quarter Ended 3.31.18 Investor Presentation under Events/Presentations. An archived replay of the call will be available shortly after the call until 1:00 p.m. (Eastern Time) on June 7, 2018. To hear the replay, please dial (800) 633-8284. International dialers, please dial (402) 977-9140. For all replays, please reference program ID number 21887410.
Golub Capital BDC, Inc. and Subsidiaries | |||||||
Consolidated Statements of Financial Condition | |||||||
(In thousands, except share and per share data) | |||||||
March 31, 2018 | December 31, 2017 | ||||||
Assets | (unaudited) | (audited) | |||||
Investments, at fair value (cost of $1,738,586 and $1,707,273, respectively) | $ | 1,759,807 | $ | 1,723,372 | |||
Cash and cash equivalents | 5,868 | 5,750 | |||||
Restricted cash and cash equivalents | 42,488 | 71,380 | |||||
Interest receivable | 7,640 | 6,536 | |||||
Other assets | 230 | 289 | |||||
Total Assets | $ | 1,816,033 | $ | 1,807,327 | |||
Liabilities | |||||||
Debt | $ | 835,200 | $ | 828,300 | |||
Less unamortized debt issuance costs | 3,920 | 3,514 | |||||
Debt less unamortized debt issuance costs | 831,280 | 824,786 | |||||
Interest payable | 2,662 | 6,132 | |||||
Management and incentive fees payable | 15,159 | 15,506 | |||||
Accounts payable and accrued expenses | 2,147 | 1,973 | |||||
Payable for open trades | 350 | 550 | |||||
Accrued trustee fees | 79 | 78 | |||||
Total Liabilities | 851,677 | 849,025 | |||||
Net Assets | |||||||
Preferred stock, par value $0.001 per share, 1,000,000 shares authorized, zero shares issued | — | — | |||||
Common stock, par value $0.001 per share, 100,000,000 shares authorized, 59,867,531 | 60 | 60 | |||||
Paid in capital in excess of par | 944,318 | 942,179 | |||||
Undistributed (over distribution of) net investment income | (976) | (387) | |||||
Net unrealized appreciation (depreciation) on investments | 23,889 | 18,767 | |||||
Net realized gain (loss) on investments | (2,935) | (2,317) | |||||
Total Net Assets | 964,356 | 958,302 | |||||
Total Liabilities and Total Net Assets | $ | 1,816,033 | $ | 1,807,327 | |||
Number of common shares outstanding | 59,867,531 | 59,741,248 | |||||
Net asset value per common share | $ | 16.11 | $ | 16.04 | |||
Golub Capital BDC, Inc. and Subsidiaries | ||||||||
Consolidated Statements of Operations | ||||||||
(In thousands, except share and per share data) | ||||||||
Three months ended | ||||||||
March 31, 2018 | December 31, 2017 | |||||||
(unaudited) | (unaudited) | |||||||
Investment income | ||||||||
Interest income | $ | 34,369 | $ | 33,354 | ||||
Dividend income | 1,866 | 2,562 | ||||||
Fee income | 662 | 534 | ||||||
Total investment income | 36,897 | 36,450 | ||||||
Expenses | ||||||||
Interest and other debt financing expenses | 7,906 | 7,714 | ||||||
Base management fee | 5,929 | 5,930 | ||||||
Incentive fee | 3,011 | 2,871 | ||||||
Professional fees | 775 | 688 | ||||||
Administrative service fee | 621 | 618 | ||||||
General and administrative expenses | 127 | 118 | ||||||
Total expenses | 18,369 | 17,939 | ||||||
Net investment income | 18,528 | 18,511 | ||||||
Net gain (loss) on investments | ||||||||
Net realized gain (loss) on investments | (618) | 481 | ||||||
Net change in unrealized appreciation (depreciation) on investments | 5,122 | 2,323 | ||||||
Net gain (loss) on investments | 4,504 | 2,804 | ||||||
Net increase in net assets resulting from operations | $ | 23,032 | $ | 21,315 | ||||
Per Common Share Data | ||||||||
Basic and diluted earnings per common share | $ | 0.39 | $ | 0.36 | ||||
Dividends and distributions declared per common share | $ | 0.32 | $ | 0.40 | ||||
Basic and diluted weighted average common shares outstanding | 59,744,054 | 59,584,421 | ||||||
ABOUT GOLUB CAPITAL BDC, INC.
Golub Capital BDC, Inc. ("Golub Capital BDC") is an externally-managed, non-diversified closed-end management investment company that has elected to be treated as a business development company under the Investment Company Act of 1940. Golub Capital BDC invests primarily in one stop and other senior secured loans of U.S. middle-market companies that are often sponsored by private equity investors. Golub Capital BDC's investment activities are managed by its investment adviser, GC Advisors LLC, an affiliate of the Golub Capital group of companies ("Golub Capital").
ABOUT GOLUB CAPITAL
Golub Capital is a nationally recognized credit asset manager with over $25 billion of capital under management. For over 20 years, the firm has provided credit to help medium-sized U.S. businesses grow. The firm's award-winning middle market lending business helps provide financing for middle market companies and their private equity sponsors. Golub Capital's credit expertise also forms the foundation of its Late Stage Lending and Broadly Syndicated Loan businesses. Golub Capital has worked hard to build a reputation as a fast, reliable provider of compelling financing solutions, and we believe this has inspired repeat clients and investors. Today, the firm has over 350 employees with lending offices in Chicago, New York and San Francisco. For more information, please visit www.golubcapital.com.
FORWARD-LOOKING STATEMENTS
This press release may contain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Statements other than statements of historical facts included in this press release may constitute forward-looking statements and are not guarantees of future performance or results and involve a number of risks and uncertainties. Actual results may differ materially from those expressed or implied in the forward-looking statements as a result of a number of factors, including those described from time to time in filings with the Securities and Exchange Commission. Golub Capital BDC, Inc. undertakes no duty to update any forward-looking statement made herein. All forward-looking statements speak only as of the date of this press release.
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