Goldman Sachs BDC Q2 2025 Earnings Call Transcript

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Provided by Quartr
August 8, 2025

Key Takeaways

  • Neutral Sentiment: Leadership changes: Co-CEO Alex Chi is stepping down, with Vivek Banwall joining David Miller as co-CEO and Tucker Green elevated to President, aiming to ensure continuity and leverage deep internal expertise.
  • Positive Sentiment: Q2 financial highlights: Net investment income per share was $0.38 and NAV stood at $13.02 (-1.4% QoQ largely due to a $0.16 special dividend), while the board declared a $0.03 supplemental Q2 dividend and a Q3 base/special dividend of $0.32/$0.16.
  • Positive Sentiment: Robust portfolio activity: The BDC committed $247.9 million across 15 companies—the highest level since Q3 2024—with 100% of originations in first-lien senior secured loans and an average spread of ~500 bps over SOFR.
  • Positive Sentiment: Improved credit quality: Non-accrual investments decreased to 1.6% of fair value from 1.9%, thanks to strategic exits, restructurings, and upgrades of underperforming credits back to accrual status.
  • Positive Sentiment: Capital management: The firm repurchased over 1 million shares for $12.1 million (NAV accretive) and maintained net debt/equity at 1.12x, below the 1.25x target, with plans to deploy leverage as pipeline commitments fund.
AI Generated. May Contain Errors.
Earnings Conference Call
Goldman Sachs BDC Q2 2025
00:00 / 00:00

There are 3 speakers on the call.

Operator

Good morning. This is Austin Eery, Head of Investor Relations team for the Goldman Sachs BDC, Inc, and I would like to welcome everyone to the Goldman Sachs BDC, Inc. Second Quarter twenty twenty five Earnings Conference Call. Please note that all participants will be in listen only mode until the end of the call when we will open 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.

Operator

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. This audiocast 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.colemansachsbdc.com under the Investor Resources section and which include reconciliations of non GAAP measures to the most directly comparable GAAP measures.

Operator

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, 08/08/2025 for replay purposes. As many of you may be aware, we announced changes effective yesterday, August 7, to the Goldman Sachs BDC management team and private credit business for at large on July 21. I will now hand the call over

Speaker 1

to Alex Chi, former co CEO and president of Goldman Sachs BDC. Thank you, Austin. Well, after thirty one years with the firm, I've made a difficult decision to step down. This is not the result of any disagreements. Rather, it's a personal decision that I've made to pursue another professional opportunity.

Speaker 1

Looking back, I'm incredibly proud of what we've accomplished together. One aspect that stands out is the integration of GSBD into the broader private credit platform at Goldman Sachs. When we pursued that, we envisioned that GSBD would benefit from the broader origination capabilities, enhanced scale, and deep expertise across the firm. I'm very proud to say it has played out exactly that way. I want to emphasize that the platform is in a strong position, and I leave it in very capable hands, including my long standing co CEO, David Miller, who I have had the sincere pleasure and privilege of working with.

Speaker 1

Vivek Banwall, who I've worked with for nearly twenty five years and is currently global co head of our private credit platform, will be stepping into my co CEO role alongside David. Tucker Green, who is our chief operating officer, will also assume the additional role as sole president of GSBD and the BDC platform. And Stan Meduszewski will continue in the role of chief financial officer. I have full confidence in our leadership and in the platform's continued success. To the board of directors, thank you for your partnership and support.

Speaker 1

And to my colleagues and team members, thank you for the trust, the collaboration, and the shared commitment over the years. And most importantly, thank you to our shareholders for your trust in investing your capital. It's been an honor. And with that, I'll now turn the call over to David.

Operator

Alex, thank you. We wish you nothing but the best in your future endeavors, and thank you for not only being a friend, but an instrumental part of the growth of the private credit franchise. We will miss you. As Alex mentioned, we're excited to have BBAC formally join our BDC complex, which has been and continues to be an integral part of our broader private credit platform. When the legacy BDC business integrated with the legacy merchant bank and special situations group in March 2022, it created a unified private credit team that opened the aperture for our BDC complex to take advantage of proprietary origination and deal flow previously unavailable to a family of funds.

Operator

In his previous role, Vivek was responsible for the firm's relationship lending book as well as the acquisition finance and leveraged buyout book. Vivek served as Co Chair of the firm wide capital committee responsible for the approval and oversight of debt related transactions, including principal commitments of the firm's capital. Expertise in lending and risk management across leveraged finance and structured finance has helped to augment our private credit business in addition to expanding our origination capabilities. BZAC's new role and long tenured experience in investment banking and global markets aligns with the aforementioned integration through the firm focus in elevating our BDC franchise, namely our flagship public and private non traded BDCs, GSBD and GS Credit. In addition, Tucker Green, our COO, will be taking on the added role of President of the BDC complex, wherein he will take on more investor engagement, both on the equity and debt side across our complex of funds.

Operator

With that, let me turn it over

Speaker 1

to my co CEO, Vivek. Thank you, David. Our BDC Complex is core to our strategy, and the growth and positioning of GSBD in particular is a focus for myself and the management team. The Goldman Sachs global private credit platform is uniquely positioned at the intersection of asset management and one of the world's top investment banking and global markets franchises, creating an unparalleled sourcing engine of investment opportunities across the credit spectrum. With that, let's pivot to a recap of what we saw in the market in q two and what is guiding the performance of GSBD.

Speaker 1

After my comments, I will then turn the call over to David Miller and Tucker Green to describe our portfolio activity and performance in more detail before handing it over to Stan Matushevsky to take us through our financial results. And then finally, we'll open the line for Q and A. Despite the policy volatility that is defined at 2025, exacerbated by the noise of Liberation Day, the M and A market has remained resilient. Total M and A dollar volumes in the first half of the year were up 29% year over year as companies adapted to a change is constant mentality. We believe that uncertainty will persist, particularly in the tariff sensitive industries that many companies are seizing the opportunity to reevaluate their portfolio and strategic ambitions with a fresh perspective.

Speaker 1

A persistent lack of DPI or distributions to paid in capital, a continued buildup of dry powder, and rapidly accelerating innovation have driven sponsors to act, especially in sectors less sensitive to tariffs, such as software, domestic services, financial services, and digital infrastructure, which are the stalwarts of our platform and strategy that have been in place for over twenty nine years. Despite the hesitation in public markets following tariff announcements in April, equity markets hovered near all time highs at the '2 boosted by a series of successful IPOs. The public and private markets are necessary enablers of each other and will continue to fuel the M and A market in tandem, which again is a key part of our approach wherein we see bringing a fulsome term sheet, whether it be private, public, or a combination of both, a leading indicator of our right to win. The interplay between the broadly syndicated loan market and direct lenders remains strong. Roughly $16,000,000,000 in direct loans have been refinanced via BSLs, while 11,700,000,000 of BSLs have been refinanced by direct loans as of the end of the second quarter.

Speaker 1

Our banking colleagues believe we are in the second year of a five to seven year M and A market recovery, but the backlog has continued to build leading into year end despite a shifting macro backdrop with a ten year moving in and a lower cost of capital. From a weighted average spread perspective, we saw a modest tightening across the platform's new deals. Now turning to our second quarter results. Our net investment income per share for the quarter was 38¢, and net asset value per share was $13.02 as of quarter end, a decrease of 1.4% relative to the first quarter NAV, which was largely due to the 16¢ per share special dividend. Taking a closer look at the NAV bridge for the quarter, if you were to exclude the supplemental and special dividend paid in q two, our book NAV per share increased quarter over quarter.

Speaker 1

The board declared a second quarter twenty twenty five supplemental dividend of 3¢ per share payable on or about 09/15/2025 to shareholders of record as of 08/29/2025. Adjusted for the impact of the supplemental dividend related to the second quarter's earnings, the company's second quarter adjusted NAV per share is $12.99, which I would note is a non GAAP financial measure introduced as a result of the dividend policy change. The board also declared a third quarter base dividend per share of 32¢ and a special dividend of 16¢ per share to shareholders of record as of 09/30/2025. We ended the quarter with a net debt to equity ratio of 1.12 times as of 06/30/2025 as compared to 1.16 times as of 03/31/2025. We remain focused on delivering on our new dividend structure through the core earnings power of the portfolio and realizing exits of legacy portfolio companies while rotating into new vintage credits.

Speaker 1

With that, let me turn over to

Operator

our COO and president, Tucker, to discuss portfolio fundamentals. Thanks, Vivek. As a result of our current trading levels, we utilized our 10 b five one stock repurchase plan during the quarter. We repurchased north of 1,000,000 shares for 12,100,000.0, which was NAV accretive. During the quarter, we made new investment commitments of approximately 247,900,000.0 across 15 portfolio companies comprised of nine new and six existing portfolio companies.

Operator

This marks the highest level of new investment commitments since q three twenty twenty four, which indicates 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 lien senior secured loans, which reflects our continued bias in maintaining exposure to the top of the capital structure. Of the nine new portfolio companies, we served as lead on eight, which is a tangible indication of the power of the GS platform. The weighted average spread of new portfolio companies during the quarter was approximately 500 basis points over SOFR. We continue to see increased prepayment activity, albeit at the tail end of the quarter.

Operator

This has contributed to the further roll off of our legacy book with pre-twenty twenty two investments accounting for 80% of fair value of year to date repayments. This rotation remains a key focus for the GSBD portfolio as it recycles into new credits. Repayments totaled 288,000,000 for the quarter, primarily driven by full repayments and exits of 10 portfolio companies, seven of which were pre 2022. One notable payoff during the quarter was Rubrik. GS agent did the first investment in the company in 2022, financed an acquisition in 2023, and acted as lead underwriter on its IPO in April 2024.

Operator

Rubrik was founded in 2013 and is a market leader in cloud data management and data security. The credit facility remained outstanding post IPO at a spread of SOFR plus 700, but was eventually repaid in June 2025. This is an example of the power of our platform and illustrates our team's enhanced credit selection in the software space where we saw two and a half times revenue growth over the course of our investment. Another notable payoff initially invested in 2015 was ZEP via a New Mountain sell side process. This comes on the back of a successful restructure with GS and the existing lender group up here the second lien position to a first lien.

Operator

ZEP is a producer of cleaning and maintenance solutions products. We believe our platform thrives in times of market volatility through the unique opportunities channel the Goldman Sachs ecosystem and investment banking origination engine, which is beneficial to GSBD shareholders. During the quarter, we financed the acquisition of Global Critical Logistics by Providence Equity Partners as a leader ranger and agent. Global Critical Logistics is a leading provider of asset light specialty logistics solutions. At the end of the quarter, total investments at fair value and unfunded commitments in our portfolio were $3,800,000,000 and 162 portfolio companies across 40 different industries.

Operator

The portfolio at fair value is comprised of 97.4% in senior secured loans, including 90.2% in first lien, 5.7% in first lien last out unit tranche, 2.3% in a combination of preferred and common stock, one and a half percent in second lien debt, as well as a negligible amount in unsecured debt. The weighted average yield of our debt and income producing investments and amortized cost at the end of the second quarter was 10.7% as compared to 10.8% at the end of the first quarter. Despite a modest tightening in portfolio yield quarter over quarter, our portfolio companies have both top line growth and EBITDA growth quarter over quarter and year over year on a weighted average basis. Weighted average net debt to EBITDA remained flat quarter over quarter at 5.8 times, and our interest coverage was also flat quarter over quarter at 1.8 times. Let me turn the call back to David to discuss credit quality.

Operator

As of 06/30/2025, investments on nonaccrual status were 1.6% at fair value, a decrease from 1.9% at fair value as of 03/31/2025. This was the result of one new nonaccrual, two names restored back to accrual status and one exit. During the quarter, a position from Streamline Media was placed on nonaccrual status due to financial underperformance, while Kawah's preferred stock position previously on nonaccrual status was exited. Furthermore, a position from Bayside OpCo was restored back to accrual status due to enhanced performance. During the quarter, lithium was restructured and restored back to accrual status.

Operator

As the lead and agent in the deal, we worked with our co lenders and existing minority shareholder following a potential sale process. Our existing debt has been exchanged for two securities. Number one, a take back term loan debt and number two, a preferred security that gives the lender group claim on a portion of all future distributions by the company. We believe this outcome is the best opportunity to maximize recovery on our initial investment. I will now turn

Speaker 1

the call over to Stan to walk through our financial results. Thank you, David. We ended the 2025 with total portfolio investments at fair value and commitments of $3,800,000,000 outstanding debt of 1,800,000,000 and net assets of $1,500,000,000 Our ending net debt to equity ratio as of the end of the second quarter was 1.12x, which continues to be below our target leverage of 1.25x. At quarter end, approximately 50% of our total principal amount of unsecured debt. As of 06/30/2025, the company had approximately $793,000,000 of borrowing capacity remaining under the revolving credit facility.

Speaker 1

Given the tightening of credit spreads we've observed in the market, we continue to constructively engage our lenders to seek lower pricing on our credit facilities. During the quarter, we amended the Truist RCF to extend maturity date from October 2028 to June 2030 and reduce the spread by 10 bps. Before continuing to the income statement, as a reminder, in addition to GAAP financial measures, we also reference certain non GAAP or adjusted measures. 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 MMLC. These non GAAP measures remove the purchase discount amortization impact from our financial results.

Speaker 1

For the second quarter, GAAP and adjusted after tax net investment income were $44,500,000 and $43,500,000 respectively, as compared to $49,600,000 and $48,800,000 respectively, in the prior quarter. On a per share basis, GAAP net investment income was $0.38 Excluding the impact of asset acquisition accounting in connection with the merger with MMLC, adjusted net investment income for the quarter was $0.37 per share, equating to an annualized net investment income yield on book value of 11.4%. Total investment income for the three months ended 06/30/2025 and 03/31/2025 was $91,000,000 and $96,900,000 respectively. We observed take as a percent of total investment income decreased to 8.3% for the second quarter from 10.5% in the 2025. With that, I'll turn it back to David for closing

Operator

remarks. Thanks, Dan, and thanks, everyone, for joining our earnings call. Although the deal environment exhibited hesitancy and caution in Q2 as a result of the headline macro reaction, we see green shoots leaning into year end and the first half of next year that will continue to support active and high quality deployment across our credit complex. With that, let's open the line for Q and A.

Speaker 2

Thank We'll take our first question from Aaron Zaganovich with Truist. Your line is now open.

Operator

Thank you. Good morning. The the investment activity, you know, pretty strong, but you had some, you know, repayment sales that exceeded that. So your leverage is still a touch, I guess, below what you deem as your as your target of 1.25. What are what are your thoughts on, you know, getting leverage back up maybe in the second half of the year and whether or not your pipeline is sufficient to kind of fulfill that.

Operator

Hey, good morning, Aaron. Yes, I mean, I think that was the result of a couple of things. Number one, some of the commitments we made slipped into the next quarter, so you'll see those fund. Across the platform, we continue to see very strong activity and new deal flow. So I would expect that to tick up slightly over time as, you know, we fund those new deals plus the existing commitments that we put online.

Operator

Great. And then, alternatively, maybe you could talk a little bit about some of the non accruals that you exited. You mentioned some restructurings and and some resolutions there. Right? Can just little more detail on those, please?

Operator

Yeah. Some are due to continued improvements like ProPT, you know, something that continues to improve, so that was taken off. You know, lithium, we restructured. We actually exited that or we restructured that into really two securities as we've talked about in the prepared comments. One, a cash paying note, and then number two, an equity linked security where we're we're entitled to receive proceeds excess proceeds over a period of time.

Operator

So those were the two main exits that we had, and then we had power solar that came off due to a disposition. And then we added one new non new accrual, which was a screen view this year this quarter. Okay. Great. Thanks.

Operator

Appreciate the the answers. Alright. Thank you.

Speaker 2

As a reminder, if you would like to ask a question, you may press star one on your telephone keypad now. Again, that's star one to ask a question. Once again, that's star one if you would like to ask a question. It appears there are no further questions at this time. I'd like to turn the conference back over to David for any additional or closing remarks.

Operator

Great. Well, thanks, everyone, for joining this quarter's call. We'll talk to you next quarter. Thank you.

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