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 8 speakers on the call.

Speaker 5

Good morning. This is Austin Neri, Head of the Vector Relations team for Goldman Sachs BDC Inc. and I would like to welcome everyone to the Goldman Sachs BDC Inc. second quarter 2025 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. 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 audio cast is copyrighted material of Goldman Sachs BDC Inc.

Speaker 5

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.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 8, 2025, for replay purposes. As many of you may be aware, we announced changes effective yesterday, August 7, to the Goldman Sachs BDC Inc. management team and private credit business writ large on July 21. I will now hand the call over to Alex Chi, former Co-CEO and President of Goldman Sachs BDC Inc.

Speaker 4

Thank you, Austin. After 31 years with the firm, I've made the 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. Looking back, I'm incredibly proud of what we've accomplished together. One aspect that stands out is the integration of Goldman Sachs BDC Inc. into the broader private credit platform at Goldman Sachs. When we pursued that, we envisioned that Goldman Sachs BDC Inc. 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 longstanding Co-CEO, David Miller, who I have had the sincere pleasure and privilege of working with.

Speaker 4

Vivek Bantwal, who I've worked with for nearly 25 years and is currently Global Co-Head of our private credit platform, will be stepping into my Co-CEO role alongside David. Tucker Greene, who is our Chief Operating Officer, will also assume the additional role as sole President of Goldman Sachs BDC Inc. and the BDC platform. Stanley Matuszewski 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. To my colleagues and team members, thank you for the trust, the collaboration, and the shared commitment over the years. Most importantly, thank you to our shareholders for your trust in investing your capital. It's been an honor. With that, I'll now turn the call over to David.

Speaker 3

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 Vivek 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 banking and special situations group in March of 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 its family of funds. In his previous role, Vivek was responsible for the firm's relationship lending book, as well as the acquisition finance and leveraged buyout book.

Speaker 3

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. Vivek's 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. Vivek's new role and long-tenured experience in investment banking in global markets aligns with the aforementioned integration to the firm's focus in elevating our BDC franchise, namely our flagship public and private non-traded BDCs, GSBD, and GS Credit. In addition, Tucker Greene, 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 sides of our complex of funds. With that, let me turn it over to my Co-CEO, Vivek.

Speaker 1

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 Q2 and what is guiding the performance of GSBD. After my comments, I will then turn the call over to David Miller and Tucker Greene to describe our portfolio activity and performance in more detail, before handing it over to Stanley Matuszewski to take us through our financial results. Finally, we'll open the line for Q&A.

Speaker 1

Despite the policy volatility that has defined 2024, exacerbated by the noise of Liberation Day, the M&A market has remained resilient. Total M&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, but many companies are seizing the opportunity to reevaluate their portfolio and strategic ambitions with a fresh perspective. 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 29 years.

Speaker 1

Despite the hesitation in public markets following tariff announcements in April, equity markets hovered near all-time highs at the end of Q2, 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&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 billion in direct loans have been refinanced via BSLs, while $11.7 billion 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&A market recovery, but the backlog has continued to build leading into year-end, despite a shifting macro backdrop with a 10-year moving in and a lower cost of capital. From a weighted average spreads 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 $0.38, and net asset value per share was $13.02 as of the quarter end, a decrease of 1.4% relative to the first quarter NAV, which was largely due to the $0.16 per share special dividend. Taking a closer look at the NAV rates for the quarter, if you were to exclude the supplemental and special dividend paid in Q2, our book NAV per share increased quarter over quarter.

Speaker 1

The Board declared a second quarter 2025 supplemental dividend of $0.03 per share payable on or about September 15, 2025, to shareholders of record as of August 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 $0.32 and a special dividend of $0.16 per share to shareholders of record as of September 30, 2025. We ended the quarter with a net debt-to-equity ratio of 1.12 times as of June 30, 2025, as compared to 1.16 times as of March 31, 2025.

Speaker 1

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. With that, let me turn over to our COO and President, Tucker, to discuss portfolio fundamentals.

Operator

Thanks, Vivek. As a result of our current trading levels, we utilized our 10b5-1 stock repurchase plan during the quarter. We repurchased north of 1 million shares for $12.1 million, which was NAV accretive. During the quarter, we made new investment commitments of approximately $247.9 million across 15 portfolio companies, comprised of nine new and six existing portfolio companies. This marks the highest level of new investment commitments since Q3 2024, which indicates our unique position in a competitive deal environment where we can be selective on credit quality and exhibit disciplines where we want to lean in. 100% of our originations during the quarter were in first lien senior secured loans, which reflect our continued bias in maintaining exposure to the top of the capital structure.

Operator

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 continued to see increased repayment activity, albeit at the tail end of the quarter. This has contributed to the further roll-off of our legacy book, with pre-2022 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 $288.9 million 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.

Operator

GS agented the first investment in the company in 2022, financed an acquisition in 2023, and acted as lead underwriter on its IPO in April 2024. 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 Zepp via a new mount and salt side process. This comes on the back of a successful restructure where GS and the existing lender group upsized the second lien position to a first lien.

Operator

Zepp is a producer of cleaning and maintenance solutions products. We believe our platform thrives in times of market volatility through the unique opportunities channeled 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 Provident Equity Partners as lead arranger 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 $3.8 billion in 162 portfolio companies across 40 different industries. 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 unitranche, 2.3% in a combination of preferred and common stock, 1.5% in second lien debt, as well as a negligible amount in unsecured debt.

Operator

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 yields 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. 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. As of June 30, 2025, investments on non-accrual status were 1.6% at fair value. It decreased from 1.9% at fair value as of March 31, 2025. This was the result of one new non-accrual, two names restored back to accrual status, and one exit.

Operator

During the quarter, a position from Streamline Media was placed on non-accrual status due to financial underperformance, while Kawa Solar's preferred acquisition, previously on non-accrual 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. As the lead and agent in the deal, we worked with our co-lenders and the 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 the call over to Stan to walk through our financial results.

Speaker 1

Thank you, David. We ended the second 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. Our ending net debt-to-equity ratio as of the end of the second quarter was 1.12 times, which continued to be below our target leverage of 1.25 times. At quarter end, approximately 50% of our total principal amount of debt outstanding was in unsecured debt. As of June 30, 2025, the company had approximately $793 million of borrowing capacity remaining under the revolving credit facility. 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 Truce RCF to extend the maturity date from October 2028 to June 2030 and reduce the spread by 10 bps.

Speaker 1

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. For the second quarter, GAAP and adjusted after-tax net investment income were $44.5 million and $43.5 million, respectively, as compared to $49.6 million and $48.8 million, 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%.

Speaker 1

Total investment income for the three months ended June 30, 2025, and March 31, 2025, was $91 million and $96.9 million, respectively. We observed a % of total investment income decrease to 8.3% for the second quarter from 10.5% in the first quarter of 2025. With that, I'll turn it back to David for closing remarks.

Operator

Thanks, Stan, 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 leading 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&A.

Speaker 6

Thank you. If you would like to ask a question, please signal by pressing star one on your telephone keypad. If you are using a speaker phone, please make sure that your mute function is turned off to allow your signal to reach our equipment. Again, press star one to ask your question. We'll pause for just a moment to allow everyone an opportunity to signal. We'll take our first question from Aaron Faganovich with Truist. Your line is now open.

Speaker 6

Thank you. Good morning. The investment activity is pretty strong. We have some repayment sales that exceeded that. Your leverage is still a touch, I guess, below what you deem as your target of 1.25. What are your thoughts on 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?

Speaker 6

Hey, good morning, Aaron. I think that was the result of health strength. Number one, some of the commitments we made slipped into the next quarter, so we'll see those fund. Across the platform, we continue to see very strong activity in new deal flow. I would expect that to pick up slightly over time as we fund those new deals plus the existing commitments that we put online.

Speaker 6

Great. Alternatively, maybe you could talk a little bit about some of the non-accruals that you're able to do. You mentioned some restructurings and some resolutions there. Can you give just a little more detail on those, please?

Speaker 6

Yeah, some are due to continued improvements like ProPT, you know, the company continues to improve, so that was taken off. Lithium, we restructured. We actually extended that or we restructured that into really two securities as we've talked about in the prepared comments. One, the cash paying note, and number two, an equity linked security where we're entitled to receive proceeds, excess proceeds over a period of time. Those were the two main exits that we had. We had Kawa Solar that came off due to a disposition. We added one new non-accrual, which was a strength year this year.

Speaker 6

Okay, great. Thanks for keeping the energy.

Speaker 6

All right. Thank you.

Speaker 6

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.

Speaker 6

Great. Thanks everyone for joining this quarter's call. We'll talk to you next quarter.

Speaker 6

Thank you.

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