Goldman Sachs BDC, Inc. (NYSE:GSBD) Q2 2025 Earnings Call Transcript

Goldman Sachs BDC, Inc. (NYSE:GSBD) Q2 2025 Earnings Call Transcript August 8, 2025

Austin Neri: Good morning. This is Austin Neri, 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 2025 Earnings Conference Call. [Operator Instructions] 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 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.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 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.

Alex Chi: Thank you, Austin. Well, 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 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.

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 GSBD and the BDC platform. And Stan Matuszewski will continue in the role of Chief Financial Officer. I have full confidence in their leadership and in the platform’s continued success. The Board of Directors, thank you for your partnership and support. 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.

David Nathan Miller: 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 bank 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 leverage buyout book.

Vivek served as Co-Chair of the Firmwide 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 and 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 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.

With that, let me turn it over to my co-CEO, Vivek.

Vivek Bantwal: 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 Stan Matuszewski to take us through our financial results.

And then finally, we’ll open the line for Q&A. Despite the policy volatility that has defined 2025, 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 that 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.

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. Our banking colleagues believe we are in the second year of a 5- to 7-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 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 bridge 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. 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 1.12x as of June 30, 2025 as compared to 1.16x as of March 31, 2025. We remain focused on delivering on our new dividend structure through the core earnings power of the portfolio and realizing exit of legacy portfolio companies while rotating into new vintage credits. With that, let me turn it over to our COO and President, Tucker, to discuss portfolio fundamentals.

Tucker Greene: 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 9 new and 6 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 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 9 new portfolio companies, we served as lead on 8, 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 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 million for the quarter, primarily driven by full repayments and exits of 10 portfolio companies, 7 of which were pre-2022. One notable payoff during the quarter was Rubrik.

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 a 2.5x 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-tiered the second lien position to a first lien.

Zep is a producer of cleaning and maintenance solutions products. We believe our platform thrives in times of market volatility through the unique opportunities to 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 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 and 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.

The weighted average yield of our debt and income-producing investments at 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. Our weighted average net debt to EBITDA remained flat quarter-over-quarter at 5.8x, and our interest coverage was also flat quarter-over-quarter at 1.8x. Let me turn the call back to David to discuss credit quality.

David Nathan Miller: As of June 30, 2025, investments on nonaccrual status were 1.6% at fair value, a decrease from 1.9% at fair value as of March 31, 2025. This was a result of 1 new nonaccrual, 2 names restored back to accrual status and 1 exit. During the quarter, a position from Streamland Media was placed on nonaccrual status due to financial underperformance, while Kawa’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. As the lead and agent in the deal, we work with our co-lenders and the existing minority shareholder following a potential sale process.

Our existing debt has been exchanged for 2 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.

Stanley Matuszewski: 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 1.12x, which continues to be below our target leverage of 1.25x. 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 Truist RCF to extend maturity date from October 2028 to June 2030 and reduced 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. 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%. Total investment income for the 3 months ended June 30, 2025 and March 31, 2025, was $91 million and $96.9 million, respectively. We observed PIK as a percent of total investment income decreased 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.

David Nathan Miller: 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 lean in the year-end in 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.

Q&A Session

Operator: [Operator Instructions] We’ll take our first question from Arren Cyganovich with Truist.

Arren Saul Cyganovich: The investment activity is pretty strong, but you had some repayment sales that exceeded that. So 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?

David Nathan Miller: Yes, I mean, I think that was a 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 we fund those new deals plus the existing commitments that we put online.

Arren Saul Cyganovich: Great. And then alternatively, maybe you could talk a little bit about some of the nonaccruals that you exited. You mentioned some restructurings and some resolutions there. Could you just a little more detail on those, please?

David Nathan Miller: Yes, somewhat due to continued improvements like Pro-PT, the company continues to improve. So that was taken off. Lithium, we restructured. We actually exited that or we restructured that into really 2 securities, as we talked about in the prepared comments, one, a cash paying note; and then number two, an equity-linked security, where we’re entitled to receive proceeds — excess proceeds over a period of time. So those were the 2 main exits that we had. And then we had Kawa Solar that came off due to a disposition. And then we added one nonaccrual, which was [indiscernible] this year — this quarter.

Operator: [Operator Instructions] 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.

David Nathan Miller: Great. Well, thanks, everyone, for joining this quarter’s call. We’ll talk to you next quarter. Thank you.