Full Transcript: Golub Capital BDC Q3 2026 Earnings Call

Golub Capital BDC (NASDAQ: GBDC ) released third-quarter financial results and hosted an earnings call on Tuesday. Read the complete transcript below. APIs provide real-time access to earnings call transcripts and financial data. Visit to learn more.

2%. 4%, attributed to ongoing elevated credit stress and industry-wide challenges. The company's investment strategy remains focused on first lien senior secured loans, with a stable portfolio and low non-accrual rates, highlighted by a $13 million commitment to new investments and strategic share repurchases. Management noted a shift in market conditions towards a more lender-friendly environment, with improved spreads and terms expected as M&A activity picks up.

33 per share and highlighted strong liquidity and low borrowing costs as key competitive advantages. Full Transcript OPERATOR Hello everyone and welcome to GBDC's earnings call for the fiscal quarter ended June 30, 2026. Before we begin, I'd like to take a moment to remind our listeners that remarks made during this call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Statements other than statements of historical facts made during this call 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 in the forward-looking statements as a result of a number of factors including those described from time to time in GBDC's SEC filings. For materials we intend to refer to on today's earnings call, please visit the Investor Resources tab on the homepage of our website, which is and click on the Events and Presentations link. Our earnings release is also available on our website in the Investor Resources section. As a reminder, this call is being recorded.

With that, I'm pleased to turn the call over to David Golub, Chief Executive Officer of Golub Capital BDC. David B. Golub, Chief Executive Officer Hello everybody and thanks for joining us today. This is David Golub and I'm joined by Tim Topicz, our Chief Operating Officer, Rob Toucher, a Senior Managing Director and officer of Golub Capital BDC, and Chris Ericson, our Chief Financial Officer.

For those of you who are new to GBDC, our investment strategy is focused on providing first lien senior secured loans to healthy, resilient middle market companies, companies that are backed by strong, partnership-oriented private equity sponsors. Yesterday we issued our earnings press release for the fiscal quarter ended June 30th and we posted an earnings presentation on our website. We'll be referring to this presentation during today's call. I'm going to start with headlines and a brief summary of performance for the quarter.

Then Tim, Rob and Chris are going to walk you through our operating and financial performance in more detail. Finally, I'll wrap up with some observations on current market conditions and our outlook and we'll take questions. So the headline for the quarter is this: GBDC's performance was much better than last quarter. Not as good as we'd like and better than it looks.

So that's a lot. That's a three-parter. So let me take a few moments to unpack each of the three parts of that headline. First, GBDC's performance was much better than last quarter.

That's pretty clear from the data. 22. 2%. The key driver of the improvement quarter over quarter was a decrease in adjusted net realized and unrealized losses.

12 per share this quarter. 5%. 33 per share distribution. Now, for those of you who are familiar with GBDC, you can see from the data I just described why the quarter was not as good as we'd like.

4% net IRR on NAV since our IPO in 2010. 2% it is clearly a few points below GBDC's 16-year-plus average. Now, you've heard us talk for several quarters about how we're in a credit cycle, how we're at a period that's marked by sustained elevated credit stress. We've also talked, including on last quarter's call, about our view that what we're seeing fits a pattern.

It's a pattern that when things shift from a borrower-friendly environment to a more lender-friendly one, we tend to see a period of bumpiness in results. So I'm not entirely surprised to see a degree of bumpiness in GBDC's results for the quarter. And my expectation is that we're going to see a large degree of bumpiness across the BDC industry as results come in. That all said, some quarters feel worse than the numbers and some quarters feel better than the numbers.

This quarter feels to me better than the numbers. Why do I think that? 12 per share of loss, they arose primarily from a small number of junior debt and equity positions and not from the core debt portfolio. We saw a lot of stability in the core debt portfolio.

This is important because our experience is that the kinds of write-downs that we had, they're typically one-offs. Put differently, I'm encouraged by the health and resilience of the vast majority of GBDC's portfolio. I'll have more to say about that in my outlook in my closing remarks. For now, I'm going to let Tim, Rob and Chris go into the quarter in more detail.

Timothy Topicz, Chief Operating Officer Thanks, David. Let's start on slide three and walk through the drivers of GBDC's earnings in the quarter. 22 per share of adjusted earnings. Let me start with the drivers of net investment income.

There were three in the quarter: number one, improving investment income yield; number two, stable borrowing costs; and number three, prudent expense management. Let's go through each of these in turn. 9% annualized, which increased modestly quarter over quarter. It was supported by a stable weighted average spread in the portfolio, consistent base rates throughout the quarter, and to a lesser extent, a modest amount of accelerated fee recognition and discount accretion tied to a handful of payoffs.

3% annualized, one of the lowest borrowing costs in the listed BDC peer group and a real competitive advantage for GBDC and its investors. And then number three, operating expenses remained low. GBDC continues to benefit from its gold standard fee structure. There's nothing new to call out here.

It's just continued efficiency. 22 per share of adjusted earnings. Overall credit performance remains solid. 9% of the portfolio at fair value.

That's a level well below the average of our listed BDC peers. 12 per share of adjusted net realized and unrealized losses in the quarter. Here's how that breaks down. 08 per share of unrealized losses from markdowns on junior debt and equity investments in two portfolio companies that were taken to non-accrual status or were on non-accrual status in the quarter.

Those losses were somewhat offset by unrealized gains due to a small degree of reversal of last quarter's spread-driven unrealized losses. 04 per share of net realized losses. This was driven primarily from the successful restructuring of RWAM Holdco and Dolphus MIG in the quarter. Importantly, the realized losses resulting from these restructurings were more than fully offset by the reversal of unrealized losses in the same investments.

And then lastly, on a positive note, we recognized $4 million of net realized gains on the exit of equity investments in a couple portfolio companies. As a reminder, GBDC will in certain instances co-invest in the equity of high-performing borrowers and the liquidation of these equity investments, which historically has typically happened at a gain, is one of the factors that have contributed to GBDC's top quartile credit performance since IPO. 25 per share. 23 times.

23 times. 33 per share distribution for the fourth fiscal quarter of 2026. We also kept up our opportunistic share repurchase program. 90 per share, or an approximate 10% discount to our March 31, 2026 net asset value.

4 million shares of GBDC during the quarter for incentive compensation purposes. This brought purchases of GBDC shares by the trust to $70 million over the last 12 months. Golub Capital affiliates now hold about 8% of GBDC shares outstanding. That's an indication of a high degree of alignment between Golub Capital and GBDC investors.

Now turning to slide 7. Here we've laid out the NAV per share bridge quarter over quarter. 25. 33 per share distribution that was paid out during the quarter.

12 per share and share repurchases added a penny per share of NAV accretion. 25 in the quarter. So that's the earnings summary for the quarter. With that, let me hand things over to Rob to take us through our investing activity and portfolio in more detail.

Rob Thanks, Tim. I will now highlight our third fiscal quarter investment activity and provide some additional context on portfolio performance. Turning to Slide 8. In the second calendar quarter of 2026 at the Golub Capital level, our team originated nearly $3 billion of new investment commitments.

GBDC participated in these new originations on a limited basis with $13 million in new investment commitments in the quarter. 5% of deals reviewed in the quarter at a weighted average loan-to-value of approximately 45%. Existing sponsor relationships and portfolio company incumbencies accounted for approximately 54% of our origination volume, and we made loans to nine new borrowers. Further, GBDC continued to participate in add-on investment commitments to existing portfolio companies via transactions in the secondary market.

Leveraging the capabilities of our capital markets desk, we acquired incremental interests in existing loans to high-quality borrowers at discounts to fair value, which we believe will prove accretive to GBDC's returns over time. We continue to leverage our scale to lead deals, acting as a sole or lead lender on 99% of our transactions in the quarter. About 78% of our new origination volume in the third fiscal quarter supported M&A-driven transactions such as LBOs and add-on acquisitions, which builds on the momentum we saw last quarter and highlights our ability to benefit from the early signs of a more active and M&A-driven market environment.

Of GBDC's $13 million in new investment commitments in the quarter, 94% were in senior secured debt investments. 2% weighted average spread. 2 billion portfolio remains well diversified across 424 different borrowers. The granularity of our portfolio can also be seen in our small position sizes.

2% of the overall portfolio on average, and our top 10 investments comprise just 13% of the overall portfolio, which represents a concentration level that is less than half of the average of our listed BDC peers. GBDC's portfolio is also diversified by industry subsector with 51 individual subsectors represented. Investments in software portfolio companies continue to represent our single largest industry subsector exposure at 26%. I mentioned on last quarter's earnings call that we plan to report back on additional work we were performing to assess the impact of AI on our software holdings.

You will recall that we are experts in software lending, having completed more than 1,000 software loans representing over $90 billion in principal over the last 20 years with a default rate averaging about 5 basis points per year. I'm pleased to report that we completed a full re-underwrite of our current software portfolio this last quarter. I'm going to outline the key takeaways; however, there will be more detail in an update to our quarterly investor presentation, which we plan to publish later this month. Our credit-by-credit re-underwrite was multi-factored.

It included evaluating revenue model, product criticality, data moats, regulatory complexity, and switching costs. In addition to our internal assessment, we engaged a leading third-party consulting firm at the expense of the manager, not the fund, to perform an independent AI risk assessment. The third-party consultant analyzed potential product displacement and end-user workflow risks. They also assessed the ability for companies with higher potential product displacement and end-user workflow risks to adapt in this new environment.

The results of our internal AI risk analysis showed that less than 10% of our software portfolio was subject to elevated AI disruption risk. The third-party consultant's AI risk assessment concluded that fewer than 3% were at elevated risk. We believe our software-related risk is very manageable and we believe there will be opportunities for Golub Capital in the software space, in part because many other lenders are leaving the sector or reducing exposures. 9% of total investments at fair value but remain at very low levels in absolute terms and relative to the broader listed BDC sector.

During the quarter, the number of non-accrual investments increased from 19 to 20 as the addition of four investments were partially offset by the removal of three portfolio companies. Our focus, as always with underperforming borrowers, is to use our deep bench of experienced investment professionals and the playbook that we've developed over several decades to minimize realized losses. Slide 12 shows the trend in internal performance ratings for the entire GBDC portfolio. 6%, modestly above historical averages.

8% of the portfolio at fair value. Now I'm going to turn it over to Chris to take us through our financial results in more detail. Chris Ericson, Chief Financial Officer Thanks, Rob. I will now cover GBDC's financial performance and liability profile for the third fiscal quarter of 2026.

6% on an annualized basis. Let's walk through the key components in detail, starting with the dark blue line, which is our investment income yield. As a reminder, the investment income yield includes the amortization of fees and discounts. 9% annualized, the result of stable weighted average reference rates and spreads across the portfolio while benefiting from some accelerated discount accretion and fees from loan payoffs in the quarter.

3%. 6% annualized. 7 billion of total net assets.