Goldman Sachs BDC, Inc.
Q1 2021 Earnings Call Transcript

Published: 7 May 2021

[Operator:]

Good morning. This is Erica, and I will be your conference facilitator today. I would like to welcome everyone to the Goldman Sachs BDC, Inc. First Quarter 2021 Earnings Conference Call. . 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.

[Brendan McGovern:]

Thank you, Erica. Good morning, everyone, and thank you for joining us for our first quarter earnings conference call. I'm joined on the call today by Jon Yoder, our Chief Operating Officer; and Joe DiMaria, our Interim Chief Financial Officer. I will begin the call by providing an overview of our first quarter results, followed by a brief look back over the last year as we navigated the COVID-19 health crisis. I'll then give a discussion of the current state of the lending environment before turning it over to Jon Yoder to describe our portfolio activity in more detail. Finally, Joe will take us through our financial results in more detail before we open the lines for Q&A. So with that, let's get to our first quarter results. Q1 net investment income per share was $0.57 on after-tax net investment income of $57.6 million. Excluding the impact of asset acquisition accounting in connection with the merger of MMLC, adjusted net investment income was $0.48 per share. Net asset value per share increased to $16 per share as of March 31, an improvement of approximately 60 basis points from the end of the fourth quarter. The increase reflected continued improvement in underlying portfolio company performance, coupled with ongoing market spread tightening. As we announced after the market closed yesterday, our Board declared a $0.45 per share dividend payable to shareholders of record as of June 30, 2021. Further, we paid the first of our 3 installments of $0.05 per share special dividends on March 15, 2021. The remaining 2 additional $0.05 per share special dividends will be made to shareholders of record as of May 14, 2021, and August 16, 2021, respectively. Suffice to say, the past year presented a unique and challenging backdrop for GSBD as the social and economic toll from the COVID-19 health crisis weighed heavily on U.S. companies, particularly middle market companies that we target for our investment strategy. Despite this negative backdrop, GSBD has performed well, and we are pleased that our long-term shareholders have been rewarded along the way with stable income from -- and dividends and a near full recovery in net asset value from the lows of Q1 2020.

[Jon Yoder:]

All right. Thanks, Brendan. As Brendan mentioned, the strong capital markets environment during the quarter enabled the team to be active on the new origination front. Our new investment commitments remain focused on senior secured loans and included both new and add-on opportunities to existing portfolio companies. During the quarter, we made 13 new investment commitments, 4 of which were to new portfolio companies and 9 that were to existing portfolio companies. Together with fundings of previously unfunded commitments, total capital deployed was approximately $196 million.

[Joseph DiMaria:]

Thank you, Jon. We ended the first quarter of 2021 with total portfolio investments at fair value of $3.2 billion, outstanding debt of $1.61 billion and net assets of $1.63 billion. We also ended the first quarter with a net debt-to-equity ratio of 0.96 compared to 1 at the end of the fourth quarter.

[Brendan McGovern:]

Great. Thank you, Joe. As we have discussed, we are pleased with the resilience of the business in the face of significant challenges posed by the COVID-19 health crisis. I'd like to thank each and every member of the GSBD team for their outstanding focus, dedication and professionalism over the past year and for all their efforts to produce strong financial results for our shareholders. And as always, I'd like to thank you for the privilege of managing your capital.

[Operator:]

. Your first question is from Finian O'Shea with Wells Fargo Securities.

[Jordan Wathen:]

This is actually Jordan Wathen calling in for Fin today. I just have a couple of questions on the portfolio. Just a couple of questions on the portfolio. So coming through investments this quarter, it looks like it was kind of tilted towards software. Obviously, one quarter doesn't really make a trend, but can we kind of take that as maybe a hint, I guess, of where the portfolio is going from here?

[Brendan McGovern:]

Yes. Jordan, thanks for the question. I don't think I would agree there's nothing notable in terms of a change in direction or anything that I think would hint towards any different portfolio construction prospectively. I think, as you know, technology, in general, growthier areas of the economy, certainly software, in particular, have been a very big theme in the portfolio going back several years. And certainly, as we look back over the past year and the volatility in the economy, other business models being a bit more cyclical in nature, that area has served to be a very, very good place to be. And we think that there continues to be very good opportunities within that space for sure. Other themes within the portfolio would be other nondiscretionary, economically sensitive areas of the economy, I think, other business services, health care services and technology have also been strong proponents of the portfolio here for a period. So overall, I would say, a lot of diversity. When we look at the portfolio today, 118 different underliers, very significant increase over the past several years, and we've talked about this a bunch benefiting from the growth in the broader platform. So I think overall, a very diverse portfolio. And I think the sectors where we've leaned into have been among the better performing sectors.

[Jordan Wathen:]

Okay. That's fair. And so another one, just looking at once I got marked down this quarter, it looks like Convene, Park Avenue, kind of stood out for $5 million markdown this quarter. Looks like some kind of combination of co-working or meeting space in New York City. So I appreciate this is a single name, private company. Maybe you could just give us -- maybe a little more about that business, maybe why it's getting a mark here, given that it feels like we're seemingly, hopefully, coming out of pandemic?

[Brendan McGovern:]

Yes, that's right. And I'm sure we've talked about this name in the past on some prior calls. One of the few businesses in the portfolio, I would say, is squarely in the crosshairs of a lot of the behavioral issues associated with pandemic. So Convene is focused on providing shared meeting space services and leading -- it's a first lien investment in top of the capital structure, very well structured, leading into the pandemic, really performing quite, quite well, broadly benefiting from a trend around people wanting to optimize their real estate footprints.

[Operator:]

At this time, there are no further questions. Please continue with any closing remarks.

[Brendan McGovern:]

Great. Thank you, Erica. And of course, thank you, everybody, for dialing in and listening to the call. To the extent you do have any additional questions, please feel free to reach out directly to the team. And I hope you enjoy a great weekend. Thank you.

[Operator:]

Ladies and gentlemen, this does conclude the Goldman Sachs BDC, Inc. First Quarter 2021 Earnings Conference Call. Thank you for your participation. You may now disconnect.