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Goldman Sachs BDC, Inc. (GSBD)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 NII per share was $0.48 (adjusted $0.47) on total investment income of $103.8M; EPS was $0.32. NAV/share fell 1.0% QoQ to $13.41, driven by net realized/unrealized losses, while leverage remained controlled at 1.17x .
  • The Board reset the base quarterly dividend to $0.32 and introduced supplemental variable distributions of at least 50% of NII above the base; authorized $0.16 special dividends for the next two quarters (management indicated intent for three quarters, see discrepancy below) .
  • Portfolio credit quality modestly improved: non‑accruals decreased to 2.0% of fair value and Pro‑PT returned to accrual; portfolio remains 97.6% senior secured (96.3% first lien) .
  • Catalysts: dividend policy and incentive fee reductions (to 17.5%) potentially enhance shareholder alignment and payout sustainability; refinancing of 2025 notes with RCF reduced near-term maturity risk .

What Went Well and What Went Wrong

What Went Well

  • First‑lien focus and portfolio recycling continued: 99.9% of Q4 originations were first‑lien; the portfolio is 97.6% senior secured with 96.3% first lien positions, supporting defensiveness .
  • Credit stabilization: Pro‑PT returned to accrual; non‑accruals decreased to 2.0% (fair value) and 4.5% (cost); weighted average interest coverage improved YoY to 1.8x and median EBITDA increased .
  • Strategic payout reset and fee cuts: “We restructured our dividend with a new base of $0.32 per share… we will supplement that with supplementals,” and incentive fees reduced to 17.5% (income and capital gains), improving alignment and predictability .

What Went Wrong

  • Income and NII declined QoQ: total investment income fell to $103.8M (from $110.4M) due to exits/downsizing; NII after taxes fell to $56.6M (from $68.2M), reflecting a $6.3M accrued incentive fee in Q4 .
  • Continued net losses on marks: net realized/unrealized losses of $(18.9)M (vs $(30.9)M in Q3) pressured NAV/share down 1.0% QoQ to $13.41 .
  • Spread compression: management cited competitive pressure in larger-cap credit and BSL market strength as drivers of spread compression, limiting return potential absent credit-enhancing events .

Financial Results

MetricQ4 2023Q2 2024Q3 2024Q4 2024
Total investment income ($M)$115.4 $108.6 $110.4 $103.8
Net investment income after taxes ($M)$61.8 $67.0 $68.2 $56.6
Adjusted NII after taxes ($M)$60.7 $65.2 $67.2 $55.6
NII per share (basic & diluted)$0.56 $0.59 $0.58 $0.48
Adjusted NII per share$0.55 $0.57 $0.57 $0.47
EPS (basic & diluted)$0.46 $(0.47) $0.32 $0.32
Net realized & unrealized gains (losses) ($M)$(11.2) $(121.4) $(30.9) $(18.9)
NAV per share$14.62 $13.67 $13.54 $13.41
Ending net debt-to-equity (x)1.11x 1.19x 1.16x 1.17x

Segment/Portfolio Mix

Investment Type (% of FV)Q3 2024Q4 2024
1st Lien/Senior Secured91.6% 91.5%
1st Lien/Last-Out Unitranche4.7% 4.8%
2nd Lien/Senior Secured1.3% 1.3%
Unsecured Debt0.5% 0.5%
Preferred Stock0.9% 0.9%
Common Stock1.0% 1.0%
Warrants~0% ~0%

Key KPIs

KPIQ4 2023Q2 2024Q3 2024Q4 2024
Non‑accrual (% FV / % cost)2.3% / 3.8% 3.4% / 7.6% 2.2% / 4.5% 2.0% / 4.5%
Weighted avg yield (amortized cost)12.6% 12.3% 11.8% 11.2%
Weighted avg yield (fair value)13.8% 13.3% 13.9% 14.1%
Weighted avg leverage (net debt/EBITDA)6.1x 6.1x 6.3x 6.2x
Weighted avg interest coverage1.5x 1.5x 1.7x 1.8x
Median EBITDA (mm)$53.98 $63.11 $62.49 $66.14
% performing debt floating rate99.9% 99.5% 99.4% 99.4%
Total debt outstanding ($M)$1,832.2 $1,955.1 $1,887.8 $1,934.6
% unsecured debt46.9% 64.4% 66.7% 65.1%
Cash & equivalents ($M)$52.4 $61.6 $54.5 $87.0

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Base quarterly dividend per shareBeginning Q1 2025$0.45 (legacy) $0.32 base, plus supplemental variable distributions ≥50% of NII above base (subject to sufficient NII) Lowered; introduced supplemental policy
Special dividend per shareQ1–Q3 2025None$0.16 declared for Q1 2025; Board authorized ~$0.16 for each of the next two quarters ; management stated intent for $0.16 in each of next three quarters (spillover ~$1.30/share) Introduced (note discrepancy: Board authorizations for two quarters; management intent for three)
Incentive fee ratesFrom Q1 2025 calc20% income and capital gains [legacy]17.5% income-based fee and cap; 17.5% capital gains fee; lookback maintained Lowered
Target leverageOngoing1.25x target Maintain; ended Q4 at 1.17x and “don’t anticipate meaningful increases” Maintained
Debt maturity managementFeb 2025 notes$360M notes due Feb 2025 outstandingRepaid via $365M RCF draw on Feb 7, 2025; ~$626M capacity remaining post-draw Addressed near-term maturity

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 2024)Previous Mentions (Q3 2024)Current Period (Q4 2024)Trend
Deployment/M&A backdropOriginations $440M; non‑accrual uptick; cautious underwriting Second highest quarterly originations since integration; optimism for 2025 sponsor M&A Gross originations $173M; expecting volume pickup in 2025 as M&A accelerates Improving activity outlook (muted Q4, stronger 2025)
Portfolio mix (first lien)92.3% first‑lien at FV; 98.0% senior secured 91.6% first‑lien; 97.6% senior secured 91.5% first‑lien; 97.6% senior secured Stable high first‑lien exposure
Spread compression/competitionNoted competition; BSL interplay implied Expect pickup in 2025; deployment correlated to M&A Spread compression in large‑cap credit; repricing mostly done over last 12–18 months Spreads compressed; selective repricing persists
Credit quality/non‑accrualsNon‑accruals 3.4% FV; two names added Non‑accruals improved to 2.2% FV; one on/off accrual; exited Zipari Non‑accruals 2.0% FV; Pro‑PT restored to accrual; interest coverage improved Stabilizing/improving
ARR/software exposureElevated recurring revenue loans earlier in year Cautiously optimistic; risk rating tick due to business services ARR exposure reduced materially vs integration; very selective new ARR (rule of 50+) Reduced ARR exposure
Tariffs/macro exposureNot emphasizedOptimism post‑election for M&A Low to mid‑single-digit % potential exposure after portfolio review; predominantly U.S. customers Limited direct macro/tariff risk
PIK dynamicsPIK income increased QoQ in Q2 PIK decreased to 9% of recurring income Discussion of PIK increase in Q4 with normalization commentary; ratings buckets improved Mixed; monitoring closely

Management Commentary

  • “Our net investment income per share for the quarter was $0.48, and net asset value per share was $13.41… decrease… largely due to net realized and unrealized losses in the quarter.”
  • “We restructured our dividend with a new base of $0.32 per share… we will supplement that with supplementals… we’re not planning to increase our leverage at all.”
  • “We continue to increase the percentage of first lien positions… from 89.4% in December 2021 to 96.3% at year‑end 2024.”
  • “Preliminary analysis of borrower exposure… low or a limited potential exposure… predominantly U.S. portfolio doing business with U.S. customers.”
  • “We think the bulk of the repricing activity has happened… there could be select instances… generally tied to credit‑enhancing events.”

Q&A Highlights

  • Leverage and dividend coverage: Management reiterated 1.25x target and ended at 1.17x; does not plan to increase leverage to meet the $0.32 base dividend given supplemental framework and spillover income (~$1.30/share) .
  • Portfolio rotation: Ongoing recycling of older vintages; modeled flexibility for realized/unrealized losses and maturities in coverage analysis .
  • Tariff/policy exposure: Name‑by‑name analysis indicates low to mid‑single‑digit percentage exposure; minimal global supply chains/government contracts .
  • ARR/software and PIK: ARR exposure reduced by >50% vs earlier integration; highly selective new ARR originations; PIK dynamics discussed with ratings bucket improvement and slight leverage/coverage enhancements .
  • Spread compression/repricing: Competitive pressure in large‑cap; bulk of repricing occurred over past 12–18 months; remaining cases linked to deleveraging/credit enhancements .

Estimates Context

  • Wall Street consensus (S&P Global) for Q4 2024 EPS and revenue was not retrievable due to an S&P Global daily request limit, so estimate comparisons are unavailable at this time. We will update when access is restored [GetEstimates error].
  • Implication: Without consensus, we cannot assess beat/miss versus Street; however, QoQ declines in investment income and NII and a stable EPS ($0.32) frame investor expectations into 2025 based on internal trajectory .

Key Takeaways for Investors

  • Defensive portfolio posture sustained: 96.3% first‑lien, 97.6% senior secured, and non‑accruals at 2.0% of FV support resilience into a potentially more active 2025 M&A cycle .
  • Earnings power moderated QoQ: lower investment income and higher incentive accrual reduced NII; watch deployment scale‑up and spread dynamics to gauge NII trajectory in 2025 .
  • Shareholder returns reset for sustainability: base dividend lowered to $0.32 with supplemental variable distributions and special dividends—focus shifts to consistent coverage and variable upside tied to NII .
  • Fee reduction enhances alignment: 17.5% incentive fee and cap reduces fee drag through cycles; lookback maintained adds discipline .
  • Liquidity/maturity risk addressed: $360M 2025 notes repaid via RCF; ~$626M remaining capacity affords flexibility for deployment or liability management .
  • Monitor estimate resumption: Once consensus is available, recalibrate expectations; near‑term narratives will hinge on deployment pace, repricing frequency, and credit performance trends [GetEstimates error].
  • Trading stance: The dividend framework and fee cuts are the principal narrative drivers post‑print; watch subsequent Board actions on special dividends and deployment updates as catalysts .