Goldman Sachs BDC, Inc. Q1 FY2026 earnings call

• Integration into broader direct lending platform since 2022, moving out of older legacy positions into new opportunities with enhanced sourcing. - Quarterly valuation process conducted by three independent sources: private credit investing team, valuation oversight group, and independent third-party valuation advisers. - Believes private credit industry fundamentals remain strong despite recent headlines, with low default rates. - Deliberate reduction of annualized recurring revenue (ARR) loans within portfolio, lowering ARR exposure from nearly 39% in Q3 2022 to under 10% today. - Proactively managing legacy ARR positions through strategic exits or conversions to EBITDA-based loans. - Framework evolving with focus on software industry, confident in assessing and mitigating AI-related risks. - First quarter results: net investment income per share $0.22, net asset value per share $12.17; base dividend of $0.32 per share declared for Q2 2026; net debt-to-equity ratio 1.37x as of 03/31/2026; new commitments of approximately $46.5 million across 17 portfolio companies; 91.6% of originations in first-lien loans; portfolio held investments in 173 portfolio companies across 40 industries; repayments totaled $82.8 million in first quarter; new 10b5-1 stock repurchase program approved to repurchase up to $75 million of shares.

Currently, about 58% of the portfolio consists of more recent originations, while the remaining 42% represents older positions. The 58% of the portfolio originated under current underwriting capabilities is performing in line with expectations, with low losses and only one name representing less than 0.5% of total nonaccrual at cost. The 42% legacy positions account for roughly 72% of losses this quarter and over 99.5% of total nonaccruals at cost. Net investment income per share for the quarter was $0.22, net asset value per share was $12.17 as of quarter end, down approximately 3.7% from the fourth quarter. Total portfolio investments at fair value were $3.2 billion, outstanding debt was $1.9 billion, and net assets were $1.4 billion as of Q1 2026 end. Weighted average yield of total debt and income-producing investments at amortized cost remained flat at 9.9%. Nonaccruals at approximately 4.7% of the portfolio at amortized cost, up from 2.8% in prior quarter, primarily driven by two legacy investments.

• Expect legacy portfolio percentage to continue ticking down, allowing redeployment with benefit of post-integration platform and better spread environment. - Intent to maintain dividend in near term, with more muted incentive fee in coming quarters expected to support dividend. - Viewed as positive that with rollout of new origination system and better spreads, ability to compete in scaled way in market.

• Market uncertainty leading to increased volatility. - Legacy portfolio causing credit volatility, with two names added to nonaccrual status this quarter (1GI LLC and 3SI Security Systems, Inc.). - Potential for increase in nonaccrual rates and performance divergence among managers if economic conditions soften. - Conflation of distinct segments of credit markets creating impression of broad 'private credit problem' where stress is focused on certain pockets.

Q: In terms of the pipeline of investment activity, maybe touch a little bit on what you are seeing there, what sponsors are saying, how they are adjusting to wider spreads and tighter documentation, and how long it might take to rotate out of the legacy and have more of the newly originated loans in the portfolio?

A: On the one hand, deal activity is a little bit quieter overall, but for deals getting done, spreads and leverage coming down, documentation, etc., with less competition. Legacy percentage keeps ticking down and expected to continue, allowing redeployment with benefit of post-integration platform and better spread environment.

Q: And with the two new credit nonaccruals that popped up, maybe you can provide a little bit of detail about whether these are older vintage, something specific or COVID-related, etc., and how much of the NAV decline in the quarter was related to those two nonaccruals?

A: About 60% of the marks were credit-specific events, including the two big ones. One is in PPM space challenged in past, working with sponsor to optimize recoveries; the other, 3SI, had acquisitions not working out, leverage elevated, in active dialogue with sponsors and lenders to optimize recovery.

Q: Could you talk about the outlook for rotating out of some of these legacy assets, particularly the underperformers? Do you have any visibility there?

A: Relatively light repayments in first quarter, but acceleration in second quarter with over $100 million in repayments from legacy names. Have maturities in next 12 to 18 months of legacy names, optimistic but progress slower than desired. Power of OneGS ecosystem helps in competing on deals with scale, ability to source and provide entire capital structure solutions.

Q: And then one other on the dividend. You maintained the dividend in Q2. You talked about using spillover this quarter to cover the shortfall. How long are you comfortable doing that, and what are some of the levers you feel you have to get dividend coverage back to a more sustainable level?

A: Results negatively impacted by outsized incentive fee, but more muted incentive fee in coming quarters expected to support dividend. Intent to maintain dividend in near term, subject to consultation with Board.