Revenue in the U.S. Middle Market Grows at 8.45% in Q1 2017, According to the Golub Capital Middle Market Report 

Overall Earnings Show Decline of 1.64% During First Two Months of the Quarter

Index provides early insight into financial performance of public companies and GDP in advance of earnings season

Middle market private companies in the Golub Capital Altman Index experienced year-over-year revenue growth of 8.45% and posted earnings (defined as earnings before interest, taxes, depreciation and amortization, or “EBITDA”) declines of 1.64% during the first two months of the first quarter of 2017. This is compared to year-over-year increases of 5.33% in revenues and a decline of 2.48% in earnings in the fourth quarter of 2016.

Lawrence E. Golub, CEO of Golub Capital said, “The Golub Capital Altman Index numbers indicate that the economy continues to grow nicely in the first quarter of 2017, consistent with 2-3% GDP growth. We don’t see the same acceleration as what seems to be happening in the European Union, but that is to be expected because U.S. economic growth has been stronger for some time. The EU is simply recovering later.”

“This was a particularly strong quarter for the Information Technology sector, which led profit growth with an increase of 11.06%. Other sectors continue to experience cost pressures, largely from rising labor costs.”

Dr. Altman said, “The Golub Capital Altman Index of middle market companies’ performance in the U.S. continued to show strong year-over-year growth in revenues in the first quarter of 2017, but, at the same time, for the third consecutive quarter, recorded negative growth in earnings. Despite high consumer confidence indicators, as buying patterns change, the sector continues to experience margin pressure. The results across all sectors show signs that the economy is struggling with inflationary costs, including big increases in wages and other operating costs.”

The Golub Capital Altman Index, which is produced by Golub Capital in collaboration with renowned credit expert Dr. Edward I. Altman, is the first and only index based on actual sales and earnings data for middle market companies. It measures median revenue and earnings performance from the data of more than 150 private U.S. companies in the loan portfolio of Golub Capital, a leading middle market lender. Reported shortly before public company quarterly earnings season, the index has served as a reliable indicator of the overall growth rates in revenue and earnings of public companies in market indexes such as the S&P 500 and S&P SmallCap 600, as well as quarterly Gross Domestic Product (“GDP”), according to statistical back-testing dating back to 2012, when data began to be tracked.

We believe the results (1) are representative of the general performance of middle market companies, which are a major contributor to U.S. private sector employment, (2) can be easily compared to the performance of the public companies that make up major stock indexes, (3) are relevant to the aggregate economic performance of the U.S. economy, and (4) provide timely information for the investment community.

Importantly, the size and diversity of the Golub Capital loan portfolio ensures that the confidentiality of all company-specific information used in the report is maintained in both the aggregate and industry segment data.

The companies in the Golub Capital Altman Index operate in a wide range of industries, and aggregate results are provided for the total universe and by industry segment. Given the index’s limited exposure to Financials, Utilities, Energy and Materials, calculations are made for the public indexes both including and excluding these sectors (for the latter, see charts marked “S&P 500 Adjusted” and “S&P 600 Adjusted”).

ABOUT THE GOLUB CAPITAL MIDDLE MARKET REPORT

The Golub Capital Middle Market Report analyzes the results of the Golub Capital Altman Index, which measures the median revenue and earnings growth of approximately 150 privately owned companies in the Golub Capital loan portfolio for the first two months of each calendar quarter. It compares these results to the financial performance of public companies in well-known market indexes, including the S&P 500 and S&P SmallCap 600, as well as the quarterly Gross Domestic Product. The index is produced by Golub Capital in collaboration with renowned credit expert Dr. Edward I. Altman. For more information, including a description of the methodology used to create the report, please view the white paper.

ABOUT DR. EDWARD I. ALTMAN

A leading expert on credit markets, Dr. Edward I. Altman is the Max L. Heine Professor of Finance, Emeritus at the NYU Stern School of Business, and Director of Research in Credit and Debt Markets at the NYU Salomon Center for the Study of Financial Institutions. He is currently an advisor to several foreign central banks.

Professor Altman has published or edited two-dozen books and over 150 articles in scholarly finance, accounting and economic journals. He has been inducted into the Fixed Income Analysts Society Hall of Fame, served as President of the Financial Management Association, was an FMA Fellow, and was amongst the inaugural inductees into the Turnaround Management Association Hall of Fame. He received his MBA and Ph.D. in Finance from the University of California, Los Angeles.

GOLUB CAPITAL ALTMAN INDEX HIGHLIGHTS –
YEAR-OVER-YEAR GROWTH

Meghan Womack
Golub Capital
212.574.8408
mwomack@golubcapital.com

APPENDIX: GCAI Middle Market Sectors

Additional information can be found below regarding specific trends in the Golub Capital Altman Index by sector.

DISCLAIMER

The Golub Capital Altman Index is provided as an indicator only, and does not constitute investment advice or the offer to sell or a solicitation to buy any security. Some of these statements constitute forward-looking statements, which may be predictions about future events, future performance, or future financial conditions. Some of these statements reflect opinions based upon the data presented in the index, and these opinions maybe incorrect. Actual results could vary materially from those implied or expressed in such forward-looking statements for any reason. The Golub Capital Altman Index has been created on the basis of information provided by third-party sources that are believed to be reliable, but the information has not been verified independently by Golub Capital. Golub Capital makes no warranty or representation as to the accuracy or completeness of such third-party information.