Middle market private companies in the Golub Capital Altman Index experienced year-over-year revenue growth of 12% and earnings growth of 2% during the first two months of the second quarter of 2022. This compares to year-over-year revenue growth of 18% and earnings growth of 9% in the first quarter of 2022.

Lawrence E. Golub, CEO of Golub Capital, said, “As expected, the economy is demonstrating muddling growth in profits and faster growth in revenues, which means margins are shrinking. This is likely to persist throughout the year, as businesses continue to adjust to higher inflation. The 12% nominal growth in revenue year-over-year well outpaced inflation, showing health in the economy consistent with the low unemployment rates, even as costs for businesses rise. We expect strong management teams and private equity sponsors will adapt to this environment with speed and creativity, much as they adapted to Covid in 2020.”

Dr. Edward I. Altman said, “Although revenue and EBITDA growth rates in the Consumer sector slowed relative to the first quarter, they were surprisingly robust given the strain on household budgets from higher food and energy prices. By contrast, EBITDA declined in the Healthcare sector year-over-year as labor costs continued to weigh on profitability. With unemployment remaining historically low, we expect the Fed to continue to raise interest rates aggressively to combat inflation in the near term. Our data suggests the economy is broadly healthy, but we believe consumer spending may soften if inflation continues to outpace growth in disposable income. We believe investors should continue to prepare for a possible scenario of stagflation if the Fed is unsuccessful.”

The Golub Capital Altman Index (“GCAI”), which is produced by Golub Capital in collaboration with credit expert Dr. Edward I. Altman, is the first and longest-running index based on actual revenue and earnings (defined as earnings before interest, taxes, depreciation and amortization, or “EBITDA”) for middle market companies.