TESTING

The Golub Capital Middle Market Report is the first and only report based on the actual performance of private middle market companies. Issued in advance of public company earnings season, the report is a unique source of timely information for investors and market analysts.

Lawrence E. Golub, CEO of Golub Capital, and Dr. Edward I. Altman, Professor of Finance at New York University’s Stern School of Business, are pleased to present the Golub Capital Altman Index.

Revenue in the U.S. Middle Market Grew By 12% in the First Two Months
of Q2 2022

GOLUB CAPITAL MIDDLE MARKET REPORT
FEATURING THE GOLUB CAPITAL ALTMAN INDEX

Index earnings grew by 2% year-over-year during the same period.

The Golub Capital Altman Index can provide 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 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. 

GOLUB CAPITAL ALTMAN INDEX HIGHLIGHTS

Year-Over-Year (YoY) Growth

REVENUE EARNINGS
Q2 2022 11.6% 1.7%

Key Sectors Q2 2022 (YoY)

REVENUE EARNINGS
Consumer 13.7% 7.1%
Healthcare 5.8% (11.6%)
Industrials 9.9% 3.5%
Technology 15.9% 4.1%

Source: Golub Capital Internal Data.
Please see footnotes.

It measures the median revenue and earnings growth of approximately 110–150 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 GCAI 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 (“S&P 600”), as well as quarterly Gross Domestic Product (“GDP”), according to statistical back-testing dating back to 2012, when data began to be tracked.

The size and diversity of the Golub Capital loan portfolio ensure that the confidentiality of all company-specific information used in the index is maintained in both the aggregate and industry segment data.

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.

The companies in the GCAI operate in a wide range of industries. Results are provided for the total universe of GCAI constituents and by industry segment. Given the index’s limited exposure to Financials, Utilities, Energy and Materials, comparisons are made to the S&P 500 and S&P 600 as well as to “adjusted” versions of those indexes that exclude the aforementioned sectors.

GCAI Revenue and Earnings Growth

Revenue Growth (Quarterly YoY)

Revenue Growth (Quarterly YoY) GCAI vs. Adj. Indexes

Earnings Growth (Quarterly YoY)

Earnings Growth (Quarterly YoY) GCAI vs. Adj. Indexes

Appendix: GCAI Results by Sector
Additional information can be found below regarding sector trends in the Golub Capital Altman Index.

Consumer

Healthcare

Industrials

Technology

About Golub Capital

Golub Capital is a market-leading, award-winning direct lender and experienced credit asset manager. We specialize in delivering reliable, creative and compelling financing solutions to companies backed by private equity sponsors. Our sponsor finance expertise also forms the foundation of our Late Stage Lending, Broadly Syndicated Loan and Credit Opportunities investment programs. We nurture long-term, win-win partnerships that inspire repeat business from private equity sponsors and investors.

As of April 1, 2022, Golub Capital had over 620 employees and over $50 billion of capital under management, a gross measure of invested capital including leverage. The firm has lending offices in Chicago, New York, San Francisco and London.

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.

Important Disclosure

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 may be 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.

1The Golub Capital Altman Index (GCAI) data for Q2 2020 and Q2 2021 are presented solely for the purpose of continuity. Readers are encouraged to interpret the data from those periods with caution. The GCAI is designed to offer early insight into the performance of the U.S. economy, based on data from the first two months of each calendar quarter. GCAI results for Q2 2020 were based on data from April and May 2020 and did not reflect the meaningful reopening of the U.S. economy in June 2020. GCAI results for Q2 2021 were based on data from April and May 2021 compared to April and May 2020, when many businesses were affected by lockdowns and other restrictions.
2Effective Q2 2022, the Golub Capital Altman Index (GCAI) excludes Golub Capital portfolio companies that have recurring revenue-based credit facilities. The data referenced herein may not reflect all companies in the loan portfolio of Golub Capital during the time periods indicated.

The Golub Capital Altman Index measures the actual revenue and EBITDA (earnings before interest, taxes, depreciation and amortization) growth of US middle market private companies for the first two months of each calendar quarter and provides insight into anticipated quarterly performance of US public companies. The index is based on aggregated data from approximately 150 companies in the loan portfolio of Golub Capital, a leading middle market lender. Effective Q2 2022, the Golub Capital Altman Index (GCAI) excludes Golub Capital portfolio companies that have recurring revenue-based credit facilities. The data referenced herein may not reflect all companies in the loan portfolio of Golub Capital during the time periods indicated.

Reported shortly before public company earnings season, the performance of the Golub Capital Altman Index has been highly correlated with the median growth rates in revenue and EBITDA of the companies in the S&P 500, S&P SmallCap 600, and Russell 2000 indexes, as well as quarterly Gross Domestic Product (GDP), since data began to be tracked in 2012.

For a white paper detailing the methodology behind the Golub Capital Altman Index, please click the download button.

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