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.
Middle Market Report
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.
Golub Capital Middle Market Report
FEATURING THE GOLUB CAPITAL ALTMAN INDEX
Revenue in the U.S. Middle Market Grew by 12% in Q3 2018
Overall, Golub Capital Altman Index earnings grew by 11% during the first two months of the third quarter
The Golub Capital Altman Index can provide early insight into the financial performance of public companies and GDP in advance of earnings season
Middle market private companies in the Golub Capital Altman Index (“GCAI”) experienced year-over-year revenue growth of 11.75% and earnings growth of 10.83% during the first two months of the third quarter of 2018. This compares to year-over-year revenue growth of 11.15% and earnings growth of 12.59% in the second quarter of 2018.
Lawrence E. Golub, CEO of Golub Capital, said, “This quarter’s Golub Capital Altman Index showed the highest year-over-year revenue growth rate since its inception, marking a fourth consecutive quarter of record revenue growth. EBITDA growth was also exceptionally strong, suggesting U.S. middle market companies have done well in controlling costs amidst a tight labor market. Our data continues to show strong momentum in the U.S. economy that could help offset the negative impact of tariffs. We expect to see another robust GDP growth rate for the third quarter of 2018, likely in excess of 3% or even 4%.”
Dr. Edward I. Altman said, “The Technology sector once again led the way for earnings growth, posting year- over-year EBITDA growth of more than 20%. The Healthcare sector continued to show welcome signs of a turnaround in profitability, with positive EBITDA growth now in three of the last four quarters. One might expect to see softness in the Consumer and Industrial sectors, with escalating trade tensions and meaningfully higher interest rates, crude oil prices and gasoline prices compared to the same period last year.
“We have not yet seen a material impact in our data, although it may take more time for any impact to register. In short, the impressive revenue and earnings growth across all sectors of the Golub Capital Altman Index suggest the strength of the U.S. economy is broad-based.”
The GCAI, 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 revenue and earnings (defined as earnings before interest, taxes, depreciation and amortization, or “EBITDA”) for middle market companies. It measures the median revenue and earnings growth 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 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 helps to ensure the confidentiality of all company-specific information used in the index and that it is maintained on both an aggregate and industry segment data level.
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.
About the Golub Capital Middle Market Report
The Golub Capital Middle Market Report analyzes the results of the Golub Capital Altman Index (“GCAI”), which measures the median revenue and earnings growth of more than 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 U.S. gross domestic product, and the financial performance of well-known market indexes, including the S&P 500 and S&P SmallCap 600. The GCAI 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 visit golubcapital.com/middle-market-report.
About Golub Capital Middle Market Lending
Golub Capital’s Middle Market Lending group provides financing for middle market, private equity-backed transactions with hold positions of over $600 million and is an arranger of credit facilities up to $1 billion. Golub Capital’s award-winning team strives to establish long-term, win-win partnerships by providing dependable, fast and creative solutions that meet private equity sponsors’ and portfolio companies’ needs.
Golub Capital is a nationally recognized credit asset manager with over $25 billion of capital under management. For over 20 years, Golub Capital has provided credit to help medium-sized U.S. businesses grow. The firm’s award-winning Middle Market Lending business provides financing for middle market companies and their private equity sponsors. Golub Capital’s credit expertise also forms the foundation of its Late Stage Lending and Broadly Syndicated Loan businesses. Golub Capital has worked hard to build a reputation as a fast, reliable provider of compelling financing solutions, and we believe this has inspired repeat clients and investors. Today, the firm has over 350 employees with lending offices in Chicago, New York and San Francisco. For more information, please visit golubcapital.com.
GOLUB CAPITAL ALTMAN INDEX HIGHLIGHTS
Year-Over-Year (“YoY”) Growth
Key Sectors Q3 2018 (YoY)
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.
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 may constitute forward-looking statements, which can include 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 change. 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.
Appendix: GCAI Results by Sector
Additional information can be found below regarding sector trends in the Golub Capital Altman Index.
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.
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.