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

Lawrence E. Golub, CEO of Golub Capital, said, “The U.S. economy continues to muddle through an environment of heightened uncertainty. This quarter’s data is consistent with our expectation that economic growth will likely remain low in real terms for the rest of 2022 into 2023. Although profit growth declined slightly in aggregate, the data also shows increasing dispersion in performance by industry and company. Successfully navigating this environment will require management teams and owners to adapt quickly to changing circumstances. In our view, this type of environment plays to the strengths of private equity-backed businesses.”

Dr. Edward I. Altman said, “EBITDA growth rates in the first two months of Q3 were negative versus the same period of 2021 with four of the five major industrial sectors registering negative growth. Only Industrials showed relative strong profit growth as these firms improved their cost management after suffering margin pressure in earlier quarters. Indeed, the Consumer and Technology sectors turned negative this past quarter despite revenue growth of more than 12%. The pullback in Consumer sector profit growth suggests companies struggled to pass rising input costs on to consumers, who faced rising prices for food and gasoline. Even Technology companies faced margin pressure, after a long stretch of very strong profit growth. That said, across all four of the sectors we track, companies with the strongest pricing power, like mission critical business-to-business SaaS companies, are in general keeping up with inflation.”

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.