Earnings in the U.S. Middle Market Grew by 13% in Q4 2018, According to the Golub Capital Middle Market Report

Press Release
January 11, 2019

NEW YORKJan. 11, 2019 /PRNewswire/ — Middle market private companies in the Golub Capital Altman Index experienced year-over-year earnings growth of 13.4% and revenue growth of 10.6% during the first two months of the fourth quarter of 2018. This compares to year-over-year earnings growth of 10.8% and revenue growth of 11.8% in the third quarter of 2018.

Lawrence E. Golub, CEO of Golub Capital, said, “The strong earnings growth in our sample of U.S. middle market companies shows American business is still booming. The Golub Capital Altman Index posted the highest rate of earnings growth since its inception, as well as double-digit revenue growth for the fifth consecutive quarter. Our data suggests the market’s concerns about the outlook for growth and profits may be overblown. There is a lot of momentum in the U.S. economy that is offsetting in Q4 the impact of tariffs, the U.S. government shutdown and market volatility. We expect to see Q4 GDP growth of about 3%, beating current estimates.”

Dr. Edward I. Altman said, “Earnings growth accelerated across all sectors of the Golub Capital Altman Index, building on the broad-based growth we saw throughout 2018. In the fourth quarter, earnings in the Technology sector grew by more than 30%—a record since inception of the Index—and earnings in the Healthcare sector grew at the fastest rate in nearly four years. Earnings growth outpaced revenue growth in the Consumer and Technology sectors, suggesting companies in those sectors were able to expand margins despite the tight labor market. The solid third- and fourth-quarter results in the Consumer and Industrial sectors suggest we have yet to see a material impact from headwinds like trade tensions, higher interest rates and higher gasoline prices compared to the same periods last year. In short, our data suggests the U.S. economy is still on firm footing.”

The Golub Capital Altman Index (“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 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.

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 up to $600 million and is an arranger of credit facilities up to $1 billion. Golub Capital’s award-winning team specializes in delivering reliable, creative and compelling financing solutions to U.S. middle market companies backed by private equity sponsors.

Golub Capital is a market-leading, award-winning private debt platform with over $25 billion of capital under management. The Middle Market Lending team has particular domain expertise in select industries, including software, technology services, healthcare, consumer and restaurant and retail. The firm’s credit expertise also forms the foundation of its Late Stage Lending business and its Broadly Syndicated Loan investment program. Across its activities, Golub Capital nurtures long-term, win-win partnerships that inspire repeat business from its private equity sponsor clients and investors. Founded in 1994, Golub Capital today has over 350 employees and lending offices in ChicagoNew York and San Francisco. For more information, please visit golubcapital.com.

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.