Middle market private companies in the Golub Capital Altman Index experienced year-over-year revenue growth of 6.79% and earnings growth of 4.89% during the first two months of the third quarter of 2017. This compares to an increase of 8.94% in revenue and 2.29% in earnings year-over-year in the second quarter.
Lawrence E. Golub, CEO of Golub Capital, said, "Middle market companies showed strong revenue growth and accelerating profit growth in the third quarter of 2017. Earnings growth began to catch up with revenue growth, suggesting the middle market firms in our sample continued to improve cost control and productivity. The Technology and Industrials sectors showed substantial acceleration of earnings growth, benefiting from a weaker dollar and improved Eurozone economic performance in the form of strong export bookings. In aggregate, the Golub Capital Altman Index results for the third quarter of 2017 are consistent with a 2-3% rate of U.S. GDP growth."
Dr. Edward I. Altman said, "The Consumer sector performed well in the third quarter of 2017, sustaining the earnings rebound we saw in the second quarter data. On the other hand, the Healthcare sector continued to struggle with profitability. There is notable dispersion within the Healthcare sector, as some companies have had more success than others in generating operating leverage amidst rising labor costs."
The Golub Capital Altman Index, 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 median revenue and earnings performance from the data 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 Index 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, as well as quarterly Gross Domestic Product ("GDP"), according to statistical back-testing dating back to 2012, when data began to be tracked.
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.
Importantly, the size and diversity of the Golub Capital loan portfolio ensures that the confidentiality of all company-specific information used in the Index is maintained in both the aggregate and industry segment data.
The companies in the Golub Capital Altman Index operate in a wide range of industries, and aggregate results are provided for the total universe and by industry segment. Given the Index's limited exposure to Financials, Utilities, Energy and Materials, calculations are made for the public indexes both including and excluding these sectors (for the latter, see charts marked "S&P 500 Adj." and "S&P 600 Adj.").
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 $400 million and is an arranger of credit facilities up to $750 million. 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 $20 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 300 employees with lending offices in Chicago, New York and San Francisco. For more information, please visit https://golubcapital.com/mmlending/.
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.