Golub Capital published a special edition of the Golub Capital Middle Market Report for Q2 2021. The report compared the April and May 2021 revenue and earnings of middle market private companies in the Golub Capital Altman Index to revenue and earnings in April and May 2019. This analysis is intended to provide greater insight into economic conditions than the report’s typical year-over-year comparisons, which reflect the impact of Covid-related lockdowns in April and May 2020. The year-over-year data is provided in the appendix for continuity purposes.
Middle market private companies in the Golub Capital Altman Index experienced EBITDA growth of 31% and revenue growth of 21% in April and May 2021 compared to their April and May 2019 earnings and revenue. The data in this special edition report reflects the median performance of approximately 130 companies that were in the Golub Capital Altman Index in both periods.
Lawrence E. Golub, CEO of Golub Capital, said, “The U.S. economic boom continues in Q2. Revenue and earnings growth in April and May 2021 were remarkably strong relative to April and May 2019, which was also a strong period. The 21% revenue growth compared to the pre-Covid period is striking because we had been seeing soft year-over-year revenue growth rates for the last several quarters. This indicates that growth in the second quarter is not just a recovery from Covid; it’s a reflection of a booming economy.”
Dr. Edward I. Altman said, “Our analysis looks at growth rates on a company-by-company basis, giving us a clean comparison of the ongoing boom to the strong pre-Covid economy of 2019. We think it is challenging to extract insight from year-over-year growth rates given the significant shutdown in April and May 2020. That said, it is notable that the Technology sector experienced year-over-year revenue and earnings growth in excess of 20%, as shown in the appendix. These companies generally were not impacted by Covid-related lockdowns, so we believe their strong year-over-year growth reflects fundamental strength as opposed to an ‘easy comp’ to the Covid period. The Technology companies in the Golub Capital Altman Index primarily serve the B2B market, so we expect strong growth to continue as companies invest in productivity-enhancing solutions in anticipation of potentially higher labor costs.”
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 longest-running 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.
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 credit expert Dr. Edward I. Altman.