Goldman Sachs BDC (GSBD) Earnings Call Transcript

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DATE

Friday, Feb. 27, 2026 at 9 a.m. ET

CALL PARTICIPANTS

• Co-Chief Executive Officer — Vivek Bantwal
• Co-Chief Executive Officer — David Miller
• President and Chief Operating Officer — Tucker Greene
• Chief Financial Officer — Stanley Matuszewski

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TAKEAWAYS

• Net Investment Income Per Share -- $0.37 for the quarter, resulting in an annualized net investment income yield on book value of 11.7%.
• Net Asset Value (NAV) Per Share -- $12.64 at quarter end, representing a decline of approximately 1% from the prior quarter, attributed primarily to realized and unrealized losses.
• Supplemental Dividend -- $0.03 per share declared for the quarter, payable on or about March 20, 2026, to shareholders of record as of March 9, 2026.
• Base Dividend -- $0.32 per share declared for the first quarter of 2026, with a record date of March 31, 2026.
• New Commitments -- $394.9 million in new commitments across 27 portfolio companies in the quarter, including 7 new and 20 existing companies; 100% of originations in first lien loans.
• Total Portfolio Investments -- $3.3 billion at fair value as of quarter end, comprised of 38.4% in senior secured loans, 1.3% in preferred and common stock, and a negligible amount of warrants.
• Nonaccrual Investments -- Investments on nonaccrual increased to 2.8% at amortized cost and 1.9% at fair value, compared to 2.5% and 1.5% as of the previous quarter.
• Net Debt-to-Equity Ratio -- 1.27x at quarter end, up from 1.17x as of September 30, 2025.
• Share Repurchases -- North of 1.5 million shares repurchased for $15 million during the quarter, accretive to NAV by $0.04 per share; $52.2 million or 4.7 million shares repurchased since June 2025 under the 10b5-1 plan.
• Weighted Average Yield -- 9.9% for total debt and income-producing investments at amortized cost, down from 10.3% from the prior quarter.
• Portfolio Company Leverage Metrics -- Weighted average net debt-to-EBITDA increased to 5.9x, while weighted average interest coverage improved to 2x versus 1.9x in the previous quarter.
• PIK Income -- 9% of total investment income in the quarter came from payment-in-kind sources, down from 15.3% a year earlier; 5% from loan modifications mainly within the legacy portfolio.
• ARR Loan Exposure -- Exposure to annualized recurring revenue loans in GSBD fell from nearly 39% to 11% of the portfolio on a fair value basis since Q3 2022.
• Repayments and Exits -- $251.6 million in sales and repayments during the quarter, $1.1 billion in total for 2025; 78% of annual repayments were from pre-2022 vintage loans.
• Largest New Investment -- $75 million in the Clearwater Analytics $3.5 billion unitranche facility; GS private credit complex retained $1.235 billion total from the deal.

SUMMARY

Management reported a continued portfolio transition, with post-integration investments now at 57%, reducing legacy exposure to 43%. $1.2 billion in new commitments was made across 35 deals, with GS leading approximately 75% of new opportunities. Undistributed taxable net income stood at $109 million, or $0.97 per share, and the company indicated no current plans to distribute a special dividend. An AI risk framework was formalized and actively applied in 2025, resulting in proactive exits of specific software assets due to perceived disruption risks. The direct lending Americas software portfolio saw about 10.3% year-over-year revenue growth and margin expansion of about 5 percentage points to 34.3%. Subsequent to quarter end, $505 million was drawn on the revolving credit facility to pay off maturing notes, and $400 million in 3-year investment-grade unsecured notes was issued at a 5.1% coupon, hedged to floating. The order book for the new note was 7.3 times oversubscribed relative to the $300 million starting size.

• Management stated, "as credit investors positioned at the top of the capital structure, our lens is fundamentally different from, say, equity investors," highlighting the company's focus on credit durability during market volatility.
• The direct lending platform's median EBITDA of portfolio companies reached $71.8 million, up 84% since year-end 2021.
• First lien investment exposure increased to 97% from 89% since year-end 2021.
• Software investment decisions are now subject to an internally developed AI disruption risk framework, and deals not meeting standards are proactively exited.
• A notable software loan was exited at $0.99 due to AI-related headwinds in the staffing sector, although the company showed "no indication of deterioration in the near or long term."
• ARR loan exposure reduction was attributed to a strategic focus on EBITDA-based investments and mitigations within the legacy portfolio.

INDUSTRY GLOSSARY

• PIK (Payment-In-Kind): A form of investment income where borrowers pay interest or dividends with additional securities rather than cash.
• Unitranche: A single debt facility that blends senior and subordinated lending into one instrument, offering a streamline for sponsors and borrowers.
• ARR (Annualized Recurring Revenue) Loan: A credit facility underwritten primarily on the basis of a borrower's recurring revenue stream, common in software and subscription businesses.
• 10b5-1 Plan: An SEC rule-compliant pre-arranged securities trading plan that allows firms to systematically repurchase shares.
• Nonaccrual: Status applied to loans or debt investments that have ceased generating interest income, typically due to borrower financial difficulties.

Full Conference Call Transcript

Vivek Bantwal: Thank you, John. Good morning, everyone, and thank you for joining us for our fourth quarter and fiscal year-end 2025 earnings conference call. I am here today with David Miller, our Co-Chief Executive Officer; Tucker Greene, our President and Chief Operating Officer; and Stan Matuszewski, our Chief Financial Officer. I would like to start by highlighting GSBD's progress since our integration, followed by an overview of our platform's activity during 2025. I'll then spend some time sharing our perspective on current market conditions amidst most recent headlines in the software space.

I'll then turn the call over to David and Tucker, who will dive into our fourth quarter results portfolio activity and performance before handing it off to Stan to take us through our financial results. And finally, we'll open the line for Q&A. Since GSBD's integration into the broader direct lending platform in 2022, we've enhanced our sourcing, underwriting and portfolio management oversight. This quarter, the proportion of our portfolio benefiting from the 2022 reorganization has grown to 57%, while 43% still reflects deals made prior to the integration, which we call the legacy portfolio.

From this integration, GSBD has directly benefited through a deeper origination funnel and the ability to invest in and frequently lead larger senior secured debt transactions supported by the platform's disciplined approach. We have approximately 250 investment professionals on our broader private credit platform. The scale of our investing team, the scale of our platform and the incumbency, relationships and investment prowess. Our team has built up over nearly 30 years, stacks up well against industry peers. What makes it more powerful and unique is having a private credit business attached to the #1 global investment bank.

In addition to the deal origination through our dedicated private credit team, we are able to draw on the relationships of more than 3,000 investment bankers, helping us identify potentially attractive opportunities from our #1 M&A franchise which we can select from as a fiduciary to investors subject to regulatory requirements. Before I dive into our view on the market, I'd like to highlight some broader stats that illustrate the progress GSBD has made as we continue to transition to the direct lending platform. The median EBITDA of the portfolio has increased 84% from year-end 2021 to $71.8 million at year-end 2025. Our exposure to first lien investments increased to 97% of the portfolio from 89% during that same period.

Throughout 2025, GSBD demonstrated continued progress in addressing credit quality concerns and active management of the portfolio. PIK as a percentage of total investment income was 9% in Q4 2025, which is down from 15.3% in Q4 2024. Of that 9% during the fourth quarter, 5% of total investment income during the quarter was from PIK that was introduced as a loan modification or amendment after the initial agreement the vast majority of which relates to the legacy portfolio. Our investments on nonaccrual decreased slightly to 1.9% of fair value from 2% during the year. This is well below our highest nonaccrual rate since integration of 3.4% of fair value.

Another topical consideration we've been keen to address is our exposure to annualized recurring revenue or ARR loans within our broader BDC complex, which includes GSBD. From its peak of 36.5% during Q3 2022, we have significantly reduced the ARR exposure within the BDC complex to approximately 5% at year-end 2025. Within GSBD specifically, ARR loans came down from nearly 39% of the portfolio on a fair value basis to 11% during that same time period. This trend is attributed to our strategic focus on EBITDA-based investments since integration and our proactive approach in mitigating ARR loans from the legacy portfolio as we seek strategic exits or EBITDA conversions for the existing loans in the space.

Overall, our direct lending platform had another strong year in 2025, which directly benefited GSBD. For the year in the Americas specifically, we committed a total of approximately $14.6 billion, which was larger than the $13 billion committed during 2024 and more than double the activity in 2023, all the while remaining selective and disciplined in our underwriting approach. From a macro perspective, despite a volatile first half of 2025, total M&A volume globally throughout the year was up 44% from 2024. U.S. private equity deals reached nearly $1.2 trillion, marking the second time in history that deal volume has surpassed $1 trillion.

Despite this being driven largely by mega deals exceeding $1 billion, we expect this M&A momentum in a potentially falling rate environment to continue and spur a resumption of private equity activity. A more favorable M&A environment should stimulate greater demand for credit financing. And despite the supply of credit remaining robust, we do anticipate spreads to moderately widen during the market dynamics we've seen over the past month. We believe that in today's market environment, differentiation among managers will increasingly be driven by sourcing quality, underwriting discipline, collateral oversight and creditor protections. Let's get to the topic of software. We have a very experienced software investing team.

Our view informed by extensive collaboration across Goldman Sachs, including our 13,000 software engineers, our technology investment banking team and our growth equity investors who are early to companies like Anthropic is that AI's impact will be highly company-specific and nuanced. We will come back to the topic of software and go through some more detail on our framework and a case study but our broader private credit platform has operated with an incredibly high bar focusing on what we believe are high-quality situations in our very broad funnel. As it relates to the recent headlines in software, and the volatility we've seen in equity markets, we understand the concerns regarding AI's potential impact on certain software business models.

However, as credit investors positioned at the top of the capital structure, our lens is fundamentally different from, say, equity investors. We don't participate in growth or equity valuation upside. We're focused on the durability of assets and their cash flows. This credit-focused perspective provides some insulation from valuation volatility. That said, we recognize that sufficiently severe disruption could impact creditworthiness, which is why we maintain ongoing vigilance and are prepared to adapt if our thesis on any portfolio company changes materially. We are focused on lending to scaled incumbent businesses that are deeply entrenched in mission-critical workflows and complex use cases, evidenced by strong retention and efficient growth.

These structural features, among other things, are key characteristics that we seek in software companies that demonstrate real incumbency advantages. Our direct lending platform has a long history of investing in the software sector with investments in the sector dating back to 2008 when we launched our first senior direct lending fund. We have been proactively assessing the impacts of AI on the software space for years. We passed on our first deal due to AI concerns in October of 2023 and rolled out an internal framework to evaluate AI disruption risk in early 2025, which is incorporated into all new investments in addition to our ongoing monitoring of existing portfolio exposure.

The characteristics of our framework include, but are not limited to, acting as mission-critical systems of record with proprietary data and deep domain expertise solving for complex use cases and deterministic outcomes with no tolerance for errors, leveraging the accumulation of context, deep understanding of customers' unique requirements to drive critical business processes, providing broad platforms versus single-product tools, operating on modern underlying architecture with limited technical debt, actively innovating and embedding AI into their own products, operating in regulated and risk-averse industries with long-term customer relationships and trust as well as having proven track records of managing security, compliance, regulatory and governance complexities. We look at each opportunity through this lens in the underwriting process.

Across our broader Direct Lending Americas platform, we have closed or committed to '26 new software deals since January 2025 that exhibit strong KPIs including an average Rule of 40 of 55.8%, comprised of 16.6% recurring revenue growth and 39.1% cash EBITDA margins. During the third quarter 2025, revenue growth and EBITDA margins of our Direct Lending Americas software portfolio improved to 9.2% and 34.9%, respectively, up from 7.8% and 30.3% a year earlier, respectively. Let me provide a concrete example of how we leverage the Goldman Sachs ecosystem for both proprietary origination and enhanced diligence by discussing our largest committed software deal during the quarter, Clearwater Analytics.

Clearwater Analytics, founded in 2004 and based in Boise, Idaho, provides cloud native investment accounting, analytics and reporting solutions for institutional investors, including insurance companies. Goldman Sachs has been around this company for a very long time. We were approached by the sponsors looking to take Clearwater Private as the only organization that we believe could have provided a 100% solution on a transaction of this size in both public and private markets in addition to offering M&A advice. We showed the sponsors indicative financing terms across both markets and ultimately, the sponsor selected the private credit alternative where we were able to structure and negotiate a mutually beneficial bilateral credit facility that included our desired long-term size allocation.

The bilateral process, both simplified and streamlined the sponsor's financing process while protecting the confidentiality of the M&A process which was critically important for the M&A execution. This is an example of leveraging the broader GS ecosystem to deliver differentiated origination and outcomes for our investors. The other part of the ecosystem relates to diligence in our AI framework. The deal team benefited from a firsthand perspective on Clearwater's capabilities and value proposition with Goldman Sachs being a customer of Clearwater's across our Asset and Wealth Management and Global Banking and Markets divisions.

The deal team was able to conduct multiple calls with our engineering colleagues to validate our credit thesis and build a high degree of conviction related to the mission criticality and stickiness of the solution and competitive positioning and durability in a rapidly evolving technology landscape. And so in December 2025, the GS Private Credit Complex committed to 100% of a $3.5 billion investment in a new unitranche financing to support the take private of Clearwater by Warburg Pincus and Permira. And a few weeks later, the sponsors brought 9 other lenders into the deal.

The Goldman Sachs private credit complex retained our desired $1.235 billion of the facility, and the GS BDC will own $75 million of that at closing. The Clearwater investment highlights key characteristics that underscore our approach to investing in software amidst an evolving and nuanced investing environment. Clearwater's advantages are not about the cost to write code. They're about owning the customer relationship, leveraging proprietary data with network effects, navigating regulatory complexity, and providing the insurance policy that mission-critical systems will work reliably. These structural and strategic advantages enable Clearwater to continue providing value to its customers and benefit from AI advancements rather than be disrupted by them. Looking forward, our framework will continue to evolve as the landscape develops.

While AI remains a dynamic and rapidly evolving area, we remain confident in our ability to thoughtfully assess and help mitigate AI-related risks across both our current portfolio and new investment opportunities. That said, and this is important, this is not a time for complacency, but rather a time to remain humble, proactive, disciplined and forward-looking. We are focused on the implications of AI, not only within software, but across the broader business landscape, and we continue to leverage the differentiated capabilities of the Goldman Sachs ecosystem in support of our portfolio. With that, let me turn it over to my co-CEO, David.

David Miller: Thanks, Vivek. I'd now like to turn to our fourth quarter results. Our net investment income per share for the quarter was $0.37, and net asset value per share was $12.64 as of quarter end. This decrease of approximately 1% relative to third quarter NAV was largely due to net realized and unrealized losses in the quarter. The Board declared a fourth quarter 2025 supplemental dividend of $0.03 per share payable on or about March 20, 2026, to shareholders of record as of March 9, 2026. Adjusted for the impact of the supplemental dividend related to the fourth quarter earnings, the company's fourth quarter 2025 adjusted NAV per share is $12.61.

The Board also declared a first quarter 2026 base dividend per share of $0.32 to shareholders of record as of March 31, 2026. We ended the quarter with net debt-to-equity ratio of 1.27x as of December 31, 2025, as compared to 1.17x as of September 30, 2025. GSBD committed approximately $1.2 billion in new commitments throughout the year in 35 new deals. Of the commitments made to new portfolio companies, GS played a lead role in approximately 75% of the deals. During the quarter, we made new commitments of approximately $394.9 million across 27 portfolio companies comprised of 7 new and 20 existing portfolio companies.

100% of our originations during the quarter were in first lien loans, which continues to reflect our bias in primarily maintaining exposure to investments that are at the top of the capital structure. During the quarter, in addition to Clearwater, we also acted as sole lead arranger in the acquisition of [ KUIU ], which is an e-commerce native apparel and accessory brand focused on outdoor enthusiasts. This transaction exemplified our ability to lean into high-quality company and commit 100% of the financing, which is an illustration of the platform's deep sponsor relationships. Turning to portfolio composition.

As of December 31, 2025, total investments in our portfolio were $3.26 billion at fair value, comprised of 38.4% in senior secured loans, 1.3% in a combination of preferred and common stock and a negligible amount of warrants. With that, let me turn it over to Tucker to discuss repayments fundamentals and credit quality.

Tucker Greene: Thanks, David. I'll first discuss the portfolio in more detail. At the end of the fourth quarter, the company held investments in 171 portfolio companies operating across 40 different industries. The weighted average yield of our total debt and income-producing investments at amortized cost at the end of the fourth quarter was 9.9% as compared to 10.3% at the end of the third quarter. Importantly, our portfolio companies continue to have both top line growth and EBITDA growth quarter-over-quarter and year-over-year on a weighted average basis. The weighted average net debt-to-EBITDA of the companies in our investment portfolio increased slightly to 5.9x during the fourth quarter compared to 5.8x during the third quarter.

At the same time, the current weighted average interest coverage of the companies in our investment portfolio at the end of the fourth quarter increased to 2x compared to 1.9x during the third quarter. As Vivek and David mentioned, we had a strong quarter of originations with an increase in our net funding as we continue to enhance the portfolio. Sales and repayment activity totaled $251.6 million during the quarter, primarily driven by full repayment and exit of 13 portfolio companies. One notable exit this quarter was with a portfolio company that our platform has been invested in for approximately 8 years. This company is a software provider for the staffing, recruitment and contingent labor industry.

Now despite performance remaining steady and showing no indication of deterioration in the near or long term, we decided to sell the loan at $0.99 to other lenders given anticipated headwinds and AI disruption risk within the industry. This is a strong example of our ability to be proactive and cautious towards exiting strong companies that we believe have potential AI risk. Our total repayments during 2025 amounted to $1.1 billion. Over 78% of this repayment activity was from pre-2022 vintage loans, demonstrating effective management of our assets. As of December 31, 2025, pre-2022 vintage investments constitute approximately 43% of GSBD's portfolio at fair market value.

The firm maintains a proactive approach to monitoring, managing and resolving any associated credit issues. Throughout this past quarter, we utilized our 10b5-1 stock repurchase plan. We repurchased north of 1.5 million shares for $15 million, which is accretive to NAV by $0.04 per share. Since implementing the 10b5-1 plan in June 2025, we have repurchased $52.2 million or 4.7 million shares. And finally, turning to asset quality. As of December 31, 2025, we placed Pluralsight's first Lien/Senior Secured Debt position -- last out position on nonaccrual status. Investments on nonaccrual status increased slightly to 2.8% and 1.9% of the total investment portfolio at amortized cost and fair value from 2.5% and 1.5% as of September 30, 2025.

I will now turn the call over to Stan to walk through our financial results.

Stanley Matuszewski: Thank you, Tucker. We ended the fourth quarter of 2025 with total portfolio investments at fair value of $3.3 billion, outstanding debt of $1.9 billion and net assets of $1.4 billion. As David mentioned, our ending net debt to equity ratio as of the end of the fourth quarter was 1.27x. At quarter end, approximately 69% of our total principal amount of debt outstanding was in unsecured debt. As of December 31, 2025, the company had approximately $1.1 billion of borrowing capacity remaining under the revolving credit facility.

Subsequent to quarter end, on January 15, 2026, we borrowed $505 million under the revolving credit facility and used the proceeds together with cash on hand to repay the 2026 notes plus accrued and unpaid interest in full satisfaction of our obligations under the notes. Also subsequent to quarter end, on January 28, 2026, we issued $400 million of 3-year investment-grade unsecured notes with a coupon of 5.1%. We also hedged the issuance by swapping the coupon from fixed to floating to match GSBD's floating rate investments. Over 100 investors participated in the company's day of live deal marketing which resulted in the peak order book being 7.3x oversubscribed on our $300 million starting size.

Before continuing to the income statement, as a reminder, in addition to GAAP financial measures, we also reference certain non-GAAP or adjusted measures. This is intended to make our results easier to compare to results prior to our October 2020 merger with Goldman Sachs Middle Market Lending Corp., or MMLC. These non-GAAP measures remove the purchase discount amortization impact from our financial results. For the fourth quarter, GAAP and adjusted after-tax net investment income was $42.2 million and $41.8 million, respectively, as compared to $45.3 million and $44.8 million, respectively, in the prior quarter. On a per share basis, GAAP net investment income was $0.37, equating to an annualized net investment income yield on book value of 11.7%.

Total investment income for the 3 months ended December 31, 2025, and September 30, 2025, was $86.1 million and $91.6 million, respectively. Our undistributed taxable net income as of 12/31/2025 is approximately $109 million or $0.97 on a per share basis. With that, I'll turn it back to Vivek for closing remarks.

Vivek Bantwal: Thanks, Stan, and thanks, everyone, for joining our earnings call. We are excited to continue turning over the portfolio into new attractive opportunities using the full breadth of the Goldman Sachs platform while continuing to navigate through this market environment with humility and continued heightened discipline. With that, let's open the line for Q&A.

Operator: [Operator Instructions] We will go first to Finian O'Shea with Wells Fargo.

Finian O'Shea: I wanted to ask about Clearwater. It's all real interesting color maybe from the -- more from the banks platform perspective than software. So when we see -- it sounds like you were -- had an advantaged position there through Goldman. But can you give us a sense of the -- like in a plus 450 type situation where those are all -- those are the sort of big clean names we see those to me from the outside look like they're not too much of a premium to BSL or the bank solution on a true like leverage-adjusted basis. So how was that true like market competitive?

Or did you lean in sort of one way or the other on say, leverage risk or like quality price on the low end? I guess if I'm worrying that right, just how distinct was your sort of angle in your underwrite?

Vivek Bantwal: Thanks for the question. Look, I think it's a really good question. And I think this is a really good example, particularly the M&A kind of cycle kind of starts to pick up, which is, to your point, one of the things we do benefit from is in addition to the origination that our team provides, we do -- we are kind of connected to #1 M&A investment bank. And so we see interesting opportunities that way. These take privates are particularly interesting because generally speaking, the most important thing in a take private is to keep the deal confidential. And so our ability to provide 100% solution helps the sponsor by avoiding leak risk.

And so then we can have a bilateral conversation. I would just say, and I don't think we get into this name by name in terms of the specifics from a disclosure perspective. But you should assume that when we provide a certainty like that, in an M&A context on a bilateral basis, we're providing value to the client by giving them 100% solution and very seamless execution while they're kind of focusing on their much bigger picture of the M&A that we get paid incremental economics for that.

And so these M&A situations and these take privates in particular, we think are real sources for Alpha because when we can kind of bilaterally negotiate a document with sponsors that are kind of really mutually beneficial where we can really kind of solve for what's important for each other, that tends to be a better dialogue and a better outcome than when you're kind of in a competitive process, kind of needing to play the game theory of how to kind of lean in vis-a-vis competition.

Finian O'Shea: I appreciate that. And I guess, name specific, that's very helpful. And sort of as a follow-up, I'll give you and the team a plug for the shareholder letter on semi-liquids. Not having studied the -- your nontraded semi-liquid as much, just curious if there is a different structure that administers the sort of safe flaws in semi-liquid and evergreen altogether or if it's just a matter of better education as other prominent voices have been saying as well? I appreciate that.

Vivek Bantwal: Thank you, Finian, and thanks for the feedback on the letter. We appreciate that. Look, the first thing I'd say, and I think this is really important, is we don't have different standards for different vehicles or different types of investors. We have a single process that goes to a single investment committee, and that's a very robust process and a high bar. And so a deal needs to meet that high bar to go into our platform. And then once it's in our platform, we kind of allocate it proportionally based on the kind of criteria of the different vehicles on a formulaic basis.

So there's no kind of -- this kind of good deals go here, other deals go there. Like there's none of that, like everyone kind of shares in this. The second point I'll make is from a fee standpoint, and this goes back to your question around Clearwater, any economics that we make on these deals get passed through to the LPs in the vehicles directly. So they completely benefit on a pro rata basis from kind of any value or economics that the platform is able to create. And so I think that's also important and quite valuable. Look, the other thing, and as you said, we spent time on this kind of in the letter.

So we don't use the word semi-liquid. We understand what people mean when they use that phrase. But I think it's really -- I think the thing you have to think about is the actual liquidity provisions in these vehicles are more nuanced than that. And so when we sit down with clients to kind of talk about our nontraded BDC, we make sure that we kind of go through and they understand exactly how it works and understand that part of the proposition is these are illiquid assets. And part of the premium that you're getting in private credit versus public credit is for that illiquidity.

Now relative to a drawdown fund, there are some liquidity mechanisms that have nuance to them in terms of redemption repurchase caps and certain types of vehicles, that the manager, also the Board has the right to actually gate. So there's like provisions to it. And so at the end of the day, we want people who understand what they're getting into, who are thinking about that holistically in the context of the portfolio construction so that they're kind of only allocating the part of their portfolio where they want this extra spread. They understand the trade-offs and the liquidity.

And so they're allocating a portion of that portfolio where they don't kind of need that liquidity for an extended period of time. And then the second thing that I think is really important is we've been very intentional in the way that we've kind of sized our vehicle. So the vast majority of our capital is drawdown capital. And obviously, it's easier to modulate as a platform when your evergreen money is only a minority of your capital. You don't have deployment pressure. I think one of the risks that one runs if they allow that kind of retail component to get too big is there a risk that it starts to kind of impact credit selection.

And one of the things that we want to make sure that we're always doing is as a platform that's been in this business for 30 years, we want to make sure that we're investors, not asset gatherers, not deployers. And so yes, that has an impact on growth. Obviously, it's easier to scale faster if you're kind of going all in on the retail channel. But we think with a more measured approach, we're in a really, really good position to kind of just navigate cycles. And so we saw, as it says in the letter, we saw some -- we saw inflows kind of reduce a little bit in the fourth quarter.

We saw kind of redemption activity kind of pick up. Again, our metrics were quite favorable to what we saw in the industry. But we think that by having diversified sources of funding, you'll be in a position where you can kind of deploy capital kind of through the cycle and put yourself in the best position to try to generate the best risk-adjusted returns for clients.

Finian O'Shea: Good stuff. I'll do one follow. Dividend, you guys have historically been front-footed about that. Incentive fee adjusted SOFR look-through adjusted, you look a little bit below. Any sort of updated views on how you're thinking about the 32 base?

David Miller: We feel pretty good about -- we reset that last year with the curve and everything in mind. The other thing I would say is we're somewhat optimistic that we see some spread widening here. It's early days yet. I think a lot of people are still in price discovery, but we're seeing anywhere from 25 to 50 basis points in both coupon as well as OID. So you roll that through the model, we feel very comfortable with the dividend as it sits today.

Operator: We'll go next to Heli Sheth with Raymond James.

Heli Sheth: So I believe you mentioned that spillover is at $0.97 a share, and that's kind of starting to approach or it's over actually 3/4 of the base dividend. Is there any strategy there looking forward, how we should think about deployment of that spillover heading into 2026? And will it be used to cover any shortfall of earnings?

Stanley Matuszewski: Yes. So in terms of the spillover, that's come down year-over-year. We had done with the restructure of our dividend structure into base and supplemental structure earlier in 2025, we utilized a certain portion of that spillover. To the extent that we would need to, we could issue a special distribution. We don't have any current plans for that right now. And as a result of our supplemental distributions, we could also issue some -- or we could also distribute some incremental NII.

Heli Sheth: Got it. And as a quick follow-up, as originations and repayments remain kind of elevated in this environment, are you seeing any sort of shift in the mix of the deals that you're seeing in the pipeline, whether it be in terms of sponsor or nonsponsor incumbent versus new borrowers, LTVs?

Vivek Bantwal: No, I wouldn't say the composition of the deal flow is changing. I would say that there continues to be signs that kind of M&A activity is sort of picking up. Obviously, not in software, just given what's happened kind of in public markets and around software. But I'd say in other parts of the -- kind of in other industries, we are kind of seeing more dialogue, and we'll see where that dialogue goes.

Operator: We'll go next to Ethan Kaye with Lucid Capital Markets.

Ethan Kaye: I appreciate the general color on software. You did mention you rolled out this AI kind of risk framework in the beginning of 2025. With that being said, it sounds like you were kind of cognizant of some of the risks, cognizant of the emerging risk prior to that, but maybe formalized it in 2025. But I guess I'm curious when you apply that framework to the current portfolio, do you find any names that maybe kind of wouldn't have passed muster had they been underwritten while that framework was in place?

David Miller: Yes. No, thanks for the question, Ethan. As you said, we turned our first deal down for AI in 2023. So we've been aware of this for a long time. We did formalize our AI framework in early 2025 and put it through. And look, the majority of the portfolio stacks up pretty well. There are a few legacy assets that certainly would be -- fit some of those weaker metrics and they would be more point solutions. I think you've seen some of those be marked down in the book to date, and we're continuing to work on those to exit those.

The other thing I would say is, as we pointed out in the script, we're very proactive in account management here. One of those names, for example, that was on the weaker side of that AI framework, we sold. So -- and we sold it at $0.99 to other lenders that didn't have the same viewpoint. So we're being very proactive with it watching those names carefully. But by and large, we feel pretty good about the software portfolio. The other thing I would point out is, if you take a look at our software portfolio in general in GSBD, the performance is strong.

They had -- revenue growth is about 10.3% year-over-year and margins expand by about 5 points to 34.3%, which is stronger metrics than the overall portfolio. So we feel pretty good about that.

Ethan Kaye: Great. I appreciate that color. I guess on repurchases, so you guys have prudently been kind of buying back shares here. You mentioned you repurchased over $50 million under the current authorization, which I believe is $75 million through June. And I know it's formulaic, but given what you know about the inputs and the underlying formula, wondering kind of whether you anticipate that full utilization of that $75 million by expiration and then whether you would explore kind of a new authorization in second half of '26?

Stanley Matuszewski: Sure. Thank you for the question. So one of the inputs into -- as you mentioned, it is formulaic so that it can operate at any time. One of the inputs into that formula is our net debt-to-equity ratio. And so that ticked up period-over-period, and it's right around our target. And so that is one of the limiting factors in us buying back. I think we will continue to assess the ability to utilize that program in the future. As you mentioned, we still have approximately $23 million of room within that program. We've been taking a measured approach to issuing that.

But it's also going to depend on the other opportunities we see in the market and where spreads go.

Operator: This concludes the question-and-answer session. At this time, we will turn the call over to Vivek for any closing remarks.

Vivek Bantwal: Thanks, everyone, for the time today. We really appreciate the continued engagement and look forward to continuing the dialogue. Let us know if you have any more questions, and have a great rest of the day.

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