Middle market private companies in the Golub Capital Altman Index grew earnings by 8% during the first two months of the third quarter of 2024. Revenue grew 5% during the same period.

Lawrence E. Golub, CEO of Golub Capital, said, “Solid revenue and earnings growth continued for companies in the Golub Capital Altman Index for the eighth consecutive quarter. The cost discipline and pricing power we highlighted throughout the recent inflationary period continues to pay dividends for many companies in our sample, as aggregate earnings growth materially outpaced aggregate revenue growth for the fifth consecutive quarter. These encouraging trends come with a caveat. Dispersion in operating performance is increasing, both in our sample and in the broader credit market. Even in a strong sector like Technology, which posted another quarter of double-digit earnings growth, there’s a striking performance gap between mission-critical enterprise software providers with dominant market share and others in more fragmented and competitive markets. We expect to see greater performance dispersion in the coming period, both within and across sectors.”

Dr. Edward I. Altman said, “We noted in last quarter’s report that the balance of headwinds and tailwinds facing consumers would be an important dynamic for investors to watch in the second half of 2024. Our sample of Consumer companies painted a mixed picture in Q3 2024, much like recent macroeconomic data. Solid revenue and EBITDA growth, in aggregate and in most sectors in our sample, suggests consumer spending continued to surpass low expectations, while a slight decline in EBITDA year-over-year indicates that wage growth and labor market strength continued to put pressure on margins. These mixed signals, together with increased dispersion in operating performance, illustrate that while many companies are adapting well to this environment, the lowest-performers are falling further behind. Our data suggests that skill at avoiding problem credits, especially for firms that are vulnerable to relatively high interest costs, and at managing problems effectively when they occur, are likely to be key drivers of investor returns in the coming period.”

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. It measures the median revenue and earnings growth of approximately 110–150 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.