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Earnings in U.S. Middle Market Continue to Boom, Golub Capital Altman Index

January 25, 2022, 07:00 AM
Filed Under: Economy

Middle market private companies in the Golub Capital Altman Index experienced EBITDA growth of 22% and revenue growth of 21% in October and November 2021 compared to their October and November 2019 earnings and revenue. The data in this report reflects the median performance of approximately 100 companies that were in the Golub Capital Altman Index in both periods. The comparison over a two-year period is intended to provide greater insight than the report’s typical year-over-year analysis, given the impact of COVID-related lockdowns throughout much of 2020. 

“Boomflation continued in Q4,” said Lawrence E. Golub, CEO of Golub Capital. “For the third consecutive quarter, median revenue and EBITDA grew by more than 20% compared to the same period in 2019, pre-Covid. That said, many industrial companies could not meet demand, and the missed operating leverage allowed increased labor and material costs to compress margins. With Omicron, 2022 will reveal which private equity backed companies fixed their 2020 Covid-related problems permanently and which just kicked the can down the road and will now face hard times.”  

Dr. Edward I. Altman said, “The Consumer and Tech sectors were once again the standout performers, posting revenue and EBITDA growth in excess of 30% compared to the same period in 2019, while expanding profit margins. Looking ahead, Omicron seems likely to drive dispersion in company performance based on industry as well as geography. Businesses that sell intangible goods and services, like software companies, will have an easier time than those that rely on physical goods and in-person interactions.” 

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. 

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