Golub Capital published a special edition of the Golub Capital Middle Market Report for Q2/21. The report compared the April and May 2021 revenue and earnings of middle-market private companies in the Golub Capital Altman Index with revenue and earnings in April and May 2019. This analysis was intended to provide greater insight into economic conditions than the report’s typical year-over-year comparisons, which would reflect the impact of COVID-19-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 with their April and May 2019 earnings and revenue. The data in this report reflected the median performance of approximately 130 companies that were in the Golub Capital Altman Index in both periods.
“The U.S. economic boom continues in Q2,” Lawrence E. Golub, CEO of Golub Capital, said. “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.”
“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,” Dr. Edward I. Altman said. “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 Altman, is an 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 middle-market lender. Reported shortly before public company quarterly earnings season, the GCAI has served as an 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, according to statistical back-testing dating back to 2012, when data began to be tracked.