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Steady Earnings Growth Persists in the U.S. Middle Market

Middle market private companies, as indicated by the Q1 2024 Golub Capital Altman Index, saw an 11 percent increase in earnings within the initial two months of the first quarter of 2024. Concurrently, revenue experienced a 5 percent growth during this timeframe.


Lawrence E. Golub, CEO of Golub Capital, commented, "Q1 2024 showcased solid growth, aligning with our projections. The sustained double-digit EBITDA growth over three consecutive quarters underscores the resilience and adaptability of middle market companies, particularly those under private equity ownership, amidst today's uncertainties. This consistent fundamental earnings growth offers valuable flexibility as companies navigate high interest rates. The robust performance seen in the Golub Capital Altman Index for Q1 2024 provides investors with optimism as they adjust their outlook on interest rate trajectories. Even if rate adjustments deviate from consensus expectations, resilient private equity-backed firms are well-positioned."


Dr. Edward I. Altman, professor of Finance, Emeritus, at New York University's Stern School of Business, added, "Q1 2024 demonstrated strength in the middle market, with notable revenue and EBITDA growth across all subsectors of the Golub Capital Altman Index. Healthcare and Industrial sectors within our sample showcased impressive year-over-year revenue and earnings growth of approximately 10 percent, indicating that adept businesses are withstanding labor market challenges. The Technology sector's fourth consecutive quarter of earnings growth surpassing 20 percent reflects the ongoing demand for mission-critical enterprise software providers. The Q1 2024 Golub Capital Altman Index aligns with prevailing expectations of a 'soft landing,' yet prudent investors should focus on strategies designed for varied scenarios."


The index tracks four sectors: technology, consumer, healthcare and industrials. While the year-on-year growth of earnings for technology was 37 percent, that of industrials, the slowest growing sector, was 10.6 percent. The corresponding numbers for consumer and healthcare were respectively 13.8 and 11.4 percent.


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