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PRIVATE & CONFIDENTIAL Driven by your success. For client and institutional use only, not for public dissemination Credit Markets & Sponsor-Related Transactions: Preview of 2021 Guest Speakers Justin Kaplan Bill Beebe Chris York Partner Vice President, Managing Director & Co- Specialty Lending Group Head Life Sciences & Technology Finance Canaccord Genuity Moderators Isaiah Knouff Amy LaBan, CFA Managing Director, Managing Director, US Financial Sponsor Coverage US Financial Sponsor Coverage [email protected] [email protected] For webcast replays visit: https://www.webcaster4.com/Webcast/Page/2332/38720 Page 1 Driven by your success. Prior to joining Balance Point, Mr. Kaplan was a Senior Vice President for BNY Mellon Alcentra Mezzanine Partners, L.P. where he was responsible for transaction sourcing, deal execution and the monitoring of portfolio companies. Mr. Kaplan was a member of the investment committee and served on the boards of directors of several portfolio companies. Mr. Kaplan began his career in the investment banking group of Justin Kaplan Veronis Suhler Stevenson, an independent investment bank and private equity fund specializing in the media industry, where he completed more than 25 corporate finance and private equity related transactions totaling over $2.0 billion in aggregate deal value. Mr. Kaplan received his B.A. from Cornell University and was awarded a Cornell Fellowship Scholarship. Bill is a vice president in the Specialty Lending Group (“GSSLG”) of Goldman Sachs & Co., with an investment focus on the healthcare services, healthcare IT, and asset light logistics sectors. GSSLG provides senior secured debt financing for middle market companies and private equity sponsors across a broad variety of industries and financing structures, ranging from senior secured debt to structured equity. Prior to joining GSSLG in 2008, Bill spent 10 years in the healthcare lending sector with Silver Point Capital, Bill Beebe FirstLight Financial Corporation, and GE Capital. Chris York is currently head of originations for MidCap’s Life Sciences & Technology Finance Group. Mr. York brings more than 17 years of experience providing venture debt financing to private and public technology and life science companies. Mr. York was one of the founding members of the Merrill Lynch Capital Life Sciences Venture Debt team. Prior to Merrill Lynch Capital, Mr. York spent 6 years at Silicon Valley Bank where he was responsible for developing and maintaining relationships with venture capital and Chris York private equity firms throughout the East Coast. Prior to joining Silicon Valley Bank, Mr. York was a professional golfer for 2 years, playing on various professional tours throughout the world. Mr. York graduated from Georgetown University in Washington, D.C. with a B.S. in Finance. Page 2 Driven by your success. Q: Where do you see the market now versus mid-year and post Labor Day? Have you seen certain sectors return to historical leverage and pricing levels despite the current travel restrictions? March through August was very quiet. AT one point, our deal flow probably dropped about 75%. The only things that we were seeing were industries really impacted by COVID, like the fitness industry and what I’ll call “healthcare retail,” like dental and dermatology practices. In August, things started to pick up. Since September, it’s been full steam ahead. This is probably the busiest December that we have ever had in our 12 years in business. We’re seeing anything that touches the consumer really coming back. Probably the biggest winner that we’ve seen is anything that touches e- Justin Kaplan commerce technology and Amazon has been on fire. For those sectors, we’ve seen leverage levels go back to pre- COVID levels, and we’ve seen pricing come down to pre-COVID levels. For those areas that have been hit by COVID, I would still say leverage is lower, probably half a turn to 3/4 of a turn. Pricing is up probably 100 or 150 basis points. I focus on the middle market, which we view as companies with $5-$40 million EBITDA. In March to June, nothing got done. If you wanted to do a deal, pricing was just astronomical. Healthcare services that got hit pretty hard in March and April, like dermatology, got absolutely hammered. Then you had the summer months, when we realized the world hadn’t ended. We started seeing a few a new opportunities pop up. Now we are the busiest we have ever been in December. For healthcare IT, pricing and leverage is back to where it was pre-COVID, if not more aggressive. I think within healthcare services, leverage is about half a turn to a turn inside of our where it was pre-COVID, and pricing is 50 Bill Beebe to 100 basis points wider, but deals are getting done. My focus within midcap is venture debt-oriented opportunities with tech and life science companies. On the pharma and biotech side, it’s actually been strong throughout COVID. These businesses have really strong balance sheets, and there’s been a bunch of capital inflows to them. But for some clinical trials getting delayed, it’s been fairly business as usual – in some ways more tailwinds than headwinds, with all the work going on around COVID. Med-tech, though, continues to struggle. The uncertainty around elective surgeries being on again off again has created underwriting Chris York challenges. In healthcare IT, it has become professionally acceptable to receive healthcare virtually, and I think that trend becomes permanent. On the tech side, we obviously lived in a digital economy before COVID, and and that’s only been accelerated, whether it’s remote working software solutions, e-commerce as Justin mentioned, or even some food services-related technology. Page 3 Driven by your success. Q: What kind of opportunities are you looking at right now that you find most attractive and actionable in terms of industry, business model, financials, and key metrics? We’re trying to finance businesses that are recurring revenue and have in-elastic demand. That worked great until you got into the COVID period, and people were scared to go to the doctor and visit volume plummeted for office based physicians and dentists. Now those businesses are bouncing back. I think leverage is a little more conservative in certain sectors, and we spend a lot more time looking at liquidity. We’re still underwriting physician practice management deals. We have a deal, hopefully, we’ll get it signed up today in the ophthalmology space, a business that’s Bill Beebe back at 95% plus or minus of pre-COVID levels. Our deal cadence is largely back to normal. We’re looking at the same types of companies that we were looking at pre- COVID. Obviously, we have a jaundiced eye towards things that continue to be affected by COVID. But, as we sit here in December, I think most management teams have worked their way through COVID. And, the ones that have survived are now turning their attention to post-COVID and making plans for growth, and, potentially, the necessary capital to support that growth, which is, obviously, what all of us here today ultimately provide. As far as sectors of focus, I touch Chris York Life Sciences and Technology. We have a food services-related technology deal we’re underwriting right now, venture capital-backed, that we’ll close this year. We’ve closed some biotech deals in the last couple of months. It feels a little bit like we’ve all got a light at the end of the tunnel now and are spending our time thinking more about greener pastures than we were in the summer months and spring months. We look at the $5-$40 million dollar EBITDA market, both sponsor/nonsponsor-backed, and we’ve got buckets for credit and for equity. I’m surprised that we haven’t seen, and would very much like to see, what I’ll call, “good companies with bad balance sheets.” We expected to see a ton of those companies in 3Q. even earlier back in Q2, but, except for a handful, they have been non-existent, Maybe that’s more of a comment on our inability to market correctly. Justin Kaplan Regardless, I’ve spoken to enough people in the marketplace that I don’t think many people are seeing those companies. I just can’t figure out where those companies are and why aren’t we seeing them. PPP is only going to last for so long. I’m pretty sure everyone did amendments in March and June and kicked the can down the road. You would think we would have started to see those opportunities in September, October, November. But we still haven’t seen them, and I think I speak to the market enough to say the market hasn’t seen them. Page 4 Driven by your success. Q: How have you handled due diligence for transactions during the pandemic? How has this evolved during the year? Has pricing increased? Has leverage decreased? Zoom due diligence meetings are now the norm, and I don’t expect those to change anytime soon. Candidly, we were very resistant to conducting due diligence meetings via Zoom, but obviously had to capitulate. We place a ton of value on sitting in the room with the management team and were nervous we were going to be missing something without having that personal interaction. It’s been an adjustment. Our deal volume this year will be half of what it is in a normal year. I think Chris York a lot of that has to do with our reticence to conduct diligence remotely. But, I think we’ve entered the world of diminishing returns.

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