Carlyle Secured Lending, Inc. Q3 FY2024 earnings call

• Third quarter financial performance benefited from stable credit performance and a higher base rate environment, generating net investment income of $0.47 per share and adjusted net investment income of $0.49 per share.
• Board of Directors declared a total fourth quarter dividend of $0.45 per share.
• Deal activity strengthened in the second half of 2024, originations up significantly year-over-year with a growing pipeline, expecting volumes to remain strong in 2025.
• Portfolio was diversified with 175 investments in 128 companies across over 25 industries, 94% in senior secured loans.
• Closed a reset of the 2015-1 CLO, extended reinvestment period and maturity date, reduced debt cost. Received investment-grade ratings from Moody's and Fitch, issued $300 million of unsecured notes.
• Credit performance stable, non-accruals decreased to 0.6% of total investments at fair value.

In the third quarter, the company generated net investment income of $0.47 per share and adjusted net investment income of $0.49 per share. The adjusted NII represents an annualized yield of nearly 12% based on the 9/30 NAV. The portfolio as of September 30 was comprised of 175 investments in 128 companies across more than 25 industries, with 94% of investments in senior secured loans. Revenue contribution details weren't explicitly broken down by specific product segments, but the overall financial performance was highlighted.

• Merger between CGBD and Carlyle Secured Lending III remains on track to close by end of Q1 2025, subject to approvals.
• Expect volumes to remain strong in 2025 as M&A pipeline expands.
• Anticipate some contraction in earnings in coming quarters due to expected lower base rates, tighter new issue spreads, and portfolio repricing activity.

• Forward-looking statements involve inherent risks and uncertainties, including those in 10-K and 10-Qs.
• Uncertainties related to merger approval and execution.
• Potential spread fluctuations and market uncertainties affecting earnings.

Q: Wanted to start on the outlook from a portfolio perspective, pipeline and balance sheet leverage.

A: Justin mentioned originations were up, pipeline is meaningful and increasing, expecting M&A activity to pick up. Tom noted CGBD's leverage was 0.9 at 9/30, target at merger close is 1.1, pipeline solid on new deals.

Q: Commentary around repayment volume and spreads stabilizing.

A: Thomas noted repayment volume reversing this quarter with higher new deal volume. Justin said for typical first lien or unitranche deals, spreads stabilized in SOFR 500 to 550 area, and there could be spread widening if base rates go down.

Q: Trends in fundamentals, revenue vs EBITDA growth.

A: Justin said fundamentals are strong, revenue and EBITDA growth was high during inflation but has slowed to mid-single digits as inflationary pressures ease