Bain Capital Specialty Finance, Inc. (BCSF) Earnings

Management highlights

### Overall Financial and Dividend Update - Reported solid Q2 2026 results: net investment income per share of $0.44, representing an annualized 10.5% yield on equity that covers the $0.42 base dividend by 105% - Annualized return on equity was 5.2% with earnings per share of $0.22; NAV per share decreased 21 cents quarter-over-quarter to $16.65 - The board declared a Q3 2026 dividend of $0.42 per share, representing a 10.1% annualized rate on ending Q2 book value - Liquidity remained strong at quarter end, totaling $806 million, including $606 million in undrawn revolver capacity and $130.6 million in cash and equivalents ### Investment Activity and Portfolio Composition - Q2 new investment fundings totaled $182 million across 99 portfolio companies: $73 million in 8 new companies (40% of total fundings) and $109 million in 91 existing companies (60% of total fundings) - Total sales and repayments reached $277 million, resulting in net repayments of $95 million quarter-over-quarter; 91% of new Q2 fundings were allocated to first lien structures - The portfolio is highly diversified: 214 portfolio companies across 30 industries, with an average single-position size of just 40 basis points of the total portfolio - Subsequent to quarter end, the company extended its revolving credit facility maturity to 2031, pre-funded 2026 debt maturities, and removed the credit adjustment spread from the facility terms with no other major changes - Debt-to-equity ratio was 1.41x at quarter end, while the net leverage ratio (debt less cash/unsettled trades) was 1.22x, down from 1.28x in Q1; gross leverage declined to 1.34x as of July 31, 2026 ### Credit Quality and Sector Exposure - Overall credit quality remained healthy, with non-accrual investments at 2.2% of fair value (up modestly from 0.6% in Q1 but still low relative to industry averages) - Two companies were added to non-accrual and four were removed in the quarter; watchlist investments totaled 6% of fair value, an increase of 1 percentage point quarter-over-quarter - Median borrower net leverage was 4.7x and median interest coverage was 2.1x, both indicating resilient credit fundamentals - Software and software-adjacent exposure represents 12% of the total portfolio (underweight relative to the broader private credit market), focused on system-of-record and specialized vertical software with solid operating performance - Only 4% of the total portfolio at fair value carries high or moderate AI disruption risk, with most of this subset continuing to deliver stable performance ### Market Positioning - Bain Capital's core middle market focus remains insulated from retail outflows that have impacted larger segments of the private credit market, offering attractive liquidity premiums, better tranche control, and tighter covenants - New first lien originations in Q2 had a weighted average spread of 570 basis points, above the 525 basis point average for sponsored middle market first lien unit tranche loans, with average net leverage of 4.5x (below the market average of 5.4x)

Guidance

- Management will reevaluate the current $0.42 per share base dividend level in coming quarters, factoring in the interest rate environment, upcoming October 2026 maturity of lower-cost unsecured notes, and expected increases in M&A deal volume that will drive additional fee income. The core priority will be ensuring consistent, sustainable dividend coverage. - The company targets a net leverage range of 1.0x to 1.25x; after operating at the higher end of the range recently, management plans to moderate net leverage back to the middle of the target range (below 1.25x) in coming quarters, while continuing to pursue attractive new investment opportunities. - The one-time reduction in ISLP joint venture income in Q2 is not expected to be recurring, as it resulted from retained earnings to build diversification in the structure, not underlying underperformance.

Segment performance

Bain Capital Specialty Finance operates as a single business segment focused on middle market private credit investments. Total investment income for Q2 2026 was $62.3 million (down from $66.2 million in Q1 2026), with 97% of this income coming from interest and dividend income, and payment-in-kind (PIC) interest income contributing 12% of total investment income (a modest decrease from Q1 2026). Total expenses before taxes were $33 million, down from $37.9 million in Q1 2026. Net investment income was $28.6 million ($0.44 per share), up from $27.4 million ($0.42 per share) in the prior quarter. Net realized and unrealized losses totaled $14.6 million ($0.22 per share), leading to net income of $14.1 million ($0.22 per share). As of June 30, 2026, the total investment portfolio at fair value was $2.4 billion allocated as follows: 63.4% to first lien senior secured debt, 1.3% to second lien debt, 3.7% to subordinated debt, 7.7% to preferred equity, 7.5% to common equity and other interests, and 16.4% to joint ventures. 95% of all debt investments carry a floating interest rate, with a weighted average portfolio yield of 10.8% at amortized cost and 10.4% at fair value.

Risks & headwinds

- Actual future results may differ materially from forward-looking statements due to inherent risks and uncertainties, as outlined in the company's Form 10-Q risk factor section. - A small subset (4% of total portfolio at fair value) of investments carry moderate or high risk of disruption from emerging AI technologies, requiring active monitoring of performance metrics like new bookings and retention rates. - Year-to-date repayment activity remains low relative to historical normalized levels, limiting capacity for new originations. - Higher interest rates increase the company's cost of debt, which will negatively impact net earnings following the October 2026 unsecured debt maturity.

Analyst Q&A

• Q: What is the company's framework for setting the base dividend, how does spillover income factor into dividend plans for 2027, and how will the upcoming unsecured debt maturity change the company's debt profile? /

  A: Management does not target a fixed payout percentage of NAV; the core priority is maintaining consistent, sustainable coverage of the base dividend. Spillover income sits at approximately $1.26-$1.27 per share, and special dividends will be evaluated as needed to manage spillover levels after the base dividend is set. The October 2026 unsecured maturity will be paid down following the recent credit facility extension, which will reduce the share of unsecured debt on the balance sheet. (263 characters)

• Q: Why did ISLP joint venture income decline materially in Q2, and should investors expect continued yield pressure for this joint venture? What other terms changed when the revolving credit facility was extended? /

  A: The Q2 income decline was a one-time event resulting from retained earnings to build diversification within the ISLP structure, not a sign of underlying underperformance. The ISLP has delivered high single-digit IRRs since inception in line with expectations, and no ongoing yield pressure is expected. The only material change to the revolving credit facility was the removal of the credit adjustment spread, with no other changes to margin requirements or collateral terms. (369 characters)

• Q: How is the company balancing leverage reduction with new investment deployment, especially given the ability to drop investments into joint ventures? Why is management targeting lower leverage? /

  A: The company has operated at the higher end of its 1.0x-1.25x net leverage range due to limited recent repayments across the market. Management plans to pull leverage back to the midpoint of the range (below 1.25x) for proactive capital planning, not because new opportunities are unattractive. The company will maintain a one-in, one-out approach (adding new loans as existing loans repay) and use joint venture drop-downs to free up capacity for continued new originations, which remain attractive at current spreads. (407 characters)

• Q: Why is there a discrepancy between the 12% reported Q2 PIC income share and the higher ~19% share calculated from year-to-date cash flow? /

  A: The 12% figure applies specifically to Q2 2026, while the higher 19% figure reflects year-to-date results driven by higher PIC income in Q1 2026. Occasional preferred dividend payments can also create timing differences between quarterly accrual figures and cumulative cash flow figures, and management will follow up with additional detail after the call. (271 characters)