Bain Capital Specialty Finance, Inc. Q2 FY2025 earnings call

• Q2 results: Net investment income per share was $0.47, earnings per share $0.37, NAV per share $17.56.
• Market environment: Increased volatility at start of Q2 due to tariffs, but new deal volume resumed to normalized levels.
• Originations: Q2 gross originations $530 million, up 73% YOY; 93% of new fundings in first lien structures, weighted average spread over 580 basis points.
• Portfolio: Q2 new investment fundings $530 million in 94 companies; portfolio at fair value $2.5 billion across 185 companies, 63% in first lien debt; weighted average yield on portfolio 11.4%.
• Credit quality: Nonaccrual rate 1.7% at amortized cost, 0.6% at fair value; risk rating 1 and 2 investments 95% of portfolio.

In the second quarter ended June 30, 2025, Bain Capital Specialty Finance (BCSF) reported Q2 net investment income per share of $0.47, representing an annualized yield on book value of 10.7%. Earnings per share were $0.37, reflecting an annualized return on book value of 8.3%. The net asset value per share was $17.56, down slightly $0.08 per share from the prior quarter end. Q2 net investment income was $30.6 million or $0.47 per share, compared to $32.1 million or $0.50 per share in the prior quarter. The investment portfolio at fair value totaled $2.5 billion as of June 30, with total assets of $2.8 billion and net asset value of $1.1 billion.

• Board declared third quarter dividend $0.42 per share, additional $0.03, total $0.45 per share (10.2% annualized on ending book value).
• Dividend coverage strong: NII dividend coverage 112% in Q2, 115% in H1 2025.
• Spillover income $1.43 per share, undistributed income from JVs $0.10 per share.
• Current market price gives 12.2% annualized dividend yield, attractive in BDC sector.

• Market volatility and spread compression.
• Potential lower interest rate environment and higher liability costs.
• Risks identified in Form 10-Q Risk Factors that could affect actual results.

Q: On the securitization refinancing, I believe it was the 2019 middle market securitization that you mentioned. So it sounds like you refinanced that. I'm just curious why or what kind of drove that decision?

A: Thanks, for your question. I would say, yes, it was pretty attractive from a pricing perspective. Our prior CLO securitization was with a weighted average cost of around 185 basis points, and we were able to access the market, which was pretty attractive and our AAA tranche, we were able to issue around 150, 155 range. So it was pretty attractive from a pricing perspective. At the same time, I would say our 2019-1 CLO basically was up from an investment period perspective. So we were evaluating it from that perspective anyway. So the market provided us an opportunity and the pricing made sense.

Q: On the origination activity this quarter, obviously, it's -- you guys are pretty active with new originations. I mean, how would you characterize the activity for the quarter? Was this mostly new company originations, a lot of existing. And I guess, in a quarter where you saw, for the most part, reduced kind of activity across the space and reduced M&A activity. Just wondering kind of what drove the higher-than-average origination?

A: Yes. Thanks, Paul. There's a couple of factors, I think, that drove that. One is the core middle market where we play didn't exhibit as much of a pullback from activity as observed in that larger segment of the market. The second thing is we've been particularly focused across the private credit group in terms of expanding our reach into the market. What we realize is as many strong relationships as we have, there's still a lot more folks that we, quite frankly, don't know in the middle market. And so we've really broadened our sponsor outreach and developed a number of new relationships across the market. If you look at the stats, it's not quite 50-50, but it's roughly 50-50 from a new platform perspective versus add-on activity. So it certainly hasn't just been driven by our incumbency advantage. That's certainly very helpful. But we also, as I said, continue to expand looking for new opportunities as well because the incumbent level of activity may wax and wane over time.

Q: Are those investments that can eventually be sold down into the JVs as you potentially want to make some room on the balance sheet? Or how do you typically manage that? Do you directly originate into the JVs?

A: They are investments that could ultimately get dropped down into our joint ventures, and that's primarily driven by the fact that they're almost all first lien loans that fit well into the joint ventures if we decide to move them in future quarters.