Sixth Street Specialty Lending, Inc. Q1 FY2026 earnings call

Beau Stanley announced Mike Fishman will become chairman effective May 21st. First quarter highlights reviewed, Ross Brock to discuss investment activity and portfolio, Ian Simmons to review financial performance. Net investment income $0.42 per share, net loss per share $0.27 due to unrealized losses. Portfolio remains healthy, balance sheet strong. Q1 investment activities: $338 million total commitments, $135 million fundings, new investments in MindBody and Labrie, repayments and payoffs, one addition and one removal from non-accrual status. Financial performance details: net investment income $0.42, net loss $0.27, total investments $3.3 billion, average debt to equity ratio changed, ample liquidity, NAV bridge discussed, operating results detailed with investment income, expenses, etc.

First quarter net investment income was 42 cents per share, annualized return on equity 9.9%. Inclusive of fair value movement, net loss per share 27 cents. Net asset value per share declined ~4.3% to 1624. Net investment income per share $0.42, net loss per share $0.27. Total investments $3.3 billion, principal debt outstanding $1.8 billion, net assets $1.5 billion or $16.24 per share. Weighted average yield on debt and income-producing securities at amortized cost decreased slightly from 11.3% to 11.2%. Portfolio performance rating strong, weighted average rating 1.19 on 1-5 scale. Core portfolio companies LTM Revenue and EBITDA Growth 9%.

Original guidance based on 30% portfolio turnover. Anticipate ROE 10%-10.5% if turnover below 20% full year, above 10.5% with higher repayment activity. Base dividend adjusted from 46 cents to 42 cents per share. Portfolio has ~$1.57 per share potential activity-based fee income embedded. Supplemental dividend framework provides flexibility for upside if activity accelerates.

Market-driven volatility from factors like AI impact on software investments, redemption requests from non-traded BDC shareholders, geopolitical uncertainty. These contributed to credit spreads widening, subdued transaction environment. Unrealized losses on investments due to wider market spreads and lower market multiples. Activity-based fee income lower due to muted market activity.

Q: Finian O'Shea on dividend framing and NAV preservation.

A: Bo Stanley discussed dividend set at responsible level, activity-based fees framed, embedded fees in portfolio, better investing environment.

Q: Brian McKenna on dividend decision timing and spread on new deals.

A: Board decision made last week, spread on new deals idiosyncratic, better investing environment.

Q: Robert Dodd on call protection half-life and software exposure.

A: Call protection half-life 2-3 years, software exposure not meaningfully changed.

Q: Rick Shane on terms and structures change.

A: Spreads widening, underwriting standards better, access to management improved.

Q: Kenneth Lee on ROE outlook and SCP-JV.

A: No update on new issue spreads, SCP-JV ramp-up expected in 2-2.5 years.

Q: Paul Johnson on software portfolio EBITDA.

A: Software portfolio margins expanding, broadly aligned with overall portfolio.

Q: Derek Hewitt on capital issuance and software portfolio EBITDA.

A: Capital issuance depends on pipeline, software portfolio margins expanding