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Blackstone Secured Lending Fund (NYSE:BXSL) Q2 2024 Earnings Conference Call August 7, 2024 9:30 AM ET Company Participants Stacy Wang - Head, Stakeholder Relations Brad Marshall - Chairman and Co-CEO Jonathan Bock - Co-CEO Teddy Desloge - CFO Carlos Whitaker - President Conference Call Participants Finian O'Shea - Wells Fargo Securities Robert Dodd - Raymond James Paul Johnson - KBW Mark Hughes - Truist Kenneth Lee - RBC Capital Markets Operator Good day and welcome to the Blackstone Secured Lending Second ...

Blackstone Secured Lending Fund (BXSL) came out with quarterly earnings of $0.89 per share, missing the Zacks Consensus Estimate of $0.90 per share. This compares to earnings of $1.06 per share a year ago. These figures are adjusted for non-recurring items. This quarterly report represents an earnings surprise of -1.11%. A quarter ago, it was expected that this company would post earnings of $0.92 per share when it actually produced earnings of $0.87, delivering a surprise of -5.43%. Over the last four quar ...

1 Blackstone Secured Lending Fund Reports Second Quarter 2024 Results NEW YORK — August 7, 2024 — Blackstone Secured Lending Fund (NYSE: BXSL, or the "Company") today reported its second quarter 2024 results. Brad Marshall and Jonathan Bock, Co-Chief Executive Officers of Blackstone Secured Lending Fund, said, "BXSL reported the best quarterly earnings on a dollar basis, the highest net asset value per share, and the most active quarter for originations since our IPO in 2021. Credit performance remains stro ...

Financial Performance - BXSL reported net investment income of $173 million, or $0.89 per share, for Q2 2024, compared to $0.87 per share in the prior quarter and $1.06 per share in Q2 2023[7]. - Net income for Q2 2024 was $196 million, or $1.01 per share, an increase from $0.96 per share in the prior quarter and $0.90 per share in Q2 2023[7]. - The total investment income for 2Q24 was $327 million, an increase from $290 million in 2Q23, with interest income rising from $274 million to $303 million[43]. - The net investment income for 2Q24 was $173 million, slightly down from $171 million in 2Q23, with a coverage ratio of 116%[43][42]. - Annualized net investment income return for Q2 2024 is 13.2%, compared to 16.2% in Q2 2023[53]. Dividends and Returns - The company declared a regular dividend of $0.77 per share for Q3 2024, representing a dividend yield of 11.3% based on the net asset value[2][7]. - BXSL's total return was 11.4% annualized since inception and 3.9% for the quarter[7]. - The company reported a quarterly total return based on NAV of 3.9% for Q2 2024[53]. Investment Commitments and Portfolio - New investment commitments in Q2 2024 totaled $1.3 billion at par, with $0.9 billion funded[7]. - The weighted average yield of new investments in 2Q24 was 10.9%, while the yield on investments fully sold or paid down was 11.7%[48]. - The portfolio includes 231 companies, with 98.8% of investments being floating rate debt[11]. - The portfolio consists of 221 companies, with no single issuer accounting for more than 4% of the total, and the largest industry exposure is in software at 18%[13]. - The company achieved new investment commitments of approximately $1.3 billion in 2Q24, with investment fundings of $0.9 billion[49]. Assets and Net Asset Value - As of June 30, 2024, BXSL's net asset value was approximately $5.4 billion, or $27.19 per share, reflecting a 1.2% increase from the previous quarter[7]. - The net asset value per share increased from $26.87 on 3/31/2024 to $27.19 on 6/30/2024[44]. - Total assets increased from $10,705 million in 3/31/2024 to $11,770 million in 6/30/2024, driven by an increase in investments at fair value from $10,439 million to $11,294 million[44]. Debt and Leverage - The company has a total debt of $6,084 million as of 6/30/2024, with only $800 million of debt maturities within the next two years[49]. - Total debt outstanding is $6,112 million, with a weighted average coupon of 2.88% on fixed rate notes[50]. - The company maintained a leverage ratio of 1.13x at quarter-end and an average leverage of 1.09x[7]. - The company maintained a well-structured capital profile with 46% of fixed-rate unsecured liabilities at a weighted average coupon of 2.88%[49]. Liquidity and Financial Position - As of June 30, 2024, the company has $1.2 billion in liquidity, consisting of cash and undrawn debt[54]. - The company has a total undrawn borrowing capacity of $888 million, enhancing its liquidity position[50]. - The company increased its Revolving Credit Facility by $300 million, reducing the drawn spread by 0.225% to SOFR + 1.525%[54]. - The company has $0.9 billion of undrawn capacity available to borrow as of 2024[54]. Risks and Forward-Looking Statements - The company anticipates potential economic and market trends that could impact future performance, as indicated in their forward-looking statements[55]. - BXSL's financial estimates are subject to various risks and uncertainties, which could cause actual outcomes to differ materially from expectations[55]. - The company has committed to updating its financial outlook in accordance with federal securities laws[55]. - BXSL's prospectus and annual report detail risk factors that could affect future operations and performance[55].

[PART I FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) Presents unaudited condensed consolidated financial statements for Blackstone Secured Lending Fund as of June 30, 2024, detailing assets, operations, cash flows, and investments [Condensed Consolidated Statements of Assets and Liabilities](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Assets%20and%20Liabilities) Total assets, liabilities, and net assets increased, with NAV per share rising to $27.19 as of June 30, 2024 Condensed Consolidated Statements of Assets and Liabilities (in thousands, except per share data) | Financial Metric | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | **Total investments at fair value** | $11,293,797 | $9,868,440 | | **Total assets** | $11,770,391 | $10,134,618 | | **Total debt (net)** | $6,084,261 | $4,911,930 | | **Total liabilities** | $6,375,818 | $5,182,577 | | **Total net assets** | $5,394,573 | $4,952,041 | | **Net Asset Value per share** | $27.19 | $26.66 | [Condensed Consolidated Statements of Operations](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Total investment income and net assets increased year-over-year for both three and six-month periods ended June 30, 2024 Key Operating Results (in thousands, except per share data) | Metric | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :--- | :--- | :--- | :--- | :--- | | **Total investment income** | $327,064 | $290,365 | $631,024 | $555,303 | | **Net investment income** | $173,098 | $171,485 | $338,946 | $320,660 | | **Net increase in net assets** | $196,186 | $144,850 | $379,941 | $283,648 | | **Earnings (loss) per share** | $1.01 | $0.90 | $1.98 | $1.76 | [Condensed Consolidated Statements of Changes in Net Assets](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Net%20Assets) Net assets grew from $4.95 billion to $5.39 billion by June 30, 2024, driven by net income and share issuances, offset by dividends Changes in Net Assets for the Six Months Ended June 30, 2024 (in thousands) | Description | Amount | | :--- | :--- | | **Net assets, December 31, 2023** | $4,952,041 | | Issuance of common shares, net | $352,133 | | Reinvestment of dividends | $10,907 | | Net investment income | $338,946 | | Net realized gain (loss) | $8,145 | | Net change in unrealized appreciation | $32,850 | | Dividends declared | ($300,449) | | **Net assets, June 30, 2024** | $5,394,573 | [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash outflow from operations was offset by financing inflows, resulting in a $136.4 million increase in cash and equivalents Summary of Cash Flows for the Six Months Ended June 30 (in thousands) | Cash Flow Activity | 2024 | 2023 | | :--- | :--- | :--- | | **Net cash provided by (used in) operating activities** | ($1,104,710) | $677,142 | | **Net cash provided by (used in) financing activities** | $1,241,128 | ($673,289) | | **Net increase (decrease) in cash and cash equivalents** | $136,418 | $3,853 | | **Cash and cash equivalents, end of period** | $291,292 | $147,383 | [Condensed Consolidated Schedules of Investments](index=11&type=section&id=Condensed%20Consolidated%20Schedules%20of%20Investments) The $11.29 billion investment portfolio is 98.6% First Lien Debt, diversified across industries like Software and Health Care Investment Portfolio Composition by Type (June 30, 2024) | Investment Type | Fair Value (in thousands) | % of Total Investments | | :--- | :--- | :--- | | First Lien Debt | $11,141,918 | 98.6% | | Second Lien Debt | $41,985 | 0.4% | | Unsecured Debt | $12,278 | 0.1% | | Equity | $97,616 | 0.9% | | **Total** | **$11,293,797** | **100.0%** | Top 5 Industry Concentrations by Fair Value (June 30, 2024) | Industry | % of Total Investments | | :--- | :--- | | Software | 18.4% | | Health Care Providers & Services | 10.5% | | Professional Services | 8.9% | | Commercial Services & Supplies | 7.1% | | Insurance | 5.5% | [Notes to Condensed Consolidated Financial Statements](index=55&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section details the company's organization, accounting policies, related party agreements, investments, fair value measurements, borrowings, and net assets [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=89&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses financial performance, highlighting a 13% YoY increase in Q2 2024 investment income, $1.29 billion in new commitments, and sufficient liquidity [Portfolio and Investment Activity](index=91&type=section&id=Portfolio%20and%20Investment%20Activity) Q2 2024 saw $1.29 billion in new first lien debt commitments, increasing portfolio companies to 231, with 99.8% of debt investments being floating rate Investment Activity Highlights (Three Months Ended June 30) | Metric | 2024 | 2023 | | :--- | :--- | :--- | | **New investments purchased (at cost)** | $890.6M | $116.9M | | **Investments sold or repaid** | ($89.4M) | ($464.8M) | | **Number of portfolio companies (end of period)** | 231 | N/A | | **Weighted average yield of new investments** | 10.9% | 12.0% | - As of June 30, 2024, **99.8%** of the company's debt investments by fair value bore a floating interest rate[280](index=280&type=chunk) [Results of Operations](index=92&type=section&id=Results%20of%20Operations) Q2 2024 total investment income rose 13% YoY to $327.1 million, with net investment income stable and a significant reversal to unrealized gains - Total investment income for Q2 2024 increased by **13% YoY to $327.1 million**, primarily due to a **15% increase** in the average fair value of investments[283](index=283&type=chunk) - Total interest expense for Q2 2024 rose **19% YoY to $78.8 million**, driven by a higher weighted average interest rate (**5.26% vs. 4.84%**) and increased average debt outstanding[290](index=290&type=chunk) - The company experienced a net change in unrealized gains of **$21.1 million** in Q2 2024, compared to a loss of **$37.5 million** in Q2 2023, primarily due to an increase in the fair value of its debt investments[302](index=302&type=chunk) [Financial Condition, Liquidity and Capital Resources](index=97&type=section&id=Financial%20Condition,%20Liquidity%20and%20Capital%20Resources) As of June 30, 2024, the company held $291.3 million in cash and $888.3 million in unused credit, maintaining an asset coverage ratio of 188.3% - As of June 30, 2024, the company had **$291.3 million** in cash and cash equivalents and **$888.3 million** of unused borrowing capacity under its credit facilities[310](index=310&type=chunk)[311](index=311&type=chunk) - The company's asset coverage ratio was **188.3%** as of June 30, 2024, exceeding the regulatory minimum of **150%**[309](index=309&type=chunk) - During the six months ended June 30, 2024, the company raised **$352.2 million** in net proceeds through its "at-the-market" (ATM) equity offering program[313](index=313&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=101&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Primary market risk is interest rate sensitivity, with 99.8% of debt investments floating rate; a 100 bps increase would boost net income by $79.9 million - As of June 30, 2024, **99.8%** of the company's debt investments by fair value were at floating rates, making its income sensitive to interest rate changes[328](index=328&type=chunk) Annualized Impact on Net Income of Hypothetical Base Rate Changes (as of June 30, 2024) | Basis Point Change | Change in Interest Income (in thousands) | Change in Interest Expense (in thousands) | Change in Net Income (in thousands) | | :--- | :--- | :--- | :--- | | +300 | $339,050 | ($99,500) | $239,550 | | +200 | $226,034 | ($66,334) | $159,700 | | +100 | $113,017 | ($33,167) | $79,850 | | -100 | ($113,017) | $33,167 | ($79,850) | | -200 | ($226,034) | $66,334 | ($159,700) | [Item 4. Controls and Procedures](index=101&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of June 30, 2024, with no material changes to internal control over financial reporting - The Co-Chief Executive Officers and Chief Financial Officer concluded that the company's disclosure controls and procedures were **effective** as of the end of the period covered by this report[331](index=331&type=chunk) - There were **no changes** in internal control over financial reporting during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, these controls[332](index=332&type=chunk) [PART II OTHER INFORMATION](index=103&type=section&id=PART%20II%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=103&type=section&id=Item%201.%20Legal%20Proceedings) The company is not currently subject to any material legal proceedings, though it may be involved in ordinary course business litigation - As of the reporting date, the company is **not subject to any material legal proceedings**[334](index=334&type=chunk) [Item 1A. Risk Factors](index=103&type=section&id=Item%201A.%20Risk%20Factors) No material changes to the risk factors previously disclosed in the Annual Report on Form 10-K for the year ended December 31, 2023 - **No material changes** to risk factors from the Annual Report on Form 10-K for the year ended December 31, 2023, have been reported[334](index=334&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=103&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reported no unregistered sales of equity securities during the period - None[334](index=334&type=chunk) [Item 3. Defaults Upon Senior Securities](index=103&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reported no defaults upon its senior securities during the period - None[334](index=334&type=chunk) [Item 5. Other Information](index=103&type=section&id=Item%205.%20Other%20Information) On August 6, 2024, the company amended its Revolving Credit Facility, increasing commitment to $2.075 billion, extending maturity, and introducing tiered interest rates - The company amended its Revolving Credit Facility on August 6, 2024, increasing the aggregate committed principal from **$1.775 billion to $2.075 billion**[335](index=335&type=chunk) - The amendment extends the maturity date of the Revolving Credit Facility from **June 2028 to August 2029**[335](index=335&type=chunk) - A new tiered interest rate structure was introduced, with rates potentially decreasing based on the ratio of the gross borrowing base to the combined revolving debt amount[335](index=335&type=chunk) [Item 6. Exhibits](index=104&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with Form 10-Q, including credit agreement amendments, officer certifications, and XBRL data files