Core Insights - Roberts Berzins has over a decade of experience in financial management, focusing on helping top-tier corporates shape financial strategies and execute large-scale financings [1] - Significant efforts have been made to institutionalize the REIT framework in Latvia to enhance the liquidity of pan-Baltic capital markets [1] - Development of national SOE financing guidelines and frameworks for channeling private capital into affordable housing stock has been a key policy-level initiative [1] - Roberts is a CFA Charterholder and holds an ESG investing certificate, indicating a strong background in finance and sustainable investing [1] - Active involvement in "thought-leadership" activities supports the development of pan-Baltic capital markets [1]

Financial Data and Key Metrics Changes - The company reported adjusted net investment income of $0.56 per share and adjusted net income of $0.64 per share for Q2 2025, with annualized returns on equity of 13.1% and 15.1% respectively [7] - Total investments decreased to $3.3 billion from $3.4 billion in the prior quarter due to net repayment activity [27] - The net asset value (NAV) per share increased to $17.17, up from $17.04 as of March 31 [12] Business Line Data and Key Metrics Changes - The company provided total commitments of $289 million and total fundings of $209 million across 13 new investments and four upsizes in Q2 [18] - Approximately 30% of commitments were sourced outside the sponsored channel, with the remaining 70% from traditional sponsor-backed finance [18] Market Data and Key Metrics Changes - The M&A market saw a 31% decline in loan volume in Q2 compared to Q1, marking the lowest levels since 2023 [13] - The company noted a significant reduction in exposure to older pre-2022 vintages, with only 29% of the portfolio by cost compared to 59% for public BDC sector averages [23] Company Strategy and Development Direction - The company anticipates a shift in focus from credit quality to dividend coverage as portfolio yields decline [10] - The management emphasized the importance of sourcing differentiated investment opportunities to maintain robust dividend coverage, which exceeded the base dividend by 22% in Q2 [10][11] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism that credit issues are predominantly behind the company, with expectations of improved non-accruals and a focus on dividend coverage moving forward [10][68] - The company highlighted the need for a longer runway for portfolio company earnings to grow in the current economic environment [14] Other Important Information - The board approved a base quarterly dividend of $0.46 per share and a supplemental dividend of $0.05 per share related to Q2 earnings [12] - The company maintained a strong balance sheet with approximately $1.1 billion of unfunded revolver capacity [28] Q&A Session Summary Question: How does the company manage portfolio diversification related to risk? - The CEO emphasized the importance of idiosyncratic underwriting and the company's strong track record in risk management [43][44] Question: What are the attractive investment themes currently? - The CEO mentioned a preference for off-the-run, non-sponsor investments, such as speculative pharma and asset-based lending, which tend to offer better returns [46][48] Question: How does the company view the impact of non-traded BDCs on loan spreads? - The CEO expressed concerns about the potential for lower ROEs in the sector due to increased competition and complacency among investors [53][60] Question: What is the outlook for non-sponsored transactions? - The company is generally positive about second-half activity, with a robust pipeline across both sponsor and non-sponsor activities [90] Question: What changes have been observed in terms and documentation for new investments? - The company has not seen changes in documentation standards or covenant packages over the last few quarters [92]

Financial Data and Key Metrics Changes - The company reported adjusted net investment income of $0.56 per share and adjusted net income of $0.64 per share for Q2 2025, with annualized returns on equity of 13.1% and 15.1% respectively [6][25] - The net asset value (NAV) per share increased to $17.17, up from $17.04 as of March 31, 2025, representing a 70 basis points increase [11][25] - Total investments decreased slightly to $3.3 billion from $3.4 billion in the prior quarter due to net repayment activity [25] Business Line Data and Key Metrics Changes - The company provided total commitments of $289 million and total fundings of $209 million across 13 new investments and four upsizes in Q2 [16] - Approximately 30% of commitments were sourced outside the sponsored channel, with the remaining 70% from traditional sponsor-backed finance [16] Market Data and Key Metrics Changes - The M&A market saw a 31% decline in loan volume in Q2 compared to Q1, marking the lowest levels since 2023 [12] - The company noted a significant reduction in exposure to older pre-2022 vintage assets, decreasing to 29% of the portfolio by cost, compared to 59% for the public BDC sector average [21] Company Strategy and Development Direction - The company anticipates a shift in focus from credit quality to dividend coverage as portfolio yields decline due to lower forward rates and tighter portfolio spreads [9] - The management emphasized the importance of sourcing differentiated investment opportunities to maintain robust dividend coverage, which exceeded the base dividend by 22% in Q2 [9][10] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism that credit issues are predominantly behind the company, with an improvement in non-accruals observed [8] - The company expects a moderate increase in M&A activity in the coming quarters as earlier investments approach the six to seven-year mark [14] Other Important Information - The board approved a base quarterly dividend of $0.46 per share and a supplemental dividend of $0.05 per share related to Q2 earnings [11] - The weighted average total yield on debt and producing securities was 12%, down from 12.3% in the previous quarter [22] Q&A Session Summary Question: How does the company manage portfolio diversification and risk? - The company focuses on idiosyncratic underwriting and has a strong track record of managing risk, emphasizing the importance of minimizing losses to achieve outperformance [39][40] Question: What are the attractive investment themes currently? - The company is focusing on off-the-run, non-sponsor investments, including sectors like specialty pharmaceuticals and asset-based lending, which tend to offer better returns [42][44] Question: What is the outlook for repayment activity in the second half of the year? - The company expects repayment activity to remain elevated, driven by a strong pipeline of post-2022 vintage assets [105]

References in this presentation ("Presentation") to "TSLX," "we," "us," "our" and "the Company" refer to Sixth Street Specialty Lending, Inc. EARNINGS PRESENTATION Quarter Ended June 30, 2025 This Presentation includes forward-looking statements about TSLX that involve substantial risks and uncertainties. These forward-looking statements are not historical facts, but rather are based on current expectations, estimates and projections about us, our current and prospective portfolio investments, our industry, ...

分组1 - Sixth Street (TSLX) reported quarterly earnings of $0.56 per share, exceeding the Zacks Consensus Estimate of $0.53 per share, but down from $0.58 per share a year ago, representing an earnings surprise of +5.66% [1] - The company posted revenues of $115.02 million for the quarter ended June 2025, surpassing the Zacks Consensus Estimate by 2.23%, but down from $121.82 million year-over-year [2] - Sixth Street has outperformed the S&P 500, with shares increasing about 12.1% since the beginning of the year compared to the S&P 500's gain of 8.3% [3] 分组2 - The current consensus EPS estimate for the coming quarter is $0.53 on revenues of $111.06 million, and for the current fiscal year, it is $2.15 on revenues of $449.72 million [7] - The Zacks Industry Rank indicates that the Financial - SBIC & Commercial Industry is currently in the bottom 37% of over 250 Zacks industries, suggesting potential challenges for stocks in this sector [8]

[Executive Summary & Financial Highlights](index=1&type=section&id=Executive%20Summary%20%26%20Financial%20Highlights) [Q2 2025 Financial Performance Overview](index=1&type=section&id=Q2%202025%20Financial%20Performance%20Overview) Sixth Street Specialty Lending, Inc. reported strong Q2 2025 results with net investment income (NII) of $0.54 per share and net income (NI) of $0.63 per share. Adjusted figures, excluding capital gains incentive fees, were $0.56 per share for NII and $0.64 per share for NI, reflecting robust annualized returns on equity. | Metric | Q2 2025 (per share) | Annualized ROE | Q2 2025 (Adjusted per share) | Annualized ROE (Adjusted) | | :-------------------------------- | :-------------------- | :------------- | :--------------------------- | :------------------------ | | Net Investment Income (NII) | $0.54 | 12.7% | $0.56 | 13.1% | | Net Income (NI) | $0.63 | 14.7% | $0.64 | 15.1% | - Adjusted figures exclude approximately **$0.02 per share** of accrued capital gains incentive fee expenses[3](index=3&type=chunk) [Net Asset Value (NAV) and Dividends](index=1&type=section&id=Net%20Asset%20Value%20(NAV)%20and%20Dividends) The Company's NAV per share increased to $17.17 at June 30, 2025, up from $17.04 (or adjusted $16.98) at March 31, 2025, driven by overearning the base dividend and net unrealized gains. A third quarter base dividend of $0.46 per share and a second quarter supplemental dividend of $0.05 per share were declared. | Metric | Value | | :------------------------------- | :------ | | NAV per share (Q2 2025) | $17.17 | | NAV per share (Q1 2025) | $17.04 | | Adjusted NAV per share (Q1 2025) | $16.98 | | Adjusted NAV per share (Q2 2025) | $17.12 | | Q3 2025 Base Dividend per share | $0.46 | | Q2 2025 Supplemental Dividend per share | $0.05 | - NAV per share growth was primarily driven by continued overearning of the base quarterly dividend and net unrealized gains from investments[4](index=4&type=chunk) [Key Financial Metrics (Table)](index=1&type=section&id=Key%20Financial%20Metrics%20(Table)) A summary of key financial metrics for Q2 2025, including net investment income, net income, return on equity, net asset value, and dividends declared. | Metric | Q2 2025 | | :-------------------------------- | :------ | | Net Investment Income Per Share | $0.54 | | Net Investment Income Per Share (adjusted) | $0.56 | | Net Income Per Share | $0.63 | | Net Income Per Share (adjusted) | $0.64 | | Return on Equity (NII) | 12.7% | | Return on Equity (NI) | 14.7% | | Return on Equity (Adj. NII) | 13.1% | | Return on Equity (Adj. NI) | 15.1% | | NAV ($ million) | $1,617.6 | | NAV (per share) | $17.17 | | NAV (per share, adj) | $17.12 | | Dividends Declared (Base, per share) | $0.46 | | LTM Q2 2025 (Base, per share) | $1.84 | | LTM Q2 2025 (Supplemental, per share) | $0.23 | | LTM Q2 2025 (Total, per share) | $2.07 | [Portfolio and Investment Activity](index=2&type=section&id=Portfolio%20and%20Investment%20Activity) [Investment Origination and Exits](index=2&type=section&id=Investment%20Origination%20and%20Exits) New investment commitments significantly increased to $297.7 million in Q2 2025 from $154.4 million in Q1 2025. The Company funded $208.6 million across thirteen new portfolio companies and four upsizes, while aggregate principal amount in exits and repayments totaled $388.7 million. | Metric | Q2 2025 ($ million) | Q1 2025 ($ million) | | :-------------------------- | :------------------ | :------------------ | | New Investment Commitments | $297.7 | $154.4 | | New Investments Funded | $208.6 | $136.8 | | Exits and Repayments | $388.7 | $269.6 | | New Portfolio Companies | 13 | 6 | | Upsizes to Existing Companies | 4 | 4 | [Portfolio Composition](index=2&type=section&id=Portfolio%20Composition) As of June 30, 2025, the portfolio consisted of 109 companies with an aggregate fair value of $3,294.9 million. First-lien debt investments continued to dominate, representing 92.4% of the portfolio by fair value. | Metric | June 30, 2025 | March 31, 2025 | | :-------------------------------- | :-------------- | :--------------- | | Number of Portfolio Companies | 109 | 115 | | Aggregate Fair Value ($ million) | $3,294.9 | $3,412.0 | | Average Investment Size (Fair Value, $ million) | $30.2 | N/A | | First-Lien Debt Investments (% FV) | 92.4% | 92.9% | | Second-Lien Debt Investments (% FV) | 0.9% | 1.0% | | Mezzanine Debt Investments (% FV) | 1.6% | 1.5% | | Equity Investments (% FV) | 5.1% | 4.6% | [Portfolio Characteristics and Quality](index=2&type=section&id=Portfolio%20Characteristics%20and%20Quality) The portfolio maintained a high proportion of floating-rate debt investments (96.5%) with reference rate floors. The weighted average total yield of debt and income-producing securities at fair value was 11.7%. Non-accrual status improved to 0.6% of the portfolio, primarily due to the restructuring of Lithium Technologies. | Metric | June 30, 2025 | March 31, 2025 | | :---------------------------------------------------------------- | :-------------- | :--------------- | | Floating Rate Debt Investments (% FV) | 96.5% | N/A | | Weighted Average Total Yield (Fair Value) | 11.7% | 12.1% | | Weighted Average Total Yield (Amortized Cost) | 12.0% | 12.3% | | Non-Accrual Status (% FV) | 0.6% | 1.2% | - The decline in non-accrual status was driven by the restructuring of Lithium Technologies, which is now paying cash interest[12](index=12&type=chunk) [Key Portfolio Metrics (Table)](index=2&type=section&id=Key%20Portfolio%20Metrics%20(Table)) A snapshot of key portfolio metrics for Q2 2025, including origination activity, average investment size, and debt characteristics. | Metric | Q2 2025 | | :---------------------------------------------------- | :-------- | | Commitments ($ million) | $297.7 | | Fundings ($ million) | $208.6 | | Net Payoffs ($ million) | $180.0 | | Average Investment Size ($ million) | $30.2 | | First Lien Debt Investments (% FV) | 92.4% | | Floating Rate Debt Investments (% FV) | 96.5% | | Weighted Average Yield of Debt and Income-Producing Securities (Fair Value) | 11.7% | | Weighted Average Yield of Debt and Income-Producing Securities (Amortized Cost) | 12.0% | [Results of Operations](index=3&type=section&id=Results%20of%20Operations) [Total Investment Income](index=3&type=section&id=Total%20Investment%20Income) Total investment income for Q2 2025 decreased to $115.0 million from $121.8 million in Q2 2024, primarily due to lower interest rates, partially offset by higher activity-based fee income. | Metric | Q2 2025 ($ million) | Q2 2024 ($ million) | | :-------------------- | :------------------ | :------------------ | | Total Investment Income | $115.0 | $121.8 | - The decrease in investment income was largely the result of lower interest rates, partially offset by higher activity-based fee income[14](index=14&type=chunk) [Net Expenses and Capital Resources](index=3&type=section&id=Net%20Expenses%20and%20Capital%20Resources) Net expenses decreased to $62.9 million in Q2 2025 from $65.4 million in Q2 2024, mainly due to lower reference rates reducing interest on outstanding debt. The Company maintained a healthy debt-to-equity ratio of 1.09x at quarter-end and had significant undrawn capacity on its revolving credit facility. | Metric | Q2 2025 ($ million) | Q2 2024 ($ million) | | :------------------------------------ | :------------------ | :------------------ | | Net Expenses | $62.9 | $65.4 | | Total Principal Debt Outstanding ($ million) | $1,757.1 | N/A | | Undrawn Revolving Credit Facility Capacity ($ million) | $1,148.2 | N/A | | Weighted Average Interest Rate on Debt | 6.3% | N/A | | Debt-to-Equity Ratio (Quarter End) | 1.09x | N/A | | Debt-to-Equity Ratio (Average) | 1.20x | N/A | - The decrease in net expenses was primarily due to the downward movement in reference rates which decreased the Company's weighted average interest rate on average debt outstanding[15](index=15&type=chunk) [Liquidity and Funding Profile](index=4&type=section&id=Liquidity%20and%20Funding%20Profile) [Liquidity Position](index=4&type=section&id=Liquidity%20Position) As of June 30, 2025, the Company reported total liquidity of $1,152 million before unfunded commitments, and $993 million burdened for available unfunded commitments. Revolver capacity stood at $1,675 million with $507 million drawn. | Metric | Amount ($ Millions) | | :------------------------------------ | :------------------ | | Revolver Capacity | $1,675 | | Drawn on Revolver | ($507) | | Unrestricted Cash Balance | $4 | | Issued Letters of Credit | ($20) | | Total Liquidity (Pre-Unfunded Commitments) | $1,152 | | Available Unfunded Commitments | ($159) | | Total Liquidity (Burdened for Unfunded Commitments) | $993 | | Unfunded Commitment Activity | Amount ($ Millions) | | :------------------------------------ | :------------------ | | Unfunded Commitments (3/31/25) | $323 | | Extinguished Unfunded Commitments | ($41) | | New Unfunded Commitments | $126 | | Net Drawdown of Unfunded Commitments | ($67) | | Total Unfunded Commitments (6/30/25) | $341 | | Unavailable Unfunded Commitments | ($182) | | Available Unfunded Commitments | $159 | [Funding Mix and Debt Maturities](index=4&type=section&id=Funding%20Mix%20and%20Debt%20Maturities) The Company's funding mix was approximately 71% unsecured and 29% secured debt. The nearest debt maturity is $300 million in August 2026, with a weighted average remaining maturity on debt of approximately 3.9 years, compared to a weighted average remaining life of investments funded with debt of approximately 2.5 years. - Funding mix: **71% unsecured debt** and **29% secured debt**[21](index=21&type=chunk) - Nearest debt maturity: **$300 million** in August 2026[21](index=21&type=chunk) | Metric | Value | | :---------------------------------------------------- | :------ | | Weighted Average Remaining Life of Investments Funded with Debt | ~2.5 years | | Weighted Average Remaining Maturity on Debt | ~3.9 years | [Conference Call and Webcast](index=5&type=section&id=Conference%20Call%20and%20Webcast) [Conference Call and Webcast Information](index=5&type=section&id=Conference%20Call%20and%20Webcast%20Information) Sixth Street Specialty Lending, Inc. held a conference call to discuss its financial results on July 31, 2025, at 8:30 a.m. Eastern Time. A live webcast and a slide presentation were available on the Company's investor relations website, with replay information also provided. - Conference call held on **July 31, 2025**, at **8:30 a.m. Eastern Time**[25](index=25&type=chunk) - Webcast and slide presentation available on the Investor Resources section of TSLX's website[25](index=25&type=chunk) - Replay available under the same webcast link after the conference call[27](index=27&type=chunk) [Detailed Financial Highlights](index=6&type=section&id=Detailed%20Financial%20Highlights) [Financial Highlights Table](index=6&type=section&id=Financial%20Highlights%20Table) This section provides a comprehensive table of financial highlights for the three months ended June 30, 2025, December 31, 2024, and June 30, 2024, covering investments, assets, NAV, income, expenses, and various per-share metrics and yields. | Metric | June 30, 2025 | Dec 31, 2024 | June 30, 2024 | | :---------------------------------------------------------------- | :-------------- | :----------- | :------------ | | Investments at Fair Value ($ million) | $3,294.9 | $3,518.4 | $3,317.1 | | Total Assets ($ million) | $3,415.8 | $3,582.2 | $3,387.0 | | Net Asset Value Per Share | $17.17 | $17.16 | $17.19 | | Supplemental Dividend Per Share | $0.05 | $0.07 | $0.06 | | Adjusted Net Asset Value Per Share | $17.12 | $17.09 | $17.13 | | Investment Income ($ million) | $115.0 | $123.7 | $121.8 | | Net Investment Income ($ million) | $50.8 | $57.6 | $55.1 | | Net Income ($ million) | $59.0 | $51.0 | $47.4 | | Accrued Capital Gains Incentive Fee Expense ($ million) | $1.4 | ($1.0) | ($1.3) | | Adjusted Net Investment Income ($ million) | $52.3 | $56.6 | $53.8 | | Adjusted Net Income ($ million) | $60.4 | $50.0 | $46.1 | | Net Investment Income Per Share | $0.54 | $0.62 | $0.59 | | Net Income Per Share | $0.63 | $0.55 | $0.51 | | Accrued Capital Gains Incentive Fee Expense Per Share | $0.02 | ($0.01) | ($0.01) | | Adjusted Net Investment Income Per Share | $0.56 | $0.61 | $0.58 | | Adjusted Net Income Per Share | $0.64 | $0.54 | $0.50 | | Annualized Return on Equity (Net Investment Income) | 12.7% | 14.4% | 13.9% | | Annualized Return on Equity (Net Income) | 14.7% | 12.8% | 11.9% | | Annualized Return on Equity (Adjusted Net Investment Income) | 13.1% | 14.2% | 13.5% | | Annualized Return on Equity (Adjusted Net Income) | 15.1% | 12.5% | 11.6% | | Weighted Average Yield of Debt and Income Producing Securities at Fair Value | 11.7% | 12.3% | 13.8% | | Weighted Average Yield of Debt and Income Producing Securities at Amortized Cost | 12.0% | 12.5% | 13.9% | | Percentage of Debt Investment Commitments at Floating Rates | 96.5% | 97.2% | 99.6% | [Consolidated Financial Statements](index=7&type=section&id=Consolidated%20Financial%20Statements) [Consolidated Balance Sheets](index=7&type=section&id=Consolidated%20Balance%20Sheets) The consolidated balance sheets present the Company's financial position as of June 30, 2025, and December 31, 2024, detailing assets, liabilities, and net assets. Total assets decreased to $3,415.8 million from $3,582.2 million, while total net assets slightly increased to $1,617.6 million. | Metric | June 30, 2025 ($ Thousands) | Dec 31, 2024 ($ Thousands) | | :---------------------------------------------------------------- | :-------------------------- | :------------------------- | | Total investments at fair value | $3,294,905 | $3,518,412 | | Cash and cash equivalents | $39,169 | $27,328 | | Total Assets | $3,415,848 | $3,582,225 | | Debt (net of deferred financing costs) | $1,726,557 | $1,901,142 | | Total Liabilities | $1,798,202 | $1,974,696 | | Total Net Assets | $1,617,646 | $1,607,529 | | Net Asset Value Per Share | $17.17 | $17.16 | [Consolidated Statements of Operations](index=8&type=section&id=Consolidated%20Statements%20of%20Operations) The consolidated statements of operations detail the Company's income and expenses for the three and six months ended June 30, 2025, and 2024. Net investment income for the three months ended June 30, 2025, was $50.8 million, a decrease from $55.1 million in the prior year period, while net income increased to $59.0 million from $47.4 million, driven by a significant net change in unrealized gains. | Metric | Three Months Ended June 30, 2025 ($ Thousands) | Three Months Ended June 30, 2024 ($ Thousands) | | :---------------------------------------------------------------- | :--------------------------------------------- | :--------------------------------------------- | | Total Investment Income | $115,015 | $121,815 | | Net Expenses | $62,884 | $65,446 | | Net Investment Income | $50,840 | $55,143 | | Total Net Unrealized and Realized Gains (Losses) | $8,163 | ($7,742) | | Increase (Decrease) in Net Assets Resulting from Operations | $59,003 | $47,401 | | Earnings per common share—basic and diluted | $0.63 | $0.51 | | Metric | Six Months Ended June 30, 2025 ($ Thousands) | Six Months Ended June 30, 2024 ($ Thousands) | | :---------------------------------------------------------------- | :------------------------------------------- | :------------------------------------------- | | Total Investment Income | $231,364 | $239,599 | | Net Expenses | $119,904 | $130,017 | | Net Investment Income | $108,818 | $107,506 | | Total Net Unrealized and Realized Gains (Losses) | ($12,861) | ($12,587) | | Increase (Decrease) in Net Assets Resulting from Operations | $95,957 | $94,919 | | Earnings per common share—basic and diluted | $1.02 | $1.04 | - Net change in unrealized gains for non-controlled, non-affiliated investments was **$73,790 thousand** in Q2 2025, a significant improvement from a loss of **($7,852) thousand** in Q2 2024[33](index=33&type=chunk) [Investment Activity Details](index=9&type=section&id=Investment%20Activity%20Details) This section provides a detailed breakdown of investment activity for the three months ended June 30, 2025, and 2024, including new investment commitments, principal amounts funded and repaid, and characteristics of new investments. | Metric | June 30, 2025 ($ Millions) | June 30, 2024 ($ Millions) | | :---------------------------------------------------------------- | :------------------------- | :------------------------- | | New investment commitments | $297.7 | $231.0 | | Principal amount of investments funded | $208.6 | $163.6 | | Principal amount of investments sold or repaid | $388.7 | $290.3 | | Number of new investment commitments in new portfolio companies | 13 | 8 | | Average new investment commitment amount in new portfolio companies | $20.0 | $21.2 | | Weighted average term for new investment commitments (in years) | 6.2 | 6.1 | | Percentage of new debt investment commitments at floating rates | 99.7% | 100.0% | | Weighted average interest rate of new investment commitments | 10.7% | 11.6% | | Weighted average spread over reference rate of new floating rate investment commitments | 6.7% | 6.6% | | Weighted average interest rate on investments fully sold or paid down | 12.2% | 13.4% | [Company Information and Disclosures](index=10&type=section&id=Company%20Information%20and%20Disclosures) [About Sixth Street Specialty Lending](index=10&type=section&id=About%20Sixth%20Street%20Specialty%20Lending) Sixth Street Specialty Lending is a specialty finance company focused on lending to U.S.-domiciled middle-market companies, primarily through direct originations of senior secured loans. It operates as a Business Development Company (BDC) and is externally managed by an affiliate of Sixth Street, leveraging the parent firm's extensive investment resources. - Focuses on lending to U.S.-domiciled middle-market companies[36](index=36&type=chunk) - Primary strategy: direct originations of senior secured loans, with some mezzanine loans and equity investments[36](index=36&type=chunk) - Regulated as a **Business Development Company (BDC)** and externally managed by Sixth Street Specialty Lending Advisers, LLC[36](index=36&type=chunk) [About Sixth Street](index=10&type=section&id=About%20Sixth%20Street) Sixth Street is a global investment firm managing over $115 billion in assets and committed capital. The firm employs a long-term flexible capital approach, data-enabled capabilities, and a 'One Team' culture to provide solutions across various growth stages for companies. - Global investment firm with over **$115 billion** in assets under management and committed capital[37](index=37&type=chunk) - Utilizes long-term flexible capital, data-enabled capabilities, and a 'One Team' culture[37](index=37&type=chunk) [Forward-Looking Statements](index=10&type=section&id=Forward-Looking%20Statements) This section includes a standard disclaimer regarding forward-looking statements, indicating that such statements relate to future events or financial performance and involve risks and uncertainties, and actual results may differ materially. The Company assumes no obligation to update these statements. - Statements are forward-looking and involve risks and uncertainties; actual results may differ materially[38](index=38&type=chunk) - The Company assumes no obligation to update forward-looking statements[38](index=38&type=chunk) [Non-GAAP Financial Measures](index=10&type=section&id=Non-GAAP%20Financial%20Measures) The report defines adjusted net investment income and adjusted net income as non-GAAP financial measures, which exclude the impact of accrued capital gains incentive fee expenses. These measures are presented to provide investors with useful information regarding the fundamental earnings power of the business. - Adjusted net investment income and adjusted net income are non-GAAP measures[39](index=39&type=chunk) - These measures exclude the impact of accrued capital gains incentive fee expenses[39](index=39&type=chunk) - They provide useful information on the fundamental earnings power of the business and are not a substitute for GAAP results[39](index=39&type=chunk) [Investor and Media Contacts](index=10&type=section&id=Investor%20and%20Media%20Contacts) Contact information for investor relations and media inquiries is provided for Sixth Street Specialty Lending and Sixth Street. - Investor Contact: Cami VanHorn, IRTSLX@sixthstreet.com[40](index=40&type=chunk) - Media Contact: Patrick Clifford, PClifford@sixthstreet.com[40](index=40&type=chunk)

PART I. FINANCIAL INFORMATION This section provides the company's comprehensive financial statements and management's discussion and analysis of its financial performance and condition [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) This section presents Sixth Street Specialty Lending, Inc.'s unaudited consolidated financial statements, detailing its financial position and performance [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets) The Consolidated Balance Sheets present the company's financial position as of June 30, 2025, and December 31, 2024, detailing assets, liabilities, and net assets, with a slight increase in Net Asset Value Per Share Balance Sheet Summary | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | Change (%) | | :-------------------------------- | :----------------------------- | :------------------------------- | :--------- | | Total Assets | $3,415,848 | $3,582,225 | -4.6% | | Total Liabilities | $1,798,202 | $1,974,696 | -8.9% | | Total Net Assets | $1,617,646 | $1,607,529 | +0.6% | | Net Asset Value Per Share | $17.17 | $17.16 | +0.1% | [Consolidated Statements of Operations](index=5&type=section&id=Consolidated%20Statements%20of%20Operations) The Consolidated Statements of Operations detail the company's financial performance for the three and six months ended June 30, 2025, and 2024, showing increased net assets from operations driven by unrealized gains Statements of Operations Summary | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change (%) | | :------------------------------------------ | :------------------------------- | :------------------------------- | :--------- | | Total Investment Income | $115,015 | $121,815 | -5.6% | | Net Investment Income | $50,840 | $55,143 | -7.8% | | Total Net Change in Unrealized Gains (Losses) | $45,039 | $(9,493) | N/A (shift from loss to gain) | | Increase (Decrease) in Net Assets from Operations | $59,003 | $47,401 | +24.5% | | Earnings per common share—basic and diluted | $0.63 | $0.51 | +23.5% | [Consolidated Schedules of Investments](index=6&type=section&id=Consolidated%20Schedules%20of%20Investments) The Consolidated Schedules of Investments detail the company's debt and equity holdings by industry and type, primarily first-lien debt, as of June 30, 2025, and December 31, 2024 Investment Portfolio by Type | Investment Type | June 30, 2025 (Fair Value in thousands) | December 31, 2024 (Fair Value in thousands) | | :-------------------------- | :------------------------------------ | :-------------------------------------- | | Total Investments | $3,294,905 | $3,518,412 | | First-lien debt investments | $3,043,110 (92.4%) | $3,302,504 (93.9%) | | Second-lien debt investments | $29,640 (0.9%) | $19,844 (0.6%) | | Mezzanine debt investments | $53,567 (1.6%) | $39,091 (1.1%) | | Equity and other investments | $168,588 (5.1%) | $155,501 (4.4%) | Investment Portfolio by Industry | Industry (June 30, 2025) | Percentage of Total Portfolio (Fair Value) | | :----------------------- | :--------------------------------------- | | Internet Services | 17.9% | | Business Services | 14.9% | | Human Resource Support Services | 9.9% | | Retail and Consumer Products | 9.7% | | Healthcare | 8.5% | - Non-qualifying assets represented **17.5% of total assets** as of June 30, 2025, within the 1940 Act limit of 30%[33](index=33&type=chunk) [Consolidated Statements of Changes in Net Assets](index=24&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Net%20Assets) The Consolidated Statements of Changes in Net Assets illustrate movements in the company's net assets for the three and six months ended June 30, 2025, and 2024, showing an increase driven by net investment income and unrealized gains Changes in Net Assets Summary | Metric (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------------------------------------- | :----------------------------- | :----------------------------- | | Balance at December 31, prior year | $1,607,529 | $1,496,375 | | Net investment income | $108,818 | $107,506 | | Net change in unrealized gains (losses) | $23,179 | $(16,462) | | Net realized gains (losses) | $(36,040) | $3,875 | | Dividends declared from distributable earnings | $(98,503) | $(97,483) | | Balance at June 30, current year | $1,617,646 | $1,599,035 | [Consolidated Statements of Cash Flows](index=27&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) The Consolidated Statements of Cash Flows detail cash movements from operating, investing, and financing activities for the six months ended June 30, 2025, and 2024, showing a significant increase in net cash from operating activities Cash Flow Summary | Metric (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------ | :----------------------------- | :----------------------------- | | Net Cash Provided by (Used in) Operating Activities | $343,118 | $59,729 | | Net Cash Provided by (Used in) Financing Activities | $(331,277) | $(50,276) | | Net Increase (Decrease) in Cash, Cash Equivalents, and Restricted Cash | $11,841 | $9,453 | | Cash, Cash Equivalents, and Restricted Cash, End of Period | $39,169 | $34,649 | - Repayments on investments significantly increased by **78.4%** from **$374.3 million** in H1 2024 to **$667.9 million** in H1 2025[53](index=53&type=chunk) [Notes to Consolidated Financial Statements](index=27&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The Notes to Consolidated Financial Statements provide detailed explanations and disclosures supporting the financial statements, covering organization, accounting policies, related party transactions, and investment valuation [1. Organization and Basis of Presentation](index=28&type=section&id=1.%20Organization%20and%20Basis%20of%20Presentation) This section outlines Sixth Street Specialty Lending, Inc.'s formation as a Delaware corporation, its BDC and RIC election, IPO, and financial statement preparation in accordance with U.S. GAAP and ASC Topic 946 - The company was formed on July 21, 2010, as a Delaware corporation and elected to be regulated as a **BDC** under the 1940 Act and a **RIC** under the Code[56](index=56&type=chunk) - Its initial public offering (IPO) was completed on March 21, 2014, with shares trading on the NYSE under the symbol '**TSLX**'[57](index=57&type=chunk) - Financial statements are prepared in accordance with **U.S. GAAP** and apply specialized accounting guidance for investment companies (**ASC Topic 946**)[57](index=57&type=chunk)[59](index=59&type=chunk) [2. Significant Accounting Policies](index=28&type=section&id=2.%20Significant%20Accounting%20Policies) This section details key accounting policies, including fair value measurement for investments, derivative instruments, and income recognition, emphasizing the Board's role in valuing illiquid assets under ASC Topic 820 - Investments without readily available market prices are valued at fair value as determined in good faith by the Board of Directors, with input from the Adviser, Audit Committee, and independent third-party valuation firms[65](index=65&type=chunk) - The company applies **ASC Topic 820**, categorizing fair value measurements into **Level 1** (active markets), **Level 2** (observable inputs), and **Level 3** (unobservable inputs)[71](index=71&type=chunk)[78](index=78&type=chunk) - Derivative instruments are recognized at fair value, with changes in fair value for hedge accounting relationships recorded in the same line item as the hedged item in the Consolidated Statements of Operations[74](index=74&type=chunk) - Loans are generally placed on non-accrual status when principal or interest payments are past due **30 days or more** or when management has reasonable doubt about full collectability[86](index=86&type=chunk) Income Tax Expense | Tax Expense (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Income taxes, including excise taxes | $1,291 | $1,226 | $2,642 | $2,076 | [3. Agreements and Related Party Transactions](index=37&type=section&id=3.%20Agreements%20and%20Related%20Party%20Transactions) This section details the company's agreements with its Adviser, including the Administration and Investment Advisory Agreements, outlining services, Management and Incentive Fee calculations, and Adviser's waivers like the Leverage Waiver - The Adviser provides administrative services under the Administration Agreement and investment advisory services under the Investment Advisory Agreement[105](index=105&type=chunk)[112](index=112&type=chunk) - The Management Fee is calculated at an annual rate of **1.5%** of the average value of the company's gross assets[113](index=113&type=chunk) - The Adviser waived Management Fees of **$0.3 million** and **$0.7 million** for the three and six months ended June 30, 2025, respectively, pursuant to the Leverage Waiver, which reduces fees on assets financed using leverage over **200% asset coverage**[116](index=116&type=chunk) Adviser Fees | Fee Type (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Management Fees (gross of waivers) | $12,918 | $12,765 | $26,001 | $25,361 | | Incentive Fees (total) | $12,527 (sum of 11,089 + 1,438) | $10,079 (sum of 11,414 - 1,335) | $20,358 (sum of 22,606 - 2,248) | $20,163 (sum of 22,342 - 2,179) | [4. Investments at Fair Value](index=41&type=section&id=4.%20Investments%20at%20Fair%20Value) This section breaks down the company's investments at fair value by type, industry, and geographic composition, distinguishing between non-controlled, affiliated, and controlled investments Investments by Type | Investment Type | June 30, 2025 (Fair Value in thousands) | December 31, 2024 (Fair Value in thousands) | | :-------------------------- | :------------------------------------ | :-------------------------------------- | | First-lien debt investments | $3,043,110 (92.4%) | $3,302,504 (93.9%) | | Second-lien debt investments | $29,640 (0.9%) | $19,844 (0.6%) | | Mezzanine debt investments | $53,567 (1.6%) | $39,091 (1.1%) | | Equity and other investments | $168,588 (5.1%) | $155,501 (4.4%) | | Total Investments | $3,294,905 | $3,518,412 | Investments by Industry | Industry (June 30, 2025) | Percentage of Total Portfolio (Fair Value) | | :----------------------- | :--------------------------------------- | | Internet Services | 17.9% | | Business Services | 14.9% | | Human Resource Support Services | 9.9% | | Retail and Consumer Products | 9.7% | | Healthcare | 8.5% | Investments by Geographic Region | Geographic Region (June 30, 2025) | Percentage of Total Portfolio (Fair Value) | | :-------------------------------- | :--------------------------------------- | | United States (Total) | 83.4% | | United Kingdom | 5.4% | | Norway | 3.4% | | Germany | 2.2% | | Canada | 1.6% | [5. Derivatives](index=44&type=section&id=5.%20Derivatives) This section details the company's use of interest rate swaps to hedge fixed-rate debt and investments, summarizing related cash flows and fair value, noting they are centrally cleared and require collateral - The company uses interest rate swaps to hedge fixed rate debt obligations and certain fixed rate debt investments[128](index=128&type=chunk) Derivative Fair Value | Metric (in thousands) | June 30, 2025 | December 31, 2024 | | :-------------------- | :------------ | :---------------- | | Fair Value of Swaps | $4,922 | $(24,238) | | Cash Collateral | $35,256 | $46,601 | Swap Cash Flows | Swap Cash Flows (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------- | :----------------------------- | :----------------------------- | | Paid | $(38,665) | $(50,198) | | Received | $30,477 | $30,482 | | Net | $(8,188) | $(19,716) | - For the six months ended June 30, 2025, the company recognized **$29.2 million** in unrealized gains on interest rate swaps designated as hedging instruments[129](index=129&type=chunk) [6. Fair Value of Financial Instruments](index=45&type=section&id=6.%20Fair%20Value%20of%20Financial%20Instruments) This section presents fair value measurements of investments and financial instruments using the ASC Topic 820 hierarchy, detailing changes in Level 3 investments and describing valuation techniques and unobservable inputs Fair Value Hierarchy of Investments | Fair Value Hierarchy (June 30, 2025, in thousands) | Level 1 | Level 2 | Level 3 | Total | | :------------------------------------------------ | :------ | :------ | :-------- | :-------- | | First-lien debt investments | $— | $29,039 | $3,014,071 | $3,043,110 | | Second-lien debt investments | $— | $905 | $28,735 | $29,640 | | Mezzanine debt investments | $— | $— | $53,567 | $53,567 | | Equity and other investments | $35,636 | $12,213 | $120,739 | $168,588 | | Total investments at fair value | $35,636 | $42,157 | $3,217,112 | $3,294,905 | - For the six months ended June 30, 2025, the net change in unrealized gains on Level 3 investments held by the company was **$23.2 million**[141](index=141&type=chunk) - Valuation techniques for Level 3 debt investments primarily use an income approach (discount rate), while equity investments use market multiples or discounted cash flow analysis[142](index=142&type=chunk)[146](index=146&type=chunk)[148](index=148&type=chunk) - Caris Life Sciences, Inc. was transferred out of Level 3 into Level 1 for fair value measurement during the six months ended June 30, 2025, due to changes in the observability of inputs[137](index=137&type=chunk) [7. Debt](index=50&type=section&id=7.%20Debt) This section details the company's debt obligations, including the Revolving Credit Facility and unsecured notes, outlining terms, interest rates, maturities, covenant compliance, and the use of interest rate swaps Debt Outstanding | Debt Instrument | Aggregate Principal Committed (in thousands) | Outstanding Principal (in thousands) | Carrying Value (in thousands) | | :---------------------- | :--------------------------------------- | :--------------------------------- | :---------------------------- | | Revolving Credit Facility | $1,675,000 | $507,117 | $490,154 | | 2026 Notes | $300,000 | $300,000 | $287,307 | | 2028 Notes | $300,000 | $300,000 | $300,581 | | 2029 Notes | $350,000 | $350,000 | $346,873 | | 2030 Notes | $300,000 | $300,000 | $301,642 | | Total Debt | $2,925,000 | $1,757,117 | $1,726,557 | - The Revolving Credit Facility's revolving period for **$1.525 billion** of commitments was extended to March 2, 2029, with a stated maturity of March 4, 2030[155](index=155&type=chunk) - As of June 30, 2025, the company's asset coverage ratio was **192.5%**, exceeding the 1940 Act requirement of **150%**[180](index=180&type=chunk) Interest Expense | Interest Expense (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------ | :----------------------------- | :----------------------------- | | Total Interest Expense | $66,617 | $78,266 | | Weighted average interest rate | 6.4% | 7.7% | [8. Commitments and Contingencies](index=58&type=section&id=8.%20Commitments%20and%20Contingencies) This section outlines the company's commitments to fund investments in portfolio companies, primarily through senior secured revolving and delayed draw term loans, with no material legal proceedings or unfunded commitments to new borrowers Portfolio Company Commitments | Commitments (in millions) | June 30, 2025 | December 31, 2024 | | :------------------------ | :------------ | :---------------- | | Total Portfolio Company Commitments | $341.0 | $356.3 | - The company's commitments include senior secured revolving loan and delayed draw term loan commitments, which are generally available on a borrower's demand[185](index=185&type=chunk) - As of June 30, 2025, management is not aware of any material pending or threatened litigation[190](index=190&type=chunk) [9. Net Assets](index=60&type=section&id=9.%20Net%20Assets) This section details changes in net assets, including common stock issuances, the dividend reinvestment plan, and stock repurchase authorizations, noting new share issuances for dividends and no repurchases - In March 2024, the company issued **4,000,000 shares** of common stock, generating **$81.5 million** in net proceeds, with an additional **600,000 shares** issued in April 2024 for **$11.9 million**[191](index=191&type=chunk) Shares Issued via Dividend Reinvestment | Shares Issued via Dividend Reinvestment | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :----------------------------- | :----------------------------- | | Total Shares Issued | 578,912 | 587,706 | | Proceeds (in millions) | $12.7 | $11.9 | - The Board authorized a stock repurchase program of up to **$50 million**, most recently refreshed on April 30, 2025; however, no shares were repurchased during the six months ended June 30, 2025, or 2024[196](index=196&type=chunk)[197](index=197&type=chunk) - As of June 30, 2025, **$100 million** of common stock remained available for issuance under 'at the market' offerings[198](index=198&type=chunk) [10. Earnings per share](index=61&type=section&id=10.%20Earnings%20per%20share) This section presents the computation of basic and diluted earnings per common share for the three and six months ended June 30, 2025, and 2024, showing varied performance across periods Earnings Per Share Summary | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Earnings per common share—basic and diluted | $0.63 | $0.51 | $1.02 | $1.04 | | Weighted average shares outstanding | 93,971,164 | 92,734,320 | 93,821,251 | 90,883,350 | [11. Dividends](index=62&type=section&id=11.%20Dividends) This section summarizes dividends declared for the six months ended June 30, 2025, and 2024, distinguishing between base and supplemental dividends, with total dividends per share remaining stable Dividends Declared | Dividend Type | Six Months Ended June 30, 2025 (per share) | Six Months Ended June 30, 2024 (per share) | | :-------------- | :--------------------------------------- | :--------------------------------------- | | Supplemental | $0.13 | $0.14 | | Base | $0.92 | $0.92 | | Total | $1.05 | $1.06 | - The company has a dividend framework that includes a quarterly base dividend and a variable supplemental dividend[200](index=200&type=chunk) - Dividends declared were derived from net investment income and long-term capital gains on a tax basis[201](index=201&type=chunk) [12. Financial Highlights](index=63&type=section&id=12.%20Financial%20Highlights) This section provides key financial highlights, including per share data, total returns, and financial ratios for the six months ended June 30, 2025, and 2024, showing increased net asset value and strong market-based returns Financial Highlights Summary | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------------ | :----------------------------- | :----------------------------- | | Net asset value, beginning of period | $17.16 | $17.04 | | Net Asset Value, End of Period | $17.17 | $17.19 | | Total return based on market value with reinvestment of dividends | 17.23% | 4.10% | | Total return based on net asset value | 6.18% | 7.12% | | Ratio of net expenses to average net assets | 15.23% | 16.94% | | Portfolio turnover | 26.96% | 23.94% | - The ratio of net expenses to average net assets reflects the Adviser's waivers, which would have been **15.32%** and **17.03%** for the six months ended June 30, 2025 and 2024, respectively, without the waivers[206](index=206&type=chunk) [13. Subsequent Events](index=63&type=section&id=13.%20Subsequent%20Events) Management evaluated subsequent events through the issuance date of the consolidated financial statements and reported no events requiring disclosure in this Form 10-Q - No subsequent events requiring disclosure in this Form 10-Q or recognition in the consolidated financial statements occurred during the period through the date of issuance[207](index=207&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=64&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial condition, liquidity, capital resources, and results of operations, covering investment framework, economic conditions, and detailed analysis of financial metrics [Overview](index=64&type=section&id=Overview) Sixth Street Specialty Lending, Inc. is a Delaware corporation operating as a BDC and RIC, focused on direct lending to U.S. middle-market companies, with shares listed on the NYSE under 'TSLX' - The company is a Delaware corporation, regulated as a **BDC** and **RIC**, primarily lending to U.S. middle-market companies[209](index=209&type=chunk)[210](index=210&type=chunk) - Since July 2011 through June 30, 2025, the company originated approximately **$48.1 billion** in investments, retaining over **$11.2 billion** on its balance sheet[210](index=210&type=chunk) - The company's shares are listed on the NYSE under the symbol '**TSLX**'[210](index=210&type=chunk) [Our Investment Framework](index=64&type=section&id=Our%20Investment%20Framework) The company employs a four-tiered investment framework, focusing on middle-market companies, prioritizing senior secured debt, and mitigating risk through call protection and floating-rate loans with interest rate floors - The company targets middle-market companies with annual **EBITDA of $10 million to $250 million**, seeking high marginal cash flow and recurring revenue streams[211](index=211&type=chunk)[215](index=215&type=chunk) - As of June 30, 2025, **93.3%** of the portfolio was invested in secured debt, with **92.4%** in first-lien debt investments[218](index=218&type=chunk) - Risk mitigation strategies include call protection on **82.9%** of debt investments and **96.5%** of debt investments bearing floating rates with **100.0%** subject to interest rate floors[220](index=220&type=chunk) - The average investment size per portfolio company was approximately **$30.2 million** as of June 30, 2025[215](index=215&type=chunk) [Relationship with our Adviser and Sixth Street](index=65&type=section&id=Relationship%20with%20our%20Adviser%20and%20Sixth%20Street) The company benefits from its relationship with Sixth Street through its Adviser, providing extensive investment resources, market expertise, and co-investment opportunities for U.S. middle-market loan originations - The Adviser, a registered investment adviser, sources and manages the company's portfolio through a dedicated Investment Team[221](index=221&type=chunk) - Sixth Street, a global investment business with over **$115 billion** of assets under management, provides extensive investment resources and market expertise[221](index=221&type=chunk) - An exemptive order from the SEC, granted May 6, 2025, allows co-investment with Sixth Street affiliates in U.S. middle-market loan originations, facilitating 'one-stop' financing for larger capital commitments[223](index=223&type=chunk)[224](index=224&type=chunk) [General Economic Conditions](index=67&type=section&id=General%20Economic%20Conditions) Global markets in 2025 are marked by uncertainty from inflation, elevated interest rates, political/regulatory shifts, and geopolitical instability, which the company actively monitors for potential impacts - Global markets in 2025 are marked by uncertainty from inflation, elevated interest rates, political/regulatory shifts, and geopolitical instability[227](index=227&type=chunk) - The current U.S. presidential administration's policy shifts, including new tariffs, could introduce additional market instability and reduce investor confidence[228](index=228&type=chunk) - The company is actively monitoring tariff developments and analyzing potential impacts on its business, portfolio companies, and the broader economic environment[228](index=228&type=chunk) [Key Components of Our Results of Operations](index=67&type=section&id=Key%20Components%20of%20Our%20Results%20of%20Operations) This section outlines the primary drivers of the company's financial performance, including investment activity, revenue generation, operating expenses, strategic leverage use, and favorable middle-market lending trends [Investments](index=67&type=section&id=Investments) The company's investment activity, focused on direct loan origination to U.S. middle-market companies, fluctuates with market conditions and M&A activity, with risk managed through partial sales or syndication - Investment activity, focused on direct origination of loans to U.S. middle-market companies, varies significantly based on debt/equity capital availability, M&A activity, and the economic/competitive environment[229](index=229&type=chunk)[230](index=230&type=chunk) - The company may reduce investment levels through partial sales or syndication to manage risk[231](index=231&type=chunk) [Revenues](index=69&type=section&id=Revenues) Revenues are primarily generated from interest income on floating-rate debt investments with interest rate floors, supplemented by dividends, capital gains, and various loan fees, which can fluctuate significantly - Primary revenues are from interest income on debt investments; as of June 30, 2025, **96.5%** of these are floating rate with **100.0%** subject to interest rate floors[232](index=232&type=chunk) PIK Interest Income | PIK Interest Income | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------ | :----------------------------- | :----------------------------- | | Percentage of Total Investment Income | 4.8% | 7.3% | - Net investment income is primarily driven by the spread between investment payments and funding costs, rather than direct changes in interest rates, due to the floating-rate nature of assets and liabilities (after swaps)[233](index=233&type=chunk) - Additional revenue sources include prepayment fees, loan origination fees, and various other fees, which can fluctuate significantly[234](index=234&type=chunk)[235](index=235&type=chunk) [Expenses](index=69&type=section&id=Expenses) The company's main operating expenses include Adviser fees (Management and Incentive Fees), administrative reimbursements, and other operational costs, with general and administrative expenses expected to stabilize or decline as a percentage of total assets during growth - Primary operating expenses include Management Fees, Incentive Fees, and expenses reimbursable under the Administration Agreement[238](index=238&type=chunk) - Other costs include those related to asset valuation, due diligence, public offerings, debt service, compliance, and various administrative and professional fees[238](index=238&type=chunk)[244](index=244&type=chunk) - General and administrative expenses are expected to be relatively stable or decline as a percentage of total assets during periods of asset growth[239](index=239&type=chunk) [Leverage](index=71&type=section&id=Leverage) The company uses leverage to enhance investment capacity, with amounts varying based on cash, financing costs, and market conditions, limited by the BDC requirement of at least a **150%** asset coverage ratio - Leverage is used to increase investment capacity, with the amount depending on cash availability, financing costs, and market conditions[240](index=240&type=chunk) - As a BDC, total borrowings are limited to ensure an asset coverage ratio of at least **150%** immediately after any borrowing, as defined in the 1940 Act[240](index=240&type=chunk) - Interest expense is expected to increase as leverage increases over time within the 1940 Act limits[240](index=240&type=chunk) [Market Trends](index=71&type=section&id=Market%20Trends) Favorable market trends in middle-market lending, driven by limited traditional capital and strong demand from private equity-backed companies, create attractive investment opportunities for BDCs like the company - Regulatory changes (e.g., Basel III, Volcker Rule) have tightened risk appetites and reduced traditional lenders' capacity for middle-market companies, creating opportunities for direct lenders[241](index=241&type=chunk)[242](index=242&type=chunk) - Strong demand for debt capital from private equity-backed companies is expected to continue driving deal activity[242](index=242&type=chunk) - Middle-market lending is labor-intensive, requiring specialized due diligence and monitoring, which favors dedicated private lenders and results in attractive pricing and favorable terms[243](index=243&type=chunk)[245](index=245&type=chunk) [Portfolio and Investment Activity](index=73&type=section&id=Portfolio%20and%20Investment%20Activity) This section details the company's investment portfolio composition and activity, including investment types, portfolio companies, weighted average yields, and new investment/exit volumes, along with the Adviser's performance rating scale Investment Portfolio Composition | Investment Type (Fair Value) | June 30, 2025 | December 31, 2024 | | :--------------------------- | :------------ | :---------------- | | First-lien debt investments | 92.4% | 93.9% | | Second-lien debt investments | 0.9% | 0.6% | | Mezzanine debt investments | 1.6% | 1.1% | | Equity investments | 5.1% | 4.4% | Portfolio Metrics | Metric | June 30, 2025 | December 31, 2024 | | :---------------------------------------------------- | :------------ | :---------------- | | Weighted average total yield of debt and income producing securities (at fair value) | 11.7% | 12.3% | | Number of portfolio companies | 109 | 116 | | Non-accrual investments (fair value) | $21.4 million (0.6%) | $49.0 million (1.4%) | Investment Activity Summary | Investment Activity (in millions) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | | Principal amount of new investments funded | $208.6 | $163.6 | | Principal amount of investments sold or repaid | $388.7 | $290.3 | | Number of new investment commitments in new portfolio companies | 13 | 8 | | Weighted average interest rate of new investment commitments | 10.7% | 11.6% | Investment Performance Ratings | Investment Performance Rating (June 30, 2025, Fair Value in millions) | Percentage of Total Portfolio | | :---------------------------------------------------- | :---------------------------- | | Rating 1 (performing as agreed) | 92.5% ($3,045.8) | | Rating 2 (performing, but concerns) | 6.0% ($197.9) | | Rating 3 (paying, but material covenant violation expected) | 0.9% ($29.8) | | Rating 5 (in default) | 0.6% ($21.4) | [Results of Operations](index=76&type=section&id=Results%20of%20Operations) This section provides a detailed analysis of the company's operating results, including investment income, expenses, net realized and unrealized gains/losses, and realized gross internal rate of return for the three and six months ended June 30, 2025, compared to 2024 [Investment Income](index=77&type=section&id=Investment%20Income) Total investment income decreased for both the three and six months ended June 30, 2025, compared to 2024, primarily due to lower interest from investments and reduced paid-in-kind interest and dividend income Investment Income Breakdown | Investment Income (in millions) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change (%) | | :------------------------------ | :------------------------------- | :------------------------------- | :--------- | | Total investment income | $115.0 | $121.8 | -5.6% | | Interest from investments | $101.2 | $105.0 | -3.7% | | Paid-in-kind interest income | $5.8 | $9.4 | -38.3% | | Dividend income | $0.4 | $1.8 | -77.8% | | Other income | $7.6 | $5.6 | +35.7% | - The decrease in interest from investments was primarily due to a decrease in reference rates for the three and six months ended June 30, 2025, compared to the same periods in 2024[261](index=261&type=chunk)[262](index=262&type=chunk) [Expenses](index=77&type=section&id=Expenses) Net expenses decreased for both the three and six months ended June 30, 2025, compared to 2024, primarily due to a significant reduction in interest expense from lower weighted average interest rates on outstanding debt Operating Expenses Breakdown | Expenses (in millions) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change (%) | | :----------------------------- | :------------------------------- | :------------------------------- | :--------- | | Net Expenses | $62.9 | $65.4 | -3.8% | | Interest | $33.6 | $39.2 | -14.3% | | Management fees (net of waivers) | $12.6 | $12.5 | +0.8% | | Incentive fees on net investment income | $11.1 | $11.4 | -2.6% | | Professional fees | $2.6 | $2.1 | +23.8% | - The decrease in interest expense was primarily due to a decrease in the weighted average interest rate on outstanding debt, from **7.7%** in H1 2024 to **6.4%** in H1 2025[264](index=264&type=chunk)[265](index=265&type=chunk) - Management Fees (gross of waivers) increased slightly due to an increase in average assets[266](index=266&type=chunk)[267](index=267&type=chunk) - Professional fees increased due to higher legal and audit-related fees[270](index=270&type=chunk)[271](index=271&type=chunk) [Net Realized and Unrealized Gains and Losses](index=80&type=section&id=Net%20Realized%20and%20Unrealized%20Gains%20and%20Losses) For the three and six months ended June 30, 2025, the company experienced net realized losses and significant net unrealized gains, driven by positive portfolio developments and tightening credit spreads, contrasting with the prior year Realized and Unrealized Gains/Losses | Gains/Losses (in millions) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :------------------------------------------ | :------------------------------- | :------------------------------- | | Net Realized Gains (Losses) | $(36.9) | $1.8 | | Net Change in Unrealized Gains (Losses) | $45.0 | $(9.5) | - Unrealized gains for the three months ended June 30, 2025, were **$94.6 million** on **77 investments**, driven by positive portfolio company developments, tightening credit spreads, and reversal of prior unrealized losses[278](index=278&type=chunk) - Unrealized losses on foreign currency borrowings for the three months ended June 30, 2025, were **$25.8 million**, primarily due to fluctuations in AUD, CAD, SEK, GBP, and EUR exchange rates[279](index=279&type=chunk) [Realized Gross Internal Rate of Return](index=82&type=section&id=Realized%20Gross%20Internal%20Rate%20of%20Return) Since 2011 through June 30, 2025, the company's exited investments generated an average realized gross internal rate of return (IRR) of **17.1%**, with **92%** achieving an IRR of **10% or greater** - Since investing began in 2011 through June 30, 2025, exited investments generated an average realized gross internal rate of return (**IRR**) of **17.1%**, weighted by capital invested[284](index=284&type=chunk) - **92%** of these exited investments resulted in a realized gross IRR of **10% or greater**[284](index=284&type=chunk) - Total capital invested in exited investments was **$8.6 billion**, with total proceeds of **$11.0 billion**[284](index=284&type=chunk) [Interest Rate and Foreign Currency Hedging](index=82&type=section&id=Interest%20Rate%20and%20Foreign%20Currency%20Hedging) The company uses interest rate swaps to hedge fixed-rate debt and investments, aligning with its floating-rate portfolio, and hedges foreign currency exposure by borrowing in local currencies under the Revolving Credit Facility - Interest rate swaps are used to hedge fixed rate debt (2026, 2028, 2029, and 2030 Notes) and certain fixed rate investments, aligning with the predominantly floating rate investment portfolio[291](index=291&type=chunk) - Foreign currency exposure in non-U.S. dollar denominated investments is primarily hedged by borrowing the par amount in local currency under the Revolving Credit Facility[292](index=292&type=chunk) - For the six months ended June 30, 2025, the company had **$36.8 million** of unrealized losses on the translation of non-U.S. dollar denominated debt[292](index=292&type=chunk) [Financial Condition, Liquidity and Capital Resources](index=84&type=section&id=Financial%20Condition,%20Liquidity%20and%20Capital%20Resources) The company's liquidity is primarily derived from equity issuances, credit facilities, and operational cash flows, used for investments, operations, debt service, and dividends, maintaining sufficient borrowing capacity within regulatory limits - Liquidity and capital resources are primarily from equity issuances, credit facilities, and cash flows from operations[293](index=293&type=chunk) - Primary uses of cash include investments, operational costs, debt service, and dividends[298](index=298&type=chunk) - As of June 30, 2025, the company had **$39.2 million** in cash and cash equivalents, including **$35.3 million** of restricted cash, and approximately **$1.1 billion** of availability on its Revolving Credit Facility[295](index=295&type=chunk)[294](index=294&type=chunk) - The company maintains an asset coverage ratio of **192.5%** as of June 30, 2025, well above the **150%** regulatory requirement[293](index=293&type=chunk) [Equity](index=84&type=section&id=Equity) The company's equity capital is sourced from common stock issuances and a dividend reinvestment plan, supplemented by an 'at the market' offering program and stock repurchase authorization, with no repurchases in reported periods - In March 2024, the company issued **4,000,000 shares** of common stock for **$81.5 million** net proceeds, with an additional **600,000 shares** issued in April 2024 for **$11.9 million**[297](index=297&type=chunk) - Through its dividend reinvestment plan, **578,912 shares ($12.7 million)** were issued in H1 2025 and **587,706 shares ($11.9 million)** in H1 2024[300](index=300&type=chunk) - A **$50 million** stock repurchase program is authorized, but no shares were repurchased in H1 2025 or H1 2024[301](index=301&type=chunk)[302](index=302&type=chunk) - As of June 30, 2025, **$100 million** of common stock remained available for issuance under 'at the market' offerings[299](index=299&type=chunk) [Debt](index=86&type=section&id=Debt) The company's debt structure includes a Revolving Credit Facility and unsecured notes with varying maturities and interest rates, maintaining compliance with debt covenants and regulatory asset coverage ratios for investments and corporate purposes Debt Outstanding Summary | Debt Instrument | Aggregate Principal Committed (in millions) | Outstanding Principal (in millions) | | :---------------------- | :---------------------------------------- | :---------------------------------- | | Revolving Credit Facility | $1,675.0 | $507.1 | | 2026 Notes | $300.0 | $300.0 | | 2028 Notes | $300.0 | $300.0 | | 2029 Notes | $350.0 | $350.0 | | 2030 Notes | $300.0 | $300.0 | | Total Debt | $2,925.0 | $1,757.1 | - The Revolving Credit Facility's revolving period for **$1.525 billion** of commitments was extended to March 2, 2029, with a stated maturity of March 4, 2030[306](index=306&type=chunk) - As of June 30, 2025, the company had outstanding debt denominated in AUD, GBP, CAD, SEK, and EUR on its Revolving Credit Facility[307](index=307&type=chunk) - The company was in compliance with the terms of all its debt arrangements as of June 30, 2025[330](index=330&type=chunk) [Off-Balance Sheet Arrangements](index=92&type=section&id=Off-Balance%20Sheet%20Arrangements) The company has commitments to fund investments in existing portfolio companies, primarily through revolving and delayed draw term loans, which are incorporated into its liquidity assessment, with no unfunded commitments or material legal proceedings Off-Balance Sheet Commitments | Commitments (in millions) | June 30, 2025 | December 31, 2024 | | :------------------------ | :------------ | :---------------- | | Total Portfolio Company Commitments | $341.0 | $356.3 | - These commitments, primarily senior secured revolving and delayed draw term loans, are incorporated into the company's liquidity assessment[331](index=331&type=chunk) - As of June 30, 2025, there were no unfunded commitments to new borrowers and no material pending or threatened litigation[336](index=336&type=chunk) [Contractual Obligations](index=95&type=section&id=Contractual%20Obligations) The company's contractual payment obligations as of June 30, 2025, primarily consist of its Revolving Credit Facility and unsecured notes, with maturities ranging from 1-3 years to beyond 5 years Contractual Obligations Summary | Contractual Obligations (in millions) | Total | Less than 1 year | 1-3 years | 3-5 years | After 5 years | | :---------------------------------- | :---- | :--------------- | :-------- | :-------- | :------------ | | Revolving Credit Facility | $507.1 | $— | $— | $507.1 | $— | | 2026 Notes | $300.0 | $— | $300.0 | $— | $— | | 2028 Notes | $300.0 | $— | $— | $300.0 | $— | | 2029 Notes | $350.0 | $— | $— | $350.0 | $— | | 2030 Notes | $300.0 | $— | $— | $— | $300.0 | | Total Contractual Obligations | $1,757.1 | $— | $300.0 | $1,157.1 | $300.0 | - In addition to these, the company has commitments to fund investments and to pledge assets as collateral under derivative agreements[340](index=340&type=chunk) [Distributions](index=95&type=section&id=Distributions) As a RIC, the company aims to distribute at least **90%** of its taxable income annually to avoid corporate-level U.S. federal income tax, with quarterly dividends paid at the Board's discretion and an 'opt out' dividend reinvestment plan in place - To maintain RIC status, the company must distribute at least **90%** of its investment company taxable income and net tax-exempt income annually[341](index=341&type=chunk) - A nondeductible **4%** U.S. federal excise tax is payable on amounts not distributed in accordance with calendar year distribution requirements[343](index=343&type=chunk) - Quarterly dividends are paid at the discretion of the Board, based on earnings, financial condition, RIC status, and BDC regulations[344](index=344&type=chunk) - The company operates an 'opt out' dividend reinvestment plan, where cash dividends are automatically reinvested into common stock unless a stockholder elects cash[348](index=348&type=chunk) [Related-Party Transactions](index=97&type=section&id=Related-Party%20Transactions) The company has ongoing business relationships with affiliated or related parties, including the Investment Advisory Agreement, the Administration Agreement, and a trademark usage agreement with an affiliate of TPG Global, LLC - Key related-party transactions include the Investment Advisory Agreement, the Administration Agreement, and an agreement with an affiliate of TPG Global, LLC concerning 'Sixth Street' and 'TPG' trademarks[355](index=355&type=chunk) [Critical Accounting Estimates](index=97&type=section&id=Critical%20Accounting%20Estimates) The company's critical accounting policies and estimates, particularly for investment portfolio valuation, are detailed in its Annual Report on Form 10-K, involving significant judgment due to the illiquid nature of many investments - Critical accounting policies and estimates, especially for investment portfolio valuation, are detailed in the Annual Report on Form 10-K for December 31, 2024[349](index=349&type=chunk) - Determining fair value for illiquid debt and equity securities of private companies requires significant judgment[351](index=351&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=73&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section outlines the company's exposure to various financial market risks, including valuation, interest rate, and currency risks, and describes the strategies employed to manage these exposures [Valuation Risk](index=97&type=section&id=Valuation%20Risk) The company faces valuation risk from its primary investments in illiquid debt and equity securities of private companies, where fair values are determined by the Board using judgment, and actual liquidation amounts may differ materially - The company primarily invests in illiquid debt and equity securities of private companies, which do not have readily available market prices[351](index=351&type=chunk) - Fair value is determined in good faith by the Board, requiring judgment due to the lack of a single valuation standard[351](index=351&type=chunk) - Actual amounts realized from liquidating portfolio investments may differ materially from reported fair values[351](index=351&type=chunk) [Interest Rate Risk](index=97&type=section&id=Interest%20Rate%20Risk) The company is exposed to interest rate risk, affecting net investment income, and manages this through a predominantly floating-rate debt portfolio with interest rate floors and interest rate swaps to hedge fixed-rate liabilities - Net investment income is affected by the difference between investment rates and borrowing rates[352](index=352&type=chunk) - As of June 30, 2025, **96.5%** of debt investments bore floating rates, with **100.0%** subject to interest rate floors[354](index=354&type=chunk) - Interest rate swaps are used to hedge fixed-rate debt (2026, 2028, 2029, and 2030 Notes) to align with the floating-rate investment portfolio[354](index=354&type=chunk) Interest Rate Sensitivity | Hypothetical Basis Point Change | Annualized Impact on Net Interest Income (in millions) | | :------------------------------ | :--------------------------------------------------- | | Up 300 basis points | $37.6 | | Up 200 basis points | $25.1 | | Up 100 basis points | $12.5 | | Down 25 basis points | $(3.1) | | Down 50 basis points | $(6.2) | [Currency Risk](index=98&type=section&id=Currency%20Risk) The company is exposed to currency risk from foreign currency-denominated investments, which it mitigates using hedging techniques like forward contracts or borrowing in local currencies under its Revolving Credit Facility - Investments denominated in foreign currencies expose the company to movements in foreign exchange rates upon translation to U.S. dollars[358](index=358&type=chunk) - Hedging techniques may include forward contracts or borrowing in local currencies under the Revolving Credit Facility to create natural hedges[358](index=358&type=chunk) - Interest rate derivatives may be used to hedge exposure to changes in associated rates if the loan or investment is based on a floating rate other than what can be borrowed under the Revolving Credit Facility[358](index=358&type=chunk) [Item 4. Controls and Procedures](index=74&type=section&id=Item%204.%20Controls%20and%20Procedures) As of June 30, 2025, the company's management, including the CEO and CFO, concluded that its disclosure controls and procedures were effective, with no material changes in internal control over financial reporting - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective as of June 30, 2025[359](index=359&type=chunk) - No changes in internal control over financial reporting occurred during the most recently completed fiscal quarter that materially affected, or are reasonably likely to materially affect, internal control over financial reporting[360](index=360&type=chunk) PART II. OTHER INFORMATION This section provides additional information not covered in the financial statements, including legal proceedings, risk factors, equity sales, defaults, and exhibits [Item 1. Legal Proceedings](index=75&type=section&id=Item%201.%20Legal%20Proceedings) The company is not currently subject to any material legal proceedings, nor are any threatened, beyond those incidental to the normal course of business - The company is not currently subject to any material legal proceedings, nor is any material legal proceeding threatened against it[361](index=361&type=chunk) [Item 1A. Risk Factors](index=75&type=section&id=Item%201A.%20Risk%20Factors) This section directs readers to review risk factors in the Annual Report on Form 10-K for December 31, 2024, as these could materially affect the company's business, financial condition, and operating results - Readers should carefully consider the risk factors discussed in Part I, 'Item 1A. Risk Factors' in the Annual Report on Form 10-K for the fiscal year ended December 31, 2024[362](index=362&type=chunk) - These risks could materially affect the company's business, financial condition, and/or operating results[362](index=362&type=chunk) - Additional risks and uncertainties not currently known or deemed immaterial may also materially and adversely affect the company[362](index=362&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=75&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This item states that there were no unregistered sales of equity securities or use of proceeds to report for the period - None[363](index=363&type=chunk) [Item 3. Defaults Upon Senior Securities](index=75&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This item states that there were no defaults upon senior securities to report for the period - Not Applicable[364](index=364&type=chunk) [Item 4. Mine Safety Disclosures](index=75&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item states that there are no mine safety disclosures to report for the period - Not Applicable[365](index=365&type=chunk) [Item 5. Other Information](index=75&type=section&id=Item%205.%20Other%20Information) This section includes disclosures about Rule 10b5-1 Trading Plans, noting no adoption, modification, or termination by directors or officers during the three months ended June 30, 2025 [Rule 10b5-1 Trading Plans](index=99&type=section&id=Rule%2010b5-1%20Trading%20Plans) No Rule 10b5-1 or non-Rule 10b5-1 trading arrangements were adopted, modified, or terminated by the company's directors or officers during the three months ended June 30, 2025 - None of the company's directors or officers adopted, modified, or terminated any Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement during the three months ended June 30, 2025[366](index=366&type=chunk) [Item 6. Exhibits](index=76&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed as part of the Form 10-Q, including organizational documents, CEO and CFO certifications, and XBRL-related documents - Exhibits include the Restated Certificate of Incorporation, Second Amended and Restated Bylaws, Certifications of Chief Executive Officer and Chief Financial Officer (pursuant to Sarbanes-Oxley Act), and Inline XBRL documents[367](index=367&type=chunk) [SIGNATURES](index=77&type=section&id=SIGNATURES) The report is duly signed on behalf of Sixth Street Specialty Lending, Inc. by Joshua Easterly, CEO, and Ian Simmonds, CFO, on July 30, 2025 - The report is signed by Joshua Easterly, Chief Executive Officer, and Ian Simmonds, Chief Financial Officer, on July 30, 2025[371](index=371&type=chunk)

Core Insights - Business Development Companies (BDCs) are highlighted as a favorable option for generating substantial dividend income through investments in floating rate debt [1] - A hybrid investment strategy combining classic dividend growth stocks, BDCs, Real Estate Investment Trusts (REITs), and Closed-End Funds is suggested to enhance investment income while achieving total returns comparable to traditional index funds like the S&P [1] Investment Strategy - Focusing on BDCs with floating rate debt investments allows investors to benefit from interest rate fluctuations, potentially increasing income [1] - The approach of mixing different asset classes aims to create a balanced portfolio that maximizes both income and growth potential [1]

Financial Data and Key Metrics Changes - The company reported adjusted net investment income of $0.58 per share, with an annualized return on equity of 13.5%, and adjusted net income of $0.36 per share, with an annualized return on equity of 8.3% for Q1 2025 [9] - Total investments decreased to $3.4 billion from $3.5 billion in the prior quarter due to net repayment activity [29] - The weighted average yield on debt and income-producing securities decreased slightly from 12.5% to 12.3% quarter over quarter [22] Business Line Data and Key Metrics Changes - In Q1, the company provided total commitments of $154 million and total funding of $137 million across six new portfolio companies and upsizes to four existing investments [15] - The company experienced $270 million of repayments from seven full and four partial investment realizations, resulting in $133 million of net repayment activity [15] - 89% of total funding this quarter was into new investments, with 11% supporting upsizes to existing portfolio companies [19] Market Data and Key Metrics Changes - The supply and demand dynamics in the US direct lending market have been characterized by an imbalance, with the supply of capital outpacing demand [14] - The company anticipates that current uncertainty and volatility will moderate the supply and demand imbalance by slowing inflows into non-traded vehicles [15] - The weighted average spread over reference rate of new investment commitments in Q1 was 700 basis points, compared to 541 basis points for public BDC peers in Q4 [23] Company Strategy and Development Direction - The company aims to remain highly selective and disciplined in capital allocation, focusing on risk-adjusted returns [16] - The company believes that periods of heightened volatility often present the most attractive investment opportunities and is well-positioned with significant liquidity [12] - The company has a disciplined capital allocation strategy, with a focus on maintaining higher portfolio yields than sector averages [11] Management's Comments on Operating Environment and Future Outlook - Management believes the business remains well protected on the asset side with limited direct exposure to tariffs and is positioned well on the liability side [8] - The company anticipates a quarterly earnings power of approximately $0.50 per share, with potential upside if activity-based fees return to historical averages [10] - Management expressed confidence in the portfolio's credit quality, with non-accruals representing only 1.2% of the portfolio at fair value [24] Other Important Information - The board approved a base quarterly dividend of $0.46 per share and a supplemental dividend of $0.06 per share [12] - The company has approximately $1 billion of unfunded revolver capacity against $175 million of unfunded portfolio company commitments [31] - The company has entered an ATM program to expand its capital raising toolkit, with no shares issued to date [32] Q&A Session Summary Question: Impact of downward pressure on spreads due to non-traded BDC fundraising - Management noted that retail flows have likely slowed due to market volatility and emphasized their resilience through a diversified capital allocation strategy [41][44] Question: Pricing risk in a volatile environment - Management indicated that the private markets are not effectively pricing risk, but their deep fundamental investment approach allows them to navigate volatility [55][58] Question: Outlook for lane two and lane three investments - Management expects to see more opportunities as stress increases in the market, particularly in the broadly syndicated loan market [81][84] Question: Impact of banks going risk-off on the liability side - Management expressed confidence in their balance sheet management and noted that recent amendments and issuances have strengthened their position [100][102]

Financial Data and Key Metrics Changes - The company reported adjusted net investment income of $0.58 per share, with an annualized return on equity of 13.5%, and adjusted net income of $0.36 per share, with an annualized return on equity of 8.3% for Q1 2025 [8][32] - Total investments decreased to $3.4 billion from $3.5 billion in the prior quarter due to net repayment activity [32] - The weighted average yield on debt and income-producing securities decreased slightly from 12.5% to 12.3% quarter over quarter [24] Business Line Data and Key Metrics Changes - In Q1, the company provided total commitments of $154 million and total funding of $137 million across six new portfolio companies and upsizes to four existing investments [16] - The company experienced $270 million of repayments from seven full and four partial investment realizations, resulting in $133 million of net repayment activity [16] - 89% of total funding this quarter was into new investments, with 11% supporting upsizes to existing portfolio companies [20] Market Data and Key Metrics Changes - The U.S. direct lending market has seen an imbalance with the supply of capital outpacing demand, primarily due to the growth of retail investor-oriented perpetual non-traded BDC structures [14] - The company anticipates that current uncertainty and volatility will moderate the supply and demand imbalance by slowing inflows into non-traded vehicles [15] Company Strategy and Development Direction - The company emphasizes a disciplined capital allocation strategy, with portfolio yields significantly higher than the sector average, at a weighted average yield of 12.5% compared to 11.6% for peers [11] - The company is well-positioned with significant liquidity and capital to invest in what is expected to be a more interesting investment environment [12] - The company plans to maintain a conservative approach to new investments, focusing on risk-adjusted returns and avoiding participation in deals that do not align with shareholder interests [22] Management's Comments on Operating Environment and Future Outlook - Management believes the business remains well protected on the asset side with limited direct exposure to tariffs and is positioned well on the liability side [7] - The company anticipates a quarterly earnings power of approximately $0.50 per share, with potential upside if activity-based fees return to historical averages [10] - Management expressed confidence in the portfolio's credit quality, with non-accruals representing only 1.2% of the portfolio at fair value [26] Other Important Information - The board approved a base quarterly dividend of $0.46 per share and a supplemental dividend of $0.06 per share [12][13] - The company completed two capital market transactions in Q1, including a $300 million issuance of long five-year notes [32] Q&A Session Summary Question: Impact of downward pressure on spreads due to non-traded BDC fundraising - Management noted that retail flows have likely slowed due to market volatility, and the company has a resilient business model that is not solely dependent on sponsor deals [42][44] Question: Outlook for M&A activity - Management is negative on the return of M&A activity in the near term, citing overvaluation of assets and the need for time and growth [51][52] Question: Pricing risk in a volatile environment - Management indicated that the private markets are not effectively pricing risk, but the company uses a fundamental approach to assess asset value and required returns [59] Question: Deployment opportunities in lane two and lane three investments - Management is starting to see more opportunities in these areas but anticipates that more stress is needed across sectors for significant deployment [80] Question: Frequency of capital raises with the ATM program - Management confirmed that there will be no change in the frequency of capital raises, emphasizing that any issuance must be accretive to shareholders [84]