Sixth Street Specialty Lending(TSLX) - 2025 Q1 - Quarterly Results

First Quarter 2025 Earnings Results Financial and Operational Highlights Sixth Street Specialty Lending reported Q1 2025 net investment income of $0.62 per share and $0.39 net income per share, with NAV at $17.04, while executing key financing activities | Metric | Q1 2025 Value | | :--- | :--- | | Net Investment Income (NII) per Share | $0.62 | | Adjusted NII per Share | $0.58 | | Net Income (NI) per Share | $0.39 | | Adjusted NI per Share | $0.36 | | Annualized ROE (NII) | 14.4% | | Annualized ROE (NI) | 9.2% | | NAV per Share (End of Period) | $17.04 | - The decline in NAV per share from $17.16 (Q4 2024) to $17.04 (Q1 2025) was mainly driven by a $0.13 per share reversal of unrealized gains from paydowns/sales and a $0.06 per share impact from widening credit spreads[4] | Dividend Type | Per Share Amount | Record Date | Payment Date | | :--- | :--- | :--- | :--- | | Q2 2025 Base Dividend | $0.46 | June 16, 2025 | June 30, 2025 | | Q1 2025 Supplemental Dividend | $0.06 | May 30, 2025 | June 20, 2025 | - The company issued $300.0 million of unsecured notes due in 2030 and entered an interest rate swap, resulting in an effective interest rate of SOFR plus 153 basis points[6] - In March, the company amended its Revolving Credit Facility, extending the maturity to March 2030 for $1.525 billion of commitments and reducing borrowing costs[7] Portfolio and Investment Activity The company's Q1 2025 portfolio activity reflected reduced new investments and increased exits, resulting in a net reduction, while maintaining a conservative, predominantly floating-rate debt structure | Activity (Principal Amount, Millions) | Q1 2025 | Q4 2024 | | :--- | :--- | :--- | | New Investment Commitments | $154.4 | $479.0 | | Investments Funded | $136.8 | $323.5 | | Exits and Repayments | $269.6 | $304.7 | | Portfolio Composition (% of Fair Value) | Mar 31, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | First-Lien Debt | 92.9% | 93.9% | | Second-Lien Debt | 1.0% | 0.6% | | Mezzanine Debt | 1.5% | 1.1% | | Equity and Other | 4.6% | 4.4% | - As of March 31, 2025, 97.0% of the company's debt investments by fair value were at floating rates, with 100% of these subject to reference rate floors[12] | Weighted Average Yield | Mar 31, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | At Fair Value | 12.1% | 12.3% | | At Amortized Cost | 12.3% | 12.5% | - Portfolio credit quality remained stable, with investments on non-accrual status at 1.2% of fair value as of March 31, 2025, a slight improvement from 1.4% at year-end 2024[13] Results of Operations For Q1 2025, total investment income slightly decreased to $116.3 million, while net expenses significantly reduced to $57.0 million, leading to an improved debt-to-equity ratio of 1.18x - Total investment income for Q1 2025 was $116.3 million, down slightly from $117.8 million in Q1 2024, mainly due to lower interest rates, partially offset by higher activity-based fee income[16] - Net expenses for Q1 2025 decreased to $57.0 million from $64.6 million in Q1 2024, primarily because lower reference rates reduced the interest expense on the company's debt[17] | Debt and Capital Metrics (Millions) | As of Mar 31, 2025 | As of Dec 31, 2024 | | :--- | :--- | :--- | | Total Principal Debt Outstanding | $1,889.2 | - | | Undrawn Revolver Capacity | $1,012.8 | - | | Debt-to-Equity Ratio (Quarter End) | 1.18x | 1.22x | | Average Debt-to-Equity Ratio | 1.19x | 1.23x | Liquidity and Funding Profile As of March 31, 2025, the company maintained a strong liquidity position of $1.018 billion (pre-unfunded commitments), with a funding mix of 66% unsecured debt and a well-laddered maturity profile | Liquidity Position ($ Millions) | As of Mar 31, 2025 | | :--- | :--- | | Revolver Capacity | $1,675 | | Drawn on Revolver | ($639) | | Unrestricted Cash Balance | $5 | | Total Liquidity (Pre-Unfunded Commitments) | $1,018 | | Total Liquidity (Burdened for Unfunded Commitments) | $843 | - The company's funding mix at quarter-end was approximately 66% unsecured and 34% secured debt[23] - The company has a well-managed debt maturity profile, with the nearest maturity of $300 million in August 2026. The weighted average remaining maturity on debt is ~4.2 years[23] Financial Statements and Tables This section presents detailed unaudited financial statements and comparative tables, including financial highlights, consolidated balance sheets, statements of operations, and investment activity, for a comprehensive view of performance Financial Highlights The financial highlights table provides quarter-over-quarter and year-over-year comparisons, showing Q1 2025 Net Investment Income per share stable at $0.62 and Net Income per share at $0.39, with weighted average debt yield at 12.1% | Metric (per share) | Q1 2025 | Q4 2024 | Q1 2024 | | :--- | :--- | :--- | :--- | | Net Asset Value | $17.04 | $17.16 | $17.17 | | Net Investment Income | $0.62 | $0.62 | $0.59 | | Net Income | $0.39 | $0.55 | $0.53 | | Metric (Annualized ROE) | Q1 2025 | Q4 2024 | Q1 2024 | | :--- | :--- | :--- | :--- | | Based on Net Investment Income | 14.4% | 14.4% | 13.8% | | Based on Net Income | 9.2% | 12.8% | 12.5% | Consolidated Balance Sheets As of March 31, 2025, the consolidated balance sheet reported total assets of $3.499 billion and total net assets of $1.601 billion, resulting in a NAV per share of $17.04, a slight decrease from year-end 2024 | Balance Sheet ($ thousands) | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total investments at fair value | $3,412,032 | $3,518,412 | | Total Assets | $3,498,500 | $3,582,225 | | Total Liabilities | $1,897,217 | $1,974,696 | | Total Net Assets | $1,601,283 | $1,607,529 | | Net Asset Value Per Share | $17.04 | $17.16 | Consolidated Statements of Operations For Q1 2025, total investment income was $116.3 million, with net expenses of $57.0 million, leading to net investment income of $58.0 million and a final net income of $37.0 million, or $0.39 per share | Statement of Operations ($ thousands) | Three Months Ended Mar 31, 2025 | Three Months Ended Mar 31, 2024 | | :--- | :--- | :--- | | Total Investment Income | $116,349 | $117,783 | | Net Expenses | $57,021 | $64,571 | | Net Investment Income | $57,978 | $52,362 | | Total Net Unrealized and Realized Gains (Losses) | ($21,023) | ($4,844) | | Increase in Net Assets (Net Income) | $36,955 | $47,518 | | Earnings per common share | $0.39 | $0.53 | Investment Activity Q1 2025 investment activity included $154.4 million in new commitments and $269.6 million in sales/repayments, with 85.1% of new debt commitments at floating rates | Investment Activity ($ millions) | Three Months Ended Mar 31, 2025 | Three Months Ended Mar 31, 2024 | | :--- | :--- | :--- | | Total new investment commitments | $154.4 | $263.6 | | Principal amount of investments funded | $136.8 | $162.8 | | Principal amount of investments sold or repaid | $269.6 | $108.6 | - For new debt investment commitments in Q1 2025, 85.1% were at floating rates, a decrease from 98.7% in Q1 2024[37] Supplemental Information This section provides logistical details for the earnings call, company background, and important legal disclaimers regarding forward-looking statements and non-GAAP financial measures Conference Call and Webcast The company will host a conference call and live webcast on May 1, 2025, at 8:30 a.m. Eastern Time, to discuss its Q1 2025 financial results, with access details provided - A conference call to discuss financial results is scheduled for 8:30 a.m. Eastern Time on May 1, 2025[27] - A live webcast and a slide presentation will be available on the Investor Resources section of the company's website[27] About the Company Sixth Street Specialty Lending (TSLX) is a regulated BDC focused on direct origination of senior secured loans to U.S. middle-market companies, externally managed by Sixth Street, a global investment firm with over $100 billion in assets - Sixth Street Specialty Lending is a specialty finance company and regulated BDC focused on lending to U.S. middle-market companies[38] - The company is externally managed by Sixth Street Specialty Lending Advisers, LLC, an affiliate of Sixth Street, a global investment firm with over $100 billion in assets under management[38][39] Forward-Looking Statements and Non-GAAP Measures The report includes forward-looking statements subject to risks and uncertainties, and utilizes non-GAAP financial measures like adjusted net investment income to reflect fundamental earnings power - The document includes forward-looking statements, and actual results may differ materially from those projected. The company does not assume an obligation to update these statements[40] - The company uses non-GAAP measures like 'Adjusted net investment income' and 'Adjusted net income' which exclude accrued capital gains incentive fees to better reflect fundamental earnings power[41]