Carlyle Secured Lending(CGBD) - 2025 Q1 - Quarterly Results

Q1 2025 Highlights CGBD reported Q1 2025 NII of $0.40 per share, driven by the CSL III merger and credit facility expansion Q1 2025 Performance and Strategic Activities Carlyle Secured Lending reported Q1 2025 Net Investment Income of $0.40 per share, marked by significant strategic activities and a slight NAV per share decrease Key Q1 2025 Performance Metrics | Metric | Value | | :--- | :--- | | Net Investment Income per Share | $0.40 | | Adjusted Net Investment Income per Share | $0.41 | | NAV per Share (as of 03/31/25) | $16.63 | | Q2 2025 Declared Base Dividend | $0.40 | | Annualized Dividend Yield on NAV | 9.6% | - Successfully completed the merger with CSL III on March 27, 2025, resulting in a $485.7 million increase in portfolio fair value and the issuance of 18.9 million new shares[13] - The portfolio's fair value reached $2.2 billion across 138 companies, with a weighted average yield of 10.9%. Non-accrual investments increased to 1.6% of the portfolio at fair value, up from 0.6% in the previous quarter[13] - Capital and liquidity were strengthened by amending the Credit Facility to increase commitments to $935.0 million and extend the maturity to March 2030. Statutory leverage stood at 1.04x with total liquidity of $858.5 million[13][14] Financial Performance CGBD's Q1 2025 financial performance saw a decline in Net Investment Income and total investment income compared to the prior quarter Quarterly Operating Results For Q1 2025, CGBD reported a decrease in Net Investment Income and total investment income compared to the prior quarter Quarterly Operating Results (in thousands) | (In thousands, except per share) | Q1 2025 | Q4 2024 | Change (QoQ) | | :--- | :--- | :--- | :--- | | Total Investment Income | $54,864 | $56,354 | -2.6% | | Net Investment Income (NII) | $20,803 | $24,171 | -14.0% | | NII per Common Share | $0.40 | $0.47 | -14.9% | | Adjusted NII per Common Share | $0.41 | $0.47 | -12.8% | | Net Income (Loss) | $13,228 | $20,482 | -35.4% | Quarterly Financial Condition As of March 31, 2025, total assets significantly increased due to the CSL III merger, while NAV per share slightly decreased and leverage improved Quarterly Financial Condition (in thousands) | (In thousands, except per share) | Q1 2025 | Q4 2024 | Change (QoQ) | | :--- | :--- | :--- | :--- | | Total Investments, at fair value | $2,245,626 | $1,803,543 | +24.5% | | Total Assets | $2,533,808 | $1,925,993 | +31.6% | | Debt and secured borrowings | $1,247,186 | $960,949 | +29.8% | | Net Assets | $1,212,389 | $905,204 | +34.0% | | Net Asset Value per Common Share | $16.63 | $16.80 | -1.0% | - The statutory debt-to-equity ratio decreased to 1.04x in Q1 2025 from 1.20x in Q4 2024, reflecting a more conservative leverage profile post-merger[17] - The portfolio composition shifted more heavily towards first-lien debt, which now constitutes 83.4% of total investments by fair value, up from 73.4% in the previous quarter[17] Investment & Origination Activity Q1 2025 saw significant investment activity, primarily driven by strategic mergers and acquisitions, with a notable shift in net investment activity Origination Activity Q1 2025 was characterized by exceptionally high investment activity, primarily driven by the CSL III Merger and Credit Fund II Purchase Q1 2025 Investment Activity (in thousands) | (In thousands) | Q1 2025 | | :--- | :--- | | New Investment Fundings | | | First lien debt | $173,719 | | CSL III Merger | $487,879 | | Credit Fund II Purchase | $198,824 | | Total New Fundings | $865,008 | | Sales & Repayments | $(187,647) | | Net Investment Activity | $677,361 | | Net Activity (Ex-Merger/Fund) | $(9,342) | - The weighted average yield on new investment fundings was 9.8%, while the yield on sales and repayments was higher at 10.9%[20] - The weighted average yield on the total income-producing portfolio at amortized cost was 10.9% at the end of Q1 2025, down from 11.7% in Q4 2024[21] Portfolio Overview CGBD's Q1 2025 portfolio is valued at $2.25 billion, defensively positioned with high senior secured and floating-rate exposure Portfolio Highlights As of March 31, 2025, CGBD's portfolio was valued at $2.25 billion, defensively positioned with high senior secured and floating-rate investments Key Portfolio Metrics | Metric | Value | | :--- | :--- | | Total Investments at Fair Value | $2,246 million | | Senior Secured Exposure | 94% | | Floating Rate Investments | 99.4% | | Weighted Average Yield | 10.9% | | Number of Portfolio Companies | 138 | | Non-accrual Investments (at FV) | 1.6% | - The asset mix is heavily weighted towards first-lien debt, which comprises 83% of the portfolio, followed by second-lien debt (6%) and equity/investment funds (11%)[25] - The portfolio is diversified by industry, with the largest concentrations in Healthcare & Pharmaceuticals (13%), Software (12%), and Consumer Services (9%)[25] Overview of Investment Funds The Credit Fund, a significant portion of CGBD's portfolio, is highly focused on senior secured debt and saw a consolidation of ownership in Q1 2025 Credit Fund Key Metrics | Credit Fund Metric | Value | | :--- | :--- | | Investments at Fair Value | $611 million | | CGBD Ownership | 50.0% | | % of CGBD Portfolio | 5.4% | | First Lien Investments | 99.9% | | Yield of Debt Investments | 10.2% | | Non-accrual | 0.9% | - In Q1 2025, CGBD acquired the remaining third-party interest in Credit Fund II, making it a wholly-owned, consolidated entity[31][32] - The Credit Fund declared a $62.5 million return of capital distribution to its partners in Q1 2025 following a refinancing of its debt facility[31][32] Capital Structure & Liquidity CGBD strengthened its capital structure and liquidity in Q1 2025 by increasing credit facility commitments and extending debt maturities Funding and Capital Management As of March 31, 2025, CGBD enhanced its financial flexibility by increasing its primary Credit Facility commitment and extending its maturity Debt Facilities and Capital Structure | Facility | Commitment | Outstanding | Maturity | Pricing | | :--- | :--- | :--- | :--- | :--- | | Credit Facility | $935M | $288M | Mar 2030 | SOFR + 1.88% | | CSL III SPV Credit Facility | $250M | $206M | Sep 2030 | SOFR + 2.85% | | CLO 2015-IN | $380M | $380M | Jul 2036 | SOFR + 1.94% | | 2028 Senior Notes | $85M | $85M | Dec 2028 | SOFR + 3.14% (swapped) | | 2030 Senior Notes | $300M | $300M | Feb 2030 | SOFR + 3.23% (swapped) | | Total / W.A. | $1,950M | $1,259M | 6.8 years | 6.50% | - In Q1 2025, the Credit Facility was amended to increase total commitments to $935 million and extend the maturity date to March 2030, enhancing liquidity and extending the debt maturity profile[33][34] Net Asset Value (NAV) Analysis CGBD's NAV per share decreased to $16.63 in Q1 2025, primarily due to dividends and net realized/unrealized losses NAV Per Share Bridge CGBD's Net Asset Value (NAV) per share decreased from $16.80 to $16.63 in Q1 2025, primarily driven by dividends and net realized/unrealized losses NAV Per Share Bridge (Q1 2025) | NAV Bridge (Q1 2025) | Per Share Amount | | :--- | :--- | | December 31, 2024 NAV | $16.80 | | Net Investment Income | +$0.40 | | Amortization of Premium/Discount | +$0.01 | | Dividend Declared | -$0.45 | | Net Realized/Unrealized Gain (Loss) | -$0.11 | | Other Adjustments | -$0.02 | | March 31, 2025 NAV | $16.63 | NAV Per Share Bridge (Last Twelve Months ending Q1 2025) | NAV Bridge (LTM Q1 2025) | Per Share Amount | | :--- | :--- | | March 31, 2024 NAV | $17.07 | | Net Investment Income | +$1.85 | | Dividend Declared | -$1.84 | | Net Realized/Unrealized Gain (Loss) | -$0.44 | | Other Adjustments | -$0.01 | | March 31, 2025 NAV | $16.63 | Portfolio Quality Portfolio credit quality saw a slight deterioration in Q1 2025, with an increase in non-accrual investments Risk Rating Distribution The credit quality of the portfolio showed some deterioration in Q1 2025, with an increase in non-accrual investments, though most remain highly rated - As of March 31, 2025, non-accrual investments represented 1.6% of total investments at fair value and 2.2% at amortized cost. This is an increase from 0.6% and 1.0%, respectively, in the prior quarter[39] Internal Risk Rating Distribution | Internal Risk Rating | % of Fair Value (Q1 2025) | % of Fair Value (Q4 2024) | | :--- | :--- | :--- | | 1 (Above Expectations) | 0.0% | 0.0% | | 2 (As Expected) | 89.7% | 87.4% | | 3 (Below Expectations) | 8.5% | 12.0% | | 4 (Materially Below) | 1.8% | 0.5% | | 5 (Substantially Below) | -% | 0.1% | Shareholder Information CGBD maintains a strong dividend profile with a 9.6% annualized yield and consistent dividend coverage Stock and Dividend Information CGBD maintains a strong dividend profile with a 9.6% annualized yield and consistent dividend coverage, supplemented by historical special dividends Key Shareholder Metrics | Metric | Value | | :--- | :--- | | Ticker | CGBD (NASDAQ) | | Annualized Dividend Yield | 9.6% | | Q1 2025 Dividend Coverage | 100% | | Spillover Income per Share | $0.85 | | ITD Share Repurchases | $158M | - The company has a consistent history of declaring dividends, with the base dividend increasing over time and supplemented by special dividends. For Q1 2025, the declared dividend was $0.40 per share[45] Historical Net Asset Value Performance CGBD's NAV per share demonstrated resilience and growth over five years, outperforming the average BDC peer group Historical NAV Per Share Performance | NAV per Share Performance (Q4'19 - Q4'24) | Q4'19 | Q4'24 | Growth/Decline | | :--- | :--- | :--- | :--- | | CGBD | $16.56 | $16.80 | +1.4% | | BDC Peers (Average) | $16.52 | $15.63 | -7.1% | Appendix The Appendix provides an overview of Carlyle's global investment firm, its Global Credit platform, and its direct lending strategy Carlyle Firm & Platform Overview Carlyle is a major global investment firm with $441 billion in AUM, managing CGBD through its Global Credit platform with a defensive direct lending strategy Carlyle Firm Overview | Carlyle Firm Overview | | | :--- | :--- | | AUM | $441 bn | | Employees | 2,300+ | | Offices | 29 | - The Global Credit platform, which manages CGBD, has $192 billion in AUM and over 190 investment professionals[57] - Carlyle's Direct Lending philosophy emphasizes a defensive approach, focusing on performing, non-cyclical companies with EBITDA of $25 million or greater, and targeting sustainable cash income from first-lien, secured, floating-rate debt[63] Non-GAAP Measures The company utilizes non-GAAP financial measures like Adjusted NII to provide a clearer view of core operating performance by excluding non-recurring items - Non-GAAP measures are used to evaluate ongoing results without the effect of amortization from acquisition accounting (ASC 805) and other one-time or non-recurring income and expense events[66][69] - For Q1 2025, adjustments were made for amortization related to assets acquired in the CSL III Merger and the Credit Fund II Purchase to reflect management's view of the economic yield on those assets[67] Detailed Financial Statements The appendix includes detailed quarterly balance sheets and income statements for the last five quarters, offering granular insight into financial position and performance trends - Detailed quarterly balance sheets from Q1 2024 to Q1 2025 are provided, showing line-item details for assets, liabilities, and net assets[71][72] - Detailed quarterly income statements from Q1 2024 to Q1 2025 are provided, breaking down investment income by source (interest, dividends, other) and detailing all expense categories[73]