Sixth Street Specialty Lending(TSLX) - 2025 Q2 - Quarterly Results

Executive Summary & Financial Highlights Q2 2025 Financial Performance Overview 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] Net Asset Value (NAV) and Dividends 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] Key Financial Metrics (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 Investment Origination and Exits 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 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) | $30.2 | N/A | | First-Lien Debt Investments (% FV) | 92.4% | 92.9% | | Second-Lien Debt Investments (% FV) | 0.9% | 1.0% | | Mezzanine Debt Investments (% FV) | 1.6% | 1.5% | | Equity Investments (% FV) | 5.1% | 4.6% | Portfolio Characteristics and Quality The portfolio maintained a high proportion of floating-rate debt investments (96.5%) with reference rate floors. The weighted average total yield of debt and income-producing securities at fair value was 11.7%. Non-accrual status improved to 0.6% of the portfolio, primarily due to the restructuring of Lithium Technologies. | Metric | June 30, 2025 | March 31, 2025 | | :---------------------------------------------------------------- | :-------------- | :--------------- | | Floating Rate Debt Investments (% FV) | 96.5% | N/A | | Weighted Average Total Yield (Fair Value) | 11.7% | 12.1% | | Weighted Average Total Yield (Amortized Cost) | 12.0% | 12.3% | | Non-Accrual Status (% FV) | 0.6% | 1.2% | - The decline in non-accrual status was driven by the restructuring of Lithium Technologies, which is now paying cash interest[12] Key Portfolio Metrics (Table) A snapshot of key portfolio metrics for Q2 2025, including origination activity, average investment size, and debt characteristics. | Metric | Q2 2025 | | :---------------------------------------------------- | :-------- | | Commitments ($ 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 Total Investment Income 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] Net Expenses and Capital Resources 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] Liquidity and Funding Profile Liquidity Position 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 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] - Nearest debt maturity: $300 million in August 2026[21] | Metric | Value | | :---------------------------------------------------- | :------ | | Weighted Average Remaining Life of Investments Funded with Debt | ~2.5 years | | Weighted Average Remaining Maturity on Debt | ~3.9 years | Conference Call and Webcast Conference Call and Webcast Information Sixth Street Specialty Lending, Inc. held a conference call to discuss its financial results on July 31, 2025, at 8:30 a.m. Eastern Time. A live webcast and a slide presentation were available on the Company's investor relations website, with replay information also provided. - Conference call held on July 31, 2025, at 8:30 a.m. Eastern Time[25] - Webcast and slide presentation available on the Investor Resources section of TSLX's website[25] - Replay available under the same webcast link after the conference call[27] Detailed Financial Highlights Financial Highlights Table This section provides a comprehensive table of financial highlights for the three months ended June 30, 2025, December 31, 2024, and June 30, 2024, covering investments, assets, NAV, income, expenses, and various per-share metrics and yields. | Metric | June 30, 2025 | Dec 31, 2024 | June 30, 2024 | | :---------------------------------------------------------------- | :-------------- | :----------- | :------------ | | Investments at Fair Value ($ 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 Consolidated Balance Sheets 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 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 ($7,852) thousand in Q2 2024[33] Investment Activity Details This section provides a detailed breakdown of investment activity for the three months ended June 30, 2025, and 2024, including new investment commitments, principal amounts funded and repaid, and characteristics of new investments. | Metric | June 30, 2025 ($ 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 About Sixth Street Specialty Lending 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] - Primary strategy: direct originations of senior secured loans, with some mezzanine loans and equity investments[36] - Regulated as a Business Development Company (BDC) and externally managed by Sixth Street Specialty Lending Advisers, LLC[36] About Sixth Street 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] - Utilizes long-term flexible capital, data-enabled capabilities, and a 'One Team' culture[37] Forward-Looking Statements 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] - The Company assumes no obligation to update forward-looking statements[38] Non-GAAP Financial Measures 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] - These measures exclude the impact of accrued capital gains incentive fee expenses[39] - They provide useful information on the fundamental earnings power of the business and are not a substitute for GAAP results[39] Investor and Media Contacts 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] - Media Contact: Patrick Clifford, PClifford@sixthstreet.com[40]