Morgan Stanley Direct Lending Fund(MSDL) - 2025 Q2 - Quarterly Results

Company Announcement Q2 2025 Financial Results and Q3 2025 Dividend Declaration Morgan Stanley Direct Lending Fund (MSDL) announced its second-quarter financial results for the period ended June 30, 2025, and declared a regular dividend of $0.50 per share for the third quarter of 2025 - Morgan Stanley Direct Lending Fund (MSDL) announced its second-quarter financial results for the period ended June 30, 2025[2] - The company declared a regular dividend of $0.50 per share for the third quarter of 2025[2] Quarterly Highlights Selected Financial and Operational Metrics The company experienced a slight decrease in net investment income and NAV per share, while the debt-to-equity ratio increased; a $0.50 regular dividend was declared, and new notes were priced and old notes redeemed Selected Financial Highlights (Per Share Information) | Metric | June 30, 2025 | March 31, 2025 | | :--- | :--- | :--- | | Net Investment Income Per Share | $0.50 | $0.52 | | Net Realized and Unrealized Gains (Losses) Per Share | ($0.09) | ($0.18) | | Earnings Per Share | $0.41 | $0.34 | | Regular Dividend Per Share | $0.50 | $0.50 | Selected Financial Highlights (Balance Sheet Information) | Metric | June 30, 2025 | March 31, 2025 | | :--- | :--- | :--- | | Investments (at Fair Value) (in thousands) | $3,785,496 | $3,788,178 | | Total Debt (at Principal) (in thousands) | $2,054,188 | $2,013,588 | | Net Assets (in thousands) | $1,790,299 | $1,817,807 | | Net Asset Value Per Share | $20.59 | $20.65 | | Debt-to-Equity Ratio | 1.15x | 1.11x | | Net Debt-to-Equity Ratio | 1.10x | 1.07x | - The company's Board of Directors declared a regular dividend of $0.50 per share[8] - The company successfully priced $350 million of 6.00% notes due May 2030, converting their fixed-rate coupon to a floating rate, and redeemed $275 million of 7.55% notes due September 2025[8] Results of Operations Investment Income and Expenses Q2 2025 total investment income decreased quarter-over-quarter due to lower benchmark rates and reduced repayment-related income, while total net expenses increased as management and incentive fee waivers expired - Total investment income for Q2 2025 was $99.5 million, down from $101.5 million in Q1 2025, primarily due to lower benchmark rates and reduced repayment-related income[6] - Total net expenses for Q2 2025 were $55.9 million, up from $55.2 million in Q1 2025, mainly due to increased fees after the expiration of management and incentive fee waivers in January 2025[7] Net Investment Income and Earnings Per Share The company's net investment income and net investment income per share both decreased in the second quarter of 2025 compared to the previous quarter Net Investment Income Comparison | Metric | Quarter Ended June 30, 2025 | Quarter Ended March 31, 2025 | | :--- | :--- | :--- | | Net Investment Income (in millions) | $43.7 | $46.2 | | Net Investment Income Per Share | $0.50 | $0.52 | Net Realized and Unrealized Gains (Losses) In Q2 2025, the company recorded $7.7 million in net unrealized depreciation, partially offset by $0.1 million in net realized gains - For the quarter ended June 30, 2025, net unrealized depreciation was $7.7 million, partially offset by $0.1 million in net realized gains[11] Portfolio and Investment Activity Portfolio Composition and Fair Value As of June 30, 2025, the company's investment portfolio fair value was approximately $3.8 billion, primarily composed of first lien debt across 214 companies - As of June 30, 2025, the company's investment portfolio fair value was approximately $3.8 billion, comprising 214 portfolio companies with an average investment size of $17.7 million[12] Portfolio Composition (by Fair Value) | Investment Type | Fair Value June 30, 2025 (in thousands) | % of Total | Fair Value March 31, 2025 (in thousands) | % of Total | | :--- | :--- | :--- | :--- | :--- | | First Lien Debt | $3,650,847 | 96.4% | $3,652,320 | 96.3% | | Second Lien Debt | $71,721 | 1.9% | $71,190 | 1.9% | | Other Debt Investments | $9,773 | 0.3% | $9,603 | 0.3% | | Equity | $53,155 | 1.4% | $55,065 | 1.5% | | Total | $3,785,496 | 100.0% | $3,788,178 | 100.0% | Investment Activity Details In Q2 2025, new investment commitments and fundings decreased, resulting in negative net deployment; the weighted average yield on debt securities slightly declined, and some investments were on non-accrual status Investment Activity Comparison | Investment Activity | Quarter Ended June 30, 2025 (in thousands) | Quarter Ended March 31, 2025 (in thousands) | | :--- | :--- | :--- | | New Investment Commitments (Net) | $149,054 | $233,368 | | Investment Fundings | $204,003 | $205,647 | | Number of New Portfolio Companies | 9 | 9 | | Number of Portfolio Companies Exited or Fully Repaid | 5 | 7 | - As of June 30, 2025, the weighted average yield on debt securities (at amortized cost and fair value) was 10.1% and 10.2%, respectively, slightly down from 10.2% and 10.3% as of March 31, 2025[13] - As of June 30, 2025, floating rate debt investments comprised 99.6% of the total investment portfolio (at fair value), consistent with the prior quarter[13] - As of June 30, 2025, certain investments in four portfolio companies were on non-accrual status, representing approximately 0.7% of total investments at amortized cost[13] Capital and Liquidity Management Debt Structure, Availability, and Debt-to-Equity As of June 30, 2025, total debt increased, with successful new note issuance and old note redemption optimizing the debt structure; the company maintained ample credit facility availability and cash reserves, though the debt-to-equity ratio slightly rose - As of June 30, 2025, the company's total debt principal was $2.0542 billion[14] - The company redeemed $275 million of senior unsecured notes due September 2025 during the second quarter[14] - As of June 30, 2025, the company had $1.113 billion in credit facility availability and $75.8 million in unrestricted cash and short-term liquid investments[14] Debt-to-Equity Ratio | Metric | June 30, 2025 | March 31, 2025 | | :--- | :--- | :--- | | Debt-to-Equity Ratio | 1.15x | 1.11x | Share Repurchase Program The Board of Directors approved a $100 million share repurchase program, with over 1 million shares repurchased in Q2 2025 - On February 27, 2025, the Board authorized an amended and restated share repurchase program for up to $100 million[17] - For the three months ended June 30, 2025, the company repurchased 1,057,127 shares at an average price of $18.92 per share[17] At-The-Market (ATM) Offering The company entered into an equity distribution agreement to sell up to $300 million of common stock, but no shares were issued under this program in Q2 2025 - On March 28, 2025, the company entered into an equity distribution agreement to sell up to $300 million in aggregate offering price of common stock[18] - No shares were issued under the ATM offering program during the quarter ended June 30, 2025[19] Shareholder Information and Corporate Updates Dividend Declarations The Board of Directors declared a regular dividend of $0.50 per share on August 5, 2025, payable around October 24, 2025 - On August 5, 2025, the Board declared a regular dividend of $0.50 per share, payable around October 24, 2025, to shareholders of record as of September 30, 2025[23] Other Recent Developments On August 6, 2025, the company successfully priced its first CLO with a total principal of approximately $400 million, achieving efficient financing costs - On August 6, 2025, the company successfully priced its first CLO with a total principal of approximately $400 million, achieving efficient financing costs[23] Conference Call Information Morgan Stanley Direct Lending Fund will host a conference call on August 8, 2025, to discuss financial results and conduct a Q&A session - Morgan Stanley Direct Lending Fund will host a conference call on August 8, 2025, at 10:00 AM ET to review financial results and conduct a Q&A session[20] About the Company Morgan Stanley Direct Lending Fund (MSDL) is a non-diversified, externally managed specialty finance company focused on lending to middle-market companies and regulated as a business development company - Morgan Stanley Direct Lending Fund (MSDL) is a non-diversified, externally managed specialty finance company focused on lending to middle-market companies[21] - MSDL has elected to be regulated as a business development company under the Investment Company Act of 1940, as amended[21] Forward-Looking Statements Forward-looking statements in the report concern future events or MSDL's future performance or financial condition, are not guarantees of future performance, and involve risks and uncertainties; MSDL undertakes no obligation to update them - Statements in the report may constitute "forward-looking statements" concerning future events or MSDL's future performance or financial condition[22] - These statements are not guarantees of future performance, condition, or results and involve a number of risks and uncertainties[22] - MSDL undertakes no obligation to update any forward-looking statements[22] Investor and Media Contacts Investor and media contact information is provided in the report - Investor and media contact details are provided[25] Consolidated Financial Statements Consolidated Statements of Assets and Liabilities As of June 30, 2025, total assets and liabilities increased compared to December 31, 2024, while net assets and NAV per share decreased Consolidated Statements of Assets and Liabilities Summary | Metric (in thousands) | June 30, 2025 (Unaudited) | December 31, 2024 (Audited) | | :--- | :--- | :--- | | Total Investments (at Fair Value) | $3,785,496 | $3,791,494 | | Cash and Cash Equivalents | $52,216 | $63,396 | | Total Assets | $3,921,890 | $3,912,018 | | Debt (Net) | $2,050,254 | $1,973,479 | | Dividends Payable | $43,575 | $53,229 | | Management Fees Payable | $9,624 | $7,042 | | Total Liabilities | $2,131,591 | $2,069,862 | | Total Net Assets | $1,790,299 | $1,842,156 | | Net Asset Value Per Share | $20.59 | $20.81 | Consolidated Statements of Operations For the three and six months ended June 30, 2025, total investment income and net investment income decreased year-over-year; total expenses increased due to expired management and incentive fee waivers, reducing net asset increase from operations Consolidated Statements of Operations Summary | Metric (in thousands) | Quarter Ended June 30, 2025 | Quarter Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Total Investment Income | $99,508 | $104,188 | $200,966 | $203,289 | | Interest and Other Financing Expenses | $34,707 | $29,302 | $68,886 | $56,562 | | Management Fees | $9,624 | $8,639 | $19,242 | $16,869 | | Net Expenses | $55,651 | $47,567 | $110,254 | $91,581 | | Net Investment Income (Loss) After Taxes | $43,657 | $56,121 | $89,885 | $110,772 | | Net Realized and Unrealized Gains (Losses) | ($7,561) | $2,924 | ($24,119) | ($43) | | Net Increase (Decrease) in Net Assets Resulting from Operations | $36,096 | $59,045 | $65,766 | $110,729 | | Net Investment Income Per Share | $0.50 | $0.63 | $1.02 | $1.25 | | Earnings Per Share | $0.41 | $0.66 | $0.75 | $1.25 | - For the three months ended June 30, 2025, management fee waivers and incentive fee waivers were $0, compared to $21.6 million and $16.51 million respectively in the prior year period, leading to increased net expenses[29]