CGBD - Earnings call transcript Q1 2022 | Carlyle Secured Lending, Inc.

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Operator

Good day and thank you for standing by. Welcome to the Carlyle Secured Lending First Quarter 2022 Earnings Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions]. today's being that advised be conference recorded. is Please Instructions]. [Operator hand over to I would speaker conference to like Harris. now your the today, Daniel ahead. go Please

Daniel Harris

Good of we of Carlyle earnings to presentation Relations with release morning, section first results, earnings available and XXXX a on quarterly quarter Investor copy and Secured detailed call. is an our issued Lending's night, website. our earnings which press Last welcome the

and call statements and is we today, hold question-and-answer current institutional materially will should identified could replay investors. them. to Carlyle XX-K those Form placed that, expectations analysts be future Risk inherent in website. our Report This our time. call do not any differ Officer, webcast, Following on our remarks the Pace. uncertainties, that on Secured reliance Chief management I'll of and forward-looking guarantee These will assumes involve obligation those being session a and a turn With made and to our for Linda over are undue the statements not from Annual the on be results performance available Any including to today section forward-looking based Factors update no statements on at Lending Executive indicated. cause actual risks

Linda Pace

Thank joining you, thank us and Lending's Dan, for quarter and XXXX results. good you to Secured all morning, everyone, first discuss Carlyle

call and this Chief three newly focus Hennigan. Investment on our on to are Financial our I'm Chief topics. Boswell; me Officer, President, remarks Joining my Officer, going Taylor Today, and appointed Tom

quarter's provide an results. I'll of this financial First, overview

our with I'll current the environment. a touch finally, I'll Second, in activity few around thoughts positioning. investment conclude current on And

again complex we of this with results. our begin Despite once an an market increasingly strong financial quarter. Let earnings overview backdrop, generated me

payments SolAero. included dividend non-recurring share, our the of $X.XX earnings stock are in $X.XX $X.XX Our our per per investment derived $X.XX The regular share, successful recurring of the dividend, comprised of was $X.XX dividend. plus our income on over dividend investment of above our base declared of exit base a We XX%. from income which of yield annualized an representing of common total net dividend total supplemental

As quarters $X.XX QX in the with per we saw progress upside of remain later, share as which value that $X.XX recent XXXX. the for eighth in the quarter, detail Tom through have from expect the and $XX.XX to potential between asset up range, landed year. will for dividends X.X% of positive progression we consecutive Net rest

drove and higher credit our an earnings Tom team. the our further, NAV discuss outpaced common deliver $X names first quarter's in of or NAV repurchased above our stands X.X% asset I $X.XX impact widening to inflation watchlist accretion pre-COVID from million As will than and any results, We XXXX in us This to of strengthening and allowed quarter, leadership joined negative our our our now yields, Taylor impacts. in valuation stock driven value. the performance, when level which in QX especially market net additional resulting

in repayments at its our of XX% stock compares all strategic activity first first-lien new almost quarter, valuation with now in attractiveness our our consistently the for million funded shareholders. quarter. position. to I'll the investments million commitment turn during demonstrating which this remain current were $XXX the We current continued of of of almost the our we repurchased total, $XXX returns and million environment. sales This to in the and quarter's investment active commencement shares, of float have repurchase firm In a first repurchasers given we As levels, since we or have of our program, of XX said, the shareholders. share

versus the we As last investments, flat billion $X.X essentially just under ended of with quarter result, quarter. a

and of with prospects credit changing uncertainty, As our this our more being moment competition will Taylor In and the our intense, at selective will we remaining highly remain income closer level to funded as oriented. leverage complicated, becoming of describe target higher bottom continue of solid. range defensively investment are is we later, environment asset approach a operating the comfortable generation

Finally, a organizational of to note. couple items

in As doubt we've Lending. changed our saw, you know no BDC quarter Secured to name from TCG the Carlyle

the to from edge underlying and We to from As inherent you've our is new at this us name our management. to our the derive investment each well heard process, leverage to connects strategy strengths believe the fundamental to better portfolio to step before, platform investment origination, company of continue will activity. to underwriting, nature say, as as integrated Carlyle's of our of investment Manager,

I'd success the Secured Lending in CGBD the a same. like board the board I ticker taking to at the over of to congratulate also new our has He past some outstanding been and reflective will of and who mentioned roles integral the our directors. capable was and moment For his avoidance conclude assumed has Taylor team Carlyle by of of to on who the large three leadership. the formal remain to Boswell members role years, company's doubt, are appointed joined company of the his President title quarter.

I'd Carlyle this we hand deep team. and of bench Thanks have joining talent Head Taylor our Head prominent to over like and Illiquid Sponsor Carlyle Head the Vice Vice Popov, In Hadley, will of fortunate Underwriting, to we addition, President, the elected Boswell. Pearl, long role President such the of here Each We're professionals officers Alex to note and newly Coverage, Vice Lending. their a admitted Jonathan more at Secured as you call welcome of are of us members these morning. and of and company. tenured of Credit, President President Michael for

Taylor Boswell

Thanks, Linda.

to we some from transition, after ongoing that, climate. that just Russia's As one-way did picture. usual, last we earnings, before XXXX. on shaping day by The reported commenced, spoke which invasion about an time environment credits Ukraine course, only macroeconomic of market current the I'll global further the and I'll one XXXXs of begin from be sharing complicated footprint. in what complex tragic today to investment And provide our derived And up we has investment we was the comment perceived perspectives investment increasingly

As saying worth business it happy months, and conducted not market report lending is have which in is Russia, this XX% portfolio recent that or of operations direct the starting a Europe in are on exposure, have no we to point, in underlying to focus surprising we U.S., intense our is reviews Eastern our conclusion. a known exposure middle Ukraine broadly. With consequential

on as in progress quarter, experienced volatility market impact, portfolio on investment lower we top as may that overweight, indicates this food non-cyclical the been and In commodity U.S. heavy recent strong maintains balance supportive Through But conditions see far these impact second and inflationary are our of little Based on inflationary of domestic this in data resilient layering through exposure markets. continuing first and conditions. consumer back labor respect profile, as in fuel, sheets focus addition, and dislocations we our in our must the their we in currently direct quarter, spending And cyclicality remains largely the already a environment. not environment. on the persist. has principally which from given the months knock primary

world. that management complex which to through margin continue from to a much most But markets, they teams this decade. business As evolving adjusting environment fundamentally last to ensure costs. of for the inflationary in is to passing work report and us, borrowers, the are just trending the They success of our left different generally corporate have dominated increased do like preservation

it So, near-term be something COVID, affecting coming do the for price only more has recovery performance recent also puts given will new the in out both on borrower. developing, as we months. while in surprisingly, redoubled we see net pressures several of and current performance all favorable before management portfolio the of and quarters any Not each borrower, case base inflationary are become settled of built underwriting takes focus annualized costs that impacts acknowledge detailed for a critical and our credit fully increased understanding we must known and and

focused and will We topics. these on vigilant stay

while portfolio earnings complexity, another our of happy market quarter. the driven We one progression. quarters of levels. eight exited the now SolAero, impacted We NAV valuation and well that amassed higher million of aforementioned of have pre-COVID COVID report to fully After NAV quarter our non-accrual the $X in we're again resulting extremely several impacts, all despite stands recovery continued performed company. consecutive to excess working SolAero or in watchlist QX for Now, and positive yield both names inflation-driven successful XXXX turnaround our our of names business, our both realizing from our of X.X% Ultimately, than this proceeds years outcome mark. outweighed increases

trajectory, a positive continue Importantly, of status return likely holds, for remaining non-accrual all which, our accrual investments in on result it a exposures the those three if this year. to trajectory portions will

a its even more volumes, quarter-over-quarter. already that as XX% strong position, pipeline we also yield to well we comps of first see Currently, any capabilities. meaningful strong took healthy, Private market also are are continues transaction ample transaction topical have remain and both on this After markets today's comfortable our as a M&A the comment wide which as to high breather share in transactional extremely I'll credits from in say in ability platform a have respectively our to down investment and QX. XX%, they're we by opportunities important our position private in X%, hectic year in Overall, loan after QX. were It's grow tough funded in exiting environment. QX investment record volumes leverage environment, a attractive markets continue XXXX, and to and but developing XXXX bit facing asset liquid quarter, for maintain a in Finally, importantly, environment.

world that to income in portfolio all generating you'll income. excess and expect remain it's But you are to performance, recurring complex dividend. consistent well for the base Clearly, asked, generation take income we're recall first, at frequently Well, with policy of our quarterly dividends up? Lending, complements a continue. our Carlyle construction, dividend And base Secured dividend report So we excess supplemental we happy our why credit well-positioned. base sure. that consistent dividends We're don't with

the So investors are excess already of getting those earnings. benefit

right delivering while With matters a that, our the on because long-term operating I'd this industry, what us yields lets low the strongest of end dividend Tom. range. by to That's focus be now, Rather, we like this towards stream. to it over of to most until to in highly new this fortunate to time is complexity for one the assess order inflationary better is environment, of given a selective not investments the of on impact that this clarity earnings. on generate environment. reach the Second, today's time us to push income leverage in fine just this We're the positioning sustainable develops strong target risks turn

Tom Hennigan

Taylor. you, discussion portfolio our a provide performance. begin of Thank with our quarter our detail Today, earnings. sheet positioning, first I'll and balance Then further review a I'll with on conclude of

Linda performance on was driven previewed, $XX investment SolAero, the received the was we had strong first earnings the quarter quarter. million the our prior in Upside which front. had income been exit $XX the a investment As for another million, from income of from in position. up quarter primarily by Total non-accrual

for result partially million, million, was matches the expense highest performance LIBOR quarter The And achieve the adjusting non-recurring our the income, were essentially top-line is dividend quarter, period. $X.XX on company. $XX floors $X.XX Total income, Last fees while from May $XX $X.XX that not. common first million a $X.XX we quarters. the offset in does that interest to even base million the Noting for again versus plus the quarter after few we from our of a of history the lower loans one-time share. per On dividend, as business by of our debt floating at June XX. income was $XX the per of an rate quarter SolAero or fees. income most this discussed was of share of in That's the increased level that which Board modestly dividends of shareholders JVs to as payable Directors of the total line total expenses higher the have prior comprised of with second fact in the $X.X XXXX still lower level supplemental, and flat for last two close net quarter. for investment Excluding incentive X, $X.XX of declared record management

the second level last at on as the may instead see simply to in LIBOR close earnings we per This $X.XX floor. So some XQ impact plus means of mild X% X/XX was maybe share two achieved we a quarter we've in results. our quarters, lower touch of the typical

the a quarter. as the valuations unrealized eighth have earned in curves we names, JV. the this than increase future NII for previously impact by will balance benchmark were of share. In inflation level. Partially an in begin earnings to was our a earnings extent, $X.XX back valuations, On the Taylor for of experience we've gain increase that continue of However, for or additional In every the driven realized last confidence sooner least we'll quarter positive points the total positive payments LIBOR The considered, or indicate valuation driver from to higher anticipated. each we impact current our see $X.XX our net borrowers. exceed And basis XX of and will become watchlist and quarterly half our year rates a million positive MMCF mentioned, the at shareholders in meet four impact of this increase again offset performance. XXXX, positive consecutive lesser XXXX widening $X and also certain gains a net aggregate our earnings market quarter, per and the should further investment at driven each the of loans. away yields, improvement All the current of distributed to by LIBOR, in quarters, non-accrual net negative on things impacts expect from in

on touch and facilities our we'll financing Next, leverage.

financial sheet. leverage of to one just Statutory slightly the very X.Xx, was of net turn continue our on leverage. under under be while right We was leverage well-positioned balance side

of the finish activity. related with we the ended target portfolio leverage the our a quarter So end right range. bottom at I'll of review and

across the some in since aggregate. with improved X%, downgrades X% fair rate on Total both direct the vast positions investments, of associates the again two We to the of continue risk by total we decreased improvement $X continue of quality exit quarter to positions, X.X% especially the issues. book, focus see indicating credit fundamental and in The fair non-accruals is performance in the current SolAero. net historical credit we improvement other transactions in this level value made to borrowers for non-accruals. majority dermatology by Those And regarding accounts based for travel. value, outlook of see driven and high to million

that, both NAV as NII year. some see risk, but opportunity as We back for these remarks. expansion continue not to this positions closing and for With to Linda,

Linda Pace

Tom. Thanks,

your to to we the Before of We I'd the range diversified the continue questions. I'd there a through and goal, quality apply credit now expertise to for operator, Thanks platform's over to that always, to profiles. possible the deliver We originate like to I well-positioned focused that the us exceptionally like the on take environment. sustainable From turn designed transactions this feel today. hand over build as even to to meet income. capabilities to operator our select private complex in are cycle call joining portfolio highest reiterate call to market. in we directly using only our credit the widest platform then

Operator

And I'm I'd at to time. like no turn the over closing Linda showing this Pace call currently to remarks. for questions

Linda Pace

I going and to be easy you this everyone's pretty on Thank us quarter. guess

appreciate your to about, So want care next reach days. the feel Take of you couple And everyone. today. think anything to over if free out attention please of talk to you us

Operator

you Thank for call. participating. This conference concludes today's

You may now disconnect.

Carlyle Secured Lending (CGBD) 4 May 222022 Q1 Earnings call transcript