- Earnings call transcript Q3 2022

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Operator

Good day and welcome to the Carlyle Secured Lending's Third 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 and instructions will be given at that time.

As a reminder, this call maybe recorded. I would like to turn the call over to Daniel Hahn, Head of Shareholder Relations.

begin. may You

Daniel Hahn

Chief welcome presentation earnings and our Investor morning Secured third of press available and Lending's our night, are Hannigan. Good issued which our we With to section quarterly me Relations website. XXXX a our Pace Linda call. Executive and this the Officer, on quarter on Tom Chief Last earnings morning, release Officer, Carlyle Financial outlining the on is both call results,

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

Linda Pace

demonstrate results. increase with our base We're core value, all well of and income of pleased I rate. three would thank with in our X% dividend in you, today's platform, deliver performance. net joining areas on asset ability us third for our with overview stable I'll Thank power results extremely discuss dividend of financial and lower on to strong for Good like NAV. levels our of said, generating you morning, objective our our non-accruals to focus third an and These to of Dan. remarks that another quarter quarter quarter a another and the resiliency my call. earnings everyone, level growth our base With and sustainable above start and results,

current one-time investment of quarter the touch few our Next, activity non-accrual $X.XX share, per net positioning. earnings consisting was the total our we income travel share, which thoughts share QX, an $X.XX per which dividend. from increased of generated this Net the investment one-time $X.XX direct status. $X.XX per finally, of income dividend for In base We share from $X.XX fourth on higher per and newly I'll to I'll with continued income environment. current of resolution market and on a included benefited conclude share $X.XX, our dividend accrual of both restoring rates. declare of core credit supplemental quarter per And plus

XXXX rate by base in now We dividend total our XX.X%. of have increased a

asset total our common resulting of XX.X% per value shares, net $X.X float million accretion by value $X.XX in credit This later during In of the Tom stock is share. our asset $X.XX in outpacing our share. an X% driven to of by since we appreciation million of from third across or our primarily which $XX.XX almost the valuations We net resulting per in commencement to our quarter, increased additional quarter increase XX repurchased will NII detail. repurchase repurchased and asset Our higher the total, of to program, dividend credits, in further discuss over per watchlist improvements value our share share. our net

remind supply chain. hikes broader conflict have geopolitical private debt U.S. risks lowering top markets. of middle investors of disruptions with companies to we environment the about market, We the Ukraine driving the the how each current expertise supporting the as elevated market a aimed equity to we remain remains knowledge Carlyle this of backed Russia, think the Fed and and dollar. increased the of capital With from global strengthened and investments constructing across inflation competitive one complex businesses. the important our and the cost evolve, at across feel a scaled stage and U.S. track Now market approach, disruptions leading of We sponsors process. high-quality structure investment that the our backdrop, record utilize edge capital borrowing it's continues and with are in rate rate as to the our volatility factors broad leveraging global withstand prioritize portfolio. floating range at market macro our for of by the platform equity at

Turning the the despite complexities portfolio, now the in environment. to market

and be company. We financial performance portfolio to of liquidity pleased with our the positions continue

yet uptick activity We any ordinary amendment drawdowns revolver or beyond capacity meaningful of our have in see by course. to either the borrowers

been given we've performance the all benchmark We coverage assessing during in names. significant to cash the focus our increase portfolio. our interest credit quarter, our also continued rate, in and across book positive to list watch across see increasing on metrics both positions the current especially and said, future That generation third

million investment investments position. for of first quarter, of all a As were which activity, the third essentially lien we new in in funded $XXX

for investments to leverage in platform and In quarter. of the broader capabilities sourcing attractive up Carlyle's flow, were to billion regular We sales the approximately $XXX the during were slightly our quarter from prior sponsor the addition we third deal several $X.X quarter with investments million. repayments ended of the quarter. Total credit able

leadership the transition Lastly, to the I quarter. address announced want during

lending of to I'm want that work invaluable and Direct September, reported have Taylor decided Taylor leadership Carlyle couple Carlisle On the Lending direct grateful thank I pursue of Boswell business. his broader to entire team for to and over for past Secured As Carlyle Lending the reshape contributions the process. the Taylor investment done in extremely our to has to and behalf years leave opportunities. other Carlyle,

like value call over for continue our As to long-term substantial I'd I shareholders efforts, CFO, creating well a come. to result the our of years the are Hannigan. positioned for hand we many to team's With that, Tom believe to

Tom Hannigan

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

As XX strong up investment earnings one-time impact million, direct Linda and on in previewed, The quarter third of travel, billion from benefit Total quarter benchmark was of front. for $XX the rising income the the we had another drivers the prior rates. primary quarter. of the

third result Total investment in base from as expenses rates aided improvement net a higher core from in in of result interest Importantly, The excluding by higher or million incentive to increased share XX, per $X.XX above expense quarter $XX income travel $X.XX per of earnings was XX few substantially and earnings, $X.XX lower core last core and quarters. per total quarter the the our the of earned investment higher non-accruals. income was primarily share of direct fees. for share.

of the the prior of of up payable dividends base plus $X.XX fourth quarter XXXX level of That's an our the XX. share. new per for at of on Board close $X.XX level from $X.XX Directors total Our shareholders record at to declared supplement, of is the $X.XX, December dividend business a comprised of which

for experience quarter. and growth in prior on attractive of continued each increase NII additional on see basis the further $X.XX will of fourth benchmark outlook XX upside XXXX, in calls, points in for investments, economics combination new based earnings, And for of the rates, or terms every the In With based increase higher on forward the we noted SOFR in latest LIBOR quarter. rate a as curves. NII on

increase and and and dividend the continue paying intend evaluate So to comfortably dividends X million we the increase net new earnings gain $X.XX in aggregate trend supplemental continued was for coming level. to dividend base by remain to a entirely base across valuations, this And consider incremental the our watchlist meet the quarter. increases highly was anticipated confident prior that quarter. quarters, total from exceed almost and in the each driven in quarter. our On on credits, improvements unrealized ability out we based realized This

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

end to slightly on be of right X.XXx, continue the our X.XXx. while Statutory sheet. up leverage quarter the leverage positioned was at side well net about of We financial balance

So given yields effectively quarter, us the in range. and our remains I'll related while of with to attractive compared allows for market. target and up prior activity. terms investments available capital to current positioning leverage a the review lower our end finish new at portfolio deploy the the modestly This of

level see XX%. issues. to overall this four improvement five and quality stability by continue and total The since risk investment reduced some improved over downgrade made across about rate We million we performance transactions watchlist of the or book, to rated names with by while indicating XX quarter, credit positions five, value historically of three the fair in

first amortized remarks. investment to of out With to X.X% from U.S. to In that, direct total addition, amended decreased for travel, status. the X.X%, cost being on with non-accruals closing some and the Linda term based accrual restored back substantially portion

Linda Pace

Thanks, Tom.

your for to up the wanted it opening on questions, to moment my company. as change role Before a in comment take I a

of you LeeKong. call aware, lending to but the of team. I'm hands look brings work will but with inherent in wealth Chair forward the I'd to at that, I'd of Directors like With the as hand finish company strong of the time and reiterating like of continuing experience serve operator direct a reins the your current over Aren his optimistic to year, to from many role, pleased I to to I'm capable Aren and this end take by remain As of the on are down knowledge our questions. be portfolio construction, handing to as that well the entire now recently I to Aren announced to the the as strategy market, the given the very the over I in cautiously highly confident of Board. that stepping as volatility CEO we to continue Board

Operator

JPMorgan. you. Thank from Our comes Instructions] question with Wedel [Operator Melissa first

line is open. Your

Melissa Wedel

of your like question Thanks congratulations on the we we just little filling bit shoes? for can transition. given evolution And to a if Taylor then his also start Hi. maybe depth morning. the actually of And Good into leading, there sort Thank who the your your will team team could, be taking you. through with I'd more? walk today. role. dig my in Linda,

Linda Pace

note Thanks. kind Sure, plus Melissa. for a double as well. the It's for terrific question. thanks congratulatory career Carlyle. at been Thanks of your decade And

obviously, little our definitely has of just about to beginning. has whole that bit. thoughts. person, is talk your to, there's us that of don't couple the people team to And just one think I right So to to a team is point a been the appreciate Tom the CEO just since title. people And person a around with investors team here name want the our word. think platform We Yes, that

but, he time, global and strength, so he Carlyle, the given credit of is been on XX here hired. been Also, liquid member side. side his also years investment a two the he's platform. team. of was -- people our I over which promoted been named moved have Carlyle a majority and years and underwriting of track years originally about business who and and dozen on to for long-term the liquid So he's approaching ahead the gentleman Officer. approximately the well He's recently Chief team think, ago lending has for now underwriters, vast He over actually of But a most, I XX credit Michael now. as several of at BDC committee worked direct our of with originally Hadley, he me, Tom, we the lose Investment decade,

report all him. they and So to

filings So we and that people of he's can that and executive we've you see working making officials our processes I our one all And to have company, high. for person that is really look a robust sure thing we the investment kind Also, out that is standards want investment really well got the back number of remain point underwriting added. people committee. are at key our a a in

we've a Credit on the people got committee platform of Washington. So all the from platform, management about Global in dozen and walks investment risk our

investment of get much that wanted. on can't talent committee we sort we if more So

happy we're ever So my specifically, of there hopefully, want the Melissa, long-winded ears looking portfolio kind everybody and sorry contact. for we us looking team eyes anybody after I if in feels talk make. to But put of -- direct let But are you investments comfortable to after that on think plenty new that the and I think you the to know, lending answer.

Melissa Wedel

Very I so. questions appreciate open-ended that.

on top-line any quarters of sort even watchlist and ratios sort the you any think fantastic the would about or and you portfolio? credit, to erosion certainly at investments I non-accruals softening across from be uncertain this see at margin on the or are portfolio any on seeing top-line it interest any environment, broader helpful I particularly is of the which know seeing of trajectory weakness in coverage stable talked least

Linda Pace

you or Tom, me Sure. us? it want of want take do Or both that? take to you to

Tom Hennigan

Linda, let me, I'll start, hey good morning, Melissa.

-- our portfolio. we a borrowers diversified portfolio, at look hundred got over different in You have the

focused gamut certainly, portfolio acquisitions, flows. continue Xx relatively overall solid in span the you're The point a via EBITDA to the environment is, continues we're interest portfolio. performance to for across organically both remains forward still the coverage but north but modestly. this be outlook interest the on broad up LTM coverage report So on statistics leverage we're grow stable overall, basis, across results to cash happy going of really to and and Revenue interest see on both coverage and to

to Xx, that to there's from go down we less Xx individual the terms across now coverage have if gamut focused higher rates keenly in leverage. north than a started broad maybe interest really is -- we And credit, portfolio, go of see of, it's be to we're on portfolio but focused the so X%, day strong one a we're performing it's going as credits going just certainly across ratio up

comfortable we're credits we're It's to those at EBITDA portfolio the underperforming interest higher going focused And to looking that to really more on but lower declines. ratio. coverage have a coverage, be are a may that with be company be So have maybe that credits. interest going going

to very just credit-by-credit free but have their coverage and capital, but cash I next looking certainly in focused generated overall it's ratios in up certainly cash importantly company basis flow going really go taxes, importantly think the LTM and to go more working interest more interest forward because going then at dramatically on be months, months. XX XX we're burden last may but the is interest

Linda Pace

going add, we on we Yes. have in market. workout Melissa we assets an given is, the this of I across new everybody's stresses at in just to can one right, But the blinders Board. we input definitely in And team. some the increasing experienced Carlyle have There's maybe seeing portfolios don't love that the the be while we're opportunities is costs do

out we've we workout have two travel [indiscernible] did got of well as do problems good and job represent lot help as when or So good I examples maximize of to that everyone's team to work doing the those extent those a to so great names. portfolio, work the kind but really muscle individual out direct in the value not power to a think things of kind looking of our aren't on individual going

Melissa Wedel

Maybe Got it. I one question. last can ask

Given much. shares ever consistently your record Thanks much decent discount you as it on could how fair current recap a as trading track leverage guys committed sort the you And the are and on share is levels Is so repurchasing think to NAV. at certainly when authorization? to repurchase? quickly left of continuing just portfolio that to

Tom Hennigan

to authorization. continue Board market. think I The last the in -- steady quarter we purchasers relative most Sure, increased be this Yes. in

under still left $XX we November renewed we quarter over have authorization. the So through Last 'XX. of it million

we the effectively So annual quarter. set last renewal

Operator

no I'd turn are the call further to further for to over questions. Linda There any Pace remarks. like

Linda Pace

year Thank for New today. the Year. your to we forward Enjoy everyone care. of And holidays. rest to you your your Take you enjoy the in and look time talking

Operator

program. the concludes This

great a have disconnect. may day. You Everyone now

Carlyle Secured Lending (CGBD) 9 Nov 222022 Q3 Earnings call transcript