CGBD - Earnings call transcript Q1 2024 | Carlyle Secured Lending, Inc.

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Operator

Thank you for standing by, and welcome to the Carlyle Secured Lending First Quarter 2024 Earnings Call. [Operator Instructions] As a reminder, today's program is being recorded. I introduce your host for today's program, Mr. Daniel Hahn, Shareholder Relations. Please go ahead, sir.

Daniel Hahn

Good morning, and welcome to Carlyle Secured Lending's First Quarter 2024 Earnings Call. call and is Financial Tom the Chief Plouffe, Officer. on Officer; Executive Hennigan, me this Justin morning our With our Chief press on the Last and Relations section of our filed website. Investor results, release our a our available night, presentation with are Form which of the we issued XX-Q

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

Justin Plouffe

CEO all and Carlyle's Thanks, everyone, morning, and Plouffe, thank Platform. Carlyle Deputy Credit Global the joining. Dan. I'm Justin you the Chief Investment Good of of BDCs for Officer

to BDCs, you opportunities may As know, professionally. Aren previously CEO pursue new resigned LeeKong, the Carlyle was of who

him for We have contributions. thank benefited from his and expertise Aren's leadership industry and

to member Direct I managing Committee I'm topics. be Private you years credit Mike Direct Carlyle's I've said, Investment with Mike Carlyle, to besides Credit Lending Secured platform. And my X since I've at and XXXX, of Carlyle growth those focus Carlyle and on over line team I that responsibility forward notably, and Global been support on on in today taking been Credit its and I've XX before, Lending for strategy, the our also strategies more For working the at for Carlyle's Hennigan with partnership and with Tom broadly continue Hadley. inception. a existing Carlyle, of focusing remarks with very excited that closely Lending of look most of not Tom have on broader leadership, worked part spoken and I'll the since I'll

First, an I'll of quarter overview first financial provide results. the XXXX

with I'll Next, comments conclude on current the and And quarter's positioning. Starting I'll a investment the touch environment. off with finally, on market portfolio earnings. activity few

share, environment. of see X/XX of a based the to income We our base rate net first investment from $X.XX higher which continue per benefit financial an In on represents annualized we generated NAV. performance our yield XX% quarter, nearly

Directors dividend Our Board declared total share, base of consisting of $X.XX $X.XX of a plus second the quarter our supplemental. $X.XX of per dividend

$X.XX per up or earnings our net was Our X.X% of primarily XX XX result the dividend. March value $XX.XX share, December as approximately our period, QX outpacing a from as asset of

volume. public credit picked drove Turning and in the of activity private the overall now as environment. XXXX market first refinancing and of and quarter the loan syndicated market to of tighter the Activity reopening rebalancing market terms up to expect to has XXXX result in expected active year, LBO M&A of in become activity origination markets. the which in picked second broader the uptick up an and we in more the half is

cuts November in the at significant predict Jason rate Carlyle, as While Economist back improbable of few we XXXX. rates, Chief saw to is do not that try our of Thomas interest one

rates report Carlyle company consensus the we higher-than-expected has holding Now data despite continues pleased are portfolio levels. well. real interest at them, stabilizing economy to show that that with up market caught the to off

our were up middle pipeline we in volatile. continues core be first U.S. market, expand year-over-year the comparatively increase the pressure Originations operate continues pricing upper-middle less flow. both deal and regular seen we've differentiated way the and Although to quarter in to market where over with particularly XX%

approach a focused differentiation it with on has middle-market lending, been strategy drive and OneCarlyle our from our to core to disciplined while and by remain reminder, in be changes. a benefit goal to performance our dynamic always As anchored response provided our direct the portfolio We maintaining market selection access in ability conservative to platform consistent management. credit the to

our quarter, Tom existing we origination completed a discuss activity increasing most the portfolio. in will of in credit detail Associates our the of Nonaccruals successfully Travel during is focused first exited on Direct are improved quarter. While first for and performance and positive as strategy, overall the significantly later, recapitalization Dermatology we the

companies highly at remains across portfolio the XX% million. XXX is of industries. end $XX XX than comprised was portfolio across diversified and loans. company The X%, of Our single quarter our average the our exposure of is portfolio any core XXX secured and more EBITDA investments senior are less in in in The than median investments

drive in to tenets in quarters. I first our we now and to performance Hennigan. Tom the the over discipline expect always, consistency will As quarter, drove performance call hand CFO, future and these

Thomas Hennigan

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

note, had investment or net average year And from share OID first of all-time interest per in an amendment As last stabilized above Justin down per balance. was to the down investment offset our successful acceleration, million it's slightly and debt quarter, as was total were increase quarter. share. the result we down quarter prepayment Of quarter for compared prior in another million the decrease of prior had fees $X.XX $XX versus the from quarter The a on flat front. was for first while modestly our earnings we exit Travel. Total high primarily lower $XX well $X.XX Total income as comparable of that's by Direct quarter $XX in rates investment from was base outstanding expense still period. expenses during previewed, quarter, prior the strong the a income million, and

the $X.XX second to declared Directors the as comprised is That's plus supplemental, $X.XX which at of for of of quarter record $X.XX shareholders total share. Board a of base XXXX dividends payable a us the of the level variable per earnings, dividend This level of supplemental new Our close paying at XX. of fluctuate. excess to of allows base out which business on be flexible dividend policy total evolves dividend of XX% the rates reflects June least and our as portfolio

share dividend peer average. At total nearly since Our the base quarter dividend dividend the XX% the XX% represents set level XXXX. attractive recent the of on based same by above time, coverage of an we've also remains XXX% for yield And base grown BDC price. the the

the per in and in out the NAV quarter. On the QX from current earnings for about in our quarter, to for of our our level at dividends based share. ability to valuations. the support rest look net realized valuations, $X.XX rate for the to total comfortably continue XXXX, on a leverage. We've unrealized $XX.XX we of curves each base rates and net resulted highly earnings aggregate environments, dividend interest In a meet our forward terms of and see believe continue and normalize million share that $X per conservative to $X.XX remain included valuations, paying was maintained This we exceed positioning payouts enable with conservative supplemental approach to us dividend rate will continue when consistent disciplined our confident combined on a variety in increasing supported in gain positive exceeding $XX.XX dividend increase by movement latest

to credit performance. Turning

sale was by Associates the in in previewed the successful Travel are see We XXXX. with that came watch is additions both continue The last in QX, lowest this risk call. our exit our across to off and there Direct another new And turnaround quality to to portfolio. of which at during total This we headline nonaccruals value last amortized back quarter deals stability nonaccruals February, aided story, nonaccrual to no overall in which Dermatology recapitalization since list, and were completed X.X% credit the successful cost, Similar X in no also X. which quarter's ratings we fell only mid-XXXX. or of total IPO level quarter, of fair investments and major the

portfolio proactively to borrowers to working manage rates We with are continue adequate have and we to expect remain the longer. for liquidity as ensure sponsors higher

Direct to recoveries companies. I'll the finish when and broader transactions leverage. by maximize platform and portfolio with financing immune on touching the arise not to highlight challenges capabilities credit Carlyle issues, of we're like facilities Derm While Travel our

well XXXX. With are of net up back I'll looks target leverage invest at maintain remain to X.XXx we the be quarter leverage and over at environment lower Leverage sheet. in This evolves side opportunistic to We on intentionally running X.XXx. was the and to as positioned of macroeconomic Justin. activity the lower of end allows to pick modestly balance the turn to flexibility positioning continue conservatively opportunities. our second our to financial the about range down the Statutory attractive in quarter-over-quarter, half deal right the and us leverage call ended that, is

Justin Plouffe

Thanks, high-quality market. Market attractive to income Tom. to reiterate consistency new originations, secured transactions focus questions. and underwriting, historical credit a and senior equity by would and on we our rate to and strategy. our for to over to to with highlighting relative cash middle sponsors, credit stable committed overall nonvolatile and sourcing portfolio to a to to you. nonaccruals, significant delivering disciplined I U.S. flow attractive like continue benefited operator by and spreads primarily prudent companies to market construction consistent conservative demand to of the leverage originations in performance. I'd through and on like our the strategy making finish primarily and we continued through strong cushions, investors from approach the backed approach documentation take attractive investment levels, portfolio solid core reduced now your management. With call private remain high, remains hand floating execution of We're risk Thank the the focused the investment our stream our investments

Operator

from our from [Operator line of B. Bryce Riley. Rowe the question Instructions] And first comes

Bryce Rowe

market I comments and seen. activity wanted maybe pickup on start the we've around that the of kind to

about wanted, what's Can a balance and how you're in appetite about portfolio with for lower if -- you of many taking maybe to think how want risk-reward versus other positioned in we've heard I could your of certainly step today? sheet pretty the is of that and part? kind wanted get I sheet investments today kind kind of the just certainly well pricing you talk for market sense you leverage, you balance thinking participants. view from to on Obviously,

Justin Plouffe

question. participating. Thanks Bryce, we're Yes, this We're we're is active. active, Justin. for your

to said, you position good capital really excited picking that. up, we're in about we're our to As work. And a put is and pipeline

at any that can the historically do we're do can still of we right, in kind ago does it little time in put market where to deploy as pricing of an into great want terms has returns, has active in that ultimately, months looks something through that tighter activity that equity-like going or it And much very to like was come pricing this the or is returns making at a there's you first look returns. pricing, secured the be priced and environment. whether whether pricing. of over do as moved market, form we're slightly a credit think -- we that's loans it attractive come we're bit lot attractive as of that's environment, tighter But broadly it us going you like potential but our invest is to what today. I we in syndicated to senior historically tighter companies. And cycles context, equity-like XX mean, in not in In somewhat, than market to is lien

Bryce Rowe

Okay. played opportunities your to now? well of for within advantage within. position, quarters, -- tried still mining incumbency the portfolio the as that portfolio some maybe out? right last you've few And over Or think there are take I Is the the opportunities

Justin Plouffe

strong always is Incumbency a factor. very

But that it's it's out. opportunities origination I but not of on portfolio. it's think will come. across lead that, past the hopefully some I the very, very think to And more say your the it's We're focused think benefited us and there's I relationship definitely. just completely -- played also quarter I also companies sponsor with don't for to this in that rest would year. individual great incumbency it

Bryce Rowe

Okay. for couple Great. A me. more

last year to You all successfully a guess, swapped did offering, floating rate. a baby I and bond

year. You've that's got some this the due debt of end at coming

what least maturity, point? -- Just at -- like at a any open thoughts considering that market debt especially around markets for open capital this capital pretty feels

Thomas Hennigan

a that. 'XX. CLO, dialogue part structure early big the which also Number a in noted, on at went period or I'll at It's Tom. end A of is end couple of thoughts been potential this last as our you 'XX one, the of with bankers, We're year. index-eligible note year. deal of and out in our of mature later our our we've bonds earmarking active capital reinvestment

are attractively on the Now very AAAs vehicle. priced that

amortize, couple structure materially notes attractive. A position we're keep capital at for structure to become long sense come down it vehicle less in So overall for ago, looking that term. now as to resetting but continue place, that the have the the actively those they'll of market, middle quarters that to made AAAs

that So be X focus -- is deal we our will big big in and CLO. X then bond 'XX the anticipate a resetting points

Bryce Rowe

Okay.

Okay. Last one for me.

going looks a down-rate for up think -- dividend asset different of your look scenarios move you that's dividend feels just base even even room thoughts BDC step quite least the look around peers. the a good, stepped most it sensitivity I coverage it there's continuing feels to healthy. to based You've Any it perspective. like And and dividend? And and some in to higher, lot here dividend than at the from pretty up tables, on like

Thomas Hennigan

On something almost quarter. it's variable on that very plus floating XX% with comfortable noted call supplemental. we at point, the We we'll the rate base. discuss now it We that $X.XX feel the every

to it's we certainly but the think where the something plus we'll evaluate I comfortable position right XX% -- we're and excess. conservative with for base $X.XX least at continue So the on are now very

Operator

I'd of Justin And program does remarks. Instructions] [Operator the the this to today's to for question-and-answer hand any conclude further session program. Plouffe back like

Justin Plouffe

we'll Thanks, speak again you call. appreciate support, everyone, quarter. Thank will next That with We conclude you your the joining much. and call. the so for

Operator

in Thank you, participation your This ladies gentlemen, the program. and conference. does today's for conclude

disconnect. now may You Good day.

Carlyle Secured Lending (CGBD) 8 May 242024 Q1 Earnings call transcript