CGBD - Earnings call transcript Q3 2024 | Carlyle Secured Lending, Inc.

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Operator

Good day, and thank you for standing by. Welcome to Carlyle's Securities Lending, Inc.

Third Quarter 2024 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Nishil Mehta, Head of Shareholder Relations. Please go ahead.

Nishil Mehta

to results Lending of for welcome discuss call XXXX. and earnings the the morning, Carlyle's conference Secured to Good third quarter Tom our XX-Q section and I'm Executive a Investor press Officer. Last Plouffe, Relations Justin a issued are we Hennigan, presentation available with and the of sight, Form joined website. Financial which our of our our filed our release Chief results, by Officer; Chief on

other and any the call to closing and differ benefits may indicated. any analysts and statements today, our based remarks our with and merger, on proposed expectations operating performance. reflecting section including a Factors XX-Q. are will merger, being statements associated These and the replay institutional and time. a proposed involve no obligation inherent be results we our This assumes CGBD forward-looking placed statements reliance website. risks made in These and among or of at materially any results identified uncertainties those statements on not views for and proposed the our future of actual realize Following synergies Risk the current with our cause those include merger the of uncertainties, today guarantee likelihood the question-and-answer on things, financial them. Today's could the XX-K ability risks anticipated of will to the investors. from do hold timing update to management is forward-looking the forward-looking available should conference expected and webcast, not session be performance our future call to undue respect Any

as ongoing are Regulation defined and financial effect as share adjusted per net net company net call, certain net for may and discuss share, income of G NII income per directly evaluate NII. without to nonrecurring or and share, investment investors net adjusted investment events used The additional measure non-GAAP results be conference GAAP are investment in believes measures tool by management reconciliation as an this to can the adjusted earnings useful income income, per investment found management to adjusted or trends company net income GAAP such company's the adjusted During slide accompanying adjusted income to giving most evaluate the of company. A economic for comparable the adjusted by the this to presentation onetime the call. SEC

X-K. With filed measures these in call Justin, over night of the be may that, I'll release Executive earnings Chief with our reconciliation addition, on to CGBD's SEC In last found turn Form also the Officer.

Justin Plouffe

activity quarter's credit Good Nishil. for our environment. Carlyle overview higher at Tom the positioning. financial Carlyle. and Justin portfolio quarter the third of stable third then as I'm morning, CIO the Hennigan. In the call BDCs from and performance discuss hand CFO, base our to and benefit I'll the continued On as I'll rate investment Thanks, everyone, Deputy of over well give performance to Plouffe, for you Global and quarter, all results our the XXXX call, CEO an Credit thank today's joining.

$X.XX accelerated certain investment reset. adjusting after to our debt the issuance we per related $X.XX per income CLO net generated of adjusted share of During income investment for and quarter, costs net share

Our adjusted NII yield X/XX on represents XX% NAV. an our of nearly annualized based

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

prior down to value flat XX has of asset from per relatively the in half of continued $XX.XX activity the net quarter. Deal modestly second at September as XXXX. Our strengthen was share,

competition the private and quarter. syndicated between third credit persistence increased continued, stabilized activity spreads repricing This and of markets. the new issue despite While refinancings the cross-market in is broadly

and in our were grow. quarter third the year-over-year significantly up continues originations Our pipeline to

in strong as remain XXXX expands. We M&A expect pipeline the to volumes

We from the One middle market. which Carlyle platform, in continue to us benefit core the differentiates

While increasing for performance and overall strategy, our portfolio. activity maintaining credit focused a on remain we is positive a origination highly diversified

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

quarters. I'll we and disciplined over our the call quarter, in these and Hennigan. performance drove in always, As to expect third Tom to performance CFO, future the drive now tenants consistency hand

Thomas Hennigan

reduced performance our Then quarter I'll Thank lower were balance million quarter results. $XX quarter modestly concluding front. weighted an CLO for sheet lower Today, Justin. the for quarter and portfolio offset lower $X.XX on discuss yields. as debt on with and versus expenses was income or $XX a total onetime had prior outstanding lower a third portfolio before for expense detail was share. average income compared $XX third The to the financial interest million flat of both strong reset third expenses earnings average the positioning. CGBD due lower quarter of Total I'll balance balance result primarily you, rates. begin quarter, the million, investment average with our associated investment overview with Total net to of prior another per

reset. or expenses NII Importantly, $X.XX CLO was associated Adjusted million with the per the share. adjusted $XX for

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

based rates, of some expected earnings achieved JV. On the the repricing valuations, in see coming our remains of total we've consistently the the loss per Our contraction for do X set peer we've tighter resulting in our net our was still. realized relative and yield years. confident remain in of meet in lower base And cumulative for aggregate contributor ahead, also We At to dividend. historical the activity. That time, same in our quarter line level share quarter. dividend the million highs and at dividend price. And in with the coverage our portfolio in largest average. last $X issue new over to XXX% outearned base and value combination BDC $X.XX spreads $X.XX an of quarters expect ability a base represents the on about XX% looking dividend recent The exceed unrealized total decline one we of said, share nearly the attractive MMCF the positions to was

some However, of exited successfully names at higher legacy we X/XX than of improve, materially Bayside. month a that to continue position highlighted And care and incremental health valuation. our by markups price SPF last our on note,

busy months favorable right credit balance financing continue continue on of quality been the credit stability few our overall nonaccrual other status. I'll in previewed performance, on continue we side of across only fair value. X facilities work we as we by our And towards investment total fair a as nonaccruals a borrowers portfolio. as finish improve value investments at emergency see call, the touching we Turning sheet. on X/XX to in last to on solutions with line last our the our in quarter's at leverage. our X.X% currently with exited and to to to It's And decreased price positioning communications

at September, in X.XX% August we in With back to XX deal target while that, October, of is deploy successfully I'll X interest net end date X.Xx. quarter's to As issued for call, and by to points plus reinvestment providing fixed beginning to both mature over basis extending statutory capital CLO, July, last rate, notes and which debt about Moody's vehicle. In mentioned sources swapped call ratings maturity a further of the than low turn our financing then was $XXX of And leverage on in period closed that reset notes the floating to a received end, X.X we the of a of reducing the accelerating quarter have of Fitch. we investment that million years we X.XXx opportunities. with financial the in early cost XXXX-X unsecured about transaction unsecured additional from more new we'll rate investment-grade fund XXXX. capacity December and Justin. XXXX leverage within This environment. With repay SOFR At and the capital X.XX opportunities by leverage and attractive X.XXx, we range our into diversifies in

Justin Plouffe

Tom. Thanks,

CGBD stockholders on first final other XXXX point, Secured Lending III I'd satisfaction between call that customary waiver on As or of earnings quarter by like the closing report track a approval second end the CGBD subject to to from close quarter merger the announced Carlyle our and remains of of and to conditions.

an high have in scale the earnings in NAV operational conviction transaction efficiencies strategic CGBD, will to both from share. liquidity, the provide and including to benefits increase continue costs a in accretion We per reduction and and to

of preferred price reminder, before than support merger. the stock a at will rather success friendly proposed Carlyle's believe and As for exchange convertible of is close has We shares its existing conversion CGBD. price shortly shareholder to of this NAV the dilutive ongoing Carlyle common the for a which occur agreed of existing that exchange $X.XX, demonstrates

upon in urge to the vote the We proxy and expect approval the distribute notification. process stockholders in to a receiving formal to merger merger materials related coming all months

As for market demand we toward private credit strong. look year-end, remains

stable stockholders focus cushions, execution We originations With leverage of benefiting to CGBD attractive conservative market profile are portfolio strategy. attractive significant from continue and equity sourcing with low the our and nonaccruals, levels. continued to relative of on transactions new spreads

credit stream we call now stable and to the like As you. the a our flow consistent income solid to operator resilient, to investors take delivering your remain committed Thank questions. performance. I'd to always, hand over through to cash

Operator

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

Bryce Rowe

and looks highlighted get point on just at is, best the of perspective leverage portfolio to to knowledge, a relatively a even what like and outlook thoughts around And leverage feel I a point? Wanted sheet pipeline the from any maybe think sister of for now? just carrying lower that at BDC this balance you're a kind from And my sheet balance leverage. low start you right perspective the the

commentary feel some M&A get up. could just as that the to around together, light picking for come in especially possibly of of X how So BDCs wanted ramp a the

Justin Plouffe

This macro about to is Yes. the Bryce. leverage. of ask I'll Justin. sheet question, take balance the maybe I'll and Sure, then Tom talk sort

short So is we're answer the optimistic.

quarter. up Our originations last were

pick think as I QX pipeline, next of to the M&A expect and and year. quarter meaningful would to in continue first up in certainly the activity I characterize increasing. We

deal of focused market I think way we coming And to merger. that that very we're respect in the the deployment terms need our So that the it's very, volume. on prior do to is in

on really course, pressure of a X focused market-wide to deploying into do what really on going try there the great Now phenomenon. next is months. that's downward We're but spreads over to we're And that's credits.

of leverage, Specifically on that Tom, do the to you are? amount we comment want where on

Thomas Hennigan

entities. our quarter, at CGBD. at And solid X.X X/XX, new that's least across target our a current X.X But Bryce. the noted, expectation. crystal pipeline, right Absolutely, merger the Repayments And and ball little on Justin bit as very of close looking deal our at this is front. combined now, lighter

pipeline least So X.XXx. And current we X.X, be quarter visible our at now. right based now, end, north on that's closer to we're think by of we'll right

in we're the way consummation rough X.X the that target to first we get to think when we on well achieve our quarter. merger in So

Bryce Rowe

to just made, the Or the comment be specific? forma? that you Okay. Tom, X.XX that And just just pro CGBD is is clear, X.X and

Thomas Hennigan

CGBD.

Bryce Rowe

Yes.

just last continuing deals end strong. pipeline repayment at pressure you've that the looks I Is I as of continuing that I Okay. an appreciate you And towards look year, had just commentary quarters, origination if are around are certainly volume. outpaced repayment maybe have that a kind the some you coming kind to originations. X from perspective? together And -- the the the think the of from progress of repayments see maybe perspective.

feel for a that and could the that change get will to that trying just dynamic make how change? So

Thomas Hennigan

that reversing see do this quarter. Yes. We

higher to repayments, at lighter the time volume terms in and new of overall it's as quarters. book, difficult than repayments least it's think side, now, quarter known couple then this it's of been on in I last just deal the of but the right

Bryce Rowe

comment your early you Justin, stabilizing. a prepared then, of And remarks kind spreads Okay. in about made

recently -- a a we've Any the space like you heard in lot spread I maybe that that couple us if heard compression don't have they're comments think expand here little and a feel bit, about mind? comment spreads of for stabilizing.

Justin Plouffe

stabilization significant reduction XXX lien it, seem call the then, SOFR a first there QX. end I of deals, we did the, Sure. we months typical kind let's XXX of our would little in at that XX sticking in to Since for I ending or mean say see area that in unitranche the be summer, the to bit.

knows what down bring. the the will as of kind if market the predicting, And when go terminal bit down we Now even say who they I that out X% is we of will rates base spreads future that value towards more little widening. do Typically, history get spread of may indicator. see a in a is rates, any we widen little see reductions go bit

the are and think have reason reduction that maybe little tomorrow, maybe and and in deal where the there's may I in we on flow based So widen even bit. that believe September to based stick a they spreads rates on

Operator

the Melissa from from comes JPMorgan. line of Our next Wedel question

Melissa Wedel

on terms seeing could portfolio? revenue fundamentals. terms And you're seeing the what trends apologize are the if capital? And but opportunity was EBITDA, that what of it the in that I seeing growth earlier, of I set deploy are touch you you I in to you just within and hoping missed within

Justin Plouffe

I book of to grow we're always end. matter, Yes. that environment. market generically past I are level to say course, are the companies I think across the would have seem over book, the and idiosyncratic benign years, eyeing continue better a rise grow But have as strong. They lower continue significant EBITDA they of revenue. the relatively market, it's general across the a to in than There that would credits of The issues. expected. our fundamentals rates the distresses survived in on couple say Companies the credit

So companies pretty overall a as I'd opportunities market with the companies. we're the perspective, constructive. where now is seeing. we're We're new seeing the credit we're strong like from pleased relatively the good market credits. seeing. They're and right characterize We

Melissa Wedel

to point Okay. And finer just maybe it. a

And across revenue that faster than provide? range growing EBITDA of you could versus the generally, any you are growth terms In portfolio, other? growth one as your seeing general

Justin Plouffe

to catching I faster Melissa, margin margins started XX back years, up, Yes. the top inflation think hit, that bottom finally X you saw We were when months were definitely, saw line. and reverse expansion. X XX, growing ago, was the go than years when line we

you low growth on little bit stabilize We've pressure's a if digit just down So double digits, go in EBITDA quarters, going XX%, away XX%. seeing mid-single the rates of digits. we had based that revenue Inflationary inflationary single seen we're back probably more -- so in couple a those slow and pressures. growth the low margins and and

So call the say, rates let's still probably we'll healthy overall growth, back. of just driven number a quarters it, higher we were inflation seeing, not, growth

Operator

to Justin to At Plouffe would [Operator closing like now for the Instructions] time, I turn this back over remarks. conference

Justin Plouffe

We Thank will the and Thank speak your really attention, everyone, That with next today. conclude joining you, call. for quarter. appreciate you us so we much. all will you

Operator

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

may now disconnect. You

Carlyle Secured Lending (CGBD) 6 Nov 242024 Q3 Earnings call transcript