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Carlyle Secured Lending, Inc. (CGBD)·Q2 2025 Earnings Summary

Executive Summary

  • CGBD delivered $0.39 NII per share on both GAAP and adjusted bases, essentially in line with S&P Global consensus $0.392, on record quarterly originations; total investment income rose to $67.3m from $54.9m in Q1 and $58.3m in Q2’24 . Revenue modestly beat consensus ($67.3m vs. $66.7m), while NII/share was a hair below, reflecting tighter spreads and higher interest expense on a larger balance sheet .*
  • NAV/share declined 1.2% q/q to $16.43 (from $16.63) driven by $13.6m net realized/unrealized losses (~$0.19/share), partially offset by earnings; non‑accruals rose to 2.1% of FV at quarter-end but would drop to 1.0% post the July Maverick restructuring .
  • Record deployment: $375.7m fundings (10.0% WAC yield) and $237.7m net investment activity; portfolio FV increased to ~$2.335B; statutory leverage rose to 1.10x (midpoint of target range) with $613m total liquidity and a $25m revolver upsize in July .
  • Dividend maintained at $0.40 for 3Q25, supported by an estimated $0.89/share of spillover income; management highlighted potential earnings headwinds from tight spreads and prospective rate cuts, offset by leverage ramp, JV earnings and lower non‑accruals .

What Went Well and What Went Wrong

What Went Well

  • Record origination quarter at both platform and CGBD levels: “$376m funded…highest level since our IPO,” with net investment activity of ~$238m and portfolio FV up to ~$2.3B .
  • Dividend sustainability reinforced: Board declared $0.40 base dividend for 3Q25; estimated spillover income of $0.89/share provides coverage cushion .
  • Post-quarter credit de-risking: Successful Maverick restructuring on July 3 implies pro forma non‑accruals fall to ~1.0% of FV (from 2.1%), improving optics on portfolio quality .

Quote: “We generated $0.39 per share of net investment income…our Board…declared a third quarter dividend of $0.40 per share.”

What Went Wrong

  • NAV pressure: $13.6m net losses (~$0.19/share) from idiosyncratic credits and market technicals (repayments/repricings) reduced NAV/share 1.2% q/q to $16.43 .
  • Earnings headwinds: Management flagged historically tight spreads and possible Fed cuts as near‑term NII drags, with Q3 seasonally slower deployment .
  • Slight EPS shortfall: NII/share of $0.39 was fractionally below consensus ~$0.392, reflecting higher interest expense and fee accruals alongside balance sheet growth; revenue beat modestly .*

Financial Results

Headline P&L and Capital Metrics

MetricQ2 2024Q1 2025Q2 2025
Total Investment Income ($USD Millions)$58.264 $54.864 $67.281
Net Investment Income per Common Share ($)$0.51 $0.40 $0.39
Net Income (Loss) per Common Share ($)$0.35 $0.25 $0.20
NAV per Share ($)$16.95 $16.63 $16.43
Statutory Debt/Equity (x)1.12x 1.04x 1.10x
Weighted Avg Yield on Income Producing Investments (Amortized Cost)12.7% 10.9% 10.9%
Non‑accruals (% of FV)—1.6% 2.1% (1.0% pro forma post‑Maverick)

Notes: Pro forma non‑accruals reflect Maverick restructuring closing 7/3/25 .

Estimates vs Actuals (Q2 2025)

MetricS&P Global ConsensusActualSurprise
NII per Share ($)0.392*0.39 In line/slight miss
Total Investment Income ($USD Millions)66.701*67.281 Beat

Values marked with * retrieved from S&P Global.

Portfolio Mix (Fair Value %)

Asset TypeQ2 2024Q1 2025Q2 2025
First Lien Debt70.9% 83.4% 85.6%
Second Lien Debt8.5% 5.8% 3.9%
Equity6.2% 5.4% 5.4%
Investment Funds14.4% 5.4% 5.1%

Deployment and Activity KPIs

KPIQ2 2024Q1 2025Q2 2025
New Investment Fundings ($USD Millions)$84.791 $865.008 (incl. CSL III & CF II) $375.735
Wtd Avg Yield on New Fundings12.7% 9.8% 10.0%
Sales & Repayments ($USD Millions)$(126.433) $(187.647) $(138.005)
Net Investment Activity ($USD Millions)$(41.642) $677.361 $237.730
Total Investments at FV ($USD Millions)$1,726.050 $2,245.626 $2,334.961
Liquidity (Cash + Undrawn) ($USD Millions)—$858.5 (Q1’25) $613.1 (Q2’25)

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Base Dividend per Share3Q25$0.40 for 2Q25 $0.40 declared for 3Q25; payable Oct 17, 2025; est. spillover $0.89/share Maintained
LeverageOngoingTarget range implied; 1.04x at Q1 1.10x at Q2; “mid‑point of our target range” On target
Origination Outlook2H25—Slower 3Q (seasonal), stronger 4Q as pipeline rebuilds Qualitative positive skew to 4Q
JV Dividend/ROEForward11.7% annualized to CGBD in Q1 JV MMCF JV targeting mid‑teens ROE run‑rate; dividend rate to “inch up” with higher utilization Raised outlook qualitatively
Credit FacilityPost‑Q2$935m commitments (Mar’25) Upsized by $25m in July to $960m Increased capacity

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4’24, Q1’25)Current Period (Q2’25)Trend
Spreads/Tightness“Tightening market spreads” in Q4’24 commentary ; tariff/trade uncertainty cited in Q1 Spreads “historically tight,” potential Fed cuts a headwind to NII Persistent headwind
DeploymentQ4’24 NII above base dividend; Q1 net fundings modest ex‑merger Record origination at platform/CGBD; 3Q slower seasonally; 4Q stronger Improving into 4Q
Non‑accruals/CreditQ1: 1.6% FV; selective risk ratings drift 2.1% FV; pro forma 1.0% after Maverick restructuring; losses idiosyncratic Stabilizing post‑restructuring
JV StrategyQ1 CF fund leverage ~2.06x; 11.7% yield to CGBD MMCF ROE mid‑teens; exploring additional JVs within non‑qual bucket Accretive growth vector
Capital & LiquidityQ1: $935m RCF; leverage 1.04x RCF upsized to $960m in July; leverage 1.10x Ample capacity

Management Commentary

  • “We generated $0.39 per share of net investment income…Our net asset value as of June 30 was $16.43 per share…Carlyle Direct Lending achieved a platform‑wide deployment record with $2.0 billion in originations…We funded $376 million…resulting in net investment activity of $238 million.”
  • “Total investment income…was $67 million…expenses of $39 million…NII of $28 million or $0.39 per share…aggregate realized and unrealized net loss…about $14 million or $0.19 per share.”
  • “Including [Maverick] restructuring…non‑accruals decrease to 1% of total investments at fair value.”
  • “Spreads…remain at historically tight levels and…potential Fed rate cuts may present a headwind to near‑term earnings.”
  • “We closed a small upsize to our primary revolving credit facility…to $960 million…statutory leverage…about 1.1x.”

Q&A Highlights

  • Spread dynamics and outlook: Management attributes tight spreads to tepid 1H deal activity and normalization from unusually wide 2022–2023 levels; expects stronger PE‑led activity in 4Q and 2026, supporting deployment opportunities .
  • Unrealized losses: ~60–65% credit‑related, ~30–35% market technicals (e.g., repays); idiosyncratic across a handful of names with expected reasonable recoveries .
  • Capital allocation: Buybacks discussed with Board; emphasis remains on scale, liquidity, and positioning to issue equity at/above NAV; no imminent repurchases .
  • JV earnings power: MMCF dividend run‑rate mid‑teens ROE; potential incremental JVs under evaluation leveraging Carlyle’s platform; a second JV’s economic impact likely 2026‑timed .
  • Leadership: Alex Chi to join Carlyle in early 2026 as Deputy CIO for Global Credit and Head of Direct Lending; no strategy change for CGBD .

Estimates Context

  • Q2 2025 results were essentially in line on NII/share ($0.39 actual vs. $0.392* consensus) and a modest beat on total investment income ($67.3m actual vs. $66.7m* consensus), suggesting stable earnings power despite spread pressure and higher average debt balances . Values marked with * retrieved from S&P Global.
  • Prior quarter (Q1 2025) was below consensus on revenue ($54.9m actual vs. $55.5m*) and below on NII/share ($0.40 vs. $0.430*), with step‑up into Q2 as the combined portfolio contributed a full quarter . Values marked with * retrieved from S&P Global.

Key Takeaways for Investors

  • Deployment momentum is a near‑term catalyst: record Q2 originations, stable yields, and leverage at the target midpoint set up for a stronger 4Q pipeline and potential revenue tailwind .
  • Earnings quality remains resilient: NII/share in line with consensus and dividend covered, with incremental upside from leverage normalization, JV contributions, and non‑accrual normalization post Maverick .
  • Watch spread/rate headwinds: management flagged historically tight spreads and possible rate cuts; sensitivity suggests incremental deployment and JV scaling must offset yield compression to maintain $0.40 .
  • Credit remains manageable: non‑accruals are modest and trending lower pro forma; losses were idiosyncratic, with active sponsor/workout engagement supporting recoveries .
  • Balance sheet capacity intact: RCF upsized to $960m and liquidity of $613m provide ample funding for continued origination and JV seeding without stressing leverage .
  • Strategic platform advantages: Carlyle deal flow and upcoming leadership addition (Alex Chi) bolster sourcing and execution, supportive of medium‑term growth in core middle market loans and JV earnings .
  • Stock setup: Dividend stability, record originations, and pro forma credit improvement are constructive near‑term narratives; sustained spread tightness or slower‑than‑expected Q4 closings are key watch‑outs .

Footnotes: Values marked with * retrieved from S&P Global.