FS Specialty Lending Fund (FSEN)·Q3 2025 Earnings Summary

Executive Summary

• FS Specialty Lending Fund completed its conversion into a registered closed-end fund on October 28, 2025 and reiterated an expected NYSE listing in mid-November 2025, subject to market conditions and board approval .
• The Board declared a Q3 distribution of $0.6024 per share (record date October 17; pay date October 20), slightly below Q2’s $0.6195, reflecting board discretion and NAV-based payout policy .
• Management set target post-listing distributions at a 9.0%–9.5% annualized yield on NAV with monthly frequency expected starting in 2026; base management fee will be waived down to 1.35% of gross assets and incentive fee to 10% with a 6% hurdle upon listing .
• Reg FD disclosed First Brands Group’s bankruptcy and stated FS Specialty Lending Fund has no exposure to First Brands, removing a potential credit overhang .
• Wall Street consensus for Q3 2025 EPS and revenue was unavailable via S&P Global; estimate-based beat/miss analysis cannot be performed for this quarter.*

What Went Well and What Went Wrong

What Went Well

• Reorganization closed and advisor alignment: The fund completed its conversion and its adviser became an indirect, wholly-owned subsidiary of Franklin Square (Future Standard), potentially improving alignment and operating continuity .
• Clear listing and distribution framework: Management articulated target dividend yield of 9.0%–9.5% on NAV post-listing with expected monthly cadence, plus fee waivers that reduce base fees and incentive fees—supportive of net investment income coverage post-listing . “Anticipating a public listing on NYSE in mid-November” (Investor presentation) .
• Risk management: “First Brands Group, LLC … filed for bankruptcy … FS Specialty Lending Fund no longer has exposure to First Brands.” This removes direct exposure to a distressed credit .

What Went Wrong

• Declining quarterly distribution: The Q3 distribution ($0.6024) declined vs Q2 ($0.6195), and management reiterates that distributions are at Board discretion and may vary with NAV and income sources .
• Limited quarterly financial disclosure: Q3 revenue, EPS, and margin metrics were not available for comparison; the quarter lacked a traditional earnings press release detailing operating results .
• Estimates visibility gap: Street consensus was unavailable for Q3, limiting beat/miss assessment and potentially reducing near-term investor confidence in forecasting the transition period.*

Financial Results

Notes: N/A indicates not available in filings. Values with * are retrieved from S&P Global.

Distributions declared per share:

Portfolio KPIs (as of June 30, 2025):

Segment/Asset Type Composition (June 30, 2025):

Industry Classification (June 30, 2025):

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• “Anticipating a public listing on NYSE in mid-November” (Investor presentation) .
• “Target distribution 9.0%–9.5% based on NAV … Distributions expected to be declared monthly following the listing starting in 2026, subject to board approval” .
• “Fee waivers … Base management fee shall be 1.35% … Incentive Fee shall be … 10.0% … with a 6.0% annualized hurdle” (Fee Waiver Agreement) .
• “We currently expect the Shares to begin trading on the NYSE before the end of Q4 2025, subject to market conditions …” (Shareholder letter) .
• “FS Specialty Lending Fund no longer has exposure to First Brands.” (Reg FD disclosure) .

Q&A Highlights

• No earnings call transcript was filed for Q3 2025 in the company’s documents; guidance and disclosures were provided via 8-K filings and investor presentation .

Estimates Context

• Wall Street consensus EPS and revenue estimates for Q3 2025 were unavailable via S&P Global; as a result, we cannot determine a beat/miss for the quarter.*
• Given the transition to a listed closed-end structure with new fee waivers and distribution framework, Street models may need to update for lower fee drag post-listing and monthly distribution cadence .

Key Takeaways for Investors

• Listing catalyst: With the reorganization closed and a mid-November listing expected, the near-term catalyst remains the first trading day and initial P/NAV discovery; management notes no lock-up provision, potentially increasing early liquidity .
• Distribution trajectory: Expect the enhanced pre-listing payouts to normalize toward a 9%–9.5% NAV-based yield post-listing, with monthly cadence targeted from 2026, which could support income-focused demand .
• Fee relief: Contractual fee waivers (1.35% base; 10% incentive, 6% hurdle) should improve net investment income coverage and total return prospects versus standard fee schedules .
• Portfolio quality: Senior secured, floating-rate, and diversified sector exposure remain core; the explicit removal of exposure to First Brands reduces a potential credit risk headline .
• Near-term trading dynamics: Initial trading may occur at discounts/premiums to NAV; peers show varied P/NAV ranges around listings—monitor investor flows and distribution coverage messaging in early months .
• Information cadence: Absent a Q3 call, focus on forthcoming listing documents and post-listing updates for detailed operating metrics and guidance confirmations .
• Watch NAV drivers: Board-discretionary distributions and fee waivers aside, NAV performance will be influenced by credit selection, leverage, and macro credit spreads—track portfolio updates and sector exposures .

Footnote: Values with * are retrieved from S&P Global.