Executive Summary

Q1 2025 delivered adjusted net investment income of $0.58 per share and GAAP net investment income of $0.62 per share; GAAP net income per share was $0.39. NII EPS beat S&P Global consensus ($0.62 vs $0.554), while total investment income modestly missed ($116.3MM vs $116.7MM). Management reaffirmed full-year adjusted ROE guidance of 11.5%–12.5% and highlighted quarterly earnings power of ~$0.50 per share absent spread impacts and additional nonaccruals .
Board declared a Q2 2025 base dividend of $0.46 and a Q1 2025 supplemental dividend of $0.06; adjusted NAV per share was $16.98 after supplemental dividends. NAV declined to $17.04, driven by reversal of unrealized gains from paydowns/sales ($0.13/share) and widening credit spreads ($0.06/share) .
Portfolio churn remained elevated (LTM churn ~28%); activity-based fee income was the highest since Q4 2021, including a ~$0.05/share Arrowhead prepayment fee that boosted NII. Non-accruals were stable at 1.2% of fair value; first-lien exposure remained high at 92.9% .
Balance sheet strengthened: $300MM notes due 2030 issued and swapped to floating (SOFR + ~153 bps), revolver amended and extended to 2030 with lower drawn spread/undrawn fee; weighted average interest rate on debt fell to 6.4% (from 7.0% in Q4) .

What Went Well and What Went Wrong

What Went Well

Strong NII performance and disciplined capital allocation: Adjusted NII $0.58 per share (GAAP $0.62), supported by elevated activity fees and lower interest expense as base rates declined. CEO: “we estimate that the quarterly earnings power of the business… is approximately $0.50 per share,” translating to ROE ~11.7% .
Robust liquidity and liability management: Issued $300MM notes due 2030 and extended $1.525B of revolver commitments to March 2030 with improved pricing. CFO: “we swapped these fixed… notes to floating at a spread of SOFR plus 152.5 bps… [and] lowered the undrawn fee… weighted average maturity on our liabilities [is] 4.2 years” .
Portfolio quality and non-sponsored origination: Non-accruals at 1.2% of fair value; 84% of new fundings originated outside the sponsor channel; weighted average spread on new commitments was 700 bps, materially wider than public BDC peers, supporting future returns .

What Went Wrong

NAV per share decline: NAV fell to $17.04 (from $17.16) due to reversal of unrealized gains tied to realizations ($0.13/share) and widening credit spreads ($0.06/share) impacting fair value marks; adjusted NAV after supplemental dividend was $16.98 .
Investment income modestly below consensus: Total investment income of $116.3MM was slightly below S&P Global consensus, with management citing lower interest rates and lower dividend income versus Q4 .
Spread compression on new investments and macro headwinds: Weighted average yields declined slightly (12.5% → 12.3% at amortized cost), with management reiterating discipline amid tight spreads and cautioning that tariff- and deglobalization-related macro risks could pressure valuations and growth over time .

Financial Results

Metric	Q3 2024	Q4 2024	Q1 2025
Total Investment Income ($MM)	$119.2	$123.7	$116.3
Net Investment Income ($MM)	$54.9	$57.6	$58.0
Net Investment Income Per Share ($)	$0.59	$0.62	$0.62
Adjusted Net Investment Income Per Share ($)	$0.57	$0.61	$0.58
Net Income ($MM)	$40.7	$51.0	$37.0
Net Income Per Share ($)	$0.44	$0.55	$0.39
NAV Per Share ($)	$17.12	$17.16	$17.04
Weighted Avg Yield at Amortized Cost (%)	13.4%	12.5%	12.3%

Q1 2025 vs consensus

Metric	Actual Q1 2025	Consensus Q1 2025
Total Investment Income ($MM)	$116.3	$116.7*
Primary EPS (NII per share) ($)	$0.619	$0.554*

Values retrieved from S&P Global.*

Year-over-year comparison (Q1)

Metric	Q1 2024	Q1 2025	YoY Change
Total Investment Income ($MM)	$117.8	$116.3	-$1.5
Net Investment Income ($MM)	$52.4	$58.0	+$5.6
NII Per Share ($)	$0.59	$0.62	+$0.03
Net Income Per Share ($)	$0.53	$0.39	-$0.14
Weighted Avg Yield at Amortized Cost (%)	14.0%	12.3%	-170 bps

KPIs and portfolio composition

KPI	Q3 2024	Q4 2024	Q1 2025
Investments at Fair Value ($MM)	$3,441.1	$3,518.4	$3,412.0
Portfolio Companies (count)	112	115	115
First-lien (% of FV)	93.2%	93.9%	92.9%
Floating-rate debt (% of FV)	98.8%	97.2%	97.0%
Non-accrual (% of FV)	1.9%	1.4%	1.2%
Debt-to-Equity (quarter-end, x)	1.19x	1.22x	1.18x
Weighted Avg Interest Rate on Debt (%)	7.7%	7.0%	6.4%
Total Liquidity pre unfunded ($MM)	$1,093	$654	$1,018

Activity

Activity	Q3 2024	Q4 2024	Q1 2025
New Commitments ($MM)	$269.3	$479.0	$154.4
Fundings ($MM)	$189.0	$323.5	$136.8
Repayments/Exits ($MM)	$90.2	$304.7	$269.6

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Adjusted ROE (on NII)	CY2025	11.5%–12.5%	11.5%–12.5%	Maintained
Quarterly earnings power (per share)	Near-term	N/A	~$0.50	New disclosure
Base dividend (per share)	Q1 2025	$0.46	—	—
Base dividend (per share)	Q2 2025	—	$0.46	Maintained
Supplemental dividend (per share)	Q4 2024	$0.07	—	—
Supplemental dividend (per share)	Q1 2025	—	$0.06	Lowered
Liquidity policy / revolver	Ongoing	Annual amend & extend	Extended to Mar 2030; lower fees/spread	Improved terms

Earnings Call Themes & Trends

Topic	Previous Mentions (Q3 2024, Q4 2024)	Current Period (Q1 2025)	Trend
Direct lending spreads and discipline	Tight spreads; Lithium markdown drove unrealized losses; maintained over-earning base dividend	Spreads remained tight in Q1; new investments 700 bps spread; 84% non-sponsored originations	Discipline sustained; accessing non-sponsored lanes
Activity-based fees	Moderate in Q3; highest in seven quarters in Q4 ($0.15/share incl. dividends)	Highest since Q4 2021; Arrowhead prepayment contributed ~$0.05/share	Elevated due to repayments
Portfolio quality	Non-accruals increased to 1.9% in Q3; 1.4% in Q4	1.2% in Q1; no new non-accruals	Improving/stable
Asset-liability management	Repaid Nov 2024 notes post Q3; revolver capacity adjusted	Issued $300MM 2030 notes, swapped to floating; revolver extended to 2030, lower fees	Stronger liability profile
Macro/tariffs/deglobalization	N/A in Q3 8-K; Q4: robust activity-based fees	Limited direct tariff exposure (~2% of portfolio); caution on deglobalization increasing discount rates and slowing growth	Monitoring macro headwinds
M&A outlook	Expect caution; sponsor flow mixed	“Very negative” on near-term non-IG M&A; potential recovery in 2026	Cautious; longer runway

Management Commentary

CEO on earnings power and NAV bridge: “we estimate that the quarterly earnings power… is approximately $0.50 per share… Of the $0.22 per share difference between net investment income and net income, only $0.05 per share was credit… $0.11 per share… realizations… $0.06 per share impact from widening credit spreads” .
President on originations: “In Q1, 84% of new fundings are originated outside the sponsor channel… weighted average spread… 700 basis points” .
CFO on balance sheet: “we issued $300 million of… notes… swapped… to floating at… SOFR plus 152.5 bps… amended our $1.675 billion secured credit facility… extended… to March 2030… lowered the undrawn fee” .
Macro stance: “we believe there is limited direct risk from [tariffs] on our portfolio… majority… software and services… average loan-to-value… 41%” .

Q&A Highlights

Capital raising philosophy unchanged with new ATM: “no changes… we will raise capital when accretive to NAV and ROE; ATM is a lower-cost tool, not an asset-gathering approach” .
M&A cycle skepticism: “do I think there’s going to be a whole bunch of noninvestment-grade M&A in 2025? No… maybe 2026” .
Spillover income and distributions: Estimated spillover income ~$1.31/share; not planning capital returns now given leverage, excise-tax arbitrage, and desire to keep capacity in volatility .
Liability-side resilience: Banks risk-off stance expected to have limited impact given revolver extension and prefunding of maturities; net interest margin sensitivity hedged via swaps .
Credit stability: No material migrations in risk ratings; limited direct tariff exposure identified and analyzed name-by-name .

Estimates Context

Q1 2025 NII EPS beat consensus by ~$0.07 ($0.62 vs $0.554). Management attributed outperformance to elevated activity-based fees (notably Arrowhead prepayment ~$0.05/share) and lower interest expense from declining base rates .
Total investment income slightly missed consensus ($116.3MM vs $116.7MM), primarily due to lower interest/dividend income in the quarter as rates declined, partially offset by higher fee income .
Forward consensus indicates moderate sequential normalization of NII EPS and investment income across Q2–Q3 2025; management reaffirmed full-year adjusted ROE target (11.5%–12.5%), suggesting a durable earnings profile under current conditions . Values retrieved from S&P Global.*

Key Takeaways for Investors

NII EPS strength and disciplined underwriting led to a notable EPS beat; expect near-term normalization toward ~$0.50/share quarterly earnings power absent one-off fees and spread impacts .
Liability-side actions are accretive: 2030 notes swapped to floating and a cheaper, longer-dated revolver reduce funding costs and extend duration, supporting NIM resilience if base rates decline .
Elevated repayments and fee income are a positive for the near term; watch activity cadence in Q2 where management expects balance sheet to be flat to slightly down, with leverage maintained within a disciplined range .
NAV headwinds from spread widening are mark-to-market and should unwind as assets pay off/mature, but macro volatility may keep valuation marks choppy; this is a key driver for stock narrative near earnings prints .
Portfolio risk remains contained: non-accruals low at 1.2% and first-lien concentration high (92.9%); limited direct tariff exposure (~2% of FV) mitigates near-term macro policy risks .
Dividend visibility is solid: base dividend maintained at $0.46 with supplemental payout aligning with over-earning, underpinned by adjusted ROE guidance and spillover income cushion .
Tactical positioning: expect continued preference for non-sponsored and complex opportunities with wider spreads; monitor spread dynamics in private credit vs BSL markets for deployment timing and potential yield uplift .

Segment/Portfolio Composition (for reference)

Composition	Q4 2024	Q1 2025
First-lien Debt (% FV)	93.9%	92.9%
Second-lien Debt (% FV)	0.6%	1.0%
Mezzanine (% FV)	1.1%	1.5%
Equity & Other (% FV)	4.4%	4.6%

Notes: All figures GAAP unless noted. Adjusted metrics remove impact of accrued capital gains incentive fees, as defined by the company . Values retrieved from S&P Global where estimates are used.*

Sixth Street Specialty Lending, Inc. (TSLX)·Q1 2025 Earnings Summary