Carlyle Secured Lending, Inc.

Good day and welcome to Carlisle Secured Lending's third quarter 2022 earnings call. At this time, all participants are in listen-only mode. After the speaker's presentation, there'll be a question and answer session and instructions will be given at that time. As a reminder, this call may be recorded. I would like to turn the call over to Daniel Hahn, head of shareholder relations. You may begin.

Good morning and welcome to Carlisle Secured Lending's third quarter 2022 earnings call. With me on the call this morning is our Chief Executive Officer, Linda Pace, and our Chief Financial Officer, Tom Hennigan. Last night, we issued a press release and earnings presentation outlining our quarterly results, both of which are available on the investor relations section on our website. Following our remarks today, we will hold a question and answer session for analysts and institutional investors. This call is being webcast and a replay will be available on our website. Any forward-looking statements made today do not guarantee future performance, and any undue reliance should not be placed on them. These statements are based on current management expectations and involve inherent risks and uncertainties, including those identified in the risk factors section of our annual report on Form 10-K that could cause actual results to differ materially from those indicated. Carlyle Secured Lending assumes no obligation to update any forward-looking statements at any time. With that, I'll turn the call over to our Chief Executive Officer, Linda Pace.

Thank you, Dan. Good morning, everyone, and thank you all for joining us to discuss another strong quarter of performance. We're extremely pleased with our third quarter results, with growth in core earnings and net asset value, a lower level of non-accruals, and another 6% increase in our base dividend rate. These results demonstrate the power and resiliency of our platform, and our ability to deliver on our objective of generating sustainable income levels well above our base dividend and a stable NAV. With that said, I would like to focus my remarks on three areas for today's call. I'll start with an overview of our third quarter financial results. Next, I'll touch on the current market environment. And finally, I'll conclude with a few thoughts on our investment activity and current positioning. In Q3, we generated net investment income of 58 cents per share, which included 14 cents per share of one-time income from restoring direct travel to accrual status. Net of this one-time income, core earnings for the quarter was 44 cents, which benefited from both the continued resolution of our non-accrual credit and higher base rates. We declared total fourth quarter dividends of 44 cents per share consisting of our newly increased $0.36 per share dividend plus an $0.08 per share supplemental dividend. We have now increased our base dividend rate in 2022 by a total of 12.5%. Our net asset value increased by over 2% in the third quarter to $17.16 per share. This increase is primarily driven by our NII outpacing our dividend and higher valuations from credit improvements across watch list credits, which Tom will discuss later in further detail. We repurchased an additional $7.1 million of our common stock during the quarter, resulting in 3 cents of accretion to our net asset value per share. In total, we've repurchased almost 11 million shares, or 17.5% of our float since the commencement of our share repurchase program. resulting in 60 cents of total accretion to our net asset value per share. Now, as for the current market, the macro environment remains complex and continues to evolve with a broad range of factors driving volatility across the global debt and equity capital markets. Fed rate hikes aimed at lowering inflation have increased the cost of borrowing and strengthened the U.S. dollar. Geopolitical risks remain elevated from the Russia-Ukraine conflict and disruptions in the global supply chain. With this as the market backdrop, we feel it's important to remind investors how we think about constructing our portfolio. We prioritize floating rate investments at the top of the capital structure of high-quality U.S. middle market companies that are scaled to withstand market disruptions and backed by leading private equity sponsors with a track record of supporting businesses. We utilize our competitive edge, the one Carlisle approach, leveraging the knowledge and expertise across our broader platform at each stage of our investment process. Turning now to the portfolio, despite the complexities in the market environment, we continue to be pleased with the financial performance and liquidity positions of our portfolio companies. We have yet to see any meaningful uptick in either amendment activity or drawdowns of revolver capacity by our borrowers beyond the ordinary course. We also continue to see positive credit performance across our book during the third quarter, especially in our watch list names. That said, given the significant increase in benchmark rates, we've been increasing our focus on assessing both current and future cash generation and interest coverage metrics across all positions in the portfolio. As for investment activity, we funded $268 million of new investments in the third quarter, essentially all of which were in a first lien position. In addition to our regular sponsored deal flow, we were able to leverage the sourcing capabilities of Carlisle's broader credit platform for several attractive investments during the quarter. Total repayments and sales in the third quarter were $212 million. We ended the quarter with approximately $1.9 billion of investments, slightly up from the prior quarter. Lastly, I want to address the leadership transition announced during the quarter. As reported in September, Taylor Boswell has decided to leave Carlyle to pursue other opportunities. On behalf of Carlyle, I want to thank Taylor for his leadership and invaluable contributions to Carlyle Secured Lending and the broader Carlyle Direct Lending business. I'm extremely grateful for the work that Taylor and the entire direct lending team have done over the past couple of years to reshape our investment process. As a result of the team's substantial efforts, I believe we are well positioned to continue creating long-term value for our shareholders for many years to come. With that, I'd like to hand the call over to our CFO, Tom Hennigan.