Carlyle Secured Lending, Inc.

Good day and thank you for standing by. Welcome to the Carlyle Secured Lending First Quarter 2023 Earnings Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. Please be advised today's conference is being recorded. And I would like to hand it to your speaker today, Daniel Hahn. Please go ahead.

Good morning. and welcome to Carlyle Secured Lending's first quarter 2023 earnings call. With me on the call this morning is Aaron Nikong, our Chief Executive Officer, and Tom Hennigan, our Chief Financial Officer. Last night, we filed our Form 10-2 initiative press release with a presentation of our results, which are available on the investor relations section of 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. These risks and uncertainties could cause actual results to differ materially from those indicated. Carlos Secured Lending assumes no obligation to update any forward-looking statements at any time. With that, I'll turn the call over to Aaron.

Thanks, Dan. Good morning, everyone, and thank you all for joining. I will focus my remarks on three topics for today's call. I'll start with an overview of our first quarter 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. Starting off with earnings, the first quarter was another strong quarter as the portfolio continued to benefit from higher base rates and attractive pricing on new investments. We generated total net investment income of $0.50 per share in Q1, which represented an increase of 25% versus our prior period core earnings and resulted in dividend coverage of 136%. We declared total Q2 dividends of $0.44, consisting of our base dividend of $0.37, which is in line with our first quarter base, plus a $0.07 supplemental. As Tom will detail later, our net asset value increased from prior quarter to $17.09 per share, primarily driven by our Q1 earnings outpacing our dividend. Turning now to the current investment environment, the terms and pricing available to us today continue to be lender-friendly. Recent deal activity indicates a potential recovery broadly syndicated in high-yield markets, though even with those green shoots sprouting, sponsors have continued to turn to private credit as the preferred financing source for the majority of LBO transactions. From a macro perspective, bank stress initially increased volatility in Q1, but the knock-on effects of those events were limited. Despite the Federal Reserve's best efforts, inflation remains persistent, with companies continuing to pass through price increases to the consumer. As a general note on our portfolio, over the last 18 months, we've seen stability in the credit quality of our book. The majority of our companies have been able to appropriately adapt to the current inflationary environment, and we pay close attention to any companies that we think may have a difficult time passing through cost inflation to customers in the long run. While Q1 is traditionally a seasonally slow quarter for deal activity, broader market volatility weighed further on M&A activity at the beginning of 2023 and led to an even slower quarter for capital formation. With this as the backdrop, we remained disciplined and focused on deploying primarily first-name capital at highly attractive yields. In line with the broader market, new originations were down, but despite this, we remained highly selective. The weighted average yield at cost of these transactions was higher than the new fundings in the fourth quarter. Additionally, newly funded investments had more attractive economics than first quarter repayments. We ended Q1 with approximately $2 billion in investment at fair value. Lastly, I'd like to spend a few minutes on our current portfolio positioning. While this was my first quarter of leading the business, our strategy remained consistent. We are focused on primarily making investments to U.S. companies backed by high-quality sponsors in the middle market. The median EBITDA across our core portfolio at the end of the first quarter was $73 million. Supplementing our core portfolio, we leveraged the sourcing capabilities of complementary lending strategies within the broader Carlyle network and capitalize on significant global resources that the firm has to offer to help us manage our risk. Our approach allows us to remain focused on disciplined underwriting, prudent portfolio construction, and conservative risk management. Our portfolio remains highly diversified and is comprised of over 170 investments in more than 130 companies across over 25 industries. The average exposure to any single portfolio company is less than 1%, and 95% of our investments are in senior secured loans, so we feel very well positioned in the current environment. I'll now hand the call over to our CFO, Tom Hennigan.