Carlyle Secured Lending, Inc.

Good day, everyone, and thank you for standing by. Welcome to the Carlisle Secure Lending Inc. Second 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. To ask the question, you will need to press star 1-1 on your telephone. You will then hear a message advising your hand is raised. To withdraw the question, simply press star 1-1 again. please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Daniel Hon. Please go ahead.

Good morning, and welcome to Carlyle Secured Lending Second Quarter 2023 Earnings Call. With me on the call this morning is Aaron Lee Kong, our Chief Executive Officer, and Tom Hennigan, our Chief Financial Officer. Last night, we filed our Form 10-Q and issued a 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 factor section of our annual report on Form 10-K. These risks and uncertainties could cause actual results to differ materially from those indicated. Carlisle 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 second 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, we continue to see the benefit of higher base rates and attractive pricing on new investments, generating total net investment income of 52 cents per share for the quarter, which is up 30% year on year. Our net asset value at June 30th was $16.73 per share as compared to $17.09 for Q1. As Tom will detail later, the change in NAV for the quarter was primarily driven by a markdown on one of our healthcare services investments that was partially offset by earning NII in excess of the dividend. We declared total Q3 dividends of $0.44, consisting of our $0.37 base dividend plus a $0.07 supplemental, both of which were in line with the prior quarter. Although we are pleased with the quarter's earnings, we remain focused on the credit performance of the overall portfolio. The credit fundamentals of our portfolio, in the aggregate, have continued to perform well, with revenues up more than 30% and EBITDA margins largely flat year over year, despite inflationary pressures to the economy. And importantly, Our borrowers have reported consistent quality results as we've not seen a meaningful increase in non-cash outbacks and interest coverage remains stable. This gives us comfort in the strength of our portfolio. Turning now to the current market environment. We saw the key trends discussed on our last call continue through the balance of the second quarter. Terms and pricing lead favorably to lenders. and deal activity in high yield and syndicated markets is still sluggish with overall net loan supply at 15-year longs. Given these market dynamics, sponsors continue to favor the private credit market to finance the limited number of LBO transactions that have been completed. While we continue to view the LBO market as a core component of our strategy, we also complemented our traditional sponsor pipeline with other sources of transaction flow. In particular, we've seen attractive sourcing opportunities from three main areas. One, as mentioned, new deal flow from sponsors-backed companies. This is our largest generator of our deal flow, and we've continued to be increasingly selective. Two, Carlyle-generated and non-sponsored deal flow. The one Carlyle platform provides us access to a wide swath of deal flow. And three, finally, what I would call farming the portfolio. We're able to leverage our position as an incumbent lender along with our long-standing relationships with companies and sponsors to execute collaborative solutions for amendments, extensions, and M&A activity that provide added flexibility to borrowers and attractive incremental economics to our portfolio. Regardless of sourcing channel, We focused our efforts in Q2 on opportunities that were accretive to the portfolio's return. One example of this was that our average spread at origination on new deals improved by approximately 100 basis points compared to this period last year. In addition, as previously mentioned, we generated significant incremental value from our existing borrowers from amendment activity, which has driven tighter documentation, incremental fees, additional equity contribution from sponsors, and spread increases. In the second quarter alone, approximately 16% of our loans saw an improvement in one or more of these areas due to amendment and other related activity. I'll now hand the call over to our CFO, Tom Hannigan.