Sixth Street Specialty Lending, Inc.

Good morning and welcome to Sixth Street Specialty Lending, Inc.' 's fourth quarter and fiscal year ended December 31st, 2021 earnings conference call. At this time, all participants are in a listen-only mode. As a reminder, this conference is being recorded on Friday, February 18th, 2022. I will now turn the call over to Ms. Van Horn, Head of Investor Relations.

Thank you. Before we begin today's call, I would like to remind our listeners that remarks made during the call may contain forward-looking statements. Statements other than statements of historical facts made during this call may constitute forward-looking statements and are not guarantees of future performance or results and involve a number of risks and uncertainties. Actual results may differ materially from those in the forward-looking statements as a result of a number of factors including those described from time to time in Sixth Street Specialty Lending Inc.' 's filings with the Securities and Exchange Commission. The company assumes no obligation to update any such forward-looking statements. Yesterday, after the market closed, we issued our earnings press release for the fourth quarter and fiscal year ended December 31, 2021, and posted a presentation to the Investor Resources section of our website, www.sixthstreetspecialtylending.com. The presentation should be reviewed in conjunction with our Form 10-K filed yesterday with the SEC. Sixth Street Specialty Lending, Inc.' 's earnings release is also available on our website under the Investor Resources section. Unless noted otherwise, all performance figures mentioned in today's prepared remarks are as of and for the fourth quarter and fiscal year ended December 31, 2021. As a reminder, this call is being recorded for replay purposes. I will now turn the call over to Joshua Easterly, Chief Executive Officer of Sixth Street Specialty Lending, Inc.

Thank you, Cami. Good morning, everyone, and thank you for joining us. With us today is my partner and our President, Bo Stanley, and our CFO, Ian Simmons. For our call today, I will review our full year and fourth quarter highlights and pass it over to Bo to discuss our originations activity and portfolio metrics. Ian will review our financial performance in more detail, and I will conclude with final remarks before opening up the call to Q&A. After the market closed yesterday, we reported fourth quarter adjusted net investment income and adjusted net income per share of 63 cents and 57 cents, respectively. This resulted in a full-year adjusted net investment income per share of $2.16 or a return on equity of 13.6% and a full-year adjusted net income per share of $3.12 or a return on equity of 19.7%. These results were primarily driven by record levels of both funding and repayments, which helped us operate within target leverage levels throughout the year while also experiencing meaningful activity-driven income. At quarter end, we had approximately 20 cents per share of cumulative accrued capital gains incentive fees on the balance sheet, and approximately 11 cents per share would be payable in cash if our entire portfolio were to be realized after quarter end mark and normal course. The rest of the accrued fees are tied to unrealized gains from the valuation of our debt investments, inclusive of call protection, which if prepaid would require recognition of fees and investment income and trigger a reversal of previously accrued capital gains and incentive fees related to these investments. In Q4, the impact of such reversals was $0.03 per share. This was offset by a similar amount from realized and unrealized gains that were above our prior quarter valuation marks, resulting in a reversal of less than $0.01 per share of accrued capital gains and incentive fees on the balance sheet. As we discussed in previous quarters throughout 2021, we've excluded accrued capital gains incentive fees amounts in the presentation of adjusted results on the basis that the expense accrual requirement for the item creates noise around the fundamental earnings power of our business. As of December 31st, 2021, the amount of capital gains incentive fees due to the advisor in cash was zero because the gains driving the fee accrual were unrealized. Throughout 2021, we continue to focus on capital efficiency by distributing record level of $3.59 per share during the calendar year through a combination of our base, supplemental, and special dividends. Over that period, we've generated a total economic return to shareholders measured by the change in net asset value per share plus dividends per share of 19.1%, exceeding our average annual economic return rate since IPO of 12.9% through 2020. These returns were primarily driven by the overrunning of our base dividend through net investment income, accretive capital market transactions, and realized and unrealized gains on investments. Yesterday, our board approved a base quarterly dividend of 41 cents per share to shareholders of record as of March 15th, payable on April 18th. Our board also declared a supplemental dividend of 11 cents per share related to our Q4 earnings to shareholders of record as of February 28th, payable on March 31st. Our year in net asset value per share pro forma for the impact of the supplemental dividend that was declared yesterday is 1673, and we estimate that our spillover income per share is approximately 42 cents. We would like to reiterate that our supplemental dividend policy is motivated in part by tax and RIC distribution considerations, and our goal of steadily building that asset value per share over time remains very much part of our philosophy. The distribution of the special supplemental dividends this past year have significantly reduced our excise tax obligations, generating estimated annual savings of $0.08 per share relative to retaining that capital. With that, I'll now pass it over to Beau to discuss this quarter's record investment activity.