Sixth Street Specialty Lending, Inc.

Good day. Thank you for standing by. Welcome to the 6th Street Specialty Lending, Inc. First Quarter 2025 Earnings Conference Call. At this time, all participants are in listen-only mode. After this previous presentation, there will be a question and answer session. To ask a question during this session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised that today's conference is being recorded. I'll now hand the conference over to your first speaker today, Kami Van Hoerden, Head of Investor Relations. Please go ahead.

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. 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 first quarter ended March 31, 2025, 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 10Q 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 first quarter ended March 31st, 2025. 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.

Good morning, everyone, and thank you for joining us. With me today are President Bo Stanley and our CFO, Ian Simmons. For our call today, I will review our first quarter highlights and pass it over to Bo to discuss activity and the portfolio. Ian will review our financial performance in more detail, and I will conclude with final remarks before opening up the call and Q&A. In addition to today's earnings call and public filings, we also published a letter to our stakeholders. We may currently be one of the most pivotal periods for the U.S. in global markets since the global financial crisis. We believe we're operating under a new world order, and it's our job as investors to embrace this reality and proactively position our business based on probabilistic assessments to navigate the evolving environment. We encourage and welcome your feedback. While we recognize that the world has changed since March 31st, we believe our business remains well protected on the asset side with limited direct exposure to tariffs and well positioned on the liability side. We already said a mouthful on these topics in our letter, so I'll limit my opening remarks today to briefly covering our first quarter results and framing how we think about the future earnings potential of our business. After the market closed yesterday, we reported first quarter adjusted net investment income of 58 cents per share, or an annualized return on equity of 13.5%, an adjusted net income of 36 cents per share, or an annualized return on equity of 8.3%. As presented in our financial statements, our Q1 net investment income and net income per share, inclusive of the unwind of non-cash accrued capital gains incentive fee expense, was $0.62 and $0.39, respectively. Of the $0.22 per share difference between net investment income and net income, only $0.05 per share was credit-related. This was primarily marked down on our existing non-accrual loans, and therefore, there was no impact in net investment income. The remaining $0.17 per share was in two buckets. In the first bucket, which we characterized as geography-related, There was 11 cents per share of prior period unrealized gains that moved out of last quarter's net income and into this quarter's net investment income, primarily related to investment realizations. And the second bucket, characterized as market-related, there was 6 cents per share impact from widening credit spreads, which, assuming no credit losses, will be reversed as investments are paid off or reach maturity. Looking ahead, we estimate that the quarterly earnings power of the business, assuming a base case of no additional non-incrual investments and no spread impact on investment valuations, is approximately 50 cents per share. This includes interest income generated by the in-the-ground portfolio today plus limited activity-based fee income. This translates to a return of equity of approximately 11.7% above the floor of the calendar year 2025 guidance we provided on our last earnings call of 11.5% to 12.5%. Given increases in repayment activity, there's potential upside to that figure if activity-based fees return to our average prior to the start of the rate hiking cycle. We believe our asset quality today supports this forward earnings profile, which we anticipate will differentiate returns from the public BDC sector for three important reasons. First, we've continued to be a very disciplined capital allocator. Our portfolio yields are meaningfully higher than the sector average with the weighted average yield and amortized cost of 12.5% in Q4 compared to 11.6% for our peers. We also have a significant small of our portion of our portfolio invested in loans with spreads below 550 basis points, which Bo will discuss later. We believe our discipline approach will allow us to outperform as the sector experiences a more significant decline in portfolio yields. This leads to the second point, which is that our patience and discipline over the past several quarters, combined with increased repayment activity, have provided us with significant capacity to invest in what we expect to be a more interesting investment environment. As we have seen in the past, periods of heightened volatility often present the most attractive investment opportunities. We are well positioned with the level of capital and significant amount of liquidity we have for the period ahead. And finally, we believe our returns will continue to be differentiated given our track record of lower credit losses relative to the sector. Yesterday, our board approved a base quarterly dividend of 46 cents per share to shareholders of record as of June 16th, payable on June 30th. Our board also declared a supplemental dividend of six cents per share relating to our Q1 earnings to shareholders of record as of May 30th, payable on June 20th. Our net asset value per share adjusted for the impact of the supplemental dividend that was declared yesterday, 1698. We estimate that our spillover income per share is approximately $1.31. With that, I'll now pass it over to Beau to discuss his quarterly investment activity.