Sixth Street Specialty Lending, Inc.

Good morning, and welcome to 6th Street Specialty Lending, Inc.' 's second quarter-ended June 30, 2025 earnings conference call. At this time, all participants are in a listen-only mode. As a reminder, this conference is being recorded on Thursday, July 31, 2025. I will now turn the call over to Ms. Kami Sinator, 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 second quarter ended June 30, 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 10-Q 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 second quarter ended June 30th, 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 CFO Ian Simmons. Before we get started, I want to take a moment to express a profound sorrow following the tragic events that unfolded in our city earlier this week. On behalf of our entire company, our hearts go out to the victims and their loved ones. Our thoughts and prayers are with the families, first responders, and local firms affected by the senseless and random act. After the market closed yesterday, we reported the second quarter adjusted net investment income of $0.56 per share on annualized return on equity of 13.1%, an adjusted net income of $0.64 per share, or an annualized return on equity of 15.1%. As presented in our financial statements, our Q2 net investment income and net income per share, inclusive of the accrued capital gains incentive fee expenses, were $0.54 and $0.63, respectively. As a reminder, any differences between the adjusted and reported metrics is a non-cash expense related to accrued fees on unrealized gains from the valuation of our investments. The difference between adjusted net investment income and adjusted net income of $0.08 per share in Q2 was largely related to net unrealized gains from the impact of tightening credit spreads on the valuation of our investments and positive portfolio company specific events. I'd like to frame an important shift we see unfolding in the sector following the mini credit cycle that took place over the last few years beginning in mid-2022 with the rapid rise of interest rates. Through that cycle, public BDCs, including SOX, experienced idiosyncratic credit issues, putting downward pressure on net asset values. While the average public BDC saw its net asset value per share decline by 10.1% from the fourth quarter of 2021, through the first quarter of this year, SLX's net asset value per share increased by 1.2% over the same timeframe, or 2% through Q2. Even with the rise of non-accruals and the losses we recognize, our disciplined approach to capital allocation allowed us to overrun our cost of equity and grow net asset value. Over this period, we generated total economic return, calculated as change in net asset value plus dividends, 42.6%, more than doubling the average of our of our public BDC peers of 19.1 percent. We expect that credit issues are predominantly behind us. This is evidenced by an improvement in non-accruals for SOX this quarter and also for the sector more broadly, which experienced a marginal decrease in non-accruals at Q1. While we don't have peer data for Q2, we expect the trend to continue this quarter. This should result in a convergence between net investment income and net income for the sector. Under the premise that credit has broadly stabilized, we anticipate the focus for the sector shifts from credit quality to dividend coverage as portfolio yields decline from the combination of lower forward rates and tighter portfolio spreads. For SLX, adjusted net investment income in Q2 of 56 cents per share exceeded our base dividend by 22%. This robust dividend coverage is tied to our ability to source and execute on differentiated investment opportunities. This is clearly demonstrated by our weighted average spread on our new first lien investors in the second quarter of 6.5%, which compares to the public BDC sector average of 5.3% on new issued first lien loans for the first quarter. Again, we don't have comparable Q2 data for our peers, but we expect the weighted average portfolio spread to decline further this quarter. We continue to caution that there has been complacency in the sector. In addition to the pursuit of AUM growth, we believe this is largely driven by a backward-looking focus on LPM metrics that reflect an elevated rate and spread environment that's no longer indicative of today's investment landscape. What matters today and always is a forward view, and we believe our approach will continue to positively distinguish our earnings profile. Looking ahead, we estimate the quarterly earnings power of our business to exceed our base dividend level, assuming stable credit, leverage in the middle of our target range, and conservative fee income. As of June 30th, our net asset value was 17.17 per share, representing an increase of 70 basis points from 17.04 as of March 31st. Yesterday, our board approved a base quarterly dividend of 46 cents per share, to shareholders of record as of September 15th, payable on September 30th. Our board also declared a supplemental dividend of five cents per share related to our Q2 earnings to shareholders of record as of August 29th, payable September 19th. Net asset value per share adjusted for the impact of the supplemental dividend that was declared yesterday at $17.12. We estimate that a spillover income per share is approximately $1.30. With that, I'll now pass it over to Beau to discuss this quarter's investment activity. Thanks, Josh.