Sixth Street Specialty Lending, Inc.

Good morning and welcome to Sixth Street Specialty Lending Inc's first quarter ended March 31st, 2026 earnings conference call. At this time, all participants are in a listen only mode. As a reminder, this conference is being recorded on Wednesday, May 6th, 2026. I will now turn it over to Ms. Cami Senatore, 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 uncertainty. 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 first quarter ended March 31, 2026, 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 first quarter ended March 31, 2026. As a reminder, this call is being recorded for replay purposes. I will now turn the call over to Beau Stanley, Chief Executive Officer of Sixth Street Specialty Lending, Inc.

Thank you, Cammie. Good morning, everyone, and thank you for joining us. With me today is our head of investment strategy, Ross Brock, and our CFO, Ian Simmons. Before I begin, I'm pleased to announce that effective May 21st, Mike Fishman will become chairman of our board of directors, following our previous announcement regarding Josh Easterly's retirement from the role. Mike is a respected industry veteran with decades of experience in credit investing and asset management. As an early member of Sixth Street, and a director of SLX since 2011. Including tenure as CEO, he has been instrumental in building our business. His combination of deep industry expertise and platform understand him make him uniquely qualified for this position, and we look forward to his contributions as chairman. For our call, I'll review our first quarter highlights and pass it to Ross to discuss investment activity and the portfolio. Ian will review our financial performance in detail, and I will conclude with final remarks before opening the call to Q&A. Yesterday, we reported first quarter net investment income of 42 cents per share, or an annualized return on equity of 9.9%. Inclusive of our movement in fair value of our investments, we reported a net loss per share of 27 cents. Our net loss per share this quarter was largely driven by unrealized losses on our investments as we incorporated the impact of wider market spreads and lower market multiples in our fair value determinations. More on that in a moment. At quarter end, our net asset value per share declined by approximately 4.3% from 1697, which includes the impact of the Q4 supplemental dividend, to 1624. Of this decline, 58 cents per share, or nearly 80%, was attributable to the movement in fair value from the market inputs which are unrealized. That included 40 cents per share from unrealized losses in our debt portfolio tied to credit spread widening seen in the broader market and 18 cents per share from lower market valuations in our limited equity portfolio. Eight cents per share of the decline is related to portfolio company specific performance and the remainder from the payoffs and realized gains. Ian will walk through the NAV bridge in more detail. These results reflect a period of market-driven volatility rather than a change in the underlying strength of our business. Our portfolio remains healthy, our balance sheet is strong, and we are well positioned to capitalize on opportunities as the market continues to evolve. Volatility in Q1 was driven by several factors. including market concerns around the impact of AI on software investments, increased redemption requests from shareholders of non-traded BDCs, and heightened geopolitical uncertainty, the latter of which was not something we anticipated at the time of our last earnings call. These dynamics contributed to credit spreads widening in a subdued transaction environment. LCD first lien spreads widened by 48 basis points, and second lien spreads widened by 256 basis points during the quarter. I want to reiterate our approach to valuation, which incorporates changes in market-wide credit spreads when determining the fair value of our investments. Our process is designed to reflect the price in an orderly transaction at the measurement date. That's not just our perspective. It's the regulatory requirement designed to maintain the integrity of the balance sheet. For additional detail regarding our valuation framework, we encourage you to read our stakeholder's letter on the topic from August 2022 available on our website. We have consistently applied this valuation framework since inception, including periods of volatility such as Q1 2020 related to COVID and Q2 2022 related to the interest rate hiking cycle. During those quarters, net asset value per share declined by approximately 7.4% and 3.6% respectively, driven primarily by the impact of wider credit spreads. These unrealized losses reflected in earnings and NAV are non-cash in nature and do not reflect our view of permanent credit losses. As such, we expect these unrealized losses related to credit spread movement to reverse over time as market conditions change and our investments approach realization or maturity. Our track record of long-term value creation is demonstrated by the 4.7% cumulative growth in our net asset value per share since our 2014 IPO through March 31st. This compares to an average NAV decline of 7.3% for our public BDC peer group from our IPO through the end of 2025, representing significant outperformance irrespective of the volatility we experienced in any quarterly period. Market volatility also impacted net investment income through lower activity-based fee income. In Q1, we earned $0.05 per share of activity-based fees, which is below our three-year historical average of $0.09 per share. As we've discussed in prior periods, activity-based fees, which are primarily driven by early repayments, are inherently episodic. During periods of heightened market volatility are experiences that many borrowers and asset owners defer capital markets activity. As a result, both funding and repayment volumes typically contract as valuation gaps widen and transaction activity slows. While we recognize that the current environment will take time to fully play out, As the market undergoes a period of price discovery, our experience has consistently shown that these periods of volatility create some of the most attractive investment opportunities. We believe we are well positioned to capitalize on that opportunity set. In our earnings release yesterday, we announced a change in our base dividend level from 46 cents to 42 cents per share. This decision was informed by what we believe is a responsible and sustainable dividend policy. As we assess the current environment, We have always believed it is appropriate to align our base dividend with the forward earnings power of the business. That forward view reflects the level of uncertainty we see around near-term activity, including the rate and spread backdrop, and also the market volatility caused by geopolitical uncertainty. that has occurred since our last call. Our perspective is also informed by historical periods of dislocation, which suggests that activity-based fee income can take several quarters to normalize following a market dislocation. While this may differ, history reinforces our decision to take a measured and prudent approach today. The pre-2022 environment provides a baseline for where our dividend level stood before rates began to increase. We had a base dividend of 41 cents per share. Our earnings power increased with higher base rates and wider spreads. We raised the base dividend to 42 cents in Q3 2022, 45 cents in Q4, and 46 cents in Q1 2023, representing a total increase of 12.2%. While we see potential for an increase in transaction activities as the year progresses, the timing and magnitude of that pickup and the resulting impact on our activity-based fee income remains difficult to forecast with conviction. That said, our view on base rates through the forward curve and new issue spreads is more visible. This adjustment establishes a distribution level that is sustainable across a range of potential activity outcomes. At quarter end, we had approximately $1.57 per share of potential activity-based fee income embedded in the portfolio, including unamortized OID and call protection. If activity accelerates, that embedded income provides meaningful upsize. Our supplemental dividend framework captures and distributes that upside to shareholders as it's realized. Yesterday, our board approved a base quarterly dividend of 42 cents per share to shareholders of record as of June 15th, payable on June 30th. This corresponds to an annualized dividend yield of 10.3% on our March 31st net asset value per share, which we believe is aligned with the core earnings power of the portfolio and with our target return on equity for the year. Ian will speak more on that in a moment. With that, I'll pass it to Ross to discuss this quarter's investment activities.