Q1 2025 Carlyle Secured Lending Inc Earnings Call

May 7, 2025

Roy Irwin, William Bittner, Nick Brubaker Lighthouse Sachets, Kverpotit, Harsha Kumar, Mata Production by Climate Change

Thank you for watching. See you next time.

Speaker Change: I would now like to hand, the conference over to your speaker today.

Speaker Change: Michelle Nida head of shareholder relations. Please go ahead.

Speaker Change: Good morning, and welcome to Carlyle's secured lending <unk> conference call to discuss the earnings results for the first quarter of 2025, I'm joined by Justin plus our Chief Executive Officer, and Tom Hennigan, Our Chief Financial Officer.

Speaker Change: 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.

Speaker Change: Following our remarks today, we will hold a question and answer session for analysts and institutional investors.

Speaker Change: Call is being webcast and a replay will be available on our website.

Speaker Change: Any forward looking statements made today do not guarantee future performance and any undue reliance should not be placed on them. Today's conference call may include forward looking statements, reflecting our views with respect to among other things the expected synergies associated with the merger.

Speaker Change: The ability to realize the anticipated benefits of the merger and our future operating results and financial performance.

Speaker Change: These statements are based on current management expectations involve inherent risks and uncertainties, including those identified in the risk factors sections of our 10-K and 10-Qs.

Speaker Change: These risks and uncertainties could cause actual results to differ materially from those indicated.

Speaker Change: <unk> assumes no obligation to update any forward looking statements at any time.

Speaker Change: During the conference call the company May discuss certain non-GAAP measures as defined by SEC regulation G.

Speaker Change: Adjusted net investment income or adjusted NII.

Speaker Change: Company's management believes adjusted net investment income adjusted net investment income per share adjusted net income and adjusted net income per share are useful to investors at additional tool to evaluate ongoing results and trends and to review our performance without giving effect to the amortization or accretion, resulting from the new cost basis.

Speaker Change: Other investments acquired in accounted for under the acquisition method of accounting.

Speaker Change: Coordinates with ASC 805, and the purchase onetime or nonrecurring investment income and expenses events.

Speaker Change: Including the effects on incentive fees and are used by management to evaluate the economic earnings of the company.

Speaker Change: A reconciliation of GAAP net investment income the most directly comparable GAAP financial measure adjusted NII per share.

Speaker Change: Can be found in the accompanying slide presentation for this call.

Speaker Change: In addition, a reconciliation of these measures may also be found in our earnings release filed.

Speaker Change: Last night with the SEC on form 8-K.

Justin plus: With that I'll turn the call over to Justin <unk>, Chief Executive Officer.

Speaker Change: Thanks, Michele good morning, everyone and thank you all for joining I'm, Justin plus the CEO of the Carlyle Bdcs and deputy CIO for Carlyle Global credit.

Speaker Change: On today's call I will give an overview of our first quarter of 2025 results, including the quarter's investment activity strategic transactions and portfolio positioning I'll, then hand, the call over to our CFO Tom Hennigan.

Speaker Change: In the first quarter <unk> benefited from growth in the overall portfolio, but was also impacted by headwinds from declining base rates and historically tight market spreads.

Speaker Change: During the quarter, we generated GAAP net investment income of <unk> 40 per share and adjusted net investment income of 41 per share after adjusting for asset acquisition accounting.

Speaker Change: This represents an annualized yield of approximately 10% on our $3 31 NAV.

Speaker Change: Our board of directors declared a second quarter dividend of <unk> 40 per share and our net asset value as of March 31 was $16 63 per share compared to $16 80 per share as of December 31.

Speaker Change: While sponsor M&A activity was muted during the first quarter <unk> was still able to add approximately $180 million inorganic originations to its portfolio. In addition, the total size of our portfolio was bolstered by our strategic activity, including the merger with CSL three and the consolidation of credit fund.

Speaker Change: <unk> assets onto the balance sheet.

Speaker Change: Upon the close of the CSL III merger on March 27th <unk> received approximately $490 million in new investments and the consolidation of credit fund two in February increase the portfolio size by a net $127 million.

Speaker Change: Cumulatively total assets increased from $1 9 billion to $2 $5 billion. This quarter based on net investment and strategic activity.

Speaker Change: From a market perspective broadly syndicated in private credit markets remained in competition, while our pipeline continues to be active recent volatility around tariffs is likely to remain a near term headwind to overall capital markets and M&A activity.

Speaker Change: We have examined our entire portfolio at this time, we see minimal potential direct risk from tariffs, we estimate that less than 5% of the portfolio has any material direct exposure.

Speaker Change: S trade policy evolves, we will continue to assess and monitor our portfolio companies for other direct and indirect impacts so far broader market volatility has had a limited impact on spreads in the private credit space, which remained near historically tight levels presenting a potential headwind to near term earnings for the sector.

Speaker Change: Overall, we remain selective in our underwriting approach taking quality credits at the top of the capital structure.

Speaker Change: As previously mentioned, we closed the strategic Filiate merger with CSL three at the end of the first quarter. The merger increased our scale and eliminated the <unk> preferred stock dilution overhang with Carlisle exchanging its investment at NASS.

Speaker Change: We expect the combination to improve the liquidity of our stock and reduce aggregate costs, all while maintaining our existing investment strategy given the near 100% overlap between CSL throughs portfolio and <unk> portfolio to support the transaction and in addition to exchanging is preferred stock Carlisle provided $5 million.

Speaker Change: Merger related expense coverage mitigating the cost impact to <unk>.

With increased uncertainty and volatility in the markets driven by tariff and trade policy. We are focused on overall credit performance and diversification, while continuing to deploy and increase the size of our portfolio.

Speaker Change: As of March 31, our portfolio is comprised of 195 investments and 138 companies across more than 25 industries. The average exposure in any single portfolio company with less than 1% of total investments and 94% of our investments were in senior secured loans, the median EBITDA across our portfolio with <unk>.

Speaker Change: $87 million.

Speaker Change: As always disciplined consistency drove performance in the first quarter. We expect these tests to drive performance in future quarters.

Speaker Change: With that I'll now hand, the call over to our CFO and our newest member of the board of Directors Tom Hennigan.

Tom Hennigan: Thank you Justin today, I'll begin with an overview of our first quarter financial results then.

Tom Hennigan: Then I will discuss portfolio performance before concluding with detail on our balance sheet positioning.

Tom Hennigan: Total investment income for the first quarter was $55 million.

Tom Hennigan: Generally in line with prior quarter, due primarily to a higher average portfolio balance.

Tom Hennigan: Offset by lower weighted average yields on the portfolio and.

Tom Hennigan: And lower dividends from credit fund too.

Tom Hennigan: Total expenses of $33 million increased versus prior quarter.

Tom Hennigan: Primarily as a result of higher interest expense from a higher average outstanding debt balance driven by growth in the portfolio.

Tom Hennigan: The result, with GAAP net investment income for the first quarter of $21 million or <unk> 40 per share.

Tom Hennigan: And adjusted net investment income per share of <unk> 41.

Tom Hennigan: Which excludes the amortization of the purchase price premium of the CSL three merger and the purchase price discount associated with the consolidation of credit fund too.

Tom Hennigan: Excluding the additional <unk> <unk> per share of income from last quarter's onetime incremental dividend from credit fund Q, which cleared the spillover income in that vehicle.

Tom Hennigan: This quarter's earnings represent about a <unk> <unk> per share decline from the prior quarter.

Tom Hennigan: Attributable to tighter yields from the combination of lower new issue spreads lower base rates, where pricing of existing loans.

Tom Hennigan: And a modest uptick in non accruals.

Tom Hennigan: What was the repayment at the end of last quarter of our lower cost bonds that were issued in a low interest rate environment.

Tom Hennigan: Given the timing of the merger closed in the last week of March Q1 earnings primarily represents income generated from pre combination Standalone <unk>.

Tom Hennigan: The earnings power of the combined portfolio will be reflected in Q2 earnings and.

Tom Hennigan: And on a per share basis, we expect NII to remain in the same range as Q1.

Tom Hennigan: Our board of directors declared a dividend for the second quarter of 2025 at a level of <unk> 40 per share equal to our base dividend, which is payable to stockholders of record as of the close of business on June 30.

Tom Hennigan: This dividend level represents an attractive yield of about 11% based on the recent share price.

Tom Hennigan: In addition, we have 85 per share of spillover income generated over the last five years. So we feel comfortable in our ability to maintain the base dividend.

Tom Hennigan: On valuations, our total aggregate realized and unrealized net loss was about $8 million for the quarter.

Tom Hennigan: Partially attributable to a markdown on Maverick, which we added to non accrual during the quarter.

Tom Hennigan: This was partially offset by the successful exit of S pay at par and.

Tom Hennigan: And markups and the value of our equity positions in Fps and Bayside, formerly known as <unk> growth and <unk>, respectively.

Tom Hennigan: Turning to credit performance, we continue to see overall stability in credit quality across the portfolio with some underperformance in a handful of names.

Tom Hennigan: And we're continuing to actively assess each portfolio companies tariff risk exposure.

Tom Hennigan: For most of our borrowers. This is not the first time there'll be reassessing supply chains should we feel comfortable that the direct impact may be somewhat limited.

Tom Hennigan: Outside of the broader risk of a slowdown in overall economic growth.

Tom Hennigan: For businesses that may not be directly impacted including those in the U S services sectors will focused on evaluating the potential secondary effects of reduced demand as various companies may face higher costs.

Tom Hennigan: On the metrics the risk rating distribution improved in the quarter with the addition of the CSL three assets, which were substantially risk rated to.

Tom Hennigan: Although non accruals increased to one 6% of total investments at fair value.

Tom Hennigan: We continue to work closely with both sponsors and borrowers to position our portfolio of companies for improved financial performance.

Tom Hennigan: And while our non accrual rate may fluctuate from period to period, we're confident in our ability to leverage the border Carlyle network to achieve maximum recoveries for underperforming borrowers.

Tom Hennigan: Moving to the credit funds as previewed last quarter, we can focus on optimizing our joint ventures over the last number of quarters in.

Tom Hennigan: In February we consolidated credit fund to onto <unk> balance sheet to adjust the static nature of that vehicle.

Tom Hennigan: Following this transaction, we turned our focus to optimizing credit fund one by extending the investment period by three years and closing a new credit facility with overall more attractive terms and economics, which should materially improve ROE had vehicles.

Tom Hennigan: Both of these transactions increased our non qualifying asset capacity.

Tom Hennigan: Thereby providing greater flexibility going forward for both complementary transactions and other strategic partnerships.

Tom Hennigan: I'll finish by touching on our financing facilities and leverage.

Tom Hennigan: We continue to improve our capital structure in early 2025.

Tom Hennigan: In March we Upsized and extended our primary revolving credit facility, increasing total commitments by $145 million to $935 million in total.

Tom Hennigan: Further increasing our debt capacity upon closing the merger CTD assume as the $250 million CSL three credit facility.

Tom Hennigan: Also in connection with closing the merger.

Tom Hennigan: Carlyle exchanges preferred stock for common stock at net asset value per share.

Tom Hennigan: Instead of the latest conversion price of $8 87 per share.

Tom Hennigan: And this eliminated the historical overhang from the potential dilutive impact of the preferred equity on both NAV and NII.

Tom Hennigan: Finally at the end of March we entered into an equity distribution agreement, enabling us to raise additional dry powder through an at the market equity offering program.

Tom Hennigan: At quarter end statutory leverage was about one turn.

Tom Hennigan: Riding capacity to deploy capital into attractive opportunities.

Joseph: With that I'll turn the call back over to Joseph.

Joseph: Thanks, Tom as we approach the middle of the second quarter, our portfolio remains resilient.

Joseph: You focus on sourcing transactions with significant equity cushions conservative leverage profiles and attractive spreads relative to market levels. Our pipeline of new originations is active and with a stable high quality portfolio <unk> stockholders are benefiting from the continued execution of our strategy as always we remain committed to delivering a.

Joseph: Stable cash flow stream to our investors through consistent income and solid credit performance.

Joseph: I'd like to now hand, the call over to the operator to take your questions. Thank you.

Joseph: Thank you.

Joseph: If you'd like to ask a question. Please press star and the number one on your telephone keypad again, the star and the number one on your telephone keypad.

Speaker Change: The first question. This comes from the line of Finian O'shea from Wells Fargo Securities.

Joseph: Your line is open.

Joseph: Okay.

Joseph: Hey, everyone, Thanks, and good morning.

Joseph: On the credit fund.

Speaker Change: Tom I think you said it would enhance ROE.

Speaker Change: Is that does that go on a nominal basis I think you paid the same dividend.

Speaker Change: This quarter.

Speaker Change: But it is smaller now I know, there's there's higher leverage maybe it's still ramping or whatnot, but.

Speaker Change: First trying to get a sense of what.

Speaker Change: The credit fund dividend looks like on the go forward.

Speaker Change: Hey, good morning. Thanks for the question you are right the nominal value outstanding the costs for both Jv's JV to go into the <unk> JV. One we had a return of capital in the aggregate in the near term, we see the dividend being flat over time, we look on an overall.

Speaker Change: Basis being roughly neutral in terms of the hot higher Roe.

Speaker Change: On a lower capital base, but then of course deploying those proceeds in regularly assets at least in the near term.

Speaker Change: Okay.

Speaker Change: Is the financing.

Speaker Change: What kind of securitization is it does it run down.

Speaker Change: So yes.

Speaker Change: What I would classify as a.

Speaker Change: More of a typical bank like facility with a revolving period.

Speaker Change: And it typically amortization period, but with cielo light qualities and tests, where we were able to achieve attractive pricing levels.

Speaker Change: Okay.

Speaker Change: Your your comments on opening up this this bucket.

Speaker Change: What you just shrunk.

Speaker Change: Standard.

Speaker Change: BSL type JV is something do you just want to do new ones that are essentially similar or is there a <unk>.

Speaker Change: Different kind of strategy you're pursuing there.

Speaker Change: I don't think Youll see anything dramatically different but we're in active negotiations and conversations internally and that's something that will it won't be an overnight.

Speaker Change: Opening, but something that we're working on actively and we anticipate making some progress in the next couple of quarters.

Speaker Change: Okay. All for me thanks, so much.

Speaker Change: Thank you.

Speaker Change: Again, if you would like to ask a question. Please press star and the number one on your telephone keypad now.

Speaker Change: Our next question comes from the line of Melissa <unk> from J P. Morgan.

Speaker Change: Your line is open.

Melissa: Good morning, Thanks for taking my questions.

Melissa: One now that the merger side any thoughts on assets on balance sheet from the filings.

Melissa: I'm curious if there is any asset rotation that you expect to take place. It's typically something we see when some of these murders get completed.

Melissa: How do the yields compare to sort of pre merger at portfolio yield for CBD and.

Uh huh.

Melissa: What's the plan there thank you.

Melissa: And listen via the impact so the CSF rebook very clean book newer vintage.

Melissa: 99% first lien so inherently.

Melissa: The overall yield compared to <unk> lower so on a merging the two the absolute impact on <unk> as a reduction in the AG portfolio of about 15 basis points.

Melissa: The rotation, you'll see it and there is also roughly about 100% overlap. So just that every loan NCS Rubens already in <unk> such as in upsizing those positions, where we will selectively look to deal with.

Melissa: Term rotating is for the some of the lower spread assets is to move those into our current JV to get better overall.

Melissa: Churn on those investments.

Speaker Change: Okay. Thanks for that and then when we look at portfolio leverage.

Melissa: It is a bit lower on a net basis.

Melissa: When you think about sort of rotating assets and.

Melissa: Driving leverage sort of hire and back into the maybe the middle of the target range.

Melissa: How do you think about the timeline for that especially in a more volatile uncertain environment like we have right now.

Melissa: Sure our target is one one in terms of where we'd like to operate going forward.

Melissa: Certainly difficult to say based on you we've seen Justin noted we've seen.

Melissa: A near term slowdown in overall activity tough to say how that will play out our goal would certainly be over the next couple of quarters.

Melissa: We have seen this quarters, we had a very strong pipeline of transactions heading into the second quarter. So I think the second quarter will be quite positive.

Melissa: We have seen a slowdown we had an uptick in repayments in the first quarter, we've seen those slow down so the crystal ball for the second quarter as I should be pretty good overall originations quarter from us will to rotate some of those assets into the JV. We would have a strong pipeline of deals that we anticipate will be selling to the JV. So we would anticipate over the next let's say two quarters getting to our target leverage range.

Melissa: That's very helpful. Thank you.

Melissa: Okay.

Melissa: Thank you.

Speaker Change: Our next question comes back from the line of Finian O'shea Wells Fargo Securities. Your line is open.

Melissa: Yes.

Finian O'shea: Hey, everyone. Thanks.

Speaker Change: We also wanted to ask on the dividend I think Tom you mentioned that the spillover.

Finian O'shea: May come into play to support the base dividend can you give us.

Speaker Change: I know this is tough to let's just say around around today so for curve.

Speaker Change: How much debt.

Speaker Change: It is expected to come into play and then also to what extent you would rundown spillover.

Speaker Change: And over the long term if you want to keep some are eventually pay it all out.

Speaker Change: <unk>.

Speaker Change: Okay.

Speaker Change: Sure.

Speaker Change: Right now when we look at second quarter combined basis.

Speaker Change: You're looking at.

Speaker Change: <unk> 40, right, where we were for the for the first quarter on a stand alone <unk> basis in terms of various levers obviously the headwind is going to need a sofa carbon we can't control that that's going to be a headwind for everyone. The magnitude and extent and the speed we will see in terms of levers we have on the positive.

Speaker Change: Leverage on the lower end.

Speaker Change: We haven't seen it quite yet the potential reversal in the historically tight credit spreads.

Speaker Change: Non accruals will probably see pluses and minuses to current non accruals were working on positive resolutions there, but we have limited tariff exposure, but we anticipate that non accruals, let's say will be neutral.

Speaker Change: And then theres, the Jv's and Thats I think in terms of.

Speaker Change: Ramping up our current JV and then utilizing that non asset non qualifying asset capacity for new endeavors that will really be our driver in terms of what our goal will be to remain in the current territory, but certainly with the sofa there will be soon.

Speaker Change: Awesome.

Speaker Change: Obvious headwinds in terms of earnings.

Speaker Change: Yes.

Speaker Change: I appreciate the uncertainty and you have various.

Speaker Change: Levers.

Speaker Change: At hand.

Speaker Change: But.

Speaker Change: Say it goes it goes against you on so far.

Speaker Change: Like how far would you dip into spillover would you under earn the dividend.

And to what extent for how long.

Speaker Change: And that's something that we have not.

Speaker Change: But numbers to a page and something that will take quarter by quarter.

Speaker Change: Right now we will assess that on a go forward basis.

Speaker Change: I'll have to assess it as as we.

Speaker Change: Developed through the summer I think it's probably an understatement to say that our entire market in the state of greater uncertainty than it's been in the past, but our intention is certainly to remain consistent with the dividend and hopefully the market allows us to do that.

Speaker Change: Very good thanks, so much.

Speaker Change: Thank you there are no further questions at this.

Justin: Time, I would like to turn the conference back over to Justin for closing remarks.

Justin: Thanks to everybody for joining the call today, we appreciate your interest and support and we will speak with you next quarter. Thank you so much.

Justin: The meeting has now concluded. Thank you all for joining have a pleasant day and you may now disconnect.

Justin: Please wait the conference will begin shortly.

Justin: Okay.

Justin: Yes.

Justin: [music].

Hello, Good day, and thank you for setting by welcome to the Carlisle secured lending Inc. First quarter 2025 earnings call. At this time, all participants are in a listen only mode.

Justin: After the speaker's presentation, there will be a question and answer session. If you'd like to ask a question. Please press star and the number one on your telephone keypad. Please.

Justin: Please be advised that today's conference is being recorded.

Justin: I would now like to hand, the conference over to your speaker today.

Speaker Change: Michelle Nita head of shareholder relations. Please go ahead.

Speaker Change: Good morning, and welcome to Carlyle's secured lending as conference call to discuss our earnings results for the first quarter of 2025, I'm joined by Justin plus our Chief Executive Officer, and Tom Hennigan, Our Chief Financial Officer.

Speaker Change: 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.

Speaker Change: Following our remarks today, we will hold a question and answer session for analysts and institutional investors.

Speaker Change: Call is being webcast and a replay will be available on our website.

Speaker Change: The ability to realize the anticipated benefits of the merger and our future operating results and financial performance.

Speaker Change: These statements are based on current management expectations and involve inherent risks and uncertainties, including those identified in the risk factors sections of our 10-K and 10-Qs.

Speaker Change: These risks and uncertainties could cause actual results to differ materially from those indicated.

Speaker Change: <unk> assumes no obligation to update any forward looking statements at any time.

Speaker Change: During the conference call the company May discuss certain non-GAAP measures.

Speaker Change: Defined by SEC regulation G such.

Speaker Change: Such as adjusted net investment income or adjusted NII.

Speaker Change: The company's management believes adjusted net investment income adjusted net investment.

Speaker Change: Income per share adjusted net income and adjusted net income per share are useful to investors as an additional tool to evaluate ongoing results and trends and to review our performance without giving effect to the amortization or accretion, resulting from the new cost basis.

Speaker Change: Investments acquired in accounted for under the acquisition method of accounting in accordance with ASC 805, and the purchase onetime or nonrecurring investment income and expenses events.

Speaker Change: Including the effects on incentive fees and are used by management to evaluate the economic earnings of the company.

Speaker Change: A reconciliation of GAAP net investment income the most directly comparable GAAP financial measure adjusted NII per share can be found in the accompanying slide presentation for this call.

In addition, a reconciliation of these measures may also be found in our earnings release.

Speaker Change: Site with the SEC on form 8-K.

Justin: With that I'll turn the call over to Justin <unk>, Chief Executive Officer.

Justin: Thanks, Michele good morning, everyone and thank you all for joining I'm, Justin Foster CEO of the Carlyle Bdcs and Deputy CIO for Carlyle Global credit on today's call I will give an overview of our first quarter of 2025 results, including the quarter's investment activity strategic transactions and portfolio positioning I'll, then hand, the call over to our CFO.

Tom Hennigan: No Tom Hennigan.

Tom Hennigan: In the first quarter <unk> benefited from growth in the overall portfolio, but was also impacted by headwinds from declining base rates and historically tight market spreads.

Tom Hennigan: During the quarter, we generated GAAP net investment income of <unk> 40 per share and adjusted net investment income of 41 per share after adjusting for asset acquisition accounting.

Tom Hennigan: This represents an annualized yield of approximately 10% on our $3 31 NAV.

Tom Hennigan: Our board of directors declared a second quarter dividend of <unk> 40 per share and our net asset value as of March 31 was $16 63 per share compared to $16 80 per share as of December 31.

Tom Hennigan: While sponsor M&A activity was muted during the first quarter <unk> was still able to add approximately $180 million inorganic originations to its portfolio.

Tom Hennigan: In addition, the total size of our portfolio was bolstered by our strategic activity, including the merger with CSL III and the consolidation of credit fund twos assets onto the balance sheet.

Tom Hennigan: Upon the close of the CSL III merger on March 27th <unk> received approximately $490 million in new investments and the consolidation of credit fund two in February increased the portfolio size by a net $127 million.

Tom Hennigan: Cumulatively total assets increased from $1 9 billion to $2 $5 billion. This quarter based on net investment in strategic activity.

Tom Hennigan: From a market perspective broadly syndicated in private credit markets remained in competition, while our pipeline continues to be active recent volatility around tariffs is likely to remain a near term headwind to overall capital markets and M&A activity we.

Tom Hennigan: We have examined our entire portfolio at this time, we see minimal potential direct risk from tariffs, we estimate that less than 5% of the portfolio has any material direct exposure.

Tom Hennigan: Trade policy evolves, we will continue to assess and monitor our portfolio companies for other direct and indirect impacts so far broader market volatility has had a limited impact on spreads in the private credit space, which remained near historically tight levels presenting a potential headwind to near term earnings for the sector.

Tom Hennigan: Overall, we remain selective in our underwriting approach seeking quality credits at the top of the capital structure.

Tom Hennigan: As previously mentioned, we closed the strategic Filiate merger with CSL three at the end of the first quarter. The merger increased our scale and eliminated the <unk> preferred stock dilution overhang with Carlisle exchanging its investment at NASS.

Tom Hennigan: We expect the combination to improve the liquidity of our stock and reduce aggregate costs, all while maintaining our existing investment strategy given the near 100% overlap between CSL <unk> portfolio and <unk> portfolio to support the transaction and in addition to exchanging is preferred stock Carlisle provided $5 million.

Tom Hennigan: Merger related expense coverage mitigating the cost impact to <unk>.

Tom Hennigan: With increased uncertainty and volatility in the markets driven by tariff and trade policy, we're focused on overall credit performance and diversification, while continuing to deploy and increase the size of our portfolio.

Tom Hennigan: As of March 31, our portfolio is comprised of 195 investments and 138 companies across more than 25 industries. The average exposure in any single portfolio company with less than 1% of total investments and 94% of our investments were in senior secured loans. The median EBITDA across our portfolio was <unk> eight.

$7 million.

Tom Hennigan: As always disciplined consistency drove performance in the first quarter and we expect these tenants to drive performance in future quarters.

Tom Hennigan: With that I'll now hand, the call over to our CFO and our newest member of the board of Directors Tom Hennigan.

Tom Hennigan: Thank you Justin today, I'll begin with an overview of our first quarter financial results then.

Then I'll discuss portfolio performance before concluding with detail on our balance sheet positioning.

Tom Hennigan: Total investment income for the first quarter was $55 million.

Tom Hennigan: Generally in line with prior quarter, due primarily to a higher average portfolio balance.

Tom Hennigan: Offset by lower weighted average yields on the portfolio.

Tom Hennigan: And lower dividends from credit fund II.

Tom Hennigan: Total expenses of $33 million increased versus prior quarter.

Tom Hennigan: Primarily as a result of higher interest expense from a higher average outstanding debt balance driven by growth in the portfolio.

Tom Hennigan: The result, with GAAP net investment income for the first quarter of $21 million or <unk> 40 per share.

Tom Hennigan: And adjusted net investment income per share of <unk> 41.

Tom Hennigan: Which excludes the amortization of the purchase price premium of the CSL III merger and the purchase price discount associated with the consolidation of credit Fund II.

Tom Hennigan: Excluding the additional <unk> <unk> per share of income from last quarter's onetime incremental dividend from credit fund Q, which cleared the spillover income in that vehicle.

Tom Hennigan: This quarter's earnings represent about a <unk> <unk> per share decline from the prior quarter.

Tom Hennigan: Repeatable to tighter yields from the combination of lower new issue spreads lower base rates for pricing of existing loans and a modest uptick in non accruals as.

Tom Hennigan: As well as the repayment at the end of last quarter of our lower cost bonds that were issued in a low interest rate environment.

Tom Hennigan: Given the timing of the merger closed in the last week of March Q1 earnings primarily represent income generated from pre combination Standalone <unk>.

Tom Hennigan: The earnings power of the combined portfolio will be reflected in Q2 earnings and on a per share basis, we expect NII to remain in the same range as Q1.

Tom Hennigan: Our board of directors declared a dividend for the second quarter of 2025 at a level of <unk> 40 per share equal to our base dividend.

Tom Hennigan: Which is payable to stockholders of record as of the close of business on June 30.

Tom Hennigan: This dividend level represents an attractive yield of about 11% based on the recent share price.

Tom Hennigan: In addition, we have 85 per share of spillover income generated over the last five years.

Tom Hennigan: So we feel comfortable in our ability to maintain the base dividend.

Tom Hennigan: On valuations, our total aggregate realized and unrealized net loss was about $8 million for the quarter.

Tom Hennigan: Attributable to a markdown on Maverick, which we added to non accrual during the quarter.

Tom Hennigan: This was partially offset by the successful exit of S pay at par.

Tom Hennigan: And markups and the value of our equity positions and Sps and Bayside, formerly known as <unk> growth and <unk>, respectively.

Tom Hennigan: Turning to credit performance, we continue to see overall stability in credit quality across the portfolio with some underperformance in a handful of names.

Tom Hennigan: And we're continuing to actively assess each portfolio companies tariff risk exposure.

Tom Hennigan: For most of our borrowers. This is not the first time there'll be reassessing supply chains should we feel comfortable that the direct impact may be somewhat limited.

Tom Hennigan: Outside of the broader risk of a slowdown in overall economic growth.

Tom Hennigan: On the metrics the risk rating distribution improved in the quarter with the addition of the CSL three assets, which were substantially risk rated cube.

Tom Hennigan: Although non accruals increased to one 6% of total investments at fair value.

Tom Hennigan: We continue to work closely with both sponsors and borrowers to position our portfolio companies for improved financial performance.

Tom Hennigan: And while our non accrual rates may fluctuate from period to period, we're confident in our ability to leverage the border Karla on network to achieve maximum recoveries for underperforming borrowers.

Tom Hennigan: Moving to the credit funds, we previewed last quarter, we've been focused on optimizing our joint ventures over the last number of quarters.