Hello. Good day, and thank you for standing by. Welcome to the Carlyle Secured Lending, Inc. First Quarter 2025 Earnings Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Nishil Mehta, Head of Shareholder Relations. Please go ahead.

Good morning, and welcome to the Carlyle Secured Lending Conference Call to discuss the Earnings Results for the First Quarter of 2025. I'm joined by Justin Plouffe, our Chief Executive Officer; and Tom Hennigan, our Chief Financial Officer. 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. Following our remarks today, we will hold a question-and-answer session for analysts and institutional investors. This call is being webcast, and a replay will be available on our website. 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, the ability to realize the anticipated benefits of the merger, and our future operating results and financial performance. These statements are based on current management expectations and involve inherent risks and uncertainties, including those identified in the Risk Factors section of our 10-K and 10-Qs. These risks and uncertainties could cause actual results to differ materially from those indicated. CGBD assumes no obligation to update any forward-looking statements at any time. During the conference call, the company may discuss certain non-GAAP measures as defined by SEC Regulation G, such as adjusted net investment income or adjusted NII. The company's management believes adjusted net investment income, adjusted investment 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 to review our performance without giving effect to the amortization or accretion resulting from the new cost basis from all the investments acquired and accounted for under the acquisition method of accounting in accordance with ASC 805 and the purchase, one-time or nonrecurring investment income and expense events, including the effects on incentive fees and are used by management to value the economic earnings of the company. A reconciliation of GAAP net investment income, the most directly comparable GAAP financial measure to 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 filed last night with the SEC on Form 8-K. With that, I'll turn the call over to Justin, CGBD's Chief Executive Officer.

Thanks, Nishil. Good morning, everyone, and thank you all for joining. I'm Justin Plouffe, the CEO of the Carlyle BDCs and Deputy CIO for Carlyle Global Credit. On today's call, I'll give an overview of our first quarter 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. In the first quarter, CGBD benefited from growth in the overall portfolio, but was also impacted by headwinds from declining base rates and historically tight market spreads. During the quarter, we generated GAAP net investment income of $0.40 per share and adjusted net investment income of $0.41 per share after adjusting for asset acquisition accounting. This represents an annualized yield of approximately 10% on our March 31 NAV. Our Board of Directors declared a second-quarter dividend of $0.40 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. While sponsor M&A activity was muted during the first quarter, CGBD was still able to add approximately $180 million in organic originations to its portfolio. 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 II’s assets onto the balance sheet. Upon the close of the CSL III merger on March 27, CGBD received approximately $490 million in new investments, and the consolidation of Credit Fund II in February increased the portfolio size by a net $127 million. Cumulatively, total assets increased from $1.9 billion to $2.5 billion this quarter based on net investment and strategic activity. From a market perspective, broadly syndicated and private credit markets remained competitive. 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 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. As trade policy evolves, we'll 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 remain near historically tight levels, presenting a potential headwind to near-term earnings for the sector. Overall, we remain selective in our underwriting approach, taking quality credits at the top of the capital structure. As previously mentioned, we closed the strategic affiliate merger with CSL III at the end of the first quarter. The merger increased our scale and eliminated the CGBD preferred stock dilution overhang, with Carlyle exchanging its investment at NAV. 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 III's portfolio and CGBD's portfolio. To support the transaction and in addition to exchanging its preferred stock, Carlyle provided $5 million of merger-related expense coverage, mitigating the cost impact to CGBD. 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. 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 was less than 1% of total investments, and 94% of our investments were in senior secured loans. The median EBITDA across our portfolio was $87 million. As always, discipline and consistency drove performance in the first quarter, and we expect these tenets to drive performance in future quarters. With that, I'll now hand the call over to our CFO and our newest member of the Board of Directors, Tom Hennigan.

Thank you, Justin. Today, I'll begin with an overview of our first quarter financial results, then I'll discuss portfolio performance before concluding with detail on our balance sheet positioning. Total investment income for the first quarter was $55 million, generally in line with prior quarters due primarily to a higher average portfolio balance, offset by lower weighted average yields on the portfolio and lower dividends from Credit Fund II. Total expenses of $33 million increased versus the prior quarter, primarily as a result of higher interest expense from a higher average outstanding debt balance driven by growth in the portfolio. The result was GAAP net investment income for the first quarter of $21 million or $0.40 per share and adjusted net investment income per share of $0.41, 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. Now excluding the additional $0.02 per share of income from last quarter's one-time incremental dividends from Credit Fund II, which cleared the spillover income in NAV vehicle, this quarter's earnings represent about a $0.04 per share decline from the prior quarter, attributable to tighter yields from the combination of lower new issue spreads, lower base rates or pricing of existing loans, and a modest uptick in non-accruals, 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. So given the timing of the merger closed in the last week of March, Q1 earnings primarily represent income generated from pre-combination standalone CGBD. 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. Our Board of Directors declared a dividend for the second quarter of 2025 at a level of $0.40 per share, equal to our base dividend, which is payable to stockholders of record as of the close of business on June 30. This dividend level represents an attractive yield of about 11% based on the recent share price. In addition, we have $0.85 per share of spillover income generated over the last five years. So we feel comfortable in our ability to maintain the base dividend. On valuations, our total aggregate realized and unrealized net loss was about $8 million for the quarter, partially attributable to a markdown on Maverick, which we added to non-accrual during the quarter. This was partially offset by the successful exit of SPF at par and markups in the value of our equity positions in SPF and Bayside, formerly known as Derm Growth and ProPT, respectively. Turning to credit performance, we continue to see overall stability in credit quality across the portfolio with some underperformance in a handful of names, and we're continuing to actively assess each portfolio of companies' tariff risk exposure. For most of our borrowers, this is not the first time they'll be reassessing supply chains. Should we feel comfortable that the direct impact may be somewhat limited, outside of the broader risk of a slowdown in overall economic growth. For businesses that may not be directly impacted, including those in the U.S. services sectors, we're focused on evaluating the potential secondary effects of reduced demand as various companies may face higher costs. On the metrics, the risk rating distribution improved in the quarter with the addition of the CSO3 assets, which were substantially risk-rated two. Although non-accruals increased to 1.6% of total investments at fair value. We continue to work closely with both sponsors and borrowers to position our portfolio of companies for improved financial performance. And while our non-accrual rates may fluctuate from period to period, we're confident in our ability to leverage the broader Carlyle network to achieve maximum recoveries for underperforming borrowers. Moving to the credit funds. I previewed last quarter, we've been focused on optimizing our joint ventures over the last number of quarters. In February, we consolidated Credit Fund II onto CGBD's balance sheet to address the static nature of that vehicle. Following this transaction, we turned our focus on optimizing Credit Fund I 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 at that vehicle. Both of these transactions increased our non-qualifying asset capacity thereby providing greater flexibility going forward for both complementary transactions and other strategic partnerships. I'll finish by touching on our financing facilities and leverage. We continue to improve our capital structure in early 2025. In March, we upsized and extended our primary revolving credit facility, increasing total commitments by $145 million to $935 million in total. Further increasing our debt capacity upon closing the merger, CGBD assumed the $250 million CSL III credit facility. Also in connection with the closing of the merger, Carlyle exchanged its preferred stock for common stock at net asset value per share, instead of the latest conversion price of $8.87 per share. And this eliminated the historical overhang from the potential dilutive impact of the preferred equity on both NAV and NII. 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. At quarter-end, statutory leverage was about 1 turn providing capacity to deploy capital into attractive opportunities. With that, I'll turn the call back over to Justin.

Thanks, Tom. As we approach the middle of the second quarter, our portfolio remains resilient. We continue to 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, CGBD stockholders are benefiting from the continued execution of our strategy. As always, we remain committed to delivering a resilient, stable cash flow stream to our investors through consistent income and solid credit performance. I'd like to now hand the call over to the operator to take your questions. Thank you.

Thank you. Please follow the instructions provided. And with the first question, this comes from the line of Finian O'Shea from Wells Fargo Securities. Your line is open.

Hey everyone. Thanks and good morning. On the credit fund, Tom, I think you said it would enhance ROE. Does that go on a nominal basis? I think you paid the same dividend this quarter, but it is smaller now. I know there's higher leverage; maybe it's still ramping or whatnot. But first, trying to get a sense of what the credit fund dividend looks like going forward?

Good morning Fin. Thanks for the question. You're right. The nominal value outstanding, the cost for both JVs, the JV 2 going to 0, JV 1, 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 NII basis as being roughly neutral in terms of the higher ROE on a lower capital base, but then, of course, deploying those proceeds in regular assets, at least in the near-term.

Okay. And is the financing what kind of securitization is it? Does it run down?

So, it is what I would classify as a more of a typical bank-like facility with a revolving period and a typical amortization period, but with CLO-like qualities and tests where we were able to achieve the attractive pricing level.

Okay. Can you share your thoughts on reopening this category after previously reducing standard BSL type joint ventures? Are you looking to pursue new ones that are largely the same, or do you have a different approach in mind?

I don't think you'll see anything dramatically different, but we're in active negotiations and conversations internally. And that's something that won't be an overnight opening, but something that we're working on actively, and we anticipate making some progress in the next couple of quarters.

Okay. That’s all for me. Thanks so much.

Thank you. Please follow the instructions provided. Our next question comes from the line of Melissa Wedel from JPMorgan. Your line is open.

Good morning. Thanks for taking my question. I wanted to know that the merger sign-on, you've brought some assets on balance sheet from the funds. 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 mergers get completed; how do the yields compare to the pre-merger portfolio yield for CGBD and what's the plan there? Thank you.

The CSL3 book is quite clean, featuring a new vintage that is 99% first lien. Consequently, the overall yield is lower compared to CGBD. Blended together, this leads to an approximate reduction of 15 basis points in the aggregate portfolio of CGBD. There's also about 100% overlap since every loan in CSL was already included in CGBD, which allows for upsizing those positions. In the near term, we plan to selectively rotate some lower spread assets into our current joint venture to achieve better overall returns on those investments.

Thank you for that. When we examine portfolio leverage, it is somewhat lower on a net basis. Considering asset rotation and increasing leverage back toward the middle of the target range, what is your perspective on the timeline for this, particularly in the current volatile and uncertain environment?

Our target is to achieve a 1:1 operating ratio going forward. It’s challenging to predict outcomes given the recent slowdown in overall activity. Our objective over the next couple of quarters is to improve this situation. This quarter, we entered with a robust pipeline of transactions heading into the second quarter, which I believe will be quite positive. While we did observe a slowdown and an increase in repayments in the first quarter, we anticipate that the second quarter will show strong overall originations from us. We plan to transfer some of those assets into our joint venture and expect a strong volume of deals to be sold to the JV. Therefore, we foresee reaching our target leverage range within the next couple of quarters.

Very helpful. Thank you.

Thank you. Please follow the instructions provided. Our next question comes back from the line of Finian O'Shea from Wells Fargo Securities. Your line is open.

Hi, everyone. Thank you. I wanted to ask about the dividend. Tom, you mentioned that spillover might be used to support the base dividend. Can you provide an estimate of how much this could play a role based on today's SOFR curve? Also, to what extent do you plan to utilize spillover over the long term? Will you aim to retain some or eventually distribute it all? Thank you.

Right now, when we look at second quarter combined basis, we're looking at around $0.40 right where we were for the first quarter on a standalone CGBD basis. In terms of various levers, obviously, the headwind is going to be the curve, and we can't control that. That's going to be a headwind for everyone. The magnitude and the extent and the speed we'll see in terms of levers we have on the positive side will be lower. We haven't seen quite yet the potential reversal in historically tight credit spreads and non-accruals. We'll probably see pluses and minuses. The current non-accruals we're working on, positive resolutions there, but we have limited tariff exposure, but we will anticipate that non-accruals, let's say, will be neutral. And then there's the JVs, and that's, I think, in terms of ramping up our current JV and then utilizing that 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 SOFR, there will be some obvious headwinds in terms of earnings.

Yeah. I appreciate the uncertainty, and you have various levers at hand. But say it goes against you on SOFR like how far would you dip into spillover? Would you under earn the dividend and to what extent for how long?

And that's something that we have not put numbers to a page and something that we'll take quarter by quarter. Right now, we'll assess that on a go-forward basis.

Yes. We'll have to assess it as we develop through the summer. I think it's probably an understatement to say that our entire market is in a 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.

Very good. Thanks so much.

Thank you. There are no further questions. At this time, I would like to turn the conference back over to Justin Plouffe for closing remarks.

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

The meeting has now concluded. Thank you all for joining. Have a pleasant day, and you may now disconnect.