Sixth Street Specialty Lending (TSLX) Q2 2024 earnings summary

Executive summary

• Q2 2024 net investment income was $55.1 million ($0.59 per share), with adjusted net investment income at $0.58 per share and annualized ROE of 13.5%.

• Net asset value (NAV) per share reached $17.19 at June 30, 2024, an all-time high, up from $17.04 at year-end 2023.

• Portfolio consisted of 105–109 companies, 92.8% in first-lien debt, 99.6% floating rate, and 1.1% on non-accrual status.

• Board declared a Q2 2024 base dividend of $0.46 per share and a supplemental dividend of $0.06 per share.

• Maintains strong capital and liquidity, with $1.2 billion undrawn revolver capacity and leverage at 1.12x.

Financial highlights

• Total investment income for Q2 2024 was $121.8 million, up from $107.6 million in Q2 2023.

• Net expenses for Q2 2024 were $65.4 million, mainly due to higher interest and management fees.

• Weighted average yield on debt and income-producing securities at fair value was 13.8%–13.9%.

• Debt-to-equity ratio was 1.12x at June 30, 2024, down from 1.19x at March 31, 2024.

• Distributions per share for Q2 2024 were $0.52.

Outlook and guidance

• Management maintains full-year adjusted net investment income target range of $2.27–$2.41 per share (13.4%–14.2% ROE).

• Base dividend is expected to remain supported by operating earnings, even if rates decline to a terminal rate of 3.5%.

• Net portfolio growth is expected to be flat in the near term, with gross originations and repayments likely to offset each other.

• Floating rate portfolio and interest rate floors help hedge against inflation and rate volatility.

• Sufficient liquidity is available for near-term investment and operational needs.