Carlyle Secured Lending Q1 2026 Earnings Report

Carlyle Secured Lending EPS Results

• Actual EPS: $0.36
• Consensus EPS: $0.35
• Beat/Miss: Beat by +$0.01
• One Year Ago EPS: N/A

Carlyle Secured Lending Revenue Results

• Actual Revenue: $64.08 million
• Expected Revenue: $65.78 million
• Beat/Miss: Missed by -$1.71 million
• YoY Revenue Growth: N/A

Carlyle Secured Lending Announcement Details

• Quarter: Q1 2026
• Date: 5/11/2026
• Time: Before Market Opens
• Conference Call Date: Monday, May 11, 2026
• Conference Call Time: 12:00PM ET

Carlyle Secured Lending (NASDAQ:CGBD) (NASDAQ: CGBD) is a closed-end, non-diversified business development company that provides customized debt financing solutions to middle-market companies. Chartered under the Investment Company Act of 1940, the company invests primarily in floating-rate senior secured loans, including first-lien, unitranche and one-stop structures. Its objective is to generate current income and capital appreciation through disciplined credit selection and active portfolio management.

The firm focuses on U.S. borrowers across a range of industries, including business services, healthcare, manufacturing and technology. By targeting sponsor-backed and independently owned enterprises with stable cash flows, Carlyle Secured Lending seeks to structure transactions that balance yield potential with downside protection. Its portfolio typically comprises secured obligations backed by company assets and receivables, providing a cushion against credit volatility in varied market environments.

Carlyle Secured Lending’s investment activities are overseen by Carlyle Global Credit Investment Management, the credit arm of The Carlyle Group. Leveraging global research capabilities and risk management frameworks, the team employs in-house credit analysis and market insights to source and monitor investments. Since commencing operations in 2018, the company has maintained a diversified portfolio and a floating-rate exposure designed to benefit from rising interest rate regimes.

Carlyle Secured Lending Q1 2026 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Strong origination and improving deal terms — CGBD funded $217 million in the quarter and the Carlyle direct lending platform closed over $1.2 billion of new commitments (platform originations +14% YoY), while new deal spreads widened ~50 bps and first‑lien leverage was reduced.
• Positive Sentiment: Joint venture ramp driving upside — MMCF surpassed $1 billion of investments with a ~15% dividend yield and expanded equity/debt capacity, and the new SCP JV (Carlyle + Sixth Street) is capitalized to scale via CLOs to potentially $6–7 billion of fee‑free assets, which management expects will boost CGBD earnings as it ramps.
• Negative Sentiment: Base dividend reset and near‑term earnings trough — the board reduced the base dividend to $0.35 per share (from $0.40) to support NAV and financial flexibility, and management expects earnings to trough in Q2 before recovering as JVs ramp.
• Positive Sentiment: Opportunistic buybacks — CGBD repurchased $19 million of shares in Q1 at an average discount of 26% (accreting ~$0.09 to NAV) and has added ~$8 million in Q2 buybacks (another ~$0.05 accretion), reflecting continued share‑repurchase execution against a meaningful discount.
• Neutral Sentiment: NAV and credit snapshot — NAV fell to $15.89 from $16.26 (≈$29 million net loss, two‑thirds from unrealized spread widening), but portfolio credit metrics remain stable with 94% senior secured exposure, median EBITDA of $100 million, and non‑accruals at only ~0.9% of fair value.

Presentation

[Operator]

Please be advised today's conference is being recorded. I would now like to hand the conference over to your speaker today, Nishil Mehta. Please go ahead.

[Nishil Mehta, Managing Director at Carlyle Secured Lending]

Good morning, and welcome to Carlyle Secured Lending's First Quarter 2026 Earnings Call. I'm joined by Alex Chi, CGBD's Chief Executive Officer, and Tom Hennigan, our President and Chief Financial Officer. This morning, we filed our Form 10-Q and issued a press release with the 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, our future operating results and financial performance.

[Nishil Mehta, Managing Director at Carlyle Secured Lending]

These statements are based on current management expectations, estimates, and projections and involve inherent risk and uncertainties, including those identified in the Risk Factors and Cautionary Statement regarding Forward-Looking Statements sections of our Form 10-K. 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 this 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.

[Nishil Mehta, Managing Director at Carlyle Secured Lending]

The 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 as additional tools 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 of the investment acquired and accounted for under the acquisition method of accounting in accordance with ASC 805 and the one-time purchase or non-recurring investment income and expense events, including the effect on incentive fees, and are used by management to evaluate the economic earnings of the company. A reconciliation of GAAP Net Investment Income per share, the most directly comparable GAAP financial measure to Adjusted NII per share, can be found in the accompanying slide presentation for this call.

[Nishil Mehta, Managing Director at Carlyle Secured Lending]

A reconciliation of these measures may also be found in our earnings release filed this morning with the SEC on Form 8-K. With that, I'll turn the call over to Alex.

[Alex Chi, CEO at Carlyle Secured Lending]

Thanks, Nishil, and good morning. On today's call, I'll give an overview of our first quarter results, including the quarter's investment activity and portfolio positioning, and provide an update on our investment outlook. I'll hand the call over to our President and CFO, Tom Hennigan. Despite a complex backdrop marked by geopolitical events and market volatility, we continue to be very pleased with the consistent credit performance of CGBD and strength of the Carlyle direct lending platform. In total, we funded $217 million of investments at CGBD and closed over $1.2 billion of new and incremental commitments at the platform level, reflecting a strong quarter of originations.

[Alex Chi, CEO at Carlyle Secured Lending]

Despite the market volatility, our platform originations were up 14% year-over-year in the face of U.S. private equity deal activity being down nearly 25% over the same period as the Carlyle direct lending platform continues to take share. In addition, we're seeing signs of an increasingly attractive investment environment with wider spreads and tighter documentation showing up in our new originations as a result of volatility and the recent rebalancing of capital supply amongst direct lenders. In the first quarter, spreads for CGBD's new investments widened by nearly 50 basis points on average compared to the fourth quarter's average of approximately 475 basis points. Our first lien deals were over a quarter turn less levered at origination.

[Alex Chi, CEO at Carlyle Secured Lending]

We also saw our enhanced origination team drive several wins during the quarter, including closing deals with two new private equity sponsors that we had not partnered with before. Repayments remained elevated with $216 million of activity during the quarter, combined with $153 million in sales to our MMCF joint venture. Net investment activity drove total investments at CGBD to decrease from $2.5 billion to $2.3 billion during the quarter. Given the strong visible pipeline and fewer expected repayments, we do expect to see portfolio growth in the second quarter. Total investments at our MMCF joint venture increased to over $1 billion as we continue to prioritize ramping this vehicle given the enhanced returns MMCF generates for CGBD.

[Alex Chi, CEO at Carlyle Secured Lending]

During the quarter, we generated $0.36 per share of net investment income on both a GAAP and adjusted basis. Our net asset value as of March 31st was $15.89 per share compared to $16.26 per share as of December 31st. The decrease was primarily attributable to market-related valuation factors, which Tom will describe in more detail later. Although concern around software companies persists, we remain confident in the quality and stability of our portfolio. The software borrowers in our book continue to grow revenue and EBITDA on a year-over-year basis. As it relates to AI disruption risk, we continue to feel comfortable with our exposure, finding no material near-term risks to our portfolio companies at this stage. We remain focused on portfolio diversification while managing target leverage.

[Alex Chi, CEO at Carlyle Secured Lending]

As of March 31st, our portfolio was comprised of 171 companies across more than 25 industries. The average exposure to any single portfolio company was less than 60 basis points of total investments, and 94% of our investments were in senior secured loans. The median EBITDA across our portfolio was $100 million. As always, discipline and consistency drove performance in the first quarter. We expect these tenets to drive performance in future quarters. Looking ahead, we continue to expect a wave of M&A activity over the medium term, and we are well-positioned with our revitalized origination platform to take advantage of increasing market activity and to continue taking share. Looking at our pipeline, a significant majority of deals are in old economy sectors, including industrials, aerospace and defense, healthcare, and consumer products.

[Alex Chi, CEO at Carlyle Secured Lending]

While we are optimistic about the potential for continued shift to an increasingly lender-friendly investment environment, CGBD's current income generation continues to be impacted by lower investment yields on the current portfolio, driven by the tight market spreads of recent years. Following discussions with our board of directors, we have reset the base dividend to $0.35 per share for the second quarter of 2026, compared to our previous $0.40 per share base dividend, which equates to a dividend yield on NAV of 8.8%. We are maintaining our existing supplemental dividend policy, which targets paying out at least 50% of excess earnings above the base dividend.

[Alex Chi, CEO at Carlyle Secured Lending]

This change will enable us to support a stable NAV in the near term and increases our financial flexibility and dividend coverage cushion, while also allowing us to deliver additional value to shareholders over time as the investment environment becomes more attractive and we scale our joint ventures. As manager dispersion increases, we expect the breadth of the Carlyle platform and the consistency of our performance to differentiate us through our ability to leverage Carlyle's scale, scope of investment capabilities, and dedicated in-house investing, portfolio management, and restructuring resources. With that, I'll now hand the call over to our President and CFO, Tom Hennigan.

[Tom Hennigan, President and CFO at Carlyle Secured Lending]

Thank you, Alex. Today, I'll begin with an overview of our first quarter financial results. I'll discuss portfolio performance before concluding with detail on our balance sheet positioning. Total investment income for the first quarter was $64 million. Below prior quarter, primarily driven by a decrease in the average portfolio size and a decrease in total portfolio yields as a result of lower base rates and lower spreads. This was partially offset by higher fee income. Total expenses of $39 million also decreased versus prior quarter, primarily as a result of lower interest expense due to a lower outstanding debt balance and lower base rates, as well as the acceleration of debt issuance costs from the repayment of our 2028 notes during the fourth quarter.

[Tom Hennigan, President and CFO at Carlyle Secured Lending]

The result was net investment income for the first quarter of $25 million or $0.36 per share on both a GAAP basis and after adjusting for the impact of asset acquisition accounting related to the CSL III merger and consolidation of Credit Fund II, both which closed in the first quarter of 2025. Our board of directors declared the dividend for the second quarter of 2026 at a level of $0.35 per share, which is payable to stockholders of record as of the close of business on June 30th. As Alex discussed, this resets the base dividend to a level supported by the earnings power of the current portfolio. With the investment environment becoming more attractive and as we continue to deploy and scale our joint ventures, we expect to potentially deliver additional value to shareholders through the supplemental dividend.

[Tom Hennigan, President and CFO at Carlyle Secured Lending]

In addition, we currently estimate we have $0.70 per share of spillover income to support the quarterly dividend. As we mentioned in prior earnings calls, we expect earnings to trough in the second quarter, and we anticipate an increase in earnings thereafter as we ramp the portfolio of both JVs. Given CGBD shares continue to trade at a compelling discount, we repurchased $19 million of shares at an average discount of 26% during the first quarter, resulting in $0.09 of accretion to NAV per share. We continue to repurchase shares in the second quarter with additional $8 million to date, which will result in an additional $0.05 per share of accretion. As a reminder, our board approved a $100 million upsize in February, increasing the total program to $300 million.

[Tom Hennigan, President and CFO at Carlyle Secured Lending]

On valuations, our total aggregate realized and unrealized net loss for the quarter was about $29 million, or $0.42 per share. Now, about 2/3 of the decline was attributable to unrealized losses from widening spreads across the broader portfolio, including software investments, driven by overall market volatility, with the remainder due to credit-related impacts on a handful of underperforming investments. Now turning to credit performance, we continue to see overall stability and credit quality across the portfolio. Key credit stats continue to be stable, including portfolio company margins, leverage levels, and LTVs. Although the fair value of loans utilizing PIK provisions did increase during the first quarter, the majority of our PIK is underwritten at origination or for performing borrowers, or what we would consider the good PIK. Non-approvals decreased as of March 31st, with one borrower, Alpine, completing a balance sheet restructuring during the quarter.

[Tom Hennigan, President and CFO at Carlyle Secured Lending]

The four remaining borrowers on non-accrual represent only 0.9% of investments at fair value and 1% at amortized cost. Moving to the Middle Market Credit Fund, or MMCF, our long-standing joint venture, we continue to focus on maximizing both asset growth and returns. During the 1st quarter, we closed an upsize to the MMCF equity commitments from $175 million-$250 million for each partner. Further supporting additional ramp, in February, we closed a new $200 million financing facility for MMCF with an attractive cost of SOFR +180 basis points. Last week, we closed a $400 million upsize to the existing credit facility from $800 million-$1.2 billion at an attractive spread of SOFR +170 basis points.

[Tom Hennigan, President and CFO at Carlyle Secured Lending]

MMCF is currently achieving a 15% dividend yield generated through over $1 billion of investments with no fees at the joint venture. The equity and debt upsides position us to continue to grow assets at the JV and increase the impact to CGBD earnings. In addition, we began ramping our new JV, Structured Credit Partners or SCP. As a reminder, SCP is capitalized with $600 million of equity commitments from the Carlyle and Sixth Street BDCs, and will invest in broadly syndicated first lien senior secured loans. The financing of these assets will be primarily through CLOs separately managed by Carlyle and Sixth Street, subject to the oversight of SCP's board of directors.

[Tom Hennigan, President and CFO at Carlyle Secured Lending]

CGBD committed $150 million of capital to the vehicle, which will not charge any management or incentive fees on the underlying JV assets, providing a potential 400 basis points-500 basis point uplift to total returns. In April, we were able to capitalize on market volatility and accelerated the timeline for the first two CLOs to price and close, benefiting from depressed loan prices and tight liability pricing. We expect to price and close two additional CLOs in 2026, subject to market conditions, in line with our plan to ramp at a cadence of four CLO issuances per year to ensure vintage diversification. Over time, the JV is expected to manage approximately $6 billion-$7 billion of assets fee-free at SCP. We expect to grow the dividend to CGBD as the JV ramps in the coming quarters.

[Tom Hennigan, President and CFO at Carlyle Secured Lending]

I'll finish by touching on our financing facilities and leverage. Our debt stack is 100% floating rate, matching our primarily floating rate assets, meaning CGBD is well-positioned in advance of any additional interest rate movements, and we have limited maturities until 2030. At quarter end, statutory leverage was 1.25x, and net financial leverage, after adjusting for unsettled sales of loans to MMCF, was only 1.06x. Given our current strong liquidity profile, we believe we're well positioned to benefit from both more attractive terms for new investments and the expected pickup in deal volume in future quarters. With that, I'll turn the call back over to Alex.

[Alex Chi, CEO at Carlyle Secured Lending]

Thanks, Tom. As we approach the middle of the second quarter, our portfolio remains resilient and our strategy remains unchanged. We continue to focus on sourcing transactions with significant equity cushions, conservative leverage profiles, and attractive spreads relative to market levels, and expect to take advantage of improved conditions in the market with a revitalized origination platform. 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.

[Operator]

Thank you. Ladies and gentlemen, if you have a question or a comment at this time, please press star one one on your telephone. If your question has been answered or you wish to remove yourself from the queue, please press star one one again. We will pause for a moment while we compile our Q&A roster. Our first question comes from Richard Shane with JPMorgan. Your line is open.

[Richard Shane, Analyst at JPMorgan]

Hey, guys. Thanks for taking my questions this morning. Look, you're highlighting the opportunity in terms of better origination terms. I am curious, you know, sort of where you see us in the cycle as things start to normalize. Are we in a scenario where it's sort of back to mid-cycle levels in terms of spreads and in terms of deal structure? Is this sort of the classic tight market where you are able to extract premiums and especially strong terms?

[Alex Chi, CEO at Carlyle Secured Lending]

Hey, it's Alex. Thanks a lot for the question. It feels to me like, as we've talked about, just given the rebalancing in the capital supply amongst the direct lending landscape, on top of the fact that there is still deal activity out there is just more discipline where it comes to spreads that are being indicated as well as for documentation. For the time being and as we look at the pipeline and our dialogue with the borrowers, it feels to us like we're clearly back in an environment where we're getting some spread back. As we mentioned, our originations in the first quarter, the spreads were up around 50 basis points. We're getting a bit more OID, and the documentation standards are also going a bit further back into lenders' hands.

[Alex Chi, CEO at Carlyle Secured Lending]

For the foreseeable future and as we look at our pipeline, it feels like this dynamic will continue.

[Richard Shane, Analyst at JPMorgan]

Got it. Okay. Appreciate it, guys. Thank you.

[Alex Chi, CEO at Carlyle Secured Lending]

Thank you.

[Operator]

One moment for our next question. Our next question comes from Erik Zwick with Lucid Capital Markets. Your line is open.

[Erik Zwick, Analyst at Lucid Capital Markets]

Thanks. Good morning. Just wanted to follow up on the questions, I'm sorry, on the commentary that Tom gave with the question. You know, I think, Tom, you mentioned that you expect earnings to trough in 2Q, given the expected kind of ramp in the JVs. You know, just you mentioned some spread widening as well for the core portfolio, but it looks like, you know, 1Q new investments, the weighted average yield to that is still below the average yield in the portfolio. That earnings trough can happen even with potentially a little bit of more kind of core investment yield compression, is that the right way to think about your commentary?

[Tom Hennigan, President and CFO at Carlyle Secured Lending]

Hey, Erik, thanks for the question. I think that's right. When you look at the second quarter, in particular compared to the first quarter, a couple of dynamics. Number one is overall portfolio spread continues to have a little bit of pressure. I think that's pretty much worked its way through. Second, base rates, we think at least for our portfolio base rates the impact worked its way through in the first quarter. Absent additional rate cuts, at least the prior rate cuts, we felt the pain to date already. When you look at our average assets, and particularly when we had some attractive sales to our JV at the end of the quarter, the average assets for the second quarter are likely to be lower than the first quarter.

[Tom Hennigan, President and CFO at Carlyle Secured Lending]

The first quarter was also aided by higher than typical fee income. We had a couple of exits, exit fees and prepayment fees that probably aided the first quarter by a little bit north of a penny. You put those together, we also anticipate we're gonna finally start to see some ramp. I say finally, we just started with our JVs. You're gonna start to see some modest ramp, particularly with our new JV with Sixth Street in the second quarter, but that's gonna be more of a back-end 2026 into 2027 positive. You put that all together, and we think that you'll see, you know we anticipate we'll trough in the second quarter and then see a rebound in the third quarter.

[Erik Zwick, Analyst at Lucid Capital Markets]

That's helpful. Thanks. Just on the, I guess, the $152 million of assets sold to the credit fund in the quarter, you know, how were those assets selected? Any commentary you can give on, just kind of the details on, you know, kind of potentially the yield that was on those as well as the pricing.

[Tom Hennigan, President and CFO at Carlyle Secured Lending]

Sure. Those I'd say are primarily late 2025 originations, regular course deals, the deals in the typically 450, 475 spread. Those transactions when we originated across our platform throughout 2025, those lower spread transactions, typically with a four handle, we really weren't considering to maintain long-term on the CGBD balance sheet. We were always working in concert with PSP with the thought that we would originate directly or ultimately sell to the JV. That was really just a timing factor of ultimately transacting on those deals that we originated at market terms throughout 2025.

[Erik Zwick, Analyst at Lucid Capital Markets]

Great. Thank you for taking my questions.

[Tom Hennigan, President and CFO at Carlyle Secured Lending]

Thank you.

[Operator]

Again, ladies and gentlemen, if you have a question or a comment at this time, please press star one one on your telephone. I'm not showing any further questions at this time. I turn the call back to Alex for any further remarks.

[Alex Chi, CEO at Carlyle Secured Lending]

Great. Thanks, everyone, for participating on our call. We'll continue to execute, and we look forward to speaking with you when we report next quarter. Have a good day.

[Operator]

Thank you. Ladies and gentlemen, this concludes today's presentation. We thank you for your participation. You may now disconnect and have a wonderful day.

Participants

Executives

• Alex Chi, CEO
• Nishil Mehta, Managing Director
• Tom Hennigan, President and CFO

Analysts

• Erik Zwick, Analyst at Lucid Capital Markets
• Richard Shane, Analyst at JPMorgan