Can you discuss the spread environment in the second half of the year and how the company balances new loan deployment with share repurchases given the current discount to NAV?

The company continues to actively repurchase shares while seeking the right balance with deploying new capital. A key focus is deploying capital into the joint ventures (MMCF and SCP) due to their accretive yields. “we continue to be active with repurchasing shares, but we're trying to find the right balance and continue to be active in deploying new capital.”

What drove the quarter-over-quarter decline in other income, specifically if it was due to lower refinance or amendment activity?

The prior quarter included outsized, one-time income from repayment activity, specifically a large repayment fee. This quarter's other income was more normalized, actually lower than the typical baseline. “last quarter we had more outsized one-time income from repayment activity. One particular repayment had a large repayment fee. So this quarter really more normalized, actually probably a lower level than normal.”

Other competitors express optimism about the M&A pipeline for the back half of the year. What is your view, and do you require flat-out stability to become more optimistic?

More clarity on inflation and interest rates, linked to geopolitical factors and oil prices, is needed for M&A to fully recover. Sellers are currently waiting for better conditions. While the 'top of the funnel' for deals has expanded, leading to some peer optimism for Q4, selectivity remains crucial, focusing on recession-resistant or non-cyclical businesses. “I do think you need more clarity respect to the inflationary picture, what's going to happen to rates. And that is linked to what's happening out of the Middle East and all the derivatives and permutations from oil prices.”

CGBD

Carlyle Secured Lending (CGBD) Q2 FY26 earnings call: guidance and Q&A

Q: What are the current trends in pricing and terms for new versus refinance transactions, given muted M&A activity but improving equity values in some sectors?

M&A activity remains muted due to geopolitical and macroeconomic uncertainty, impacting valuations. The pipeline is robust but focused on 'old economy' sectors less exposed to economic volatility. Spreads held steady, and documentation standards improved. Low non-accruals allow for offensive deployment and share repurchases. “The overall landscape for M&A continues to be a bit muted. And I think that's driven by the continued geopolitical uncertainty and also the macroeconomic uncertainty.”

Earnings call· Jun 2026 (Q2 FY26)· Financials· Aug 7, 2026

Source: earnings call transcript

Executive summary

Carlyle Secured Lending Q2 FY26 — Strong Origination and JV Performance Amidst Muted M&A

Carlyle Secured Lending delivered solid Q2 FY26 results, characterized by robust platform originations and strong dividend yields from its joint ventures. Despite a challenging M&A environment and a slight decline in NAV, the company actively repurchased shares and maintains a disciplined underwriting approach. Management anticipates future earnings growth and supplemental dividends as JV portfolios continue to ramp, with a strategic focus on 'old economy' sectors.

Highlights

Platform originations increased over 20% versus Q1, totaling $1.5 billion in new and incremental commitments.
MMCF joint venture's annualized dividend yield increased by over 200 basis points to 17.6%.
SEP joint venture's portfolio grew to $1.7 billion and produced an annualized dividend yield of 18.7%.
Repurchased $12.5 million of shares at an average discount of 29% to NAV, resulting in $0.07 accretion to NAV per share.
Non-accruals remained low at 0.6% of investments at fair value.

Concerns

Net asset value (NAV) decreased to $15.61 per share from $15.89 per share quarter-over-quarter.
Total investment income was $62 million, below prior quarter, primarily due to reduced repayment activity and lower fee income.
Total aggregate realized and unrealized net loss for the quarter was $24 million, or $0.35 per share, partially driven by markdowns on a limited number of investments.
Macroeconomic and geopolitical factors led to a complicated market backdrop and muted M&A activity.

Guidance & targets

Category	Target	Timeline	Confidence
Earnings and Supplemental Dividends	Increase high materiality	Next 4-6 quarters	High
SCP CLO Issuances	Two additional CLOs medium materiality	FY26	Medium
SCP Assets Under Management (AUM)	$6 billion to $7 billion high materiality	Long-term	High

Segment performance

Segment	Revenue	YoY	QoQ	Margin
Overall Portfolio Net investment activity drove total investments to increase from $2.3 billion to $2.4 billion during the quarter. The portfolio remains diversified and resilient. Total investments: $2.4 billionNumber of companies: 177Number of industries: >25Average exposure to any single portfolio company: <60 basis points of total investmentsInvestments in senior secured loans: 95%Median EBITDA across portfolio: $101 millionNon-accruals at fair value: 0.6%Non-accruals at amortized costs: 1.2%	—	—	—	—
MMCF Joint Venture The JV continues to scale and generate attractive returns. Total investments increased to $1.2 billion, and the annualized dividend yield increased by over 200 basis points quarter-over-quarter. The main credit facility was upsized by $400 million, increasing total commitments to $1.2 billion. Total investments: $1.2 billionAnnualized dividend yield: 17.6%Credit facility commitments: $1.2 billionCredit facility spread: SOFR + 170 basis points	—	—	—	—
Structured Credit Partners (SCP) Joint Venture The JV is ramping up, with its portfolio growing to $1.7 billion and producing an 18.7% annualized dividend yield. Two CLOs were priced and closed in April, and two additional CLOs are expected in 2026, with a long-term target to manage $6 billion to $7 billion of assets. Total investments: $1.7 billionAnnualized dividend yield: 18.7%CLO issuances in 2026: 2 (expected additional)Target managed assets over time: $6 billion to $7 billion	—	—	—	—

Deals & partnerships

Lenders to MMCF JV Upsize of main credit facility for Middle Market Credit Fund (MMCF) joint venture. $400 million (upsize amount), $1.2 billion (total commitments)

Closed a $400 million upsize to the main credit facility, increasing total commitments to $1.2 billion at an attractive spread of SOFR plus 170 basis points.

CLO investors Pricing and closing of two CLOs by Structured Credit Partners (SCP) joint venture.

In April, SCP was able to capitalize on market volatility and accelerated the timeline for the first two CLOs to price and close.

Risks & headwinds

Muted M&A Activity Near to medium term

continues to be a bit muted

Mitigation:Focus on 'old economy' sectors; disciplined underwriting; expectation for activity to pick up over medium/long term.

Valuation Markdowns Q2 FY26

$24 million or $0.35 per share

Mitigation:Dedicated workouts team working with sponsors and management teams to right-size capital structures and provide additional liquidity for recovery (e.g., US Infra).

Software Sector Focus ongoing

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Mitigation:Highly disciplined underwriting approach to software borrowers; exemplary track record with zero defaults on $7 billion in commitments over six years.

Top-line Deceleration and Margin Squeeze in Home Services current

starting to see a bit of top line volume deceleration because I think people are feeling it in terms of what's happening in the economy and margins are starting to get a bit squeezed.

Mitigation:Being more selective about areas to stay away from.

What to watch in Q3 FY26

Earnings and Supplemental Dividends

Next 4-6 quarters (starting Q3 FY26)

Current Q2 FY26 NII fully covered base dividend; supplemental dividend policy in place.

Target Increase in earnings and supplemental dividends.

Why it matters

Indicates the success of ramping JV portfolios and overall profitability growth.

we still expect the second quarter will be the near-term earnings trough, which means we not only expect to maintain full dividend coverage in future quarters, but we anticipate an increase in earnings and supplemental dividends as we ramp the portfolios and earnings of both JVs over the course of the next four to six quarters.

Find out whether CGBD delivers this. Inve re-checks your case every morning.

Q&A highlights

What are the current trends in pricing and terms for new versus refinance transactions, given muted M&A activity but improving equity values in some sectors?

M&A activity remains muted due to geopolitical and macroeconomic uncertainty, impacting valuations. The pipeline is robust but focused on 'old economy' sectors less exposed to economic volatility. Spreads held steady, and documentation standards improved. Low non-accruals allow for offensive deployment and share repurchases.

“The overall landscape for M&A continues to be a bit muted. And I think that's driven by the continued geopolitical uncertainty and also the macroeconomic uncertainty.”

asked by Rick Shane · answered by Unknown Speaker

2 min read 5 chapters

Detailed narrative

Origination Platform Strength

Despite a complicated market backdrop, Carlyle Direct Lending's platform closed $1.5 billion in new and incremental commitments, with CGBD funding $248 million of investments, excluding JV activity. Platform selectivity increased, with a commitment rate of less than 5% on Q2 pipeline deals.

Weighted average spreads on new originations held steady in line with Q1, while weighted average leverage on entry continued to decrease, reflecting disciplined underwriting.

Joint Venture Performance and Scaling

Both the Middle Market Credit Fund (MMCF) and Structured Credit Partners (SCP) joint ventures continue to scale and generate attractive returns. MMCF's total investments reached $1.2 billion, with its annualized dividend yield increasing by over 200 basis points to 17.6%.

SCP's portfolio grew to $1.7 billion and produced an annualized dividend yield of 18.7%. SCP expects to price and close two additional CLOs in FY26, aiming to manage approximately $6 billion to $7 billion of assets over time.

Portfolio Quality and Diversification

The portfolio expanded to 177 companies across more than 25 industries, with 95% of investments in senior secured loans. The average exposure to any single portfolio company was less than 60 basis points of total investments, and the median EBITDA across the portfolio was $101 million.

Non-accruals remained low at 0.6% of investments at fair value, and the software portfolio has an exemplary track record with zero defaults on $7 billion in commitments over the last six years.

Capital Management and Shareholder Returns

The company repurchased $12.5 million of shares at an average discount of 29% to NAV during the quarter, resulting in $0.07 of accretion to NAV per share. Total repurchases since the program's inception now exceed $200 million. The Board of Directors declared a third-quarter dividend of $0.35 per share, which is fully covered by net investment income, and maintains an existing supplemental dividend policy targeting at least 50% of excess earnings above the base dividend.

Market Outlook and Investment Strategy

Despite current market complexities, management expects strong activity in the market over the medium and long term, with a revitalized origination platform poised to take advantage. The pipeline for new originations is active, with a significant majority of deals in 'old economy' sectors such as industrials, aerospace and defense, healthcare, and consumer products.

The company emphasizes disciplined underwriting, focusing on significant equity cushions and conservative leverage profiles, while being selective in areas like home services due to observed top-line deceleration and margin squeeze.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.