Skip to content
    CGBD
    Earnings call· Jun 2026(Q2 FY26)

    Carlyle Secured Lending Q2 FY26 earnings call CGBD

    Aug 7, 2026 Source

    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

    5

    • 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

    4

    • 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

    3
    CategoryTargetConfidence
    Earnings and Supplemental Dividends
    Increase
    high materiality
    High
    SCP CLO Issuances
    Two additional CLOs
    medium materiality
    Medium
    SCP Assets Under Management (AUM)
    $6 billion to $7 billion
    high materiality
    High

    Segment performance

    3
    SegmentRevenueYoYQoQMargin
    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
    		————

    Operational metrics

    21
    Adjusted Net Investment Income per share
    $0.35In line with GAAP NII per share
    Q2 FY26

    Fully covered the new base dividend.

    Net Asset Value per share
    $15.61Down from $15.89 per share (Q1 FY26)
    Q2 FY26

    As of June 30th.

    Share Repurchases
    $12.5 million
    Q2 FY26

    Total purchases since inception of the program now exceed $200 million.

    Spillover Income
    $0.73
    Q2 FY26

    Estimated spillover income to support the quarterly dividend.

    Statutory and Net Financial Leverage
    1.2 times
    Q2 FY26

    At quarter end, both statutory and net financial leverage were 1.2 times.

    Platform Originations
    $1.5 billionUp over 20% versus Q1
    Q2 FY26

    New and incremental commitments at the platform level.

    CGBD Investments Funded
    $248 million
    Q2 FY26

    Excluding Joint Venture Activity.

    Platform Selectivity (Commitment Rate)
    <5%
    Q2 FY26

    Commitment rate on second quarter pipeline deals.

    Weighted Average Spreads on New Originations
    held steadyIn line with Q1
    Q2 FY26

    Weighted average spreads on new originations held steady in line with first quarter.

    Weighted Average Leverage on Entry
    decreased
    Q2 FY26

    Weighted average leverage on entry continued to decrease.

    Payments (CGBD)
    $68 milliondecreased
    Q2 FY26

    Payments decreased in the quarter to $68 million of activity.

    Sales to MMCF JV
    $123 million
    Q2 FY26

    Sales to our MMCF joint venture.

    Equity Funding at SEP
    $0 million
    Q2 FY26

    Equity funding at SEP.

    Total Investment Income
    $62 millionBelow prior quarter
    Q2 FY26

    Primarily driven by a decline in interest income due to lower OID accretion from reduced repayment activity, as well as a decrease in fee income, partially offset by increased dividend income from both JVs.

    Total Expenses
    $38 millionDecreased versus prior quarter
    Q2 FY26

    Primarily as a result of lower interest expense due to lower outstanding debt balance.

    Net Investment Income (GAAP) per share
    $0.35
    Q2 FY26

    Achieved NII of 35 cents per share.

    Third Quarter 2026 Dividend
    $0.35
    Q3 FY26

    Declared by Board of Directors, payable to stockholders of record as of September 30th. Fully covered by net investment income.

    Supplemental Dividend Policy
    targets paying out at least 50% of excess earnings above the base dividend
    ongoing

    Maintaining existing supplemental dividend policy to deliver additional value to shareholders as earnings grow.

    Total Aggregate Realized and Unrealized Net Loss
    $24 million
    Q2 FY26

    Partially driven by markdowns on a limited number of investments.

    MMCF Credit Facility Spread
    SOFR + 170 basis points
    Q2 FY26

    Spread for the $1.2 billion credit facility for the Middle Market Credit Fund (MMCF) joint venture.

    Debt Stack
    100% floating rate
    Q2 FY26

    The company's debt stack is 100% floating rate, matching its primarily floating rate assets.

    Industry KPIs

    2
    MetricValueDetails
    Fundraising inflows$1.5 billionUSD
    Deployment realizations$248 millionUSD

    Deals & partnerships

    2
    Lenders to MMCF JVUpsize 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 investorsPricing 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

    4
    Muted M&A ActivityNear 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 MarkdownsQ2 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 Focusongoing

    null

    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 Servicescurrent

    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

    5

    Earnings and Supplemental Dividends

    Next 4-6 quarters (starting Q3 FY26)
    CurrentQ2 FY26 NII fully covered base dividend; supplemental dividend policy in place.
    TargetIncrease 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.

    Q&A highlights

    6

    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 read5 chapters

    Detailed Narrative

    01

    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.

    02

    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⏳.

    03

    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.

    04

    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.

    05

    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.

    AI-generated summary of the company’s earnings call. Not investment advice.