Sixth Street Specialty Lending, Inc. · NYSE:TSLX
Sixth Street Specialty Lending — Q1 2025 Earnings Presentation
54 slides from Sixth Street Specialty Lending's earnings presentation, May 2025
Slide 1: Sixth Street Specialty Lending, Inc. Equity Investor Presentation May 2025
SIXTH STREET SPECIALTY LENDING SIXTH STREET SPECIALTY LENDING, INC Equity Investor Presentation May 2025
Slide 2: Disclaimer and Forward-Looking Statement
DISCLAIMER AND FORWARD-LOOKING STATEMENT General Disclaimer The information contained in this presentation (the ʺPresentationʺ) is preliminary, may not be complete and may be changed. By acceptance hereof, you agree that the information contained herein may not be used, reproduced or distributed to
Slide 3: Agenda: Overview & Organization
AGENDA 1. Overview & Organization 3 SIXTH STREET SPECIALTY LENDING
Slide 4: Overview
14.71 0.00 $14.71 Q4'11 14.88 0.06 $14.94 14.92 0.22 $15.14 15.12 0.54 $15.66 15.19 0.90 $16.09 Q4'12 15.27 1.23 $16.50 15.29 1.61 $16.90 OVERVIEW 15.35 2.01 $17.36 15.52 2.39 $17.91 Q4'13 15.51 2.79 $18.30 15.70 3.17 $18.87 15.66 3.55 $19.21 15.53 3.93 $19.46 Q4'14 15.60 4.32 $19.92 NAV per Share 1
Slide 5: The Sixth Street Platform
THE SIXTH STREET PLATFORM 1 Overview & Organization TAO: Sixth Street Highly Flexible, Thematically Focused, Cross-Platform Investing Vehicle Real Estate Fundamental Direct Asset Based Credit Market Opportunities Growth Sports Agriculture Strategies Lending Finance Strategies Commercial Control Conv
Slide 6: Sixth Street Sector Franchises
SIXTH STREET SECTOR FRANCHISES 1 Overview & Organization Fundamental US & European Energy, Renewables & Strategies Growth Direct Lending Infrastructure Healthcare & Life Sciences Opportunistic Insurance Real Estate Sports, Media, Entertainment Credit Market Software & & Telecom Strategies Business S
Slide 7: Flexible Capital: Sixth Street Platform Reach
FLEXIBLE CAPITAL: SIXTH STREET PLATFORM REACH 1 Overview & Organization Opportunities Growth Adjacencies Reward Fundamental Infrastructure Strategies ABF Direct Lending Insurance Real Estate Credit Market Strategies Yielding Agriculture Risk Note: For illustrative purposes only. Real Estate and Infr
Slide 8: Differentiated Solutions Provider
DIFFERENTIATED SOLUTIONS PROVIDER 1 Overview & Organization Our Competitive Advantages Our Track Record Highlights Approximately $47.5 billion of Part of a $100+ billion1 Sixth Street investments originated with a realized platform with proprietary deal flow and significant resources including avera
Slide 9: Agenda: Track Record of Strong Performance
AGENDA 2. Track Record of Strong Performance 9 SIXTH STREET SPECIALTY LENDING
Slide 10: Track Record of Strong Performance
TRACK RECORD OF STRONG PERFORMANCE 2 Track Record of Strong Performance RETURN ON EQUITY 2 (NI) OPERATING RETURN ON EQUITY 2 (NII) TSLX BDC Peers (Mean) BDC Peers Top Quartile¹ TSLX BDC Peers (Mean) BDC Peers Top Quartile¹ LTM Since TSLX IPO LTM Since TSLX IPO outperformance 13.3% 13.6% 13.5% 11.5%
Slide 11: Industry vs TSLX Unit Economics
INDUSTRY VS TSLX UNIT ECONOMICS 2 Track Record of Strong Performance Unit Economics (Since TSLX IPO) BDC Peers TSLX Return on Assets: All-in Yield (on Assets) 10.3% 13.3% Higher return on assets Cost of Funds2 (5.6%) (5.6%) Debt/Equity 0.93x 0.86x Net Interest Income Return (on Equity)1 14.6% 19.9%
Slide 12: Delivering Through-the-Cycle Returns
DELIVERING THROUGH-THE-CYCLE RETURNS 2 Track Record of Strong Performance TSLX Annual Returns Since IPO ROE on Adj. Net Income Economic Return 19.7% 19.1% 15.4% 15.9% 16.2% 15.5% 14.7% 15.5% 16.1% 14.5% 11.9% 13.0% 10.8% 12.1% 11.6% 11.7% 11.6% 11.3% 10.0% 7.6% 7.6% 7.6% 2014 2015 2016 2017 2018 201
Slide 13: Returns vs Industry
RETURNS VS INDUSTRY 2 Track Record of Strong Performance Since TSLX IPO Total Return Since TSLX IPO Total Return Since TSLX IPO Out/(Under)performance 24,207 bps 7,448 bps 27,370 bps 27,402 bps 340.9% 266.4% 98.8% 67.2% 66.8% TSLX TSLX BDC Peers S&P 500 High Yield Leveraged Loans Historical Total Re
Slide 14: Agenda: Capital Allocation & Dividend Policy
AGENDA 3. Capital Allocation & Dividend Policy 14 SIXTH STREET SPECIALTY LENDING
Slide 15: Access to Equity Markets
ACCESS TO EQUITY MARKETS 3 Capital Allocation & Dividend Policy Price-to-Book 1.60x TSLX BDC Peers TSLX Average: 1.20x 1.40x 1.20x 1.00x 0.80x BDC Peers Average: 0.92x 0.60x 0.40x 0.20x Mar '14 Feb '15 Jan '16 Dec '16 Nov '17 Oct '18 Sep '19 Aug '20 Jul '21 Jun '22 May '23 Apr '24 Mar '25 Canceled u
Slide 16: Dividend Level Considerations
DIVIDEND LEVEL CONSIDERATIONS 3 Capital Allocation & Dividend Policy “BDC managers have to be long-only investors and fully invested to meet a dividend that the market expects.” -CEO and Chairman, Joshua Easterly (Letter to Stakeholders, April 30, 2025) MULTI-FACETED APPROACH TO DIVIDEND POLICY DIVI
Slide 17: Dividend Coverage
DIVIDEND COVERAGE 3 Capital Allocation & Dividend Policy Net Investment Income Net Investment Income (plus Realized Gains / Losses) Net Income (includes Realized and Unrealized Gains / Losses) 190% 162% 156% 150% 149% 145% 144% 136% 133% 133% 133% 132% 132% 132% 128% 131% 128% 128% 128% 127% 126% 12
Slide 18: Dividend Level Considerations: Variable Supplemental Dividend Framework
DIVIDEND LEVEL CONSIDERATIONS 3 Capital Allocation & Dividend Policy Variable Supplemental Dividend Framework 1 50% Over-Earning (NII per share less base dividend per share) Variable Supplemental Dividend NAV Constraint Test (no more than $0.15 per share decline in NAV over current and 2 preceding q
Slide 19: Book Value per Share and Dividends Paid per Share
$14.71 $0.00 $14.71 $14.88 $0.06 $14.94 $14.92 $0.22 $15.14 $15.12 $0.54 $15.66 $15.19 $0.90 $16.09 Note: As of 3/31/25. $15.27 $1.23 $16.50 $15.29 $1.61 $16.90 $15.35 $2.01 $17.36 $15.52 $2.39 $17.91 $15.51 $2.79 $18.30 $15.70 $3.17 $18.87 $15.66 $3.55 $19.21 NAV per Share $15.53 $3.93 $19.46 $15.6
Slide 20: Agenda: Principles and Investment Strategy
AGENDA 4. Principles and Investment Strategy 20 SIXTH STREET SPECIALTY LENDING
Slide 21: Differentiated Platform Expertise
DIFFERENTIATED PLATFORM EXPERTISE 4 Principles and Investment Strategy DIFFERENTIATED MAINTAIN A LOW PLATFORM DISCIPLINED SECTOR FOCUSED RISK VOLATILITY EXPERTISE AND APPROACH MANAGEMENT PORTFOLIO CAPABILITIES • Source away from Wall • Late cycle-minded sector • Cover the downside • Avoid risks that
Slide 22: Sourcing and Underwriting Overview
SOURCING AND UNDERWRITING OVERVIEW 4 Principles and Investment Strategy Sourcing Underwriting Asset Management Process: Process: Process: • Credit originators / team • Quick Look memo • Performing Loans – Monthly review of operating performance • Weekly pipeline conference calls • Prepare Investment
Slide 23: Differentiated Platform Expertise and Capabilities
DIFFERENTIATED PLATFORM EXPERTISE AND CAPABILITIES 4 Principles and Investment Strategy Sourcing Voting Control TSLX Portfolio Construction Intermediary/ Market Relationship No Voting >1% Control 23% $20-105 Predominantly, million floating rate, first position size lien / senior secured US and Targe
Slide 24: Net Interest Margin Analysis
NET INTEREST MARGIN ANALYSIS 4 Principles and Investment Strategy 1 Weighted Average Total Yield on Debt and Income Producing Securities at Amortized Cost Weighted Average Interest Rate of Debt and Income Producing Securities at Fair Value Weighted Average Spread Over Reference Rate of All Floating
Slide 25: Disciplined Sector Approach
DISCIPLINED SECTOR APPROACH 4 Principles and Investment Strategy GOOD BUSINESSES WITH CHALLENGED BUSINESS GOOD BUSINESSES WITH 1 2 3 GOOD CAPITAL STRUCTURE MODELS WITH GOOD ASSETS CHALLENGING CAPITAL STRUCTURE Note: Reflects current and fully realized investments; selected to represent a variety of
Slide 26: Low Cyclical Exposure
Q1'13 626 31% 31% Q2'13 787 25% 25% Q3'13 22% 889 26% Q4'13 22% 1,016 26% Q1'14 19% 1,196 28% Q2'14 20% 1,129 24% Q3'14 18% 28% 1,233 $ Millions by Fair Value Q4'14 12% 20% 1,264 Q1'15 10% 18% 1,331 Investments at Fair Value Q2'15 8% 17% 1,398 Q3'15 7% 16% 1,396 Q4'15 7% 10% 1,486 Q1'16 7% 9% 1,564
Slide 27: Diversification Across Borrowers & Industries
DIVERSIFICATION ACROSS BORROWERS & INDUSTRIES 4 Principles and Investment Strategy Top 10 Borrower Diversification Industry Diversification Merative L.P. Bcto Ace Purchaser Inc. Internet Services Business Services ExtraHop Networks, Inc. Payscale Holdings Inc. Retail and consumer products Human Reso
Slide 28: Portfolio Diversification Across Borrowers
Q1'13 626 70% Q2'13 787 61% Q3'13 889 57% Q4'13 1,016 54% Q1'14 1,196 50% Q2'14 1,129 50% Q3'14 1,233 49% $ Millions by Fair Value Q4'14 1,264 48% Q1'15 1,331 47% Q2'15 44% 1,398 Q3'15 43% 1,396 Q4'15 41% 1,486 Q1'16 39% 1,564 Q2'16 38% 1,611 Q3'16 36% 1,644 Q4'16 36% 1,657 Q1'17 38% 1,580 Q2'17 40%
Slide 29: Asset Vintage Diversity
ASSET VINTAGE DIVERSITY 4 Principles and Investment Strategy Fair Value by Vintage Debt Investments by Maturity $ Millions by Fair Value $ Millions by Fair Value 25% 21% 20% $680 22% $802 $638 17% 17% $727 20% $568 $565 $648 18% $596 13% $424 6% 6% 5% $207 $188 4% $158 3% 2% $116 $86 1% $71 >0% 0% $
Slide 30: High Quality Portfolio
HIGH QUALITY PORTFOLIO 4 Principles and Investment Strategy TSLX Weighted Average Portfolio Performance Rating TSLX % of Investments on Non-Accrual By Fair Value % of Portfolio Rated 1 or 2 By Fair Value By Amortized Cost 96% 96% 97% 98% 97% 3.9% 3.7% 3.7% 2.2% 2.2% 1.9% 1.15 1.14 1.14 1.10 1.11 1.4
Slide 31: Agenda: Sector Observations
AGENDA 5. Sector Observations 31 SIXTH STREET SPECIALTY LENDING
Slide 32: Illustrative Interest Coverage Throughout Cycles
ILLUSTRATIVE INTEREST COVERAGE THROUGHOUT CYCLES 5 Sector Observations Illustrative Interest Coverage Illustrative Interest Coverage Debt to Equity Debt to Equity 298.91% 0.90x 0.95x 1.00x 1.05x 1.10x 1.25x 298.91% 0.90x 0.95x 1.00x 1.05x 1.10x 1.25x 11.0% 2.71x 2.67x 2.64x 2.61x 2.57x 2.49x 6.00% 3
Slide 33: Illustrative ROE Throughout Cycles
ILLUSTRATIVE ROE THROUGHOUT CYCLES 5 Sector Observations Illustrative ROE Illustrative ROE Debt to Equity Debt to Equity 12.35% 0.90x 0.95x 1.00x 1.05x 1.10x 1.25x 12.35% 0.90x 0.95x 1.00x 1.05x 1.10x 1.25x 11.0% 7.7% 7.8% 7.9% 8.1% 8.2% 8.6% 6.00% 12.2% 12.4% 12.6% 12.8% 13.0% 13.6% 11.5% 8.5% 8.6%
Slide 34: BDC Sector Price-to-Book
BDC SECTOR PRICE-TO-BOOK 5 Sector Observations Price-to-Book vs. ROE on Net Income (Since TSLX IPO) Average Price-to-Book1 1.4x Annualized ROE (on NI): • TSLX: 13.4% 1.3x • BDC Peers Mean: 7.3% • BDC Peers Median: 6.6% TSLX 1.2x BDC 21BDC 23 1.1x BDC 6 BDC 1 25 BDC 12 BDC BDC 19 1.0x BDC 16 BDC 11 0
Slide 35: Price-to-Earnings (NII 2025E)
PRICE-TO-EARNINGS (NII 2025E) 5 Sector Observations Price-to-Earnings2 Historical NI as % of NII1: 15.0x • TSLX: 99% • BDC Peers Mean: 91% 12.0x 10.3x 10.3x 10.2x 10.0x 9.7x 9.6x 9.5x 9.3x 9.2x BDC Peers Median: 8.6x 9.0x 8.8x 9.0x 8.6x 8.5x 8.3x BDC Peers Mean: 8.4x 8.7x 8.7x 8.6x 8.3x 8.2x 7.8x 7.
Slide 36: Adjusted Price-to-Earnings (2025E)
ADJUSTED PRICE-TO-EARNINGS (2025E) 5 Sector Observations Adjusted Price-to-Earnings1 35.0x 30.3x 30.0x 25.0x 20.0x 18.0x 16.0x 15.2x 15.0x 14.1x 13.2x 13.1x 12.6x BDC Peers Mean: 11.0x 11.1x 11.0x 10.9x 10.5x BDC Peers Median: 10.1x 10.4x 10.6x 9.6x 9.5x 9.4x 9.3x 9.0x 10.0x 8.5x 8.0x 7.9x 7.6x 6.7x
Slide 37: Agenda: Appendix
AGENDA 6. Appendix 37 SIXTH STREET SPECIALTY LENDING
Slide 38: Strong Liquidity and Funding Profile
STRONG LIQUIDITY AND FUNDING PROFILE CAPITAL & LIQUIDITY ROBUST BALANCE SHEET LIQUIDITY VS. NEAR-TERM OBLIGATIONS ($ in Millions) As of March 31, 2025 / $ Millions Near-term Obligations $5 Cash $1,017 Total Liquidity: $ 1,013 Undrawn Revolver $1.0BN1,2 Capacity1 $175 $639 Secured Revolver Liquidity
Slide 39: Liquidity Management
LIQUIDITY MANAGEMENT CASH AND CASH EQUIVALENTS Unrestricted Cash Totaled $4.6 Million as of March 31, 2025. Restricted Cash Related to Interest Rate Swaps Totaled $42.7 Million 1 Revolving Credit Facility Unsecured Notes $1.675 Billion Committed; Uncommitted Accordion Size: $300 Million $300 Million
Slide 40: A Disciplined Approach to Liquidity & Capital Management
A DISCIPLINED APPROACH TO LIQUIDITY & CAPITAL MANAGEMENT ($ in Millions) Revolving Credit Facility Renewal Unsecured Bonds Issued Convertible Notes Issued Equity Issued DRIP Equity $36 $25 1.60x TSLX $90 $94 $6 $21 1.40x $130 $300 $350 $300 $22 $78 1.20x $10 $300 $16 $10 $300 $50 1.00x $75 P / NAV $
Slide 41: TSLX Valuation Process: Internal, External & Board Level Review
TSLX VALUATION PROCESS: INTERNAL, EXTERNAL & BOARD LEVEL REVIEW 25+ people 15+ people 100+ people 100+ people 100+ people 9 people Complete Initial Preliminary Final Valuation Audit Committee Board of Portfolio Review of Draft of Valuation Committee Meeting Directors Reviews Valuation Valuation Comm
Slide 42: Thorough Origination, Underwriting and Negotiation Process
THOROUGH ORIGINATION, UNDERWRITING AND NEGOTIATION PROCESS ORIGINATION UNDERWRITING & APPROVAL NEGOTIATION & CLOSING Input / Output Process Bottleneck Make Decision Simultaneous Process Pre-cmt. Create Expense checklist Start Ledger for Out-of- Pocket Expenses Issue Commitment Legal & Final KYC Proc
Slide 43: Financial Highlights
FINANCIAL HIGHLIGHTS DOLLAR AMOUNTS IN THOUSANDS Except Per Share Data; Per Share Data is Based on Weighted Average Shares Outstanding During the Period, Except as Otherwise Noted Q1 2024 Q2 2024 Q3 2024 Q4 2024 Q1 2025 Net Investment Income Per Share $0.59 $0.59 $0.59 $0.62 $0.62 Net Income (Loss)
Slide 44: Portfolio Highlights – Selected Metrics
PORTFOLIO HIGHLIGHTS – SELECTED METRICS DOLLAR AMOUNTS IN THOUSANDS March 31, 2024 June 30, 2024 September 30, 2024 December 31, 2024 March 31, 2025 Investments at Fair Value $3,380,009 $3,317,069 $3,441,075 $3,518,412 $3,412,032 Number of Portfolio Companies 124 109 115 116 115 Average Investment S
Slide 45: Quarterly Statements of Financial Condition
QUARTERLY STATEMENTS OF FINANCIAL CONDITION DOLLAR AMOUNTS IN THOUSANDS Except Per Share Data; Per Share Data is Based on Ending Shares Outstanding March 31, 2024 June 30, 2024 September 30, 2024 December 31, 2024 March 31, 2025 Assets Investments at Fair Value $3,380,009 $3,317,069 $3,441,075 $3,51
Slide 46: Net Asset Value Bridge – Q1'25
NET ASSET VALUE BRIDGE – Q1’25 $0.04 ($0.13) $0.58 ($0.46) $17.16 $17.13 $17.09 $0.01 $17.04 $16.98 ($0.07) ($0.06) ($0.05) ($0.06) 12/31/2024 Q4'24 12/31/24 Q1'25 Q1'25 Q1'25 Q1'25 NAV Q1'25 Net Realized Q1'25 3/31/25 Q1'25 Declared 3/31/25 2 Supplemental Adjusted NAV 1 Adjusted Net Reversal of Rev
Slide 47: Our Drivers of ROE
OUR DRIVERS OF ROE Illustrative Unit Economics / Return on Equity Return on Assets: Return on Assets Weighted Average Interest Rate of Portfolio 11.5% Amortization of upfront fees1 0.9% Total Yield on Debt and Income Producing Securities 12.4% Impact of Additional fees2 0.8% Prudent Use of Leverage
Slide 48: Sixth Street Responsible Investment Overview
SIXTH STREET RESPONSIBLE INVESTMENT OVERVIEW WHAT WE BELIEVE RI AND ESG GOVERNANCE EMPLOYEE TRAINING • Our mission is to deliver • Senior oversight through • Sixth Street provides training compelling risk-adjusted ESG Oversight and other tools to its returns while conducting our Committee includes e
Slide 49: Differentiated Investor Transparency and Communication
DIFFERENTIATED INVESTOR TRANSPARENCY AND COMMUNICATION Letter to Stakeholders – Quarterly Debt & Equity Investor Presentations April 2025 Regional Banking Crisis – Valuation Principles – Covid-19 Pandemic – 2020 March 2023 August 2022 49 SIXTH STREET SPECIALTY LENDING
Slide 50: Footnotes
FOOTNOTES SIXTH STREET SPECIALTY LENDING
Slide 51: Footnotes
FOOTNOTES Slide 4: Overview 1. Reflects NAV per share adjusted for the supplemental dividend per share related to Q1 2025 earnings 2. Moody’s rating upgraded 2/14/2025; S&P rating affirmed on 1/16/2025; Fitch rating affirmed on 4/14/2025; KBRA affirmed 6/3/2024 Slide 5: The Sixth Street Platform 1.
Slide 52: Footnotes
FOOTNOTES Slide 24: Net Interest Margin Analysis 1. Total yield on investments is calculated based on the interest rate and the accretion of OID, exclusive of investments on non-accrual status 2. Interest rate on debt outstanding includes the swap-adjusted interest expense related to our Unsecured N
Slide 53: Footnotes
FOOTNOTES Slide 44: Portfolio Highlights – Selected Metrics 1. Calculation includes income earning debt investments only 2. Total yield on investments is calculated based on the interest rate and the accretion of OID, exclusive of investments on non-accrual status 3. Excludes structured credit inves
Slide 54: TSLX Investor Relations
CONTACT US: TSLX Investor Relations IRTSLX@sixthstreet.com VISIT US: www.sixthstreetspecialtylending.com 54 SIXTH STREET SPECIALTY LENDING
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