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Introduction & Market Context
Carlyle Secured Lending, Inc. (NASDAQ:CGBD) released its third-quarter 2025 earnings presentation on November 5, revealing mixed results that fell short of analyst expectations. The business development company reported net investment income of $0.37 per share ($0.38 adjusted), missing forecasts of $0.39, while revenue came in at $66.51 million against expectations of $69.83 million. Following the announcement, CGBD shares declined 2.38% to $12.17, trading just 4.5% above its 52-week low of $11.65.
Despite portfolio growth and strategic capital structure improvements, the company’s cautious outlook for an "earnings trough" in upcoming quarters has dampened investor sentiment. The presentation highlighted CGBD’s defensive positioning and long-term NAV preservation while acknowledging near-term challenges.
Quarterly Performance Highlights
For Q3 2025, Carlyle Secured Lending reported net investment income of $0.37 per common share, or $0.38 after adjusting for asset acquisition accounting. The company’s net asset value (NAV) per share stood at $16.36 as of September 30, 2025, down slightly from $16.43 at the end of the previous quarter.
As shown in the quarterly highlights slide, the company declared a $0.40 quarterly dividend for Q4 2025, representing an annualized yield of 12.8% based on current share price:
Total investment income increased year-over-year from $55.97 million in Q3 2024 to $66.51 million in Q3 2025, reflecting portfolio growth and higher yields. However, the company experienced a total realized and unrealized net loss of $3 million during the quarter, contributing to the earnings miss.
The company’s portfolio fair value expanded to $2.4 billion across 158 portfolio companies, with new investment fundings of $260.4 million at a weighted average yield of 9.5%. Non-accrual investments decreased to 1.6% of the portfolio, suggesting improving credit quality despite broader economic concerns.
Portfolio Positioning & Strategy
Carlyle Secured Lending has maintained a defensive portfolio strategy, with a strong emphasis on senior secured exposure and floating-rate investments. The portfolio highlights slide reveals that 86% of investments are in first lien debt, with 99.5% floating rate exposure—positioning the company well in the current interest rate environment:
The industry diversification shows significant concentration in software (28%) and healthcare & pharmaceuticals (17%), sectors that have historically demonstrated resilience during economic downturns. The median portfolio company EBITDA of $98 million indicates a focus on middle-market companies with substantial scale.
During the earnings call, CEO Justin Plouffe emphasized the company’s defensive approach: "We see an earnings trough in the next couple of quarters, and then it starts to build back up in the second half of 2026 into 2027." This statement aligns with the company’s risk rating distribution, which shows 91.4% of the portfolio rated in category 2 (performing as expected):
The company’s investment fund continues to deliver strong returns with an annualized dividend yield to CGBD of 15.3%. The fund maintains high-quality metrics with 99.9% first lien exposure and only 0.8% of investments on non-accrual status:
Capital Structure & Liquidity
A significant focus of the Q3 presentation was Carlyle Secured Lending’s capital structure optimization. The company issued $300 million of 5.75% unsecured notes maturing in 2031 and announced plans to redeem $85 million of outstanding 8.20% 2028 Notes on December 1, 2025. Additionally, CGBD repaid the CSL III SPV Facility in full and upsized total commitments at the senior secured Credit Facility by $25 million to $960 million.
The funding and capital management slide shows the company’s current financing structure:
The pro forma slide illustrates how these capital structure changes will impact the company’s leverage profile after the completion of Q4 transactions:
These refinancing activities are expected to reduce the company’s cost of capital and increase financial flexibility. Notably, the percentage of utilized balance sheet leverage with mark-to-market provisions will decrease from 42% to 26%, reducing potential volatility in a challenging market environment.
The company maintained strong liquidity of $594.6 million and a statutory leverage ratio of 1.10x, within its target range.
Forward Outlook & NAV Performance
Despite the near-term earnings challenges, Carlyle Secured Lending highlighted its long-term NAV preservation compared to BDC peers. The historical NAV information slide shows that while the average BDC experienced an 8.8% NAV decline over the past five years, CGBD’s NAV has remained relatively stable:
The company’s dividend history demonstrates a commitment to shareholder returns, with the current quarterly dividend of $0.40 per share supported by an estimated $0.86 per share of spillover income:
However, the anticipated earnings trough in the next two quarters raises questions about the sustainability of current dividend levels. The NAV per share bridge shows the factors affecting the company’s NAV during Q3 2025, with unrealized appreciation partially offsetting the impact of dividend payments:
Conclusion
Carlyle Secured Lending’s Q3 2025 presentation reveals a company navigating a challenging market environment with a defensive portfolio strategy and proactive capital management. While the earnings miss and cautious outlook have weighed on the stock price, the company’s focus on senior secured, floating-rate investments and its strategic refinancing activities may position it well for the expected recovery in late 2026.
Investors will be closely watching how the company manages through the anticipated earnings trough while maintaining its dividend and preserving NAV. The expansion of joint venture capabilities, including a second joint venture in advanced discussions, could provide additional avenues for growth and returns as market conditions improve.
Full presentation:
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