Sixth Street TSLX Earnings Call Transcript

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DATE

Friday, February 13, 2026 at 8:30 a.m. ET

CALL PARTICIPANTS

• Chief Executive Officer — Bo Stanley
• Chief Financial Officer — Ian Timothy Simmonds
• Managing Director and Head of Investment Strategy — Ross Bruck

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TAKEAWAYS

• Adjusted Net Investment Income -- $0.52 per share in Q4, covering the base dividend by 113% and supporting an annualized operating ROE of 12%.
• Adjusted Net Income -- $0.30 per share in Q4, yielding a 7% annualized ROE.
• Full-Year 2025 Performance -- Adjusted net investment income per share was $2.18 (12.7% ROE); adjusted net income per share was $1.76 (10.3% ROE); economic return was 10.9%, marking a decade of double-digit annual economic returns.
• Q4 Net Asset Value (NAV) -- $16.98 per share at year end, down from $17.11 in Q3, reflecting over-earning of the base dividend partially offset by reversal of net unrealized gains, credit spread widening, and company-specific factors.
• Dividend Declarations -- Base quarterly dividend of $0.46 per share declared for March 31, and a $0.01 per share supplemental dividend capped under their framework.
• Leverage and Liquidity -- Year-end debt-to-equity ratio was 1.1x, with $246 million in investment capacity before hitting the upper leverage target, and liquidity totaling 33% of total assets.
• Portfolio Composition -- Enterprise software exposure represented approximately 40% of the portfolio by fair value, with LTM revenue and EBITDA growth of approximately 9% and approximately 15%, respectively, and weighted average loan-to-value (LTV) of 40%.
• Credit Metrics -- Weighted average leverage attachment and detachment points were 0.4x and 5.3x, with a weighted average interest coverage ratio of 2.1x in core borrowers.
• Yield Movements -- Weighted average yield on debt and income-producing securities at amortized cost declined sequentially from 11.7% to 11.3%, attributed mainly to lower base rates.
• Q4 and 2025 Originations -- $242 million of commitments and $197 million of fundings in Q4; $1.1 billion of commitments and $894 million of fundings for 2025, with nearly half in segments outside regular channels.
• Repayments and Turnover -- Q4 repayments totaled $235 million; full-year repayments reached a record $1.2 billion, driving portfolio turnover to 34%, significantly above the three-year average of 22%.
• Nonaccruals -- Nonaccruals remained unchanged at 0.6% of the portfolio by fair value, including a de minimis addition (0.01%) in Alcogen.
• Supplemental Fee Income -- Activity-based fee income for 2025 reached $0.64 per share, the highest level since 2020.
• Joint Venture Launch -- Announced $200 million commitment to Structured Credit Partners, a fee-free JV between Sixth Street-managed and Carlyle-managed BDCs, with targeted mid-teens equity returns from broadly syndicated loan CLOs.
• 2026 Guidance -- Management projects a 2026 ROE on net investment income of 11%-11.5%, corresponding to $1.87-$1.95 in adjusted net investment income per share on year-end book value.
• Spillover Income -- Year-end spillover income was $1.21 per share, with regular monitoring for distribution planning.
• Portfolio Vintage -- Only 20%-25% of NAV is in pre-2022 vintages; most assets were originated after rate hikes in 2023-2024.
• Sponsor vs. Non-Sponsor Mix -- Recent investments have an approximately even split between sponsor and non-sponsor originations; historically, non-sponsor share has been near 35%.

SUMMARY

Management characterized the competitive environment as defined by excess private capital and tight spreads, requiring heightened selectivity. The company stated that its liquidity coverage on unfunded commitments of six times outstrips the peer median of two times, citing this as a core differentiator. Enterprise software credit spreads widened 10-20 basis points relative to year-end, while equity multiples compressed by about 15%, signaling market concerns are more equity-driven than credit-driven according to management. Principal debt outstanding at year end totaled $1.8 billion, with total investments of $3.3 billion and net assets of $1.6 billion. The new Structured Credit Partners joint venture is expected to generate returns above current portfolio asset yields due to zero management or incentive fees at both the CLO and JV levels.

• The weighted average credit rating of the investment portfolio was 1.13 (1 being strongest), showing little change from 1.12 prior quarter.
• Average debt-to-equity for full-year 2025 was 1.17x, slightly down from 1.19x in 2024.
• Interest and dividend income in Q4 rose to $95.5 million, with prepayment and fee income also increasing due to activity in Merit and Arrowhead.
• Supplemental dividend payments are capped by a policy that limits NAV declines over any two-quarter period to $0.15 per share, including supplementals.
• Underlying portfolio performance statistics—LTM revenue growth of 9% and EBITDA growth of 12%—were steady despite macro and sector dislocation.
• Management highlighted that periods of market volatility produce their highest relative outperformance, with net income ROE during disruption averaging nearly 14%.
• CFO Ian Timothy Simmonds said, “our liability structure is entirely floating rate, which means our cost of debt will move in the same direction as interest rates.”
• Paydowns and repayments contributed $0.10 per share NAV decline, while unrealized portfolio losses and market-driven credit spread changes further impacted NAV by $0.12 and $0.03 per share, respectively.

INDUSTRY GLOSSARY

• CLO (Collateralized Loan Obligation): A securitized investment vehicle backed by pools of corporate loans, chiefly held by institutional investors.
• BSL (Broadly Syndicated Loan): A large corporate loan syndicated to many institutional investors, typically not originated by the lending institution that holds it to maturity.
• Nonaccrual: A loan or asset for which interest income is no longer recognized due to doubt about collectability, typically reflecting credit deterioration.
• LTV (Loan-to-Value): Ratio measuring the loan amount relative to collateral value, used for portfolio risk assessment.
• Supplemental Dividend: An additional dividend declared above the regular dividend, typically to distribute excess earnings subject to distribution restrictions.
• Spillover Income: Undistributed taxable income required to be paid out in future periods for BDCs under regulated investment company rules.

Full Conference Call Transcript

Bo Stanley: Thank you, Cami. Good morning, everyone. Thank you for joining us.

Bo Stanley: This marks my first earnings call as CEO, and I am energized by the continued strength of our platform and the discipline our team has maintained through a dynamic 2025 and into 2026. Before we dive into the financial results, I am pleased to introduce Ross Bruck, who is joining us on this call today for the first time in his capacity as Managing Director and Head of Investment Strategy. Ross was one of the first members of our direct lending investment team, having joined Sixth Street more than a decade ago. He has had roles across the Sixth Street platform in both the U.S. and Europe, applying his deep underwriting expertise to various credit investment strategies.

Ross brings a unique perspective that bridges complex asset-level underwriting with a strategic lens on market opportunity. His appointment reflects our commitment to elevating our internal talent to drive disciplined investment decisions, and we are excited to have his voice on these calls. For our prepared remarks, I will review full-year and fourth-quarter highlights and pass it over to Ross to discuss investment activity in the portfolio. Our CFO, Ian, will review our financial performance in more detail, and I will conclude with final remarks before opening the call to Q&A.

After the market closed yesterday, we reported fourth-quarter results with adjusted net investment income of $0.52 per share, or an annualized operating return on equity of 12%, and adjusted net income of $0.30 per share, or an annualized return on equity of 7%. Adjusted net investment income of $0.52 per share exceeded our base dividend of $0.46 per share, providing base dividend coverage of 113%. As presented in our financial statements, our Q4 net investment income and our net income per share, inclusive of the unwind of the non-cash accrued capital gains incentive fee expense, were $0.53 and $0.32, respectively.

The difference between adjusted net investment income and adjusted net income of $0.22 per share in Q4 was primarily driven by $0.12 per share of unrealized losses from idiosyncratic credit impacts and $0.10 per share of prior-period unrealized gains that reversed this period and moved into this quarter's net investment income related to investment realizations. For the full year 2025, we generated adjusted net investment income per share of $2.18, representing an operating return on equity of 12.7%, which exceeded the top end of our guidance range we communicated throughout the course of 2025. Adjusted net income per share was $1.76, corresponding to a return on equity of 10.3%.

From an economic return perspective, which is calculated using movement in net asset value plus dividends paid in the year, we delivered a return of 10.9%, representing our tenth consecutive year of double-digit economic returns, highlighting the durability of our business across different credit and interest rate environments. Consistent with our ongoing messaging regarding the importance of earning one’s cost of capital, our 2025 net income ROE and economic return both exceeded our estimated cost of equity of 9%. It is hard to have a thoughtful conversation about the market today without spending real time on enterprise software and the impact of AI, so we are going to address this directly in our prepared remarks.

We have been thinking deeply about these issues for quite some time, and consistent with our investment framework, we have taken a forward-looking approach in how we underwrite and manage risk. Longtime followers will know that our team has been investing in technology-related businesses for more than two decades, and we have navigated multiple periods of significant change. In each case, there were predictions of the demise of incumbents or the erosion of margins. With hindsight, those shifts tended to expand addressable markets and create opportunities for those who could distinguish between durable and fragile business models. That insight is where we will focus our commentary today.

What we are not going to do is resort to hyperbole about the portfolio or describe our performance with words like impeccable. We generally find that kind of language not particularly credible because credit outcomes are always idiosyncratic. More importantly, this is not about congratulating ourselves on historical performance, which has been good from a credit lens and is clearly reflected in the cumulative net realized gain and loss metrics in our financial statements. Our job has always been about the forward. It is about how business models evolve from here under a new cost curve in a different competitive landscape.

Throughout cycles, we have maintained an intensive focus on the durability of business models grounded in deep understanding of specific business unit economics, sector-specific ecosystems, valuation discipline, and the resulting margin of safety embedded in our investments. The reality is that capital is never a long-term moat for a business. It is merely a tool. At its core, AI levels the playing field for additional competition because the cost curve is shifting down.

Bo Stanley: Capital intensity

Bo Stanley: was never the primary barrier to entry for a business, and replacement cost is not a concept we have ever felt was applicable in assessing the intrinsic value of a software company. So rather than AI being a moat that protected businesses and their margins, we see AI as leveling the playing field on development costs that does not fundamentally change the intrinsic moat that protects a business. Existing enterprise software companies should benefit from this shift in the cost curve if they are well managed and have limited technical debt. They can use these tools to accelerate product development and enhance their value proposition.

The moats in software are what the customer is actually purchasing as a product: a single source of truth, ongoing maintenance and customer service, security, governance and compliance, and often transaction enablement. In many ways, these customers are also effectively purchasing an insurance policy: a guarantee these tools will work reliably for mission critical applications where the cost of failure is far higher than the cost of the software. The vast majority of our portfolio companies today have a mass incumbency advantage. They own the distribution, they own the customer relationship, and they possess deep domain expertise.

These moats—data integration, network effects, and regulatory complexity—are incredibly difficult for a new entrant to come in and displace, even in a world where it is faster and cheaper to write code. If we did our job correctly, we ignored purchase prices and market valuations, and looked at how durable the business model was to support the credit thesis. This has always been our lens. As credit investors, we do not participate in the growth or the upside of equity valuations. We are focused on the durability of an asset and its cash flows. We are not saying the tails might not be wider on the margin for ill-prepared business models and management teams.

But, generally, we think this is an equity valuation problem. We believe many software businesses will likely have less pricing power given the change in the cost curve and, therefore, may see less revenue growth. Less growth means fundamental valuations of these assets are lower, but that does not mean they are not generally creditworthy. If you look at the credit spreads since the beginning of the year of public enterprise software companies, how little they have widened—about 10 to 20 basis points on average—compared to the compression in the TEV multiples—about two to three turns, or about 15% on average—it illustrates this point.

For more levered private software companies, we see broadly syndicated loan spreads about 50 to 100 basis points wider versus the beginning of the year. The market is rerating the equity risk, but the credit remains resilient. By focusing on the moats that drive durability, we assess not just where the business stands today, but how well it is positioned to withstand and even benefit from AI-driven change. With some credit investors focused on historical results, our underwriting has been forward looking from day one. This emphasis on future durability rather than past performance is a core differentiator in our investment process and underpins our confidence in the resilience of the businesses within our portfolio today and in the future.

Turning to our portfolio in aggregate, our borrowers continue to demonstrate strong credit statistics characterized by consistent revenue growth and expanding EBITDA margins. As of year end, the weighted average LTV within our portfolio company was approximately 41%, remaining broadly stable year-over-year, as steady earnings growth offset lower equity valuations in the broader market. Our view of LTV is based on our own fundamental valuation of these companies, which incorporates the rerating of enterprise values to reflect current market conditions.

We believe the resilience of our portfolio, reflected in LTM revenue and earnings growth rates of approximately 9% and 12%, respectively, for our core portfolio companies, is a testament to our discipline of allocation of capital and our ability to apply a nuanced lens to asset selection across market environments. We understand many of our peers map the industry exposure differently from us, with a specific software classification which is intended to illustrate enterprise software exposure. We do not view software as a stand-alone industry, but instead, we view it as a mission-critical tool that enables a broad range of end users.

For that reason, our industry disclosure is organized by end market, such as healthcare, business services, and financial services, rather than by specific products or delivery mechanisms used to serve those markets. We believe this is a better approach to risk management, as the primary driver of credit performance is the health and demand of the end market being served rather than the technology used to deliver the service. At this moment in time, however, we felt it beneficial to our stakeholders to provide a more comparable figure to our peers. We have mapped our portfolio to enterprise software exposure that comprises approximately 40% of our total portfolio by fair value.

The credit statistics of this portfolio are largely consistent with the overall portfolio, including a weighted average LTV of 40%, LTM top line growth of approximately 9%, and LTM earnings growth of approximately 15%. As we have said for several quarters, we have remained disciplined in our credit selection in what has been a tighter spread environment. Periods of market volatility and uncertainty play to our strength, and we would love to see an environment where we can put more capital to work. We ended the year at 1.1 times debt to equity, presenting us with $246 million in investment capacity before we reach the top end of our target leverage range.

This compares to ending leverage of our peers in Q3 of 1.22x, near the upper end of the target range for BDCs. Our liquidity represented approximately 33% of our total assets, and we had nearly six times coverage on our unfunded commitments available to be drawn by our borrowers based on contractual requirements in the underlying loan agreements. This compares to a peer median of approximately two times as of September 30. Our robust liquidity combined with our capital available means that we have substantial investment capacity and flexibility during these uncertain times. Further, our capital base is permanent in nature.

As noted in our November shareholder letter, unlike other structures of BDCs, we are not subject to redemptions or outflows and believe as a result, we are able to take advantage of opportunities created by market dislocations. These times of market volatility have been the environments where we have shown that the Sixth Street platform excels and creates shareholder value. There is significant change happening in our ecosystem, and we have always performed better on a relative basis in changing and dynamic environments.

Our expertise spans the firm, from our investing teams across direct lending, growth, digital strategies, and infrastructure to our technical leadership of our engineering team, Chief Information Officer, alongside our Vice Chairman and pioneering AI strategist, Martin Chavez. Ultimately, we believe that as the market enters a more complex era, we remain uniquely positioned to lean into volatility and extend our track record of outperformance. Moving back to our financial results, reported net asset value per share at year end was $16.98 compared to $17.11 in Q3, and $17.09 at year end 2024, the latter two after giving effect to the supplemental dividends declared for those periods.

Factors contributing to net asset value movement during Q4 include the over-earning of our base dividend through net investment income, which was offset primarily by the reversal of net unrealized gains from investment realizations during the quarter, the impact of widening credit spreads on the valuation of our portfolio, and portfolio-specific events. Ian will discuss movements in net asset value in further detail. Yesterday, our board approved a base quarterly dividend of $0.46 per share to shareholders of record as of March 16, payable on March 31. Our board also declared a supplemental dividend of $0.01 per share relating to our Q4 earnings to shareholders of record as of February 27, payable on March 20.

The supplemental dividend was capped at $0.01 per share this quarter in accordance with our distribution framework. As a reminder, we limit the payment of supplemental dividends such that any decline in net asset value over the preceding two quarters, inclusive of any supplemental payment, does not exceed $0.15 per share. We have maintained this framework since we declared our first supplemental dividend in 2017, to prudently retain capital and stabilize net asset value in periods of market volatility. I will now turn the call over to Ross Bruck for the market outlook and investment activity. Thanks, Bo.

Ross Bruck: I would like to start by layering on some additional thoughts on the direct lending environment and, more specifically, how we are positioned for the opportunity set we are anticipating this year. Our base case is that the investment environment for 2026 will be characterized by the continued imbalance between the supply of private capital and the demand for financing, resulting in sustained levels of competition and tight spreads for regular-way, on-the-run transactions. In contrast to what is implied by terms across our market, we believe that asset selection today remains complex. Fluctuating macroeconomic conditions, geopolitical paradigm changes, and rapid technological advancements create significant crosscurrents.

With this backdrop, we remain focused on driving investment activity through our differentiated and thematically oriented originations engine and our deep underwriting capabilities, in each case leveraging unique capabilities from across the Sixth Street platform. Our asset selection prioritizes businesses with positions in their value chain, and resulting unit economics that are robust in the face of potential headwinds. Additionally, we remain focused on thoughtful structuring and deal documentation, providing us with the tools to actively manage credits during our investment period to preserve capital and generate incremental economics for shareholders. While we remain highly selective in investing capital, we see two potential upside nodes for accelerated originations.

The first is capitalizing on generalized market volatility to finance businesses in which we have high conviction, at attractive risk-adjusted returns. By maintaining a strong balance sheet through the cycle, we are well positioned to be a capital solutions provider in times of uncertainty. The second is an acceleration in the market correcting rebalancing of capital. As noted in our November shareholder letter, we anticipated higher redemptions from non-traded BDCs, which began to materialize at the end of 2025. We view this capital reallocation as a healthy development for the ecosystem. While we expect this rebalancing to extend over a prolonged period, we recognize that this trend may accelerate given less predictable retail capital flows.

We are pleased with our level of originations to close out a strong year for funding activity. In Q4, we provided total commitments of $242 million and total fundings of $197 million across five new portfolio companies and upsizes to four existing investments. For full year 2025, we provided $1.1 billion of commitments and closed on $894 million of fundings. To characterize our funding activity in Q4, 97% of our investments were in first lien loans, underscoring our commitment to investing at the top of the capital structure. All five new investments were cross-platform transactions where we leveraged the expertise of Sixth Street’s investment teams to execute on opportunities that offered compelling risk-adjusted returns.

During the quarter, we further diversified our end market exposure with five new investments spanning four distinct industries. On funding trends for the year, nearly half of fundings were off the run—in what we consider lane two, challenged businesses with good asset bases, and lane three, good businesses with challenged capital structures. We also had an approximately even split in 2025 between sponsor and non-sponsor investments, highlighting the importance of our thematic investment approach in sourcing across both of these channels.

From a portfolio yield perspective, our weighted average yield on debt and income-producing securities at amortized cost decreased quarter over quarter from 11.7% to 11.3%, with the majority of this decline, or 33 basis points, attributable to lower underlying base rates. Despite market credit spreads remaining tight from a historical perspective, we continue to maintain discipline and focus on transactions with

Ross Bruck: 30 basis points range across all four quarters of the year. In Q4, our weighted average spread on new investments was 691 basis points, which compares favorably to the 551 basis points reported by our public BDC peers in Q3. Moving on to repayment activity, we experienced a moderate slowdown in payoffs during the fourth quarter to finish off a record year. Total repayments in Q4 were $235 million across eight full and two partial investment realizations. Total repayments were $1.2 billion for the year, representing the highest annual repayment activity since inception. In 2025, portfolio turnover was 34%, well above our three-year average of 22%.

This significant volume of repayment activity contributed to $0.64 per share of activity-based fee income in 2025, representing the highest level of fee income since 2020. Refinancing was the dominant theme during the fourth quarter, driving six of eight repayments in our portfolio. Four of these six were refinanced at lower spreads, including one in the BSL market and three in the private credit market, highlighting the realization of our investment thesis as these credits improved during our hold period. The other two resulted in the repayment of our existing investment, followed by the opportunity to continue lending to the business through a new-money term loan.

As evidenced by this quarter’s activity, we will continue to selectively participate in refinancings where we believe the investment represents an appropriate use of capital for our business, where we can leverage our expertise into uniquely insightful underwritings. Moving on to credit statistics, across our core borrowers for whom these metrics are relevant, we continue to have conservative weighted average attachment and detachment leverage points of 0.4 times and 5.3 times, respectively, with weighted average interest coverage of 2.1 times. As of Q4 2025, weighted average revenue and EBITDA of our core portfolio companies were $449 million and $127 million, respectively. Median revenue and EBITDA were $159 million and $48 million.

Finally, the performance rating of our portfolio continues to be strong, with a weighted average rating of 1.13 on a scale of one to five, with one being the strongest, compared to last quarter’s rating of 1.12. Our very limited exposure to a second-lien term loan in Alcogen, which we acquired as a de minimis position, was added to nonaccrual status during the quarter, representing 0.01% of our total portfolio by fair value. Total nonaccruals remained unchanged at 0.6% by fair value as of December 31. With that, I would like to turn it over to Ian to cover our financial performance in more detail.

Ian Timothy Simmonds: Thank you, Ross. Q4, we generated net investment income per share of $0.53, resulting in full-year net investment income per share of $2.23. Our Q4 net income per share was $0.32, resulting in full-year net income per share of $1.81.

Ian Timothy Simmonds: We experienced an unwind of $0.05 per share of capital gains incentive fees in 2025, resulting in adjusted net investment income and adjusted net income per share for the year of $2.18 and $1.76, respectively. At year end, we had total investments of $3,300,000,000.0, total principal debt outstanding of $1,800,000,000.0, and net assets of $1,600,000,000, or $16.98 per share, which is prior to the impact of the supplemental dividend that was declared yesterday. Our ending debt-to-equity ratio was 1.1 times, down from 1.15 times in the prior quarter. Our average debt-to-equity ratio increased from 1.1 times to 1.17 times quarter over quarter.

Ending leverage was lower than average leverage during Q4 driven by the timing of repayments occurring near quarter end. For full year 2025, our average debt-to-equity ratio was 1.17 times, down slightly from 1.19 times in 2024. We continue to have ample liquidity, with approximately $1,100,000,000 of unfunded revolver capacity at year end against $199,000,000 of unfunded portfolio company commitments eligible to be drawn. In terms of upcoming maturities, we have reserved for the $300,000,000 of 2026 notes due in August under our revolving credit facility. After adjusting our unfunded revolver capacity as of year end for the repayment of the 2026 notes, we continue to have significant liquidity that exceeds our unfunded commitments by 4.2 times.

We remain focused on our established cadence in accessing the debt market annually to maintain our funding mix. Pivoting to our presentation materials, slide 10 contains this quarter’s NAV bridge. Walking through the main drivers of the change in net asset value, we added $0.52 per share from adjusted net investment income against our base dividend of $0.46 per share. There was a $0.10 per share decline in NAV from the reversal of net unrealized gains from paydowns and sales. The impact of widening credit spreads on the valuation of our portfolio had a negative $0.03 per share impact to net asset value.

Other changes included a $0.04 per share increase in NAV from net realized gains on investments and a $0.12 per share reduction to NAV primarily from unrealized losses from portfolio company-specific events. Moving to our operating results detail on slide 12, we generated total investment income of $108,200,000.0, down slightly compared to $109,400,000.0 in the prior quarter. Walking through the components of income, interest and dividend income was $95,500,000.0, up from $95,200,000.0 in the prior quarter. Other fees, representing prepayment fees and accelerated amortization of upfront fees from unscheduled paydowns, were also higher at $10,900,000.0 compared to $6,800,000.0 in Q3, driven primarily by prepayment fees earned on our investments in Merit and Arrowhead.

Other income was $1,900,000.0, down from $7,400,000.0 in the prior quarter. Net expenses, excluding the impact of the non-cash accrual related to capital gains incentive fees, were $58,200,000.0, down from $58,400,000.0 in the prior quarter. Our weighted average interest rate on average debt outstanding decreased from 6.1% to 6%. This was the result of a decline in base rates quarter over quarter. As a reminder, our liability structure is entirely floating rate, which means our cost of debt will move in the same direction as interest rates.

Included in our earnings release yesterday was the announcement of the formation of Structured Credit Partners, or SCP, a joint venture between both BDCs managed by Sixth Street and two BDCs managed by The Carlyle Group. The investment objective of the JV is to invest equity into newly issued broadly syndicated loan CLOs, managed by Sixth Street or Carlyle. By combining the investment capabilities of both platforms, this partnership enhances diversification and expands investment flexibility for

Ian Timothy Simmonds: SLX.

Ian Timothy Simmonds: We believe the unique structure will be highly accretive for earnings, providing access to a core Sixth Street competency in a fee-free format, as SCP will not charge any management or incentive fees on the underlying CLOs or at the joint venture level. We believe SCP will generate returns in the mid-teens on capital invested, which will be accretive to our overall asset-level yields. SLX’s total commitment to the joint venture is $200,000,000. Looking ahead to 2026, we continue to focus on the evolution of the interest rate environment and new-issue investment spreads and their combined impact on normalized earnings.

As a core tenet of our dividend framework, we established our base dividend level using the forward interest rate curve to assess durability through cycles. As it relates to new-issue investment spreads, our disciplined capital allocation and focus on asset selection can alleviate pressure from compression under various competitive environments. Based on that assessment, we believe the earnings power of our portfolio remains well aligned with our existing base dividend. We believe the anticipated returns from our newly established JV will also provide support to our earnings profile.

Based on our model, which incorporates the forward curve, reflects leverage in the middle of our target range, and assumes spreads on new investments remain broadly stable, we expect to target a return on equity on net investment income for 2026 of 11% to 11.5%. The lower end of this range reflects normalized activity-based fees, while the upper end reflects activity-based fees above our three-year historical average. Using our year-end book value per share of $16.97, which is adjusted to include the impact of our Q4 supplemental dividend, this corresponds to a range of $1.87 to $1.95 for full year 2026 adjusted net investment income per share. At year end, we had $1.21 per share of spillover income.

We will continue to monitor this figure closely as part of our ongoing review of our distribution strategy. With that, I will turn it back to Bo for concluding remarks.

Bo Stanley: Thank you, Ian. I will close by tying together a set of themes we have been consistently communicating in shareholder letters and on recent earnings calls. For several quarters now, we have been very vocal that the sector has been over-allocating capital into a tighter spread environment. We have also been clear that as reinvestment spreads compressed and the forward curve rolled over, sector ROEs would come down. While net investment income may decline slightly further based on the current shape of the forward curve, we believe we are approaching trough earnings for the space, absent any credit losses. As anticipated, the natural outcome of this misallocation is a reallocation of capital.

We believe that the market is in the early innings of a gradual market rebalancing. As Ross mentioned, this began to materialize in December with a meaningful increase in redemptions from the perpetually offered non-traded BDC vehicles. Over time, we expect capital to migrate towards managers and structures that can consistently earn their cost of capital and away from those that cannot. Should we see capital continue to pull back, whether due to generalized AI fears or broader macro uncertainty, we are very well positioned with significant liquidity and a robust balance sheet to capitalize on the opportunity set.

These periods of market retreat and heightened volatility represent the greatest environment for SLX to fully leverage the breadth and depth of the broader Sixth Street platform. Our firm’s extensive sector expertise, flexible and diverse capital base, and integrated investment capabilities enable us to provide differentiated bespoke capital solutions. Coupled with our technical underwriting and thematic investment approach, this unique combination has historically allowed us to outperform during periods of market instability or uncertainty. Our average net income ROE during years of heightened volatility has been nearly 14%, outperforming the average net income ROE of our peers during that period by over 600 basis points and our own average ROE in more benign periods by 200 basis points.

Should the investment environment present a similar opportunity, we have the necessary resources and structural advantages to generate differentiated risk-adjusted returns and create lasting value for our shareholders. With that, thank you for your time today. Operator, please open the line for questions.

Operator: Thank you. If you would like to ask a question, please press 1-1. If your question has been answered and you would like to remove yourself from the queue, please press 1-1 again. Our first question comes from Brian McKenna with Citizens. Your line is open.

Brian McKenna: Okay, great. Thanks. Good morning, everyone. So just my first question, how much of the portfolio has turned over since 2022? And then if you look at the mix of loans today, what year or two were the majority of these assets originated in? Sure. Thanks for the question, Brian. So as we have stated before, we have less exposure to pre-2022 vintages than our peers. I think today, we set it about 20% to 25% of NAV. The vast majority of our portfolio we originated in post the rate hiking cycle in 2023 and 2024. We have been less active of late as the markets have gotten tighter. But, yeah.

So about 20% of NAV before 2022, which is much different than our peers.

Bo Stanley: Okay. That is helpful. And then I guess somewhat of a related question. I appreciate all the detail on software and how Sixth Street is thinking about the sector and where we go from here. But I think what the market might be missing is that there is going to be a very large new set of deployment opportunities, really across a number of subsectors over time, in and around what is happening with AI. So thinking through how you invest and why, and I know you are thoughtful about that.

But I would just love to get your thoughts on how you see the deployment environment evolving here over the next few years, and what this ultimately means for the evolution of your portfolio.

Bo Stanley: Yeah. Sure. It is a great question. Look. I think, first of all, we did try to provide a framework of how we are thinking about the sector given a lot of the noise related to enterprise software and its effect on direct lending and its effects on portfolios. Hopefully, people found that helpful. It sounds like you did. What I would tell you is we are thematic investors here at Sixth Street and have always been. And the great thing about being thematic investors, themes rotate often.

Eighteen to twenty-four months is the general gestation period of a theme, and we are constantly rotating across the platform, looking at things on a relative value basis to find the best risk-adjusted return and to find those durable moat businesses that we talked about in the earnings script. We have never thought of software as a sector, and as such, we have always had rotating themes in and out of the sector.

And I think that is really important because over the past two to three years, our team has been focused on the impacts that AI have on the ecosystem and where businesses are going, and we have been rotating our capital to those businesses we think are going to be the beneficiaries in the future. Those are the ones that I talked about that have the strong moats, that are able to invest in product, and what we ultimately think will expand the TAM of the market. So we are pretty excited about that. On top of what we think is going to be a misunderstanding, generally, and we are seeing that already, of the threats and the opportunities.

I want to be clear. We think there are going to be winners and losers here. There are going to be businesses that are fragile that will, over time, be disintermediated by AI. But there are going to be businesses that are systems of record, that have strong data moats, most importantly, own their customers, are going to be able to invest in product and drive TAM, and we are looking forward to being providers of capital to those winners.

Brian McKenna: Very helpful. Thanks so much.

Operator: Thank you. Our next question comes from Finian O’Shea with Wells Fargo Securities. Your line is open.

Finian Patrick O'Shea: Hey, everyone. Good morning.

Operator: So

Finian Patrick O'Shea: move over to the JV. Will these look like more BSL CLOs, just sort of true third party that you and Carlyle already have big platforms in? Is this something like more of a typical JV where it is a little more senior-type direct lending, or you are selling stuff down to it from the book as it matures?

Bo Stanley: Good question, Finn. I am going to address at just what the criteria was for us to invest in this JV and then pass it over to Ross and Ian, who were very instrumental in working through this for that question. I think it is a very good question. But the two important criteria are: it has to be clearly accretive to our shareholders on a returns basis and on a relative value basis to other options that we see. That is one. And then two, it has to overlay with the core competencies of our platform and what we do well here at Sixth Street. And this hits both of those.

Ross, do you want to address Finn’s question directly?

Ross Bruck: Sure. Thanks, Finn. So in terms of the underlying collateral, these will be broadly syndicated loan CLOs. We do not anticipate the CLOs holding private credit either originated by us or third parties, and we would expect that on the liability side, they would be financed like traditional BSL CLOs, as you mentioned, that ourselves and Carlyle already have large platforms originating and managing. The main exception to third-party CLOs will be there will be no management fees at either the CLO or the joint venture level. A typical third-party CLO, you know, fees are 40 to 50 basis points of assets, or about 400 to 500 basis points to the equity.

So that is the real differentiator in driving accretion for shareholders of the BDCs that are participating in the joint ventures. Great. Thanks, Ross.

Bo Stanley: Okay.

Finian Patrick O'Shea: That is helpful. Or, sorry, Ian. Were you going to

Bo Stanley: Nope.

Finian Patrick O'Shea: Okay. What about, like, already I missed the number. I am sure you said it. On spillover, but it is something reasonably high. How do you address the spillover problem that sort of true BSL CLO equity brings?

Bo Stanley: So it is a good question, and I think we have made the comment multiple times about monitoring spillover income. And it is something that we think about deeply about how we can generate the best return on shareholder value

Finian Patrick O'Shea: taking that into account.

Bo Stanley: There is not one factor that matters the most, but we take them all into account,

Finian Patrick O'Shea: including where we are trading, how much of that spillover needs to be distributed in the near term, what our prospects for over-earning are. Your point is a really good one on the BSL side. I think

Bo Stanley: just to address that more directly, it is going to take us some time to ramp

Finian Patrick O'Shea: the JV. So we talked about a commitment of $200,000,000. That is not $200,000,000 today. So this is not going to create an impact on spillover income in the next quarter or the next two quarters. This is going to be something that happens over time.

Bo Stanley: And as you saw,

Finian Patrick O'Shea: spillover income can move quarter to quarter. Our supplemental dividend framework was really designed to help us manage that without sacrificing stability in NAV.

Bo Stanley: It will be something that we

Finian Patrick O'Shea: that will develop, and we will be monitoring that as we go. But I do not have a

Bo Stanley: specific answer on

Finian Patrick O'Shea: whether that changes our approach. I think it is just another factor that we include in our assessment.

Bo Stanley: And why will it

Finian Patrick O'Shea: take a lot of time—for operation reasons, or because you want to, you know, the arb is really tight

Ross Bruck: kind of thing and you want to

Maxwell Fritscher: manage it to that.

Finian Patrick O'Shea: Well, just think about the general sequence and cadence of CLO creation. We are not looking to create a CLO with, in our case, $200,000,000 equity commitment today. That is going to allow us to create multiple CLOs.

Bo Stanley: Cool. Thanks so much. Thanks, Finn.

Operator: Thank you. Our next question comes from Arren Cyganovich with Truist Securities.

Bo Stanley: Thanks. Good morning. I was wondering if you could talk a little bit about the investment pipeline and some of the disruption that we have seen from the public software space, and

Ross Bruck: that is impacting any of your

Bo Stanley: I know it is quite early thus far, but just curious if you have had any conversations with sponsors. Actually, we have had a lot of conversations over the last few weeks, as you would imagine, with sponsors. I think sponsors are trying to understand the landscape of who is going to be providers of capital in this market and who is not. I would say it is too early to see if there is going to be a pickup in pipeline from this disruption. I think we are well suited, as I mentioned in the script, to take advantage of any dislocation.

These dislocations are really what our platform is built for, so we stand ready and able to take advantage of that. As far as the generalized pipeline, I think the pipeline is decent. We had good activity in Q4, as you saw a pickup in M&A activity, particularly on the sponsor side. Last year, our non-sponsor to sponsor origination was around 50/50. So 50% non-sponsor versus sponsor. We were certainly focused on origination away from the regular channel. We were allocating our capital to transactions that we believed earned our cost of equity. But we are encouraged by the pipeline, certainly encouraged if this dislocation continues.

Whenever there is a lot of uncertainty, that is the period that we generally step in and take advantage of.

Ross Bruck: Thanks. And then

Bo Stanley: the unrealized losses were—they were not too high, 1% impact to NAV. What was driving some of those impacts to your portfolio companies?

Ian Timothy Simmonds: Yeah. Sure. So this is Ian. Arren, there was about $0.03 per share that was attributable to

Bo Stanley: spreads.

Ian Timothy Simmonds: And then on the credit side, there were some specific reversals. So Carrot, which is a public equity name that we hold,

Maxwell Fritscher: the market price at $9.30 was higher than what it was at 12/31, so that creates

Ian Timothy Simmonds: a reversal of previously unrealized gains. And then there was an impact from a restructuring at IRG and a couple of other portfolio companies that were less impactful individually.

Operator: Got it. Thank you.

Bo Stanley: Thank you.

Operator: Our next question comes from Kenneth S. Lee with RBC Capital Markets. Your line is open.

Bo Stanley: Hey, good morning, and thanks for taking my question. Just one on the SCP JV again. I am wondering

Ross Bruck: you could talk a little bit more about some of the motivations here. Are you seeing particular opportunities within the BSL markets?

Kenneth S. Lee: Just want to flesh that out a little bit more. Thanks.

Ross Bruck: Ken, this is Ross. So, to echo Bo’s comments, we are constantly on the lookout for how we can leverage core competencies of the Sixth Street platform for shareholders. As you know, we have leveraged the expertise of our structured credit team for some time now, investing in CLO debt with a very strong track record in that asset class. We have been thinking about ways to do more beyond CLO debt, and we developed this structure, which Carlyle happened to be considering on their end simultaneously. And so the motivations are: we think the risk return generated by fee-free CLO equity is really attractive within a portfolio context for SLX.

It is not so much picking a specific market environment in which we think the arb is more attractive or less attractive. The idea, as Ian alluded to, is that we are going to deploy this equity capital sequentially in CLOs over time, creating very high diversification across borrowers and across vintages. And so those are some of the key motivations.

Kenneth S. Lee: Gotcha. Very helpful there. Just one follow-up if I may. Wonder if you could just talk a little bit more about what you are seeing in terms of spreads on new investments. There is a little bit of a delta quarter to quarter, but just wondering whether that is driven more by mix rather than any kind of spread compression or widening.

Bo Stanley: Yeah. Generally speaking, we have seen spreads pretty stable throughout the course of 2025 and expect that in 2026. We took maybe a bit of a pickup given the broader markets recently. But I think we were within a 50 basis point band across the four quarters last year. Again, speaking to the breadth of our platform and our ability to find things off the run, thematically. But, broadly, we see stability. We are not anticipating any real change in that going forward. Our hope is, if capital continues to reallocate in the sector, that spreads will continue to widen a bit, but we have not seen that as

Kenneth S. Lee: Gotcha. Very helpful there. Thanks again.

Bo Stanley: Yep. Thank you. Thank you.

Operator: Our next question comes from Sean Paul Adams with B. Riley Securities.

Ross Bruck: Hey, guys. Good morning. Could you provide just a little

Ian Timothy Simmonds: more color on the restructuring for IRG Sports?

Bo Stanley: Yes. I will take that one really quickly. IRG Sports is a business that we have been an investor in for nine years now, I believe. We concluded the sale of one of the operating assets during the quarter that was actually above our NAV. We have been in the process of marketing and selling the other operating asset. We have marked that to what we believe is the mid-range of the bids that we have today and feel good about that. Hopefully, it may actually do a little bit better than that. Got it. Thank you.

Operator: Thank you. Our next question comes from Paul Conrad Johnson with KBW.

Ross Bruck: Hey, good morning. Thanks for taking my questions. Most of mine have been asked, but I am curious, on the 40% software exposure,

Maxwell Fritscher: has that come down, or has that been—where has that gone over time? Has that been pretty consistent over time? And based on current market conditions, where would you expect that to trend, with your pipeline and your selectivity currently?

Bo Stanley: Yeah. So I will take that. Given that we have always mapped to the end market, and I think we have provided a framework why we think that is the right way to think about risk because that is ultimately what you are underwriting, we do not have historical statistics. We actually took a look at the portfolio, wanted to provide some clarity given the market context, and mapped the portfolio to broadly what we believe people in the space are defining as enterprise software.

What I would say anecdotally: I would believe that has come down marginally over the past couple years, in part because we were seeing a decline in unit economics across the software space post the COVID pull-through of demand. And I think that is one of the things that is really important to note that people are losing sight of, is that valuations in software companies are coming down in part because unit economics are slowing. There is a little bit of cannibalization of AI budgets and enterprise software budgets that are causing some of that. There is not disruption and dislocation from AI taking market share yet, though.

But as we saw those unit economics coming down and, frankly, more capital in the private market which are over-indexing probably to software, and certainly private credit to software, we were just less competitive in the regular-way LBO financing for software companies. A lot of the businesses that we did invest in the software space over the last couple years were off the run, direct to company, or very thematic in some of the areas that we were rotating to. So we do not have the exact numbers because we have never tracked it that way. What I would tell you is, anecdotally, it has come down marginally over time because we were less competitive.

As far as the future, we are going to invest where we feel we can invest into defensible businesses that meet our criteria. I am hopeful on the margin that we are more competitive in the regular-way financings for the winners in the future, but that will remain to be seen.

Maxwell Fritscher: Thank you very much, Bo. That is all for me.

Kenneth S. Lee: Thanks.

Operator: Thank you. Our next question comes from Robert James Dodd with Raymond James. Your line is open.

Ross Bruck: Hi, guys. I have

Ian Timothy Simmonds: some questions about the JV, but I think I will follow up with you on those. On the spread question going forward, if I can,

Robert James Dodd: I mean, in your guidance and your prepared remarks, you are saying you expect spreads to remain tight. So does that mean that you think that the market AI software concerns are going to blow over? Because, obviously, right now, software spreads in the liquid market—obviously, we cannot really see them in the private credit market yet—but those are, you know, 150 basis points wider, give or take. And that is not just the explicit software—kind of healthcare IT, anything where software is the product—spreads are materially wider, but you expect them to be tight for the year. So can you reconcile me? Do you expect it to blow over, or how do those two things align?

Bo Stanley: Thanks for the question, Robert. Look. Our base case coming into the year

Bo Stanley: is that

Bo Stanley: the credit spreads are going to be stable and not increasing. What I would tell you is it is too early to tell if the dislocation in software and in the BSL market—and I think for performing BSL for software names that, you know, we said it in our script, is closer to 50 to 100 basis points. I think you are quoting more broadly software and some of the more challenged names—

Robert James Dodd: Yep.

Bo Stanley: That up it out to 150. Overall, that should be support for the ability to find risk with a better spread environment than in the past. But I do not think that is our base case now. I think the markets are still generally awash with liquidity and capital. That could reverse. We saw redemptions in the non-traded BDC sector pick up in Q4. I cannot imagine that they are going to slow down any in Q1. I think we think that is a gradual shift of reallocation of capital in the sector, which is healthy. Over the long arc, we believe the space needs to earn its cost of equity. Spreads need to widen.

That is going to take time. Our base case is not that they are going to in the near term, but that could change very quickly. I do think over the long term, they have to.

Robert James Dodd: Got it. Thank you. One more if I can, and I will let you—I mean,

Bo Stanley: software and technology has been a core part of the

Robert James Dodd: platform for a considerable period of time, and the personnel backgrounds even before that. How long has there been, say, an AI risk section in an investment committee memo or an investment committee meeting? I mean, it is not like I think AI risk suddenly appeared over the last three months. So how long has that been a core part of your underwriting for the software-as-a-product, rather than software-as-an-end-market, kind of businesses?

Bo Stanley: We have been thinking about how AI impacts the ecosystem both positively and negatively really over the past three years. And, as I mentioned, working thematically to reposition the portfolio and our new activity to the areas that we think are both most protected and can benefit from those. The other great thing about Sixth Street and our platform is we have a purview of what is going on in the ecosystem. It is not just in direct lending.

Robert James Dodd: It—

Bo Stanley: you know, we have a growth franchise that starts to see businesses just post kind of venture, and we have folks that are looking at things in the broadly syndicated market, also on the distressed market. So we have this perfect purview of what is going on across the ecosystem, and that allows us some early signals of where we should be focusing our capital and where we, thematically, should be thinking about positioning our portfolio. So it has been for quite some time that our team has been working on this and thinking through it. You know, and so

Kenneth S. Lee: yeah.

Bo Stanley: Yep.

Robert James Dodd: Thank you.

Operator: Thank you. Our next question is a follow-up from Brian McKenna with Citizens. Your line is open.

Brian McKenna: Great. Thanks for the follow-up. Just two more unrelated questions, if I may. So how much of your software and related exposure is sponsor versus non-sponsor? And then one for you, Ian. If you look back at the last decade as a public BDC, what has been the low end of the initial target range for ROE? What did the operating environment look like during that period, specifically as it relates to base rates and spreads, etc.? And then where did the ROE come in for that period?

Bo Stanley: Might be easiest if I answer your questions

Ian Timothy Simmonds: to me first. We have provided guidance, excluding this year for 2026. We have done it on 11 prior occasions. Our actual operating ROEs

Robert James Dodd: have ended up above our guidance range in eight of those years,

Ian Timothy Simmonds: and the other three years we have met the midpoint of those ranges. And so that is across a period from 2015 to 2025. You had different periods where base rates were elevated in 2018. You had some dislocation from energy markets on the broader market in 2014–2015. You had COVID. I am not as familiar with what our peers do on the guidance side, but we have been providing guidance now for—this is our twelfth year of providing guidance.

Bo Stanley: And then just going back quickly to your question on sponsor versus non-sponsor in the software space. We do not have it broken down for the software space, but I would venture to say that it would mirror the broader portfolio that has traditionally been close to 35% non-sponsor versus sponsor. Of course, of late over the last eighteen months, that activity has been closer to 50/50.

Brian McKenna: Super helpful. Thank you, guys.

Bo Stanley: Thanks.

Operator: Thank you. I am showing no further questions at this time. I would like to turn the call back over to Bo Stanley for closing remarks.

Bo Stanley: Well, thank you, everybody. Thanks for the great questions today and for listening to us. I also want to thank everybody in this room for the tremendous amount of work preparing for this every quarter and wish everybody a great long weekend. Thank you.

Operator: Thank you for your participation. You may now disconnect.

Bo Stanley: Good day.

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