Input

Here’s the initial prompt we used:

Can you find Sixth Street Specialty’s (TSLX) IQ 2025, IVQ 2024 and IQ 2024 earnings press releases and create a table comparing the key metrics including Net Investment Income, Net Investment Income Per Share (not the adjusted; NAV Per Share, non-accruals, portfolio cost and FMV and number of companies ?

This is what we received in return, lightly edited:

Here is a comprehensive comparison table for Sixth Street Specialty Lending (TSLX), including the additional key metrics where available for Q1 2025, Q4 2024, and Q1 2024.

Sixth Street Specialty Lending (TSLX) – Key Quarterly Metrics

Notes:

• Total Investment Income: Sometimes called “total revenue” or “total investment income.”
• NII: Net investment income, the dollar amount.
• Adjusted NII Per Share: Excludes capital gains incentive fee accruals.
• Net Income Per Share: Includes realized/unrealized gains/losses.
• Dividend Per Share: Base dividend plus any supplemental dividend.
• Return on Equity: Annualized, based on reported NII.
• Portfolio Yield: Weighted average yield at cost.
• Weighted Avg. Interest Rate on Debt: Average rate paid on outstanding borrowings.
• Net Assets: Total net assets at quarter end.
• Leverage Ratio: Debt-to-equity ratio.
• Non-accruals: Percentage of portfolio on non-accrual status, based on FMV.
• Portfolio Cost/FMV: Cost and fair market value of investment portfolio.
• Number of Portfolio Companies: As of quarter-end.

Sources:

• TSLX Q1 2025 Earnings Release
• TSLX Q4 2024 Earnings Release
• TSLX Q1 2024 Earnings Release
• Investor Presentations and SEC Filings

Perplexity’s Commentary on TSLX Key Quarterly Metrics

1. Earnings Strength and Stability

• Net Investment Income (NII) Per Share remained robust at $0.62 for both Q1 2025 and Q4 2024, up from $0.59 in Q1 2024. This consistency signals strong underwriting discipline and portfolio management, even as market conditions fluctuate.
• Total Investment Income showed a healthy increase year-over-year, reflecting both portfolio growth and strong origination activity.

2. NAV and Dividend Consistency

• Net Asset Value (NAV) Per Share has been remarkably stable, hovering just above $17 across all periods. This suggests that TSLX has avoided significant realized or unrealized losses, and that portfolio valuations have held up well.
• Dividends (base plus supplemental) have been maintained or slightly adjusted, reflecting management’s confidence in recurring earnings and their commitment to returning capital to shareholders.

3. Portfolio Quality and Yield

• Non-accruals as a Percent of FMV remain low (1.1%-1.4%), an indicator of high credit quality and effective risk management. This is especially notable given macroeconomic uncertainties.
• Portfolio Yield at Cost is strong (above 12%), suggesting TSLX is able to command attractive rates on its investments, likely due to its focus on senior secured loans and disciplined deal selection.

4. Leverage and Funding Costs

• Leverage Ratio (around 1.06x to 1.09x) is moderate and well within regulatory limits, providing TSLX with both stability and flexibility for future growth.
• Weighted Average Interest Rate on Debt decreased from 7.0% in Q4 2024 to 6.4% in Q1 2025, indicating successful refinancing or reduced borrowing costs-positive for net interest margins.

5. Portfolio Size and Diversification

• Portfolio Cost and FMV have grown steadily, reflecting new investments and portfolio appreciation.
• Number of Portfolio Companies has declined from 124 in Q1 2024 to 115 in Q1 2025, which may indicate a move toward larger, more concentrated positions or a focus on higher-conviction investments.

6. Profitability and Return Metrics

• Return on Equity (ROE) remains strong and stable, consistently in the mid-teens, underscoring efficient capital deployment and solid earnings generation.
• Net Income Per Share (including realized/unrealized gains) fluctuates more, as expected, given market movements and portfolio revaluations.

Summary

TSLX’s quarterly results demonstrate a well-managed, income-focused BDC with strong credit quality, stable NAV, and a disciplined approach to portfolio construction and leverage. The company’s ability to maintain high yields, low non-accruals, and consistent dividends-even as the number of portfolio companies decreases-suggests prudent risk-taking and a focus on shareholder returns. Lower borrowing costs and steady ROE further support a positive outlook for continued performance.

VIEWPOINT

Impressed

We were delighted by how quickly – at least in this case – the AI was able to construct the table, the simple elegance of the layout and the offering of sources.

To our mind, the “commentary” by Perplexity above is plain vanilla-ish, basically re-hashing what the metrics show, but is not without some value for anyone seeking a quick summary.

We can see ourselves utilizing this resource throughout earnings season to prepare similar data-heavy tables and to provide a written summary of what is found.

Not Worried

However, AI is not able to generate anything we would consider incisive when asked to make broader commentary.

This is what we got back when we asked how TSLX might perform in the rest of 2025:

TSLX is well-positioned to deliver stable net investment income, attractive dividends, and above-average returns on equity for the remainder of 2025, supported by strong credit quality, prudent leverage, and a resilient funding profile. While market volatility may create some headwinds, both management and analysts express confidence in TSLX’s ability to navigate these challenges and capitalize on new opportunities

It’s not that the summary above is necessarily wrong. The weakness is in the broad nature of the assessment and the bland language involved – more in the nature of a marketing pitch – and with little in the way of specifics.

In Our Own Words

Our own – longer winded – assessment would go more like this:

TSLX believes many of its BDC competitors have been offering capital too cheaply, putting pressure on shareholder returns as supply exceeds demand in many parts of leveraged lending. This has caused TSLX to”pull back” recently where deploying capital and leverage is concerned. Management – like most everyone – believes that in the macro environment we are in one of the most “pivotal” periods since the GFC. Ironically, the argument is that the turmoil in the economy and markets is just what the doctor ordered for TSLX. The hope is that spreads will widen in the face of increased risks and experienced lenders with plenty of liquidity and broad access to new deals – like TSLX – will benefit. Moreover, TSLX believes that its approach to investment selection – including its ability to ramp up lending to non-sponsored companies (including the premium pricing involved) and its track record of low credit losses will allow the BDC to thrive during this period, and more so than its peers. “Bring It On” seems to be the BDC’s slogan in the face of our changing world. Part of TSLX’s confidence is that it has analyzed the potential impact of tariffs on its portfolio companies and – at this point – has only minor concerns, but concedes that the “derivative impacts” might ultimately change that picture. The BDC – one of the few not afraid to provide “guidance” – is so bullish on its prospects that it is predicting its return on equity in 2025 might reach 11.7%, above the range previously projected at the time of the last conference call. Moreover, management argues that the IQ 2025 drop in net asset value per share (NAVPS) can only be very partially blamed on weaker credit and much of this quarter’s decline could be reversed in the near future. While we take everything always with a bit of salt, there is no doubt – as the metrics above illustrate – that the BDC has performed well of late. Looking forward, where for some BDCs this might turn out to be the “worst of times”, TSLX has the opportunity to make this “the best of times”.

BDC Reporter’s View

Going Forward

We are not Luddites and we’re anxious to speed up the research process, so expect more use of AI in future articles – especially in the realm of data aggregation.

However, the technology cannot – yet – do much more and the voice you’ll be hearing on these pages will always be ours.

We shall not go quietly…