OCSL - Oaktree Specialty Lending Corporation Announces First Fiscal Quarter 2024 Financial Results and Declares Quarterly Distribution of $0.55 Per Share | Benzinga

February, 01 2024 11:00 AM Oaktree Specialty Lending Corporation

LOS ANGELES, Feb. 01, 2024 (GLOBE NEWSWIRE) -- Oaktree Specialty Lending Corporation (NASDAQ:OCSL) ("Oaktree Specialty Lending" or the "Company"), a specialty finance company, today announced its financial results for the fiscal quarter ended December 31, 2023.

Financial Highlights for the Quarter Ended December 31, 2023

Total investment income was $98.0 million ($1.26 per share) for the first fiscal quarter of 2024, as compared with $101.9 million ($1.32 per share) for the fourth fiscal quarter of 2023. Adjusted total investment income was $98.0 million ($1.26 per share) for the first fiscal quarter, as compared with $102.2 million ($1.32 per share) for the fourth fiscal quarter of 2023. The decrease for the quarter was primarily driven by lower interest income, mainly due to an increase in non-accrual investments, partially offset by higher fee income and higher dividend income.
GAAP net investment income was $44.2 million ($0.57 per share) for the first fiscal quarter of 2024, as compared with $47.5 million ($0.62 per share) for the fourth fiscal quarter of 2023. The decrease for the quarter was primarily driven by lower total investment income, partially offset by lower part I incentive fees.
Adjusted net investment income was $44.2 million ($0.57 per share) for the first fiscal quarter of 2024, as compared with $47.8 million ($0.62 per share) for the fourth fiscal quarter of 2023. The decrease for the quarter was primarily driven by lower adjusted total investment income, partially offset by lower part I incentive fees.
Net asset value ("NAV") per share was $19.14 as of December 31, 2023, down as compared with $19.63 as of September 30, 2023. The decline from September 30, 2023 primarily reflected realized and unrealized losses on certain debt and equity investments and the impact of the December 2023 special distribution.
Originated $370.3 million of new investment commitments and received $213.5 million of proceeds from prepayments, exits, other paydowns and sales during the quarter ended December 31, 2023. The weighted average yield on new debt investments was 11.6%.
Total debt outstanding was $1,660.0 million as of December 31, 2023. The total debt to equity ratio was 1.10x, and the net debt to equity ratio was 1.02x, after adjusting for cash and cash equivalents.
Liquidity as of December 31, 2023 was composed of $112.4 million of unrestricted cash and cash equivalents and $907.5 million of undrawn capacity under the Company's credit facilities (subject to borrowing base and other limitations). Unfunded investment commitments were $226.6 million, or $199.5 million excluding unfunded commitments to the Company's joint ventures. Of the $199.5 million, approximately $165.9 million can be drawn immediately with the remaining amount subject to certain milestones that must be met by portfolio companies or other restrictions.
A quarterly cash distribution was declared of $0.55 per share. The distribution is payable in cash on March 29, 2024 to stockholders of record on March 15, 2024.

Armen Panossian, Chief Executive Officer and Chief Investment Officer, said, "Our first quarter results were highlighted by strong origination activity and adjusted net investment income that supports our cash distribution. We leveraged the breadth of the Oaktree platform to invest $370 million across sponsor, non-sponsor and discounted publicly traded credit investments, generating net portfolio growth with a diverse set of attractive opportunities."

"During the quarter, however, we experienced idiosyncratic performance challenges at four portfolio investments, resulting in a decline in NAV and an increase in non-accruals," Panossian added. "We are drawing upon Oaktree's deep resources and expertise in navigating turnarounds, and we believe we are well-positioned to manage these specific situations and maintain strong overall credit quality."

Distribution Declaration

The Board of Directors declared a quarterly distribution of $0.55 per share. The distribution is payable in cash on March 29, 2024 to stockholders of record on March 15, 2024.

Distributions are paid primarily from distributable (taxable) income. To the extent taxable earnings for a fiscal taxable year fall below the total amount of distributions for that fiscal year, a portion of those distributions may be deemed a return of capital to the Company's stockholders.

Results of Operations



For the three months ended
($ in thousands, except per share data)

December 31, 2023 (unaudited)

September 30, 2023 (unaudited)

December 31, 2022 (unaudited)
GAAP operating results:






Interest income

$
91,414


$
94,732


$
69,978

PIK interest income


3,849



5,544



6,130

Fee income


1,307



572



2,021

Dividend income


1,415



1,057



1,050

Total investment income


97,985



101,905



79,179

Net expenses


53,796



54,407



40,293

Excise tax


—



—



(78
)
Net investment income


44,189



47,498



38,808

Net realized and unrealized gains (losses), net of taxes


(33,654
)


(1,546
)


(25,636
)
Net increase (decrease) in net assets resulting from operations

$
10,535


$
45,952


$
13,172

Total investment income per common share

$
1.26


$
1.32


$
1.30

Net investment income per common share

$
0.57


$
0.62


$
0.63

Net realized and unrealized gains (losses), net of taxes per common share

$
(0.43
)

$
(0.02
)

$
(0.42
)
Earnings (loss) per common share — basic and diluted

$
0.14


$
0.60


$
0.22

Non-GAAP Financial Measures¹:






Adjusted total investment income

$
98,014


$
102,157


$
77,433

Adjusted net investment income

$
44,218


$
47,750


$
37,062

Adjusted net realized and unrealized gains (losses), net of taxes

$
(32,858
)

$
(1,668
)

$
(23,890
)
Adjusted earnings (loss)

$
11,360


$
46,082


$
13,172

Adjusted total investment income per share

$
1.26


$
1.32


$
1.27

Adjusted net investment income per share

$
0.57


$
0.62


$
0.61

Adjusted net realized and unrealized gains (losses), net of taxes per share

$
(0.42
)

$
(0.02
)

$
(0.39
)
Adjusted earnings (loss) per share

$
0.15


$
0.60


$
0.22

______________________
¹_{See Non-GAAP Financial Measures below for a description of the non-GAAP measures and the reconciliations from the most comparable GAAP financial measures to the Company's non-GAAP measures, including on a per share basis. The Company's management uses these non-GAAP financial measures internally to analyze and evaluate financial results and performance and believes that these non-GAAP financial measures are useful to investors as an additional tool to evaluate ongoing results and trends for the Company and to review the Company's performance without giving effect to non-cash income/gain/loss resulting from the merger of Oaktree Strategic Income Corporation ("OCSI") with and into the Company in March 2021 (the "OCSI Merger") and the merger of Oaktree Strategic Income II, Inc. ("OSI2") with and into the Company in January 2023 (the "OSI2 Merger") and, in the case of adjusted net investment income, without giving effect to capital gains incentive fees. The presentation of non-GAAP measures is not intended to be a substitute for financial results prepared in accordance with GAAP and should not be considered in isolation.}



As of
($ in thousands, except per share data and ratios)

December 31, 2023 (unaudited)

September 30, 2023

December 31, 2022 (unaudited)
Select balance sheet and other data:






Cash and cash equivalents

$
112,369

$
136,450

$
17,382
Investment portfolio at fair value


3,018,552


2,892,420


2,642,870
Total debt outstanding (net of unamortized financing costs)


1,622,717


1,600,731


1,463,624
Net assets


1,511,651


1,515,764


1,201,989
Net asset value per share


19.14


19.63


19.63
Total debt to equity ratio

1.10x

1.10x

1.26x
Net debt to equity ratio

1.02x

1.01x

1.24x

Adjusted total investment income for the quarter ended December 31, 2023 was $98.0 million and included $91.4 million of interest income from portfolio investments, $3.8 million of payment-in-kind ("PIK") interest income, $1.3 million of fee income and $1.4 million of dividend income. The $4.1 million decline in adjusted total investment income was attributable to $5.2 million of lower interest income, mainly due to an increase in non-accrual investments during the quarter, partially offset by a $0.7 million increase in fee income mainly driven by prepayment and exit fees and a $0.4 million increase in dividend income from the Company's investment in Senior Loan Fund JV I, LLC ("SLF JV I").

Net expenses for the quarter ended December 31, 2023 totaled $53.8 million, down $0.6 million from the quarter ended September 30, 2023. The decrease in net expenses was primarily driven by lower part I incentive fees during the quarter.

Adjusted net investment income was $44.2 million ($0.57 per share) for the quarter ended December 31, 2023, down from $47.8 million ($0.62 per share) for the quarter ended September 30, 2023. The decline of $3.5 million primarily reflected $4.1 million of lower adjusted total investment income, partially offset by $0.6 million of lower net expenses.

Adjusted net realized and unrealized losses, net of taxes, was $32.9 million for the quarter ended December 31, 2023, primarily reflecting realized and unrealized losses on certain debt and equity investments.

Portfolio and Investment Activity



As of
($ in thousands)

December 31, 2023 (unaudited)

September 30, 2023 (unaudited)

December 31, 2022 (unaudited)
Investments at fair value

$
3,018,552


$
2,892,420


$
2,642,870

Number of portfolio companies


146



143



156

Average portfolio company debt size

$
20,200


$
19,800


$
16,500








Asset class:






Senior secured debt


86.3
%


86.5
%


86.3
%
Unsecured debt


2.5
%


1.9
%


2.4
%
Equity


4.8
%


5.0
%


4.3
%
JV interests


6.4
%


6.6
%


7.0
%







Non-accrual debt investments:






Non-accrual investments at fair value

$
120,713


$
48,743


$
—

Non-accrual investments as a percentage of debt investments at fair value


4.2
%


1.8
%


—
%
Non-accrual investments as a percentage of debt investments at cost


5.9
%


2.4
%


—
%
Number of investments on non-accrual


7



4



—








Interest rate type:






Percentage floating-rate


84.3
%


86.2
%


87.3
%
Percentage fixed-rate


15.7
%


13.8
%


12.7
%







Yields:






Weighted average yield on debt investments¹


12.2
%


12.7
%


11.6
%
Cash component of weighted average yield on debt investments


11.1
%


11.2
%


10.3
%
Weighted average yield on total portfolio investments²


11.7
%


12.0
%


11.2
%







Investment activity:






New investment commitments

$
370,300


$
87,500

Full story available on Benzinga.com

Company Name:	Oaktree Specialty Lending Corporation
Stock Symbol:	OCSL
Market:	NASDAQ
Website:	oaktreespecialtylending.com

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