OCSI - Oaktree Strategic Income Corporation Announces First Fiscal Quarter 2019 Financial Results and Declares Distribution of $0.155 Per Share

February, 07 2019 06:00 AM Oaktree Strategic Income Corporation

LOS ANGELES, CA, Feb. 07, 2019 (GLOBE NEWSWIRE) -- Oaktree Strategic Income Corporation (NASDAQ: OCSI) (“Oaktree Strategic Income” or the “Company”), a specialty finance company, today announced its unaudited financial results for the fiscal quarter ended December 31, 2018.

Financial Highlights for the Quarter Ended December 31, 2018

Total investment income of $11.3 million ($0.38 per share), down from $14.7 million ($0.50 per share) for the fourth fiscal quarter of 2018, and up from $10.7 million ($0.36 per share) for the first fiscal quarter of 2017.

Net investment income of $4.9 million ($0.17 per share), down from $5.6 million ($0.19 per share) for the fourth fiscal quarter of 2018, and up from $4.5 million ($0.15 per share) for the first fiscal quarter of 2017.

Net asset value per share of $9.43, down from $10.04 for the fourth fiscal quarter of 2018 and $9.84 for the first fiscal quarter of 2017 primarily due to a decline in certain liquid debt investments resulting from the broader market volatility experienced during the quarter ended December 31, 2018.

Originated $93.1 million of new investment commitments and received $73.1 million of proceeds from prepayments, exits, other paydowns and sales.

A quarterly distribution was declared of $0.155 per share, payable on March 29, 2019 to stockholders of record on March 15, 2019.

Edgar Lee, Chief Executive Officer and Chief Investment Officer, said, “In the first quarter, OCSI had solid earnings and we made continued progress exiting non-core investments, which now represent less than 10% of the portfolio. The broader market volatility experienced during the quarter led to a decline in the prices of certain liquid debt investments at the end of the quarter. Since then, we have seen encouraging signs that market conditions are improving and have already experienced some recovery in the prices of our liquid debt investments. Despite the mark-to-market decline, we believe that the credit quality of the portfolio is very strong and that we are well positioned to preserve capital and provide attractive risk-adjusted returns to our shareholders.”

Distribution Declaration

The Board of Directors declared a quarterly distribution of $0.155 per share, payable on March 29, 2019 to stockholders of record on March 15, 2019.

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


December 31, 2018

September 30, 2018

December 31, 2017
Operating results:






Interest income

$
11,203,567


$
13,436,037


$
10,034,267

PIK interest income

7,745


536,377


298,414

Fee income

47,635


751,808


398,049

Total investment income

11,258,947


14,724,222


10,730,730

Net expenses

6,395,410


9,160,910


6,183,955

Net investment income

4,863,537


5,563,312


4,546,775

Net realized and unrealized gains (losses)

(18,064,228
)

2,795,998


(2,640,807
)
Net increase (decrease) in net assets resulting from operations

(13,200,691
)

8,359,310


1,905,968

Net investment income per common share

$
0.17


$
0.19


$
0.15

Net realized and unrealized gains (losses) per common share

$
(0.62
)

$
0.09


$
(0.09
)
Earnings (loss) per common share – basic and diluted

$
(0.45
)

$
0.28


$
0.06



As of


December 31, 2018

September 30, 2018
Select balance sheet and other data:




Investment portfolio at fair value

$
553,351,420


$
556,841,828

Total debt outstanding

262,156,800


275,056,800

Net assets

277,977,380


295,745,420

Net asset value per share

9.43


10.04

Total leverage

0.94x


0.93x

Total investment income for the quarter ended December 31, 2018 was $11.3 million, which primarily consisted of $11.2 million of interest income from portfolio companies.

Net expenses for the quarter were $6.4 million, a $2.8 million decrease from $9.2 million in the prior quarter. The decrease was primarily due to a $2.0 million one-time write-off of previously unamortized financing costs in connection with the redemption of the $309.0 million debt securitization that occurred during the three months ended September 30, 2018 and a $0.8 million decrease in Part I incentive fees (net of waivers) as a result of lower pre-incentive fee net investment income during the three months ended December 31, 2018.

Net realized and unrealized losses on the investment portfolio for the quarter were $18.1 million.

Portfolio and Investment Activity



As of
(Dollar amounts in thousands)

December 31, 2018

September 30, 2018

December 31, 2017
Investments at fair value

$
553,351


$
556,842


$
541,408

Number of portfolio companies

79


75


66

Average portfolio company debt size

$
7,100


$
7,600


$
8,300








Asset class:






Senior secured debt

90.1
%

89.1
%

89.2
%
Unsecured debt

9.9
%

10.5
%

10.6
%
Equity

–
%

0.4
%

0.2
%







Non-accrual debt investments:






Non-accrual investments at fair value

$
50


$
50


$
6,352

Non-accrual investments as a percentage of debt investments

–
%

–
%

1.2
%
Number of investments on non-accrual

1


1


3








Interest rate type:






Percentage floating-rate

100.0
%

100.0
%

100.0
%







Yields:






Weighted average yield on debt investments (1)

7.8
%

7.7
%

7.1
%
Cash component of weighted average yield on debt investments

7.7
%

7.6
%

6.9
%
Weighted average yield on total portfolio investments (2)

7.8
%

7.7
%

6.9
%







Investment activity:






New investment commitments

$
93,100


$
91,800


$
136,200

New funded investment activity (3)

$
87,000


$
91,000


$
143,900

Proceeds from prepayments, exits, other paydowns and sales

$
73,100


$
101,700


$
161,400

Net new investments (4)

$
13,900


$
(10,700
)

$
(17,500
)
Number of new investment commitments in new portfolio companies

12


13


17

Number of new investment commitments in existing portfolio companies

7


2


3

Number of portfolio company exits

9


9


22

__________

⁽¹⁾

^{Annual stated yield earned plus net annual amortization of original issue discount or premium earned on accruing investments, including our share of the return on debt investments in the OCSI Glick JV.}

⁽²⁾

^{Annual stated yield earned plus net annual amortization of original issue discount or premium earned on accruing investments and dividend income, including our share of the return on debt investments in the OCSI Glick JV.}

⁽³⁾

^{New funded investment activity is reflected net of original issue discount and includes drawdowns on existing revolver commitments.}

⁽⁴⁾

^{Net new investments consists of new funded investment activity less proceeds from prepayments, exits, other paydowns and sales.}

As of December 31, 2018, the fair value of the Company's investment portfolio was $553.4 million and was comprised of investments in 79 companies, including the Company's investments in OCSI Glick JV LLC ("OCSI Glick JV").

At fair value, 90.1% of the Company's portfolio as of December 31, 2018 consisted of senior secured floating-rate debt investments, including 85.7% of first lien loans and 4.4% of second lien loans, and 9.9% consisted of a subordinated note investment in the OCSI Glick JV.

As of December 31, 2018, there was one investment on which the Company had stopped accruing cash and/or PIK interest or original issue discount ("OID") income that, in the aggregate, represented 0.14% of the debt portfolio at cost and 0.01% at fair value.

As of December 31, 2018, the OCSI Glick JV had $159.2 million in assets, including senior secured loans to 32 portfolio companies. The joint venture generated income of $1.5 million for Oaktree Strategic Income during the quarter ended December 31, 2018.

Liquidity and Capital Resources

As of December 31, 2018, the Company had $15.0 million of cash and cash equivalents (including restricted cash), total principal value of debt outstanding of $262.2 million, and $192.8 million of undrawn capacity on its credit facilities, subject to borrowing base and other limitations. The weighted average interest rate on debt outstanding was 4.5% as of December 31, 2018.

As of December 31, 2018, the Company’s total leverage ratio was 0.94x debt-to-equity.

Conference Call Information

Oaktree Strategic Income will host a conference call to discuss its first fiscal quarter results at 12:30 p.m. Eastern Time / 9:30 a.m. Pacific Time on February 7, 2019. The conference call may be accessed by dialing (877) 507-4376 (U.S. callers) or +1 (412) 317-5239 (non-U.S. callers), participant password “Oaktree Strategic Income.” During the earnings conference call, Oaktree Strategic Income intends to refer to an investor presentation that will be available on the Investors section of the Oaktree Strategic Income website, www.oaktreestrategicincome.com. Alternatively, a live webcast of the conference call can be accessed on Oaktree Strategic Income’s website.

For those individuals unable to listen to the live broadcast of the conference call, a replay will be available on Oaktree Strategic Income’s website, or by dialing (877) 344-7529 (U.S. callers) or +1 (412) 317-0088 (non-U.S. callers), access code 10127880, beginning approximately one hour after the broadcast.

About Oaktree Strategic Income Corporation

Oaktree Strategic Income Corporation (NASDAQ:OCSI) is a specialty finance company dedicated to providing customized capital solutions for middle-market companies in both the syndicated and private placement markets. The firm seeks to generate a stable source of current income while minimizing the risk of principal loss and, to a lesser extent, capital appreciation by providing innovative first-lien financing solutions to companies across a wide variety of industries. The Company is regulated as a business development company under the Investment Company Act of 1940, as amended. Oaktree Strategic Income is managed by Oaktree Capital Management, L.P. For additional information, please visit Oaktree Strategic Income's website at www.oaktreestrategicincome.com.

Forward-Looking Statements

Some of the statements in this press release constitute forward-looking statements because they relate to future events or our future performance or financial condition. The forward-looking statements may include statements as to: our future operating results and distribution projections; our business prospects and the prospects of our portfolio companies; and the impact of the investments that we expect to make. In addition, words such as “anticipate,” “believe,” “expect,” “seek,” “plan,” “should,” “estimate,” “project” and “intend” indicate forward-looking statements, although not all forward-looking statements include these words. The forward-looking statements contained in this press release involve risks and uncertainties. Our actual results could differ materially from those implied or expressed in the forward-looking statements for any reason, including the factors set forth in “Risk Factors” and elsewhere in our annual report on Form 10-K. Other factors that could cause actual results to differ materially include: changes in the economy, financial markets and political environment; risks associated with possible disruption in our operations or the economy generally due to terrorism or natural disasters; future changes in laws or regulations (including the interpretation of these laws and regulations by regulatory authorities) and conditions in our operating areas, particularly with respect to business development companies or regulated investment companies; and other considerations that may be disclosed from time to time in our publicly disseminated documents and filings.

We have based the forward-looking statements included in this presentation on information available to us on the date of this presentation, and we assume no obligation to update any such forward-looking statements. Although we undertake no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise, you are advised to consult any additional disclosures that we may make directly to you or through reports that we in the future may file with the Securities and Exchange Commission, including annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K.

Contacts

Investor Relations:
Oaktree Strategic Income Corporation
Michael Mosticchio
(212) 284-1900
ocsi-ir@oaktreecapital.com

Media Relations:
Financial Profiles, Inc.
Moira Conlon
(310) 478-2700
mediainquiries@oaktreecapital.com

Oaktree Strategic Income Corporation
Consolidated Statements of Assets and Liabilities


December 31, 2018 (unaudited)

September 30, 2018
ASSETS



Investments at fair value:



Control investments (cost December 31, 2018: $73,440,352; cost September 30, 2018: $73,501,970)
$
54,535,309


$
58,512,170

Non-control/Non-affiliate investments (cost December 31, 2018: $515,681,060; cost September 30, 2018: $499,423,794)
498,816,111


498,329,658

Total investments at fair value (cost December 31, 2018: $589,121,412; cost September 30, 2018: $572,925,764)
553,351,420


556,841,828

Cash and cash equivalents
6,892,598


10,439,023

Restricted cash
8,081,210


5,992,764

Interest, dividends and fees receivable
3,074,356


3,139,334

Due from portfolio companies
50,826


167,946

Receivables from unsettled transactions
2,939,282


5,143,533

Deferred financing costs
2,329,897


2,469,675

Derivative asset at fair value
–


45,807

Other assets
1,009,609


891,960

Total assets
$
577,729,198


$
585,131,870

LIABILITIES AND NET ASSETS





Liabilities:



Accounts payable, accrued expenses and other liabilities
$
552,712


$
649,781

Base management fee and incentive fee payable
1,139,267


1,915,682

Due to affiliate
2,855,707


1,700,952

Interest payable
2,549,429


1,130,735

Payables from unsettled transactions
30,419,142


8,932,500

Derivative liability at fair value
28,761


–

Director fees payable
50,000


–

Credit facilities payable
262,156,800


275,056,800

Total liabilities
299,751,818


289,386,450

Commitments and contingencies



Net assets:



Common stock, $0.01 par value, 150,000,000 shares authorized; 29,466,768 shares issued and outstanding as of December 31, 2018 and September 30, 2018
294,668


294,668

Additional paid-in-capital
370,751,389


370,751,389

Accumulated overdistributed earnings
(93,068,677
)

(75,300,637
)
Total net assets (equivalent to $9.43 and 10.04 per common share as of December 31, 2018 and September 30, 2018, respectively)
277,977,380


295,745,420

Total liabilities and net assets
$
577,729,198


$
585,131,870

Oaktree Strategic Income Corporation
Consolidated Statements of Operations
(unaudited)



Three months ended December 31, 2018

Three months ended September 30, 2018

Three months ended December 31, 2017
Interest income:






Control investments

$
1,485,423


$
928,198


$
1,198,697

Non-control/Non-affiliate investments

9,651,149


12,443,148


8,764,475

Interest on cash and cash equivalents

66,995


64,691


71,095

Total interest income

11,203,567


13,436,037


10,034,267

PIK interest income:






Control investments

–


528,743


295,151

Non-control/Non-affiliate investments

7,745


7,634


3,263

Total PIK interest income

7,745


536,377


298,414

Fee income:






Non-control/Non-affiliate investments

47,635


751,808


398,049

Total fee income

47,635


751,808


398,049

Total investment income

11,258,947


14,724,222


10,730,730

Expenses:






Base management fee

1,414,767


1,437,341


1,412,172

Part I incentive fee

854,378


1,180,825


259,722

Professional fees

458,612


308,234


1,020,183

Directors fees

105,000


105,000


130,000

Interest expense

3,222,954


5,482,159


2,764,477

Administrator expense

434,867


197,206


279,684

General and administrative expenses

332,226


446,961


435,210

Total expenses

6,822,804


9,157,726


6,301,448

Fees waived

(427,394
)

3,184


(117,493
)
Net expenses

6,395,410


9,160,910


6,183,955

Net investment income

4,863,537


5,563,312


4,546,775

Unrealized appreciation (depreciation):






Control investments

(3,915,243
)

275,475


(721,175
)
Affiliate investments

–


–


75,916

Non-control/Non-affiliate investments

(15,770,813
)

2,218,715


2,387,158

Foreign currency forward contract

(74,568
)

45,807


–

Net unrealized appreciation (depreciation)

(19,760,624
)

2,539,997


1,741,899

Realized gains (losses):






Affiliate investments

–


–


28

Non-control/Non-affiliate investments

1,447,306


379,381


(4,382,734
)
Foreign currency forward contract

249,090


(123,380
)

–

Net realized gains (losses)

1,696,396


256,001


(4,382,706
)
Net realized and unrealized gains (losses)

(18,064,228
)

2,795,998


(2,640,807
)
Net increase (decrease) in net assets resulting from operations

$
(13,200,691
)

$
8,359,310


$
1,905,968

Net investment income per common share – basic and diluted

$
0.17


$
0.19


$
0.15

Earnings (loss) per common share – basic and diluted

$
(0.45
)

$
0.28


$
0.06

Weighted average common shares outstanding – basic and diluted

29,466,768


29,466,768


29,466,768

Company Name:	Oaktree Strategic Income Corporation
Stock Symbol:	OCSI
Market:	NASDAQ
Website:	oaktreestrategicincome.com

Twitter