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

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

LOS ANGELES, Aug. 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 June 30, 2019.

Financial Highlights for the Quarter Ended June 30, 2019

Total investment income of $13.8 million ($0.47 per share), up from $12.5 million ($0.42 per share) for the second fiscal quarter of 2019, primarily reflecting higher interest income and fee income related to the exit of an investment.

Net investment income of $5.9 million ($0.20 per share), up from $5.2 million ($0.18 per share) for the second fiscal quarter of 2019, primarily due to higher investment income, partially offset by higher net expenses.

Net asset value per share of $9.71, down from $9.74 for the second fiscal quarter of 2019, driven by unrealized depreciation on certain debt investments.

Originated $38.8 million of new investment commitments and received $43.0 million of proceeds from prepayments, exits, other paydowns and sales.

A quarterly distribution was declared of $0.155 per share, payable on September 30, 2019 to stockholders of record on September 13, 2019.

Edgar Lee, Chief Executive Officer and Chief Investment Officer, said, “OCSI delivered strong earnings and solid portfolio performance in the third quarter. Net investment income increased to $0.20 per share, or 17% from the same period one year ago, reflecting a larger average portfolio size as well as prepayment fees related to a successful investment exit. NAV was relatively stable from the prior quarter and credit quality was strong. We remain focused on taking a highly selective, late-cycle approach to investing and believe we are well positioned with over 98% of the portfolio in first lien loans, excluding our investment in the Glick JV.”

Distribution Declaration

The Board of Directors declared a quarterly distribution of $0.155 per share, payable on September 30, 2019 to stockholders of record on September 13, 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


June 30, 2019

March 31, 2019

June 30, 2018
Operating results:






Interest income

$
13,521,604


$
12,294,014


$
10,791,586

PIK interest income

2,838


6,004


570,552

Fee income

284,081


181,806


298,686

Total investment income

13,808,523


12,481,824


11,660,824

Net expenses

7,890,136


7,265,064


6,588,926

Net investment income

5,918,387


5,216,760


5,071,898

Net realized and unrealized gains (losses)

(2,435,487
)

8,478,667


(3,346,766
)
Net increase (decrease) in net assets resulting from operations

$
3,482,900


$
13,695,427


$
1,725,132

Net investment income per common share

$
0.20


$
0.18


$
0.17

Net realized and unrealized gains (losses) per common share

$
(0.08
)

$
0.28


$
(0.11
)
Earnings (loss) per common share — basic and diluted

$
0.12


$
0.46


$
0.06



As of


June 30, 2019

March 31, 2019

September 30, 2018
Select balance sheet and other data:






Investment portfolio at fair value

$
588,582,089


$
592,147,418


$
556,841,828

Total debt outstanding

308,256,800


307,656,800


275,056,800

Net assets

286,021,008


287,105,458


295,745,420

Net asset value per share

9.71


9.74


10.04

Total leverage

1.08x


1.07x


0.93x

Total investment income for the quarter ended June 30, 2019 was $13.8 million, and included $13.5 million of interest income from portfolio investments and $0.3 million of fee income. Total investment income was higher as compared to the quarter ended March 31, 2019, primarily due to the acceleration of interest income and prepayment fees earned in connection with the exit of an investment.

Net expenses for the quarter were $7.9 million, a $0.6 million increase from $7.3 million in the prior quarter. The increase was primarily due to a $0.4 million increase in Part I incentive fees (net of waivers) as a result of higher pre-incentive fee net investment income during the quarter and a $0.1 million increase in interest expense as a result of a higher level of borrowings during the quarter.

Net realized and unrealized losses on the investment portfolio for the quarter were $(2.4) million, reflecting unrealized depreciation on certain debt investments.

Portfolio and Investment Activity



As of
($ in thousands)

June 30, 2019

March 31, 2019

June 30, 2018
Investments at fair value

$
588,582


$
592,147


$
570,794

Number of portfolio companies

82


81


72

Average portfolio company debt size

$
7,300


$
7,400


$
8,100








Asset class:






Senior secured debt

90.5
%

90.5
%

89.7
%
Unsecured debt

9.5
%

9.5
%

10.1
%
Equity

—
%

—
%

0.2
%







Non-accrual debt investments:






Non-accrual investments at fair value

$
—


$
—


$
50

Non-accrual investments as a percentage of debt investments

—
%

—
%

0.01
%
Number of investments on non-accrual

1


1


1








Interest rate type:






Percentage floating-rate

100.0
%

100.0
%

100.0
%







Yields:






Weighted average yield on debt investments (1)

7.8
%

8.0
%

7.9
%
Cash component of weighted average yield on debt investments

7.6
%

7.8
%

7.7
%
Weighted average yield on total portfolio investments (2)

7.8
%

8.0
%

7.8
%







Investment activity:






New investment commitments

$
38,800


$
64,400


$
113,600

New funded investment activity (3)

$
41,300


$
67,900


$
114,300

Proceeds from prepayments, exits, other paydowns and sales

$
43,000


$
38,900


$
83,800

Net new investments (4)

$
(1,700
)

$
29,000


$
30,500

Number of new investment commitments in new portfolio companies

5


9


15

Number of new investment commitments in existing portfolio companies

4


5


1

Number of portfolio company exits

4


7


8

__________
^{(1) Annual stated yield earned plus net annual amortization of original issue discount or premium earned on accruing investments, including the Company's 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 the Company's share of the return on debt investments in the OCSI Glick JV.}
^{(3) New funded investment activity 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 June 30, 2019, the fair value of the Company's investment portfolio was $588.6 million and was comprised of investments in 82 companies, including the Company's investments in OCSI Glick JV LLC ("OCSI Glick JV").

At fair value, 90.5% of the Company's portfolio as of June 30, 2019 consisted of senior secured floating-rate debt investments, including 88.4% of first liens and 2.1% of second liens, and 9.5% consisted of a subordinated note investment in the OCSI Glick JV.

As of June 30, 2019, 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 0.1% of the debt portfolio at cost and 0.00% at fair value.

As of June 30, 2019, the OCSI Glick JV had $163.7 million in assets, including senior secured loans to 35 portfolio companies. The joint venture generated income of $1.5 million for Oaktree Strategic Income during the quarter ended June 30, 2019.

Liquidity and Capital Resources

As of June 30, 2019, the Company had $14.0 million of cash and cash equivalents (including restricted cash), total principal value of debt outstanding of $308.3 million, and $146.7 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 June 30, 2019.

As of June 30, 2019, the Company’s total leverage ratio was 1.08x debt-to-equity.

Conference Call Information

Oaktree Strategic Income will host a conference call to discuss its third fiscal quarter results at 12:30 p.m. Eastern Time / 9:30 a.m. Pacific Time on August 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 10133107, 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


June 30, 2019 (unaudited)

March 31, 2019 (unaudited)

September 30, 2018
ASSETS





Investments at fair value:





Control investments (cost June 30, 2019: $73,210,028; cost March 31, 2019: $73,237,461; cost September 30, 2018: $73,501,970)
$
55,634,655


$
56,017,403


$
58,512,170

Non-control/Non-affiliate investments (cost June 30, 2019: $544,954,488; cost March 31, 2019: $546,005,001; cost September 30, 2018: $499,423,794)
532,947,434


536,130,015


498,329,658

Total investments at fair value (cost June 30, 2019: $618,164,516; cost March 31, 2019: $619,242,462; cost September 30, 2018: $572,925,764)
588,582,089


592,147,418


556,841,828

Cash and cash equivalents
4,070,731


2,854,506


10,439,023

Restricted cash
9,929,895


8,972,775


5,992,764

Interest, dividends and fees receivable
2,985,869


2,935,766


3,139,334

Due from portfolio companies
45,327


52,091


167,946

Receivables from unsettled transactions
5,180,121


—


5,143,533

Deferred financing costs
2,172,147


2,199,665


2,469,675

Derivative asset at fair value
—


93,702


45,807

Other assets
844,178


930,541


891,960

Total assets
$
613,810,357


$
610,186,464


$
585,131,870

LIABILITIES AND NET ASSETS




Liabilities:





Accounts payable, accrued expenses and other liabilities
$
1,215,840


$
650,869


$
649,781

Base management fee and incentive fee payable
1,798,217


1,368,446


1,915,682

Due to affiliate
1,592,125


1,047,888


1,700,952

Interest payable
2,978,785


2,961,560


1,130,735

Payables from unsettled transactions
11,934,950


9,395,443


8,932,500

Derivative liability at fair value
12,632


—


—

Credit facilities payable
308,256,800


307,656,800


275,056,800

Total liabilities
327,789,349


323,081,006


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 June 30, 2019, March 31, 2019 and September 30, 2018
294,668


294,668


294,668

Additional paid-in-capital
370,751,389


370,751,389


370,751,389

Accumulated overdistributed earnings
(85,025,049
)

(83,940,599
)

(75,300,637
)
Total net assets (equivalent to $9.71, $9.74 and 10.04 per common share as of June 30, 2019, March 31, 2019 and September 30, 2018, respectively)
286,021,008


287,105,458


295,745,420

Total liabilities and net assets
$
613,810,357


$
610,186,464


$
585,131,870

Oaktree Strategic Income Corporation
Consolidated Statements of Operations
(unaudited)



Three months ended June 30, 2019

Three months ended March 31, 2019

Three months ended June 30, 2018

Nine months ended June 30, 2019

Nine months ended June 30, 2018
Interest income:










Control investments

$
1,486,149


$
1,472,785


$
1,074,611


$
4,444,357


$
3,041,858

Non-control/Non-affiliate investments

11,984,332


10,769,097


9,642,088


32,404,578


26,696,591

Interest on cash and cash equivalents

51,123


52,132


74,887


170,250


208,861

Total interest income

13,521,604


12,294,014


10,791,586


37,019,185


29,947,310

PIK interest income:










Control investments

—


—


562,883


—


1,632,596

Non-control/Non-affiliate investments

2,838


6,004


7,669


16,587


18,425

Total PIK interest income

2,838


6,004


570,552


16,587


1,651,021

Fee income:










Affiliate investments

—


—


14,822


—


14,822

Non-control/Non-affiliate investments

284,081


181,806


283,864


513,522


1,333,172

Total fee income

284,081


181,806


298,686


513,522


1,347,994

Total investment income

13,808,523


12,481,824


11,660,824


37,549,294


32,946,325

Expenses:










Base management fee

1,497,711


1,451,393


1,414,815


4,363,871


4,220,445

Part I incentive fee

1,294,691


1,096,144


1,002,145


3,245,213


1,742,251

Professional fees

397,365


375,601


618,423


1,231,578


2,383,716

Directors fees

105,000


105,278


114,093


315,278


374,093

Interest expense

3,860,478


3,771,530


3,235,080


10,854,962


8,897,722

Administrator expense

224,328


231,033


326,998


890,228


888,613

General and administrative expenses

325,656


283,338


225,132


941,220


936,910

Total expenses

7,705,229


7,314,317


6,936,686


21,842,350


19,443,750

Fees waived

184,907


(49,253
)

(347,760
)

(291,740
)

(705,445
)
Net expenses

7,890,136


7,265,064


6,588,926


21,550,610


18,738,305

Net investment income

5,918,387


5,216,760


5,071,898


15,998,684


14,208,020

Unrealized appreciation (depreciation):










Control investments

(355,315
)

1,684,985


(750,211
)

(2,585,573
)

(1,531,317
)
Affiliate investments

—


—


16,333,131


—


16,543,140

Non-control/Non-affiliate investments

(2,132,068
)

6,989,963


5,630,684


(10,912,918
)

11,063,715

Foreign currency forward contract

(106,334
)

122,463


—


(58,439
)

—

Net unrealized appreciation (depreciation)

(2,593,717
)

8,797,411


21,213,604


(13,556,930
)

26,075,538

Realized gains (losses):










Affiliate investments

—


—


(15,914,944
)

—


(15,914,916
)
Non-control/Non-affiliate investments

(125,517
)

(77,774
)

(8,645,426
)

1,244,015


(12,054,903
)
Foreign currency forward contract

283,747


(240,970
)

—


291,867


—

Net realized gains (losses)

158,230


(318,744
)

(24,560,370
)

1,535,882


(27,969,819
)
Net realized and unrealized gains (losses)

(2,435,487
)

8,478,667


(3,346,766
)

(12,021,048
)

(1,894,281
)
Net increase (decrease) in net assets resulting from operations

$
3,482,900


$
13,695,427


$
1,725,132


$
3,977,636


$
12,313,739

Net investment income per common share — basic and diluted

$
0.20


$
0.18


$
0.17


$
0.54


$
0.48

Earnings (loss) per common share — basic and diluted

$
0.12


$
0.46


$
0.06


$
0.13


$
0.42

Weighted average common shares outstanding — basic and diluted

29,466,768


29,466,768


29,466,768


29,466,768


29,466,768

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

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