Oaktree Specialty Lending (OCSL) Q3 2024 earnings summary

Executive summary

• Adjusted net investment income per share was $0.55, down slightly from $0.56, while GAAP net investment income per share rose to $0.54; NAV per share declined to $18.19 from $18.72, mainly due to unrealized losses and increased non-accruals.

• Portfolio at fair value grew to $3.12 billion across 158 companies, with 82% in first lien loans and 86% in senior secured debt.

• $339 million in new investment commitments and $293 million in new fundings were made, with a weighted average yield on new debt investments of 11.1%.

• Permanent reduction in base management fee to 1% of gross assets, effective July 1, 2024, is expected to increase annual Adjusted NII by $0.15 per share; $3.2 million in Part I incentive fees and $1.5 million in management fees were waived for the quarter.

• Quarterly dividend of $0.55 per share was declared, consistent with prior quarters.

Financial highlights

• Adjusted net investment income was $45.2 million ($0.55 per share), with total investment income at $95.0 million, and net expenses at $50.4 million, mainly due to waived incentive fees.

• Net realized and unrealized losses were $44.1 million for the quarter, mainly from exits and restructurings.

• Net leverage ratio increased to 1.10x, with total debt at $1.74 billion and a weighted average interest rate of 7.0%.

• Liquidity at quarter end was over $900 million, including $96 million in cash and $828 million undrawn credit.

• Earnings per share were $0.01, down from $0.12 in the previous quarter.

Outlook and guidance

• Management expects the permanent base management fee reduction to boost annual Adjusted NII by $0.15 per share and $0.03 to $0.04 per quarter.

• Focus remains on middle-market lending, resilient business models, and opportunistic investments amid market volatility and higher rates.

• Target leverage ratio is 0.90x to 1.25x, with investment grade ratings maintained.