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Oaktree Strategic Income Corporation Announces Fourth Fiscal Quarter and Full Year 2019 Financial Results and Declares Distribution of $0.155 Per Share

LOS ANGELES, CA, Nov. 20, 2019 (GLOBE NEWSWIRE) -- Oaktree Strategic Income Corporation (NASDAQ: OCSI) (“Oaktree Strategic Income” or the “Company”), a specialty finance company, today announced its financial results for the fiscal quarter and year ended September 30, 2019.

Financial Highlights for the Quarter and Year Ended September 30, 2019

  • Total investment income was $12.1 million ($0.41 per share) and $49.6 million ($1.68 per share) for the fourth fiscal quarter and the full year of 2019, respectively, as compared with $13.8 million ($0.47 per share) and $47.7 million ($1.62 per share) for the third fiscal quarter of 2019 and the full fiscal year of 2018, respectively. The increase in investment income for the full year was primarily due to a larger average investment portfolio and call protection fees earned on exits of certain investments.
  • Net investment income was $5.1 million ($0.17 per share) and $21.1 million ($0.72 per share) for the fourth fiscal quarter and the full year of 2019, respectively, as compared with $5.9 million ($0.20 per share) and $19.8 million ($0.67 per share) for the third fiscal quarter of 2019 and the full fiscal year of 2018, respectively. The increase in net investment income for the full year was primarily due to higher levels of investment income and lower professional fees.

  • Net asset value ("NAV") per share was $9.65 as of September 30, 2019, down as compared to $9.71 as of June 30, 2019 and down from $10.04 as of September 30, 2018. The decrease in NAV was primarily due to unrealized depreciation on our investment portfolio.
  • Originated $50.8 million of new investment commitments and received $40.2 million of proceeds from prepayments, exits, other paydowns and sales during the quarter ended September 30, 2019.
  • A quarterly distribution was declared of $0.155 per share, payable on December 31, 2019 to stockholders of record on December 13, 2019.

Mathew Pendo, President and Chief Operating Officer, said, “OCSI finished a strong year with solid earnings and excellent credit quality. Net investment income for the full year grew by 7 percent from 2018, reflecting a larger portfolio and several successful investment exits. Credit quality continues to be very strong, with no investments on non-accrual, and NAV has been relatively stable after rebounding from the volatility in the liquid credit markets in the December quarter. We remain focused on defensively positioning OCSI’s portfolio by adhering to our disciplined and cautious investment approach and believe that the portfolio is well-positioned to continue to generate strong risk-adjusted returns for our shareholders.”

Armen Panossian, who was appointed Chief Executive Officer and Chief Investment Officer in September 2019, said, “The team managing OCSI has done a superb job repositioning the portfolio for stronger risk-adjusted returns over the past two years. I look forward to building on these accomplishments by continuing to execute on our strategic plan while maintaining our disciplined and risk-controlled investment approach.”

Distribution Declaration

The Board of Directors declared a quarterly distribution of $0.155 per share, payable on December 31, 2019 to stockholders of record on December 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   For the year ended
    September 30, 2019 (unaudited)   June 30, 2019 (unaudited)   September 30, 2018 (unaudited)   September 30, 2019   September 30, 2018
Operating results:                    
Interest income   $ 11,975,868     $ 13,521,604     $ 13,436,037     $ 48,995,053     $ 43,383,347  
PIK interest income   9,633     2,838     536,377     26,220     2,187,398  
Fee income   92,675     284,081     751,808     606,197     2,099,802  
Total investment income   12,078,176     13,808,523     14,724,222     49,627,470     47,670,547  
Net expenses   6,936,609     7,890,136     9,160,910     28,487,219     27,899,215  
Net investment income   5,141,567     5,918,387     5,563,312     21,140,251     19,771,332  
Net realized and unrealized gains (losses)   (2,145,221 )   (2,435,487 )   2,795,998     (14,166,269 )   901,717  
Net increase (decrease) in net assets resulting from operations   $ 2,996,346     $ 3,482,900     $ 8,359,310     $ 6,973,982     $ 20,673,049  
Net investment income per common share   $ 0.17     $ 0.20     $ 0.19     $ 0.72     $ 0.67  
Net realized and unrealized gains (losses) per common share   $ (0.07 )   $ (0.08 )   $ 0.09     $ (0.48 )   $ 0.03  
Earnings (loss) per common share — basic and diluted   $ 0.10     $ 0.12     $ 0.28     $ 0.24     $ 0.70  


    As of
    September 30, 2019   June 30, 2019 (unaudited)   September 30, 2018
Select balance sheet and other data:            
Investment portfolio at fair value   $ 597,104,447   $ 588,582,089   $ 556,841,828
Total debt outstanding   294,656,800   308,256,800   275,056,800
Net assets   284,450,006   286,021,008   295,745,420
Net asset value per share   9.65   9.71   10.04
Total leverage   1.04x   1.08x   0.93x

Total investment income for the quarter ended September 30, 2019 was $12.1 million and included $12.0 million of interest income from portfolio investments and $0.1 million of fee income. Total investment income was $1.7 million lower as compared to the quarter ended June 30, 2019, primarily due to significant call protection fees earned in connection with an exit that occurred during the prior quarter and lower interest income earned due to decreases in LIBOR on our floating rate investments.

Total investment income for the year ended September 30, 2019 was $49.6 million and included $49.0 million of interest income from portfolio investments and $0.6 million of fee income. Total investment income was $2.0 million higher as compared to the year ended September 30, 2018, primarily due to a larger average investment portfolio as well as significant call protection fees earned in connection with exits of certain investments that occurred during the year.

Net expenses decreased $1.0 million, to $6.9 million for the fourth quarter of 2019, from $7.9 million in the third quarter of 2019. The decrease was primarily attributable to a $0.6 million decrease in incentive fees (net of waivers) resulting from lower investment income earned during the quarter and a $0.2 million decrease in interest expense resulting from a lower amount of borrowings outstanding and deceases in LIBOR during the quarter.

Net expenses for the year ended September 30, 2019 were $28.5 million, a slight increase from $27.9 million for the year ended September 30, 2019. The increase was primarily due to a $1.8 million increase in management and incentive fees (net of waivers) resulting from a larger investment portfolio and higher investment income earned during the year, partially offset by a $1.2 million decrease in professional fees.

Net realized and unrealized losses on the investment portfolio for the quarter were $2.1 million, reflecting unrealized depreciation and realized losses on certain debt investments. Net realized and unrealized losses on the investment portfolio for the year were $14.2 million, primarily reflecting unrealized depreciation on certain debt investments.

Portfolio and Investment Activity

      As of
($ in thousands)   September 30, 2019
(unaudited)
  June 30, 2019
(unaudited)
  September 30, 2018
(unaudited)
  Investments at fair value   $ 597,104     $ 588,582     $ 556,842  
  Number of portfolio companies   84     82     75  
  Average portfolio company debt size   $ 7,200     $ 7,300     $ 7,600  
               
  Asset class:            
  Senior secured debt   90.9 %   90.5 %   89.1 %
  Unsecured debt   9.1 %   9.5 %   10.5 %
  Equity   %   %   0.4 %
               
  Non-accrual debt investments:            
  Non-accrual investments at fair value   $     $     $ 50  
  Non-accrual investments as a percentage of debt investments   %   %   %
  Number of investments on non-accrual       1     1  
               
  Interest rate type:            
  Percentage floating-rate   100.0 %   100.0 %   100.0 %
               
  Yields:            
  Weighted average yield on debt investments (1)   7.4 %   7.8 %   7.7 %
  Cash component of weighted average yield on debt investments   7.3 %   7.6 %   7.6 %
  Weighted average yield on total portfolio investments (2)   7.4 %   7.8 %   7.7 %
               
  Investment activity:            
  New investment commitments   $ 50,800     $ 38,800     $ 91,800  
  New funded investment activity (3)   $ 51,100     $ 41,300     $ 91,000  
  Proceeds from prepayments, exits, other paydowns and sales   $ 40,200     $ 43,000     $ 101,700  
  Net new investments (4)   $ 10,900     $ (1,700 )   $ (10,700 )
  Number of new investment commitments in new portfolio companies   7     5     13  
  Number of new investment commitments in existing portfolio companies   1     4     2  
  Number of portfolio company exits   5     4     9  
__________
                 
(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 September 30, 2019, the fair value of the Company's investment portfolio was $597.1 million and was comprised of investments in 84 companies, including the Company's investments in OCSI Glick JV LLC ("OCSI Glick JV").

As of September 30, 2019, 90.9% of the Company's portfolio consisted of senior secured floating-rate debt investments, including 88.5% of first liens and 2.4% of second liens, and 9.1% consisted of a subordinated note investment in the OCSI Glick JV at fair value.

As of September 30, 2019, there were no investments on which the Company had stopped accruing cash and/or payment-in-kind interest or original issue discount income.

As of September 30, 2019, the OCSI Glick JV had $179.7 million in assets, including senior secured loans to 39 portfolio companies.  The joint venture generated income of $1.5 million for Oaktree Strategic Income during the quarter ended September 30, 2019.

Liquidity and Capital Resources

As of September 30, 2019, the Company had $14.1 million of cash and cash equivalents (including restricted cash), total principal value of debt outstanding of $294.7 million, and $160.3 million of undrawn capacity on its credit facilities, subject to borrowing base and other limitations. The weighted average interest rate on debt outstanding was 4.2% and 4.5% as of September 30, 2019 and June 30, 2019, respectively.

The Company’s total leverage ratio was 1.04x and 1.08x debt-to-equity as of September 30, 2019 and June 30, 2019, respectively.

Conference Call Information

Oaktree Strategic Income will host a conference call to discuss its fourth fiscal quarter and full year 2019 results at 12:30 p.m. Eastern Time / 9:30 a.m. Pacific Time on November 20, 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 10135817, 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
 
  September 30, 2019   June 30, 2019 (unaudited)   September 30, 2018
ASSETS          
Investments at fair value:          
Control investments (cost September 30, 2019: $73,189,664; cost June 30, 2019: $73,210,028; cost September 30, 2018: $73,501,970) $ 54,326,418     $ 55,634,655     $ 58,512,170  
Non-control/Non-affiliate investments (cost September 30, 2019: $553,679,070; cost June 30, 2019: $544,954,488; cost September 30, 2018: $499,423,794) 542,778,029     532,947,434     498,329,658  
Total investments at fair value (cost September 30, 2019: $626,868,734; cost June 30, 2019: $618,164,516; cost September 30, 2018: $572,925,764) 597,104,447     588,582,089     556,841,828  
Cash and cash equivalents 5,646,899     4,070,731     10,439,023  
Restricted cash 8,404,733     9,929,895     5,992,764  
Interest, dividends and fees receivable 3,813,730     2,985,869     3,139,334  
Due from portfolio companies 350,597     45,327     167,946  
Receivables from unsettled transactions 5,091,671     5,180,121     5,143,533  
Deferred financing costs 2,139,299     2,172,147     2,469,675  
Derivative asset at fair value 20,876         45,807  
Other assets 761,462     844,178     891,960  
Total assets $ 623,333,714     $ 613,810,357     $ 585,131,870  
LIABILITIES AND NET ASSETS        
Liabilities:          
Accounts payable, accrued expenses and other liabilities $ 901,410     $ 1,215,840     $ 649,781  
Base management fee and incentive fee payable 1,368,431     1,798,217     1,915,682  
Due to affiliate 1,457,007     1,592,125     1,700,952  
Interest payable 2,750,587     2,978,785     1,130,735  
Payables from unsettled transactions 37,724,473     11,934,950     8,932,500  
Derivative liability at fair value     12,632      
Director fees payable 25,000          
Credit facilities payable 294,656,800     308,256,800     275,056,800  
Total liabilities 338,883,708     327,789,349     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 September 30, 2019, June 30, 2019 and September 30, 2018 294,668     294,668     294,668  
Additional paid-in-capital 369,199,332     370,751,389     370,751,389  
Accumulated overdistributed earnings (85,043,994 )   (85,025,049 )   (75,300,637 )
Total net assets (equivalent to $9.65, $9.71 and 10.04 per common share as of September 30, 2019, June 30, 2019 and September 30, 2018, respectively) 284,450,006     286,021,008     295,745,420  
Total liabilities and net assets $ 623,333,714     $ 613,810,357     $ 585,131,870  


 
Oaktree Strategic Income Corporation
Consolidated Statements of Operations
(unaudited)
 
    Three months ended
September 30, 2019
(unaudited)
  Three months ended
June 30, 2019
(unaudited)
  Three months ended
September 30, 2018
(unaudited)
  Year ended
September 30, 2019
  Year ended
September 30, 2018
Interest income:                    
Control investments   $ 1,500,837     $ 1,486,149     $ 928,198     $ 5,945,194     $ 3,970,056  
Non-control/Non-affiliate investments   10,443,068     11,984,332     12,443,148     42,847,646     39,139,739  
Interest on cash and cash equivalents   31,963     51,123     64,691     202,213     273,552  
Total interest income   11,975,868     13,521,604     13,436,037     48,995,053     43,383,347  
PIK interest income:                    
Control investments           528,743         2,161,339  
Non-control/Non-affiliate investments   9,633     2,838     7,634     26,220     26,059  
Total PIK interest income   9,633     2,838     536,377     26,220     2,187,398  
Fee income:                    
Affiliate investments                   14,822  
Non-control/Non-affiliate investments   92,675     284,081     751,808     606,197     2,084,980  
Total fee income   92,675     284,081     751,808     606,197     2,099,802  
Total investment income   12,078,176     13,808,523     14,724,222     49,627,470     47,670,547  
Expenses:                    
Base management fee   1,511,365     1,497,711     1,437,341     5,875,236     5,657,786  
Part I incentive fee   1,048,786     1,294,691     1,180,825     4,293,999     2,923,076  
Professional fees   303,380     397,365     308,234     1,534,958     2,691,950  
Directors fees   105,000     105,000     105,000     420,278     479,093  
Interest expense   3,673,356     3,860,478     5,482,159     14,528,318     14,379,881  
Administrator expense   231,756     224,328     197,206     1,121,984     1,085,819  
General and administrative expenses   260,501     325,656     446,961     1,201,721     1,383,871  
Total expenses   7,134,144     7,705,229     9,157,726     28,976,494     28,601,476  
Fees waived   (197,535 )   184,907     3,184     (489,275 )   (702,261 )
Net expenses   6,936,609     7,890,136     9,160,910     28,487,219     27,899,215  
Net investment income   5,141,567     5,918,387     5,563,312     21,140,251     19,771,332  
Unrealized appreciation (depreciation):                    
Control investments   (1,287,873 )   (355,315 )   275,475     (3,873,446 )   (1,255,842 )
Affiliate investments                   16,543,140  
Non-control/Non-affiliate investments   1,106,013     (2,132,068 )   2,218,715     (9,806,905 )   13,282,430  
Foreign currency forward contract   33,508     (106,334 )   45,807     (24,931 )   45,807  
Net unrealized appreciation (depreciation)   (148,352 )   (2,593,717 )   2,539,997     (13,705,282 )   28,615,535  
Realized gains (losses):                    
Affiliate investments                   (15,914,916 )
Non-control/Non-affiliate investments   (2,187,603 )   (125,517 )   379,381     (943,588 )   (11,675,522 )
Foreign currency forward contract   190,734     283,747     (123,380 )   482,601     (123,380 )
Net realized gains (losses)   (1,996,869 )   158,230     256,001     (460,987 )   (27,713,818 )
Net realized and unrealized gains (losses)   (2,145,221 )   (2,435,487 )   2,795,998     (14,166,269 )   901,717  
Net increase (decrease) in net assets resulting from operations   $ 2,996,346     $ 3,482,900     $ 8,359,310     $ 6,973,982     $ 20,673,049  
Net investment income per common share — basic and diluted   $ 0.17     $ 0.20     $ 0.19     $ 0.72     $ 0.67  
Earnings (loss) per common share — basic and diluted   $ 0.10     $ 0.12     $ 0.28     $ 0.24     $ 0.70  
Weighted average common shares outstanding — basic and diluted   29,466,768     29,466,768     29,466,768     29,466,768     29,466,768  

 

OCSI logo.png

Source: Oaktree Strategic Income Corporation