Oaktree Specialty Lending Corporation Announces Fourth Fiscal Quarter and Full Year 2022 Financial Results and Declares Increased Quarterly Distribution of $0.18 Per Share and Special Distribution of $0.14 Per Share
Oaktree Specialty Lending Corporation (NASDAQ: OCSL) reported financial results for the fiscal year and quarter ending September 30, 2022. Total investment income reached $70.1 million for Q4 and $262.5 million for the full year, up from $63.1 million and $209.4 million respectively year-over-year. Despite an increase in total investment income, GAAP net investment income decreased to $35.9 million for Q4, attributed to higher interest expenses. The company declared a quarterly cash distribution of $0.18 per share, marking a 6% increase, alongside a special distribution of $0.14 per share.
- Total investment income increased to $70.1 million for Q4 and $262.5 million for FY 2022, reflecting growth from higher interest income driven by rising base rates.
- Quarterly cash distribution declared at $0.18 per share, marking a 6% increase, and is the tenth consecutive quarterly distribution increase.
- GAAP net investment income decreased to $35.9 million for Q4, primarily due to higher interest expenses.
- Net asset value (NAV) per share declined to $6.79, down from $6.89 as of June 30, 2022, reflecting credit spread widening and unrealized losses on equity investments.
LOS ANGELES, CA, Nov. 15, 2022 (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 and year ended September 30, 2022.
Financial Highlights for the Quarter and Year Ended September 30, 2022
- Total investment income was
$70.1 million ($0.38 per share) and$262.5 million ($1.44 per share) for the fourth fiscal quarter and full year, respectively, as compared with$63.1 million ($0.34 per share) and$209.4 million ($1.29 per share) for the third fiscal quarter of 2022 and the full year of 2021. Adjusted total investment income was$68.0 million ($0.37 per share) and$251.3 million ($1.38 per share) for fiscal quarter and full year ended September 30, 2022, as compared with$60.9 million ($0.33 per share) and$198.1 million ($1.22 per share) for the third fiscal quarter of 2022 and the full year of 2021. The increase for the quarter was primarily driven by higher interest income resulting from rising base rates, partially offset by lower prepayment fees. The increase for the full year was primarily driven by higher interest income resulting from rising base rates and a larger investment portfolio. - GAAP net investment income was
$35.9 million ($0.20 per share) and$148.6 million ($0.82 per share) for the fourth fiscal quarter and full year, respectively, as compared with$40.4 million ($0.22 per share) and$97.1 million ($0.60 per share) for the third fiscal quarter of 2022 and the full year of 2021. The decrease for the quarter was principally from a reversal of accrued capital gains incentive fees in the prior quarter and higher interest expense, partially offset by higher total investment income. The full year increase was primarily driven by higher total investment income and a reversal of accrued capital gains incentive fees, partially offset by higher interest expense, base management fees (net of waivers) and part I incentive fees. - Adjusted net investment income was
$33.7 million ($0.18 per share) and$128.6 million ($0.71 per share) for the fourth fiscal quarter and full year, as compared with$31.4 million ($0.17 per share) and$103.4 million ($0.64 per share) for the third fiscal quarter of 2022 and the full year of 2021. The increase for the quarter primarily reflected higher adjusted total investment income, partially offset by higher interest expense. The increase for the full year was primarily driven by higher adjusted total investment income, partially offset by higher interest expense, base management fees (net of waivers) and part I incentive fees. - Net asset value ("NAV") per share was
$6.79 as of September 30, 2022, as compared with$6.89 as of June 30, 2022. The decrease primarily reflected credit spread widening on debt investments and unrealized losses on certain equity investments, partially offset by undistributed net investment income. The NAV decline from$7.28 as of September 30, 2021 primarily reflected credit spread widening on debt investments and unrealized losses on certain equity investments, partially offset by undistributed net investment income. - Originated
$97.0 million of new investment commitments and received$146.1 million of proceeds from prepayments, exits, other paydowns and sales during the quarter ended September 30, 2022. The weighted average yield on new debt investments was9.9% . - No investments were on non-accrual status as of September 30, 2022.
- Total debt outstanding was
$1,350.0 million as of September 30, 2022. The total debt to equity ratio was 1.08x, and the net debt to equity ratio was 1.06x, after adjusting for cash and cash equivalents. - Liquidity as of September 30, 2022 was composed of
$23.5 million of unrestricted cash and cash equivalents and$500.0 million of undrawn capacity under the credit facilities (subject to borrowing base and other limitations). Unfunded investment commitments were$224.2 million , or$175.2 million excluding unfunded commitments to the Company's joint ventures. Of the$175.2 million , approximately$141.9 million can be drawn immediately with the remaining amount subject to certain milestones that must be met by portfolio companies. - A quarterly cash distribution was declared of
$0.18 per share, up6% from the prior quarter and the tenth consecutive quarterly distribution increase. The distribution is payable in cash on December 30, 2022 to stockholders of record on December 15, 2022. - A special distribution was also declared of
$0.14 per share payable in cash on December 30, 2022 to stockholders of record on December 15, 2022.
Armen Panossian, Chief Executive Officer and Chief Investment Officer, said, “We delivered another quarter of exceptional results, ending our fiscal year with strong momentum. Over the course of the year, we prudently grew our portfolio, selectively investing across non-sponsor and sponsor-owned companies, while maintaining excellent credit quality. Additionally, rising base rates supported investment income, given our portfolio’s exposure to floating rate loans. We generated a record level of adjusted net investment income for the year as a result, with an ROE of nearly
Distribution Declaration
The Board of Directors declared a quarterly distribution of
The Board of Directors also declared a special distribution of
Distributions are paid primarily from distributable (taxable) income. To the extent taxable earnings for a fiscal taxable year fall below the total amount of distributions for that fiscal year, a portion of those distributions may be deemed a return of capital to the Company’s stockholders.
Results of Operations
| For the three months ended | For the year ended | ||||||||||||||||||
| ($ in thousands, except per share data) | September 30, 2022 (unaudited) | June 30, 2022 (unaudited) | September 30, 2021 (unaudited) | September 30, 2022 | September 30, 2021 | ||||||||||||||
| GAAP operating results: | |||||||||||||||||||
| Interest income | $ | 61,719 | $ | 54,728 | $ | 55,094 | $ | 228,916 | $ | 174,381 | |||||||||
| PIK interest income | 6,011 | 5,178 | 4,960 | 20,526 | 16,447 | ||||||||||||||
| Fee income | 1,539 | 2,275 | 645 | 6,631 | 14,098 | ||||||||||||||
| Dividend income | 875 | 956 | 3,101 | 6,447 | 4,459 | ||||||||||||||
| Total investment income | 70,144 | 63,137 | 63,800 | 262,520 | 209,385 | ||||||||||||||
| Net expenses | 34,286 | 22,767 | 28,321 | 110,591 | 109,484 | ||||||||||||||
| Net investment income before taxes | 35,858 | 40,370 | 35,479 | 151,929 | 99,901 | ||||||||||||||
| (Provision) benefit for taxes on net investment income | — | — | (2,437 | ) | (3,308 | ) | (2,795 | ) | |||||||||||
| Net investment income | 35,858 | 40,370 | 33,042 | 148,621 | 97,106 | ||||||||||||||
| Net realized and unrealized gains (losses), net of taxes | (22,650 | ) | (78,204 | ) | 3,519 | (119,398 | ) | 140,154 | |||||||||||
| Net increase (decrease) in net assets resulting from operations | $ | 13,208 | $ | (37,834 | ) | $ | 36,561 | $ | 29,223 | $ | 237,260 | ||||||||
| Total investment income per common share | $ | 0.38 | $ | 0.34 | $ | 0.35 | $ | 1.44 | $ | 1.29 | |||||||||
| Net investment income per common share | $ | 0.20 | $ | 0.22 | $ | 0.18 | $ | 0.82 | $ | 0.60 | |||||||||
| Net realized and unrealized gains (losses), net of taxes per common share | $ | (0.12 | ) | $ | (0.43 | ) | $ | 0.02 | $ | (0.66 | ) | $ | 0.86 | ||||||
| Earnings (loss) per common share — basic and diluted | $ | 0.07 | $ | (0.21 | ) | $ | 0.20 | $ | 0.16 | $ | 1.46 | ||||||||
| Non-GAAP Financial Measures1: | |||||||||||||||||||
| Adjusted total investment income | $ | 67,971 | $ | 60,949 | $ | 58,229 | $ | 251,303 | $ | 198,089 | |||||||||
| Adjusted net investment income | $ | 33,685 | $ | 31,386 | $ | 29,100 | $ | 128,613 | $ | 103,425 | |||||||||
| Adjusted net realized and unrealized gains (losses), net of taxes | $ | (20,477 | ) | $ | (76,016 | ) | $ | 9,088 | $ | (108,183 | ) | $ | 117,372 | ||||||
| Adjusted earnings (loss) | $ | 13,208 | $ | (37,834 | ) | $ | 36,559 | $ | 29,221 | $ | 203,182 | ||||||||
| Adjusted total investment income per share | $ | 0.37 | $ | 0.33 | $ | 0.32 | $ | 1.38 | $ | 1.22 | |||||||||
| Adjusted net investment income per share | $ | 0.18 | $ | 0.17 | $ | 0.16 | $ | 0.71 | $ | 0.64 | |||||||||
| Adjusted net realized and unrealized gains (losses), net of taxes per share | $ | (0.11 | ) | $ | (0.41 | ) | $ | 0.05 | $ | (0.59 | ) | $ | 0.72 | ||||||
| Adjusted earnings (loss) per share | $ | 0.07 | $ | (0.21 | ) | $ | 0.20 | $ | 0.16 | $ | 1.25 | ||||||||
______________________
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 resulting from the merger of Oaktree Strategic Income Corporation with and into the Company (the "OCSI 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) | September 30, 2022 | June 30, 2022 (unaudited) | September 30, 2021 | |||||
| Select balance sheet and other data: | ||||||||
| Cash and cash equivalents | $ | 23,528 | $ | 34,306 | $ | 29,334 | ||
| Investment portfolio at fair value | 2,494,111 | 2,565,389 | 2,556,629 | |||||
| Total debt outstanding (net of unamortized financing costs) | 1,301,043 | 1,356,606 | 1,268,743 | |||||
| Net assets | 1,245,563 | 1,263,529 | 1,312,823 | |||||
| Net asset value per share | 6.79 | 6.89 | 7.28 | |||||
| Total debt to equity ratio | 1.08x | 1.10x | 0.97x | |||||
| Net debt to equity ratio | 1.06x | 1.08x | 0.95x | |||||
Adjusted total investment income for the quarter ended September 30, 2022 was
Adjusted total investment income for full-year 2022 was
Net expenses for the quarter ended September 30, 2022 totaled
Net expenses for full-year 2022 totaled
Adjusted net investment income was
Adjusted net investment income was
Adjusted net realized and unrealized losses, net of taxes, were
Portfolio and Investment Activity
| As of | |||||||||||
| ($ in thousands) | September 30, 2022 (unaudited) | June 30, 2022 (unaudited) | September 30, 2021 (unaudited) | ||||||||
| Investments at fair value | $ | 2,494,111 | $ | 2,565,389 | $ | 2,556,629 | |||||
| Number of portfolio companies | 149 | 151 | 138 | ||||||||
| Average portfolio company debt size | $ | 16,500 | $ | 16,700 | $ | 18,700 | |||||
| Asset class: | |||||||||||
| Senior secured debt | 86.9 | % | 86.6 | % | 86.7 | % | |||||
| Unsecured debt | 2.3 | % | 2.5 | % | 1.7 | % | |||||
| Equity | 4.2 | % | 4.3 | % | 4.2 | % | |||||
| JV interests | 6.7 | % | 6.6 | % | 7.4 | % | |||||
| — | % | ||||||||||
| Non-accrual debt investments: | |||||||||||
| Non-accrual investments at fair value | $ | — | $ | — | $ | — | |||||
| Non-accrual investments as a percentage of debt investments | — | % | — | % | — | % | |||||
| Number of investments on non-accrual | — | — | — | ||||||||
| Interest rate type: | |||||||||||
| Percentage floating-rate | 86.5 | % | 87.8 | % | 91.5 | % | |||||
| Percentage fixed-rate | 13.5 | % | 12.2 | % | 8.5 | % | |||||
| Yields: | |||||||||||
| Weighted average yield on debt investments1 | 10.6 | % | 9.3 | % | 8.7 | % | |||||
| Cash component of weighted average yield on debt investments | 9.3 | % | 8.2 | % | 7.4 | % | |||||
| Weighted average yield on total portfolio investments2 | 10.2 | % | 9.0 | % | 8.3 | % | |||||
| Investment activity: | |||||||||||
| New investment commitments | $ | 97,000 | $ | 131,900 | $ | 385,000 | |||||
| New funded investment activity3 | $ | 84,500 | $ | 130,000 | $ | 416,400 | |||||
| Proceeds from prepayments, exits, other paydowns and sales | $ | 146,100 | $ | 129,900 | $ | 201,800 | |||||
| Net new investments4 | $ | (61,600 | ) | $ | 100 | $ | 214,600 | ||||
| Number of new investment commitments in new portfolio companies | 6 | 12 | 14 | ||||||||
| Number of new investment commitments in existing portfolio companies | 5 | 16 | 6 | ||||||||
| Number of portfolio company exits | 8 | 7 | 11 | ||||||||
______________________
1 Annual stated yield earned plus net annual amortization of OID or premium earned on accruing investments, including the Company's share of the return on debt investments in SLF JV I and Glick JV, and excluding any amortization or accretion of interest income resulting solely from the cost basis established by ASC 805 (see Non-GAAP Financial Measures below) for the assets acquired in connection with the OCSI Merger.
2 Annual stated yield earned plus net annual amortization of OID or premium earned on accruing investments and dividend income, including the Company's share of the return on debt investments in SLF JV I and Glick JV, and excluding any amortization or accretion of interest income resulting solely from the cost basis established by ASC 805 for the assets acquired in connection with the OCSI Merger.
3 New funded investment activity includes drawdowns on existing revolver and delayed draw term loan commitments.
4 Net new investments consists of new funded investment activity less proceeds from prepayments, exits, other paydowns and sales.
As of September 30, 2022, the fair value of the investment portfolio was
As of September 30, 2022,
As of September 30, 2022, there were no investments on non-accrual status.
The Company's investments in SLF JV I totaled
As of September 30, 2022, SLF JV I had
The Company's investments in Glick JV totaled
As of September 30, 2022, Glick JV had
Liquidity and Capital Resources
As of September 30, 2022, the Company had total principal value of debt outstanding of
As of September 30, 2022, the Company had
As of September 30, 2022, the weighted average interest rate on debt outstanding, including the effect of the interest rate swap agreement, was
The Company’s total debt to equity ratio was 1.08x and 1.10x as of September 30, 2022 and June 30, 2022, respectively. The Company's net debt to equity ratio was 1.06x and 1.08x as of September 30, 2022 and June 30, 2022, respectively.
OSI 2 Merger Update
On September 15, 2022, the Company entered into an agreement to merge with Oaktree Strategic Income II, Inc. (“OSI 2”), an affiliated business development company managed by Oaktree Fund Advisors, LLC, with the Company as the surviving company. Under the terms of the proposed merger, OSI 2 shareholders will receive an amount of shares of the Company's common stock with a NAV equal to the NAV of shares of OSI 2 common stock that they hold at the time of closing.
On October 24, 2022, the Company filed a preliminary registration statement on Form N-14, which included a joint proxy statement of the Company and OSI 2 and the Company’s prospectus. The registration statement on Form N-14 is subject to review by the SEC. Once the registration statement on Form N-14 is declared effective, the Company will file its final joint proxy statement/prospectus with the SEC and begin mailing proxies to stockholders. The transaction is subject to approval by OSI 2 and the Company's stockholders and other customary closing conditions. Assuming these conditions are satisfied, the transaction is expected to close in the first calendar quarter of 2023.
Non-GAAP Financial Measures
On a supplemental basis, the Company is disclosing certain adjusted financial measures, each of which is calculated and presented on a basis of methodology other than in accordance with GAAP (“non-GAAP”). 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 resulting from the OCSI Merger and in the case of adjusted net investment income, without giving effect to capital gains incentive fees. The presentation of the below 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.
- "Adjusted Total Investment Income" and "Adjusted Total Investment Income Per Share" – represents total investment income excluding any amortization or accretion of interest income resulting solely from the cost basis established by ASC 805 (see below) for the assets acquired in connection with the OCSI Merger.
- “Adjusted Net Investment Income” and “Adjusted Net Investment Income Per Share” – represents net investment income, excluding (i) any amortization or accretion of interest income resulting solely from the cost basis established by ASC 805 (see below) for the assets acquired in connection with the OCSI Merger and (ii) capital gains incentive fees ("Part II incentive fees").
- “Adjusted Net Realized and Unrealized Gains (Losses), Net of Taxes” and “Adjusted Net Realized and Unrealized Gains (Losses), Net of Taxes Per Share” – represents net realized and unrealized gains (losses) net of taxes excluding any net realized and unrealized gains (losses) resulting solely from the cost basis established by ASC 805 (see below) for the assets acquired in connection with the OCSI Merger.
- “Adjusted Earnings (Loss)” and “Adjusted Earnings (Loss) Per Share” – represents the sum of (i) Adjusted Net Investment Income and (ii) Adjusted Net Realized and Unrealized Gains (Losses), Net of Taxes and includes the impact of Part II incentive fees1, if any.
On March 19, 2021, the Company completed the OCSI Merger. The OCSI Merger was accounted for as an asset acquisition in accordance with the asset acquisition method of accounting as detailed in ASC 805-50, Business Combinations—Related Issues ("ASC 805"). The consideration paid to stockholders of Oaktree Strategic Income Corporation ("OCSI") was allocated to the individual assets acquired and liabilities assumed based on the relative fair values of the net identifiable assets acquired other than "non-qualifying" assets, which established a new cost basis for the acquired OCSI investments under ASC 805 that, in aggregate, was significantly lower than the historical cost basis of the acquired OCSI investments prior to the OCSI Merger. Additionally, immediately following the completion of the OCSI Merger, the acquired OCSI investments were marked to their respective fair values under ASC 820, Fair Value Measurements, which resulted in unrealized appreciation. The new cost basis established by ASC 805 on debt investments acquired will accrete over the life of each respective debt investment through interest income, with a corresponding adjustment recorded to unrealized appreciation on such investment acquired through its ultimate disposition. The new cost basis established by ASC 805 on equity investments acquired will not accrete over the life of such investments through interest income and, assuming no subsequent change to the fair value of the equity investments acquired and disposition of such equity investments at fair value, the Company will recognize a realized gain with a corresponding reversal of the unrealized appreciation on disposition of such equity investments acquired.
The Company’s management uses the non-GAAP financial measures described above internally to analyze and evaluate financial results and performance and to compare its financial results with those of other business development companies that have not adjusted the cost basis of certain investments pursuant to ASC 805. The Company’s management believes "Adjusted Total Investment Income", "Adjusted Total Investment Income Per Share", "Adjusted Net Investment Income" and "Adjusted Net Investment Income Per Share" are useful to investors as an additional tool to evaluate ongoing results and trends for the Company without giving effect to the accretion income resulting from the new cost basis of the OCSI investments acquired in the OCSI Merger because these amounts do not impact the fees payable to Oaktree Fund Advisors, LLC (the "Adviser") under its amended and restated advisory agreement (the "A&R Advisory Agreement"), and specifically as its relates to "Adjusted Net Investment Income" and "Adjusted Net Investment Income Per Share", without giving effect to Part II incentive fees. In addition, the Company’s management believes that “Adjusted Net Realized and Unrealized Gains (Losses), Net of Taxes”, “Adjusted Net Realized and Unrealized Gains (Losses), Net of Taxes Per Share”, “Adjusted Earnings (Loss)” and “Adjusted Earnings (Loss) Per Share” are useful to investors as they exclude the non-cash income/gain resulting from the OCSI Merger and are used by management to evaluate the economic earnings of its investment portfolio. Moreover, these metrics align the Company's key financial measures with the calculation of incentive fees payable to the Adviser under with the A&R Advisory Agreement (i.e., excluding amounts resulting solely from the lower cost basis of the acquired OCSI investments established by ASC 805 that would have been to the benefit of the Adviser absent such exclusion).
______________________
1 Adjusted earnings (loss) includes accrued Part II incentive fees. For the year ended September 30, 2022,
The following table provides a reconciliation of total investment income (the most comparable U.S. GAAP measure) to adjusted total investment income for the periods presented:
| For the three months ended | For the year ended | ||||||||||||||||||||||||||||||||||||||
| September 30, 2022 (unaudited) | June 30, 2022 (unaudited) | September 30, 2021 (unaudited) | September 30, 2022 | September 30, 2021 | |||||||||||||||||||||||||||||||||||
| ($ in thousands, except per share data) | Amount | Per Share | Amount | Per Share | Amount | Per Share | Amount | Per Share | Amount | Per Share | |||||||||||||||||||||||||||||
| GAAP total investment income | $ | 70,144 | $ | 0.38 | $ | 63,137 | $ | 0.34 | $ | 63,800 | $ | 0.35 | $ | 262,520 | $ | 1.44 | $ | 209,385 | $ | 1.29 | |||||||||||||||||||
| Less: Interest income accretion related to merger accounting adjustments | (2,173 | ) | (0.01 | ) | (2,188 | ) | (0.01 | ) | (5,571 | ) | (0.03 | ) | (11,217 | ) | (0.06 | ) | (11,296 | ) | (0.07 | ) | |||||||||||||||||||
| Adjusted total investment income | $ | 67,971 | $ | 0.37 | $ | 60,949 | $ | 0.33 | $ | 58,229 | $ | 0.32 | $ | 251,303 | $ | 1.38 | $ | 198,089 | $ | 1.22 | |||||||||||||||||||
The following table provides a reconciliation of net investment income (the most comparable U.S. GAAP measure) to adjusted net investment income for the periods presented:
| For the three months ended | For the year ended | ||||||||||||||||||||||||||||||||||||||
| September 30, 2022 (unaudited) | June 30, 2022 (unaudited) | September 30, 2021 (unaudited) | September 30, 2022 | September 30, 2021 | |||||||||||||||||||||||||||||||||||
| ($ in thousands, except per share data) | Amount | Per Share | Amount | Per Share | Amount | Per Share | Amount | Per Share | Amount | Per Share | |||||||||||||||||||||||||||||
| GAAP net investment income | $ | 35,858 | $ | 0.20 | $ | 40,370 | $ | 0.22 | $ | 33,042 | $ | 0.18 | $ | 148,621 | $ | 0.82 | $ | 97,106 | $ | 0.60 | |||||||||||||||||||
| Less: Interest income accretion related to merger accounting adjustments | (2,173 | ) | (0.01 | ) | (2,188 | ) | (0.01 | ) | (5,571 | ) | (0.03 | ) | (11,217 | ) | (0.06 | ) | (11,296 | ) | (0.07 | ) | |||||||||||||||||||
| Add: Part II incentive fee | — | — | (6,796 | ) | (0.04 | ) | 1,629 | 0.01 | (8,791 | ) | (0.05 | ) | 17,615 | 0.11 | |||||||||||||||||||||||||
| Adjusted net investment income | $ | 33,685 | $ | 0.18 | $ | 31,386 | $ | 0.17 | 29,100 | $ | 0.16 | $ | 128,613 | $ | 0.71 | $ | 103,425 | $ | 0.64 | ||||||||||||||||||||
The following table provides a reconciliation of net realized and unrealized gains (losses), net of taxes (the most comparable U.S. GAAP measure) to adjusted net realized and unrealized gains (losses), net of taxes for the periods presented:
| For the three months ended | For the year ended | ||||||||||||||||||||||||||||||||||||
| September 30, 2022 (unaudited) | June 30, 2022 (unaudited) | September 30, 2021 (unaudited) | September 30, 2022 | September 30, 2021 | |||||||||||||||||||||||||||||||||
| ($ in thousands, except per share data) | Amount | Per Share | Amount | Per Share | Amount | Per Share | Amount | Per Share | Amount | Per Share | |||||||||||||||||||||||||||
| GAAP net realized and unrealized gains (losses), net of taxes | $ | (22,650 | ) | $ | (0.12 | ) | $ | (78,204 | ) | $ | (0.43 | ) | $ | 3,519 | $ | 0.02 | $ | (119,398 | ) | $ | (0.66 | ) | $ | 140,154 | $ | 0.86 | |||||||||||
| Less: Net realized and unrealized losses (gains) related to merger accounting adjustments | 2,173 | 0.01 | 2,188 | 0.01 | 5,569 | 0.03 | 11,215 | 0.06 | (22,782 | ) | (0.14 | ) | |||||||||||||||||||||||||
| Adjusted net realized and unrealized gains (losses), net of taxes | $ | (20,477 | ) | $ | (0.11 | ) | $ | (76,016 | ) | $ | (0.41 | ) | $ | 9,088 | $ | 0.05 | $ | (108,183 | ) | $ | (0.59 | ) | $ | 117,372 | $ | 0.72 | |||||||||||
The following table provides a reconciliation of net increase (decrease) in net assets resulting from operations (the most comparable U.S. GAAP measure) to adjusted earnings (loss) for the periods presented:
| For the three months ended | For the year ended | ||||||||||||||||||||||||||||||||||||||
| September 30, 2022 (unaudited) | June 30, 2022 (unaudited) | September 30, 2021 (unaudited) | September 30, 2022 | September 30, 2021 | |||||||||||||||||||||||||||||||||||
| ($ in thousands, except per share data) | Amount | Per Share | Amount | Per Share | Amount | Per Share | Amount | Per Share | Amount | Per Share | |||||||||||||||||||||||||||||
| Net increase (decrease) in net assets resulting from operations | $ | 13,208 | $ | 0.07 | $ | (37,834 | ) | $ | (0.21 | ) | $ | 36,561 | $ | 0.20 | $ | 29,223 | $ | 0.16 | $ | 237,260 | $ | 1.46 | |||||||||||||||||
| Less: Interest income accretion related to merger accounting adjustments | (2,173 | ) | (0.01 | ) | (2,188 | ) | (0.01 | ) | (5,571 | ) | (0.03 | ) | (11,217 | ) | (0.06 | ) | (11,296 | ) | (0.07 | ) | |||||||||||||||||||
| Less: Net realized and unrealized losses (gains) related to merger accounting adjustments | 2,173 | 0.01 | 2,188 | 0.01 | 5,569 | 0.03 | 11,215 | 0.06 | (22,782 | ) | (0.14 | ) | |||||||||||||||||||||||||||
| Adjusted earnings (loss) | $ | 13,208 | $ | 0.07 | $ | (37,834 | ) | $ | (0.21 | ) | $ | 36,559 | $ | 0.20 | $ | 29,221 | $ | 0.16 | $ | 203,182 | $ | 1.25 | |||||||||||||||||
Conference Call Information
Oaktree Specialty Lending will host a conference call to discuss its fourth fiscal quarter and full year 2022 results at 11:00 a.m. Eastern Time / 8:00 a.m. Pacific Time on November 15, 2022. The conference call may be accessed by dialing (877) 507-3275 (U.S. callers) or +1 (412) 317-5238 (non-U.S. callers). All callers will need to reference “Oaktree Specialty Lending” once connected with the operator. Alternatively, a live webcast of the conference call can be accessed through the Investors section of Oaktree Specialty Lending’s website, www.oaktreespecialtylending.com. During the conference call, the Company intends to refer to an investor presentation that will be available on the Investors section of its website.
For those individuals unable to listen to the live broadcast of the conference call, a replay will be available on Oaktree Specialty Lending’s website, or by dialing (877) 344-7529 (U.S. callers) or +1 (412) 317-0088 (non-U.S. callers), access code 8580879, beginning approximately one hour after the broadcast.
About Oaktree Specialty Lending Corporation
Oaktree Specialty Lending Corporation (NASDAQ:OCSL) is a specialty finance company dedicated to providing customized one-stop credit solutions to companies with limited access to public or syndicated capital markets. The Company's investment objective is to generate current income and capital appreciation by providing companies with flexible and innovative financing solutions including first and second lien loans, unsecured and mezzanine loans, and preferred equity. The Company is regulated as a business development company under the Investment Company Act of 1940, as amended, and is externally managed by Oaktree Fund Advisors, LLC, an affiliate of Oaktree Capital Management, L.P. For additional information, please visit Oaktree Specialty Lending's website at www.oaktreespecialtylending.com.
Forward-Looking Statements
Some of the statements in this press release constitute forward-looking statements because they relate to future events, future performance or financial condition. The forward-looking statements may include statements as to: future operating results of the Company and distribution projections; business prospects of the Company and the prospects of its portfolio companies; and the impact of the investments that the Company expects 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. Certain factors could cause actual results and conditions to differ materially from those projected, including the uncertainties associated with (i) the timing or likelihood of the two step-merger of OSI 2 with and into the Company (the "Mergers") closing; (ii) the expected synergies and savings associated with the Mergers; (iii) the ability to realize the anticipated benefits of the Mergers, including the expected elimination of certain expenses and costs due to the Mergers; (iv) the percentage of OSI 2 and the Company's stockholders voting in favor of the proposals submitted for their approval; (v) the possibility that competing offers or acquisition proposals will be made; (vi) the possibility that any or all of the various conditions to the consummation of the Mergers may not be satisfied or waived; (vii) risks related to diverting management’s attention from ongoing business operations; (viii) the risk that stockholder litigation in connection with the Mergers may result in significant costs of defense and liability; (ix) changes in the economy, financial markets and political environment, including the impacts of inflation and rising interest rates, (x) risks associated with possible disruption in the operations of the Company or the economy generally due to terrorism, war or other geopolitical conflict (including the current conflict between Russia and Ukraine), natural disasters or pandemics; (xi) future changes in laws or regulations (including the interpretation of these laws and regulations by regulatory authorities); (xii) conditions in the Company’s operating areas, particularly with respect to business development companies or regulated investment companies; and (xiii) other considerations that may be disclosed from time to time in the Company’s publicly disseminated documents and filings. The Company has based the forward-looking statements included in this press release on information available to it on the date of this press release, and the Company assumes no obligation to update any such forward-looking statements. The Company undertakes 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 it may make directly to you or through reports that the Company 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 Specialty Lending Corporation
Michael Mosticchio
(212) 284-1900
ocsl-ir@oaktreecapital.com
Media Relations:
Financial Profiles, Inc.
Moira Conlon
(310) 478-2700
mediainquiries@oaktreecapital.com
Oaktree Specialty Lending Corporation
Consolidated Statements of Assets and Liabilities
(in thousands, except per share amounts)
| September 30, 2022 | June 30, 2022 (unaudited) | September 30, 2021 | |||||||||
| ASSETS | |||||||||||
| Investments at fair value: | |||||||||||
| Control investments (cost September 30, 2022: | $ | 214,165 | $ | 222,858 | $ | 270,765 | |||||
| Affiliate investments (cost September 30, 2022: | 26,196 | 23,427 | 18,289 | ||||||||
| Non-control/Non-affiliate investments (cost September 30, 2022: | 2,253,750 | 2,319,104 | 2,267,575 | ||||||||
| Total investments at fair value (cost September 30, 2022: | 2,494,111 | 2,565,389 | 2,556,629 | ||||||||
| Cash and cash equivalents | 23,528 | 34,306 | 29,334 | ||||||||
| Restricted cash | 2,836 | 2,009 | 2,301 | ||||||||
| Interest, dividends and fees receivable | 35,598 | 29,130 | 22,125 | ||||||||
| Due from portfolio companies | 22,495 | 6,881 | 1,990 | ||||||||
| Receivables from unsettled transactions | 4,692 | 3,274 | 8,150 | ||||||||
| Due from broker | 45,530 | 36,340 | 1,640 | ||||||||
| Deferred financing costs | 7,350 | 7,918 | 9,274 | ||||||||
| Deferred offering costs | 32 | 32 | 34 | ||||||||
| Deferred tax asset, net | 1,687 | 1,698 | 714 | ||||||||
| Derivative assets at fair value | 6,789 | 1,134 | 1,912 | ||||||||
| Other assets | 1,665 | 1,267 | 2,284 | ||||||||
| Total assets | $ | 2,646,313 | $ | 2,689,378 | $ | 2,636,387 | |||||
| LIABILITIES AND NET ASSETS | |||||||||||
| Liabilities: | |||||||||||
| Accounts payable, accrued expenses and other liabilities | $ | 3,701 | $ | 2,324 | $ | 3,024 | |||||
| Base management fee and incentive fee payable | 15,940 | 15,563 | 32,649 | ||||||||
| Due to affiliate | 3,180 | 3,540 | 4,357 | ||||||||
| Interest payable | 7,936 | 8,356 | 4,597 | ||||||||
| Director fees payable | — | 38 | — | ||||||||
| Payables from unsettled transactions | 26,981 | 8,556 | 8,086 | ||||||||
| Derivative liability at fair value | 41,969 | 30,866 | 2,108 | ||||||||
| Credit facilities payable | 700,000 | 745,000 | 630,000 | ||||||||
| Unsecured notes payable (net of | 601,043 | 611,606 | 638,743 | ||||||||
| Total liabilities | 1,400,750 | 1,425,849 | 1,323,564 | ||||||||
| Commitments and contingencies | |||||||||||
| Net assets: | |||||||||||
| Common stock, | 1,834 | 1,834 | 1,804 | ||||||||
| Additional paid-in-capital | 1,826,498 | 1,826,498 | 1,804,354 | ||||||||
| Accumulated overdistributed earnings | (582,769 | ) | (564,803 | ) | (493,335 | ) | |||||
| Total net assets (equivalent to | 1,245,563 | 1,263,529 | 1,312,823 | ||||||||
| Total liabilities and net assets | $ | 2,646,313 | $ | 2,689,378 | $ | 2,636,387 | |||||
Oaktree Specialty Lending Corporation
Consolidated Statements of Operations
(in thousands, except per share amounts)
| Three months ended September 30, 2022 (unaudited) | Three months ended June 30, 2022 (unaudited) | Three months ended September 30, 2021 (unaudited) | Year ended September 30, 2022 | Year ended September 30, 2021 | |||||||||||||||
| Interest income: | |||||||||||||||||||
| Control investments | $ | 3,829 | $ | 3,400 | $ | 3,670 | $ | 14,043 | $ | 11,792 | |||||||||
| Affiliate investments | 574 | 470 | 279 | 1,744 | 716 | ||||||||||||||
| Non-control/Non-affiliate investments | 57,021 | 50,707 | 51,144 | 212,677 | 161,864 | ||||||||||||||
| Interest on cash and cash equivalents | 295 | 151 | 1 | 452 | 9 | ||||||||||||||
| Total interest income | 61,719 | 54,728 | 55,094 | 228,916 | 174,381 | ||||||||||||||
| PIK interest income: | |||||||||||||||||||
| Non-control/Non-affiliate investments | 6,011 | 5,178 | 4,960 | 20,526 | 16,447 | ||||||||||||||
| Total PIK interest income | 6,011 | 5,178 | 4,960 | 20,526 | 16,447 | ||||||||||||||
| Fee income: | |||||||||||||||||||
| Control investments | 12 | 12 | 13 | 50 | 59 | ||||||||||||||
| Affiliate investments | 5 | 5 | 5 | 20 | 20 | ||||||||||||||
| Non-control/Non-affiliate investments | 1,522 | 2,258 | 627 | 6,561 | 14,019 | ||||||||||||||
| Total fee income | 1,539 | 2,275 | 645 | 6,631 | 14,098 | ||||||||||||||
| Dividend income: | |||||||||||||||||||
| Control investments | 875 | 875 | 3,101 | 6,366 | 4,459 | ||||||||||||||
| Non-control/Non-affiliate investments | — | 81 | — | 81 | — | ||||||||||||||
| Total dividend income | 875 | 956 | 3,101 | 6,447 | 4,459 | ||||||||||||||
| Total investment income | 70,144 | 63,137 | 63,800 | 262,520 | 209,385 | ||||||||||||||
| Expenses: | |||||||||||||||||||
| Base management fee | 9,703 | 9,819 | 9,768 | 39,556 | 32,288 | ||||||||||||||
| Part I incentive fee | 6,986 | 6,497 | 6,015 | 26,644 | 21,598 | ||||||||||||||
| Part II incentive fee | — | (6,796 | ) | 1,629 | (8,791 | ) | 17,615 | ||||||||||||
| Professional fees | 1,389 | 885 | 1,288 | 4,418 | 4,231 | ||||||||||||||
| Directors fees | 160 | 160 | 160 | 603 | 607 | ||||||||||||||
| Interest expense | 15,751 | 11,870 | 9,032 | 46,929 | 30,518 | ||||||||||||||
| Administrator expense | 278 | 271 | 463 | 1,246 | 1,510 | ||||||||||||||
| General and administrative expenses | 769 | 811 | 716 | 2,986 | 2,725 | ||||||||||||||
| Total expenses | 35,036 | 23,517 | 29,071 | 113,591 | 111,092 | ||||||||||||||
| Fees waived | (750 | ) | (750 | ) | (750 | ) | (3,000 | ) | (1,608 | ) | |||||||||
| Net expenses | 34,286 | 22,767 | 28,321 | 110,591 | 109,484 | ||||||||||||||
| Net investment income before taxes | 35,858 | 40,370 | 35,479 | 151,929 | 99,901 | ||||||||||||||
| (Provision) benefit for taxes on net investment income | — | — | (2,437 | ) | (3,308 | ) | (2,795 | ) | |||||||||||
| Net investment income | 35,858 | 40,370 | 33,042 | 148,621 | 97,106 | ||||||||||||||
| Unrealized appreciation (depreciation): | |||||||||||||||||||
| Control investments | (6,754 | ) | (16,991 | ) | 1,395 | (33,306 | ) | 31,731 | |||||||||||
| Affiliate investments | 33 | (328 | ) | 355 | (683 | ) | 568 | ||||||||||||
| Non-control/Non-affiliate investments | (16,803 | ) | (67,806 | ) | (3,311 | ) | (107,136 | ) | 80,531 | ||||||||||
| Foreign currency forward contracts | 5,655 | (1,630 | ) | (537 | ) | 4,877 | 1,689 | ||||||||||||
| Net unrealized appreciation (depreciation) | (17,869 | ) | (86,755 | ) | (2,098 | ) | (136,248 | ) | 114,519 | ||||||||||
| Realized gains (losses): | |||||||||||||||||||
| Control investments | — | — | — | 1,868 | — | ||||||||||||||
| Non-control/Non-affiliate investments | (4,303 | ) | 416 | 827 | 1,585 | 27,094 | |||||||||||||
| Foreign currency forward contracts | 1,547 | 8,796 | 2,912 | 13,726 | (674 | ) | |||||||||||||
| Net realized gains (losses) | (2,756 | ) | 9,212 | 3,739 | 17,179 | 26,420 | |||||||||||||
| (Provision) benefit for taxes on realized and unrealized gains (losses) | (2,025 | ) | (661 | ) | 1,878 | (329 | ) | (785 | ) | ||||||||||
| Net realized and unrealized gains (losses), net of taxes | (22,650 | ) | (78,204 | ) | 3,519 | (119,398 | ) | 140,154 | |||||||||||
| Net increase (decrease) in net assets resulting from operations | $ | 13,208 | $ | (37,834 | ) | $ | 36,561 | $ | 29,223 | $ | 237,260 | ||||||||
| Net investment income per common share — basic and diluted | $ | 0.20 | $ | 0.22 | $ | 0.18 | $ | 0.82 | $ | 0.60 | |||||||||
| Earnings (loss) per common share — basic and diluted | $ | 0.07 | $ | (0.21 | ) | $ | 0.20 | $ | 0.16 | $ | 1.46 | ||||||||
| Weighted average common shares outstanding — basic and diluted | 183,374 | 183,370 | 180,361 | 182,181 | 162,118 | ||||||||||||||
FAQ
What were Oaktree Specialty Lending's financial results for Q4 2022?
What is the quarterly distribution declared by OCSL?
How did OCSL's net investment income change in Q4 2022?
What is the net asset value per share for Oaktree Specialty Lending as of September 30, 2022?
What factors impacted OCSL's investment income performance in 2022?
