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News Release

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

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  
                               

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Oaktree Strategic Income Corporation