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Oaktree Strategic Income Corporation Announces Third Fiscal Quarter 2018 Financial Results and Declares Distribution of $0.155 Per Share

August 8, 2018

LOS ANGELES, CA, Aug. 08, 2018 (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, 2018.

Third Fiscal Quarter 2018 Highlights

-- Total investment income of $11.7 million, or $0.40 per share; -- Net investment income of $5.1 million, or $0.17 per share; -- Net asset value (“NAV”) per share as of June 30, 2018 of $9.91; and -- Originated $113.6 million of new investment commitments and received $83.8 million of proceeds from prepayments, exits, other paydowns and sales. -- The Company’s Board of Directors declared a quarterly distribution of $0.155 per share, payable on September 28, 2018 to stockholders of record on September 15, 2018.

Management Commentary

Edgar Lee, Chief Executive Officer and Chief Investment Officer said, “Oaktree Strategic Income delivered improved earnings for the third quarter by exiting virtually all of our underperforming investments and selectively growing our investment portfolio. Looking forward, with access to greater leverage, we are excited to grow and further diversify our portfolio to deliver enhanced shareholder returns.”

Portfolio and Investment Activity

As of June 30, 2018, the fair value of the Company’s investment portfolio was $570.8 million and was comprised of investments in 72 companies, including our investments in OCSI Glick JV LLC (“Glick JV”).

At fair value, 89.7% of the Company’s portfolio as of June 30, 2018 consisted of senior secured floating-rate debt investments, including 85.7% of first lien loans and 4.0% of second lien loans; 10.1% consisted of a subordinated note investment in the Glick JV; and 0.2% consisted of equity investments in other portfolio companies.

As of June 30, 2018, the Glick JV had $181.9 million in assets, including senior secured loans to 32 portfolio companies. The joint venture generated income of $1.6 million for Oaktree Strategic Income during the quarter ended June 30, 2018.

The weighted average yield on the Company’s debt investments as of June 30, 2018, including the return on our subordinated note investment in Glick JV, was 7.9%.

During the quarter ended June 30, 2018, the Company originated $113.6 million of new investment commitments in 15 new portfolio companies and 1 existing portfolio company and funded $114.3 million of investments across new and existing portfolio companies.

During the quarter, the Company received $83.8 million of proceeds from various prepayments, exits, other paydowns and sales and exited 8 investments.

Results of Operations

Total investment income for the quarter ended June 30, 2018 was $11.7 million, including $10.8 million of cash interest income, $0.6 million of payment-in-kind (“PIK”) interest income and $0.3 million of fee income from portfolio investments. PIK interest income, net of PIK collected in cash, represented 4.9% of total investment income for the quarter ended June 30, 2018.

Net expenses for the quarter were $6.6 million, a $0.6 million increase from $6.0 million in the prior quarter. The increase was primarily due to higher incentive fees, which was attributable to higher pre-incentive fee net investment income, and higher interest expense, which was attributable to increases to LIBOR, partially offset by lower professional fees.

Net realized and unrealized loss on our investment portfolio for the quarter ended June 30, 2018 was $3.3 million.

Liquidity and Capital Resources

As of June 30, 2018, the Company had $24.3 million of cash and cash equivalents (including restricted cash), total principal value of debt outstanding of $260.6 million, and $64.4 million of undrawn capacity on its credit facilities and debt securitization, subject to borrowing base and other limitations. The weighted average interest rate on debt outstanding was 4.3% as of June 30, 2018.

As of June 30, 2018, the Company’s total leverage ratio was 0.89x debt-to-equity.

Distribution Declaration

The Company’s Board of Directors declared a quarterly distribution of $0.155 per share, payable on September 28, 2018 to stockholders of record on September 15, 2018.

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.

Portfolio Asset Quality

As of June 30, 2018, 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 0.14% of the debt portfolio at cost and 0.01% at fair value.

($ in thousands) Non-Accrual - Debt Investments As of June 30, 2018 As of September 30, 2017 - ------------------- - - ------------------------ - Non-Accrual Investments at Fair Value $ 50 $ 6,293 Non-Accrual Investments/Total Debt Investments at Fair 0.01 % 1.1 % Value

Oaktree Strategic Income Corporation Consolidated Statements of Assets and Liabilities June 30, 2018 March 31, 2018 September 30, (unaudited) (unaudited) 2017 ---------------- ---------------- ---------------- ASSETS Investments at fair value: Control investments (cost June 30, 2018: $72,973,228; cost March 31, 2018: $72,410,345; cost September 30, $ 57,707,953 $ 57,895,281 $ 57,606,674 2017: $71,340,632) Affiliate investments (cost June 30, 2018: $0; cost March 31, 2018: $16,333,131; cost September 30, 2017: — — 935,913 $17,479,053) Non-control/Non-affiliate investments (cost June 30, 2018: $516,498,332; cost March 31, 2018: $493,721,398; 513,086,230 484,777,863 501,894,073 cost September 30, 2017: $516,270,639) -------------- - -------------- - -------------- - Total investments at fair value (cost June 30, 2018: $589,471,560; cost March 31, 2018: $582,464,874; cost 570,794,183 542,673,144 560,436,660 September 30, 2017: $605,090,324) Cash and cash equivalents 13,296,085 23,633,508 35,604,127 Restricted cash 10,982,637 7,973,136 7,408,260 Interest, dividends and fees receivable 2,678,368 2,681,992 3,014,075 Due from portfolio companies 8,951 37,546 286,260 Receivables from unsettled transactions 4,620,469 2,020,000 505,000 Deferred financing costs 2,101,795 2,220,700 1,222,933 Other assets 968,876 1,045,792 185,336 -------------- - -------------- - -------------- - Total assets $ 605,451,364 $ 582,285,818 $ 608,662,651 -- ----------- - -- ----------- - -- ----------- - LIABILITIES AND NET ASSETS Liabilities: Accounts payable, accrued expenses and other liabilities $ 867,845 $ 1,154,430 $ 482,877 Base management fee and incentive fee payable 1,711,290 1,515,934 2,236,187 Due to affiliate 2,491,450 1,932,272 450,517 Interest payable 2,510,079 2,098,920 1,996,171 Payables from unsettled transactions 47,366,994 22,975,533 49,029,789 Director fees payable — 130,000 98,008 Credit facilities payable 80,556,800 80,056,800 82,956,800 Notes payable (net of $2,006,553, $2,079,079 and $2,224,132 of unamortized financing costs as of June 30, 177,993,447 177,920,921 177,775,868 2018, March 31, 2018 and September 30, 2017, respectively) -------------- - -------------- - -------------- - Total liabilities 313,497,905 287,784,810 315,026,217 Commitments and contingencies Net assets: Common stock, $0.01 par value, 150,000,000 shares authorized; 29,466,768 shares issued and outstanding as 294,668 294,668 294,668 of June 30, 2018, March 31, 2018 and September 30, 2017 Additional paid-in-capital 373,995,934 373,995,934 373,995,934 Net unrealized depreciation on investments, secured (18,578,126 ) (39,791,730 ) (44,653,664 ) borrowings and foreign currency Net realized loss on investments and secured borrowings (52,324,441 ) (27,764,071 ) (24,354,622 ) Accumulated overdistributed net investment income (11,434,576 ) (12,233,793 ) (11,645,882 ) -------------- - -------------- - -------------- - Total net assets (equivalent to $9.91, $9.99 and $9.97 per common share as of June 30, 2018, March 31, 2018 and 291,953,459 294,501,008 293,636,434 September 30, 2017, respectively) -------------- - -------------- - -------------- - Total liabilities and net assets $ 605,451,364 $ 582,285,818 $ 608,662,651 -- ----------- - -- ----------- - -- ----------- -

Oaktree Strategic Income Corporation Consolidated Statements of Operations (unaudited) Three months Three months Three months Nine months Nine months ended ended ended ended ended June 30, 2018 March 31, 2018 June 30, 2017 June 30, 2018 June 30, 2017 -------------- -------------- -------------- --------------- -------------- Interest income: Control investments $ 1,074,611 $ 768,550 $ 1,452,148 $ 3,041,858 $ 4,250,910 Affiliate investments — — 130,217 — 331,804 Non-control/Non-affiliate 9,642,088 8,290,028 10,406,975 26,696,591 28,930,631 investments Interest on cash and cash 74,887 62,879 36,094 208,861 98,590 equivalents ------------ - ------------ - ------------ - ------------- - ------------ - Total interest income 10,791,586 9,121,457 12,025,434 29,947,310 33,611,935 ------------ - ------------ - ------------ - ------------- - ------------ - PIK interest income: Control investments 562,883 774,562 — 1,632,596 — Affiliate investments — — 63,551 — 164,331 Non-control/Non-affiliate 7,669 7,493 — 18,425 20,965 investments ------------ - ------------ - ------------ - ------------- - ------------ - Total PIK interest income 570,552 782,055 63,551 1,651,021 185,296 ------------ - ------------ - ------------ - ------------- - ------------ - Fee income: Affiliate investments 14,822 — 3,351 14,822 9,647 Non-control/Non-affiliate 283,864 651,259 498,497 1,333,172 1,177,271 investments ------------ - ------------ - ------------ - ------------- - ------------ - Total fee income 298,686 651,259 501,848 1,347,994 1,186,918 ------------ - ------------ - ------------ - ------------- - ------------ - Dividend and other income: Control investments — — — — 187,420 Allowance for control — — (420,192 ) — (420,192 ) investments Total dividend and other — — (420,192 ) — (232,772 ) income ------------ - ------------ - ------------ - ------------- - ------------ - Total investment income 11,660,824 10,554,771 12,170,641 32,946,325 34,751,377 ------------ - ------------ - ------------ - ------------- - ------------ - Expenses: Base management fee 1,414,815 1,393,458 1,419,603 4,220,445 4,234,003 Part I incentive fee 1,002,145 480,384 1,143,101 1,742,251 2,420,829 Professional fees 618,423 745,110 280,008 2,383,716 972,310 Board of Directors fees 114,093 130,000 127,464 374,093 385,064 Interest expense 3,235,080 2,898,165 2,661,975 8,897,722 8,124,752 Administrator expense 326,998 281,931 127,533 888,613 456,018 General and administrative 225,132 276,568 480,490 936,910 1,513,902 expenses ------------ - ------------ - ------------ - ------------- - ------------ - Total expenses 6,936,686 6,205,616 6,240,174 19,443,750 18,106,878 Fees waived (347,760 ) (240,192 ) — (705,445 ) (6,232 ) Insurance recoveries — — — — (250,000 ) ------------ - ------------ - ------------ - ------------- - ------------ - Net expenses 6,588,926 5,965,424 6,240,174 18,738,305 17,850,646 ------------ - ------------ - ------------ - ------------- - ------------ - Net investment income 5,071,898 4,589,347 5,930,467 14,208,020 16,900,731 ------------ - ------------ - ------------ - ------------- - ------------ - Unrealized appreciation (depreciation) on investments and foreign currency: Control investments (750,211 ) (59,931 ) 103,555 (1,531,317 ) (1,702,261 ) Affiliate investments 16,333,131 134,093 (1,633,615 ) 16,543,140 (3,281,200 ) Non-control/Non-affiliate 5,630,684 3,045,873 (4,272,744 ) 11,063,715 7,195,580 investments ------------ - ------------ - ------------ - ------------- - ------------ - Net unrealized appreciation (depreciation) on investments 21,213,604 3,120,035 (5,802,804 ) 26,075,538 2,212,119 and foreign currency ------------ - ------------ - ------------ - ------------- - ------------ - Net unrealized appreciation — — — — (14,575 ) on secured borrowings Realized gain (loss) on investments and secured borrowings: Affiliate investments (15,914,944 ) — — (15,914,916 ) — Non-control/Non-affiliate (8,645,426 ) 973,257 11,535 (12,054,903 ) (13,401,975 ) investments ------------ - ------------ - ------------ - ------------- - ------------ - Net realized gain (loss) on investments and secured (24,560,370 ) 973,257 11,535 (27,969,819 ) (13,401,975 ) borrowings ------------ - ------------ - ------------ - ------------- - ------------ - Net increase in net assets $ 1,725,132 $ 8,682,639 $ 139,198 $ 12,313,739 $ 5,696,300 resulting from operations -- --------- - -- --------- - -- --------- - -- ---------- - -- --------- - Net investment income per common share — basic and $ 0.17 $ 0.16 $ 0.20 $ 0.48 $ 0.57 diluted Earnings per common share — $ 0.06 $ 0.29 $ — $ 0.42 $ 0.19 basic and diluted Weighted average common shares outstanding — basic 29,466,768 29,466,768 29,466,768 29,466,768 29,466,768 and diluted Distributions per common $ 0.145 $ 0.14 $ 0.19 $ 0.475 $ 0.605 share

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 8, 2018. 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 for 30 days 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 10121987, 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 and our quarterly reports on Form 10-Q. 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 SEC, 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 CorporationMichael Mosticchio(212) 284-1900ocsi-ir@oaktreecapital.com

Media Relations:Financial Profiles, Inc.Moira Conlon(310) 478-2700mediainquiries@oaktreecapital.com

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