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Press release content from Globe Newswire. The AP news staff was not involved in its creation.

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

November 20, 2019

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

As of September 30, June 30, 2019 September 30, 2019 (unaudited) 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 September June 30, September ($ in thousands) 30, 2019 2019 30, 2018 (unaudited) (unaudited) (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 1 4 2 companies Number of portfolio company exits 5 4 9 __________ Annual stated yield earned plus net annual amortization of original issue discount or premium earned (1) on accruing investments, including the Company’s share of the return on debt investments in the OCSI Glick JV. Annual stated yield earned plus net annual amortization of original issue discount or premium earned (2) 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 CorporationMichael 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, June 30, 2019 September 30, 2019 (unaudited) 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: $ 54,326,418 $ 55,634,655 $ 58,512,170 $73,501,970) Non-control/Non-affiliate investments (cost September 30, 2019: $553,679,070; cost June 30, 2019: $544,954,488; cost 542,778,029 532,947,434 498,329,658 September 30, 2018: $499,423,794) ------------- - ------------- - ------------- - Total investments at fair value (cost September 30, 2019: $626,868,734; cost June 30, 2019: $618,164,516; cost 597,104,447 588,582,089 556,841,828 September 30, 2018: $572,925,764) 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 294,668 294,668 294,668 September 30, 2019, June 30, 2019 and September 30, 2018 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 284,450,006 286,021,008 295,745,420 September 30, 2018, respectively) ------------- - ------------- - ------------- - 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 Three months Three months ended ended ended Year ended Year ended September 30, June 30, 2019 September 30, September 30, September 30, 2019 (unaudited) 2018 2019 2018 (unaudited) (unaudited) ------------- ------------- ------------- ------------- -------------- Interest income: Control investments $ 1,500,837 $ 1,486,149 $ 928,198 $ 5,945,194 $ 3,970,056 Non-control/Non-affiliate 10,443,068 11,984,332 12,443,148 42,847,646 39,139,739 investments Interest on cash and cash 31,963 51,123 64,691 202,213 273,552 equivalents ----------- - ----------- - ----------- - ----------- - ------------ - 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 9,633 2,838 7,634 26,220 26,059 investments ----------- - ----------- - ----------- - ----------- - ------------ - 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 92,675 284,081 751,808 606,197 2,084,980 investments ----------- - ----------- - ----------- - ----------- - ------------ - 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 260,501 325,656 446,961 1,201,721 1,383,871 expenses ----------- - ----------- - ----------- - ----------- - ------------ - 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 1,106,013 (2,132,068 ) 2,218,715 (9,806,905 ) 13,282,430 investments Foreign currency forward contract 33,508 (106,334 ) 45,807 (24,931 ) 45,807 ----------- - ----------- - ----------- - ----------- - ------------ - Net unrealized appreciation (148,352 ) (2,593,717 ) 2,539,997 (13,705,282 ) 28,615,535 (depreciation) ----------- - ----------- - ----------- - ----------- - ------------ - Realized gains (losses): Affiliate investments — — — — (15,914,916 ) Non-control/Non-affiliate (2,187,603 ) (125,517 ) 379,381 (943,588 ) (11,675,522 ) investments 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 (2,145,221 ) (2,435,487 ) 2,795,998 (14,166,269 ) 901,717 (losses) ----------- - ----------- - ----------- - ----------- - ------------ - Net increase (decrease) in net $ 2,996,346 $ 3,482,900 $ 8,359,310 $ 6,973,982 $ 20,673,049 assets resulting from operations - --------- - - --------- - - --------- - - --------- - - ---------- - Net investment income per common $ 0.17 $ 0.20 $ 0.19 $ 0.72 $ 0.67 share — basic and diluted Earnings (loss) per common share — $ 0.10 $ 0.12 $ 0.28 $ 0.24 $ 0.70 basic and diluted Weighted average common shares 29,466,768 29,466,768 29,466,768 29,466,768 29,466,768 outstanding — basic and diluted