Oaktree Specialty Lending Corporation Announces Third Fiscal Quarter 2026 Financial Results

LOS ANGELES--(BUSINESS WIRE)--Oaktree Specialty Lending Corporation (NASDAQ: OCSL) (“Oaktree Specialty Lending” or the “Company”), a specialty finance company, today announced its financial results for the third fiscal quarter ended June 30, 2026.

Financial Highlights for the Quarter Ended June 30, 2026

• Total investment income was $69.4 million ($0.79 per share) for the third fiscal quarter of 2026 as compared to $70.4 million ($0.80 per share) for the second fiscal quarter of 2026. Adjusted total investment income was $69.2 million ($0.79 per share) for the third fiscal quarter of 2026 as compared with $69.7 million ($0.79 per share) for the second fiscal quarter of 2026. The decrease was primarily driven by a lower average portfolio balance and a decrease in non-recurring income. This was partially offset by restoring one investment that was previously on non-accrual status to accrual status.
• GAAP net investment income was $32.5 million ($0.37 per share) for the third fiscal quarter of 2026 as compared with $34.4 million ($0.39 per share) for the second fiscal quarter of 2026. The decrease for the quarter was primarily driven by lower total investment income and higher income-based ("Part I") incentive fees (net of fees waived), partially offset by lower interest expense.
• Adjusted net investment income was $32.2 million ($0.37 per share) for the third fiscal quarter of 2026 as compared with $33.7 million ($0.38 per share) for the second fiscal quarter of 2026. The decrease for the quarter was primarily driven by lower total investment income and higher income-based ("Part I") incentive fees (net of fees waived), partially offset by lower interest expense.
• Net asset value ("NAV") per share was $15.70 as of June 30, 2026, compared with $15.69 as of March 31, 2026.
• Originated $206.4 million of new investment commitments and received $262.8 million of proceeds from prepayments, exits, other paydowns and sales during the quarter ended June 30, 2026. The weighted average yield on new debt investments was 10.0%.
• Total debt outstanding was $1,451.0 million as of June 30, 2026. The total debt to equity ratio was 1.05x, and the net debt to equity ratio was 1.02x, after adjusting for cash and cash equivalents.
• Liquidity as of June 30, 2026 was composed of $39.9 million of unrestricted cash and cash equivalents and $659.0 million of undrawn capacity under the Company's credit facility (subject to borrowing base and other limitations). Unfunded investment commitments were $235.4 million, or $208.3 million excluding unfunded commitments to the Company's joint ventures.
• Quarterly and supplemental cash distributions were declared of $0.30 per share and $0.03 per share, respectively, payable in cash on September 30, 2026 to stockholders of record on September 15, 2026.

“We are pleased with the progress we made in reducing our non-accrual investments,” said Armen Panossian, Chief Executive Officer and Co-Chief Investment Officer of Oaktree Specialty Lending. “Net asset value per share was stable relative to the prior quarter, and we maintained conservative leverage while continuing to selectively redeploy capital into credits that we believe offer attractive risk-adjusted returns.”

Distribution Declaration

The Board of Directors declared quarterly and supplemental cash distributions of $0.30 per share and $0.03 per share, respectively, payable in cash on September 30, 2026 to stockholders of record on September 15, 2026.

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

Adjusted total investment income for the quarter ended June 30, 2026 was $69.2 million and included $61.4 million of interest income from portfolio investments, $5.2 million of PIK interest income, $1.0 million of fee income and $1.6 million of dividend income. The $0.6 million quarterly decrease in adjusted total investment income was primarily driven by a lower average portfolio balance and a decrease in non-recurring income. This was partially offset by restoring one investment that was previously on non-accrual status to accrual status.

Net expenses for the quarter ended June 30, 2026 totaled $36.6 million, increased by $0.6 million from the quarter ended March 31, 2026. The increase for the quarter was primarily driven by higher Part I incentive fees (net of fees waived), partially offset by lower interest expense due to lower average borrowings outstanding during the quarter.

Adjusted net investment income was $32.2 million ($0.37 per share) for the quarter ended June 30, 2026, which was down from $33.7 million ($0.38 per share) for the quarter ended March 31, 2026. The decrease of $1.5 million primarily reflected $0.6 million of lower adjusted total investment income and $0.6 million of higher net expenses.

Adjusted net realized and unrealized losses, net of taxes, were $2.1 million for the quarter ended June 30, 2026, primarily reflecting realized and unrealized losses on certain debt and equity investments.

Portfolio and Investment Activity

As of June 30, 2026, the fair value of the investment portfolio was $2.7 billion and was composed of investments in 163 companies. These included debt investments in 141 companies, equity investments in 39 companies, and the Company's joint venture investments in Senior Loan Fund JV I, LLC ("SLF JV I") and OCSI Glick JV LLC ("Glick JV"). 20 of the equity investments were in companies in which the Company also had a debt investment.

As of June 30, 2026, 95.0% of the Company's portfolio at fair value consisted of debt investments, including 81.5% of first lien loans, 3.0% of second lien loans and 10.5% of unsecured debt investments, including the debt investments in SLF JV I and Glick JV. This compared to 83.7% of first lien loans, 1.8% of second lien loans and 10.8% of unsecured debt investments, including the debt investments in SLF JV I and Glick JV, as of March 31, 2026.

As of June 30, 2026, there were six investments on non-accrual status, which represented 4.2% and 1.8% of the debt portfolio at cost and fair value, respectively. As of March 31, 2026, there were ten investments on non-accrual status, which represented 5.9% and 2.6% of the debt portfolio at cost and fair value, respectively.

SLF JV I

The Company's investments in SLF JV I totaled $113.2 million at fair value as of June 30, 2026, increased by 0.4% from $112.8 million as of March 31, 2026. The increase was primarily driven by SLF JV I’s use of leverage and net unrealized appreciation in the underlying investment portfolio.

As of June 30, 2026, SLF JV I had $429.0 million in assets, including senior secured loans to 130 portfolio companies. This compared to $447.5 million in assets, including senior secured loans to 124 portfolio companies, as of March 31, 2026. SLF JV I generated cash interest income of $1.9 million for the Company during the quarter ended June 30, 2026, down from $3.0 million in the prior quarter. SLF JV I generated dividend income of $1.4 million for the Company during the quarter ended June 30, 2026, compared to no dividend income generated during the quarter ended March 31, 2026. As of June 30, 2026, SLF JV I had $17.5 million of undrawn capacity (subject to borrowing base and other limitations) on its $290 million senior revolving credit facility, and its debt to equity ratio was 2.1x.

Glick JV

The Company's investments in Glick JV totaled $41.3 million at fair value as of June 30, 2026, down 0.5% from $41.5 million as of March 31, 2026. The decrease was primarily driven by Glick JV’s use of leverage and net realized losses in the underlying investment portfolio.

As of June 30, 2026, Glick JV had $142.5 million in assets, including senior secured loans to 131 portfolio companies. This compared to $142.2 million in assets, including senior secured loans to 121 portfolio companies, as of March 31, 2026. Glick JV generated cash interest income of $1.0 million for the Company during the quarter ended June 30, 2026 down slightly from $1.2 million in the prior quarter. As of June 30, 2026, Glick JV had $30.0 million of undrawn capacity (subject to borrowing base and other limitations) on its $120 million senior revolving credit facility, and its debt to equity ratio was 1.9x.

Liquidity and Capital Resources

As of June 30, 2026, the Company had total principal value of debt outstanding of $1,451.0 million, including $501.0 million of outstanding borrowings under its revolving credit facility and $950.0 million of unsecured notes payable. The funding mix was composed of 35% secured and 65% unsecured borrowings as of June 30, 2026. The Company was in compliance with all financial covenants under its syndicated credit facility as of June 30, 2026.

As of June 30, 2026, the Company had $39.9 million of unrestricted cash and cash equivalents and $659.0 million of undrawn capacity on its credit facility (subject to borrowing base and other limitations). As of June 30, 2026, unfunded investment commitments were $235.4 million, or $208.3 million excluding unfunded commitments to the Company's joint ventures. The Company has analyzed cash and cash equivalents, availability under its credit facilities, the ability to rotate out of certain assets and amounts of unfunded commitments that could be drawn and believes its liquidity and capital resources are sufficient to invest in market opportunities as they arise.

As of June 30, 2026, the weighted average interest rate on debt outstanding, including the effect of the interest rate swap agreements was 5.9%, unchanged from the prior quarter.

The Company’s total debt to equity ratio was 1.05x and 1.08x as of June 30, 2026 and March 31, 2026, respectively. The Company's net debt to equity ratio was 1.02x and 1.04x as of June 30, 2026 and March 31, 2026, respectively.

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/loss resulting from the OCSI Merger and the OSI2 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 and the OSI2 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 the OSI2 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 and the OSI2 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.

The OCSI Merger and the OSI2 Merger (the "Mergers") were accounted for as asset acquisitions 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 each of the stockholders of OCSI and OSI2 were 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 investments under ASC 805 that, in aggregate, was different than the historical cost basis of the acquired investments prior to the OCSI Merger or the OSI2 Merger, as applicable. Additionally, immediately following the completion of the Mergers, the acquired investments were marked to their respective fair values under ASC 820, Fair Value Measurements, which resulted in unrealized appreciation/depreciation. The new cost basis established by ASC 805 on debt investments acquired will accrete/amortize over the life of each respective debt investment through interest income, with a corresponding adjustment recorded to unrealized appreciation/depreciation on such investment acquired through its ultimate disposition. The new cost basis established by ASC 805 on equity investments acquired will not accrete/amortize 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/loss with a corresponding reversal of the unrealized appreciation/depreciation 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 income resulting from the new cost basis of the investments acquired in the Mergers because these amounts do not impact the fees payable to Oaktree Fund Advisors, LLC (the "Adviser") under its investment advisory agreement (as amended and restated from time to time, 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 and gain/loss resulting from the Mergers and are used by management to evaluate the economic earnings of its investment portfolio. Moreover, these metrics more closely align the Company's key financial measures with the calculation of incentive fees payable to the Adviser under the A&R Advisory Agreement (i.e., excluding amounts resulting solely from the lower cost basis of the acquired investments established by ASC 805 that would have been to the benefit of the Adviser absent such exclusion).

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:

Investor Relations:
Oaktree Specialty Lending Corporation
Alison Mermey
(213) 830-6946
ocsl-ir@oaktreecapital.com

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