Blue Owl Capital Corp Q4 FY2024 earnings call

• Generated strong fourth quarter and full year results driven by portfolio strength, investment activity, and elevated interest rates.
• Fourth quarter NII was $0.47 per share, full year NII was $1.89 per share. ROE for Q4 was 12.4%, full year 12.2%.
• Achieved record originations in 2024 despite challenges like disappointing M&A deal flow and spread compression. Maintained excellent credit quality.
• Strengthened capital structure by upsizing revolving credit facility and pricing lowest spread unsecured bond offering. Closed merger with OBDE, making Blue Owl Capital Corporation the second-largest publicly traded BDC by total assets.
• Portfolio metrics: Average investment represents less than 45 basis points of the portfolio, median EBITDA of portfolio borrowers is $119 million, weighted average EBITDA is $201 million, average LTV is 44%. Non-accrual rate low at 40 basis points of the portfolio at fair value.
• Limited exposure to manufacturing, import goods, or direct government contractors; majority of portfolio companies are services-oriented, U.S.-based, serving domestic customers.

Blue Owl Capital Corporation reported fourth quarter NII of $0.47 per share and full year NII of $1.89 per share. ROE for the fourth quarter was 12.4% (eighth consecutive quarter of double-digit ROE) and full year ROE was 12.2%. Net asset value per share at quarter-end was $15.26. In 2024, the company paid record dividends totaling $1.72 per share, a nearly 10% increase year over year while maintaining stable net asset value per share. The non-accrual rate remained well below the industry average.

• Expect market conditions to be supportive in 2025, potentially driving M&A activity. Rates are lower, but expect to migrate the combined portfolio to previous Blue Owl Capital Corporation profile, benefiting from scale, lower financing costs, aiming for 50-75 basis points of additional ROE.
• Anticipate synergies from merger with OBDE, including over $5 million of operational savings in year one, reductions in financing costs over time, and optimization of portfolio and asset mix to improve yield.

• Economic uncertainties and market conditions that could impact portfolio performance.
• Potential credit deterioration in the sector, though Blue Owl Capital Corporation is not seeing signs of broad economic slowdown at the margin.
• Impact of tariffs and government efficiency reform on portfolio, though portfolio is defensively structured with limited exposure to affected sectors.

Q: What do you think Blue Owl Capital Corporation can deliver in terms of ROEs in 2025 and beyond?

A: Rates are lower, but expect to migrate the combined portfolio to previous profile, benefiting from scale, lower financing costs, aiming for 50-75 basis points of additional ROE, with returns still attractive relative to peer group.

Q: How does the evolution of your public BDCs play into the growth of the broader direct lending platform longer term?

A: Blue Owl Capital Corporation is the flagship, will continue executing on strategy. Blue Owl has expanded credit capabilities, is a market leader in direct lending, and expanded credit offerings will expand funnel and make more relevant to counterparties.

Q: Where is the portfolio in terms of fully recognizing 100 basis points of portfolio resets as of the end of the portfolio?

A: A little more than two-thirds, about 70% of the way through.

Q: How much of the portfolio is still kind of above legacy assets that are above market spreads today?

A: The number is somewhere in the 10 to 15% range of the book.

Q: Do you get any sense that the economy is starting to slow down at the margin?

A: Don't get that sense, continue to see modest growth in revenues and EBITDA across portfolio companies, with no broad signs of economic weakness seen.