Blue Owl Capital Corporation Q2 FY2025 earnings call

• Delivered solid second quarter results driven by strong portfolio performance, achieving an ROE of 10.6% and adjusted NII per share of $0.40.
• Portfolio continues to perform well with strong borrower fundamentals, including revenue and EBITDA growth, and low nonaccrual and loss rates due to defensive investment strategy.
• 2025 has been a challenging deal environment, but sourcing capabilities enhanced by scale allow attractive deal flow. Expanded into complementary strategies like alternative credit, digital infrastructure, and formed an equipment leasing joint venture at quarter end.
• Borrowers experience healthy trends with solid revenue and EBITDA growth, and the debt portfolio is at a conservative LTV of 42% on average.

Blue Owl Capital Corporation delivered solid second quarter results with an ROE of 10.6%, its 12th consecutive quarter of double-digit ROE. Adjusted NII per share was $0.40. Net asset value per share was $15.03, down $0.11 from the prior quarter. Total portfolio investments were nearly $17 billion, total net assets nearly $8 billion, and total outstanding debt approximately $9 billion. Net leverage stood at 1.17x, within the target range of 0.9x to 1.25x. The portfolio's borrowers experienced healthy fundamental trends with revenue and EBITDA growing mid- to high single digits year-over-year, and interest coverage increased to 1.9x.

• Cautiously optimistic about potential rebound in deal activity in the second half of 2025, with encouraging conversations with private equity sponsors.
• Potential for ROE improvement from financing synergies (another 50 basis points) and portfolio rebalancing (another 25+ basis points), totaling up to 75 basis points over time.
• Confident in maintaining dividend level throughout the year despite uncertain rate outlook.

• Muted M&A activity weighing on overall deal activity.
• Uncertainty around tariffs impacting some portfolio companies on the watch list.
• Market environment volatility potentially affecting spread pressure and deal flow.

Q: Where are we in realizing synergies from the OBDE merger?

A: On the OpEx side, most synergies have been realized immediately. On the financing side, it's a slower burn with about 20-25% of synergies realized so far, and further expected over the next year. Also, portfolio rotation will take time, with potential for another 50-75 basis points of ROE improvement from financing and portfolio rebalancing.

Q: How much ROE benefit from additional financing synergies?

A: Another 50 basis points.

Q: View on the credit cycle?

A: Portfolio companies continue to perform well, not a microcosm of the US economy as they are focused on recession-resistant sectors. Growth is modestly expanding, and a potential recession would likely have less impact on the portfolio.

Q: Scaling the equipment leasing business?

A: Takes time, but examples like Wingspire show potential. It's a mix of opportunities, including chunkier opportunities in areas like data centers, and the team is actively working on integrating and ramping up deal flow.