Oaktree Specialty Lending Corporation Q1 FY2026 earnings call

Matt Pendo began by outlining first quarter results, noting adjusted net investment income was $36.1 million, up modestly, and dividend was declared. He highlighted focused efforts on reducing nonaccruals and equity positions. Armen Panossian discussed market trends in private credit, noting bifurcation in the economy, spreads in private credit bottoming out, and AI impact on software, emphasizing disciplined underwriting and selectivity. Raghav Khanna talked about software investment approach, being more selective with added criteria due to AI, and portfolio growth. Christopher McKown reviewed financial performance, including adjusted net investment income, NAV per share, leverage, liquidity, and JV results.

Adjusted net investment income for the quarter was $36.1 million or 41¢ per share, up modestly from the prior quarter. Software represented approximately 23% of investments at fair value across 28 issuers, with 94% of software positions being first lien term loans and 2% ARR-based loans. 85% of the total portfolio was first lien senior secured debt with a weighted average yield of 9.3%. Newly funded investment activity totaled $314 million, up 42% sequentially. Nonaccruals were 3.1% of the total debt portfolio at quarter-end.

Adjusted net investment income for the quarter was $36.1 million, up modestly from prior quarter. Board declared a quarterly cash dividend of 40¢ per share. New funded investments totaled $314 million, up from prior quarter. Ample liquidity with over $576 million available.

Concerns about AI impact on software investments with potential uneven outcomes and dispersion. Risk of nonaccruals and equity positions not converting to income-producing assets. Potential pullback in AI investment if realized returns or adoption timelines disappoint.

Q: Finian O'Shea asked about portfolio underperforming assets and AI impact on software.

A: Raghav Khanna mentioned nonaccruals, restructured equities, and monitored positions trading below par, with most tech names facing pressure from CLO sellers but not significant selling.

Q: Ethan Kaye asked about median portfolio EBITDA increase and unrealized appreciation.

A: Raghav Khanna said it was driven by large cap originations in Q4, and Christopher McKown noted Pluralsight was the largest driver of markdowns.

Q: Paul Johnson asked about software top-line growth, EBITDA trends, and LTV.

A: Armen Panossian discussed AI impact on software performance, Matt Pendo mentioned EBITDA growth and margin in software deals, and Armen explained LTV at underwrite and potential valuation resets.