Blue Owl Capital Corporation (NYSE:OBDC) has unveiled its second-quarter 2023 earnings report, revealing earnings per share of 48 cents, a remarkable 4.4% above the Consensus Estimate. Notably, the bottom line also experienced a significant surge of 50% when compared to the corresponding period of the previous year.

The financial summary for OBDC in the second quarter showcases a robust total investment income amounting to $394.2 million, marking an impressive increase of 44.3% year over year. Notably, this top-line figure outperformed the Consensus Estimate by a notable margin of 2.6%.

The second quarter witnessed a commendable performance by OBDC, underpinned by portfolio growth, elevated interest rates, and a record-breaking net investment income. However, this positive momentum was somewhat dampened by higher costs.

Insights into Q2 Performance

The net investment income for the period registered a remarkable 49.2% increase year over year, reaching $186.7 million. Impressively, this figure exceeded our projections by a significant 10.6%.

On the investment front, total new investment commitments amounted to $183 million, distributed across five new portfolio companies as well as six existing ones. However, it’s worth noting that this metric experienced a notable decline of 69.7% when compared to the same period of the previous year.

As of June 30, 2023, Blue Owl Capital boasted investments in a total of 187 portfolio companies, collectively valued at an aggregate fair value of $12.9 billion. This translated to an average investment size of $68.9 million for each portfolio company.

The second quarter saw a 40% increase in total expenses year over year, reaching $205.2 million. This figure exceeded our estimate by 2.1%, primarily driven by elevated interest expenses, performance-based incentive fees, and other general and administrative expenses.

OBDC marked a significant upturn in net income during the second quarter, reporting $195.6 million, a notable contrast from the $34.9 million loss recorded in the corresponding period of the previous year.

As of the end of the second quarter, Blue Owl Capital’s cash and restricted cash amounted to $367.9 million, showing a decline from the $445.1 million reported as of December 31, 2022. Meanwhile, the total assets totaled $13.4 billion, slightly lower than the $13.6 billion figure reported at the end of 2022.

The company’s debt stood at $7 billion, down from $7.3 billion at the close of 2022. Notably, OBDC retained $1.5 billion in undrawn capacity under its credit facilities.

A noteworthy aspect of OBDC’s performance was the net cash generated from operating activities during the first half of 2023, which amounted to $542.8 million, significantly surpassing the figure of $74.7 million reported in the prior year.

As of the end of the second quarter, the net debt-to-equity ratio was recorded at 1.14X, marking a decrease from the 1.19X ratio reported at the close of 2022.

Dividends and Share Repurchases

OBDC’s board of directors declared a dividend of 33 cents per share for the third quarter of 2023, with the payment slated for on or before October 13, 2023. Shareholders on record as of September 29 will be eligible for this dividend. Additionally, a supplemental dividend of 7 cents per share for the second quarter of 2023 was announced.

It’s noteworthy that OBDC initiated a share buyback program of $150 million on November 1, 2022, with a duration of 18 months. As of June 30, 2023, $75 million worth of OBDC stock had been repurchased, with 66.6% of the buybacks executed by OBDC at a price of $12.22 per share.

Future Prospects

The majority of Blue Owl Capital’s assets are floating, making the anticipated improvement in the interest rate environment a key factor projected to drive net investment income. Pre-payment fees, a component of Investment Income, are expected to increase as interest rates stabilize, contributing to enhanced repayments. This dynamic is anticipated to influence the company’s future performance positively.

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