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Blue Owl Capital Corp (OBDC)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 delivered stable earnings with Net Investment Income (NII) per share of $0.47, consistent with Q3 and supported by one-time income items; NAV per share was $15.26, down $0.02 QoQ due to credit-related markdowns .
  • The Board declared a Q4 supplemental dividend of $0.05 and maintained the regular dividend at $0.37; management reiterated base dividend coverage at 127% and spillover income of ~$0.39 per share pro forma with OBDE, supporting distributions into 2025 .
  • Portfolio credit quality improved: non‑accruals fell to 0.4% of fair value (0.6% in Q3) and weighted average total yield came in at 11.1%; Q4 originations were $1.68B with $1.58B repayments, keeping net leverage at 1.19x (within 0.9–1.25x target) .
  • Strategic catalysts: OBDE merger closed Jan 13, 2025; OBDC will file a $750M ATM equity program (to be used accretively above NAV), expects >$5M year‑1 operational savings, and targets ROE in the “10s” in 2025 with 50–75 bps uplift from merger/scale despite lower rate/spread headwinds .
  • Management noted the stock has traded well post-merger and above book, citing improved liquidity and institutional base; watch for accretive ATM usage and liability cost tightening as scale benefits accrue .

What Went Well and What Went Wrong

What Went Well

  • NII per share held at $0.47, over-earning the base dividend and supporting a $0.05 supplemental dividend; CFO highlighted ~$0.03 per share benefit from accelerated OID and a Belron dividend: “we benefited from an elevated level of onetime income in the fourth quarter” .
  • Credit quality strengthened: non‑accruals decreased to 0.4% of the portfolio at fair value; management emphasized “no new additions this quarter” and watchlist stability .
  • Scale and financing progress: revolver upsized and unsecured notes reopened at the tightest spread printed by a Blue Owl BDC; post‑merger, OBDC cites improved funding access and >$5M operational savings in year 1 .

What Went Wrong

  • NAV per share declined $0.02 QoQ due to credit‑related markdowns; weighted average yield contracted 40 bps QoQ as spreads and base rates fell .
  • Investment income decreased YoY to $394.4M (vs $411.2M in Q4 2023), reflecting lower portfolio yield despite higher dividends/other income .
  • Estimates context unavailable from S&P Global for the quarter due to service limits, limiting explicit beat/miss assessment vs Street consensus (see Estimates Context) [SPGI daily limit error].

Financial Results

MetricQ2 2024Q3 2024Q4 2024
Investment Income ($USD Thousands)$396,760 $406,029 $394,392
Net Investment Income ($USD Thousands)$189,134 $184,912 $184,246
NII Per Share ($)$0.48 $0.47 $0.47
Net Income Per Share ($)$0.31 $0.35 $0.40
NAV Per Share ($)$15.36 $15.28 $15.26
Weighted Avg Yield at Fair Value (%)11.9% 11.5% 11.1%
% Debt Investments Floating Rate96.5% 96.3% 96.4%
Investments at Fair Value ($USD Thousands)$13,341,982 $13,447,536 $13,194,545
Total Assets ($USD Thousands)$13,866,620 $14,090,780 $13,865,564
Net Debt-to-Equity (x)1.20x 1.23x 1.19x

Dividends and Supplemental Distributions

MetricQ2 2024Q3 2024Q4 2024
Regular Dividend Declared from NII Per Share ($)$0.37 $0.37 $0.37
Supplemental Dividend Declared from NII Per Share ($)$0.06 $0.05 $0.05

Segment (Portfolio Composition by Instrument, % of Total Fair Value)

SegmentQ2 2024Q3 2024Q4 2024
First‑Lien Senior Secured Debt75.4% 75.9% 75.6%
Second‑Lien Senior Secured Debt6.3% 5.4% 5.4%
Unsecured Debt2.2% 2.3% 2.3%
Preferred Equity2.9% 2.9% 2.8%
Common Equity10.3% 10.6% 11.7%
Joint Ventures2.9% 2.9% 2.2%

Operating/Origination KPIs

KPIQ2 2024Q3 2024Q4 2024
Non‑Accrual (% of Debt Portfolio Fair Value)1.4% 0.7% 0.4%
Number of Portfolio Companies212 219 227
New Investment Commitments ($USD Thousands)$3,296,799 $1,151,667 $1,679,673
Principal Funded ($USD Thousands)$2,305,430 $1,080,803 $1,622,739
Principal Repaid/Sold ($USD Thousands)$(1,146,773) $(1,114,619) $(1,579,156)
Weighted Avg Interest Rate on New Debt Commitments (%)10.9% 9.7% 9.5%
Weighted Avg Spread on New Floating Commitments (%)5.4% 5.1% 5.2%

Note: Estimates vs. actuals not shown due to S&P Global data unavailability for the quarter (see Estimates Context).

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Regular DividendQ1 2025$0.37 declared in prior quarter cadence $0.37 declared, record 3/31/2025, payable on/around 4/15/2025 Maintained
Supplemental DividendQ4 2024Variable per framework (Q3: $0.05) $0.05 declared, record 2/28/2025, payable on/around 3/17/2025 Maintained (variable)
Base Dividend CoverageOngoing127% (Q3) 127% (Q4), consistent with prior quarter Maintained
Spillover IncomePro forma~$0.41/share (Q3 standalone) ~$0.39/share pro forma with OBDE Slightly lower on pro forma basis
Net Leverage TargetOngoing0.9x–1.25x 0.9x–1.25x; Q4 actual 1.19x Maintained
ROE OutlookFY 2025~12% at peak rates (historical) “In the 10s” with 50–75 bps uplift from merger/scale, given lower rates/spreads Lowered (rate/spread headwinds) with offset
ATM Equity ProgramMulti‑yearNone previouslyFile $750M ATM; to be used accretively above NAV under supportive conditions New
Operational SynergiesYear 1Not previously quantified>$5M operational savings expected in year 1 New
Unsecured Financing Cost2025–2026NATightest BDC bond spread printed; expect further tightening 10–20 bps over time due to scale Improving trend

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 2024, Q3 2024)Current Period (Q4 2024)Trend
Rates/SpreadsSpreads tightened; yields ~11% on new loans; trough spreads ~475–500 bps vs public loans 300–325 bps Spreads “stabilized” at 475–500 bps; ~70% of portfolio reset to lower base rates; yields down modestly QoQ Stabilizing at tight levels
M&A/Deal FlowM&A subdued; incumbency driving originations; 2/3 originations from existing borrowers Expect supportive 2025, potential M&A pickup; multi‑billion deals completed (Catalent, Squarespace) Potentially improving
Credit Quality/Non‑AccrualsNon‑accruals 1.4% in Q2; watchlist stable Non‑accruals down to 0.4%; watchlist/amendments flat; pro forma non‑accruals ~0.3% with OBDE Improving
Strategic Equity/JVsSenior Loan Fund, Wingspire, Fifth Season as income drivers New multi‑BDC JV; aim for higher risk‑adjusted returns/lower OpEx Consolidating/optimizing
Platform Expansion (Tech/Data Centers/Alt Credit)Atalaya, IPI, insurance broaden sourcing funnel Continued emphasis; enhances deal flow without strategy drift in BDC Expanding
ATM ProgramNA$750M ATM, accretive issuance above NAV New
Dividends PolicyProgrammatic supplemental framework; base covered into 2025 Base coverage 127%; Q4 supplemental $0.05 Maintained

Management Commentary

  • “Our fourth quarter results concluded another strong year for OBDC, delivering a 12.4% annualized return on equity…we expect to build on our momentum in 2025 by leveraging the benefits of enhanced scale resulting from our completed merger with OBDE.” – Craig Packer, CEO .
  • “We reported net investment income of $0.47 per share…we benefited from an elevated level of onetime income…about $0.03 per share higher…along with a onetime dividend from Belron.” – Jonathan Lamm, CFO .
  • “Following the closing of the merger, OBDC is now the second largest publicly traded BDC by total assets…we anticipate the merger will drive lower cost of financing and generate meaningful operational synergies.” – Craig Packer, CEO .
  • “We will file a $750 million at‑the‑market equity issuance program…This represents a cost efficient and accretive tool to raise capital that we will use only under supportive market conditions.” – Jonathan Lamm, CFO .
  • “We expect to realize…more than $5 million of operational savings in year 1…reductions in financing costs over time driven by the benefits of increased scale.” – Craig Packer, CEO .

Q&A Highlights

  • ROE Outlook: Management guided ROE into the “10s” for 2025 due to lower rates/spreads, offset by 50–75 bps uplift from merger scale and portfolio optimization; relative attractiveness vs asset classes maintained .
  • Spreads/Refi Dynamics: New unitranche spreads at 475–500 bps (low end historically); ~10–15% of book remains at risk of opportunistic refi; refi volumes already slowing early in 2025 .
  • ATM Usage: Commitment to issue above NAV on a net basis to ensure accretion; ATM viewed as just‑in‑time capital to fund pipeline while keeping leverage in target range .
  • Large Deals/Mix: Closed multibillion public‑to‑private financings (Catalent, Squarespace); incumbency drove ~50% of Q4 origination; amendment activity flat QoQ .
  • JV Optimization: Established a single cross‑BDC JV, replacing OBDC’s senior loan fund to improve funding profile and operating efficiency, targeting higher risk‑adjusted returns .

Estimates Context

  • Attempted to retrieve S&P Global (Capital IQ) Wall Street consensus for Primary EPS Consensus Mean and Revenue Consensus Mean for the current and next quarter; data was unavailable due to service limits (“Daily Request Limit…Exceeded”). As a result, explicit beat/miss vs consensus cannot be presented for Q4 2024 [SPGI error].
  • Implication: Use of programmatic supplemental dividends and disclosed factors (one-time income, spread/base rate changes) informs qualitative assessment; once access is restored, Street comparisons should be updated.

Key Takeaways for Investors

  • Earnings quality: Core NII remained resilient at $0.47 with identifiable one‑time boosts; dividend coverage at 127% plus ~$0.39 spillover supports ongoing regular and variable supplemental payments into 2025 .
  • Credit tailwinds: Non‑accruals trend favorable (0.4%); watchlist/amendments stable; portfolio heavily first‑lien and floating‑rate, supporting downside protection as base rates reset lower .
  • Scale arbitrage: OBDE merger enhances diversification/liquidity and should lower financing costs; management targets >$5M synergy and 50–75 bps ROE uplift even as rates/spreads compress .
  • Accretive capital flexibility: $750M ATM to be used above NAV; monitor for disciplined issuance aligned with pipeline and leverage near top of range (currently 1.19x) .
  • Deployment posture: Spreads likely at cyclical trough; if M&A reaccelerates or syndicated market loosens, expect spread normalization and incremental return improvement; incumbency remains a strong funnel .
  • Near‑term trading: Management cited stock performing above book and up post‑merger, improving technicals; watch liability repricing and accretive growth as potential catalysts .
  • Update estimates: Refresh S&P Global consensus once accessible to calibrate supplemental dividend expectations and model NII under lower‑rate scenarios (management sensitivity: 50 bps cuts ~ $0.02 NII impact QoQ in prior context) .