Fourth Quarter Fiscal Year 2019 Earnings Presentation November 20, 2019 Nasdaq: OCSI Exhibit 99.2
Forward Looking Statements Some of the statements in this presentation constitute forward-looking statements because they relate to future events or our future performance or financial condition. The forward-looking statements contained in this presentation may include statements as to: our future operating results and distribution projections; the ability of Oaktree Capital Management, L.P. (“Oaktree”) to reposition our portfolio and to implement Oaktree’s future plans with respect to our business; that ability of Oaktree to attract and retain highly talented professionals; our business prospects and the prospects of our portfolio companies; the impact of the investments that we expect to make; the ability of our portfolio companies to achieve their objectives; our expected financings and investments and additional leverage we may seek to incur in the future; the adequacy of our cash resources and working capital; the timing of cash flows, if any, from the operations of our portfolio companies; and the cost or potential outcome of any litigation to which we may be a party. In addition, words such as “anticipate,” “believe,” “expect,” “seek,” “plan,” “should,” “estimate,” “project” and “intend” indicate forward-looking statements, although not all forward-looking statements include these words. The forward-looking statements contained in this presentation involve risks and uncertainties. Our actual results could differ materially from those implied or expressed in the forward-looking statements for any reason, including the factors set forth in “Risk Factors” and elsewhere in our annual report on Form 10-K for the fiscal year ended September 30, 2019. Other factors that could cause actual results to differ materially include: changes or potential disruptions in our operations, the economy, financial markets and political environment; future changes in laws or regulations (including the interpretation of these laws and regulations by regulatory authorities) and conditions in our operating areas, particularly with respect to business development companies or regulated investment companies; and other considerations that may be disclosed from time to time in our publicly disseminated documents and filings. We have based the forward-looking statements included in this presentation on information available to us on the date of this presentation, and we assume no obligation to update any such forward-looking statements. Although we undertake no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise, you are advised to consult any additional disclosures that we may make directly to you or through reports that we in the future may file with the SEC, including annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K. Unless otherwise indicated, data provided herein are dated as of September 30, 2019.
Accomplishments for the Fiscal Year Ended September 30, 2019 Earnings Growth Continued Progress Repositioning Portfolio Excellent Credit Quality ($ in millions, at fair value) 1 Net Investment Income Per Share Portfolio Assets NAV Per Share Key Accomplishments +7% increase in NII per share in FY 2019 vs. FY 2018 1 2 3 +14% -27% 1Excludes investments in OCSI Glick JV (“Glick JV”), a joint venture that invests primarily in senior secured loans of middle-market companies. No investments on non-accrual as of 9/30/19
Summary of Results for the Quarter Ended September 30, 2019 Net investment income per share for the quarter ended September 30, 2019 was $0.17 as compared to $0.20 for the quarter ended June 30, 2019 Net Investment Income Net Asset Value Net asset value per share as of September 30, 2019 was $9.65 as compared to $9.71 as of June 30, 2019 Dividends Paid a distribution of $0.155 per share during the quarter ended September 30, 2019 Board of Directors declared a dividend of $0.155 per share, payable on December 31, 2019 to stockholders of record as of December 13, 2019 Investment Activity $51 million of new investment commitments and received $40 million of proceeds from prepayments, exits, other paydowns and sales 97% of new investment commitments were first lien 6.8% weighted average yield on new investment commitments Investment Portfolio $597 million of investments at fair value in 84 companies 7.4% weighted average debt portfolio yield 100% of the debt portfolio is performing and there are no investments on non-accrual status
Portfolio Summary as of September 30, 2019 (As % of total portfolio, at fair value; $ in millions) (As % of total portfolio, at fair value) Portfolio Composition Top 10 Industries2,3 Portfolio Characteristics (at fair value) $597 million invested in 84 companies 99.9% of the total portfolio consists of debt investments 100% of debt portfolio consists of floating rate investments 7.4% weighted average yield on debt investments $7 million average debt investment size1 < 1% Note:Numbers may not sum due to rounding. 1Excludes investments in the Glick JV. 2Excludes multi-sector holdings, which is comprised of investments in the Glick JV. 3Based on GICS sub-industry classifications.
Portfolio Diversity OCSI’s portfolio is diverse across borrowers and industries (As % of total portfolio, at fair value) (As % of total portfolio, at fair value) Portfolio by Industry1,2 Diversity by Investment Size Top 10 Investments 22% Next 15 Investments 23% Remaining 58 Investments 46% Glick JV 9% Industry Group % of Portfolio Software 17.8% IT Services 9.8% Commercial Services & Supplies 8.6% Diversified Telecommunication Services 6.3% Aerospace & Defense 6.0% Media 5.8% Oil, Gas & Consumable Fuels 4.9% Professional Services 3.4% Healthcare Providers & Services 3.2% Diversified Financial Services 2.7% Pharmaceuticals 2.2% Interactive Media & Services 2.2% Remaining 20 Industries 27.3% As of September 30, 2019 1Excludes investments in the Glick JV. 2Based on GICS industry classifications.
Debt Portfolio Company Metrics OCSI’s portfolio has transitioned into higher quality, larger borrowers with lower leverage, reflecting our defensive investment approach Debt Portfolio Company EBITDA1 Debt Portfolio Company Leverage1 Median Debt Portfolio Company EBITDA ($ in millions) Source: S&P Global Market Intelligence. 1 Excludes negative EBITDA borrowers and recurring revenue software investments. 2Represents average debt multiples for 1Q-3Q 2019. 9/30/17 9/30/18 9/30/19 $67 $110 $158 2 Debt portfolio company leverage has decreased by 0.8x since 9/30/17
Non-core Investments: 8% of portfolio Non-core Investments: 58% of portfolio Historical Portfolio Progression1 100% of core debt portfolio is comprised of senior secured loans ($ in millions, at fair value) ($ in millions, at fair value) Non-core Portfolio Core Debt Portfolio 1Excludes investments in the Glick JV. -85% Non-core Investments +139% Core Investments
Note:Numbers may not sum due to rounding. Non-core Investment Portfolio Detail Non-core Portfolio Characteristics Private Loans $33 million at fair value in three companies Average debt price: 90.9% Liquid Debt Investments $10 million at fair value in three companies Comprised of publicly quoted liquid loans Average debt price: 93.5% Exits since September 30, 2019 $7 million in two companies Both exited at par (As % of non-core investment portfolio, at fair value; $ in millions) Non-core Investments by Type (At fair value; $ in millions) Non-core Portfolio Composition < 1% $43
Q4 2019 Portfolio Originations $51 million of new investment commitments $49 million in 7 new portfolio companies and $2 million in 1 existing portfolio company $51 million of new funded investments1 Diversified across 6 industries 6.8% weighted average yield at cost on new investments 100% of new debt investment commitments at floating rates 100% of new investments also held by other Oaktree funds New Investment Highlights ($ in millions) Historical Originations and Exits (As % of new investment commitments; $ in millions) New Investment Composition Note:Numbers rounded to the nearest million or percentage point and may not sum due to rounding. 1 New funded investments includes drawdowns on existing revolver commitments.
Historical Financial Information ($ in thousands, except per share data) Operating Results For the three months ended 9/30/2019 6/30/2019 3/31/2019 12/31/2018 9/30/2018 Interest income $11,976 $13,522 $12,294 $11,204 $13,436 PIK interest income 10 3 6 8 536 Fee income 93 284 182 48 752 Total investment income 12,078 13,809 12,482 11,259 14,724 Base management fee 1,511 1,498 1,451 1,415 1,437 Part I incentive fee 1,049 1,295 1,096 854 1,181 Interest expense 3,673 3,860 3,772 3,223 5,482 Other operating expenses1 901 1,052 995 1,331 1,057 Total expenses 7,134 7,705 7,314 6,823 9,158 Fees waived (198) 185 (49) (427) 3 Net expenses 6,937 7,890 7,265 6,395 9,161 Net investment income 5,142 5,918 5,217 4,864 5,563 Net unrealized appreciation (depreciation) (148) (2,594) 8,797 (19,761) 2,540 Net realized gains (losses) (1,997) 158 (319) 1,696 256 Net increase (decrease) in net assets resulting from operations $2,996 $3,483 $13,695 $(13,201) $8,359 Net investment income per common share $0.17 $0.20 $0.18 $0.17 $0.19 Net realized and unrealized gains (losses) per common share (0.07) (0.08) 0.28 (0.62) 0.09 Earnings (loss) per common share – basic and diluted $0.10 $0.12 $0.46 $(0.45) $0.28 Distributions per common share $0.155 $0.155 $0.155 $0.155 $0.155 1Includes professional fees, directors fees, administrator expenses and general and administrative expenses.
Historical Financial Information ($ in thousands, except per share data) Select Balance Sheet and Other Data As of 9/30/2019 6/30/2019 3/31/2019 12/31/2018 9/30/2018 Investment Portfolio (at fair value) $597,104 $588,582 $592,147 $553,351 $556,842 Debt Outstanding1 294,657 308,257 307,657 262,157 275,057 Total Net Assets 284,450 286,021 287,105 277,977 295,745 Net Asset Value per share $9.65 $9.71 $9.74 $9.43 $10.04 Total Leverage 1.04x 1.08x 1.07x 0.94x 0.93x Weighted Average Interest Rate on Debt Outstanding 4.2% 4.5% 4.6% 4.5% 4.3% Weighed Average Yield on Debt Investments2 7.4% 7.8% 8.0% 7.8% 7.7% Cash Component of Weighted Average Yield on Debt Investments 7.3% 7.6% 7.8% 7.7% 7.6% Weighted Average Yield on Total Portfolio Investments3 7.4% 7.8% 8.0% 7.8% 7.7% 1Net of unamortized financing costs. 2Annual stated yield earned plus net annual amortization of original issue discount or premium earned on accruing investments, including our share of the return on the debt investments in the Glick JV. 3Annual stated yield earned plus net annual amortization of original issue discount or premium earned on accruing investments and dividend income, including our share of the return on the debt investments in the Glick JV.
Historical Portfolio Activity ($ in thousands) As of 9/30/2019 6/30/2019 3/31/2019 12/31/2018 9/30/2018 Investments at Fair Value $597,104 $588,582 $592,147 $553,351 $556,842 Number of Portfolio Companies 84 82 81 79 75 Average Portfolio Company Debt Investment Size $7,200 $7,300 $7,400 $7,100 $7,600 Asset Class: Senior Secured Debt 90.9% 90.5% 90.5% 90.1% 89.1% Glick JV 9.1% 9.5% 9.5% 9.9% 10.5% Equity 0.0% 0.0% 0.0% 0.0% 0.4% Interest Rate Type: % Floating Rate 100% 100% 100% 100% 100% Investment Activity: New Investment Commitments $50,800 $38,800 $64,400 $93,100 $91,800 New Funded Investment Activity1 51,100 41,300 67,900 87,000 91,000 Proceeds from Prepayments, Exits, Other Paydowns and Sales 40,200 43,000 38,900 73,100 101,700 Net New Investments2 10,900 (1,700) 29,000 13,900 (10,700) Number of New Investment Commitments in New Portfolio Companies 7 5 9 12 13 Number of New Investment Commitments in Existing Portfolio Companies 1 4 5 7 2 Number of Portfolio Company Exits 5 4 7 9 9 1New funded investment activity includes drawdowns on existing revolver commitments. 2Net new investments consists of new funded investment activity less proceeds from prepayments, exits, other paydowns and sales.
Net Asset Value Per Share Bridge Note:Net asset value per share amounts are based on the shares outstanding at each respective quarter end. Net investment income per share, net unrealized appreciation / (depreciation), and net realized gain / (loss) are based on the weighted average number of shares outstanding for the period. 1Excludes reclassifications of net unrealized appreciation / (depreciation) to net realized gains / (losses) as a result of investments exited during the quarter. 1 1
Capital Structure Overview ($ in millions) (As % of total funding sources) ($ in millions) Funding Sources Funding Source by Type Historical Principal Outstanding and Leverage Ratio Committed Principal Outstanding Interest Rate Maturity Deutsche Bank Facility $250 $158 LIBOR+2.00% 6/30/2020 Citibank Revolving Credit Facility 180 126 LIBOR+1.70% / 2.25%1 7/18/2023 East West Bank Facility 25 11 LIBOR+2.85% 1/6/2021 Total $455 $295 As of September 30, 2019 1Interest rate spread depends on asset type. Target Leverage Ratio: 1.2x-1.6x debt-to-equity Multiple capital sources provides us with flexibility to optimize new investment fundings in order to maintain competitive borrowing costs Prudently deploying leverage toward long-term target ratio range 100% of debt sources are floating rate
Increase portfolio size to operate within long term target leverage ratio range Opportunities to Increase Return on Equity 1 Utilize additional investment capacity at the Glick JV 2 Modest increase in second lien investments 3 Current total leverage of 1.04x debt-to-equity, below target leverage range of 1.20x to 1.60x debt-to-equity Prudently deploying capital in new investment opportunities in order to reach long term target range $180 million total assets, including senior secured loans to 39 portfolio companies Originated $22 million of investments across 5 issuers during the quarter ended September 30, 2019 1.5x leverage (debt-to-equity), below long term target leverage level of 2.0x $32 million of remaining investment capacity (assuming 2.0x leverage) Second liens represented 2% of the portfolio at fair value Ample capacity to increase exposure to second liens should we find compelling investment opportunities As of September 30, 2019 We believe OCSI is well-positioned to enhance return on equity
Contact: Michael Mosticchio, Investor Relations ocsi-ir@oaktreecapital.com