Blue Owl Capital: Highlights From The IVQ 2024 Conference Call
NEWS
NEW YORK, Jan. 16, 2025 /PRNewswire/ — Blue Owl Capital Corporation (NYSE: OBDC or the “Company”) today announced preliminary financial results and provided a portfolio update for the fourth quarter ended December 31, 2024. The Company has elected to provide these results in connection with the closing of the merger with Blue Owl Capital Corporation III (“OBDE”) on January 13, 2025.
“OBDC’s and OBDE’s standalone fourth quarter performance reflects the consistent strength of our portfolios and positive momentum heading into 2025,” commented Craig W. Packer, Chief Executive Officer of OBDC. “The successful closing of the merger subsequent to quarter end further improves our ability to deliver attractive risk-adjusted returns to all shareholders. The increased scale of the combined company positions OBDC to enhance its liquidity profile, achieve lower costs of financing and generate immediate operational efficiencies.”
SELECT FINANCIAL RESULTS
| For the Three Months Ended December 31, 2024 | ||
| ($ in millions, except per share amounts) | Actual (unaudited) OBDC | Actual (unaudited) OBDE |
| Total investment income per share | $ 1.01 | $ 1.05 |
| Net investment income per share | $ 0.47 | $ 0.43 |
| Net realized/unrealized gain/(loss) per share | $ (0.08) | $ (0.08) |
| Earnings gain/(loss) per share | $ 0.39 | $ 0.35 |
| Return on equity1 | 12.3 % | 11.3 % |
| As of December 31, 2024 | |||
| ($ in millions, except per share amounts) | Actual (unaudited) OBDC | Actual (unaudited) OBDE | Pro forma (unaudited) OBDC |
| Cash, cash equivalents and restricted cash | $ 514 | $ 210 | $ 725 |
| Total assets | $ 13,852 | $ 4,485 | $ 18,337 |
| Total outstanding debt | $ 7,579 | $ 2,503 | $ 10,082 |
| Total committed debt | $ 10,271 | $ 3,102 | $ 13,373 |
| Total net assets | $ 5,953 | $ 1,839 | $ 7,792 |
| Net asset value per share | $ 15.26 | $ 14.91 | $ 15.26 |
| Net debt-to-equity | 1.19x | 1.25x | 1.20x |
| Funding mix (on a committed basis): | |||
| Revolving credit facility | 29.1 % | 22.6 % | 27.6 % |
| CLO | 21.5 % | 8.4 % | 18.5 % |
| SPV facility | 2.9 % | 42.7 % | 12.2 % |
| Unsecured notes | 46.5 % | 26.3 % | 41.8 % |
PORTFOLIO HIGHLIGHTS
| As of December 31, 2024 | |||||
| At fair value unless otherwise noted($ in millions) | Actual (unaudited) OBDC | Actual (unaudited) OBDE | Pro forma (unaudited) OBDC | ||
| Total investments | $ 13,195 | $ 4,223 | $ 17,417 | ||
| Top 15 investments | 32 % | 28 % | 29 % | ||
| Top 25 investments | 44 % | 41 % | 40 % | ||
| Number of portfolio companies | 227 | 189 | 236 | ||
| Average position size | 0.4 % | 0.5 % | 0.4 % | ||
| Asset class: | |||||
| First lien senior secured debt investments | 75.6 % | 85.2 % | 77.9 % | ||
| Second lien senior secured debt investments | 5.4 % | 4.5 % | 5.2 % | ||
| Unsecured debt investments | 2.3 % | 1.6 % | 2.1 % | ||
| Preferred equity investments | 2.8 % | 3.2 % | 2.9 % | ||
| Common equity investments | 11.7 % | 5.4 % | 10.2 % | ||
| Joint ventures | 2.2 % | 0.1 % | 1.7 % | ||
| Industry diversification: | |||||
| Internet software and services | 10.5 % | 12.8 % | 11.1 % | ||
| Insurance | 7.6 % | 10.8 % | 8.3 % | ||
| Food and beverage | 7.3 % | 5.5 % | 6.8 % | ||
| Healthcare providers and services | 6.3 % | 8.4 % | 6.8 % | ||
| Healthcare technology | 6.2 % | 7.3 % | 6.5 % | ||
| Asset based lending and fund finance | 5.9 % | 1.0 % | 4.7 % | ||
| Manufacturing | 5.9 % | 3.3 % | 5.2 % | ||
| Business services | 4.7 % | 7.1 % | 5.3 % | ||
| Buildings and real estate | 3.9 % | 3.3 % | 3.8 % | ||
| Consumer products | 3.6 % | 2.8 % | 3.4 % | ||
| Other industries | 38.1 % | 37.7 % | 38.0 % | ||
| Non-accruals as a percentage of total investments | 0.4 % | 0.1 % | 0.3 % | ||
| Internal 1- and 2-rated investments | 90.3 % | 92.6 % | 90.8 % |
| 1. Annualized Q4 2024 net investment income per share divided by average beginning and ending period net asset value per share. |
January 16, 2025 – Blue Owl Capital Corporation Press Release
ANALYSIS
As You Know
As covered in the BDC Publications, LLC News Feed, the two publicly-traded Owl Rock BDCs – OBDC and OBDE – have merged, with the former being the surviving entity.
Although IVQ 2024 earnings reporting season is just around the corner, OBDC’s management has “announced preliminary financial results and provided a portfolio update for the fourth quarter” because of the merger.
Thankfully, this doubling up of results reporting by OBDC is a one-time thing associated with the merger, avoiding any more of the deja vu effect we get with some BDCs that like to throw out some preliminary metrics in advance of the full release which keeps an already busy BDC Reporter ever more busy.
Quarter Over Quarter
We quickly reviewed how OBDC performed in the IIIQ 2024 and compared the numbers to their pre-merger numbers for the IVQ 2024.
It seems that recurring earnings are unchanged from the prior period at $0.47 per share, $0.01 higher than what the analysts were expecting.
The BDC incurred ($0.08) per share in realized and unrealized losses, less than ($0.13) per share in the quarter before but still a loss.
Net Income Per Share, helped by those lower losses, was slightly better in the IVQ 2024 than in the IIIQ – $0.39 vs $0.35.
The Net Asset Value Per Share (NAVPS) barely budged, going from $15.28 to $15.26 a share.
The portfolio dropped slightly in size by about ($200mn).
Post Merger
The data regarding what OBDC looks like post-merger is probably more important for investors going forward.
Yes, OBDC will become larger in terms of AUM; debt and net assets but on a per share basis the NAVPS is unchanged and so is the debt to equity at 1.20x, versus 1.19x previously.
In terms of the number of portfolio companies, the merger is helping with diversification – up to a point.
OBDE may have had 189 portfolio companies on its books but many are also on its sister BDC’s books.
As a result, the total number of companies at OBDC increases only from 227 to 236.
This also means, though, that performance is unlikely to be much affected by the merger.
Non-accruals – already low as a percentage of total investments – remains so at 0.3%.
Investors who like to see “granular” portfolios will be encouraged to see that the enlarged OBDC has an average portfolio size equal to only 0.4% of the entire portfolio.
VIEWS
Looks Good
Overall, the metrics for OBDC both before and after the merger look pretty good, and should not cause much in the way of surprise to the BDC’s investors.
[The stock price has barely moved since the issuance of the press release].
However, this is a 36,000 feet view of the BDC and we will learn a good deal more in the IQ 2025 when we get the first official combined results.
Consider this set of numbers – and even the IVQ 2024 results of OBDC pre-merger – to be just a first look.
Later in the year, we’ll delve far more deeply into the performance and prospects of this now second larges public BDC
VALUATION
As this stock price chart shows, OBDC has been trading well off its 52-week high since the summer of 2024, in something of a holding pattern.
As of January 16, 2025 at the close, the stock was priced at $14.92, (12%) off its 52 week high and 7% above its low.
The stock trades (2%) below its just announced iVQ 2024 NAVPS.
The analyst community is projecting 2025’s recurring earnings per share will be $1.71, implying a Price To Projected Earnings of 1.7x.
BDC Best Ideas projects OBDC will pay out $1.60 per share in 2025 – down from $1.72 in 2024.
If correct, that means the BDC will be paying out a relatively average yield of 10.7%.
OBDC’s NAVPS dropped (1.2%) in 2024. BDC Best Ideas is projecting a further (2.0%) drop due to a few troubled credits that may see further write-downs.
Check out BDC Best Ideas for many more metrics.