Blue Owl Capital Corporation

Good morning, everyone, and welcome to the Blue Owl Capital Corporation's first quarter 2026 earnings call. As a reminder, this call is being recorded. At this time, I'd like to turn the call over to Mike Mastichio, head of BDC Investor Relations. Mike, please go ahead.

Thank you, Operator, and welcome to Blue Owl Capital Corporation's first quarter 2026 earnings conference call. Joining me today are Craig Packer, Chief Executive Officer, Logan Nicholson, President, and Jonathan Lamb, Chief Financial Officer. I'd like to remind listeners that remarks made during today's call may contain forward-looking statements, which are not guarantees of future performance or results and involve a number of risks and uncertainties that are outside of the company's control. Actual results may differ materially from those in forward-looking statements as a result of a number of factors, including those described in OBDC's filings with the SEC. The company assumes no obligation to update any forward-looking statements. We'd also like to remind everyone that we'll refer to non-GAAP measures on the call, which are reconciled to GAAP figures in our earnings presentation available on the events and presentation section of our website. Certain information discussed on this call and in the company's earnings materials, including information related to portfolio companies, was derived from third-party sources and has not been independently verified. The company makes no such representations or warranties with respect to this information. Yesterday, OBDC issued its financial results for the first quarter ended March 31, 2026, reporting adjusted net investment income of $0.31 per share and net asset value per share of $14.41. All materials referenced during today's call, including the earnings press release, earnings presentation, and 10-Q, are available on the news and events section of OBDC's website. With that, I'll turn the call over to Craig.

Thanks, Mike, and good morning, everyone. Thanks for joining us. I'd like to start by highlighting that our credit performance remains strong with no new non-accruals, stable borrower performance, and underlying performance in line with recent quarters, and we continue to feel confident in the underlying credit quality of our portfolio. I would also like to acknowledge that the first quarter was a more challenging environment for OBDC from an earnings perspective. Lower base rates and tighter market spreads weighed on our results, reflecting headwinds that have been building over the last year and were fully realized this quarter. Given the market uncertainty this quarter, the deal environment was also slower, which led to minimal fee and repayment income, which was at a three-year low. In addition, we operated with lower leverage and preserved capital, which has positioned us well for the more attractive opportunity set we're starting to see. As we have highlighted on recent earnings calls, our dividend has been a key focus as we have watched these dynamics unfold, and we believe this is the right moment to address our dividend. As a reminder, when we went public in 2019, we set our dividend at 31 cents per share and maintained it there for more than three years while rates were low. When rates began to rise in 2022, we increased the dividend to reflect the higher earnings power of the portfolio and and introduced the supplemental dividend framework in an effort to provide shareholders with a predictable base dividend while distributing excess income above that level. Similar to what a number of our peers have recently done, we're reducing the base dividend for the second quarter back to $0.31 per share, representing an approximate 8.6% yield on net asset value and an over 10% yield at the current share price. We believe this is the appropriate level given the forward earnings power of the portfolio, particularly with spreads now widening and the rate environment appearing more stable. At the same time, we are maintaining the supplemental dividend framework. As a reminder, under this framework, we pay out 50% of NII above our base dividend, allowing shareholders to benefit in a predictable manner when earnings exceed the base dividend. Separately, spread widening across the credit markets drove unrealized losses this quarter, resulting in a net asset value decline. Because our portfolio is marked quarterly and spreads are a key valuation input, this drop in NAV was mostly driven by broader market moves across public and private credit and not a deterioration in the underlying quality of our assets, which remains strong. Approximately 75% of the write-down was attributable to spread widening across our debt portfolio. And that is a key point I want to emphasize. While this quarter reflected a more challenging earnings environment, the underlying portfolio continues to perform very well. Credit selection and portfolio construction are the part of the business we can control most directly, and that continues to be a source of OBDC strength. Non-accruals remained low and declined again this quarter. borrower revenue and EBITDA growth remain healthy, and repayment activity at par has been consistent. In the first quarter, we saw a market-wide reassessment of risk and a reduction in flows into private credit, which has resulted in a much better balance of supply and demand and a more favorable investing environment. We will come back to our outlook at the end of the call, but we believe we are very well positioned from here, given our lower leverage, the strength of the portfolio, and the more attractive spread environment we see today. Now I will turn the call over to Logan to provide more details on our investment activity and portfolio performance.

Thanks, Greg. Starting with investment activity, we approached the environment more conservatively this quarter, which contributed to lighter origination activity and lower leverage at OBDC. As market volatility increased and deal activity slowed, we remained disciplined in our pace of deployment, and now we're encouraged to see opportunities coming to market at wider spreads. In the first quarter, OBDC had fundings of $525 million against an almost $1.5 billion of repayments and sales, resulting in an ending net leverage of one spot one three times, our lowest level in two years. The majority of our deployment was related to fourth quarter transactions that closed in the first quarter, which were committed at spreads lower than what we're seeing in the market today. As noted, we intentionally kept leverage low, and with ample dry powder, we are well positioned to deploy as the pipeline builds. Consistent with our approach of investing in diversified accretive assets, we continue to deploy selectively into our joint ventures and specialty finance investments in the first quarter. For example, within our life sciences specialty finance vehicle, LSI, OBDC increased its allocation primarily to support an investment in TG Therapeutics, a company we have backed since 2024 that continues to perform well. Blue Owl served as sole lender in a $1 billion financing to support the company's continued growth. The LSI vehicle has generated returns of more than 14% to OBDC since inception, underscoring the attractiveness of our specialty finance and JV investments. Turning to the portfolio, credit performance remains stable and our borrowers continue to perform well. As a reminder, OBDC is a broadly diversified portfolio across 30 industries with an average position size of approximately 40 basis points, and our focus remains on lending to large, non-cyclical, defensive businesses. Our borrowers delivered year-over-year revenue and EBITDA growth in the high single digits, consistent with last year and a reflection of the fundamental health of the businesses we finance. Zooming in, our software borrowers also demonstrated revenue and EBITDA growth consistent with the rest of the portfolio. As a reminder, these are primarily first lien senior secured loans with conservative LTVs, even at today's valuations. As you'll recall, we invest in mission-critical scaled enterprise software providers with characteristics that we believe make them durable. While we remain appropriately cautious about the potential impact of AI on some areas of software, we are not yet seeing any material impact on our software borrowers' performance. Additionally, we saw meaningful repayments from software names during the quarter, including IntelliRad, which was an over $400 million investment across the Blue Owl platform, including $169 million in OBDC. IntelliRad is a provider of medical imaging software solutions, which was sold to GE Healthcare at a $2.3 billion valuation, resulting in a full repayment. This is another example of the quality and strategic value of the software businesses in our portfolio. As a result of this and one additional large repayment, MindBody, software exposure declined to approximately 16% of the portfolio, down from roughly 19% last quarter. Turning to our key credit KPIs, the picture is healthy and stable in all respects. Interest coverage ratios remain healthy at approximately two times. Revolver draws remain at conservative low levels. Amendment activity is stable, and our three to five rated names remain in the same range as last year. TIC income was also stable compared to last quarter on a dollar basis, but rose slightly to 11.7% as a percentage of total investment income, due to a decrease in cash interest as a result of lower rates. PIC remains down from the peak of over 13% in 2024. Also, as we have highlighted in previous earnings calls, over 85% of our PIC names were underwritten that way at inception, and we have never taken a principal loss on those intentionally structured PIC positions. Finally, our non-accrual rate declined to one spot 0% at fair value as we removed two names from non-accrual with no new additions. Over the last few quarters, our non-accruals have remained relatively stable, with a three-year average of approximately 1% at fair value, and this quarter's decline is a good reminder that our borrowers are performing well and fundamental performance is stable. We would note that LTVs moved modestly higher this quarter, which we attribute to the broader valuation environment, rather than a deterioration in borrower fundamentals. Our average LTV across the portfolio sits at 47%. implying that over half of enterprise value would need to be impaired before we incur any losses. To close, the breadth and resilience of our portfolio remain intact. With lower leverage, more dry powder, and the sourcing advantages of the Blue Isle platform, we believe we're well positioned to take advantage of opportunities that this environment may bring. Now I'll turn it over to Jonathan to review our financial results.

Thank you, Logan. In the first quarter, OBDC earned adjusted NII of 31 cents per share. As Craig outlined, results this quarter reflected several earnings headwinds that have been building over time and came through more fully in Q1. Most notably, three rate cuts between last September and December, totaling 75 basis points, are now fully reflected in our results, given the lagged impact that lower rates have on our mostly floating rate portfolio. Non-recurring income was also light this quarter, coming in at more than one cent below our historical average after running above that level last quarter. In addition, the earnings benefit from the low-cost unsecured notes we issued before rates moved higher over four years ago continue to roll off as those maturities come due. Since last July, one billion of those notes have matured, with another one billion set to mature this year. These factors, together with lower leverage throughout the period, drove the decline in adjusted NII this quarter and are now mostly reflected in our current run rate earnings. The Board declared a second quarter base dividend of 31 cents, which we believe aligns with the portfolio's forward earnings power in the current environment. The dividend will be paid on July 15, 2026, to shareholders of record as of June 30, 2026. Our spillover income remains healthy at approximately $0.28 per share, providing a meaningful cushion that further supports the base dividend going forward. Moving to the balance sheet, our first quarter NAV per share was $14.41, down from $14.81 last quarter, primarily reflecting the impact of mark-to-market adjustments. We'd note that the realized losses reflected on the income statement were related to investments previously on non-accrual that had already been written down over the past several years and did not contribute to the NAV decline this quarter. We continue to execute on our share repurchase program in the first quarter, buying back $35 million of stock, which was accretive to NAV per share by $0.02, while balancing that activity with a focus on deleveraging and maintaining capacity to deploy into a more attractive market environment. Over the past two quarters, we have repurchased a total of $183 million, reflecting our conviction in OBDC's long-term value. The Board of Directors also authorized a new $300 million share repurchase program in February, replacing the previous $200 million plan, leaving approximately $265 million remaining following first quarter activity. We ended the quarter with net leverage at 1.13 times, within our target range of 0.9 to 1.25 times, as we decreased leverage to preserve flexibility. Turning to our capital structure, we continue to be active in further strengthening our balance sheet and enhancing our liquidity profile. In January, Moody's upgraded our credit rating to BAA2. Beyond serving as meaningful recognition of the quality of our platform, the consistency of our performance, and the strength of our balance sheet, we believe this is a validation of our efforts to build a best-in-class BDC credit profile. Subsequent to quarter end, we accessed the unsecured debt markets with a $400 million note offering, demonstrating OBDC's continued ability to raise capital and make broader market volatility. The strong institutional investor demand we received is a meaningful vote of market confidence and OBDC's credit profile. With this offering, our liquidity has increased to over $4 billion in total cash and capacity on our facilities, which comfortably exceeds our unfunded commitments and provides ample capacity to invest in the current environment while addressing upcoming debt maturities. Overall, we are pleased with the proactive steps taken this quarter to strengthen our balance sheet, and we believe OBDC is well positioned from a capital and liquidity standpoint And now I will turn it over to Craig for some closing remarks.

Thanks, Jonathan. I want to close by reflecting on where we are today and our outlook. Over the past few years, private credit has benefited from a very constructive backdrop, but it also became increasingly competitive as significant amounts of capital entered the space at a time of moderate private equity M&A. That drove spreads tighter, and together with lower base rates put pressure on returns and earnings across the sector and including at OBDC. That environment has begun to shift. Volatility in the broadly syndicated loan market has driven a meaningful widening in spreads, while the rate backdrop appears to be stabilizing. On the deals we are seeing today spreads are generally about 50 to 75 basis points wider and terms are more attractive than they were just a few quarters ago. At the same time, retail capital inflows have slowed into private credit and the supply demand balance for new deals looks more favorable than it has been in years. Put simply, we believe this is a more attractive investment environment than the one we've been operating in over the last two years, and we believe OBDC is well-positioned to take advantage of it. Our portfolio is in good shape, our balance sheet is strong, and our leverage is at its lowest level in two years. Repayments over the past year have contributed meaningfully to that positioning, giving us additional flexibility at a time when spreads are widening and the opportunity set is improving. Combined with our scale, incumbencies, and deep sponsor and borrower relationships, we We believe we are well positioned to deploy selectively into attractive risk-adjusted opportunities as they emerge. While overall deal activity has been more modest in recent months, periods like this have historically created a more favorable setup for direct lenders. As the broadly syndicated loan market becomes more volatile, borrowers increasingly turn to established direct lenders for certainty of execution, and Blue Owl is well positioned to capture that demand. As borrowers adjust to new market realities, refinancings will resume, driving spread widening and fee income. And even if new deal flow stays moderate, we will naturally have the opportunity to put capital to work through regular activity from our existing portfolio, including add-ons and upsizings, with borrowers we know well and have backed through multiple cycles. Lastly, this quarter also marks an important milestone for OBDC, as the fund has reached its 10-year anniversary. Over that time, we have delivered a 9.6% annualized total return while managing the portfolio through multiple periods of volatility, maintaining strong credit performance, and low loss rates that have averaged just 31 basis points annually. This recent volatility highlights the importance of risk management across the balance sheet. We remain focused on conservative asset selection with well-matched liabilities, sufficient liquidity, and the right protections in place. We have conviction in our strategy, remain focused on acting in the best interest of shareholders, and believe that our long-term track record is the clearest demonstration of the quality of this platform. Thank you for your time today. We will now open the line for questions.

Thank you. We'll now be conducting our question and answer session. If you'd like to be placed in the question queue, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing star 1. One moment, please, while we poll for questions. Our first question today is coming from Brian McKenna from Citizens. Your line is now live.

Okay, great. Thanks. Good morning, everyone. So on the new 31-cent quarterly dividend, should we view that as a floor in NII over the next several quarters? And since you're keeping the supplemental dividend framework in place, is there the potential for some supplemental dividends to come through later this year, depending on the trajectory of NII from here as the environment begins to normalize with wider spreads, which should be a recovery in transaction activity along with stable base rates?

Hey, Brian. Thanks. So we thought very carefully about where to set the dividend. We think that this is the right level. In terms of it's a floor, I hope it's a floor. I expect that we will have a really good environment. I think spreads, as we talked about, will go wider from here. Obviously, it's very base rate driven as well. Right now, base rates are expected to sort of stabilize here. We had very little prepayment income this quarter. That's not an easily predictable variable, but our history shows we typically have it. So, I hope and expect it to be a four, but, you know, in any quarter, things can happen. So, I don't want to overstate the level of precision there. I appreciate you highlighting the supplemental dividend. I do think that there are going to be quarters where we overrun the 31, and, again, this is, you know, at the risk of saying this multiple times, this isn't a special dividend. We're really expressing a commitment to pay out 50% of everything over 31. So we hope investors appreciate that versus special, which is much more discretionary. So that's some perspective on it. I'm quite optimistic over the next 12 months it's going to be a better investing environment and we'll have the ability to generate some really attractive earnings for the portfolio, hopefully in excess of the dividend.

Okay, that's helpful. Thanks, Craig. And then, Jonathan, it would be helpful to get a little more color around your framework and approach to marking a portfolio. I know your process is very thorough, but I think it would be timely just to get a little bit more detail here. And then do you have any historical data around the average markup between final realized marks across the portfolio relative to the prior unrealized marks?

Sure. So just in terms of our valuation approach, it's been consistent for the last 10 years. We will remind you and remind everyone that here we do not mark our book at all. We go out to an external valuation agent every single quarter for every single name, you know, a large, well-regarded valuation agent. They're not providing a range of values, but rather rather marking the book to the point value. And so we're not putting a number where it's at the top end of the range or the bottom end of the range, et cetera, but rather just a price taker ultimately for every single valuation. We do, as part of our overall requirements with our board and obviously internally, do a look-back analysis on, first of all, comparable valuations to the peers. We've always been marked on a conservative basis, but not too much. We obviously don't want to be just taking marks down without thought, but we're always analyzing where we mark relative to the peers. And another thing that we do is obviously always look at where we exit versus where we were previously marked in the prior quarter. So on a realization basis, we'll look at where the unrealized values are and then ultimately where those realizations come in. And you're talking about generally a very, very small amount, unless obviously in the particular quarter there's some, you know, massive change relative to where we were. the context of the unrealized, what were the realizations that we had in this quarter, all of those realizations, you know, some of them were historical non-accruals, where we effectively realized them exactly where they were, because we had already taken the pain, and there were some realizations on the way up, like a name like SpaceX is obviously moving pretty dramatically, so there was a realized gain associated with SpaceX in the quarter because the valuation changed between 1231 and 331.

Yeah, you know, I just add, we're a lender. Our loans are contractually due at par. Our loans, if they're performing and going to get taken out, they should be getting taken out at par. it's very different than a private equity portfolio where a private equity firm is marking the value and then they have to exit and there's an indeterminate value up or down. So the vast, vast, vast majority of our loans in our history are exiting at their fair value because as we approach that refinancing or repayment or maturity, it gets more closer and closer to par. And as we've highlighted, we've only had 35 basis points of loss in the history of the fund. So almost everything has gotten repaid at par. The average, just so you have it at your fingertips, the current spread in the book is 560 over, and the average loan is marked at 95.4. And we expect to get par on almost all of those loans.

Really helpful. Thank you, guys.

Thanks, Brian. Perfect. Thank you.

Next question today is coming from Sean Paul Adams from B Riley Securities. Your line is outlined.

Hey, guys. Good morning. It looks like your headline non-accrual has declined, but, you know, look, you marked Walker Edison on non-accrual, you know, but you kept the first lien at a 96 mark while, you know, effectively taking that delay draw to basically a zero. Okay. it looks like that was an opportunity to kind of draw down, or do you have estimates of a better recovery from that specific name?

Walker Edison's been on non-accrual for a significant period of time. It's been marked down to very, very low levels with a certain view of recovery. There was a realization this quarter, Sean Paul, so that's That's probably what's tripping you up. But there is, you know, in terms of non-accrual, it's not a new non-accrual and has been marked down drastically, not much more significantly this quarter.

No impact to NAV. This was just a realization of an already unrealized markdown that we had. So there was no change to NAV net at the end of the day.

Correct. Correct, yes. It's been a long-standing non-accrual. It's just, you know, more questioning the marks of where it's, you know, the fair value at 96%. On the new non-accruals for the quarter, Cornerstone On Demand, you know, was a new addition, and, you know, that is kind of cross-held within the Aries portfolio as well. That is within the kind of SaaS business, right? That mark has kind of deteriorated pretty rapidly. Do you have any extra color on that specific name?

Well, sure. Before, I just want to make sure it's clear. We didn't have any additional monocles this quarter. So, we can talk about Cornerstone. Cornerstone has public loans that trade. And when we are in an investment that has public loans that trade, we certainly and our valuation firm takes the marks of those public loans heavily into account for obvious reasons. And so in that particular case, the loan, the mark that we have is heavily fact weighed by the public marks. We believe it's a performing credit. It's had some volatility, some of this. Look, there's a lot of public market concern about software names, and sometimes that trading volatility may or may not line up with our view of credit fundamentals. But we feel good about having it on accrual, and we feel like we've marked it appropriately.

My apologies to clarify. Okay. your non-accruals were lower for the quarter, but your watch list, you know, with, you know, the aggregate marks below 85% did increase. And so that, you know, the quarterstone drawout was from the watch list increasing while the non-accruals are going down. So my question was more pointed towards whether, you know, headline non-accruals might be going down, but the aggregate watch list credits or the risk ratings within the portfolio, could those be going up or is that rather just a mark-to-market, like you said earlier in the call, when a number of these names are cross-held positions within other BDCs?

I would add, are 3s to 5s rated names, which we would view as more expansive than just the names below 80 and the names that we spend a lot of time considering, all of the factors around credit performance, that is stable, and it has not gone up. So the subset of names that you're looking at that have had volatile trading prices, there are a few. Most notably, you know, Cornerstone, you highlighted, have been a relative value to a first lien that traded down significantly with the volatile public market, particularly around software names in the first quarter. On that name in particular – earnings and revenues in that company are perfectly stable. It's a public market volatility point related to the first lien. So when we look at our more expansive proxy for a watch list, our threes to fives rated, the numbers are not going up. They're stable.

Okay. Thank you for the comment. I appreciate it.

Thank you.

Thank you. The next question today is coming from Robert Dodd from Raymond James. Your line is now live.

Hi, guys. A couple of questions, if I can, kind of underline it. On the first kind of earnings trends going forward, I mean, to your point, three-year low in fee income, two-year low in leverage. So, you know, there's a lot of potential drivers. I mean, what do you think could be the primary drivers of earnings one way or the other through the remainder of the year? I mean, do you think fee income – is likely, I mean, prepays, et cetera, is actually likely to increase this year given how choppy the market is and spreads are wider and maybe people don't want to refi? Or do you think leverage is more likely to be the primary tool for kind of the direction of NII through the course of this year?

Look, Robert, I think it's a mix. You know, I don't think there's one primary in any one quarter range. different things can happen. I think our income, pre-income prepayment income was unusually low this quarter. In almost all market environments, it's higher than we've seen this quarter. It just wound up being an exceptionally low quarter. Again, that type of income could be from OID, could be from repayments, call premium, amendment fees. There's a lot of drivers. It's not any one thing and just wound up being an exceptionally quiet quarter without getting too far ahead of myself. I suspect it will be higher in the second quarter, but we'll see. I do think that refinancings will take place throughout the year that will allow us to add some spread to the book. I think that we're going to be cautious on leverage just because I think it's an environment that deserves caution. But if we see attractive opportunities, which I think we will, taking the leverage up a bit is certainly... We have the flexibility to do that. So I think it's all those things. We have our joint ventures. They pay dividends. They're very predictable dividends, but in any one quarter, they can be a little bit higher, a little bit lower. And obviously, credit performance needs to continue to be very strong. So it's all the factors. I guess what I would say is, and we said in the script, and I just want to be really clear, This quarter, you saw the culmination of a period of time where spreads were ground down in the industry and rates came down. And there's a lag effect to the rates as borrow elections turn over. And so you saw this in our results, but I think you're seeing it in our peers' results pretty consistently. And you're seeing it in the first quarter. For investors that don't follow the space very closely, what we are highlighting is now that that's really washed its way through, I'm optimistic because of the supply-demand in the industry that spreads are widening from here, and I think their expectation is base rates have stabilized from here. So if we get just some reasonable repayment, that's a cause for hope around earnings for the industry over the rest of the year. It's all those factors.

Got it. Thank you. One more if I can. On the LPVs, obviously there's been – you know, it has been an area of focus for the space to talk about LTVs as a capital protection kind of indicator. Can you give us any more color on how rapidly you update or where the V part of that comes from in your disclosure? And, you know, is it the underwriting value? Is it updated quarterly, which I presume? And also to the point, like, you know, what's, You know, that's the average for the portfolio. You know, what's the kind of range across the portfolio in terms of LTVs, and obviously for the overall portfolio, and obviously I'm also interested in the software side in terms of how that V is moving and what the range is in software as well as the overall portfolio. Yeah.

Yeah. I'll start, and anyone from the team can chime in. We update the LTVs every quarter. That's something we've disclosed consistently in our history. We called out in the script that the LTV for OBDC this quarter went from 41 to 47. If you've followed us for a long time, you know that we've consistently been in the low 40s, so this is a little bit higher. That drive is very much driven by the drop in valuation in software. The biggest piece of it meaningfully was software, which is the largest sector in the book. um so to the spirit of your question we look at this every quarter the teams look at it we look at it um they look at a number of factors for when they're valuing a name um certainly entry valuation is a key factor in the early years because that's sort of the most clear indicator but as names um season in the book um we update it for other comparable evaluation where assets are trading at M&A value, what's happened to the underlying credit. So this gets updated. I would say this quarter, you know, we all recognize that there's been a really key change in valuation for software assets. I think that's very clear, certainly, to us and to the market. And so I think we took extra special care around valuing the software names, and that's reflected in the increase from 41 to 47. In terms of your broader question around the range, you know, I don't have it at my fingertips, but the vast majority of the names are going to be You know, in that zip code and, you know, most if you were doing statistical analysis, they would cluster around, you know, 30 to 55%. We certainly have names. We always have and we always will that are, you know, more challenged. And they're going to be higher loan-to-value. Just any lending book has that, and we have that. You can see that reflected in valuation levels. But we feel really good about our cushion, even in today's environment, even in software. We highlighted it, and a name like Intellirad is a software name. It got sold to us strategic for 20 times cash flow. Our LTV on that loan was, at the end of the day, 25% or something. So, you know, we feel good about it. We update it. It's only one metric. I think it's an easy metric for people to wrap their head around. It's not, you know, but there's hundreds of other metrics that we look at to assess the quality of the portfolio. But I think that the fact that the LTV went up this quarter, I think, should give investors some confidence that these are statistics that we put a lot of thinking into.

Got it. Thank you.

All right. Thanks, Robert.

Thank you. Our next question today is coming from Paul Johnson from KBW. Your line is now live.

Thanks for taking my questions. I appreciate all the color that you've provided. I just have one question, actually two questions here, but I realize this is a more recent development, but you've seen relatively strong performance in the equity markets, public equity markets for software companies over the last few weeks. I think they've bounced almost a little over 20% from kind of the bottom that they hit at the end of last quarter. I was just curious, I mean, in any way has that been reflected within conversations, engagement, you know, with the sponsor community where maybe there's a little more of a narrowing of the bid-ask between these companies or, you know, anything that's happening to allow these sponsors to get a little bit more comfortable, I guess, transacting in that sector, just given the balance we've seen in the public markets?

Look, I do think it's – nice to see some of that bounce, and I think the market is being, the equity markets, but the markets in general, I think, are being a little more thoughtful about software and the impact on AI. You know, the initial reaction, you know, was so dramatic, and I think you're starting to see the market focus on the high-quality aspects of software and the stickiness and the durability, even in an AI world. I don't have a... I think it's too soon to... We're not seeing any significant different dialogue with sponsors based on, you know, a few weeks of trading activity. But I can tell you the sponsors are very focused on making sure that their companies are prepared for an AI world and invest in considerable resources and doing what we would expect them to be doing to make sure their companies continue to prosper. And that's the biggest part of our dialogue with them. But I don't have anything to add beyond that.

Thanks. That's helpful. Last one, just higher level, but it feels like banks could certainly become more competitive here and lean into the BSL market a little more if they wanted to. I'm wondering, just in terms of the repayments, $1.5 billion this quarter, a little over $5 billion last year. like how much of that is going to the BSL market and whether or not you can actually use something like that to your advantage where, you know, you could potentially reduce software exposure or improve liquidity, that sort of thing where, you know, perhaps getting some of these deals refinanced into the BSL market is not such a bad thing.

So I'll start. You can chime in. Look, we compete with the broader syndicated market. You know, that's been a core part of our business over 10 years. There's times the market's really strong. There's times the market's weak. I think right now it's not especially strong. So I don't think this is an environment where the banks are leaning in on underwriting. And I think, you know, if you follow that market closely, you'll know that there's been some challenges in some syndications in the BSL market. But it's part of the model. Sometimes names get refinanced, sometimes they don't. All of our names get refinanced, whether they get refinanced by getting refinanced in the private market, public market, the companies get sold. It's an expected part of our economic model in those repayments. I think, yes, I do think that this environment over the next 12 months is going to give us an opportunity when we get repayments to to recycle those dollars into higher spread assets. And it could be just refinancing some of our own names and marking those to market. And so I do think this is an environment where, through refinancing some repayments, whether it comes from a BSL syndication, private refinancing, we'll have a chance to add spread to the book. We reduced software exposure this quarter from 19% to 16%. That happened naturally due to some repayments. And I think that we're going to continue to be, I think, very cautious in software. And as we get repayments, probably look to continue to take that down. But we continue to have conviction on our software names. You know, it's a lawyer sector. There's more uncertainty there, and I think you'll see that reflected in a very high bar to add new names and probably a disposition to reduce our software exposure. But they performed very well, and this quarter was all just repayments.

I appreciate it. That's all for me. Thank you.

Thank you. Next question is coming from Aaron Sikonovich from True Security. Why is that live?

I was hoping you could discuss some of the conversations you're having with sponsors in terms of the pipeline that you're seeing right now. I know things have slowed down quite a bit, but anything that's starting to show signs of opening up, and would we also expect the repayments to slow as well since there's new deal activities slowing?

Sure. Thanks, Aaron. We are starting to see a little bit of an uptick in activity. The vast majority of the activity so far has been on our incumbent positions, so add-ons, bolt-ons, small acquisitions. But in the last couple of weeks, we've seen a couple of M&A processes underway, more in the healthcare, industrial, and distribution space. Software still remains relatively quiet, but we are starting to see some more activity. particularly with the bounce back in public markets and equity markets. But for now, the activity still remains relatively light. Repayment activity really just depends. We have seen areas where over the years, public market volatility slows repayments. I think that's a fair point, and those are oftentimes correlated, but In the past quarter, as an example, a number of our takeouts were strategic buyers taking out assets like IntelliRad. And strategic buyers have certainly strong equity market performance, strong valuations, and strong earnings in public investment grade companies. So it really just depends. And this is not like the last few bouts of volatility. So we'll just have to see what happens.

Thank you.

Thank you. Our next question today is coming from Kenneth Lee from RBC Capital Markets. Your line is now live.

Hey, good morning. Thanks for taking my question. Just another one on the new dividend level there. I wonder if you could just talk a little bit more about some of the embedded assumptions behind there. Are you embedding potentially either further spread compression or conversely some benefit from spread widening. Anything else you'd like to articulate around what drove the new dividend level there? Thanks.

Sure. So we're constantly analyzing our model and forward earnings. So for sure, we are taking into account the forward curve and thinking through stresses to that. We are also looking at spreads and, you know, the compression that we've seen over the last couple of years and stressing, you know, the relative up-down of spreads further compressing relative to widening. And obviously, you know, we have a view on that. We're also looking at historical levels of fee income relative to where we're currently performing. So all of those things, leverage, et cetera, credit performance, everything goes into that. And we've set our dividend at a level that we think is a supportable level. And that's, you know, we took our time thinking through that process over the course of several quarters. Over the last few quarters, we've talked about it. And we think that this is the level that makes the most sense given all of those factors here.

Gotcha. Very helpful there. And then one follow-up, if I may, just in terms of share repurchases, wondering given where valuations are and given some of the leverage considerations you have there, how active could you be in terms of share repurchases over the near term? Thanks.

Well, I mean, I think you've seen us over the last couple of quarters, you know, be active. We've, you know, upsized the total size of our repurchase plans. This quarter we were a little less active, as you can see, you know, notwithstanding the spread movements, overall credit spread movements, and therefore declines in NAV, we were able to bring, you know, leverage down and into a level that, you know, puts us in a very, very comfortable range. And so when we think about repurchases, we're thinking about it, in the context of capital allocation, which is thinking about your leverage, thinking about future deal opportunities relative to current deal opportunities, and all of those elements. So we want to be active, and we think that we created, in all of those things, depending on where the best capital allocation is on the forward, and we think bringing down leverage this quarter is helpful to all of those potential allocations.

Gotcha. Very helpful there. Thanks again.

Thank you. Our next question today is coming from Derek Hewitt from Bank of America. Your line is now live.

Good morning, everyone. So I might have missed it because I was jumping between calls earlier, but could you discuss, like, what is your net leverage on the total portfolio? And then also, what is the net leverage specifically on the software portfolio? Yeah.

You're talking about at the investment level, not the BDC, not the company. Is that? That's correct. Okay.

Yeah, we've typically been running between five and a half and six times on our portfolio companies for net leverage, and that has not moved dramatically over the last few quarters. You know, similarly, interest coverage, as we talked about, has picked up from, you know, 1.6 at a trough to around two times. Software companies, given the strong cash flow dynamics, have typically run a little bit higher, so north of six times for leverage. But that has not moved dramatically in the last few quarters either, given fundamental performance of our software borrowers has been strong. And as we mentioned, earnings growth for the software portfolio companies is still low double-digit EBITDA growth. in line with the rest of the portfolio. So the leverage statistics have not moved around dramatically.

Okay, great. And then just in terms of the software portfolio, what is the LTV in the software portfolio? Yeah. And you had mentioned the overall portfolio was 4.47.

It's close to our overall. So we mentioned 47 for the overall portfolio, and it's approximately 48 for the software portfolio. So it's not materially different. It's 48 for the software portfolio and 47 for the overall.

Okay. And does that include kind of mark-to-market in terms of, like, what's happened with software values quarter-to-date?

Correct. That's our current view. Okay. Marked to the quarter end. Okay.

Thank you. Thank you. Our next question today is coming from Patrick Dallin from Economist Research. Why is that live?

Hey, good morning. Thanks for letting me join the party today. I just had a follow-up on the software EBITDA growth. I think you just said it's low double digits versus last quarter. Am I hearing that correctly? And if so, could you give more color on what's driving that decline? Thank you.

Great. Yeah, sure. Thanks for the question. You know, last year we saw software EBITDA growth for our borrowers in the low double digits. The fourth quarter, as you mentioned, was a little bit of an outlier higher. You know, it's not a perfect measure in any one quarter given some of it includes M&A. And the portfolio has puts and takes given there are names exiting and names entering. And so initial seasonality. So we'll see what the trend is over time. But I would say that low double digits has been consistent for the last year. And you are right that the fourth quarter was a slight outlier higher.

So the 16% was not a full year number. That was just the quarterly.

That was the year-over-year reference last quarter. Got it. Okay. Thanks a lot.

Thanks. Our next question today is coming from Christopher Nolos from Latimer. Following your line is now live. Hi. Thanks for my questions.

Most of the questions have been asked. On loan sales, there are roughly $400 billion in loan sales in February, according to the Q. Are these the same loan sales that were discussed in the last quarterly call?

Yes.

Okay.

Just want to clarify. Thank you. Thank you. We've reached the end of our question and answer session. I'd like to turn the floor back over for any further closing comments.

Terrific. Thank you all for joining. We appreciate your interest. As always, we're accessible if you have follow-up questions, but we'd be happy to engage with you. Just reach out and hope everyone has a great day.

Thank you. That does conclude today's teleconference and webcast. You may disconnect your line at this time and have a wonderful day. We thank you for your participation today.