Blue Owl Technology Finance Corp. (OTF) Earnings

Management highlights

- Overall Portfolio & Financial Performance * OTF delivered a strong Q2 2026, with stable net asset value (NAV) of $16.48 per share, adjusted net investment income (NII) of $0.30 per share, and a declared total Q3 2026 dividend of $0.40 per share (including a $0.05 final special dividend from portfolio gains). * The portfolio maintains strong credit quality: non-accruals are 10 basis points of fair value, 3-5 rated names declined modestly to 7.6% of fair value from 8.5% last quarter, revolver utilization holds at 10% (consistent with historical levels), and most borrowers generate high single-digit revenue and EBITDA growth. - Capital Structure & Liquidity * During the quarter, OTF strengthened its balance sheet by issuing a $500 million unsecured bond, adding $150 million in secured financing, and extending the maturity of its $2.7 billion revolving credit facility. All 2026 maturities have been addressed, and all credit rating agencies affirmed OTF's investment-grade ratings. * OTF ended the quarter with over $2 billion in total cash and available capacity across credit facilities, with net leverage of 0.93x, at the lower end of its 0.9-1.25x target range. - Origination & Portfolio Activity * Q2 2026 saw $850 million in new commitments and $550 million in new funding, with $222 million in sales and portfolio repayments. Management is actively rotating legacy low-spread positions to capture current wider spreads, and can improve economics on existing portfolio positions through add-on capital and maturity extensions. * OTF is diversifying beyond software into high-opportunity adjacent segments: Blue Owl's existing real assets platform provides access to digital infrastructure debt opportunities backed by mission-critical assets and often investment-grade counterparties, while the dedicated life sciences team is growing the segment, highlighted by a recent $700 million platform-wide loan to commercial-stage cancer diagnostics firm Caris. - Share Repurchase Program * OTF has continued active share repurchases at current discounted trading levels, reflecting management's confidence in portfolio value. Approximately $195 million remains available under the $300 million authorized program.

Guidance

- Management confirms the existing target of achieving full base dividend coverage by the middle of 2027, supported by three clear drivers: (1) deployment of available capital to increase net leverage from the current 0.93x (low end of the target range) toward the midpoint of the range, (2) rotation of non-income producing equity investments into higher-spread income-generating loans, and (3) capture of wider current market spreads on all new originations and existing portfolio repricing opportunities. - Management expects to continue growing the life sciences and digital infrastructure segments over time, and expects the technical selling pressure from post-listing lockup releases to ease now that 100% of the OTF float is fully unlocked. - No changes were made to the existing net leverage target range of 0.9x to 1.25x.

Segment performance

Blue Owl Technology Finance Corp (OTF) is a single-segment focused business development company specializing in technology-focused private credit. As of Q2 2026: - 70% of the total portfolio value is allocated to software investments, concentrated in durable, mission-critical segments positioned to benefit from AI integration. - Life sciences investments represent approximately 2% of the total portfolio, with targeted growth planned for this segment. - All remaining portfolio exposure (approximately 28%) is allocated to complementary technology sectors including digital infrastructure. Over 80% of the overall portfolio consists of senior secured loans, with a stable weighted average loan-to-value (LTV) of 40% quarter-over-quarter. Non-accrual loans represent just 0.10% (10 basis points) of portfolio fair value, one of the lowest rates in the industry.

Risks & headwinds

- The current market valuation of OTF reflects a large discount to net asset value that implies an extremely severe credit loss scenario (40% portfolio default with 50% recovery), which is disconnected from the portfolio's actual strong current performance, though management cannot predict when this valuation disconnect will close. - Broad market uncertainty around AI disruption has created broad-based pressure on software credit valuations, even for high-quality, mission-critical software companies that are well-positioned to leverage AI. - Current primary technology deal activity remains subdued amid broader market uncertainty, which may slow the pace of portfolio rotation to higher-spread assets. - Private credit market sentiment has lagged the recent rally in public technology credit markets, as lingering investor angst about the sector persists.

Analyst Q&A

• Q: What are the drivers of future earnings growth, how can we expect monetization of equity gains to proceed, and what is the growth outlook for the life sciences segment? /

  A: The four key drivers of earnings growth to reach the $0.35 per share base dividend target are: additional leverage from the current low end of the target range, improved deployment economics from wider current spreads, repricing of existing lower-spread portfolio assets, and rotation of non-income producing equity into higher-spread loans. For example, OTF's remaining half-stake in SpaceX could generate $125 million in net gains if sold at current prices, which would be redeployed into higher-yielding assets. The life sciences JV produces stable recurring dividends, and OTF plans to continue growing the segment steadily, with occasional one-time impacts from repayments as a normal course of business. (618 characters)

• Q: How active is current deal activity in software, and what is the outlook for deal flow over coming quarters? /

  A: Overall software deal volume remains muted, but reduced competition and lower available capital have created much more attractive risk-adjusted returns, with spreads 150 to 200 basis points wider than at the 2025 market tights. OTF has abundant capital to deploy, and is also prioritizing large opportunities in digital infrastructure and life sciences alongside selective software investments in high-quality, mission-critical assets. (378 characters)

• Q: How is OTF adjusting its market positioning given the improved investment environment, and why has private software debt valuation not followed the recent rebound in public software equities? /

  A: There has been no material change to OTF's core underwriting criteria, which still prioritizes high-quality, mission-critical assets; OTF is just capturing wider spreads and incrementally tighter contract documentation in the current lower-competition environment. Public software credit spreads have only improved modestly, as the market continues to differentiate between high and low AI disruption risk and search for more performance data. OTF's portfolio is marked appropriately by third-party valuations, and most holdings are contractual loans that are expected to be repaid at par regardless of interim marking. Private credit sentiment overall continues to lag the public market rally, due to lingering investor angst, though this disconnect may ease as strong BDC results are reported. (723 characters)

• Q: Does broad AI disruption fear create attractive investment opportunities for OTF given its strong credit position? /

  A: Yes, broad AI concerns have created significant opportunities: wider spreads (a return to historical software spread averages after a period of unsustainably tight spreads in 2024-2025) and better contract terms for new investments. Opportunities also come from refinancing and add-on capital requests for existing portfolio companies, allowing OTF to raise spreads on high-quality existing positions while continuing to support familiar businesses. (321 characters)