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DATE

Thursday, May 7, 2026 at 11:30 a.m. ET

CALL PARTICIPANTS

  • Chief Executive Officer — Craig Packer
  • Chief Investment Officer — Erik Bissonnette
  • Chief Financial Officer — Jonathan Lamm

TAKEAWAYS

  • Adjusted Net Investment Income Per Share -- $0.29, reflecting lower base rates, tighter spreads, and reduced nonrecurring income.
  • Net Asset Value (NAV) Per Share -- $16.49, a decrease from $17.33, driven primarily by market-driven mark-to-market adjustments.
  • Dividend -- Regular dividend declared at $0.35 per share and a $0.05 per share special dividend, totaling $0.40 for the quarter, with the special dividend supported by $0.50 per share of spillover income.
  • Portfolio Composition -- Approximately 70% software sector exposure, with the balance in life sciences, hardware, and technology-enabled services.
  • Repayments -- $1.1 billion of repayments, including the full par repayment of Intelerad ($163 million allocation), Mindbody ($105 million allocation), and Relativity ($137 million allocation).
  • New Commitments and Fundings -- $1.7 billion in new commitments, $1.3 billion funded, mainly from deals originated before the recent widening of spreads.
  • Net Leverage -- Increased modestly to 0.85x, just below the low end of the 0.90x to 1.25x target range.
  • Non-Accrual Rate -- 10 basis points of total portfolio at fair value, with no new non-accruals and remaining significantly below industry average.
  • Weighted Average Loan-to-Value (LTV) -- 40%, up from 34% prior quarter, still characterized as conservative by management.
  • PIK Income -- 13% of total investment income; 7.6% from PIK interest and 5.4% from PIK dividends, with 98% of PIK income structured at origination and no realized losses on such PIK loans since inception.
  • SpaceX Equity Partial Sale -- 50% of position sold generating $133 million proceeds and a realized gain of $117 million, equating to a roughly 10x return on the original investment.
  • Share Repurchases -- $50 million in the quarter ($115 million across two quarters), with $250 million remaining under a $300 million buyback program authorized in February 2026.
  • Liquidity -- Over $2.3 billion in total cash and available facility capacity at period end.
  • Recent Bond Issuance -- $400 million unsecured bond issuance, subsequently swapped to a floating-rate coupon.
  • Equity Float -- Approximately 80% of stock float released; remaining lockup releases scheduled for May 20 and June 12, expected to ease technical pressures and improve trading liquidity.
  • Portfolio Growth -- Life sciences and digital infrastructure strategies represent approximately 3% of assets, with management indicating intent to expand these allocations as opportunities arise.
  • Credit Ratings -- Internally rated 3- to 5-valued assets steady at 8.5% of fair value, with rating stability reported.
  • Board Actions -- Capital gains incentive fee reversals of $0.08 per share recorded, primarily from mark-to-market impacts on equity investments.
  • Revolver Utilization -- Remained consistent with historic levels at just under 10%.

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RISKS

  • Management stated, “it may take somewhat longer for earnings to cover the base dividend than we previously expected,” due to a lag in ramping deployment and leverage despite confidence in the long-term support of the dividend.
  • Management attributed the NAV decline primarily to “mark-to-market adjustments,” with over 80% of the portfolio markdown in debt attributed to spread movements, rather than fundamental credit weakness.
  • Weighted average LTV increased to 40% from 34%, reflecting market-driven asset valuation changes.
  • Management acknowledged, “most lenders that have significant software will be looking to reduce exposure, including us, but within reasonable bounds,” in response to AI-related uncertainty in the software sector, which may pressure future portfolio construction.

SUMMARY

Blue Owl Technology Finance Corp. (OTF 5.97%) detailed sequential NAV per share decline to $16.49, mainly driven by market-driven markdowns and not by fundamental asset performance. Portfolio repayments totaled $1.1 billion, highlighted by par repayments on notable investments and a substantial realized gain from the partial sale of SpaceX equity. Net leverage rose slightly to 0.85x, below target, as robust origination activity was partially offset by repayments. Exposure to life sciences and digital infrastructure investment strategies totaled 3%, with management indicating intention to grow these portfolios. Management also highlighted active management of capital structure, including $50 million in quarterly share buybacks and a new $400 million unsecured bond issuance.

  • Management stated the average debt spread in the portfolio is “about 530 basis points over,” with average loans marked at $0.97 on the dollar, and a “non-accrual” rate of 10 basis points, juxtaposed against a stock trading at 67% of NAV and yielding “about 12.7%” based on current prices.
  • Management emphasized that 80% of quarterly markdowns were spread-related and linked to broader market volatility in technology credit, as public loans and junior investments experienced observable revaluations.
  • Syndicated loan and BDC sector volatility led to moderate leverage and affected income, but management cited $0.50 per share of spillover income supporting ongoing dividends.
  • Management observed a changing market sentiment toward software, referencing stabilizing syndicated loan prices and public software valuations as catalysts that may drive increased transaction and refinancing activity later in the year.
  • LTVs remained at conservative levels despite rising modestly, and 98% of PIK income arose from origination-structured instruments with no realized losses to date.
  • Dedicated investment teams for digital infrastructure and life sciences, with LSI Financing in life sciences yielding an IRR over 14% since OTF entered the strategy in November 2024.

INDUSTRY GLOSSARY

  • PIK (Payment-in-Kind) Income: Interest or dividends paid in the form of additional securities rather than cash, often used in private credit structures to allow borrowers to reinvest cash flow.
  • Non-Accrual: Loans or investments on which the issuer has stopped accruing interest or dividends due to credit quality concerns, indicating potential impairment.
  • LTV (Loan-to-Value): Ratio of the amount lent to the appraised value of the collateral, a key measure of credit risk for asset-backed loans.
  • Spillover Income: Earnings accumulated in prior periods but not yet distributed, available to support future dividends.
  • Mark-to-Market Adjustment: Valuation process updating asset values to current market prices, impacting reported NAV and income.
  • Senior Secured: Debt that is collateralized by specific assets and has priority in claims over other unsecured or junior obligations in the event of default.
  • Preferred Equity: Equity securities with preference over common equity in distributions and liquidation, often structured for enhanced income or return potential.
  • IGV: iShares Expanded Tech-Software Sector ETF, commonly referenced as a gauge of public software sector performance and sentiment.

Full Conference Call Transcript

Yesterday, Blue Owl Technology Finance Corp. issued its financial results for the first quarter ended 03/31/2026, reporting adjusted net investment income per share of $0.29 and net asset value per share of $16.49. During the call today, we will be referencing materials including the earnings press release, earnings presentation, and 10-Q, which are available on the News and Events section of Blue Owl Technology Finance Corp.'s website. I will now turn the call over to Craig.

Craig Packer: Thanks, Mike. Good morning, everyone, and thank you all for joining us today. Software has obviously been a major focus for investors and as a meaningful lender in the space, Blue Owl Technology Finance Corp. has been part of that conversation. Before getting into our views on software, I wanted to step back and provide some broader context on Blue Owl Technology Finance Corp. Credit performance remains very strong. Non-accruals are among the lowest in the space, and we are one of the only BDCs to have generated net gains since inception.

At the same time, the current level of market concern around software has created one of the most attractive investing environments that we have seen in a while, with spreads significantly wider and capital a lot less available. We also think the market's discussion around software has evolved meaningfully over the last quarter. Early on, much of the debate was centered around whether software businesses had a reason to exist in an AI-enabled world. Today, we believe that discussion is becoming more balanced and nuanced as the market increasingly distinguishes between businesses with durable moats and those that may be more exposed to change.

We think that evolution of the discourse is constructive and, importantly, that the Blue Owl Technology Finance Corp. portfolio is positioned well in the parts of the software market where durability matters most. Erik will speak in more detail in a moment about what we are seeing, but at a high level, while we remain appropriately cautious on AI, given how transformative the technology is, we are not seeing material signs of stress in the portfolio today. That view is also supported by our underlying credit metrics, including no new non-accruals this quarter and a non-accrual rate of just 10 basis points of the total portfolio at fair value.

As a reminder, we lend to companies that are leaders in their markets and have durable business models. We remain in close dialogue with both sponsors and portfolio companies and in many cases are seeing borrowers adapt thoughtfully and invest to strengthen their competitive positions as AI continues to develop. As a lender, even if there is pressure over time on software profitability or terminal values in certain parts of the market, we believe the structures of our investments—with relatively short durations, conservative LTVs, and contractual maturities—position us well. With that said, our results in the first quarter were impacted by the broader volatility across technology and software assets.

As spreads widened meaningfully across technology credit names, valuations came under pressure across the space more broadly, including within our own portfolio. Importantly, this was market-driven pressure rather than a reflection of credit stress. Over 80% of the write-down during the quarter was attributable to mark-to-market movements, and it did not reflect a weakness in the underlying quality of our assets. Since quarter-end, technology broadly syndicated loan prices have rebounded by roughly 70 basis points in April, which we think is an encouraging sign that the conversation is becoming more balanced and constructive. I would also highlight that our earnings this quarter were impacted by many of the same headwinds affecting the broader BDC sector.

Lower base rates and tighter spreads weighed on adjusted net investment income, and elevated repayments kept leverage more moderate than we would have otherwise expected as we continue to ramp the portfolio. As we look ahead, we are confident in the fundamentals that underpin the Blue Owl Technology Finance Corp. portfolio. We are long-term investors and we have constructed the portfolio with that perspective in mind. While there are questions around the impact to software from AI, we believe that over time, the high-quality technology businesses we finance will display resilience, given the stability we have seen today and that we anticipate over time.

Today, Blue Owl Technology Finance Corp. has ample dry powder and the ability to increase leverage towards our target range, and volatile periods like this have historically created attractive opportunities for disciplined capital deployment. That said, our underwriting bar will remain high and we expect to stay selective in the opportunities we pursue. With that, I will turn it over to Erik.

Erik Bissonnette: Thanks, Craig, and good morning, everyone. Our strategy remains centered on lending to innovative, market-leading technology companies. Today, approximately 70% of the portfolio is in software, with a balance in other technology areas such as life sciences, hardware, and other tech-enabled services. We detailed our AI framework on last quarter's earnings call, and a full transcript of that discussion is available on our website. Today, we will focus on the portfolio to provide insight into borrower-level performance as the technology landscape continues to advance. We believe our portfolio remains positioned in the most durable segments of the software market, specifically within mission-critical products, embedded workflows, and trusted data.

With a weighted average EBITDA of nearly $300 million, these scaled businesses possess the inherent resilience necessary to navigate industry shifts while continuing to invest in their platforms. The portfolio's construction further reinforces this durability, as our holdings remain predominantly senior secured. While the market selloff caused weighted average LTVs to rise modestly to 40% from 34% last quarter, these levels remain conservative and provide a significant equity cushion beneath our debt investments. We continue to see solid weighted average revenue and EBITDA growth across our software borrowers, and importantly, we have seen minimal signs of material disruption attributable to AI across the broader portfolio.

Regarding core credit metrics, there were no new non-accruals this quarter, which remained significantly below the industry average at just 10 basis points of the total portfolio at fair value. Three- to five-rated names were steady at 8.5% at fair value, as our internal ratings were broadly stable during the quarter. Amendments remained similarly light with no pickup in material amendment activity, and portfolio company revolver utilization remained consistent with historical levels at just under 10%. PIK income also remained moderate this quarter at 13% of total investment income, down about half from prior peak levels, with approximately 7.6% of that coming from PIK interest and 5.4% from PIK dividends.

As a reminder, PIK dividend income reflects our dedicated allocation to preferred equity positions, which are designed to generate current income and often come with attractive premium return potential. Over 98% of our PIK was structured at origination and notably we have not realized a single loss since inception on any PIK loan that was structured this way at origination. We view structured PIK as a valuable return enhancer that allows high-quality borrowers to prioritize growth reinvestment. These portfolio indicators are also consistent with our direct market observations. Our 40-person dedicated technology investment team maintains a constant dialogue with portfolio companies, sponsors, and industry experts as they adapt to the changing landscape and deploy additional resources.

It is notable that sophisticated software operators continue to invest heavily in AI enablement. A prime example is the strategic partnership announced earlier this month between Thoma Bravo and Google Cloud, which aims to accelerate AI transformations across enterprise software companies. We view this as a significant external signal that AI serves as a catalyst for product enhancement and value creation rather than simply a source of disruption. It was an active quarter for both new investments and repayments. We had $1.1 billion of repayments during the quarter, including several meaningful ones, which we think reinforces the strategic value that scaled software assets can continue to command even in a more challenging market environment.

For example, Intelerad, a medical imaging software business, was an over $400 million investment across the Blue Owl platform, including $163 million in Blue Owl Technology Finance Corp., and was acquired by GE Healthcare for $2.3 billion, resulting in a full repayment of our position at par. Mindbody, a 2019 vintage investment, is a software and payments provider to gyms, salons, and spas. It was a $105 million investment in Blue Owl Technology Finance Corp. and an over $200 million investment across the Blue Owl platform, and was fully repaid across our credit facilities and preferred equity in connection with its merger with a global leader in AI-enabled fitness tech.

Relativity, a leading provider of e-discovery document review software, was a $137 million investment in Blue Owl Technology Finance Corp. and an over $340 million platform investment, where we were fully repaid through a broadly syndicated loan refinancing ahead of its recently announced plan to go public. Our equity sleeve provides another avenue for the portfolio to capture differentiated upside, as proven by the partial sale of our SpaceX equity in early March. We sold 50% of our position, generating approximately $133 million of proceeds and a realized gain of $117 million, which reflected roughly a 10x return on our original investment.

We viewed this as an attractive opportunity to partially monetize a strong performer while retaining the remaining 50% of the position to participate in potential future upside. We view this as a prime example of how our strategy can selectively capture additional value while keeping the portfolio primarily credit-oriented. On the origination side, we entered the quarter with a strong pipeline, which converted into $1.7 billion of new commitments and $1.3 billion funded. Most of that activity reflected deals worked on in Q4 prior to the most recent widening of spreads.

However, the strength of repayments offset a significant portion of originations and resulted in net leverage increasing modestly to 0.85x at quarter end, just below the low end of our target range. While software remains a primary focus, our underwriting threshold for new investments has never been higher. As we evaluate opportunities against a rapidly evolving AI landscape, we are increasingly selective, continuing to pass on legacy models that may have been investable years ago but now lack the core defensive attributes required to withstand technological disruption, which has always been our core focus. Looking ahead, we anticipate that software deal activity will remain tempered as the market recalibrates to current dynamics.

Historically, these periods have yielded attractive entry points for disciplined lenders with the capacity to increase leverage towards our target range, and we are well positioned to capitalize on these opportunities as the market matures. At the same time, slower software deal flow may create an opportunity to revisit adjacent technology areas that have always been within scope for us, including digital infrastructure and life sciences. We believe we can generate attractive, less-correlated returns over time. In digital infrastructure, we continue to see opportunities that help power AI enablement, such as GPUs and data center financings.

Blue Owl also has a dedicated life sciences credit and royalties platform called LSI Financing with specialized expertise and flexible financing solutions across the capital structure. That team focuses on term loans and royalty-based structures for later-stage companies funding innovation, commercialization, and drug development. LSI Financing currently includes 11 debt and royalty investments. Blue Owl Technology Finance Corp. entered the strategy in November 2024, and this exposure has since delivered a net IRR of over 14% for the fund. Collectively, these strategies represent approximately 3% of the current portfolio, so there is ample room to increase our allocation from here as opportunities emerge. Overall, we are confident in the quality of the portfolio and how the platform is positioned today.

While AI-related uncertainty has clearly shaped market sentiment, the portfolio continues to perform, and we believe Blue Owl Technology Finance Corp. is well equipped to capitalize on opportunities as the market continues to adjust. I will now turn the call over to Jonathan to discuss our financial results in more detail.

Jonathan Lamm: Thank you, Erik. In the first quarter, Blue Owl Technology Finance Corp. reported adjusted net investment income of $0.29 per share. While we continue to make progress in ramping the portfolio, our results this quarter reflected several headwinds that have been affecting the market, including the full impact of the three rate cuts between September and December, spread compression from 2025 as newer originations came on at tighter spreads, and lighter nonrecurring income, which came in approximately $0.01 below historical averages. We would also note that our GAAP results included $0.08 per share capital gains incentive fee reversals driven by mark-to-market impacts on equity investments following the market selloff.

Earlier this week, our Board declared a first-quarter regular dividend of $0.35 per share, consistent with our last quarterly distribution, which will be paid on or before 07/15/2026 to shareholders of record as of 06/30/2026. We also continue to pay a quarterly special dividend of $0.05 per share through September 2026, supported by spillover income generated prior to listing, bringing total distributions for the quarter to $0.40 per share. At our current rate of deployment and leverage, along with the widening spread environment, we remain confident in the long-term support for our base dividend. However, given the current market backdrop, it may take somewhat longer for earnings to cover the base dividend than we previously expected.

Importantly, we continue to have meaningful support from spillover income of $0.50 per share as well as gains from our equity book as we continue to ramp the portfolio. Moving to the balance sheet, NAV per share was $16.49 at quarter end, down from $17.33 in the prior quarter, primarily reflecting the impact of mark-to-market adjustments, partially offset by realized gains as well as $0.05 per share of accretion from share repurchases during the quarter. We bought back approximately $50 million of stock, bringing total repurchases over the past two quarters to $115 million.

These repurchases reflect our conviction in the quality of the portfolio while still preserving ample capacity to deploy into what we see as an increasingly more attractive market environment for technology names. Our Board also authorized a new $300 million share repurchase program in February, replacing the prior $200 million authorization, leaving approximately $250 million remaining following our first-quarter activity. We ended the quarter with net leverage at 0.85x, reflecting $284 million of net funded investment activity. While leverage increased modestly during the quarter, it remains just below the low end of our target range of 0.90x to 1.25x, which we believe leaves us well positioned to continue growing the portfolio as opportunities become more attractive.

Turning to our capital structure, we continue to be active in further strengthening our balance sheet. In January, we issued a $400 million unsecured bond, which we subsequently swapped to a floating-rate coupon. This transaction demonstrated continued access to the investment-grade unsecured market while maintaining alignment with our predominantly floating-rate asset base. We ended the quarter with over $2.3 billion of total cash and available capacity across our credit facilities. This provides ample liquidity to meet upcoming obligations, including our June 2026 note maturity, and support continued portfolio growth as we move toward our target leverage range while maintaining balance sheet flexibility.

Additionally, at this time, approximately 80% of Blue Owl Technology Finance Corp.'s stock float has now been released, with the second-to-last lockup release scheduled for May 20 and the final lockup release on June 12. We believe these additional releases should continue to ease technical pressures, support trading liquidity, and further diversify our shareholder base over time. I will now hand it back to Craig to provide final thoughts for today's call.

Craig Packer: Thanks, Jonathan. As we wrap up today's call, I want to step back and reflect on what we believe this environment means for Blue Owl Technology Finance Corp. Periods like this tend to create more dispersion across technology, and that is especially true when the market is trying to separate durable businesses from those that may be more exposed to change. In our view, this is exactly the type of environment where domain expertise, disciplined underwriting, and long-term perspective matter most. Recent volatility in the broadly syndicated loan market, along with slower retail capital inflows into private credit, has made the supply-demand balance for new deals look more favorable than it has been in years.

We believe that backdrop may create a more differentiated opportunity set for lenders with the experience and underwriting depth to distinguish between businesses that can adapt and strengthen through this cycle and those that may not. Importantly, we do not need a significant rebound in LBO volumes to improve returns from here. Even in a more moderate deal environment, we see meaningful opportunity to enhance portfolio spread through activity within our existing portfolio, including refinancing or re-underwriting names we know well and continue to like. That is where we believe Blue Owl Technology Finance Corp. has unique positioning in the market.

Our portfolio remains concentrated in businesses we believe are durable and mostly have considerable backing from large private equity sponsors. Our balance sheet still has meaningful room to grow, and with leverage below our target range, we have the dry powder, team, and platform to move thoughtfully as opportunities emerge. Importantly, Blue Owl Technology Finance Corp.'s path from here is also somewhat different from that of many other BDCs. Because we are still ramping toward our target leverage range, we have a clear opportunity to grow earnings through prudent deployment over time. At the same time, we are not dependent on one narrow part of the market.

Although software remains our core focus, we have the flexibility to target adjacent technology areas such as digital infrastructure and life sciences, where Blue Owl has dedicated investment teams and where we believe we can generate attractive, less-correlated returns over time. Looking ahead, we believe Blue Owl Technology Finance Corp. is exceptionally well positioned to expand spread and improve returns by investing in this environment. We will remain cautious and highly selective, but we believe that discipline, combined with the quality of the portfolio and our long-term credit track record, should serve shareholders well.

Blue Owl Technology Finance Corp. has generated a strong track record since inception in 2018 with a net realized gain of 29 basis points annually, which we believe speaks to the strength of our underwriting across cycles. Operator, please open the line for questions.

Operator: Thank you. The floor is now open for questions. Today's first question is coming from Finianos O'Shea of Wells Fargo. Please go ahead.

Finianos O'Shea: Hey, everyone. Good morning. Craig or Erik, big picture on software, performing well still, but the theme more and more—decided theme—is lenders in private credit and in the liquid market want to pare down exposure, have less appetite for it, maybe from a portfolio construction or a risk perspective. Maybe it is temporary, but to the extent that continues, is that a concern for future credit quality if new money dries up from the broader credit domain?

Craig Packer: Hey, Fin, I will start and Erik can chime in. To start, I would say that AI is a significant issue, and all lenders and equity holders are trying to make sense of the impact in AI and software. It is moving quickly. As time elapses, we will all be able to better understand just how significant this is. So this is a moment of peak uncertainty and time will help that. Your characterization is fair. I think most lenders that have significant software will be looking to reduce exposure, including us, but within reasonable bounds. We will still, at Blue Owl Technology Finance Corp., be a significant player in software.

Our bar is going to be very high for new investments and also very high as we have opportunities to refinance. We are going to go through our same process in making investment decisions in new software deals like we do in every other investment and take into account our outlook and our confidence in getting repaid. We are certainly going to want to make sure that if we are staying invested in software names, we are getting appropriately compensated, and spreads have widened materially in the software sector given that uncertainty. Companies are doing well.

We believe good, durable software businesses will continue to do well in an AI world, and they are working very closely with the sponsors to ensure that. If the companies are performing well, even in a world where lenders are looking to pull back, I would expect those companies to continue to have access to financing. The financing will be more expensive, but it had tightened quite considerably in the last 18 months, and to a certain extent, it is reverting back to more historical levels. Again, it is all about credit performance and confidence in getting repaid. I feel confident that if the company's outlooks are reasonable and lenders feel protected, then there will be plenty of capital there.

It is just maybe more expensive. The private equity firms—again, if the businesses are performing well—will equally have capital to support those businesses. The general picture I am painting is one where credits will be refinanceable even if some lenders want to reduce exposure. There will be other lenders that can increase, companies can pay down debt, they can delever, and sponsors can commit more capital. If the companies are doing well, they will be refinanceable.

Finianos O'Shea: Appreciate that. Follow-up more on the portfolio picture today. The marks this quarter look pretty broad, spread-related, but then the sharp, more acute marks look to us either tied to liquid—there is a BSL quote kind of thing—or junior, like preferred equity-type exposure. Correct me if I am wrong there. Is that a pure loan-to-value thing just taking down enterprise value, or is there any slowing in performance across that book?

Jonathan Lamm: Thanks, Fin. About a third of the marks associated with our markdowns were in that book, and they were really all multiple-driven—nothing of materiality from a fundamental perspective. The vast majority on the debt side was spread-related. The book you are referring to has been an incredible driver of net realized gains for us since inception of close to 30 basis points annualized, so we are giving back a little bit here just on mark movements.

Craig Packer: Eighty percent of the move in our debt marks was spread-driven. Blue Owl Technology Finance Corp., over the arc of time, has had one of the best credit performances in the industry, and we have had net NAV growth. It is very logical and expected after a quarter that went through a real rerating of valuation in the software space that investors would expect that to be reflected in our marks. You bucketed it properly: the public loans moved meaningfully—very observable—and that is reflected in the portion of our book that is BSL-related. The more junior investments, which have performed well, go through a valuation process and those were also marked down appropriately.

The book behaved the way investors should expect given the environment that we just went through, but we are coming from a position of strength and gave back a little bit this quarter.

Operator: Thank you. The next question is coming from Brian Mckenna of Citizens. Please go ahead.

Brian Mckenna: Great, thanks. It feels like the tide might be shifting a bit in the public software market. The IGV is up 20% from the lows, and some subsectors are up quite a bit more. Erik, if this recovery in public software valuations continues, does that start to drive a recovery in transaction activity? And are sponsors you are talking to starting to look at some take-private opportunities?

Erik Bissonnette: Yes. We have seen a marked change in sentiment as reflected in public stocks. We are going through public earnings right now. I will not mention specific names, but broadly speaking, the prints we have seen have been very strong. Publicly focused companies are performing extremely well, which is consistent with what we are seeing across our portfolios and in conversations with sponsors. They see opportunities similar to 2022, when you had a large number of go-private transactions coming off the peak ZIRP-related multiples in 2020 and 2021. We think there is going to be a meaningful pickup in activity. It is muted right now with a bit of a pause, but sentiment is shifting.

The nuance around the conversation has changed dramatically the past two months. There are signals like the Thoma Bravo–Google announcement, and others. There is a lot of narrative shift around the reality of a combination or a partner at the application tier, which I think will give more balance to the conversation and unlock some deal activity in the latter half of the year.

Brian Mckenna: Thanks. And a quick follow-up: not all the focus has to be on downside. When do you think the conversation starts to shift to some of the upside scenarios or positive tailwinds from layering on AI?

Erik Bissonnette: I think it is going to take a few quarters. One of the great strengths of the software revenue model is multiyear contracts committed in advance. As businesses embed AI into their solutions, it will take time to roll through the financials and show up in new KPIs. We are seeing strong increases in R&D and revenue starting to roll through as these solutions take hold. People will want to see a couple of prints from large companies. Sentiment is already improving versus eight weeks ago, and I think it will continue to improve as we see the stability and durability of these assets and continued growth.

Operator: Once again, ladies and gentlemen, our next question is coming from Kenneth Lee of RBC Capital Markets. Please go ahead.

Kenneth Lee: Hey, good afternoon, and thanks for taking my question. In terms of opportunities outside of software—you mentioned digital infrastructure and life sciences—what sorts of deals are you seeing in those pipelines, and is there a wide enough funnel to continue to ramp up the portfolio within similar time frames?

Craig Packer: Sure. I will start. The answer is yes, there is enough. Software is the biggest part of the book and will be for the foreseeable future because it has performed extremely well, and we expect it to continue to do so. That said, as I touched on earlier, we will look to reduce software exposure at the margin and really focus on the best names that we have the most confidence in. We have already been active in these adjacent sectors with dedicated capabilities. On life sciences, these are commercially successful drugs in the market—drug royalties or loans to companies with very predictable revenue streams.

It takes technical knowledge of the underlying drugs and market demand to invest in, and we have a team with that expertise. We are seeing terrific opportunities that fit the remit of the technology fund but are not software. It is scalable and the deals are sizable. Often there is not a private equity firm involved—these are public or private companies—and it is an area we would like to scale up. Erik, do you want to touch on digital infrastructure?

Erik Bissonnette: On the digital infrastructure side, we have done a few transactions in the GPU financing space, which I think is misunderstood. We are not financing GPUs to residual value. These tend to be JVs or SPVs with investment-grade counterparty credit risk, amortizing structures, premium rates of return, and very tight documentation—often with a corporate guarantee as well. You have seen a few of those start to come to the public markets recently, so there is broader acceptance of structures we have been pioneering over the past year. We have quite a few of those in the hopper right now. Demand for compute continues to be exceptionally high, well in excess of supply, so there will be interesting opportunities.

On the data center side, there are opportunities we see through the broader Blue Owl platform. We have an IPI data center business that is actively involved in development with hyperscaler offtakes. There should be some activity we can review and analyze over the course of this year. I think we will increase the percentage of this exposure, but there are natural limiters—oftentimes they fall into non-qualifying buckets. It will not be disproportionately high, but it should be really attractive on a go-forward basis.

Kenneth Lee: Very helpful color. One follow-up on the dividend: can you share additional thoughts around dividend coverage? Is the Board going to evaluate this based on deal activity and ramping progress, given time frames might be a little longer to reach your targeted leverage ranges?

Jonathan Lamm: Yes. We are constantly evaluating dividends, and the Board is always focused on it. The drivers here are deployment, leverage, and spreads. There is also some churn associated with the structured capital book. Deployment and churn have been impacted by market events and perceptions over the course of this year, so it will take longer for those to play out. We have not changed our view of the ultimate outcome—just the timing. Post this quarter, we are still paying out roughly $0.11 more than what we earned, but we still have $0.50 of spillover income, so there is plenty of runway in the context of short-term slippage with respect to reaching the dividend.

Erik Bissonnette: The only thing I would add is that as we go through any amendments or potential extensions of existing positions, we will do comprehensive and thoughtful re-underwriting. Given our AI reviews and internal evaluations, we think there are a lot of companies we financed over the past few years that are exceptionally well positioned to grow and compound in an AI future that we did at tight spreads. As those come up for renewal, we will re-underwrite them, but you will likely see meaningful mark-to-market spread adjustments on some of our better-performing assets. That is a third leg of the stool I would add.

Operator: Thank you. Our next question is coming from Arren Cyganovich of Truist Securities. Please go ahead.

Arren Cyganovich: I was wondering how the overall platform is dealing with the high level of redemption requests in the evergreen funds that are not directly associated with Blue Owl Technology Finance Corp., and whether that is impacting your ability to put as much capital to work as you need, or if there is enough institutional flow coming in to offset that.

Craig Packer: It has not had any impact on our ability to deploy capital. The individual funds have capital. At Blue Owl Technology Finance Corp., we would like to find attractive investment opportunities. At OBDC, we reduced leverage. We also have non-BDC institutional capital. The non-traded funds that have outflows have ample liquidity to cover those outflows, so there is no ripple effect. It is only part of our business and very predictable given tender limits. We are one of the largest players in direct lending, with deep sponsor relationships and as much available capital as any direct lender.

We are excited about this environment to deploy into good deals with good sponsors and good companies at attractive returns, just like we have for the last ten years.

Operator: Thank you. Our next question is coming from Sean-Paul Adams of B. Riley Securities. Please go ahead.

Sean-Paul Adams: Hey guys, good morning. On the equity co-investment part of the portfolio, it looks like there was a large shift on the marks for some of those equity positions and that drove some of the mark-to-market changes on the portfolio. Do you have any line of sight on near-term liquidity events at these names? And at what point would you point to this being a mark-to-market-driven event versus a realized loss scenario?

Erik Bissonnette: The vast majority of the changes in the equity book were mark-to-market. You saw the IGV trade off pretty dramatically throughout the quarter, and that rolled through our marks directly for many of our equity positions. Most of those equity positions are senior preferred, so even if they are marked below par, there is a very real possibility for us to get our basis back and see some recoupment, regardless of where they exit. In terms of the forward, we discussed SpaceX and monetizing part of that position. There are another three to four behind that which we think are extremely attractive.

One I would emphasize is Revolut—it is about a $75 million cost-basis investment, a challenger bank based in the UK. We had marked that up over the prior few quarters. There have been reports in the press around another tender offer and a potential IPO coming in 2028. We also have investments in Stripe and other really attractive assets that we could monetize. We feel we are in a good position to continue to generate some of those upside returns.

Operator: Thank you. At this time, I would like to turn the floor back over to management for any additional or closing comments.

Craig Packer: I thought I would just end with an observation. Obviously, Blue Owl Technology Finance Corp. has a lot of software exposure, and the stock has been impacted by that. A couple of statistics: the average debt spread in Blue Owl Technology Finance Corp. is about 530 basis points over; the average loan is marked at $0.97 on the dollar; the non-accruals in the fund are 10 basis points. The stock currently yields about 12.7% at today's prices—it is probably higher than that given today's trading activity as of this morning. The stock trades at 67% of NAV; earlier this year it traded closer to 80% of NAV.

If the stock got back to 80% of NAV over the next one to two years and you factor in that recovery and the dividend levels, that would be a total return of 19% to 25% over a one- to two-year period. There are obviously a lot of assumptions embedded in that—time frame, what might happen to NAV, dividends, and so on—but I want to put a spotlight on where it is trading, what the yield is, and juxtapose that with the quality of the portfolio, which continues to be extremely strong.

We have been talking on this call about recovery in the equity markets and the equity of software businesses, and here is another area of the markets that, if the market is starting to have a more balanced view on software, can offer equity-like returns. If folks have questions about the fund, we would be pleased to take them—just reach out, and we are available. Thank you, and have a great day.

Operator: Ladies and gentlemen, this concludes today's event. You may disconnect your lines or log off the webcast at this time and enjoy the rest of your day.