Blue Owl Technology Finance Stock

Good morning, everyone, and welcome to the Blue Owl Technology Finance Corp. Q2 2026 Earnings Call. As a reminder, this call is being recorded. At this time, I'd like to turn the call over to Mike Mosticchio, Head of BDC Investor Relations. Mike, please go ahead.

Thank you, operator, and welcome to Blue Owl Technology Finance Corp.'s Second Quarter 2026 Earnings Conference Call. Joining us on the call today are Craig Packer, Chief Executive Officer; Erik Bissonnette, President; and Jonathan Lamm, 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 OTF'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 this call, which are reconciled to GAAP figures in our earnings presentation available on the Events and Presentations 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, OTF issued its financial results for the second quarter ended June 30, 2026, reporting adjusted net investment income per share of $0.30 and net asset value per share of $16.48. 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 OTF's website.

With that, I'll turn the call over to Craig.

Thanks, Mike. Good morning, everyone, and thank you all for joining us today. OTF delivered another strong quarter with stable net asset value, continued earnings growth and excellent credit quality, including nonaccrual rates that remain among the lowest in the industry. This performance was a direct result of the strength and resiliency of our borrowers' underlying fundamentals. Across the portfolio, our borrowers continue to generate steady organic growth in revenues and EBITDA, and we are not seeing any material signs of stress in the portfolio today. We continue to support NAV per share through ongoing share repurchase activity, which we believe remains prudent at current trading levels. We also made good progress ramping earnings during the quarter.

Adjusted NII increased, supported by continued deployment and growth in net leverage. Since our direct listing in June 2025, net leverage has increased by 0.4 of a turn and sits just inside the low end of our target range. The investment environment has improved meaningfully. And as we continue deploying capital, OTF has a clear path towards dividend coverage by the middle of next year. We have positioned the balance sheet to capitalize on this opportunity set. During the quarter, we strengthened our capital structure by issuing an unsecured bond, adding a secured debt facility and extending the maturity of our revolving credit facility, all amid a very challenging backdrop for technology-oriented companies. Jonathan will cover this in more detail, but we have substantial liquidity and flexibility to support future portfolio growth.

Looking ahead, we have several reasons to be optimistic about OTF's positioning. First, the investing environment is more attractive for technology. Reduced capital availability has allowed lenders to become more selective, leading to significantly wider spreads and stronger protections. With leverage near the low end of our target range, OTF has ample capacity to deploy capital into compelling opportunities as they emerge. Second, forward rate expectations have moved higher since the beginning of the year, which would provide a meaningful tailwind for our portfolio of predominantly floating rate loans and expand portfolio yields over time. Third, we believe the market conversation around software has continued to become more balanced.

While initial AI concerns were broad-based, investors are increasingly distinguishing between businesses vulnerable to AI disruption and those built around mission-critical platforms with embedded workflows that position them to use AI to strengthen their products and reinforce their competitive advantages. We are seeing this in the rebound of certain public software categories, including cybersecurity as well as through partnerships between the AI model companies and established software platforms. This evolution increasingly reflects the characteristics we have long prioritized in our software portfolio and reinforces our conviction in these businesses. Finally, the lockup releases are now behind us. With 100% of OTF float fully unlocked for trading, we expect the technical selling pressure typical of newly listed stocks to ease over time, creating a clear opportunity to further broaden and diversify our shareholder base.

Taken together, these developments improve both the fundamental and technical backdrop for OTF. We remain focused on disciplined execution and believe continued performance across our portfolio will ultimately be reflected in shareholder value.

With that, I'll turn it over to Erik.

Thanks, Craig, and good morning, everyone. We have continued to make steady progress ramping the portfolio. In the second quarter, we made approximately $850 million of new commitments and funded $550 million. Although primary deal activity stayed subdued, we successfully funded multiple transactions that have been committed to before the recent expansion of market spreads. Looking ahead, a larger share of our new originations will capture today's more attractive pricing, allowing us to steadily realize the benefits of the current market conditions. While software activity remains slower, we continue to find differentiated opportunities across other areas of technology where we have deep expertise and strong platform connectivity, including life sciences and digital infrastructure.

Blue Owl is a significant player in digital infrastructure, particularly through our real assets platform, which gives us broad visibility into the capital needs supporting data center and GPU build-outs. As major technology companies scale their computing capacity, we see an attractive opportunity to provide debt capital, capture compelling yields and secure resilient cash flows backed by mission-critical digital assets, often with investment-grade counterparty risk. Another area where we are seeing attractive opportunities is life sciences, where Blue Owl has built deep sector expertise and a dedicated life sciences credit and royalty team. A recent transaction highlights the benefits of these capabilities.

In the second quarter, Blue Owl led a $700 million platform-wide loan for Caris, a commercial stage company focused on next-generation cancer diagnostics. Life sciences has grown to nearly 2% of the portfolio. And given the strong performance and attractive opportunity set, we look forward to continuing to grow this strategy over time. OTF received approximately $222 million in sales and repayments during the quarter. While repayment activity has been slower given the market environment, we are seeing an increasing number of opportunities to improve economics through our existing portfolio. As high-quality borrowers look to raise additional capital or extend maturities, we are often able to secure wider spreads, enhanced protections and stronger covenants.

This incumbency advantage allows us to stay invested in companies we know well while transitioning our portfolio from legacy low spread deals to today's more attractive market environment. Turning to the portfolio. Credit quality and borrower health remains sound. OTF is focused on scaled sponsor-backed companies as evidenced by the nearly $300 million weighted average EBITDA of our borrowers. Software exposure represents approximately 70% of the portfolio. Within software, our exposure is concentrated in durable market segments positioned to benefit from further AI integration, typically distinguished by mission-critical applications, embedded workflows and trusted data. This targeted approach has helped the portfolio to remain resilient to recent market volatility.

Our borrowers are generating high single-digit revenue and EBITDA growth with software generally growing faster than the other areas across Blue Owl's broader direct lending portfolio. Importantly, we have seen minimal signs of material disruption attributable to AI across the broader portfolio. Our internal ratings demonstrated broad stability over the quarter with our 3 to 5 rated names modestly declining to 7.6% at fair value from 8.5% last quarter. Amendment activity remains light and portfolio company revolver utilization remained consistent with historical levels at approximately 10%. Credit quality remains a key differentiator for OTF. Nonaccruals remain among the lowest in the industry at just 10 basis points at fair value, even with the addition of one small position during the quarter.

We further attribute this performance to the portfolio's conservative construction. As of quarter end, over 80% of the portfolio consisted of senior secured loans and weighted average LTV remained steady at 40% with little quarter-over-quarter change. This provides significant equity cushion beneath our debt investments, which we believe has been valuable considering the equity valuation resets across software earlier this year. PIK income declined from 13.1% last quarter to approximately 12.5% of total investment income this quarter with 7.5% of that coming from PIK interest and 5% from PIK dividends.

Approximately 98% of our PIK was structured at origination rather than introduced through subsequent amendments, which is an important distinction when evaluating the portfolio's credit quality. This is consistent with our view that structured PIK can be a valuable return enhancer for high-quality borrowers reinvesting in growth. These portfolio indicators reinforce what we see firsthand in the market. Our 40-person dedicated technology investing team maintains ongoing dialogue with management teams, sponsors and industry experts, giving us differentiated real-time insight into how businesses are adapting to AI.

Through our observations, one theme has been particularly clear: sophisticated sponsors are continuing to invest significant resources in AI enablement across their portfolio companies, reaffirming the value of lending to high-quality businesses with the capital and strategic support to evolve through periods of technological change. Looking forward, we remain focused on growing the portfolio toward the midpoint of our target leverage range. Even as deal activity remains muted, we are staying disciplined in software deployment, prioritizing high-quality opportunities with familiar borrowers we have followed over time. We believe this environment rewards deep domain expertise, selectivity and incumbency. Our long-standing relationships, knowledge of the investable universe and dedicated technology team allow us to deploy with conviction while prioritizing opportunities with stronger risk-adjusted returns.

Blue Owl's investment capabilities in innovative areas such as digital infrastructure and life sciences allow us to access differentiated opportunities that could generate attractive, less correlated returns for investors over time. We expect to continue expanding our activity across these strategies in the quarters ahead. Overall, we remain confident in the quality of our existing portfolio and believe we have multiple avenues for deployment that can be accretive for investors as market conditions improve.

Now I'll turn the call over to Jonathan to discuss our financial results in more detail.

Thank you, Erik. In the second quarter, OTF reported adjusted net investment income of $0.30 per share. This was supported by continued portfolio growth and higher dividend income related to a repayment. Earlier this week, our Board declared a third quarter base dividend of $0.35 per share, consistent with our last quarterly dividend and payable on or before October 15 to shareholders of record as of September 30. We will also pay the final quarterly special dividend of $0.05 per share, which was declared in connection with the listing and is supported by spillover income generated from gains on the portfolio, which was $0.32 as of quarter end. Together with the base dividend, this brings total dividends to $0.40 per share for the quarter. Now that we have reached the lower end of our target leverage range and with rates and spreads becoming more favorable, we expect to cover our base dividend by the middle of next year.

Moving to the balance sheet. NAV per share was $16.48 at quarter end, reflecting ongoing stability in the performance of the portfolio. Portfolio write-ups and accretion from share repurchases supported NAV, partially offset by the ongoing quarterly special distributions declared in connection with the listing. We repurchased over $55 million of stock over the quarter, bringing total repurchases over the past 3 quarters to roughly $170 million. These repurchases reflect our conviction in the quality of the portfolio and attractiveness of our shares at current levels, while preserving ample capital to deploy into a meaningfully improved environment for technology. Following our second quarter activity, approximately $195 million remains available under the $300 million share repurchase program authorized by the Board in February.

We ended the quarter with net leverage of 0.93x, reflecting over $475 million of net funded investment activity. With leverage now at the lower end of our target range of 0.9 to 1.25x, we remain well positioned to continue growing the portfolio. The quarter's financing activity was an important external validation of OTF. In a challenging market for technology credit, we issued a $500 million unsecured bond, added $150 million of secured financing and completed an amend and extend of our $2.7 billion revolving credit facility. Importantly, every existing bank partner renewed its revolver commitment, and we added a new lending relationship that provided incremental financing capacity.

As a result, all 2026 maturities have been addressed, and we preserved our unsecured funding mix and all our credit rating agencies have affirmed OTF's investment-grade ratings. We ended the quarter with over $2 billion of total cash and available capacity across our credit facilities. We view that combination as a strong validation of both the underlying portfolio and the durability of OTF's funding model. Overall, OTF finished the quarter with stable NAV, improving earnings power, significant liquidity and a stronger capital structure, positioning us well to continue scaling the portfolio while remaining disciplined in a more constructive investment environment.

And now I'll hand it back to Craig to provide final thoughts for today's call.

Thanks, Jonathan. As we wrap up today's call, we believe OTF enters the second half of the year from a position of strength. The fund recently navigated a period of questions around the future of software, broader confusion around private credit and the technical overhang associated with our share lockup releases. Through it all, the portfolio remained resilient, credit quality remained strong and OTF continued to build earnings momentum. Despite this progress, we recognize that OTF's market valuation has not reflected the underlying performance of the fund, and we are disappointed by that disconnect. At current trading levels, the discount implies nearly $3 billion of credit losses.

Said differently, the market is effectively pricing in a scenario where approximately 40% of the portfolio defaults and recoveries are only $0.50 on the dollar. That stands in stark contrast to the actual performance of the portfolio where nonaccruals remain just $20 million or 10 basis points of the portfolio. We view that disconnect as significant and our repurchase activity reflects our confidence in the portfolio and the value of OTF shares at current levels. While we cannot predict when the discount will close, we believe the path forward is clear. The portfolio is performing, the technical pressure should continue to ease and OTF has multiple levers to continue expanding earnings power over time.

Just as importantly, we see multiple tangible drivers to improve ROE and dividend coverage from here. First, leverage sits at the low end of our target range and continued deployment toward the midpoint of that range provides a clear path towards increased earnings power. Second, we have the opportunity to continue rotating nonincome-producing equity investments into income-generating assets. And third, we're now able to deploy capital into a more attractive environment and expect to benefit from wider spreads, stronger documentation and higher base rates. Taken together, these drivers give us confidence in the fund's ability to expand ROE and cover the base dividend by the middle of next year while maintaining the same, if not an even more disciplined underwriting approach that has supported the portfolio's credit performance to date.

Rate expectations are higher than they were at the start of the year. Technology spreads are much wider, and we think we have the right expertise to capture these opportunities. In addition, we intend to continue to diversify the portfolio into complementary areas like life sciences, digital infrastructure and other areas where Blue Owl has differentiated capabilities and long-standing relationships. As we look ahead, we expect manager selection to matter even more. Periods of uncertainty tend to create dispersion, and we believe OTF's combination of technology domain expertise, senior secured focus, disciplined underwriting and access to the broader Blue Owl platform positions the fund well to navigate that environment and deliver compelling long-term results for shareholders. We remain focused on executing against that opportunity while continuing to demonstrate the strength of the portfolio over time.

Operator, please open the line for questions.

[Operator Instructions] Our first question today is coming from Finian O'Shea from Wells Fargo.

I want to ask, I guess, a bit of a 2-parter on earnings power. For one, if you could hit on any potential guide you can give on monetizing the equity gains from this quarter? And then also the life sciences program, or JV, I think this came up on the last call. It was described as partially onetime, but any way -- any guide on how we can think of the growth and how to think about the returns in that?

Sure, Fin. Thanks for the question. I think as we laid out in the call, there are really 4 primary drivers to drive earnings towards the $0.35, the biggest one being leverage, we're about 0.93 turns, which is the low end of the target range. So pretty meaningful room to grow there. We also talked about improved deployment economics for new bookings. We think the spread environment is meaningfully better across the board and particularly more attractive for software and technology assets going forward. We didn't say this on the prepared remarks, but we're also starting to see repricing of existing names.

So assets that we've invested in that we think are very attractive that will come to us for acquisitions or for some other need can be repriced on a mark-to-market basis. Roughly right now, there's about $4.7 billion in OTF that's below S plus 500. So we think that's a natural rotation. And then to the last point, the rotation of the equity portfolio, about 7% right now is in non-income-producing equity positions. And when you look at something like SpaceX, it's been a fantastic outcome for us. We've been involved with the company since 2018. We started by lending the money. We took a fairly small equity position that's turned out to be a fantastic gain. We sold half of that.

And if we sell the other half of that at today's prices, that's another 10x or $125 million of net gains that we can take and immediately redeploy into income-producing assets at the higher spreads that I was referencing. So taken all together, I think the path towards the $0.35 feels very, very solid, and we expect to cover that dividend by the middle of next year. And then life sciences as well.

I don't think -- I wouldn't categorize anything as particularly onetime. That's -- the LSI JV is a collection of multiple assets and produces very stable, consistent dividends to the fund. I think there was one repayment that came with some call pro that increased that this quarter. But I would view that as sort of normal course. We're going to see repayments and some acceleration of call pro like we see in regular way loans. We continue to populate that pool of assets with really attractive loans today. So I would consider -- I would continue -- expect to continue to see that strong performance and good dividend level there.

I appreciate that. And a follow-up on one of those vectors being leverage. Jon, you gave us some color on the path there on sort of -- and the current activity of keeping the unsecured stack. But I think optimally, you want even more unsecured as you ramp and it remains a bit expensive for the time being. So does this change the way you think about your ramp and your funding mix?

I mean, look, the -- as Erik mentioned on the asset side, the spreads have widened, and we see the opportunity set there as being very, very fruitful. And as you know, in our history, we're never going to get close to the barriers in terms of making sure that the company is well capitalized with a significant cushion of unsecured. And so as we continue to finance ourselves, you should expect to see us continue to do unsecured as a portion of the incremental financing. We only have one maturity in 2027 for a small amount, $300 million. So we've got plenty of optionality with respect to what we do and over time in order to optimize our cost structure. And we're going to continue to be focused on it.

Next question today is coming from Kenneth Lee from RBC Capital Markets.

Wondering if you could just share a little bit more color on some of the deal activity you're seeing within the software space currently. I appreciate it's potentially wider spread. Just want to gauge the level of activity and what are your thoughts in terms of the potential outlook over the next few quarters there?

Yes, sure. Thanks for the question. Volumes have been somewhat muted. I think you've heard us say that. You've heard others say that in software, across technology, across other industries. But we think the current market is pretty attractive from a risk-adjusted return perspective. I think there's less competition, there's less capital. As we just articulated, we have an abundance of capital. We have that in OTF in spades as well as across the broader Blue Owl landscape. From a software perspective, there's been a few deals done, and we've seen some pretty meaningful spread widening.

There are deals that we ultimately chose to not participate in, but think in the context of 150 to 200 basis points wider than what we were seeing at the tights earlier this year and last year. So we think the opportunity set for very attractive assets will be perfect for us given the amount of capital and the expertise we have on a going-forward basis. We mentioned this a bit as well on the call, but we're also spending substantial time in LSI as well as in our digital infrastructure group. Those opportunities are very large. The amount of capital, I think, as everybody knows, being raised for digital infra across the investable universe is substantial. And given our relationships and our expertise and our structuring knowledge of how to set those types of transactions up, we think there's going to be plenty of things for us to do over the course of the year.

Got you. Very helpful there. And one follow-up, if I may, just in terms of the share repurchases. And from the prepared remarks, it sounds like you continue to be active there. Just want to gauge how active OTF could be in terms of share repurchases, especially with the context of leverage and investment opportunities?

Yes. I mean, look, we talked about this as well in the context of OBDC as well. We evaluate share repurchases in terms of just the general allocation of capital. We've continued to repurchase here. We've bought a significant amount over the course of the last number of quarters, and our Board re-upped the share purchase plan to $300 million. We've still got close to $200 million remaining there. So you should expect us to continue to be deploying capital into that alongside of what is a very, very attractive investment landscape. So here, we've got room to be able to take advantage of the different opportunities that are going to be in front of us, both from an investing perspective as well as a share repurchase perspective.

Next question today is coming from Arren Cyganovich from Truist Securities.

Just following up on Fin's line of questioning in terms of the kind of earnings power expectations. If we get to the kind of $0.35 sort of run rate, it's still sort of like a sub-9% ROE in terms of where your current equity base is. What is the kind of expectation once you're kind of fully ramped, et cetera, where your ROE could potentially go to?

Sure. I mean, look, we -- that is a run rate ROE that has been historically bolstered by incremental capital gains from the equity portion of our book. So we're -- we think that, that certainly is a coverable level that can grow given the backdrop on a widening spread environment and as well as the forward rate curve to go even higher from there. But we feel with leverage comfortably inside and toward the middle of our target leverage range, we can get there plus a little bit more to the extent that we see those items plus all of the incremental returns that we've seen historically on the equity side.

I just -- I certainly appreciate the question. I just want to put it in some perspective. That's on book value. Today, the stock is trading at a dramatic discount to book value. So if you take our $0.35 that we feel confident we're going to get to by the middle of next year, on today's value, the stock's yielding 12.5%. So the scenario that you're describing where we are trading at book value, that would be a very substantial return over the next year or so. So I think it's fair to ask the question kind of what comes next after that. But I just want to make sure that those that don't follow it as closely on the call say that were we to be in the position where we were earning that 9%, that would be a substantial return over that period of time.

[Operator Instructions] Our next question is coming from Jason Stewart from Compass Point.

You talked about the investment environment improving a couple of times. How have you shifted the positioning in market? I mean, are you taking the same structure, just higher yields? Are you making changes to the offering in market? If you just talk around some of those nuanced market positioning changes?

Yes. I don't think there's a material change in the way we evaluate or underwrite credit that we're still looking for mission-critical enterprise-grade software companies or best-in-class life sciences, or GPU or other digital infrastructure opportunities. So I don't think there's a material change in the basis of what we're looking for. What we're seeing, frankly, is less capital, less competition.

And in that environment, we can target the best assets, the ones that we always would have focused on, but we're able to capture meaningfully better spreads, number one. And number two, we're also structuring exceptionally tight documents. We've always focused on control around our intellectual property and data rights, et cetera, inside of our credit agreements, but we are just taking the opportunity to be even incrementally more conservative with respect to leverage and overall documentation while also capturing those spreads, but no fundamental change.

Okay. That's helpful. And then we've talked a little bit about rebounding public equity prices in software and tech. Is there anything technical happening in the private debt market for these companies that's limiting private debt from participating? Is it CLO transactions? Is there anything that you could highlight that says we're either lagging more so than we have historically or we're not following the same sort of regression that you would expect in private debt markets? Or how would you think about that?

Sorry, I think we heard you, but just maybe add a little bit more of what you're looking for, so we can make sure to answer it.

Well, you've talked about rebounding valuations in public equity prices for software and technology. And I guess the core of my question is, when do you expect to see that flow through to the valuation of your debt positions? Or do you at all? And is there anything technical that's happening in the debt market that's limiting it?

Sure. Let me try to take a stab at it and let me know if this is responsive to your question. Public loans, public loans overall have been rallying this year, in the last few months, in particular, due to a very strong bid in the market, improving sort of perception of credit overall, CLO creation and the like. So you're seeing spreads tighten in the public loan market. That is true in software as well, but only modestly. So I think software continues to lag in the public loan markets as there continues to be overall concern about AI. So software loans have not improved meaningfully, but you're starting to see the market differentiate between companies of high concern of AI or low concern of AI.

But there's been a repricing of software risk in the public loan markets. There's been a repricing of risk in the private loan markets as well. Spreads, I would say, have been stable. So we haven't seen -- I don't think it's a technical. I think the market is still wrestling with their outlook for software and is looking for more data on how these companies are performing and some of the emerging trends. We remain -- first, our software book and our book in the tech fund, we think is marked really carefully, and we use a third party to do that as we have for many years.

And it reflects all those trading environment and valuation environment. So we've marked the book appropriately for where things stand today, but we feel really confident in the quality of our book. And over time, look, our loans have contractual maturities. So regardless of where we mark them, we expect to get repaid. And when we get repaid, we get repaid at par. So I know it's simple, but it's sort of well worth reminding everyone of that. We're not -- we don't own equities where there's some indeterminate value. We own loans where the ultimate value for almost all the loans is contractual. So I think it's more fundamental than anything technical.

I will say private credit overall, I think the perception away from software or private credit is still lagging the strength we're seeing in the public markets. The public loan markets are ripping, and I don't think that the perception of the private markets yet has caught up to that, and there's still sort of some lingering angst about private credit, which I would say that's a bit of a disconnect. Technicals, the BDCs are all up today. Maybe people are starting to see at the end of reporting season and BDC results have been, I think, consistently strong across the board and certainly not in any way reflecting all the handwringing that we've heard for the first half of this year. So maybe that will start to catch up, but it's been lagging.

Next question is coming from Chris Muller from Citizens Capital Markets.

Nice to be on with you today. So I wanted to ask about some of the AI disruption stuff, but maybe through a slightly different lens. So your guys' credit quality is really solid despite what the discount to book value says. So as these waves of fear come, does that present an opportunity for you guys to make some really attractive investments that would otherwise get competed away?

I think that we -- to your point, look, we hope over time, as more information comes out, I think the tone of the conversation around AI becomes more balanced. And I think you're starting to see that. But I think you're spot on that these concerns are creating a very significant opportunity for us. Spreads are much wider. And beyond spread, the purchasing power that we have as a significant technology investor is just higher. And that reflects itself not only in spread, but the other terms of an agreement, the structures and the like.

The capital available for software buyouts is just more limited now, and that will be reflected in more attractive terms. And that can show up in a variety of different ways. It shows up if we were to price a new deal. But candidly, there -- how many new deals are there going to be right now? I think that the private equity firms are going to be equally cautious. But it also shows up just as we get asked to refinance existing positions in our portfolio, which is happening and is going to continue to happen across the space. We -- and I would imagine all lenders are going to want to make sure that as we refinance, extend, do add-ons that we're getting properly compensated.

So I think there's a real opportunity in OTF for us to take spread up in the portfolio simply by continuing to support our companies at appropriate spreads. And I would just say spreads in the last 18 months prior to this period of time, the last couple of years, spreads have gotten really tight. So the kind of spreads we're talking about here, they're not out of line in the last -- in the broader pantheon of where software deals come. Software deals for many years came 500 to 700 over. That was where software was. And it was only in the last couple of years prior to the AI disruption that it got really tight. So you're really just seeing a return to the mean of where software spreads are. And so I think that will be something that's very much an upside for OTF over the next year or 2.

That context is very helpful, and congrats on a solid quarter.

We reached the end of our question-and-answer session. I'd like to turn the floor back over for any further or closing comments.

Thanks all for joining. We were really pleased with the quarter, especially the credit quality, which remains one of the best in the industry. If you have any follow-up questions, we would appreciate hearing from you. Please reach out, and we hope everyone has a great afternoon.

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.

Good morning, everyone, and welcome to Blue Owl Technology Finance Corp.'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 Michael Mosticchio, Head of BDC Investor Relations. Please go ahead.

Thank you, operator, and welcome to Blue Owl Technology Finance Corp.'s First Quarter 2026 Earnings Conference Call. Joining us on the call today are Craig Packer, Chief Executive Officer; Erik Bissonnette, President; and Jonathan Lamm, 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 OTF'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 this call, which are reconciled to GAAP figures in our earnings presentation, which is available on the Events and Presentations 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, OTF issued its financial results for the first quarter ended March 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 OTF's website.

With that, I'll turn the call over to Craig.

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, OTF has been part of that conversation. Before getting into our views on software, I wanted to step back and provide some broader context on OTF.

Credit performance remains very strong. Nonaccruals 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've 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 OTF 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 nonaccruals this quarter and a nonaccrual 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 widen meaningfully across technology credit names, valuations came under pressure across the space more broadly, including within our own portfolio. Importantly, this was a 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 OTF 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've seen today and that we anticipate over time. Today, OTF 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'll turn it over to Erik.

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 the 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 sell-off 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 nonaccruals this quarter, which remained significantly below the industry average at just 10 basis points of the total portfolio at fair value. 3 to 5 rated names were steady at 8.5% at fair value as our internal ratings are 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 approximately 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 OTF 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 OTF 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 the merger with a global leader in AI-enabled fitness tech.

And Relativity, a leading provider of eDiscovery document review software was $137 million investment in OTF 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 originations side, we entered the quarter with a strong pipeline, which converted into $1.7 billion of new commitments and funded $1.3 billion. Though 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, 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, where we believe we can generate attractive, less correlated returns over time.

In digital infrastructure, we continue to see opportunities in areas 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. OTF 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 OTF is well equipped to capitalize on opportunities as the market continues to adjust.

Now, I'll turn the call over to Jonathan Lamm to discuss our financial results in more detail.

Thank you, Erik. In the first quarter, OTF 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 3 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 at approximately $0.01 below historical averages.

We would also note that our GAAP results also included $0.08 per share of capital gains incentive fee reversals driven by mark-to-market impacts on equity investments following the market sell-off. 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 July 15, 2026, to shareholders of record as of June 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 2 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 0.9 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 OTFs 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.

And now I'll hand it back to Craig to provide final thoughts for today's call.

Thanks, Jonathan. As we wrap up today's call, I want to step back and reflect on what we believe this environment means for OTF. 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 OTF 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, OTF'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 OTF 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. OTF 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.

Thank you for your continued support. Operator, please open the line for questions.

[Operator Instructions] Today's first question is coming from Finian O'Shea of Wells Fargo.

I guess, Craig or Erik, big picture on software, performing well still, but the theme more and more, the 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, maybe from a risk perspective, maybe it's temporary. But to the extent that, that continues, is that a concern for future credit quality if new money sort of dries up from the broader credit domain?

Fin, I'll start. Erik, you can chime in. Look, to start, I would say that AI is a significant issue, and all lenders are trying to make sense, and all equity holders are trying to make sense of the impact in AI on software. And it's moving quickly. And so I think as time elapses, we're all going to be able to better understand just how significant this is.

So this is a moment of kind of peak uncertainty and time will help that. I think that your characterization, I think, is fair. I think most lenders that have significant software will be looking to reduce exposure. I think we'll be looking to reduce exposure, but within reasonable bounds. I think we'll still, at OTF, still be a significant player in software, but our bar is going to be very high for new investments, but also very high as we have opportunities to refinance.

We're 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, our confidence in getting repaid. And we're going to certainly want to make sure that if we are staying invested in software names that we're getting appropriately compensated and spreads have widened materially in the software sector given that uncertainty. The companies are doing well. Even if good, durable software businesses, we believe, will continue to do well in an AI world, and they're 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 has tightened in quite considerably in the last 18 months. And so to a certain extent, it's reverting back to more historical levels. Again, it's all about credit performance. It's all about confidence in getting repaid.

I feel confident that if the company's outlooks are reasonable for lenders and lenders feel protected, then there'll be plenty of capital there. It's just maybe more expensive. The private equity firms, again, if the businesses are performing well, then the private equity firms will equally have capital to support those businesses. So I think the general picture on painting is one where it's credits will be refinanceable even if lenders want to reduce exposure, then there'll be other lenders that potentially can increase. companies can pay down debt, they can delever, sponsors can commit more capital. But I think if the companies are doing well, they'll be refinanceable.

I appreciate that. A follow-up more on the portfolio picture today. The marks this quarter look pretty broad spread related, but then the sharper or more acute marks look to us at least either, say, tied to liquid, there's a BSL quote kind of thing or junior like pref equity type exposure, correct me if I'm wrong there.

The question is, is that a pure loan-to-value thing, just taking down enterprise value? Or is there any slowing in performance across that book?

About 1/3 of -- thanks, Fin. About 1/3 of the marks associated with our markdowns were in those -- in that book and really all multiple driven, nothing of materiality from a fundamental perspective. And the vast majority, again, on the debt side as well spread related. So just speaking to the book that you're referring to, that has been an incredible driver of net realized gains for us since inception of close to 30 basis points annualized. And so we're giving back a little bit here just on mark movements.

80% of the move in our debt marks was just spread driven. And again, I think this is -- I think our results in OTF, look, the fund over the arc of time has had one of the best credit performances in the industry, and we've had net NAV growth. But I think it's very logical and expected after a quarter that just went through a really re-rating of valuation in the software space. I think any investor would expect that to be reflected in our marks. And I think you bucketed it properly.

The public loans move meaningfully. That's very observable, and that is reflected in the portion of our book that's BSL related and the more junior investments, which have performed well, we do go through a valuation process, and those were also marked appropriately down. So I think the book behaved the way I think investors should expect given the environment that we just went through, but we're coming from such a strong position of strength and gave back a little bit this quarter.

The next question is coming from Brian McKenna of Citizens.

So it does feel like the tide might be shifting a bit here in the public software market. The IGV is up 20% from the lows. And then if you look at some of the other names and subsectors within that, they're up quite a bit above that.

So Erik, I'm curious your thoughts here. It does seem like maybe the public markets in this area overcorrected. We're getting some of that back. And then we'll see if a few weeks make a new trend. But if this recovery in public software valuations continue, does that start to drive a recovery in transaction activity? And then I'm also curious, the sponsors you're talking to and those counterparts, are any of them starting to look at some take private opportunities?

Yes. Look, we've seen a market change in sentiment as reflected in public stocks. We're going through public earnings right now. I won't mention specific names, but broadly speaking, the prints that we've seen have been very, very strong.

So we're seeing very publicly focused companies perform extremely well, which is consistent with what we're seeing across our portfolios, the conversations we have with sponsors, I think they do see opportunities in a very similar fashion to what you saw in 2022, where you had a very large number of go-private transactions coming off of the peak ZIRP-related multiples in 2020 and '21. So we think there's going to be a meaningful pickup in activity. It's a bit muted right now. I think there's a bit of a pause in the market. We're seeing sentiment shift.

To our points in the comments, the nuance around the conversation has changed dramatically in the past 2 months. We've been having hundreds or thousands of conversations with investors around our views. Obviously, any of other investors in the marketplace having the same conversations. I think there's some breadcrumbs. We mentioned one with the TB/Google announcement. You saw another one with Anthropic. So there's a lot of narrative shift around the reality of a combination or a partnership

[Audio Gap]

and the application here, which I think will give a bit of more balance to that conversation, I think will unlock some deal activity going forward in the latter half of the year.

Okay. That's helpful. And then just following up on the last question and the comments there. I mean, I think all the focus has been on the downside and the defensive nature and kind of where we go, but it doesn't feel like the conversation has shifted to maybe some of the upside scenarios or the positive and tailwinds from a lot of these businesses layering on AI. So from your seat, I mean, when does that conversation start to shift, if at all? But is that a couple of quarters? Like I'm just curious about your thoughts on that as well.

Look, I think it's going to take a few quarters. One of the great strengths of the software revenue model is that many of these companies have multiyear contracts that are committed in advance. And what we're going through right now is as these businesses embed AI into their solutions, it's going to take some time to roll through the financial statements to come out in the form of new KPIs.

But what we are seeing is a pretty strong increase both in R&D and now revenue start to roll through the system as these agentified solutions start to take hold. So I think it's going to take a few quarters. I think people are going to have to see a couple of prints from pretty large companies and continue to perform. But that sentiment, I believe, will change. Look, obviously, things move quickly. 8 weeks ago, I'm not sure I would have told you that I think we feel meaningfully better in terms of narrative and sentiment, but I do feel better today. And I think that's going to just continue to improve over time as we see the stability and durability of these assets and the continued growth.

Our next question is coming from Kenneth Lee of RBC Capital Markets.

Just in terms of potentially looking at other opportunities outside of software, you mentioned digital infrastructure, life sciences. Maybe just talk a little bit more about what sorts of deals you're seeing in those kind of pipelines and whether there's enough -- wide enough funnel for you to make enough investments to continue to ramp up the portfolio roughly within the same, kind of, original time frames.

Sure. I'll start. The answer is yes, I think that there is enough. Look, I don't want to overstate this. Software is the biggest part of the book and will be for the foreseeable future because it's performed extremely well, and we expect it to perform extremely well.

But as I touched on a few minutes ago, I think we will look to reduce the software exposure and really focus on the best names that we have the most confidence in. And there are -- these are 2 examples of sectors that we've already been active in. We have teams that have dedicated capabilities, and they're quite meaningful. So we talked about life sciences, which has been an area we've been active.

These are commercially successful in the market drug royalties or loans to companies that have those drugs with very predictable revenue streams that we -- that take deep technical knowledge of the underlying drugs and market demand to invest in, and we have a team that has that expertise, and we've been investing in it, and we're seeing terrific opportunities that very much fit the remit of the technology fund, but are obviously not -- nothing to do with the software itself.

So that's an area, I think, is scalable and where the deals are sizable, very different. There's not typically a private equity firm involved. These are public or private companies, and it's an area that we'd like to scale up. I don't know if you want to touch Erik, on digital infrastructure.

Yes. On the digital infrastructure side, we've done a few transactions on the GPU financing space, which I think is a misunderstood part of the market. We're not really financing GPUs to their -- to any residual value. They tend to be JVs or SPVs with IG counterparty credit risk, amortizing structures, premium rates of return are very tightly documented oftentimes with the corporate guarantee as well. So really interesting assets.

You've seen a few of those start to leak into the public markets recently. So I think there's broader acceptance of the structures that we've been really pioneering over the past year. We have quite a few of those in the hopper right now. Clearly, from our seat, the demand for compute continues to be exceptionally high, well in excess of the supply of it. So there'll be some interesting opportunities there that we're working on right now.

And then on the data center side, there are often things that we see through the broader Blue Owl platform. We have our IPI data center business is actively involved in the development of these builds with hyperscaler offtakes. So there's going to be some activity, hopefully, that we can review and analyze over the course of this year. And I think we'll increase the percentage of this, but there's some natural limiters. Oftentimes, these fit into the nonqualified bucket. So I don't think it's going to be disproportionately high, but I think really attractive on a go-forward basis.

Got you. Very helpful there. Very helpful color there. And one follow-up, if I may. You touched upon this briefly in the prepared remarks around the dividend. wonder if you can share some additional thoughts around dividend coverage. Is this something that the Board is going to continually evaluate just based on deal activity and ramping progress of the portfolio, just given that the -- it sounds like that the time frames could be a little bit longer in terms of when you get your targeted leverage ranges there?

Yes. I mean, look, we're always constantly thinking through the dividends for all of our companies, and the Board is definitely always focused on it. We know the drivers here similar to drivers in our other businesses. It's deployment leverage, it's spreads. Here, it's also a little bit of the churn associated with the structured capital book. All of those things have obviously been -- or at least the churn and deployment have certainly been impacted by the market events and just the market perceptions over the course of this year.

And so all we're indicating here is that it will take longer for those things to play out. In terms of the dividend and getting there, we haven't changed our view as to the ultimate outcome in terms of getting there. It's really just much more of a timing thing. And we've got post this quarter, where we are still paying out roughly $0.11 more than what we earned, we've still got $0.50 of spillover income. And so there's plenty of runway for us in the context of a short-term just slippage with respect to reaching the dividend.

Yes. I think the only thing I would add to that is as we go through any amendments or any potential extensions of existing positions, obviously, we're going to do comprehensive and thoughtful re-underwritings of everything. But given our view of what we've done with respect to our AI reviews and our AI internal evaluations, we think there's a lot of companies that we've 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.

So as those come up for renewal, we'll re-underwrite them. But most likely, you'll see pretty meaningful mark-to-market adjustments on some of our better performing assets. So I think that's a third leg of the stool that I would add there.

Our next question is coming from Arren Cyganovich of Truist Securities.

Yes. I was just wondering if you could talk about how the overall platform is dealing with the high level of redemption requests in the evergreen funds that are obviously not directly associated with OTF and whether or not that's impacting your ability to maybe put as much capital to work as you need or if there's enough institutional flow coming in that can help essentially offset that?

It hasn't had any impact on our ability to deploy capital. Obviously, the funds -- individual funds have capital. We've talked about that at OTF. We'd like to find attractive investment opportunities, OBDC. We talked earlier today. We just reduced leverage. We have non-BDC capital, institutional capital. And so no impact on our ability to deploy. The nontraded funds that have outflows have ample liquidity to cover those outflows. So there's no ripple effect there. It's only part of our business, and it's very predictable. We know exactly what the outflows are when we do the math around the tender limits.

So look, we're one of the largest players in direct lending. We have deep relationships with the sponsors. We have as much available capital, I think, as any direct lender out there. And we are excited about this environment to deploy it for good deals with good sponsors and good companies at attractive returns, just like we have for the last 10 years.

Our next question is coming from Sean-Paul Adams of B. Riley Securities.

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 kind of drove some of the mark-to-market changes on the portfolio and the reflection. When -- do you guys have any kind of line of sight on any near-term liquidity events at these names? And at what point would you guys point to this just being a mark-to-market driven event versus just a real realized loss scenario?

Yes. The vast majority of the changes in the equity book were mark-to-market. Obviously, you saw the IGV traded off pretty dramatically throughout the course of 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're trading below par, there's a very real possibility for us to get our payback and see some recoupment there no matter where they exit.

In terms of the forward, obviously, we talked a bit about SpaceX and monetizing some of that position. There are another 3 to 4 behind that, that we think are extremely attractive, one that I would emphasize is Revolut. It's about a $75 million cost basis investment. Challenger Bank based in the U.K. We had marked that up over the prior few quarters. They have been rumors announced in the press around another tender offer, a potential IPO coming in 2027, it's actually 2028. But we think there's going to be some pretty big exits. We have other investments in Stripe and some other really attractive assets that we could monetize. So we feel like we're in a good position to continue to generate some of those upside returns.

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

I thought I would just end with an observation. Obviously, OTF has a lot of software exposure and the stock, I think, has been impacted by that. So I thought I would just wrap with a couple of statistics. The average spread -- the average debt spread in OTF is about 530 over. The average loan is marked at $0.97 on the dollar. The nonaccruals in the fund are 10 basis points. The stock currently yields about 12.7% at today's prices. It's probably higher than that given today's trading activity. That was as of this morning.

The stock trades at 67% of NAV before today's levels. The stock traded closer to 80% of NAV at the beginning of the year. if the stock got back to 80% of NAV over the next 1 to 2 years and you factor in that recovery and the dividend levels, that would be a total return of 19% to 25% over a 1- to 2-year period. There's obviously a lot of assumptions embedded in that. You can make your own assumptions about time frame, what might happen to NAV, dividends, all those things.

But I think it's a very -- I want to put a spotlight on just where it's trading, what the yield is and juxtapose that with the quality of the portfolio, which continues to be extremely strong. We've been talking on this call about a recovery in the equity markets and the stock of the equity of software businesses. And here's another area of the market that if the market is starting to have a more balanced view on software that can offer equity-like returns. So I just pass that along for consideration. We're available. If folks have questions about the fund, we'd be pleased to take them, just reach out, and we're available.

With that, thank you. Thanks, and have a great day.

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.

Good morning, everyone, and welcome to Blue Owl Technology Finance Corp.'s Fourth Quarter 2025 Earnings Call. As a reminder, this call is being recorded.

At this time, I'd like to turn the call over to Mike Mosticchio, Head of BDC Investor Relations. Please go ahead.

Thank you, operator, and welcome to Blue Owl Technology Finance Corp.'s Fourth Quarter and Full Year 2025 Earnings Conference Call. Yesterday, OTF issued its earnings release and posted an earnings presentation for the fourth quarter ended December 31, 2025. They should be reviewed in connection with the company's 10-K filed yesterday with the SEC. All materials referenced on today's call, including the earnings press release, earnings presentation and 10-K are available on the Investors section of the company's website at bluewltechnologyfinance.com.

Joining us on the call today are Craig Packer, Chief Executive Officer; Erik Bissonnette, President; and Jonathan Lamm, 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 OTF'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 this call, which are reconciled to GAAP figures in our earnings presentation available on the Events and Presentations 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.

With that, I'll turn the call over to Craig.

Thanks, Mike. Good morning, everyone, and thank you all for joining us today. There has been a lot of investor attention on software over the past several weeks, particularly around what AI could mean for the sector. We understand the focus. What I want to underscore at the outset is that performance at OTF has been strong, and we expect that to continue. We are pleased to report another strong quarter for OTF, closing out a milestone year marked by our successful public listing on the New York Stock Exchange and continued progress in enhancing our long-term earnings power.

In June 2025, OTF was listed and established as the largest publicly traded technology-focused BDC by total assets. In connection with the listing, we declared 5 quarterly special dividends of $0.05 per share through September 2026, in addition to our regular $0.35 per share dividend, supported by substantial spillover income generated prior to the listing. This distribution profile underscores our earnings potential as we ramp toward our target leverage, particularly during a period when many credit managers are navigating earnings compression. Since listing, we've been working our way through the lockup releases. And as of today, roughly 50% of shares are freely tradable.

We used this increased float to opportunistically repurchase $65 million of OTF shares during the fourth quarter at an average price to book value of 0.82x. These repurchases were accretive to NAV per share and reflective of our conviction in the quality of our portfolio.

With that, let me address the recent headlines around software and AI. We saw a broad sell-off in tech and SaaS names on concerns that AI could disrupt software business models, and that pressure ultimately impacted BDCs as well. We've always liked software, and it has been a significant contributor to our performance. We've built dedicated technology investing capabilities to match the opportunity and portfolio performance remains excellent. Our software borrowers are delivering low to mid-teens revenue and EBITDA growth on average, among the strongest across our direct lending strategy. Our technology strategy is supported by a dedicated team of over 40 technology investment professionals, part of our broader direct lending team of more than 120 investment professionals. The team is organized across 10 key subsectors, including cybersecurity, health care IT and fintech, giving us deep domain coverage and experience navigating ongoing technology shifts.

They have evaluated AI risks and opportunities for many years. But given how quickly the technology is evolving, we proactively revisited our core thesis and reevaluated our portfolio with a forward-looking lens. Our analysis confirms the quality of our assets and gives us confidence that our portfolio remains aligned with where the market is going. As a reminder, we primarily lend to large-scale market-leading companies that provide mission-critical solutions with durable moats. We emphasize systems of record that are deeply embedded in customers' workflows, carry high switching costs and operate in environments where errors, downtime or security breaches cannot be tolerated. Combined with our defensively constructed portfolio of predominantly first lien senior secured loans to private equity sponsored borrowers with LTVs in the low 30s and significant equity cushions, we have a substantial buffer even in periods when equity valuations are pressured, which helps support downside protection and durable earnings.

Our performance continues to validate our approach. In the fourth quarter, OTF delivered a nearly 11% return on adjusted net income. NAV increased 35 basis points in the quarter and is up nearly 16% since inception. Furthermore, OTF continues to maintain low levels of nonaccruals and has posted average annual net gains of 23 basis points since inception, underscoring our credit quality. While periods of rapid technological change will create disruption, they will also create opportunities and dispersion in performance. We believe that our deep domain expertise positions us to identify and capitalize on those opportunities. We are very pleased with our results and confident that we are well positioned to navigate ongoing changes in the sector.

With that, I'll turn it over to Erik.

Thanks, Craig. Good morning, everyone. Since inception, our investment strategy has been to invest in a broad range of established and high-growth technology companies. To date, software companies have presented the most attractive investment opportunities, and as a result, software comprises approximately 70% of our portfolio. The balance of the portfolio is made up of tech-enabled services, other technology sectors, life sciences and a small portion of nontechnology investments. We remain enthusiastic proponents of software. Software is an enabling technology that can serve every sector, end market and company in the world. It's not a monolith and neither is AI. Great software businesses provide mission-critical solutions that enhance productivity, drive efficiency and replace analog and error-prone ways of conducting business.

The software industry has navigated significant shifts before. When the industry moved from on-premise license and maintenance models to cloud subscription-based pricing models, there were winners and losers, but the shift ultimately expanded markets and strengthened the category. Like the cloud transition, we expect Gen AI to drive significant long-term value through increased product utility, operating leverage and expanding enterprise software wallet share. Our underwriting thesis remains focused on sticky, mission-critical applications where AI serves as an additive layer rather than a replacement. We believe the most resilient winners will be incumbents to successfully integrate these capabilities to solve complex enterprise-grade challenges, thereby increasing switching costs and solidifying their status as essential corporate infrastructure.

Given the heightened focus on software, it can be easy to think about it as a single homogenous sector. That isn't how we underwrite or manage our portfolio. Instead, we think about our software exposure across 3 core categories: applications, systems and infrastructure and fintech and payments, which together represent roughly 70% of the portfolio. I'll briefly walk through each one of these. First is application software, which represents about 50% of the portfolio and is the operating layer for core business functions, including ERPs, CRMs, supply chains and vertical-specific SaaS. We believe incumbents in these categories can be insulated because they control the proprietary data and complex workflows that AI needs to be useful in an enterprise context. As true systems of record, these platforms are extremely difficult to replace, and we believe will evolve into systems of action where AI increases product utility, deepens customer reliance and broadens opportunity to expand within their existing customer base.

Second is systems and infrastructure software, about 20% of the portfolio, where cybersecurity is the largest component. This is the defense layer that protects enterprise data and networks to keep systems connected and operating reliably. We see this as structurally resilient and a beneficiary of the AI transition as businesses expand technology, services and complexity across the organization.

Finally, fintech and payments is approximately 5% of the portfolio. These businesses provide the critical rails for the global movement of capital, a category we view as insulated from AI disruption. While AI can improve things like fraud detection and the customer interface, the core need for secure, regulated and reliable movement of funds remains unchanged and create significant moats for incumbents. The categories we prioritize each play a specific functional role that is difficult to bypass. Even as the technology landscape shifts, the need for auditability, control and data integrity remains constant. As such, we believe these companies are well positioned to remain as the foundational layer to which new AI-driven activity is governed and executed. While there will certainly be winners and losers as AI reshapes the landscape, we believe the market leaders we finance are using AI to stay on the winning side of that transition.

We have navigated major technological shifts before, such as the transition to the cloud. However, AI feels fundamentally different because it is a daily presence. We interact with it personally. It's in our pockets, in our homes, which creates a unique sense of both its power and its potential risk. But as we move this technology into the enterprise, we must distinguish between personal utility and business-critical execution. The challenge with AI and current large language models is that while it is world-class at communicating, its underlying nature is probabilistic. It is a statistical engine designed to predict the next logical pattern. This is excellent for a personal assistant, but it is a problem for systems that need to be precisely accurate. A payroll calculation or bank transfer is either 100% correct or is a failure. And the corporate world almost right is completely wrong. This is why we believe established software leaders, the incumbents, occupy a much stronger position than the market currently discounts.

These companies own the systems of record and the workflow. They have spent decades codifying the intricate rules of how a hospital operates or how a global supply chain moves. They don't just have the data, they have the operational context. We engage regularly with our nearly 200 portfolio companies and their sponsors. And what we're seeing is that AI isn't theoretical, it's already operational. Many of these businesses are backed by sophisticated private equity sponsors that are investing meaningful resources to embed AI into products and workflows in ways that strengthen their leadership positions. In our portfolio, the incumbents are using AI inside proven zero error frameworks, using AI to help with reasoning while relying on their proven deterministic software to execute. Importantly, that framing matters for us as lenders. A lot of the public debate right now is being expressed through equity market volatility, who wins the growth, who captures the upside and how valuations reset. Our returns don't rely on hyper growth. We underwrite for durability and downside protection first.

The portfolio is predominantly senior secured, and we're typically sitting at low 30s LTVs, meaning that over 65% of the company's value would need to be impaired before our investment is impacted. There is inherently a margin of safety in our capital structure. And we're not taking loan bets. Our loans generally have an average duration of 3 to 5 years, which gives us a defined time horizon for how this evolution plays out. In addition, the portfolio turns over actively with about 1/4 of the book repaying each year, which means a large portion of today's portfolio has been underwritten in an AI world. Many of these businesses are built on multiyear contractual recurring revenue models, which supports stability through periods of change and we have contractual maturities, ultimately, we must be repaid. Underpinning all of this is our specialized dedicated technology investing team of over 40 professionals who have been continuously pressure testing our underwriting and portfolio as AI reshapes the landscape.

With that, I'll jump into an overview of investment activity for the quarter. As we previewed on our last call, our pipeline was very strong. In the fourth quarter, we converted that backlog and meaningfully more, deploying $2.3 billion of new investment commitments, including $2 billion of new investment fundings, while repayments remained steady at $881 million. This activity drove a meaningful increase in net leverage over the period, which will translate into improving returns over time. And while we've been very active, make no mistake, the bar for new investments is higher than it has ever been as we factor in a rapidly evolving AI landscape. There are areas that were once investable several years ago that we are now passing on.

Although we do not have full visibility into repayment activity, we have a meaningful backlog of approximately $900 million in transactions that we expect to fund next quarter, positioning us to continue deploying capital toward our portfolio growth targets. These investments remain subject to documentation and approvals, but our pro forma leverage based on these anticipated fundings and visible repayments would bring us to the bottom end of our target leverage range, slightly ahead of expectations at our listing. Looking ahead, we remain encouraged by the quality and momentum of our near-term pipeline, which continues to support disciplined portfolio growth through 2026.

Now I'll turn the call over to Jonathan to discuss our financial results in more detail.

Thank you, Erik. We delivered strong fourth quarter results driven by healthy deployment activity and the ongoing strength of our portfolio. We ended the quarter with total portfolio investments of over $14 billion, outstanding debt of $6 billion and total net assets of $8 billion. As of quarter end, our net asset value per share was $17.33, up $0.06 from the prior quarter, reflecting several write-ups of common and preferred equity positions, including SpaceX and Revolut, investments that exemplify our ability to proactively source and back innovative companies. For those newer to the story, we invested $27 million of equity in SpaceX in 2021, which has been written up over 7x as of December 31.

Turning to the income statement. OTF reported adjusted net investment income of $0.30 per share in the fourth quarter. This reflected steady interest income from increased deployment, offset by onetime expenses and the timing of originations, which were weighted towards the end of the period, limiting the impact to earnings. Altogether, adjusted net income was strong at $0.47 per share, equating to a 10.9% adjusted net income ROE for the quarter. Our GAAP results include $0.03 per share of accrued capital gains incentive fees driven by the positive marks on certain equity investments. This incentive fee accrual underscores OTF's strong credit track record with net gains since inception. 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 April 15, 2026, to shareholders of record as of March 31, 2026.

In addition to our regular dividend in connection with our listing in June, our Board declared 5 special dividends of $0.05 per share, each to be paid quarterly through September 2026. As a reminder, these dividends are being supported by the significant amount of spillover income OTF generated prior to listing, which totaled $0.40 as of quarter end.

Moving to the balance sheet. We ended the quarter with net leverage at 0.75x, reflecting the pickup in new deals and steady add-ons. Given that deployments were weighted toward the end of the quarter, our average leverage was 0.66x. So the full impact of the higher leverage and recent deployments will materialize in future earnings. Alongside that, we took several steps to improve our funding flexibility and reduce costs by adding lower cost secured capacity through CLO and SPV activity and exiting higher cost legacy financings. Pro forma for this activity, we expect annual run rate interest savings of approximately $10 million. Additionally, in January, we further diversified our liabilities with a $400 million unsecured bond issuance, demonstrating continued access to the IG unsecured market. We ended the quarter with nearly $2.3 billion of total cash and capacity on our facilities. This provides more than ample unfunded capacity to support our future growth as we ramp towards our target leverage range of 0.9 to 1.25x.

Turning to OTF stock float. As Craig mentioned earlier, roughly 50% of shares have been released, and our next lockup release is scheduled for tomorrow, February 20. We hope that additional lockup releases will continue to ease technical pressures, generate interest and diversify our ownership base over time. We've been using this period to thoughtfully deploy the tools available to us, such as our share repurchase program to drive value for our investors. As Craig mentioned, we repurchased $65 million of shares during the quarter, which added $0.03 per share to NAV. The Board of Directors has also authorized a new share repurchase program of up to $300 million, which will replace our current $200 million share repurchase plan. Longer-term, we remain confident that our share price will ultimately reflect the strength of our fundamentals.

And now I'll hand it back to Craig to provide final thoughts for today's call.

Thanks, Jonathan. As we wrap up today's call, I want to take a step back and reflect on the current market environment and what it means for OTF. The world is changing quickly with the acceleration of AI. We have always underwritten our investments with technological change in mind, but the pace of that evolution and the uncertainty around where it will go next is higher today. That's why our investment teams are even more committed to being selective, particularly as it relates to underwriting AI risk and focusing our capital on the platforms we believe will remain durable through the transition. At the same time, periods like this tend to create supply-demand imbalances as some lenders pull back and that volatility can create opportunity. It can lead to better pricing, better structure and the ability to deploy capital into names we like on attractive terms.

And importantly, OTF continues to stand out in the BDC universe for its capacity to invest in new opportunities while seeking to grow ROE. It also provides differentiated access to the innovative growth economy through select positions like SpaceX. We have significant capacity and ample liquidity, which positions us to take advantage of these opportunities as they emerge.

In closing, I'd like to remind everyone that OTF's earnings trajectory is positioned differently than many BDC peers. We set our $0.35 base dividend in early 2025 using the forward curve at the time, so it was calibrated for a lower rate environment. As a result, we are not expecting to have to adjust our base dividend simply because rates have moved lower, unlike many other BDCs that set their dividends in a very different backdrop. Even excluding any special dividends, our $0.35 base dividend alone represents an approximately 11% yield at today's market value. As we look ahead, we're optimistic that this environment will create more opportunities to deploy capital in a disciplined way, continue to grow our earnings power and deliver compelling results for shareholders.

Thank you for your continued support. Operator, please open the line for questions.

[Operator Instructions] Today's first question is coming from Brian McKenna of Citizens.

Okay. So just looking at the portfolio, clearly underlevered today. There's meaningful capacity to invest. But given the evolving deployment environment here, how are you making sure you're investing into the right businesses in the current backdrop? And I asked this on the prior call, but are there any subsectors you're looking to lean into from a deployment perspective, specifically as it relates to the tech sector and then just some of the businesses in and around AI?

Yes, sure. Thanks for the question. So we tried to lay out a pretty comprehensive framework of how we're thinking about the broader software universe in the prepared remarks, but I appreciate that it was probably somewhat dense. And as I said, we think that the market misunderstands or unappreciates that our existing companies and the opportunities that we're facing today are more than just simple bundles of code, right? These businesses are attractive and valuable and they're solving complex enterprise-grade challenges that's built upon a tremendous amount of knowledge in solving domain or vertically specific challenges. These are decades in the making, mastering these types of workflows. They leverage complicated rules and processes, combining that with proprietary data, sprawling integrations. And they also leverage the power of network effects into that specific area of expertise.

And the last point is they really underpin zero fault tolerance operations. So it's the amalgam, Brian, of all of those things, and that can be represented differently in different categories, both in applications or payments or security or more specifically in different areas of the application universe. But we believe that just because the ability to write code is changing, the market seems to be pricing in a situation where code generation renders everything else around them. That's clearly not the case. All of our companies and the ones we're looking at it have an equal and unembedded access to the same models and the power of AI that everybody else does. And if your solution was a thin user interface wrapper over a back-end database, you're already in trouble, but that's never been where we focused simple feature differentiation was never the main differentiator.

But also, as I alluded to, this continued evolution from systems of record to systems of action where data is stored, activity is tracked to where AI can manage workflows independently, all of that taken together is why we think the portfolio and the opportunity set and where we're going to continue to focus is much stronger than what the market might fear. Of course, there will be disruption, but we think the companies with the real moat will continue to leverage these tools and we will build faster and compound their leads.

That's great. And switching gears a little bit. Just in terms of the trajectory of ROEs from here, I know this will ebb and flow a little bit from quarter-to-quarter just as you manage prepayments and leverage is further optimized. But is there just an updated time line around ROEs kind of normalizing ROEs over time? And then should we still think about a normalized ROE longer-term of about 10%?

Yes. So Brian, it's -- we made some significant progress in terms of deployments in the fourth quarter. Some of those deployments were back-ended. Therefore, average leverage was a bit lower than where we ended. We're still very, very much on track in terms of delivering the NIIs for the dividend that we've basically set by the end of this year, which is consistent with how we were portraying it when we -- back when we listed the company in the middle of last year. And so we're on track. We think that over the -- it will -- it should build over the course of the year. And so you saw a little bit of a decline in NII due to some bespoke items this quarter, but that momentum should pick up as we move across 2026. And we're not changing the time line, but some of it may be a little bit more back-ended to the second half of '26 in terms of reaching those targets.

The next question is coming from Kenneth Lee of RBC Capital Markets.

Just one on the refreshed or new share repurchase program. Given the leverage capacity there, wondering how active OTF can be there in that area?

Yes. So look, we're -- we've upsized and refreshed the repurchase program here from $200 million up to $300 million. We repurchased shares in the quarter. We're still releasing shares under lockups. We're approximately 50% released at this point in time with another 50% really coming -- the remainder coming out over the course of the balance of the first half of the year. And so liquidity in the stock is definitely picking up, but certainly prevents us from being as active in terms of the repurchase plan, but we plan to continue to use it, and that's why you saw us with the Board refresh it and upsize it.

Look, we're not afraid to use it. We think these levels don't make any sense, and we couldn't be clear with our confidence in the portfolio and the value of the assets. So if there's a world where we can sell our assets at par and buy our stock in the 70s, that's a world we're going to have to do that. It's attractive to shareholders. So we're not -- we used it. We used it in a big way in both funds in the fourth quarter. We used it more than any other firm, and we'll continue to use it.

Got you. Very helpful there. And just one follow-up, if I may. Just in terms of the spreads you're seeing, any drivers for the quarter-over-quarter movement in spreads on new investments? And what are your expectations going forward in this area?

Yes. So look, a lot of the activity that you saw roll through the financials and the performance in the fourth quarter were deals that were negotiated, as I alluded to, in Q3 and in Q4, which is spreads have been persistently tight. You've heard it from us on this call and other calls. What I think -- I don't want to try to predict the future too dramatically here, but I think we are going to see, particularly in the software universe, a widening of spreads. I think there's going to be lesser participation, frankly. I don't want to speak on behalf of investor banks or any other firms, but I think it's going to be more challenging to underwrite these assets. It requires very unique and deep sophisticated sets of investors who do nothing but focus on this all day long.

We have that team of 40 people. The opportunities that we're seeing today and in the first quarter are actually extremely attractive. We signed up some very large substantial assets at pretty attractive rates and very attractive LTVs. And I think we're going to continue to invest in very similar companies, as I articulated, but those spreads will probably continue to widen, I hope, for some period of time.

The next question is coming from Arren Cyganovich of Truist Securities.

I appreciate all the comments. Clearly, you're still very confident in software. With the $900 million backlog that you've mentioned, is there a big component of software in there? And when you're talking to sponsors as you're kind of moving through this in real time, what are you hearing from the sponsors in terms of their continued commitment to investing in the space?

Yes. I think it's pretty consistent with what we've looked at historically. There's some -- it's probably a pretty comparable mix in terms of overall software mix between applications and some security opportunities. In our conversations with our portfolio companies and sponsors, they're doing exactly the same thing that we're doing. Everyone is reevaluating everything they own and looking at how they are going to consider to move forward and invest against the lens of exactly what we're seeing today. So everyone is really re-underwriting and refocusing on what we think are the most important things, right? So enterprise-grade complexity, as I said, data gravity, workflow modes, proprietary assets, network effects, understanding tech debt and pricing durability, fault tolerance, regulatory infrastructure, all of these other factors as we think about what is the most attractive areas to invest in the new world of AI.

And we continue to see new opportunities, businesses that are compounding their leads and compounding their moats, leveraging these tools that are democratic and everyone has access to, and we feel that the incumbency position in which they're in, will continue to help them continue to grow. And we're very confident. Over time, we will -- there are areas, as I said earlier, particularly some areas that were in scope of in applications, maybe parts of managing the development life cycle and pipeline for software developers or passive repositories of information with lightweight user interfaces, there are narrow point solutions that are not particularly embedded and those are at risk. And frankly, we haven't really been focused on those before. So the application aperture might tighten just a little bit, and you might see a little less in applications, but I still think there's going to be some tremendous opportunities there. So we're pretty excited about the thesis, and it's going to take some time to prove out, but I think we'll be happy and you'll be happy with the results.

The next question is coming from Casey Alexander of Compass Point.

The private equity sector is pretty reactive to what it sees as market sentiment. And seeing this -- I mean, you guys are pretty underlevered. Is your pipeline shifting and are private equity firms shifting their activity away from software at least until there's more certainty? And does that create more challenges for you to get to a more fully levered position?

I think that answer might depend on with whom you're talking about in the private equity universe. I think if you were to talk to some of the larger players, the technology-focused investors, they largely share the thesis that we have, and they are out talking and evangelizing about what we see and what they see and where the opportunity sets might lie. And frankly, particularly in the public markets, there might be some really attractive opportunities that have been created by somewhat of a dislocation. This is kind of similar to what we saw in 2022, where coming off of the peak multiples in ' 20 and '21 in the ZIRP environment, there were a meaningfully large amount of, I think, over 20 go-private tech transactions at pretty good valuations and really attractive rates of return from our perspective. That isn't to say that for us or for others that we are exclusively software.

As I said in the prepared remarks, we really like software, and we will continue to focus on areas of software that we think are the most defensible over time, but there are other areas of tech that we have been invested in. There are other areas of business services. There are other areas of life sciences that we continue to focus on. So I think the aperture that we have is appropriately wide and it doesn't particularly give me concerned about the overall opportunity set to get to our target.

I might just add, I actually don't think the private equity firms are reactive. I think they take a long view. And I think they're extremely well versed in the space. And they're not making investment decisions based on the headlines of today. They're deep into these companies. And I think that they -- I would expect that they will be able to discern businesses that are going to do well, and they're going to view this as an opportunity to buy them cheap. We've seen this for 30 years. This is the history of private equity.

I would also say that without in any way minimizing the disruption of AI, we think it helps us as a direct lender to see the public loan markets get dislocated and helps us. That's a competing source of capital -- so those investors don't have the ability to do deep dive due diligence. They don't have 40-person investment teams that get to know their companies and get detailed financial information. They're just trading on headlines. And so that's an opportunity for us. So I'm completely confident that we're going to be able to get OTF to its target leverage. We're not hell bent on all that being in software. But if there are great software investments, we'll do them. But the fund has a broad mandate, as Erik said. And in this environment, I expect others to pull back their lending capacity, and I think we're going to benefit from that for the select deals that we do.

Our next question is coming from Sean Paul Adams of B. Riley Securities.

You guys talked a little bit about selling off some assets at par, especially given the fact that you guys are kind of trading at a 30% discount to NAV. But later in the call, you additionally touched on the fact that there's additional opportunities, especially in the open market for new investments, especially in a couple of other sectors. Can you provide a little bit more color on just that bifurcation that you're going to be looking at in terms of either repurchasing the stocks or reinvesting into other sectors? It just seems like there's kind of a competing viewpoint right there.

Sure. I appreciate the question. It's a good one. Look, this is what we do, and this is how we've been doing it for 10 years. We're always evaluating the incremental investment opportunity versus potentially buying our stock. We're in an environment where both OBDC, OTF stock prices are severely depressed on a net asset value. It's not specific to Blue Owl. It's the case of most of the industry. And so we will compare the incremental dollar that we can deploy and get returns from buying our stock in the 70s or 80s versus making additional loans. There's a lot of value to having permanent capital. We don't take that lightly. But by the same token, buying stock can be very accretive to shareholders. So obviously limits to how much stock we can buy. We're mindful of our leverage, our liquidity.

Our main business is lending. That's the investors are investing in this fund, so we'll make loans. But we'll do both. I think the fourth quarter speaks for itself in terms of not just talking about buying stock. We bought stock. So I think it's very instructive. And I think we'll be very open-minded and front-footed about buying stock as well. It just depends on the relative returns of those 2 parameters. Just as a reminder, I think maybe this is obvious, but I'll say it, we have to follow various regulatory restrictions when you're buying back stock, there are windows where we can buy or not buy depending upon where we are in the quarter. So -- and that's no different than any other company out there. So we don't have unfettered ability to buy stock every day with volume restrictions and the like. But within those bounds, we're an active buyer in the fourth quarter, and we'll continue to evaluate that. OTF is in an extremely strong position because it's underlevered. So we can do both. So we will do both.

The next question is coming from Brian McKenna with Citizens.

Sorry if I missed this, but if you were to mark-to-market your portfolio for current public market valuations and multiples, what is the average LTV of the portfolio look like? And then just an unrelated question on your SpaceX investment, what valuation was this position marked at, at the end of the year?

Sure. So I'll answer the second one first. So when we see observed marks, in this case, it was a tender offer in the period, we typically take a discount to the tender. So it's roughly 10% of the tender offer, which was $800 billion. So I believe it's marked at around $720 billion or so today. That obviously does not contemplate the merger of SpaceX and xAI, which was consummated in Q1 at a $1.25 trillion value. I keep stumbling over that word because it's such a staggeringly large number. So we would obviously expect to see some meaningful -- expect to see a meaningful uptick in that position in Q1 as well. Look, we're going through -- we're obviously going through always and looking at what's going on in the public markets and evaluating what we think the prevailing values are there and how accurate they are for what actually occurs in private transactions.

I think the first point that I would make is looking at private equity deals that we're doing now and what we're seeing in Q1, there's a meaningful disconnect between prevailing control values in private markets versus what we're observing in public markets. That said, we don't ignore those marks. But if you take our portfolio and just say you're 30% LTV across the entire portfolio, if you had a 50% adjustment to enterprise value, obviously, the LTVs would go up by 16% or 17%. So would I be -- I don't love going up to 46% to 47% or 48% LTV, but that's obviously still a tremendous margin of safety from our perspective. So we have a lot of ability to absorb any amount of degradation in terminal multiples for our software companies given where we attach.

The next question is coming from Paul Johnson of KBW.

I'm just curious in the decade or so or near decade that you guys have been investing in the space, the software space and direct lending broadly. But how many software defaults have the Blue Owl platform worked through in the total aggregate of investments that you've made in that space?

Yes. I mean the answer to that is one. And that one company was a publicly visible name that we work through and we eventually took over that company. We still own that company. It's still on the SOI, and we're still trying to see where we can take that business. But that's across -- I don't have the precise number of the total investments in software since inception, but it's 300-plus names, obviously. So a tremendous number. The number of defaults are almost nonexistent and really troubled situations are very small. And I think that's a function of 2 things. Number one, it's a function of the strength of the overall business model, but also our asset selection. I mean after 10 years, at some point, it's a pretty real and observable track record over a long enough period of time.

Very helpful. And then on -- I'm just curious maybe your observations of the ARR structures within the portfolio. I honestly can't remember if you've disclosed how much of the portfolio is ARR, but any sort of observations and trends there in terms of conversions or payoffs this quarter and your thoughts on the performance there?

Yes. The ARR percentage has been coming down pretty dramatically over the past few years. It's probably sitting today somewhere in the low teens. And that drop-off has been a function of most of the class of 2022 and some of 2023 converting early or being refinanced into alternative markets. So they've met their growth goals. They've generated a meaningful amount of EBITDA, and we've either converted them into regular rate cash flow transactions or they've been executed in alternative environments. So we think that there's still really good businesses that could be underwritten on that basis.

I think, obviously, the bar for that type of underwriting has always been exceptionally high, and I think it will continue to be exceptionally high, particularly in a world where we're evaluating potential evolutions of revenue models. So it's a pretty low percentage. It's the absolute lowest percentage it's been, frankly, since inception right now, and we'll continue to monitor that going forward.

Once again, also very helpful. And the last question I had, just bigger picture, I'd like to get your thoughts maybe just broadly for software, even kind of pre AI disruption fears. What are your thoughts in terms of the economics or the unit economics for a typical SaaS deal? Have you seen any sort of softening there in terms of the KPIs that you look at for the industry? Or do they remain as strong as ever? And I ask just because we've heard from a few of your competitors that, that may be the case, but I just like to get your opinion on that.

Well, it depends on what unit economics you're referring to. If you look at the -- just the overall ASPs that we're seeing in our portfolios for new bookings, they continue to be very strong. I think what you've seen both in public companies as well as private companies, which I think you're alluding to has been a degradation in net new retention statistics, which means the companies are just growing at an absolutely slower pace than they were 4 or 5 years ago, which is true. And if you look at the efficiency scores across many of these companies, they're okay in the 0.5x, 0.6x range.

But across our portfolio, we've seen NRR come down from, call it, 115 to 108, which certainly is a slowdown in the absolute growth rate of those businesses, and that absolutely will have an impact on the terminal value of that asset. But we certainly haven't seen, broadly speaking, and I'm not going to go into the 25 different components of KPIs and unit economics and quality of revenue that we talk about, a deterioration that would suggest there's some major issue. So I've read similar things that you have. And I think that if you point to one specific statistic, I think you might be somewhat misled by what's going on in the aggregate.

Thank you. That brings us to the end of the question-and-answer session. I will now turn the floor back over to management for closing comments.

Okay. Thanks all for joining us. If you have any follow-up questions, we're here and we welcome engaging with you on OTF or OBDC. Have a great afternoon.

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

Good morning, everyone, and welcome to Blue Owl Technology Finance Corp.'s Third Quarter 2025 Earnings Conference Call. As a reminder, this call is being recorded. At this time, I would like to turn the call over to Mike Mosticchio, Head of BDC Investor Relations. Please go ahead.

Thank you, operator, and welcome to Blue Owl Technology Finance Corp.'s Third Quarter 2025 Earnings Conference Call. Yesterday, OTF issued its earnings release and posted an earnings presentation for the third quarter ended September 30, 2025. These should be reviewed in connection with the company's 10-Q filed yesterday with the SEC. All materials referenced on today's call, including the earnings press release, earnings presentation and 10-Q are available on the Investors section of the company's website at blueowltechnologyfinance.com.

Joining us on the call today are Craig Packer, Chief Executive Officer; Erik Bissonnette, President; and Jonathan Lamm, 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 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 OTF's filings with the SEC. The company assumes no obligation to update any forward-looking statements.

We would also like to remind everyone that we'll refer to non-GAAP measures on this call, which are reconciled to GAAP figures in our earnings presentation available on the Events and Presentations 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. With that, I'll turn the call over to Craig.

Thanks, Mike. Good morning, everyone, and thank you all for joining us today. As a reminder, last quarter was our first earnings call after listing on the New York Stock Exchange in June, and this is our first full quarter as a publicly listed company. OTF delivered strong third quarter results driven by the continued robust performance of our differentiated technology portfolio.

As of quarter end, our net asset value increased to $17.27, up $0.10 or 60 basis points from Q2 due to continued strong portfolio performance. This is consistent with last quarter's trend where we saw NAV increase $0.08 from Q1. Since inception, OTF has generated NAV growth of approximately 18%, further demonstrating our investment thesis that technology investing and software, in particular, offers one of the most compelling risk return profiles in the market.

Our nonaccrual rate remains one of the best in the industry at 3 basis points of the portfolio at fair value. Our credit performance is underscored by the sustained strength of our portfolio companies, which continue to experience low double-digit revenue and EBITDA growth. As discussed on last quarter's earnings call, we are focused on increasing net leverage by selectively growing our portfolio in what we deem to be attractive risk-adjusted investments to enhance ROE. As Erik will discuss later, deal flow and origination activity were solid, but so were repayments, resulting in leverage at quarter end that was in line with the prior period. This contributed to a third quarter ROE of 7.4% based on $0.32 per share of adjusted NII.

However, inclusive of gains, our adjusted net income ROE for the quarter was 12.6%. As we look ahead, we are encouraged by the continued momentum of our pipeline. While we don't have full visibility into repayment activity, our pipeline is robust and positions us to deploy capital into attractive opportunities as we work towards meeting our portfolio growth targets. Before Erik gives more detail on this quarter's performance, I'd like to take a moment to address the broader market sentiment around credit that has been a focus in recent headlines.

In particular, we'd like to reaffirm why we believe direct lending remains a compelling strategy and technology lending specifically continues to be the best performing area within it. At Blue Owl, our credit platform was designed to originate loans to high-quality sponsor-backed companies in the upper middle market with a focus on noncyclical sectors that offer stability and resilience.

At OTF, the core of what we do is invest in enterprise-grade, large-scale, mission-critical software companies with the resources and talent to execute across various market conditions. These businesses typically generate highly predictable recurring revenues, often secured by long-term contracts for essential services with strong organic growth. This revenue visibility, combined with their defensive positioning, makes software an ideal fit for direct lending.

Software credits also tend to feature tighter covenants, lower loan-to-value ratios and higher spreads, all of which contribute to stronger downside protection and more stable returns. The majority of OTF's portfolio is comprised of senior secured loans, complemented by select debt and equity-related investments in large pre-IPO companies that offer both income and upside potential. Our average loan-to-value ratio remains conservative at approximately 33%, and we maintain direct relationships with management teams, typically serving as lead or co-lead lender.

OTF's credit performance continues to validate our approach with virtually no nonaccruals today and only 2 nonaccruals in our operating history. Our focus on resilient software businesses has helped us deliver strong returns through varying market conditions while providing investors with meaningful downside protection and consistent income.

And now I'll turn it over to Erik for more detail on our portfolio performance this quarter.

Thanks, Craig. To start, we are pleased with the performance of the portfolio with strong fundamentals and excellent credit quality. Since listing in June, OTF remains the largest technology-focused BDC and is highly diversified across 38 end markets and 185 portfolio companies with average investments representing approximately 50 basis points of the portfolio.

In our last earnings call, we shared our plan to enhance OTF's earnings profile, including ramping to target leverage while maintaining our credit discipline. I'd like to share a few updates on the execution of our plan while highlighting the strength of OTF's performance alongside these efforts. To touch on origination activity, we deployed approximately $1 billion of new investment commitments with $811 million of fundings in the quarter. We also had elevated repayments of $848 million, which resulted in net leverage that was in line with the prior quarter.

As Craig mentioned, we've seen strong momentum in our origination activity and backlog. Through October 31, we've deployed nearly $400 million in new deals and have a backlog of over $500 million in transactions we expect to fund in this calendar quarter. While investments in our backlog are subject to documentation and approvals, our leverage pro forma based on this activity and visible repayments would be up nearly 1/10 of a turn at year-end. Looking ahead, we're encouraged by the increase in pipeline activity and remain focused on improving leverage while maintaining our underwriting standards that have driven our performance across varying market conditions.

Turning to the portfolio. At quarter end, our investments totaled $13 billion with 80% of senior secured investments, reflecting our focus on being at the top of the capital structure. We emphasize large established technology companies with a strategic focus on software, where we see durable business models and attractive recurring revenue profiles. These borrowers are scaled businesses with strong fundamentals that continue to support portfolio performance. The average revenue and EBITDA of our portfolio borrowers is $950 million and $282 million, respectively, and they continue to experience low double-digit growth in both metrics on a year-over-year basis.

Our debt portfolio sits at a conservative LTV of 33% on average, which is a key differentiator in our approach as we typically see a significant amount of equity capital below our debt. Interest coverage is over 2x based on current spot rates, reflecting our borrowers' continued growth as well as lower base rates. These metrics provide a meaningful cushion to support debt service and protect against downside risk. We remain focused on optimizing our portfolio mix for an improved yield, which includes selectively increasing our allocation to PIK and ARR.

PIK is selectively offered at origination as a time-limited flexibility option that comes with a premium return. Over 97% of our PIK income was structured at initial underwrite, and these investments continue to perform as expected. Most importantly, we have never had a PIK loan that was structured at origination generate a loss since our inception. ARR loans are offered to high organic growth companies with attractive unit economics that choose to reinvest cash flows into customer acquisition. These loans carry a yield premium and are contractually required to convert to a regular rate EBITDA loan within a specified period, typically 2 to 3 years.

As of quarter end, ARR loans comprised 12% of the portfolio at fair value, which continues to be on the low end of historical averages. As our current allocation to PIK and ARR investments is below target, we will look to selectively increase our exposure as we find attractive opportunities.

Credit performance remains excellent. Our nonaccrual rate is 3 basis points at fair value. There have only been 2 names on nonaccrual in our entire operating history, and we have delivered 16 basis points of net gains since inception. Internal ratings remain steady with only 8% of investments rated 3 to 5, and we have not seen any material pickup in amendment activity or other signs of stress.

Next, I want to take a moment to discuss how we're thinking about the impact of AI on the software sector and why we remain confident in our strategy, even as the conversation around potential disintermediation evolves. To start, software is not a single monolithic category. It spans multiple subsectors, including horizontal software that serves universal functions across industries, vertical software tailored to specific sectors and infrastructure software that underpins hardware, platforms and security. It is also a massive market with roughly $1.4 trillion in annual spending that's growing in the low teens annually. A market of this magnitude and diverseness defies holistic evaluation and requires a more granular and refined analysis.

Within this landscape, we believe that software companies can vary widely in their long-term competitive advantages depending on their profile, market positioning and target audience. Our approach focuses on businesses that offer broad integrated solutions rather than narrow point solutions as platforms create deeper customer engagement and stickiness. We also prioritize companies that manage complex enterprise operations and leverage proprietary data sets that are difficult to replicate and often tied to regulatory compliance.

Further, mission-critical applications provide the infrastructure for core business operations and cannot tolerate downtime, errors or security breaches. The deeply embedded nature of these products and the risk of material business disruption creates substantial switching costs. In our view, this creates powerful layers of durability and resilience against potential AI disruption. In addition, we favor companies with clean, modern technology stacks that minimize legacy complexity and enable rapid integration of AI and emerging technologies. We continue to see substantial investments in our portfolio companies embracing the potential of these transformative services.

Finally, scale matters. Businesses with strong fundamentals, diverse product offerings and global reach have the financial and human capital to innovate faster and compete more effectively than smaller firms. AI is a profound paradigm shift. And although we do not believe it will have a materially negative impact to our portfolio, we believe it is poised to transform decision-making, accelerate productivity and drive unprecedented innovation across the modern enterprise. We believe AI will drive further value creation for software businesses by enabling superior product features, optimizing operations and delivering highly personalized customer experiences. There will naturally be winners and losers driven by execution, adaptability and the underlying strength of each company.

Access to AI is universal, and ultimate market share will hinge on delivering the most value to the end customer. We have seen examples of how the growth of AI has benefited our portfolio companies and our investment in Securiti AI highlights this. The company, which delivers AI-powered data security and privacy solutions received a preferred equity investment from us in 2022 and is now set to be sold at a significant valuation, underscoring the strategic relevance and value creation potential of our approach.

Additionally, as AI continues to reshape industries, we are actively identifying new ways to participate in its growth by leveraging opportunities across Blue Owl's platform. We're currently exploring investments sourced in collaboration with our alternative credit, real asset and data center teams, including financing data center assets and equipment such as GPUs. These opportunities align with our underwriting standards, fit within the thesis of our overall strategy and offer attractive unit economics and tightly structured documentation.

In summary, we believe that the combination of our disciplined strategy, deep relationships and focus on resilient software businesses will continue to deliver strong results even as AI reshapes the industry.

And now I'll turn the call over to Jonathan to provide more detail on OTF's quarterly results and financial profile.

Thank you, Erik. We delivered solid third quarter results driven by the ongoing strength of our portfolio. We ended the quarter with total portfolio investments of approximately $13 billion, outstanding debt of $5 billion and total net assets of $8 billion. As of quarter end, our net asset value per share was $17.27, up $0.10 from the prior quarter. The increase was primarily driven by the performance of several equity positions, which drove unrealized write-ups in the quarter.

Turning to the income statement. We reported adjusted net investment income of $0.32 per share in the third quarter. I would note that our Q3 GAAP figures included -- include approximately $0.04 per share of accrued capital gains incentive fees on the write-ups from select equity investments. This incentive fee accrual underscores OTF's strong credit track record with net gains since inception.

Earlier this week, our Board declared a fourth quarter regular dividend of $0.35 per share, consistent with our last quarterly distribution, which will be paid on or before January 15, 2026, to shareholders of record as of December 31, 2025. In addition to our regular dividend, in connection with our listing in June, our Board declared 5 special dividends of $0.05 per share, each to be paid quarterly beginning in the third quarter. In aggregate, these special dividends provide an additional $0.25 per share in distributions to our shareholders. As a reminder, these dividends are being supported by the significant amount of spillover income OTF generated prior to listing, which totaled $0.46 as of quarter end. Together, our base dividend of $0.35 and quarterly special of $0.05 result in a dividend yield of 9.3%.

Moving to the balance sheet. We ended the quarter with net leverage of 0.57x as originations were matched by elevated repayment activity. After quarter end, we took steps to improve funding flexibility and lower costs. First, we priced a new $390 million CLO with a blended cost of capital of S plus 1.82%. We also amended an SPV, increasing its capacity from $300 million to $500 million, reducing pricing by 40 basis points and extending its maturity. Finally, we terminated a legacy CLO that carried higher pricing at S plus 3.56%. We ended the quarter with nearly $4 billion of total cash and capacity on our facilities. This provides us with more than ample unfunded capacity to support our future growth as we ramp towards our target leverage range of 0.9 to 1.25x.

Turning to OTF stock float. You will recall that in connection with the direct listing in June, our Board waived the lockup on approximately 5% of each investor's position, making those shares freely tradable at the time of the listing. On September 9, we early released 10% of shares for a total of 15% of each shareholder's position as freely tradable. Initially, the remaining shares were scheduled to be released over 3 tranches at 3-month intervals. Today, the Board approved an update to that plan. The remaining lockup releases will now be broken down into smaller, more frequent tranches, resulting in approximately 11% of shares outstanding being released each month, beginning next week on November 13.

This adjustment is designed to further enhance liquidity, broaden investor participation and attract interest in our strategy. We encourage investors to review the updated lockup release schedule as announced in a press release today. In connection with the listing, our Board of Directors previously authorized a $200 million discretionary share repurchase program. Following the partial early lockup release, the company repurchased $9 million of shares at an average price to book value of 0.84x, which was accretive to NAV.

And now I'll hand it back to Craig to provide final thoughts for today's call.

Thanks, Jonathan. As we wrap up today's call, I want to emphasize how proud we are of OTF's progress. Our performance continues to reflect the quality and resilience of our portfolio, underscored by excellent credit quality and the momentum we're seeing across the business. OTF stands out in the BDC universe for its capacity to invest in new opportunities while seeking to grow ROE. Our pipeline remains robust, and we will continue to be selective in deploying capital into attractive risk-adjusted opportunities.

As we work on optimizing our ROE, we have provided clear visibility to our shareholders on returns by declaring 5 special dividends through September 2026. Additionally, the accelerated partial lockup release has brought more shares into the market, improving liquidity for our existing shareholders and attracting new investors. We're encouraged by the positive momentum this has generated and plan to build on it through the revised lockup release schedule that Jonathan outlined earlier. Longer term, we remain confident that our share price will ultimately reflect the strength of our fundamentals. We're optimistic about the future of OTF. Our credit quality remains strong, and we have a clear path forward to growing our earnings power.

As we execute on our portfolio deployment strategy, we believe our unique focus on upper middle market technology lending, combined with our scale and experienced team will allow us to continue delivering compelling results for our shareholders. Thank you for your continued support and for joining us today. We look forward to updating you on our progress next quarter. We'll now open the line for questions.

[Operator Instructions]

Today's first question is coming from Brian Mckenna of Citizens.

Okay. You've talked about an ROE expansion opportunity of 200 basis points plus for OTF. I'm assuming that's still a reasonable expectation from here. And then is there any updated time line around getting there? And then pretty related to that, just looking at the balance sheet, you have $400 million of cash, leverage is still only at 0.57x. I know you touched on the outlook for leverage into year-end, but how should we think about leverage throughout next year? And then I guess, where does that ultimately settle in at longer term?

I'll start and I you guys can jump in. I think we think that the ROE over time, 200 basis points, perhaps more, perhaps as much as 250. Again, most of that is simply getting to our target leverage, which will take some time, but is relatively under our control as well as rotating out of some of our non-income-producing investments and grinding our debt costs lower. So we think that is still the case.

In terms of time, look, we're trying to balance being disciplined on investing. Repayments are a bit of a headwind. And -- but we'd like to get to target leverage as soon as it's sort of practical. I think that our math shows with a comfortable pace of deployment, by the end of next year, we should be nicely in the center of our target amount of leverage and NII consistent with our dividend level. But Erik and Jonathan, feel free to add anything to anything I've said.

That was pretty complete.

Okay. I appreciate that. And then it was great to see another strong quarter of gains across the portfolio. I think this speaks to how the portfolio is structured and really the upside potential that does exist in certain parts of the book. So a little tough to predict quarter-to-quarter, but I mean, any visibility into any additional markups or similar type events into year-end? And then you've done a nice job growing NAV since inception for OTF. What should we expect in terms of NAV growth from here as a public vehicle?

Yes, I'll take that. So on the NAV growth on some of these equity positions, I think as you mentioned, this is a -- it's a core part of the strategy, and it can be a great driver of the growth of NAV. We saw some pretty material write-ups. And I think one of the points we want to talk about with respect to those write-ups where they were all mark transactions. So one is a full sale process. The other 2 major drivers were very, very large tenders. So they're real observed valuations in the market. So we feel really confident about where we're going to see potential value creation.

As you said, Brian, it's hard to predict when we're going to see these appreciation events or when we're going to see the ultimate exits. We're confident that the IPO market is okay, but improving. So hopefully, we'll see some activity in that regard. And frankly, a bunch of the investments that we have today in our equity book, both income and non-equity -- I'm sorry, non-income producing, you are getting to a stage where an exit will need to happen. So we're cautiously optimistic that we'll see some more of these throughout 2026. And given the underlying performance of the assets themselves, we feel they'll be in a good place to be realized.

The next question is coming from Finian O'Shea of Wells Fargo.

I wanted to hit on the ABF or data center GPU remark. Can you talk about the type of returns available there? Is there a sort of mezz market? Or does this mean more at the equity level? And yes, I hit on types of returns. I'll leave it at that.

I'll start, and Erik, you should chime in. Look, we haven't done any data center GPU investments yet. So we're flagging it because we like to be transparent about what we're looking at, and we expect to do them in the relatively coming -- near term in the coming quarters. Just as a reminder, Blue Owl has a significant presence in the data center space in our real assets business, having acquired a business last year, IPI, that's a developer of data centers and also investing in data centers and data center structures in our real estate business.

So we've become quite active in the space as a platform. And we think that a subset of those investment opportunities in a judicious amount can be appropriate for our direct lending portfolios, in particular, our tech funds given the nature of the tech fund. We're going to approach investing in these assets in the same sort of careful, deliberate way that we have in all of our investing. What we're looking for is investments that can generate very predictable income streams and dividend streams that can contribute to the earnings power of the portfolio. And we're also going to stick to our knitting when it comes to portfolio construction in terms of bite size and the like.

Most importantly, these investments -- the investments that we think are appropriate for the direct lending funds and our BDCs are ones where we're primarily taking very predictable financing risk against extremely high-quality counterparties. You should think of this as more like equipment finance with predictable cash flow streams. We're not making a bet on underlying technology or underlying winners in the AI race. That's not the type of investment that we're going to be putting in the funds. The actual structure of the investments will vary. Data centers looks a little bit different than GPUs. But Erik, maybe you can just comment on the general return profile.

Yes. I thought that was a great and comprehensive summary. I think it is a little bit dependent on the various different types of opportunities, spin. But the range of returns that we're looking at tend to be in the low double digits, maybe a little more depending on the specific opportunity set, but somewhere in that low double-digit range.

A follow-up on the AI issue or debate. It sounded like a pretty clear tailwind for software companies. Can you touch on like to what extent is there a cohort of visible losers in software? Are there deals that are being sort of turned down by the market kind of thing or down rounds? Like is there any sort of impairment happening from names that are more of a clear-cut risk or maybe even being impacted already out there in the market?

Yes, it's a good question. I think the areas that we see, the most immediate risk from AI, and we've seen it certainly not in our portfolio, but companies that we've evaluated in the past around testing for software, which can be now more tightly integrated into coding tools, very lightweight tooling companies, businesses that have very small dollars invested into them, things that are not integrated into the broader operations of an overall enterprise, very siloed, like we've seen very early signs of people standing up lightweight products that are good enough to be deployed on the line. They're not necessarily enterprise grade or enterprise-ready and nowhere close to what we're seeing and what we actually invest in on our side.

But thankfully, in our portfolio, when we designed the rubric and the framework that I articulated on the -- in the script, it certainly -- we've been investing in that fashion for the better part of 15 to 20 years around that thesis. It was not established in the context of an AI world, but it actually stands up pretty well with respect to where we think the most durable parts of software will be and frankly, where we think the incumbents have the most power to embed these tools into their solutions and drive further value and hopefully expand their TAM over time.

The next question is coming from Arren Cyganovich of Truist Securities.

I just had a question about the yield-enhancing structures that you put out there, the ARR and the PIK upfront. They've kind of trended down, like you said, and you continue to intend to use those. What's kind of driving the, I guess, lack of fit for some of the recent investments? And do you have any in your recently deployed or in your backlog that might help enhance the yield a little?

Yes. Thanks, Arren. It's not a lack of fit. If you look at the decline in the overall portion of the ARR book, it's due to the outperformance of the underlying assets. I think that ARR percentage spiked to its peak around 2022. We had a very large amount of take privates that we did at that time, so very scaled businesses that have performed amazingly well. And due to that meaningful outperformance, the vast majority of those deals have either early converted or they've been refinanced into regular way of loans or frankly refinanced into the BSL market.

So the decline in overall exposure is solely due to the performance or outperformance of those underlying assets, and we're actively looking for new opportunities. We have done a few new deals in those structures this year. We do have some in the backlog. So we're certainly excited about those opportunities and the one takeaway I would have for you is certainly not to look at where we are right now from an exposure percentage and assume that's where it will be over time. I think we're going to try to take that up as we see opportunities.

From a PIK perspective, kind of breaking -- I kind of break it down into 2 components, PIK interest and PIK dividend income. Our PIK dividend income related to most of our preferred equity investments has actually been very, very stable, exactly where we'd expect it to be. Where we've seen the meaningful -- the most meaningful amount of decline comes from our PIK interest income. And as we've talked about in the past, this is something we do selectively and oftentimes do in a somewhat concentrated fashion to our best opportunities. And a lot of those deals were booked in '23 and '24 and with a 2-year time limit to utilize that option, they're just starting to roll off. So we're down to about 7.7% on PIK interest income. I would expect to see that come up modestly in the future.

I would just add to this. I appreciate the question and forgive me for making this observation. When levels were higher, I think that there were many investors that were asking about these structures with concern over quality. And at the time, we said these are -- we're doing these on purpose, we generate really good returns. We've had great success. And so I appreciate the spirit of the question as well, it's lower, can you do more?

I think it's the right way to look at it. I just would sort of put a bookmark for anyone listening on this call, when we do more, hopefully, it will be viewed in the context of this is something that we're quite comfortable with. We do -- the fund is designed to do, and it generates excess returns. That's why we do them. And so particularly on the PIK one, I think that can be a confusing topic for investors when they see PIK go up. We'll point to this being done as a yield enhancer, but I think sometimes it can get lost in the mix a little bit. So it's going to be a permanent part. The opportunity set will ebb and flow a bit. In this case, it's a sign of success that's gone down a bit. And I'm sure when new deals come in, we'll have opportunities to do a bit more in the other direction.

The next question is coming from Paul Johnson of KBW.

Just a little bit further on broader the pipeline as well as just kind of the software deal flow. I appreciate the points on the -- and the outperformance there on the ARR book. But I'd just be curious, are you finding enough of those opportunities at this point because we know that you find those ARR deals attractive? Or at this point, is there's just such a hyper focus on AI and data centers that it's kind of, I guess, cut into the deal share, I guess, if you will, for those types of deals?

Yes. I don't think it's driven by the focus on AI or any other form of digital infrastructure. The buyers of the assets that we're typically financing for ARR deals are the large late-stage private equity firms. And that deal activity, as we've talked about, has been somewhat challenged over the past 2 years. What I would say is in the third quarter, we've seen a tremendous pickup in volume. We're looking at, I think, roughly 30% to 35% more deals than we were earlier this year.

Obviously, we were a little disappointed with the amount of repayments that we had in the third quarter, but we had $1 billion of deployments. We have a very large backlog coming into this quarter, of which many of those deals are ARR deals. We have new transactions that are still coming through today. Our deal screens have been exceptionally busy. So we feel really optimistic about the pacing of deal flow right now going into '26. And I would expect there to be a pretty standard mix to what we've done in the past. You're going to see ARR go up. You're going to see regular way EBITDA deals. You're going to see some structured equity deals. We have a bunch in the hopper. Unfortunately, it just did not convert in the third quarter, but fourth quarter looks good so far and excited about '26.

Got it. Appreciate that. Very helpful. And then last one for me. I was just curious, like for any of your upcoming maturity bonds, I think there's one coming in here in December. I mean, how much of a rush are you in to get ahead of that and potentially issue it into the unsecured market, I guess, just given that leverage is still a little bit below your optimal range?

You've answered the question. We're not in a rush at all. We have a significant amount of liquidity, obviously, given where leverage is. We feel very good about certainly our -- the percentages that we have in unsecured. We're cognizant, obviously, of upcoming maturities, but we have the opportunity really to take out whatever we need to using secured facilities and really be opportunistic as we think about sort of the next leg of issuance that we're going to do next year as we sort of -- as we deploy into our leverage. We have plenty of capacity to get to our target leverage ratio now. So all issuances really beyond this are to give us incremental liquidity and financing, obviously, as we manage the company on a go-forward basis.

[Operator Instructions]

Next question is coming from Mickey Schleien of Clear Street.

Just wanted some color on the unrealized appreciation of the portfolio, particularly the equity investments. Was that driven more by multiples or company performance or a combination of both?

Yes. It was driven mostly by performance and actual transactions. So the 3 largest movers in that category were the Securiti AI deal, which I mentioned, which will be a full realization in the fourth quarter, a very nice return. And the other 2 large drivers were Revolut and SpaceX, both of whom did very large tenders. I believe the Revolut tender was $300 million or $400 million. I'm not sure the sizing of the SpaceX. So real marked transactions as opposed to just increases in multiples.

Terrific. Given the nature of the portfolio, I just wanted to understand whether there's any risk exposure to the government shutdown at all?

Yes. There's relatively small exposure. We do have some software companies that serve various parts of the government. Most of them are serving states and municipalities, and most of them are on annual subscriptions. So they tend to prepay the cost of their software upfront. So obviously, we'll have to analyze. Hopefully, we don't have to analyze going into the next year if there's going to be any issues with respect to billing and cash conversion.

But we haven't seen any meaningful issues in our GovTech portfolio. Obviously, we think bookings are going to be a little slower for some of those names, but no major impacts. We've done a pretty extensive DOGE-related deep dive and now obviously, you can dovetail part of that analysis into the shutdown, and we don't really see any major issues.

That's good to hear. And lastly, you may have already talked about this in previous calls, but can you remind us, does the portfolio have any meaningful tariff risk, particularly in respect to sourcing products or services from China?

No. Almost no tariff exposure whatsoever. And one of the great benefits of being an asset-light business model is that we don't source products pretty much from anywhere.

At this time, I would like to turn the floor back over to management for any closing comments.

Okay. Well, thanks, everyone, for joining us. We thought it was a terrific quarter for OTF. We're particularly pleased by the growth in some of these equity investments just showing the power of that strategy and the credit performance is exceptional, particularly in an environment where investors are understandably nervous about credit. We think it's really one of the very best credit performing funds out there. So I appreciate everyone's attention. We're all -- we're accessible and reachable if you have further questions. We would enjoy engaging with you. With that, have a great day.

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.