Declares Third Quarter Distribution of $0.34
Per Share
OFS Capital Corporation (NASDAQ: OFS) (“OFS Capital,” the
“Company,” “we,” “us,” or “our”) today announced its financial
results for the fiscal quarter ended June 30, 2024.
SECOND QUARTER FINANCIAL HIGHLIGHTS
- Net investment income decreased to $0.26 per common share for
the quarter ended June 30, 2024 from $0.42 per common share for the
quarter ended March 31, 2024.
- Net gain on investments of $0.51 per common share for the
quarter ended June 30, 2024, primarily comprised of net unrealized
appreciation of $0.83 per common share, partially offset by net
realized losses of $0.32 per common share.
- Net asset value per common share increased to $11.51 as of June
30, 2024 from $11.08 as of March 31, 2024.
- As of June 30, 2024, based on fair value, 92% of our loan
portfolio consisted of floating rate loans and approximately 100%
of our loan portfolio consisted of first lien and second lien
loans.
- For the quarter ended June 30, 2024, the investment portfolio’s
weighted-average performing income yield increased to 13.4% from
13.0% during the prior quarter, primarily due to the acceleration
of deferred fees from loan repayments.
- No new loans were placed on non-accrual status during the
second quarter. The number of issuers with loans on non-accrual
status decreased by one from the prior quarter.
OTHER RECENT EVENTS
- On July 30, 2024, our Board of Directors declared a
distribution of $0.34 per common share for the third quarter of
2024, payable on September 30, 2024 to stockholders of record as of
September 20, 2024.
SELECTED FINANCIAL HIGHLIGHTS (unaudited)
Three Months Ended
(Per common share)
June 30, 2024
March 31, 2024
Net Investment Income
Net investment income
$
0.26
$
0.42
Net Realized/Unrealized Gain
(Loss)
Net realized gain (loss) on investments,
net of taxes
$
(0.32
)
$
0.06
Net unrealized appreciation (depreciation)
on investments, net of taxes
0.83
(1.15
)
Net realized/unrealized gain (loss)
$
0.51
$
(1.09
)
Earnings (Loss)
Earnings (loss)
$
0.77
$
(0.67
)
Net Asset Value
Net asset value
$
11.51
$
11.08
Distributions paid
$
0.34
$
0.34
As of
(in millions)
June 30, 2024
March 31, 2024
Balance Sheet Highlights
(unaudited)
Investment portfolio, at fair value
$
398.2
$
400.4
Total assets
407.9
410.5
Net assets
154.2
148.4
“We are pleased to announce an increase in our net asset value
per common share to $11.51 as of June 30, 2024 from $11.08 as of
March 31, 2024,” said Bilal Rashid, OFS Capital’s Chairman and
Chief Executive Officer. “We believe that we continue to benefit
from our balance sheet positioning, with the vast majority of our
loan portfolio being floating rate and the majority of our debt
being fixed-rate.”
PORTFOLIO AND INVESTMENT
ACTIVITIES
($ in millions)
Three Months Ended
Portfolio Yields(1)
June 30, 2024
March 31, 2024
Average performing interest-bearing
investments, at cost
$
322.6
$
338.0
Weighted-average performing income yield -
interest-bearing investments(2)
13.4
%
13.0
%
Weighted-average realized yield -
interest-bearing investments(3)
11.8
%
11.6
%
(1)
The weighted-average yield of our
investments is not the same as a return on investment for our
stockholders, but rather relates to our investment portfolio and is
calculated before the payment of all of our fees and expenses.
(2)
Performing income yield is
calculated as (a) the actual amount earned on performing
interest-bearing investments, including interest, prepayment fees
and amortization of net loan fees, divided by (b) the
weighted-average of total performing interest-bearing investments
at amortized cost.
(3)
Realized yield is calculated as
(a) the actual amount earned on interest-bearing investments,
including interest, prepayment fees and amortization of net loan
fees, divided by (b) the weighted-average of total interest-bearing
investments at amortized cost, in each case, including debt
investments on non-accrual status and non-income producing
structured finance securities.
Three Months Ended
Portfolio Purchase Activity
June 30, 2024
March 31, 2024
Investments in debt and equity
investments
$
5.0
$
7.3
Investments in structured finance
securities
—
—
Total investment purchases and
originations
$
5.0
$
7.3
As of June 30, 2024, based on fair value, our investment
portfolio was comprised of the following:
- Total investments of $398.2 million, which was equal to
approximately 103% of amortized cost;
- Debt investments of $236.9 million, of which approximately 85%
and 15% were first lien and second lien loans, respectively;
- Equity investments of $85.7 million;
- Structured finance securities of $75.6 million; and
- Unfunded commitments of $8.9 million to eight portfolio
companies.
During the quarter ended June 30, 2024, no new loans were placed
on non-accrual status.
RESULTS OF OPERATIONS
(unaudited)
(in thousands)
Three Months Ended
June 30, 2024
March 31, 2024
Total investment income
$
11,165
$
14,233
Expenses:
Interest expense
4,117
4,572
Base management and incentive fees
2,337
2,922
Other expenses
1,274
1,143
Total expenses
7,728
8,637
Net investment income
3,437
5,596
Net gain (loss) on investments
6,891
(14,645
)
Net increase (decrease) in net assets
resulting from operations
$
10,328
$
(9,049
)
Investment Income
For the quarter ended June 30, 2024, total investment income
decreased to $11.2 million from $14.2 million in the prior quarter,
primarily due to decreases in total dividend income of $2.4 million
and interest income of $0.5 million.
Expenses
For the quarter ended June 30, 2024, total expenses decreased by
$0.9 million to $7.7 million compared to the prior quarter,
primarily due to declines in interest expense of $0.5 million and
incentive fees of $0.5 million.
Net Gain (Loss) on Investments
For the quarter ended June 30, 2024, we recognized a net gain on
investments of $6.9 million, primarily comprised of net unrealized
appreciation of $11.3 million, partially offset by net realized
losses of $4.3 million.
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 2024, we had $5.6 million in cash, which includes
$2.7 million held by OFSCC-FS, LLC (“OFSCC-FS”), an indirect wholly
owned subsidiary. Our use of cash held by OFSCC-FS is restricted by
contractual conditions of our credit facility with BNP Paribas,
including limitations on the amount of cash OFSCC-FS can distribute
to us.
As of June 30, 2024, we had no outstanding balance and an unused
commitment of $25.0 million under our senior secured revolving
credit facility with Banc of California, as well as an unused
commitment of $80.9 million under our revolving credit facility
with BNP Paribas, both of which are subject to borrowing base
requirements and other covenants. As of June 30, 2024, we had
outstanding commitments to fund portfolio company investments
totaling $8.9 million under various undrawn revolvers and other
credit facilities.
CONFERENCE CALL
OFS Capital will host a conference call to discuss these results
on Friday, August 2, 2024, at 10:00 AM Eastern Time. Interested
parties may participate in the call via the following:
INTERNET: Go to www.ofscapital.com at least 15 minutes prior to
the start time of the call to register, download, and install any
necessary audio software. A replay will be available for 90 days on
OFS Capital’s website at www.ofscapital.com.
TELEPHONE: Dial (844) 816-1364 (Domestic) or (412) 317-5699
(International) approximately 15 minutes prior to the call. A
telephone replay of the conference call will be available through
August 12, 2024 and may be accessed by calling (877) 344-7529
(Domestic) or (412) 317-0088 (International) and utilizing
conference ID #5908152.
For more detailed discussion of the financial and other
information included in this press release, please refer to OFS
Capital’s Form 10-Q for the second quarter ended June 30, 2024.
OFS Capital Corporation and
Subsidiaries
Consolidated Statements of Assets and
Liabilities (unaudited)
(Dollar amounts in thousands, except
per share data)
June 30, 2024
December 31,
2023
Assets
Total investments, at fair value
(amortized cost of $385,446 and $403,530, respectively)
$
398,156
$
420,287
Cash and cash equivalents
5,580
45,349
Interest receivable
2,945
2,217
Prepaid expenses and other assets
1,194
1,965
Total assets
$
407,875
$
469,818
Liabilities
Revolving lines of credit
$
69,100
$
90,500
Unsecured Notes (net of deferred debt
issuance costs of $2,178 and $2,667, respectively)
177,822
177,333
SBA debentures (net of deferred debt
issuance costs of $0 and $20, respectively)
—
31,900
Interest payable
3,249
3,712
Payable to adviser and affiliates
2,931
3,556
Other liabilities
601
813
Total liabilities
$
253,703
$
307,814
Net assets
Preferred stock, par value of $0.01 per
share, 2,000,000 shares authorized, -0- shares issued and
outstanding as of June 30, 2024 and December 31, 2023,
respectively
$
—
$
—
Common stock, par value of $0.01 per
share, 100,000,000 shares authorized, 13,398,078 shares issued and
outstanding as of June 30, 2024 and December 31, 2023,
respectively
134
134
Paid-in capital in excess of par
184,841
184,841
Total accumulated losses
(30,803
)
(22,971
)
Total net assets
154,172
162,004
Total liabilities and net
assets
$
407,875
$
469,818
Number of common shares outstanding
13,398,078
13,398,078
Net asset value per share
$
11.51
$
12.09
OFS Capital Corporation and
Subsidiaries
Consolidated Statements of Operations
(unaudited)
(Dollar amounts in thousands, except
per share data)
Three Months Ended June
30,
Six Months Ended June
30,
2024
2023
2024
2023
Investment income
Interest income
$
10,854
$
14,101
$
22,247
$
27,494
Dividend income
280
334
2,991
1,119
Fee income
31
91
160
196
Total investment income
11,165
14,526
25,398
28,809
Expenses
Interest expense
4,117
5,011
8,689
9,885
Base management fee
1,478
1,883
3,001
3,777
Income Incentive Fee
859
1,280
2,258
2,518
Professional fees
414
429
828
865
Administration fee
453
440
847
922
Other expenses
407
360
742
769
Total expenses
7,728
9,403
16,365
18,736
Net investment income
3,437
5,123
9,033
10,073
Net realized and unrealized gain (loss)
on investments
Net realized loss, net of taxes
(4,304
)
(10,408
)
(3,506
)
(10,412
)
Net unrealized appreciation
(depreciation), net of taxes
11,195
3,321
(4,248
)
2,200
Net gain (loss) on investments
6,891
(7,087
)
(7,754
)
(8,212
)
Loss on extinguishment of debt
—
—
—
(19
)
Net increase (decrease) in net assets
resulting from operations
$
10,328
$
(1,964
)
$
1,279
$
1,842
Net investment income per common share –
basic and diluted
$
0.26
$
0.38
$
0.67
$
0.75
Net increase (decrease) in net assets
resulting from operations per common share – basic and diluted
$
0.77
$
(0.15
)
$
0.10
$
0.13
Distributions declared per common
share
$
0.34
$
0.33
$
0.68
$
0.66
Basic and diluted weighted-average common
shares outstanding
13,398,078
13,398,078
13,398,078
13,398,078
ABOUT OFS CAPITAL
The Company is an externally managed, closed-end,
non-diversified management investment company that has elected to
be regulated as a business development company. The Company’s
investment objective is to provide stockholders with both current
income and capital appreciation primarily through debt investments
and, to a lesser extent, equity investments. The Company invests
primarily in privately held middle-market companies in the United
States, including lower-middle-market companies, targeting
investments of $3 million to $20 million in companies with annual
EBITDA between $5 million and $50 million. The Company offers
flexible solutions through a variety of asset classes including
senior secured loans, which includes first-lien, second-lien and
unitranche loans, as well as subordinated loans and, to a lesser
extent, warrants and other equity securities. The Company’s
investment activities are managed by OFS Capital Management, LLC,
an investment adviser registered under the Investment Advisers Act
of 1940(4), as amended, and headquartered in Chicago, Illinois,
with additional offices in New York and Los Angeles.
FORWARD-LOOKING STATEMENTS
Statements in this press release regarding management's future
expectations, beliefs, intentions, goals, strategies, plans or
prospects, including statements relating to: OFS Capital’s results
of operations, including net investment income, net asset value and
net investment gains and losses and the factors that may affect
such results; management’s belief that the Company continues to
benefit from its balance sheet positioning due to a high percentage
of floating rate loans in the portfolio and a majority of
liabilities that have a fixed rate of interest, when there can be
no assurance that such a composition will lead to future success;
and other factors may constitute forward-looking statements for
purposes of the safe harbor protection under applicable securities
laws. Forward-looking statements can be identified by terminology
such as “anticipate,” “believe,” “could,” “could increase the
likelihood,” “estimate,” “expect,” “intend,” “is planned,” “may,”
“should,” “will,” “will enable,” “would be expected,” “look
forward,” “may provide,” “would” or similar terms, variations of
such terms or the negative of those terms. Such forward-looking
statements involve known and unknown risks, uncertainties and other
factors including those risks, uncertainties and factors referred
to in OFS Capital’s Annual Report on Form 10-K for the year ended
December 31, 2023 filed with the Securities and Exchange Commission
under the section “Risk Factors,” as well as other documents that
may be filed by OFS Capital from time to time with the Securities
and Exchange Commission. As a result of such risks, uncertainties
and factors, actual results may differ materially from any future
results, performance or achievements discussed in or implied by the
forward-looking statements contained herein. OFS Capital is
providing the information in this press release as of this date and
assumes no obligations to update the information included in this
press release or revise any forward-looking statements, whether as
a result of new information, future events or otherwise.
(4) Registration does not imply a certain level of skill or
training
OFS® and OFS Capital® are registered trademarks of Orchard First
Source Asset Management, LLC
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version on businesswire.com: https://www.businesswire.com/news/home/20240801475954/en/
INVESTOR RELATIONS CONTACT: Steve Altebrando 847-734-2084
investorrelations@ofscapital.com
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