Declares Second 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 March 31, 2024.
FIRST QUARTER FINANCIAL HIGHLIGHTS
- Net investment income increased to $0.42 per common share for
the quarter ended March 31, 2024 from $0.35 per common share for
the quarter ended December 31, 2023.
- Net loss on investments of $1.09 per common share for the
quarter ended March 31, 2024, primarily comprised of net unrealized
depreciation of $1.15 per common share.
- Net asset value (“NAV”) per common share decreased from $12.09
as of December 31, 2023 to $11.08 as of March 31, 2024.
- As of March 31, 2024, based on fair value, 91% 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 March 31, 2024, the investment
portfolio’s weighted-average performing income yield decreased to
13.0% from 14.1% during the prior quarter, primarily due to
non-recurring interest and prepayment fee income recognized in the
prior quarter.
OTHER RECENT EVENTS
- On March 1, 2024, OFS SBIC I, LP, a wholly owned subsidiary,
fully repaid its outstanding SBA debentures totaling $31.9 million
that were contractually due March 1, 2025, and, on April 17, 2024,
surrendered its license to operate as a small business investment
company.
- On April 30, 2024, our Board of Directors declared a
distribution of $0.34 per common share for the second quarter of
2024, payable on June 28, 2024 to stockholders of record as of June
18, 2024.
SELECTED FINANCIAL HIGHLIGHTS
(unaudited)
Three Months Ended
(Per common share)
March 31, 2024
December 31, 2023
Net Investment Income
Net investment income
$
0.42
$
0.35
Net Realized/Unrealized Gain
(Loss)
Net realized gain (loss) on investments,
net of taxes
$
0.06
$
(0.08
)
Net unrealized depreciation on
investments, net of taxes
(1.15
)
(0.58
)
Net realized/unrealized loss
$
(1.09
)
$
(0.66
)
Earnings (Loss)
Earnings (loss)
$
(0.67
)
$
(0.31
)
Net Asset Value
Net asset value
$
11.08
$
12.09
Distributions paid
$
0.34
$
0.34
As of
(in millions)
March 31, 2024
December 31, 2023
Balance Sheet Highlights
(unaudited)
Investment portfolio, at fair value
$
400.4
$
420.3
Total assets
410.5
469.8
Net assets
148.4
162.0
“We are pleased to announce that net investment income for the
first quarter exceeded the quarterly distribution paid,” said Bilal
Rashid, OFS Capital’s Chairman and Chief Executive Officer. “We
believe that we continue to benefit from the current interest rate
environment 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 Yield(1)
March 31, 2024
December 31, 2023
Average performing interest-bearing
investments, at cost
$
338.0
$
357.9
Weighted-average performing income yield -
interest-bearing investments(2)
13.0
%
14.1
%
Weighted-average realized yield -
interest-bearing investments(3)
11.6
%
12.8
%
(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 Activity
March 31, 2024
December 31, 2023
Investments in debt and equity
investments
$
7.3
$
7.0
Investments in structured finance
securities
—
—
Total investment purchases and
originations
$
7.3
$
7.0
As of March 31, 2024, based on fair value, our investment
portfolio was comprised of the following:
- Total investments of $400.4 million, which was equal to
approximately 100% of amortized cost;
- Debt investments of $245.4 million, of which approximately 84%
and 16% were first lien and second lien loans, respectively;
- Equity investments of $77.1 million;
- Structured finance securities of $77.9 million; and
- Unfunded commitments of $10.9 million to nine portfolio
companies.
During the quarter ended March 31, 2024, loans to one portfolio
company with an aggregate amortized cost and fair value of $13.5
million and $8.8 million, respectively, were placed on non-accrual
status.
RESULTS OF OPERATIONS
(unaudited)
(in thousands)
Three Months Ended
March 31, 2024
December 31, 2023
Total investment income
$
14,233
$
13,483
Expenses:
Interest expense
4,572
4,684
Base management and incentive fees
2,922
2,819
Other expenses
1,143
1,284
Total expenses
8,637
8,787
Net investment income
5,596
4,696
Net loss on investments
(14,645
)
(8,805
)
Net decrease in net assets resulting
from operations
$
(9,049
)
$
(4,109
)
Investment Income
For the quarter ended March 31, 2024, total investment income
increased to $14.2 million from $13.5 million in the prior quarter,
primarily due to an increase in dividend income of $2.4 million,
partially offset by a decrease in interest income of $1.5
million.
Expenses
For the quarter ended March 31, 2024, total expenses decreased
by $0.2 million to $8.6 million compared to the prior quarter,
primarily due to a decline in interest expense related to a
decrease in our average outstanding debt balance. During the
quarter ended March 31, 2024, we redeemed $31.9 million of SBA
debentures and reduced the total amount outstanding under our
revolving credit facility with BNP Paribas by $12.0 million.
Net Gain (Loss) on Investments
For the quarter ended March 31, 2024, we recognized a net loss
on investments of $14.6 million, comprised of net unrealized
depreciation of $15.4 million, partially offset by net realized
gains of $0.8 million. For the quarter ended March 31, 2024, net
unrealized depreciation of $15.4 million was primarily due to
declines in a couple of portfolio companies.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 2024, we had $6.1 million in cash, which
includes $2.5 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 March 31, 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 $71.5 million under its revolving credit
facility with BNP Paribas, both of which are subject to borrowing
base requirements and other covenants. As of March 31, 2024, we had
outstanding commitments to fund portfolio company investments
totaling $10.9 million under various undrawn revolvers and other
credit facilities.
CONFERENCE CALL
OFS Capital will host a conference call to discuss these results
on Friday, May 3, 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) 763-8274 (Domestic) or (412) 717-9224
(International) approximately 15 minutes prior to the call. A
telephone replay of the conference call will be available through
May 13, 2024 and may be accessed by calling (877) 344-7529
(Domestic) or (412) 317-0088 (International) and utilizing
conference ID #7369839.
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 first quarter ended March 31, 2024.
OFS Capital Corporation and
Subsidiaries
Consolidated Statements of Assets and
Liabilities
(Dollar amounts in thousands, except
per share data)
March 31, 2024
December 31,
2023
(unaudited)
Assets
Total investments, at fair value
(amortized cost of $399,037 and $403,530, respectively)
$
400,414
$
420,287
Cash and cash equivalents
6,092
45,349
Interest receivable
2,532
2,217
Prepaid expenses and other assets
1,431
1,965
Total assets
$
410,469
$
469,818
Liabilities
Revolving lines of credit
$
78,500
$
90,500
SBA debentures (net of deferred debt
issuance costs of $0 and $20, respectively)
—
31,900
Unsecured Notes (net of deferred debt
issuance costs of $2,423 and $2,667, respectively)
177,577
177,333
Interest payable
1,905
3,712
Payable to adviser and affiliates
3,380
3,556
Accrued professional fees
438
500
Other liabilities
269
313
Total liabilities
262,069
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 March 31, 2024 and December 31, 2023,
respectively
$
—
$
—
Common stock, par value of $0.01 per
share, 100,000,000 shares authorized, 13,398,078 and 13,398,078
shares issued and outstanding as of March 31, 2024 and December 31,
2023, respectively
134
134
Paid-in capital in excess of par
184,841
184,841
Total accumulated losses
(36,575
)
(22,971
)
Total net assets
148,400
162,004
Total liabilities and net
assets
$
410,469
$
469,818
Number of shares outstanding
13,398,078
13,398,078
Net asset value per share
$
11.08
$
12.09
OFS Capital Corporation and
Subsidiaries
Consolidated Statements of Operations
(unaudited)
(Dollar amounts in thousands, except
per share data)
Three Months Ended March
31,
2024
2023
Investment income
Interest income
$
11,393
$
13,393
Dividend income
2,711
785
Fee income
129
105
Total investment income
14,233
14,283
Expenses
Interest expense
4,572
4,874
Base management fee
1,523
1,894
Income Incentive Fee
1,399
1,238
Professional fees
414
436
Administration fee
394
482
Other expenses
335
409
Total expenses
8,637
9,333
Net investment income
5,596
4,950
Net realized and unrealized gain (loss)
on investments
Net realized gain (loss), net of taxes
798
(4
)
Net unrealized depreciation, net of
taxes
(15,443
)
(1,121
)
Net loss on investments
(14,645
)
(1,125
)
Loss on extinguishment of debt
—
(19
)
Net increase (decrease) in net assets
resulting from operations
$
(9,049
)
$
3,806
Net investment income per common share –
basic and diluted
$
0.42
$
0.37
Net increase (decrease) in net assets
resulting from operations per common share – basic and diluted
$
(0.67
)
$
0.28
Distributions declared per common
share
$
0.34
$
0.33
Basic and diluted weighted-average shares
outstanding
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 the current interest rate environment 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/20240502918546/en/
INVESTOR RELATIONS CONTACT: Steve Altebrando 847-734-2084
investorrelations@ofscapital.com
OFS Capital (NASDAQ:OFS)
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