[PART I. FINANCIAL INFORMATION](index=9&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Consolidated Financial Statements](index=9&type=section&id=Item%201.%20Consolidated%20Financial%20Statements) The company's net assets and NAV per share declined in Q1 2025 due to a net operating loss, with the investment portfolio remaining diversified [Consolidated Statements of Assets and Liabilities](index=9&type=section&id=Consolidated%20Statements%20of%20Assets%20and%20Liabilities) Total assets and net assets decreased during the quarter, resulting in a lower net asset value per share Consolidated Statements of Assets and Liabilities (in thousands, except per share data) | Metric | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total investments, at fair value | $403,071 | $409,665 | | Total assets | $411,963 | $428,123 | | Total liabilities | $251,580 | $255,898 | | Total net assets | $160,383 | $172,225 | | Net asset value per share | $11.97 | $12.85 | [Consolidated Statements of Operations](index=10&type=section&id=Consolidated%20Statements%20of%20Operations) Quarterly investment income and net investment income decreased year-over-year, leading to a net loss from operations Consolidated Statements of Operations (in thousands, except per share data) | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Total investment income | $10,295 | $14,233 | | Total expenses | $6,830 | $8,637 | | Net investment income | $3,465 | $5,596 | | Net loss on investments | $(10,752) | $(14,645) | | Net decrease in net assets from operations | $(7,287) | $(9,049) | | Net investment income per share | $0.26 | $0.42 | | Net decrease in net assets per share | $(0.54) | $(0.67) | | Distributions declared per share | $0.34 | $0.34 | [Consolidated Statements of Changes in Net Assets](index=11&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Net%20Assets) Net assets decreased by $11.8 million in Q1 2025, driven by a net operating loss and shareholder distributions - Net assets decreased from **$172,225 thousand** at the end of 2024 to **$160,383 thousand** at March 31, 2025[16](index=16&type=chunk) Changes in Net Assets for Q1 2025 (in thousands) | Description | Amount | | :--- | :--- | | Net investment income | $3,465 | | Net realized loss on investments | $(2,587) | | Net unrealized depreciation on investments | $(8,165) | | Distributions declared | $(4,555) | | **Net decrease for the period** | **$(11,842)** | [Consolidated Statements of Cash Flows](index=12&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Net cash from operations decreased significantly year-over-year, while financing activities primarily involved shareholder distributions Consolidated Cash Flows (in thousands) | Cash Flow Category | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $2,841 | $9,218 | | Net cash used in financing activities | $(4,855) | $(48,475) | | **Net decrease in cash and cash equivalents** | **$(2,014)** | **$(39,257)** | [Consolidated Schedules of Investments](index=13&type=section&id=Consolidated%20Schedules%20of%20Investments) The investment portfolio's fair value slightly decreased to $403.1 million, with a significant concentration in Pfanstiehl Holdings, Inc Portfolio Composition by Fair Value | Investment Type | Fair Value (Mar 31, 2025) | % of Total | Fair Value (Dec 31, 2024) | % of Total | | :--- | :--- | :--- | :--- | :--- | | First lien debt | $184,315 | 45.8% | $189,874 | 46.3% | | Second lien debt | $31,547 | 7.8% | $34,331 | 8.4% | | Preferred equity | $10,615 | 2.6% | $12,248 | 3.0% | | Common equity, warrants & other | $97,060 | 24.1% | $96,337 | 23.5% | | Structured Finance Securities | $79,534 | 19.7% | $76,875 | 18.8% | | **Total Investments** | **$403,071** | **100.0%** | **$409,665** | **100.0%** | - The company's equity investment in Pfanstiehl Holdings, Inc had a fair value of $90.8 million, representing **56.6% of total net assets** as of March 31, 2025[26](index=26&type=chunk)[78](index=78&type=chunk) - As of March 31, 2025, investments on non-accrual status had an aggregate amortized cost of **$39.1 million** and a fair value of **$16.9 million**[26](index=26&type=chunk)[77](index=77&type=chunk) [Notes to Consolidated Financial Statements (unaudited)](index=31&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements%20(unaudited)) The notes detail the company's BDC structure, related-party transactions, portfolio valuation, and debt facilities with upcoming maturities - The company is an externally managed BDC and has elected to be treated as a RIC for tax purposes[45](index=45&type=chunk) - OFS Advisor manages operations and receives a base management fee of **1.75%** of average total assets and a two-part incentive fee[58](index=58&type=chunk)[60](index=60&type=chunk)[61](index=61&type=chunk) - As of March 31, 2025, affiliates of OFS Advisor held approximately **22.6%** of the Company's outstanding common stock[70](index=70&type=chunk) - As of March 31, 2025, the company had **$13.8 million in unfunded commitments** to nine portfolio companies[99](index=99&type=chunk) - On March 1, 2024, the company's subsidiary, SBIC I LP, fully repaid its outstanding SBA debentures totaling **$31.9 million** and surrendered its SBIC license[49](index=49&type=chunk)[103](index=103&type=chunk) - The Board declared a second quarter 2025 distribution of **$0.34 per share**, payable on June 30, 2025[129](index=129&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=52&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the decline in NAV per share, lower investment income, and key liquidity considerations for 2025 and 2026 Key Performance Metrics Per Share | Metric | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Net asset value | $11.97 | $12.85 | | Net investment income (for the quarter) | $0.26 | $0.30 | | Net (decrease) in net assets (for the quarter) | $(0.54) | $1.90 | | Distributions paid (for the quarter) | $0.34 | $0.34 | - The decrease in NAV per share was attributed to a **net loss on investments of $0.80 per share** and a quarterly distribution exceeding net investment income[131](index=131&type=chunk) - The company's **asset coverage ratio was 165%** as of March 31, 2025, exceeding the minimum requirement of 150%[135](index=135&type=chunk)[183](index=183&type=chunk) - The reinvestment period for the BNP Facility ends in June 2025, posing a **significant short-term liquidity risk** if not extended or replaced[181](index=181&type=chunk)[206](index=206&type=chunk) [Portfolio Composition and Investment Activity](index=55&type=section&id=Portfolio%20Composition%20and%20Investment%20Activity) The portfolio's fair value was $403.1 million, with high concentration in the top ten investments and a decrease in performing income yield Ten Largest Investments by Fair Value (as of March 31, 2025, in thousands) | Issuer Name | Type | Fair Value | % of Total Portfolio | % of Net Assets | | :--- | :--- | :--- | :--- | :--- | | Pfanstiehl Holdings, Inc. | Equity | $90,762 | 22.5% | 56.6% | | Kreg LLC | Debt | $17,431 | 4.3% | 10.9% | | Inergex Holdings, LLC | Debt | $17,086 | 4.2% | 10.7% | | SS Acquisition, LLC | Debt | $16,641 | 4.1% | 10.4% | | Tolemar Acquisition, Inc. | Debt | $15,320 | 3.8% | 9.6% | | Honor HN Buyer Inc. | Debt | $15,008 | 3.7% | 9.4% | | One GI LLC | Debt | $12,244 | 3.0% | 7.6% | | Boca Home Care Holdings, Inc. | Debt and Equity | $10,432 | 2.6% | 6.5% | | Contract Datascan Holdings, Inc. | Equity | $10,255 | 2.5% | 6.4% | | ICG US CLO 2021-3, Ltd. | Structured Finance | $9,893 | 2.5% | 6.2% | Portfolio Yields | Weighted-Average Performing Income Yield | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Debt investments | 12.3% | 12.9% | | Structured Finance Securities | 16.3% | 16.3% | | **Interest-bearing investments** | **13.4%** | **13.8%** | - As of March 31, 2025, debt investments on non-accrual status had a fair value of **$16.9 million**, representing 4.2% of total investments at fair value[134](index=134&type=chunk)[163](index=163&type=chunk) [Results of Operations](index=59&type=section&id=Results%20of%20Operations) Investment income and expenses both decreased from Q4 2024, while a net loss on investments reversed the prior quarter's gain Quarterly Operating Results Comparison (in thousands) | Metric | Q1 2025 | Q4 2024 | Q1 2024 | | :--- | :--- | :--- | :--- | | Total investment income | $10,295 | $11,648 | $14,233 | | Total expenses | $6,830 | $7,572 | $8,637 | | Net investment income | $3,465 | $4,076 | $5,596 | | Net gain (loss) on investments | $(10,752) | $21,399 | $(14,645) | - The Q1 2025 net loss on investments of **$10.8 million** was primarily due to a net loss of $8.1 million on debt investments[177](index=177&type=chunk)[178](index=178&type=chunk) - The Q4 2024 net gain on investments of **$21.4 million** was primarily driven by net unrealized appreciation on the Pfanstiehl Holdings, Inc investment[179](index=179&type=chunk) [Liquidity and Capital Resources](index=62&type=section&id=Liquidity%20and%20Capital%20Resources) The company has adequate near-term liquidity but faces significant debt maturities and facility expirations in 2025 and 2026 Sources and Uses of Cash (in thousands) | Description | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $2,841 | $9,218 | | Net cash used in financing activities | $(4,855) | $(48,475) | | **Net decrease in cash** | **$(2,014)** | **$(39,257)** | - The company has **$125.0 million of Unsecured Notes** and the Banc of California Facility maturing in February 2026[188](index=188&type=chunk)[190](index=190&type=chunk) - The Board extended the Stock Repurchase Program to May 2026, with **$9.6 million remaining** available for repurchases[202](index=202&type=chunk)[232](index=232&type=chunk) - On June 26, 2024, stockholders authorized the company to **sell shares below NAV**, though no shares have been sold under this authorization[203](index=203&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=67&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company is exposed to significant investment valuation uncertainty and interest rate risk affecting its floating-rate assets - The company faces **investment valuation risk** due to the use of unobservable inputs (Level 3) for most of its investments[217](index=217&type=chunk) - As of March 31, 2025, **$207.0 million** of the company's investments at fair value were floating-rate, making income sensitive to rate changes[218](index=218&type=chunk) Annualized Impact of Hypothetical Interest Rate Changes (in thousands) | Basis Point Change | Impact on Interest Income | Impact on Interest Expense | Net Change | | :--- | :--- | :--- | :--- | | +100 | $2,159 | $(664) | $1,495 | | -100 | $(2,204) | $697 | $(1,507) | [Controls and Procedures](index=68&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective, with no material changes to internal controls during the quarter - The CEO and CFO concluded that as of March 31, 2025, the company's **disclosure controls and procedures were effective** at the reasonable assurance level[224](index=224&type=chunk) - **No material changes** in internal control over financial reporting occurred during the quarter ended March 31, 2025[225](index=225&type=chunk) [PART II. OTHER INFORMATION](index=69&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Legal Proceedings](index=69&type=section&id=Item%201.%20Legal%20Proceedings) The company is not currently subject to any material pending legal proceedings that would adversely affect its financial condition - The company is **not currently subject to any material pending legal proceedings** as of March 31, 2025[227](index=227&type=chunk) [Risk Factors](index=69&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes to the risk factors previously disclosed in the company's 2024 Annual Report on Form 10-K - There have been **no material changes** to the risk factors disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2024[229](index=229&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=69&type=section&id=Item%202%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) No unregistered equity was sold, and no shares were repurchased under the extended stock repurchase program during the quarter - The Board extended the **Stock Repurchase Program** for a two-year period ending May 22, 2026[232](index=232&type=chunk) - **No shares of common stock were repurchased** under the program during the three months ended March 31, 2025[123](index=123&type=chunk)[233](index=233&type=chunk) - As of March 31, 2025, approximately **$9.6 million remained available** for purchase under the Stock Repurchase Program[232](index=232&type=chunk) [Defaults Upon Senior Securities](index=69&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) Not applicable - Not applicable[234](index=234&type=chunk) [Mine Safety Disclosures](index=69&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) Not applicable - Not applicable[235](index=235&type=chunk) [Other Information](index=70&type=section&id=Item%205.%20Other%20Information) No directors or officers adopted new trading plans, and the company's stock traded at a significant discount to NAV during the quarter - No director or officer of the Company adopted or terminated a **Rule 10b5-1 trading arrangement** during the three months ended March 31, 2025[236](index=236&type=chunk) Q1 2025 Stock Performance | Metric | Value | | :--- | :--- | | NAV Per Share (end of Q1) | $11.97 | | High Sales Price | $9.80 | | Low Sales Price | $7.92 | | Premium (Discount) of High Price to NAV | -18.1% | | Premium (Discount) of Low Price to NAV | -33.8% | | Cash Distribution per Share | $0.34 | [Exhibits](index=71&type=section&id=Item%206.%20Exhibits) This section lists standard exhibits filed with the report, including Sarbanes-Oxley certifications and Inline XBRL data - The report includes standard exhibits, such as **CEO and CFO certifications** under Sarbanes-Oxley and Inline XBRL filings[239](index=239&type=chunk) [Signatures](index=72&type=section&id=SIGNATURES) - The report was signed on May 1, 2025, by **Bilal Rashid, Chief Executive Officer, and Kyle Spina, Chief Financial Officer**[242](index=242&type=chunk)

[Financial Highlights and Recent Events](index=1&type=section&id=OFS%20CAPITAL%20CORPORATION%20ANNOUNCES%20FIRST%20QUARTER%202025%20FINANCIAL%20RESULTS) OFS Capital reported a net investment income of $0.26 per share and a net loss of $0.54 per share for Q1 2025, with NAV decreasing to $11.97 per share [First Quarter 2025 Financial Highlights](index=1&type=section&id=FIRST%20QUARTER%20FINANCIAL%20HIGHLIGHTS) OFS Capital reported a net investment income of $0.26 per share and a net loss of $0.54 per share for the first quarter of 2025, with net asset value (NAV) per common share decreasing to $11.97 from $12.85 in the previous quarter, and total investments at fair value standing at $403.1 million, while announcing a second-quarter distribution of $0.34 per share | (Per common share) | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Net investment income | $0.26 | $0.30 | | Earnings (loss) | $(0.54) | $1.90 | | Net asset value | $11.97 | $12.85 | | Distributions paid | $0.34 | $0.34 | | **(in millions)** | **As of March 31, 2025** | **As of December 31, 2024** | | Total investments, at fair value | $403.1 | $409.7 | | Total outstanding debt - principal | $248.1 | $248.4 | | Total net assets | $160.4 | $172.2 | - The Board of Directors declared a distribution of **$0.34 per common share** for the second quarter of 2025, payable on June 30, 2025[3](index=3&type=chunk) - Net investment income decreased to **$0.26 per common share** for Q1 2025 from **$0.30** in Q4 2024[5](index=5&type=chunk) - The investment portfolio's weighted-average performing income yield decreased to **13.4%** from **13.8%** in the prior quarter, primarily due to the reduction in the U.S. Federal Reserve target federal funds rate[5](index=5&type=chunk) [Portfolio and Investment Activities](index=2&type=section&id=PORTFOLIO%20AND%20INVESTMENT%20ACTIVITIES) As of March 31, 2025, the investment portfolio was valued at $403.1 million, with debt investments comprising $215.9 million, a weighted-average performing income yield of 13.4%, and investment purchases totaling $10.4 million, while non-accrual loans constituted 4.2% of the total portfolio at fair value with no new additions [Portfolio Composition](index=2&type=section&id=Portfolio%20Composition) As of March 31, 2025, the investment portfolio's fair value was $403.1 million, with debt investments accounting for $215.9 million (85% first lien), and equity investments and structured finance securities valued at $107.7 million and $79.5 million, respectively - As of March 31, 2025, based on fair value, the investment portfolio was comprised of: Debt investments: **$215.9 million** (85% first lien, 15% second lien); Equity investments: **$107.7 million**; Structured finance securities: **$79.5 million**[11](index=11&type=chunk) - As of March 31, 2025, **90%** of the loan portfolio consisted of floating rate loans, and **100%** consisted of first lien and second lien loans[5](index=5&type=chunk) [Portfolio Yields and Activity](index=2&type=section&id=Portfolio%20Yields%20and%20Activity) The weighted-average performing income yield on interest-bearing investments decreased to 13.4% in Q1 2025 from 13.8% in Q4 2024, with total investment purchases and originations dropping significantly to $10.4 million from $32.6 million in the prior quarter, and no new loans placed on non-accrual status Portfolio Yields | Portfolio Yields | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Weighted-average performing income yield | 13.4% | 13.8% | | Weighted-average realized yield | 11.6% | 11.9% | Portfolio Purchase Activity (in millions) | Portfolio Purchase Activity (in millions) | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total investment purchases and originations | $10.4 | $32.6 | - No new loans were placed on non-accrual status during the first quarter, with non-accrual loans having an aggregate fair value of **$16.9 million**, or **4.2%** of total investments at fair value, as of March 31, 2025[8](index=8&type=chunk) [Results of Operations](index=2&type=section&id=RESULTS%20OF%20OPERATIONS) For Q1 2025, OFS Capital reported a net decrease in net assets of $7.3 million, a significant downturn from a $25.5 million increase in Q4 2024, driven by a $1.3 million decrease in total investment income to $10.3 million and a net loss on investments of $10.8 million, while total expenses fell by $0.7 million to $6.8 million primarily due to lower incentive fees [Summary of Operations](index=2&type=section&id=Summary%20of%20Operations) The company's net investment income for Q1 2025 was $3.5 million, down from $4.1 million in the previous quarter, and a substantial net loss on investments of $10.8 million, compared to a $21.4 million gain in Q4 2024, led to a net decrease in net assets from operations of $7.3 million | (in millions) | Three Months Ended March 31, 2025 | Three Months Ended December 31, 2024 | | :--- | :--- | :--- | | Total investment income | $10.3 | $11.6 | | Total expenses | $6.8 | $7.6 | | Net investment income | $3.5 | $4.1 | | Net gain (loss) on investments | $(10.8) | $21.4 | | Net increase (decrease) in net assets | $(7.3) | $25.5 | [Investment Income](index=4&type=section&id=Investment%20Income) Total investment income for Q1 2025 decreased to $10.3 million from $11.6 million in the prior quarter, primarily caused by a $0.5 million drop in interest income due to lower SOFR rates, and a combined $0.8 million decrease in dividend and fee income from non-recurring amounts in the previous quarter - Total investment income decreased to **$10.3 million** from **$11.6 million** in the prior quarter, driven by decreases in interest income (**$0.5 million**), dividend income (**$0.5 million**), and fee income (**$0.3 million**)[12](index=12&type=chunk) - The decrease in interest income was mainly due to lower SOFR rates from Federal Reserve rate cuts, while the drop in dividend and fee income was due to non-recurring amounts in Q4 2024[13](index=13&type=chunk) [Expenses](index=4&type=section&id=Expenses) Total expenses for Q1 2025 were $6.8 million, a decrease of $0.7 million from the prior quarter, with the reduction almost entirely attributable to a $0.7 million decrease in incentive fees, which was a result of lower net investment income - Total expenses decreased by **$0.7 million** to **$6.8 million**, primarily due to a **$0.7 million** decrease in incentive fees resulting from lower net investment income return on net assets[14](index=14&type=chunk) [Net Gain (Loss) on Investments](index=4&type=section&id=Net%20Gain%20(Loss)%20on%20Investments) In Q1 2025, the company recognized a net loss on investments of $10.8 million, comprising $2.6 million in net realized losses and $8.2 million in net unrealized depreciation, with the latter driven mainly by a $7.3 million depreciation on debt investments, including $3.9 million related to non-accrual loans - A net loss on investments of **$10.8 million** was recognized, consisting of **$8.2 million** in net unrealized depreciation and **$2.6 million** in net realized losses[15](index=15&type=chunk) - The net unrealized depreciation was primarily due to a **$7.3 million** markdown on debt investments, of which **$3.9 million** was related to non-accrual debt investments[15](index=15&type=chunk) [Liquidity, Capital Resources, and Debt](index=2&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) As of March 31, 2025, OFS Capital had $4.1 million in cash and access to $107 million in unused credit facilities, with average borrowings for the quarter at $248.7 million at a stable interest rate of 6.29%, and $13.8 million in unfunded commitments to portfolio companies [Outstanding Debt](index=2&type=section&id=OUTSTANDING%20DEBT) During Q1 2025, average borrowings were $248.7 million with a weighted-average effective interest rate of 6.29%, figures that remained relatively stable compared to the $248.1 million in borrowings and 6.30% interest rate in Q4 2024 | Three Months Ended | Average Dollar Borrowings (in millions) | Weighted-Average Effective Interest Rate | | :--- | :--- | :--- | | March 31, 2025 | $248.7 | 6.29% | | December 31, 2024 | $248.1 | 6.30% | [Liquidity and Capital Resources](index=4&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES_sub) As of March 31, 2025, the company held $4.1 million in cash and cash equivalents, with significant available liquidity including $21.5 million unused under its Banc of California facility and $85.5 million unused under its BNP Paribas facility, subject to covenants, and unfunded commitments to portfolio companies totaling $13.8 million - As of March 31, 2025, the company had **$4.1 million** in cash and cash equivalents[16](index=16&type=chunk) - The company had a total of **$107 million** in unused commitments under its revolving credit facilities (**$21.5 million** with Banc of California and **$85.5 million** with BNP Paribas)[17](index=17&type=chunk) - Outstanding commitments to fund various undrawn revolvers and other credit facilities of portfolio companies totaled **$13.8 million**[17](index=17&type=chunk) [Consolidated Financial Statements](index=5&type=section&id=Consolidated%20Financial%20Statements) The consolidated financial statements show a decrease in net assets to $160.4 million and a net loss of $7.3 million for Q1 2025, driven by investment losses [Consolidated Statements of Assets and Liabilities](index=5&type=section&id=Consolidated%20Statements%20of%20Assets%20and%20Liabilities%20(Unaudited)) As of March 31, 2025, OFS Capital's total assets were $412.0 million and total liabilities were $251.6 million, resulting in total net assets of $160.4 million, reflecting a decrease from $172.2 million at the end of 2024, with net asset value per share declining to $11.97 from $12.85 | (in millions, except per share data) | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total investments, at fair value | $403.1 | $409.7 | | Total assets | $412.0 | $428.1 | | Total liabilities | $251.6 | $255.9 | | Total net assets | $160.4 | $172.2 | | Net asset value per share | $11.97 | $12.85 | [Consolidated Statements of Operations](index=6&type=section&id=Consolidated%20Statements%20of%20Operations%20(Unaudited)) For the first quarter of 2025, OFS Capital generated $10.3 million in total investment income and incurred $6.8 million in expenses, resulting in a net investment income of $3.5 million ($0.26 per share), while a significant net loss on investments of $10.8 million led to a net decrease in net assets from operations of $7.3 million, or ($0.54) per share | (in millions, except per share data) | Three Months Ended March 31, 2025 | Three Months Ended December 31, 2024 | | :--- | :--- | :--- | | Total investment income | $10.3 | $11.6 | | Total expenses | $6.8 | $7.6 | | Net investment income | $3.5 | $4.1 | | Net gain (loss) on investments | $(10.8) | $21.4 | | Net increase (decrease) in net assets | $(7.3) | $25.5 | | Net investment income per common share | $0.26 | $0.30 | | Net increase (decrease) in net assets per share | $(0.54) | $1.90 | [Company Information and Disclosures](index=4&type=section&id=Company%20Information%20and%20Disclosures) This section provides an overview of OFS Capital's business model, details for the Q1 2025 earnings conference call, and a standard forward-looking statements disclaimer [About OFS Capital](index=7&type=section&id=ABOUT%20OFS%20CAPITAL) OFS Capital is an externally managed business development company (BDC) focused on providing current income and capital appreciation, primarily investing in debt and, to a lesser extent, equity of privately held U.S. middle-market companies, typically with annual EBITDA between $5 million and $50 million, with investment activities managed by OFS Capital Management, LLC - OFS Capital is an externally managed, closed-end, non-diversified management investment company regulated as a business development company (BDC)[22](index=22&type=chunk) - The company's investment objective is to provide stockholders with current income and capital appreciation through debt and equity investments in U.S. middle-market companies with annual EBITDA between **$5 million** and **$50 million**[22](index=22&type=chunk) [Conference Call Information](index=4&type=section&id=CONFERENCE%20CALL) OFS Capital will host a conference call to discuss its Q1 2025 financial results on Friday, May 2, 2025, at 10:00 AM Eastern Time, with details provided for participation via internet webcast and telephone - A conference call to discuss results is scheduled for Friday, May 2, 2025, at **10:00 AM Eastern Time**[18](index=18&type=chunk) - Participation is available via internet at www.ofscapital.com or by telephone at **(833) 816-1364 (Domestic)** or **(412) 317-5699 (International)**[18](index=18&type=chunk)[19](index=19&type=chunk) [Forward-Looking Statements](index=7&type=section&id=FORWARD-LOOKING%20STATEMENTS) This section serves as a legal disclaimer, cautioning that statements in the press release about future expectations are forward-looking and subject to various risks and uncertainties, noting that actual results may differ materially and directing readers to the company's SEC filings for more information on these risks, with OFS Capital undertaking no obligation to update these statements - The press release contains forward-looking statements that involve known and unknown risks and uncertainties, which may cause actual results to differ materially from expectations[23](index=23&type=chunk) - The company assumes no obligation to update the information or revise any forward-looking statements[23](index=23&type=chunk)

Core Viewpoint - The article emphasizes the importance of value investing and highlights OFS Capital as a strong candidate for value investors due to its attractive financial metrics and strong earnings outlook [2][4][7] Group 1: Investment Strategy - Value investing is a popular strategy that focuses on identifying undervalued companies using fundamental analysis [2] - The Zacks Rank and Style Scores system are tools that can help investors find high-quality value stocks [3] Group 2: OFS Capital Financial Metrics - OFS Capital has a Zacks Rank of 2 (Buy) and an A for Value, indicating strong potential [4] - The Forward P/E ratio of OFS is 8.64, which is lower than the industry average of 9.47, suggesting it may be undervalued [4] - OFS's P/B ratio is 0.69, compared to the industry average of 0.97, indicating an attractive valuation [5] - The P/CF ratio for OFS is 6.02, significantly lower than the industry average of 8.88, further supporting its undervaluation [6] - These financial metrics collectively suggest that OFS Capital is likely being undervalued at the moment [7]

Group 1 - OFS Credit Company Inc (NASDAQ: OCCI) operates as a closed-end fund focused on generating high income from its portfolio of CLO investments [1] - CLOs (Collateralized Loan Obligations) consist of various pools of loans, which are the primary investment vehicle for the company [1] - The company aims to create a hybrid investment strategy that combines growth and income, achieving total returns comparable to traditional index funds like the S&P [1] Group 2 - The article emphasizes the importance of diversifying investments by including high-quality dividend stocks, Business Development Companies, REITs, and Closed End Funds to enhance investment income [1] - The author has over 15 years of experience in investing and specializes in identifying lucrative market opportunities [1]

Core Insights - The article emphasizes the importance of a hybrid investment strategy that combines high-quality dividend stocks with other investment vehicles such as Business Development Companies, REITs, and Closed End Funds to enhance income while achieving total returns comparable to traditional index funds [1]. Investment Strategy - The investment approach focuses on creating a balanced portfolio that not only provides income through dividends but also captures growth, aiming for a total return that aligns with the S&P 500 [1]. - The strategy suggests that a solid base of classic dividend growth stocks can be effectively supplemented with alternative assets to boost overall investment income [1].

OFS Capital (OFS) appears an attractive pick, as it has been recently upgraded to a Zacks Rank #2 (Buy). This upgrade primarily reflects an upward trend in earnings estimates, which is one of the most powerful forces impacting stock prices.A company's changing earnings picture is at the core of the Zacks rating. The system tracks the Zacks Consensus Estimate -- the consensus measure of EPS estimates from the sell-side analysts covering the stock -- for the current and following years.The power of a changing ...

Financial Data and Key Metrics Changes - Net investment income increased by approximately 13% to $0.30 per share for Q4 2024 [6][14] - Net asset value per share increased by 14% to $12.85 per share [6][16] - Total investment income rose almost 7% to $11.6 million [19] - Total expenses increased by 3.5% to $7.6 million [20] Business Line Data and Key Metrics Changes - Significant increase in dividend income attributed to a nonrecurring distribution and other nonrecurring fee income [7][14] - No new non-accruals this quarter, with one loan exiting non-accrual status [9][17] - The loan portfolio remains well-diversified, with 100% in first lien and second lien senior secured loans [10][22] Market Data and Key Metrics Changes - The regulatory asset coverage ratio increased by eight percentage points to 169% [18] - Approximately 72% of outstanding debt was unsecured at quarter end [11][19] Company Strategy and Development Direction - The company is focused on rotating non-interest earning equity positions into interest-earning assets to improve net investment income [7][24] - Continued exploration of monetizing the minority equity investment in Fansteel Holdings [7][16] - Emphasis on capital preservation during uncertain economic times [24][25] Management's Comments on Operating Environment and Future Outlook - The Fed rate cuts in the second half of 2024 positively impacted portfolio companies by reducing interest costs [11] - Confidence in the adviser's experience and expertise in navigating the current market environment [13][25] - The company believes it is well-positioned to navigate the market successfully due to its adviser's size and reputation [25][26] Other Important Information - The company has $18.8 million in unfunded commitments to portfolio companies [22] - The investment portfolio comprised approximately 69% senior secured loans, 25% structured finance securities, and 6% equity securities [22] Q&A Session Summary - The Q&A session was not detailed in the provided content, and thus no specific questions and answers can be summarized. [27]

Investment Strategy - The company targets U.S. middle-market companies with annual revenues between $10 million and $1 billion, representing approximately 200,000 potential companies[32]. - The investment strategy focuses on senior secured loans, including first lien, second lien, and unitranche loans, as well as subordinated loans[38]. - The company aims to generate strong risk-adjusted net returns by assembling a diversified portfolio across various industries[38]. - The company focuses on investments in middle-market companies in the U.S., targeting individual investments generally ranging from $3.0 million to $25.0 million[65]. - The loan portfolio is expected to continue comprising a significant portion of Senior Secured First Lien Loans, which provide security interests in the assets of portfolio companies[66]. - Unitranche loans represent a significant growth opportunity, combining senior and subordinated debt into one loan, typically structured as senior secured loans[67]. - The company anticipates that Senior Secured Second Lien Loans will continue to be part of its investment strategy, with no contractual loan amortization in the initial years[68]. - Broadly Syndicated Loans are utilized for leveraged buyouts, mergers, acquisitions, and refinancings, with the company relying on agents for monitoring compliance and payment collection[69]. - Subordinated Loans are typically unsecured and provide high fixed interest rates, but carry a greater risk of loss compared to secured loans[70]. - The company invests in Structured Finance Securities, including mezzanine and subordinated note securities of CLOs, which are leveraged 9 to 13 times[74]. - The investment strategy includes tailoring terms to protect rights and manage risks while incentivizing portfolio companies to improve operating results[76]. - The company expects to hold most middle-market debt investments to maturity, but may sell some earlier based on relative value decisions and liquidity needs[77]. Risk Management - The company employs a rigorous credit analysis and approval process to minimize credit losses through effective underwriting and comprehensive due diligence[29]. - The company utilizes a disciplined investment process that includes ongoing risk assessments and assigns credit ratings to debt investments[46][47]. - The company has access to a proprietary database of borrowers developed over 25 years, aiding in identifying investment opportunities[39]. - The company anticipates that the unique challenges of lending to middle-market companies create high barriers to entry for new lenders[34]. - The investment committees are responsible for reviewing and evaluating potential investments, ensuring adherence to the company's core investment philosophy[61]. - The company monitors the creditworthiness of counterparties involved in repurchase agreement transactions[114]. - The classification of debt investments by risk category showed that 70.5% were rated as average risk, while 25.4% were under special mention[489]. - Non-accrual loans totaled $39.1 million in amortized cost, with a fair value of $20.8 million as of December 31, 2024[490]. Financial Performance - For the year ended December 31, 2024, total investment income decreased by $8,979,000 to $47,964,000 compared to $56,943,000 in 2023[499]. - Net investment income for the year ended December 31, 2024 was $16,712,000, down from $20,160,000 in 2023, reflecting a decrease of 22.1%[499]. - The net gain on investments for the year ended December 31, 2024 was $11,730,000, a significant recovery from a loss of $20,412,000 in 2023[516]. - Total expenses for the year ended December 31, 2024 decreased to $31,252,000 from $36,783,000 in 2023, a reduction of 15.1%[507]. - Interest expense for the year ended December 31, 2024 decreased by $2,834,000 to $16,648,000, primarily due to a reduction in average outstanding debt balances[508]. - The company recognized total PIK income of $2.7 million for the year ended December 31, 2024, representing 5.7% of total investment income[502]. - The average investment portfolio at fair value decreased from $474.5 million in 2023 to $404.7 million in 2024[509]. - Net unrealized appreciation for the year ended December 31, 2024 was $28.9 million, primarily related to common equity investments[518]. - The company fully repaid outstanding SBA debentures totaling $31.9 million during the year ended December 31, 2024[508]. - For the year ended December 31, 2023, the company reported net losses of $20.4 million, including net realized losses of $11.4 million and net unrealized depreciation of $9.0 million[520]. - The net loss of $20.4 million was primarily due to net unrealized depreciation of $14.5 million in the common equity of Pfanstiehl Holdings, Inc.[521]. - The company recognized net realized losses of $11.4 million, mainly from the write-off of a non-accrual loan and equity investment in Eblens Holdings, Inc.[522]. - For the year ended December 31, 2022, the company experienced net losses of $25.8 million, primarily due to unrealized depreciation of $23.0 million on debt investments and Structured Finance Securities[523]. Management Fees and Incentives - OFS Advisor's base management fee is set at an annual rate of 1.75%, calculated based on the average value of total assets, excluding cash and cash equivalents[79]. - For the years ended December 31, 2024, 2023, and 2022, the base management fee was reduced to 0.25% per quarter (1.00% annualized) for OFSCC-FS Assets, resulting in reductions of $1.1 million, $1.2 million, and $1.4 million respectively[80]. - The incentive fee consists of two parts: the Income Incentive Fee, based on pre-incentive fee net investment income, and the Capital Gains Fee, calculated at 20% of positive cumulative realized capital gains[81][85]. - Pre-incentive fee net investment income is compared to a hurdle rate of 2.0% per quarter (8.0% annualized), with no accumulation of amounts on the hurdle rate from quarter to quarter[83]. - For the year ended December 31, 2024, base management fees amounted to $5.993 million, while the Income Incentive Fee was $4.178 million[89]. - The Capital Gains Fee for the year ended December 31, 2022, was reversed, resulting in a reduction of $1.9 million due to decreased net unrealized appreciation[89]. - The structure of the incentive fee allows for the possibility of paying an incentive fee in a quarter where a loss is incurred, provided pre-incentive fee net investment income exceeds the hurdle rate[82]. - The cumulative aggregate realized capital gains and losses are calculated based on the net sales price of investments when sold, impacting the Capital Gains Fee calculation[86]. Regulatory Compliance - The company is regulated as a Business Development Company (BDC) under the 1940 Act, which imposes restrictions on transactions with affiliates and requires a majority of independent directors[104]. - The company has modified its asset coverage requirements, reducing the minimum required asset coverage ratio from 200% to 150% effective May 3, 2019[117]. - The company is subject to periodic examination by the SEC for compliance with the Exchange Act and the 1940 Act[125]. - The company has adopted a code of ethics to establish procedures for personal investments and restrict certain personal securities transactions[129]. - The company has received an existing Order from the SEC allowing greater flexibility to enter into co-investment transactions with certain Affiliated Funds[122]. - The company must meet certain source-of-income and asset diversification requirements to maintain its qualification as a RIC under Subchapter M of the Code[139]. - The company is required to diversify its holdings such that at least 50% of its assets consist of cash and government securities, and no more than 25% is invested in the securities of any one issuer[144]. - Failure to qualify as a RIC would subject the company to corporate-level U.S. federal income tax on all ICTI and Net Capital Gains[149]. - The company may be required to recognize income in excess of distributions from PFICs, which will be subject to the Annual Distribution Requirement[147]. - The company is authorized to borrow funds and sell assets to satisfy distribution requirements, but must meet certain asset coverage tests[146]. - The company may face conflicts of interest when investing alongside affiliated accounts, particularly in distressed situations[153]. Portfolio Composition - As of December 31, 2024, total debt and equity investments amounted to $332.8 million, with a fair value of $274.6 million, compared to $341.2 million and $306.4 million respectively as of December 31, 2023[477]. - The portfolio consisted of 100% first lien and second lien loans based on fair value, with first lien debt investments valued at $189.9 million and second lien debt investments at $34.3 million as of December 31, 2024[478]. - The three largest industries by fair value in the investment portfolio were Manufacturing (36.7%), Health Care and Social Assistance (20.1%), and Administrative and Support and Waste Management (6.5%), totaling approximately 63.3% of the portfolio[479]. - The ten largest investments by issuer accounted for 52.8% of the total portfolio at fair value, with Pfanstiehl Holdings, Inc. being the largest equity investment at a fair value of $89.3 million[480]. - As of December 31, 2024, the company had no Structured Finance Securities that had been optionally redeemed, and sold Structured Finance Securities for net proceeds of $20.1 million during the year[483]. - Total investment purchases and originations for the year ended December 31, 2024, were $93.4 million, significantly up from $41.7 million in 2023[483]. - The company recognized a realized loss of $3.5 million from the write-off of preferred and common equity investments in Master Cutlery, LLC during the year ended December 31, 2024[484]. - As of December 31, 2023, total debt investments on non-accrual status amounted to $34,568,000, with a fair value of $12,139,000[491]. - For the three months ended December 31, 2024, total investment income was $11.6 million, an increase from $10.9 million in the previous quarter[530]. - The company reported net gains of $21.4 million for the three months ended December 31, 2024, primarily due to net unrealized appreciation of $15.6 million on the common equity investment in Pfanstiehl Holdings, Inc.[533]. - As of December 31, 2024, the company held cash of $6.1 million, including $4.8 million held by OFSCC-FS, and received $11.4 million in cash distributions from OFSCC-FS during the year[535]. - The company had an unused commitment of $24.0 million under its Banc of California Credit Facility and $82.7 million under the BNP Facility as of December 31, 2024[536]. - The aggregate amount outstanding of senior securities issued by the company was $248.4 million, with an asset coverage of 169%, exceeding the minimum requirement of 150%[537].

Financial Performance - Net investment income increased to $0.30 per common share for Q4 2024, up from $0.27 in Q3 2024[5] - Net gain on investments was $1.60 per common share for Q4 2024, primarily due to net unrealized appreciation of $1.79 per common share[5] - Total investment income for Q4 2024 was $11.648 million, an increase of $0.7 million from Q3 2024[12] - For the three months ended December 31, 2024, total investment income was $11,648,000, a decrease of 6.2% from $13,483,000 in the same period of 2023[22] - Net investment income for the year ended December 31, 2024, was $16,712,000, down 17.9% from $20,160,000 in 2023[22] - The net investment income per common share for the year ended December 31, 2024, was $1.25, down from $1.50 in 2023[22] - Distributions declared per common share remained stable at $0.34 for both the three months ended December 31, 2024, and 2023[22] Asset and Investment Overview - Net asset value per common share rose to $12.85 at December 31, 2024, compared to $11.29 at September 30, 2024[5] - Total investments at fair value were $409.7 million, approximately 113% of amortized cost[11] - The investment portfolio included $224.2 million in debt investments, with 85% as first lien loans[11] - Cash and cash equivalents totaled $6.1 million as of December 31, 2024[16] Debt and Liabilities - Outstanding debt was $248.4 million as of December 31, 2024, with a weighted-average effective interest rate of 6.30%[9] Gains and Losses - The net realized loss for the year ended December 31, 2024, was $17,121,000, compared to a loss of $11,405,000 in 2023, indicating a significant increase in losses[22] - Net unrealized appreciation for the year ended December 31, 2024, was $28,851,000, a recovery from a depreciation of $9,007,000 in 2023[22] - The net increase in net assets resulting from operations for the three months ended December 31, 2024, was $25,475,000, compared to a decrease of $4,109,000 in the same period of 2023[22] Company Strategy and Management - OFS Capital primarily targets investments of $3 million to $20 million in privately held middle-market companies with annual EBITDA between $5 million and $50 million[23] - The company is externally managed by OFS Capital Management, LLC, which is registered under the Investment Advisers Act of 1940[23] Forward-Looking Statements - Forward-looking statements indicate that actual results may differ materially from expectations due to various risks and uncertainties[24]

Group 1 - The article highlights the importance of closed-end funds and the potential for directional and arbitrage opportunities due to market price deviations [1] - OFS Credit Company (NASDAQ: OCCI) offers a distribution yield of 18.5%, which is emphasized as a significant investment opportunity [2] - The investment group Trade With Beta provides various services including frequent picks for mispriced preferred stocks and baby bonds, weekly reviews of over 1200 equities, and hedging strategies [2]