Oxford Square Capital (US:OXSQ)2025-04-30 22:24PART I. FINANCIAL INFORMATION Presents the unaudited financial statements and management's discussion and analysis for the first quarter of 2025 Financial Statements Presents unaudited financial statements for Q1 2025, showing a decrease in net assets to $148.9 million and NAV per share to $2.09 Statements of Assets and Liabilities Reports total assets of $285.5 million and net assets of $148.9 million as of March 31, 2025, with NAV per share declining to $2.09 Statements of Assets and Liabilities (Unaudited) | Metric | March 31, 2025 ($) | December 31, 2024 ($) | | :--- | :--- | :--- | | Total Assets | 285,490,638 | 299,730,974 | | Total Liabilities | 136,608,328 | 139,065,494 | | Total Net Assets | 148,882,310 | 160,665,480 | | Net Asset Value (NAV) per Share | 2.09 | 2.30 | Schedule of Investments (as of March 31, 2025) Details the investment portfolio with a fair value of $243.2 million, primarily in Senior Secured Notes (60.6%) and CLO Equity (37.5%) Portfolio Composition by Fair Value (March 31, 2025) | Investment Type | Fair Value ($) | % of Net Assets | | :--- | :--- | :--- | | Senior Secured Notes | 147,337,396 | 99.0% | | CLO Equity Investments | 91,331,433 | 61.3% | | Common Stock | 622,538 | 0.4% | | Preferred Stock | 3,890,986 | 2.6% | | Total Investments | 243,182,353 | 163.3% | - The total cost of investments was $359.6 million, resulting in a net unrealized depreciation of $116.4 million26 - The portfolio includes affiliated investments in UniTek Global Services, Inc. with a fair value of approximately $3.9 million34 Schedule of Investments (as of December 31, 2024) Presents the investment portfolio as of December 31, 2024, with a fair value of $260.9 million, primarily in Senior Secured Notes (57.8%) and CLO Equity (40.1%) Portfolio Composition by Fair Value (December 31, 2024) | Investment Type | Fair Value ($) | % of Net Assets | | :--- | :--- | :--- | | Senior Secured Notes | 150,686,777 | 93.8% | | CLO Equity Investments | 104,594,232 | 65.1% | | Common Stock | 957,750 | 0.6% | | Preferred Stock | 4,614,100 | 2.9% | | Total Investments | 260,852,859 | 162.4% | Statements of Operations Reports total investment income of $10.2 million and a net decrease in net assets from operations of $8.1 million for Q1 2025 Operational Results (Three Months Ended March 31) | Metric | 2025 ($) | 2024 ($) | | :--- | :--- | :--- | | Total Investment Income | 10,161,050 | 10,677,424 | | Total Expenses | 4,057,176 | 4,139,868 | | Net Investment Income | 6,103,874 | 6,537,556 | | Net Realized Losses | (12,158,495) | (8,094,940) | | Net Change in Unrealized Depreciation | (2,066,896) | (211,006) | | Net Decrease in Net Assets from Operations | (8,121,517) | (1,768,390) | | Net Investment Income per Share | 0.09 | 0.11 | | Net Decrease in Net Assets from Operations per Share | (0.12) | (0.03) | Statements of Changes in Net Assets Details a $11.8 million decrease in net assets for Q1 2025, ending at $148.9 million, driven by operational losses and distributions Changes in Net Assets (Three Months Ended March 31) | Metric | 2025 ($) | 2024 ($) | | :--- | :--- | :--- | | Net Decrease from Operations | (8,121,517) | (1,768,390) | | Distributions to Stockholders | (7,349,702) | (6,263,108) | | Net Increase from Capital Share Transactions | 3,688,049 | 1,062,696 | | Total Decrease in Net Assets | (11,783,170) | (6,968,802) | | Net Assets at Beginning of Period | 160,665,480 | 151,308,625 | | Net Assets at End of Period | 148,882,310 | 144,339,823 | Statements of Cash Flows Shows net cash provided by operating activities of $6.0 million and a net increase in cash and cash equivalents of $2.3 million for Q1 2025 Cash Flow Summary (Three Months Ended March 31) | Activity | 2025 ($) | 2024 ($) | | :--- | :--- | :--- | | Net Cash Provided by Operating Activities | 5,987,857 | 20,293,981 | | Net Cash Used in Financing Activities | (3,661,653) | (5,127,844) | | Net Increase in Cash and Cash Equivalents | 2,326,204 | 15,166,137 | | Cash and Cash Equivalents, Beginning of Period | 34,926,468 | 5,740,553 | | Cash and Cash Equivalents, End of Period | 37,252,672 | 20,906,690 | Notes to Financial Statements Provides detailed explanations of accounting policies, investment valuation, borrowings, related party transactions, and financial highlights Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 2025 financial condition and results, covering investment objectives, portfolio changes, income drivers, and liquidity Overview Outlines the company's investment objective to maximize total return through corporate debt and CLO investments as a BDC and RIC - The primary investment focus is on corporate debt securities and CLO investments to seek an attractive risk-adjusted total return217 - As of March 31, 2025, the weighted average annualized yield on debt investments was approximately 14.31%219221 - The company utilizes leverage, which magnifies potential gains and losses, exposing it to increased risk222 Portfolio Composition and Investment Activity Details the investment portfolio's decrease to $243.2 million, driven by sales and losses, with new acquisitions partially offsetting Portfolio Reconciliation (in millions) | | Three Months Ended March 31, 2025 ($) | | :--- | :--- | | Beginning investment portfolio | 260.9 | | Portfolio investments acquired | 16.0 | | Debt repayments | (8.7) | | Sales of securities | (10.7) | | Reductions to CLO equity cost value | (1.7) | | Net change in unrealized depreciation | (2.1) | | Net realized losses on investments | (12.2) | | Ending investment portfolio | 243.2 | Portfolio Composition by Asset Class (Fair Value) | Asset Class | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Senior Secured Notes | $147.3M (60.6%) | $150.7M (57.8%) | | CLO Equity | $91.3M (37.5%) | $104.6M (40.1%) | | Equity and Other Investments | $4.5M (1.9%) | $5.6M (2.1%) | | Total | $243.2M (100.0%) | $260.9M (100.0%) | - As of March 31, 2025, qualifying assets under the 1940 Act represented 67.1% of total assets, below the 70.0% requirement to acquire new non-qualifying assets247 Portfolio Grading Describes the debt portfolio's credit grading, with a weighted average grade of 2.2 and 81.4% of fair value in Grade 2 Debt Portfolio Grading (by Fair Value, March 31, 2025) | Grade | Summary Description | Fair Value ($M) | % of Debt Portfolio | | :--- | :--- | :--- | :--- | | 1 | Ahead of expectations | — | —% | | 2 | Full repayment expected | 119.9 | 81.4% | | 3 | Closer monitoring required | 27.4 | 18.6% | | 4 | Loss of interest expected | — | —% | | 5 | Loss of principal expected | — | —% | | Total | | 147.3 | 100.0% | Results of Operations Analyzes Q1 2025 operational results, showing decreased investment income of $10.2 million and a net decrease in net assets of $8.1 million Investment Income Components (Three Months Ended March 31) | Income Source | 2025 ($) | 2024 ($) | | :--- | :--- | :--- | | Total Interest Income | 5,534,755 | 6,421,047 | | Income from Securitization | 3,956,053 | 3,932,374 | | Total Other Income | 670,242 | 324,003 | | Total Investment Income | 10,161,050 | 10,677,424 | - As of March 31, 2025, the company had no debt investments on non-accrual status, compared to six investments on non-accrual status in the prior year258 - Net realized losses for Q1 2025 were approximately $12.2 million. Net unrealized depreciation was $2.1 million, with significant depreciation in CLO investments like BlueMountain CLO XXXI and Dryden 43, partially offset by appreciation in Alvaria, Inc271272 Liquidity and Capital Resources Details liquidity with $37.3 million cash, $125.3 million in debt, and an asset coverage ratio of 218% as of March 31, 2025 - Cash and cash equivalents increased to $37.3 million from $34.9 million at year-end 2024278 Contractual Obligations (as of March 31, 2025) | Contractual obligations (in millions) | Principal Amount ($) | Less than 1 year ($) | 1 – 3 years ($) | 3 – 5 years ($) | | :--- | :--- | :--- | :--- | :--- | | 6.25% Unsecured Notes | 44.8 | — | 44.8 | — | | 5.50% Unsecured Notes | 80.5 | — | — | 80.5 | | Total | 125.3 | — | 44.8 | 80.5 | - The company's asset coverage ratio for borrowed amounts was 218% as of March 31, 2025, exceeding the required 150%283 Quantitative and Qualitative Disclosures About Market Risk Discusses the company's primary exposure to interest rate risk and provides a sensitivity analysis on investment income Hypothetical Impact of Interest Rate Changes on Investment Income | Hypothetical Change in Base Rates | Estimated Percentage Change in Investment Income | | :--- | :--- | | Up 300 basis points | 13.5% | | Up 200 basis points | 9.0% | | Up 100 basis points | 4.5% | | Down 100 basis points | (4.5)% | | Down 200 basis points | (8.9)% | | Down 300 basis points | (13.2)% | - The company may use hedging instruments like futures and options in the future to mitigate interest rate risk, though none are currently in use302 Controls and Procedures Management concluded that disclosure controls and procedures were effective, with no material changes to internal control over financial reporting - The CEO and CFO concluded that disclosure controls and procedures were effective as of the end of the period305 - No material changes to internal control over financial reporting occurred during the quarter ended March 31, 2025307 PART II. OTHER INFORMATION Provides disclosures on legal proceedings, risk factors, equity sales, and other general information Legal Proceedings The company is not currently subject to any material legal proceedings - As of the report date, the company is not subject to any material legal proceedings310 Risk Factors No material changes to the company's risk factors were reported for the quarter - No material changes to risk factors were reported for the three months ended March 31, 2025311 Unregistered Sales of Equity Securities and Use of Proceeds Details the issuance of 87,090 common shares valued at $223,000 through the distribution reinvestment plan in Q1 2025 - Issued 87,090 shares of common stock valued at approximately $223,000 under the distribution reinvestment plan during Q1 2025312 - No common stock was repurchased by the Company during the three months ended March 31, 2025313 Defaults Upon Senior Securities No defaults upon senior securities were reported - None314 Other Information No directors or officers adopted or terminated Rule 10b5-1 trading plans during the fiscal quarter - No directors or officers adopted or terminated any Rule 10b5-1 trading plans during the quarter316 Exhibits Lists exhibits filed with the report, including CEO and CFO certifications