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OFS Capital(OFS) - 2025 Q1 - Quarterly Results
OFS CapitalOFS Capital(US:OFS)2025-05-01 20:31

Financial Highlights and Recent Events 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 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, 20253 - Net investment income decreased to $0.26 per common share for Q1 2025 from $0.30 in Q4 20245 - 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 rate5 Portfolio and Investment Activities 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 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 million11 - As of March 31, 2025, 90% of the loan portfolio consisted of floating rate loans, and 100% consisted of first lien and second lien loans5 Portfolio Yields and Activity 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, 20258 Results of Operations 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 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 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 - 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 202413 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 assets14 Net Gain (Loss) on Investments 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 losses15 - 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 investments15 Liquidity, Capital Resources, and Debt 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 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 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 equivalents16 - 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 - Outstanding commitments to fund various undrawn revolvers and other credit facilities of portfolio companies totaled $13.8 million17 Consolidated Financial Statements 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 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 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 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 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 - 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 million22 Conference Call Information 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 Time18 - Participation is available via internet at www.ofscapital.com or by telephone at (833) 816-1364 (Domestic) or (412) 317-5699 (International)1819 Forward-Looking Statements 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 expectations23 - The company assumes no obligation to update the information or revise any forward-looking statements23