OFS Capital(OFS) - 2022 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The net asset value per share decreased to $14.57 from an all-time high of $15.52 last quarter, primarily due to unrealized depreciation from declines in broader capital markets [13][21] - Net investment income was reported at $0.47 per share, with adjusted net investment income at $0.24 per share, reflecting a decline primarily due to lower fees related to loan origination and dividend income [15][18] - Total investment income for the quarter was $10.4 million, down from $10.9 million in the prior quarter, mainly due to decreased dividend and fee income [24] Business Line Data and Key Metrics Changes - The company slowed origination activities in the last quarter, reflecting a cautious approach due to economic uncertainty, while continuing to opportunistically buy assets [15][19] - The income yield on the investment portfolio remained stable at 9.1% [32] Market Data and Key Metrics Changes - The S&P 500 declined by 16.4% and the High Yield Bond Index declined by 11.5% during the last quarter, impacting the company's net asset value [14] - The three-month LIBOR increased by 133 basis points to 2.3% by the end of the second quarter, with further increases anticipated [30] Company Strategy and Development Direction - The company is positioned to benefit from rising interest rates, with a portfolio primarily composed of floating rate loans and long-term fixed rate debt [8][34] - The focus on capital preservation is emphasized, with 98% of the loan portfolio being senior secured [35] - The company has a long-term debt-to-equity ratio target of approximately 1.3 to 1.4 times [27] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the uncertain economic environment influenced by inflation, rising interest rates, and geopolitical conflicts, but expressed confidence in the portfolio's fundamentals [8][10] - The company expects a path to increased adjusted net investment income in the third quarter due to the positioning of its balance sheet [20] Other Important Information - The company announced a stable distribution of $0.29 per share, maintaining the distribution after seven consecutive increases [26] - 100% of the outstanding debt matures in 2025 or later, with 49% being unsecured [12][26] Q&A Session Summary - No questions were raised during the Q&A session, and the call concluded without any inquiries from participants [40]