OFS Capital(OFS) - 2023 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Net investment income increased to $0.40 per share, up by 5% from the previous quarter [7][13] - Net asset value declined by 1.5% to $12.74 per share, primarily due to unrealized depreciation on a few assets [8][14] - Total investment income rose approximately 0.2% to $14.7 million, driven by an increase in interest income [15] Business Line Data and Key Metrics Changes - The portfolio's weighted average performing investment income yield increased by 80 basis points to 14.6% [16] - 99% of the loan portfolio at fair value is senior secured, with 71% in senior secured loans [16] Market Data and Key Metrics Changes - The company noted subdued M&A activity compared to historical levels due to interest rate and macroeconomic uncertainty [9][10] - The overall performance of portfolio companies remains solid despite some weaknesses [16] Company Strategy and Development Direction - The company focuses on capital preservation, with nearly 100% of the loan portfolio being senior secured [18] - The financing structure is long-term, with approximately 89% of outstanding debt maturing in 2026 or later [19] - The company aims to navigate the current market successfully due to the experience and reputation of its adviser [19] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism for increased M&A activity in the first half of next year [10] - The company remains cautious with new originations and continues to support portfolio companies in identifying growth opportunities [16] Other Important Information - The company has commitments to fund investments totaling $14.1 million under various credit facilities [16] - The adviser manages approximately $4.2 billion across loan and structured credit markets, with a strong alignment with shareholders [19] Q&A Session Summary Question: What percentage of second liens is in the portfolio? - Second liens account for 20% of the loan portfolio, with a modest increase since last quarter [22] Question: What percentage of the portfolio has interest coverage below 1x? - The statistic was not readily available, but covenant coverage ratios have been maintained despite some tightening [23] Question: What is the growth in EBITDA and revenue on a trailing 12-month basis? - More than a majority of the portfolio has seen growth in both revenues and EBITDA, with some margin compression noted but lessening [24]