OFS Capital (OFS) 4 Aug 232023 Q2 Earnings call transcript

Good morning, everyone and welcome to the OFS Capital Corporation Second Quarter 2023 Earnings Conference Call. After today’s prepared remarks, there will be an opportunity to ask questions. [Operator Instructions] Please also note, today’s call is being recorded. At this time, I would like to hand the call over to Steve Altebrando, Vice President of Capital Markets. Please go ahead.

thank joining and everyone morning, you us. for Good are our Jeff Chairman on Treasurer. the the Chief Rashid, today call and Officer and Also and Bilal Executive Chief Financial company’s Cerny, Officer;

note we and may OFS laws. opinions webcast statements Such that Before reflect forward-looking please the made assumptions, call constitute applicable on under defined by various statements anticipated statements. and as materially statements and performance this securities concerning management uncertainties and factors and begin, expectations unknown results, known subject to from guarantees cause future Capital could are of are differ risks, actual other that to not results such

The factors the uncertainties beyond risk described way from some time SEC. in factors and with are to in filings the management’s control, including time other our

any assumptions those assumptions and reasonable, statements we inaccurate, prove the these those based a on could incorrect. Although as be believe assumptions result, also could forward-looking of are

these forward-looking undue should herein as Capital any update speak call. date statements on not of undertakes place to only the forward-looking of You statements all statements. forward-looking this duty OFS reliance and made no

the turn I’ll and to over Bilal Rashid. that, With Chief Executive Chairman Officer, call

Good Thank morning. you, Steve.

to in net income, share, our rose another are investment the per report per up to quarterly $X.XX share $X.XX We which by from pleased quarter. increase previous

benefits majority the rate. to majority and of vast debt the our We portfolio the to balance floating rate our the rate expect with environment current being of our see continue sheet interest positioning in of being fixed loan

share, a increase quarter. our over improvement, the XX distribution quarter the XXth for the prior result As third is This our investment continued X% per Board $X.XX quarterly of a increased the quarters. is increase income this net last over to distribution which

remained $XX.XX net structured portfolio equity Our unrealized quality value stable, on no new the investments. depreciation declined to quarter. and our in net non-accruals of had finance The and our to materially credit we per share, overall due X.X% primarily asset

of in last increases cost benchmark companies. portfolio with our that borrowing the portfolio remains the manageable believe to Yields rates. to quarter, the observed on line to continue We continue compared for in increase

we with manufacturing, As part of positioned sector technology. that highly our investing our exposures defensively in our investment industries. care, believe portfolio largest well-diversified long-standing business is services in cyclical We health generally and avoid discipline,

So putting the that to activity second this will far year, continues we subdued year. be meantime, capital the M&A the work. In of pickup to some deliberate with the in in half remain expectation see we

debt approximately with continues to our of flexibility. debt At outstanding XXXX unsecured. of or operational later more our and XX% the the Our matures is provide outstanding second financing us in half quarter, end of than

$XXX BNP million XXXX. which loan the BDC, is in senior Paribas, with matures facility June to non-recourse Our

of line is credit no provisions. corporate mark-to-market flexible Our with

of with benefit $XXX ago, than market discussed As economic this million we years in this a locked which secured, before, pricing. have coupon rate of average environment. will we us majority unsecured debt we believe senior loan notably and portfolio of lower current our in is The X.X%, continue weighted to uncertain X fixed is

continue billion XX-year to and classes multiple experience adviser, and approximately of loan multiple manages which will a across industries, benefit we that from has in asset $X.X cycles. record credit anticipate structured also We more expertise has and than credit through the markets, the our track

Financial Chief for call quarter. and more turn I’ll the the point, over Jeff details Officer, you to this color give to At Cerny, our

Good morning, Bilal. Thanks, everyone.

net our prior income net compares quarter’s favorably share we investment As quarter. of the $X.XX Bilal mentioned, for per posted share. of income to $X.XX per This investment

is prior also X% $X.XX a third increase share a distribution the We the a per over announced quarterly for of which quarter. $X.XX or quarter,

slightly higher offset investment income increased partially by driven due income by expense. to primarily was higher Quarter-over-quarter, interest interest higher income and yields, X.X%. our net increase lower The dividend

equity net relatively by value, value portfolio non-accruals unrealized per credit The primarily decreased on this had no our non-accrual due to asset our decline share. stable. currently net structured status. We fair quarter. quarter new X.X% on depreciation this our was quality At we have to Our remained total of per $XX.XX just investments and X.X% The share investments. credit of

the investment income Turning to X% income statement. was million. approximately up $XX.X Total to

an increase variable million credit As income facility. rate of I by were was on interest due due our yields. increase up higher an this primarily mentioned, slightly, Total $X.X in previously interest the driven expenses to primarily BNP in to

a income year. quarter, over was investment compared trend last $X.XX the share of continues Net per to $X.XX quarterly second is which increase This increases past quarter. the for the

approximately to continue of debt portfolio loan at was outstanding XX% the fixed unsecured. It will outstanding investment XX% while our vast majority also believe debt solid that income is worth XX% our of is that rate. remain our later that our net approximately or and quarter We rate, in is of debt of XXXX noting matures end, floating given outstanding

SBIC was our the Excluding relatively and was quarter-over-quarter asset ratio at X.XXx regulatory approximately our ratio stable XXX%. debt, coverage debt-to-equity regulatory

to our investments. Turning

the of portfolio uncertain companies by our this continued pleased are We in performance macroeconomic environment.

committed remain selective being structure senior to the in in capital our regard cautious new underwriting. remain and originations. to expect to with We We

identify this third to However, incremental funding funded quarter. portfolio of we or several opportunities our evaluating which quarter companies for add-on either for are the in continue growth

investments at loans. XXX% our nearly of as was are secured. And value XX, of fair majority June loan The the senior of in portfolio

of the rate, end, in was which quarter’s naturally environment. In is addition, loan at advantageous portfolio interest floating rate current the XX%

While our pace elevated rate continue interest the increases help performance. has the slowed, of interest rates overall to

notes loans, investment equity debt, secured securities. of percentage XX% senior finance overall includes and portfolio a structured subordinated X% X% cost, XX% approximately As our

in on end basis. XX At the quarter, we totaling $XXX the unique value investments Our had remains of portfolio fair diversified. million issuers approximately a

XX weighted the points fees the For up on all of which basis was deferred the XX, XX.X%. portion June of loan fees, average performing and includes income interest, the investment quarter interest-bearing ended portfolio, to yield prepayment amortization

turn Bilal. With over the I will that, call to back

The are loan wrap in To growth of of fixed we outstanding sheet of strong vast majority debt up is in today, floating happy comprised Thank our portfolio part call and our rate. continued is report to investment to investments, XX% our you, positioning. due net rate this quarter, income balance our Jeff.

focus portfolio our quality being of fundamentals Our at fair XXX% on of we nearly and overall capital loan portfolio. secured, value confident remains the preservation and senior with remain in our

Our beyond. XXXX approximately debt financing primarily with in outstanding long-term of maturing is XX% and our

has years, last generating our relied while invested returns on X.X% just served realized more cumulative investment experience a discipline, beginning We loss well. portfolio. billion BDC $X.X risk-adjusted have of XXXX, us net on has long-standing the with attractive which of the Since our and XX.X over the than

a banking our believe expertise successfully billion of a the our size, to advisor due equipped experience is business We management especially navigate platform reputation advisor. market With long-standing and our has affiliated with markets broad more credit corporate $XX relationships. including and $X.X group, than billion this capital to asset

XX-plus Our corporate has gone credit the through platform years. multiple over cycles last credit

it Our strongly a with BDC. in shareholders the stake ownership as advisor also XX% maintains is aligned

With that, up questions. operator, please open the for call

you. Thank

[Operator with go will from We Instructions] begin session. now Mitchel the Penn Today’s first ahead. Oppenheimer. Please comes question question-and-answer

give you second in percent guys. Hey us portfolio liens? Can of the the

of we liquid names. XX% larger, lien as morning the to credit. Good said question. know, is be before for And have Thanks more loan tend in the you Mitchel. Yes. portfolio those second the

weighted have is interest average Yes. it the of possible that? Do sort get And portfolio’s ratio? coverage you to

lien in we first is typically portfolio you We model the It statistic. that which of don’t coverage with that while have something current they I obviously, But light still And do look manageable being includes generally can they environment. that at. tightened, the rates. sensitivity publish are we tell downside, of interest ratios,

Got of how your much a portfolio it. that? XX%, The with loan-to-value than percentage greater is

than XX%? value loan-to-enterprise Loan-to-value, greater

Yes.

that in my now, fingertips It’s not Mitchel. right a have statistic I

Okay. all you, Thank for me. That’s guys.

Okay. Thank you.

question-and-answer attending call presentation. Thank and our now has session, concludes you concluded. This today’s the for

You may now disconnect.