OFS Credit Company Announces Financial Results for the Third Fiscal Quarter 2023
THIRD QUARTER HIGHLIGHTS
-
Net investment income (“NII”) of
$3.8 million , or$0.34 per common share, for the fiscal quarter endedJuly 31, 2023 . This compares to NII of$3.6 million , or$0.35 per common share, for the fiscal quarter endedApril 30, 2023 . The decrease in net investment income per common share was primarily due to a decrease in the portfolio’s earned investment yield and an increase in the weighted average shares outstanding primarily related to common stock issued pursuant to our “At-the-Market” offering. -
Core net investment income (“Core NII”)1 of
$7.0 million , or$0.62 per common share, for the fiscal quarter endedJuly 31, 2023 . Core NII increased$1.0 million , or$0.03 per common share, from the prior quarter. The increase in Core NII was primarily due to an increase in CLO equity issuers making their initial cash distribution payments. -
Net asset value (“NAV”) per common share of
$8.02 as ofJuly 31, 2023 , a decrease of$0.46 from NAV of$8.48 as ofApril 30, 2023 . -
During the fiscal quarter ended
July 31, 2023 , the earned income yield of our investment portfolio at amortized cost was 14.7%.
OTHER RECENT EVENTS
-
On
September 1, 2023 , OFS Credit’s board of directors declared a quarterly distribution of$0.55 per share of common stock for the fiscal quarter endingOctober 31, 2023 . The distribution is payable onOctober 31, 2023 in cash or shares of our common stock to stockholders of record as ofSeptember 15, 2023 . The total amount of cash distributed to all stockholders will be limited to 20% of the total distribution, excluding any cash paid for fractional shares.
SELECTED FINANCIAL HIGHLIGHTS |
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(in millions, except per share data) (unaudited) |
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As of |
As of |
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Investment portfolio, at fair value |
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$ |
147.1 |
$ |
142.6 |
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NAV per common share |
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8.02 |
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8.48 |
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For the Fiscal Quarter Ended |
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(Per common share) |
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Net investment income |
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$ |
0.34 |
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$ |
0.35 |
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Net unrealized depreciation on investments |
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(0.29 |
) |
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(1.49 |
) |
Net earnings (loss) |
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$ |
0.05 |
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$ |
(1.14 |
) |
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Core NII — Non-GAAP1 |
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Net investment income |
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$ |
0.34 |
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$ |
0.35 |
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CLO equity adjustments |
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0.28 |
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|
|
0.24 |
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Core NII |
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$ |
0.62 |
|
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$ |
0.59 |
1 |
On a supplemental basis, we disclose Core NII, which is a financial measure calculated and presented on a basis of methodology other than in accordance with accounting principles generally accepted in |
MANAGEMENT COMMENTARY
“We continue to deploy capital into new investments both in the primary and secondary markets,” said
PORTFOLIO AND INVESTMENT ACTIVITIES
As of
Subsequent to
Portfolio Overview ($ in millions) |
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As of |
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As of |
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Investment portfolio, at fair value |
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$ |
147.1 |
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$ |
142.6 |
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Total number of portfolio companies |
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74 |
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69 |
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Weighted-average effective yield |
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14.11 |
% |
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14.58 |
% |
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For the Fiscal Quarter Ended |
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Portfolio Activity ($ in millions) |
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CLO equity investments |
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$ |
3.9 |
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$ |
— |
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CLO debt investments |
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6.4 |
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9.6 |
|
Loan accumulation facility investments |
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0.6 |
|
|
|
0.1 |
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Total investments |
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$ |
10.9 |
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$ |
9.7 |
|
Weighted-average effective yield |
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|
20.23 |
% |
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|
13.65 |
% |
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As of |
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Portfolio Composition ($ in millions) |
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Cost |
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Fair Value |
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CLO equity investments |
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$ |
166.2 |
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$ |
117.5 |
||
CLO debt investments |
|
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20.5 |
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|
20.7 |
||
Loan accumulation facility investments |
|
|
8.1 |
|
|
8.0 |
||
Other CLO equity-related investments |
|
|
0.8 |
|
|
0.9 |
||
Total investments |
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$ |
195.6 |
|
$ |
147.1 |
RESULTS OF OPERATIONS
Interest Income
During the fiscal quarter ended
Expenses
During the fiscal quarter ended
Net realized and unrealized gain (loss)
During the fiscal quarter ended
DISTRIBUTIONS
On
Record Date |
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Payable Date |
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Distribution Per Common Share2 |
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2 |
The total amount of cash distributed to all stockholders will be limited to 20% of the total distribution to be paid, excluding any cash paid for fractional shares. The remainder of the distribution (approximately 80%) will be paid in the form of shares of our common stock. The exact distribution of cash and stock to any given stockholder will be dependent upon each stockholder's election as well as the elections of other stockholders, subject to the pro-rata limitation. Participants in the Company’s dividend reinvestment plan will also receive an election form. The investment feature of the dividend reinvestment plan will be suspended for the common stock distribution payable in cash and common stock on |
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Statement of Assets and Liabilities |
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As of |
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(unaudited) |
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Assets: |
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Investments, at fair value (amortized cost of |
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$ |
147,075,483 |
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Cash |
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22,541,930 |
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Interest receivable |
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729,155 |
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Other assets |
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791,002 |
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Total assets |
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171,137,570 |
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Liabilities: |
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Preferred stock (net of deferred issuance costs of |
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62,651,642 |
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Payable to adviser and affiliates |
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2,252,174 |
|
Accrued professional fees |
|
|
402,026 |
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Other liabilities |
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|
74,000 |
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Total liabilities |
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65,379,842 |
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Net assets |
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$ |
105,757,728 |
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Net assets consist of: |
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Common stock, par value of |
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$ |
13,187 |
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Paid-in capital in excess of par |
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141,706,879 |
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Total accumulated losses |
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(35,962,338 |
) |
Total net assets |
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$ |
105,757,728 |
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Net asset value per share |
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$ |
8.02 |
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Statements of Operations |
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Three Months Ended |
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Nine Months Ended |
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(unaudited) |
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(unaudited) |
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Investment income: |
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Interest income |
$ |
7,228,780 |
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$ |
21,616,886 |
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Operating expenses: |
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Interest expense |
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1,021,241 |
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|
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3,063,723 |
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Management fees |
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750,181 |
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|
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2,169,362 |
|
Incentive fees |
|
962,141 |
|
|
|
2,826,032 |
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Administration fees |
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322,663 |
|
|
|
891,910 |
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Professional fees |
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243,736 |
|
|
|
636,317 |
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Excise tax provision (benefit) |
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(70,000 |
) |
|
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230,000 |
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Other expenses |
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150,253 |
|
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|
495,416 |
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Total operating expenses |
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3,380,215 |
|
|
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10,312,760 |
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Net investment income |
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3,848,565 |
|
|
|
11,304,126 |
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Net realized and unrealized loss: |
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Net change in unrealized depreciation on investments |
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(3,319,205 |
) |
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(15,186,923 |
) |
Net realized and unrealized loss |
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(3,319,205 |
) |
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(15,186,923 |
) |
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Net increase (decrease) in net assets resulting from operations |
$ |
529,360 |
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|
$ |
(3,882,797 |
) |
About
Forward-Looking Statements
Statements in this press release regarding management’s future expectations, beliefs, intentions, goals, strategies, plans or prospects, including statements relating to: the Company’s results of operations, including NII, Core NII, earnings per share and net asset value and the factors that may affect such results; management’s belief that the Company’s balance sheet is well positioned due to liabilities that have a fixed rate of interest with maturities that do not come due until 2026, when there can be no assurance that such a composition will lead to future success; and other factors may constitute forward-looking statements. These forward-looking statements are not historical facts, but rather are based on current expectations, estimates and projections about us, our current and prospective portfolio investments, our industry, our beliefs, and our assumptions. Words such as “anticipates,” “expects,” “intends,” “plans,” “will,” “may,” “continue,” “believes,” “seeks,” “estimates,” “would,” “could,” “should,” “targets,” “projects,” and variations of these words and similar expressions are intended to identify forward-looking statements. These statements are not guarantees of future performance and are subject to risks, uncertainties, and other factors, some of which are beyond our control and difficult to predict and could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements, including those risks, uncertainties and factors referred to in documents that may be filed by
3 |
Registration does not imply a certain level of skill or training |
Supplemental Information Regarding Core Net Investment Income
We provide information relating to Core NII (a non-GAAP measure) on a supplemental basis. This measure is not provided as a substitute for GAAP NII, but in addition to it. Our non-GAAP measures may differ from similar measures by other companies, even in the event of similar terms being utilized to identify such measures. Core NII represents GAAP NII adjusted for differences in applicable cash distributions received on our CLO equity investments relative to income recognized in accordance with GAAP.
Income from investments in the “equity” class securities of CLO vehicles, for GAAP purposes, is recorded using the effective interest method; this is based on an effective yield to the expected redemption utilizing estimated cash flows, at current amortized cost, including those CLO equity investments that have not made their inaugural distribution for the relevant period end. The result is an effective yield for the investment in which the respective investment’s cost basis is adjusted quarterly based on the difference between the actual cash received, or distributions entitled to be received, and the effective yield calculation. Accordingly, investment income recognized on CLO equity securities in the GAAP statement of operations differs from the cash distributions actually received by the Company during the period (referred to below as “CLO equity adjustments”).
Furthermore, in order for the Company to continue to qualify for tax treatment as a regulated investment company, we are required, among other things, to distribute at least 90% of our investment company taxable income annually. Therefore, Core NII may provide a better indication of our estimated taxable income for a reporting period than GAAP NII; we can offer no assurance that will be the case, however, as the ultimate tax character of our earnings cannot be determined until our tax returns are prepared after the close of a fiscal year. We note that this non-GAAP measure may not serve as a useful indicator of taxable earnings, particularly during periods of market disruption and volatility, and, as such, our taxable income may differ materially from our Core NII.
The following table provides a reconciliation of GAAP NII to Core NII for the fiscal quarters ended
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For the Fiscal Quarter Ended |
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For the Fiscal Quarter Ended |
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Amount |
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Per Common Share Amount |
|
Amount |
|
Per Common Share Amount |
||||
Net investment income |
|
$ |
3,848,565 |
|
$ |
0.34 |
|
$ |
3,611,303 |
|
$ |
0.35 |
CLO equity adjustments |
|
|
3,160,851 |
|
|
0.28 |
|
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2,439,456 |
|
|
0.24 |
Core NII |
|
$ |
7,009,416 |
|
$ |
0.62 |
|
$ |
6,050,759 |
|
$ |
0.59 |
View source version on businesswire.com: https://www.businesswire.com/news/home/20230908846004/en/
INVESTOR RELATIONS:
saltebrando@ofsmanagement.com
Source: