OFS Credit Company Announces Financial Results for the Third Fiscal Quarter 2024
THIRD QUARTER HIGHLIGHTS
-
Net investment income (“NII”) of
$3.9 million , or$0.24 per common share, for the fiscal quarter endedJuly 31, 2024 . This compares to NII of$4.5 million , or$0.28 per common share, for the fiscal quarter endedApril 30, 2024 . The decrease in NII per common share was primarily due to a decrease in interest income. See additional information under “Results of Operations” below. -
Core net investment income (“Core NII”)1 of
$7.6 million , or$0.47 per common share, for the fiscal quarter endedJuly 31, 2024 . This compares to Core NII of$8.4 million , or$0.53 per common share, for the fiscal quarter endedApril 30, 2024 . For the fiscal quarter endedJuly 31, 2024 , recurring waterfall payments from CLO equity investments decreased to$9.6 million from$9.7 million in the prior quarter. -
Net asset value (“NAV”) per common share of
$7.24 as ofJuly 31, 2024 , a decrease of$0.10 from NAV of$7.34 as ofApril 30, 2024 , primarily due to distributions of$0.315 per common share paid during the quarter exceeding our quarterly NII of$0.24 per common share. -
During the fiscal quarter ended
July 31, 2024 , the earned income yield of our investment portfolio based on average amortized cost was 13.71%.
OTHER RECENT EVENTS
-
As previously announced, on
August 1, 2024 , our board of directors (the “Board”) declared monthly cash distributions of$0.115 per common share for common stockholders for each of the three months in the quarter endingOctober 31, 2024 , a 9.5% increase from the prior monthly distribution amount of$0.105 per common share. The Board also declared monthly cash distributions on our outstanding preferred stock throughJanuary 31, 2025 . See additional information under “Distributions” below.
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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 |
$ |
161.1 |
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$ |
164.6 |
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NAV per common share |
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7.24 |
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7.34 |
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For the Fiscal Quarter Ended |
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(Per common share) |
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Net investment income |
$ |
0.24 |
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$ |
0.28 |
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Net realized loss on investments |
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(0.37 |
) |
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(0.12 |
) |
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Net unrealized appreciation (depreciation) on investments |
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0.35 |
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(0.20 |
) |
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Net earnings (loss) |
$ |
0.22 |
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$ |
(0.04 |
) |
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Reconciliation of Core NII — Non-GAAP1 |
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Net investment income |
$ |
0.24 |
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$ |
0.28 |
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CLO equity adjustments |
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0.23 |
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|
0.25 |
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Core NII |
$ |
0.47 |
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$ |
0.53 |
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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 |
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MANAGEMENT COMMENTARY
“We are pleased to announce another quarter of strong recurring waterfall payments from our CLO equity investments,” said
PORTFOLIO AND INVESTMENT ACTIVITIES
As of
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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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$ |
161.1 |
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$ |
164.6 |
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Total number of issuers |
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72 |
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|
76 |
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Weighted-average effective yield3 |
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|
12.71 |
% |
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|
12.83 |
% |
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2 Calculated as CLO equity cash distributions received during the quarter, excluding distributions on CLO equity investments that have been optionally redeemed, divided by average CLO equity investments at amortized cost. |
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3 Based on amortized cost at period end; excludes discount accretion on CLO debt investments. |
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For the Fiscal Quarter Ended |
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Portfolio Purchase Activity ($ in millions) |
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CLO equity investments |
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$ |
8.8 |
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$ |
11.2 |
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CLO debt investments |
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— |
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|
|
— |
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Other CLO equity-related investments |
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|
0.2 |
|
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0.4 |
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Loan accumulation facility investments |
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3.1 |
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4.3 |
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Total investments |
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$ |
12.1 |
|
|
$ |
15.9 |
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Weighted-average effective yield - period end |
|
|
20.03 |
% |
|
|
17.83 |
% |
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As of |
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Portfolio Composition ($ in millions) |
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Amortized Cost |
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Fair Value |
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CLO equity investments |
|
$ |
170.1 |
|
|
$ |
122.6 |
|
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CLO debt investments |
|
|
32.8 |
|
|
|
34.7 |
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Loan accumulation facility investments |
|
|
2.5 |
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|
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2.5 |
|
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Other CLO equity-related investments |
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|
1.1 |
|
|
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1.3 |
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Total investments |
|
$ |
206.5 |
|
|
$ |
161.1 |
|
RESULTS OF OPERATIONS
Interest Income
During the fiscal quarter ended
Expenses
During the fiscal quarter ended
Net Realized and Unrealized Gain (Loss) on Investments
During the fiscal quarter ended
DISTRIBUTIONS
Fourth Quarter 2024 Common Stock Distributions
The following schedule applies to distributions for common stockholders of record on the close of business of each specific record date:
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Month |
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Record Date |
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Payment Date |
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Cash Distribution Per Share |
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Dividend Reinvestment Plan (“DRIP”) – DRIP Shares Issued at 95% of Market Price
Our DRIP offers our common stockholders the right to receive a 5% discount to the market price on the valuation date (i.e., the payment date). Our DRIP is structured to allow our common stockholders to receive their distribution in shares based on 95% of the market price per share of common stock at the close of regular trading on The Nasdaq Capital Market on the valuation date fixed by the
Common stockholders that are interested in participating in our DRIP should contact their broker or financial intermediary.
Additional information about our DRIP and how to participate can be found at https://ir.ofscreditcompany.com/shareholder-services/dividend-reinvestment-plan. We make our website content available for informational purposes only. It should not be relied upon for investment purposes, nor is it incorporated by reference into this press release.
Preferred Stock Distributions
The following schedule applies to distributions for preferred stockholders of record on the close of business of each specific record date:
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Preferred Stock Series |
Month |
Record Date |
Payment Date |
Cash Distribution Per Share |
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6.125% Series C Term Preferred Stock |
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6.00% Series D Term Preferred Stock |
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5.25% Series E Term Preferred Stock |
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Statement of Assets and Liabilities (Unaudited) |
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As of |
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Assets: |
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Investments, at fair value (amortized cost of |
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$ |
161,112,008 |
|
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Cash and cash equivalents |
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|
22,007,239 |
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Interest receivable |
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|
192,698 |
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Other assets |
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|
674,370 |
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Total assets |
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183,986,315 |
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Liabilities: |
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Preferred stock (net of deferred issuance costs of |
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60,088,407 |
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Payable to adviser and affiliates |
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2,372,229 |
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Other liabilities |
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517,000 |
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Total liabilities |
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62,977,636 |
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Net assets |
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$ |
121,008,679 |
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Net assets consist of: |
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Common stock, par value of |
|
$ |
16,719 |
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Paid-in capital in excess of par |
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168,862,318 |
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Total accumulated losses |
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(47,870,358 |
) |
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Total net assets |
|
$ |
121,008,679 |
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Net asset value per common share |
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$ |
7.24 |
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Statements of Operations (Unaudited) |
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Three Months Ended |
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Nine Months Ended |
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Investment income: |
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Interest income |
$ |
7,451,266 |
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$ |
23,963,937 |
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Operating expenses: |
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Interest expense |
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963,162 |
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2,906,172 |
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Incentive fees |
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964,744 |
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3,238,103 |
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Base management fees |
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804,026 |
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2,405,415 |
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Administration fees |
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400,316 |
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1,016,634 |
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Professional fees |
|
258,279 |
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|
767,743 |
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Excise tax provision |
|
— |
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35,000 |
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Other expenses |
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201,762 |
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642,459 |
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Total operating expenses |
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3,592,289 |
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11,011,526 |
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Net investment income |
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3,858,977 |
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12,952,411 |
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Net realized and unrealized gain (loss) on investments: |
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Net realized loss on investments |
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(5,938,328 |
) |
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(9,686,876 |
) |
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Net change in unrealized appreciation on investments |
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5,514,518 |
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6,459,602 |
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Net loss on investments |
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(423,810 |
) |
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(3,227,274 |
) |
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Net increase in net assets resulting from operations |
$ |
3,435,167 |
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$ |
9,725,137 |
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Weighted-average common shares outstanding |
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16,211,566 |
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|
16,037,061 |
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About
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4 Registration does not imply a certain level of skill or training |
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 remains strong and is well positioned with an asset coverage ratio below regulatory requirements; management’s belief that the Company’s fixed-rate preferred stock financing affords the Company operational flexibility to create stockholder value in this interest rate environment; 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
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 if similar terms are used 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 estimated effective yield, at current amortized cost, to the expected redemption of the security utilizing assumed cash flows, including those CLO equity investments that have not made their inaugural distribution for the relevant period end. The result is an estimated 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 income recognized via the estimated 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”). Therefore, management believes that Core NII may provide a useful indicator of distributable operating income, as this reflects a measure of potential cash availability, net of operating expenses, that could be utilized to cover distributions to common stockholders. We note that this non-GAAP measure has no bearing on the tax character of the common stock distributions made during the period, and future distributions are not guaranteed. A portion of current and future common stock distributions may consist of a return of capital for tax purposes. The actual tax character of our earnings cannot be finally determined until our tax return is prepared after the close of our taxable year.
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
|
|
Amount |
|
Per Common
|
||||
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Net investment income |
|
$ |
3,858,977 |
|
$ |
0.24 |
|
$ |
4,503,076 |
|
$ |
0.28 |
|
CLO equity adjustments |
|
|
3,711,202 |
|
|
0.23 |
|
|
3,914,723 |
|
|
0.25 |
|
Core NII |
|
$ |
7,570,179 |
|
$ |
0.47 |
|
$ |
8,417,799 |
|
$ |
0.53 |
OFS® and OFS Credit® are registered trademarks of
OFS Capital Management™ is a trademark of
View source version on businesswire.com: https://www.businesswire.com/news/home/20240913498050/en/
INVESTOR RELATIONS:
847-734-2085
investorrelations@ofscreditcompany.com
Source: