OFS Credit Company Announces Fourth Fiscal Quarter and Fiscal 2022 Financial Results
FOURTH QUARTER HIGHLIGHTS
-
Net investment income (“NII”) of
$4.0 million , or$0.44 per common share, for the fiscal quarter endedOctober 31, 2022 . This compares to NII of$3.5 million , or$0.42 per common share, for the fiscal quarter endedJuly 31, 2022 . -
Core net investment income (“Core NII”)1 of
$3.9 million , or$0.43 per common share, for the fiscal quarter endedOctober 31, 2022 . Core NII declined$0.7 million , or$0.11 per common share, from the prior quarter primarily due to a decline in cash flows related to a mismatch in asset and liability rate resets in a rapidly rising rate environment. -
Net asset value (“NAV”) per common share of
$9.98 as ofOctober 31, 2022 , a decrease from$10.61 as ofJuly 31, 2022 . -
The weighted average effective yield of our investment portfolio at amortized cost was 16.64% as of
October 31, 2022 .
SUBSEQUENT EVENTS
-
On
December 1, 2022 , OFS Credit’s board of directors declared a quarterly distribution of$0.55 per share of common stock for the fiscal quarter endingJanuary 31, 2023 . The distribution is payable onJanuary 31, 2023 in cash or shares of our common stock to stockholders of record as ofDecember 13, 2022 . 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 |
|
|
|
|
||
(in thousands, except per share data) |
|
|
|
|
||
|
|
As of |
|
As of |
||
Investment portfolio, at fair value |
|
$ |
145,768 |
|
$ |
147,903 |
NAV per share |
|
$ |
9.98 |
|
$ |
10.61 |
|
|
For the Fiscal Quarter Ended |
||||||
(Per common share) |
|
|
|
|
||||
Net investment income |
|
$ |
0.44 |
|
|
$ |
0.42 |
|
Net unrealized loss |
|
|
(0.43 |
) |
|
|
(1.63 |
) |
Earnings (loss) |
|
$ |
0.01 |
|
|
$ |
(1.21 |
) |
|
|
|
|
|
||||
Core NII — Non-GAAP |
|
|
|
|
||||
Net investment income |
|
$ |
0.44 |
|
|
$ |
0.42 |
|
CLO equity adjustments |
|
|
(0.01 |
) |
|
|
0.12 |
|
Core NII |
|
$ |
0.43 |
|
|
$ |
0.54 |
|
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
“Our effective yield and NII remained strong during the fourth quarter,” said
PORTFOLIO AND INVESTMENT ACTIVITIES
As of
Portfolio Overview |
|
|
|
|
||||
($ in thousands) |
|
As of |
|
As of |
||||
Investment portfolio, at fair value |
|
$ |
145,768 |
|
|
$ |
147,903 |
|
Total number of portfolio companies |
|
|
65 |
|
|
|
64 |
|
Weighted-average effective yield |
|
|
16.64 |
% |
|
|
16.86 |
% |
|
|
For the Fiscal Quarter Ended |
||||
Portfolio Activity |
|
|
|
|
||
CLO equity investments |
|
$ |
— |
|
$ |
4.0 |
CLO debt investments |
|
|
1.8 |
|
|
— |
Loan accumulation facility investments |
|
|
— |
|
|
1.2 |
Total investments |
|
$ |
1.8 |
|
$ |
5.2 |
RESULTS OF OPERATIONS
Interest Income
For the fiscal quarter ended
Expenses
For the fiscal quarter ended
Net realized and unrealized gain (loss)
For the fiscal quarter ended
DISTRIBUTIONS
On
Record Date |
|
Payable Date |
|
Distribution Per Common Share2 |
|
|
|
|
|
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. |
On
Description |
|
Record Date |
|
Payable Date |
|
Distribution Per Preferred Share |
Series B Term Preferred Stock |
|
|
|
|
|
|
|
|
|
|
|
|
0.1375 |
|
|
|
|
|
|
0.1375 |
|
|
|
|
|
|
0.1375 |
|
|
|
|
|
|
0.1375 |
|
|
|
|
|
|
0.1375 |
|
|
|
|
|
|
|
Series C Term Preferred Stock |
|
|
|
|
|
|
|
|
|
|
|
|
0.1276042 |
|
|
|
|
|
|
0.1276042 |
|
|
|
|
|
|
0.1276042 |
|
|
|
|
|
|
0.1276042 |
|
|
|
|
|
|
0.1276042 |
|
|
|
|
|
|
|
Series D Term Preferred Stock |
|
|
|
|
|
|
|
|
|
|
|
|
0.125 |
|
|
|
|
|
|
0.125 |
|
|
|
|
|
|
0.125 |
|
|
|
|
|
|
0.125 |
|
|
|
|
|
|
0.125 |
|
|
|
|
|
|
|
Series E Term Preferred Stock |
|
|
|
|
|
|
|
|
|
|
|
|
0.109375 |
|
|
|
|
|
|
0.109375 |
|
|
|
|
|
|
0.109375 |
|
|
|
|
|
|
0.109375 |
|
|
|
|
|
|
0.109375 |
|
||||
Statement of Assets and Liabilities |
||||
|
|
As of |
||
Assets: |
|
|
||
Investments, at fair value (amortized cost of |
|
$ |
145,767,878 |
|
Cash |
|
|
12,540,909 |
|
Interest receivable |
|
|
607,293 |
|
Other assets |
|
|
115,004 |
|
Total assets |
|
$ |
159,031,084 |
|
|
|
|
||
Liabilities: |
|
|
||
Preferred stock (net of deferred issuance costs of |
|
$ |
62,306,105 |
|
Payable to adviser and affiliates |
|
|
2,325,645 |
|
Accrued professional fees |
|
|
130,000 |
|
Other liabilities |
|
|
59,333 |
|
Total liabilities |
|
$ |
64,821,083 |
|
|
|
|
||
Net assets |
|
$ |
94,210,001 |
|
|
|
|
||
Net assets consist of: |
|
|
||
Common stock, par value of |
|
$ |
9,443 |
|
Paid-in capital in excess of par |
|
|
109,537,569 |
|
Total accumulated losses |
|
|
(15,337,011 |
) |
Total net assets |
|
$ |
94,210,001 |
|
|
|
|
||
Net asset value per share |
|
$ |
9.98 |
|
|||||||
Statements of Operations |
|||||||
|
Three Months Ended |
|
Year Ended |
||||
|
|
|
|
||||
|
(unaudited) |
|
|
||||
Investment income: |
|
|
|
||||
Interest income |
$ |
7,503,898 |
|
|
$ |
26,221,594 |
|
|
|
|
|
||||
Operating expenses: |
|
|
|
||||
Interest expense |
|
1,021,241 |
|
|
|
4,048,516 |
|
Management fees |
|
699,551 |
|
|
|
2,893,923 |
|
Incentive fees |
|
987,750 |
|
|
|
3,021,410 |
|
Administration fees |
|
288,793 |
|
|
|
1,421,809 |
|
Professional fees |
|
174,254 |
|
|
|
845,113 |
|
Board of directors fees |
|
45,000 |
|
|
|
180,000 |
|
Excise tax |
|
213,752 |
|
|
|
213,752 |
|
Other expenses |
|
122,558 |
|
|
|
548,578 |
|
Total operating expenses |
|
3,552,899 |
|
|
|
13,173,101 |
|
|
|
|
|
||||
Net investment income |
|
3,950,999 |
|
|
|
13,048,493 |
|
|
|
|
|
||||
Net realized and unrealized gain (loss): |
|
|
|
||||
Loss on redemption of preferred stock |
|
— |
|
|
|
(384,729 |
) |
Net change in unrealized depreciation on investments |
|
(3,875,136 |
) |
|
|
(26,249,879 |
) |
Net realized and unrealized loss |
|
(3,875,136 |
) |
|
|
(26,634,608 |
) |
|
|
|
|
||||
Net increase (decrease) in net assets resulting from operations |
$ |
75,863 |
|
|
$ |
(13,586,115 |
) |
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 and net asset value and the factors that may affect such results; management's beliefs regarding the cause of unrealized depreciation and the impact on EPS and NAV per share; 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; management’s intention to deploy capital into discounted investments to achieve attractive risk-adjusted returns; 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 additional applicable cash distributions received on our CLO equity investments.
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 after tax returns are prepared at 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
|
|
For the Fiscal Quarter Ended
|
|
For the Fiscal Quarter Ended
|
||||||||||
|
|
Amount |
|
Per Common Share Amount |
|
Amount |
|
Per Common Share Amount |
||||||
Net investment income |
|
$ |
3,950,999 |
|
|
$ |
0.44 |
|
|
$ |
3,505,891 |
|
$ |
0.42 |
CLO equity adjustments |
|
|
(93,022 |
) |
|
|
(0.01 |
) |
|
|
1,013,500 |
|
|
0.12 |
Core NII |
|
$ |
3,857,977 |
|
|
$ |
0.43 |
|
|
$ |
4,519,391 |
|
$ |
0.54 |
The following table provides a reconciliation of GAAP NII to Core NII for the fiscal years ended
|
|
For the Fiscal Year Ended
|
|
For the Fiscal Year Ended
|
||||||||
|
|
Amount |
|
Per Common Share Amount |
|
Amount |
|
Per Common Share Amount |
||||
Net investment income |
|
$ |
13,048,495 |
|
$ |
1.58 |
|
$ |
6,503,994 |
|
$ |
1.22 |
CLO equity adjustments |
|
|
9,144,817 |
|
|
1.11 |
|
|
7,599,466 |
|
|
1.43 |
Core NII |
|
$ |
22,193,312 |
|
$ |
2.69 |
|
$ |
14,103,460 |
|
$ |
2.65 |
View source version on businesswire.com: https://www.businesswire.com/news/home/20221212005141/en/
INVESTOR RELATIONS:
saltebrando@ofsmanagement.com
Source: