• Net Investment Income: $0.26 per share, down from $0.30 per share in the prior quarter.
• Net Asset Value: $11.97 per share, compared to $12.85 per share in the prior quarter.
• Quarterly Distribution: Maintained at $0.34 per share for the second quarter of 2025.
• Total Investment Income: Decreased by approximately 12% to $10.3 million.
• Total Expenses: Decreased by approximately 10% to $6.8 million.
• Regulatory Asset Coverage Ratio: Decreased to 165% at quarter end.
• Weighted Average Performing Investment Income Yield: Declined to 13.4%, down 0.4% quarter-over-quarter.
• Investment Portfolio Composition: 69% senior secured loans, 25% structured finance securities, 6% equity securities.
• Outstanding Debt: 73% unsecured at the end of the quarter.

• Warning! GuruFocus has detected 5 Warning Signs with OFS.

Release Date: May 02, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• OFS Capital Corp (NASDAQ:OFS) maintained its quarterly distribution at $0.34 per share, representing a 14.6% annualized yield based on the market price of its common stock.
• The company has a diversified portfolio with 100% of its loan portfolio in senior secured loans, providing a defensive position in uncertain economic times.
• OFS Capital Corp (NASDAQ:OFS) has a strong track record, having invested over $2 billion since 2011 with a cumulative net realized loss of just 3.4%.
• The company has received approximately $3.9 million in distributions from its investment in Fan Steel Holdings, significantly exceeding its initial investment cost.
• OFS Capital Corp (NASDAQ:OFS) benefits from the experience and expertise of its adviser, which manages approximately $4.1 billion across loan and structured credit markets.

Negative Points

• Net investment income decreased to $0.26 per share from $0.30 per share in the prior quarter, primarily due to a drop in nonrecurring dividend and fee income.
• Net asset value per share declined by approximately 7% or $0.88 this quarter, mainly due to net unrealized depreciation on the investment portfolio.
• Total investment income decreased by approximately 12% to $10.3 million, driven by lower interest income on the loan portfolio and the absence of nonrecurring income.
• The weighted average performing investment income yield declined to 13.4%, down about 0.4% quarter-over-quarter, due to the impact of last year's interest rate cuts.
• The macroeconomic uncertainty and potential slowdown in economic activity could lead to earnings pressure on portfolio companies and OFS Capital Corp (NASDAQ:OFS)'s earnings.

Q & A Highlights

Q: Can you provide more details on the decrease in net investment income this quarter? A: Bilal Rashid, Chairman and CEO, explained that the decrease in net investment income to $0.26 per share from $0.30 per share in the prior quarter was primarily due to the absence of nonrecurring dividend and fee income that was recognized in the previous quarter.

Q: What factors contributed to the decline in net asset value per share? A: Bilal Rashid noted that the decline in net asset value per share from $12.85 to $11.97 was mainly due to company-specific marks and a broader decline in credit market pricing.

Q: How is OFS Capital positioning its portfolio in response to economic uncertainty? A: Bilal Rashid emphasized that the company is focused on maintaining a stable and diversified portfolio, investing higher in the capital structure with 100% of the loan portfolio in senior secured loans, and avoiding highly cyclical industries.

Q: What is the current status of the loan portfolio? A: Kyle Spina, CFO, stated that the loan portfolio remains stable with no new nonaccruals this quarter, and 85% of loan holdings are in first lien positions. The company continues to monitor a few borrowers performing below expectations.

Q: How is OFS Capital managing its debt and liquidity? A: Bilal Rashid highlighted that 73% of the company's outstanding debt is unsecured, providing operational flexibility. The company also has a $150 million floating rate facility with BNP Paribas and a $25 million line of credit with Bank of California to ensure liquidity.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.