On August 1, 2024, OFS Capital Corp (OFS, Financial) released its 8-K filing announcing its financial results for the fiscal quarter ended June 30, 2024. OFS Capital Corp is an externally managed, closed-end, non-diversified management investment company. Its business objective is to generate current income and capital appreciation by investing in middle-market companies in the United States. The company focuses on investments in senior secured loans, including first lien, second lien, and unitranche loans, as well as subordinated loans and, to a lesser extent, warrants, and other equity securities.
Performance Overview
OFS Capital Corp reported net investment income of $0.26 per common share for the quarter, a decrease from $0.42 per common share in the previous quarter. This figure fell short of the analyst estimate of $0.29 per share. However, the company reported a net gain on investments of $0.51 per common share, driven primarily by net unrealized appreciation of $0.83 per common share, partially offset by net realized losses of $0.32 per common share.
Financial Achievements
Despite the decline in net investment income, OFS Capital Corp saw an increase in its net asset value per common share, rising to $11.51 as of June 30, 2024, from $11.08 as of March 31, 2024. This improvement is significant for the company as it reflects the overall health and potential growth of its investment portfolio.
“We are pleased to announce an increase in our net asset value per common share to $11.51 as of June 30, 2024 from $11.08 as of March 31, 2024,” said Bilal Rashid, OFS Capital’s Chairman and Chief Executive Officer. “We believe that we continue to benefit from our balance sheet positioning, with the vast majority of our loan portfolio being floating rate and the majority of our debt being fixed-rate.”
Income Statement Highlights
For the quarter ended June 30, 2024, total investment income decreased to $11.2 million from $14.2 million in the prior quarter. This decline was primarily due to decreases in total dividend income of $2.4 million and interest income of $0.5 million. On the expense side, total expenses decreased by $0.9 million to $7.7 million compared to the prior quarter, driven by declines in interest expense and incentive fees.
Balance Sheet and Cash Flow
As of June 30, 2024, OFS Capital Corp reported total assets of $407.9 million and net assets of $154.2 million. The company had $5.6 million in cash, including $2.7 million held by its subsidiary OFSCC-FS, LLC. The company also had no outstanding balance and an unused commitment of $25.0 million under its senior secured revolving credit facility with Banc of California, as well as an unused commitment of $80.9 million under its revolving credit facility with BNP Paribas.
Investment Portfolio
As of June 30, 2024, OFS Capital Corp's investment portfolio was valued at $398.2 million, which was equal to approximately 103% of amortized cost. The portfolio consisted of $236.9 million in debt investments, with 85% in first lien loans and 15% in second lien loans, $85.7 million in equity investments, and $75.6 million in structured finance securities. Notably, no new loans were placed on non-accrual status during the quarter.
Analysis and Conclusion
OFS Capital Corp's performance in Q2 2024 presents a mixed picture. While the company missed the analyst estimate for earnings per share, it managed to beat the revenue projection and increase its net asset value per share. The decline in net investment income and total investment income highlights some challenges, but the increase in net asset value and the stability of the investment portfolio are positive signs. The company's focus on floating rate loans and fixed-rate debt positions it well in the current economic environment.
For more detailed discussion of the financial and other information included in this press release, please refer to OFS Capital’s Form 10-Q for the second quarter ended June 30, 2024.
Explore the complete 8-K earnings release (here) from OFS Capital Corp for further details.
