OFS Capital (NASDAQ:OFS) released first-quarter financial results and hosted an earnings call on Friday. Read the complete transcript below.
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The full earnings call is available at https://event.choruscall.com/mediaframe/webcast.html?webcastid=yklVOILv
Summary
OFS Capital reported a net investment income of $0.18 per share for Q1 2026, covering the distribution of $0.17 per share, despite a $0.02 decline from the previous quarter due to lower net interest margins.
The company’s net asset value decreased to $8.16 per share from $9.19, primarily due to unrealized depreciation in CLO equity holdings and market sentiment affecting loan prices.
OFS Capital has extended its debt maturities to 2028 and beyond, reducing its total debt by $45.6 million over the last four quarters, and entered a new credit facility with Natixis.
The company is focused on monetizing its equity position in Fansteel, which has yielded substantial returns, to improve net investment income and reduce portfolio concentration.
Despite macroeconomic uncertainties, OFS Capital maintains a resilient loan portfolio with a focus on senior secured loans and limited exposure to sectors affected by AI disruptions.
Full Transcript
OPERATOR
Good day and welcome to the OFS Capital Corporation First Quarter 2026 Earnings Conference Call. All participants will be in listen only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today’s presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Steve Altobrando. Please go ahead.
Steve Altobrando
Good morning everyone and thank you for joining us. Also on the call today are Bilal Rashid, our Chairman and Chief Executive Officer, and Kyle Spina, the company’s Chief Financial Officer and Treasurer. Before we begin, please note that the statements made on this call and webcast may constitute forward looking statements as defined under applicable SECurities laws. Such statements reflect various assumptions, expectations and opinions by OFS Capital Management concerning anticipated results, are not guarantees of future performance, and are subject to known and unknown risks, uncertainties and other factors that could cause actual results to differ materially from such statements. The uncertainties and other factors are in some way beyond management’s control, including the risk factors described from time to time in our filings with the SEC. Although we believe these assumptions are reasonable, any of those assumptions could prove incorrect and as a result the forward looking statements based on those assumptions also could be incorrect. You should not place undue reliance on these forward looking statements. OFS Capital undertakes no duty to update any forward looking statements made herein and all forward looking statements speak only as of the date of this call. With that, I’ll turn the call over to Chairman and Chief Executive Officer.
Bilal Rashid (Chairman and Chief Executive Officer)
Thank you Steve. Yesterday afternoon we reported our first quarter results. Net investment income totaled $0.18 per share, covering our distribution of $0.17 per share. Despite being down $0.02 per share from the prior quarter. The decline was again primarily driven by a lower net interest margin. This reflects the higher interest costs on our unsecured notes issued last year, which replaced debt issued in a historically low rate environment. That said, this new debt has allowed us to meaningfully extend our debt maturities. In addition, benchmark rate reductions by the Fed last year have lowered yields across our loan portfolio, further impacting our net interest margin. Our net asset value at quarter end was $8.16 per share, compared to $9.19 per share in the prior quarter. The decrease was primarily due to unrealized depreciation on our CLO equity holdings driven by spread tightening in the underlying loan collateral as well as a decrease in loan prices due to overall market sentiment. Overall, our non accrual investments as a percentage of our total portfolio at fair value decreased slightly quarter over quarter by 0.7% during the quarter we exited one of our long time non accrual loans. In addition, we placed one small loan representing just 0.3% of the total portfolio at fair value on non accrual status. Despite this borrower remaining current on its interest payments, the loan was placed on non accrual status due to an internal credit rating downgrade. We remain focused on improving our net investment income over the long term. As discussed on prior calls. This includes our ongoing efforts to monetize our minority equity position in Fansteel, the largest position in our portfolio which had a fair value of approximately $80.4 million at quarter end. We continue to be encouraged by the company’s operational momentum and believe its long term outlook remains compelling. A successful exit could increase the likelihood of improved net investment income and reduced portfolio concentration. At the same time, we remain disciplined in balancing the timing of a potential exit with the realization value of the asset in order to maximize our overall returns. Since our initial $200,000 investment in 2014, our position …
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