Oxford Square Capital Q3 2023 Earnings Report

Oxford Square Capital EPS Results

• Actual EPS: $0.11
• Consensus EPS: N/A
• Beat/Miss: N/A
• One Year Ago EPS: N/A

Oxford Square Capital Revenue Results

• Actual Revenue: $13.05 million
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Oxford Square Capital Announcement Details

• Quarter: Q3 2023
• Date: 11/7/2023
• Time: N/A
• Conference Call Date: Tuesday, November 7, 2023
• Conference Call Time: 9:00AM ET

Oxford Square Capital (NASDAQ:OXSQ) is a business development company, operates as a closed-end, non-diversified management investment company. It is a private equity and mezzanine firm. The firm invests in both public and private companies. It invests in secured and unsecured senior debt, subordinated debt, junior subordinated debt, preferred stock, common stock and syndicated bank loans. The firm primarily invests in debt and/or equity securities of technology-related companies that operate in the computer software, Internet, information technology infrastructure and services, media, telecommunications and telecommunications equipment, semiconductors, hardware, technology-enabled services, semiconductor capital equipment, medical device technology, diversified technology, and networking systems sectors. It concentrates its investments in companies having annual revenues of less than $200 million and a market capitalization or enterprise value of less than $300 million. The firm invests between $5 million and $30 million per transaction. It seeks to exit its investments within 7 years. It serves as the investment adviser to TICC. Oxford Square Capital Corp., formerly known as TICC Capital Corp., was founded in 2003 and is headquartered in Greenwich, Connecticut.

Oxford Square Capital Q3 2023 Earnings Call Transcript

Key Takeaways

• Oxford Square reported net investment income of $6.4 million ($0.11/share) for Q3, down from $6.7 million ($0.13/share) in Q2, with NAV per share declining to $2.78 from $2.88.
• The board declared a Q3 distribution of $0.225 per share, including a $0.12 per share special distribution, and approved monthly distributions of $0.035 per share for January through March 2024.
• The company recorded net unrealized appreciation of $13.9 million ($0.28/share) but also logged $13.6 million ($0.24/share) in realized losses, reflecting portfolio mark-to-market volatility.
• Capital activity included an ATM offering of 1.4 million shares raising $4.4 million, and a subsequent redemption of $7 million of its 2024 6.5% notes to optimize financing costs.
• Portfolio manager commentary highlighted improved U.S. leveraged loan market conditions, with the default rate falling to 1.27% and the distress ratio dropping to 4.36% alongside broader price gains.

[Operator]

Good morning, ladies and gentlemen. Welcome to the Oxford Square Capital Corp Third Quarter 2023 Earnings Conference Call. My name is Jig Vida. I will be the moderator for today's call. All lines will be muted on the presentation portion of the call with an opportunity for questions and answers at the end.

[Operator]

I would now like to pass the conference over to your host, Jonathan Cowen With Jonathan, please go ahead CEO, please go ahead.

[Speaker 1]

Good morning, everyone. Welcome to the Oxford Square Capital Corp. 3rd quarter 2023 earnings conference call. I'm joined today by Saul Rosenthal, our President Bruce Rubin, our Chief Financial Officer and Kevin Yonon, our Managing Director and Portfolio Manager. Bruce, could you open the call with a disclosure regarding forward looking statements?

[Speaker 1]

Sure, Jonathan. Today's conference call

[Speaker 2]

is being recorded. An audio replay of the conference call will be available for 30 days. Replay information is included in our press release that was issued earlier this morning. Please note that this call is the property of Oxford Square Capital Corp. Any unauthorized rebroadcast of this call in any form is strictly prohibited.

[Speaker 2]

At this point, please direct your attention to the customary disclosure in this morning's press release regarding forward looking information. Today's conference call includes forward looking We do not undertake to update our forward looking statements unless required to do so by law. To obtain copies of our latest SEC filings, please visit our website at www

[Speaker 1]

Oxford Square's net investment income was approximately $6,400,000 or $0.11 per share compared to $6,700,000 or $0.13 per share for the prior quarter. Our net asset value per share stood at $2.78 Compared to a net asset value per share of $2.88 for the prior quarter. During the quarter, we distributed $0.225 per share, which included $0.12 per share of special distributions. For the Q3, we recorded Total investment income of approximately $13,000,000 as compared to approximately $13,500,000 in the prior quarter. In the Q3, we recorded net unrealized appreciation on investments of approximately $13,900,000 or $0.28 per share compared to net unrealized appreciation on investments of approximately $8,300,000 or $0.16 per share for the prior quarter.

[Speaker 1]

In the Q3, we recorded realized losses of approximately $13,600,000 or $0.24 per share. We recorded realized losses on investments of approximately $3,300,000 or $0.07 per share in the prior quarter. During the Q3, our investment activity consisted of sales of approximately $1,900,000 and repayments of approximately $14,200,000 No purchases were affected during the quarter. As of September 30, we held cash and cash equivalents of approximately $12,400,000 Subsequent to quarter end, on November 3, we redeemed $7,000,000 of the $14,400,000 An aggregate principal amount of issued and outstanding 20 24 6.5 percent notes. During the quarter ended September, we issued a total of approximately 1,400,000 shares of our common stock pursuant to an at the market offering, resulting in net proceeds of approximately $4,400,000 and net appreciation to shareholders of approximately $0.01 per share of NAV for the quarter.

[Speaker 1]

On November 2nd, our Board of Directors declared monthly distributions of $0.035 per share for each of the months ending January, February March of 2024. Additional information regarding record and payment dates can be found in our press release that was issued this morning. With that, I'll turn the call over to our Portfolio Manager, Kevin Yonon.

[Speaker 3]

Thank you, Jonathan. During the quarter ended September 30, 2023, U. S. Loan market performance improved versus the prior quarter. U.

[Speaker 3]

S. Loan prices As defined by the Morningstar LSTA U. S. Leverage Loan Index increased from 94.24 percent of par as of June 30 to 95.55 percent par as of September 29. According to LCD, during the quarter, there were some pricing dispersion With BB rated loan prices increasing 56 basis points or 0.57 percent, B rated loan prices 142 basis points or 1.49 percent and CCC rate loan prices increasing 145 basis points or 1.84% on average.

[Speaker 3]

The 12 month trailing default rate for the Morningstar LSTA U. S. Leveraged Loan Index decreased to 1.27 percent by principal amount at the end of the quarter from 1.71% at the end of June 2023. Additionally, the distress ratio defined as the percentage of loans with a price below 80% to par ended the quarter at 4.36% compared to approximately 6% at the end of June 2023. During the quarter ended September 30, 2023, U.

[Speaker 3]

S. Leverage loan primary market issuance was $70,700,000,000 representing a 2 37% increase versus This was driven by refinancing and M and A activity, while LBO activity remained relatively slow.

[Speaker 2]

At the

[Speaker 3]

same time, U. S. Loan fund inflows as measured by Lipper were approximately $500,000,000 for the quarter ended September 30, 20 designed to maximize our long term total return. And as a permanent capital vehicle, we historically have been able to take a longer term view towards our investment strategy. With that, I will turn the call back over to Jonathan.

[Speaker 1]

Thanks, Kevin. Additional information about Oxford Square's 3rd quarter performance has been posted to our website at www.oxfordsquarecapital.com. And with that, operator, we're happy to open the call up for any questions.

[Operator]

Absolutely. There are no questions waiting at this time. So I would now like to pass the conference back over to the management team for closing remarks.

[Speaker 1]

Thanks very much. We'd like to thank everyone for their participation on this call or listening to the replay.

[Operator]

That concludes today's conference call. Thank you for your participation. You may now disconnect your lines.