Oxford Lane Capital Q4 2024 Earnings Report

Oxford Lane Capital EPS Results

• Actual EPS: $1.75
• Consensus EPS: N/A
• Beat/Miss: N/A
• One Year Ago EPS: N/A

Oxford Lane Capital Revenue Results

• Actual Revenue: $82.60 million
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Oxford Lane Capital Announcement Details

• Quarter: Q4 2024
• Date: 5/14/2024
• Time: N/A
• Conference Call Date: Tuesday, May 14, 2024
• Conference Call Time: 4:00PM ET

Oxford Lane Capital (NASDAQ:OXLC) Corp is a closed-end, externally managed investment company that seeks to generate high current income and capital appreciation. The company invests primarily in debt and equity securities of private funds managed or advised by Oxford Finance LLC, targeting U.S. middle-market companies. Its portfolio spans senior secured loans, mezzanine debt and private equity interests, providing diversification across credit instruments and industry sectors.

Established in 2009 and based in Greenwich, Connecticut, Oxford Lane Capital commenced operations in 2012. The company’s investment activities are overseen by Oxford Lane Capital Advisor LLC, an affiliate of Oxford Finance LLC, leveraging the adviser’s long-standing expertise in direct lending and structured financings for growth-oriented businesses.

Oxford Lane Capital employs leverage through senior secured financing facilities to enhance potential returns on its investment portfolio. By focusing on middle-market sponsors with established business models, the company seeks to balance risk and reward while maintaining diversified exposure across sectors such as healthcare, technology, business services and manufacturing within the U.S. economy.

Serving institutional and individual investors, Oxford Lane Capital provides access to private credit and private equity markets through a closed-end capital structure. Under the direction of its board of directors and management team, the company regularly reviews its portfolio mix and financing arrangements to adapt to evolving market conditions while aiming to maintain consistent distributions to shareholders.

Oxford Lane Capital Q4 2024 Earnings Call Transcript

Key Takeaways

• Net Asset Value per share increased to $4.90 at March 31 from $4.82 the prior quarter, reflecting portfolio appreciation and income generation.
• GAAP total investment income totaled $82.6 million (up $3.4 million Q/Q), delivering GAAP net investment income of $51 million ($0.22/share) and core NII of $79.9 million ($0.35/share).
• Oxford Lane issued ~18.6 million new shares in an aftermarket offering (net proceeds ~$94.7 million), invested $225.2 million in new CLO positions and received $19 million from repayments and sales.
• The Board approved a 12.5% increase in monthly common stock distributions to $0.09 per share for July–September 2024, underscoring confidence in cash flow generation.
• U.S. loan market improvements (higher loan prices, lower default/distress rates) and record CLO issuance (~$49 billion) enabled Oxford to extend its CLO equity reinvestment period to July 2026 and pursue an opportunistic, long-term strategy.

[Operator]

Good afternoon, ladies and gentlemen. Thank you for joining today's Oxford Lane Capital Corp 4th Fiscal Quarter 2024 Earnings Call. My name is Tia, and I will be your moderator for today's call. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. I would now like to pass the call over to your host, Song Rosenthal.

[Operator]

Please proceed.

[Speaker 1]

Thank you, Tia, and hello, everyone, and welcome to the Oxford Lane Capital Corp. 4th fiscal quarter 2024 earnings call. I'm joined today by Bruce Rubin, our Chief Financial Officer and Brian Alexa, senior member of our CLO investment team. Note that Jonathan Cohen, our CEO, is traveling today. Bruce, would you please open our call with a disclosure regarding forward looking statements?

[Speaker 2]

Sure, Saul. Today's conference call is being recorded. In order, a replay of the call will be available for 30 days. Replay information is included in our press release that was issued earlier this afternoon. Please note that this call is the property of Ochsner Lane Capital Corp.

[Speaker 2]

Any unauthorized rebroadcast of this call in any form is prohibited. At this point, direct your attention to the customary disclosure in the press release regarding forward looking information. Today's conference call includes forward looking statements and projections that reflect the company's current views with respect to, among other things, future events and financial performance. The SEC will refer to our most recent filings with the SEC for important factors that could cause actual results to differ materially from those indicated in these projections. We do not undertake to update our forward looking statements unless required to do so by law.

[Speaker 2]

During this call, we'll use terms defined in the earnings release and also refer to non GAAP measures. For definitions and reconciliations to GAAP, please refer to our earnings release posted on our website at w ww.oxfordlanecapital.com. With that, I'll turn the presentation back over to Saul.

[Speaker 1]

Thank you, Bruce. On March 31, 2024, our net asset value per share stood at $4.90 compared to a net asset value per share of $4.82 at the previous quarter. For the quarter ended March 31, we recorded GAAP total investment income of approximately $82,600,000 representing an increase of approximately $3,400,000 from the prior quarter. The quarter's GAAP total investment income consisted of approximately $76,300,000 from our CLO Equity and CLO Warehouse investments and approximately $6,300,000 from our CLO Debt Investments and other income. Osterline recorded GAAP net investment income of approximately $51,000,000 or 0 point 22 dollars per share for the quarter ended March 31, compared to approximately $48,700,000 or $0.23 per share for the quarter ended December 31.

[Speaker 1]

Our core net investment income was approximately $79,900,000 for the quarter or $0.35 per share compared with approximately $82,700,000 or $0.39 per share for the quarter ended December 31. Quarter ended March 31, we recorded net unrealized depreciation on investments of approximately $17,700,000 and net realized losses of approximately $1,200,000 We had a net increase in net assets resulting from operations of approximately $67,500,000 or $0.30 per share for the 4th fiscal quarter. As of March 31, the following metrics applied and we note that none of these metrics represents a total return to shareholders. The weighted average yield of our CLO debt investments at current cost was 17.1%, up from 16.6% as of December 31. The weighted average effective yield of our CLO equity investments at current cost was 16.9%, up from 16.5% as of December 31.

[Speaker 1]

The weighted average cash distribution yield of our CLO equity investments at current cost was 23.5%, down from 24% as of December 31. And we note that the cash distribution yields calculated on our CLO equity investments are based on the cash distributions we received or which we were entitled to receive at each respective period end. During the quarter ended March 31, we issued a total of approximately 18,600,000 shares of our common stock pursuant to an aftermarket offering, resulting in net proceeds of approximately $94,700,000 During the quarter ended March 31, we made additional CLO investments of approximately $225,200,000 and we received approximately $19,000,000 from sales and repayments. Today, our Board of Directors declared a 12.5 percent increase in monthly common stock distributions to $0.09 per share for each of the months ending July, August September 2024. With that, I'll turn the call over to Brian Alexis, senior member of our investment team.

[Speaker 3]

Thank you, Saul. During the quarter ended March 31, 2024, U. S. Loan market performance improved versus the prior quarter. U.

[Speaker 3]

S. Loan prices, as defined by the Morningstar LSTA U. S. Leveraged Loan Index, increased from 96.23% as of December 31, 2023, to 96.73% as of March 31. The increase in U.

[Speaker 3]

S. Loan prices led to an approximate 5 point increase in median U. S. CLO equity net asset values. Additionally, we observed median weighted average spreads across loan pools within CLO portfolios decreased to 3 68 basis points compared to 3 72 basis points last quarter.

[Speaker 3]

The 12 month trailing default rate for the loan index decreased to 1.1% by principal amount at the end of the quarter from 1.5% at the end of December 2023. We note that out of court restructurings, exchanges and subpar buybacks, which are not captured in the cited default rate, remain elevated. Additionally, the distress ratio defined as the percentage of loans with a price below 80% of par ended the quarter at 3.5% compared to approximately 4.5% at the end of December 2023. CLO new issuance during the quarter totaled approximately $49,000,000,000 an increase of $17,000,000,000 from the prior quarter, setting the pace nearly 45% ahead of last year's issuance as CLO liabilities continue to tighten throughout the quarter. Oxford Lane continued to be active this quarter, trading over $300,000,000 notional of CLO equity and junior debt in the secondary market and adding 3 new issues CLO equity investments in the primary market.

[Speaker 3]

As a function of our overall activity in both markets this quarter, we were able to lengthen the weighted average reinvestment period at Foxford Lane's CLO equity portfolio from April 2026 to July 2026. Our investment strategy during the quarter was to engage in relative value trading and to lengthen the weighted average reinvestment period of Oxford Lane's CLO equity portfolio. In the current market environment, we intend to continue to utilize an opportunistic and unconstrained CLO investment strategy across U. S. CLO Equity, Debt and Warehouses as we look to maximize our long term total return.

[Speaker 3]

And as a permanent capital vehicle, we have historically been able to take a longer term view toward our investment strategy. With that, I will turn the call back over to Saul.

[Speaker 1]

Thank you, Brian. Additional information about Oxford Lane's 4th quarter performance has been uploaded to our website at www.oxfordlanecapital.com. And with that, operator, we will now take questions.

[Operator]

The first question comes from the line of Mickey Sklien with Ladenburg. Please proceed.

[Speaker 4]

Yes. Good afternoon, everyone. A couple of questions from me. With the tightening of CLO liabilities we've seen this year, how do the economics look now in the primary market versus the secondary market and the opportunity for you to refinance and reset and rotate positions which are beyond the reinvestment period into new positions?

[Speaker 1]

Sure, Mickey. Yes, very good question and Brian will address it.

[Speaker 3]

Yes, sure. Mickey, as you noted, it has been a good opportunity to take advantage of the tightened liabilities, especially where refis and resets are concerned. As far as the primary market is concerned, it is kind of a push and pull between tightening liabilities and rising asset prices. The rising asset prices make the primary market slightly more challenging, while tightening liabilities obviously make it easier to get deals done. So that push and pull is something we monitor every day.

[Speaker 3]

But as you stated, we have taken advantage of the tightened liabilities to restructure some of our refinance and reset some of the post reinvestment deals especially.

[Speaker 4]

Okay. I understand. Obviously, I haven't had a chance to review the results yet for the quarter or the investor presentation, but looking at the deck from the last quarter, I counted about a dozen positions, which were still in their reinvestment period and where the AAA spread was meaningfully above sort of 150 basis points, which I think is where the market is now. I want to ask if that sounds about right to you and how would you describe the potential impact on Oxford of refinancing or resetting those positions?

[Speaker 3]

Yes, Mickey, in positions where we hold majority, those liabilities are something we're very carefully monitoring. I can't speak to any individual positions, but we are actively monitoring all of those positions for moneyness as far as refi and reset opportunities go. I mean, we've been in an active dialogue with all of our CLO managers as well as various dealers to look at resetting and refining those liabilities where possible.

[Operator]

Thank you. There are no additional questions left at this time. I will pass the call back to Saul Rosenthal.

[Speaker 1]

Thank you, Tia. And thank you, everyone, for joining today's call and listening to our 4th fiscal quarter results. And we look forward to speaking to you again soon. Thank you.

[Operator]

That concludes today's conference call. Thank you. You may now disconnect your line.