Oxford Square Capital Q2 2026 Earnings Call Transcript

Key Takeaways

  • Negative Sentiment: Net investment income rose to $5.1 million, or $0.05 per share, but remained below the $0.105 quarterly distribution; NAV declined to $1.29 per share from $1.32.
  • Positive Sentiment: The company invested $19.9 million entirely in secondary-market CLO equity, with cash-on-cash and forward effective yields in the low-20% range.
  • Positive Sentiment: Investment losses narrowed substantially to approximately $1.1 million from $29.7 million in the prior quarter, while a restructured non-accrual position now includes an accruing first-lien term loan and common equity.
  • Positive Sentiment: The broader leveraged-loan market improved, with loan prices increasing, the trailing default rate falling to 0.97%, and the distress ratio declining to 6.87% during the quarter.
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Earnings Conference Call
Oxford Square Capital Q2 2026
00:00 / 00:00

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Operator

Thank you for standing by. My name is Tina, and I will be your conference operator today. At this time, I would like to welcome everyone to the Oxford Square Capital Corp second quarter 2026 earnings release conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. To ask a question, press star one on your telephone keypad. To withdraw your question, press star one again. It is now my pleasure to turn the call over to Jonathan Cohen, CEO. Please go ahead.

Jonathan H. Cohen
Jonathan H. Cohen
CEO at Oxford Square Capital Corp

Thank you. Good morning, everyone. Welcome to the Oxford Square Capital Corp second quarter 2026 earnings conference call. I am joined today by Saul Rosenthal, our president, Bruce Rubin, our chief financial officer, and Kevin Yonon, managing director and portfolio manager. Bruce, could you open the call with the disclosure regarding forward-looking statements?

Bruce L. Rubin
Bruce L. Rubin
CFO at Oxford Square Capital Corp

Sure, Jonathan. Today's conference call is being recorded. An audio replay of the conference call will be available for 30 days. Replay information is included in our press release as issued 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. At this point, please direct your attention to the customary disclosure in this morning's press release regarding forward-looking information.

Bruce L. Rubin
Bruce L. Rubin
CFO at Oxford Square Capital Corp

Today's conference call includes forward-looking statements and projections that reflect the current company's views with respect to, among other things, future events and financial performance. We ask that you refer to our most recent filings with the SEC for important factors that can 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. To obtain copies of our latest SEC filings, please visit our website at www.oxfordsquarecapital.com. With that, I will turn the call back to Jonathan.

Jonathan H. Cohen
Jonathan H. Cohen
CEO at Oxford Square Capital Corp

Thanks, Bruce. For the quarter ended June 30th, Oxford Square's net investment income was approximately $5.1 million, or $0.05 per share, compared with approximately $4.1 million in the prior quarter. Our net asset value per share stood at $1.29, compared to a net asset value per share of $1.32 for the prior quarter. During the quarter, we distributed $0.105 per share to our common stock shareholders.

Jonathan H. Cohen
Jonathan H. Cohen
CEO at Oxford Square Capital Corp

For the second quarter, we recorded total investment income of approximately $9.4 million, compared to approximately $8.9 million in the prior quarter. In the second quarter, we recorded combined net unrealized and realized losses on investments of approximately $1.1 million, or $0.01 per share, compared to combined net unrealized and unrealized losses on investments of approximately $29.7 million, or $0.34 per share for the prior quarter.

Jonathan H. Cohen
Jonathan H. Cohen
CEO at Oxford Square Capital Corp

During the second quarter, our investment activity consisted of purchases of approximately $19.9 million and repayments of approximately $500,000. During the quarter ended June, we issued a total of approximately 11.3 million shares of our common stock pursuant to an at-the-market offering, resulting in net proceeds of approximately $17.8 million.

Jonathan H. Cohen
Jonathan H. Cohen
CEO at Oxford Square Capital Corp

On July 29th, our board of directors declared monthly distributions of $0.035 per share for each of the months ending October, November, and December of 2026. We note that additional details regarding record and payment date information 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. Kevin?

Kevin Yonon
Kevin Yonon
Managing Director and Portfolio Manager at Oxford Square Capital Corp

Thank you, Jonathan. During the quarter ended June 30th, U.S. loan market performance improved versus the prior quarter. U.S. loan prices, as defined by the Morningstar LSTA U.S. Leveraged Loan Index, increased from 94.63% of par as of March 31st to 94.96% of par as of June 30th.

Kevin Yonon
Kevin Yonon
Managing Director and Portfolio Manager at Oxford Square Capital Corp

According to LCD, during the quarter, there was some pricing dispersion, with BB-rated loan prices increasing 32 basis points, B-rated loan prices increasing 42 basis points, and CCC-rated loan prices increasing 6 basis points on average. According to PitchBook LCD, the 12-month trailing default rate for the loan index decreased to 0.97% by principal amount at the end of the quarter from 1.44% at the end of March.

Kevin Yonon
Kevin Yonon
Managing Director and Portfolio Manager at Oxford Square Capital Corp

Additionally, the default rate, including various forms of liability management exercises, which are not captured in the aforementioned default rate, remained at an elevated level of 2.77%, but declined from 3.48% as of March 31st. The distress ratio, defined as the percentage of loans with prices below 80% of par, ended the quarter at 6.87%, compared to 7.23% at the end of March.

Kevin Yonon
Kevin Yonon
Managing Director and Portfolio Manager at Oxford Square Capital Corp

During the quarter ended June 30th, 2026, U.S. leverage loan primary market issuance, excluding amendments and repricing transactions, was $101.8 billion, representing a 33% increase versus the quarter ended June 30th, 2025. This was driven by higher refinancing and M&A activity, partly offset by lower LBO and dividend activity versus the prior year comparable quarter. At the same time, U.S. loan fund inflows, as measured by Lipper, were approximately $1 billion for the quarter ended June 30th.

Kevin Yonon
Kevin Yonon
Managing Director and Portfolio Manager at Oxford Square Capital Corp

We continue to focus on portfolio management strategies designed to maximize our long-term total return, 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.

Jonathan H. Cohen
Jonathan H. Cohen
CEO at Oxford Square Capital Corp

Thanks very much, Kevin. Additional information about Oxford Square's second quarter performance has been posted to our website at oxfordsquarecapital.com. With that, operator, we're happy to open the call up for any questions.

Operator

Once again, to ask a question, press star one on your telephone keypad. Our first question comes from the line of Eric Zwick with Lucid Capital Markets. Please go ahead.

Eric Zwick
Analyst at Lucid Capital Markets

Thank you. Good morning. I wanted to start with-

Jonathan H. Cohen
Jonathan H. Cohen
CEO at Oxford Square Capital Corp

Good morning, Eric.

Eric Zwick
Analyst at Lucid Capital Markets

Hey, John. With the $19.9 million of purchases you referenced in the quarter, curious if you could provide any characteristics on those investments in terms of security type, yield or spread, types of industries, anything additional there would be great.

Jonathan H. Cohen
Jonathan H. Cohen
CEO at Oxford Square Capital Corp

Sure. Hey, Eric, that was actually all CLO equity for this quarter. The cash-on-cash was probably low 20s. The forward effective yield is also in that range. Yeah, that was all CLO equity for this quarter.

Bruce L. Rubin
Bruce L. Rubin
CFO at Oxford Square Capital Corp

That's consistent, Eric, with our current thesis of CLO equity tranche investments representing what we believe is a fairly compelling cash-on-cash opportunity, particularly for purchases made in the secondary market. I believe that all of those purchases, yes, all of those purchases, Eric, were made in the secondary market.

Eric Zwick
Analyst at Lucid Capital Markets

Excellent. Thanks for the color there. In terms of the unrealized gains that were recorded in the quarter, was this primarily a rebound from last quarter's marks, or were there some other factors that contributed to the appreciation in value in the quarter?

Jonathan H. Cohen
Jonathan H. Cohen
CEO at Oxford Square Capital Corp

No, it was principally that, just coming off of those levels.

Eric Zwick
Analyst at Lucid Capital Markets

Okay. Just looking at the makeup of the non-accruals or the one debt position that I guess was on there last quarter but now gone. I think the press release mentioned you did not make any sales, was that resolved or that's obviously back to non-accrual now, or how should I interpret that? What kind of transpired there?

Kevin Yonon
Kevin Yonon
Managing Director and Portfolio Manager at Oxford Square Capital Corp

Sure. This is Kevin Yonon. That one position went through a restructuring transaction which closed during the quarter. There's now a new manageable capital structure of which we hold the new first lien term loan as well as some common equity. That new first lien term loan is on accrual.

Eric Zwick
Analyst at Lucid Capital Markets

Okay. Did you record any additional losses or gains a result of that restructuring, or where you had it marked last quarter, that ended up being pretty accurate?

Kevin Yonon
Kevin Yonon
Managing Director and Portfolio Manager at Oxford Square Capital Corp

Mark was consistent with the prior quarter.

Eric Zwick
Analyst at Lucid Capital Markets

Excellent. Thanks. It was good to see total investment income up quarter-over-quarter, yet the NII per share still below the dividend level. Just curious how you're looking at the portfolio. What levers do you have at your disposal to drive that NII higher? Over what time frame would you expect it to take to get that earnings power back to a full dividend coverage again?

Jonathan H. Cohen
Jonathan H. Cohen
CEO at Oxford Square Capital Corp

Sure. We don't, as you know, Eric, make forward projections or forward-looking performance estimates. We are, I think, broadly optimistic about the capital that we're deploying presently, including the capital that we just deployed in this last quarter. We'll certainly keep you updated.

Eric Zwick
Analyst at Lucid Capital Markets

No, it's good. Thanks for taking my questions this morning, guys.

Jonathan H. Cohen
Jonathan H. Cohen
CEO at Oxford Square Capital Corp

Thank you, Eric. Thank you.

Operator

Again, to ask a question, press star one on your telephone keypad. With no further questions in the queue, I will now turn the call back to Jonathan Cohen, CEO.

Jonathan H. Cohen
Jonathan H. Cohen
CEO at Oxford Square Capital Corp

Thank you very much, operator. We'd like to thank everybody on this call and everybody listening to the replay for their continued interest in Oxford Square, and we look forward to speaking to you again soon. Thanks very much.

Operator

Thank you again for joining us today. This does conclude today's conference call. You may now disconnect.

Executives
    • Bruce L. Rubin
      Bruce L. Rubin
      CFO
    • Kevin Yonon
      Kevin Yonon
      Managing Director and Portfolio Manager
Analysts
    • Eric Zwick
      Analyst at Lucid Capital Markets