Oxford Lane Capital Q3 Earnings Call Highlights

Key Points

• NAV plunged from $19.19 to $15.51 at quarter end, driven by approximately $305.4 million of net unrealized depreciation and a $240.7 million ($2.47/share) net decrease in net assets from operations.
• The board cut the monthly common distribution to $0.20 for April–June 2026 to retain capital for opportunistic CLO equity and junior-debt investments and to help support long-term NAV while remaining RIC-compliant.
• Oxford Lane deployed about $97.2 million into CLOs while receiving ~$85.5 million in sales/repayments, holds roughly $263.1 million of CLO equity yet to pay initial distributions, and reports weighted-average yields of 17.3% (CLO debt) and 13.8% (CLO equity effective) with a 19.0% cash distribution yield on CLO equity.

Oxford Lane Capital NASDAQ: OXLC reported third fiscal quarter results that reflected lower income, a sharp decline in net asset value, and sizable unrealized depreciation tied to broader market conditions affecting CLOs and leveraged loans. Management also announced a reduction in the monthly common distribution, citing a desire to retain additional capital for investment opportunities and to support net asset value over time.

Quarterly results and portfolio marks

CEO Jonathan Cohen said net asset value (NAV) per share was $15.51 as of December 31, 2025, down from $19.19 at the end of the prior quarter.

For the quarter ended December 31, Oxford Lane recorded GAAP total investment income of approximately $117.8 million, a decrease of about $10.5 million from the prior quarter. The company attributed most of that income to CLO equity and CLO warehouse positions:

• Approximately $114.3 million from CLO equity and CLO warehouse investments
• Approximately $3.5 million from CLO debt investments and other income

Oxford Lane reported GAAP net investment income (NII) of approximately $71.8 million, or $0.74 per share, compared with approximately $81.4 million, or $0.84 per share, for the quarter ended September 30.

Core net investment income was approximately $108.9 million, or $1.12 per share, down from approximately $120 million, or $1.24 per share, in the prior quarter.

Oxford Lane also reported significant valuation pressure during the period, including net unrealized depreciation on investments of approximately $305.4 million and net realized losses of approximately $7.0 million. As a result, the company reported a net decrease in net assets resulting from operations of approximately $240.7 million, or $2.47 per share, for the third fiscal quarter.

Yields and undistributed CLO equity positions

As of December 31, management provided several portfolio yield metrics, while noting that “none of these metrics necessarily represented a total return to shareholders.” The company reported:

• Weighted average yield of CLO debt investments at current cost of 17.3%, down from 17.4% as of September 30
• Weighted average effective yield of CLO equity investments at current cost of 13.8%, down from 14.6%
• Weighted average cash distribution yield of CLO equity investments at current cost of 19.0%, down from 19.4%

Cohen noted that cash distribution yields for CLO equity were calculated based on cash distributions received (or entitled to be received) at each period end.

He also said that as of December 31, the company held approximately $263.1 million in newly issued or newly acquired CLO equity investments that had not yet made initial distributions to Oxford Lane.

Activity during the quarter

During the quarter, Oxford Lane made approximately $97.2 million of additional CLO investments and received approximately $85.5 million from sales and repayments.

Managing Director Joe Kupka said Oxford Lane invested “over $97 million” in CLO equity and warehouses during the period and described the firm’s positioning as opportunistic and unconstrained across U.S. CLO equity, debt, and warehouses.

Kupka said the firm also “led or participated in more than 10 resets and refinancings” during the quarter, taking advantage of tightening liability spreads to lower funding costs and extend the weighted average reinvestment period of Oxford Lane’s CLO equity portfolio from May 2029 to August 2029.

Market backdrop: loans and CLO issuance

Kupka said U.S. loan market performance declined versus the prior quarter. The U.S. loan price index decreased from 97.06% as of September 30 to 96.64% as of December 31, which he said contributed to an “approximate 2-point decrease” in median U.S. CLO equity net asset values.

He also noted that median weighted average spreads across loan pools within CLO portfolios declined to 311 basis points from 318 basis points in the prior quarter.

On credit conditions, Kupka said the 12-month trailing default rate for the loan index decreased to 1.2% by principal amount at quarter end from 1.5%, while adding that out-of-court restructurings, exchanges, and “subpar buybacks” not captured in the cited default rate “remain elevated.”

CLO market activity remained strong. Kupka said CLO new issuance totaled about $55 billion during the quarter, up roughly $2 billion from the previous quarter. Reset and refinancing activity totaled approximately $74 billion in Q4 2025, compared with approximately $105 billion in the previous quarter.

Distribution reset and capital deployment goals

Oxford Lane’s board declared monthly common distributions of $0.20 per share for each of the months ending April, May, and June 2026. Cohen said the board considers a range of factors when setting distributions, including GAAP and core NII and the distributions needed to maintain the company’s status as a regulated investment company (RIC).

He said that, given the opportunities management sees in the market for CLO equity and junior debt tranche investments, the board concluded it would be beneficial to retain additional capital to deploy. Cohen said the company supports “a stable or growing net asset value” as a meaningful component of shareholder returns, and the board believes the reduced distribution will support that objective while remaining compliant with the requirement to distribute at least 90% of investment company taxable income to maintain RIC status.

During the Q&A, Cohen also emphasized that the company has historically shifted between primary and secondary market opportunities and said it currently sees “more opportunities in the secondary than in the primary market.” Asked about the possibility of a special dividend, Cohen said it is “certainly possible” depending on the level of earnings and the need to comply with RIC distribution requirements, adding that the company thinks about compliance on its fiscal-year basis.

On resets and refinancings, Kupka said 2026 “should be a very active year” for the company. He said Oxford Lane participated in or led about 70 resets or refinancings in 2025, and noted that starting in July, a significant portion of the portfolio will be rolling off non-call periods, with potential actions dependent on market fundamentals.

About Oxford Lane Capital NASDAQ: OXLC

Oxford Lane Capital 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.

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