Earnings call transcript: Oxford Square Q1 2025 shows mixed results

Oxford Square Capital Corp. (OXSQ) reported its Q1 2025 financial results, revealing a mixed performance. The company posted net investment income of $6.1 million, or $0.09 per share, surpassing the earnings per share (EPS) forecast of $0.08. However, the company’s net asset value (NAV) declined to $2.09 per share from $2.30, and it registered combined net unrealized and realized losses of $14.2 million, or $0.20 per share. Following the earnings announcement, Oxford Square’s stock saw a modest increase of 1.21%, closing at $2.44. According to InvestingPro data, the company maintains a significant 17.21% dividend yield and received a "GOOD" financial health score, demonstrating its ability to meet financial obligations despite market challenges.

Key Takeaways

• Net investment income exceeded expectations at $0.09 per share.
• NAV decreased to $2.09 per share, down from $2.30.
• The stock price rose by 1.21% post-earnings.
• The company issued 1.3 million shares, raising $3.5 million.
• Monthly distributions of $0.35 per share are planned for Q3 2025.

Company Performance

Oxford Square’s performance in Q1 2025 was characterized by higher-than-expected net investment income, though the company faced challenges with a declining NAV and significant unrealized and realized losses. The firm maintained its total investment income at $10.2 million, consistent with the previous quarter. Despite the mixed results, the company’s focus on its long-term investment strategy in the leveraged loan market remains unchanged.

Financial Highlights

• Net Investment Income: $6.1 million ($0.09 per share)
• Total Investment Income: $10.2 million (unchanged from prior quarter)
• Net Asset Value: $2.09 per share (down from $2.30)
• Combined net unrealized and realized losses: $14.2 million ($0.20 per share)
• Distributed $0.05 per share to common stockholders

Earnings vs. Forecast

Oxford Square’s EPS of $0.09 exceeded the forecast of $0.08, marking a positive surprise for investors. This represents a 12.5% beat over expectations. The performance trend indicates resilience in generating income despite the broader challenges in the loan market.

Market Reaction

Following the earnings release, Oxford Square’s stock experienced a slight uptick of 1.21%, closing at $2.44. This movement reflects a cautious optimism among investors, possibly influenced by the company’s ability to exceed EPS expectations and its strategic focus on long-term investments.

Outlook & Guidance

The company remains committed to its long-term investment strategy in the leveraged loan market and plans to continue focusing on portfolio management. It has declared monthly distributions of $0.35 per share for Q3 2025, indicating confidence in its cash flow generation capabilities.

Executive Commentary

Kevin Yonan, Portfolio Manager, emphasized the company’s commitment to maximizing long-term total returns through effective portfolio management strategies. He stated, "As a permanent capital vehicle, we historically have been able to take a longer-term view towards our investment strategy."

Risks and Challenges

• Declining NAV could impact investor confidence.
• Continued losses in unrealized and realized investments may pressure financial performance.
• The leveraged loan market volatility poses a risk to returns.
• Broader economic conditions could affect loan market dynamics.
• Regulatory changes in the financial sector might impact operations.

Oxford Square’s Q1 2025 results highlight its ability to generate income above expectations, despite facing headwinds in the form of declining NAV and investment losses. The company’s strategic focus and planned distributions offer a degree of assurance to investors looking for stability in an uncertain market.

Full transcript - Oxford Square Capital Corp (OXSQ) Q1 2025:

Conference Operator: Morning, ladies and gentlemen, and welcome to the Oxford Square Capital Corp. First Quarter twenty twenty five Earnings Conference Call. This call is being recorded on Friday, 04/25/2025. I would now like to turn the conference over to Mr. Jonathan Cohen.

Please go ahead.

Jonathan Cohen, Executive (likely CEO or President), Oxford Square Capital Corp.: Good morning. Welcome to the Oxford Square Capital Corp. First Quarter twenty twenty five Earnings Conference Call. I’m joined today by Bruce Rubin, our Chief Financial Officer and Kevin Yonan, Managing Director and Portfolio Manager. Bruce, could you open the call with the disclosure regarding forward looking statements?

Sure, Jonathan. Today’s conference call is being recorded. An audio replay of the conference call will be available for thirty days. Replay information is included in our press release that was 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. 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. We ask that you 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.

To obtain copies of our latest SEC filings, please visit our website at www.oxfordsquarecapital.com. With that, I’ll turn the presentation back to Jonathan. Thanks, Rich. For the quarter ended March 31, Oxford Square’s net investment income was approximately $6,100,000 or $09 per share compared with approximately $6,000,000 or $09 per share for the prior quarter. Our net asset value per share stood at $2.09 compared to a net asset value per share of $2.3 for the prior quarter.

During the quarter, we distributed $0.01 $05 per share to our common stock shareholders. For the first quarter, we recorded total investment income of approximately $10,200,000 which was approximately the same as in the prior quarter. During the first quarter, we recorded combined net unrealized and realized losses on investments of approximately $14,200,000 or $0.20 per share compared to combined net unrealized and realized losses on investments of approximately $2,700,000 or $04 per share for the prior quarter. During the first quarter, our investment activity consisted of purchases of approximately $16,000,000 sales of approximately $10,700,000 and repayments of approximately $8,700,000 During the quarter ended March, we issued a total of approximately 1,300,000.0 shares of our common stock pursuant to an aftermarket offering, resulting in net proceeds of approximately $3,500,000 On 04/22/2025, our Board of Directors declared monthly distributions of $0.35 per share for each of the months ending July, August and September of twenty twenty five. Additional details regarding record and payment data 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 Young. Kevin? Thank you, Jonathan. During the quarter ended March 31, U. S.

Loan market performance weakened versus the prior quarter. U. S. Loan prices, as defined by the Morningstar LSTA U. S.

Leveraged loan index, decreased from 97.33% of par as of December 31 to 96.31% of par as of March 31. According to LCE, during the quarter, there were some pricing dispersion with double b rated loan prices decreasing 82 basis points, b rated loan prices decreasing 134 basis points, and triple c rated loan prices decreasing 211 basis points on average. While the twelve month trailing default rate for the loan decreased to 0.82% by principal amount at the end of the quarter from 0.91% at the December, we note that the default rate, including various forms of liability management exercises, which are not captured in this tighter default rate, remain in an elevated level of 4.31%. Additionally, the distress ratio, defined as the percentage of loans with prices below 80% of par, ended the quarter at 3.21% compared to 3.02 at the end of twenty twenty four. During the quarter ended 03/31/2025, U.

S. Leverage on primary market issuance, excluding amendments and repricing transactions, was $141,100,000,000 representing a 2% decrease versus the quarter ended 03/31/2024. This was driven by lower opportunistic activity, including refinancings and the funding of dividends, partly offset by higher non refinancing issuance, including M and A and LDO activity versus the prior year comparable quarter. At the same time, U. S.

Loan fund inflows as measured by Lipper were approximately $1,940,000,000 for the quarter ended March 31. We continue to focus on portfolio management strategies 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. Thanks very much, Kevin. We note that additional information about Oxford Square’s first quarter performance has been posted to our Web site at oxfordsquarecapital.com.

And with that, operator, we can open the calls for any questions.

Conference Operator: Thank you, ladies and gentlemen. We will now begin the question and answer session. Should you have a question, please press the star followed by the number one On your touch tone phone, you will hear a prompt that your hand has been raised. Should you wish to decline from the calling process, please press the star followed by the number two. If you are using a speakerphone, please lift the handset before pressing any key.

One moment, please, for our first question. There are no further questions or there are no questions at this time. I would now like to turn the call back over to mister Jonathan Cohen for his closing remarks.

Jonathan Cohen, Executive (likely CEO or President), Oxford Square Capital Corp.: Thank you, operator. Thanks very much to everybody who listened and participated in this call. We look forward to speaking with you again soon. Thanks very much.

Conference Operator: Ladies and gentlemen, this concludes today’s conference call. Thank you for your participation. You may now disconnect.

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