Earnings call transcript: Oxford Square’s Q4 2024 sees steady income, slight NAV dip

Oxford Square Capital Corp. (NASDAQ:OXSQ), a $191 million market cap business development company, reported its financial results for the fourth quarter of 2024, showing a stable net investment income of $6 million, or $0.09 per share, slightly down from the previous quarter. The company’s total investment income reached $10.2 million, with a minor decrease from the prior quarter’s $10.3 million. The net asset value (NAV) per share fell to $2.30 from $2.35. The stock price saw a modest increase of 0.36% following the earnings announcement. Notably, InvestingPro data shows the company maintains an impressive 15% dividend yield, having consistently paid dividends for 22 consecutive years.

Key Takeaways

• Net investment income stood at $6 million, a slight decline from the previous quarter.
• NAV per share decreased to $2.30 from $2.35.
• The company distributed $0.105 per share to shareholders.
• Stock price increased by 0.36% post-announcement.
• U.S. leveraged loan market showed improvements with increased loan prices.

Company Performance

Oxford Square Capital Corp. maintained a steady performance in Q4 2024, despite a slight decrease in net investment income and total investment income compared to the previous quarter. The company continues to focus on portfolio management strategies aimed at maximizing long-term total returns. The U.S. leveraged loan market, where Oxford Square is actively involved, showed signs of improvement, contributing to the company’s strategic positioning.

Financial Highlights

• Net Investment Income: $6 million or $0.09 per share, down from $6.2 million or $0.10 per share.
• Total (EPA:TTEF) Investment Income: $10.2 million, a slight decrease from $10.3 million.
• Net Asset Value (NAV): $2.30 per share, down from $2.35.
• Distributed $0.105 per share to common stock shareholders.
• Net unrealized and realized losses of $2.7 million or $0.04 per share.

Market Reaction

Following the earnings release, Oxford Square’s stock price increased by 0.36%, reflecting a positive investor sentiment. The stock closed at $2.8, with a 52-week high of $3.29 and a low of $2.4, indicating a stable position within its range. With a beta of 1.09 and an impressive year-to-date return of 17.72%, the stock has shown strong momentum. InvestingPro analysis reveals an overall Financial Health Score of 2.6 (GOOD), suggesting solid fundamental strength despite market fluctuations.

Executive Commentary

Kevin Yonan, Managing Director and Portfolio Manager, emphasized the company’s focus on portfolio management strategies designed to maximize long-term total return. Jonathan Cohen, Executive, highlighted the $0.105 per share distribution to common stock shareholders, underscoring the company’s commitment to returning value to investors.

Risks and Challenges

• Market volatility in the leveraged loan sector could impact future performance.
• Fluctuations in interest rates may affect investment income and NAV.
• Economic downturns could lead to increased default rates in the loan portfolio.
• Competition in the financial sector may pressure margins and returns.
• Regulatory changes could alter the operating environment for investment companies.

In summary, Oxford Square Capital Corp.’s Q4 2024 earnings report reflects a stable performance with a focus on long-term returns, despite slight declines in income and NAV. The company’s strategic positioning in the improving U.S. leveraged loan market supports its competitive stance, while the modest stock price increase post-announcement indicates positive investor sentiment.

Full transcript - Oxford Square Capital Corp (OXSQ) Q4 2024:

Conference Operator: Good morning, ladies and gentlemen, and welcome to the Oxford Square Capital Corp. Fourth Quarter twenty twenty four Earnings Conference Call. This call is being recorded on Friday, 02/28/2025. I would now like to turn the conference over to Mr. Jonathan Cohen.

Please go

Jonathan Cohen, Executive (likely CEO or President), Oxford Square Capital Corp: ahead. Good morning, everyone. Welcome to the Oxford Square Capital Corp. Fourth quarter twenty twenty four earnings conference call. I’m joined today by Bruce Rubin, our Chief Financial Officer and Kevin Yonan, our Managing Director and Portfolio Manager.

Bruce, could you open the call with a disclosure regarding forward looking statements? Sure, Jonathan. Today’s conference call is being recorded. An audio replay of the call will be available for thirty days. Replay information is included in our press release that’s issued this morning.

Please note that this call is the property of Oxford Square Capital Corp, and the 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 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’ll turn the presentation back over to Jonathan. Thank you, Chris. For the quarter ended December, Oxford Square’s net investment income was approximately $6,000,000 or $0.09 per share compared with $6,200,000 or $0.1 per share for the prior quarter. Our net assets value per share is $2.3 compared to a net asset value per share of $2.35 for the prior quarter.

During the quarter, we distributed $0.105 per share to our common stock shareholders. For the fourth quarter, we recorded total investment income of approximately $10,200,000 as compared with approximately $10,300,000 for the prior quarter. In the fourth quarter, we recorded combined net unrealized and realized losses on investments of approximately $2,700,000 or $0.04 per share compared to combined net unrealized and realized losses on investments of approximately $7,100,000 or $0.11 per share for the prior quarter. During the fourth quarter, our investment activity consisted of purchases of approximately $25,100,000 sales of $7,000,000 and repayments of approximately $15,000,000 During the quarter ended December, we issued a total of approximately 1,800,000.0 shares of our common stock pursuant to an at the market offering resulting in net proceeds of approximately $5,000,000 On February 27, our Board of Directors declared monthly distributions of $0.035 per share for each of the months ending April, May and June of twenty twenty five. Additional details regarding record payment data information can be found in our press release that was issued this morning.

With that, I’ll turn the call over to Kevin Yonk.

Kevin Yonan, Managing Director and Portfolio Manager, Oxford Square Capital Corp: Thank you, Jonathan. During the quarter ended December 31, U. S. Loan market performance improved versus the prior quarter. Quarter.

U. S. Loan prices as defined by the Morningstar LSTA U. S. Leveraged Loan Index increased from 96.71% par as of September 31.

According to LCD, during the quarter, there was some pricing dispersion with BB rated loan prices increasing 48 basis points, B rated loan prices increasing 74 basis points and CCC (WA:CCCP) rated loan prices decreasing three seventy three basis points on average. While the twelve month trailing default rate for the loan index increased to 0.91 by principal amount at the end of the quarter from 0.8% at the September, we note that out of core restructurings, exchanges and subpar buybacks, which are not captured in this cited default rate, remain elevated. Additionally, the distressed ratio, defined as the percentage of loans with prices below 80% of par, ended the quarter at 3.02% compared to 3.43% at the end of the third quarter. During the quarter ended 12/31/2024, U. S.

Leveraged loan primary market issuance, excluding amendments and repricing transactions, was $96,700,000 representing a 75% increase versus the quarter ended 12/31/2023. This was driven by higher non refinancing issuance, including M and A and LBO activity and opportunistic activity, including refinancings and the funding of dividends versus the prior year comparable quarter. At the same time, U. S. Loan fund inflows measured by Lipper were approximately $5,500,000,000 for the quarter ended December 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 make a longer term view towards our investment strategy. With that, I will turn the call back over

Jonathan Cohen, Executive (likely CEO or President), Oxford Square Capital Corp: to Jonathan. Thanks very much, Kevin. We note that additional information about Oxford Square’s fourth quarter performance has been posted to our website at www.oxfordsquarecapital.com. Operator, with that, we’re happy to open the call for any questions.

Conference Operator: Thank you. Ladies and gentlemen, we will now begin the question and answer session. There appear to be no questions. I will turn the call back over to Mr. Cohen for closing comments.

Jonathan Cohen, Executive (likely CEO or President), Oxford Square Capital Corp: Thanks very much. I’d like to thank everyone for their participation on this call, and we look forward to speaking again soon. Thanks very much.

Conference Operator: Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and we ask that you please disconnect your lines.

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