Oxford Square Capital Corp. (NASDAQ:OXSQ) Q1 2024 Earnings Call Transcript

Oxford Square Capital Corp. (NASDAQ:OXSQ) Q1 2024 Earnings Call Transcript May 2, 2024

Oxford Square Capital Corp. misses on earnings expectations. Reported EPS is $-0.16 EPS, expectations were $0.15. OXSQ isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Good day, everyone, and welcome to today’s Oxford Square Capital Corp.’s First Quarter 2024 Earnings Conference Call. [Operator Instructions] Please note that this call is being recorded, and I will be standing by should you need any assistance. It is now my pleasure to turn the conference over to Jonathan Cohen. Please go ahead.

Jonathan Cohen: Good morning, everyone, and welcome to the Oxford Square Capital Corp. First Quarter 2024 Earnings Conference Call. I’m 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 a disclosure regarding forward-looking statements.

Bruce Rubin: 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 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.

Jonathan Cohen: Thank you, Bruce. For the quarter ended March 31, Oxford Square’s net investment income was approximately $6.5 million or $0.11 per share compared with $7.8 million or $0.13 per share in the prior quarter. Our net asset value per share stood at $2.42 compared to a net asset value per share of $2.55 for the prior quarter. During the quarter, we distributed [indiscernible] per share. For the first quarter, we recorded total investment income of approximately $10.7 million as compared to approximately $12.2 million in the prior quarter. In the first quarter, we recorded net unrealized depreciation on investments of approximately $210,000 compared to net unrealized depreciation on investments of approximately $14.8 million in the prior quarter.

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Q&A Session

In the first quarter, we recorded realized losses of approximately $8.1 million or $0.14 per share. In the prior quarter, we recorded realized losses on investments of approximately $270,000. During the first quarter, our investment activity consisted of purchases of approximately $12.1 million, sales of approximately $1.4 million and repayments of approximately $17.9 million. During the quarter ended March, we issued a total of approximately 324,000 shares of our common stock pursuant to an at-the-market offering, resulting in net proceeds of approximately $924,000. On April 25, 2024, our Board of Directors declared monthly distributions of $0.035 per share for each of the months ending July, August and September of 2024. 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 Yonon: Thank you, Jonathan. During the quarter ended March 31, 2024, U.S. loan market performance improved versus the prior quarter. U.S. loan prices, as defined by the Morningstar LSTA US Leveraged Loan Index increased from 96.23% of par as of December 31, 2023, to 96.69% of par as of March 31, 2024. According to LCD, during the quarter, there was some pricing dispersion with BB-rated loan prices decreasing 5 basis points, B-rated loan prices increasing 32 basis points and CCC-rated loan prices increasing 134 basis points on average. The 12-month trailing default rate for the Morningstar LSTA US Leveraged Loan Index decreased to 1.14% by principal amount at the end of the quarter from 1.53% at the end of December of 2023.

We note that we have seen higher default rates amongst issuers of the type we invest in. Additionally, the distress ratio, defined as a percentage of loans were a price below 80% of par, into the quarter at 3.51% compared to 4.54% at the end of December 2023. During the quarter ended March 31, 2024, U.S. leveraged loan primary market issuance was $138 billion, representing a 163% increase versus the quarter ended March 31, 2023. This was driven by opportunistic activity, including refinancings and add-ons, while M&A and LBO activity remained relatively slow, but showed some recovery. At the same time, U.S. loan fund inflows as measured by Lipper for approximately $2 billion for the quarter ended March 31, 2024. 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.

Jonathan Cohen: Thanks, Kevin. We note that additional information about Oxford Square’s first quarter performance has been posted to our website at www.oxfordsquarecapital.com. With that, operator, we’re happy to open the call for any questions.

Operator:

Jonathan Cohen: Thank you. We’d like to thank everyone for their interest in Oxford Square Capital Corp., and we look forward to speaking to you soon. Thank you very much.

Operator: And this will conclude today’s conference. Thank you for your participation, and you may now disconnect.