OFS Capital (OFS) Q4 2025 Earnings Call Transcript

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Tue, March 3, 2026 astatine 10:03 AM CST 11 min read

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Tuesday, March 3, 2026 astatine 10 a.m. ET

• Chief Executive Officer — Bilal Rashid

• Chief Financial Officer — Kyle Spina

Bilal Rashid: Thank you, Stephen. Yesterday, we announced our 4th fourth earnings. Net concern income totaled $0.20 per share, down from $0.22 per stock successful the anterior quarter. The diminution was chiefly driven by a little nett involvement borderline resulting from higher involvement rates connected our caller unsecured notes. These notes refinanced our existing indebtedness that was issued successful a historically debased involvement complaint environment. In doing so, we were capable to meaningfully widen the maturity of our debt. In addition, the involvement rates connected our indebtedness portfolio person been impacted by the Fed's continued simplification successful benchmark rates, which besides had an effect connected our involvement margin.

Our nett plus worth astatine December 31 was $9.19 per stock compared to $10.17 per stock successful the anterior quarter. The diminution was chiefly owed to further markdowns of a mates of nonperforming loans. In addition, we experienced unrealized depreciation connected our CLO equity holdings owed to dispersed tightening successful the underlying indebtedness collateral. Overall, we judge our recognition portfolio is stable. During the quarter, we placed 1 indebtedness connected nonaccrual; however, we placed 1 indebtedness backmost connected accrual presumption pursuing the completion of a restructuring transaction. While we stay committed to preserving capital, we proceed to beryllium focused connected improving our nett concern income implicit the agelong term.

This includes our efforts to monetize our number equity presumption successful Fansteel, our largest presumption successful the portfolio, with a just worth of astir $79,400,000 astatine 4th end. We are encouraged by the company's continued operational momentum and, successful our view, judge its semipermanent outlook remains compelling. A palmy exit could amended nett concern income and trim portfolio concentration. At the aforesaid time, we stay disciplined successful balancing the timing of a imaginable exit with the realization worth of the plus successful bid to maximize our wide returns. Since our archetypal $200,000 concern successful 2014, our presumption successful Fansteel has generated astir $4,200,000 successful distributions to date, representing astir a 19x instrumentality connected our cost.

As we look ahead, the macroeconomic situation remains uncertain. From a monetary standpoint, the Fed held rates dependable successful January pursuing 3 cuts successful 2025; however, determination remains imaginable for further reductions successful the adjacent term. Because astir of our indebtedness portfolio is floating rate, further complaint cuts could enactment further unit connected our nett concern income. On the different hand, further cuts would proceed to trim the involvement load connected our portfolio companies and assistance amended their currency flows. We person deliberately constructed our indebtedness portfolio to beryllium resilient by avoiding highly cyclical industries and maintaining beardown diversification.