Market Overview

OFS Capital Corporation Announces First Quarter 2019 Financial Results

Share:

Net Investment Income of $0.36 per common share Increased 24%
year-over-year

Declares 26th Consecutive
$0.34 per common share Distribution

OFS Capital Corporation (NASDAQ:OFS) ("OFS Capital," the "Company,"
"we," "us," or "our") today announced its financial results for the
quarter ended March 31, 2019.

FINANCIAL HIGHLIGHTS

  • Net investment income of $4.83 million, or $0.36 per share, an
    increase of 24% year-over-year and above the $0.34 quarterly
    distribution.
  • Closed investments in the first quarter of 2019
    totaled approximately $63.6 million.
  • Net asset value ("NAV") per share decreased to $13.04 at March 31,
    2019 from $13.10 at December 31, 2018 due to unrealized depreciation
    of the portfolio. No new non-accruals.
  • At March 31, 2019, 88% of our loan portfolio consisted of senior
    secured loans, based on fair value.
  • As of March 31, 2019, our total debt was 87% fixed rate and 87% of our
    debt matures in 2024 and beyond.
  • On April 30, 2019, OFS Capital's Board of Directors declared a
    distribution of $0.34 per share for the second quarter of 2019,
    payable on June 28, 2019 to stockholders of record as of June 21, 2019.

"Our net investment income again exceeded our distribution," said Bilal
Rashid, OFS Capital's Chairman and Chief Executive Officer. "Since our
2012 IPO, we have declared 26 consecutive $0.34 per share quarterly
distributions totaling over $9 per share in regular and special
distributions.

We are working to establish an additional credit facility, which if
consummated, would enable the Company to benefit from the incremental
leverage permitted under last years' Small Business Credit Availability
Act."

HIGHLIGHTS

($ in millions, except for per share data)

   
Portfolio Overview At March 31, 2019
Total assets $ 460.2
Investment portfolio, at fair value $ 437.7
Net assets $ 174.3
Net asset value per share $ 13.04
Weighted average yield on performing debt investments (1) 11.80 %
Weighted average yield on total debt investments (2) 11.45 %
Weighted average yield on total investments (3) 10.74 %
 
 
(1) The weighted average yield on our performing debt and structured
finance note investments is computed as (a) the sum of (i) the
annual stated accruing interest on our debt investments plus the
annualized accretion of loan origination fees, original issue
discount, market discount or premium, and loan amendment fees at the
balance sheet date, plus the annual effective yield on our
structured finance notes at the balance sheet date divided by (b)
amortized cost of our debt and structured finance note investments,
excluding assets on non-accrual basis as of the balance sheet date.
(2) The weighted average yield on our total debt and structured finance
note investments is computed as (a) the sum of (i) the annual stated
accruing interest plus the annualized accretion of loan origination
fees, original issue discount, market discount or premium, and loan
amendment fees on our debt investments at the balance sheet date,
plus the annual effective yield on our structured finance notes at
the balance sheet date divided by (b) amortized cost of our debt and
structured finance note investments, including assets on non-accrual
basis as of the balance sheet date.
(3) The weighted average yield on total investments is computed as (a)
the annual stated accruing interest plus the annualized accretion of
loan origination fees, original issue discount, market discount or
premium, and loan amendment fees on our debt investments at the
balance sheet date, plus the annual effective yield on our
structured finance notes at the balance sheet date, plus the
effective cash yield on our performing preferred equity investments
divided by (b) amortized cost of our total investment portfolio,
including assets on non-accrual basis as of the balance sheet date.
The weighted average yield of investments is not the same as a
return on investment for our stockholders but, rather, relates to a
portion of our investment portfolio and is calculated before the
payment of all of our fees and expenses.
 
     

Quarter Ended March 31,

Operating Results     2019   2018
Total investment income $ 12.3 $ 9.0
Net investment income $ 4.8 $ 3.8
Net investment income per common share, basic and diluted $ 0.36 $ 0.29

Net increase in net assets resulting from operations

$

3.7

$

3.5

 

Quarter Ended March 31,

Portfolio Activity     2019 2018
Number of new portfolio companies 3 7
Investments in new portfolio companies $ 35.6 $ 73.0
Investments in existing portfolio companies $ 12.7 $ 25.2
Investments in structured finance notes $ 15.3 $
Number of portfolio companies at end of period 51 39
 

PORTFOLIO AND INVESTMENT ACTIVITIES

During the first quarter of 2019, OFS Capital closed $31.5 million of
senior secured debt investments in three new portfolio companies, as
well as $4.1 million of equity investments in two of these portfolio
companies. In addition, we made $12.7 million of new senior secured debt
investments in existing portfolio companies and $15.3 million of new
investments in structured finance notes.

The total fair value of OFS Capital's investment portfolio was $437.7
million at March 31, 2019, which was equal to approximately 96% of
amortized cost. As of March 31, 2019, the fair value of OFS Capital's
debt investment portfolio totaled $385.7 million in 46 portfolio
companies, of which 88% and 12% were senior secured loans and
subordinated loans, respectively. As of March 31, 2019, we also held
approximately $36.2 million in equity investments, at fair value, in 15
portfolio companies in which we also held debt investments, 5 portfolio
companies in which we solely held an equity investment and 2 investments
in structured finance notes with a fair value of $15.8 million. We had
unfunded commitments of $9.4 million to five portfolio companies at
March 31, 2019. As of March 31, 2019, floating rate loans as a
percentage of fair value comprised 88% of OFS Capital's debt investment
portfolio, with the remaining 12% in fixed rate loans.

RESULTS OF OPERATIONS

Income

Investment Income

Interest income increased by $2.6 million for the three months ended
March 31, 2019, compared to the three months ended March 31, 2018, due
to a $3.6 million increase caused by an approximately $106.0 million
increase in the average outstanding performing loan balance offset, in
part, by a ($1.0) million decrease resulting from a 96 basis point
decrease in the recurring earned yield on our portfolio. Fee income
increased $0.5 million for the three months ended March 31, 2019
compared to the three months ended March 31, 2018, primarily due to an
increase in syndication fees resulting from approximately $60.5 million
in loan originations during the period in which OFS Capital Management,
LLC sourced, structured, and arranged the lending group, and for which
we were additionally compensated.

Expenses

Interest expense

Interest expense for the three months ended March 31, 2019 increased
$1.8 million over the corresponding period in the prior year due to the
issuance of $98.5 million in unsecured notes issued during 2018.

Management fee

Management fee expense for the three months ended March 31, 2019
increased $0.5 million over the corresponding period in the prior year
due to an increase in our average total assets, resulting from the
issuance of $98.5 million of unsecured notes during 2018.

Incentive fee

Incentive fee expense increased by $0.4 million for the three months
ended March 31, 2019 compared to the three months ended March 31, 2018
primarily due to additional net investment income resulting from the
increase in the size of the portfolio.

Administration fee

Administration fee expense for the three months ended March 31, 2019
decreased $0.1 million over the corresponding period in the prior year
primarily due to an decrease in our allocable portion of OFS Services's
overhead.

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