OFS Capital Corporation Announces First Quarter 2021 Financial Results & Increases Quarterly Cash Distribution
Quarterly Distribution Increased by 10% Compared to Prior Quarter
FINANCIAL HIGHLIGHTS
-
Net investment income of
$2.6 million , or$0.19 per share. -
Adjusted net investment income(1) of
$3.1 million , or$0.23 per share. -
Net asset value ("NAV") per share increased to
$11.96 atMarch 31, 2021 from$11.85 atDecember 31, 2020 . During the three months endedMarch 31, 2021 , our portfolio recognized net gains of$3.9 million . - No new loans placed on non-accrual status in the quarter.
-
At
March 31, 2021 , 96% and 70% of our loan portfolio and total portfolio, respectively, consisted of senior secured loans, based on fair value. -
As of
March 31, 2021 , 90% of our debt matures in 2024 and beyond and 64% of our outstanding debt is unsecured. -
On
May 7, 2021 ,OFS Capital's Board of Directors declared a distribution of$0.22 per share for the second quarter of 2021, payable onJune 30, 2021 , to stockholders of record as ofJune 23, 2021 .
"We are pleased to announce our third consecutive increase in our quarterly distribution," said
(1) Supplemental information regarding adjusted net investment income:
On a supplemental basis, we disclose adjusted net investment income ("Adjusted Net Investment Income") (including on a per share basis), which is a financial measure calculated and presented on a basis of accounting other than in accordance with generally accepted accounting principles of
HIGHLIGHTS |
||||
($ in millions, except for per share data) |
||||
Portfolio Overview |
At |
|||
Total assets |
$ |
511.6 |
|
|
Investment portfolio, at fair value |
$ |
466.1 |
|
|
Net assets |
$ |
160.5 |
|
|
Net asset value per share |
$ |
11.96 |
|
|
Weighted average yield on performing debt investments (1) |
10.04 |
% |
||
Weighted average yield on total debt investments (2) |
9.01 |
% |
||
Weighted average yield on total investments (3) |
8.41 |
% |
(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 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 (ii) the annual effective yield on structured finance notes at the balance sheet date, divided by (b) amortized cost of our debt and structured finance note investments, excluding debt investments in non-accrual status 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 on 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 (ii) the annual effective yield on structured finance notes at the balance sheet date, divided by (b) amortized cost of our debt and structured finance note investments, including debt investments in non-accrual status 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 |
||||||
Operating Results |
2021 |
|
2020 |
||||
Total investment income |
$ |
10.5 |
$ |
12.9 |
|
||
Net investment income |
$ |
2.6 |
$ |
4.0 |
|
||
Net investment income per common share, basic and diluted |
$ |
0.19 |
$ |
0.30 |
|
||
Net increase (decrease) in net assets resulting from operations |
$ |
4.2 |
$ |
(32.2 |
) |
|
Quarter Ended |
|||||
Portfolio Activity |
2021 |
|
2020 |
|||
Number of new portfolio company investments |
18 |
5 |
||||
Investments in new portfolio companies |
$ |
36.2 |
$ |
39.8 |
||
Investments in existing portfolio companies |
$ |
26.1 |
$ |
11.8 |
||
Investments in structured finance notes |
$ |
6.2 |
$ |
12.0 |
||
Number of portfolio companies and structured finance notes at end of period |
87 |
77 |
PORTFOLIO AND INVESTMENT ACTIVITIES
The total fair value of our investment portfolio was
RESULTS OF OPERATIONS
Income
Investment Income
During the three months ended
Syndication fees and prepayment fees result from periodic transactions rather than from holding portfolio investments and are considered non-recurring. During the three months ended
Expenses
Interest expense
Interest expense for the three months ended
Management fee
Management fee expense for the three months ended
Incentive fee
Incentive fee expense for the three months ended
Administration fee
Administration fee expense for the three months ended
Our portfolio experienced net gains of
During the three months ended
-
We recognized net gains of
$3.9 million on our senior debt investments, primarily as a result of unrealized appreciation of$1.5 million on our investment inWastebuilt Environmental Solutions, LLC . -
We recognized net losses of
$1.4 million on our subordinated debt investments, primarily as a result of unrealized depreciation of$2.3 million on our investment inOnline Tech Stores, LLC . -
We recognized net gains of
$0.7 million on our preferred equity investments, primarily as a result of unrealized appreciation of$0.9 million on our investment inNeosystems Corp. -
We recognized net gains of
$1.4 million on our common equity, warrants and other investments, primarily as a result of unrealized appreciation of$1.0 million on our investment inPfanstiehl Holdings, Inc. -
We recognized net losses of
$0.5 million on our Structured Finance Note investments, primarily as a result of unrealized depreciation of$0.7 million on our investment in Apex Credit CLO 2020 Ltd.
Other
Our net asset value per share was reduced
LIQUIDITY AND CAPITAL RESOURCES
At
RECENT DEVELOPMENTS
We are continuing to closely monitor the impact of the outbreak of COVID-19 on all aspects of our business, including how it impacts our portfolio companies, employees, due diligence and underwriting processes, and financial markets. The
On
The extent of the impact of the COVID-19 pandemic on our operational and financial performance, including our ability to execute our business strategies and initiatives in the expected time frame, will depend to a large extent on future developments regarding the duration and severity of the coronavirus, effectiveness of vaccination deployment and the actions taken by governments (including stimulus measures or the lack thereof) and their citizens to contain the coronavirus or treat its impact, all of which are beyond our control. An extended period of global supply chain and economic disruption could materially affect our business, results of operations, access to sources of liquidity and financial condition. Given the fluidity of the situation, we cannot estimate the long-term impact of COVID-19 on our business, future results of operations, financial position, or cash flows at this time.
CONFERENCE CALL
INTERNET: Go to www.ofscapital.com at least 15 minutes prior to the start time of the call to register, download, and install any necessary audio software. A replay will be available for 90 days on OFS Capital’s website at www.ofscapital.com.
TELEPHONE: Dial (877) 510-7674 (Domestic) or (412) 902-4139 (International) approximately 15 minutes prior to the call. A telephone replay of the conference call will be available through
For more detailed discussion of the financial and other information included in this press release, please refer to OFS Capital’s Form 10-Q for the first quarter ended
|
||||||||
Consolidated Statement of Assets and Liabilities |
||||||||
(Dollar amounts in thousands, except per share data) |
||||||||
|
|
|
|
|||||
|
(unaudited) |
|
|
|||||
Assets |
|
|
||||||
Investments, at fair value: |
|
|
||||||
Non-control/non-affiliate investments (amortized cost of |
$ |
352,837 |
|
$ |
328,665 |
|
||
Affiliate investments (amortized cost of |
101,964 |
|
102,846 |
|
||||
Control investment (amortized cost of |
11,298 |
|
10,812 |
|
||||
Total investments at fair value (amortized cost of |
466,098 |
|
442,323 |
|
||||
Cash |
41,641 |
|
37,708 |
|
||||
Interest receivable |
519 |
|
1,298 |
|
||||
Receivable for investments sold |
474 |
|
— |
|
||||
Prepaid expenses and other assets |
2,859 |
|
2,484 |
|
||||
Total assets |
$ |
511,591 |
|
$ |
483,813 |
|
||
|
|
|
||||||
Liabilities |
|
|
||||||
Revolving lines of credit |
$ |
19,550 |
|
$ |
32,050 |
|
||
SBA debentures (net of deferred debt issuance costs of |
94,583 |
|
104,182 |
|
||||
Unsecured notes (net of deferred debt issuance costs of |
198,495 |
|
172,953 |
|
||||
Interest payable |
1,860 |
|
3,176 |
|
||||
Payable to adviser and affiliates |
2,798 |
|
3,252 |
|
||||
Payable for investments purchased |
32,927 |
|
8,411 |
|
||||
Accrued professional fees |
479 |
|
495 |
|
||||
Other liabilities |
429 |
|
338 |
|
||||
Total liabilities |
351,121 |
|
324,857 |
|
||||
|
|
|
||||||
Commitments and contingencies |
|
|
||||||
|
|
|
||||||
Net assets |
|
|
||||||
Preferred stock, par value of |
$ |
— |
|
$ |
— |
|
||
Common stock, par value of |
134 |
|
134 |
|
||||
Paid-in capital in excess of par |
187,146 |
|
187,124 |
|
||||
Total distributable earnings (losses) |
(26,810 |
) |
(28,302 |
) |
||||
Total net assets |
160,470 |
|
158,956 |
|
||||
|
|
|
||||||
Total liabilities and net assets |
$ |
511,591 |
|
$ |
483,813 |
|
||
|
|
|
||||||
Number of shares outstanding |
13,411,962 |
|
13,409,559 |
|
||||
Net asset value per share |
$ |
11.96 |
|
$ |
11.85 |
|
||
|
||||||||
Condensed Consolidated Statements of Operations (unaudited) |
||||||||
(Dollar amounts in thousands, except per share data) |
||||||||
|
Three Months Ended |
|||||||
|
2021 |
|
2020 |
|||||
Investment income |
|
|
||||||
Interest income: |
|
|
||||||
Non-control/non-affiliate investments |
$ |
8,527 |
|
$ |
9,072 |
|
||
Affiliate investments |
904 |
|
2,394 |
|
||||
Control investment |
269 |
|
196 |
|
||||
Total interest income |
9,700 |
|
11,662 |
|
||||
Payment-in-kind interest and dividend income: |
|
|
||||||
Non-control/non-affiliate investments |
318 |
|
261 |
|
||||
Affiliate investments |
71 |
|
269 |
|
||||
Control investment |
98 |
|
85 |
|
||||
Total payment-in-kind interest and dividend income |
487 |
|
615 |
|
||||
Dividend income: |
|
|
||||||
Affiliate investments |
— |
|
100 |
|
||||
Total dividend income |
— |
|
100 |
|
||||
Fee income: |
|
|
||||||
Non-control/non-affiliate investments |
267 |
|
485 |
|
||||
Affiliate investments |
37 |
|
5 |
|
||||
Control investment |
— |
|
3 |
|
||||
Total fee income |
304 |
|
493 |
|
||||
Total investment income |
10,491 |
|
12,870 |
|
||||
Expenses |
|
|
||||||
Interest expense |
4,825 |
|
4,922 |
|
||||
Management fee |
1,834 |
|
2,019 |
|
||||
Incentive fee |
— |
|
883 |
|
||||
Professional fees |
387 |
|
648 |
|
||||
Administration fee |
568 |
|
520 |
|
||||
Other expenses |
327 |
|
347 |
|
||||
Total expenses before incentive fee waiver |
7,941 |
|
9,339 |
|
||||
Incentive fee waiver |
— |
|
(441 |
) |
||||
Total expenses, net of incentive fee waiver |
7,941 |
|
8,898 |
|
||||
Net investment income |
2,550 |
|
3,972 |
|
||||
Net realized and unrealized gain (loss) on investments |
|
|
||||||
Net realized gain (loss) on non-control/non-affiliate investments |
91 |
|
(8,973 |
) |
||||
Net unrealized appreciation (depreciation) on non-control/non-affiliate investments, net of taxes |
1,518 |
|
(22,422 |
) |
||||
Net unrealized appreciation (depreciation) on affiliate investments |
1,926 |
|
(2,924 |
) |
||||
Net unrealized appreciation (depreciation) on control investment |
388 |
|
(1,664 |
) |
||||
Net gain (loss) on investments |
3,923 |
|
(35,983 |
) |
||||
Loss on extinguishment of debt |
(2,299 |
) |
(149 |
) |
||||
Net increase (decrease) in net assets resulting from operations |
$ |
4,174 |
|
$ |
(32,160 |
) |
||
Net investment income per common share – basic and diluted |
$ |
0.19 |
|
$ |
0.30 |
|
||
Net increase (decrease) in net assets resulting from operations per common share – basic and diluted |
$ |
0.31 |
|
$ |
(2.41 |
) |
||
Distributions declared per common share |
$ |
0.20 |
|
$ |
0.34 |
|
||
Basic and diluted weighted average shares outstanding |
13,409,033 |
|
13,377,008 |
|
||||
Schedule I
Non-GAAP Financial Measure – Adjusted Net Investment Income
On a supplemental basis, we disclose Adjusted Net Investment Income (including on a per share basis), which is a financial measure calculated and presented on a basis of accounting other than in accordance GAAP. Management believes that Adjusted Net Investment Income is a useful indicator of future operations and that providing this measure may facilitate a more complete analysis and greater transparency into our ongoing operations, particularly in comparing underlying results from period to period, and afford investors a view of results that may be more easily compared to those of other companies.
The following table provides a reconciliation from net investment income (the most comparable GAAP measure) to Adjusted Net Investment Income for the three months ended
|
Three months ended
|
|||||
|
(000's) |
Per Share |
||||
Net investment income |
$ |
2,550 |
$ |
0.19 |
||
Duplicate interest costs |
564 |
0.04 |
||||
Adjusted Net Investment Income |
$ |
3,114 |
$ |
0.23 |
||
ABOUT
The Company is an externally managed, closed-end, non-diversified management investment company that has elected to be regulated as a business development company. The Company's investment objective is to provide stockholders with both current income and capital appreciation primarily through debt investments and, to a lesser extent, equity investments. The Company invests primarily in privately held middle-market companies in
FORWARD-LOOKING STATEMENTS
Statements in this press release regarding management's future expectations, beliefs, intentions, goals, strategies, plans or prospects, including statements relating to: OFS Capital’s results of operations, including net investment income, net asset value and net investment gains and losses and the factors that may affect such results; management's belief that net investment income can grow over time as a result of increased origination pacing and reduced borrowing costs, when there can be no assurance that either will occur; the effect of the COVID-19 pandemic on the Company's business, financial condition, results of operations and cash flows and those of its portfolio companies, including the Company's and its portfolio companies' ability to achieve their respective objectives; the effect of the disruptions caused by the COVID-19 pandemic on the Company's ability to continue to effectively manage its business and other factors may constitute forward-looking statements for purposes of the safe harbor protection under applicable securities laws. Forward-looking statements can be identified by terminology such as “anticipate,” “believe,” “could,” “could increase the likelihood,” “estimate,” “expect,” “intend,” “is planned,” “may,” “should,” “will,” “will enable,” “would be expected,” “look forward,” “may provide,” “would” or similar terms, variations of such terms or the negative of those terms. Such forward-looking statements involve known and unknown risks, uncertainties and other factors including those risks, uncertainties and factors referred to in OFS Capital’s Annual Report on Form 10-K for the year ended
1 Registration does not imply a certain level of skill or training
View source version on businesswire.com: https://www.businesswire.com/news/home/20210511005274/en/
INVESTOR RELATIONS CONTACT:
646-652-8473
saltebrando@ofsmanagement.com
Source: