OFS Capital Corporation Announces Second Quarter 2018 Financial Results
Declares a
FINANCIAL HIGHLIGHTS
- Net investment income of $4.56 million, or $0.34 per share.
-
Net asset value ("NAV") per share increased to
$13.70 atJune 30, 2018 from$13.67 per share atMarch 31, 2018 . -
At
June 30, 2018 , 80% of our loan portfolio consisted of senior secured loans, based on fair value. -
Closed investments in the second quarter of 2018 totaled approximately
$47.0 million . As of August 3, 2018, we closed approximately $17.3 million of additional new investments during the third quarter of 2018. -
As of
June 30, 2018 , 77% of the fair value of our loan portfolio was floating rate, and the weighted average yield of our loan portfolio was 12.26%(1). -
As of
June 30, 2018 , our debt had a weighted average cost of 4.37%. -
As of
June 30, 2018 , 96% of our debt was fixed rate and over 86% of our debt matures after 2023. - On July 31, 2018, OFS Capital's Board of Directors declared a distribution of $0.34 per share for the third quarter of 2018, payable on September 28, 2018 to stockholders of record as of September 14, 2018.
"The second quarter was a strong period for us," said Bilal Rashid, OFS
Capital's Chairman and Chief Executive Officer. "Our net investment
income per share was in line with our current distribution rate and we
just declared our 23rd straight
Since our IPO in 2012, our total return (as measured by change in NAV plus cumulative distributions) is well above the industry average. We believe our strong performance is attributable to the strength of our platform which has been in existence since 1994."
(1) See Highlights contained in this press release for further
information on our weighted average yield. Excluding assets classified
as non-accrual, the weighted average yield of our debt investment
portfolio was 12.26% at
HIGHLIGHTS ($ in millions, except for per share data) |
|||
Portfolio Overview | At June 30, 2018 | ||
Total assets | $ | 392.7 | |
Investment portfolio, at fair value | $ | 362.8 | |
Net assets | $ | 182.9 | |
Net asset value per share | $ | 13.70 | |
Weighted average yield on performing debt investments (1) | 12.26% | ||
Weighted average yield on total debt investments (2) | 11.80% | ||
Weighted average yield on total investments (3) | 11.06% |
(1) The weighted average yield on our performing debt investments is computed as (a) the annual stated accruing interest on our debt investments at the balance sheet date, plus the annualized accretion of loan origination fees, original issue discount, market discount or premium, and loan amendment fees divided by (b) amortized cost of our debt investments, excluding assets on non-accrual basis as of the balance sheet date.
(2) The weighted average yield on our total debt investments is computed as (a) the annual stated accruing interest on our debt investments at the balance sheet date, plus the annualized accretion of loan origination fees, original issue discount, market discount or premium, and loan amendment fees divided by (b) amortized cost of our debt 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 on our debt investments at the balance sheet date, plus the annualized accretion of loan origination fees, original issue discount, market discount or premium, and loan amendment fees, 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 June 30, | ||||||||
Operating Results | 2018 | 2017 | ||||||
Total investment income | $ | 10.3 | $ | 8.0 | ||||
Net investment income | $ | 4.6 | $ | 4.3 | ||||
Net investment income per common share, basic and diluted | $ | 0.34 | $ | 0.33 | ||||
Adjusted net investment income (a Non-GAAP measure described below) | $ | 4.6 | $ | 4.0 | ||||
Adjusted net investment income (a Non-GAAP measure described below) per share, basic and diluted | $ | 0.34 | $ | 0.31 | ||||
Net increase in net assets resulting from operations | $ | 5.0 | $ | (2.3 | ) |
Quarter Ended June 30, | ||||||
Portfolio Activity | 2018 | 2017 | ||||
Number of new portfolio companies | 5 | 9 | ||||
Investments in new portfolio companies | $ | 44.2 | $ | 59.1 | ||
Investments in existing portfolio companies | $ | 2.8 | $ | 7.0 | ||
Number of portfolio companies at end of period | 42 | 42 |
PORTFOLIO AND INVESTMENT ACTIVITIES
During the second quarter of 2018,
The total fair value of OFS Capital’s investment portfolio was
RESULTS OF OPERATIONS
Income
Interest Income
Interest income increased by
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 increased by
Administration fee
Administration fee expense for the three months ended
Other expenses
Other expenses for the three months ended
Net Gain (Loss) on Investments
We recognized net losses of
We recognized net losses of
We recognized net losses of
We recognized net gains of
LIQUIDITY AND CAPITAL RESOURCES
At
In
On
CONFERENCE CALL
INTERNET: Log on 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 second quarter ended
OFS Capital Corporation and Subsidiaries Consolidated Balance Sheets (Dollar amounts in thousands, except per share data) |
|||||||
June 30, 2018 |
December 31, 2017 |
||||||
(unaudited) | |||||||
Assets | |||||||
Investments, at fair value: | |||||||
Non-control/non-affiliate investments (amortized cost of $249,111 and $209,360, respectively) | $ | 241,071 | $ | 197,374 | |||
Affiliate investments (amortized cost of $106,689 and $70,402, respectively) | 111,017 | 69,557 | |||||
Control investments (amortized cost of $10,275 and $10,213, respectively) | 10,744 | 10,568 | |||||
Total investments at fair value (amortized cost of $366,075 and $289,975, respectively) | 362,832 | 277,499 | |||||
Cash and cash equivalents | 22,665 | 72,952 | |||||
Interest receivable | 2,919 | 2,734 | |||||
Prepaid expenses and other assets | 4,257 | 4,593 | |||||
Total assets | $ | 392,673 | $ | 357,778 | |||
Liabilities | |||||||
Revolving line of credit | $ | 8,000 | $ | 17,600 | |||
SBA debentures (net of deferred debt issuance costs of $2,470 and $2,657, respectively) | 147,410 | 147,223 | |||||
Unsecured notes (net of deferred debt issuance costs of $1,701 and $0, respectively) | 48,299 | — | |||||
Interest payable | 2,260 | 1,596 | |||||
Management and incentive fees payable | 2,683 | 1,987 | |||||
Administration fee payable | 478 | 476 | |||||
Accrued professional fees | 444 | 433 | |||||
Other liabilities | 170 | 127 | |||||
Total liabilities | 209,744 | 169,442 | |||||
Commitments and contingencies | |||||||
Net assets | |||||||
Preferred stock, par value of $0.01 per share, 2,000,000 shares authorized, -0- shares issued and outstanding as of June 30, 2018, and December 31, 2017, respectively | $ | — | $ | — | |||
Common stock, par value of $0.01 per share, 100,000,000 shares authorized, 13,350,458 and 13,340,217 shares issued and outstanding as of June 30, 2018, and December 31, 2017, respectively | 134 | 133 | |||||
Paid-in capital in excess of par | 187,549 | 187,398 | |||||
Accumulated undistributed net investment income | 7,088 | 9,404 | |||||
Accumulated undistributed net realized gain (loss) | (8,497 | ) | 3,881 | ||||
Net unrealized depreciation on investments | (3,345 | ) | (12,480 | ) | |||
Total net assets | 182,929 | 188,336 | |||||
Total liabilities and net assets | $ | 392,673 | $ | 357,778 | |||
Number of shares outstanding | 13,350,458 | 13,340,217 | |||||
Net asset value per share | $ | 13.70 | $ | 14.12 |
OFS Capital Corporation and Subsidiaries Condensed Consolidated Statements of Operations (unaudited) (Dollar amounts in thousands, except per share data) |
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Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Investment income | |||||||||||||||
Interest income: | |||||||||||||||
Non-control/non-affiliate investments | $ | 6,326 | $ | 4,446 | $ | 12,084 | $ | 9,058 | |||||||
Affiliate investments | 2,768 | 1,646 | 4,853 | 3,477 | |||||||||||
Control investment | 250 | 542 | 489 | 1,066 | |||||||||||
Total interest income | 9,344 | 6,634 | 17,426 | 13,601 | |||||||||||
Payment-in-kind interest and dividend income: | |||||||||||||||
Non-control/non-affiliate investments | 122 | 319 | 346 | 626 | |||||||||||
Affiliate investments | 285 | 374 | 746 | 726 | |||||||||||
Control investment | 27 | 39 | 54 | 77 | |||||||||||
Total payment-in-kind interest and dividend income | 434 | 732 | 1,146 | 1,429 | |||||||||||
Dividend income: | |||||||||||||||
Non-control/non-affiliate investments | — | 45 | — | 50 | |||||||||||
Affiliate investments | — | — | 130 | 85 | |||||||||||
Control investments | 94 | 137 | 127 | 170 | |||||||||||
Total dividend income | 94 | 182 | 257 | 305 | |||||||||||
Fee income: | |||||||||||||||
Non-control/non-affiliate investments | 387 | 169 | 413 | 325 | |||||||||||
Affiliate investments | 3 | 176 | 5 | 234 | |||||||||||
Control investments | 16 | 85 | 34 | 118 | |||||||||||
Total fee income | 406 | 430 | 452 | 677 | |||||||||||
Total investment income | 10,278 | 7,978 | 19,281 | 16,012 | |||||||||||
Expenses | |||||||||||||||
Interest expense | 2,169 | 1,339 | 3,803 | 2,726 | |||||||||||
Management fee | 1,548 | 1,224 | 2,908 | 2,416 | |||||||||||
Incentive fee | 1,135 | (22 | ) | 1,872 | 1,159 | ||||||||||
Professional fees | 200 | 293 | 401 | 556 | |||||||||||
Administration fee | 358 | 307 | 941 | 708 | |||||||||||
Other expenses | 310 | 521 | 1,005 | 791 | |||||||||||
Total expenses before incentive fee waiver | 5,720 | 3,662 | 10,929 | 8,356 | |||||||||||
Incentive fee waiver | — | — | (22 | ) | — | ||||||||||
Total expenses, net of incentive fee waiver | 5,720 | 3,662 | 10,907 | 8,356 | |||||||||||
Net investment income | 4,558 | 4,316 | 8,374 | 7,656 | |||||||||||
Net realized and unrealized gain (loss) on investments | |||||||||||||||
Net realized gain (loss) on non-control/non-affiliate investments | (5,464 | ) | 163 | (5,003 | ) | 163 | |||||||||
Net realized gain (loss) on affiliate investments | (3,477 | ) | 874 | (4,018 | ) | 874 | |||||||||
Net unrealized appreciation (depreciation) on non-control/non-affiliate investments | 5,411 | (5,505 | ) | 3,848 | (8,546 | ) | |||||||||
Net unrealized appreciation (depreciation) on affiliate investments | 3,928 | (3,366 | ) | 5,173 | 658 | ||||||||||
Net unrealized appreciation on control investment | 39 | 1,237 | 114 | 1,780 | |||||||||||
Net gain (loss) on investments | 437 | (6,597 | ) | 114 | (5,071 | ) | |||||||||
Net increase (decrease) in net assets resulting from operations | $ | 4,995 | $ | (2,281 | ) | $ | 8,488 | $ | 2,585 | ||||||
Net investment income per common share – basic and diluted | $ | 0.34 | $ | 0.33 | $ | 0.63 | $ | 0.67 | |||||||
Net increase (decrease) in net assets resulting from operations per common share – basic and diluted | $ | 0.37 | $ | (0.17 | ) | $ | 0.64 | $ | 0.23 | ||||||
Distributions declared per common share | $ | 0.34 | $ | 0.34 | $ | 1.05 | $ | 0.68 | |||||||
Basic and diluted weighted average shares outstanding | 13,348,793 | 13,197,759 | 13,344,670 | 11,458,706 | |||||||||||
Non-GAAP Financial Measure – Adjusted Net Investment Income (“Adjusted NII”)
On a supplemental basis, we disclose Adjusted NII (including on a per share basis), which is a financial measure calculated and presented on a non-GAAP basis. Adjusted NII represents net investment income excluding the net capital gains incentive fee (fee adjustments) in periods in which they occur. Our management agreement with our investment adviser provides that a capital gains incentive fee is determined and paid annually with respect to realized capital gains (but not unrealized capital gains) to the extent such realized capital gains exceed realized and unrealized capital losses for such year. Management believes that Adjusted NII is a useful indicator of operations exclusive of any net capital gains incentive fee, as net investment income does not include gains associated with the capital gains incentive fee. In addition, management believes that providing Adjusted NII may facilitate a more complete analysis and greater transparency into OFS Capital’s 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 NII for the periods presented (dollar amounts in thousands, except per share data):
Quarter Ended June 30, | |||||||||
2018 | 2017 | ||||||||
Net investment income | $ | 4,558 | $ | 4,316 | |||||
Capital gains incentive fee | — | (283 | ) | ||||||
Adjusted net investment income | $ | 4,558 | $ | 4,033 | |||||
Adjusted net investment income per common share: | |||||||||
Basic and diluted | $ | 0.34 | $ | 0.31 | |||||
Weighted average shares outstanding: | |||||||||
Basic and diluted | 13,348,793 | 13,197,759 |
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 beliefs regarding the performance of the portfolio
and expectations regarding future portfolio performance in a rising rate
environment; management's view that
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Source:
INVESTOR RELATIONS:
Steve Altebrando, 646-652-8473
saltebrando@ofsmanagement.com