OFS Capital Corporation Announces Financial Results for Q4 2024
OFS Capital Corporation (Nasdaq: OFS) (“OFS Capital,” “we,” “us,” or “our”) today announced its financial results for the fiscal quarter ended December 31, 2024.
Fourth Quarter Financial Highlights
OFS Capital Corporation reported strong financial performance in the fourth quarter of 2024, demonstrating growth in key financial metrics. The company’s net investment income increased to $0.30 per common share, compared to $0.27 per common share in the previous quarter, highlighting improved earnings.
The net gain on investments was reported at $1.60 per common share, primarily driven by net unrealized appreciation of $1.79 per common share. This was slightly offset by net realized losses of $0.19 per common share. As a result, net asset value (NAV) per common share saw an increase, rising to $12.85 as of December 31, 2024, from $11.29 as of September 30, 2024.
In terms of portfolio composition, 91% of OFS Capital’s loan portfolio consisted of floating-rate loans, and 100% of the loan portfolio consisted of first and second lien loans. The company also experienced an increase in its investment portfolio’s weighted-average performing income yield, which rose to 13.8% from 13.6% in the previous quarter. This increase was primarily attributed to higher earned yields on structured finance securities.
Additionally, the company reported positive developments in its non-accrual loans. No new loans were placed on non-accrual status, and the number of issuers with loans on non-accrual status decreased by one compared to the previous quarter.
Other Recent Events
On February 26, 2025, OFS Capital’s Board of Directors declared a distribution of $0.34 per common share for the first quarter of 2025. This dividend will be payable on March 31, 2025, to stockholders of record as of March 21, 2025, reflecting the company’s commitment to returning value to shareholders.
Selected Financial Highlights
For the quarter ended December 31, 2024, net investment income stood at $4.08 million, up from $3.60 million in the previous quarter. The company’s total investment income for the quarter increased to $11.65 million, compared to $10.92 million in Q3 2024. This growth was fueled by higher dividend income and fee income.
On the balance sheet side, OFS Capital reported a total investment portfolio value of $409.7 million as of December 31, 2024, up from $394.7 million at the end of Q3 2024. Net assets grew from $151.3 million to $172.2 million over the quarter.
Portfolio and Investment Activities
OFS Capital’s investment strategy remained robust during Q4 2024, with continued investments in debt and structured finance securities. During the quarter, the company invested $23.2 million in debt securities and $9.4 million in structured finance securities, totaling $32.6 million in new investment purchases and originations. In the previous quarter, total investments amounted to $48.4 million.
As of December 31, 2024, the company’s investment portfolio consisted of:
- Total investments of $409.7 million, approximately 113% of amortized cost.
- Debt investments of $224.2 million, with 85% allocated to first lien loans and 15% to second lien loans.
- Equity investments totaling $108.6 million.
- Structured finance securities worth $76.9 million.
During the fourth quarter, OFS Capital sold a second lien debt investment that was previously on non-accrual status, resulting in a net realized loss of $1.9 million. However, this loss was substantially recognized in prior periods as an unrealized loss, minimizing its impact on the company’s NAV.
Outstanding Debt
OFS Capital maintained a stable debt position during the quarter. The average dollar borrowings and weighted-average effective interest rate for the company’s debt were as follows:
- Q4 2024: $248.1 million in average borrowings with a weighted-average effective interest rate of 6.30%.
- Q3 2024: $249.1 million in average borrowings with a weighted-average effective interest rate of 6.46%.
Results of Operations
Investment Income
Total investment income for Q4 2024 increased by $0.7 million compared to the previous quarter. This growth was mainly due to an increase in dividend income by $0.6 million and fee income by $0.3 million.
Expenses
Total expenses for the quarter were $7.57 million, up from $7.32 million in Q3 2024. The increase in expenses was primarily driven by a rise in base management and incentive fees by $0.2 million.
Net Gain on Investments
Net gain on investments for Q4 2024 amounted to $21.4 million, significantly up from a net loss of $1.92 million in the previous quarter. This gain was primarily attributed to net unrealized appreciation of $15.6 million in OFS Capital’s common equity investment in Pfanstiehl Holdings, Inc.
Liquidity and Capital Resources
As of December 31, 2024, OFS Capital had cash and cash equivalents of $6.1 million, including $4.8 million held by OFSCC-FS, LLC, an indirect wholly owned subsidiary. The company’s ability to use cash held by OFSCC-FS is subject to contractual conditions under its credit facility with BNP Paribas.
Additionally, OFS Capital had an unused commitment of $24.0 million under its senior secured revolving credit facility with Banc of California and an unused commitment of $82.7 million under its revolving credit facility with BNP Paribas. Both facilities remain subject to borrowing base requirements and other covenants.
The company also had a payable for investments purchased of $1.8 million and outstanding commitments to fund various undrawn revolvers and other credit facilities of portfolio companies totaling $18.8 million.
OFS Capital Corporation demonstrated strong financial performance in the fourth quarter of 2024, with increases in net investment income, net asset value, and investment portfolio size. The company’s disciplined investment approach, strong credit quality, and stable capital structure position it well for continued growth in 2025. The declaration of a dividend of $0.34 per common share further reinforces its commitment to shareholder returns. As the company moves into 2025, its focus remains on maintaining portfolio quality and optimizing investment opportunities for long-term success.
