Oxford Square Capital’s Earnings Call Reveals Mixed Sentiment

Oxford Square Capital ((OXSQ)) has held its Q3 earnings call. Read on for the main highlights of the call.

The recent earnings call for Oxford Square Capital Corp. presented a mixed sentiment, with notable achievements in investment income and debt management overshadowed by concerns over declining net asset value and increased losses. While the company has made strides in certain areas, the overall cautious outlook reflects the significant challenges it faces.

Increased Total Investment Income

Oxford Square Capital Corp. reported a positive increase in total investment income for the third quarter, reaching approximately $10.2 million compared to $9.5 million in the previous quarter. This growth highlights the company’s ability to generate higher revenue from its investments, marking a positive development amidst other financial challenges.

Net Proceeds from Stock Issuance

The company successfully issued approximately 5.4 million shares of common stock through an at-the-market offering, resulting in net proceeds of $11.8 million. This strategic move provided Oxford Square with additional capital, which could be utilized for further investments or debt management.

Successful Debt Management

Oxford Square demonstrated effective debt management by issuing $74.8 million of 7.75% unsecured notes due in July 2030 and fully repaying the remaining balance of $34.8 million of 6.25% unsecured notes due in April 2026. This action reflects the company’s proactive approach to managing its debt obligations and optimizing its financial structure.

Increase in U.S. Leveraged Loan Primary Market Issuance

The U.S. leveraged loan primary market issuance saw a significant increase, reaching $133.7 billion, a 22% rise from the previous year. This growth in the market could present new opportunities for Oxford Square to enhance its investment portfolio.

Decrease in Net Asset Value per Share

Despite positive developments, the net asset value per share for Oxford Square decreased to $1.95 from $2.06 in the prior quarter. This decline raises concerns about the company’s overall financial health and its ability to maintain shareholder value.

Increased Net Unrealized and Realized Losses

The company faced increased net unrealized and realized losses on investments, totaling approximately $7.5 million or $0.09 per share, compared to $1.1 million or $0.01 per share in the previous quarter. This significant rise in losses poses a challenge to Oxford Square’s profitability.

Higher Default Rate in Loan Index

The 12-month trailing default rate for the loan index increased to 1.47% by principal amount at the end of the quarter, up from 1.11% at the end of June. This higher default rate indicates a more challenging credit environment, which could impact Oxford Square’s investment strategy.

Dividend Coverage Concerns

Oxford Square has faced difficulties in covering dividends with its net investment income for several quarters, raising concerns about the sustainability of its current dividend levels. This issue highlights the need for the company to address its income and distribution strategies.

Forward-Looking Guidance

Looking ahead, Oxford Square Capital Corp. provided guidance for the upcoming quarters, indicating a cautious approach. The company reported a slight increase in net investment income and plans to continue monthly distributions of $0.035 per share for the first quarter of 2026. However, the decrease in net asset value and increased losses remain critical areas of focus for future performance.

In conclusion, the earnings call for Oxford Square Capital Corp. painted a complex picture of the company’s financial standing. While there were positive strides in investment income and debt management, significant challenges such as declining net asset value and increased losses necessitate a cautious outlook. Investors and stakeholders will be keenly watching how the company navigates these hurdles in the coming quarters.