OFS Capital Corp Q4 FY2023 earnings call

• Net investment income in Q4 was $0.35 per share, covering the $0.34 per share distribution. Current distribution rate is an 11.6% annualized yield based on year-end common stock price. • No new non-accruals this quarter, and one investment was placed back on accrual status. • Benefited from balance sheet positioning with majority debt fixed rate and majority loan portfolio floating rate. • Net asset value per share decreased by $0.65 to $12.9 due to unrealized depreciation. • Anticipate increase in M&A activity later in 2024 as interest rate clarity improves; remain active in supporting existing portfolio companies. • At end of Q4, ~89% of outstanding debt matures in 2026 or later, 60% is unsecured and non-recourse; retired remaining $31.9 million of SBIC debt due in early 2025. • Rely on adviser with ~$4 billion across loan and structured credit markets, 25+ years of track record through multiple credit cycles.

Net investment income in the fourth quarter was $0.35 per share, below the third quarter's $0.4 per share due to non-recurring investment income in the third quarter. Our net investment income remains above the distribution of $0.34 per share. 100% of our loan portfolio at fair value is senior secured. Based on amortized cost as of quarter end, our investment portfolio was comprised of approximately 69% senior secured loans, 1% subordinated debt, 24% structured finance securities, and 6% equity securities. At year end, 2.9% of our total investments at fair value were on nonaccrual status.

• Continue to believe portfolio is well-positioned for current macroeconomic environment. • Expect increase in M&A activity later in 2024 as interest rate clarity improves. • Remain active in supporting existing portfolio companies. • Benefit from adviser's experience and expertise across multiple asset classes and industries.

• Uncertain macroeconomic environment could impact portfolio performance. • Interest rate fluctuations could affect investment income and debt costs. • Valuation changes of investments, as seen in the fourth quarter's unrealized depreciation, could impact net asset value.

Q: What percent of your loans are second liens?

A: About 19% of our loan portfolio is second liens.

Q: On the affiliate pick income, was there a catch-up for the quarter?

A: There was a pickup of a loan where we put back on accrual status, with an equity infusion and recognition of previously reserved past-due interest.

Q: Do you guys use a third-party valuation service for the portfolio?

A: For all of our Level three investments we have them valued by a third-party every quarter. If it's at level two, it's at market value.