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Oxford Square Capital Corp. (OXSQ)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 2025 total investment income rose 7.5% sequentially to $10.24M, while net investment income (NII) was $5.56M ($0.07 per share); NAV per share declined to $1.95 from $2.06 in Q2 .
  • EPS met Wall Street consensus at $0.07*, and revenue beat consensus ($10.24M vs $9.60M*) — strength came from higher CLO equity income and debt yields; however, larger unrealized losses drove a net decrease in net assets from operations of $(2.09)M .
  • Management authorized a $25M 12‑month share repurchase program and maintained the monthly dividend at $0.035 through March 2026; NII did not fully cover distributions ($0.07 vs $0.105), raising coverage questions into 2026 .
  • Capital structure repositioning: issued $74.8M of 7.75% notes due 2030 and repaid $34.8M of 6.25% notes due 2026, improving maturity profile and funding portfolio growth .

Values marked with * retrieved from S&P Global.

What Went Well and What Went Wrong

What Went Well

  • Sequential revenue strength and yield improvement: Total investment income increased to $10.24M (vs $9.52M in Q2), with debt investment yield at 14.6% and CLO equity effective yield at 9.7% .
  • Strategic portfolio additions: $58.1M in purchases, including long-dated CLO equity with “steady, predictable cash flow,” and opportunistic secondary loan positions acquired at par or below to capture spread .
  • Capital actions support flexibility: $74.8M 7.75% notes and ATM equity issuance (~5.4M shares; $11.8M net) enhanced liquidity; buyback authorization up to $25M could be a support for the stock .

Management quotes:

  • “We were able to purchase a couple CLO equity pieces… long-dated… steady, predictable cash flow…” .
  • “The best hedge in this asset class really is duration.” .
  • “We’ve hit the maximum… ability to add additional CLO equity without rotating the portfolio.” .

What Went Wrong

  • Distribution coverage shortfall: NII per share ($0.07) did not cover distributions ($0.105), continuing a multi‑quarter trend highlighted in Q&A; management noted leverage is “light” and a potential lever to improve NII .
  • NAV pressure and valuation drawdown: NAV/share fell to $1.95 (from $2.06), and Q3 market total return was −24.74%, reflecting portfolio marks and market performance .
  • Elevated unrealized losses: Net unrealized depreciation of ~$7.50M and realized losses ~$0.15M drove a net decrease in net assets from operations of $(2.09)M despite higher NII .

Financial Results

MetricQ3 2024Q1 2025Q2 2025Q3 2025
Total Investment Income ($USD Millions)$10.34 $10.16 $9.52 $10.24
Net Investment Income ($USD Millions)$6.19 $6.10 $5.50 $5.56
NII per Share ($USD)$0.10 $0.09 $0.08 $0.07
Net Assets from Operations per Share ($USD)$(0.01) $(0.12) $0.06 $(0.03)
Distributions per Share ($USD)$0.105 $0.105 $0.105 $0.105
NAV per Share ($USD)$2.35 $2.09 $2.06 $1.95
Net Unrealized (Depreciation)/Appreciation ($USD Millions)$5.84 $(2.07) $1.25 $(7.50)
Net Realized Gains/(Losses) ($USD Millions)$(12.90) $(12.16) $(2.37) $(0.15)
Revenue Consensus Mean ($USD Millions)*—$9.90*—$9.60*
EPS Consensus Mean ($USD)*—$0.08*—$0.07*

Values marked with * retrieved from S&P Global.

Segment investment income breakdown

Source ($USD Millions)Q3 2024Q1 2025Q2 2025Q3 2025
Debt Investments—$5.53 $5.09 $5.16
CLO Equity Investments—$3.96 $3.86 $4.30
Other Income—$0.67 $0.58 $0.78
Total Investment Income$10.34 $10.16 $9.52 $10.24

Key KPIs and portfolio metrics

KPIQ1 2025Q2 2025Q3 2025
Weighted Avg Yield – Debt Investments14.3% 14.5% 14.6%
Weighted Avg Effective Yield – CLO Equity9.0% 8.8% 9.7%
Weighted Avg Cash Distribution Yield – Senior Secured Notes—9.0% 9.5%
Weighted Avg Cash Distribution Yield – CLO Equity16.0% 13.8% 14.3%
Shares Outstanding (end of period)71.19M 76.24M 81.67M
Cash Equivalents ($USD)—$29.79M $50.26M
Cash ($USD)——$0.52M

Estimate comparison (Q3 2025)

  • EPS: $0.07 actual vs $0.07 consensus* → met .
  • Revenue: $10.24M actual vs $9.60M consensus* → bold beat.

Values marked with * retrieved from S&P Global.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Monthly Dividend per ShareOct–Dec 2025$0.035/month —Maintained (for those months)
Monthly Dividend per ShareJan–Mar 2026—$0.035/month Maintained level vs prior quarter run-rate
Share Repurchase AuthorizationOct 30, 2025–Oct 30, 2026—Up to $25.0M total New program
Notes Issuance7.75% due July 2030Priced $65M (Aug 1) Issued $74.8M; repaid $34.8M of 6.25% due Apr 2026 New financing; extended maturities

Earnings Call Themes & Trends

TopicPrevious Mentions (Q-2 and Q-1)Current Period (Q3 2025)Trend
Loan Market ConditionsQ1: Prices fell; default rate 0.82% (LSTA), distress ratio 3.21% . Q2: Prices rose; default rate 1.11%; distress ratio 3.06% .Stable prices q/q; dispersion by ratings; default rate up to 1.47%; distress ratio 2.88% .Gradual normalization; defaults tick higher.
CLO Strategy & DurationQ1/Q2: CLO equity yields 9.0%→8.8%; focus on long-term positioning .Added long-dated CLO equity with “steady, predictable cash flow”; emphasize duration as hedge .Renewed CLO deployment, higher effective yields.
Secondary Loan OpportunitiesQ2: Opportunistic activity limited; repayments only .Focus on less-liquid secondary names at par/below to capture spread .Increased opportunistic trading.
Capital StructureQ1/Q2: ATM issuance; planning notes offering .Issued $74.8M 7.75% notes; repaid 6.25% notes; ATM ~$11.8M .Extended maturities; added liquidity.
Dividend Coverage / LeverageQ2/Q1: NII < distributions; limited commentary .Management: portfolio “relatively lightly levered”; leverage a lever to improve NII; coverage shortfall noted in Q&A .Focus on potential leverage adjustments.
Corporate Actions—Consideration of reverse split conceptually; $25M buyback authorization .Exploring equity structure and capital return.

Management Commentary

  • Strategic posture: “We were able to purchase a couple CLO equity pieces… long-dated… steady, predictable cash flow… top-tier managers” .
  • Risk management: “The best hedge in this asset class really is duration.” .
  • Portfolio construction limits: “We’ve hit the maximum… ability to add additional CLO equity without rotating the portfolio.” .
  • Liquidity/ATM timing: Cash increase “principally timing as a result of the ATM issuances.” .
  • NII levers: “We’re running a relatively lightly levered portfolio… that’s certainly one element… worthy of consideration” .

Q&A Highlights

  • Pipeline and mix: Expect continued focus on secondary loans, less-liquid credits for spread capture; CLO equity adds would require rotation given current positioning .
  • Liquidity and capital actions: Higher quarter-end cash tied to ATM timing; discussion of potential reverse split concept analogous to sister entity .
  • Dividend coverage: Acknowledged NII below distributions for several quarters; leverage cited as a potential lever to improve run-rate NII .
  • Allocation discipline: Emphasis on duration for CLOs and risk-adjusted returns in loan book .

Estimates Context

  • EPS met consensus ($0.07 actual vs $0.07*), while revenue beat ($10.24M vs $9.60M*) — strength in CLO equity income and improved debt yields likely contributed to the top-line beat .
  • Prior quarters: Q1 revenue beat consensus ($10.16M vs $9.90M*), Q1 EPS beat ($0.09 actual vs $0.08*); Q2 estimates unavailable or limited in S&P Global for revenue/EPS .

Values marked with * retrieved from S&P Global.

Implications for estimates:

  • Given rising effective yields on CLO equity and active secondary loan deployment, near-term revenue estimates may drift higher.
  • However, recurring unrealized depreciation and coverage shortfall vs distributions may cap EPS estimate revisions absent increased leverage or lower funding costs .

Key Takeaways for Investors

  • Revenue beat with EPS in-line; top-line benefited from higher CLO equity income and debt yields, but marks drove a net decrease in net assets — monitor realized vs unrealized P&L trajectory .
  • Dividend coverage remains below 1x (NII/share $0.07 vs distributions $0.105); watch leverage policy and portfolio rotation as levers to close the gap .
  • NAV/share decline to $1.95 and macro default metrics moving up warrant caution; focus on credit trends in lower-rated cohorts and marks sensitivity .
  • Capital structure improved: $74.8M of 7.75% notes due 2030 funded growth and refinanced 2026 notes; potential interest cost trajectory and liquidity support are positives .
  • Buyback authorization up to $25M could support trading levels, especially if deployed near NAV discounts; monitor actual repurchase activity .
  • Deployment discipline into less-liquid secondary loans at par/below and long-duration CLO equity aims to enhance spread and resilience; execution is key in a dispersing credit environment .
  • Near-term trading: Share repurchase program and revenue beats are catalysts, but ongoing NAV pressure and coverage shortfall may temper multiple expansion until clearer improvement in realized earnings and marks is evident .