The following is a summary of the OFS Capital (OFS) Q3 2024 Earnings Call Transcript:

Financial Performance:

• Net investment income increased by approximately 4.8% to $0.27 per share.

• Net Asset Value (NAV) per share decreased by 1.9% to $11.29, influenced by markdowns in loan and structured finance positions, offset by increases in equity positions.

• Total investment income decreased by 2% to $10.9 million this quarter, influenced by the repayment of a large loan position.

• Total expenses reduced by 5.3% to $7.3 million mainly due to decreased G&A expenses.

Business Progress:

• Announced focus on increasing net investment income by rotating non-interest earning equity into interest-earning assets.

• Continued diversification and defensive positioning of the loan portfolio, with significant exposure in manufacturing and healthcare sectors.

Opportunities:

• Ongoing evaluation and potential sale of minority equity investment in Pfanstiehl to boost net investment income.

• Further interest rate cuts by the Federal Reserve expected to decrease borrowing costs and potentially improve loan portfolio health.

• Anticipation of increased M&A activity potentially leading to higher originations and fee income.

Risks:

• Modest increase in non-accrual loans, representing 0.6% of the total portfolio at fair value.

• Recent interest rate cut by the Federal Reserve may pressure net interest margins, although also viewed as reducing recession risks.

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