OFS Capital Corporation

Good day and welcome to the LFS Capital Corporation Q4 2024 Earnings Conference Call. All participants will be in listen-only mode. If you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad, and to withdraw your question, please press star then two. Please note today's event is being recorded. And now I'd like to turn the conference over to Steve Aldebrando. Please go ahead.

Good morning, everyone, and thank you for joining us. Also on the call today are Bilal Rashid, our Chairman and Chief Executive Officer, and Jeff Cerny, the company's Chief Financial Officer and Treasurer. Before we begin, please note that the statements made on this call and webcast may constitute forward-looking statements as defined under applicable securities laws. Such statements reflect various assumptions, expectations, and opinions by OFS capital management concerning anticipated results, are not guarantees of future performance, and are subject to known and unknown risks, uncertainties, and other factors that could cause actual results to differ materially from such statements. The uncertainties and other factors are in some way beyond management's control, including the risk factors described from time to time in our filings with the SEC. Although we believe these assumptions are reasonable, any of those assumptions could prove inaccurate, and as a result, the forward-looking statements based on those assumptions also could be incorrect. You should not place undue reliance on these forward-looking statements. OFS Capital undertakes no duty to update any forward-looking statements made herein, and all forward-looking statements speak only as of the date of this call. With that, I'll turn the call over to Chairman and Chief Executive Officer, Bilal Rashid.

Thank you, Steve. We announced our fourth quarter earnings earlier this morning. For the quarter, our net investment income increased by approximately 13% to 30 cents per share. Our net asset value per share increased by 14% to $12.85 per share. The improvement in net investment income was primarily driven by an increase in dividend income attributed to a non-recurring distribution on one of our equity positions and other non-recurring fee income. We remain focused on rotating certain non-interest earning equity positions into interest earning assets to improve net investment income in the long term. As we have discussed on previous calls, we continue to explore potential ways to monetize our minority equity investment in fan steel holdings. Our largest equity position, whose fair value continued to increase in the quarter due to improved fundamental performance, appreciating by $15.6 million to $89.3 million at quarter end. As we have noted before, this is a position we invested in more than 11 years ago at a cost of only $200,000. To date, we have received approximately $3.9 million in distributions or approximately 18 times our cost. As I just mentioned, we had a significant increase in net asset value per share. primarily related to an increase in the value of our equity positions, as well as some of our structured finance positions. We had no new non-accruals this quarter. We believe our portfolio continues to be well positioned for the current macroeconomic environment. As part of our longstanding investment discipline, we remain committed to avoiding highly cyclical industries. we believe that our loan portfolio remains well diversified and defensively positioned. At quarter end, our largest sector exposures at fair value are in manufacturing and healthcare. Another key part of our investment discipline is investing higher in the capital structure, with 100% of our loan portfolio at fair value in first lien and second lien senior secured loans. We believe the Fed rate cuts during the second half of 2024 have had a positive impact on our portfolio companies by reducing interest costs, despite putting pressure on our loan yields. In our view, our financing continues to provide us operational flexibility. 72% of our outstanding debt is unsecured at the end of the quarter. Our non-recourse $150 million floating rate facility with BNP Paribas matures in June 2027. Our $25 million Bank of California floating rate corporate line of credit provides us additional liquidity and flexibility. M&A activity continues to remain muted. However, we continue to find investment opportunities from our existing borrowers. As we navigate this uncertain market environment, we have confidence in the experience of our advisor, which manages approximately $3.9 billion across the loan and structured credit markets, has expertise in multiple asset classes and industries, and has a more than 25-year track record through multiple credit cycles. At this point, I'll turn the call over to Jeff Cerny, our Chief Financial Officer, to give you more details and color for the quarter.