OFS Capital Corporation

Good day and welcome to the OFS Capital Corporation first quarter 2026 earnings conference call. All participants will be in listen-only mode. Should 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. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Steve Altibrando. 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 Kyle Spina, 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 incorrect, 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. Yesterday afternoon, we reported our first quarter results. Net investment income totaled 18 cents per share, covering our distribution of 17 cents per share, despite being down 2 cents per share from the prior quarter. The decline was again primarily driven by a lower net interest margin. This reflects the higher interest costs on our unsecured notes issued last year. which replaced debt issued in a historically low rate environment. That said, this new debt has allowed us to meaningfully extend our debt maturities. In addition, benchmark rate reductions by the Fed last year have lowered yields across our loan portfolio, further impacting our net interest margin. Our net asset value at quarter end was $8.16 per share, compared to $9.19 per share in the prior quarter. The decrease was primarily due to unrealized depreciation on our CLO equity holdings, driven by spread tightening in the underlying loan collateral, as well as a decrease in loan prices due to overall market sentiment. Overall, our non-accrual investments as a percentage of our total portfolio at fair value decreased slightly quarter over quarter by 0.7%. During the quarter, we exited one of our long-time non-accrual loans. In addition, we placed one small loan representing just 0.3% of the total portfolio at fair value on non-accrual status. Despite this borrower remaining current on its interest payments, the loan was placed on non-accrual status due to an internal credit rating downgrade. We remain focused on improving our net investment income over the long term. As discussed on prior calls, this includes our ongoing efforts to monetize our minority equity position in Fansteel, the largest position in our portfolio. which had a fair value of approximately $80.4 million at quarter end. We continue to be encouraged by the company's operational momentum and believe its long-term outlook remains compelling. A successful exit could increase the likelihood of improved net investment income and reduce portfolio concentration. At the same time, we remain disciplined in balancing the timing of a potential exit with the realization value of the asset in order to maximize our overall returns. Since our initial $200,000 investment in 2014, our position in fan steel has generated approximately $5.1 million in distributions to date, representing roughly a 23 times return on our costs. Looking ahead, the macroeconomic environment remains uncertain. However, we believe we have constructed our loan portfolio to be resilient. We maintain diversification and avoid highly cyclical industries. we continue to monitor potential disruptions related to AI and at this time have not observed material impacts on our loan portfolio. We have limited direct enterprise software exposure and no reliance on annual recurring revenue or ARR-based lending in our loan portfolio. Instead, we are focused on originating loans based on profitability of the borrowers. We are closely watching geopolitical developments, specifically the conflicts in the Middle East and their potential implications for inflation and interest rates. However, we have not seen direct effects on our loan portfolio today. Importantly, our discipline underwriting approach remains unchanged. Our loan portfolio is entirely composed of first and second lien senior secured loans with 98% of our loan holdings in first lien positions based on fair value. Underscoring our focus on maintaining a senior position in the capital structure. Turning to originations, middle market M&A activity has remained below expectations to start the year. However, we remain actively engaged with our existing portfolio companies and stand ready to deploy additional capital where appropriate. We have also continued to strengthen our balance sheet. Over the past several months, we have extended all near-term debt maturities with our earliest remaining maturity in 2028. In addition, we have reduced our total debt balance by $45.6 million over the last four quarters, further deleveraging the balance sheet. During the quarter, we fully repaid the remaining balance on our unsecured notes that were scheduled to mature in February 2026. In early January, we extended the maturity of our Bank of California facility to February 2028. In February, we entered into a new credit facility with Nutixis, refinancing our prior facility with BNP. We believe that this new facility, which matures in 2031, further enhances our balance sheet positioning. As we navigate an uncertain environment, we remain confident in the experience and capabilities of our advisor. With approximately $4.2 billion in assets under management across the loan and structured credit markets, deep expertise across industries, and a track record spanning more than 25 years and multiple credit cycles, we believe we are well positioned to navigate the current landscape and respond to evolving conditions. With that, I'll turn the call over to Kyle Spina, our Chief Financial Officer, to give you more details and color for the quarter.