OFS Capital Corporation

Good day and welcome to the OFS Capital Corporation Q2 2026 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference list 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. I would now like to turn the conference over to Steve Altebrando. 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. Substatements 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 second quarter results. Net investment income totaled $0.08 per share compared to $0.18 per share in the prior quarter. As we discussed on our last call, the prior quarter's results benefited from a large non-recurring dividend from our equity position in Fan Steel. We also anticipated additional net interest margin compression following the final redemption of our 4.75% February 2026 unsecured notes last quarter. In addition, we experienced some pressure from our ongoing efforts to de-lever our balance sheet. Net investment income was also impacted by one new loan being placed on non-accrual during the quarter. Our net asset value at quarter end was $8.41 per share compared to $8.16 per share in the prior quarter. The increase was primarily driven by the performance of our equity investment in Fansteel. During the quarter, Fansteel delivered another period of strong operating results. As I mentioned, we placed one new loan on non-accrual during the quarter. The loan was marked at 79% of par at quarter end, representing 3.5% of our total portfolio at fair value. While the loan is currently on non-accrual, we are actively working with the borrower and other stakeholders to support a return to accrual status. We believe the underlying value of the business will support the recovery of our principal investment over time. We also believe that the company has the liquidity to make debt service payments but is preserving cash as it executes initiatives designed to strengthen the business and maximize long-term enterprise value. While our current net investment income remains below our long-term objective, we believe we are now better positioned to concentrate on improving NII going forward. Over the past several quarters, we have been focused on strengthening the balance sheet and improving operational flexibility through extending our debt maturities and deleveraging. As we have discussed on prior calls, we have extended all near-term debt maturities with our earliest remaining maturity in 2028. In addition, over the last 12 months, we have reduced our total debt balance by $57.6 million. With the reduction in our leverage levels, our focus is shifting toward prudently redeploying capital into new income generating investments. We also continue to pursue opportunities to monetize our position in Fansteel, the largest position in our portfolio. which had a fair value of $94.6 million at quarter end. This position has grown in value over the last 12 years due to its strong performance, now representing approximately 32% of our total portfolio at fair value. Although we are cognizant of the outsized concentration of this portfolio company, we remain disciplined in balancing a monetization transaction with optimizing overall returns. That said, we continue to be encouraged by the company's operational momentum, as evidenced by the notable increase in our valuation this quarter, and we believe its long-term outlook remains compelling. As a reminder, Since our initial $200,000 investment in 2014, our position in Fansteel has generated approximately $5.1 million in distributions to date, representing roughly a 23 times return on our costs. Looking ahead, There continues to be macroeconomic uncertainty surrounding interest rates, inflation, and geopolitical events, and we believe our known portfolio is generally well positioned to navigate these conditions. We continue to maintain a diversified portfolio with limited exposure to highly cyclical industries. We also continue to monitor potential disruptions related to AI and to date, We have not observed material impacts on our loan portfolio. Consistent with our disciplined underwriting approach, we have limited direct enterprise software exposure and no reliance on annual recurring revenue or ARR based lending. Instead, we are focused on originating loans based on cash flow and profitability of the borrowers. Through this environment, we also benefited from our loan portfolio being entirely composed of first and second lien senior secured loans, with 97% 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, while middle market M&A activity has remained low, We continue to work closely with our existing portfolio companies for add-on acquisition and growth financing opportunities. Having strengthened our balance sheet over the past several quarters and bolstering liquidity, we believe that we are now better positioned to deploy capital into both existing portfolio companies and new investments as attractive opportunities arise. As we navigate an uncertain environment, we remain confident in the experience and capabilities of our advisor. With approximately $4.1 billion in assets under management across the known 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.