Oxford Lane Capital Corp.

Morning and thank you all for attending the Oxford Lane Capital Court announces net asset value and selected financial results for the first fiscal quarter and declaration of distributions on common stock. My name is Brieca and I will be your moderator for today. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. I would now like to pass the conference over to your hosts. Jonathan Collins, CEO at Oxford Lane Capital Corp. Thank you. You may proceed, Jonathan.

Thank you. Good morning, everyone, and welcome to the Oxford Lane Capital Corp. first fiscal quarter 2026 earnings conference call. I'm joined today by Bruce Rubin, our Chief Financial Officer, and Joe Kupka, our Managing Director. Bruce, could you open the call today with a disclosure regarding forward-looking statements? Sure, Jonathan. Sure. Today's call is being recorded. An audio replay of the call will be available for 30 days. Replay information is included in our press release as issued earlier this morning. Please note that this call is the property of Oxford Lane Capital Corp. Any unauthorized rebroadcast of this call in any form is strictly prohibited. At this point, please direct your attention to the customary disclosure of this morning's press release regarding forward-looking information. Today's conference call includes forward-looking statements and projections that reflect the company's current views with respect to, among other things, future events and financial performance. We ask that you refer to our most recent filings with the SEC for important factors that can cause actual results to differ materially from those indicated in these projections. We do not undertake to update our forward-looking statements unless required to do so by law. During this call, we will use terms defined in the earnings release and also refer to non-GAAP measures. For definitions and reconciliations to GAAP, please refer to our earnings release posted this morning at www.oxfordwaycapital.com. With that, I'll turn the presentation back to Jonathan. Thanks, Chris. On June 30th, 2025, our net asset value per share stood at $4.12 compared to a net asset value per share of $4.32 as of the previous quarter. For the quarter ended June, we recorded GAAP total investment income of approximately $124 million, representing an increase of approximately $2.8 million from the prior quarter. The quarter's GAAP total investment income consisted of approximately $117.4 million from our CLO equity and CLO warehouse investments, and approximately $6.6 million from our CLO debt investments, and from other income. Oxford Lane recorded GAAP's net investment income of approximately $75.1 million or 16 cents per share for the quarter ended June 30th compared to approximately $75.4 million or 18 cents per share for the quarter ended March 31st. Our core net investment income was approximately $112.4 million or $0.24 per share for the quarter ended June, compared with approximately $95.8 million or $0.23 per share for the quarter ended March. As of June 30th, we held approximately $701.5 million in newly issued or newly acquired CLO equity investments that had not yet made their initial distributions to Oxford Lane. For the quarter end of June, we recorded net unrealized depreciation on investments of approximately $40.2 million and net realized losses of approximately $8.8 million. We had a net increase in net assets resulting from operations of approximately $26.1 million, or six cents per share, for the first fiscal quarter. As of June 30th, we note that the following metrics applied. We also note that none of these metrics necessarily represented a total return to shareholders. The weighted average yield of our CLO debt investments at current cost was 16.9%, up from 15.9% as of March 31st. The weighted average effective yield of our CLO equity investments at current cost was 14.7%, down from 15.9% as of March 31st. the weighted average cash distribution yield of our CLO equity investments at current costs was 21.6%, up from 20.5% as of March 31st. You notice that the cash distribution yields calculated on our CLO equity investments are based on the cash distributions we received, or which we were entitled to receive, at each respective period end. During the quarter end of June, we issued a total of approximately 25.8 million shares of our common stock, pursuant to an out-of-market offering, resulting in net proceeds of approximately $116.4 million. During the quarter end of June, we made additional CLO investments of approximately $441.8 million, and we received approximately $120.7 million from sales and from repayment. On July 22nd, our Board of Directors authorized a one-for-five reverse stock set and declared monthly common stock distributions of $0.08 per share for each of the months in October, November, and December of 2025. With that, I'll turn the call over to our Managing Director, Chair Kafka.

Thanks, Jonathan. During the quarter ended June 30th, 2025, U.S. loan market performance improved versus the prior quarter. U.S. loan price index increased from 96.31% as of March 31st to 97.07% as of June 30th. The increase in U.S. loan prices led to an approximate six-point increase in median U.S. CLO equity net asset values. Additionally, we observed medium-weighted average spreads across loan pools within CLO portfolios decreased to 327 basis points compared to 330 basis points last quarter. The 12-month down default rate for the loan index increased for 1.1% by principal amount at the end of the quarter from 0.82% at the end of March. We note that out-of-court restructuring, exchanges, and subpar buybacks, which are not captured in the site of default rate, remain elevated. CLO new issuance for the quarter totaled approximately $51 billion, reflecting an approximate $3 billion increase from the prior quarter, keeping pace with the first half of 2024, a record-breaking year. Additionally, the U.S. CLO market saw approximately $53 billion in reset and refinancing activity in Q2 2025, compared to approximately $105 billion in the previous quarter. Oxford Lane remained active this quarter, investing over $441 million in CLO equity debt and warehouses, while participating in opportunity-specific resets and refinances. As a function of our overall activity during the quarter, we were able to lengthen the wage average reinvestment period of Oxford Maine CLO equity portfolio from November 2028 to January 2029. Our primary investment strategy during the quarter was to engage in relative value trading and seek to lengthen the weighted average green investment period of Oxford Maine CLO equity portfolio. In the current market environment, we intend to continue to utilize our opportunistic and unconstrained CLO investment strategy across U.S. CLO equity debt and warehouses as we look to maximize our long-term total returns. And as a permanent capital vehicle, we've historically been able to take a longer-term view towards our investment strategy. With that, I'll turn the call back over to Jonathan.

Thanks very much, Joe. Additional information about Oxford Lane's first fiscal quarter performance has been uploaded to our website at www.oxfordlanecapital.com. And with that, we're happy to open the call, operator, for any questions.

Thank you. If you would like to ask a question, you can do so by pressing star followed by 1 on your telephone keypad. If, for any reason, you would like to remove that question, please press star followed by 2. And again, to ask a question, please press star 1. And as a reminder, if you are using a speakerphone, please remember to pick up your handset before asking a question. We will pause here briefly whilst questions are registered. The last question we have comes from Eric Vick with Leasford Capital and Management. Please go ahead. Your line is open.

Thanks. Good morning, everyone. You indicated that the CLO market continues to remain, you know, a platform issue inside. I'm wondering if you could just maybe, you know, as you scan the market today, looking at both primary and secondary opportunities, Maybe a little commentary into how you're weighing the opportunities for each versus each other.

Yeah, I think we're still, you know, seeing value in both primary and secondary. It's something we reevaluate every single day to make sure we're, you know, taking the right profile. Here, one long-dated equity has definitely caught a very strong bid. So we still feel comfortable creating that profile in the primary, knowing how strongly it trades in the secondary. And then in the secondary, we've been targeting a bit lower tier managers that trade significantly wider, as well as reset and refinancing opportunities as well.

Thank you. And just curious, as you evaluate... I'm going to get to my two-part question. One, as the CLO market continues to grow and be strong, are there new managers coming into the market, and how do you evaluate those as well as maybe existing managers that you haven't worked with before and deciding to work with it?

Yeah, so generally we will wait for a manager to kind of – at least complete a few deals and evaluate their performance before stepping in. And then we can usually pick up their paper in the secondary and very attractive deals. But it's definitely comforting to keep a close eye on all the new, you know, entrants to the space and kind of new managers. Right.

Most of our primary market activity, though, Eric, and our warehousing activity does tend to be with the largest best regarded tier one managers. Got it. Thanks. And then you mentioned in the prepared remarks, I think there are 705 million of new issue CLOs that are on this balance sheet but have yet to make their first cash distribution. Just in terms of your expectations, would you expect most of those to make their first payments either in the current quarter of 25 or the final quarter of the year?

Yeah, so the majority of those. will be in the following quarter. And then they kind of sell off, but they're still a significant amount in the quarter ending 1231 and then 331 the following year. Right.

Thanks. And with regard to the unrealized depreciation that was recorded during the most recently completed quarter, could you just maybe provide a little color in terms of how much of that was market-related versus any specific COO developments?

No real specific CLO developments to highlight, I would say. There were some short-dated deals that, you know, diverted and took the market-to-market loss. But generally, it's just a function of the market-to-market of those assets declining as payments come out. So the total return is still positive on those assets, but you just see a slight market-to-market decline on assets.

Right. And as you know, Eric, we're focused primarily on total returns. So how that total return manifests, whether it's in cash flow, payments we get down the IO waterfall, or principal recovery down the PO waterfall, or gains that we make by trading in the secondary market, buying in the primary, we are essentially indifferent to the way that we generate the total return, but the total return itself is the objective. Yeah, and I think that's a good point, and your historical returns certainly demonstrate that. I wonder if you could maybe just add a little bit more in terms of how you view your competitive advantage relative to your kind of unconstrained investment philosophy and then how that positions you better versus some of your peers. Sure. So, as you know, we run essentially a completely unconstrained investment mandate. meaning that we have the ability and the mandate and the capability of participating in the warehouses, participating in the primary market, which we do on a very large scale, participating on a particularly large scale in the secondary market. We own Tier 1 managed deals, Tier 2 managed deals, some Tier 3 managed deals, deals that are well within their reinvestment period, deals that are outside of their reinvestment period. I think it is that breadth to our portfolio in terms of the various profiles that we're willing to engage in that has been particularly beneficial to us over a long period of time. Thanks. And one final one from me, and I'll step aside. You know, it seems like the economic data that we continue to see here in the U.S. continues to be There's still a lot of uncertainty, I guess, from your seat, from what you're able to see as you continue to look into your existing CLO portfolio as well as new opportunities. Anything on the horizon is to the ability that you can see that gives you any pause or concern with regard to the kind of future performance? Nothing specific, Eric. I mean, as you know, ELOs are essentially pools of U.S. syndicated corporate loans, large pools, roughly about a half a billion dollars apiece, consisting of highly diversified collateral pools of U.S. syndicated corporates. Those corporate loans are obviously issued by larger U.S. corporations. So to some significant extent, the success of this asset class is tied – to the performance of the U.S. economy, the global economy, and the performance of U.S. corporations. There are lots and lots of offsets to that dynamic and to that construct by virtue of the architecture of these CLO structures. But at the end of the day, we are investing in U.S. corporations. So the success of the U.S. economy, the success of the U.S. corporate sector, those are clearly important elements. Thanks. I appreciate all the commentary today. Thank you.

Thank you. I can confirm that that concludes our question and answer session, and I'd like to turn it back to our CEO, Mr. Cohen, for some final closing comments.

Thank you. I'd like to thank everybody who's participated in this call or who's listening in the replay for their interest in Oxford Lane, and we look forward to speaking to you in the future. Thanks very much.

Thank you all. I can confirm that that concludes today's conference call with Oxford Lane Cabot and Corp. Thank you all for your participation. Enjoy the rest of your day and you may now disperse.