Oxford Lane Capital Corp. Q1 FY2026 earnings call

Key Points

• On June 30, 2025, net asset value per share was $4.12. GAAP total investment income for the quarter was ~$124 million, up ~$2.8 million from prior quarter.
• GAAP net investment income was ~$75.1 million or $0.16 per share, core net investment income was ~$112.4 million or $0.24 per share.
• Held ~$701.5 million in newly issued/acquired CLO equity not yet distributed. Net unrealized depreciation was ~$40.2 million, net realized losses ~$8.8 million.
• Weighted average yields and cash distribution yields for CLO debt and equity were provided.
• Board authorized 1-for-5 reverse stock split and declared monthly common stock distributions.
• U.S. loan market performance improved: loan price index increased, median CLO equity NAV up, spreads decreased. CLO new issuance ~$51 billion, reset/refinancing activity ~$53 billion.
• Oxford Lane invested over $441 million in CLOs, lengthened weighted average reinvestment period of CLO equity portfolio. Primary strategy was relative value trading to lengthen reinvestment period.

As of June 30, 2025, net asset value per share was $4.12 compared to $4.32 in the previous quarter. For the quarter ended June, GAAP total investment income was approximately $124 million, an increase of ~$2.8 million from the prior quarter. GAAP total investment income consisted of ~$117.4 million from CLO equity and CLO warehouse investments and ~$6.6 million from CLO debt investments and other income. GAAP net investment income was approximately $75.1 million or $0.16 per share, and core net investment income was ~$112.4 million or $0.24 per share. As of June 30, ~$701.5 million in newly issued or acquired CLO equity investments had not yet made initial distributions. Net unrealized depreciation on investments was ~$40.2 million, and net realized losses were ~$8.8 million. There was a net increase in net assets from operations of ~$26.1 million or $0.06 per share. The weighted average yield of CLO debt investments at current cost was 16.9%, up from 15.9% in March; the weighted average effective yield of CLO equity investments at current cost was 14.7%, down from 15.9%; and the weighted average cash distribution yield of CLO equity investments at current cost was 21.6%, up from 20.5%. During the quarter, ~25.8 million shares of common stock were issued via an at-the-market offering, resulting in net proceeds of ~$116.4 million. ~$441.8 million in CLO investments were made, and ~$120.7 million was received from sales and repayments.

No specific forward-looking guidance statements beyond indicating the intent to continue utilizing the opportunistic and unconstrained CLO investment strategy across U.S. CLO equity debt and warehouses to maximize long-term total return.

No detailed discussion of specific risks in the transcript. Noted that actual results may differ materially from projections due to factors in the company's most recent SEC filings, and the company does not undertake to update forward-looking statements unless required by law.

Q: You indicated that the CLO market continues to remain robust on the issuance side. Wondering if you could just maybe as you scan the market today, looking at both primary and secondary opportunities, give a little commentary into how you're weighing the opportunities for each versus each other?

A: Erik, yes, I think we're still seeing value in both primary and secondary. It's something we reevaluate every single day just to make sure we're picking the right profiles. Tier 1 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 and as well as reset and refinancing opportunities as well.

Q: And then just curious, as you evaluate maybe kind of a 2-part question. One, as the CLO market continues to grow and see strong issuance, 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?

A: Yes. 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 of very attractive yields, but it's definitely something we keep a close eye on all the new entrants to the space and kind of new managers.

Q: You mentioned in the prepared remarks, I think it was $705 million of new issue CLOs that are on the balance sheet but have yet to make their first cash distribution. Just in terms of expectations, would you expect most of those to make their first payment either in the current quarter of '25 or the final quarter of the year?

A: Yes. So the majority of those will be in the following quarter, and then they kind of tail off, but there's still a significant amount in the quarter ending 12/31 and then 3/31 the following year.

Q: 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 CLO developments?

A: No real specific CLO developments to highlight. I would say. There were some short-dated deals that diverted and took a mark-to-market loss. But generally, it's just a function of the mark-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 mark-to-market decline on some assets.

Q: 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?

A: Sure, Erik. 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 in -- well within their reinvestment periods, deals that are outside of the 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.

Q: It seems like the economic data that we continue to see here in the U.S. continues to be positive. 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 as to the ability that you can see that gives you any pause or concern with regard to the kind of future performance?

A: Nothing specific, Erik. I mean, as you know, CLOs are essentially pools of U.S. syndicated corporate loans, large pools, roughly about $0.5 billion of fees, 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.