Oxford Lane Capital Corp. Q2 FY2026 earnings call

• Net asset value per share stood at $19.19 on September 30, down from $20.60 prior quarter (adjusted for 1-for-5 reverse stock split).
• GAAP total investment income increased ~$4.3 million to ~$128.3 million. Net unrealized depreciation on investments was ~$68.5 million, net realized losses ~$18.1 million. Net decrease in net assets from operations was ~$5.3 million or $0.05 per share.
• Issued ~700,000 shares via at-the-market offering, net proceeds ~$14.5 million; repurchased ~1.2 million shares via repurchase program, ~$20.5 million. Invested ~$145.2 million in CLOs, received ~$173.5 million from sales/repayments.
• Board declared $0.40 per share monthly distributions for Jan, Feb, Mar 2026.
• U.S. loan market performance steady; median U.S. CLO equity net asset values rose ~20 bps; median weighted average spreads in CLO portfolios decreased. CLO new issuance ~$53 billion, reset/refinancing activity ~$105 billion in Q3 2025. Oxford Lane invested ~$145 million in CLO equity/debt, participated in over 25 resets/refinancings, lengthened CLO equity portfolio reinvestment period from Jan 2029 to May 2029.

For the quarter ended September, GAAP total investment income was approximately $128.3 million, with approximately $124.6 million from CLO equity and CLO warehouse investments and approximately $3.7 million from CLO debt investments and other income. GAAP net investment income was approximately $81.4 million or $0.84 per share, and core net investment income was approximately $120 million or $1.24 per share. As of September 30, $366 million in newly issued or newly acquired CLO equity investments had not yet made initial distributions. The weighted average yield of CLO debt investments at current cost was 17.4%, up from 16.9% prior; weighted average effective yield of CLO equity investments at current cost was 14.6%, down from 14.7% prior; weighted average cash distribution yield of CLO equity investments at current cost was 19.4%, down from 21.6% prior.

• Continue opportunistic and unconstrained CLO investment strategy across U.S. CLO equity debt and warehouses to maximize long-term total return.
• Expect repricing activity to continue but at a slower pace than year-to-date.
• Upcoming opportunities for resets/refinancings in next quarter as several CLOs exit non-call periods.

• Macroeconomic uncertainties including consumer weakness, tariffs, and government shutdowns.
• Impact of CLO portfolio losses, though First Brands bankruptcy had muted impact on Oxford Lane's portfolio.
• Uncertainty in CLO market pricing and risk-adjusted returns due to market volatility.

Q: How would you characterize trends in loan spreads in October relative to September?

A: Year-to-date dominated by repricing wave; October saw softness in loan market, but loan market now over 40% trading above par, with still some repricing activity to come.

Q: What drove the decrease in the CLO equity portfolio's cash yield quarter-to-quarter and how to reconcile with increase in core NII?

A: Decrease in cash yields due to resets/refinancings (short-term hit to cash yield) and repricing wave compressing ARB; core NII moves due to first-time payers and repayments from liquidated CLOs.

Q: What was the impact of First Brands bankruptcy on your portfolio's value?

A: Muted overall, average position was 20-30 basis points, diversified nature of CLOs limited impact, OC ratios held up.

Q: What drove this quarter's realized and unrealized losses?

A: Primarily loan spread compression.

Q: What's appealing to you in trading and what are you trading out of/in?

A: Selling things we think we can sell well, buying things we think we can buy better, with ~300 line items in portfolio.

Q: Current level of AAA CLO debt in the market and remaining opportunity to refinance/reset liabilities?

A: Tier 1 AAAs broke ~119, reset/refinancing opportunities in low 120s; active this quarter, expecting more opportunities next quarter as CLOs exit non-call periods.

Q: Your target balance sheet leverage ratio?

A: No specific target, considers cost of capital and use of proceeds; open to operating at higher leverage to take advantage of opportunities.

Q: View on evaluating performance considering NAV erosion?

A: Total return-focused, return appears via income, capital gains, distributions, and NAV changes; NAV erosion normal in line with market dynamics.

Q: Pipeline size and attractive opportunities in primary vs secondary market?

A: Focus shifted to secondary market, still seeing attractive opportunities, type of opportunities changing rapidly due to market factors.

Q: Drivers of net unrealized depreciation?

A: Broadly based on U.S. syndicated corporate loan spread compression.

Q: Quantity of new investments yet to make first payments and expectation of first payments?

A: $366 million as of 9/30; about half to make next quarter, other half following quarter