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OFS Reports NII Beat & NAV Gain In Q2-18

|About: OFS Capital (OFS)

The consensus projections from Yahoo Finance for OFS Capital Corporation (OFS) :

Earnings Estimate Current Qtr. (Jun 2018) Next Qtr. (Sep 2018) Current Year (2018) Next Year (2019)
No. of Analysts 2 2 2 1
Avg. Estimate 0.33 0.33 1.26 1.38
Low Estimate 0.32 0.33 1.26 1.38
High Estimate 0.33 0.33 1.26 1.38
Year Ago EPS 0.33 0.33 1.28 1.26

Revenue Estimate Current Qtr. (Jun 2018) Next Qtr. (Sep 2018) Current Year (2018) Next Year (2019)
No. of Analysts 1 1 1 0
Avg. Estimate 10.03M 10.34M 40.03M N/A
Low Estimate 10.03M 10.34M 40.03M N/A
High Estimate 10.03M 10.34M 40.03M N/A
Year Ago Sales 7.98M 9.12M 33.43M 40.03M
Sales Growth (year/est) 25.70% 13.40% 19.80% N/A

NII/share was $0.3414 compared to a projection of $0.33/share

TII or revenue was $10.278 million compared to a single projection of $10.030 million.

My spreadsheets:

OFS Capital Q2-18 Q1-18 Q4-17 Q3-17 Q2-17 Q1-17 Q4-16 Q3-16 Q2-16 Q1-16 Q4-15 Q3-15 Q2-15 Q1-15 Q4-14 Q3-14 Q2-14 Q1-14 Q4-13 Q3-13 Q2-13 Q1-13
Realized & Unrealized Gains 0.437 -0.323 0.311 -3.227 -6.567 1.526 1.087 -0.909 0.881 -1.376 1.896 -2.209 4.650 0.483 0.754 0.942 -1.542 0.651 -0.201 -1.062 1.791 1.429
Realized & Unrealized Gains/share 0.0327 -0.0242 0.0233 -0.2420 -0.4976 0.1573 0.1121 -0.0938 0.0909 -0.1420 0.1957 -0.2283 0.4812 0.0500 0.0782 0.0978 -0.1601 0.0676 -.0209 -.1103 .1861 .1488
Incentive fees 1.135 0.714 0.713 1.090 -0.022 1.181 0.926 0.817 0.857 0.733 1.113 0.908 0.231 0.375 0.530 0.723 0.000 0.000
Incentive Fees/share 0.0850 0.0535 0.0535 0.0818 0.1217 0.0955 0.0820 0.0884 0.0756 0.1149 0.0938 0.0239 0.0388 0.0550 0.0750 0.000 0.000

OFS Capital Q2-18 Q1-18 Q4-17 Q3-17 Q2-17 Q1-17 Q4-16 Q3-16 Q2-16 Q1-16 Q4-15 Q3-15 Q2-15 Q1-15 Q4-14 Q3-14 Q2-14 Q1-14 Q4-13 Q3-13 Q2-13 Q1-13
Interest income 9.344 8.082 7.189 7.818 6.970 7.281 7.659 6.580 6.592 6.763 7.589 6.695 7.528 7.158 6.248 5.593 4.580 4.915
Dividend income 0.434 0.163 0.052 0.411 0.578 0.506 0.284 0.528 0.539 0.557 0.012 0.591 0.430 0.329 0.176 0.335 0.000 0.000
Fee income 0.406 0.046 0.343 0.893 0.430 0.247 0.266 0.251 0.552 0.523 1.272 0.402 0.124 0.134 0.529 0.269 0.078 0.097
Total investment income 10.278 9.003 8.292 9.122 7.978 8.034 8.209 7.359 7.683 6.763 8.873 7.688 8.082 7.621 6.953 6.197 4.658 5.012 4.452 4.017 4.236 4.365
Net investment income 4.558 3.816 3.819 4.402 4.316 3.340 3.736 3.297 3.457 3.655 4.280 3.630 2.752 2.749 2.743 2.893 2.009 1.400 1.382 1.428 1.466 1.442
Investments @ fair value 0.363 0.335 0.277 0.297 0.297 0.258 0.282 0.259 0.249 0.245 0.257 0.247 0.256 0.316 0.312 0.266 0.231 0.228 0.238 0.220 0.242 0.229
Number of portfolio companies 42 39 38 40 42 38 41 38 37 36 39 39 39 60 62 67 57 56 58 56 57 57
Wt Av Share Count 13.349 13.341 13.334 13.332 13.198 9.700 9.697 9.694 9.692 9.691 9.690 9.676 9.663 9.651 9.639 9.638 9.632 9.631 9.629 9.601 9.621 9.601
TII/share $0.7699 $0.6748 $0.6219 $0.6842 $0.6045 $0.8282 $0.8466 $0.7591 $0.7927 $0.6979 $0.9157 $0.7945 $0.8364 $0.7897 $0.7213 $0.6430 $0.4836 $0.5204 $0.4624 $0.4184 $0.4403 $0.4546
NII/share $0.3414 $0.2860 $0.2864 $0.3302 $0.3270 $0.3443 $0.3853 $0.3401 $0.3567 $0.3772 $0.4417 $0.3751 $0.2848 $0.2848 $0.2846 $0.3002 $0.2086 $0.1454 $0.1435 $0.1487 $0.1524 $0.1502
Adjusted NII/share $0.34 $0.37 $0.29 $0.33 $0.33 $0.37 $0.39 $0.34 $0.36 $0.38 $0.46 $0.38 $0.35 $0.29 $0.33 $0.30 $0.22 $0.15 $0.14 $0.15 $0.15 $0.18
Dividends/share $0.34 $0.71 $0.34 $0.34 $0.34 $0.34 $0.34 $0.34 $0.34 $0.34 $0.34 $0.34 $0.34 $0.34 $0.34 $0.34 $0.34
NAV/share $13.70 $13.67 $14.12 $14.15 $14.40 $14.98 $14.82 $14.67 $14.76 $14.65 $14.76 $14.46 $14.66 $14.24 $14.24 $14.22 $14.17 $14.45 $14.58 $14.46 $14.76 $14.76
Wt Av Yield 12.26% 12.57% 12.11% 11.50% 11.66% 12.03% 12.08% 11.88% 11.84% 12.34% 12.01% 11.82% 11.50% 10.24% 9.56% 9.09% 8.08% 8.35% 8.53% 7.21% 7.23% 7.43%
NII/TII Ratio 44.3% 42.4% 46.0% 48.2% 54.1% 41.6% 45.5% 44.8% 45.0% 54.0% 48.2% 47.2% 34.1% 36.1% 39.5% 46.7% 43.1% 27.9% 31.0% 35.5% 34.6% 33.0%
Adjusted NII represents NII excluding write-offs of deferred financing costs on the credit facility and excludes the cap gains incentive fee expense
Q2-15 had $0.4 million of write-offs of deferred financing costs. Q1-15 had $0.4 million write-offs of deferred financing costs from the credit facility. Q4-14 had $0.7 million
On 5-28-15 OFS sold $67.8 million in 20 senior secured loans to Madison Capital. There was a gain due to reversals of prior unrealized depreciation. OFS terminated the credit facility with Wells
PIK income YTD 1,146 712 2,199 1,428 697 2,627 1,903 1,193 593 2,322 1,983 1,229 593
PIK income Quarter 434 712 708 771 731 697 724 710 600 593 339 754 636 593
PIK income/TII 4.22% 7.91% 8.54% 7.79% 9.16% 8.67% 8.82% 9.65% 7.81% 8.77% 2.62% 9.81% 7.87% 7.78%
Non-accrual @ cost 12,403 11,090 11,090 7,639 14,340 7,639 7,639 6,664 7,609 937 937
Non-accrual @ fair 2,286 0 1,201 2,038 5,030 4,685 5,393 5,433 6,634 798 798
Non-accrual % @ cost 3.39% 3.28% 3.97% 2.53% 4.77% 3.00% 2.73% 2.58% 3.08% 0.38%
Non-accrual % @ fair 0.63% 0 0.43% 0.69% 1.69% 1.81% 1.91% 2.10% 2.67% 0.33%
Portfolio @ cost 366,075 348,175 289,975 302,058 300,696 254,465 279,307 258,154 246,851 244,308
Portfolio @ fair 362,832 335,464 277,499 296,630 296,908 258,311 281,627 259,169 248,831 245,407

Q2-18 Q1-18 Q4-17 Q3-17 Q2-17 Q1-17 Q4-16 Q3-16 Q2-16 Q1-16 Q4-15 Q3-15 Q2-15 Q1-15 Q4-14 Q3-14 Q2-14 Q1-14
Debt 203.709 188.266 164.833 164.228 153.033 154.938 156.343 146.747 146.651 146.556 146.460 149.880 149.880 149.880 127.295 146.138 118.389 129.459
Debt/share 15.2602 14.1118 12.3618 12.3183 11.5952 15.9730 16.1228 15.1379 15.1311 15.1229 15.1146 15.4899 15.5300 15.5300 13.2062 15.1627 12.2823 13.4419
Debt/share to NAV 111.39% 103.23% 87.55% 87.06% 80.52% 106.63% 108.79% 103.19% 102.51% 103.23% 102.40% 107.12% 105.93% 109.06% 92.74% 106.63% 86.25% 93.02%
Interest expense 2.169 1.634 1.584 1.503 1.339 1.387 1.366 1.320 1.308 1.308 1.200 1.089 1.468 1.777 1.235 1.001 0.997 0.991
Interest expense/share 0.1625 0.1225 0.1188 0.1127 0.1015 0.1430 0.1409 0.1362 0.1350 0.1350 0.1238 0.1125 0.1519 0.1841 0.1281 0.1039 0.1035 0.1030
Interest expense/TII 21.10% 18.15% 19.10% 16.47% 16.78% 17.26% 16.64% 17.94% 17.02% 19.34% 13.52% 14.16% 18.16% 23.32% 19.77% 16.15% 21.40% 19.77%
Annualized Int exp/Debt 4.26% 3.47% 3.84% 3.66% 3.50% 3.58% 3.49% 3.60% 3.57% 3.57% 3.28% 2.91% 3.92% 4.74% 3.88% 2.74% 3.67% 3.06%
PWAY - Int exp/Debt 800 bps 910 bps 827 bps 784 bps 816 bps 845 bps 859 bps 828 bps 827 bps 877 bps 873 bps 891 bps 758 bps 550 bps 568 bps 635 bps 441 bps 529 bps
In April 2018, OFS closed $50.0 million of 6.375% notes (OFSSL) due 2025
$147 million of OFS' debt is SBA debt - which results in a low average interest rate.

Assessments & Observations:

OFS' 2019 projection covers the dividend - but not by much.

OFS has a negative NAV trend - but not by much.

With investments in 42 portfolio companies - the portfolio has a small failing in granularity.

The PWAY is high enough to be a concern.

The record on 'portfolio gains' is superior to sector average.

The cost on the 2018 notes is relatively - indicating higher than average risk.

The record on NII projection accuracy is relatively bad.

The equity has too many negatives - buy the bond (NASDAQ:OFSSL), not the equity.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.