Oxford Lane Capital Corp (OXLC) 2024 Q2 法說會逐字稿

Good morning, everyone, and welcome to the Oxford Lane Capital Corp. second fiscal quarter financial results conference call. My name is Chach, and I'll be coordinating your call today. (Operator Instructions) I'll now hand you over to your host, Jonathan Cohen, CEO, to begin. Please go ahead.

大家早安，歡迎參加牛津萊資本公司第二財季財務業績電話會議。我叫 Chach，今天我將協調您的電話。 （操作員指示）我現在將把您交給主持人、首席執行官喬納森·科恩（Jonathan Cohen）開始。請繼續。

Thanks very much. Good morning, and welcome to the Oxford Lane Capital Corp. Second Fiscal Quarter 2024 Earnings Conference Call. I'm joined today by Saul Rosenthal, our President; Bruce Rubin, our Chief Financial Officer; and Joe Kupka, our Managing Director.

非常感謝。早安，歡迎參加 Oxford Lane Capital Corp. 2024 年第二財季財報電話會議。今天我們的總統索爾·羅森塔爾也加入了我的行列。 Bruce Rubin，我們的財務長；和我們的董事總經理喬·庫普卡。

Bruce, could you open the call with a disclosure regarding forward-looking statements.

布魯斯，您能否在電話會議開始時披露有關前瞻性陳述的資訊。

Sure, Jonathan. Today's conference call is being recorded. An audio replay of the call will be available for 30 days. Replay information is included in our press release that was 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.

當然，喬納森。今天的電話會議正在錄音。通話的音訊重播將在 30 天內提供。重播資訊包含在我們今天早上早些時候發布的新聞稿中。請注意，本次電話會議屬於 Oxford Lane Capital Corp. 的財產。未經授權，嚴禁以任何形式轉播本次電話會議。

At this point, please direct your attention to the customary disclosure in 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, current future events and financial performance. We ask that you refer to our most recent filings with the SEC for important factors that could 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.

此時，請注意今天上午新聞稿中有關前瞻性資訊的慣例披露。今天的電話會議包括前瞻性陳述和預測，反映了公司目前對當前未來事件和財務表現等的看法。我們要求您參考我們最近向 SEC 提交的文件，以了解可能導致實際結果與這些預測中所示結果有重大差異的重要因素。除非法律要求，否則我們不承諾更新我們的前瞻性陳述。

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 on our website at www.oxfordlanecapital.com.

在本次電話會議中，我們將使用收益發布中定義的術語，並參考非 GAAP 衡量標準。有關 GAAP 的定義和調節，請參閱我們網站 www.oxfordlanecapital.com 上發布的收益報告。

With that, I'll turn the presentation back over to Jonathan.

這樣，我會將簡報轉回喬納森。

Thank you, Bruce. On September 30, 2023, our net asset value per share stood at $4.81 compared to a net asset value per share of $4.34 as of June 30. For the quarter ended September, we recorded GAAP total investment income of approximately $74.4 million, representing an increase of approximately $3.9 million from the prior quarter.

謝謝你，布魯斯。截至2023 年9 月30 日，我們的每股資產淨值為4.81 美元，而截至6 月30 日的每股資產淨值為4.34 美元。截至9 月的季度，我們的GAAP 總投資收益約為7,440 萬美元，年成長較上一季減少約 390 萬美元。

The quarter's GAAP total investment income from our portfolio consisted of approximately $69.3 million from our CLO equity and CLO warehouse investments and approximately $5.1 million from our CLO debt investments and from other income. Oxford Lane recorded GAAP net investment income of approximately $44.8 million or $0.23 per share for the quarter ended September compared to approximately $42 million or $0.24 per share for the quarter ended June 30.

本季我們投資組合的 GAAP 總投資收入包括來自 CLO 股權和 CLO 倉庫投資的約 6,930 萬美元，以及來自 CLO 債務投資和其他收入的約 510 萬美元。 Oxford Lane 記錄的截至9 月的季度的GAAP 淨投資收益約為4,480 萬美元，即每股0.23 美元，而截至6 月30 日的季度的GAAP 淨投資收益約為4,200 萬美元，即每股0.24 美元。

Our core net investment income was approximately $79.7 million or $0.41 per share for the quarter ended September compared with approximately $75 million or $0.43 per share for the quarter ended June 30. Quarter ended September, we recorded net realized losses of approximately $10.5 million and net unrealized appreciation on investment of approximately $95.8 million or $0.44 per share in total.

截至9 月的季度，我們的核心淨投資收入約為7,970 萬美元，即每股0.41 美元，而截至6 月30 日的季度，我們的核心淨投資收益約為7,500 萬美元，即每股0.43 美元。截至9 月的季度，我們錄得已實現淨虧損約1,050 萬美元，未實現淨虧損約為1,050 萬美元。投資增值約 9,580 萬美元，即每股 0.44 美元。

We had a net increase in net assets resulting from operations of approximately $130.1 million or $0.67 per share for the second fiscal quarter. As of September 30, the following metrics applied. We note that none of these metrics represented a total return to shareholders.

第二財季營運帶來的淨資產淨增加約 1.301 億美元，即每股 0.67 美元。截至 9 月 30 日，適用以下指標。我們注意到，這些指標都不能代表股東的總回報。

The weighted average yield of our CLO debt investments at current cost was 18.5%, up from 18.1% as of June 30. The weighted average effective yield of our CLO equity investments at current cost was 16.3%, up from 16% as of June 30. The weighted average cash distribution yield of our CLO equity investments at current cost was 25%, up from 24.6% as of June 30. We note 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.

以現值計算的CLO 債務投資的加權平均收益率為18.5%，高於截至6 月30 日的18.1%。以現值計算的CLO 股權投資的加權平均有效收益率為16.3%，高於截至6月30 日的16%我們的CLO 股權投資以現值計算的加權平均現金分配收益率為25%，高於截至6 月30 日的24.6%。我們注意到，我們的CLO 股權投資計算的現金分配收益率是基於我們收到的現金分配或我們有權在每個相應期末收到。

During the quarter ended September, we issued a total of approximately 20.8 million shares of our common stock pursuant to an at-the-market offering, resulting in net proceeds of approximately $104.8 million, which resulted in net accretion to shareholders of approximately $0.07 per share of NAV for the quarter.

在截至 9 月的季度中，我們根據市場發行總共發行了約 2,080 萬股普通股，淨收益約為 1.048 億美元，為股東帶來每股約 0.07 美元的淨增值該季度的資產淨值。

During the quarter ended September, we made additional CLO investments of approximately $171.7 million, and we received approximately $11.8 million from sales and from repayments. On October 26, our Board of Directors declared monthly common stock distributions of $0.08 per share for each of the months ending January, February and March of 2024.

在截至 9 月的季度中，我們進行了約 1.717 億美元的額外 CLO 投資，並從銷售和還款中收到了約 1,180 萬美元。 10 月 26 日，我們的董事會宣布截至 2024 年 1 月、2 月和 3 月的每月普通股分配為每股 0.08 美元。

With that, I'll turn the call over to our Managing Director, Joe Kupka.

接下來，我會將電話轉給我們的總經理喬‧庫普卡 (Joe Kupka)。

Thanks, Jonathan. During the quarter ended September 30, 2023, U.S. loan market performance improved versus the prior quarter. U.S. loan prices, as defined by the Morningstar LSTA U.S. Leveraged Loan Index increased from 94.24% as of June 30 to 95.55% as of September 30. The increase in U.S. loan prices led to an approximate 11-point increase in median U.S. CLO equity net asset values.

謝謝，喬納森。截至 2023 年 9 月 30 日的季度，美國貸款市場表現較上一季有所改善。根據晨星 LSTA 美國槓桿貸款指數定義，美國貸款價格從 6 月 30 日的 94.24% 上升至 9 月 30 日的 95.55%。美國貸款價格的上漲導緻美國 CLO 權益淨值中位數增加約 11 個百分點資產價值。

Median junior overcollateralization cushions declined 0.1% to approximately 4.1%. Additionally, we observed loan pools within CLO portfolios increased their weighted average spreads to 370 basis points compared to 359 basis points last quarter. The 12-month trailing default rate for the loan index decreased to 1.27% by principal amount at the end of the quarter from 1.71% at the end of June. Additionally, the distress ratio, defined as the percentage of loans with a price below 80% of par, ended the quarter at 4.36% compared to approximately 6% at the end of June.

初級超額抵押緩衝中位數下降 0.1%，至約 4.1%。此外，我們觀察到 CLO 投資組合內的貸款池的加權平均利差從上季的 359 個基點增加至 370 個基點。以本金計算，貸款指數 12 個月追蹤違約率從 6 月底的 1.71% 降至本季末的 1.27%。此外，不良率（定義為價格低於面額 80% 的貸款百分比）截至本季為 4.36%，而 6 月底約為 6%。

CLO new issuance during the quarter totaled approximately $28 billion, an increase of $6 billion from the prior quarter. However, the $84 billion of year-to-date issuance as of quarter end trials the $106 billion of issuance for the same period in 2022. Oxford Lane continued to be active during the quarter, transacting in both the primary and secondary markets. Overall, we executed over 40 transactions in the quarter, adding 16 new CLO equity investments and 2 new CLO debt investments.

本季 CLO 新發行總額約 280 億美元，較上季增加 60 億美元。然而，截至季度末，年初至今的發行量為 840 億美元，相當於 2022 年同期發行量的 1,060 億美元。Oxford Lane 在本季度繼續活躍，在一級和二級市場上都有交易。總體而言，我們在本季執行了 40 多筆交易，增加了 16 筆新的 CLO 股權投資和 2 筆新的 CLO 債務投資。

Our investment strategy during the quarter was engaged in relative value trading and to lengthen the weighted average reinvestment period of Oxford Lane's CLO equity portfolio. In the current market environment, we intend to continue to utilize an opportunistic and unconstrained CLO investment strategy across U.S. CLO equity, debt and warehouses as we look to maximize our long-term total return. And as a permanent capital vehicle, we have historically been able to take a longer-term view towards our investment strategy.

我們本季的投資策略是進行相對價值交易，並延長Oxford Lane CLO 股票投資組合的加權平均再投資期間。在當前的市場環境下，我們打算繼續在美國 CLO 股票、債務和倉庫方面採用機會主義和不受約束的 CLO 投資策略，以實現長期總回報最大化。作為一種永久的資本工具，我們歷來能夠以更長遠的眼光來制定我們的投資策略。

With that, I'll turn the call back over to Jonathan.

這樣，我會將電話轉回喬納森。

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

謝謝，喬。有關我們第二季度業績的更多資訊已上傳到我們的網站 www.oxfordlanecapital.com。接線生，我們很樂意為您解答任何問題。

(Operator Instructions) Our first question comes from Mickey Schleien from Ladenburg.

（操作員說明）我們的第一個問題來自拉登堡的 Mickey Schleien。

Jonathan, I want to start by asking you how you drive how the managers in your CLO portfolios responded to take advantage of the strength in the low-end CLO markets during the third quarter in terms of the opportunity to refinance or reset liabilities.

喬納森，首先我想問您，您如何推動 CLO 投資組合中的經理如何應對，以利用第三季度低端 CLO 市場的優勢，獲得再融資或重置負債的機會。

Mickey, this is Joe. Yes, we saw some limited activity in terms of refis and some resets around the margin. The liability market was quick moving during the quarter. So just given the amount of supply out there, we tend to see like a push and pull pretty quickly. We also see some call deals, but there wasn't that wave of refis and resets that are waiting in the wings, but we did see some around the margins.

米基，這是喬。是的，我們在再融資方面看到了一些有限的活動，並且在邊際上進行了一些重置。本季負債市場發展迅速。因此，考慮到供應量，我們往往很快就會看到推拉。我們也看到了一些看漲期權交易，但並沒有出現一波再融資和重置的浪潮，但我們確實看到了一些邊緣交易。

And I imagine that given the war in the Middle East and the weakness in the markets in October, if anything, that opportunity is lower now than it was in the third quarter. Would you agree with that?

我想，考慮到中東戰爭和十月市場的疲軟，如果有的話，現在的機會比第三季要低。你同意嗎？

Yes, I think that's fair to say.

是的，我認為這麼說是公平的。

Okay. My next question, was inflation still above target? The consensus seems to be building around higher interest rates for longer. So curious to understand how managers are dealing with that risk in terms of the stress to their issuers, interest coverage ratios and the potential for more downgrades to CCC.

好的。我的下一個問題是，通膨是否仍高於目標？共識似乎是在更長時間內圍繞更高的利率建立的。我很想了解管理人員如何應對發行人面臨的壓力、利息覆蓋率以及進一步下調至 CCC 的可能性等風險。

Yes. I think that's definitely been at the top of manager's mind for several quarters now. So I think they've had time to prepare and manage their portfolios appropriately. We've seen some managers take proactive measures in terms of limiting their CCCs, limiting their B exposure just at the -- just for the potential further downgrades to manage those tests. Also have seen managers limiting certain sectors where they see...

是的。我認為這幾個季度以來一直是經理最關心的問題。所以我認為他們有時間適當地準備和管理他們的投資組合。我們看到一些經理採取了積極主動的措施來限制他們的 CCC，限制他們的 B 風險敞口，只是為了可能進一步降級以管理這些測試。也看到管理者限制他們認為的某些部門...

Less of an ability to pass through price increases, Mickey. Where demand elasticity is lower, we've seen a push for managers to make those smaller positions inside of their collateral portfolios.

米基，承受價格上漲的能力較差。在需求彈性較低的地方，我們看到管理者在其抵押品投資組合中持有較小的部位。

I understand. You've reported net realized losses pretty consistently every quarter. I want to understand, to what extent is your goal of defending the portfolio's average reinvestment period driving exits from post reinvestment periods, CLOs, those prices have been relatively weak. And are those -- what's leading to the loss -- the realized losses?

我明白。您每季都相當一致地報告已實現的淨虧損。我想了解，你們的目標是在多大程度上捍衛投資組合的平均再投資期，推動再投資期後退出，CLO，這些價格相對較弱。那些導致損失的因素是已實現的損失嗎？

I don't think in a meaningful way, Mickey. I mean we are trading the portfolio on a relative value basis. So in instances where we see the ability to sell something and buy something at a better price with a better reinvestment period or a cleaner portfolio or more stronger cash flows or a diminished probability of a future diversion, we will likely engage in those trades. But there's no wholesale effort to sell positions either at losses or gains simply with the sole objective of extending the reinvestment period. That is one objective, but it is not the driving objective beyond all of our trading activity.

我的想法並不有意義，米基。我的意思是我們在相對價值的基礎上交易投資組合。因此，如果我們看到有能力以更好的價格出售和購買某些東西，並且有更好的再投資期限或更乾淨的投資組合或更強勁的現金流或未來轉移的可能性降低，我們可能會參與這些交易。但沒有人會為了延長再投資期限而大規模地以虧損或獲利的方式出售部位。這是一個目標，但它並不是我們所有交易活動之外的驅動目標。

Okay. So these consistent realized losses have been proactive decisions on relative trades in the portfolio. Is that -- am I understanding you correctly?

好的。因此，這些持續的已實現損失是投資組合中相關交易的主動決策。我對你的理解正確嗎？

Yes. That is a truthful and fair statement, Mickey. Yes.

是的。這是一個真實而公正的聲明，米奇。是的。

Okay. That's it for me this morning. I appreciate your time, as always.

好的。今天早上我就是這樣。我一如既往地感謝您的寶貴時間。

Thank you, Mickey.

謝謝你，米奇。

The next question on the line is from Matthew Howlett from B. Riley Financial.

下一個問題來自 B. Riley Financial 的 Matthew Howlett。

Matt, you may be on mute.

馬特，你可能處於靜音狀態。

Sorry about that. Just your thoughts on relative value. When you look at primary versus secondary, you look at the credit curve, you look at tiering among managers. Are things becoming more pronounced now where you could really look at value between those sort of metrics? Or just I'd love to hear your thoughts on relative value within the CLO market today.

對於那個很抱歉。只是您對相對價值的想法。當您查看主要與次要時，您會查看信用曲線，您會查看經理之間的分層。現在事情是否變得更加明顯，您可以真正查看這些指標之間的價值？或者我很想聽聽您對當今 CLO 市場相對價值的看法。

Joe?

喬？

Yes. I think it's very quick moving. As you said, manager tiering is especially top of mind for us. We've seen that basis grow and shrink throughout the year. It's pretty wide at the moment. So that's a potential avenue for some relative value in terms of primary and secondary. That's moved around a bit, probably not to the extent as the manager tiering.

是的。我認為它的移動速度非常快。正如您所說，經理分層對我們來說尤其重要。我們已經看到這一基礎全年都在增長和收縮。目前來說還蠻寬的。因此，這是在主要和次要方面實現某些相對價值的潛在途徑。這種情況發生了一些變化，可能沒有達到經理分層的程度。

But selectively, we've participated in the primary in a few instances this year, but the bulk of it has been in the secondary, just given that's where we see the relative value. But yes, I think, like you said, there's a lot of opportunities just given the large bases between managers, between lengths and between primary and secondary.

但有選擇性地，我們今年參加了幾次初選，但大部分都是在中學，因為這是我們看到相對價值的地方。但是，是的，我認為，就像你說的那樣，考慮到經理之間、長度之間以及初級和二級之間的巨大基礎，就有很多機會。

Right.

正確的。

Yes. It seems like you guys are finding a lot of value. Is that -- the yields all went up on the GAAP yield and the core yield on the equity and the debt. Is that from the new purchases that you're finding deeper value? Or is that just from improvement in existing holdings? Just curious on that upward movement in yields, we'd like to see that...

是的。看來你們發現了很多價值。是不是——公認會計原則報酬率以及股票和債務的核心報酬率都上升了。您是否從新購買的產品中發現了更深層的價值？或者這只是由於現有持股的改善？只是對收益率的上升趨勢感到好奇，我們希望看到...

Yes. It's a combination of both.

是的。這是兩者的結合。

It's a bit of both, Matt. So obviously, when we're turning the portfolio, by definition, we're seeking better total returns, better risk-adjusted returns in the positions we held historically. But this was a strong quarter. We saw a meaningful improvement in NAV, certainly driven by strength in the underlying collateral pools, so very much so.

兩者兼而有之，馬特。顯然，根據定義，當我們調整投資組合時，我們正在尋求更好的總回報，以及我們歷史上持有的頭寸的更好的風險調整回報。但這是一個強勁的季度。我們看到資產淨值有了有意義的改善，這當然是由基礎抵押品池的實力推動的，所以非常如此。

Great. And look, it shows the benefits of active management, and congratulations to everyone on the team on that. And then I guess the follow-up question, the balance sheet is just in terrific shape. You haven't really issued any new preferred or unsecured notes in some time. I know there's one small maturity mid next year.

偉大的。看，它顯示了主動管理的好處，並祝賀團隊中的每個人。然後我想接下來的問題是，資產負債表的狀況非常好。您已經有一段時間沒有真正發行任何新的優先票據或無擔保票據了。我知道明年年中會有一次小額到期。

But with the growth in the equity base, the improvement in the NAV, how -- I mean can you just give us an update on those markets and when potentially you'd look to tap them? I mean we've seen that market's open up, that 5-year market open up to some other people. Just curious that as your equity base -- your common equity base grows, how willing would you be to be able to tap those markets that seems would be [benefiting shareholders].

但是，隨著股本基礎的成長、淨值的改善，我的意思是，您能否向我們介紹這些市場的最新情況以及您何時可能考慮利用這些市場？我的意思是我們已經看到市場開放了，五年市場向其他一些人開放。只是好奇，隨著您的股本基礎（您的普通股本基礎）的增長，您是否願意能夠開拓那些似乎[使股東受益]的市場。

Sure, Matt. Absolutely. We're always open to that possibility, but at a price. So we need to be very mindful of the differentials between our uses of proceeds and our capital. And the 5-year, for example, $25 par market that you just referenced, is certainly a wider market than it was a year or a 2 ago. And so we're watching those markets. We're sort of always in internal discussion about the viability and desirability of issuing more debt. But as you say, we haven't chosen to in a while.

當然，馬特。絕對地。我們始終對這種可能性持開放態度，但要付出一定的代價。因此，我們需要非常注意收益用途和資本用途之間的差異。例如，您剛才提到的 5 年期 25 美元面值市場肯定比一年或兩年前更廣泛。所以我們正在關注這些市場。我們總是在內部討論發行更多債務的可行性和可取性。但正如你所說，我們已經有一段時間沒有選擇這樣做了。

Absolutely. And it's not that you guys are paying attention to price. Just the balance sheet continues to improve and improve, it just seems like even with these -- putting on some higher yields, it would could be enormously accretive if you put on something in the 8% range, call it, and to go into market and buy/sell equity yield [in high teens]. I was just curious if the math would make a lot of sense at some point when you're ready to explore.

絕對地。這並不是說你們關注價格。只是資產負債表不斷改善和改善，即使有了這些——投入一些更高的收益率，如果你投入 8% 範圍內的東西，稱之為，並進入市場，它可能會帶來巨大的增值以及買入/賣出股票報酬率[在十幾歲左右]。我只是很好奇，當你準備好探索時，數學是否會在某個時候變得有意義。

Absolutely, Matt. It's a dynamic we're very much focused on, certainly.

當然，馬特。當然，這是我們非常關注的動態。

We have a follow-up question from Mickey Schleien from Ladenburg.

來自拉登堡的 Mickey Schleien 向我們提出了後續問題。

Jonathan, I just wanted to follow up on the relative value trades and the realized losses. Do you, as a practice triangulate the prices that you're getting on these exits when you consider your estimated yields? In other words, on these exits, could you argue that the estimated yields were too high and not enough return of capital was booked and that led to the realized loss? Or am I misinterpreting that trend?

喬納森，我只是想跟進相對價值交易和已實現的損失。作為實踐，當您考慮您的估計收益率時，您是否會對這些退出的價格進行三角測量？換句話說，在這些退出中，您是否可以認為估計的收益率太高，並且沒有記錄足夠的資本回報，從而導致了已實現的損失？或者我誤解了這種趨勢？

I'm not sure, Mickey. It's a somewhat technical accounting question. We can go through with our internal accounting group and get back to you. I'm not sure.

我不確定，米奇。這是一個有點技術性的會計問題。我們可以與我們的內部會計小組聯繫並回覆您。我不知道。

I show no further questions in the question queue.

我在問題隊列中不再顯示任何問題。

All right. I'd like to thank everybody for their interest and for their participation in our second fiscal quarter earnings call. We look forward to speaking with you again soon. Thanks very much.

好的。我要感謝大家對我們第二財季財報電話會議的關注與參與。我們期待很快再次與您交談。非常感謝。

Thank you for joining today's conference call. You may now disconnect your lines, and enjoy the rest of your day.

感謝您參加今天的電話會議。現在您可以斷開線路，享受剩下的一天。