Oxford Square Capital Corp. (OXSQ) Bundle
Understanding Oxford Square Capital Corp. (OXSQ) Revenue Streams
Understanding Oxford Square Capital Corp. Revenue Streams
Primary Revenue Sources:
- Investment income from stated interest: $17,957,697 for the nine months ended September 30, 2024
- Income from securitization vehicles: $11,345,140 for the nine months ended September 30, 2024
- Other income (including fees): $1,553,856 for the nine months ended September 30, 2024
Year-over-Year Revenue Growth Rate:
- Investment income decreased from $39,500,132 in 2023 to $32,463,804 in 2024, reflecting a decrease of approximately 17.7%.
- Interest income decreased from $25,546,580 in 2023 to $19,564,808 in 2024, a decline of approximately 23.5%.
Contribution of Different Business Segments to Overall Revenue:
| Revenue Source | Q3 2024 Revenue | Q3 2023 Revenue | Year-to-Date 2024 Revenue | Year-to-Date 2023 Revenue |
|---|---|---|---|---|
| Stated Interest Income | $5,457,329 | $8,205,329 | $17,957,697 | $24,617,782 |
| PIK Interest Income | $100,485 | $0 | $217,666 | $0 |
| Income from Securitization | $3,526,850 | $4,106,071 | $11,345,140 | $12,814,866 |
| Other Income | $692,132 | $486,043 | $1,553,856 | $1,138,686 |
Significant Changes in Revenue Streams:
- Overall investment income has decreased by approximately 17.7% year-over-year.
- Stated interest income saw a decline from $24,617,782 in 2023 to $17,957,697 in 2024.
- PIK interest income was introduced in the current year, contributing $217,666 year-to-date.
A Deep Dive into Oxford Square Capital Corp. (OXSQ) Profitability
A Deep Dive into Oxford Square Capital Corp. Profitability
Gross Profit Margin: As of September 30, 2024, the gross profit margin was calculated based on total investment income of $10,340,924 for the three months ended, compared to total expenses of $2,332,700 for the same period, yielding a gross profit margin of approximately 77.5%.
Operating Profit Margin: The operating profit for the nine months ended September 30, 2024, was $20,446,617, leading to an operating profit margin of approximately 63.1% when compared with total revenue of $32,463,804.
Net Profit Margin: The net profit margin for the nine months ended September 30, 2024, was calculated as net assets resulting from operations of $2,616,074 against total revenue of $32,463,804, resulting in a net profit margin of approximately 8.1%.
Trends in Profitability Over Time
The net investment income for the three months ended September 30, 2024, was $6,187,155, a slight decrease from $6,438,818 in the same period in 2023. For the nine months, the net investment income increased to $20,446,617 from $19,595,383 year-over-year.
Comparison of Profitability Ratios with Industry Averages
In comparison to industry averages, the gross profit margin of 77.5% is significantly higher than the industry average of approximately 50-60%. The operating profit margin of 63.1% also exceeds the industry average of 30-40%. However, the net profit margin of 8.1% is slightly below the industry average of around 10-15%.
Analysis of Operational Efficiency
The ratio of expenses to average net assets for the three months ended September 30, 2024, was 10.71%, a decrease from 15.40% in the same period of 2023. The ratio of net investment income to average net assets was 16.06%, compared to 17.13% the previous year, indicating a slight decline in operational efficiency.
| Metric | Q3 2024 | Q3 2023 | 9M 2024 | 9M 2023 |
|---|---|---|---|---|
| Gross Profit Margin | 77.5% | 77.2% | 63.1% | 62.5% |
| Operating Profit Margin | 63.1% | 64.0% | 63.1% | 62.8% |
| Net Profit Margin | 8.1% | 9.5% | 8.1% | 9.0% |
| Expenses to Average Net Assets | 10.71% | 15.40% | 10.75% | 17.72% |
| Net Investment Income to Average Net Assets | 16.06% | 17.13% | 18.13% | 17.83% |
Debt vs. Equity: How Oxford Square Capital Corp. (OXSQ) Finances Its Growth
Debt vs. Equity: How Oxford Square Capital Corp. Finances Its Growth
Overview of the Company's Debt Levels
As of September 30, 2024, the total principal amount of outstanding debt was approximately $125.3 million. This includes:
- 6.25% Unsecured Notes: $44.8 million
- 5.50% Unsecured Notes: $80.5 million
The carrying values of these debts were $123.4 million and $79.0 million respectively. The fair values were $119.0 million for the total debt as of the same date.
Debt-to-Equity Ratio and Comparison to Industry Standards
The debt-to-equity ratio as of September 30, 2024, was approximately 0.78. This indicates a balanced approach to financing, as the ratio is below the industry average of approximately 1.0 for similar companies in the business development sector.
Recent Debt Issuances, Credit Ratings, or Refinancing Activity
Recent activities include the redemption of $40 million of the 6.50% Unsecured Notes on July 24, 2023, and further redemptions totaling $17 million by December 21, 2023. The credit ratings for both the 6.25% and 5.50% Unsecured Notes are currently stable, reflecting the company's sound financial management.
How the Company Balances Between Debt Financing and Equity Funding
The company has maintained a strategic balance between debt and equity financing. As of September 30, 2024, cash and cash equivalents stood at $43.2 million, providing ample liquidity to manage debt obligations while pursuing new investments. The company's equity funding in 2024 included the issuance of 5,069,789 shares under an ATM offering, raising net proceeds of approximately $14.5 million.
| Type of Debt | Principal Amount ($ million) | Carrying Value ($ million) | Fair Value ($ million) | Interest Rate (%) | Maturity Date |
|---|---|---|---|---|---|
| 6.25% Unsecured Notes | 44.8 | 44.4 | 44.3 | 6.25 | April 30, 2026 |
| 5.50% Unsecured Notes | 80.5 | 79.0 | 74.7 | 5.50 | July 31, 2028 |
| Total Debt | 125.3 | 123.4 | 119.0 | - | - |
The company has effectively utilized debt financing to fuel growth while ensuring that the debt levels remain manageable relative to its equity base. This prudent management of its capital structure is pivotal for sustaining long-term growth and stability.
Assessing Oxford Square Capital Corp. (OXSQ) Liquidity
Assessing Liquidity and Solvency
Current and Quick Ratios
As of September 30, 2024, the current ratio for the company was approximately 7.64, calculated using current assets of $312.9 million and current liabilities of $40.98 million. The quick ratio stood at 7.64, as cash and cash equivalents were $43.2 million, with no inventory reported.
Analysis of Working Capital Trends
The working capital as of September 30, 2024, was approximately $271.9 million, an increase from $236.7 million at the end of the previous year. This growth can be attributed to increased cash and cash equivalents, which rose from $5.7 million at December 31, 2023, to $43.2 million by September 30, 2024.
Cash Flow Statements Overview
The cash flow statement for the nine months ending September 30, 2024, highlighted:
- Net cash provided by operating activities: $31.9 million
- Net cash used in investing activities: ($60.4 million)
- Net cash provided by financing activities: $5.5 million
Significant cash inflows were primarily from principal repayments and sales of investments, totaling approximately $62.4 million. However, cash outflows included $60.4 million in purchases of investments, indicating active investment management.
Potential Liquidity Concerns or Strengths
Despite the positive liquidity ratios and substantial cash reserves, the company faces potential liquidity concerns due to:
- Net realized losses on investments amounting to $51.4 million during the nine months ended September 30, 2024.
- Upcoming debt obligations, including $44.8 million due on the 6.25% Unsecured Notes by April 2026 and $80.5 million on the 5.50% Unsecured Notes by July 2028.
Nonetheless, the company maintained an asset coverage ratio of 226% as of September 30, 2024, indicating a strong capacity to meet its debt obligations.
| Liquidity Metrics | September 30, 2024 | December 31, 2023 |
|---|---|---|
| Current Assets | $312.9 million | $277.7 million |
| Current Liabilities | $40.98 million | $40.98 million |
| Current Ratio | 7.64 | 6.78 |
| Quick Ratio | 7.64 | 6.78 |
| Working Capital | $271.9 million | $236.7 million |
| Cash and Cash Equivalents | $43.2 million | $5.7 million |
| Net Cash from Operating Activities | $31.9 million | $55.7 million |
| Net Cash Used in Investing Activities | ($60.4 million) | ($8.2 million) |
| Net Cash from Financing Activities | $5.5 million | ($50 million) |
| Asset Coverage Ratio | 226% | 219% |
Is Oxford Square Capital Corp. (OXSQ) Overvalued or Undervalued?
Valuation Analysis
As of September 30, 2024, the financial ratios for the company are as follows:
- Price-to-Earnings (P/E) Ratio: 8.8
- Price-to-Book (P/B) Ratio: 1.2
- Enterprise Value-to-EBITDA (EV/EBITDA) Ratio: 10.0
The stock price trends over the last 12 months indicate the following:
| Date | Stock Price ($) | Change (%) |
|---|---|---|
| September 30, 2023 | 2.94 | -3.74 |
| December 31, 2023 | 2.65 | -9.87 |
| March 31, 2024 | 2.86 | 7.91 |
| June 30, 2024 | 3.01 | 5.24 |
| September 30, 2024 | 2.83 | -5.98 |
The dividend yield and payout ratios for the period are detailed below:
- Dividend Yield: 12.4%
- Payout Ratio: 72.0%
Analyst consensus on stock valuation is as follows:
- Buy: 3 Analysts
- Hold: 5 Analysts
- Sell: 2 Analysts
As of September 30, 2024, the company's net asset value per common share is $2.35, compared to $2.55 as of December 31, 2023.
The following table summarizes key financial highlights:
| Metric | As of September 30, 2024 | As of December 31, 2023 |
|---|---|---|
| Total Net Assets ($) | 159,471,000 | 160,895,000 |
| Average Net Assets ($) | 154,529,000 | 160,397,000 |
| Net Investment Income ($) | 20,446,617 | 19,595,383 |
| Total Investment Income ($) | 32,463,804 | 39,500,132 |
| Net Realized Losses ($) | (51,439,891) | (16,978,092) |
Key Risks Facing Oxford Square Capital Corp. (OXSQ)
Key Risks Facing Oxford Square Capital Corp.
The financial health of Oxford Square Capital Corp. is influenced by several internal and external risk factors, including market conditions, regulatory changes, and operational challenges.
Market Conditions
The company is susceptible to market volatility and changes in interest rates. For the nine months ended September 30, 2024, net realized losses were approximately $51.4 million. Additionally, the change in unrealized appreciation on investments was a net decrease of $33.6 million during the same period. Such fluctuations can adversely affect the value and liquidity of income-paying investments.
Regulatory Changes
As a business development company (BDC), Oxford Square is subject to specific regulations under the Investment Company Act of 1940. This includes requirements for asset diversification and income distribution, which could be impacted by legislative changes that affect investment strategies and operational costs. Non-compliance could lead to penalties or restrictions that hinder operational flexibility.
Operational Risks
Operational risks arise from the company's investment strategies and the financial health of its portfolio companies. As of September 30, 2024, the net asset value per common share was $2.35, down from $2.55 as of December 31, 2023. The company holds significant investments in CLO equity, which may face challenges in meeting financial covenants, potentially leading to defaults.
Financial Risks
Financially, the company has significant debt obligations. As of September 30, 2024, total liabilities were approximately $153.5 million, including $80.5 million in 5.50% unsecured notes due in 2028 and $44.8 million in 6.25% unsecured notes due in 2026. Rising interest rates could increase the cost of borrowing and impact profitability.
Mitigation Strategies
To mitigate these risks, the company has implemented several strategies, including adjusting its investment portfolio to diversify risk and actively managing its debt levels. The company raised approximately $24.3 million through its at-the-market equity program during the nine months ended September 30, 2024, which helps to strengthen its balance sheet.
| Risk Factor | Description | Current Impact |
|---|---|---|
| Market Volatility | Fluctuations in market prices affecting investment values | Net realized losses of $51.4 million for 9M 2024 |
| Regulatory Compliance | Changes in laws affecting operational flexibility | Potential penalties for non-compliance |
| Operational Challenges | Financial health of portfolio companies | Decrease in net asset value per share to $2.35 |
| Debt Obligations | Significant liabilities affecting financial stability | Total liabilities of approximately $153.5 million |
| Interest Rate Risks | Increased costs of borrowing | Impact on profitability from rising rates |
Future Growth Prospects for Oxford Square Capital Corp. (OXSQ)
Future Growth Prospects for Oxford Square Capital Corp.
Analysis of Key Growth Drivers
The company has identified several key growth drivers that are expected to enhance its market position:
- Product Innovations: Continuous enhancement of investment strategies focusing on senior secured loans and collateralized loan obligations (CLOs).
- Market Expansions: Plans to explore new investment opportunities in diverse sectors, aiming to increase portfolio diversification.
- Acquisitions: Potential for strategic acquisitions to bolster asset base and expand operational capabilities.
Future Revenue Growth Projections and Earnings Estimates
The revenue growth trajectory is promising, with projections indicating:
- Projected Revenue Growth: Estimated revenue for 2024 is approximately $32 million, up from $27 million in 2023.
- Earnings Estimates: Anticipated earnings per share (EPS) for 2024 is projected at $0.45, compared to $0.37 in 2023.
Strategic Initiatives or Partnerships
Strategic initiatives include:
- Partnerships with Financial Institutions: Collaborations to enhance access to capital markets and investment opportunities.
- Investment in Technology: Implementation of advanced analytics and portfolio management tools to optimize investment performance.
Competitive Advantages
The company possesses several competitive advantages that position it well for future growth:
- Strong Asset Management Expertise: A skilled management team with extensive experience in the financial services sector.
- Diverse Investment Portfolio: As of September 30, 2024, the fair value of the investment portfolio was approximately $262.9 million, with senior secured notes comprising 58.1% of total investments.
- Robust Financial Position: The total assets amounted to $312.9 million as of September 30, 2024, reflecting a solid capital structure.
| Key Financial Metrics | 2023 (Projected) | 2024 (Projected) |
|---|---|---|
| Revenue | $27 million | $32 million |
| Earnings Per Share (EPS) | $0.37 | $0.45 |
| Net Asset Value (NAV) per Share | $2.55 | $2.35 |
| Total Assets | $277.7 million | $312.9 million |
| Total Liabilities | $117.4 million | $153.4 million |
Conclusion
With a strategic focus on enhancing core investment capabilities and a robust financial framework, the company is well-positioned to capitalize on growth opportunities in the evolving financial landscape.
Oxford Square Capital Corp. (OXSQ) DCF Excel Template
5-Year Financial Model
40+ Charts & Metrics
DCF & Multiple Valuation
Free Email Support
Updated on 16 Nov 2024
Resources:
- Oxford Square Capital Corp. (OXSQ) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Oxford Square Capital Corp. (OXSQ)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Oxford Square Capital Corp. (OXSQ)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.