10-Q: Oxford Square Capital Corp. Reports Q2 2026 Results

Oxford Square Capital Corp. filed its Form 10-Q for the quarter ended June 30, 2026, detailing a decrease in net asset value per share and mixed financial performance.

Summary

• Oxford Square Capital Corp. (OXSQ) filed its Form 10-Q for the quarter ended June 30, 2026.
• The company's net asset value (NAV) per share decreased to $1.29 from $1.69 at the end of 2025.
• Total investment income for the six months ended June 30, 2026, was $18.3 million, down from $19.7 million in the prior year period.
• Operating expenses increased to $9.1 million for the six months ended June 30, 2026, from $8.1 million in the prior year period, primarily due to higher interest expenses.
• The company experienced a net decrease in net assets resulting from operations of $21.5 million for the six months ended June 30, 2026, compared to a net decrease of $3.7 million in the prior year period.
• As of June 30, 2026, the company's investment portfolio had a fair value of $252.8 million, a slight increase from $251.7 million at December 31, 2025.
• The company's debt investments had a weighted average yield of approximately 14.95% as of June 30, 2026.

Sentiment

Score: 3

Explanation: StockSavvy.ai views this filing as slightly negative due to a decrease in net asset value per share and a net decrease in net assets from operations for the six-month period, despite a slight increase in the fair value of the investment portfolio.

Positives

• The fair value of the investment portfolio increased slightly to $252.8 million as of June 30, 2026, from $251.7 million as of December 31, 2025.
• The company's debt investments had a weighted average yield of approximately 14.95% as of June 30, 2026.
• The company's asset coverage for borrowed amounts was 185% as of June 30, 2026, exceeding the 150% requirement.
• The company raised approximately $30.1 million in net proceeds from the issuance of common stock through its At-the-Market (ATM) offering during the first six months of 2026.

Negatives

• Net asset value per common share decreased to $1.29 as of June 30, 2026, from $1.69 as of December 31, 2025.
• Total investment income decreased to $18.3 million for the six months ended June 30, 2026, from $19.7 million for the same period in 2025.
• Operating expenses increased to $9.1 million for the six months ended June 30, 2026, from $8.1 million for the same period in 2025, driven by higher interest expenses.
• The company reported a net decrease in net assets resulting from operations of $21.5 million for the six months ended June 30, 2026, a significant deterioration from a $3.7 million decrease in the prior year period.
• The company's qualifying assets represented 69.4% of total assets as of June 30, 2026, slightly below the 70% threshold for acquiring additional non-qualifying assets.

Risks

• The general illiquidity of the market for its investment portfolio means that substantially all of its fair valued investments are measured based upon Level 3 inputs, which rely on unobservable inputs and management's assumptions.
• Interest rate volatility could adversely affect the company's results, particularly given its use of leverage.
• The company's reliance on its investment adviser, Oxford Square Management, LLC, and potential conflicts of interest arising from related party transactions.
• The company's ability to maintain its status as a Regulated Investment Company (RIC) depends on distributing at least 90% of its taxable income annually and meeting certain source-of-income and diversification requirements.
• The company's investment portfolio is concentrated in CLO equity and senior secured notes, which carry inherent risks.
• The company's qualifying assets represented 69.4% of total assets as of June 30, 2026, which is below the 70% threshold required to acquire additional non-qualifying assets without impacting its BDC status.

Future Outlook

The company's future success depends on its ability to originate new loans and investments, manage market conditions, access capital, and achieve the objectives of its portfolio companies. The company's investment objective remains to maximize its portfolio's total return.

Management Comments

• The company's Board of Directors approved the fair value of the investment portfolio of approximately $252.8 million in good faith.
• During the six months ended June 30, 2026, the company purchased approximately $35.7 million in portfolio investments, including additional investments in existing portfolio companies and new portfolio companies.

Industry Context

StockSavvy.ai notes that the U.S. loan market performance improved in Q2 2026, with the Morningstar/LSTA US Leveraged Loan Index increasing slightly. However, the company's portfolio composition, heavily weighted towards CLO equity and senior secured notes, remains subject to the specific risks associated with these asset classes.

Related Party Transactions

• The company pays Oxford Square Management an annual base investment advisory fee and incentive fees.
• Oxford Funds provides administrative services and office facilities to the company.
• Potential conflicts of interest exist due to shared officers and directors between the company and affiliated entities managed by Oxford Funds.

Stakeholder Impact

• Shareholders have experienced a decrease in net asset value per share.
• The company's ability to generate income and manage expenses will impact future distributions to shareholders.
• The company's reliance on its investment adviser and potential conflicts of interest could affect shareholder interests.

Next Steps

• Continue to monitor investment portfolio quality and market conditions.
• Manage expenses and interest costs.
• Pursue opportunities through the At-the-Market (ATM) offering.
• Comply with RIC distribution requirements to avoid adverse tax consequences.

Key Dates

Recommendation

While the company's portfolio fair value saw a slight increase, the decline in NAV per share, reduced investment income, and increased expenses, coupled with a significant net decrease in assets from operations, suggest a cautious approach. The company's ability to manage its debt and maintain RIC status are key factors. The ATM offering provides some liquidity, but the overall financial performance warrants a hold rating until a clearer positive trend emerges.

Keywords

Oxford Square Capital Corp, BDC, CLO, Senior Secured Notes, Investment Portfolio, Net Asset Value, Interest Income, Debt Investments