Earnings call transcript: Oxford Lane’s Q4 2026 sees NAV drop, stock dips

Oxford Lane Capital Corp (OXLC) reported its Q4 FY2026 earnings, revealing a significant decrease in net asset value (NAV) per share and a decline in investment income. The company’s stock experienced a pre-market drop of 4.03%, reflecting investor concerns over the quarter’s performance and the broader market conditions.

Oxford Lane Capital Corp faced a challenging Q4 FY2026, with significant declines in key financial metrics. The company reported a NAV per share of $10.56 as of March 31, 2026, down from $15.51 at the end of the previous quarter. This decrease was driven by unrealized depreciation and realized losses on investments. Despite a partial recovery in NAV to an estimated $11.27 by April 30, 2026, the overall performance reflected the pressures in the CLO market.

Oxford Lane’s stock price fell by 4.03% in pre-market trading, reflecting investor concerns over the steep decline in NAV and investment income. The stock is currently trading at $9.52, a significant drop from its 52-week high of $23.65, indicating a challenging environment for the company and its investors.

Executives highlighted the challenging market conditions impacting CLO yields and investment income. The decline in weighted average effective yield and cash distribution yield of CLO equity investments by 210 and 230 basis points, respectively, underscores the pressures facing Oxford Lane. The company’s leadership remains focused on navigating these challenges and optimizing its investment strategy.

Oxford Lane Capital Corp’s Q4 FY2026 results highlight significant challenges and market pressures. The company’s efforts to stabilize its NAV and investment income will be crucial in the coming quarters as it navigates a complex financial landscape.

Roy, Conference Operator: Hi, thank you for standing by. This is Roy, I will be your conference operator today. At this time, I would like to welcome everyone to the Oxford Lane Capital Corp announces net asset value and selected financial results for the fourth fiscal quarter 2026. All lines have been placed on mute to prevent any background noise. After the speaker’s remarks, there will be a question-and-answer session. If you would like to ask a question during this time, please press Star followed by the number 1 on your telephone keypad. If you would like to withdraw your question, please press Star 1 again. I would now like to turn the call over back to Jonathan Cohen. You may now begin.

Jonathan Cohen, CEO, Oxford Lane Capital Corp: Good morning, and welcome to the Oxford Lane Capital Corp. fourth fiscal quarter 2026 earnings conference call. I’m joined today by Saul Rosenthal, our President; Bruce Rubin, our Chief Financial Officer; and Joe Kupka, Managing Director. Bruce, could you open the call with a disclosure regarding forward-looking statements?

Bruce Rubin, Chief Financial Officer, Oxford Lane Capital Corp: 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. 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, future events and financial performance. We ask you to refer to our most recent filings with the SEC for important factors that can 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.

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

Jonathan Cohen, CEO, Oxford Lane Capital Corp: Thanks, Bruce. On March 31, 2026, our net asset value per share stood at $10.56 compared to a net asset value per share of $15.51 as of the prior quarter. As of April 30, 2026, the midpoint of the range of our estimated net asset values per share was $11.27. For the quarter ended March, we recorded GAAP total investment income of approximately $94 million, representing a decrease of approximately $23.8 million from the prior quarter. The quarter’s GAAP total investment income consisted of approximately $90.8 million from our CLO equity and CLO warehouse investments and approximately $3.1 million from our CLO debt investments and from other income.

Oxford Lane recorded GAAP net investment income of approximately $54.5 million or $0.56 per share for the quarter ended March, compared to approximately $71.8 million or $0.74 per share for the quarter ended December 31st. Our core net investment income was approximately $100.7 million or $1.03 per share for the quarter ended March 31st, compared with approximately $108.9 million or $1.12 per share for the quarter ended December 31st. As of the end of March, we held approximately $64 million in newly issued or newly acquired CLO equity investments that had not yet made initial distributions to Oxford Lane.

For the quarter ended March, we recorded net unrealized depreciation on investments of approximately $381.4 million and net realized losses of approximately $38.4 million. We had a net decrease in net assets resulting from operations of approximately $365.3 million or $3.74 per share for the fourth fiscal quarter. As of March 31st, the following metrics applied. We note that none of these metrics necessarily represented a total return to shareholders. The weighted average effective yield of our CLO equity investments at current cost was 11.7%, down from 13.8% as of December. The weighted average cash distribution yield of our CLO equity investments at current cost was 16.7%, down from 19% as of December 31st.

We note that the cash distribution yields calculated on our CLO equity investments are based on the cash distributions which we received or which we were entitled to receive at each respective period end. During the quarter ended March, we made additional CLO investments of approximately $500,000. We received approximately $82.9 million from sales and from repayments. On May 14th, our board of directors declared monthly common stock distributions of $0.20 per share for each of the months ending July, August, and September of 2026. With that, I will now turn the call over to Joe Kupka. Joe.

Joe Kupka, Managing Director, Oxford Lane Capital Corp: Thanks, Jonathan. During the quarter ended March 31st, 2026, U.S. loan market performance declined versus the prior quarter. The U.S. loan price index decreased from 96.64% as of December 31st, 2025 to 94.63% as of March 31st. The decrease in U.S. loan prices led to an approximate 17-point decrease in median U.S. CLO equity net asset values. Additionally, we observed median weighted average spreads across loan pools within CLO portfolios decreased to 304 basis points compared to 311 basis points last quarter. 12-month trailing default rate for the loan index increased to 1.4% by principal amount at the end of the quarter from 1.2% at the end of December. We note that out-of-court restructurings, exchanges and subpar buybacks, which are not captured in the cited default rate, remain elevated.

CLO new issuance for the quarter totaled approximately $47 billion, reflecting an approximate $8 billion decrease from the previous quarter. Additionally, the U.S. CLO market saw approximately $56 billion in reset and refinancing activity in Q1 2026, compared to approximately $74 billion in the previous quarter. Oxford Lane remained active this quarter, trading over $75 million in CLO equity and CLO warehouses. During the quarter, we also led or participated in numerous resets or refinancings, taking advantage of tightening liability spreads to lower the cost of funding and lengthen the weighted average reinvestment period of Oxford Lane CLO equity portfolio from August 2029 to October 2029. We continue to evaluate existing investments for opportunities to improve the economics of our CLO equity positions.

In the current market environment, we intend to continue to utilize our opportunistic and unconstrained CLO investment strategy across U.S. CLO equity debt and warehouses as we look to maximize our long-term total return. As a permanent capital vehicle, we’ve historically been able to take a longer term view towards our investment strategy. With that, I’ll turn the call back over to Jonathan.

Jonathan Cohen, CEO, Oxford Lane Capital Corp: Thanks, Joe. Additional information about Oxford Lane’s fourth fiscal quarter financial performance has been uploaded to our website at oxfordlanecapital.com. With that, operator, we’re happy to poll for any questions.

Roy, Conference Operator: Thank you. We will now begin the question and answer session. We’ll be standing by briefly for the questions and comments. Thank you. Your first question comes from Erik Zwick with Lucid Capital Markets. Your line is now open.

Erik Zwick, Analyst, Lucid Capital Markets: Thank you. Good morning, all.

Jonathan Cohen, CEO, Oxford Lane Capital Corp: Morning, Erik.

Erik Zwick, Analyst, Lucid Capital Markets: Hoping, Jonathan, to start just on a question in terms of, you know, kind of understanding the primary drivers of the unrealized appreciation in 1Q. I mean, it seems like for most of, you know, ’25, it was, you know, the tightening spread, but it seems like it may have been a little bit different, just more due to kind of reduced activity in the secondary market in 1Q. Is the perception right there? Then kinda curious if