Oxford Square Capital Corp. (NASDAQ: OXSQ) reported second-quarter 2026 net investment income of $5.1 million, or $0.05 per share, rising from $4.1 million in the prior quarter. The business development company also declared monthly distributions of 3.5 cents per share for October, November, and December 2026.

The improvement in net income was driven by a significant reduction in investment losses rather than a surge in revenue alone. Total investment income increased modestly to $9.4 million from $8.9 million. However, combined net unrealized and realized losses on investments contracted sharply to $1.1 million, down from $29.7 million in the previous quarter.

What the Numbers Show

The divergence between total investment income and net investment income highlights the impact of mark-to-market volatility on earnings. While operating income (total investment income) grew by only about 5.6%, the drastic drop in unrealized/realized losses ($28.6 million reduction) was the primary driver of the 24% increase in net investment income. This suggests that the core yield generation remained stable, while portfolio valuation pressures eased significantly compared to the prior period.

Portfolio Activity and Market Context

During the quarter ended June 30, Oxford Square purchased approximately $19.9 million in investments, primarily CLO equity tranches in the secondary market. CEO Jonathan Cohen noted these purchases align with the company’s thesis on compelling cash-on-cash opportunities in CLO equity. The company also recorded repayments of approximately $500,000.

To support capital deployment, Oxford Square issued approximately 11.3 million shares through an at-the-market offering, generating net proceeds of $17.8 million. Despite the new capital inflow, net asset value per share decreased slightly to $1.29 from $1.32, reflecting the drag from the remaining net losses against the book value.

The broader U.S. leveraged loan market showed signs of stabilization. The Morningstar LSTA U.S. Leveraged Loan Index price rose from 94.63% of par to 94.96% of par. The 12-month trailing default rate declined to 0.97% from 1.44%, while the distress ratio (loans priced below 80% of par) fell to 6.87% from 7.23%. Primary market issuance surged 33% year-over-year to $101.8 billion, driven by refinancing and M&A activity.

Oxford Square Capital Corp. (NasdaqGS: OXSQ) reported second quarter 2026 earnings per share of $0.05, beating the analyst consensus estimate of $0.04 by 25 percent. The business development company also posted total investment income of approximately $9.402 million, surpassing the $8.322 million revenue estimate by nearly 13 percent. Despite beating current estimates, these figures represent a decline from the prior year, with EPS down 37.5 percent from $0.08 and sales down 1.26 percent from $9.522 million in the same period last year. The company simultaneously declared quarterly distributions of $0.035 per share for October, November, and December 2026, maintaining a payout that exceeds current per-share earnings.

The beat on both earnings and revenue highlights operational resilience despite a challenging year-over-year comparison. Total investment income reached approximately $9.4 million for the quarter ended June 30, 2026, up from approximately $8.9 million in the prior quarter. This growth was driven by $5.4 million from debt investments and $3.5 million from collateralized loan obligation (CLO) equity investments. Total expenses decreased to approximately $4.3 million from approximately $4.8 million in the first quarter, contributing to the net investment income of approximately $5.1 million.

Distribution Schedule

Net asset value (NAV) per share stood at $1.29 as of June 30, 2026, down from $1.32 at the end of the first quarter. The weighted average yield of debt investments rose slightly to 14.9% at current cost, compared with 14.7% previously. Meanwhile, the weighted average effective yield of CLO equity investments increased to 8.1% from 7.3%. However, the weighted average cash distribution yield of cash income producing CLO equity investments declined to 12.4% from 13.6%, reflecting changes in portfolio composition or market conditions.

What the Numbers Show

The divergence between rising investment yields and declining NAV suggests valuation pressures within the portfolio. While interest income generation improved enough to beat estimates, the year-over-year decline in EPS indicates broader headwinds. The company recorded a net increase in net assets resulting from operations of approximately $4.0 million, which included net realized losses of approximately $5.2 million offset by net unrealized appreciation of approximately $4.1 million. Additionally, preferred equity investments in one portfolio company, with an aggregate fair value of approximately $6.9 million, were placed on non-accrual status, signaling potential credit risk that may impact future income streams.

During the quarter, Oxford Square Capital Corp. purchased approximately $19.9 million in new investments and received repayments of approximately $0.5 million, with no sales executed. The company also issued approximately 11.3 million shares of common stock through an "at-the-market" offering, generating net proceeds of approximately $17.8 million after expenses. As of June 30, 2026, there were approximately 105.1 million shares outstanding. Management discussed these results during a conference call on July 31, 2026.