Capital Southwest Corporation · NASDAQ:CSWC
Capital Southwest — Q2 2018 Earnings Presentation
21 slides from Capital Southwest's earnings presentation, Nov 6, 2017
Slide 1: Capital Southwest Corporation Q2 2018 Earnings Presentation
Capital Southwest Corporation Q2 2018 Earnings Presentation 5400 Lyndon B. Johnson Freeway, Suite 1300 Dallas, Texas 75240 214.238.5700 capitalsouthwest.com November 7, 2017
Slide 2: Forward-Looking Statements
This presentation contains forward-looking statements within the meaning of The Private Securities Litigation Reform Act of 1995 relating to, among other things, the business, financial condition and results of operations of Capital Southwest, the anticipated investment strategies and investments of
Slide 3: Conference Call Participants
Bowen S. Diehl President and Chief Executive Officer Michael S. Sarner Chief Financial Officer Chris Rehberger VP Finance / Treasurer Conference Call Participants
Slide 4: CSWC Company Overview
CSWC is a middle-market lending firm focused on supporting the acquisition and growth of middle-market companies across the capital structure CSWC was formed in 1961, and became a BDC in 1988 Publicly-traded on Nasdaq under CSWC ticker Internally Managed BDC with RIC status for tax purposes December
Slide 5: Q2 2018 Highlights
Financial Highlights Q2 2018 Pre-Tax Net Investment Income (“NII”) of $4.1 MM or $0.25 per share Paid Quarterly Dividend of $0.24 per share NAV per share increased to $18.26 from $17.96 Increased Investment Portfolio to $322 MM from $307 MM at fair value $32.5 MM committed in two new originations $1
Slide 6: Evolution of CSWC: Generating Consistent Dividend and NAV Growth
1.2 % 1.8 % 3.0 % 4.2 % 4.5 %1 5.2 % 5.6 % Over the past four quarters, CSWC has generated $0.90 per share in Pre-Tax NII and paid out $0.81 per share in regular dividends LTM dividend coverage of 111% of Pre-Tax NII In addition, paid out a Special Dividend of $0.26 in Q4 2017 generated primarily fr
Slide 7: Two Pronged Investment Strategy
Lower Middle Market (“LMM”): CSWC led or Club Deals Companies with EBITDA between $3 MM and $15 MM Typical leverage of 2x – 4x Debt to EBITDA through CSWC debt Commitment size up to $20 MM with hold sizes generally $10 to $15 MM Both Sponsored and Non-sponsored deals Securities include first lien, u
Slide 8: Q2 2018 Portfolio Originations
Q2 2018 Portfolio Originations $32.5 MM in new committed Lower Middle Market investments during the quarter ($23 MM funded debt) at a weighted average debt YTM of 11.5% 1. At close, $2.0 MM Revolver and $2.5 MM Delayed Draw Term Loan were unfunded Note: Market Segment refers to Upper Middle Market (
Slide 9: Q2 2018 Portfolio Prepayments
Q2 2018 Portfolio Prepayments Prepayments continue to demonstrate our track record of generating attractive risk adjusted returns on shareholders’ capital Note: Market Segment refers to Upper Middle Market (“UMM”) and Lower Middle Market (“LMM”) Q2 2018 Portfolio Exits Name Industry Type Market Proc
Slide 10: Balance Sheet Credit Portfolio Mix
Balance Sheet Credit Portfolio Mix Credit portfolio has grown to $187 MM and 73% first lien exposure at 9/30/17 Credit Portfolio (Fair Value)
Slide 11: Portfolio Statistics by Investment Strategy
Portfolio Statistics by Investment Strategy Portfolio statistics illustrate CSWC’s prudent investment underwriting Note: All metrics above exclude the I-45 Senior Loan Fund At September 30, 2017, we had equity ownership in approximately 84.6% of our LMM investments. The weighted-average annual effec
Slide 12: Portfolio Mix as of 9/30/17 at Fair Value
Portfolio Mix as of 9/30/17 at Fair Value Current Investment Portfolio (By Type) Current Investment Portfolio (By Industry) Current Portfolio of $322 MM continues to be granular, diverse, and focused on income generating securities
Slide 13: Interest Rate Sensitivity
Interest Rate Sensitivity Fixed vs. Floating Portfolio Composition (1) Debt Portfolio Exposure at 9/30/17 Well-Positioned for Changes to Base Interest Rates Note: Illustrative change in NII is based on a projection of CSWC’s existing debt investments as of 9/30/17, adjusted only for changes in Base
Slide 14: I-45 Portfolio Overview
I-45 Portfolio Overview Current I-45 Portfolio (By Industry) I-45 portfolio grew to $224 MM while average investment size remained at 2.2% (1) Through I-45 Security Telecommunications Retail Capital Equipment Media: Advertising, Printing & Pub. Healthcare & Pharmaceuticals Current I-45 Portfolio (By
Slide 15: Income Statement
Income Statement (In Thousands, except per share amounts) Quarter Ended 12/31/16 Quarter Ended 3/31/17 Quarter Ended 6/30/17 Quarter Ended 9/30/17 Investment Income Interest Income $3,611 $4,113 $4,520 $5,282 Dividend Income $3,078 $3,002 $3,004 $3,088 Fees and Other Income $176 $611 $200 $139 Total
Slide 16: Balance Sheet
Balance Sheet (In Thousands, except per share amounts) Quarter Ended 12/31/2016 Quarter Ended 3/31/2017 Quarter Ended 6/30/2017 Quarter Ended 9/30/2017 Assets Portfolio Investments $267,131 $286,880 $306,582 $321,860 Cash & Cash Equivalents $32,671 $22,386 $12,359 $33,329 Deferred Tax Asset $1,940 $
Slide 17: Portfolio Statistics
Portfolio Statistics CSWC utilizes an internal 1 - 4 investment rating system in which 1 represents material outperformance and 4 represents material underperformance. All new investments are initially set to 2. Includes dividends from Media Recovery, Inc. and I-45 Senior Loan Fund. Excludes CSWC eq
Slide 18: Credit Portfolio Roll Forward
Credit Portfolio Roll Forward Credit portfolio has grown to $187 MM at 9/30/17 from $138 MM at 9/30/16 Includes purchases of new investments, as well as discount accretion on existing investments. Includes conversion of $2.7 million debt security in legacy Titan Liner to equity in 12/31/16 quarter
Slide 19: Investment Income Detail
Investment Income Detail Constructing a portfolio of investments with recurring cash yield Non-Recurring income principally made up of acceleration of unamortized OID and prepayment fees Recurring cash interest income continues to grow quarter over quarter Earned less non-recurring prepayment fees i
Slide 20: Financial Highlights
Financial Highlights Quarter Ended 12/31/2016 Quarter Ended 3/31/2017 Quarter Ended 6/30/2017 Quarter Ended 9/30/2017 Financial Highlights Pre-Tax Net Investment Income Per Wtd Avg Diluted Share $0.21 $0.22 $0.22 $0.25 Pre-Tax Net Investment Income Return on Equity (ROE) 4.79% 4.99% 4.96% 5.55% Real
Slide 21: Corporate Information
Corporate Information Board of Directors Senior Management Fiscal Year End Inside Directors March 31 Bowen S. Diehl Bowen S. Diehl President & Chief Executive Officer Independent Auditor Independent Directors David R. Brooks Michael S. Sarner Jack D. Furst Chief Financial Officer, Secretary & Treasu