Capital Southwest Corporation · NASDAQ:CSWC
Capital Southwest — Q1 2018 Earnings Presentation
19 slides from Capital Southwest's earnings presentation, Aug 7, 2017
Slide 1: Capital Southwest Corporation Q1 2018 Earnings Presentation
Capital Southwest Corporation Q1 2018 Earnings Presentation 5400 Lyndon B. Johnson Freeway, Suite 1300 Dallas, Texas 75240 214.238.5700 capitalsouthwest.com August 8, 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: Q1 2018 Highlights
Financial Highlights Q1 2018 Pre-Tax NII of $3.6 MM or $0.22 per share Paid Quarterly Dividend of $0.21 per share Increased Investment Portfolio to $307 MM from $287 MM at fair value $38 MM deployed in four new originations and one add-on $19 MM proceeds received from four portfolio exits $75 MM ava
Slide 6: Credit Portfolio Growth
Balance Sheet Credit Portfolio Growth Credit portfolio has grown to $182 MM at 6/30/17 from $84 MM at 6/30/16 Debt Portfolio (Fair Value) Includes purchases of new investments, as well as discount accretion on existing investments. Includes conversion of $2.7 million debt security in legacy Titan Li
Slide 7: Two Pronged Investment Strategy
Lower Middle Market (“LMM”): CSWC led or Club Deals Companies with EBITDA greater than $3 MM Typically 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, unitr
Slide 8: Q1 2018 Portfolio Prepayments
Q1 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”) Q1 2018 Portfolio Exits Name Industry Type Market Proc
Slide 9: 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 10: Q1 2018 Highlights
Financial Highlights Q1 2018 Pre-Tax NII of $3.6 MM or $0.22 per share Paid Quarterly Dividend of $0.21 per share Increased Investment Portfolio to $307 MM from $287 MM at fair value $38 MM deployed in four new originations and one add-on $19 MM proceeds received from four portfolio exits $75 MM ava
Slide 11: Q1 2018 Portfolio Originations
Q1 2018 Portfolio Originations Strong Lower Middle Market origination activity with $38 MM in new investments in Q1 2018 at a weighted average YTM of 10.3% Note: Market Segment refers to Upper Middle Market (“UMM”) and Lower Middle Market (“LMM”) Q1 2018 Portfolio Originations Name Industry Type Mar
Slide 12: I-45 Portfolio Overview
I-45 Portfolio Overview Current I-45 Portfolio (By Industry) I-45 portfolio grew to $210 MM while average investment size shrunk to 2.2% (1) Through I-45 Security Telecommunications Services: Business Capital Equipment Media: Advertising, Printing & Pub. Healthcare & Pharmaceuticals Current I-45 Por
Slide 13: Interest Rate Sensitivity
Interest Rate Sensitivity Fixed vs. Floating Portfolio Composition (1) Debt Portfolio Exposure at 6/30/17 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 6/30/17, adjusted only for changes in Base
Slide 14: Interest Rate Sensitivity
Interest Rate Sensitivity Fixed vs. Floating Portfolio Composition (1) Debt Portfolio Exposure at 6/30/17 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 6/30/17, adjusted only for changes in Base
Slide 15: Income Statement
Income Statement (In Thousands, except per share amounts) Quarter Ended 9/30/16 Quarter Ended 12/31/16 Quarter Ended 3/31/17 Quarter Ended 6/30/17 Investment Income Interest Income $2,630 $3,611 $4,113 $4,520 Dividend Income $1,995 $3,078 $3,002 $3,004 Fees and Other Income $101 $176 $611 $200 Total
Slide 16: Portfolio Mix as of 6/30/17 at Fair Value
Portfolio Mix as of 6/30/17 at Fair Value Current Investment Portfolio (By Type) Current Investment Portfolio (By Industry) Current Portfolio of $307 MM continues to be granular, diverse, and focused on income generating securities I - 45 SLF 22% Industrial Products 12% Media, Marketing, & Entertain
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: Balance Sheet
Balance Sheet (In Thousands, except per share amounts) Quarter Ended 9/30/2016 Quarter Ended 12/31/2016 Quarter Ended 3/31/2017 Quarter Ended 6/30/2017 Assets Portfolio Investments $238,319 $267,131 $286,880 $306,582 Cash & Cash Equivalents $57,840 $32,671 $22,386 $12,359 Deferred Tax Asset $1,940 $
Slide 19: 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 RSM Chicago, IL David R. Brooks Michael S. Sarner Jack D. Furst Chief Financial Officer, Se