Capital Southwest Corporation · NASDAQ:CSWC
Capital Southwest — Q3 2016 Earnings Presentation
18 slides from Capital Southwest's earnings presentation, Feb 8, 2016
Slide 1: Capital Southwest Q3 2016 Earnings Presentation
capital southwest Capital Southwest Corporation Q3 2016 Earnings Presentation February 8, 2016 '5400 Lyndon B. Johnson Freeway, Suite 1300 | Dallas, Texas75240 | 214.238.5700 | capitalsouthwest com
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. DiehlChief Executive Officer and PresidentMichael S. SarnerChief Financial OfficerDouglas M. KelleyManaging DirectorChris RehbergerVP Finance Conference Call Participants
Slide 4: CSWC Company Overview
CSWC has refocused its investment strategy to become a lender to middle-market companies across the capital structureCSWC was formed in 1961, and became a BDC in 1988Publicly-traded on Nasdaq under CSWC tickerInternally-managed BDC with RIC status for tax purposesManagement transition over the last
Slide 5: Asset Allocation & Investment Strategy
Investment strategy designed with the end game in mind….Build a BDC portfolio that pays shareholders attractive sustainable dividends, funded from investment incomeAchieve granularity and diversity across asset classesEstablish balance between liquid and illiquid asset classesMaintain capital preser
Slide 6: Investment Focus
Support the acquisition and growth of companies in the Lower Middle Market Companies range from $3 to $20 million in EBITDATarget leverage of 2x – 4x Debt to EBITDA Commitment size up to $20 million with hold sizes of $5 MM to $15 MMOriginate both Sponsored and Non-sponsored debt investments across
Slide 7: Maintaining Strict Investment Criteria
Maintaining Strict Investment Criteria Experienced Management Team with Meaningful Equity Ownership Relevant experience and track record of successSignificant economic interest in the future success of the company Strong Competitive Position Sustainable Business Model Diversification of Customers an
Slide 8: Portfolio Rotation Focused on Credit
Portfolio Rotation Focused on Credit 6/30/2014 (excl. CSWI Companies) 12/31/2015 Investable Assets Since June 2014, CSWC has made significant strides towards rotating its investment assets from equity to creditExited 21 portfolio companies for $222 MM in proceedsInvested $61 MM in 12 middle-market c
Slide 9: Q3 2016 and Post-Quarter End Originations
Q3 2016 and Post-Quarter End Originations In Thousands Q3 2016 Portfolio Originations Name Industry Type Market Segment Par Value Yield Three Sixty Group Consumer Products & Retail 1st Lien Upper Middle Market $7,000 L + 9.0% (1% Floor) Argon Medical Devices Healthcare Products 2nd Lien Upper Middle
Slide 10: Portfolio Mix as of 12/31/15 at Fair Value
Portfolio Mix as of 12/31/15 at Fair Value By Investment Type By Industry Continuing to build a diverse investment portfolio
Slide 11: I-45 Senior Loan Fund Portfolio Detail
I-45 Senior Loan Fund Portfolio Detail By Investment Type By Industry I-45 Portfolio Statistics Total Principal Outstanding $83,689 Number of Issuers 19 Avg. Investment Size as a % of Portfolio 5.26% Wtd. Avg. Leverage of Investments 3.3x Wtd. Avg. Yield to Maturity 7.59% Wtd. Avg. Duration (Years)
Slide 12: Q3 2016 Highlights
Financial HighlightsQ3 2016 Net Investment Loss of ($20 K) or ($0.00) per weighted average shareNet Investment Income of $0.7 MM or $.04 per weighted average share excluding spin-off related expensesGrew investment portfolio to $135 MM from $93 MM Positive cash flow from operations excluding spin-of
Slide 13: Key Highlights
Key Highlights 1 NAV reduction attributed to $2.9 MM tax payment on behalf of shareholders and $1.1 MM of net portfolio depreciation.2 CSWC utilizes an internal 1 - 4 investment rating system in which 1 represents material outperformance and 4 represents material underperformance. All new investment
Slide 14: Balance Sheet Highlights
Balance Sheet Highlights (In Thousands, except per share amounts) Quarter Ended 9/30/2015 Quarter Ended 12/31/2015 Assets Portfolio Investments $93,339 $134,935 Cash & Cash Equivalents $184,111 $143,680 Other Assets $8,200 $7,965 Total Assets $285,650 $286,580 Liabilities Payable for Unsettled Trans
Slide 15: Income Statement Highlights
Income Statement Highlights (In Thousands, except per share amounts) Quarter Ended 9/30/2015 Quarter Ended 12/31/2015 Investment Income Interest Income $945 $1,415 Dividend Income $0 $1,612 Fees and Other Income $133 $280 Total Investment Income $1,078 $3,307 Expenses Cash Compensation $3,411 $1,675
Slide 16: Investment Income Detail
Investment Income Detail Constructing a portfolio of investments with recurring cash yield (In Thousands) Quarter Ended 9/30/2015 Quarter Ended 12/31/2015 Investment Income Breakdown Cash Interest $930 $1,392 Amortization of purchase discounts and fees $15 $23 Cash Dividends $0 $1,612 Management Fee
Slide 17: Interest Rate Sensitivity
Interest Rate Sensitivity Debt Portfolio Composition Impact of Base Rate Changes on Net Investment Income Note: Illustrative change in NII is based on a projection of our existing debt investments as of 12/31/15, adjusted only for changes in Base Rates. The I-45 Senior Loan Fund is comprised of 100%
Slide 18: Corporate Information
Corporate Information Board of Directors Senior Management Fiscal Year End Inside Directors March 31 Joseph B. Armes Bowen S. Diehl Bowen S. Diehl President & Chief Executive Officer Independent Auditor Grant Thornton Dallas, TX Independent Directors Michael S. Sarner John H. Wilson Chief Financial