Capital Southwest Corporation · NASDAQ:CSWC
Capital Southwest — Q2 2017 Earnings Presentation
17 slides from Capital Southwest's earnings presentation, Nov 7, 2016
Slide 1: Capital Southwest Corporation Q2 2017 Earnings Presentation
Capital Southwest Corporation Q2 2017 Earnings Presentation November 8, 2016 5400 Lyndon B. Johnson Freeway, Suite 1300 | Dallas, Texas 75240 | 214.238.5700 | capitalsouthwest.com
Slide 2: Forward-Looking Statements
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 s
Slide 3: Conference Call Participants
Conference Call Participants Bowen S. Diehl President and Chief Executive Officer Michael S. Sarner Chief Financial Officer Chris Rehberger VP Finance / Treasurer Page 3
Slide 4: CSWC Company Overview
CSWC Company Overview CSWC has refocused its investment strategy to become a lender to 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 In
Slide 5: CSWC Corporate Strategy
CSWC Corporate Strategy • Building a BDC that pays shareholders attractive and sustainable dividends by establishing: • • • • • A portfolio of investments balanced between liquid and illiquid asset classes A portfolio of predominantly cash generating loans An investment discipline focused on granula
Slide 6: Two Pronged Investment Strategy
Two Pronged Investment Strategy L o w e r M i d d l e M a r ke t ( “ L M M ” ) : 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 million with hold sizes of $5 MM to $15 MM Originate b
Slide 7: Q2 2017 Highlights
Q2 2017 Highlights Financial Highlights • Q2 2017 Pre-Tax Net Investment Income of $1.8 MM or $0.11 per weighted average diluted share Paid quarterly dividend of $0.11 per share Closed $100 MM ING led Credit Facility with five bank syndicate • 4 year facility with cost of funding of L + 325 • Includ
Slide 8: Financial Highlights
Financial Highlights Page 9 Quarter Ended 12/31/2015 Quarter Ended 3/31/2016 Quarter Ended 6/30/2016 Quarter Ended 9/30/2016 Financial Highlights Pre-Tax Net Investment Income Per Wtd Avg Diluted Share Pre-Tax Net Investment Income Return on Equity (ROE) Dividends Per Share Earnings Per Wtd Avg Dilu
Slide 9: Q2 2017 Portfolio Originations
Q2 2017 Portfolio Originations Strong portfolio growth with $55 MM in new investments originated in Q2 2017 at a weighted average YTM of 9.8% Note: Market Segment refers to Upper Middle Market (“UMM”) and Lower Middle Market (“LMM”) Page 10 Portfolio Originations - Since Quarter End NameIndustryType
Slide 10: Portfolio Statistics
Portfolio Statistics Continuing to demonstrate quarter over quarter credit portfolio growth 1 CSWC’s $2.5 MM sub debt investment (legacy 2012 funding) in Titan Liner is currently in the process of being restructured, with CSWC likely taking a controlling position in the company. 2 CSWC utilizes an i
Slide 11: Portfolio Mix as of 9/30/2016 at Fair Value
Portfolio Mix as of 9/30/2016 at Fair Value Current Portfolio of $238 MM continues to be granular, diverse, and focused on income generating securities Current Investment Portfolio (By Type) Current Investment Portfolio (By Industry) Non-Yielding Equity 6% Consumer Services 2% Financial Services 2%
Slide 12: I-45 Senior Loan Fund Portfolio
I-45 Senior Loan Fund Portfolio Current I-45 Portfolio (By Type) Current I-45 Portfolio (By Industry) CSWC invested $8 MM additional equity to fund I-45 portfolio growth to $173 MM 1st Lien 98% 2nd Lien 2% 13% 11% 10% 9% 8% 7% 6% 5% 4% 4% 4% 3% 3% 3% 3% 3% 3% 1% Q3 2016 Q4 2016 Q1 2017 Q2 2017 Total
Slide 13: Balance Sheet Highlights
Balance Sheet Highlights Page 14 (In Thousands, except per share amounts) Quarter Ended 12/31/2015 Quarter Ended 3/31/2016 Quarter Ended 6/30/2016 Quarter Ended 9/30/2016 Assets Portfolio Investments Cash & Cash Equivalents Deferred Tax Asset Other Assets $134,935 $143,680 $1,544 $6,421 $178,436 $95
Slide 14: Income Statement Highlights
Income Statement Highlights Page 15 (In Thousands, except per share amounts) Quarter Ended 12/31/15 Quarter Ended 3/31/16 Quarter Ended 6/30/16 Quarter Ended 9/30/16 Investment Income Interest Income Dividend Income Fees and Other Income $1,415 $1,612 $280 $2,110 $1,578 $123 $2,292 $1,769 $96 $2,630
Slide 15: Investment Income Detail
Investment Income Detail Constructing a portfolio of investments with recurring cash yield Page 16 (In Thousands) Quarter Ended 12/31/2015 Quarter Ended 3/31/2016 Quarter Ended 6/30/2016 Quarter Ended 9/30/16 Investment Income Breakdown Cash Interest Cash Dividends Management Fees Amortization of pu
Slide 16: Interest Rate Sensitivity
Interest Rate Sensitivity Debt Portfolio Well-Positioned for Changes to Base Interest Rates Yielding Debt Portfolio Composition Fixed 9% Floating 91% Note: Illustrative change in NII is based on a projection of our existing debt investments as of 9/30/16, adjusted only for changes in Base Rates. The
Slide 17: Corporate Information
Corporate Information Dallas, TX Capital Southwest Page 18 Securities Listing NASDAQ: CSWC Transfer Agent American Stock Transfer & Trust Company, LLC 800-937-5449 www.amstock.com Corporate Offices & Website 5400 LBJ Freeway 13th Floor Dallas, TX 75240 http://www.capitalsouthwest.com Investor Relati