Capital Southwest Corporation · NASDAQ:CSWC
Capital Southwest — Q1 2017 Earnings Presentation
17 slides from Capital Southwest's earnings presentation, Aug 8, 2016
Slide 1: Capital Southwest Corporation Q1 2017 Earnings Presentation
Capital Southwest Corporation Q1 2017 Earnings Presentation August 9, 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 Lower Middle Market: 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 both Sponsored and Non-sponso
Slide 7: I-45 Senior Loan Fund Portfolio
I-45 Senior Loan Fund Portfolio Invested $4 MM additional equity to fund I-45 loan portfolio growth to $134 MM Current I-45 Portfolio (By Industry) Current I-45 Portfolio (By Type) 2%1% 3% 3% 13% 4% 4% 4% 4% 1st Lien 98% 12% 4% 4% 11% 7% 7% 10% 9% 2nd Lien 2% Page 7 I-45 Portfolio Statistics Q3 2016
Slide 8: Q1 2017 Portfolio Originations
Q1 2017 Portfolio Originations In Thousands Page 8 Portfolio Originations - Since Quarter End Name Industry Type Market Par Value Yield I nfogroup Software & I T Services 1st Lien Upper Middle Market $2,204 L + 5.5% (1.5% Floor) I magine! Print Solutions Media, Marketing, & Entertainment 1st Lien Up
Slide 9: Portfolio Rotation Focused on Credit
Portfolio Rotation Focused on Credit • Since June 2014, CSWC has transformed its investment portfolio increasing income earning assets from 1% of the investable portfolio to 58% o Exited 21 legacy portfolio equity investments, generating $222 MM in proceeds o Invested $102 MM in 18 middle-market cre
Slide 10: Portfolio Mix as of 6/30/16 at Fair Value
Portfolio Mix as of 6/30/16 at Fair Value Current Portfolio of $178 MM continues to be granular, diverse, and focused on income generating securities Current Investment Portfolio (By Type) Current Investment Portfolio (By Industry) Healthcare Services 4% Specialty Chemicals 1% Financial Services 2%
Slide 11: Q1 2017 Highlights
Q1 2017 Highlights Financial Highlights • Q1 2017 Pre-Tax Net Investment Income of $918 K or $0.06 per weighted average diluted share Paid quarterly dividend of $0.06 per share No non-accruals within debt investment portfolio Increased I-45 Senior Loan Fund investment portfolio to $134 MM from $99 M
Slide 12: Key Highlights
Key Highlights 1 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. 2 Excludes CSWC equity investment in I-45 Senior Loan Fund Page 12 (In Thousands, except per
Slide 13: Balance Sheet Highlights
Balance Sheet Highlights Page 13 (In Thousands, except per share amounts) Quarter Ended 9/30/2015 Quarter Ended 12/31/2015 Quarter Ended 3/31/2016 Quarter Ended 6/30/2016 Assets Portfolio Investments Cash & Cash Equivalents Deferred Tax Asset Other Assets $93,339 $184,111 $1,649 $6,551 $134,935 $143
Slide 14: Income Statement Highlights
Income Statement Highlights Page 14 (In Thousands, except per share amounts) Quarter Ended 9/30/15 Quarter Ended 12/31/15 Quarter Ended 3/31/16 Quarter Ended 6/30/16 Investment Income Interest Income Dividend Income Fees and Other Income $945 $0 $133 $1,415 $1,612 $280 $2,110 $1,578 $123 $2,292 $1,7
Slide 15: Investment Income Detail
Investment Income Detail Constructing a portfolio of investments with recurring cash yield Page 15 (In Thousands) Quarter Ended 9/30/2015 Quarter Ended 12/31/2015 Quarter Ended 3/31/2016 Quarter Ended 6/30/2016 Investment Income Breakdown Cash Interest Cash Dividends Management Fees Amortization of
Slide 16: Interest Rate Sensitivity
Interest Rate Sensitivity Impact of Base Rate Changes on Net Investment Income Debt Portfolio Composition Fixed Rate Debt 18% Floating Rate Debt 82% Note: Illustrative change in NII is based on a projection of our existing debt investments as of 6/30/16, adjusted only for changes in Base Rates. The
Slide 17: Corporate Information
Corporate Information Dallas, TX Capital Southwest Page 17 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