Capital Southwest Corporation · NASDAQ:CSWC
Capital Southwest — Q4 FY2025 Earnings Presentation
26 slides from Capital Southwest's earnings presentation, May 14, 2025
Slide 1: Q4 2025 Earnings Presentation
Q4 2025 Earnings Presentation 8333 Douglas Avenue, Suite 1100 | Dallas, Texas 75225 | 214.238.5700 | capitalsouthwest.com May 15, 2025 Capital Southwest Corporation
Slide 2: Important Notices
Page 2 Important Notices • These materials and any presentation of which they form a part are neither an offer to sell, nor a solicitation of an offer to purchase, any securities of Capital Southwest. • These materials and the presentations of which they are a part, and the summaries contained herei
Slide 3: Forward-looking statements
Page 3 • This presentation contains forward-looking statements relating to, among other things, the business, market conditions, financial condition and results of operations of Capital Southwest, the anticipated investment strategies and investments of Capital Southwest, and future market demand. A
Slide 4: CSWC Senior Management
Page 4 Chris T. Rehberger Chief Financial Officer, Treasurer and Secretary • Joined Capital Southwest in September 2015 • Former VP at American Capital • 20+ years of BDC experience • BS – University of Virginia | MBA – University of Virginia CSWC Senior Management Josh S. Weinstein Senior Managing
Slide 5: Conference Call Participants
Page 5 Michael S. Sarner President and Chief Executive Officer Chris T. Rehberger Chief Financial Officer, Treasurer and Secretary Josh S. Weinstein Senior Managing Director and Chief Investment Officer Amy L. Baker Executive Vice President Accounting Conference Call Participants
Slide 6: CSWC Company Overview
Page 6 • CSWC was formed in 1961, and elected to be regulated as a BDC in 1988 • Publicly-traded on Nasdaq: Common Stock (“CSWC”) and 7.75% Notes due 2028 ("CSWCZ") • Internally Managed BDC with RIC tax treatment for U.S. federal income tax purposes • 30 employees based in Dallas, Texas • Total Bala
Slide 7: Lower Middle Market Credit Strategy
Page 7 CSWC leads financing transactions, primarily backing private equity firms that generally fit the following parameters • Flexible financing solutions to fund growth, changes of control, or other corporate events • Investments are diverse among industries, geographic regions, and end markets •
Slide 8: Fiscal Year 2025 Highlights
Page 8 Fiscal Year 2025 Highlights • Investments at Fair Value of $1.8 B compared to $1.5 B in prior year, an increase of 21% ◦ Committed Investment Originations of $665.4 MM for Fiscal Year 2025 • Investment Revenue of $204.4 MM compared to $178.1 MM, an increase of 15% • Paid Regular Dividends of
Slide 9: Q4 2025 Highlights
Page 9 • Q4 2025 Pre-Tax Net Investment Income (“NII”) of $28.5 MM or $0.56 per share ◦ Adjusted Pre-Tax NII of $0.61 per share, excluding one-time net expenses of $2.8 million, or $0.05 per share, related to the departure of the former President and Chief Executive Officer (1) • Declared Regular Di
Slide 10: Investment Activity Highlights
Page 10 Investment Activity Highlights • During the quarter, CSWC originated $149.9 MM in total new committed investments ($124.4 MM funded at close) to four new portfolio companies and fifteen existing portfolio companies ◦ New committed investments consisted of $146.1 MM of first lien debt and $3.
Slide 11: NAV per Share Bridge for Quarter Ended 3/31/25
Page 11 $16.59 $0.56 $(0.58) $(0.06) $(0.12) $(0.08) $0.34 $0.05 $16.70 12/31/2024 NAV/Share Pre- Tax Net I nvest ment In come Regular Dividend Supplem ental Dividend Net C hange in In vest ment P ortfo lio Valu e Tax on Real ize d/Unrea lize d Gain s Accr etio n fro m Equity Iss uance Other Corpora
Slide 12: CSWC Investment Portfolio Composition
Page 12 CSWC Investment Portfolio Composition (1) At March 31, 2025 and December 31, 2024, we had equity ownership in approximately 65% and 62%, respectively, of our investments (2) The weighted-average annual effective yields were computed using the effective interest rates during the quarter for a
Slide 13: Quarter-over-Quarter Investment Rating Migration
Page 13 Over 95% of all debt investments are currently rated a "1" or "2" as credit portfolio continues to demonstrate solid performance Investment Rating 12/31/2024 Investment Rating Upgrades Investment Rating Downgrades 3/31/2025 # of Loans Fair Value ($MM) % of Portfolio (FV) # of Loans Fair Valu
Slide 14: History of Value Creation
Page 14 History of Value Creation $17.68 $17.38 $18.63 $20.90 $22.71 $21.97 $24.90 $28.27 $30.06 $32.93 $35.40 $17.68 $17.34 $17.80 $19.08 $18.62 $15.13 $16.01 $16.86 $16.37 $16.77 $16.70 $0.26 $0.26 $1.16 $2.31 $2.71 $3.41 $3.66 $3.89 $4.12 $0.04 $0.57 $1.56 $2.93 $4.53 $6.18 $8.00 $10.03 $12.27 $1
Slide 15: Track Record of Consistent Dividends Continues
Page 15 • In the last twelve months ended 3/31/2025, CSWC generated $2.53 per share in Pre-Tax NII and paid out $2.31 per share in Regular Dividends ◦ LTM Pre-Tax NII Regular Dividend Coverage of 110% • Cumulative Pre-Tax NII Regular Dividend Coverage of 110% since launch of credit strategy in 2015
Slide 16: Granular Credit Portfolio Heavily Weighted Towards First Lien Investments
Page 16 Granular Credit Portfolio Heavily Weighted Towards First Lien Investments 99% of credit portfolio in first lien senior secured loans with an average investment hold size of 0.9% as of 3/31/2025 Credit Portfolio Heavily Weighted to First Lien $ (M illi on s) Average H old S ize % $93 $167 $23
Slide 17: CSWC Portfolio Mix as of March 31, 2025
Page 17 CSWC Portfolio Mix as of March 31, 2025 at Fair Value Current Investment Portfolio (By Type) Current Investment Portfolio (By Industry) Current Investment Portfolio of approximately $1.8 B continues to be heavily weighted towards first lien investments and diverse across industries First Lie
Slide 18: Operating Leverage Trend
Page 18 Operating Leverage Trend Driving exceptional Operating Leverage through benefits of internally-managed structure Period Ending To ta l A ss et s ( $M M ) O perating Expenses as % of A vg A ssets $284 $326 $417 $552 $585 $736 $974 $1,258 $1,557 $1,883 4.9% 4.2% 3.7% 3.0% 2.8% 2.4% 2.2% 1.9% 1
Slide 19: Significant Unused Debt Capacity with Long-Term Duration
Page 19 Significant Unused Debt Capacity with Long-Term Duration Earliest debt maturity occurs in October 2026 Facility Total Commitments Interest Rate Maturity Principal Drawn Undrawn Commitment October 2026 Notes (1) $150.0 MM 3.375% October 2026 $150.0 MM N/A Corporate Credit Facility $485.0 MM T
Slide 20: Balance Sheet
Page 20 Balance Sheet (In Thousands, except per share amounts) Quarter Ended 6/30/2024 Quarter Ended 9/30/2024 Quarter Ended 12/31/2024 Quarter Ended 3/31/2025 Assets Portfolio Investments $1,468,126 $1,508,507 $1,701,286 $1,785,299 Cash & Cash Equivalents 33,299 47,237 36,013 43,221 Restricted Cash
Slide 21: Income Statement
Page 21 Income Statement (In Thousands, except per share amounts) Quarter Ended 6/30/2024 Quarter Ended 9/30/2024 Quarter Ended 12/31/2024 Quarter Ended 3/31/2025 Investment Income Interest Income $42,987 $43,698 $42,889 $44,619 PIK Interest Income 3,051 2,398 3,246 3,982 Dividend Income 2,418 572 5
Slide 22: Portfolio Statistics
Page 22 Portfolio Statistics Continuing to build a well performing credit portfolio (In Thousands) Quarter Ended 6/30/2024 Quarter Ended 9/30/2024 Quarter Ended 12/31/2024 Quarter Ended 3/31/2025 Portfolio Statistics Fair Value of Debt Investments $1,335,279 $1,374,041 $1,542,524 $1,605,906 Average
Slide 23: Investment Income Detail
Page 23 Investment Income Detail Constructing a portfolio of investments with recurring cash yield (In Thousands) Quarter Ended 6/30/2024 Quarter Ended 9/30/2024 Quarter Ended 12/31/2024 Quarter Ended 3/31/2025 Investment Income Breakdown Cash Interest $41,998 $42,629 $42,294 $42,985 Cash Dividends
Slide 24: Key Financial Metrics
Page 24 Key Financial Metrics Strong Pre-Tax Net Investment Income and Dividend Yield driven by net portfolio growth and investment performance (1) Return on Equity is calculated as the quarterly annualized Pre-Tax NII, Realized Earnings, or Total Earnings, respectively, divided by equity at the end
Slide 25: Interest Rate Sensitivity
Page 25 Note: Illustrative change in annual NII does not adjust for potential changes in the credit market, credit quality, size and composition of the assets in the portfolio. It also does not adjust for other business developments, including future originations and repayments. Accordingly, no assu
Slide 26: Corporate Information
Page 26 Corporate Information Board of Directors Senior Management Fiscal Year End Inside Director Michael S. Sarner March 31 Michael S. Sarner President & Chief Executive Officer Independent Directors Independent Auditor David R. Brooks Chris T. Rehberger RSM US LLP Chicago, ILChristine S. Battist