Capital Southwest Corporation · NASDAQ:CSWC
Capital Southwest — Q1 2019 Earnings Presentation
21 slides from Capital Southwest's earnings presentation, Aug 6, 2018
Slide 1: Capital Southwest Corporation Q1 2019 Earnings Presentation
Capital Southwest Corporation Q1 2019 Earnings Presentation August 7, 2018 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 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 fut
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 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 elected to be regulated as a BDC in 1988 • Publicly‐traded on Nasdaq: Common Stock (“CSWC”) and December
Slide 5: Q1 2019 Highlights
Q1 2019 Highlights Financial Highlights • Q1 2019 Pre‐Tax Net Investment Income (“NII”) of $5.0 MM or $0.31 per share • Announced Supplemental Dividend Program $0.60 per share Supplemental Dividend paid during the quarter Expect to pay $0.10 per share Supplemental Dividend per quarter going forw
Slide 6: Track Record of Dividend and NAV Growth Continues
Track Record of Dividend and NAV Growth Continues • In the last twelve months ending 6/30/18, CSWC generated $1.11 per share in Pre‐Tax NII and paid out $1.07 per share in regular dividends LTM Regular Dividend coverage of 104% of Pre‐Tax NII Ten consecutive quarters of regular dividend per shar
Slide 7: Two Pronged Investment Strategy
Two Pronged Investment Strategy CORE: Lower Middle Market (“LMM”): CSWC led or Club Deals • Companies with EBITDA between $3 MM and $15 MM • Typical leverage of 2x –4x Debt to EBITDA through CSWC debt • Commitment size up to $25 MM with hold sizes generally $10 MM to $20 MM • Both Sponsored and Non‐
Slide 8: Strong Quarter of CSWC Originations
Strong Quarter of CSWC Originations $66.9 MM in new committed investments during the quarter ($53.3 MM funded at close) at a weighted average debt YTM of 11.1% Q1 2019 Portfolio Originations Unfunded Total Debt Total Equity Commitments Funded at Close Funded at Close at Close Debt Spread over Debt Y
Slide 9: CSWC Portfolio Prepayments and Exits
CSWC Portfolio Prepayments and Exits Prepayments and exits continue to demonstrate our track record of generating attractive risk adjusted returns on shareholders’ capital • During the quarter, we received $39.9 MM in proceeds from two Lower Middle Market exits and one Upper Middle Market prepayment
Slide 10: CSWC Portfolio Asset Mix by Market
CSWC Portfolio Asset Mix by Market Maintaining appropriate portfolio leverage while receiving attractive risk adjusted returns Investment Portfolio ‐ Statistics at 6/30/18 Lower Middle Upper Middle (In Thousands) Market (1) Market Number of Portfolio Companies 19 10 Total Cost $227,901 $73,033 Total
Slide 11: Robust Lower Middle Market First Lien Credit Portfolio
Robust Lower Middle Market First Lien Credit Portfolio CSWC Credit Portfolio continues to migrate to LMM and First Lien Investments • LMM Investments have increased to 73% of the credit portfolio at 6/30/18 from 18% at 6/30/16 • First Lien Investments have increased to 86% of the credit portfolio at
Slide 12: CSWC Portfolio Mix as of 6/30/18 at Fair Value
CSWC Portfolio Mix as of 6/30/18 at Fair Value Current Investment Portfolio of $411 MM continues to be granular and diverse Current Investment Portfolio (By Type) Current Investment Portfolio (By Industry) Page 12
Slide 13: Interest Rate Sensitivity
Interest Rate Sensitivity Debt Portfolio Exposure at 6/30/18 Well‐Positioned for Rising Interest Rate Environment Fixed vs. Floating Portfolio Composition (1) Illustrative Illustrative Change in Base Interest Rates NII Change ($'s) NII Change (Per Share) (50bps) ($1,250,241) ($0.08) 50 bps $1,271,18
Slide 14: I-45 Portfolio Overview
I‐45 Portfolio Overview I‐45 loan portfolio of $228 MM is 93% first lien with average hold size of 2.2% Current I‐45 Portfolio (By Type) Current I‐45 Portfolio (By Industry) Telecommunications Healthcare & Pharmaceuticals Retail Capital Equipment Services: Consumer I‐45 Portfolio Statistics (In Thou
Slide 15: Income Statement
Income Statement Quarter Ended Quarter Ended Quarter Ended Quarter Ended (In Thousands, except per share amounts) 9/30/17 12/31/17 3/31/18 6/30/18 Investment Income Interest Income $5,282 $5,566 $6,575 $7,643 Dividend Income $3,088 $3,149 $3,069 $3,075 Fees and Other Income $139 $304 $230 $389 Total
Slide 16: Balance Sheet
Balance Sheet Quarter Ended Quarter Ended Quarter Ended Quarter Ended (In Thousands, except per share amounts) 9/30/2017 12/31/2017 3/31/2018 6/30/18 Assets Portfolio Investments $321,860 $367,120 $393,095 $411,330 Cash & Cash Equivalents $33,329 $20,527 $7,907 $12,532 Deferred Tax Asset $1,846 $2,0
Slide 17: Portfolio Statistics
Portfolio Statistics Continuing to build a well performing credit portfolio with no non‐accruals Quarter Ended Quarter Ended Quarter Ended Quarter Ended (In Thousands) 9/30/2017 12/31/2017 3/31/2018 6/30/18 Portfolio Statistics Fair Value of Debt Investments $187,316 $226,441 $239,122 $272,133 Avera
Slide 18: Significant Unused Debt Capacity with Long-Term Duration
Significant Unused Debt Capacity with Long‐Term Duration Earliest Debt Maturity occurs in November 2021 Facility Total Commitments Interest Rate Maturity Principal Drawn Credit Facility(1) $210.0 MM L + 3.00% with Step‐Down November 2021 $65.0 MM December 2022 Notes $58.9 MM 5.95% December 2022 $58.
Slide 19: Investment Income Detail
Investment Income Detail Constructing a portfolio of investments with recurring cash yield • Non‐Cash and Non‐Recurring investment income remain a minor portion of Total Investment Income Quarter Ended Quarter Ended Quarter Ended Quarter Ended (In Thousands) 9/30/17 12/31/17 3/31/18 6/30/18 Investme
Slide 20: Key Financial Metrics
Key Financial Metrics Strong Earnings ROE as Portfolio continues to appreciate Quarter Ended Quarter Ended Quarter Ended Quarter Ended 9/30/2017 12/31/2017 3/31/2018 6/30/18 Key Financial Metrics Pre‐Tax Net Investment Income Per Wtd Avg Diluted Share $0.25 $0.27 $0.28 $0.31 Annualized Pre‐Tax Net I
Slide 21: Corporate Information
Corporate Information Board of Directors Senior Management Fiscal Year End Inside Directors Bowen S. Diehl March 31 Bowen S. Diehl President & Chief Executive Officer Independent Directors Independent Auditor David R. Brooks Michael S. Sarner RSM US Christine S. Battist Chief Financial Officer, Secr