Capital Southwest Corporation · NASDAQ:CSWC
Capital Southwest — Q1 2025 Earnings Presentation
25 slides from Capital Southwest's earnings presentation, Aug 6, 2024
Slide 1: Capital Southwest Corporation Q1 2025 Earnings Presentation
Capital Southwest Corporation Q1 2025 Earnings Presentation August 6, 2024 8333 Douglas Avenue, Suite 1100 | Dallas, Texas 75225 | 214.238.5700 | capitalsouthwest.com
Slide 2: Important Notices
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 herein, do n
Slide 3: 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 4: Conference Call Participants
Conference Call Participants Bowen S. Diehl President and Chief Executive Officer Michael S. Sarner Chief Financial Officer Josh S. Weinstein Senior Managing Director and Chief Investment Officer Chris Rehberger Executive Vice President and Treasurer Page 4
Slide 5: 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 7.75% Not
Slide 6: Q1 2025 Highlights
Q1 2025 Highlights Financial Highlights • Q1 2025 Pre-Tax Net Investment Income (“NII”) of $31.3 MM or $0.69 per share • Declared Regular Dividend of $0.58 per share for the quarter ending September 30, 2024, an increase of 1.8% compared to the $0.57 per share Regular Dividend paid for the quarter e
Slide 7: Dividend Per Share
Track Record of Consistent Dividends Continues • In the last twelve months ended 6/30/2024, CSWC generated $2.76 per share in Pre-Tax NII and paid out $2.27 per share in Regular Dividends ◦ LTM Pre-Tax NII Regular Dividend Coverage of 122% • Cumulative Pre-Tax NII Regular Dividend Coverage of 111% s
Slide 8: History of Value Creation
History of Value Creation Total Value (Net Asset Value + Cumulative Dividends Paid) Increase from Credit Strategy of $15.71 per share through 6/30/2024 $35.00 $32.93 $33.39 $30.06 $30.00 $28.27 $24.90 $12.27 $12.84 $25.00 $10.03 $22.71 $21.97 $8.00 $20.90 $6.18 $2.93 $20.00 $18.63 $1.56 $4.53 $17.68
Slide 9: Lower Middle Market Credit Strategy
Lower Middle Market Credit Strategy 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, geographi
Slide 10: Granular Credit Portfolio Heavily Weighted Towards First Lien Investments
Granular Credit Portfolio Heavily Weighted Towards First Lien Investments 98% of credit portfolio in first lien senior secured loans with an average investment hold size of 1.0% as of 6/30/24 Credit Portfolio Heavily Weighted to First Lien $1,345 7.0% $1,335 $1,250 6.0% 5.6% $1,038 $1,000 5.0% Avera
Slide 11: Q1 2025 Originations
Q1 2025 Originations $108.1 MM in total new committed investments to three new portfolio companies and eleven existing portfolio companies • $75.6 MM funded at close Portfolio Originations Q1 2025 Total Debt Total Equity Unfunded Funded at Close Funded at Close Commitments at Debt Yield to Name Indu
Slide 12: Track Record of CSWC Exits Continues
Track Record of CSWC Exits Continues Refinancing activity in the portfolio increased this quarter as the lending market continues to be competitive • During the quarter, CSWC exited eight debt investments generating proceeds of $77.2 MM and a weighted average IRR of 12.6% • Cumulative weighted avera
Slide 13: CSWC Investment Portfolio Composition
CSWC Investment Portfolio Composition Maintaining appropriate portfolio leverage while receiving attractive risk- adjusted returns Investment Portfolio - Statistics (in $000's) 3/31/2024 6/30/2024 Total CSWC Total CSWC Portfolio Portfolio Number of Portfolio Companies 116 117 Total Cost $1,476,703 $
Slide 14: CSWC Portfolio Mix as of June 30, 2024 at Fair Value
CSWC Portfolio Mix as of June 30, 2024 at Fair Value Current Investment Portfolio of approximately $1.5 B continues to be heavily weighted towards first lien investments and diverse across industries Current Investment Portfolio (By Type) Current Investment Portfolio (By Industry) Senior Subordinate
Slide 15: Quarter-over-Quarter Investment Rating Migration
Quarter-over-Quarter Investment Rating Migration Approximately 92% of all debt investments are currently rated a "1" or "2" as credit portfolio continues to demonstrate solid performance Investment Rating Investment Rating Investment Rating 3/31/2024 6/30/2024 Upgrades Downgrades Fair % of Fair % of
Slide 16: Income Statement
Income Statement Quarter Ended Quarter Ended Quarter Ended Quarter Ended (In Thousands, except per share amounts) 9/30/23 12/31/23 3/31/24 6/30/24 Investment Income Interest Income $37,955 $37,841 $39,923 $42,987 PIK Interest Income 1,526 4,073 2,953 3,051 Dividend Income 2,484 4,672 1,887 2,418 Fee
Slide 17: Operating Leverage Trend
Operating Leverage Trend Continuing to improve Operating Leverage through benefits of internally- managed structure $1,557 $1,544 $1,500 6% Operating Expenses as % of Avg Assets $1,258 $1,250 5% Total Assets ($MM) $1,000 4.9% $974 4.2% 4% $736 $750 3.7% $585 $552 3% $500 $417 3.0% 2.8% $326 $284 2.4
Slide 18: NAV per Share Bridge for Quarter Ended 6/30/24
NAV per Share Bridge for Quarter Ended 6/30/24 $18 $0.69 $17.5 $17 $16.77 $0.27 $(0.57) $(0.06) $16.60 $16.5 $(0.22) $(0.18) $(0.10) $16 $15.5 Investment Portfolio $15 Earnings / Dividends Valuation Change Other Corporate $0.06 per Share $(0.32) per Share $0.09 per Share $14.5 $14 re e en d d io io
Slide 19: Significant Unused Debt Capacity with Long-Term Duration
Significant Unused Debt Capacity with Long-Term Duration Increased SPV Credit Facility to $200 MM in total commitments during the quarter Facility Total Commitments Interest Rate Maturity Principal Drawn Undrawn Commitment January 2026 Notes (1) $140.0 MM 4.50% January 2026 $140.0 MM N/A October 202
Slide 20: Balance Sheet
Balance Sheet Quarter Ended Quarter Ended Quarter Ended Quarter Ended (In Thousands, except per share amounts) 9/30/23 12/31/23 3/31/24 6/30/24 Assets Portfolio Investments $1,353,566 $1,365,037 $1,476,561 $1,468,126 Cash & Cash Equivalents 23,020 23,605 32,273 33,299 Other Assets 40,327 40,845 47,9
Slide 21: Portfolio Statistics
Portfolio Statistics Continuing to build a well performing credit portfolio Quarter Ended Quarter Ended Quarter Ended Quarter Ended (In Thousands) 9/30/23 12/31/23 3/31/24 6/30/24 Portfolio Statistics Fair Value of Debt Investments $1,179,074 $1,181,737 $1,344,559 $1,335,279 Average Debt Investment
Slide 22: Investment Income Detail
Investment Income Detail Constructing a portfolio of investments with recurring cash yield Quarter Ended Quarter Ended Quarter Ended Quarter Ended (In Thousands) 9/30/23 12/31/23 3/31/24 6/30/24 Investment Income Breakdown Cash Interest $36,588 $36,743 $38,881 $41,998 Cash Dividends 2,484 4,672 1,88
Slide 23: Key Financial Metrics
Key Financial Metrics Strong Pre-Tax Net Investment Income and Dividend Yield driven by net portfolio growth and investment performance Quarter Ended Quarter Ended Quarter Ended Quarter Ended 9/30/23 12/31/23 3/31/24 6/30/24 Key Financial Metrics Pre-Tax Net Investment Income Per Wtd Avg Diluted Sha
Slide 24: Interest Rate Sensitivity
Interest Rate Sensitivity Fixed vs. Floating Credit Portfolio Exposure 2.4% 97.6% Fixed Floating Illustrative Annual Illustrative Annual NII Change in Base Interest Rates NII Change ($'s) Change ($ Per Share) (200 bps) (21,957,039) (0.47) (150 bps) (16,467,779) (0.35) (100 bps) (10,978,520) (0.23) (
Slide 25: Corporate Information
Corporate Information Board of Directors Senior Management Fiscal Year End Inside Director Bowen S. Diehl March 31 Bowen S. Diehl President & Chief Executive Officer Independent Directors Independent Auditor David R. Brooks Michael S. Sarner Christine S. Battist Chief Financial Officer, Secretary &