UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q 1 (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2024 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ……………..to …………….. Commission File Number: 814-00061 | --- | --- | |------------------------------------------------------------------------------------- ...

Capital Southwest (NASDAQ:CSWC) Q2 2025 Earnings Conference Call October 29, 2024 11:00 AM ET Company Participants Chris Rehberger - EVP of Finance Bowen Diehl - CEO Josh Weinstein - Chief Investment Officer Michael Sarner - CFO Conference Call Participants Brian Mckenna - JMP Securities Bryce Rowe - B. Riley Securities FBR Doug Harter - UBS Matthew Hurwit - Jefferies Robert Dodd - Raymond James Operator Thank you for joining today's Capital Southwest Second Quarter Fiscal Year 2025 Earnings Call. Participa ...

Financial Data and Key Metrics Changes - Pre-tax net investment income for the quarter was $30 million or $0.64 per share, a decrease from $31.3 million or $0.69 per share in the prior quarter [34] - Total investment income decreased to $48.7 million from $51.4 million in the prior quarter, primarily due to a reduction in one-time cash dividends and fee revenue [35] - The company's NAV per share decreased slightly by $0.01 to $16.59 per share, driven by net realized and unrealized depreciation on the investment portfolio [41] Business Line Data and Key Metrics Changes - Portfolio activity included $89.8 million in new commitments to four new portfolio companies and 11 existing companies, with $45.2 million in proceeds from debt prepayments generating a weighted average realized IRR of 14.5% [13][28] - The on-balance sheet credit portfolio ended the quarter at $1.4 billion, representing year-over-year growth of 17% from $1.2 billion [23] - The credit portfolio had a weighted average yield of 12.9% and a weighted average leverage of 3.8 times EBITDA [29] Market Data and Key Metrics Changes - Deal flow in the lower middle market remains healthy, but competition for quality deals has resulted in tighter spreads and slower net portfolio growth [9] - The current backlog of deals indicates strong net portfolio growth expected in the December quarter, with loan-to-value levels ranging from 35% to 50% [10] - The company has seen increased competition from banks, affecting pricing dynamics in the market [60] Company Strategy and Development Direction - The company maintains a conservative approach to BDC leverage and balance sheet liquidity, allowing for continued investment in new platform companies and financing for existing portfolio companies [16] - The investment strategy focuses on lending and investing in the lower middle market, with approximately 93% of the credit portfolio backed by private equity firms [19] - The company aims to continue distributing excess quarterly pretax NII as supplemental dividends, supported by a current UTI balance of $0.64 per share [39] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to generate attractive returns despite competitive pressures and a challenging market environment [12] - The overall health of the portfolio is strong, with 93.5% of the portfolio rated in the top two categories and cash flow coverage of debt service obligations at 3.4 times [31] - Management noted that while there are idiosyncratic challenges, the overall portfolio remains resilient with significant upgrades outpacing downgrades [30][87] Other Important Information - The company raised approximately $21 million in gross equity proceeds through its equity ATM program at a weighted average share price of $24.49 per share [14] - The company has robust balance sheet liquidity with approximately $475 million in cash and undrawn leverage commitments [42] - The company is actively working towards obtaining a second SBIC license, with optimism about completing the process by the end of the calendar year [44] Q&A Session Summary Question: Can you quantify the deals pushed into calendar Q4 and the expected net portfolio growth? - Management indicated significant net portfolio growth expected in Q4, estimating $150 million to $200 million of net portfolio growth for the quarter [52][53] Question: What is the current state of new deal activity in the lower middle market? - Management noted that while deal flow has been relatively flat, there is increased competition from larger private equity firms moving down market, which could impact pricing [58][59] Question: What is the appetite for raising capital given the premium to book value? - Management confirmed a proactive approach to raising capital, with expectations of increasing secured capacity and engaging in unsecured activity over the next six to nine months [66] Question: Can you provide details on the non-accruals and expectations for those assets? - Management mentioned two new non-accruals, with expectations for restructuring by the end of December, indicating ongoing discussions with management teams [72][74] Question: Are there any emerging signs of weakness in the portfolio? - Management identified lower-end consumer businesses and B2B sectors as areas of caution, but overall, the portfolio remains strong with significant upgrades [85][86]

Capital Southwest (CSWC) came out with quarterly earnings of $0.66 per share, in line with the Zacks Consensus Estimate. This compares to earnings of $0.69 per share a year ago. These figures are adjusted for non-recurring items. A quarter ago, it was expected that this business development company would post earnings of $0.66 per share when it actually produced earnings of $0.63, delivering a surprise of -4.55%. Over the last four quarters, the company has surpassed consensus EPS estimates just once. Capit ...

Exhibit 99.1 Second Quarter Fiscal Year 2025 Financial Highlights 8333 Douglas Avenue, Suite 1100 Dallas, Texas 75225 T 214.238.5700 F 214.238.5701 Capital Southwest Announces Financial Results for Second Fiscal Quarter Ended September 30, 2024, Declares Regular Dividend of $0.58 per share and Supplemental Dividend of $0.05 per share for the Quarter Ending December 31, 2024 CSWC Reports Pre-Tax Net Investment Income of $0.64 Per Share for Quarter Ended September 30, 2024 Dallas, Texas – October 28, 2024 – C ...

Rising interest rates benefited business development companies greatly over the past several quarters due to the fact that the overwhelming majority of their debt investments were at floating rates, while much of their debt was at fixed rates. With Hidden Dividend Stocks Plus he scours the world's markets to find solid income opportunities with dividend yields ranging from 5% to 10% or more, backed by strong earnings. Features include: a portfolio with up to 40 holdings at a time including links to associat ...

Klaus Vedfelt Capital Southwest Corporation (NASDAQ:CSWC) is a well-managed business development company with considerable net investment income potential. The BDC is focused primarily on highly collateralized First Liens which dominate the Capital Southwest's debt portfolio, while Equity exposure could boost Capital Southwest's returns in case of a lucrative portfolio exit. Capital Southwest offers passive income investors a well-covered 10% yield and a well-performing credit portfolio. Due to the quality ...

DALLAS, Sept. 12, 2024 (GLOBE NEWSWIRE) -- Capital Southwest Corporation ("Capital Southwest") (Nasdaq: CSWC), an internally managed business development company focused on providing flexible financing solutions to support the acquisition and growth of middle market businesses, today announced an increase to the total commitments under its senior secured credit facility (the "Corporate Credit Facility"). The Corporate Credit Facility was increased under the existing accordion feature by $25 million, bringin ...

Core Viewpoint - The article highlights two high-income stocks, Capital Southwest and Ladder Capital, which offer attractive dividend yields of 9.1% and 7.7% respectively, making them appealing options for dividend investors [1][12]. Group 1: Capital Southwest (CSWC) - CSWC is a well-managed business development company (BDC) with a conservative investment portfolio and a low operating expense ratio of 1.8%, the second-lowest in the BDC sector [2][3]. - The company has raised its dividend 29 times since 2015, with a cumulative dividend of $16.79 nearly equal to its NAV per share of $17.68 [3][4]. - CSWC's portfolio consists of 89% first lien debt and 9.1% equity exposure across 69 portfolio companies, focusing on defensive sectors like healthcare and food [4]. - The company generated a weighted average yield of 13.5% on income-producing investments and saw $108 million in new commitments during fiscal Q1 2025 [4]. - CSWC maintains a low debt-to-equity ratio of 0.75x, allowing for potential portfolio growth, and has a 122% NII-to-Dividend coverage ratio [4][12]. - The current price of $25.36 reflects a Price-to-NAV of 1.53x, but the forward PE of 9.8x suggests it is not overpriced given its earnings power [4]. Group 2: Ladder Capital (LADR) - LADR is an internally managed commercial mortgage REIT with a portfolio size of $5.2 billion, of which $2.5 billion is allocated to commercial loans [5][6]. - The loan portfolio has a 64% weighted average loan-to-value ratio, with 99% of loans being senior secured first mortgages, providing a buffer against potential losses [5][6]. - LADR's office loans constitute only 17% of the total portfolio, with a focus on Class A properties and loans originated post-COVID [6][7]. - The company reported a 10.5% return on adjusted equity during Q2 2024, with distributable EPS of $0.31 covering the $0.23 quarterly dividend at a 135% coverage ratio [8][10]. - LADR's adjusted debt-to-equity ratio improved to 1.4x, reflecting a strong balance sheet with higher liquidity and lower leverage [10][11]. - The current price of $11.89 represents a 13% discount to the undepreciated book value of $13.71, making it an attractive investment opportunity [11][12].

Here are three stocks added to the Zacks Rank #6 (Strong Sell) List today: Blue Owl Capital Inc. (OWL) is an asset management company. The Zacks Consensus Estimate for its current year earnings has been 3.7% downward over the last 60 days. CPI Card Group Inc. (PMTS) is a designer of financial cards. The Zacks Consensus Estimate for its current year earnings has been revised 4.5% downward over the last 60 days. Capital Southwest Corporation (CSWC) is a business development company specializing in credit and ...