Capital Southwest Q3 Earnings Call Highlights

Core Insights - The company reported strong financial performance with a pre-tax net investment income (NII) of $0.60 per share, totaling approximately $34.6 million, and an increase in total investment income to $61.4 million from $56.9 million in the prior quarter, driven by higher PIK income, fees, and dividend income [3][4][7] Undistributed Taxable Income (UTI) - The company's UTI position is $1.02 per share, up from $0.68 per share in December 2024, supported by realized gains from equity exits totaling $44.5 million over the last 12 months, with an additional $6.8 million realized post-quarter [1][7] Investment and Portfolio Activity - The company closed $244 million in new commitments during the quarter, including $199 million into eight new portfolio companies, with a focus on first lien senior secured debt [6][8] - The on-balance credit portfolio grew to $1.8 billion, representing a 19% year-over-year increase, with 99% of the portfolio remaining first lien senior secured [10][11] Joint Venture and Competitive Strategy - A new first-out senior loan joint venture was formed to access larger, tighter-spread deals, with each partner committing $50 million and targeting a leverage of ≤ 1.5x debt/EBITDA [5][20] - The joint venture aims to generate low- to mid-teens equity returns for the company while allowing participation in higher-quality deals [20][23] Financial Position and Liquidity - The company raised approximately $53 million through its equity ATM program, contributing to a net asset value (NAV) increase to $16.75 per share from $16.62 in the prior quarter [17][18] - Total liquidity stands at about $438 million, providing more than 1.5x coverage of $285 million in unfunded commitments [18] Credit Metrics and Risk Management - The weighted average yield across the credit portfolio is reported at 11.3%, with non-accruals at 1.5% of the investment portfolio at fair value [14][15] - Approximately 93% of the credit portfolio is sponsor-backed, indicating a focus on disciplined risk management [12][14]