Q2 2025 Capital Southwest Corp Earnings Call Transcript
Key Points
- Capital Southwest Corp (CSWC) generated pre-tax net investment income of $0.64 per share, fully covering both its regular and supplemental dividends.
- The company declared a regular dividend of $0.58 per share and a supplemental dividend of $0.05 per share for the December quarter, indicating strong dividend coverage.
- CSWC's portfolio activity included $89.8 million in new commitments, with a significant portion in first lien senior secured debt, reflecting a conservative investment strategy.
- The company increased its corporate credit facility to $485 million, enhancing its balance sheet liquidity and financial flexibility.
- CSWC's equity co-investment portfolio showed a fair value of $134 million, representing 9% of the total portfolio, with significant unrealized appreciation, providing potential for future gains.
- Competition in the lower middle market remains fierce, leading to tighter spreads on quality new deals and slower net portfolio growth.
- The company experienced a decrease in total investment income to $48.7 million, primarily due to a reduction in one-time cash dividends and fee revenue.
- Loans on nonaccrual represented 3.5% of the investment portfolio at fair value, indicating some credit challenges.
- CSWC's net asset value per share decreased slightly by $0.01 to $16.59, driven by net realized and unrealized depreciation on the investment portfolio.
- The company faces potential yield compression due to anticipated lower interest rates, which could impact future earnings and dividend sustainability.
Thank you for joining today's Capital Southwest second quarter fiscal year 2025 earnings call. Participating on the call today are Bowen Diehl, Chief Executive Officer; Michael Sarner, Chief Financial Officer; Josh Weinstein, Chief Investment Officer, and Chris Rehberger, Executive Vice President of Finance.
I will now turn the call over to Chris Rehberger.
Thank you. I would like to remind everyone that in the course of this call, we will be making certain forward-looking statements. These statements are based on current conditions, currently available information, and management's expectations, assumptions, and beliefs. They are not guarantees of future results and are subject to numerous risks, uncertainties, and assumptions that could cause actual results to differ materially from such statements.
For information concerning these risks and uncertainties, see Capital Southwestâs publicly available filings with the SEC. The company does not undertake any
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