Capital Southwest Reveals Positive Financial Performance Report
Overview of Capital Southwest's Financial Results
Capital Southwest Corporation (NASDAQ: CSWC), a business development company focused on middle-market investments, recently shared its impressive financial results for its second fiscal quarter. The Company emphasizes supporting the acquisition and growth of middle-market businesses, showcasing its strong portfolio performance this quarter.
Financial Highlights
During this quarter, the Company reported a total investment portfolio valued at approximately $1.5 billion, comprising a credit portfolio of $1.4 billion, predominantly consisting of first lien senior secured debt, which accounts for 98% of the portfolio. Additionally, new credit investments reached $88 million, while the weighted average yield on debt investments stood at 12.9%. However, there are current non-accruals with a fair value of $52.2 million, representing 3.5% of the total investment portfolio.
Investment Breakdown
The equity portfolio totaled $134.5 million, with $1.8 million in new equity co-investments during this quarter. The Company also reported a pre-tax net investment income of $30 million, equating to $0.64 per weighted average share outstanding. Notably, the Company achieved a robust operating leverage ratio of 1.7% for this quarter.
Dividend Announcements
Capital Southwest declared a regular dividend of $0.58 per share along with a supplemental dividend of $0.05 per share, resulting in total dividends for the quarter amounting to $0.64 per share. The board has reiterated its intention to sustain the distribution of quarterly supplemental dividends in the foreseeable future.
Investment Activity Overview
During the quarter, the Company originated $89.8 million in new commitments across four new portfolio companies, totaling $73 million in investments, with an add-on commitment of $16.8 million in an additional 11 companies. This proactive approach towards growing its portfolio is a testament to its strategic focus on middle-market investments.
Highlighted New Investments
Some of the notable new investments include:
- InSure Home Corporation: $25 million in first lien debt.
- Campany Roof Maintenance, LLC: A total commitment of approximately $20.3 million.
- LEHR Upfitters, LLC: Providing upfitting services with an investment of $10 million.
- UPS Intermediate, LLC: Secured a $10 million split lien term loan.
Operating Results
In terms of operating results, the Company recorded a total investment income of $48.7 million, a slight decline compared to $51.4 million in the prior quarter. However, the operating expenses without interest were reduced to $6.1 million, improving operational efficiency. The increased interest expenses to $12.6 million were primarily due to a higher average debt outstanding.
Liquidity Position and Capital Resources
Capital Southwest's liquidity remains healthy, with approximately $47.2 million in unrestricted cash and $406.2 million in unused capacity under its corporate credit facility. The Company is well-positioned with a solid regulatory debt-to-equity ratio of 0.80.
Outlook and Future Growth
The leadership at Capital Southwest, under the direction of President and CEO Bowen Diehl, remains optimistic about future growth. With delayed deal closings and an impressive backlog of opportunities, the Company is poised to see robust portfolio growth in upcoming quarters.
Frequently Asked Questions
What are the financial highlights of Capital Southwest for this quarter?
Capital Southwest reported a total investment portfolio of $1.5 billion, with a pre-tax net investment income of $30 million, and a regular dividend of $0.58 per share.
What investment activities were conducted by Capital Southwest?
The Company originated $89.8 million in new commitments across various portfolio companies, demonstrating its active investment strategy.
When are the declared dividends set to be paid?
The total declared dividends of $0.63 per share for the quarter are scheduled to be paid on December 31, 2024.
What is the current liquidity position of Capital Southwest?
As of the latest report, Capital Southwest has about $47.2 million in unrestricted cash and substantial unused capacity under its credit facilities.
What is the outlook for Capital Southwest moving forward?
Management is optimistic about the Company's growth potential, forecasting robust expansion in the next reporting period due to a strong portfolio and a healthy backlog of deals.
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