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• Pretax Net Investment Income: $0.64 per share, covering regular and supplemental dividends.

• Undistributed Taxable Income: $0.68 per share, up from $0.64 per share in the prior quarter.

• Dividends Declared: Regular dividend of $0.58 per share and supplemental dividend increased to $0.06 per share for the March quarter.

• New Commitments: $317.5 million in new commitments to nine new and 20 existing portfolio companies.

• Convertible Notes Issued: $230 million with a coupon of 5.125% and conversion price of $25 per share.

• Gross Equity Proceeds: Approximately $54 million raised through equity ATM program.

• On Balance Sheet Credit Portfolio: $1.5 billion, a 31% year-over-year growth.

• Portfolio Yield: Weighted average yield of 12.1% on the credit portfolio.

• Net Investment Income: $30.7 million or $0.64 per share for the quarter.

• Total Investment Income: Increased to $52 million from $48.7 million in the prior quarter.

• Loans on Non-Accrual: Represented 2.7% of the investment portfolio at fair value.

• Net Asset Value (NAV) Per Share: Flat at $16.59 per share.

• Balance Sheet Liquidity: Approximately $412 million in cash and undrawn leverage commitments.

• Debt-to-Equity Ratio: 0.9 to 1, up from 0.8 to 1 in the prior quarter.

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Release Date: February 04, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Capital Southwest Corp (NASDAQ:CSWC) generated pretax net investment income of $0.64 per share, covering both regular and supplemental dividends.

• The company declared an increase in the supplemental dividend to $0.06 per share for the March quarter, indicating strong financial health.

• CSWC's portfolio activity included $317.5 million in new commitments, showcasing robust deal flow and investment opportunities.

• The company issued $230 million in convertible notes, effectively managing its debt and enhancing balance sheet flexibility.

• CSWC maintained a conservative leverage ratio, with a debt-to-equity ratio of 0.9 to 1, ensuring financial stability and liquidity.

Negative Points

• The competitive environment in the lower middle market has led to tight loan pricing, potentially impacting future returns.

• CSWC's portfolio includes some non-accrual loans, representing 2.7% of the investment portfolio at fair value, which could affect earnings.

• The company faces potential risks from tariffs and immigration policies, with around 10% of the portfolio possibly impacted.

• There is ongoing pressure from spread compression due to market competition, which may affect profitability.

• The company anticipates some refinancing risk in the portfolio, with expectations of 10% to 15% portfolio rotation in 2025.