Capital Southwest Announces Financial Results for First Fiscal Quarter Ended June 30, 2023 and Announces Increase in Total Dividends to $0.62 per share for the Quarter Ended September 30, 2023
CSWC Reports Pre-Tax Net Investment Income of
DALLAS, Aug. 07, 2023 (GLOBE NEWSWIRE) -- Capital Southwest Corporation (“Capital Southwest,” “CSWC” or the “Company”) (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 its financial results for the first fiscal quarter ended June 30, 2023.
First Quarter Fiscal Year 2024 Financial Highlights
- Total Investment Portfolio:
$1.3 billion - Credit Portfolio of
$1.1 billion :97% 1st Lien Senior Secured Debt$108.0 million in new committed credit investments- Weighted Average Yield on Debt Investments:
12.9% - Current non-accruals with a fair value of
$22.4 million , representing1.7% of the total investment portfolio
- Equity Portfolio of
$122.5 million , excluding investment in I-45 Senior Loan Fund ("I-45 SLF")$3.9 million in new equity co-investments
- CSWC Investment in I-45 SLF of
$51.9 million at fair value- I-45 SLF portfolio of
$131.7 million - Portfolio consists of 33 issuers:
95% 1st Lien Debt
- Portfolio consists of 33 issuers:
$78.0 million of debt outstanding at I-45 SLF- I-45 SLF fund leverage of 1.20x debt to equity at fair value
- I-45 SLF paid a
$2.1 million quarterly dividend to CSWC; an annualized yield of16.5%
- I-45 SLF portfolio of
- Credit Portfolio of
- Pre-Tax Net Investment Income:
$25.0 million , or$0.67 per weighted average share outstanding - Dividends: Paid
$0.54 per share Regular Dividend and$0.05 per share Supplemental Dividend118% LTM Pre-Tax NII Regular Dividend Coverage- Total Dividends for the quarter ended June 30, 2023 of
$0.59 per share
- Net Realized and Unrealized Depreciation:
$0.7 million $0.6 million of net appreciation related to I-45 SLF$0.6 million of net depreciation related to the credit portfolio$0.7 million of net depreciation related to the equity portfolio
- Balance Sheet:
- Cash and Cash Equivalents:
$21.3 million - Total Net Assets:
$636.2 million - Net Asset Value (“NAV”) per Share:
$16.38
- Cash and Cash Equivalents:
In commenting on the Company’s results, Bowen Diehl, President and Chief Executive Officer, stated, “The June quarter was another strong quarter for Capital Southwest, with solid originations in six new and seven existing portfolio companies and a well-performing portfolio that produced
First Quarter Fiscal Year Investment Activities
Originations
During the quarter ended June 30, 2023, the Company originated
Edge Autonomy Holdings, LLC,
FS Vector, LLC,
Bond Brand Loyalty ULC,
Heat Trak, LLC,
HH-Inspire Acquisition, Inc. (dba Inspire Aesthetics),
LKC Technologies, Inc.,
Prepayments and Exits
During the quarter ended June 30, 2023, the Company received proceeds from the sale of one equity investment totaling
Chandler Signs: Proceeds of
First Fiscal Quarter 2024 Operating Results
For the quarter ended June 30, 2023, Capital Southwest reported total investment income of
For the quarter ended June 30, 2023, total operating expenses (excluding interest expense) were
For the quarter ended June 30, 2023, interest expense was
For the quarter ended June 30, 2023, total pre-tax net investment income was
During the quarter ended June 30, 2023, Capital Southwest recorded total net realized and unrealized losses on investments of
The Company’s NAV at June 30, 2023 was
Liquidity and Capital Resources
At June 30, 2023, Capital Southwest had approximately
In June 2023, the Company issued approximately
The Company has an "at-the-market" offering (the "Equity ATM Program"), pursuant to which the Company may offer and sell, from time to time through sales agents, shares of its common stock having an aggregate offering price of up to
In August 2016, CSWC entered into a senior secured credit facility (the “Credit Facility”) to provide additional liquidity to support its investment and operational activities. Borrowings under the Credit Facility accrue interest on a per annum basis at a rate equal to the applicable SOFR rate plus
On August 2, 2023, CSWC entered into the Third Amended and Restated Senior Secured Revolving Credit Agreement which (1) increased commitments under the Credit Facility from
On April 20, 2021, our wholly owned subsidiary, Capital Southwest SBIC I, LP (“SBIC I”), received a license from the Small Business Administration (the "SBA") to operate as a Small Business Investment Company ("SBIC") under Section 301(c) of the Small Business Investment Act of 1958, as amended. The SBIC license allows SBIC I to obtain leverage by issuing SBA-guaranteed debentures ("SBA Debentures"), subject to the issuance of a leverage commitment by the SBA. SBA debentures are loans issued to an SBIC that have interest payable semi-annually and a ten-year maturity. The interest rate is fixed shortly after issuance at a market-driven spread over U.S. Treasury Notes with ten-year maturities. Current statutes and regulations permit SBIC I to borrow up to
In November 2015, I-45 SLF entered into a senior secured credit facility led by Deutsche Bank. On March 30, 2023, the I-45 credit facility was amended to permanently reduce total commitments to
Share Repurchase Program
On July 28, 2021, the Company's board of directors (the "Board") approved a share repurchase program authorizing the Company to repurchase up to
Regular Dividend of
On August 3, 2023, the Board declared a total dividend of
The Company's dividend will be payable as follows:
Regular Dividend
Amount Per Share:
Ex-Dividend Date: September 14, 2023
Record Date: September 15, 2023
Payment Date: September 29, 2023
Supplemental Dividend
Amount Per Share:
Ex-Dividend Date: September 14, 2023
Record Date: September 15, 2023
Payment Date: September 29, 2023
When declaring dividends, the Board reviews estimates of taxable income available for distribution, which may differ from net investment income under generally accepted accounting principles. The final determination of taxable income for each year, as well as the tax attributes for dividends in such year, will be made after the close of the tax year.
Capital Southwest maintains a dividend reinvestment plan ("DRIP") that provides for the reinvestment of dividends on behalf of its registered stockholders who hold their shares with Capital Southwest’s transfer agent and registrar, American Stock Transfer and Trust Company. Under the DRIP, if the Company declares a dividend, registered stockholders who have opted into the DRIP by the dividend record date will have their dividend automatically reinvested into additional shares of Capital Southwest common stock.
First Quarter 2024 Earnings Results Conference Call and Webcast
Capital Southwest has scheduled a conference call on Tuesday, August 8, 2023, at 11:00 a.m. Eastern Time to discuss the first quarter 2024 financial results. You may access the call by using the Investor Relations section of Capital Southwest's website at www.capitalsouthwest.com, or by using http://edge.media-server.com/mmc/p/u3nrxpe8.
An audio archive of the conference call will also be available on the Investor Relations section of Capital Southwest’s website.
For a more detailed discussion of the financial and other information included in this press release, please refer to the Capital Southwest's Form 10-Q for the period ended June 30, 2023 to be filed with the Securities and Exchange Commission and Capital Southwest’s First Fiscal Quarter 2024 Earnings Presentation to be posted on the Investor Relations section of Capital Southwest’s website at www.capitalsouthwest.com.
About Capital Southwest
Capital Southwest Corporation (Nasdaq: CSWC) is a Dallas, Texas-based, internally managed business development company with approximately
Forward-Looking Statements
This press release contains historical information and forward-looking statements with respect to the business and investments of Capital Southwest, including, but not limited to, the statements about Capital Southwest's future performance and financial performance and financial condition, and the timing, form and amount of any distributions or supplemental dividends in the future. Forward-looking statements are statements that are not historical statements and can often be identified by words such as "will," "believe," "expect" and similar expressions and variations or negatives of these words. These statements are based on management's current 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 those expressed in any forward-looking statement. These risks include risks related to: changes in the markets in which Capital Southwest invests; changes in the financial, capital, and lending markets; changes in the interest rate environment and its impact on our business and our portfolio companies; regulatory changes; tax treatment; our ability to operate our wholly owned subsidiary, Capital Southwest SBIC I, LP, as a small business investment company; an economic downturn and its impact on the ability of our portfolio companies to operate and the investment opportunities available to us; the impact of supply chain constraints and labor shortages on our portfolio companies; and the elevated levels of inflation and its impact on our portfolio companies and the industries in which we invests.
Readers should not place undue reliance on any forward-looking statements and are encouraged to review Capital Southwest's Annual Report on Form 10-K for the year ended March 31, 2023 and any subsequent filings, including the "Risk Factors" sections therein, with the Securities and Exchange Commission for a more complete discussion of the risks and other factors that could affect any forward-looking statements. Except as required by the federal securities laws, Capital Southwest does not undertake any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, changing circumstances or any other reason after the date of this press release.
Investor Relations Contact:
Michael S. Sarner, Chief Financial Officer
214-884-3829
CAPITAL SOUTHWEST CORPORATION AND SUBSIDIARIES | |||||||
CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES | |||||||
(In thousands, except shares and per share data) | |||||||
June 30, | March 31, | ||||||
2023 | 2023 | ||||||
(Unaudited) | |||||||
Assets | |||||||
Investments at fair value: | |||||||
Non-control/Non-affiliate investments (Cost: | $ | 1,046,398 | $ | 966,627 | |||
Affiliate investments (Cost: | 187,058 | 188,505 | |||||
Control investments (Cost: | 51,862 | 51,256 | |||||
Total investments (Cost: | 1,285,318 | 1,206,388 | |||||
Cash and cash equivalents | 21,278 | 21,585 | |||||
Receivables: | |||||||
Dividends and interest | 19,743 | 18,430 | |||||
Escrow | 467 | 363 | |||||
Other | 819 | 647 | |||||
Income tax receivable | 102 | 368 | |||||
Debt issuance costs (net of accumulated amortization of | 3,440 | 3,717 | |||||
Other assets | 5,836 | 6,186 | |||||
Total assets | $ | 1,337,003 | $ | 1,257,684 | |||
Liabilities | |||||||
SBA Debentures (Par value: | $ | 121,352 | $ | 116,330 | |||
January 2026 Notes (Par value: | 139,135 | 139,051 | |||||
October 2026 Notes (Par value: | 147,448 | 147,263 | |||||
August 2028 Notes (Par value: | 69,327 | — | |||||
Credit facility | 195,000 | 235,000 | |||||
Other liabilities | 15,216 | 16,761 | |||||
Accrued restoration plan liability | 593 | 598 | |||||
Income tax payable | 876 | 156 | |||||
Deferred tax liability | 11,855 | 12,117 | |||||
Total liabilities | 700,802 | 667,276 | |||||
Commitments and contingencies (Note 10) | |||||||
Net Assets | |||||||
Common stock, | 9,710 | 9,604 | |||||
Additional paid-in capital | 667,440 | 646,586 | |||||
Total distributable (loss) earnings | (40,949 | ) | (41,845 | ) | |||
Treasury stock - at cost, 0 shares at June 30, 2023 and 2,339,512 shares at March 31, 2023 | — | (23,937 | ) | ||||
Total net assets | 636,201 | 590,408 | |||||
Total liabilities and net assets | $ | 1,337,003 | $ | 1,257,684 | |||
Net asset value per share (38,839,918 shares outstanding at June 30, 2023 and 36,076,425 shares outstanding at March 31, 2023) | $ | 16.38 | $ | 16.37 |
CAPITAL SOUTHWEST CORPORATION AND SUBSIDIARIES | |||||||
CONSOLIDATED STATEMENTS OF OPERATIONS | |||||||
(Unaudited) | |||||||
(In thousands, except shares and per share data) | |||||||
Three Months Ended | |||||||
June 30, | |||||||
2023 | 2022 | ||||||
Investment income: | |||||||
Interest income: | |||||||
Non-control/Non-affiliate investments | $ | 30,640 | $ | 15,748 | |||
Affiliate investments | 4,179 | 2,512 | |||||
Payment-in-kind interest income: | |||||||
Non-control/Non-affiliate investments | 914 | 416 | |||||
Affiliate investments | 742 | 271 | |||||
Dividend income: | |||||||
Non-control/Non-affiliate investments | 499 | 550 | |||||
Affiliate investments | 60 | 101 | |||||
Control investments | 2,144 | 1,535 | |||||
Fee income: | |||||||
Non-control/Non-affiliate investments | 945 | 1,290 | |||||
Affiliate investments | 157 | 118 | |||||
Control investments | 24 | — | |||||
Other income | 57 | 2 | |||||
Total investment income | 40,361 | 22,543 | |||||
Operating expenses: | |||||||
Compensation | 2,510 | 1,542 | |||||
Share-based compensation | 963 | 821 | |||||
Interest | 9,681 | 5,484 | |||||
Professional fees | 955 | 849 | |||||
General and administrative | 1,249 | 1,217 | |||||
Total operating expenses | 15,358 | 9,913 | |||||
Income before taxes | 25,003 | 12,630 | |||||
Federal income, excise and other taxes | 599 | 73 | |||||
Deferred taxes | (152 | ) | 119 | ||||
Total income tax provision | 447 | 192 | |||||
Net investment income | $ | 24,556 | $ | 12,438 | |||
Realized (loss) gain | |||||||
Non-control/Non-affiliate investments | $ | (5,806 | ) | $ | 2,549 | ||
Affiliate investments | (6,655 | ) | 15 | ||||
Income tax provision | (321 | ) | (244 | ) | |||
Total net realized (loss) gain on investments, net of tax | (12,782 | ) | 2,320 | ||||
Net unrealized appreciation (depreciation) on investments | |||||||
Non-control/Non-affiliate investments | 2,283 | (4,551 | ) | ||||
Affiliate investments | 9,169 | (714 | ) | ||||
Control investments | 606 | (5,902 | ) | ||||
Income tax provision | (20 | ) | (1,081 | ) | |||
Total net unrealized appreciation (depreciation) on investments, net of tax | 12,038 | (12,248 | ) | ||||
Net realized and unrealized (losses) gains on investments | (744 | ) | (9,928 | ) | |||
Net increase in net assets from operations | $ | 23,812 | $ | 2,510 | |||
Pre-tax net investment income per share - basic and diluted | $ | 0.67 | $ | 0.50 | |||
Net investment income per share – basic and diluted | $ | 0.65 | $ | 0.49 | |||
Net increase in net assets from operations – basic and diluted | $ | 0.63 | $ | 0.10 | |||
Weighted average shares outstanding – basic and diluted | 37,597,884 | 25,513,534 |