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What were the key takeaways from Capital Southwest's earnings call?

- **Revenue and Dividends**: $0.61 per share net income with $0.64 total dividends, supported by $350M debt issuance and 104% dividend coverage.
- **Portfolio Growth**: 24% YoY credit portfolio expansion to $1.7B, 99% first lien senior secured, and 3.6x cash flow coverage.
- **Equity Upside**: $172M equity co-investments at 126% of cost, contributing $0.63 per share in unrealized gains.
- **Liquidity and Leverage**: $719M liquidity, 0.91x regulatory leverage, and 1.6% operating leverage below industry average.
- **Pipeline Momentum**: Q4 originations expected to match Q2 levels, with focus on add-ons and conservative underwriting.

**【CEO Summary Section】**
- Generated pretax net investment income of $0.61 per share, with total dividends declared at $0.64 per share for the quarter.
- Raised $350 million in 5.95% unsecured notes, redeeming $221.9 million in maturing debt without make-whole premiums.
- Originated $245 million in new commitments across 7 platforms and 10 add-ons, with 32% of capital allocated to performing portfolio companies.
- Weighted average spread on new commitments was 6.5%, reflecting strong pricing in a competitive market.

**【CIO (Josh Weinstein) Commentary】**
- Credit portfolio grew 24% YoY to $1.7 billion, with 99% of debt in first lien senior secured positions.
- Equity co-investment portfolio of $172 million (9% of total assets) marked at 126% of cost, contributing $0.63 per share in unrealized gains.
- Portfolio companies achieved 10% annualized EBITDA growth, with cash flow coverage of 3.6x, the highest in 3 years.
- 91% of loans rated in top 2 categories, with 0.9% average exposure per company, ensuring granular risk distribution.

**【CFO (Chris Rehberger) Financial Commentary】**
- Reported pretax net investment income of $34 million ($0.61 per share), with 104% dividend coverage over 12 months.
- Operating leverage of 1.6%, significantly below industry average of 2.7%, driven by internally managed model efficiency.
- NAV per share increased to $16.62, supported by $40 million in ATM equity proceeds at 137% of NAV.
- Regulatory leverage of 0.91x, with $719 million in liquidity to cover $334 million in unfunded commitments.

**【Q&A Highlights】**
- Pipeline expansion: CEO expects $150-200 million in quarterly originations, up from prior $100-125 million range.
- Credit quality: 9% of portfolio underperforming, but 3.6x LTV and 3.5x EBITDA leverage provide significant cushions.
- Equity strategy: 9% of assets in equity co-investments, targeting 10-15% over time through non-sponsored deals.
- Capital structure: No major shifts planned, with SBIC, secured debt, and ATM equity as primary funding sources.

Capital Southwest (CSWC) Q2 2026 Earnings Call Transcript

Revenue

Sales and Services Revenue

Financing Services Revenue

Other Revenue

Cost of Revenue

Cost of Goods and Services

Cost of Financing Services

Other Cost

Gross Profit

Other Operating Income

Operating Expenses

Selling, General and Administrative Expenses

Selling and Marketing Expenses

General and Administrative Expenses

Research and Development Expenses

Loss on Bad Debts

Loss on Impairment of Other Assets

Loss on Disposal of Assets

Other Operating Expenses

Operating Income

Non-Operating Income (Loss)

Income (Loss) from Affiliates

Income (Loss) from Associates

Income (Loss) from Joint ventures

Gain (Loss) on Other Investment

Gain (Loss) on Change in Fair Value

Gain (Loss) on Foreign Currency Exchange

Other Non-Operating Income (Loss)

Net Interest Expense

Interest Expense

Interest Income

Pretax Income From Continuing Operations

Income Tax Expense

Current Income Tax

Deferred Income Tax

Income Tax Adjustments

Net Income from Continuing Operations

Income from Discontinued Operations

Other Items Before Net Income

Net Income

Net Income Attributable to Minority Interests

Net Income Attributable to Owners of the Company

Preferred Stock Dividends

Other Adjustments

Net Income Attributable to Common Stockholders

Other Comprehensive Income

Total Comprehensive Income

Total Comprehensive Income Attributable to Minority Interests

Total Comprehensive Income Attributable to Owners of the Company

Basic EPS

Basic EPS from Continuing Operations

Basic EPS from Discontinued Operations

Diluted EPS

Diluted EPS from Continuing Operations

Diluted EPS from Discontinued Operations

CSWC

CSWC fundamentals

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