CSWC - Earnings call transcript Q2 2025 | Capital Southwest Corporation

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Operator

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.

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. on and currently beliefs. based management's information are assumptions expectations, statements current available conditions, and These that results They and statements. numerous assumptions are not subject cause are guarantees to risks, of uncertainties from differ materially to future results could such actual and

information obligation uncertainties, Capital events to whether revise forward-looking available risks update Southwest's except company does as and SEC. any by other date or as the press statements, of circumstances future with or changing the The these new a not concerning publicly For after see required filings undertake information, law. this result any any reason of release,

I to our will Diehl. off call Bowen hand now Chief Executive the Officer,

Bowen Diehl

earnings for thank Chris. everyone, call. us you, XXXX Thanks joining our second for And quarter year fiscal

you company your and execute portfolio to to and an our as We morning investment you giving continue of with look our our on capital. to are the of strategy diligently update pleased this as we performance forward be stewards

we remarks, website at various found Relations our of prepared which slides section in the our be presentation, earnings will www.capitalsouthwest.com. can Throughout our Investor in to refer

will our quarterly earnings our website. release You also last evening issued find on

key begin quarter. summarized the we of We'll some Slide for highlights earnings where of presentation, on now X the performance the have

income our of the earnings share. and of our the as Portfolio fully supplemental $X.XX pretax $X.XX be quarter. dividend covered share end During taxable quarter, $X.XX during $X.XX net to estimate which the share generated of quarter, of per that strong. our of the share per we investment income undistributed per regular paid continue dividend we And was per

our announce the a has of declared per regular of December quarter, As for we we December Directors to look are Board ended XXXX. share pleased $X.XX XX, dividend to quarter forward that the

continue December at healthy lower a flow quarter, of pace market dividend continued while competition per to declared total bringing deals well be dividends credit market quality resulted slower as declared per a of tighter bank from for quarters in and deals last as middle our has net spreads portfolio Deal in This Board have the $X.XX the has we to Capital Southwest share, in fierce. quarter maintained as the also for the quality discipline. lenders $X.XX Our supplemental nonbank on growth over X share. for this new both

currently win, which in That up very either in levels are portfolio or be current to that to levels of received that ranging capital should XX%, Xx the reasonable net indication loan-to-value deals leverage EBITDA. around we our an to cushion XX% debt. said, we deals continue underwriting signed The And our have would of backlog growth have we quarter. are have indicate in to from resulting December significant strong debt equity likely below

and market middle lower quarter-to-quarter, quarters. from the in always closings is Deal been certainly these have that the case lumpy few past

color performance decade, for remarks. the and past team in the Josh attractive our and prepared additional track our in on will Weinstein excellent highly in done has portfolio of I'm an generating confident will the our our record environment. activity competitive environments, our later continue market, our investment current Over we shareholders provide the all job returns

a which Portfolio XX source of X million an commitments us. of companies quarter add-on in during portfolio generated debt important the continues new companies $XX.X be consisted the $XX.X by in average growth activity proceeds and new originations to from and prepayments, was of as XX.X%. attractive offset for for Portfolio quarter IRR weighted to realized X portfolio million financing existing highly

to addition $XXX with million new On corporate the the increased capitalization ING-led front, -- million additional bank during the our we one facility of quarter, lender. from credit

price ATM million approximately Additionally, program. share. $XX.XX of through share equity the per per during prevailing of NAV average our equity share the proceeds $XX quarter XXX% or weighted gross in raised at we a

remained ensuring sheet portion of also a we while accretive liquidity our meaningful in investment funding We strong diligent equity balance have issuances. that have activity with

to leverage liquidity. the sheet BDC to and We continue a both balance mindset maintain conservative

believe liquidity will to provide We grow us Michael balance sheet Capital us NAV. growth at continue ability as allows stock repurchase target additional Managing financing provide if a our to Southwest were liquidity opportunistically to as acquisitions grow also end any new for existing range sheet ensuring maintaining the in remains in platform portfolio to robust, for lower capital commentary the through well capital to to sheet balance both while Balance our strong of and this to add-on flexibility environment, which our moment. it while on companies companies. the our leverage strategy continue meaningfully affords markets invest trade

On creation. the quarterly X, and consistent XX cut strong while with dividend, we our continued the and income. increased Slide dividend record never of dividend growth regular coverage XXx regular illustrate solid -- value ago, Since producing maintaining dividend our X of and dividend of track dividend our net investment have regular credit almost our steady all coverage years strategy we pretax have launch

and the period, declared investment portfolio. have per realized gains we In paid $X.XX same totaling XX share, all from or dividends generated supplemental excess from over special addition, or earnings our

overall and capital to our continued credit sources business Dividend capital access multiple performance to are all from strategy. core sustainability strong

track the these interest all as the all shareholders. of fellow in decisions our alignment of demonstrates strategies strength management our investment and the our of as with areas Our absolute record well capitalization

the market. a is X and first deal senior As [ lien lays portfolio activity majority investing vast equity portfolio junior secured loans Middle of a portfolio our core guidance of Currently, Slide if as in private our in ] strategy out is the XX% our companies reminder, potential backed firms, private the The approximately well which by support credit for backed by investment equity companies in as and firms. and of tenants lending needed. to to capital important leadership Royal provide

compelling. basis of our have equity lower the In thesis market, portfolio invest a we minority pari-passu [ the equity firm companies private believe the on with the is the middle often ] in we equity to when opportunity

equity the of the co-investment portfolio of our million XX a value. of investments with quarter, end fair at consisted total $XXX our As fair of of representing value X% total portfolio

Our marked in cost representing unrealized $XX.X appreciation at our share. of equity XXX% or million portfolio was per embedded $X.XX

strategic shareholders equity across Southwest over Our the our attractive well middle experienced equity as asset value to co-investments significant the accretion the with lower provide value portfolio potential equity distributions from often potential time. of resulting Capital the appreciation acquisitions. the institutionalization continues as to as upside for participation add-on our of shareholders of by provide well in our growing private firms Equity businesses these market potential portfolio as businesses,

billion, $X.X year-over-year on from growth billion our illustrated Slide XX% as ended September XXXX. of of XX, As the sheet the quarter credit $X.X portfolio on-balance representing at

originations senior For company secured. first the current lien new the quarter, debt were portfolio XXX% of

quarter, our XX% the posture sheet. maintaining X%. of to the was company as remaining management granularity portfolio our lien of end our we portfolio the of first with risk continued exposure We secured at As conservative balance to a grow senior investment credit of speaks overall believe average weighted per discipline

improve We base our in asset expect continue metric this to will growth.

activity, market over call to investment of now Josh portfolio the performance our for the and to specifics environment want to hand our I the review of more the quarter.

Josh Weinstein

companies included during $XX.X companies, in committed total across to $XXX,XXX also million detailed Slide of On senior portfolio equity. lien the we secured in new invested debt in quarter capital the during and million X of which invested we portfolio Capital Bowen. Thanks, quarter. committed first $XX in a XX,

debt for in XX add-on in closed we companies of existing financing in addition, $XXX,XXX consisting equity. million $XX In senior portfolio lien secured of first

with by of our established from across pleased is the quality the broad opportunities. This array strong team relationships are the We premier position countries evidenced market to the our that lender as is market. middle which lower team has sourcing a

equity there a XX of represented our more are portfolio. As investment private reference, point across firms than currently, different

the we last we XX in market. closed our new continued year, platforms sponsors, had in penetration closed deal, the which with previously financial showing the not Additionally,

XXXX, of firms country, across we XX%, loss with private multiple in back over the credit over our including different equity have the have completed Since strategy XXX transactions transactions. January completed we which

middle resulted strong. been the months As in opportunities. the market and pricing our team high-quality for Bowen of over the has We competition depth the has loan strength quite in the tight relationships, lower years. has mentioned, over This in last X cultivated

gain with risk auto transactions of year. source opportunities end and very return pleased between attractive the and the continue are current to the profiles, now close and we that We back with should

Turning Slide XX. to

for returns $XX.X IRR weighted on strong proceeds, of is In of exits, quarter. prepayments in our exits record generated total, during average track a generating these total the debt our million XX.X%. continued We

companies the held financing I-XX, were with in market Tactical were at During was of ADS driven million. and the were prepayments by quarter, syndicated X portfolio at activity prepayment refinancing of off all Two excess transactions formerly par. paid credits as large the of robust the EBITDA WIS which companies, $XX

past of IRR billion the company XX.X%. we have have weighted over average proceeds realized years, Over $X.X exits, in portfolio representing a XX generated XX cumulative that

value of of weighted of weighted XX, X.Xx a unique as detail end debt, for to end the XX.X% debt Slide debt, the second average The we XXX average our On credit quarter. fair consisted first total secured of of equity The secured X.X% with key weighted to subordinated in statistics companies X.X% co-investments. senior EBITDA. the to XX.X% quarter, through of a as our portfolio and had leverage senior the portfolio lien and security lien X.X% portfolio yield of

with we our are the portfolio. pleased across Overall, loan operating performance

shown more Slide upgrades fact, portfolio downgrades In the meaningfully on were quarter. this XX, as the than

initially high all value X $XX in the one quarter. We with upgraded the are rating. reminder, during upon and assigned a in lowest while being only for X loans having of a As million loan the approximately X-point fair the $XX being quarter, an rating representing on representing loans origination million scale, during downgraded had investment value rating fair X

of the XX.X% healthy at portfolio value, base on the basis our of weighted debt EBITDA portfolio With X, obligations the revenue one despite remained of approximately Cash fair enterprise X the value. Quarter-over-quarter in respectively. across and weighted was average environment. and XX% the growth at remains a averaging a of or rate healthy portfolio X portfolio X%, the higher categories. top X% our X.X% loans portfolio, and The with flow categories, across X only X or service of the coverage in portfolio X.Xx company

on strong seen our industries, be security Slide shareholders' asset with mix our As capital. which across for an broadly continues portfolio diversified XX, to provides

per to addition exposure average portfolio. is great risk our comfort of in overall diversification, profile industry which X% In of assets, our company us the gives

on investment portfolio. the on Our experiences to risk, various utilized through both cycles, a well assess company-by-company navigating continually as committee as cumulative economic members our basis

Michael now financial our will call to performance hand of the for specifics I the quarter. the to review

Michael Sarner

as share subsidiary, was quarter, investment CSCI, $X.XX holds $XX.X to on Slide the Thanks, in the main XX, prior per investments. Josh. as our the share this net summarized tax the tax share million for majority or our Specific $X.XX deferred $X.XX to $XX per to income taxes was income or Net million quarter. or pretax taxable million our per for driver quarter performance related quarter. of investment after was million of in compared equity $X.X benefit which the $XX.X The

decreased For quarter, income investment in $XX.X to $XX.X million the quarter. million the from prior total

nonrecurring a The in equity result occurred The approximately driven well fee income reduction million cash quarter-over-quarter. in recap decrease quarter. $XXX,XXX X prior the as a as the of primarily prior cash was the $X.X in dividends quarter in of dividend was transactions investments in which decrease by revenue onetime dividend from decrease

of was quarter, in yield investments average our the XX.X%. on investment our value at X.X% represented on nonaccrual the of and end loans the all the fair of portfolio weighted As portfolio

out $X.XX a During the paid per dividend. and share per a regular quarter, $X.XX we dividend supplemental share

December has earnings. $X.XX share future of regular and space share supplemental mentioned per the dividend Management a the our significant ] environment lower As of Board the the rate Board of declared contemplating on quarter. per earlier, time in $X.XX dividend has impact [ a interest for

to rate over long interest regular dividend cut returns term. at level the believe maintained is be a will stable, key we have never shareholder attractive generating in setting any We that environment consistently foreseeable a the

and We XXX% track XXXX. strong XX credit regular of continued the January with coverage months strategy XXX% coverage for XX, since XXXX, launch dividend ended of our in record cumulative coverage the September our

continue pretax to quarterly over our quarterly our intent in is our dividend. the to As to excess our shareholders distribute dividend of NII regular a on a supplemental reminder,

share continue in from per over to ability time harvest based for per current our $X.XX in confident dividends foreseeable are equity supplemental we We balance distribute our unrealized the UTI existing our future share the quarterly upon gains portfolio. expectation of to appreciation and that the will $X.XX on

the slightly ] Slide ended at on seen LTM which As XX, X.X%, leverage quarter-over-quarter. improved quarter [ operating

operating and of to benefits approximately alignment favorably internally this industry The of to to best-in-class shareholders. for allowing internally invested model also produce while we the believe continue X.X%. compare BDC a infrastructure leverage to build managed BDC. the of model real be leverage our the We in to absolute speaks people continues BDC Our will has and and X.X% to with manage metric significant average managed cost fixed as and resources continue

at per unrealized from stock share Turning to NAV or per of The for the offset $XX.XX decreased slightly per of investment share of Slide at $X.XX common and issuance the end accretion decrease premium NAV The share. to XX. on share. depreciation primary share a to realized by per the per company's the the quarter our portfolio, drivers by net NAV quarter

Slide to Turning XX.

that with the commitments of facilities of approximately is million quarter. cash sheet pleased commitment, leverage are of on credit debenture our the to We the had we in portfolio robust dense as SDA report X.Xx, commitment undrawn our which and liquidity X our our across $XXX unfunded million altogether $XXX represents and end balance

from ING quarter, During the bank $XXX prior addition to corporate quarter, up facility the increased lender. September to new led the million one of credit commitments in million, with the $XXX

$XXX based total us an current This overall lockstep million our revolver million, with have addition, we to In facility in continue the to total aggregate in on the increase borrowing further allowing feature has accordion in for of our to base, up the an of grow sheet. growth to access $XXX allowing commitments capacity full balance the commitments.

which towards a As SBIC the we FDA, a reminder, began a submitted in March application the XXXX, second process MAC license. to

by We be working this calendar continue we will the this of year. are the optimistic actively that process end with FDA, we to complete and

in liabilities the quarter, of debt our Finally, our as end capital January of with an earliest September covenant maturity the bonds unsecured structure were free XXXX.

seen leverage, the of at as Slide up as regulatory X.XX:X prior Our the quarter. quarter ended ratio X.X:X, debt-to-equity of XX, on a from

allow potentially optimal While reductions levels in X.XX are support to X.X future maintaining leverage earnings impact target cushion and dividend weighing to the to leverage us adequate growth. and base range, future to the the of to continues increase be rate we flexibility

capital adequate and debt we maintain covenant our capital We and as ATM will continue methodically with to to leverage and well as secured equity cushions. sheet program, opportunistically raise balance ensure unsecured liquidity conservative through significant

not From unsecured within remain perspective, also financing in volatility transactions while future of evaluating are a rate until been capital to BDCs have we new current actively interest markets structure active on our issuances. very the and constructive the investors maturities environment. any capital Despite debt mitigate mindful market market debt bond being having XXXX, as

for hand the now back some to will final Bowen I call comments.

Bowen Diehl

and Thank you, joining Michael, And Josh. thank you, thank today. us again, you, everyone, for

opportunity the environment. market portfolio our we the to our provide appreciate always, an with As business, update and on you

impressed robust and performance, base, strong flexible as demonstrate to team capability asset continue our a we portfolio by origination portfolio in continue is job management doing well and a structure. as and capital building company the Our deal to be

future prepared well We company believe The of is have we and and growth portfolio our overall health security performance. strong. our for

The industries credit is debt loans majority below obligations firms. with debt of private portfolio company across of cushion a of our and equity across vast lien senior X.Xx support and only made portfolio was Our and strong is investments. of our X%. strong exposure Interest predominantly backed coverage up array average allocated weighted by portfolio per equity the a first broad with companies secured our

providing multiple liquidity, exciting a well-capitalized sheet to capital an for of equity further which all balance very co-investment of but long-term Last upside grow provides many lower and our sheet shareholder to continue generate and with to returns. in growing to market equity enhancement we sources significant years shareholder of our strong our middle the not portfolio these have company participation balance gives shareholders least, returns businesses, Additionally, come. runway our

This are concludes ready lines we for the to our Q&A. Operator, remarks. open prepared

Operator

Instructions]. [Operator

question McKenna GMP. from first of will Our be Brian coming Citizens

Brian Mckenna

Great. Okay.

into Is the pipeline I also quantify that any that XQ. deals this? it's hear around way commentary great is there the pushed So then And got to calendar some heard to robust.

of we year into magnitude as about think portfolio the growth how So also calendar XXXX and into then net should well? year-end

Bowen Diehl

Yes.

likely in mean, in deals quarter we're speaking, be mean, fourth they're said I to up, very X the things, the heavy going if generally mean, and quarter. you So that win either the I we've deal diligence into to net -- growth or we has told pushed will I signed we've as close, that look been the so I had But portfolio at it commentary, the significant right? so we those in deals

Michael Sarner

Yes.

quarter, So mostly relative it's also our late originations to stage. the were X/XX

This million the on we I mean, we to of quarter, probably probably if to going we'd for net quantify, million to quarter. the see services -- expect side, growth were portfolio $XXX see $XXX

so And will closed of either are or close -- the shortly. half say originations have

pretty income we sheet. the a as So portfolio ultra well as expected growth, strong balance

Brian Mckenna

Yes.

activity. it. And of Okay. seeing bigger broadly are That's kind the helpful. of Got markets picture terms in you more within maybe and just really the question. just deal then then What new lower middle just a markets

I sponsor lower middle been flows the markets several broader of think and last M&A kind remain largely pretty and the deal years has muted. stable,

larger some So I moving think down players we've seen market.

be end thinking sponsor here. about M&A, in up that market, of So should the specifically the picking larger

signs these market what yields moving in you guess, mean space? up for does any firms I are seeing and back then transactions of bit? of early larger a that your So And some

Bowen Diehl

Yes.

a firms interesting think quite and we about And question. it's when really often. about So other ask

of just amount private the credit you capital enormous quantity initially an large probably just and capital capital. then no seen obviously, raised, When we've years, several me that's last the other lean about market. equity the market tends of reason the to being the read lot more towards more private over for market, -- a in in think raised I to

we've that also and just has heard deal last you've been referenced, think I say. X.X in the et muted the cetera, read flow, as papers, in you years

and heard to X between so things competitive doesn't And you capital lot what in is middle there's we've change balance, And lower and the of going market on. supply pricing. whole if will, in disrupt it a the take demand

equity or not controlling flow holdings. and deal businesses firms each to the private to family-owned you know, equity businesses buying we've it's middle -- the firms in lower are private their selling interest in founder market, So that as as other, but diversify want is aging

And so the deal flow relatively flat. has been

smaller when have some so decreased the deal have you from of the deal So as deal back. market, firms. large flat in to cascades upper have back we I've of seen cascade kind private in equity deals a private justifying and seen to starting mean then lower flow increased right? and competition smaller And should flow flow equity certainly picks effect, bit And a a that down. you I firms when Brian, mid-market that the referenced, and private market, market It's just larger equity talked that little market the parties deals up, little relatively justify middle bit cascading then

the Now amount liquidity of an enormous market. there's in

think to back is at up. that the I So cascade the tend but cascades speed which mark, back it would question

other banks. is is our The competition we're in effect more recently seeing market from

regional They're banks. -- here many it's certain years now, ago handful come X.X here of were go. all we know, in and As they and banks and a

market a disrupts pricing from somewhat that's the perspective. So

has not as haven't a edges, changed. like a but bit credit, around much the worse, lot covenants leverage seen of pricing little deterioration up We as in

to a think I the you so doesn't those a from pond, will, factors, perspective. pricing it again, take if And X lot disrupt

Michael Sarner

Silver ago, June XXX. over -- perspective. ago, was XXX, in X million it a say this quarter, the We quarters and quarters X our over $XXX quarter, XX was spread fact, it just was Probably shade

spread So we've moment. at the on in seen obviously XX XXX to somewhere points basis tightening the

Operator

of coming UBS. Doug will our Instructions]. next And [Operator question be Harter from

Douglas Harter

book continue given capital talk talked about? and you raise Can increased to of the about your to to that the appetite premium the you pipeline combination

Michael Sarner

Sure.

the hard done So we've for today. lot by work well, I'll [indiscernible] a start of coming saying

capital of We available our on through either facilities. have close cash or to credit availability $XXX million

book, are eye constantly Now opportunistically basis. in rating that X.Xx where we're looking we -- an in and I we trading say refinance ATM XXXX, time. are towards our we is always certainly would with capital those a sort capital funds daily to the additional of on

I you, we're tell So there. active would yes,

capacity us like raising over look bit. see expect probably certainly a money in quarter. months You'll increase We probably the and to $XX the will million a X little some to should see million next $XX to activity something secure X unsecured ATM

Operator

from be And Rowe Bryce B. our next will Riley. of question coming

Bryce Rowe

the couple a Maybe around topic of more that. portfolio, wanted around to robust start a and discussion the questions portfolio

the curious, some calendar the So into portfolio Bowen, newer the I'm portfolio kind end companies. the on spread kind incremental backlog, And versus be September you over of touch mix since and of fourth it compression existing maybe kind have quarter? new the that's with blood whether of companies seen of of activity of deal

Bowen Diehl

Yes.

third So mix is last companies the you I in the deal quarters. X/X the in mean platform new of new been activity has kind historically which add-ons, several say

So but -- it's I'd for of not probably the biggest have It's say item change. but credits. same, our tighter the it's spreads slightly that's not same. the of concern, slightly September, that quality tightened since about kind

Bryce Rowe

of given portfolio speak of the Maybe compression compression Bowen, rate here that was the about can portfolio have inflows? was resets driven? then kind percentage lag? in that SOFR expectation from talked the kind nonaccrual And yield helpful. of yield Michael quarter. of what what what percentage -- how the And we in rate your that is for to maybe saw That's a you of for you to September What or we speak then Okay. the little I guys short-term bit a lag think see perspective, loan past

Michael Sarner

Sure. Sure.

came elevated XX due was points versus it in basis nonaccruals X.X% and quarter then I from there effective, previous the compression points, the from came on essentially in in some saw quarter. XX X/XX compression to during to basis quarter effectively the in about X/XX So guess, the yield come SOFR quarter, for

debt XX.X% this brought our on it yield So XX.X%. down to from

reset was October was in expecting, For the down XX/XX which the previous X, from quarter. the quarter, the on we're pipeline so based date, X.X%,

So another compression the XX that's where good of points are -- today. to on basis we kind anticipation so items

Bryce Rowe

Yes.

then rating the weighted bucket. the expectation average nonaccruals. Okay. is just little quarter, in a assets? risk you into you you Helpful. nonaccruals maybe commentary improved And that but did I portfolio's give around mean, on kind a what the Can of that, touch the obviously, couple of flow nonaccrual saw us have for those particular

Bowen Diehl

I part those Yes. were it's our obviously, X to nonaccruals, frustrating mean, both new -- It's of frustrating. business. X that's It's quarter. see names of last

think So my they lower sale our is were that. on already company closeout consumers, I list. One of to end and view watch a that's

think milk more the affected that with and cost inflation. view by I and lower-end that's acutely eggs is of the that consumer of gas our

And hurt business. so that's that

things, the video then they're Prime, is content that types a it other it's company. one editor And through serves of Hulu, those digital Netflix, do streamed the the video

business but the that's the the now, of -- they'll affected then that end pretty by industry restructured content strike. most so be and streaming likely right the be of of it's down. -- is that end a And been recovers. restructured the over, just comeback volume by fast quantum will nonaccruals businesses in function And are of Both December. how December. be Both that and discussions by I'm the confident the will of That's still

own that the we'll continue businesses, there'll where around management with and anyway, in, but equity those to be be off teams companies work hopefully. they'll So and list we'll turn

Michael Sarner

to percentages accrual. anticipated. some just can't Probably give portion that's the of will a back get be will will be come asset on of but so it course, and to I equity. of portion those But you clarified, now, the be

Bryce Rowe

Yes.

one Last a just for Okay. question. me, modeling

You saw let's line what XX% fiscal the year? comp the comp that or Michael, look help like in us so about might for kind can think of balance of you line come quarter-over-quarter. the call it,

Michael Sarner

basis, million about Yes. I million, of would the should is basis comp $X and million $X.X of. total on compensation million you that SG&A rate rates for a is off -- cash another be number on should $X normal million compensation run then at $X.X run stock rate run rate be the set for SG&A to for compensation $X.X working tell run of you

Operator

Our Matthew VP. will coming Hurwit question from next of be

Matthew Hurwit

Hurwit from on Jefferies. This is Matt Congrats quarter. the

Just nonaccrual list. like Are or able to some the Research to follow Now American on ]? provide quarter [ last up Nuts Stat you Gauge, of NPAs on detail Meds the any from

Bowen Diehl

with because Now, easy. and I'll That start Research that That's Yes. that's sold. gone. was restructured

And so to then loss American quarter. kind of that's net actually this the realized business. And that's better flat Nuts,

-- was and a our one struggle. [ the that's one? Mets Stat -- ], So company what then that's and other X, name to that continues kind of

Operator

And question Raymond of our Robert James. Dodd will coming from next be

Robert Dodd

and we the in not mean and should and you say bonus numbers I at [indiscernible]. fourth I expect healthy On comp anything is run that comp just gave I the accrual net But of level what unusual deployments, given of to kind the -- mean deployments, obviously, the the stock mean some that is quarter, with number quarter drives the least. December you're rate looking for which the

Michael Sarner

so, I would mean say I Robert.

look like payment, up one bonus fourth end end be year that the payment time our at the the bonus will paid quarter then quarter-to-quarter, -- fiscal making the for look true only final and accrual provide I what think and based year. to X first the assess as quarters of just year-end a like on at then the what rate everybody we at think from the accrued will that we of the we will run at the supposed

as So people I on certainly, originations. pay mean, don't we definitely based --

pay with how the foremost, the shareholders is our up eye of pay but we year, the of with what's bucket. our to So remainder build going credit out answer to that dividends we're think to the for able supplemental on the question will and being to it able company, looking depend on first and is UTI dividends what continue to also for out, the

wouldn't I how So compensate is expect anything because employees. not that we dramatic

Robert Dodd

you've I Got industries, on mean I would the then of where is consumer that's a and got Bowen, you sign pressure. in credit -- Digital you any up your I low-end other mean, quarter-over-quarter. are your X% kind I business mean nonaccruals general, that mean I and said these point any the on expect exposure mean, EBITDA, there's I I to And not so just was there quarter. related But this business thing. of it. point, I other emerging I mean, new said Got weakness. But to areas revenue a -- consumer -- EBITDA, be any think any will under think, low-end it. obviously.

to is So a mean -- lower now between And declining are up got incremental those some be not any where concerns on I X%. -- EBITDA are pressures portion a sequentially. any declining? given and themes be growth There's of levels there's that got everybody proportion to

Bowen Diehl

purchases you necessarily, a area, the don't We another you the or something have but portfolio. Yes. one portfolio, but look, related lot to I discretionary out seen on idiosyncratic not I say, like list. zone general would it. we've the X that throughout look that not and would trends businesses nonaccrual. end that's all stories an about of a to any is becoming type So see mean, slowed, be our up economic I consumer portfolio, were or lower there mean think right? that problem, are question Thanks, economic about But yes, I are things would that low-end if No X what say I in the Robert. consumer. in if that show credit or across necessarily that

much businesses, I about purchase say just that some businesses cautious the other then decisions, in business serving other is decisions ways. And that to the are probably business-to-business slower candidly, as future would make is are

if there's that's that about narrative I that -- material that portfolio, at zone like that don't out, our you overall but definitely -- definitely you respect. a know look in so And

And in back like, then PIK interest have our a downgrades, a of is migration, rating all take on percentage the a I'll our down. lot upgrades, step interest this coverage amount income and you as as of both Bryce right, referenced, migration, not we and well, of strong rating quarter significant portfolio

recurring. a it's percentage a cash income percentage our So -- our cash is of higher higher and

types pretty at about very referenced, benefiting what fixable, than you idiosyncratic, those problems, shareholders. feel the purchase purchase decisions, stories, you things very and those that's themes you portfolio slower be good the margins, the fixable think if or kind X at you in look So But decisions. of paying our general management loan you that other are any about dividend engine consumer are, look at the that show bad investment slower negative decision all as that and would if and that's BXB low-end of just up the

Operator

closing for conference now like would remarks. I Bowen Diehl turn And to to the back

Bowen Diehl

update thanks, in us for Thanks, operator, updated to opportunity to our everybody, on company joining we appreciate the portfolio, give you today. events on future. forward you keeping We an and look the and and

Operator

conference this concludes today's for And call. you Thank participating.

may disconnect. You now

Capital Southwest (CSWC) 29 Oct 242025 Q2 Earnings call transcript