Capital Southwest — Second Fiscal Quarter 2027 Earnings Summary

Financial Performance:

• Total investment income was $67.2 million for the quarter ended September 30, 2026, compared to $61.0 million in the prior quarter.
• Pre-tax net investment income was $37.2 million ($0.58 per weighted average common share), compared to $35.0 million in the prior quarter.
• Total operating expenses (excluding interest expense) were $9.0 million, compared to $7.6 million in the prior quarter.
• Interest expense was $21.0 million, compared to $18.5 million in the prior quarter.
• Total net realized and unrealized losses on investments were $13.4 million, compared to $10.9 million in the prior quarter.
• Net increase in net assets from operations was $21.4 million, compared to $24.7 million in the prior quarter.
• Net Asset Value (NAV) per share was $16.64 at September 30, 2026, compared to $16.61 in the prior quarter.
• Total investment portfolio at fair value was $2.4 billion, with a credit portfolio of $2.2 billion and equity portfolio of $192.3 million.
• Weighted average yield on debt investments was 10.9%.
• Non-accruals had a fair value of $34.8 million (1.4% of total portfolio) and a cost basis of $85.5 million (3.5% of total portfolio).
• Cash and cash equivalents were $48.0 million.
• Total net assets were $1.1 billion.
• LTM operating leverage was 1.4% as of September 30, 2026.
• Regulatory debt to equity ratio was 1.00 to 1 at the end of the quarter.

Guidance and Future Outlook:

• No specific forward financial guidance or revenue targets were provided in the press release.
• Management indicated the new joint venture with Trinity Capital provides access to the technology lending market, an area not historically focused on by the company.
• SBA approval was received to increase Capital Southwest SBIC II, LP's leverage commitment from $175 million to $250 million to enhance capital deployment capacity.

Business Segments and Product Lines:

• Originated $391.0 million in new commitments, including $327.1 million in 14 new portfolio companies and $63.9 million in add-on commitments to 16 existing portfolio companies.
• New portfolio company originations consisted of $314.2 million in first lien senior secured debt and $12.9 million in equity investments.
• Committed $25.0 million in equity to Desert Star, a new joint venture with Trinity Capital.
• Received $74.2 million in proceeds from four portfolio company prepayments and exits, generating a weighted average IRR of 14.5%.
• Equity portfolio included $14.2 million in new equity co-investments during the quarter.
• Joint Venture Equity Investments totaled $36.4 million, including $28.4 million in CapTrin and $7.9 million in Desert Star.

Market and Competitive Landscape:

• The company described itself as an internally managed business development company focused on middle market businesses with $5 million to $50 million investments.
• The credit portfolio is 99% first lien senior secured debt.
• The company successfully raised a new $350 million unsecured bond at 6.75% to pay down its Corporate Credit Facility.
• Raised approximately $67 million through the Equity ATM Program during the quarter.

Risks and Challenges:

• The press release includes a standard "Forward-Looking Statements" section noting risks such as changes in markets, financial/capital/lending markets, interest rate environment, regulatory changes, tax treatment, and economic downturns.
• Specific risks mentioned include the impact of tariffs, trade barriers, geopolitical conditions, supply chain constraints, and elevated inflation on portfolio companies.
• Net realized and unrealized depreciation on the credit portfolio was $14.6 million for the quarter.

Management Commentary and Tone:

• Michael Sarner, President and CEO, stated the quarter delivered the largest origination quarter in the company's history.
• Management highlighted strong earnings generation for shareholders, citing $0.58 of pre-tax net investment income per share.
• Management noted the strengthening and diversification of the capital base through bond issuance, equity raising, and increased SBIC leverage capacity.

Other Key Points:

• Dividends paid for the quarter ended September 30, 2026, totaled $0.64 per share ($0.58 regular quarterly and $0.06 supplemental).
• A regular quarterly dividend of $0.58 per share and a supplemental quarterly dividend of $0.06 per share were declared for the quarter ending December 31, 2026.
• The Board declared the regular quarterly dividend of $0.58 per share to be paid in three installments of $0.1934 in October, November, and December 2026, with the supplemental $0.06 paid in December 2026.
• The Company entered into the Fourth Amended and Restated Senior Secured Revolving Credit Agreement, increasing commitments from $510 million to $595 million and extending the maturity to September 2031.
• The Company recognized a realized loss on extinguishment of debt of $1.1 million in connection with the credit facility amendment.
• SBIC II received SBA approval to increase its leverage commitment from $175 million to $250 million.
• No shares were repurchased under the $20 million share repurchase program during the quarter.
• The Company sold 2,732,562 shares under the Equity ATM Program at a weighted-average price of $24.50, raising $67.0 million in gross proceeds.
• Estimated Undistributed Taxable Income (UTI) was $0.92 per share as of September 30, 2026.