Capital Southwest (CSWCZ) Financials

Capital Southwest Corp (NASDAQ: CSWC) demonstrated steady financial performance over the last four years, with key metrics showing solid income growth, fluctuating cash flow patterns, and a strong balance sheet position as of the latest periods.

Positive Indicators:

• Consistent increase in Total Interest Income quarterly, from $17.7M in Q3 2022 to $48.6M in Q4 2025, indicating growth in core earnings.
• Net Income Attributable to Common Shareholders showed a general upward trend with $2.5M in Q1 2023 rising to $17.2M in Q4 2025, reflecting improved profitability.
• Basic and diluted EPS steadily rose from $0.49 in Q1 2023 to $0.54 in Q4 2025, suggesting value creation for shareholders.
• Total Common Equity increased significantly from approximately $475.7M in Q2 2023 to $830.4M by Q3 2025, enhancing the financial stability of the company.
• The company maintained a focus on issuing common equity each quarter, supporting capital growth, with $67.5M issued in Q4 2025.
• Dividends per common share increased from $0.50 in early 2023 to $0.63 by late 2024, showing consistent and growing returns to shareholders.
• Debt issuance appears strategic, generally increasing long-term financing and balancing repayments, promoting flexible capital structure management.
• Cash and equivalent balances have remained healthy, ranging around $20M-$47M in recent quarters, supporting liquidity needs.
• Operating expenses, while increasing in nominal terms, are reasonable relative to revenue growth, indicating operational control.
• Non-interest income components such as Other Service Charges and Other Non-Interest Income have steadily grown, contributing to revenue diversification.

Neutral Considerations:

• Non-cash adjustments to reconcile net income show volatile large figures each quarter, reflecting complex accounting or valuation impacts in the operations.
• Other Special Charges fluctuate significantly across quarters, which may be tied to one-off items or restructuring costs but require monitoring.
• Net cash from continuing operating activities has been volatile and often negative, suggesting working capital or investment cycle stress at times.
• Cash interest paid remains relatively steady around $9M-$14M quarterly, reflecting stable interest expense relative to debt levels.
• Capital expenditures for property and equipment are modest and appear stable, aligning with growth investment expectations.

Negative Factors:

• Net Cash from Operating Activities frequently shows large negative values in many quarters, indicating substantial cash outflows and potential liquidity pressure.
• Recurring “Other Adjustments to Consolidated Net Income” are sizeable negative amounts, which have significantly reduced consolidated net income in some quarters.
• Certain quarters record substantial repayments of debt exceeding issuance, which may tighten liquidity if not balanced by financing or operational cash flows.
• The total liabilities have consistently increased, reaching nearly $959M by Q3 2025, which, if unchecked, could pressure leverage ratios.
• While income and equity grew, the volatility in realized and unrealized gains/losses on investments may pose earnings volatility risks.

In summary, Capital Southwest Corp has shown robust growth in revenue and shareholder equity with steady earnings improvement and shareholder returns. However, the company experiences volatile cash flows and adjustment items that investors should watch closely. The balance sheet remains strong with significant equity growth, but rising liabilities and cash flow variability indicate a need for careful liquidity and risk management going forward.