Capital Southwest (CSWC) Q1 2027 Earnings Call Transcript

DATE

Tuesday, Aug. 4, 2026 at 11:00 a.m. ET

CALL PARTICIPANTS

• Chief Executive Officer - Michael Sarner
• Chief Financial Officer - Chris Rehberger
• Chief Investment Officer - Josh Weinstein
• Executive Vice President, Accounting - Amy Baker

TAKEAWAYS

• Pretax Net Investment Income -- $0.57 per share, supported by recurring earnings across the portfolio.
• Total Investment Income -- $61 million, representing an increase from $57.8 million in the prior quarter driven by higher cash and PIK interest income.
• Regular Quarterly Dividend -- $0.58 per share, declared for the September quarter and payable monthly in July, August, and September 2026.
• Supplemental Quarterly Dividend -- $0.06 per share, maintaining the total dividend declared for the September quarter at $0.64 per share.
• Total New Commitments -- $222 million, reflecting the closing of 11 new portfolio companies and 16 existing portfolio companies during the quarter.
• First Lien Senior Secured Debt -- $167 million in new portfolio company originations, representing 100% of new debt originations for the period.
• Add-on Originations -- 25% of total new commitments over the last 12 months, allowing the deployment of capital into existing management teams and sponsors.
• Deal Pipeline Screening -- 1,300 deals screened over the last 12 months, an increase from 1,200 in fiscal year 2025 and 1,000 in fiscal year 2024.
• Close Rate -- 1.5%, reflecting a decrease from 1.7% in fiscal year 2024 due to disciplined underwriting.
• New Platform Leverage and LTV -- 2.8x debt-to-EBITDA and 29% loan-to-value for deals closed in the June quarter, providing an equity cushion beneath the debt.
• Credit Portfolio Size -- $2 billion, representing 24% year-over-year growth from $1.6 billion as of June 2025.
• Average Position Size -- 0.8% per company, intended to mitigate company-specific risk through broad diversification.
• Weighted Average Yield -- 10.9% for the credit portfolio, an increase from 10.8% in the previous quarter driven by weighted average spread expansion.
• ATM Equity Proceeds -- $64 million in gross proceeds raised through the at-the-market program during the quarter.
• ATM Pricing to NAV -- $23.47 per share, representing 141% of the prevailing net asset value per share.
• Equity Co-investment Portfolio -- $202 million at fair value across 95 investments, representing 9% of the total portfolio at fair value.
• Equity Portfolio Appreciation -- $34.4 million in embedded unrealized appreciation, which equates to $0.54 per share.
• Portfolio Investment Ratings -- 89% of the portfolio rated in the top two categories, indicating performance at or above expectations.
• Cash Flow Coverage -- 3.6x, representing an improvement from the 2.9x low observed during the peak of base rates.
• Non-accrual Investments -- 1.1% of the portfolio at fair value, remaining flat compared to the end of the prior quarter.
• LTM Operating Leverage -- 1.4%, representing an improvement from 1.7% in June 2025 despite the addition of 12 employees.
• Undistributed Taxable Income -- $0.87 per share, reflecting a decline due to annual corporate activity and book-to-tax differences.
• Net Asset Value per Share -- $16.61, representing a decrease from $16.69 in the prior quarter due to equity grants and net realized/unrealized losses.
• Liquidity -- $375 million in cash and undrawn leverage commitments, providing 1.2x coverage for $312 million in unfunded commitments.
• PIK Interest Income -- $4.9 million, including $1.1 million in non-recurring income from a portfolio company amendment.

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RISKS

• Sarner stated, "A failure to vote has the same practical effect as a vote against the proposal," regarding the company's requirement for two-thirds of all outstanding shares to approve a proposal to increase authorized shares to maintain growth flexibility.

SUMMARY

Management at Capital Southwest Corporation (NASDAQ:CSWC) reported pretax net investment income of $0.57 per share and an expansion of the credit portfolio to $2 billion. The company stated that investment activity remained focused on first lien senior secured debt and equity co-investments within the lower middle market, supported by a deal pipeline that screened 1,300 opportunities over the last 12 months. Strategic growth initiatives during the quarter included scaling the CapTrin joint venture and utilizing an at-the-market program to raise equity capital at a premium to net asset value.

• CEO Sarner indicated that the origination pipeline for the next 60 days could be in the range of "$250 million to $300 million," with approximately 75% consisting of new platform companies.
• Sarner noted that the CapTrin joint venture target of a 13% to 15% return could be reached in "12 to 15 months" if current origination momentum continues, faster than the original 18 to 24 month estimate.
• The company maintained LTM operating leverage of 1.4%, which management noted is significantly lower than the BDC industry median of approximately 2.6%.
• CFO Rehberger reported that the CapTrin joint venture closed a $150 million revolving credit facility in April 2026, intended to provide liquidity for scaling the venture.
• CFO Rehberger stated that the company is "working on an amendment and maturity extension of our corporate credit facility," which is expected to provide beneficial economic changes to the cost of capital.
• CIO Weinstein noted that the portfolio now includes investments from 95 unique private equity firms, having closed deals with 20 new sponsors over the last 12 months.
• CFO Rehberger clarified that the CapTrin portfolio was seeded through a "secondary transaction" to transfer assets and now holds $98 million in securities across 14 companies.

INDUSTRY GLOSSARY

• BDC: Business Development Company, a type of closed-end investment fund that invests in small and mid-sized companies.
• First Lien: Debt that has priority claim on a company's assets and earnings over all other debt in the event of liquidation.
• Unitranche: A hybrid loan structure that combines different tiers of debt into a single loan with a blended interest rate.
• PIK Interest: Payment-in-kind interest that is added to the principal balance of a loan rather than being paid in cash.
• NAV: Net Asset Value, the total value of an entity's assets minus its total liabilities, often expressed on a per-share basis.
• ATM Program: At-the-market offering, a program allowing a company to sell shares into the secondary market at prevailing prices.
• UTI: Undistributed Taxable Income, representing earnings that have been realized for tax purposes but not yet distributed as dividends.
• EBITDA: Earnings before interest, taxes, depreciation, and amortization, used as a measure of a company's operating performance.
• LTV: Loan-to-value, a ratio representing the loan amount divided by the appraised value of the asset.
• SOFR: Secured Overnight Financing Rate, a benchmark interest rate for dollar-denominated loans and derivatives.
• Pari Passu: A Latin term meaning "on equal footing," describing securities that have equal rights to payment.
• SBIC: Small Business Investment Company, a type of privately owned investment fund licensed by the Small Business Administration.

Full Conference Call Transcript

Operator: Thank you for joining today's Capital Southwest First Quarter Fiscal Year 2027 Earnings Call. Participating on the call today are Michael Sarner, Chief Executive Officer; Chris Rehberger, Chief Financial Officer; Josh Weinstein, Chief Investment Officer; and Amy Baker, Executive Vice President, Accounting. I will now turn the call over to Amy Baker.

Amy Baker: Thank you. I would like to remind everyone that in the course of this call, we will be making certain forward-looking statements. These statements are based on current conditions, currently available information and management's 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 such statements. For information concerning these risks and uncertainties, see Capital Southwest's publicly available filings with the SEC.

The company does not undertake any obligation to 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, except as required by law. I will now hand the call over to our President and Chief Executive Officer, Michael Sarner.

Michael Sarner: Thanks, Amy, and thank you, everyone, for joining us for our first quarter fiscal year 2027 earnings call. We're pleased to be with you today and look forward to discussing our results for the quarter. Before turning to the quarter, I want to highlight that we are still seeking additional shareholder votes for our proposal to increase Capital Southwest's authorized shares. The company has received substantial shareholder support for the proposal to date. As of today, approximately 89% of votes cast have been cast in favor of the proposal. However, because approval under Texas law requires the affirmative vote of holders of at least 2/3 of all outstanding shares, shareholder participation remains critical to the proposal's approval.

A failure to vote has the same practical effect as a vote against the proposal. The proposal would provide Capital Southwest with the flexibility to continue executing the strategy that has supported the company's growth and long-term performance. Approval would not by itself authorize the issuance of any new shares. Rather, it would ensure that the company has sufficient authorized shares available to issue accretive equity when attractive investment opportunities arise. Additionally, I would like to highlight that ISS and Glass Lewis have both issued reports recommending that shareholders vote for the proposal.

We would encourage all shareholders who have not voted or have voted against the proposal to support the company by casting their affirmative vote prior to the September 1 meeting date. Turning to the financial results. During the first fiscal quarter, we generated pretax net investment income of $0.57 per share, supported by strong recurring earnings across the portfolio. Our undistributed taxable income balance remains robust at $0.87 per share, reflecting consistent realization activity. Although our UTI balance declined this quarter as a result of normal annual corporate activity, we remain confident in our ability to continue growing this balance over time. Chris will provide additional detail later in the call.

Our Board of Directors has declared a $0.58 regular dividend for the September quarter, payable monthly in each of July, August and September 2026 and has also declared a quarterly supplemental dividend of $0.06 per share payable in September, bringing total dividends declared for the September quarter to $0.64 per share. Turning to originations. Deal flow in the lower middle market was strong this quarter. We closed $222 million in total new commitments across 11 new portfolio companies and 16 existing portfolio companies. Add-on financings continue to be an important source of originations for us as over the last 12 months, add-ons as a percentage of total new commitments have been 25%.

These opportunities allow us to deploy capital into businesses we know well with proven management teams and sponsors. Our investment pipeline of new opportunities continues to meaningfully expand. Over the last 12 months, we have screened approximately 1,300 deals, of which we've closed 19 new platform companies. That is an increase from the 1,200 deals we screened in fiscal year 2025 and 1,000 deals we screened in fiscal year 2024. We have continued to source more deals with each passing year, while our close rate has decreased from 1.7% in fiscal year 2024 to 1.5% today. This highlights both our disciplined underwriting process and our continued penetration into opportunities in the lower middle market.

Demonstrating our continued investment discipline for new platform deals closed during the June quarter, weighted average senior leverage was 2.8x debt-to-EBITDA and weighted average loan-to-value was 29%, providing a substantial equity cushion beneath our debt. Over the past 12 months, new platform originations have averaged 3.1x senior leverage and 34% loan-to-value, further underscoring our consistent commitment to conservative underwriting. Additionally, our portfolio continues to benefit from the broad industry diversification with an average position size of 0.8% per company, which helps mitigate company-specific risk. Furthermore, the weighted average yield on our debt portfolio increased to 10.9% during the quarter, up from 10.8% in the previous quarter.

The main driver of this increase was an increase in the weighted average spread of our portfolio, which reflects our continued ability to originate high-quality opportunities while maintaining attractive spread economics even amidst a more competitive and tighter spread credit environment. On the capitalization front, we raised $64 million in gross equity proceeds through our ATM program this quarter. Our ability to assess the ATM program continues to be a meaningful competitive advantage for Capital Southwest. In a market where fewer publicly traded BDCs are trading above book value, our improved price-to-book valuation gives us a differentiated ability to raise growth capital in a way that is accretive to NAV and supportive of long-term shareholder value.

We believe our relative position has strengthened significantly over the past few years, and it provides us with the flexibility that many of our peers simply do not have today. In fact, only 6 BDCs were trading above book on June 30, 2026, down from 17 BDCs on June 30, 2024. Additionally, while the median BDC price-to-book multiple declined from 0.96x to 0.73x over that same 2-year period, CSWC has continued to trade well above book value in a range of 1.2x to 1.5x. I'll now hand the call over to Josh to review more specifics of our investment activity.

Josh Weinstein: Thanks, Michael. As previously mentioned, this quarter, we deployed a total of $222 million of new committed capital, consisting of $167 million in first lien senior secured debt and $6 million of equity across 11 new portfolio companies. We also completed add-on financings for 16 existing portfolio companies, totaling $49 million in first lien senior secured debt and $285,000 in equity. Our on-balance sheet credit portfolio ended the quarter at $2 billion, representing 24% year-over-year growth from $1.6 billion as of June 2025. Importantly, 100% of new portfolio company debt originations were first lien senior secured.

And as of quarter end, 99% of the credit portfolio remained first lien senior secured with a weighted average exposure per company of only 0.8%. This level of portfolio granularity reflects our disciplined approach to risk management as we continue to scale the balance sheet. The vast majority of our deal activity continues to be in first lien senior secured loans to private equity-backed companies. Approximately 92% of our credit portfolio is sponsor-backed, which provides strong governance, operational support and when needed, the potential for junior capital.

In the lower middle market, we frequently have the opportunity to invest on a minority basis in the equity of our portfolio companies, pari passu with the private equity firm when we believe the equity thesis is compelling. As of quarter end, our equity co-investment portfolio consisted of 95 investments with a total fair value of $202 million, representing 9% of our total portfolio at fair value. This portfolio was marked at 121% of our cost, representing $34.4 million of embedded unrealized depreciation or $0.54 per share. These equity positions continue to give our shareholders meaningful upside participation in growing lower middle market businesses, driven by both operational improvements and strategic add-on acquisitions.

The lower middle market remains competitive as this segment of the market continues to attract both bank and nonbank lenders. Although this environment has produced tighter loan pricing for higher-quality opportunities, the depth and durability of the sponsor relationships our team has built, combined with the enhanced deal flow generated by our expanded and more seasoned investment staff continue to position us to source and win transactions with compelling risk return profiles. Today, our portfolio includes investments from 95 unique private equity firms. And over the past 12 months, we have closed new platform investments with 20 sponsors with which we had not previously partnered.

Since launching our credit strategy, we have completed transactions with over 135 private equity firms nationwide, including more than 20% with whom we have completed multiple deals. Our portfolio now consists of 141 portfolio companies allocated 89.6% to first lien senior secured debt, 1.1% to second lien senior secured debt and 9.2% to equity co-investments. The credit portfolio generated a weighted average yield of 10.9% with weighted average leverage through our security of 3.7x EBITDA. We remain pleased with the overall performance of the portfolio. At origination, all loans are initially assigned an investment rating of 2 on our 5-point scale, with 1 being the highest rating and 5 being the lowest rating.

As of quarter end, 89% of the portfolio at fair value was rated in the top 2 categories. Cash flow coverage remained strong at 3.6x, reflecting an improvement from the 2.9x low observed during the peak of base rates. I will now hand the call over to Chris to review the specifics of our financial performance for the quarter.

Chris Rehberger: Thanks, Josh. Specific to our performance for the quarter, pretax net investment income was $35 million or $0.57 per share. For the quarter, total investment income increased to $61 million from $57.8 million in the prior quarter. The increase was primarily driven by a $2.6 million increase in cash interest income, coupled with an increase of $1.1 million in PIK interest income. The increase in PIK income was driven by an amendment to one of our portfolio companies, which capitalized 2 quarters of PIK into the current quarter, half of which will be nonrecurring going forward.

As of the end of the quarter, our loans on nonaccrual represented 1.1% of our investment portfolio at fair value, flat from the end of the prior quarter. During the quarter, we paid a $0.58 per share regular quarterly dividend paid monthly and a $0.06 per share supplemental quarterly dividend. For the September 2026 quarter, our Board has again declared $0.58 per share regular quarterly dividend payable monthly in each of July, August and September 2026 and maintained the $0.06 supplemental quarterly dividend also payable in September, bringing total dividends declared to $0.64 per share. We continue to demonstrate strong dividend coverage with 109% cumulative coverage since launching our credit strategy.

Our UTI balance declined to $0.87 per share this quarter, primarily due to book-to-tax differences related to annual cash bonus payments and equity award vesting. However, we have visibility on an equity realization expected to close in the near term, which should generate a realized gain and increase our UTI balance as of September 30. In addition, we continue to hold significant unrealized appreciation across our equity portfolio. As a result, we remain confident in our ability to grow our UTI balance and continue paying quarterly supplemental dividends over time. LTM operating leverage ended the quarter at 1.4%, a meaningful improvement from the 1.7% observed a year ago in June 2025.

Notably, this reduction occurred despite the addition of 12 new employees. Going forward, we expect to continue to add resources to our team while maintaining operating leverage in the 1.4% to 1.5% range. Our operating leverage remains significantly better than the BDC industry median of approximately 2.6%, underscoring the inherent efficiency of the internally managed BDC model. This structure has consistently delivered meaningful fixed cost leverage to shareholders while still enabling us to invest in talent and infrastructure as we continue to scale a best-in-class BDC platform. NAV per share decreased to $16.61 per share, down from $16.69 per share in the prior quarter.

The primary drivers of the NAV per share decline for the quarter were net realized and unrealized appreciation on our investment portfolio and our annual equity grant to employees, offset by accretion from our equity ATM program. We raised approximately $64 million in gross equity proceeds during the quarter through our equity ATM program at a weighted average share price of $23.47 per share or 141% of the prevailing NAV per share, reinforcing our ability to raise capital efficiently and accretively. Our liquidity position remains robust with approximately $375 million in cash and undrawn leverage commitments across our 2 credit facilities. In total, this represents more than 1.2x coverage of the $312 million in unfunded commitments across the portfolio.

Currently, we are working on an amendment and maturity extension of our corporate credit facility, which should provide beneficial economic changes to our cost of capital. We'll share further details regarding the outcome of this process over the next few weeks. Regulatory leverage ended the quarter at 0.91 to 1 debt to equity. We will continue to raise secured and unsecured debt capital as well as equity through our ATM program in a methodical and opportunistic manner to ensure we maintain significant liquidity and a conservatively constructed balance sheet with adequate covenant cushions. Finally, we have made meaningful progress with CapTrin Partners, our joint venture with Trinity Capital.

During the quarter, we closed a $150 million revolving credit facility, which will provide the liquidity to meaningfully increase the scale of our joint venture over time with advance rates that should produce a 13% to 15% return once fully ramped. The JV currently holds approximately $98 million in first lien securities in 14 portfolio companies with a weighted average leverage of 1.2x debt to EBITDA. We expect to continue originating low leverage, high-quality investments within this structure. I will now hand the call back to Michael for some final comments.

Michael Sarner: Thank you, Chris, Josh and Amy and all the employees who help us tell this story on a quarterly basis. And thank you, everyone, for joining us today. This concludes our prepared remarks. Operator, we are ready to open the lines up for Q&A.

Operator: [Operator Instructions] Our first question comes from Erik Zwick from Lucid Capital Markets.

Erik Zwick: First question maybe for either Josh or Michael. Just curious for the 11 new portfolio companies that you added during the quarter, if you could provide any detail into the either the average or the range of spreads on those new companies as well as maybe a sampling of the industries that they operate in. curious if you're seeing some common themes there, some industries that you're finding more attractive today or if it's pretty a little bit more diverse and widespread at this point.

Michael Sarner: Yes. I mean I'll start on the coupons. I think they ranged between 5.75% and I think as high as 7%. And some of the uplift in our spreads this quarter were due to CapTrin starting to take shape, where we've had additional first-out, last-out positions. So the yield on our last-out acquisition is a little bit higher. I don't know, Josh, do you have any thoughts on...

Josh Weinstein: On the industry, I mean, generally speaking, I think it's pretty consistent with our portfolio broadly. I mean we've not seen any specific industries that we focused on in the last couple of quarters or see more volume. It's really across the board from an industry perspective and continues to remain diversified.

Michael Sarner: I think the other thing to add as well, and we've noted this in the opening comments is that the add-on investments that we've seen, some of those are for deals that are older deals that maybe started with $5 million of EBITDA and they've grown through add-on originations that we funded. And so some of those have been on the higher end of the yield as well.

Erik Zwick: It's always nice when you continue to maintain those relationships as they grow, a good testament to the service that you're providing. So just curious, given the strong origination activity you had in the past quarter, how does the pipeline look today in terms of maybe dollars compared to 3 months ago? And then is the mix between new and add-ons still kind of -- I guess, in terms of dollar size, you did more -- it's easier to do bigger, chunkier ones on the new ones, but you had a nice -- a number of new add-ons as well. So just curious what that mix looks like today.

Michael Sarner: Yes. So I think when we were looking ahead where we're just into August, we've already closed about $125 million in originations this quarter. In a continued granular sense, we're still originating somewhere between $15 million and $20 million on each origination. We would tell you, based on the pipeline of deals that we've actually signed up that we expect to close over the next 60 days. I mean, we could be in the $250 million to $300 million range. And that's going to include probably about 75% of that are new platform companies and the other 25% are add-ons to existing companies.

Josh Weinstein: And we've continued to ramp our origination staff that's helped drive continued pipeline strength.

Michael Sarner: That coupled with CapTrin, again, where we're able to originate deals with slightly lower yields on the face. I think those 2 things together really -- I think we noted also just the amount of deals that we looked at on an annual basis is just -- it's growing, and we fully expect that to continue to grow because it feels like momentum is real and sustainable.

Erik Zwick: No, that's good to hear. It's certainly a little bit of a difference from some of the other of your competitors that are having a little bit more challenge growing the portfolio today. So last question for me, and then I'll step aside. Just I think you mentioned 14 companies in that CapTrin fund today. Are any of those just solely in that fund? Or is it they all have a shared overlap with your legacy portfolio?

Chris Rehberger: Yes, Erik, they're all -- it's a mix. So we did a secondary transaction to sort of seed the portfolio and then we've originated some new first outs into that fund, as Michael mentioned. So there's overlap. There's nothing that's solely in CapTrin. There's overlap on every asset between Capital Southwest and CapTrin in some form or fashion, whether it's a pari passu debt piece or a first out last out.

Erik Zwick: And you expect that -- will that be consistent over the life of the fund?

Michael Sarner: Yes, that will be. I will also say that we have looked at opportunities that are first out only loans that would go only into the JV. I think we're looking at one today. But I don't think today, we haven't closed any. But we are open to deals that are 1, 1.5 turns of leverage to support a deal.

Operator: Our next question comes from Robert Dodd from Raymond James.

Robert Dodd: Congrats on the quarter. Just sticking with CapTrin, if I can, for a moment. Obviously, you seeded it a little bit this quarter, so this is not necessarily the normal kind of growth rate. But in the last quarter, I think you said 18 to 24 months to kind of ramp that up. Looking at the amount of deals you're seeing both this quarter, screening, what sounds like the pipeline for next quarter, I mean, do you think that, that JV vehicle could reach its 13% to 15% kind of target return faster than 18 to 24 months? Or you'd still stick with that as kind of a base case?

Michael Sarner: The answer to your question is it's certainly possible. And if I'm being optimistic, I would probably say yes. But I think we'd probably stick to that time line because we're not trying to reach. I think this quarter, we'll probably see -- and maybe typically, we might see like 2 to 4 deals a quarter that fit into the pipeline. But if we are originating in excess of the $250 million to $300 million I noted earlier, certainly, this could be 12 to 15 months.

Robert Dodd: Got it. And I mean on the lower leverage type deals, it's something you said you'd be willing to consider a first out with 1.5 turn. I mean, would you be willing to consider kind of nonsponsor-backed deals to go into CapTrin that might be not M&A related, growth capital, working capital receivables backed or other things that could go into that vehicle have lower leverage, lower spread, lower risk, but might not have a sponsor behind them? Would you consider something like that?

Michael Sarner: I think my -- the answer is possibly, but I actually think this fund is set up to have 1 to 1.25x leverage and have lower risk because we're planning to lever the entity 3 turns, which is significantly higher than we would lever our balance sheet. From that perspective, I think having a non-sponsored deal, which on the margin is higher risk than a sponsored deal. So I probably would shy away from that, but there are instances where we see a deal that we like a lot and perhaps it's levered lowly enough, and there's some comfort there. But I wouldn't think that's going to be the bread and butter.

Josh Weinstein: Most of our non-sponsored deals are -- we consider them to be usually higher risk and have higher spreads versus lower spreads.

Robert Dodd: Agreed. I didn't mean it in the sense of a normal non-sponsor deal. I just meant in the sense that you might find -- there might be somebody with a funding opportunity that isn't a buyout at all and might be just growth capital or something like that rather than a more traditional non-sponsored deal where the leverage is higher than something like that. But I take your point. Then just on -- if I can, on the expansion in the deal screenings. I mean, obviously, pretty sizable increases. You've added headcount. You're seeing a lot more deals. What proportion of those increases are kind of deals that are relevant to you?

Obviously, you could say, hey, well, look at billion-dollar deals, right, it's going to get a desk kill immediately, right? I mean, so what percentage of kind of the increase is relevant to you? Obviously, closing rates down. So some of them you're not going to -- you're not actually interested in closing. But are those all kind of relevant deals to the type of markets you want to operate in, in terms of lower middle market with maybe an equity co-invest opportunity?

Josh Weinstein: Yes. I think that what we call sort of dead on arrival, the DOA deals, like I think that they're the same percentage we've had over the years. I don't think that we're increasing our sort of DOA type of deals that we're getting in over the last 6 or 12 months. In fact, as a percentage of total deals, I would say there's a chance it's even lower.

Michael Sarner: I mean the other thing to add is keep going back to CapTrin, but the reason we set up that fund was so we could originate deals that were below 5.75 because that's sort of the bogey that we'd like to stay above in terms of minimum yield. And so I think Josh and his team is working with sponsors and where deals were priced in the 5s, we probably weren't relevant or weren't being shown as many of those deals. And today, that's sort of -- that's opened up.

And so I think we're just negotiating on -- I mean, if you think about it, I've said this a few times on other calls, these deals are higher quality deals. These are going to tend to be $8 million to $10 million EBITDA companies that are low levered, but lower spread, but kind of more sleep at night credits, if that is actually a thing. And so we're just seeing more of those.

Operator: I am showing no further questions at this time. I would like to turn it back over to Michael Sarner for closing remarks.

Michael Sarner: Thank you, operator, and thank you again to everyone for joining us today. Before we end the call, I want to reiterate the importance of shareholder approval of the proposal to increase Capital Southwest's authorized shares. We encourage all shareholders who have not yet voted or who have voted against the proposal to support the company by casting an affirmative vote prior to the September 1 meeting. Everyone at Capital Southwest works each day to serve our shareholders in a transparent, disciplined and shareholder-friendly manner. We are now asking for your support so we can continue building on the success we have achieved for our shareholders, employees, Board of Directors and all stakeholders.

Thank you in advance for your support, and we look forward to speaking with you again next quarter.

Operator: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.

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