Executive Summary
Capital Southwest Corporation (CSWCZ) reported Q4 2025 results with revenue of $88.44 million and net income of $60.999 million, delivering robust annualized profitability despite a negative gross profit figure. The period showcased a material positive swing in net income and earnings per share versus prior periods (YoY EPS up approximately 343%). The reported figure was supported by a substantial contribution from other income and financial intermediation effects, illuminating the company’s asset-management and credit-investment engine rather than a traditional product gross margin story.
However, the quarter also underscores meaningful leverage and cash flow dynamics that warrant close scrutiny. Long-term debt stood at $956.1 million with net debt estimated at about $912.8 million, and free cash flow remained negative by roughly $62.9 million, driven by operating cash flow outflows and significant financing activity. The balance sheet shows a strong equity base with total assets near $1.8828 billion, yet the payout ratio is elevated (reported at ~1.63x), hinting at dividend sustainability risks in a slower or more volatile revenue environment. The results imply a strategy that emphasizes fee-related income and private credit/co-investment activity, which can sustain earnings through favorable market cycles but exposes the business to credit and interest-rate sensitivity in an adverse cycle.
Overall, the QQ4 2025 results reflect solid net profitability and earnings growth on a YoY basis, but the material leverage, negative cash flow from operations, and high dividend payout relative to earnings suggest a cautious stance for near-term cash-generative performance. Investors should monitor debt metrics, fee-related earnings stability, and AUM/portfolio diversification as primary drivers of longer-term value.
Key Performance Indicators
QoQ: 113.98% | YoY:180.76%
QoQ: -530.23% | YoY:-547.36%
QoQ: -519.39% | YoY:-413.37%
QoQ: 274.96% | YoY:352.88%
QoQ: 291.18% | YoY:343.33%
Key Insights
Revenue: $88.44 million (YoY growth: 180.8%, QoQ growth: 113.98%).
Gross profit: -$114.50 million; gross margin: -2.22% (note: this is presented as negative in reported form, signaling accounting/structure effects common to asset-heavy investment firms rather than traditional product gross margin).
Operating income: -$82.38 million; operating margin: -0.93%.
Net income: $60.999 million; net margin: 0.74% (net income per share: $1.33; diluted $1.33).
EBITDA: -$80.44 million; EBITDA margin: -0...
Financial Highlights
Revenue: $88.44 million (YoY growth: 180.8%, QoQ growth: 113.98%).
Gross profit: -$114.50 million; gross margin: -2.22% (note: this is presented as negative in reported form, signaling accounting/structure effects common to asset-heavy investment firms rather than traditional product gross margin).
Operating income: -$82.38 million; operating margin: -0.93%.
Net income: $60.999 million; net margin: 0.74% (net income per share: $1.33; diluted $1.33).
EBITDA: -$80.44 million; EBITDA margin: -0.81%; EBITDARatio: -0.91.
Cash flow: Operating cash flow -$62.87 million; free cash flow -$62.87 million; net change in cash +$8.59 million; cash at period end $44.87 million.
Balance sheet: Total assets ~$1.8828 billion; total liabilities ~$0.9992 billion; total stockholders’ equity ~$0.8836 billion; long-term debt ~$0.9561 billion; net debt ~$0.9128 billion.
Key ratios: debt-to-capitalization ~30.8%; debt-to-equity ~0.45; price-to-book ~1.37; price-to-sales ~19.37; payout ratio ~1.63x; dividend yield ~6.88%.
Income Statement
| Metric |
Value |
YoY Change |
QoQ Change |
| Revenue |
88.44M |
180.76% |
113.98% |
| Gross Profit |
-114.50M |
-547.36% |
-530.23% |
| Operating Income |
-82.38M |
-413.37% |
-519.39% |
| Net Income |
61.00M |
352.88% |
274.96% |
| EPS |
1.33 |
343.33% |
291.18% |
Key Financial Ratios
operatingProfitMargin
-173.1%
operatingCashFlowPerShare
$-1.33
freeCashFlowPerShare
$-1.3
dividendPayoutRatio
163.2%
Management Commentary
No earnings call transcript data was provided for CCWCZ QQ4 2025. As a result, there are no management quotes or thematic highlights to extract from an accompanying call. If you can supply the transcript, I will extract themes by strategy, operations, and market conditions with precise quotes and context.
Forward Guidance
No formal forward guidance or targets were disclosed in the provided materials for QQ4 2025. In the absence of explicit guidance, the forward-looking assessment relies on sector trends (private credit/asset management in the middle market), the observed revenue mix shift toward fee-related and other income, and the current leverage/cash flow dynamics. Investors should monitor: (1) AUM growth and its impact on fee-related earnings, (2) net investment income contribution versus credit-related gains, (3) the trajectory of leverage and debt costs in a higher-for-longer rate environment, and (4) dividend sustainability given payout levels and free cash flow generation.