Participants

Chris Rehberger; Executive Vice President and Treasurer; Capital Southwest Corp

Bowen Diehl; President, Chief Executive Officer and Director; Capital Southwest Corp

Josh Weinstein; Senior Managing Director, Chief Investment Officer; Capital South Corp

Michael Sarner; Chief Financial Officer; Capital South Corp

Braim McKenna; Analyst; JMP Securities

Doug Harter; Analyst; UBS

Bryce Rowe; Analyst; B.Riley

Robert Dodd; Analyst; Raymond James

Presentation

Operator

Thank you for joining today's Capital Southwest second quarter. This year 2025 earnings call participating on the call today are Bowen Deal, Chief Executive Officer Michael Sarner, Chief Financial Officer Josh Weinstein, Chief Investment Officer and Chris Reberger, Executive Vice President of Finance. I'll 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.
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 material 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 off to our Chief Executive Officer Bowen Diehl.

Bowen Diehl

Thanks Chris and thank you everyone for joining us for our second quarter fiscal year, 2025 earnings call.
We are pleased to be with you this morning and look forward to giving you an update on the performance of our company and our portfolio as we continue to diligently execute our investment strategy as stewards of your capital.
Throughout our prepared remarks, we will refer to various slides in our earnings presentation which can be found in the investor relations section of our website at www.capitalsouthwest.com.
You will also find our quarterly earnings release issued last evening on our website.
We'll now begin on slide 6 of the earnings presentation where we have summarized some of the key performance highlights for the quarter during the quarter, we generated pretax net investment income of 0.64 per share which fully covered our regular dividend of 58¢ per share and our supplemental dividend of 0.6 per share paid during the quarter.
Portfolio earnings continue to be strong. And as of the end of the quarter, we estimate that our undistributed taxable income was 0.64 per share.
As we look forward to the December quarter. We are pleased to announce that our board of directors has declared a regular dividend of 0.58 per share for the quarter ended December 31, 2024.
Our board has also declared a supplemental dividend of 0.5 per share, bringing total dividends declared for the December quarter to 0.63 per share deal flow in the lower middle market continued at a healthy pace this quarter. While competition in the market from both bank and nonbank lenders for quality deals continue to be fierce.
This has resulted in tighter spreads on quality new deals as well as slower net portfolio growth of the last two quarters for Capital Southwest as we have maintained our credit discipline that said a current backlog of deals in which we have either signed up or have received an indication that we are likely to win would indicate that net portfolio growth should be very strong in the December quarter.
The deals we are currently underwriting continue to have loan to value levels ranging from 35% to 50% resulting in significant equity capital cushion below our debt and reasonable leverage levels of around 3 times that the top deal closings at the in the lower mill market have always been lumpy from quarter to quarter. And that is certainly the case these past few quarters over the past decade, our team has done an excellent job generating attractive returns for our shareholders in all competitive environments. And I'm highly confident we will continue our track record in the current environment.
Josh Weinstein will provide additional color on the market, our investment activity and the performance of our portfolio later in our prepared remarks portfolio activity during the quarter consisted of $89.8 million in new commitments to four new portfolio companies and 11 existing portfolio companies. As add on financing continue to be an important and highly attractive source of originations for us.
Portfolio growth for the quarter was offset by $45.2 million in proceeds from 4 debt prepayments which generated a weighted average realized IRR of 14.5% on the capitalization front. During the quarter, we increased our ING led corporate credit facility to $485 million from $460 million with the additional addition of one new bank lender.
Additionally, we raised approximately $21 million in gross equity proceeds during the quarter through our equity ATM program at a weighted average share price of $24.90 per share or 148% of the prevailing NAV per share.
We have remained diligent in ensuring that we have strong balance sheet liquidity while also funding a meaningful portion of our investment activity with the creative equity issuances, we continue to maintain a conservative mindset of both B two leverage and balance sheet liquidity balance sheet liquidity at Capital Southwest remains robust which Michael will provide additional commentary on in a moment, managing leverage to the lower end of our target range. While ensuring strong balance sheet liquidity affords us the ability to continue to invest in new platform companies as well as provide financing for both growth capital and add on acquisitions for our existing portfolio companies.
We believe this strategy allows us to continue to grow our balance sheet through any capital markets environment while also maintaining the flexibility to opportunistically repurchase our stock if it were to trade meaningfully below. NAV On slide 7 and 8, we illustrate our continued track record of producing steady dividend growth, consistent dividend coverage and solid value creation.
Since the launch of our credit strategy almost 10 years ago, we have increased our quarterly dividend, regular dividend 29 times and have never cut the regular dividend all while maintaining strong coverage of our regular dividend with pretax net investment income.
In addition, over the same period, we have paid or declared 26 special or supplemental dividends totaling $4.06 per share.
All generated from excess earnings and realized gains from our investment portfolio.
Dividend, sustainability, strong credit performance and continued access to capital from multiple capital sources are all core to our overall business strategy.
Our track record in all these areas demonstrates the strength of our investment and capitalization management strategies as well as the absolute the absolute alignment of all our decisions with the interest of our fellow shareholders.
And a reminder fly nine lays out the core tenets of our investment strategy in lending and investing in the market.
The vast majority of our portfolio and deal activity is in first lien senior secured loans to companies backed by private equity firms.
Currently, approximately 93% of our credit portfolio is backed by private equity firms which provides import, which provide important guidance and leadership to the portfolio companies as well as the potential for junior capital support if needed in the lower middle market. We often have the opportunity to invest on a minority basis in the equity of our portfolio companies perry pursue with a private equity firm. When we believe the equity thesis is compelling as of the end of the quarter, our equity co investment portfolio consisted of 72 investments with a total fair value of $134 million representing 9 9% of our total portfolio of fair value.
Our equity portfolio was marked at 132% of our cost representing $32.5 million in embedded unrealized appreciation or 0.68 per share.
Our equity portfolio continues to provide our shareholders participation in the attractive upside potential of these growing lower than market businesses often resulting from the institutionalization of the businesses by experienced private equity firms as well as the significant value accretion potential of strategic add on acquisitions, equity coinvestments across our portfolio provide our shareholders with the potential for asset value appreciation as well as equity distributions to capital southwest over time.
As illustrated on slide 10, our on balance sheet credit portfolio ended the quarter at $1.4 billion, representing year over year growth of 17% from the $1.2 billion as of September 2023.
With the current quarter, 100% of the new portfolio company debt originations were firstly continue secured.
As at the end of the quarter, 98% of the credit portfolio was first Lane Senior secured with weighted average exposure per company remaining at 1%.
We believe our portfolio granularity speaks to our continued investment discipline of maintaining a conservative posture to overall risk management as we grow our balance sheet, we expect this metric will continue to improve in our asset based growth.
I want to end now end the call over to Josh to review more specifics of our investment activity, the market environment and the performance of our portfolio for the quarter.

Josh Weinstein

Thanks Bowen on slide 11, we detailed an $89.8 million of capital invested in and committed to portfolio companies during the quarter, capital committed during the quarter included $72 million in first leaning Senior secured debt across four new portfolio companies in which we also invested a total of 975,000 in equity.
In addition, we closed add-on financing for 11 existing portfolio companies consisting of $16 million in first lien Senior secured debt and 815,000 in equity.
We are pleased with the strong market position that our team has established as a premier lender to the lower middle market.
This is evident by the broad array of relationships across the country from which our team is sourcing quality opportunity.
As a point of reference, currently, there are more than 70 different private equity firms represented across our investment portfolio.
Additionally, in the last year, we closed 10 new platforms with financial sponsors with which we had not previously closed the deal showing our continued penetration in the market since the launch of our credit strategy. Back in January 2015, we have completed transactions with over 100 different private equity firms across the country including over 20% with which we have completed multiple transactions.
As zo mentioned competition in the lower middle market over the last six months has been quite strong. This has resulted in tight loan pricing for high quality opportunities due to the depth and strength of the relationships our team has cultivated over the years, we continue to source and win opportunities with attractive risk return profiles and we are very pleased with the current backlog of transactions that should close between now and the end of the year.
Turning to July 12th, we continued our track record of strong returns on our exits with 4 debt prepayments during the quarter. In total, these exits generated $45.2 million in total proceeds generating a weighted average IRR of 14.5% during the quarter. The prepayment activity was driven by the robust financing market as all four prepayments were refinancing transactions of portfolio companies with EBITDA in excess of $15 million.
2 of the companies ADI Tactical and (WI) were large syndicated credits formerly held at I 45 which were paid off at all.
Over the past 10 years, we have realized 86 portfolio company exits representing over $1.1 billion in protein that have generated a cumulative weighted average IRR of 13.9%.
On slide. 13, we detail key statistics for our portfolio. As of the end of the quarter, the total portfolio consisted of 118 unique companies with a fair value. As of the end of the quarter weighted 89.2%. In first lien, you issued your debt 1.8% to second lien. You issued your debt 0.1% to subordinated debt and 8.9% to equity co investment.
The credit portfolio had a weighted average yield of 12.9% and weighted average leverage through our security of 3.8 times overall. We are pleased with the operating performance across our loan portfolio. In fact, as shown on slide 14, the portfolio upgrade will meaningfully more than the than the downgrade to this quarter.
As a reminder, all loans upon origination are initially assigned an investment rating of 2 on a 4 point scale with one being the highest rating and four being the lowest rating.
We had 5 loans representing $80 million in fair value upgraded during the quarter. While having only one loan representing approximately $12 million in fair value downgraded during the quarter, the portfolio remains healthy with 93.5% of the portfolio at fair value rated in one of the top two categories. A one or two and only 6.5% of the portfolio in the three or four categories, cash flow coverage of debt service obligations across the portfolio remained at a healthy 3.4 times. Despite the higher base rate environment, with our loans across our portfolio averaging approximately 43% of the portfolio company enterprise value quarter over quarter revenue in EBITDA Road on a weighted average basis was 2% and 1% respectively.
As seen on slide 15, our portfolio continues to be broadly diversified across industries with an asset mix which provides strong security for our shareholders' capital.
In addition to industry diversification, our average exposure per company is 1% of assets which gives us great comfort in the overall risk profile of our portfolio.
Our investment, our investment committee members utilize our cumulative experiences navigating through various economic cycles to continually assess risk both on a company by company basis. As well as on the portfolio.
I will now end the call to Michael to review the specifics of our financial performance for the quarter.

Michael Sarner

Thanks Josh, specific to our performance for the quarter. As summarized on slide 16 pretax net investment income was $30 million or 0.64 per share as compared to $31.3 million or 0.69 per share in the prior quarter.
Net net investment income after tax was $31.2 million or 0.66 per share for the quarter.
The main driver of the tax benefit this quarter was 1.5 million in deferred taxes related to our taxable subsidiary.
The which holds the majority of our equity investment for the quarter. Total investment income decreased to $48.7 million from $51.4 million in the prior quarter.
The degree was driven primarily by a $1.8 million reduction in onetime cash dividends from equity investments in the prior quarter. As well as a decrease of approximately 800,000 in fee revenue quarter over quarter, the decrease in cash given income was the result of three nonreccurring dividend recap transactions which occurred in the prior quarter. As at the end of the quarter, our loans on non aul represented 3.5% of our investment portfolio at fair value and the weighted average yield in the portfolio on all investments was 12.7%.
During the quarter, we paid out a 0.58 per share, regular dividend and a 0.6 per share supplemental dividend. As mentioned earlier, our board has declared a regular dividend of 0.58 per share and a supplemental dividend of 0.5 per share for the December quarter management and the board have spent significant time contemplating the impact of a lower interest rate environment on future earnings.
We have consistently maintained that setting a regular dividend at a level that we believe will never be cut in any foreseeable interest rate environment is key to generating stable attractive shareholder returns over the long term.
We continued our strong track record of regular dividend coverage with 119% coverage for the 12 months ended September 30,2024 and 111% cumulative coverage since the launch of our credit strategy in January 2015.
As a reminder, our intent is to continue to distribute to our shareholders the excess of our quarterly pretext and I over our regular dividend and a quarterly sentimental dividend, we are confident in our ability to continue to distribute quarterly sentimental dividends for the foreseeable future based upon our current UTI balance of (68.064) per share and the expectation that we will harvest gains over time from existing 0.68 per share and unrealized appreciation on the equity portfolio.
As seen on slide 17 LTM operating leverage ended the quarter at 1.7% which improved slightly quarter over quarter. Our operating leverage of 1.7% continues to compare favorably to the BBC industry average of approximately 2.8%.
We believe this metric speaks to the benefits of the internally managed BDC model and of absolute alignment with shareholders. The internally managed model has and will continue to produce real fixed cost leverage while also allowing for significant resources to be invested in people and infrastructure as we continue to build and manage a best in class BC.
Turning to slide 18, the company's NAV per share at the end of the quarter decreased slightly by 0.1 per share to $16.059 per share. The primary drivers of the NAV per share decrease for the quarter were net realized and unrealized depreciation on our investment portfolio offset by accretion from the issuance of common stock at a premium to NAV per share.
During the slide 19, we're pleased to report that our balance sheet liquidity is robust with approximately $475 million in cash and unraw leverage commitments on our two credit facilities and our FBI commitments which altogether represent 3.6 times. The $133 million of unfunded commitments we had across our portfolio as at the end of the quarter during the September quarter, commitments to the IMG led corporate credit facility increased to $485 million up from $460 million in the prior quarter. With the addition of one new bank lender. In addition, based on the current borrowing base, we have access to the full $485 million in total commitment.
This facility has an accordion feature allowing for the further increase in total commitments up to an aggregate of $750 million owing us to continue to grow our revolver capacity in lockstep with the growth of our overall balance sheet.
As a reminder in March 2024 we submitted a Mas application to the SDI which began the process towards a second license.
We are actively working with the SDI and we continue to be optimistic that we will complete this process by the end of this calendar year.
Finally, as of the end of the September quarter, 46% of our capital, structural liabilities were an unsecured covenant free bond with the earliest debt maturity in January 2026.
A regulatory leverage as seen on slide 20 ended the quarter at a debt to equity ratio of 0.8 to 1 up from 0.75 to 1 as of the prior quarter.
Our optimal target leverage continues to be in the 0.8 to 0.95 range. We are weighing the impact of future based rate reductions and maintaining adequate cushion levels to allow the flexibility to potentially increase leverage to support future earnings and dividend growth.
We will continue to methodically and opportunistically raise secured and unsecured debt capital as well as equity capital through our ATM program to ensure we maintain significant liquidity and conservative balance sheet leverage with adequate covenant cushions from a capital market perspective. BBC's have been very active in the unsecured debt market as investors remain constructive on new bond issue.
Despite not having any maturity within our debt structure until 2026 we are actively evaluating financing transactions to mitigate future capital market volatility while also being mindful of the current interest rate environment.
I would ask them to call back to Bowen for some final comments.

Bowen Diehl

Thank you Michael and thank you Josh.
And again, thank you everyone for joining us today. As always, we appreciate the opportunity to provide you with an update on our business, our portfolio and the market environment.
Our company and portfolio continue to demonstrate strong performance and we continue to be impressed by the job our team is doing in building a robust asset base deal origination and portfolio management capability as well as a flexible capital structure.
We believe we have prepared our company well for future growth and performance.
The overall health and security of our portfolio is strong.
Our credit portfolio is predominantly made up of firstly, senior skilled loans allocated across a broad array of companies and industries with weighted average exposure per company of only 1%.
The vast majority of our portfolio is backed by private equity firms, interest coverage of the debt obligations across that portfolio is a strong 3.4 times with strong equity cushion and support below our debt investments.
Additionally, our equity co investment portfolio gives our shareholders participation in the equity upside of many of these growing lower middle market businesses providing further enhancement to our long term shareholder returns.
Last but not least, we have a very well capitalized balance sheet with multiple capital sources and significant balance sheet liquidity. All of which provide our company an exciting runway to continue to grow and generate strong shareholder returns for years to come.
This concludes our prepared remarks. Operator, we are ready to open the lines for Q&A.

Question and Answer Session

Operator

(Operator Instructions)
Our first question will be coming from Brian Mckenna of citizens MP. Your line is open.

Braim McKenna

Okay, great, thanks, good morning everyone. So I heard the commentary around some deals that got pushed into calendar four Q. Is there any way to quantify this? And then it's great to hear that the pipeline is also robust. You know, so how should we think about the magnitude of net portfolio growth into year end and then also into calendar year 2025 as well?

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

Yeah. So if they also relative to the 930 quarter, our originations were mostly late stage. This quarter, if we were in quantify would probably be, I mean, on the conservative side, we probably expect to see $150million to $200 million of net portfolio growth for the quarter. And so say half of the originations are either have closed or will close shortly. So we expected a pretty strong portfolio growth both from income as well as balance sheet.

Braim McKenna

Yeah. Okay. Got it. That's helpful. And then maybe just a bigger picture, bigger picture question, you know, what are you seeing just within kind of the lower middle markets? And then, you know, really just the markets more broadly in terms of New Deal activity, you know, I think deal flow has remained largely stable the last several years and kind of the lower lower mill markets and, and you know, broader sponsor M&A has been pretty muted. So I think we've seen some larger players moving down market. So, you know, thinking about sponsor M&A specifically in the larger end of the market, you know, that should be picking up here. So I guess what does that mean for for transactions and yields in your space. And then are you seeing any early signs of some of these larger firms moving back, you know, moving back up market a bit?

Yeah. So it's a really interesting question and when we think about and ask other firms about quite often, I think, you know, over the last several years, we've seen an enormous amount of capital being raised, you know, initially in the private equity market and then in the private credit market, when you read about the the quantity of capital raise, obviously just that tends to lean more towards the large market, probably for no other reason than that's just a lot more capital. I think we've also heard and you've read in the papers et cetera that, that deal flow as you just referenced has been muted in the last, you know, year and a half say.
And so what we've heard is, you know, there's two things going on. It doesn't take a whole lot of change in the competitive balance if you will, between supply and demand of capital in the lower middle market to disrupt pricing. So the deal flow in the lower middle market, you know, as we've, as you know, is, is not private equity firms selling businesses to each other. But it's private equity firms buying, controlling interests and founder or family owned businesses that are aging and want to diversify their holdings. And so the deal flow has been relatively, you know, flat. And so when you have decreased deal flow in the upper market and relatively flat deal flow in the lower middle market, you know, we have seen, you know, certainly private equity parties that, that I've talked to have seen some of the competition increased competition from larger market, private equity firms and it's a cascading effect, right. So large market, private equity firms starting to justify deals a little bit smaller and then midmarket justifying deals a little bit smaller and it kind of cascades down.
And then, you know, as you just referenced, Brian, I mean, that, that, you know, when deal flow picks back up, that should cascade back now, there's an enormous amount of liquidity in the market. So the speed at which that cascades back is the question mark, but I think it would tend to cascade back up. The other effect is, you know, in our market is we're seeing more competition recently from banks. As we all know, banks come and go, they're here now and they weren't here a year and a half ago in many, you know, and it's a certain handful of regional banks.
So, you know, that, that somewhat disrupts the market from a pricing perspective. We haven't seen a lot of deterioration in credit, like leverage up, you know, covenants worse, you know, a little bit around the edges, but not, not as much as pricing has changed And so, you know, I think those two factors, again, it doesn't take a lot to disrupt the, the pond if you will. From a pricing perspective.

Bowen Diehl

So.

From right perspective, probably three quarters ago and back our spread over silver was 752 quarters ago. The June 30 quarter, it was 700 this quarter it was just a shade over 650. So we've seen, you know, obviously somewhere in the, you know, 50 to 100 basis points tightening on spread at the moment.

Braim McKenna

Yes. Alright, great. Thank you guys. I'll leave it.

Operator

Thank you one moment for our next question and our next question will be coming from Doug Harter of UBS. Your line is open.

Doug Harter

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

Sure. So we start by saying we've done a lot of the hard work, you know, coming you know, to today, we have close to$ 500 million of capital available either through cash or available on our credit facilities not trade in where we are 1.5 times book. We we the ATM is constantly raising capital on a daily basis. We would say that we are always opportunistically looking to raise additional capital and certainly with an eye towards our bonds in 2026. Sort of refinance those in time. So I would tell you, yes, we're active there. You'll probably see us increase secured capacity a little bit. You certainly should expect over the next 6 to 9 months to see some unsecured activity and you know, raising ATM money will probably look like something in the, in the (20 to $40) million a quarter.

Doug Harter

Great, appreciate that. Thank you.

Operator

Thank you one moment for our next question.
And our next question will be coming from Bryce Rowe of B Riley. Your line is open.

Bryce Rowe

Thanks. Good, good morning. Maybe, maybe wanted to start around the the discussion topic of the portfolio robust portfolio and a couple more questions around that. So, so Bowen and, and maybe touch on the mix of, of the backlog whether it be kind of newer portfolio companies versus existing portfolio companies. And I'm kind of curious, have you seen incremental spread compression, you know, since the end of September with, with some of the new activity, new Deal activity that's kind of blood over into the into the fourth calendar quarter.

Yeah, so I mean, the new the New Deal activity is.

Bowen Diehl

What you say. Third.

Two thirds new platform companies is about a.

3rd, 3rd add ons, which is kind of in the mix.

Bowen Diehl

Historically the last several quarters. So it's about the.

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

Bryce Rowe

Okay. That's helpful. And then maybe, maybe speak to, I think you guys have talked in the past about how the the the the loan rate resets kind of lag what we see from a short term rate perspective. We, we saw a little bit of yield compression for the portfolio. Here here in the September quarter, maybe Michael or Bone can you can you kind of speak to, you know what percentage of that were, was not a cruel inflows. What percentage of that was so for compression driven? And then what your expectation is for the portfolio yield, you know, given that, given that lag.

Sure, So we saw so far come in from essentially 5.1% in the previous quarter from a to an effective about, I guess the 12 basis point it came in effectively for the, 930 quarter versus the 630 quarter. Compression on yield came in about 15 basis points. And then there was some compression due to elevated nor during the quarter so that it brought our yield on the debt from (13 3) down to 12.9 for the 1,231 quarter we're expecting based on the, the reset date, which was October 1st was 4.6% So down from the 51 in the previous quarter, so now the 50 basis point anticipated.
So that kind of give you a sense where we are on the on con today. Yeah. Okay.

Bryce Rowe

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

Yeah, I mean, it's two new nors obviously, that's frustrating. It's part of our business. It's, it's frustrating to see both of those names were three last quarter. So they were already on our watch list. One is a closeout sale company to lower end consumers. And I think that's, you know, my view of that, I think our view of that is that's the lower end consumer that's affected more acutely by the cost of eggs and gas and milk. You know, with inflation and so that's, that's hurt that business. You know, and then the other one is, it serves the it's, it's a video, the video content that's strained through Hulu Netflix prime. Those types of things are a video, digital editor company. And so that's been affected by the strike. That's over, but the business is the industry is still down. And then it's just the, the comeback of that business will be a function of the qantm of streaming content volume. And how fast that recovers both nonaccruals will most likely be restructured by the end of December. Both are in discussions right now and I, I'm pretty confident that they'll be struct restructured by the end of December. So they'll be off off that list anyway, but there'll be companies where we'll own equity in and we'll continue to work with the manager teams and turn around those businesses.

Hopefully it'll probably be a portion just to be clarified. So a portion of the asset will be debt and the bus will be at some of it will come back on a cool I can't give you those percentages now, but that's anticipated.

Bryce Rowe

Yeah.

Okay.

Bryce Rowe

Last one for me, just a modeling question you saw the, the comp line kind of come in. It's called 40% or so quarter over quarter, Michael. Can you, can you help us think about what that comp line might look like for the balance of the fiscal year?

Yeah, I'll tell you that the the run rate for, for compensation for cash compensation is $3 million. The stock comp.

Michael Sarner

Number should be about 1.5.

So $4.5 million for compensation on a normal basis, run rate basis. And then you know SG&A is another $2.5 million on run rate. So.

Michael Sarner

Total of.

SG&A at.

Michael Sarner

$7 million is the run rate you should be working.

Josh Weinstein

Off of.

Bryce Rowe

Okay. All right. Thank you all.

Thanks. Bye.

Operator

And one moment for our next question, our next question will be coming from Matthew Hris of VP. Your line is open.

Hi there. This is Matt Hewitt from jeffries'. Congrats on the quarter just to follow up on the non accrual list. Are you able to provide any detail on some of the NPAS from last quarter? Like gauge American Nuts research now or statin?

Yeah, research now and start with that because that's easy. That's gone. You know, that was, you know, restructured and sold. And so that's, that's actually the net realized loss this quarter. And then American Nuts, you know, kind of flat the better business.
So, and then what was the other one?
Yeah, that med Yeah, that's, that's our one name that's a four and that company, you know, continues to kind of struggle.

Okay. That's really helpful. Thank you all.

Operator

And one moment for our next question and our next question will be coming from Robert Dodd of Raymond James .

Robert Dodd

I guess on the, the, the net deployments, obviously that is not what drives bonus or anything like that, that, you know, just the point. But I mean, with the, with the number that you're looking at for the December quarter, I mean, and, and you gave kind of some run rate, comp numbers and, and stock comp numbers. But I mean, should we expect anything unusual in the fourth quarter? Given the level of, of deployments, which is, healthy to say the least?

I mean, I, I would say so, Robert, I think that, you know, from quarter to quarter, we assess what the bonus accrual will look like at year end and then make, you know, just to remind everybody we accrue for the first three quarters based on what we think the run rate will look like at the end of the year and then the fourth quarter will be the true up to the the final bonus payment. The payment bonuses are only paid at one time at the end of our fiscal year. So, I mean, certainly as we definitely don't pay people based on origination. So the answer to that question is it will depend on what's going on with the company. How is our credit looking, what we think we're able to pay out first and foremost for our shareholders for dividends for the remainder of the year. But also with the eye of being able to continue to pay out supplemental dividends and build up a UT I bucket. So I wouldn't expect anything dramatic because that, that is not how we compensate employees.

Robert Dodd

Got it, got it. Thank you. And then on. So just credit in general, I mean to your point. I think you said, you know, you've got a low end consumer business, that's a, you call this business, this, this quarter digital. I think, I mean, these are, these are not related industries, obviously, but, I mean, is there any, I mean, I would expect the low end consumer and any other exposure that will be under pressure but any other areas where there's any kind of emerging sign of weakness, I mean, to your point on the revenue and EBITDA, I mean, EBITDA, I think you said was up 1% quarter over quarter. So there's got to be a, not everybody is up 1%, there's got to be a proportion that are, that are now declining sequentially. And I mean, any, any themes on where those pressures are and any incremental concerns given low levels, the growth, which means some portion declining.

Yeah, thanks Robert. I would tell you, look, I mean, there's, there's idiosyncratic stories all throughout any portfolio, right? So I would say if I were to zone out and think about what, what are the economic related or, you know, trends or things that show up that would be on an economic general list. I mean, one is the lower end consumer. No question about it. We don't have a lot of businesses in that area, but like that's, that's, that's something that we've seen. Not necessarily, you know, yes to our non accrual. But if you look across the portfolio, you know, another one or two discretionary, low end consumer type purchases, you know, that it's slow, not necessarily becoming a credit problem, but, but you see that in the portfolio and then the other I would say is just businesses that are serving other businesses, business to business that, you know, decisions are slower to make slower to make purchase decisions. As, you know, candidly, probably as much cons, you know, businesses, you know, cautious about the future in some ways. And so that, you know, I don't know if that's like material, if you zone out, look at our overall portfolio, but you definitely there, there's definitely a narrative out there in that respect. And then I think I take a step back and I'm like, all right, well, our rating migration as you and Bryce both referenced our rating migration. We have significant amount of upgrades, not a lot of downgrades, you know, strong interest coverage in the portfolio. Our pick interest this quarter is a percentage of income or is down. So our cash, our income is a higher percentage cash and it's a higher percentage recurring. So you look at that and you feel pretty good about the engine that's paying the dividend and that's, that's that, that, that's benefiting our shareholders. But at the margins as you referenced there, you know that if you look at negative stories other than just idiosyncratic, very fixable problems, bad management decisions, all those types of things that, that show up in any loan portfolio that are very fixable. If you think about what general themes are, those would be the two kind of the low end consumer and B to B you know, slow, slow or investment decision or slow purchase, slower purchase decisions.
Got it. Thank you.

Operator

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

Bowen Diehl

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

Operator

And this concludes today's conference call. Thank you for participating. You may now disconnect.