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 off to our President and Chief Executive Officer, Bowen Diehl.

Thanks, Chris, and thank you to everyone for joining us for our first quarter fiscal year 2020 earnings call. Throughout our prepared remarks, we will refer to various slides in our earnings presentation, which can be found on our website. We are pleased to be with you this morning to announce our quarterly results for the first quarter ended June 30, 2019. During the quarter, we continued to advance the credit strategy we laid out for our shareholders 4.5 years ago of prudently building a well-performing credit portfolio, utilizing conservative late-cycle underwriting principles. We continue to be committed and excited about our core investment strategy of building a predominantly lower middle market portfolio consisting largely of first lien senior secured debt with equity co-investments across the loan portfolio, where we believe significant equity upside exists. Executing our investment strategy under our shareholder-friendly internally managed structure closely aligns the interests of our board and management team with that of our fellow shareholders in generating sustainable long-term value through recurring dividends, capital preservation, and NAV per share growth and operating cost efficiency. During the June 30, 2019 quarter, we generated $0.44 per share of pretax net investment income, representing 42% growth over the $0.31 per share generated in the same quarter a year ago, while paying out our regular dividend of $0.39 per share for the June quarter, representing 34% growth over the $0.29 per share paid out in the same quarter a year ago. Additionally, we distributed $0.10 per share through our supplemental dividend program, funded by our sizable undistributed taxable income balance, or UTI, which was generated by excess income and capital gains accumulated from our investment strategy to date. As of June 30, 2019, we had approximately $19.5 million or $1.10 per share in UTI, providing visibility into continuing the quarterly supplemental dividend program well into the future. For the June quarter, the $0.49 per share paid out in total dividends generated a total annualized dividend yield of 9.4% based upon our June 30, 2019 share price. We are also pleased to announce further growth in our quarterly regular dividend for the September quarter, as our Board has declared dividends of $0.50 per share for the September quarter, comprised of a $0.40 per share regular dividend and a $0.10 per share supplemental dividend. This will mark our 15th consecutive quarter of increasing shareholder dividends. During the June quarter, we grew our portfolio on a net basis to $533 million from $524 million as of March 31, 2019, originating $35 million in new commitments and exiting one portfolio company for $20 million in total proceeds. Our Senior Loan Fund, I-45, also continued its solid performance, providing a 17.7% annualized yield at fair value on our capital in the fund for the quarter. Additionally, during the quarter, we raised $4.2 million in gross proceeds through our equity ATM program and upsized our revolving credit facility by $25 million to a total of $295 million in total commitments from 10 banks. Turning to Slide 7, we showcase our ongoing ability to grow shareholder dividends while strategically adjusting our balance sheet towards target leverage levels through the development of a portfolio comprised of high-performing, income-generating assets. Moving to Slide 8, I want to remind you that our investment strategy has been consistent since its inception in January 2015. We focus on a combination of lower middle market and upper middle market assets, which gives us the strategic flexibility to pursue attractive risk-adjusted returns in both segments. In our core lower middle market, we actively source opportunities that include debt investments and equity co-investments. Creating a highly effective and detailed portfolio of equity co-investments is crucial for enhancing NAV per share growth and helping to reduce potential future credit losses. Simultaneously, our strength and presence in the upper middle market allow us to invest opportunistically in a more liquid market whenever attractive risk-adjusted returns are available. Ultimately, we believe that maximizing our deal origination potential in both markets is vital for achieving strong credit investment performance over time, as it permits us to evaluate a diverse range of deals, facilitating our conservative underwriting practices in a competitive environment and carefully constructing a portfolio that will succeed throughout various economic conditions. Our on-balance sheet credit portfolio, as highlighted on Slide 9, increased to $382 million as of June 30, 2019, up from $368 million as of March 31, 2019. We place a strong emphasis on first lien senior secured debt lending to the lower middle market as part of our investment strategy. By the end of the quarter, 76% of our on-balance sheet credit portfolio was allocated to lower middle market companies, with 87% of the credit portfolio in first lien senior secured debt. Turning to Slide 10, we originated $35 million in first lien senior secured debt this quarter, which included 2 new portfolio companies and 2 add-ons to existing ones. One of the new portfolio companies was involved in a club deal in the upper middle market, while the other was a first lien senior secured loan to a lower middle market company where Capital Southwest serves as the sole lender. Both add-ons occurred within the lower middle market, with one being a Capital Southwest-led deal that involved a co-lender, and the other being a deal where Capital Southwest is the sole lender. The weighted average yield to maturity on all origins this quarter was 11.1%. As presented on Slide 11, we exited a portfolio company during the quarter for total proceeds of $20 million, yielding a realized gain of $226,000 and an internal rate of return of 10.9% on total invested capital. This further reinforces our solid track record, as we have achieved 26 portfolio exits since the launch of our credit strategy in January 2015, producing $182 million in proceeds and a cumulative internal rate of return of 15.7%. On Slide 12, we break out our on-balance sheet portfolio, again excluding I-45, between the lower middle market and the upper middle market. As of the end of the quarter, the total portfolio was weighted approximately 77% to the lower middle market and 23% to the upper middle market on a cost basis. We had 26 lower middle market portfolio companies with an average hold size of $12.5 million, a weighted average EBITDA of $8.8 million, a weighted average yield of 12.2%, and a leverage ratio measured as debt to EBITDA through our security of 3.4x. Within our lower middle market portfolio as of the end of the quarter, we held equity ownership in 69% of our portfolio companies. Our upper middle market portfolio consisted of 11 companies with an average hold size of $8.8 million, a weighted average EBITDA of $65.6 million, a weighted average yield of 9.9%, and a leverage ratio through our security of 3.4x. We should note that our balance sheet upper middle market metrics are shown excluding our investment in American Addiction as the EBITDA is not meaningful and thus skews the total upper middle market portfolio ratios so as not to clearly show the ratios of the remainder of the upper middle market portfolio. With respect to our American Addiction investment, the company continues to struggle, albeit with recently improving operating metrics. Since American Addiction is a public company, we want to be careful not to effectively announce developments prior to the American Addiction management team appropriately communicating to their shareholders. What we will say is that the lender group continues to work with the company on solutions to the capital structure. The company's leading market position in the substance abuse industry, the company's cost savings and business development initiatives, and its large owned real estate portfolio all provide reasons to be optimistic about the prospects of a favorable resolution. American Addiction remains rated a 3 on our internal rating system. As a reminder, all investments upon origination are initially assigned an investment rating of 2 on a 4-point scale, with 1 being the highest rating and 4 being the lowest rating. Overall, we are pleased with the performance of the investment portfolio as a whole. As of the end of the quarter, of the 40 loans in the portfolio, we had 4 with the highest rating of 1, representing 17% of the credit portfolio, we had 32 loans rated a 2, representing 77% of the credit portfolio, and we had 3 loans rated as 3 representing 4% of the credit portfolio. We did reduce AG Kings to a 4 this quarter, making it the only investment rated a 4 in the credit portfolio. The investment is our first and only non-accrual among the investments made since launching our credit strategy 4.5 years ago. As a reminder, AG Kings was placed on non-accrual during our December 2018 quarter. As illustrated on Slide 13, we have established a portfolio well diversified across industries, which we believe is well positioned for late in the economic cycle. Further, our portfolio asset mix should provide strong security for our shareholders' capital. The portfolio remains heavily weighted toward first lien senior secured debt, with only 7% and 3% of the portfolio in second lien senior secured debt and subordinated debt investments, respectively. Our last remaining legacy equity investment, Media Recovery, which does business under the banner SpotSee, represents 10% of the portfolio and other equity co-investments as of the end of the quarter represented 6%. As we have mentioned on prior calls, Media Recovery is currently undergoing a sale process. The process is going well, and our expectation continues to be that this company will sell during the 2019 calendar year. Shown on Slide 14, as of the end of the quarter, the I-45 portfolio was 95% first lien, with diversity among industries and an average hold size of 2% of the portfolio. The I-45 portfolio had a weighted average EBITDA of approximately $71 million and a weighted average leverage through the I-45 security of 3.9x. We also excluded American Addiction from these ratios for the aforementioned reasons. We should also note that the increase in weighted average leverage to 3.9x from 3.6x last quarter was driven primarily by the prepayment of 2 lower leveraged loans in the I-45 portfolio during the quarter. Overall, we have been pleased with the solid performance of I-45 since its inception back in 2015. We and our partner in I-45, Main Street Capital, have invested approximately $500 million to the fund primarily in first lien senior secured syndicated loans. Since inception, we have harvested 54 exits, generating $223 million in proceeds at a weighted average IRR on the exits of 11.3%. I will now hand the call over to Michael to review the specifics of our financial performance for the quarter.

Thanks, Bowen. As seen on Slide 15, our investment portfolio produced $15.8 million of investment income this quarter with a weighted average yield on all investments of 11.6%. This represents an increase of $1.5 million from the previous quarter, mostly attributable to net portfolio growth. The weighted average yield on our credit portfolio was 11.7% for the quarter, a slight increase from the previous quarter. As of the end of the quarter, there was one asset on non-accrual with a fair value of $7.9 million, representing 1.5% of our total investment portfolio. Excluding interest expense, we incurred $4.3 million in operating expenses this quarter, which was an increase of roughly $500,000 from the prior quarter. As noted on our prior quarterly call, the increase was expected as we incurred seasonal expenses in the June quarter of each year associated with payroll taxes and the Annual Shareholder Meeting. Additionally, during the June quarter, we incurred a one-time charge for the accelerated vesting of restricted stock awards for a long-time employee upon his retirement. For the quarter, we earned pretax net investment income of $7.7 million or $0.44 per share compared to $0.42 per share during the prior quarter. We paid out $0.39 per share in regular dividends for the quarter, an increase of $0.01 per share over the $0.38 per share regular dividend paid out in the prior quarter. We continue to focus on growing our regular dividends in a sustainable manner, demonstrated by our cumulative regular dividend coverage of 108% over the last 12 months and 105% since the launch of our credit strategy 4 years ago. As Bowen mentioned earlier, we also paid out a supplemental dividend of $0.10 per share this quarter as part of our supplemental dividend program. This program allows our shareholders to meaningfully participate in the successful exits of our investment portfolio. The program will continue to be funded from our UTI earned from both realized gains on debt and equity, as well as undistributed net investment income earned each quarter in excess of our regular dividends. On Slide 16, we illustrate our operating leverage, which at the end of the quarter was 3.1%. Excluding the aforementioned seasonal expenses and one-time charge, our operating leverage for the quarter was 2.8%, which continues to move towards our target operating leverage of sub-2.5%. We are fully committed to actively managing our operating costs in lockstep with portfolio growth and expect to achieve our target operating leverage over the next few quarters. With senior professionals and corporate infrastructure largely in place, operating leverage should continue to improve as the investment portfolio grows due to our internally managed structure. As Bowen mentioned earlier, our NAV per share as of the end of the quarter was essentially flat at $18.58 per share, as seen on Slide 17. The slight decrease for the quarter was primarily driven by a $0.10 per share quarterly supplemental dividend paid to shareholders. Our total pretax NII, return on equity for the quarter was 9.4%. On Slide 18, we outline our multiple pockets of capital. As of the end of the quarter, we had approximately $160 million in cash and undrawn commitments available between our balance sheet and I-45, with the earliest debt maturity at December 2022. During the quarter, we added an additional $25 million commitment from a new lender to our credit facility, increasing total commitments to $295 million. Our balance sheet leverage ended the quarter at a debt-to-equity ratio of 0.69:1. We feel good about our liquidity and capital structure flexibility and believe that would allow us to thoughtfully grow our investment portfolio. With that being said, a strategic priority for our company is to continually evaluate approaches to de-risk the liability structure of the company, while ensuring that we have adequate investable capital throughout the economic cycle. During the quarter ended June 30, 2019, the company sold 195,549 shares of its common stock under the equity ATM program at a weighted average price of $21.66 per share, raising $4.2 million of gross proceeds. Cumulative to date, the company has sold 459,205 shares of its common stock under the equity ATM program at a weighted average price of $21.55, raising $9.9 million of gross proceeds. We continue to believe our equity ATM program is a prudent and cost-effective way to issue equity over time at tight spreads to the latest trade while selling equity on a just-in-time basis so it can be thoughtfully invested in income-generating assets.

Thanks, Michael, and thank you, everyone, for joining us today. Capital Southwest has grown and the business and portfolio have developed consistent with the vision and strategy we communicated to our shareholders 4.5 years ago. Our team has done an excellent job generating significant returns for our shareholders. Everyone here at Capital Southwest is dedicated to being good stewards of our shareholders' capital by continuing to deliver strong performance and creating long-term sustainable value for our shareholders. This concludes our prepared remarks. Operator, we are ready to open the lines for questions.

Our first question comes from Tim Hayes from B. Riley FBR.

This is actually Mike on for Tim. My first question is when you look at Slide 13, it looks like you added MRI to the graph, which implies a $53-million-or-so mark, which is largely unchanged quarter-over-quarter. So I was just wondering if this is a reflection of more or less interest you're seeing from bidders? Or I guess if you could just broadly provide any additional commentary on the sale process?

Yes. So you're right, we put MRI on the chart. It has been previously noted as yielding equity. We just decided this quarter to be more specific and separate out from our other general equity co-investments. I would say, generally, the sale process is going well. As I said in my prepared remarks, there’s obviously interest in the asset, and it's progressing forward. So that's really all I want to say on the sale process, given the buyers looking at the business. But we still think it will exit before the end of the year. Our valuation process methodology hasn't changed, so we incorporate DCF, costs, and a weighting from the valuations in the market. And as the valuation or sale process progresses, that weighting influence on the valuation increases over time. We did have a $1.2 million write-up this quarter, so it's not exactly flat, as you said. But as again, the weighting of the valuations in the market increases as they influence valuation over time as the sale process progresses and you get more clarity and visibility on where it might ultimately trade.

And then just a follow up. Do you have any updates on the decision once the sales process is complete? Or is that something you guys are still thinking about in terms of retaining versus paying out a special dividend?

Yes. So I mean the board is going to make that determination, and we'll make that determination once it sells. So the answer is, no. We don't have anything else additional to tell the market, other than a reminder that we'll have the option to replenish the UTI bucket. The gain will most likely be much in excess of that. The remainder of the gain, we have options. We can either retain it and do a deemed distribution to the shareholders, pay a 21% tax, or we can distribute it in a special dividend or, as a third option, do a combination of both. The Board, like I said, will ultimately decide that once the sale is complete, and we'll announce it.

Got you. And then one more question. How does the pipeline look compared to a year ago?

Yes, the number of deals we’re reviewing is higher than it was a year ago, which is why I mentioned that the pipeline is strong. The market is still quite competitive, but I wouldn't say it's more so than it was six, nine, or even twelve months ago. It has been competitive for a while. Our pipeline looks good in terms of the deals we are evaluating. We are being very thorough in our due diligence. We've experienced a few delays in closings due to findings during our diligence, needing additional months of performance data. However, that's typical in our industry, which often leads to fluctuations. Overall, we are quite satisfied with the pipeline and are certainly receiving many inquiries.

Got you. And have you seen any changes in the upper middle market versus the lower middle market? Have you seen any improvements in the upper middle market or vice versa?

No, we continue to see the best opportunities in the lower middle market with a few exceptions. iEnergizer in this quarter is actually an upper middle market deal. But I would say, still the same environment largely in the lower middle market, and I would say the same general environment in the upper middle market. There continues to be some frothiness in that market.

I wanted to follow up on the previous question regarding the upper middle market compared to the lower middle market. It seems that investors and analysts are finding it challenging to assess the outlook for defaults and recoveries in these two different markets, especially if the economy experiences a slowdown. How do you evaluate the risk-adjusted returns in these two markets? Additionally, how do you assess the differences in default and recovery probabilities between them?

Yes. Thanks, Mickey. I hope you’re well. Clearly, a textbook view is while larger companies are more established, therefore, they do better in a recessionary environment. While that’s not wrong, the other thing that goes into that is structure and leverage levels. We're a first lien lender. If we can leverage our business appropriately versus the potential volatility of that business in dollar one risk, then we can control the dialogue and ultimately have much better control of our destiny, which is ultimately what our shareholders care about with our capital. In the lower middle market, where leverage levels are lower and structures are tighter, they're smaller companies, clearly. We have to pick the companies correctly, but it's not correct to say that there aren't good, sustainable full cycle businesses in the lower middle market. But you have to have less leverage, and you have to have tighter structures. The market largely follows that because the lower middle market has tighter structures and lower leverage. In the upper middle market, we all know about very loose structures, a lot of covenant-light deals, and higher leverage. So if you think about a full cycle in a recessionary environment, I've got a lot more options if I'm at a lower leverage level going into the cycle than if I'm at a higher leverage level. In general, during good times in the lower middle market, we have some equity upside in our portfolio. So as an investor, I see that, okay, good times, I'm going to make some money. In bad times, I can control my destiny; the company survives, the capital structure survives, and we can ride it out through the other side of a recession, which are typically about 18 months long. Essentially, we can live to play for another day, and we've achieved appropriate full-cycle returns for our shareholders.

So just a follow up, if I can, Bowen. When you talk about cycles and weathering the storm, we're in the longest expansion in the history of the country, obviously, off of a very low base. But a lot of the borrowers and a lot of BDC portfolios didn’t exist during the Great Recession. So you don't necessarily have data to look at how revenues and margins behaved in 2008, 2009, and so forth. With that in mind, how do you underwrite the downside to a borrower that didn't exist or wasn't really around in that timeframe?

Yes. Those are good questions. We’ve always looked at the Great Recession as an analog for the current situation. Yes, not every company we invest in was around in 2008. A lot of them were, but even the ones that were might have been a lot smaller back then, which skews the results. We go back and look at the industry and look at other players that were there. We do a deep dive into what was happening during that time frame in that industry and in that company regarding suppliers, customers, customer behavior, pricing, and then we basically construct a simulation of how that same dynamic would affect the company today. Are we going to get that perfectly right every time? Of course not. But we believe we’re going to get pretty close, and we’ll be right more than we’re wrong. Our deal teams put in considerable work on that simulation and on a loan-by-loan basis. We believe by doing that, we’re better positioned as a whole to weather that storm, which reflects in our lower average leverage compared to many BDCs.

Bowen, just one last question because you jogged my memory about something I'd like to follow up on. Given that you've looked at a variety of industries, could you share broadly how revenues behaved and EBITDA during the recession in the lower middle market? I know it varies by industry, but could you provide some insights?

I don’t have those macro lower middle market asset class stats in front of me. Honestly, I can’t quantify that. We've focused on a company-by-company basis.

I wanted to focus on yields. We’ve seen a modest bit of upward pressure on yields for the overall portfolio. Is that more of a sense of a portfolio mix rather than yields on new deals being higher than yields coming off?

That's probably a portfolio mix. We've recently done a couple of first out/last out deals where we sell a small first out piece at a much lower rate and then we scrape the rest to our position, controlling the loan along the way.

Overall, the yield went up based on the MRI dividend producing a larger dividend this quarter due to additional free cash flows, and I-45 having a refinancing of a portfolio company that had a $400,000 gain that flowed through as a dividend to Capital Southwest. So those 2 enhanced the overall yield for the entire portfolio.

Got it. And then, given the rate outlook, can you provide a sense of where you anticipate yields heading going forward?

Well, I think based on the recent Fed cut, I anticipate yields will remain flat, assuming no further cuts. The LIBOR reset date doesn’t occur until the first of the next quarter, meaning we will see a 25 basis point hit, resulting in about a $0.01 per quarter reduction in yield.

Okay. Got it. And then one last one from me. Can you remind us of your target leverage ratios in the near term, intermediate term, and longer term?

Yes, our target leverage ratio, we kind of define it as a fairway between 1:1 to as high as 1.2:1. The speed at which we get there depends on originations, and our culture is not to rush. We’ll get there intentionally step-by-step as we find good deals. Intermediate to long term, we aim to have leverage around that 1:1 level.

We likely said in past calls that our strategy includes issuing some equity through our ATM program while ensuring we always have borrowing capacity to steadily increase leverage without hastily raising large amounts of equity.

So Michael, you touched on my question a little bit here in your answer to the last question. But given that the Q is not out, could you elaborate on the drivers of the increase in the dividend from controlled portfolio companies in the quarter? And whether you think this increase is sustainable?

Yes. So the two noted earlier, MRI being one controlled portfolio company, and then I-45 being the other. The dollar amount I noted showed the MRI dividend increased by $150,000 and the I-45 was $400,000.

Got it. So are either of those sustainable, so the sequential increase...?

Yes, correct. Neither of those increases are going to be sustainable going forward. So that $500,000 is a one-time for this quarter. You'll see that it was met by $400,000 of additional non-run rate expenses this quarter as well.

Yes, the slight increase in MRI was a function of cash flows on MRI. The I-45 increase was due to a refinancing. Most of the gain is from I-45.

To answer your question, Chris, that $0.44 of NII, of that, the run rate is around $0.43 going forward after accounting for one-time revenue hits and expenses.

Thank you. This concludes the question-and-answer session of today's program. I'd like to hand the program back to Bowen Diehl, Chief Executive Officer, for any further remarks.

Thank you, operator, and thanks everybody for joining us today. We really appreciate it. I appreciate all your support, and we look forward to keeping you apprised on the business as we report. Have a great week.

Thank you, ladies and gentlemen, for your participation in today's conference. This concludes the program. You may now disconnect. Good day.