Capital Southwest Corporation (CSWC) Q3 2026 Earnings Report, Transcript and Summary

Thank you for joining today's Capital Southwest Third Quarter Fiscal Year 2026 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 L. Baker, Executive Vice President Accounting. I will now turn the call over to Amy L. 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.

Thanks, Amy. And thank you all for joining us for our third quarter fiscal year 2026 earnings call. We are pleased to be with you today. And look forward to walking you through our results for the quarter. During the third fiscal quarter, we generated pretax net investment income of 60¢ per share, supported by strong recurring earnings across the portfolio. Our undistributed taxable income balance remained robust, at $1.02 per share reflecting consistent realization activity. In fact, over the last twelve months, we have harvested $44.5 million in realized gains from equity access. Driving UTI growth from 68¢ per share in December 2024 to today's level. Subsequent to quarter end, we realized an additional realized gain of $6.8 million from another equity exit. Which should further support our UTI balance going forward. Our board of directors has declared a total of 58¢ in regular dividends for January, February, and March 2026, and has also declared a quarterly dividend, supplemental dividend, of 6¢ per share payable in March bringing total dividends declared for March to 64¢ per share. Turning to originations. Deal flow in the lower middle market remained healthy this quarter. We closed $244 million in total new commitments across eight 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 twelve months, add-ons as a percentage of total new commitment have been 29%. These opportunities allow us to deploy capital into businesses we know well with proven management teams and sponsors. The weighted average spread on our new commitments this quarter was approximately 6.4% which we view is very attractive given today's competitive spread environment. On the capitalization front, last quarter we strengthened our balance sheet by issuing $350 million in aggregate principal, of 5.95% notes due 2030. This quarter, we used a portion of the proceeds to fully redeem our $150 million notes due 2026 and $71.9 million notes due 2028. Extending our maturity profile at an attractive cost of capital. We also raised approximately $53 million in gross equity proceeds through our equity ATM program. At a weighted average share price of $21.11 per share or a 127% of the prevailing NAV per share. Reinforcing our ability to raise capital efficiently and accretively. Subsequent to quarter end, we announced a first out senior loan joint venture with a private credit asset manager which I would like to spend some time discussing. We believe this new JV will enhance our competitiveness in our core lower middle market by enabling us to participate in larger, higher quality deals with tighter spreads while maintaining disciplined hold sizes. The structure also allows us to earn outsized economics due to our role as originator and administrator of the JV. And higher relative yields on last out loans. Which is extremely important in an environment where SOFR is declining and loan spreads on new deals remain very tight. The first out loans within the JV are expected to be conservatively levered, approximately 1.5 times debt to EBITDA or less, and once fully ramped, expect the JV to generate a low to mid teens equity return for Capital Southwest. Finally, our partners in the JV is a highly regarded, well-capitalized asset manager with whom we are extremely excited to build a long-term relationship. We believe this relationship may open up other unique opportunities for co-investment in the future as we continue to expand our platform. Overall, we are pleased with our performance this quarter, enthusiastic about the prospects for this new venture. We look forward to giving further updates on the funds in the coming quarters. I will now hand the call over to Josh, to review more specifics on our investment activity and the market environment.

Thanks, Michael. This quarter, we deployed a total of $199 million of new committed capital. Consisting of a $197 million in first lien senior secured debt and $2 million of equity across eight new portfolio companies. We also completed add-on financing for 16 existing portfolio companies. Totaling $44 million in first lien senior secured debt and $405,000 in equity. Our on-balance sheet credit portfolio ended the quarter at $1.8 billion representing 19% year-over-year growth from $1.5 billion as of December 2024. Importantly, 100% of new portfolio companies 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 0.9%. This level of portfolio granularity reflects our disciplined approach to risk management as we continue to scale the balance The vast majority of our deal activity continues to be in first lien senior secured loans to private equity-backed companies. Approximately 93% 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 monthly on a minority basis in the equity of our portfolio companies parry pursuit with the private equity firm where we believe the equity thesis is compelling. As of quarter end, our equity co-investment portfolio consisted of 86 investments with a total fair value of 183 representing 9% of our total portfolio at fair value. This portfolio was marked at a 133% of our cost. Representing $45.2 million of embedded unrealized appreciation. Or 76¢ per share. These equity positions continue to give our shareholders meaningful upside participation in growing lower middle market businesses driven by both operational improvement and strategic add-on acquisitions. This is evident from the recent realized gains, which Michael mentioned earlier. The lower middle market remains highly competitive, as this segment of the market continues to attract both bank and nonbank lenders. While this has resulted in tight loan pricing, for high-quality opportunities, the depth and strength of our sponsor relationships the team has cultivated over the years have continued to result in our sourcing and winning opportunities with attractive risk return profile. Today, our portfolio includes investments from 90 unique private equity firms, And over the past twelve months, we closed 14 new platform investments with sponsors we had not previously partnered with. Since launching our credit strategy, we have completed transactions with over 129 private equity firms nationwide. Including more than 20% with whom we have completed multiple deals. Our portfolio now consists of 132 portfolio allocated 90% to first lien senior secured debt, 0.8% to second lien senior secured debt, and 9.1% to equity co-investments. The credit portfolio generated a weighted average yield of 11.3% with weighted average leverage through our security of 3.6 times EBITDA. We remain pleased with the overall performance of the portfolio. At origination, all loans are initially assigned an investment rating of two on a five-point scale, with one being the highest rating and five being the lowest rating. As of quarter end, 90% of the portfolio at fair value was rated in the top two categories. Cash flow coverage remained strong at 3.4 times, reflecting an improvement from the 2.9 times low observed during the peak of base rates. This strength is further supported by the fact that our loans represent on average, only 44% of portfolio company enterprise value. Our portfolio remains broadly diversified across industries, and our average exposure per company of less than 1% continues to provide meaningful protection against idiosyncratic risk. For new platform deals closed during the December, weighted average senior leverage was three times debt to EBITDA, and weighted average loan to value was 36%. Providing a substantial equity cushion for each of our debt. Over the past twelve months, new platform originations have averaged 3.3 times senior leverage, and 37% loan to value. Underscoring our consistent commitment to conservative underwriting. I will now hand the call over to Chris to review the specifics of our financial performance for the quarter.

Thanks, Josh. Turning to our financial performance for the quarter. Pretax net investment income was $34.6 million or 60¢ per share. Total investment income increased to $61.4 million up from $56.9 million in the prior quarter. The increase was driven primarily by a $1.8 million increase in PIK income a $1.1 million increase in fees and other income, and a $1 million increase in dividend income. The increase in PIC was driven by an amendment to one of our portfolio companies, in which the sponsor provided significant new cash equity support and a debt pay down in exchange for a pick option. As of quarter end, nonaccruals represented just 1.5% of our investment portfolio at fair value. During the quarter, paid a 58¢ per share regular dividend and a $06 per share supplemental dividend. For the March 2026 quarter, our board has again declared a total of $0.58 per share in regular dividends, payable monthly in each of January, February, and March 2026 and maintained the 6¢ supplemental dividend also payable in March, bringing total dividends declared to 64¢ per share. We continue to demonstrate strong dividend coverage, with a 110% cumulative coverage since launching our credit strategy. With UTI of a dollar and 2¢ per share, and a sizable unrealized appreciation balance in our equity portfolio, we remain confident in our ability to continue distributing quarterly supplemental dividends over time. LTM operating leverage ended the good quarter at 1.7%. Significantly better than the BDC industry average of approximately 2.6%. As our asset base continues to grow, our near-term target for operating leverage is 1.5% or below, reflecting the inherent efficiency of the internally managed BDC model. The internally managed model has and will continue to provide meaningful fixed cost leverage to shareholders while still allowing us to invest in talent and infrastructure as we continue to scale a best-in-class BDC platform. NAV per share increased to $16.75 per share up from $16.62 per share in the prior quarter. Driven primarily by our equity ATM program. As Michael noted, last quarter, we issued $350 million of 5.95% unsecured notes due twenty third. During the December, we used a portion of the proceeds to fully redeem our $71.9 million August 2028 notes and a $150 million October 2026 notes. With no make-whole payments required. We view this refinancing as a highly favorable outcome for shareholders strengthening our balance sheet and positioning us well across a range of market environments. Our liquidity position remains robust, with approximately $438 million in cash and undrawn leverage commitments across our two credit facilities plus $20 million available on SBA debentures. In total, this represents more than 1.5 times coverage of the $285 million in unfunded commitments across the portfolio. Regulatory leverage ended the quarter at 0.89 to one debt to equity, down slightly from 0.91 to one in the prior quarter. While our target leverage remains 0.8 to 0.95, we continue to factor in the macroeconomic backdrop and intend to maintain a prudent leverage cushion to help mitigate capital markets volatility. 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 at a conservatively constructed balance sheet with adequate covenant cushions. I will now hand the call back to Michael for some final comments.

Thank you, Chris, Josh, and Amy. Thank you to all of our employees who work tirelessly behind the scenes to help us deliver for our shareholders and communicate our progress each quarter. Your dedication is a critical part of what makes this platform so strong. And it remains a deep source of pride for me. And to everyone joining us today, we appreciate your continued interest engagement, and support. We remain focused on executing our strategy maintaining disciplined growth and creating long-term value for our shareholders. That concludes our prepared remarks. Operator, we're ready to open the line for Q and A.

And wait for your name to be announced. To withdraw your question, please press 11 again. Our first question comes from Doug Harter with UBS.

Thanks. I was hoping you could just expand a little more, talk about the lower middle market. Just how do you view that from a competitive dynamic today? What are you seeing in terms of players or is anyone, you know, kinda moving back into that market, moving out of the market, you know, how are you seeing that? And what's the outlook for spreads as a result?

Yeah. I do not think it's really changed much over the last probably six months. I think over the last twelve and eighteen months, we have seen regional banks that I've noticed this before. They've dropped down historically they only landed, you know, to maybe one and a half turns of leverage in a maybe in a senior measure. Structure. And more recently, we're seeing regional banks actually underwrite a whole unitranche loan. Now they come and go. Certainly anytime you're seeing headlines of know, private credit issues, they sort of back off. But by and large, I think that it was kind of the same players mean, what we probably have seen in the last I would say, one to two months is that there's particularly on the BDC space, there's 27,042 BDCs that cut their dividends And I think we're only seeing five BDCs trade above book right now. So there's a little less competition from our peers. As they sort of lick their wounds right now. Other than that, I think that, you we're in a very strong competitive position Obviously, we've announced this joint venture, which we think is gonna strengthen our ability to continue to win deals that are in our core competency, the lower middle market.

Great. And I guess just then on the spread outlook, how that kind of those comments would lead to kind of how you think spreads progress over the coming quarters?

Yeah. So we look at it in our the spread on debt is actually from 03/31/2025. It was 7.35%. Today, seven point two four. So we've held in pretty well from a spread perspective. I think we say that we've seen spreads the spread compression has seemed to stop the last twelve months and even the last three months we've seen our spreads on our newly originated deals the mid sixes. And those are with, you know, three times leverage and 36% loan to value. So very conservatively structured deals. With decent with decent decent spread. So I I think for us, we'll continue to be somewhere between seven percent and and seven and a quarter if we would expect for the next twelve months.

Appreciate that. Thank you.

Our next question comes from Mickey Schleien with Clear Street.

Yes. Good morning, everyone. Michael, could you give us a sense of the breakdown of the portfolio between sponsored and non-sponsored at this time?

I think it's 93% sponsored and 7% non-sponsored. And that's probably I thought it's been it's typically been somewhere between 85-95% sponsored deals.

And how are those sponsors behaving in terms of their appetite for deals in the in the current market environment? You know, I mean, we go quarter to quarter, and you know, sometimes it's risk on, sometimes it's risk off. We're there's so much going on. Can you give us a sense of just the backdrop?

Josh, you wanna take this one?

I think there's there's still a lot of capital in the private equity lower middle market private equity funds. So this they're still looking for deals. I think that if you ask most private equity sponsors in the lower middle market, they would say last year was a pretty quote, unquote, weak year from a deployment perspective, and they're hoping 2026 there'll be more opportunities for them. But yeah. So I think that they're looking for deals. They have capital to spend, but they're not you know, last year, they didn't find as many deals available to them. You know, the other thing I would add is that the lower lower middle market where we play the 3 to 15,000,000 in EBITDA, you know, we're not volume you see isn't as typical with what you hear on the headlines of you know, m and a going up and down. There are founders as an aging pop aging population where, you know, companies are turning over. There's been a steady drumbeat I wouldn't say that there's been there's clearly not the same peaks and troughs that you see in the upper and middle middle market. So I I think the sponsors that that Josh is referring to, they're they're they're still seeing plenty of of deal flow.

And and, Michael, with that in mind, I mean, we're we're certainly reading a lot about pressure from LPs on these sponsors to to provide them some liquidity. But I'm getting the sense that you know, the sponsors you work with, which are know, focused on the lower middle market, is that less of an issue for them?

I think it's I mean, I I think it can be an issue. Depends on where they are in the life cycle of fund. I mean, I think that they're that you're I think that they're looking for opportunities to exit as well. To provide that liquidity to LPs, but but probably a little bit less pressure than you'd see in the middle market or upper middle market. But but you know, we obviously talk to a lot of sponsors in the country and have deep relationships with them. But you know, speaking specifically about their you know, their liquidity situations and all that stuff is a little bit tough for us.

Right. No. I get it.

Yep. And the other thing I would note for you, this is when we go through our investment committee process, on new deals, we definitely focus on where this investment stands in a fund life. So if a comp if if a fund or a sponsor, this is, you know, one of the last deals, and we're you know, there's only 5 to 10,000,000 of dry powder. That's allocated with the rest of the portfolio. That's certainly gonna be a negative and something that we're gonna discuss to see whether we still feel good about the credit. So we typically want these deals to be in, you know, beginning or the middle stages of of a fund line.

Understood. Michael, given what we've just talked about in terms of sponsors, any sense of you know, how active you expect to be, you know, this calendar year and and maybe even next year in terms of deal flow and know, repayment risk in the portfolio and essentially, you know, what's your sort of business plan for net portfolio growth?

No. I I honestly I feel very bullish for for several reasons. One, you know, we've grown our sponsor relationships think we cited the numbers earlier over time. We've recently added another MD under originating MD, Brian Mullins, who brings his own unique set of sponsors. Who's gonna be covering know, the contrary. We recently promoted Grant Easton, one of our principals, to MD, and he's you know, he's firing on all cylinders, and he's been so he's another source of origination. And then, you know, the joint venture, I'm looking back to it. So the joint venture allows us to compete on the same deals we're looking at today, but we've historically held the line at around 5.75% because that's you know, that's a moving target. But most recently, 5.75% spread kinda meets our ROE target. And anything below that, you know, with the we we didn't view as accretive to the portfolio and and helpful to our dividend. By doing this joint venture, we're able to compete and win on deals that 5% or above, while still actually, you know, incorporating additional arranger fees profit allocation, and this enhanced spread that increases the yield on the deal by a 100 basis points. So we're gonna be able to see the same amount of deals from one perspective, but be winning more of them. And these are typically the reason this venture was really important to us is we were focused over the last twelve months saying, look, You've seen a lot of really high-quality deals that we would love to put in our portfolio that we thought were, quote, unquote, you know, sleep at night credit. But we weren't getting our DLC and the ability to go below $5.05 75. This is giving them another you know, arrow and a quiver to to actually go out and compete And, these are deals that we can consider cleaner and more high quality. And it also allows us to maintain granularities. We think that's been a huge part of our success is maintaining granularity through the last ten years and then not really getting greedy, staying below that 1% on average.

Michael, did you say in your prepared remarks that the JV would be primarily a last out fund? Did I hear you correctly?

No. So well, I'd say it's primarily, but there's gonna be different types of assets that go into the fund. But the the probably the best example of what this fund is is if you look at a a $10 million EBITDA company, that's levered three and a half times with say, 35% loan to value at a you know, five fifty spread. That's a $35 million total debt check. So in our in the example I give you, the first out we go into the joint venture, So probably correct myself. The only thing that's pretty much going into the joint ventures would be first out position. So they would hold $10 million at $3.75 spread one turn of leverage, and 10% loan to value. On our balance sheet, we would hold $25 million of that debt of the debt stack and that would get a, you know, 66.25% spread and still levered at the same 3.5 times and 35% loan to value. So that kinda gives you an idea of what what what it'll look like on balance sheet and and in the JV.

Understood. And and what kind of leverage do you expect the JV's balance sheet to have?

So I'll start. The asset level is gonna be between one and one and a half turns. Of leverage for for individually on the asset side. The fund itself will be probably something around two and a half turns plus or minus.

Okay. And that gets you to your ROE target. I understand. And lastly, and I appreciate your patience, the portfolio has about 21% at fair value in consumer products and services, restaurants, and and movies. You know, those are, you know, sort of cyclical segments. Can can you discuss your underwriting approach to those segments and how are those portfolio companies doing given know, everything we're reading about a k shaped economy?

So I think maybe Josh, wanna take this one? I would tell you that when I look at our weighted average leverage for consumer services that fall into the buckets you're referring to, leverage is is slightly elevated at 4.2 times. When we look at, you know, where other portfolios begin at five and a half to six times in upper middle market, we would say it's still pretty conservatively levered because, you know, our entry multiple on many of these companies are gonna be somewhere between one and a half to three times leverage. Okay. We're we're certainly cognizant of of consumer discretionary. So I would say there's a decent amount of that consumer probably the majority that consumer, we think, well positioned for consumer pullback or economic pullback. And on top of that, we do structure our deals you know, recognizing, you know, where we are with the know, with the with potential consumer pullback.

Understood. I appreciate you taking my questions. That's all I have this morning. Thank you very much.

Thanks, Nick.

Our next question comes from Erik Zwick with Lucid Capital Markets.

Good morning. This is Justin Marco on for Erik today. Just going back to the spread conversation, it was wondering if you guys could talk about the current state of underwriting conditions and if you're seeing any other signs of pressure on structure terms?

We have from a performance standpoint, I would tell you that we're not seeing pressure on any particular industry. Any issues in the portfolio continue to be idiosyncratic. I think you're asking about the the structures of the of new deals we're doing. I I think is is that your question?

Yeah. Yep.

Yeah. So so I think we said this, and it it can stay consistent that we've we've definitely seen we had seen spread compression over the last twelve, eighteen months considerably. But but structurally in the lower middle market, we have not seen, you know, sort of weak credit agreements or asks coming through from our private equity sponsors. It's it's pretty status quo from a structural perspective over the last bunch of years. I think that where where the lower middle market has moved in the last kinda eighteen months or so, has been on the pricing and spread, not on the structure. So it's still seeing good covenants and and and solid credit documents. Yes. I mean, almost, I'd say, 100% of our portfolio or close to it. You know, I have a fixed charge covenant and leverage covenant. We have a CapEx covenant. And then to the extent that there's a DDTL, you'll see an incurrence covenant as well.

Okay. Thanks for the color there. And for me. Any other additional details on the new JV expecting to be fully ramped up? whether, you have like a targeted size in mind or when you're

Sure. So we've actually we've been negotiating that for a bit of time. We've already started ramping. We we closed three deals that will be contributed closed three deals in the $12.30 mark quarter that contributed in the coming weeks. And we're close to closing a credit facility I think how many? $300 million credit facility. I think the answer to question is each party was contributing committed $50 million of equity to date. We think it's gonna take probably at least a year to get probably up to the the full leverage. So it's gonna probably it'll it'll eventually be a a mid teens return. I think it'll be, you know, double digits return. By the end of the year.

Got it. Thanks for taking my questions today.

Of course.

Our next question comes from Dylan Hines with B. Riley Securities.

Hey, thanks for taking my I was just wondering, I noticed you talked about the in the quarter for the originations. I was wondering, do you have do you know what the weighted average yield was for your originations in the quarter?

Wait over to you. Well, we I think I said earlier. So the spread on the new deals this quarter was six and a half percent. And leverage was three times, and loan to value is 36%. So are you just saying I mean, with the so far, so the weighted average yield is approximately ten fifty.

Gotcha. Right. Okay. Deals. Gotcha. Yeah. And then I was wondering about the ATM issuances. Do you expect to continue doing that as long as the premium's favorable? Do you have a do you have a target rate that you generally wanna issue at? Or

Yeah. Sure. So, yeah, if you look, you know, past history, we do somewhere between 30 and 50,000,000 every quarter. That vacillates depending on deal flow and repayments and and liquidity needs. But certainly, with the with the premium we're trading at, you know, somewhere in that range it is would be a good expectation for the coming quarter.

Okay. Alright. That'll be it. Thank you.

Welcome.

Our next question comes from Robert Dodd with Raymond James.

Hi, everybody. Hope you can hear me with the much background noise On the JV, we can go back, is there any impact? Mean, you've said you don't need to expand kind of your your your net currently in terms of being able to to to stock that up. But is there any intent to can you expand maybe the size of the businesses or the the, the type of leverage multiple, anything like that. Maybe once it gets closer to to to scale, or is it is it just it's exactly the same assets, just the the lowest spread ones going in that JV?

I I think that's right. It's pretty much exactly the same as this. I think these deals that are really targeted for this are gonna be deals that are between 5 and 10,000,000 of EBITDA. So there, like I said, many times are very clean. They're deals? And they're priced between 5 and $5.75. I would say it's the extent that we're seeing deals that are slightly larger, so let's call them you know, 35 to $40 million check, which we don't prefer to hold, because our our our preference for granularity, this does give us the ability on those deals to put 10 to 15,000,000 in the JV. While, you know, still maintaining a, you know, 20 to $30 million hold. to be feel more comfortable in putting So I think it on the margin, it allows us to start to feel that are slightly larger. But for the most part, it's just the cleanest deals in our course base.

Got it. Thank you for that. One more quick. It's it's been topical over the last couple of days. How are you evaluating AI risk both within the assets you already have in the portfolio, but then when you look at new originations and opportunities, how much, if any, is is AI risk being factored into your underwriting case

Honestly, that is it's something that we started taking up about probably a year ago. We formed an AI committee And then actually created a segment in our investment committee process which rates the various aspects of a company in terms of the the AI risk or so because, look, when we look at companies, sometimes AI is gonna be helpful. We see in some financial services companies, they're gonna be using AI to to know, basically become more efficient. In other deals, we're seeing AI as a potential. We just saw a deal maybe two weeks ago that we we couldn't get comfortable with because the advent of AI may not impact business in the next two years, but it would impact the business in five. And therefore, you know, the concern of how it's gonna get sold and at what valuation would that cover the debt. So I think looking at we're we're certainly it's definitely a a a heavy segment of our investment committee discussion. And then internally, we're looking to see how we can utilize AI as well to become more efficient as an organization. And that's something that's it's begun in our

Got it. Thank you.

That concludes today's question and answer session. I'd like to turn the call back to Michael Sarner for closing remarks.

Yeah. I wanna take one minute to just pause and reflect. Our our company, our balance sheet, just passed $2 billion in assets. I know, you know, growing the balance sheet is not the goal here. It's creating value. It is a testament to everybody who's worked here and all the value that's created to allow us to continue to grow. And my optimism today, and I think our optimism as a group has never been higher, I mean, we've mentioned the two you know, new MDs that are you know, helping enhance the business. The joint venture, which we spent a lot of time discussing, You know, we've we've talked about we've over the last twelve months, we've exited to date, like, $50 million in equity. And I'd remind everybody that's on 5000005% equity portfolio at cost. So we're punching way above our weight, which tells you, you know, our underwriting both on our debt and and our ability to to create equity gains has been has been strong. That's created the dollar 2 per share of UTI. We have 76¢ of unrealized appreciation and we would tell you majority of that are in companies that are in the market. Some in the 2026 and other in the back half. Our operating leverage of the company is 1.4% on a run rate basis. Excluding the onetime charge in from from last year. Conservative leverage at active corporate level of 0.89, conservative leverage at our portfolio level of 3.6 times, significant liquidity. And and all of that is brought us to a place where we have a a 40% plus premium to book on our stock. Which reflects, I think, all the strong work we've done in the company. So, you know, as we leave this call, I I just I'm I'm thankful to all of the shareholders that support the company. I'm extremely proud of of all of the employees who who've done this great work. And as we look forward, we, you know, we see this optimism and and hope you understand it as well. Thanks to everyone, and and have a great week.

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