CNL Strategic Capital's Net Assets Soar 45% on Strong Investment Gains

TL;DR

**CNL Strategic Capital is crushing it, with net assets up big, making it a solid play in private markets.**

AI Summary

CNL Strategic Capital, LLC reported a significant increase in net assets and investment income for the nine months ended September 30, 2025. Net assets resulting from operations surged to $99,280 thousand, up from $68,365 thousand in the prior year, representing a 45.2% increase. Total investment income grew to $60,603 thousand for the nine-month period, compared to $51,753 thousand in 2024, driven by higher dividend income of $20,820 thousand and interest income of $31,785 thousand. The company's portfolio company investments at fair value increased to $1,352,090 thousand from $1,140,859 thousand at December 31, 2024. Operating expenses also rose, with total return incentive fees reaching $21,890 thousand and base management fees at $17,490 thousand for the nine months ended September 30, 2025. Net change in unrealized appreciation on investments significantly contributed to net assets, totaling $91,888 thousand for the nine-month period. Cash and cash equivalents decreased to $79,403 thousand from $146,319 thousand at the end of 2024, primarily due to substantial purchases of portfolio company investments totaling $166,572 thousand.

Why It Matters

This robust performance from CNL Strategic Capital, a non-traded business development company, signals a strong return environment for its private equity and debt investments, which is crucial for its unlisted shareholders. The significant increase in net assets and investment income suggests effective portfolio management and favorable market conditions for its target industries, potentially attracting more capital. For investors, the rising net asset value per share across all classes, such as Class FA increasing from $39.55 to $42.05, indicates capital appreciation. This positive trend could also influence competitive dynamics in the private credit and equity space, as CNL demonstrates its ability to generate substantial returns.

Risk Assessment

Risk Level: medium — The company's risk level is medium due to its significant exposure to illiquid portfolio company investments, which constitute 98.6% of total investments at fair value. While unrealized appreciation is high at $91,888 thousand, the valuation of these private assets can be subjective and volatile. Additionally, the decrease in cash and cash equivalents from $146,319 thousand to $79,403 thousand, coupled with substantial investment purchases of $166,572 thousand, indicates a less liquid balance sheet, which could pose challenges in adverse market conditions.

Analyst Insight

Investors should closely monitor CNL Strategic Capital's continued ability to generate strong returns from its private portfolio, especially given the illiquid nature of its investments. While current performance is strong, evaluate the underlying health and diversification of its portfolio companies. Consider the impact of rising operating expenses, particularly incentive fees, on future profitability and net investment income.

Financial Highlights

debt To Equity

0.04

revenue

$60,603,000

operating Margin

N/A

total Assets

$1,431,720,000

total Debt

$60,633,000

net Income

$99,280,000

eps

N/A

gross Margin

N/A

cash Position

$79,403,000

revenue Growth

+17.1%

Revenue Breakdown

Key Numbers

• $99.28M — Net increase in net assets from operations (Up 45.2% from $68.37M in 2024 for the nine-month period.)
• $60.60M — Total investment income (Increased from $51.75M in 2024 for the nine-month period, indicating strong revenue generation.)
• $1.35B — Portfolio company investments at fair value (Increased from $1.14B at December 31, 2024, reflecting significant portfolio growth.)
• $91.89M — Net change in unrealized appreciation on investments (A major driver of net asset growth, up from $53.31M in 2024.)
• $21.89M — Total return incentive fees (Increased from $14.93M in 2024, reflecting higher performance-based compensation.)
• $166.57M — Purchases of portfolio company investments (Significant capital deployment, contributing to the decrease in cash and cash equivalents.)
• $79.40M — Cash and cash equivalents (Decreased from $146.32M at December 31, 2024, indicating active investment.)
• 42.05 — Class FA Net asset value per share (Increased from $39.55 at December 31, 2024, showing shareholder value growth.)
• 69.6% — Common Equity as a percentage of total investments (Represents the largest portion of the investment portfolio, indicating a focus on equity upside.)
• 7.4% — LOCI Topco Limited investment as a percentage of net assets (Largest single foreign investment, based in the United Kingdom.)

Key Players & Entities

• CNL Strategic Capital, LLC (company) — registrant
• $99,280 thousand (dollar_amount) — net increase in net assets resulting from operations for nine months ended September 30, 2025
• $60,603 thousand (dollar_amount) — total investment income for nine months ended September 30, 2025
• $1,352,090 thousand (dollar_amount) — portfolio company investments at fair value as of September 30, 2025
• $21,890 thousand (dollar_amount) — total return incentive fees for nine months ended September 30, 2025
• $17,490 thousand (dollar_amount) — base management fees for nine months ended September 30, 2025
• $91,888 thousand (dollar_amount) — net change in unrealized appreciation on investments for nine months ended September 30, 2025
• $79,403 thousand (dollar_amount) — cash and cash equivalents as of September 30, 2025
• $166,572 thousand (dollar_amount) — purchases of portfolio company investments for nine months ended September 30, 2025
• LOCI Topco Limited (company) — portfolio company, headquartered in the United Kingdom

FAQ

Risk Factors

• Valuation of Investments [high — financial]: The company's net assets are heavily influenced by the fair value of its portfolio company investments, which totaled $1,352,090 thousand. Fluctuations in the fair value, including significant unrealized appreciation of $91,888 thousand, can lead to volatility in net asset value. A decline in the fair value of these investments could materially and adversely affect the company's financial condition and results of operations.
• Dependence on Key Personnel and Management [medium — operational]: The success of CNL Strategic Capital, LLC is dependent on the expertise of its management team. The company's ability to source, manage, and exit investments relies on the skills and experience of its investment professionals. Loss of key personnel could negatively impact the company's investment performance and strategic direction.
• Market and Economic Downturns [high — market]: The company's investments are subject to market and economic risks. A general economic downturn or a downturn in specific industries in which the company invests could lead to decreased investment income, reduced fair values of investments, and potential impairments. The significant capital deployment of $166,572 thousand into portfolio investments increases exposure to these risks.
• Liquidity and Cash Position [medium — financial]: Cash and cash equivalents decreased to $79,403 thousand from $146,319 thousand at December 31, 2024, due to substantial investment purchases. While the company has significant investments, a sudden need for liquidity could be challenging if portfolio investments cannot be readily sold at favorable prices.
• Regulatory Changes [low — regulatory]: The investment management industry is subject to evolving regulations. Changes in securities laws, tax regulations, or other governmental policies could impact the company's operations, investment strategies, and profitability. Compliance with these regulations requires ongoing attention and resources.
• Concentration of Investments [medium — financial]: While not explicitly detailed in the summary, a high concentration in a few portfolio companies or specific foreign investments (e.g., LOCI Topco Limited representing 7.4% of net assets) could increase risk. Adverse performance of a single large investment could have a disproportionate impact on overall results.

Industry Context

CNL Strategic Capital operates within the alternative investment sector, focusing on private equity and debt investments in portfolio companies. This sector is characterized by illiquid assets, long investment horizons, and a reliance on active management for value creation. The industry is competitive, with firms differentiating themselves through sector specialization, deal sourcing capabilities, and fee structures.

Regulatory Implications

As an investment company, CNL Strategic Capital is subject to regulations governing investment advisors and securities offerings. Compliance with SEC rules, reporting requirements, and fiduciary duties is paramount. Changes in regulatory frameworks, particularly concerning private fund disclosures or investor protections, could necessitate adjustments to operations.

What Investors Should Do

1. Monitor the fair value of portfolio company investments closely.
2. Analyze the drivers of increased operating expenses, particularly incentive fees.
3. Assess the company's capital deployment strategy.
4. Review the net asset value per share trends across different classes.

Key Dates

• 2025-09-30: Nine Months Ended — Reporting period showing significant growth in net assets and investment income.
• 2024-12-31: End of Prior Fiscal Year — Baseline for comparison of portfolio value and cash position.

Glossary

Payment-in-kind ("PIK") interest income

Interest that is paid in the form of additional debt or equity rather than cash. (Contributes to investment income, indicating a non-cash component of returns from portfolio companies.)

Capital in excess of par value

The amount shareholders have paid for stock above its par value. (Represents a significant portion of the company's equity, indicating substantial capital raised from investors.)

Distributable earnings

The portion of net assets that can be distributed to shareholders as dividends or distributions. (Indicates the company's ability to return capital to its investors.)

Net asset value per share

The value of a company's assets minus its liabilities, divided by the number of outstanding shares. (Key metric for investors to track the per-share value of their investment, showing growth across all share classes.)

Total return incentive fees

Fees paid to the investment manager based on the total return of the fund's investments. (Reflects performance-based compensation, which increased significantly, aligning manager incentives with investor returns.)

Year-Over-Year Comparison

CNL Strategic Capital has demonstrated robust growth in the nine months ended September 30, 2025, compared to the same period in 2024. Net assets from operations increased by a substantial 45.2% to $99.28M, driven by a 17.1% rise in total investment income to $60.60M, particularly from dividends and interest. The portfolio value grew significantly, with investments at fair value reaching $1.35B. However, operating expenses also climbed, with total return incentive fees up 46.6% to $21.89M, reflecting strong performance but higher management costs. The company's cash position decreased by 45.7% to $79.40M due to aggressive investment in portfolio companies.

Filing Documents

• cnl-20250930.htm (10-Q) — 2680KB
• scap93025ex311.htm (EX-31.1) — 11KB
• scap93025ex312.htm (EX-31.2) — 11KB
• scap93025ex321.htm (EX-32.1) — 10KB
• 0001684682-25-000021.txt ( ) — 12146KB
• cnl-20250930.xsd (EX-101.SCH) — 77KB
• cnl-20250930_cal.xml (EX-101.CAL) — 52KB
• cnl-20250930_def.xml (EX-101.DEF) — 422KB
• cnl-20250930_lab.xml (EX-101.LAB) — 697KB
• cnl-20250930_pre.xml (EX-101.PRE) — 572KB
• cnl-20250930_htm.xml (XML) — 2541KB

FINANCIAL INFORMATION

PART I. FINANCIAL INFORMATION

Financial Statements (unaudited)

Item 1. Financial Statements (unaudited): 2 Condensed Consolidated Statements of Assets and Liabilities 2 Condensed Consolidated Statements of Operations 3 Condensed Consolidated Statements of Changes in Net Assets 5 Condensed Consolidated Statements of Cash Flows 7 Condensed Consolidated Schedules of Investments 8 Notes to Condensed Consolidated Financial Statements 13

Management's Discussion and Analysis of Financial Condition and Results of Operations

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 37

Quantitative and Qualitative Disclosures about Market Risk

Item 3. Quantitative and Qualitative Disclosures about Market Risk 59

Controls and Procedures

Item 4. Controls and Procedures 60

OTHER INFORMATION

PART II. OTHER INFORMATION

Legal Proceedings

Item 1. Legal Proceedings 61

Risk Factors

Item 1A. Risk Factors 61

Unregistered Sales of Equity Securities and Use of Proceeds

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 61

Defaults Upon Senior Securities

Item 3. Defaults Upon Senior Securities 61

Mine Safety Disclosures

Item 4. Mine Safety Disclosures 61

Other Information

Item 5. Other Information 61

Exhibits

Item 6. Exhibits 62 Exhibit Index 62

Signatures

Signatures 63 1 Table of Contents

FINANCIAL INFORMATION

PART I. FINANCIAL INFORMATION

Financial Statements

Item 1. Financial Statements CNL STRATEGIC CAPITAL, LLC CONDENSED CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES (in thousands, except per share data) September 30, 2025 (Unaudited) December 31, 2024 Assets Investments at fair value: Portfolio company investments (amortized cost of $ 1,012,284 and $ 892,940 , respectively) $ 1,352,090 $ 1,140,859 Cash and cash equivalents 79,403 146,319 Receivable for shares sold — — Prepaid expenses and other assets 227 472 Total assets 1,431,720 1,287,650 Liabilities Due to related parties, net (Note 5) 23,869 26,386 Payable for shares repurchased 16,450 19,169 Deferred tax liabilities, net 18,354 9,844 Accounts payable and other accrued expenses 1,960 1,043 Total liabilities 60,633 56,442 Commitments and contingencies ( Note 11 ) Members' Equity (Net Assets) Preferred shares, $ 0.001 par value, 50,000 shares authorized and unissued — — Class FA Common shares, $ 0.001 par value, 7,400 shares authorized; 4,844 shares issued; 3,871 and 4,017 shares outstanding, respectively 4 4 Class A Common shares, $ 0.001 par value, 94,660 shares authorized; 9,354 and 8,549 shares issued, respectively; 8,897 and 8,238 shares outstanding, respectively 9 8 Class T Common shares, $ 0.001 par value, 558,620 shares authorized; 4,010 and 3,582 shares issued, respectively; 2,244 and 2,511 shares outstanding, respectively 2 3 Class D Common shares, $ 0.001 par value, 94,660 shares authorized; 3,382 and 3,275 shares issued, respectively; 3,054 and 3,072 shares outstanding, respectively 3 3 Class I Common shares, $ 0.001 par value, 94,660 shares authorized; 18,455 and 15,936 shares issued, respectively; 15,924 and 14,154 shares outstanding, respectively 16 14 Class S Common shares, $ 0.001 par value, 100,000 shares authorized; 1,770 shares issued; 1,699 and 1,712 shares outstanding, respectively 2 2 Capital in excess of par value 1,103,855 1,031,526 Distributable earnings 267,196 199,648 Total Members' Equity

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