Earnings Performance - Saratoga Investment reported quarterly earnings of $0.66 per share, missing the Zacks Consensus Estimate of $0.69 per share, and down from $1.05 per share a year ago, representing an earnings surprise of -4.35% [1] - The company posted revenues of $32.32 million for the quarter ended May 2025, missing the Zacks Consensus Estimate by 1.36%, and down from $38.68 million year-over-year [2] Market Performance - Saratoga Investment shares have increased approximately 6.4% since the beginning of the year, outperforming the S&P 500's gain of 5.9% [3] Future Outlook - The current consensus EPS estimate for the coming quarter is $0.73 on revenues of $33.12 million, and for the current fiscal year, it is $2.84 on revenues of $133.6 million [7] - The Zacks Industry Rank indicates that the Financial - SBIC & Commercial Industry is currently in the bottom 5% of over 250 Zacks industries, which may impact stock performance [8] Estimate Revisions - The estimate revisions trend for Saratoga Investment was mixed ahead of the earnings release, resulting in a Zacks Rank 3 (Hold) for the stock, suggesting it is expected to perform in line with the market in the near future [6]

Saratoga Investment Corp. Announces Fiscal First Quarter 2026 Financial Results Reports 17.9% Increase in Adjusted NII Per Share and 0.9% Increase in NAV from Previous Quarter Quarterly ROE of 14.1% Generates LTM ROE of 9.3% and Beats the BDC Industry Average of 7.0% NEW YORK, July 8, 2025 – Saratoga Investment Corp. (NYSE: SAR) ("Saratoga Investment" or "the Company"), a business development company ("BDC"), today announced financial results for its fiscal first quarter 2026 ended May 31, 2025. Exhibit 99. ...

Core Insights - Saratoga Investment Corp. reported a 17.9% increase in adjusted net investment income (NII) per share and a 0.9% increase in net asset value (NAV) from the previous quarter, with a quarterly return on equity (ROE) of 14.1%, generating a last twelve months (LTM) ROE of 9.3%, surpassing the BDC industry average of 7.0% [1][2][4] Financial Performance - As of May 31, 2025, assets under management (AUM) were $968.3 million, down 11.6% from $1.095 billion a year earlier and down 1.0% from $978.1 million in the previous quarter [4] - Total investment income for the quarter was $32.3 million, a decrease of 16.4% from $38.7 million year-over-year but an increase of 3.3% from $31.3 million in the previous quarter [4][6] - NAV increased to $396.4 million, up $28.5 million from $367.9 million a year ago and up $3.7 million from $392.7 million in the previous quarter [4][6] - Adjusted NII for the quarter was $10.1 million, a decrease of 29.3% from $14.3 million year-over-year but an increase of 26.2% from $8.0 million in the previous quarter [6][4] Investment Activity - The company originated $50.1 million in new investments during the quarter, including two new portfolio companies and six follow-on investments [4][6] - Principal repayments totaled $64.3 million, which included one equity realization and multiple full and partial repayments of existing investments [4][6] - The fair value of the portfolio increased by $3.8 million during the quarter, with net realized gains of $2.9 million [4][6] Dividend and Shareholder Returns - The company declared a base dividend of $0.75 per share for the second quarter of fiscal 2026, representing an 11.8% yield based on the stock price of $25.44 as of July 7, 2025 [2][4] - The change to monthly dividends resulted in a one-time additional $0.50 per share dividend, increasing total dividends for the quarter to $1.25 per share [3][4] Portfolio Quality and Credit Metrics - The overall credit quality remained steady, with 99.7% of credits rated in the highest category, and only two investments on non-accrual status [4][6] - The portfolio composition consisted of 86.9% first lien term loans, indicating a strong focus on secured investments [4][6] Liquidity and Capital Resources - As of May 31, 2025, the company had $224.3 million in cash and cash equivalents, providing significant liquidity in a volatile macro environment [4][6] - The total undrawn borrowing capacity, including cash and credit facilities, was $430.3 million, allowing for potential new investments or support for existing portfolio companies [4][6]

Part I. Financial Information [Consolidated Financial Statements](index=3&type=section&id=Item%201.%20Consolidated%20Financial%20Statements) The consolidated financial statements present Saratoga Investment Corp.'s financial position as of May 31, 2025, and its performance for the three-month period then ended, highlighting total assets of $1.20 billion and a net increase in net assets of $13.9 million [Consolidated Statements of Assets and Liabilities](index=3&type=section&id=Consolidated%20Statements%20of%20Assets%20and%20Liabilities) As of May 31, 2025, Saratoga's total assets increased to $1.20 billion, with net assets growing to $396.4 million, though Net Asset Value (NAV) per share decreased to $25.52 Consolidated Statements of Assets and Liabilities Highlights (in thousands) | Metric | May 31, 2025 | February 28, 2025 | | :--- | :--- | :--- | | Total investments at fair value | $968,318 | $978,078 | | Total assets | $1,202,269 | $1,191,544 | | Total liabilities | $805,900 | $798,878 | | Total net assets | $396,369 | $392,665 | | **Net asset value per share** | **$25.52** | **$25.86** | [Consolidated Statements of Operations](index=5&type=section&id=Consolidated%20Statements%20of%20Operations) For the three months ended May 31, 2025, total investment income decreased to $32.3 million, resulting in a net increase in net assets of $13.9 million, or $0.91 per share, driven by a shift from net realized/unrealized losses to gains Quarterly Operating Results (in thousands, except per share data) | Metric | Three months ended May 31, 2025 | Three months ended May 31, 2024 | | :--- | :--- | :--- | | Total investment income | $32,319 | $38,678 | | Total operating expenses | $22,177 | $24,343 | | Net investment income | $10,142 | $14,335 | | Net realized and unrealized gain (loss) | $3,790 | $(7,725) | | **Net increase in net assets** | **$13,932** | **$6,610** | | **Earnings per share** | **$0.91** | **$0.48** | [Consolidated Statements of Changes in Net Assets](index=6&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Net%20Assets) For the quarter ended May 31, 2025, net assets increased by $3.7 million, primarily due to a $13.9 million net gain from operations and $8.8 million from capital share transactions, partially offset by $19.0 million in distributions Reconciliation of Net Assets for the three months ended May 31, 2025 (in thousands) | Description | Amount | | :--- | :--- | | Net assets at beginning of period | $392,665 | | Net increase from operations | $13,932 | | Distributions to shareholders | $(18,980) | | Net increase from capital share transactions | $8,752 | | **Net assets at end of period** | **$396,369** | [Consolidated Statements of Cash Flows](index=7&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) During the three months ended May 31, 2025, the company generated $32.3 million in cash from operating activities, resulting in a net increase in cash and cash equivalents of $19.6 million Summary of Cash Flows (in thousands) | Activity | Three months ended May 31, 2025 | Three months ended May 31, 2024 | | :--- | :--- | :--- | | Net cash from operating activities | $32,291 | $52,145 | | Net cash from financing activities | $(12,728) | $645 | | **Net increase in cash** | **$19,563** | **$52,790** | | Cash at end of period | $224,287 | $93,297 | [Consolidated Schedule of Investments](index=9&type=section&id=Consolidated%20Schedule%20of%20Investments) As of May 31, 2025, Saratoga's investment portfolio had a fair value of $968.3 million across 46 portfolio companies, primarily composed of first lien term loans, with top concentrations in Healthcare Services, Consumer Services, and HVAC Services and Sales Investment Portfolio Composition by Type (May 31, 2025) | Investment Type | Fair Value (in millions) | % of Net Assets | | :--- | :--- | :--- | | Non-control/Non-affiliate | $875.4 | 220.9% | | Affiliate | $52.0 | 13.1% | | Control | $40.9 | 10.3% | | **Total Investments** | **$968.3** | **244.3%** | Top 5 Industry Concentrations by Fair Value (May 31, 2025) | Industry | Fair Value (in millions) | % of Total Portfolio | | :--- | :--- | :--- | | Healthcare Services | $83.6 | 8.6% | | Consumer Services | $59.2 | 6.1% | | HVAC Services and Sales | $53.8 | 5.6% | | Real Estate Services | $51.7 | 5.3% | | Healthcare Software | $45.9 | 4.7% | - The total fair value of the investment portfolio was **$968.3 million** as of May 31, 2025, compared to **$978.1 million** as of February 28, 2025[10](index=10&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=119&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's financial performance for the quarter ended May 31, 2025, highlighting a decrease in investment income, stable portfolio credit quality, and adequate liquidity with an asset coverage ratio of 163.8% [Overview](index=121&type=section&id=MD%26A%20Overview) Saratoga Investment Corp. is a BDC focused on generating income and capital appreciation by investing in U.S. middle-market companies, operating as a RIC and utilizing leverage through its SBIC subsidiaries, credit facilities, and a CLO - The company's investment objective is to generate current income and long-term capital appreciation from investments in private U.S. middle-market companies[389](index=389&type=chunk) - The company operates two SBIC subsidiaries, SBIC II LP and SBIC III LP, which allow for up to **$350.0 million** in combined SBA-guaranteed debentures[391](index=391&type=chunk) - In June 2024, the company completed the fifth refinancing of its Saratoga CLO and amended its Live Oak Credit Facility, increasing the available borrowings from **$50.0 million** to **$75.0 million**[392](index=392&type=chunk)[394](index=394&type=chunk) [Portfolio and Investment Activity](index=129&type=section&id=Portfolio%20and%20Investment%20Activity) For the quarter ended May 31, 2025, the company had net repayments of $14.2 million, with the $968.3 million portfolio composed of 127 investments in 46 companies, primarily first lien term loans, and maintaining strong credit quality with 90.6% rated 'Green' Quarterly Investment Activity (in millions) | Activity | Three months ended May 31, 2025 | Three months ended May 31, 2024 | | :--- | :--- | :--- | | New/Existing Investments | $50.1 | $39.3 | | Exits and Repayments | $(64.3) | $(75.7) | | **Net Activity** | **$(14.2)** | **$(36.4)** | Portfolio Composition by Type (May 31, 2025) | Investment Type | % of Total Portfolio | Weighted Avg. Current Yield | | :--- | :--- | :--- | | First lien term loans | 86.9% | 11.4% | | Second lien term loans | 0.7% | 16.8% | | Unsecured term loans | 1.7% | 10.6% | | Structured finance securities | 2.8% | 15.6% | | Equity interests | 7.9% | - | | **Total** | **100.0%** | **10.7%** | Credit Quality (CMR) Distribution (May 31, 2025) | Color Score | % of Total Portfolio (Fair Value) | | :--- | :--- | | Green (Performing) | 90.6% | | Yellow (Underperforming) | 0.1% | | Red (Default/Loss Expected) | 0.2% | | N/A (Equity/CLO) | 9.1% | [Results of Operations](index=134&type=section&id=Results%20of%20Operations) For Q1 FY2026, total investment income decreased by 16.4% YoY to $32.3 million, while total operating expenses fell 8.9% to $22.2 million, resulting in net investment income of $10.1 million and a net realized gain of $2.9 million Investment Income Comparison (in thousands) | Income Source | Q1 FY2026 | Q1 FY2025 | | :--- | :--- | :--- | | Interest from investments | $28,004 | $34,306 | | Interest from cash | $2,027 | $625 | | Management fee income | $705 | $804 | | Dividend Income | $999 | $1,547 | | Other income | $583 | $1,396 | | **Total Investment Income** | **$32,318** | **$38,678** | Operating Expenses Comparison (in thousands) | Expense Source | Q1 FY2026 | Q1 FY2025 | | :--- | :--- | :--- | | Interest and debt financing | $12,452 | $12,962 | | Base management fees | $4,333 | $4,983 | | Incentive management fees | $2,537 | $3,585 | | Other operating expenses | $2,850 | $2,875 | | **Total Operating Expenses** | **$22,177** | **$24,343** | - The decrease in interest income was due to an **11.6% decrease** in the size of the investment portfolio and a reduction in the weighted average current yield from **11.5% to 10.6%**, primarily due to lower SOFR rates[454](index=454&type=chunk) - The company recognized a net realized gain of **$2.9 million**, primarily from the sale of equity in Identity Automation Systems[470](index=470&type=chunk)[472](index=472&type=chunk)[473](index=473&type=chunk) [Financial Condition, Liquidity and Capital Resources](index=139&type=section&id=Financial%20Condition%2C%20Liquidity%20and%20Capital%20Resources) The company maintains a diverse liquidity profile with $131.6 million in cash, available credit facilities, and SBA debentures, reporting an asset coverage ratio of 163.8% and unfunded commitments totaling $136.4 million - The company's asset coverage ratio was **163.8%** as of May 31, 2025, exceeding the regulatory minimum of **150%**[490](index=490&type=chunk)[564](index=564&type=chunk) Contractual Obligations as of May 31, 2025 (in thousands) | Obligation | Total | Less Than 1 Year | 1 - 3 Years | 3 - 5 Years | More Than 5 Years | | :--- | :--- | :--- | :--- | :--- | :--- | | Encina Credit Facility | $32,500 | $32,500 | $0 | $0 | $0 | | Live Oak Credit Facility | $37,500 | $0 | $37,500 | $0 | $0 | | SBA debentures | $170,000 | $0 | $0 | $20,000 | $150,000 | | Unsecured Notes | $551,375 | $204,000 | $347,375 | $0 | $0 | | **Total** | **$791,375** | **$236,500** | **$384,875** | **$20,000** | **$150,000** | - As of May 31, 2025, the company had unfunded commitments of **$136.4 million**, with **$77.7 million** at the company's discretion and **$58.6 million** at the portfolio company's discretion upon meeting certain covenants[568](index=568&type=chunk)[569](index=569&type=chunk)[570](index=570&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=160&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risk is interest rate risk, with approximately 95.1% of debt investments and credit facilities bearing floating rates, where a hypothetical 100 basis point increase would positively impact net interest income - As of May 31, 2025, approximately **95.1%** of the company's debt investments bear interest at floating rates, while **4.9%** are at fixed rates, and the Encina and Live Oak credit facilities are also floating rate[575](index=575&type=chunk) Interest Rate Sensitivity Analysis (Annualized, in thousands) | Basis Point Change | Change in Interest Income | Change in Interest Expense | Change in Net Interest Income (pre-incentive) | Change in Net Interest Income (post-incentive) | | :--- | :--- | :--- | :--- | :--- | | +100 | $8,629 | $(700) | $7,929 | $6,343 | | -100 | $(8,580) | $700 | $(7,880) | $(6,304) | [Controls and Procedures](index=161&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of May 31, 2025, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the end of the period[581](index=581&type=chunk) - No material changes to internal control over financial reporting occurred during the quarter ended May 31, 2025[581](index=581&type=chunk) Part II. Other Information [Other Disclosures](index=162&type=section&id=Other%20Disclosures) The company reports no material legal proceedings or changes to risk factors, no defaults on senior securities, and an extended share repurchase plan with no shares repurchased during the quarter - The company is not subject to any material legal proceedings[583](index=583&type=chunk) - There have been no material changes to the risk factors disclosed in the company's Annual Report on Form 10-K for the fiscal year ended February 28, 2025[584](index=584&type=chunk) - The company's share repurchase plan, authorizing up to **1.7 million shares**, was extended to January 15, 2026, with no shares repurchased in the three months ended May 31, 2025, and **1,035,203 shares** purchased to date under the plan[585](index=585&type=chunk)

Core Insights - The article emphasizes the importance of a hybrid investment strategy that combines classic dividend growth stocks with Business Development Companies, REITs, and Closed End Funds to enhance investment income while achieving total returns comparable to traditional index funds [1]. Investment Strategy - The investment approach focuses on high-quality dividend stocks and assets that provide long-term growth potential, which can significantly contribute to income generation [1]. - A balanced portfolio that includes both growth and income-generating assets can lead to efficient investment income while maintaining a total return aligned with the S&P [1].

Earnings Results - Saratoga Investment Corp. is set to release its first-quarter earnings results on July 8, with analysts expecting earnings of 72 cents per share, a decrease from $1.05 per share in the same period last year [1] - The projected quarterly revenue is $32.79 million, down from $38.68 million a year earlier [1] Recent Performance - On May 7, Saratoga Investment reported weaker-than-expected results for the fourth quarter [2] - The company's shares increased by 0.5%, closing at $24.80 on the preceding Monday [2] Analyst Ratings - Casey Alexander from Compass Point downgraded the stock from Buy to Neutral, reducing the price target from $25.25 to $24.25 on June 9, 2025 [4] - Bryce Rowe from B. Riley Securities maintained a Neutral rating with a price target of $25 on October 10, 2024 [4]

Core Viewpoint - Saratoga Investment Corp. will report its financial results for the fiscal quarter ended May 31, 2025, on July 8, 2025, with a conference call scheduled for July 9, 2025, to discuss these results [1][2]. Company Overview - Saratoga Investment Corp. is a specialty finance company that provides customized financing solutions to U.S. middle-market businesses [3]. - The company primarily invests in senior and unitranche leveraged loans and mezzanine debt, with a lesser focus on equity, to finance ownership changes, strategic acquisitions, recapitalizations, and growth initiatives [3]. - The objective of Saratoga Investment is to generate attractive risk-adjusted returns through current income and long-term capital appreciation from its debt and equity investments [3]. - The company is regulated as a business development company under the Investment Company Act of 1940 and is externally managed by Saratoga Investment Advisors, LLC, which focuses on credit-driven strategies [3]. - Saratoga Investment Corp. owns two active SBIC-licensed subsidiaries and manages a $550 million collateralized loan obligation (CLO) fund, along with co-managing a joint venture fund that owns a $400 million CLO [3]. - The company holds 52% of the Class F and 100% of the subordinated notes of the CLO, as well as 87.5% of both the unsecured loans and membership interests of the JV and 87.5% of the Class E notes of the JV CLO [3]. - The diverse funding sources and a permanent capital base enable Saratoga Investment to offer a wide range of financing solutions [3].

Core Viewpoint - Saratoga Investment Corp. has declared a base quarterly dividend of $0.75 per share for the second quarter of fiscal 2026, continuing its strong dividend distribution history and providing a 12.5% dividend yield based on its recent stock price of $24.08 per share [1][2]. Dividend Declaration - The declared dividends for the second quarter of fiscal 2026 are as follows: - June 2025: $0.25 per share, record date July 8, 2025, payment date July 24, 2025 - July 2025: $0.25 per share, record date August 6, 2025, payment date August 21, 2025 - August 2025: $0.25 per share, record date September 4, 2025, payment date September 24, 2025 [1]. Historical Dividend Distributions - The total dividend for fiscal year 2026 is projected to be $1.50 per share, with consistent monthly dividends of $0.25 per share since fiscal Q1 2026 [3]. - Historical dividends per share for previous fiscal years include: - Fiscal 2025: $2.96 total, with quarterly distributions of $0.74 - Fiscal 2024: $2.86 total, with quarterly distributions of $0.71 to $0.73 - Fiscal 2023: $2.44 total, with quarterly distributions ranging from $0.53 to $0.69 [3]. Company Overview - Saratoga Investment is a specialty finance company focused on providing customized financing solutions to U.S. middle-market businesses, primarily through senior and unitranche leveraged loans and mezzanine debt [4]. - The company aims to generate attractive risk-adjusted returns through current income and long-term capital appreciation from its investments [4]. - Saratoga Investment is regulated as a business development company and is externally managed by Saratoga Investment Advisors, LLC [4].

Core Viewpoint - Saratoga Investment (SAR) has received an upgrade to a Zacks Rank 2 (Buy), indicating a positive outlook based on rising earnings estimates, which significantly influence stock prices [1][4]. Earnings Estimates and Revisions - The Zacks Consensus Estimate for Saratoga Investment indicates expected earnings of $3.17 per share for the fiscal year ending February 2026, reflecting a year-over-year decline of 16.8% [9]. - Over the past three months, the Zacks Consensus Estimate for Saratoga Investment has increased by 0.8%, suggesting a positive trend in earnings estimates [9]. Zacks Rating System - The Zacks rating system is based solely on a company's changing earnings picture, making it a valuable tool for investors to gauge stock performance [2][3]. - The system classifies stocks into five groups, with Zacks Rank 1 (Strong Buy) stocks historically generating an average annual return of +25% since 1988 [8]. - Saratoga Investment's upgrade to Zacks Rank 2 places it in the top 20% of Zacks-covered stocks, indicating strong potential for market-beating returns in the near term [10][11].

Core Insights - The Zacks Rank system emphasizes earnings estimates and revisions to identify winning stocks [1] - Value investing remains a preferred strategy for finding strong stocks across various market conditions [2] - The Style Scores system, particularly the "Value" category, helps investors identify stocks with strong value characteristics [3] Company Analysis: Saratoga Investment Corp (SAR) - Saratoga Investment Corp (SAR) holds a Zacks Rank of 2 (Buy) and a Value grade of A, indicating strong potential [4] - The stock's current P/E ratio is 7.44, significantly lower than the industry average of 9.03, suggesting it may be undervalued [4] - SAR's Forward P/E has fluctuated between 5.96 and 8.79 over the past year, with a median of 7.45, indicating stable valuation metrics [4] - The P/S ratio for SAR is 2.46, compared to the industry's average P/S of 3.41, further supporting the notion of undervaluation [5] - These metrics contribute to SAR's strong Value grade, highlighting its potential as an attractive investment opportunity [6]