Financial Data and Key Metrics Changes - The adjusted net investment income (NII) for the third quarter is $12.4 million, down 5.3% year-over-year and 31.7% quarter-over-quarter [14][20] - The adjusted NII per share is $0.90, down 10.9% from $1.01 last year and down 32.3% from $1.33 last quarter [14][15] - The latest 12 months return on equity is 9.2%, up from 6.6% last year and 5.8% last quarter, outperforming the industry average of 8.5% [15][16] - The net asset value (NAV) per share is $26.95, down 1.7% from $27.42 last year and down 0.4% from $27.07 last quarter [15][16] Business Line Data and Key Metrics Changes - The company experienced healthy originations with $85 million in new portfolio company investments and eight follow-on investments during the quarter [11][41] - The total portfolio fair value is now 0.7% below cost, while the core non-CLO portfolio is 3% above cost [10][12] - The company’s cash position increased to $250 million, primarily due to $160 million in repayments from successful investments [11][12] Market Data and Key Metrics Changes - The company noted a decline in deal volumes in the lower middle market, with year-to-date deal volumes down over 34% compared to the prior year [35][37] - The company’s portfolio consists of 86.8% first lien debt, supported by strong enterprise values in historically resilient industries [43][44] Company Strategy and Development Direction - The company aims to leverage its strong reputation and market positioning to create attractive investment opportunities despite lower overall M&A volumes [8][9] - The management team is focused on maintaining balance sheet strength, liquidity, and NAV preservation while navigating economic challenges [13][60] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the potential for future economic opportunities and challenges, citing a resilient portfolio valued at $960 million [9][60] - The management team anticipates a resurgence in M&A activity as interest rates potentially decline and economic conditions stabilize [76][100] Other Important Information - The company’s annualized third quarter dividend of $0.74 per share implies a 12.2% dividend yield based on the stock price of $24.21 [8][54] - The company has maintained a substantial $474 million of investment capacity to support portfolio companies [13][26] Q&A Session Summary Question: Expectations on repayments and growth outlook - Management noted that while repayments were strong in the recent quarter, they expect a balance between new growth and repayments, with a solid pipeline of opportunities [66][72] Question: Potential to realize future equity gains - The management team indicated that future equity gains are typically realized when companies are sold, and they actively assess co-investment opportunities [86][89] Question: Discussion on SBIC debentures and repayment strategy - Management explained that they are monitoring the cost of debentures and will make decisions on repayments based on cash availability and potential follow-on investment needs [82][104]

Saratoga Investment Corp. Fiscal Third Quarter 2025 Shareholder Presentation January 9, 2025 Steady Long-Term Performance in Q3 2025 Fiscal Third Quarter 2025 Highlights: Continued high quality portfolio and solid performance Outsized repayments this quarter exceed strong originations, remain on track for growing long-term assets under management • AUM of $960.1 million, a decrease of 13.8% since last year and 7.7% from last quarter, with $84.5m in originations offset by $160.4m repayments in Q3 Base of liq ...

Core Viewpoint - Saratoga Investment (SAR) reported quarterly earnings of $0.90 per share, exceeding the Zacks Consensus Estimate of $0.82 per share, but down from $1.01 per share a year ago, indicating a 10.89% year-over-year decline in earnings [1][2] Financial Performance - The company achieved revenues of $35.88 million for the quarter ended November 2024, surpassing the Zacks Consensus Estimate by 2.97%, although this represents a decrease from $36.34 million in the same quarter last year [2] - Over the last four quarters, Saratoga Investment has exceeded consensus EPS estimates three times and topped revenue estimates four times [2] Stock Performance - Since the beginning of the year, Saratoga Investment shares have increased by approximately 1.2%, outperforming the S&P 500, which gained 0.5% [3] Future Outlook - The company's earnings outlook will be crucial for future stock performance, with current consensus EPS estimates at $0.62 for the upcoming quarter and $3.81 for the current fiscal year [4][7] - The estimate revisions trend for Saratoga Investment is currently mixed, resulting in a Zacks Rank 3 (Hold), indicating expected performance in line with the market [6] Industry Context - The Financial - SBIC & Commercial Industry, to which Saratoga Investment belongs, is currently ranked in the bottom 44% of over 250 Zacks industries, suggesting potential challenges ahead [8]

Financial Performance - Adjusted Net Investment Income (NII) per share for Q3 2025 was $0.90, a 1.1% sequential increase, with a Last Twelve Months (LTM) Return on Equity (ROE) of 9.2%[2] - Total Investment Income for the quarter was $35.9 million, down 1.3% year-over-year and down 16.6% from the previous quarter[8] - Net investment income for the three months ended November 30, 2024, was $12,435,655, compared to $14,166,063 for the same period in 2023, reflecting a decrease of approximately 12.2%[30] - For the nine months ended November 30, 2024, total investment income was $117,560,160, an increase from $106,486,533 in the same period of 2023[32] - Net investment income for the nine months ended November 30, 2024, was $44,968,058, slightly higher than $44,089,797 for the same period in 2023[32] - Adjusted net investment income for the three months ended November 30, 2024, was $12,435,655, compared to $13,127,030 in the same period of 2023[35] Asset Management - Assets Under Management (AUM) decreased to $960.1 million, a 13.8% decline from $1.114 billion year-over-year and a 7.7% decline from the previous quarter[8] - Net Asset Value (NAV) increased to $374.9 million, up $15.3 million from $359.6 million year-over-year and up $2.8 million from the previous quarter[8] - The net asset value per share decreased to $26.95 from $27.12 year-over-year[28] - Total assets as of November 30, 2024, amount to $1,219.9 million, compared to $1,191.2 million as of February 29, 2024[26] - Total liabilities as of November 30, 2024, are $845.1 million, an increase from $821.0 million as of February 29, 2024[26] Dividends - The company declared a quarterly dividend of $0.74 per share, a 2.8% increase from $0.72 per share in Q3 2024, along with a special dividend of $0.35 per share[14] - For fiscal Q3 2025, the total dividend per share is $1.09, comprising a base dividend of $0.74 and a special dividend of $0.35[17] - Year-to-date fiscal 2025, the total dividend per share is $2.57, which includes $2.22 in base dividends and $0.35 in special dividends[17] Credit Quality - The overall credit quality remained strong, with 99.7% of credits rated in the highest category, and only 0.3% of fair value and cost in non-accrual status[6] - The portfolio's fair value decreased by $3.5 million due to net realized gains and unrealized depreciation, with 86.8% of investments in first lien debt[12] - The weighted average current yield on the portfolio was 10.8%, with first lien term loans yielding 11.6%[12] Cash and Borrowing Capacity - As of November 30, 2024, Saratoga Investment has a total of $337.7 million in undrawn credit facility borrowing capacity and cash and cash equivalents, including $250.2 million in cash[5] - The company has $136.0 million in undrawn SBA debentures available from its existing SBIC III license, leading to a total undrawn borrowing capacity of $473.7 million[5] - The company has committed undrawn lending commitments of $52.3 million and discretionary funding commitments of $75.7 million as of fiscal 2025 third quarter-end[5] Share Repurchase - As of November 30, 2024, the company has purchased 1,035,203 shares of common stock at an average price of $22.05, totaling approximately $22.8 million under its Share Repurchase Plan[18] - The board of directors has extended the Share Repurchase Plan to January 15, 2026, allowing for the repurchase of up to 1.7 million shares of common stock[19] Originations and Cash Position - Originations for the quarter totaled $84.5 million, with significant repayments of $160.4 million, leading to a net cash position of $250.2 million[6] - The company is evaluating the use of callable long-term liabilities to reduce current debt in light of available cash creating negative arbitrage[4]

Core Insights - Saratoga Investment Corp. reported a sequential increase of 1.1% in adjusted net investment income (NII) per share, reaching $0.90, while the last twelve months (LTM) return on equity (ROE) improved to 9.2% [1][3] - The company achieved strong deployments of $84.5 million, supporting two new platforms and eight existing portfolio companies, although this was offset by significant repayments totaling $160.4 million [1][3] Financial Performance - As of November 30, 2024, assets under management (AUM) decreased to $960.1 million, down 13.8% year-over-year and 7.7% from the previous quarter [2][6] - Net asset value (NAV) increased to $374.9 million, up from $359.6 million a year ago and $372.1 million from the previous quarter [2][6] - Total investment income for the quarter was $35.9 million, a decrease of 1.3% year-over-year and a decline of 16.6% from the previous quarter [2][7] - The company declared a quarterly dividend of $0.74 per share, along with a special dividend of $0.35, resulting in a total dividend of $1.09 per share for the quarter [2][14] Investment Activity - The company originated $84.5 million in investments during the quarter, which included two new portfolio company investments and eight follow-on investments [3][5] - Principal repayments amounted to $160.4 million, which included five full repayments of existing investments [3][5] Portfolio Composition - The fair value of the portfolio was $960.1 million, with 86.8% in first lien debt, indicating a strong focus on secured investments [2][14] - The weighted average current yield on the portfolio was 10.8%, with first lien term loans yielding 11.6% [14] Credit Quality - The overall credit quality remained stable, with 99.7% of credits rated in the highest category, and only two investments on non-accrual status [5][6] - The company has taken decisive actions to resolve challenges in four portfolio companies through sales and restructurings [5][6] Management Commentary - The management expressed confidence in navigating the current economic environment, citing a robust pipeline and strong underwriting standards to enhance portfolio quality and performance [5][6]

Investment Strategy and Portfolio - The company has elected to be regulated as a Business Development Company (BDC) under the Investment Company Act of 1940, aiming for attractive risk-adjusted returns through investments primarily in senior and unitranche leveraged loans and mezzanine debt issued by U.S. middle-market companies with EBITDA between $2 million and $50 million [412]. - The company has the ability to invest up to 30.0% of its portfolio in opportunistic investments to enhance returns, which may include distressed debt and private equity [412]. - The company’s SBIC subsidiaries can provide up to $175.0 million in long-term capital through SBA-guaranteed debentures, with a recent merger allowing access to all undistributed capital [415]. - The company and TJHA have committed to provide up to $50.0 million of financing to SLF JV, with the company providing $43.75 million, resulting in an 87.5% ownership stake [423]. - The company’s investment in SLF JV includes an unsecured note of $17.6 million and membership interests valued at $17.6 million, with fair values of $16.2 million and $4.8 million as of November 30, 2024 [423]. - The company’s unsecured loan to SLF 2022 was paid in full on June 9, 2023, after being fully repaid on October 28, 2022, as part of the CLO closing [424]. - The fair value of Class E Notes purchased by the company was $12.3 million as of both November 30, 2024 and February 29, 2024 [426]. - The company has identified investment valuation, revenue recognition, and capital gains incentive fee expense as critical accounting estimates [427]. - As of November 30, 2024, the investment portfolio consisted of 133 investments across 48 portfolio companies, with an average investment per company of $19.6 million [462]. - The Company's portfolio composition as of November 30, 2024, included 86.8% in first lien term loans with a weighted average current yield of 11.6% [467]. - Non-performing or delinquent investments at fair value amounted to $2.7 million as of November 30, 2024 [462]. - The weighted average maturity of the investment portfolio was 2.3 years as of November 30, 2024 [462]. - As of November 30, 2024, 98.1% of the Saratoga CLO portfolio investments had a CMR color rating of green or yellow, with two investments in default valued at $0.04 million [469]. - The CMR distribution for Saratoga Investment Corp. shows that 89.3% of investments were rated green, while 0.2% were rated red as of November 30, 2024 [472]. - The total fair value of Saratoga Investment Corp.'s portfolio decreased from $1,138.8 million on February 29, 2024, to $960.1 million on November 30, 2024 [472]. - The healthcare services sector represented 8.7% of the portfolio at fair value as of November 30, 2024, up from 4.7% on February 29, 2024 [475]. - The Midwest region accounted for 34.3% of the total portfolio fair value as of November 30, 2024, an increase from 23.3% on February 29, 2024 [479]. - The total fair value of investments in the subordinated notes and equity interests of Saratoga CLO was included in the N/A category, which accounted for 10.4% of the portfolio as of November 30, 2024 [472]. - The total investments in the Saratoga CLO portfolio were valued at $525.7 million, with 91.4% rated green as of November 30, 2024 [473]. Financial Performance - During the three months ended November 30, 2024, the Company invested $84.4 million in new and existing portfolio companies, resulting in net investments of $(76.0) million for the period [464]. - For the nine months ended November 30, 2024, the Company invested $126.3 million in new and existing portfolio companies, leading to net investments of $(169.9) million [465]. - Total investment income for the three months ended November 30, 2024 decreased by $0.5 million, or 1.3%, to $35.9 million compared to $36.3 million for the same period in 2023 [483]. - For the nine months ended November 30, 2024, total investment income increased by $11.1 million, or 10.4%, to $117.6 million from $106.5 million for the same period in 2023 [484]. - Interest income from investments for the three months ended November 30, 2024 decreased by $1.9 million, or 5.8%, to $30.8 million compared to $32.7 million for the same period in 2023 [483]. - Total operating expenses for the three months ended November 30, 2024 increased by $1.3 million, or 5.7%, to $23.4 million compared to $22.2 million for the same period in 2023 [493]. - Interest and debt financing expenses for the three months ended November 30, 2024 increased by $0.5 million, or 4.2%, compared to the same period in 2023 [494]. - For the nine months ended November 30, 2024, interest and debt financing expenses increased by $2.5 million, or 6.8%, compared to the same period in 2023 [495]. - Incentive management fees for the nine months ended November 30, 2024 increased by $6.4 million, or 132.9%, compared to the same period in 2023 [501]. - Total dividend income for the three months ended November 30, 2024 was $1.1 million, down from $1.8 million for the same period in 2023 [489]. - Other income for the three months ended November 30, 2024 was $0.9 million, up from $0.2 million for the same period in 2023 [492]. - The net increase in net assets resulting from operations for the three months ended November 30, 2024, was $8.8 million, translating to a per share increase of $0.64 based on 13,789,951 weighted average common shares outstanding [535]. - For the nine months ended November 30, 2024, the net increase in net assets resulting from operations was $28.8 million, with a per share increase of $2.09 based on 13,733,008 weighted average common shares outstanding [536]. Debt and Financing - The Encina Credit Facility allows for a commitment increase to up to $75.0 million, with a minimum drawn amount of $12.5 million, and the maturity date extended to January 27, 2026 [418]. - The Live Oak Credit Facility was closed with a commitment amount of up to $150.0 million, requiring a minimum drawn amount of $12.5 million, and was amended to increase borrowings available from $50.0 million to $75.0 million [420]. - The average borrowings under the Encina Credit Facility for the three months ended November 30, 2024 were $33.3 million with an interest rate of 9.73%, compared to $38.9 million and 9.62% for the same period in 2023 [505]. - The average borrowings of SBA debentures for the three months ended November 30, 2024 were $214.0 million with a weighted average interest rate of 3.30%, compared to $200.4 million and 3.25% for the same period in 2023 [504]. - The average borrowings under the Live Oak Credit Facility for the three months ended November 30, 2024 were $20.0 million with an interest rate of 9.00%, compared to $0.0 million and 0.0% for the same period in 2023 [504]. - The total amount of 7.75% 2025 Notes outstanding as of November 30, 2024, was $5.0 million [581]. - The total amount of 6.25% 2027 Notes outstanding as of November 30, 2024, was $15.0 million [584]. - The total amount of 4.375% 2026 Notes outstanding as of November 30, 2024, was $175.0 million [587]. - The total amount of 4.35% 2027 Notes outstanding as of November 30, 2024, was $75.0 million [589]. - The total amount of 6.00% 2027 Notes outstanding as of November 30, 2024, was $105.5 million [593]. - The total amount of 7.00% 2025 Notes outstanding as of November 30, 2024, was $12.0 million [595]. - The total amount of 8.00% 2027 Notes outstanding as of November 30, 2024, was $46.0 million [597]. - The total amount of 8.125% 2027 Notes outstanding as of November 30, 2024, was $60.4 million [600]. - On March 31, 2023, the company issued $10.0 million in 8.75% fixed-rate notes due 2024, with net proceeds of $9.7 million after underwriting discounts of approximately $0.4 million [601]. - As of November 30, 2024, the total amount of 8.75% 2025 Notes outstanding was $20.0 million [602]. - On April 14, 2023, the company issued $50.0 million in 8.50% fixed-rate notes due 2028, with net proceeds of $48.4 million after underwriting commissions of approximately $1.6 million [603]. - As of November 30, 2024, the total amount of 8.50% 2028 Notes outstanding was $57.5 million [604]. - The company capitalized financing costs of $0.7 million related to the 8.75% 2025 Notes, amortized over the term of the notes [601]. - The company capitalized financing costs of $2.0 million related to the 8.50% 2028 Notes, amortized over the term of the notes [603]. - The 8.50% 2028 Notes may be redeemed in whole or in part at the company's option starting April 14, 2025 [603]. Asset Management and Valuation - The company recorded a $20.6 million unrealized depreciation in its investment in Pepper Palace, Inc., primarily due to declines in company performance [529]. - The unrealized depreciation in Netreo Holdings, LLC amounted to $11.5 million, driven by increased company leverage and decreased performance [530]. - The restructuring of the investment in Pepper Palace, Inc. resulted in a $31.6 million net change in unrealized appreciation, reversing previously recognized unrealized depreciation [520]. - The investment in Zollege PBC saw a $16.3 million net change in unrealized appreciation due to restructuring, reversing previously recognized unrealized depreciation [521]. - The net change in unrealized appreciation for the nine months ended November 30, 2024 was $33.7 million, compared to a net change in unrealized depreciation of $39.9 million for the same period in 2023 [518]. - The asset coverage ratio was 160.1% as of November 30, 2024, indicating the company's ability to meet its borrowing obligations [540]. - The company received exemptive relief from the SEC, allowing it to borrow up to an additional $350.0 million under the asset coverage test [578]. - The company intends to fund growth through net proceeds from future equity offerings, including a dividend reinvestment plan and an equity ATM program [538]. - The company anticipates needing to raise additional capital from various sources to fund growth in its investment portfolio [540]. - The company incurred $0.8 million in fees related to the Live Oak Credit Facility [571]. - The operating expenses payable under both credit facilities are limited to $200,000 per annum [567]. - The Encina Credit Agreement does not allow grace periods for breaches of negative covenants, including those related to the preservation of the company's existence [554]. - The company increased borrowings available under the Encina Credit Facility from $50.0 million to $65.0 million, and extended the revolving period to January 27, 2026 [556]. - The Live Oak Credit Facility requires an Interest Coverage Ratio of at least 175% and an Overcollateralization Ratio of at least 200% [569]. - The company’s SBIC subsidiaries can borrow up to $175.0 million of SBA debentures if they have at least $87.5 million in regulatory capital [577]. - As of November 30, 2024, SBIC II LP had $87.5 million in regulatory capital and $175.0 million in SBA-guaranteed debentures outstanding, while SBIC III LP had $66.7 million in regulatory capital and $39.0 million in SBA-guaranteed debentures outstanding [579].

Core Viewpoint - Saratoga Investment Corp. will report its financial results for the fiscal quarter ended November 30, 2024, on January 8, 2025, with a conference call scheduled for January 9, 2025, to discuss these results [1][2][3]. Company Overview - Saratoga Investment is a specialty finance company that provides customized financing solutions to U.S. middle-market businesses, primarily investing in senior and unitranche leveraged loans and mezzanine debt [5]. - The company's objective is to create attractive risk-adjusted returns through current income and long-term capital appreciation from its debt and equity investments [5]. - Saratoga Investment is regulated as a business development company under the Investment Company Act of 1940 and is externally managed by Saratoga Investment Advisors, LLC [5]. - The company owns two active SBIC-licensed subsidiaries and manages a $600 million collateralized loan obligation (CLO) fund, along with a joint venture fund that owns a $400 million CLO [5]. - Saratoga Investment holds significant stakes in its CLO and JV funds, including 52% of Class F and 100% of subordinated notes of the CLO, and 87.5% of both unsecured loans and membership interests of the JV [5].

Core Points - Saratoga Investment Corp. declared a base quarterly dividend of $0.74 per share and a special dividend of $0.35 per share for the fiscal third quarter ending November 30, 2024, fulfilling fiscal 2024 distribution requirements [1][2][3] - The total distributions for the fiscal third quarter amount to $1.09 per share, which is the highest in the company's history [1][2] - The annualized dividend rate implies a 12.7% dividend yield based on a recent stock price of $23.31 per share [2] - The special distribution was driven by substantial overearning of dividends during the previous fiscal year, fulfilling fiscal 2024 spillover requirements [3] - The company has declared three dividends in fiscal year 2025, maintaining industry-leading dividend coverage and yield [3] Dividend History - For fiscal Q3 2025, the base dividend per share is $0.74, special dividend per share is $0.35, totaling $1.09 [4] - Year-to-date fiscal 2025 total dividends amount to $2.57 per share, including the pending special dividend [4] - Historical dividends show a consistent increase, with the base dividend per share rising from $0.53 in fiscal Q1 2023 to $0.74 in fiscal Q2 and Q3 2025 [4] Company Overview - Saratoga Investment is a specialty finance company providing customized financing solutions to U.S. middle-market businesses, primarily investing in senior and unitranche leveraged loans and mezzanine debt [6] - The company aims to create attractive risk-adjusted returns through current income and long-term capital appreciation from its investments [6] - Saratoga Investment is regulated as a business development company and is externally managed by Saratoga Investment Advisors, LLC [6]

Financial Data and Key Metrics Changes - The annualized second quarter dividend was $0.74 per share, implying a 12.7% dividend yield based on the stock price of $23.26 per share on October 7, 2024 [4] - Adjusted net investment income (NII) was $18.2 million, up 38.3% from last year and 26.9% from last quarter, with adjusted NII per share at $1.33, up 23.2% from $1.08 last year [11][14] - The net asset value (NAV) per share was $27.07, down 4.8% from $28.44 last year but up 0.8% from $26.85 last quarter [12][16] Business Line Data and Key Metrics Changes - The portfolio's fair value was $1.04 billion, with 85.2% in first lien debt, and the core non-CLO portfolio was 3.3% above cost [10][20] - The company originated no new portfolio company investments this quarter but had five smaller follow-on investments totaling $2.6 million, while repayments and amortization amounted to $60.1 million [9][10] Market Data and Key Metrics Changes - The lower middle market deal volumes were down significantly year-to-date, with factors such as elevated interest rates and a disconnect between buyers and sellers impacting activity [23][24] - The overall credit quality increased to 99.7% rated in the highest category, with only two investments on non-accrual status [10][28] Company Strategy and Development Direction - The company is focused on maintaining balance sheet strength, liquidity, and NAV preservation, with $385.5 million of investment capacity available [11][19] - The management team emphasizes a disciplined approach to investment decisions and proactive portfolio management, particularly in the current economic environment [26][31] Management's Comments on Operating Environment and Future Outlook - Management noted that while short-term interest rates have decreased, earnings continue to benefit from elevated rates on floating rate assets [5] - The company remains optimistic about future economic opportunities despite current challenges, with a strong operating performance foundation [6][26] Other Important Information - The company has resolved uncertainties related to all four portfolio companies on its watchlist, with significant actions taken to improve management and capital structures [8][32] - The company recognized a $34 million realized loss this quarter due to the restructuring of Pepper Palace, while the Noland investment was fully repaid, contributing positively to NII [34][35] Q&A Session Summary Question: Commentary on market and investment characteristics - Management indicated that the investments reviewed did not meet quality standards due to unique issues such as customer concentration [42] Question: Impact of interest rate changes on NII - A 25 basis point reduction in short-term rates would impact NII by approximately $0.03 quarterly, with the effect not being immediate [44] Question: Recovery potential for Zollege and Pepper Palace - Management expressed cautious optimism about recovery, noting that it would take time and effort to restore these investments to profitability [50] Question: Current spillover balance and dividend sustainability - The company has over $3 per share of spillover that could be considered for future dividends, providing a cushion against declining interest rates [51]

Saratoga Investment Corp. Fiscal Second Quarter 2025 Shareholder Presentation October 9, 2024 Steady Long-Term Growth and Performance in Q2 2025 Fiscal Second Quarter 2025 Highlights: • Continued high quality portfolio and solid performance • Investment quality remains solid • 99.7% of loan investments with highest internal rating and two residual non-accruals (0.3% of fair value / 0.4% of cost) • All four non-accrual or watchlist investments resolved during the quarter with decisive action • Return on equi ...