Core Insights - Saratoga Investment Corp. reported a 4.7% sequential quarter and a 6.1% annual increase in Net Asset Value (NAV), while reducing leverage [1] - The company achieved net deployments of $25.9 million in the fiscal fourth quarter of 2025, supporting one new platform and six follow-on investments, with two additional new portfolio companies since year-end [1] - Non-accruals were reduced to 0.3% of fair value and 0.5% of cost in fiscal 2025, indicating improved credit quality [1] Financial Performance - As of February 28, 2025, Assets Under Management (AUM) were $978.1 million, a decrease of 14.1% from $1.139 billion as of February 29, 2024, but an increase of 1.9% from $960.1 million last quarter [9] - Total investment income for the year ended February 28, 2025, was $148.9 million, an increase of $5.2 million, or 3.6%, from the previous year [9] - For the fiscal fourth quarter, total investment income was $31.3 million, a decrease of $5.9 million, or 15.9%, from the same quarter last year [9] Earnings and Dividends - Net Investment Income (NII) per share for the year was $3.81, compared to $4.10 the previous year, reflecting a dilution from increased share count [5] - Earnings per share (EPS) for the year was $2.02, up from $0.71 in the previous year [5] - The company declared a base quarterly dividend of $0.74 per share for the fiscal fourth quarter and transitioned to a monthly dividend structure, increasing the quarterly base dividend to $0.75 for the first quarter of fiscal 2026 [19][18] Portfolio and Investment Activity - The fair value of Saratoga Investment's portfolio was $978.1 million, with 88.7% in first lien debt [8][14] - The company executed approximately $45.5 million of new originations in two new portfolio companies and six follow-ons since quarter-end [11] - The overall portfolio composition included 88.7% first lien term loans, with a weighted average current yield of 10.8% [14] Leverage and Credit Quality - The company reduced its regulatory leverage from 161.1% to 162.9% due to the NAV increase of $22.5 million from the previous year [5] - The overall credit quality remained steady, with 99.7% of credits rated in the highest category, and only two investments on non-accrual status [5][6] - The current cash position was $204.7 million, providing a strong level of cash availability in a volatile macro environment [5]

Investment Strategy - The company has invested primarily in senior and unitranche leveraged loans and mezzanine debt issued by private U.S. middle-market companies, defined as those with EBITDA between $2 million and $50 million[360]. - The company has the ability to invest up to 30.0% of its portfolio in opportunistic investments to enhance returns, including distressed debt and structured finance vehicles[360]. - The company has no current intention to invest in private equity funds exceeding 15.0% of its net assets[360]. - The company’s SBIC subsidiaries provide up to $175.0 million in long-term capital in the form of debentures guaranteed by the SBA[363]. Financing Activities - The company completed the fourth refinancing of the Saratoga CLO, increasing its assets from $500 million to approximately $650 million and investing an additional $14.0 million in subordinated notes[364]. - The company formed Saratoga Investment Funding II LLC to enter into a $50.0 million senior secured revolving credit facility, which can be increased to $75.0 million within the first two years[366]. - The Live Oak Credit Facility was closed with a commitment of $50.0 million, which can be increased to $75.0 million, and bears interest at a floating rate of Adjusted Term SOFR plus an applicable margin[368]. - The company and TJHA have committed to provide up to a combined $50.0 million of financing to SLF JV, with the company contributing $43.75 million[371]. Investment Performance - The company’s investment in SLF JV includes an unsecured note with a fair value of $16.5 million as of February 28, 2025[371]. - The fair value of Class E Notes held by the company was $12.3 million as of February 28, 2025, and February 29, 2024[374]. - The company expects its debt investments to have terms of up to ten years and to bear interest at either a fixed or floating rate[384]. - The Saratoga CLO portfolio increased from approximately $300.0 million to approximately $500.0 million following the third refinancing[386]. - Non-performing or delinquent investments at fair value decreased to $2.6 million as of February 28, 2025, from $18.9 million in the previous year[404]. Financial Results - Total investment income for the fiscal year ended February 28, 2025, was $148.855 million, an increase from $143.720 million in 2024[422]. - Net investment income decreased to $53.003 million in 2025 from $56.874 million in 2024[422]. - The total operating expenses rose to $95.852 million in 2025, compared to $86.846 million in 2024[422]. - The net change in unrealized appreciation on investments was $18.974 million in 2025, a significant recovery from a depreciation of $47.091 million in 2024[422]. Dividends and Shareholder Returns - The company distributed dividends totaling $1.49 per share for the tax year ended February 28, 2026, and $3.30 per share for the tax year ended February 28, 2025[548]. - The company repurchased 1,035,203 shares of common stock at an average price of $22.05 for approximately $22.8 million as of February 28, 2025[542]. - The company extended its Share Repurchase Plan to January 15, 2026, allowing for the repurchase of up to 1.7 million shares[542]. - The company amended its Equity Distribution Agreement to increase the maximum amount of shares to be sold through the ATM Program to $300.0 million[546]. Debt and Borrowing - The average borrowings outstanding under Credit Facilities were approximately $33.1 million for the fiscal year ended February 28, 2025, with a weighted average interest rate of 9.49%[443]. - The average borrowings outstanding of SBA debentures was $213.8 million for the fiscal year ended February 28, 2025, with a weighted average interest rate of 3.32%[444]. - The Encina Credit Facility has a commitment amount of $50.0 million, with specific eligibility criteria for loan assets included in the Borrowing Base[489]. - The company increased the borrowings available under the Encina Credit Facility from $50.0 million to $65.0 million, and the effective margin rate on borrowings increased from 4.00% to 4.25%[501]. Accounting and Valuation - The company has identified investment valuation, revenue recognition, and capital gains incentive fee expense as its most critical accounting estimates[375]. - The company is currently evaluating the impact of new accounting standards issued by the FASB, including ASU 2023-09 and ASU 2024-03, which require more detailed disclosures on income taxes and expenses[401][402]. - Interest income on the investment in Saratoga CLO is recorded using the effective interest method based on anticipated yield and estimated cash flows[392]. Market and Economic Conditions - The portfolio composition by industry grouping indicated a significant increase in Healthcare Services from 4.5% in 2024 to 8.5% in 2025[416]. - The Midwest region accounted for 37.3% of total investments at fair value in 2025, up from 23.3% in 2024[421].

Core Viewpoint - Saratoga Investment Corp. is set to report its financial results for the fiscal year and quarter ending February 28, 2025, on May 7, 2025, with a conference call scheduled for May 8, 2025, to discuss these results [1][2]. Company Overview - Saratoga Investment 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 achieve 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 operates 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 [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 permanent capital base enable Saratoga Investment to offer a wide range of financing solutions [3].

Core Points - Saratoga Investment Corp. declared a base quarterly dividend of $0.74 per share for the fiscal fourth quarter ending February 28, 2025, payable on March 25, 2025 [1] - The company transitioned its dividend payment schedule from quarterly to monthly starting March 31, 2025, increasing the quarterly dividend to $0.75 per share for the first quarter of fiscal 2026, which represents a 1.4% increase from the previous four quarters [2][3] - The annualized dividend rate implies an industry-leading 11.8% dividend yield based on a recent stock price of $25.39 per share [2] Dividend History - The new monthly dividends for fiscal Q1 2026 are set at $0.25 per share for March, April, and May 2025, totaling $0.75 for the quarter [2][4] - The total dividend per share for fiscal year 2025 was $3.31, which included a special dividend of $0.35 [4][5] - Historical dividends show a consistent increase over the years, with the base dividend per share rising from $0.70 in fiscal Q1 2024 to $0.74 in fiscal Q4 2025 [4][5] 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 [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 manages a $650 million collateralized loan obligation (CLO) fund [6]

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Core Viewpoint - Saratoga Investment (SAR) has been upgraded to a Zacks Rank 2 (Buy), indicating a positive outlook on its earnings estimates, which is a significant factor influencing stock prices [1][4]. Earnings Estimates and Ratings - The Zacks rating system is based solely on a company's changing earnings picture, tracking the Zacks Consensus Estimate for EPS from sell-side analysts [2]. - The Zacks rating upgrade reflects an improvement in Saratoga Investment's earnings outlook, which could lead to increased buying pressure and a rise in stock price [4][6]. Impact of Earnings Estimates on Stock Prices - Changes in a company's future earnings potential, as shown by earnings estimate revisions, are strongly correlated with near-term stock price movements, influenced by institutional investors [5]. - Rising earnings estimates for Saratoga Investment indicate an improvement in its underlying business, which should positively affect its stock price [6]. Importance of Earnings Estimate Revisions - Empirical research supports a strong correlation between earnings estimate revisions and near-term stock movements, making it beneficial for investors to track these revisions [7]. - The Zacks Rank system effectively utilizes earnings estimate revisions to classify stocks, with a proven track record of performance [8]. Current Earnings Estimates for Saratoga Investment - Saratoga Investment is expected to earn $3.87 per share for the fiscal year ending February 2025, reflecting a year-over-year change of -5.6%, although estimates have increased by 1.6% over the past three months [9]. Zacks Rating System Overview - The Zacks rating system maintains a balanced distribution of 'buy' and 'sell' ratings across its universe of over 4000 stocks, with only the top 20% receiving favorable ratings [10][11]. - The upgrade to Zacks Rank 2 places Saratoga Investment in the top 20% of Zacks-covered stocks, suggesting potential for market-beating returns in the near term [11].

Core Viewpoint - The article emphasizes the importance of value investing and highlights Saratoga Investment Corp (SAR) as a strong candidate for value investors due to its favorable valuation metrics and strong earnings outlook [2][4][7]. Valuation Metrics - Saratoga Investment Corp (SAR) has a Zacks Rank of 2 (Buy) and an A for Value, indicating strong potential for value investors [4]. - The current P/E ratio for SAR is 8.54, which is lower than the industry average P/E of 9.23, suggesting that SAR may be undervalued [4]. - SAR's Forward P/E has fluctuated between 5.70 and 8.56 over the past year, with a median of 6.56, further indicating its valuation strength [4]. - The P/B ratio for SAR is 0.91, compared to the industry average of 0.98, reinforcing the perception of SAR as a solid investment [5]. - SAR's P/B ratio has ranged from 0.81 to 0.96 over the past year, with a median of 0.86, which supports its valuation appeal [5]. - The P/S ratio for SAR stands at 2.24, significantly lower than the industry average P/S of 3.62, indicating a favorable sales performance relative to its price [6]. Investment Outlook - The combination of SAR's strong valuation metrics and positive earnings outlook positions it as an impressive value stock in the current market [7].

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]