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 ...

Saratoga Investment (SAR) came out with quarterly earnings of $1.33 per share, beating the Zacks Consensus Estimate of $0.94 per share. This compares to earnings of $1.08 per share a year ago. These figures are adjusted for non-recurring items. This quarterly report represents an earnings surprise of 41.49%. A quarter ago, it was expected that this business development company would post earnings of $0.97 per share when it actually produced earnings of $1.05, delivering a surprise of 8.25%. Over the last fo ...

On October 8, 2024, Saratoga Investment Corp (SAR, Financial) released its 8-K filing for the fiscal second quarter of 2025, showcasing a commendable financial performance that surpassed analyst expectations. Saratoga Investment Corp, a specialty finance company, provides customized financing solutions to U.S. middle-market businesses, primarily investing in senior and unitranche leveraged loans, mezzanine debt, and equity. Oct 08, 2024 Powered by 0 Performance Highlights and Challenges Saratoga Investment ...

Core Insights - Saratoga Investment Corp (SAR) is expected to report Q2 2025 earnings on October 8, 2024, with revenue estimates of $37.12 million and earnings of $0.94 per share [1] - For the full year 2025, revenue is projected at $147.75 million, with earnings expected to be $3.17 per share [1] Revenue and Earnings Estimates - Revenue estimates for 2025 have increased from $145.19 million to $147.75 million over the past 90 days, while 2026 estimates rose from $139.37 million to $141.21 million [2] - Earnings estimates for 2025 have decreased from $3.62 per share to $3.17 per share, and for 2026 from $3.45 per share to $3.23 per share [2] Historical Performance - In the previous quarter ending May 31, 2024, actual revenue was $31.42 million, missing expectations of $36.62 million by 14.21% [3] - Actual earnings were $0.48 per share, falling short of the expected $0.93 per share by 48.5% [3] - Following the earnings release, the stock price increased by 2.72% in one day [3] Price Targets and Recommendations - The average one-year price target for SAR is $25.04, with a high estimate of $29 and a low estimate of $23, indicating a potential upside of 7.75% from the current price of $23.24 [4] - GuruFocus estimates a GF Value of $82.73 for SAR in one year, suggesting a significant upside of 255.98% from the current price [4] - The average brokerage recommendation for SAR is 2.0, indicating an "Outperform" status on a scale where 1 is Strong Buy and 5 is Sell [4]

The market expects Saratoga Investment (SAR) to deliver a year-over-year decline in earnings on higher revenues when it reports results for the quarter ended August 2024. This widely-known consensus outlook is important in assessing the company's earnings picture, but a powerful factor that might influence its near-term stock price is how the actual results compare to these estimates. The stock might move higher if these key numbers top expectations in the upcoming earnings report, which is expected to be r ...