Saratoga(SAR) - 2026 Q1 - Quarterly Results

Fiscal First Quarter 2026 Financial Highlights Saratoga Investment Corp. delivered strong Q1 FY26 financial results, featuring increased Adjusted NII per share, NAV growth, and a robust ROE Summary Financial Information Saratoga Investment Corp. reported a 17.9% increase in Adjusted NII per share and a 0.9% increase in NAV from the previous quarter for Q1 fiscal 2026, achieving a quarterly ROE of 14.1% - Adjusted NII per share increased by 17.9% from the previous quarter, and NAV increased by 0.9%[2] - Quarterly ROE was 14.1%, significantly above the BDC industry average of 7.0%[2] Key Financial Metrics (Q1 FY26 vs. Q4 FY25 vs. Q1 FY25) | Metric | May 31, 2025 ($ thousands) | Feb 28, 2025 ($ thousands) | May 31, 2024 ($ thousands) | | :--- | :--- | :--- | :--- | | Assets Under Management (AUM) | 968,318 | 978,078 | 1,095,559 | | Net Asset Value (NAV) | 396,369 | 392,666 | 367,855 | | NAV per share | 25.52 | 25.86 | 26.85 | | Total Investment Income | 32,319 | 31,295 | 38,678 | | Net Investment Income (NII) per share | 0.66 | 0.56 | 1.05 | | Adjusted NII per share | 0.66 | 0.56 | 1.05 | | Earnings per share | 0.91 | (0.05) | 0.48 | | Dividends per share (declared) | 0.75 | 0.74 | 0.74 | | Return on Equity – annualized quarter | 14.1% | (0.7%) | 7.2% | | Originations | 50,086 | 41,802 | 39,301 | | Repayments | 64,330 | 15,867 | 75,703 | CEO Commentary and Business Outlook The CEO highlighted strong Q1 FY26 performance, including increased adjusted NII per share, NAV growth, and a robust ROE, while maintaining a high-quality portfolio and improving net interest margin - Adjusted NII per share increased by 17.9% from the previous quarter, and NAV continued to grow, with a strong return on equity beating the industry average[3] - Announced a base dividend of $0.25 per share per month, totaling $0.75 per share for Q2 FY26, representing an 11.8% yield[4] - Originated $50.1 million in two new portfolio companies and six follow-ons, alongside $64.3 million in repayments and an equity realization generating $2.9 million in realized gains[4][5] - Net interest margin expanded from $13.7 million last quarter to $15.6 million, driven by increased non-CLO interest income and decreased interest expense[6] - Overall credit quality remained steady at 99.7% of credits rated in the highest category, with 86.9% of investments in first lien debt[6] Detailed Financial Performance Analysis This section analyzes Saratoga Investment Corp.'s financial performance, detailing trends in AUM, investment income, NII, NAV, and ROE Assets Under Management (AUM) AUM decreased by 11.6% year-over-year and 1.0% quarter-over-quarter, primarily due to significant net repayments in the last six months AUM Trends | Period | AUM ($ millions) | YoY Change | QoQ Change | | :--- | :--- | :--- | :--- | | May 31, 2025 | $968.3 | -11.6% | -1.0% | | May 31, 2024 | $1,095.0 | - | - | | Feb 28, 2025 | $978.1 | - | - | Total Investment Income Total investment income decreased by 16.4% YoY but increased by 3.3% QoQ, with the weighted average interest rate on the core BDC portfolio remaining stable QoQ at 11.5% Total Investment Income Trends | Period | Total Investment Income ($ millions) | YoY Change | QoQ Change | | :--- | :--- | :--- | :--- | | May 31, 2025 | $32.3 | -16.4% | +3.3% | | May 31, 2024 | $38.7 | - | - | | Feb 28, 2025 | $31.3 | - | - | - Weighted average interest rate on the core BDC portfolio was 11.5% as of May 31, 2025, unchanged QoQ but down from 12.6% YoY due to SOFR base rate decreases[8] Operating Expenses (Excluding Certain Items) Total operating expenses (excluding interest, debt financing, management/incentive fees, and taxes) decreased slightly YoY to $2.8 million but increased QoQ, remaining at 0.8% of average total assets Total Operating Expenses (Excluding Certain Items) | Period | Expenses ($ millions) | YoY Change | QoQ Change | % of Avg Total Assets (Annualized) | | :--- | :--- | :--- | :--- | :--- | | May 31, 2025 | $2.8 | -$0.1 | +$1.4 | 0.8% | | May 31, 2024 | $2.9 | - | - | 1.0% | | Feb 28, 2025 | $1.4 | - | - | 0.8% | Net Investment Income (NII) and Adjusted NII Adjusted NII decreased by 29.3% YoY to $10.1 million but increased by 26.2% QoQ, primarily due to the non-recurrence of an annual excise tax Adjusted NII Trends | Period | Adjusted NII ($ millions) | YoY Change | QoQ Change | | :--- | :--- | :--- | :--- | | May 31, 2025 | $10.1 | -29.3% | +26.2% | | May 31, 2024 | $14.3 | - | - | | Feb 28, 2025 | $8.0 | - | - | - QoQ increase in Adjusted NII was primarily due to the non-recurrence of a $2.4 million annual excise tax recognized last quarter[8] Net Asset Value (NAV) and NAV per Share NAV increased by $28.5 million YoY and $3.7 million QoQ, reaching $396.4 million, though NAV per share decreased to $25.52 NAV Trends | Period | NAV ($ millions) | YoY Change ($ millions) | QoQ Change ($ millions) | | :--- | :--- | :--- | :--- | | May 31, 2025 | $396.4 | +$28.5 | +$3.7 | | May 31, 2024 | $367.9 | - | - | | Feb 28, 2025 | $392.7 | - | - | NAV per Share Trends | Period | NAV per Share | | :--- | :--- | | May 31, 2025 | $25.52 | | May 31, 2024 | $26.85 | | Feb 28, 2025 | $25.86 | - Excluding a one-time $0.50 per share dividend impact from a policy change, NAV per share would have been $26.02, a 0.6% increase[4] Return on Equity (ROE) LTM ROE increased to 9.3% from 4.4% YoY and 7.5% QoQ, with annualized quarterly ROE significantly improving to 14.1% ROE Trends | Metric | May 31, 2025 | May 31, 2024 | Feb 28, 2025 | | :--- | :--- | :--- | :--- | | LTM ROE | 9.3% | 4.4% | 7.5% | | Annualized Qtr ROE | 14.1% | 7.2% | (0.7%) | Weighted Average Common Shares Outstanding Weighted average common shares outstanding increased to 15.3 million, up from 14.5 million QoQ and 13.7 million YoY Weighted Average Common Shares Outstanding | Period | Shares Outstanding (millions) | | :--- | :--- | | May 31, 2025 | 15.3 | | Feb 28, 2025 | 14.5 | | May 31, 2024 | 13.7 | Portfolio and Investment Activities This section reviews Saratoga Investment Corp.'s portfolio, detailing fair value, investment activities, historical performance, and current composition Portfolio Overview and Fair Value Changes The portfolio fair value was $968.3 million, primarily invested across 46 companies, one CLO, one JV, and nine BB CLO debt investments, increasing by $3.8 million during the quarter - Portfolio fair value was $968.3 million, excluding $224.3 million in cash, invested across 46 portfolio companies, one CLO, one JV, and nine BB CLO debt investments[11] - Overall portfolio fair value increased by $3.8 million during the quarter, driven by $2.6 million net appreciation in core non-CLO portfolio, $0.2 million net unrealized appreciation in new BB CLO debt, $0.6 million net realized appreciation from an equity realization, and $0.7 million net realized gains from escrow payments[11] - As of quarter-end, total portfolio fair value was 2.1% below cost, while the core non-CLO portfolio was 1.7% above cost[5] Investment Originations and Repayments New investments totaled $50.1 million, including two new portfolio companies and six follow-ons, while principal repayments amounted to $64.3 million Investment Activity (Q1 FY26) | Activity | Amount ($ millions) | Details | | :--- | :--- | :--- | | Originations | $50.1 | Two new portfolio companies, six follow-ons | | Repayments | $64.3 | One equity realization, four full repayments, five partial repayments | Historical Investment Performance Since 2010, the company has generated $1.26 billion in repayments and sales from Saratoga-originated investments, achieving a gross unlevered IRR of 15.0% - Since 2010, $1.26 billion in repayments and sales from Saratoga-originated investments, yielding a gross unlevered IRR of 15.0%[11] - Total investments originated by Saratoga amount to $2.36 billion across 122 portfolio companies[11] Portfolio Composition and Yields The portfolio is predominantly composed of first lien term loans (86.9%), with a weighted average current yield on the total portfolio of 10.7% Portfolio Composition and Yields | Asset Type | % of Portfolio | Weighted Average Current Yield | | :--- | :--- | :--- | | First Lien Term Loans | 86.9% | 11.3% | | Second Lien Term Loans | 0.7% | 16.8% | | Unsecured Term Loans | 1.7% | 10.6% | | Structured Finance Securities | 2.8% | 15.6% | | Common Equity | 7.9% | 0.0% | | Total Portfolio | 100% | 10.7% | Liquidity and Capital Management This section details Saratoga Investment Corp.'s liquidity and capital management, including outstanding borrowings, undrawn capacity, and share offering programs Outstanding Borrowings As of May 31, 2025, Saratoga Investment had $70.0 million outstanding under its revolving credit facilities, $170.0 million in SBA debentures, and $269.4 million in listed baby bonds Outstanding Borrowings (May 31, 2025) | Debt Instrument | Amount ($ millions) | | :--- | :--- | | Revolving Credit Facilities | $70.0 | | SBA Debentures (SBIC II & III) | $170.0 | | Listed Baby Bonds | $269.4 | | Unsecured Unlisted Institutional Bonds | $250.0 | | Unlisted Issuances | $32.0 | Undrawn Borrowing Capacity The company had a total undrawn borrowing capacity of $430.3 million, including credit facilities, cash, and undrawn SBA debentures, alongside committed and discretionary funding commitments Undrawn Borrowing Capacity (May 31, 2025) | Source | Amount ($ millions) | | :--- | :--- | | Undrawn Credit Facility Capacity | $70.0 | | Cash and Cash Equivalents | $224.3 | | Undrawn SBA Debentures (SBIC III) | $136.0 | | Total Undrawn Borrowing Capacity | $430.3 | | Committed Undrawn Lending Commitments | $58.6 | | Discretionary Funding Commitments | $77.7 | - The company has an active ATM offering program to sell up to $300.0 million of common stock, having sold 8,089,547 shares for $214.3 million gross proceeds to date[14] Shareholder Returns This section outlines Saratoga Investment Corp.'s shareholder return strategies, including dividend declarations, historical trends, and the share repurchase program Dividend Declaration and Policy Saratoga Investment declared a base quarterly dividend of $0.75 per share for Q2 fiscal 2026, payable as three monthly dividends, with shareholders having a DRIP option - Declared a base quarterly dividend of $0.75 per share for Q2 FY26, distributed as three monthly payments of $0.25 per share[15] - Shareholders can elect to receive dividends in cash or common stock at a 5% discount via the DRIP[15] Dividend History The company's dividend history shows a consistent base dividend, with a special dividend declared in Fiscal Q3 2025, and a projected full-year fiscal 2026 base dividend of $1.50 per share Dividend History (Past Fourteen Quarters) | Period (Fiscal Year ends Feb) | Base Dividend Per Share | Special Dividend Per Share | Total Dividend Per Share | | :--- | :--- | :--- | :--- | | Fiscal Q2 2026 (August 2025) | $0.25 | - | $0.25 | | Fiscal Q2 2026 (July 2025) | $0.25 | - | $0.25 | | Fiscal Q2 2026 (June 2025) | $0.25 | - | $0.25 | | Fiscal Q1 2026 (May 2025) | $0.25 | - | $0.25 | | Fiscal Q1 2026 (April 2025) | $0.25 | - | $0.25 | | Fiscal Q1 2026 (March 2025) | $0.25 | - | $0.25 | | Full Year Fiscal 2026 | $1.50 | - | $1.50 | | Fiscal Q4 2025 | $0.74 | - | $0.74 | | Fiscal Q3 2025 | $0.74 | $0.35 | $1.09 | | Fiscal Q2 2025 | $0.74 | - | $0.74 | | Fiscal Q1 2025 | $0.74 | - | $0.74 | | Full Year Fiscal 2025 | $2.96 | $0.35 | $3.31 | | Fiscal Q4 2024 | $0.73 | - | $0.73 | | Fiscal Q3 2024 | $0.72 | - | $0.72 | | Fiscal Q2 2024 | $0.71 | - | $0.71 | | Fiscal Q1 2024 | $0.70 | - | $0.70 | | Full Year Fiscal 2024 | $2.86 | - | $2.86 | | Fiscal Q4 2023 | $0.69 | - | $0.69 | | Fiscal Q3 2023 | $0.68 | - | $0.68 | | Fiscal Q2 2023 | $0.54 | - | $0.54 | | Fiscal Q1 2023 | $0.53 | - | $0.53 | | Full Year Fiscal 2023 | $2.44 | - | $2.44 | Share Repurchase Program As of May 31, 2025, the company had repurchased 1,035,203 shares for approximately $22.8 million under its Share Repurchase Plan, which was extended to January 15, 2026 - As of May 31, 2025, 1,035,203 shares were repurchased for approximately $22.8 million under the plan[17] - The Share Repurchase Plan, extended to January 15, 2026, allows for repurchases of up to 1.7 million shares below NAV[18] - No shares were purchased under the plan during the three months ended May 31, 2025[17] Company Information and Forward-Looking Statements This section provides details on Saratoga Investment Corp.'s conference call, company overview, forward-looking statements, and investor contacts Conference Call/Webcast Details Saratoga Investment Corp. scheduled a conference call and webcast for July 9, 2025, at 10:00 a.m. ET to discuss its Q1 FY26 financial results, with access details available online - Conference call and webcast for Q1 FY26 financial results scheduled for Wednesday, July 9, 2025, at 10:00 a.m. ET[19] - Access to the live webcast and presentation, along with a replay, is available on Saratoga Investment Corp.'s investor relations website[19] About Saratoga Investment Corp. Saratoga Investment Corp. is a specialty finance company and BDC providing customized financing solutions to U.S. middle-market businesses, aiming for attractive risk-adjusted returns through diverse investments and funding sources - Saratoga Investment Corp. is a specialty finance company and BDC focused on providing customized financing solutions to U.S. middle-market businesses[20] - Invests primarily in senior and unitranche leveraged loans, mezzanine debt, and equity, aiming for attractive risk-adjusted returns through current income and capital appreciation[20] - Manages a $650 million CLO fund and co-manages a joint venture fund that owns a $400 million CLO fund, with diverse funding sources and a permanent capital base[20] Forward-Looking Statements and Risk Factors This section contains forward-looking statements based on current beliefs and expectations, subject to various risks and uncertainties, with readers advised to review SEC filings for comprehensive risk discussions - Forward-looking statements are based on current beliefs and expectations, subject to risks and uncertainties including market changes, economic downturns, interest rate volatility, tariffs, supply chain issues, and inflation[22] - Readers should not place undue reliance on forward-looking statements and are advised to review the company's SEC filings, including the 'Risk Factors' sections, for a complete discussion of risks[23] - The company undertakes no duty to update forward-looking statements unless required by law[23] Contacts Contact information for Saratoga Investment Corporation, including its Chief Financial Officer, Henri Steenkamp, and investor relations contacts at The Equity Group Inc. is provided - Contact information provided for Saratoga Investment Corporation, including Henri Steenkamp (CFO) and investor relations representatives Lena Cati and Val Ferraro from The Equity Group Inc[24] Consolidated Financial Statements This section presents Saratoga Investment Corp.'s consolidated financial statements, including assets, liabilities, operations, and supplemental adjusted net investment income Consolidated Statements of Assets and Liabilities The consolidated balance sheet shows total assets of $1,202.3 million as of May 31, 2025, with a modest increase in total net assets despite slight changes in investments and cash Consolidated Statements of Assets and Liabilities (May 31, 2025 vs. Feb 28, 2025) | Metric | May 31, 2025 ($) | Feb 28, 2025 ($) | | :--- | :--- | :--- | | Total investments at fair value | 968,317,962 | 978,077,750 | | Cash and cash equivalents | 131,562,513 | 148,218,491 | | Cash and cash equivalents, reserve accounts | 92,724,212 | 56,505,433 | | Total assets | 1,202,269,333 | 1,191,543,857 | | Total liabilities | 805,900,018 | 798,878,389 | | Total net assets | 396,369,315 | 392,665,468 | | NET ASSET VALUE PER SHARE | $25.52 | $25.86 | | Asset Coverage Ratio | 163.8% | 162.9% | Consolidated Statements of Operations For the three months ended May 31, 2025, total investment income was $32.3 million, with net investment income at $10.1 million, and a net increase in net assets from operations of $13.9 million Consolidated Statements of Operations (Q1 FY26 vs. Q1 FY25) | Metric | May 31, 2025 ($) | May 31, 2024 ($) | | :--- | :--- | :--- | | Total investment income | 32,318,617 | 38,678,150 | | Total operating expenses | 22,176,585 | 24,343,145 | | NET INVESTMENT INCOME | 10,142,032 | 14,335,005 | | Net realized gain (loss) from investments | 2,901,339 | (21,194,997) | | Net change in unrealized appreciation (depreciation) on investments | 943,977 | 13,931,431 | | Net increase (decrease) in net assets resulting from operations | 13,932,263 | 6,610,438 | | WEIGHTED AVERAGE - BASIC AND DILUTED EARNINGS (LOSS) PER COMMON SHARE | $0.91 | $0.48 | Supplemental Adjusted Net Investment Income Information This section provides non-GAAP measures for adjusted net investment income (NII), NII yield, and NII per share, which exclude capital gains incentive fee expense or reversal - Adjusted Net Investment Income (NII) is a non-GAAP measure excluding capital gains incentive fee expense or reversal attributable to realized and unrealized gains[31] Adjusted NII Reconciliation (Q1 FY26 vs. Q1 FY25) | Metric | May 31, 2025 ($) | May 31, 2024 ($) | | :--- | :--- | :--- | | Net Investment Income | 10,142,033 | 14,335,005 | | Changes in accrued capital gains incentive fee expense/ (reversal) | - | - | | Adjusted net investment income | 10,142,033 | 14,335,005 | | Net investment income yield | 10.3% | 15.5% | | Adjusted net investment income yield | 10.3% | 15.5% | | Net investment income per share | $0.66 | $1.05 | | Adjusted net investment income per share | $0.66 | $1.05 |