Saratoga(US:SAR)2024-07-10 17:18Financial Data and Key Metrics Changes - Saratoga's adjusted net investment income (NII) per share increased by 12% compared to the previous quarter, reflecting a 19% increase in recurring net interest margin driven by a 9% rise in average assets under management [21][28] - The company's total expenses increased from $2.3 million to $2.9 million compared to last year, representing 1.0% of average total assets on an annualized basis, up from 0.8% last year [29] - The net asset value (NAV) was $367.9 million, a decrease of $2.3 million from the last quarter but an increase of $30.4 million from the same quarter last year [30] Business Line Data and Key Metrics Changes - Originations this quarter totaled $39 million, while repayments and amortization amounted to $76 million, leading to a quarter-end cash position of $93.3 million [24] - The credit quality remained high, with 98.3% of credits rated in the highest category, and only 1.6% of fair value in non-accrual status [25] Market Data and Key Metrics Changes - The overall M&A activity for private equity-backed deals is at record lows, impacting new investment opportunities [3][4] - The company noted that competition on pricing is increasing due to the capital sitting on the sidelines and low new deal activity [4][47] Company Strategy and Development Direction - The company is focusing on the lower end of the middle market, which is viewed as a favorable position for credit quality and deal activity [6][47] - Management is actively implementing changes to capital structure and business plans to enhance recovery value [23] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ability to deploy capital effectively despite the current low deal activity, emphasizing the importance of maintaining high underwriting standards [7][60] - The management team is focused on supporting existing portfolio companies and managing a few challenged credits, with a strong emphasis on maintaining balance sheet strength and liquidity [38][62] Other Important Information - The company has a significant amount of dry powder available, totaling $299 million, which includes cash and undrawn credit facilities [31] - The annualized dividend of $0.74 per share reflects a 13.1% dividend yield, with the company over-earning its dividend by $0.31 this quarter [26][72] Q&A Session Summary Question: Can you provide commentary on the investing environment and repayment activity? - Management noted that while M&A activity is low, there are still opportunities to support existing portfolio companies, and repayment activity may pick up due to aggressive pricing from lenders [3][4] Question: How is the cash position and undistributed income being managed? - The company mentioned a growing cash position and is evaluating the undistributed income in light of potential future investments [8][9] Question: What is the nature of the follow-on investments made this quarter? - Most follow-on investments were for tuck-in acquisitions in existing platforms, reflecting a strategy that has historically worked well [96] Question: Can you elaborate on the non-accrual investments and their status? - Management confirmed that three investments remain on non-accrual, with ongoing efforts to recover capital from these investments [62][64] Question: How does the company view the competitive landscape in the current market? - While some larger private credit platforms are moving down market, the company has not seen significant competition affecting its operations [14][16]