Saratoga(SAR)2025-01-09 18:34Financial Data and Key Metrics Changes - The adjusted net investment income (NII) for the third quarter is 0.90, down 10.9% 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 27.42 last year and down 0.4% from 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 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 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]