Saratoga(US:SAR)2024-05-07 21:25Financial Data and Key Metrics Changes - Adjusted net investment income (NII) per share for the year increased by 44% compared to last year, while for Q4 it decreased by 2.5% year-over-year and 4% quarter-over-quarter [5][11] - The latest 12 months return on equity is 2.5%, down from 7.2% last year and 6.6% last quarter [11] - NAV per share is $27.12, down 7% from $29.18 last year and down 1% from $27.42 last quarter [11] - Adjusted NII for fiscal 2024 is $52 million, up 52% from $34 million last year [11] Business Line Data and Key Metrics Changes - The company originated eight new portfolio company investments and had 65 smaller follow-on investments, totaling $246 million in originations for the year [15] - The weighted average current coupon on non-CLO BDC investments increased from 12.1% to 12.6% year-over-year [22] - The overall credit quality remained high at 98.1% of credits rated in the highest category, with three investments currently on non-accrual [9] Market Data and Key Metrics Changes - The overall deal market reflects slower deal volume and M&A activity compared to historical periods, with liquidity among private equity firms remaining abundant [36] - The industry debt multiples have come down slightly this year from historical highs, with total leverage for the overall portfolio at 3.9x [78] Company Strategy and Development Direction - The company continues to focus on maintaining a high-quality portfolio and is cautious in new commitments due to the current economic environment [8] - The management team emphasizes the importance of balance sheet strength, liquidity, and NAV preservation in volatile economic conditions [10] - The company is actively engaged in managing its portfolio and supporting its companies, with a focus on disciplined investment decisions [38] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating challenges and uncovering opportunities in the current environment, supported by a strong balance sheet and capital structure [58] - The company is optimistic about the potential for future economic opportunities despite the current constrained M&A environment [7] Other Important Information - The company raised $48 million of equity at NAV since the end of Q1, increasing NAV from $338 million to $370 million [10] - The annualized fourth quarter dividend of $0.73 per share reflects a 6% increase over the past year [53] Q&A Session Summary Question: Expectations for the next couple of quarters regarding new opportunities - Management noted that while there is more competition, the risk-adjusted returns on first-lien assets remain exceptional, and they are open to deploying capital as opportunities arise [62][66] Question: Thoughts on continuing to use the equity distribution agreement - Management emphasized the importance of having a diversified source of capital and is always looking to optimize their capital structure [68][70] Question: Insights on origination activity and quality of new opportunities - Management indicated that the majority of deals passed did not meet their credit standards, reflecting a perceived decline in the quality of businesses in the marketplace [102] Question: Update on specific investments facing challenges - Management provided updates on investments like Zollege, indicating active restructuring efforts and optimism about recovering value for shareholders [106]