Saratoga Investment Corp 6.00% Q1 FY2026 earnings call

Chairman and CEO highlighted 17.9% increase in adjusted NII per share, continued NAV growth, strong ROE, 2 new portfolio company investments, solid core BDC portfolio performance in volatile macro. Announced base dividend of $0.25 per share per month. Q1 adjusted NII reflected impact of decreasing short-term rates. Had $224 million cash available. Slower deal volume and M&A activity in lower middle market. Portfolio had debt repayments, equity realization, realized gains and new investments. Core non-CLO portfolio marked up by $2.6 million, CLO and JV marked down by $0.2 million. Net interest margin expanded due to non-CLO interest income increase and interest expense decrease. Weighted average common shares outstanding increased. Adjusted NII affected by nonreoccurrence of excise tax and dilution from share issuance. Credit quality remained steady with 99.7% in highest category. Substantial investment capacity of $430 million at quarter end.

Adjusted NII per share increased 17.9% from previous quarter. NAV continued to grow. Return on equity beat industry average. Core BDC portfolio performed solidly in volatile macro environment. Q1 adjusted NII was $0.66 per share. Net interest margin expanded from $13.7 million to $15.6 million. Portfolio fair value increased by $3.8 million during the quarter. Core non-CLO portfolio was 1.7% above cost. Assets under management had recent repayments but quality of credits remained strong with only 2 nonaccrual investments which were restructured.

Believes Saratoga is favorably situated for future economic opportunities. Will be prudent in deploying available capital into strong credit opportunities meeting high underwriting standards. Confident in experienced management team, robust pipeline, strong leverage structure and high underwriting standards to increase portfolio size, quality and performance over long term. Expect to continue delivering exceptional risk adjusted returns to shareholders.

Challenges posed by current geopolitical landscape and volatile macro environment. Uncertainty in M&A activity and deal volume in lower middle market. Potential impact of tariffs on deal activity and new debt issuances. Risk of unexpected prepayments and redemptions affecting AUM and NII.

Q: On commitment to AUM expansion and prepayments visibility.

A: Redemptions unpredictable, but pipeline growing with new business efforts.

Q: Spillover level.

A: Just under $2 at moment from February spillover, closer to $2.50 now.

Q: Liability and funding side.

A: No bias, assess situations neutrally with optionality.

Q: CLO BB investments origin and size.

A: Familiar with CLO marketplace, BB assets offer strong risk adjusted returns, mix of primary and secondary, size dependent on opportunities.

Q: Balance sheet cash use bias.

A: No bias, optimize situations as they arise with optionality.

Q: Timing of quality deals.

A: Pipeline has interesting deals, competitive, timing not predictable but business development efforts expected to yield results.