Saratoga Investment Corp 8.125% Q1 FY2026 earnings call

Highlights include 17.9% increase in adjusted NII per share, continued NAV growth, strong ROE beating industry average, 2 new portfolio company investments, announced base dividend of $0.25 per share per month, impact of short-term interest rates on assets, slower deal volume and M&A activity in lower middle market, portfolio debt repayments and realizations, strong reputation and sponsor relationships, portfolio fair value changes, net interest margin expansion, steady credit quality with 2 investments on nonaccrual but restructured, $430 million investment capacity available, etc.

Saratoga Investment Corp's segment performance includes a 17.9% increase in adjusted NII per share from the previous quarter. NAV was $396.4 million, up 7.8% from last year and 0.9% from last quarter. Adjusted NII was $10.1 million, down 29.3% from last year but up 26.2% from last quarter. The core BDC portfolio had a strong performance in a volatile macro environment, with $224 million of cash available at quarter end. $50.1 million was invested in 2 new portfolio companies, and the portfolio fair value increased by $3.8 million during the quarter. The core non-CLO portfolio was 1.7% above cost.

Management 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 team, robust pipeline, and high underwriting standards to steadily increase portfolio size, quality, and investment performance over long term, delivering exceptional risk-adjusted returns to shareholders.

Risks include macro environment volatility, geopolitical uncertainties affecting deal volume and M&A activity, unpredictable prepayments, credit quality risks in volatile market, etc.

Q: About AUM expansion and prepayments, A: Redemptions are unpredictable, but pipeline is growing with new business efforts and hiring.

Q: About CLO investments, A: CLO investments include BB CLO debt securities, originated from both primary and secondary markets, and there's potential for the CLO portfolio to grow relative to total investment portfolio but dependent on opportunities and market conditions.