SAJ

• Continued NAV growth from previous quarter and year with stable NAV per share.
• Increase in NII of $0.03 per share from previous quarter. Strong 13.5% return on equity, beating the industry.
• Net originations of $17.2 million, including 3 new portfolio companies. Strong originations outpaced repayments during the quarter.
• Announced a monthly base dividend of $0.25 per share for the fourth quarter of fiscal 2026, annualizing to a 12.9% yield based on stock price of $23.19 as of January 6, 2026.
• Third quarter NII of $0.61 per share reflected impact of decreasing short-term interest rates and spreads on floating rate assets and high repayments. Cash position at quarter end was $169.6 million.
• Portfolio fair value increased by $2.5 million during the quarter, with current noncore CLO portfolio marked up including realized gains by $2.9 million, offsetting CLO and JV markdown of $0.4 million.
• Net interest margin increased from $13.1 million last quarter to $13.5 million driven by $0.5 million decrease in interest expense from baby bond repayments. Interest income relatively unchanged with increase in non-CLO assets and accelerated OID recognitions from repayments, offset by yield reduction in core non-CLO BDC portfolio and timing of originations/repayments.
• Overall credit quality improved to 99.8% of credits in highest category, with only 1 investment (Pepper Palace) on nonaccrual status, representing 0.2% of fair value and 0.4% of cost.
• Dry powder available as of quarter end totaled $395.6 million, including $170 million cash, $136 million undrawn SBA debentures, and undrawn secured credit facilities. Baby bonds callable, providing option to refinance and protect net interest margin.

• Expect long-term AUM growth as originations again outpaced repayments in the quarter.
• Continue to be prudent and discerning in new commitments in volatile environment.
• Confident in being favorably situated for future economic opportunities and challenges. Focus on deploying available capital into strong credit opportunities meeting high underwriting standards.
• Portfolio companies performing well, with core non-CLO BDC portfolio fair value 2.1% above cost.

Saratoga Investment Corp's fiscal third quarter ended November 30, 2025 had a quarter end NAV of $413 million, up 10.2% from the same quarter last year and up 0.7% from the previous quarter. NAV per share was $25.59. Adjusted NII was $9.8 million, down 21.3% from last year but up 7.8% from the previous quarter. Adjusted NII per share was $0.61. The weighted average interest rate on the core BDC portfolio was 10.6% this quarter. The core non-CLO portfolio remained 2.1% above cost. The portfolio fair value was 1.7% above cost. The weighted average common shares outstanding in Q3 was 16.1 million. The nonaccrual rate of the core BDC portfolio was 0.4% of cost, 8x lower than the industry average of 3.2%.

• Volatile macro environment and competitive market dynamics could impact new originations and portfolio performance.
• Geopolitical tensions and uncertainty in the broader underwriting, M&A, and macro environment pose risks.
• Lower short-term interest rates and tight spreads could impact net interest margin if not managed properly.
• Potential impact of high-profile bankruptcies in the private credit market, although considered idiosyncratic and not representative of the lower middle market Saratoga participates in.

Q: Could you provide more color on the increase in M&A activity, whether it's broad-based and if it's expected to continue into 2026?

A: Christian Oberbeck mentioned large M&A has picked up substantially, and in the focused market, more deals and more parties ready to transact. Michael Grisius added they're seeing deal flow from long-term relationships as a good sign, and the lower middle market has many companies, so effort in outreach drives deal flow.

Q: What's the trade-off to ensure adequate risk-adjusted rate of return with tighter spreads on new investments?

A: Michael Grisius stated they evaluate each deal to ensure fundamental risks are level set, returns are appropriate from risk-adjusted standpoint, and deals are accretive to shareholders. They benefit from SBIC license for favorable cost of capital and have equity co-investments in many deals.

Q: How are you balancing new relationships versus existing ones given potential surprises with new relationships?

A: Michael Grisius said most investments are follow-ons with existing relationships, new relationships take longer to develop. They do extensive work to get comfortable with new relationships' reputation, portfolio performance, and team. The bar is higher with new relationships but they've been courting them for a long time.

Q: Any shift in the mix of deals in the pipeline in terms of sponsor versus nonsponsor, etc.?

A: Michael Grisius said they have strong expertise in SaaS lending but are seeing more non-software deals. The mix is mostly sponsored deals, but also some with independent sponsors or management teams.

Q: Any industries vulnerable to AI outside of tech?

A: Michael Grisius said they evaluate each business for AI impact, steer away from deals where AI could significantly disrupt, and are attuned to AI in portfolio companies, which can improve credit profiles.

Q: Could I get the spillover balance as of the end of the quarter?

A: Henri Steenkamp said it's around approximately $2 per share at the moment.