Saratoga Investment Corp. · NYSE:SAR
Saratoga Investment — Q2 2020 Earnings Presentation
28 slides from Saratoga Investment's earnings presentation, Oct 10, 2019
Slide 1: Saratoga Investment Corp. Fiscal Second Quarter 2020 Shareholder Presentation
Saratoga Investment Corp. Fiscal Second Quarter 2020 Shareholder Presentation October 10, 2019
Slide 2: Continued Growth and Outperformance in Q2 FY20
Continued Growth and Outperformance in Q2 FY20 Fiscal Second Quarter 2020 Highlights: • Second SBIC license approval provides up to $175 million in additional long-term, low-cost capital • Continued high quality portfolio and strong performance ▫ Investment quality remains strong 99.0% of loan inv
Slide 3: Continued Asset Growth and Strong Credit Quality
Continued Asset Growth and Strong Credit Quality Asset Base Expansion Trend Overall Credit Quality Remains Strong $600 100% $500 99.0% $487 98.6% 98.7% 80% 96.8% $400 $410 94.1% $402 98.3% $300 $343 60% 94.2% $284 $293 90.5% $241 82.4% $200 40% $206 64.3% $155 $100 $95 20% $80 $0 0% Investments at F
Slide 4: Q2 FY20: Strong Financial Foundation and Momentum
Q2 FY20: Strong Financial Foundation and Momentum Key Performance Metrics for the Fiscal Quarter For the quarter ended and as of Aug 31, 2018 May 31, 2019 Aug 31, 2019 ($ in millions except per share) $10,000 Net investment income $5,144 $3,681 $4,956 $0 $7,000 $3,500 Adjusted net investment income*
Slide 5: NAV Growth Continues Accretively
NAV Growth Continues Accretively Net Asset Value (FY11 to FY20) in millions $240 20% increase this quarter $220 $224.3 161% increase in 9 years $200 $180 $186.8 $180.9 $160 $140 $143.7 $120 $125.1 $127.3 $122.6 $113.0 $100 $107.0 $97.0 $80 $86.0 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 FY 201
Slide 6: Quarterly Reconciliation of NII and NAV per Share
Quarterly Reconciliation of NII and NAV per Share • Impacts are shown net Reconciliation of Quarterly Adjusted NII per Share of incentive fee ($0.02) ($0.01) $0.04 ($0.04) $0.10 $0.01 $0.60 $0.68 Adjusted NII per Increase in CLO Increase in Increase in Base Increase in Operating Increase in Dilution
Slide 7: Dry Powder Remains Available
Dry Powder Remains Available Total Remaining Fixed / Borrowing Available Maturity Floating (As of Aug 31, 2019) Capacity Outstanding Liquidity Period Rate Secured Revolving $45.0 million $0.0 million $45.0 million 6 Years Floating Credit Facility SBIC $150.0 million $150.0 million $0.0 million 4-9 y
Slide 8: Portfolio Composition and Yield
Portfolio Composition and Yield Portfolio Composition – $486.9 m Portfolio Yield – 10.1% (Based on Fair Values (Weighted Average as of Aug 31, 2019) Current Yield of Existing Portfolio) Unsecured Unsecured Term Term Loans, Loans, 0.4% 0.0% Second Second Lien, Lien, 20.5% Structured 11.6% Structured
Slide 9: Yield of BDC Remains Strong
Yield of BDC Remains Strong Weighted Average Current Yields Annual 13.4% 14.0% 11.8% 11.8% 11.1% 10.8% 11.1% 10.7% 10.1% Totals* $500 $450 14.7% $400 $350 14.6% 5.9% 21.2% 10.4% $ Millions $300 5.3% 7.6% 14.0% 10.9% 16.4% $250 11.2% 6.2% 11.0% 25.2% $200 6.2% 11.0% 18.6% $150 27.1% 11.1% 10.6% $100
Slide 10: Diversified Across Industry and Geography
Diversified Across Industry and Geography Investments diversified geographically Investments across 8 distinct industries Consumer Northeast Services West Southwest Metals Healthcare Services Structured Consumer Midwest Finance Products Other Food and Education Beverage Business Services Southeast N
Slide 11: Net Realized Gains Help Protect Shareholder Capital
Net Realized Gains Help Protect Shareholder Capital Cumulative net realized gains reflect portfolio credit quality Net Realized Gains $ in thousands (all investments) $20,000 $18,569 $15,000 $12,368 $10,000 $4,874 $5,000 $3,276 $1,870 $1,271 $562 $226 $0 FY13 FY14 FY15 FY16 FY17 FY18 FY19 YTD FY20 T
Slide 12: Exercising Disciplined Investment Judgment While Growing Origination Pace
Exercising Disciplined Investment Judgment While Growing Origination Pace SAR Debt Multiples/Deals Closed (2016-2019) Total Portfolio Leverage is 4.89x1 New Portfolio 8 7 8 8 Companies Number of executed investments 16 18 24 19 10 Multiples for SAR 8 8 deals at low end of 8 8 YTD industry 7 average
Slide 13: Robust and Growing Pipeline During Tough Execution Market
Robust and Growing Pipeline During Tough Execution Market The number of new business opportunities remains strong, yet we remain as disciplined as ever. LTM Q3 Calendar* 2016 ∆ 2017 ∆ 2018 ∆ 2019 • 50% of deal flow from private equity sponsors • 40% of deals from private companies without Deals inst
Slide 14: Demonstrated Strong Track Record
Demonstrated Strong Track Record Realized Investments Unrealized Investments 1 (Gross Unlevered IRR%) (Gross Unlevered IRR%) $324.2m $263.1m 16% $476.3m 16% $392.5m 14.8% 14.6% $129.4m 14.0% 14% 13.5% 14% 12.7% $152.1m 12% 12% 10.5% 10% 10% 8% 8% 6% 6% 4% 4% 2% 2% 0% 0% SBIC BDC Combined SBIC BDC Co
Slide 15: SBIC I Fully Funded - SBIC II Fully Available
SBIC I Fully Funded - SBIC II Fully Available $300 SBIC I Assets* SBIC first license provided $171m, $143m, $105m, $51m, $42m, $19m, $17m and $5m of available capacity in FY13, FY14, FY15, FY16, FY17, FY18, $250 $4.9 $41.8 FY19 and Q2FY20, respectively (debt $17.2 and equity at 2:1 leverage) $50.9 $
Slide 16: Dividends Continue to Increase
Dividends Continue to Increase • Established dividend policy to pay regular Dividends Per Share* quarterly cash dividends Pro Forma to stockholders pursuant Q2 FY20 Adjusted NII/share+ to dividend reinvestment plan (“DRIP”) 0.55 0.56 0.58 0.54 0.53 • Increased dividend by 0.47 0.48 0.49 0.50 0.51 0.
Slide 17: Year-Over-Year Quarterly Dividend Growth at Top of Industry
10.0% 20.0% 30.0% 40.0% -30.0% -20.0% -10.0% 0.0% CSWC 34.5% NEWT 9.5% SAR 7.7% OCSI 6.9% ARCC 5.3% MAIN 5.3% HTGC 3.2% GAIN 1.5% FDUS 0.0% ICMG 0.0% Source: Raymond James report as of 9/19/2019 OCSL 0.0% SLRC 0.0% NMFC 0.0% MVC 0.0% SCM 0.0% GEOC 0.0% GLAD 0.0% TPVG 0.0% 17 TSLX 0.0% WHF 0.0% Indus
Slide 18: SAR LTM Total Return Outperforms BDC Index
SAR LTM Total Return Outperforms BDC Index LTM Total Return (%) (September 2018 to September 2019) SAR +12% vs. BDC Index +6% 20 15 10 5 0 -5 -10 -15 -20 -25 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 SAR US Equity WFBDC Index 18
Slide 19: Performance at Top of BDC Industry
10 20 40 50 0 30 (20) (10) (30) 20 40 60 80 100 140 120 0 100 150 200 0 50 (60) (40) (20) (50) TPVG TPVG GAIN CSWC CSWC MAIN SAR GAIN GAIN SAR CSWC ARCC WHF MAIN HRZN SCM TPVG FDUS MAIN TSLX AINV ARCC ARCC SUNS OXSQ GLAD SAR TSLX WHF SCM GLAD TSLX SUNS SUNS OCSL SSSS WHF HTGC FDUS GBDC SCM NMFC OFS
Slide 20: Strongly Differentiated Outperformance
Strongly Differentiated Outperformance Interest % on Portfolio LTM NII Yield LTM ROE LTM Operating Expense 10.9% 12% 16% 5% Ratio* 10.8% 10.7% 14.3% 10.8% 11% 4.1% 14% 10.7% 10% 9.5% 4% 9.2% 12% 3.3% 10.6% 3.0% 10.5% 9% 10% 10.5% 8.7% 3% 10.4% 8% 7.7% 10.4% 8% 7% 6% 2% 10.3% 10.2% 6% 4% 1% 10.1% 5%
Slide 21: Establishing Competitive Edge vs. Other BDCs
Establishing Competitive Edge vs. Other BDCs Outstanding performance characteristics Paying a current dividend yield of approx. 9.1%; increased quarterly dividend by 211% Strong and growing ► dividend since program launched; over-earning dividend; significant management ownership of 16% Strong retur
Slide 22: Objectives for the Future
Objectives for the Future • Expand our asset base without sacrificing credit quality while benefitting from scale • Increase our capacity to source, analyze, close and manage our investments by adding to our management team and processes • Utilize benefits of fully deploying available financing to b
Slide 23: Questions?
Questions? & K' SARATOGA Pt INVESTMENT CORP.
Slide 24: Appendix
& K' SARATOGA Pt INVESTMENT CORP.
Slide 25: KPIs – Balance Sheet – Q2 FY20
KPIs – Balance Sheet – Q2 FY20 FMV Investment Portfolio FMV Investment Portfolio Period (in millions) (in millions) Q2-18 $ 333.0 Q3-18 $ 338.8 $500.0 Q4-18 $ 342.7 $450.0 Q1-19 $ 343.4 $400.0 Q2-19 $ 392.9 $350.0 Q3-19 $ 443.8 Q4-19 $ 402.0 $300.0 Q1-20 $ 409.5 Q2-18 Q3-18 Q4-18 Q1-19 Q2-19 Q3-19 Q
Slide 26: KPIs – Income Statement – Q2 FY20
KPIs – Income Statement – Q2 FY20 Net Interest Margin Net Interest Margin Excluding CLO Period (in millions) (in millions) Q2-18 $ 5.5 Q3-18 $ 5.4 $8.0 Q4-18 $ 5.8 $7.0 Q1-19 $ 6.0 Q2-19 $ 6.5 $6.0 Q3-19 $ 7.2 $5.0 Q4-19 $ 6.4 Q2-18 Q3-18 Q4-18 Q1-19 Q2-19 Q3-19 Q4-19 Q1-20 Q2-20 Q1-20 $ 6.3 Q2-20 $
Slide 27: KPIs – Income Statement – Q2 FY20 (continued)
KPIs –Income Statement– Q2 FY20 (continued) Period EPS Q2-18 $ 1.15 $1.20 EPS Q3-18 $ 0.71 Q4-18 $ 0.89 $1.00 Q1-19 $ 0.61 $0.80 Q2-19 $ 0.45 Q3-19 $ 0.49 $0.60 Q4-19 $ 1.04 Q1-20 $ 0.99 $0.40 Q2-20 $ 0.91 Q2-18 Q3-18 Q4-18 Q1-19 Q2-19 Q3-19 Q4-19 Q1-20 Q2-20 Period LTM ROE Q2-18 8.3% LTM ROE Q3-18
Slide 28: KPIs - SAR Net Interest Margin
KPIs - SAR Net Interest Margin SAR has more than tripled its Net Interest Margin since taking over management Net Interest Margin $31,228 $30,194 15% increase in LTM 231% increase in 9 years $24,185 $19,460 $18,414 $17,309 $14,096 $11,904 $9,430 $9,956 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 Q2