Saratoga Investment Corp. · NYSE:SAR
Saratoga Investment — Q1 2020 Earnings Presentation
28 slides from Saratoga Investment's earnings presentation, Jul 11, 2019
Slide 1: Saratoga Investment Corp. Fiscal First Quarter 2020 Shareholder Presentation
Saratoga Investment Corp. Fiscal First Quarter 2020 Shareholder Presentation July 11, 2019
Slide 2: Continued Growth and Outperformance in Q1 FY20
Continued Growth and Outperformance in Q1 FY20 Fiscal First Quarter 2020 Highlights: • Continued high quality portfolio and strong performance ▫ Investment quality remains strong 98.7% of loan investments with highest internal rating ▫ Return on equity of 11.7% for LTM and 16.6% for Q1, beating BD
Slide 3: Continued Asset Growth and Strong Credit Quality
Continued Asset Growth and Strong Credit Quality Asset Base Expansion Trend Overall Credit Quality Continues Strong $450 $400 100% $402 $410 $350 98.6% 98.7% $343 80% 96.8% $300 94.1% $250 $284 $293 98.3% 60% $241 94.2% $200 $206 90.5% 82.4% $150 40% $155 64.3% $100 $95 $50 $80 20% $0 0% Investments
Slide 4: Q1 FY20 - Strong Financial Foundation and Momentum
Q1 FY20 - Strong Financial Foundation and Momentum Key Performance Metrics for the Fiscal Quarter For the quarter ended and as of May 31, 2018 Feb 28, 2019 May 31, 2019 ($ in millions except per share) $5,000 Net investment income $3,928 $4,091 $3,681 $0 $7,000 $3,500 Adjusted net investment income*
Slide 5: NAV Growth Driven by Performance
NAV Growth Driven by Performance Net Asset Value (FY11 to FY20) in millions $200 3.3% increase this quarter $186.8 $180 117% increase in 8 years $180.9 $160 $140 $143.7 $125.1 $127.3 $120 $122.6 $113.0 $107.0 $100 $97.0 $86.0 $80 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY2019
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 $0.01 ($0.02) ($0.01) $0.02 ($0.03) $0.66 ($0.03) $0.60 Adjusted NII per Increase in CLO Decrease in CLO Decrease in Decrease in Decrease in Dilution from Adj
Slide 7: Dry Powder Remains Available
Dry Powder Remains Available Total Remaining Fixed / Borrowing Available Maturity Floating (As of May 31, 2019) Capacity Outstanding Liquidity Period Rate Secured Revolving $45.0 million $0.0 million $45.0 million 6 Years Floating Credit Facility SBA Debentures $150.0 million $150.0 million $0.0 mil
Slide 8: Portfolio Composition and Yield
Portfolio Composition and Yield Portfolio Composition – $409.5 m Portfolio Yield – 10.6% (Based on Fair Values (Weighted Average as of May 31, 2019) Current Yield of Existing Portfolio) Unsecured Unsecured Term Term Loans, Loans, 0.5% Structured 0.0% Structured Finance Finance Second Securities, Sec
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% 10.6% Totals* $450 $400 16.0% $350 14.6% 5.9% 21.2% $300 5.3% 10.8% 7.6% $ Millions 14.0% 10.9% 16.4% $250 6.2% 11.2% 11.0% 25.2% $200 11.0% 6.2% 18.6% $150 27.1% 11.1% 10.6% $100 11.3%
Slide 10: Diversified Across Industry and Geography
Diversified Across Industry and Geography Investments diversified geographically Investments across 8 distinct industries Consumer Services Northeast West Southwest Healthcare Services Metals Structured Other Consumer Midwest Business Finance Services Products Education Food and Beverage 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 $16,699 $15,000 $12,368 $10,000 $4,874 $5,000 $3,276 $1,271 $562 $226 $0 $0 FY13 FY14 FY15 FY16 FY17 FY18 FY19 Q1 FY20 Total
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) Market Average Multiples Total Portfolio Leverage is 4.56x1 (Total Debt/EBITDA) March 31, 2019* March 31, 2018* >7.0x 6.7% >7.0x 0.0% 6.0x-6.9x 23.3% 6.0x-6.9x 33.3% 76.7% 66.6% 5.0x
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 Q2 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%) $293.8m $246.3m 16% $381.9m 16% 129.4m $375.7m 14.5% 14.4% 14% 13.9% 13.4% 14% 12.7% 12% $88.1m 12% 9.9% 10% 10% 8% 8% 6% 6% 4% 4% 2% 2% 0% 0% SBIC BDC Combined SBIC BDC Combi
Slide 15: SBIC Assets Fully Funded
SBIC Assets Fully Funded $300 SBIC Assets* SBIC first license provided $171m, $143m, $105m, $51m, $42m, $19m, $17m and $21m of available capacity in FY13, FY14, FY15, FY16, FY17, FY18, $250 $41.8 FY19 and Q1FY20, respectively (debt $21.4 and equity at 2:1 leverage) $17.2 $50.9 $19.1 $200 $104.9 $ Mi
Slide 16: Dividends Continue to Increase
Dividends Continue to Increase • Established dividend policy to pay regular Dividends Per Share* Average LTM May quarterly cash dividends 2019 Adjusted NII/share to stockholders pursuant 0.65 to dividend reinvestment plan (“DRIP”) 0.53 0.54 0.55 0.52 • Increased dividend by 0.51 0.50 0.49 0.48 0.47
Slide 17: Year-Over-Year Quarterly Dividend Growth at Top of Industry
-80.0% -60.0% -40.0% -20.0% 20.0% 40.0% 60.0% 0.0% CSWC 35.7% OCSL 11.8% OCSI 10.7% SAR 7.8% ARCC 5.3% GAIN 4.6% MAIN 3.5% SLRC 0.0% NEWT 0.0% NMFC 0.0% Source: Raymond James report as of 3/29/2019 MVC 0.0% SCM 0.0% GBDC 0.0% GECC 0.0% HRZN 0.0% TPVG 0.0% TSLX 0.0% WHF 0.0% GLAD 0.0% AINV 0.0% 17 In
Slide 18: Saratoga LTM Total Return Outperforms BDC Index
Saratoga LTM Total Return Outperforms BDC Index LTM Total Return (%) (June 2018 to June 2019) SAR +9% vs. BDC Index +8% 20 15 10 5 0 -5 -10 -15 -20 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 Mar-19 Apr-19 May-19 SAR US Equity WFBDC Index 18
Slide 19: Performance at Top of BDC Industry
0 10 20 30 40 (20) (10) 20 40 60 80 100 120 140 100 150 200 50 0 0 (40) (20) (50) CSWC GAIN GAIN HRZN CSWC SAR CPTA SCM CSWC OCSL SAR MAIN FDUS TPVG OFS TPVG WHF TSLX TSLX OXSQ ARCC ARCC GLAD SCM OFS ARCC WHF SCM TSLX TPVG MAIN MAIN NMFC NMFC NMFC GLAD MFIN FDUS SLRC HTGC OCSL GBDC GLAD OFS SUNS TCP
Slide 20: Strongly Differentiated Outperformance
Strongly Differentiated Outperformance Interest % on Portfolio LTM NII Yield LTM ROE LTM Operating Expense 11.0% 11% 14% 5% Ratio* 10.9% 10.1% 10.9% 10.8% 11.7% 10% 12% 4.0% 10.8% 9.0% 9.2% 10.7% 4% 10.7% 9% 3.4% 10% 3.1% 8.7% 10.6% 8% 3% 8% 7.1% 10.5% 10.4% 7% 6% 2% 10.3% 6% 4% 10.2% 1% 5% 2% 10.1%
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%; increased quarterly dividend by 206% Strong and growing ► dividend since program launched; over-earning dividend by 18% (based on average adjusted LTM NII per share); s
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 – Q1 FY20
KPIs – Balance Sheet – Q1 FY20 FMV Investment Portfolio FMV Investment Portfolio Period (in millions) (in millions) Q1-18 $ 329.7 Q2-18 $ 333.0 $500.0 Q3-18 $ 338.8 $450.0 Q4-18 $ 342.7 $400.0 Q1-19 $ 343.4 $350.0 Q2-19 $ 392.9 $300.0 Q3-19 $ 443.8 $250.0 Q4-19 $ 402.0 Q1-18 Q2-18 Q3-18 Q4-18 Q1-19
Slide 26: KPIs – Income Statement – Q1 FY20
KPIs – Income Statement – Q1 FY20 Ne t Inte re st Margin Net Interest Margin Excluding CLO Pe rio d (in millio ns) (in millions) Q1-18 $ 4.7 $8.0 Q2-18 $ 5.5 $7.0 Q3-18 $ 5.4 $6.0 Q4-18 $ 5.8 $5.0 Q1-19 $ 6.0 $4.0 Q2-19 $ 6.5 Q3-19 $ 7.2 $3.0 Q4-19 $ 6.4 $2.0 Q1-20 $ 6.3 Q1-18 Q2-18 Q3-18 Q4-18 Q1-1
Slide 27: KPIs – Income Statement – Q1 FY20 (continued)
KPIs – Income Statement – Q1 FY20 (continued) Period EPS EPS Q1-18 $ 0.17 $1.40 Q2-18 $ 1.15 $1.20 Q3-18 $ 0.71 $1.00 Q4-18 $ 0.89 $0.80 Q1-19 $ 0.61 $0.60 Q2-19 $ 0.45 $0.40 Q3-19 $ 0.49 $0.20 Q4-19 $ 1.04 $- Q1-20 $ 0.99 Q1-18 Q2-18 Q3-18 Q4-18 Q1-19 Q2-19 Q3-19 Q4-19 Q1-20 Period LTM ROE LTM ROE
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 $30,194 $30,956 25% increase in past year 220% increase in 8 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 F