Saratoga Investment Corp. · NYSE:SAR
Saratoga Investment — Q1 2025 Earnings Presentation
29 slides from Saratoga Investment's earnings presentation, Jul 10, 2024
Slide 1: Fiscal First Quarter 2025 Shareholder Presentation
Saratoga Investment Corp. Fiscal First Quarter 2025 Shareholder Presentation July 10, 2024
Slide 2: Steady Long-Term Growth and Performance in Q1 2025
Steady Long-Term Growth and Performance in Q1 2025 Fiscal First Quarter 2025 Highlights: • Continued high quality portfolio and solid performance • Investment quality remains solid • 98.3% of loan investments with highest internal rating and three non-accruals (1.6% of fair value / 4.8% of cost) • R
Slide 3: Saratoga Double Digit Long-Term ROE Substantially Ahead of the BDC Industry
Saratoga Double Digit Long-Term ROE Substantially Ahead of the BDC Industry Return on Equity 25.0% 23.6% 20.0% 14.8% 15.0% 13.9% 13.2% 11.5% 10.1% 10.1% 10.5% 9.0% 10.0% 9.3% 9.4% 8.9% 8.5% 8.5% 7.5% 6.6% 7.2% 6.7% 5.0% 5.0% 4.4% 2.5% 0.9% 0.9% 0.6% 0.0% FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 20
Slide 4: Consistent Asset Growth and Solid Credit Quality
Consistent Asset Growth and Solid Credit Quality Asset Base Expansion Trend Overall Credit Quality Remains Solid $1,200 $1,139 $1,096 100% $1,000 $973 $800 $818 $600 $554 80% 98.3% 96.8% 98.6% 99.0% 98.5% 98.1% 98.3% 94.2% 95.9% $486 94.1% 93.3% $400 90.5% $402 82.4% $343 $284 $293 $200 $241 $206 $1
Slide 5: Q1 FY25: Strong Financial Foundation and Momentum
Q1 FY25: Strong Financial Foundation and Momentum Key Performance Metrics for the Fiscal Quarter For the quarter ended and as of 31-May-23 28-Feb-24 31-May-24 $15,000 ($ in millions except per share) $10,000 $5,000 $0 Net investment income $15,959 $12,785 $14,335 $15,000 $10,000 $5,000 Adjusted net
Slide 6: Long-Term NAV and NAV Per Share Growth Despite Recent Discrete Weakness
Long-Term NAV and NAV Per Share Growth Despite Recent Discrete Weakness Net Asset Value and NAV per Share (FY 11 to Q1 FY25) NAV: 1% decrease this quarter. 328% increase since Saratoga took over management. NAV/Share: 1% decrease this quarter. 21% increase since FY17 with increases 21 of the last 27
Slide 7: Quarterly Reconciliation of NII and NAV per Share
Quarterly Reconciliation of NII and NAV per Share • Impacts are shown net of incentive fees. Reconciliation of Quarterly Adjusted NII per Share • Zero dilution/accretion from ATM and DRIP $0.05 $0.04 $0.02 $1.05 $0.94 Adjusted NII per Increase in non-CLO Net Interest Increase in Decrease in operatin
Slide 8: Dry Powder Remains Available
Dry Powder Remains Available Total Borrowing Available Remaining Fixed / (As of May 31, 2024) Outstanding Call Period Capacity Liquidity Maturity Period Floating Rate Encina Credit Facility $65.0 million $32.5 million $32.5 million 2 Years - Floating Live Oak Credit Facility $50.0 million $13.0 mill
Slide 9: Portfolio Composition and Yield
Portfolio Composition and Yield Portfolio Composition – $1,095.6m Portfolio Yield – 11.5% (Based on Fair Values (Weighted Average as of May 31, 2024) Current Yield of Total Existing Portfolio) Structured Structured Finance Second Lien Finance Second Lien 5.2% Common Equity Securities Common Securiti
Slide 10: Yield of BDC Growing With Rising Rates
Yield of BDC Growing With Rising Rates Weighted Average Current Yields Annual 9.1% 7.7% 10.7% 11.4% 11.5% 13.4% 14.0% 11.8% 11.8% 11.1% 10.8% 11.1% 10.7% 9.3% Totals* 12.6% $1,000 12.4% 7.4% $800 8.9% $ Millions $600 11.6% 12.6% 12.6% 11.4% 12.1% $400 14.6% 5.9% 5.3% 21.2% 9.5% 7.6% 14.0% 6.2% 16.4%
Slide 11: Diversified Across Geography
Diversified Across Geography Investments Diversified Geographically Southwest 7.6% Northeast 11.6% West 18.3% Midwest 28.8% Other 6.2% Northwest 0.0% Southeast 27.5% 11
Slide 12: Diversified Across Industry
Diversified Across Industry Investments across 43 distinct industries Talent Acquisition Software, Health/Fitness Franchisor, 2.5% Sports Management, 2.5% 2.8% Healthcare Services, 6.3% Financial Services, 2.4% Investment Fund, Direct Selling Structured Software, 2.2% Education Services, 2.3% Financ
Slide 13: Net Realized Gains Help Protect Shareholder Capital
Net Realized Gains Help Protect Shareholder Capital Cumulative net realized gains reflect portfolio credit quality $ in thousands Net Realized Gains (all investments) $70,000 $60,450 $60,000 $50,000 $42,877 $40,000 $30,000 $20,000 $12,368 $13,398 $8,495 $10,000 $4,874 $1,271 $3,276 $562 $226 $22 $15
Slide 14: Exercising Disciplined Investment Judgment While Expanding Portfolio
Exercising Disciplined Investment Judgment While Expanding Portfolio SAR Debt Multiples/Deals Closed (2018-2024) Portfolio leverage with non-recurring revenue underwriting is 4.27x1^ Average Middle Market 12/31/2023 3/31/2024 All Senior 3.87x 3.84x 1st Lien/Mezz 4.81x 4.62x 1st Lien/2nd Lien 4.08x 5
Slide 15: Pipeline Remains Healthy But Reflects Market Slowdown
Pipeline Remains Healthy But Reflects Market Slowdown New business opportunities impacted by market opportunities and largely offset by follow-on investments LTM Q1-Q2 Q1-Q2 2020 ∆ 2021 ∆ 2022 ∆ 2023 ∆ Q2 ∆ 2023 2024 Calendar* 2024 • ~63% of deal flow from private equity sponsors • ~37% of deals fro
Slide 16: Demonstrated Strong Track Record
Demonstrated Strong Track Record Realized Investments ^ Unrealized Investments 1 ^ ** (Gross Unlevered IRR%) (Gross Unlevered IRR%) 20% 20% $560.9m $112.6m $289.6m 16.8% 16.7% $977.7m 15.6% 15.4% 16% $414.4m 15% $304.1m 12.8% $1,188.1m 11.7% 12% $484.1m 10.9% 9.3% 10% 8% 5% 4% 0.0% 0.0% 0% 0% SBIC I
Slide 17: SBIC II Fully Funded - SBIC III Availability
SBIC II Fully Funded - SBIC III Availability $350 $300 $250 $42.3 $136.0m debentures undrawn $ Millions $200 $9.2 $150 $228.4 $100 $144.1 $50 $0 SBIC II SBIC III 21% 13% ** SBIC II and III cash available for new originations and follow-ons in existing license. *** SBIC III has $136 million of availa
Slide 18: Long-Term Consistent Dividend Growth
Long-Term Consistent Dividend Growth • Established dividend policy to pay regular Dividends Per Share* quarterly cash dividends to stockholders pursuant to dividend $0.74 $0.73 $0.72 $0.71 $0.70 $0.69 reinvestment plan $0.68 (“DRIP”) in 2014 $0.56 $0.56 • Increased dividend by $0.55 $0.54 $0.54 $0.5
Slide 19: SAR LTM Total Return Lagging BDC Index Creates Opportunity
SAR LTM Total Return Lagging BDC Index Creates Opportunity 19
Slide 20: BDC Total Return Comparison
0 -20 -10 10 20 30 40 50 60 100 100 120 140 160 180 0 0 -60 -40 -20 -60 -40 -20 20 40 60 80 20 40 60 80 GECC CGBD HTGC HTGC FDUS CGBD PNNT HTGC FDUS CSWC MFIC CSWC CCAP PNNT PNNT MAIN TRIN GAIN BBDC CION OCSL MFIC MAIN TSLX CGBD OBDC GLAD BCSF SCM CCAP CION BCSF ARCC RAND CSWC MFIC BXSL ARCC MAIN OX
Slide 21: Short-Term Performance Impacted by Discrete Non-Accruals
Short-Term Performance Impacted by Discrete Non-Accruals Interest % on Portfolio Regulatory Debt/Equity LTM NII Yield LTM ROE 14.0% 16% 14.9% 14% 180% 12.6% 12.8% 15% 12.1% 168.5% 12.4% 170% 14% 13.0% 12% 12.7% 10.1% 12.0% 13% 160% 12% 10% 150% 11% 8% 10.0% 10% 140% 9% 6% 130% 4.4% 8% 4% 120% 114.1%
Slide 22: Establishing Competitive Edge vs. Other BDCs
Establishing Competitive Edge vs. Other BDCs Outstanding performance characteristics Increased quarterly dividend by 211% since program launched until Covid deferral; Latest dividend ► Strong long-term dividend declared of 74c per share for the quarter ended May 31, 2024, up 6% over prior year, repr
Slide 23: 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 diverse and available fi
Slide 24: Questions?
Questions? & K' SARATOGA Pt INVESTMENT CORP.
Slide 25: Appendix
& K' SARATOGA Pt INVESTMENT CORP.
Slide 26: KPIs – Balance Sheet – Q1 FY25
KPIs – Balance Sheet – Q1 FY25 FMV Inve stme nt Po rtfo lio Pe rio d (in millio ns) FMV Investment Portfolio Q1-23 $ 894.5 (in millions) $1,200.0 Q2-23 $ 954.7 $1,100.0 Q3-23 $ 982.0 $1,000.0 Q4-23 $ 972.6 $900.0 Q1-24 $ 1,084.1 $800.0 Q2-24 $ 1,098.9 $700.0 Q3-24 $ 1,114.0 $600.0 Q4-24 $ 1,138.8 Q1
Slide 27: KPIs – Income Statement – Q1 FY25
KPIs – Income Statement – Q1 FY25 Ne t Inte re st Net Interest Margin Excluding CLO Margin Pe rio d (in millio ns) (in millions) Q1-23 $ 9.2 $22.0 Q2-23 $ 11.0 $20.0 Q3-23 $ 14.5 $18.0 Q4-23 $ 15.2 $16.0 $14.0 Q1-24 $ 17.5 $12.0 Q2-24 $ 19.6 $10.0 Q3-24 $ 19.8 $8.0 Q4-24 $ 20.3 Q1-23 Q2-23 Q3-23 Q4-
Slide 28: KPIs – Income Statement – Q1 FY25 (continued)
KPIs – Income Statement– Q1 FY25 (continued) Pe rio d EPS $2.00 EPS Q1-23 $ (0.12) Q2-23 $ 0.08 $1.50 Q3-23 $ 0.51 $1.00 Q4-23 $ 1.62 $0.50 Q1-24 $ (0.02) Q2-24 $ 0.65 $- Q3-24 $ (0.31) $(0.50) Q4-24 $ 0.39 Q1-25 $ 0.48 $(1.00) Q1-23 Q2-23 Q3-23 Q4-23 Q1-24 Q2-24 Q3-24 Q4-24 Q1-25 Pe rio d LTM ROE L
Slide 29: KPIs - SAR Net Interest Margin Continues to Grow
KPIs - SAR Net Interest Margin Continues to Grow SAR Net Interest Margin up 36% the past year and over sevenfold since taking over management Net Interest Margin $82,085 $78,605 $52,456 $38,964 $38,127 $30,236 $33,364 $24,185 $19,460 $17,309 $18,414 $14,096 $11,904 FY13 FY14 FY15 FY16 FY17 FY18 FY19