Saratoga Investment Corp. · NYSE:SAR
Saratoga Investment — Q2 2024 Earnings Presentation
30 slides from Saratoga Investment's earnings presentation, Oct 10, 2023
Slide 1: Fiscal Second Quarter 2024 Shareholder Presentation
Saratoga Investment Corp. Fiscal Second Quarter 2024 Shareholder Presentation October 10, 2023
Slide 2: Continued Growth and Outperformance in Q2
Continued Growth and Outperformance in Q2 Fiscal Second Quarter 2024 Highlights: • Continued high quality portfolio and strong performance • Investment quality remains strong • 98.2% of loan investments with highest internal rating and two non-accruals (1.6% of fair value/4.5% of cost) • Return on e
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 100% $1,200 $1,099 $1,000 $973 $800 $818 $600 80% 98.3% 96.8% 98.6% 99.0% 98.5% 98.2% 94.2% 94.1% 95.9% 93.3% $554 90.5% $400 $486 82.4% $402 $343 $200 $284 $293 $241 $206 $95 $155 $0 60
Slide 4: Q2 FY24: Strong Financial Foundation and Momentum
Q2 FY24: Strong Financial Foundation and Momentum Key Performance Metrics for the Fiscal Quarter For the quarter ended and as of August 31, 2022 May 31, 2023 August 31, 2023 ($ in millions except per share) $20,000 Net investment income $7,698 $15,959 $13,965 $10,000 $0 $20,000 Adjusted net investme
Slide 5: Long-Term Accretive NAV and NAV Per Share Growth
Long-Term Accretive NAV and NAV Per Share Growth Net Asset Value and NAV per Share (FY11 to FYQ224) NAV: 7% increase this quarter. 321% increase since Saratoga took over management. NAV/Share: Minimal change this quarter. 29% increase since FY17 with increases 16 of the last 22 quarters. (in million
Slide 6: 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 $0.14 $(0.12) $(0.02) $0.03 $(0.03) $1.08 $1.08 Adjusted NII per Increase in non-CLO Net Decrease in Increase in base Decrease in operating Decrease from ne
Slide 7: Dry Powder Remains Available
Dry Powder Remains Available Total Fixed / Borrowing Available Remaining Floating (As of August 31, 2023) Capacity Outstanding Liquidity Maturity Period Rate Secured Revolving Credit $65.0 million $35.0 million $30.0 million 2.5 Years Floating Facility SBIC I $0.0 million $0.0 million $0.0 million -
Slide 8: Portfolio Composition and Yield
Portfolio Composition and Yield Portfolio Composition – $1,098.9m Portfolio Yield – 11.3% (Based on Fair Values (Weighted Average as of August 31, 2023) Current Yield of Total Existing Portfolio) Structured Finance Structured Second Lien Finance Common Securities Second Lien 1.4% Securities Equity 3
Slide 9: Yield of BDC Growing With Rising Rates
Yield of BDC Growing With Rising Rates Weighted Average Current Yields 13.4% 14.0% 11.8% 11.8% 11.1% 10.8% 11.1% 10.7% 9.3% 9.1% 7.7% 10.7% 11.4% 11.3% Annual Totals* $1,000 8.9% 9.3% $900 7.4% $800 $700 8.9% $600 $ Millions 11.6% $500 11.4% 12.7% 12.6% 12.1% $400 14.6% 5.9% 9.5% 7.6% 5.3% 21.2% $30
Slide 10: Accretive Impact of Increased Rates with Lag Effect on Earnings
Accretive Impact of Increased Rates with Lag Effect on Earnings SOFR Impact on Portfolio 5.29% 6.00% 5.40% 5.40% Q2 actual earnings do not reflect full 5.00% 5.31% quarter impact of 4.98% Q2 average rate 5.02% 4.00% 5.24% increase (7bps) nor current closing Yield (%) rate difference 3.00% (another 9
Slide 11: Diversified Across Geography
Diversified Across Geography Investments Diversified Geographically Southwest 12.0% West Northeast 19.9% 13.0% Other 7.6% Midwest Northwest 21.1% 0.2% Southeast 26.2% 11
Slide 12: Diversified Across Industry
Diversified Across Industry Structured Finance Securities, 3.2% Investments across 43 distinct industries Health/Fitness Franchisor, 2.9% Healthcare Services, 3.2% Education Services, 3.5% Talent Acquisition Software, Sports Management, 2.4% 2.5% Hospitality/Hotel, 3.5% Financial Services, 2.4% Cybe
Slide 13: 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) $90,000 $81,582 $80,000 $70,000 $60,000 $50,000 $42,877 $40,000 $30,000 $20,000 $13,398 $12,368 $8,495 $10,000 $3,276 $4,874 $562 $1,
Slide 14: Strong Net Realized Gains Flow from Disciplined Underwriting
Strong Net Realized Gains Flow from Disciplined Underwriting Last 3 Year Average Realized Gains (Loss) as a Percentage of Portfolio Cost* 6.0% SAR is one of only 12 BDCs to have positive 3.8% net realized gains for the past three years. 4.0% 1.7% 1.3% 0.9% 0.8% 0.7% 0.6% 0.5% 0.5% 2.0% 0.3% 0.1% 0.1
Slide 15: Exercising Disciplined Investment Judgment While Growing Origination Pace
Exercising Disciplined Investment Judgment While Growing Origination Pace SAR Debt Multiples/Deals Closed (2018-2023) Portfolio leverage with non-recurring revenue underwriting is 4.17x1^ Average Middle Market 3/31/2023 6/30/2023 All Senior 3.68x 3.81x 1st Lien/Mezz 4.92x 4.61x 4.17x1 1st Lien/2nd L
Slide 16: Pipeline Growth Interrupted by COVID-19
Pipeline Growth Interrupted by COVID-19 New business opportunities severely impacted by COVID-19 but healthy success in term sheets and deals executed driven by investments in team and strong reputation LTM Q1-Q3 Q1-Q3 2019 ∆ 2020 ∆ 2021 ∆ 2022 ∆ Q3 ∆ 2022 2023 Calendar* 2023 • ~63% of deal flow fro
Slide 17: Demonstrated Strong Track Record
Demonstrated Strong Track Record Realized Investments ^ Unrealized Investments 1 ^ (Gross Unlevered IRR%) (Gross Unlevered IRR%) 20% $553.6m $98.4m $89.8m 18% $907.7m 17% 16.7% 16.8% 16.2% 16% 15.6% $264.2m 15% 14% $286.4m 12.5% 12% 13% 12.6% $253.5m $1,114.6m 10% 10.9% 11% 10.6% $476.3m 8% 9.3% 6%
Slide 18: SBIC I and II Fully Funded - SBIC III Availability
SBIC I and II Fully Funded - SBIC III Availability $300 $4.1 $250 $200 Zero debentures undrawn $ Millions $161.0m debentures $150 $0.1 undrawn $253.6 $100 $142.1 $1.2 $50 $72.3 $0 13% 23% 7% SBIC I SBIC II SBIC III * SBIC I cash available to the BDC ** SBIC II and III cash available for new originat
Slide 19: Long-Term Dividend Growth
Long-Term Dividend Growth • Established dividend policy to pay regular Dividends Per Share* quarterly cash dividends to stockholders pursuant to dividend $0.71 $0.70 reinvestment plan $0.69 $0.68 (“DRIP”) in 2014 • Increased dividend by $0.56 $0.56 $0.55 $0.54 $0.54 $0.53 $0.53 $0.53 $0.53 $0.52 $0.
Slide 20: SAR LTM Total Return In Line With BDC Index
SAR LTM Total Return In Line With BDC Index LTM Total Return (%) (September 2022 to September 2023) SAR +16% v BDC Index +12% 25.00% Hundreds 20.00% 15.00% 10.00% 5.00% 0.00% -5.00% -10.00% -15.00% -20.00% Sep-22 Oct-22 Nov-22 Dec-22 Jan-23 Feb-23 Mar-23 Apr-23 May-23 Jun-23 Jul-23 Aug-23 Sep-23 SAR
Slide 21: Long-Term Performance at Top of BDC Industry
20 40 60 0 (60) (40) (20) -50 -100 0 100 150 50 50 0 100 150 200 (50) (100) FCRD FDUS OFS HTGC HTGC FDUS CSWC OCSL PNNT OFS CSWC CSWC CION OFS CGBD OBDC ARCC SCM TSLX TSLX PTMN BCSF GAIN LRFC RWAY HRZN FCRD BXSL SCM PFX CGBD CGBD BCSF GBDC SAR HTGC SCM SAR GLAD FDUS BKCC WHF PNNT FSK NMFC SLRC OCSL
Slide 22: Differentiated Long-Term Outperformance
Differentiated Long-Term Outperformance Interest % on Portfolio LTM ROE Regulatory Debt/Equity LTM NII Yield 14.0% 15% 12% 180% 12.9% 13.6% 167.5% 12.5% 12.6% 14% 9.6% 170% 13% 10% 12.0% 11.8% 11.6% 160% 12% 11% 8% 150% 10% 6.1% 10.0% 6% 5.1% 140% 9% 8% 130% 4% 117.8% 118.0% 8.0% 7% 120% 6% 2% 110%
Slide 23: Establishing Competitive Edge vs. Other BDCs
Establishing Competitive Edge vs. Other BDCs Outstanding performance characteristics Increased quarterly dividend by 211% since program launched until recent deferral; Latest ► Strong long-term dividend dividend declared of 71c per share for the quarter ended August 31, 2023, up 31% over prior year,
Slide 24: 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 25: Questions?
Questions? & K' SARATOGA Pt INVESTMENT CORP.
Slide 26: Appendix
& K' SARATOGA Pt INVESTMENT CORP.
Slide 27: KPIs – Balance Sheet – Q2 FY24
KPIs – Balance Sheet – Q2 FY24 FMV Inve stme nt Po rtfo lio FMV Investment Portfolio Pe rio d (in millio ns) (in millions) Q2-22 $ 666.1 $1,100.0 Q3-22 $ 661.8 $1,000.0 Q4-22 $ 817.6 $900.0 Q1-23 $ 894.5 $800.0 Q2-23 $ 954.7 $700.0 Q3-23 $ 982.0 $600.0 Q4-23 $ 972.6 $500.0 Q2-22 Q3-22 Q4-22 Q1-23 Q2
Slide 28: KPIs – Income Statement – Q2 FY24
KPIs – Income Statement – Q2 FY24 Ne t Inte re st Margin Net Interest Margin Excluding CLO Pe rio d (in millio ns) Q2-22 $ 8.6 (in millions) Q3-22 $ 8.0 $20.0 Q4-22 $ 9.0 $18.0 Q1-23 $ 9.2 $16.0 Q2-23 $ 11.0 $14.0 Q3-23 $ 14.5 $12.0 Q4-23 $ 15.2 $10.0 Q1-24 $ 17.5 $8.0 Q2-22 Q3-22 Q4-22 Q1-23 Q2-23
Slide 29: KPIs – Income Statement – Q2 FY24 (continued)
KPIs – Income Statement– Q2 FY24 (continued) Perio d EPS Q2-22 $ 0.71 $2.00 EPS Q3-22 $ 0.73 $1.50 Q4-22 $ 0.70 $1.00 Q1-23 $ (0.12) $0.50 Q2-23 $ 0.08 Q3-23 $ 0.51 $- Q4-23 $ 1.62 $(0.50) Q1-24 $ (0.02) $(1.00) Q2-24 $ 0.65 Q2-22 Q3-22 Q4-22 Q1-23 Q2-23 Q3-23 Q4-23 Q1-24 Q2-24 Pe rio d LTM ROE Q2-2
Slide 30: KPIs - SAR Net Interest Margin Continues to Grow
KPIs - SAR Net Interest Margin Continues to Grow SAR has quintupled its Net Interest Margin since taking over management Net Interest Margin $68,458 66% increase in LTM 588% increase in 12 years $52,456 $38,964 $38,127 $33,364 $30,236 $24,185 $19,460 $17,309 $18,414 $14,096 $11,904 $9,956 FY12 FY13