Saratoga Investment Corp. · NYSE:SAR
Saratoga Investment — Q2 2025 Earnings Presentation
29 slides from Saratoga Investment's earnings presentation, Oct 9, 2024
Slide 1: Saratoga Investment Corp. Fiscal Second Quarter 2025 Shareholder Presentation
Saratoga Investment Corp. Fiscal Second Quarter 2025 Shareholder Presentation October 9, 2024
Slide 2: Steady Long-Term Growth and Performance in Q2 2025
Steady Long-Term Growth and Performance in Q2 2025 Fiscal Second Quarter 2025 Highlights: • Continued high quality portfolio and solid performance • Investment quality remains solid • 99.7% of loan investments with highest internal rating and two residual non-accruals (0.3% of fair value / 0.4% of c
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% 9.0% 10.1% 10.0% 10.0% 9.3% 9.4% 8.9% 9.1% 8.5% 8.5% 7.5% 7.2% 6.9% 6.6% 5.8% 5.0% 5.0% 2.5% 0.9% 0.9% 0.6% 0.0% FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 202
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 $1,200 100% $1,139 $1,000 $1,041 $973 $800 $818 $600 80% 98.6% 99.0% 98.5% 99.7% 98.3% 96.8% 98.1% 94.2% 95.9% $554 94.1% 93.3% $486 90.5% $400 $402 82.4% $343 $284 $293 $200 $206 $241 $1
Slide 5: Q2 FY25: Strong Financial Foundation and Momentum
Q2 FY25: Strong Financial Foundation and Momentum Key Performance Metrics for the Fiscal Quarter For the quarter ended and as of August 31, 2023 May 31, 2024 August 31, 2024 ($ in millions except per share) $20,000 Net investment income $14.0 $14.3 $18.2 $15,000 $10,000 $20,000 Adjusted net investme
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 Q2 FY25) NAV: 1% increase this quarter. 333% increase since Saratoga took over management. NAV/Share: 1% increase this quarter. 23% increase since FY17 with increases 22 of the last 28
Slide 7: Quarterly Reconciliation of NII and NAV per Share
Quarterly Reconciliation of NII and NAV per Share (1)(2) Reconciliation of Quarterly Adjusted NII per Share $0.28 $(0.04) $0.01 $0.03 $1.33 $1.05 Adjusted NII per Increase in Decrease in Decrease in Decrease in Adjusted NII per Share for Q1 FY25 non-CLO Net Interest Income Other Income base manageme
Slide 8: Dry Powder Remains Available
Dry Powder Remains Available Total Borrowing Available Remaining Fixed / (As of August 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 $75.0 million $20.0 m
Slide 9: Portfolio Composition and Yield
Portfolio Composition and Yield Portfolio Composition – $1,040.7m Portfolio Yield – 11.5% (Based on Fair Values (Weighted Average as of August 31, 2024) Current Yield of Total Existing Portfolio) Structured Finance Structured Second Lien Securities 2.5% Common Second Lien Finance Common Equity 2.2%
Slide 10: Yield of BDC Grew With Rising Rates
Yield of BDC Grew With Rising Rates Weighted Average Current Yields Annual 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% 11.5% Totals1 12.6% $1,000 13.0% 7.4% $800 8.9% $ Millions $600 11.6% 12.6% 12.6% 11.4% $400 12.1% 14.6% 5.9% 5.3% 21.2% 9.5% 7.6% 14.0% 6.2% 16.4% 9.
Slide 11: Diversified Across Geography
Diversified Across Geography Investments Diversified Geographically Southwest 5.9% Northeast 12.0% West 16.7% Midwest 30.2% Other 5.6% Northwest 0.0% Southeast 29.6% 11
Slide 12: Diversified Across Industry
Diversified Across Industry Investments across 41 distinct industries Health/Fitness Franchisor, 3.0% Talent Acquisition Software, 2.6% Financial Services, 2.5% Healthcare Services, 6.6% Investment Fund, 2.1% Structured Finance Securities, 2.2% Direct Selling Software, 2.3% Education Services, 2.5%
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) $60,000 $42,877 $40,000 $27,001 $20,000 $12,368 $13,398 $8,495 $3,276 $4,874 $562 $1,271 $226 $22 $154 $0 FY13 FY14 FY15 FY16 FY17 FY
Slide 14: Exercising Disciplined Investment Judgment
Exercising Disciplined Investment Judgment SAR Debt Multiples/Deals Closed (2018-2024)(1) Portfolio leverage with non-recurring revenue underwriting is 4.51x(2)(3) Average Middle Market 3/31/2024 6/30/2024 All Senior 3.84x 3.87x 1st Lien/Mezz 4.62x 4.69x 1st Lien/2nd Lien 5.46x 5.49x Unitranche 5.53
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-Q3 Q1-Q3 2020 ∆ 2021 ∆ 2022 ∆ 2023 ∆ Q3 ∆ 2023 2024 Calendar(1) 2024 • ~61% of deal flow from private equity sponsors • ~39% of deals f
Slide 16: Demonstrated Strong Track Record
Demonstrated Strong Track Record Realized Investments(1)(2)(3) Unrealized Investments(1)(2)(3)(4) (Gross Unlevered IRR%) (Gross Unlevered IRR%) 20% $289.6m $560.9m $133.8m 16% 15.1% 16.8% $1,030.9m 16.1% $393.9m 15.2% 12.9% $1,137.6m 15% $336.1m 12% $454.0m 11.3% 11.6% 9.9% 10% 8% 5% 4% 0.0% 0.0% 0%
Slide 17: SBIC II Fully Funded - SBIC III Availability
SBIC II Fully Funded - SBIC III Availability (1)(2) $350 $300 $250 $55.1 $136.0m debentures undrawn $200 $ Millions $14.4 $150 $100 $206.7 $144.5 $50 $0 20% 14% SBIC II SBIC III 1) SBIC III cash available for new originations and follow-ons in existing license, with SBIC II cash only available for f
Slide 18: Long-Term Consistent Dividend Growth
Long-Term Consistent Dividend Growth Dividends Per Share1 • Established dividend policy to pay regular quarterly cash dividends to stockholders pursuant $0.74 $0.74 $0.73 $0.72 to dividend reinvestment $0.71 $0.70 $0.69 $0.68 plan (“DRIP”) in 2014 • Increased dividend by $0.56 $0.56 $0.55 $0.54 $0.5
Slide 19: SAR LTM Total Return Lagging BDC Index Creates Opportunity
SAR LTM Total Return Lagging BDC Index Creates Opportunity LTM Total Return (%) (September 2023 to September 2024) SAR 2% v BDC Index +15% 30.00% 25.00% 20.00% 15.00% 10.00% 5.00% 0.00% -5.00% -10.00% -15.00% -20.00% Sep-23 Oct-23 Nov-23 Dec-23 Jan-24 Feb-24 Mar-24 Apr-24 May-24 Jun-24 Jul-24 Aug-24
Slide 20: BDC Total Return (%)
-20 -10 0 10 20 40 30 -60 -40 -20 100 -60 -20 100 140 0 20 40 80 20 60 60 MAIN-US CGBD-US HTGC-US RAND-US HTGC-US FDUS-US PFX-US FDUS-US CGBD-US HTGC-US MAIN-US CSWC-US CGBD-US BCSF-US PNNT-US CION-US CION-US CCAP-US GLAD-US PNNT-US GLAD-US CCAP-US MFIC-US GAIN-US CSWC-US OBDC-US RAND-US BBDC-US SCM
Slide 21: Short-Term Performance Impacted by Discrete Non-Accruals
Short-Term Performance Impacted by Discrete Non-Accruals Interest % on Portfolio LTM NII Yield LTM ROE Regulatory Debt/Equity 14.0% 18% 12% 180% 12.6% 12.7% 10.4% 12.3% 16.0% 170.4% 16% 10% 9.1% 170% 12.0% 160% 8% 14% 150% 10.0% 12.6% 12.5% 5.8% 6% 140% 12% 4% 130% 8.0% 111.2% 113.3% 10% 120% 2% 110
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 $0.74 per share for the quarter ended August 31, 2024, up 4% over prior year,
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 – Q2 FY25
KPIs – Balance Sheet – Q2 FY25 FMV Inve stme nt Po rtfo lio Pe rio d (in millio ns) FMV Investment Portfolio Q2-23 $ 954.7 (in millions) Q3-23 $ 982.0 $1,200.0 Q4-23 $ 972.6 Q1-24 $ 1,084.1 $1,100.0 Q2-24 $ 1,098.9 Q3-24 $ 1,114.0 $1,000.0 Q4-24 $ 1,138.8 Q1-25 $ 1,095.6 $900.0 Q2-25 $ 1,040.7 Q2-23
Slide 27: KPIs – Income Statement – Q2 FY25
KPIs – Income Statement – Q2 FY25 Net Interest Margin Perio d (in millio ns) Net Interest Margin Excluding CLO Q2-23 $ 11.0 (in millions) Q3-23 $ 14.5 $26.0 Q4-23 $ 15.2 $22.0 Q1-24 $ 17.5 Q2-24 $ 19.6 $18.0 Q3-24 $ 19.8 $14.0 Q4-24 $ 20.3 $10.0 Q1-25 $ 21.0 Q2-23 Q3-23 Q4-23 Q1-24 Q2-24 Q3-24 Q4-24
Slide 28: KPIs – Income Statement – Q2 FY25 (continued)
KPIs – Income Statement– Q2 FY25 (continued) EPS Pe rio d EPS $2.00 Q2-23 $ 0.08 Q3-23 $ 0.51 $1.50 Q4-23 $ 1.62 $1.00 Q1-24 $ (0.02) $0.50 Q2-24 $ 0.65 Q3-24 $ (0.31) $- Q4-24 $ 0.39 $(0.50) Q1-25 $ 0.48 Q2-25 $ 0.97 $(1.00) Q2-23 Q3-23 Q4-23 Q1-24 Q2-24 Q3-24 Q4-24 Q1-25 Q2-25 Pe rio d LTM ROE LTM
Slide 29: KPIs - SAR Net Interest Margin Continues to Grow
KPIs - SAR Net Interest Margin Continues to Grow SAR Net Interest Margin up 37% the past twelve months and over eightfold since taking over management Net Interest Margin $88,401 $78,605 $52,456 $38,127 $33,364 $38,964 $30,236 $19,460 $24,185 $17,309 $18,414 $11,904 $14,096 FY13 FY14 FY15 FY16 FY17