Saratoga Investment Corp. · NYSE:SAR
Saratoga Investment — Q4 2024 Earnings Presentation
31 slides from Saratoga Investment's earnings presentation, May 7, 2024
Slide 1: Fiscal Year-End and Fourth Quarter 2024 Shareholder Presentation
Saratoga Investment Corp. Fiscal Year-End and Fourth Quarter 2024 Shareholder Presentation May 7, 2024
Slide 2: Steady Growth and Performance in FY24 and Q4
Steady Growth and Performance in FY24 and Q4 Fiscal Year-End and Fourth Quarter 2024 Highlights: • Continued high quality portfolio and solid performance • Investment quality remains solid • 98.1% of loan investments with highest internal rating and three non-accruals (1.7% of fair value/ 5.7% of co
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% 23.6% 20% 14.8% 15% 13.9% 13.2% 11.5% 10.1% 10.5% 10% 9.3% 9.4% 9.0% 8.5% 8.9% 8.5% 6.6% 7.5% 7.2% 6.5% 5.0% 5% 2.5% 0.9% 0.9% 0.6% 0% FY2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 FY 20
Slide 4: Continued Asset Growth and Solid Credit Quality
Continued Asset Growth and Solid Credit Quality Asset Base Expansion Trend Overall Credit Quality Remains Solid $1,200 100% $1,139 $1,000 $973 $800 $818 $600 80% 99.0% 98.1% 98.3% 96.8% 98.6% 98.5% 95.9% $554 94.2% 94.1% 93.3% 90.5% $400 $486 82.4% $402 $343 $200 $284 $293 $241 $206 $95 $155 $0 60%
Slide 5: Q4 FY24: Strong Financial Foundation and Momentum
Q4 FY24: Strong Financial Foundation and Momentum Key Performance Metrics for the Fiscal Quarter For the quarter ended February 28, November 30, February 29, and as of 2023 2023 2024 ($ in millions except per share) $15,000 $10,000 $5,000 Net investment income $9,649 $14,166 $12,785 $0 $15,000 $10,0
Slide 6: FY24: Strong Financial Foundation and Momentum
FY24: Strong Financial Foundation and Momentum Key Performance Metrics for the Fiscal Year For the year ended and as of Feb 28, 2022 Feb 28, 2023 Feb 29, 2024 ($ in millions except per share) $60,000 $40,000 Net investment income $19,943 $35,201 $56,874 $20,000 $55,000 Adjusted net investment income
Slide 7: Long-Term NAV and NAV Per Share Growth Despite Recent Isolated Weakness
Long-Term NAV and NAV Per Share Growth Despite Recent Isolated Weakness Net Asset Value and NAV per Share (FY 11 to FY24) NAV: 3% increase this quarter. 330% increase since Saratoga took over management. NAV/Share: 1% decrease this quarter. 23% increase since FY17 with increases 20 of the last 28 qu
Slide 8: Quarterly Reconciliation of NII and NAV per Share
Quarterly Reconciliation of NII and NAV per Share Reconciliation of Quarterly Adjusted NII per Share • Impacts are shown net of incentive fees. $0.04 $(0.11) $0.03 $0.02 $(0.05) $1.01 $0.94 Adjusted NII per Increase in non-CLO Net Increase in Decrease in operating Excise taxes Decrease due to Adjust
Slide 9: Annual Reconciliation of NII and NAV per Share
Annual Reconciliation of NII and NAV per Share • Impacts are shown net of incentive fee Reconciliation of Annual Adjusted NII per Share $(0.07) $0.10 ($ $(0.14) $(0.02) $(0.05) ) $(0.16) $1.59 $4.10 $2.85 Adjusted NII per Increase in non- Decrease in CLO Increase in Increase in Base Increase in Incr
Slide 10: Dry Powder Remains Available
Dry Powder Remains Available Total Remaining Fixed / (As of February 29, Borrowing Available Maturity Call Period Floating 2024) Capacity Outstanding Liquidity Period Rate Secured Revolving $65.0 million $35.0 million $30.0 million 2 Years - Floating Credit Facility SBIC I $0.0 million $0.0 million
Slide 11: Portfolio Composition and Yield
Portfolio Composition and Yield Portfolio Composition – $1,138.8m Portfolio Yield – 11.4% (Based on Fair Values (Weighted Average as of February 29, 2024) Current Yield of Total Existing Portfolio) Structured Finance Structured Second Lien Securities Second Lien Finance 1.6% Common Securities Common
Slide 12: Yield of BDC Growing With Rising Rates
Yield of BDC Growing 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% Totals* 8.0% $1,000 7.4% $800 8.9% $ Millions $600 11.6% 12.6% 11.4% 12.1% $400 14.6% 5.9% 5.3% 9.5% 7.6% 21.2% 14.0% 6.2% 16.4% 9.6% 25.2% 9.8% $2
Slide 13: Diversified Across Geography
Diversified Across Geography Investments Diversified Geographically Southwest 9.8% Northeast 12.7% West 20.5% Other 6.6% Midwest 23.3% Northwest 0.0% Southeast 27.1% 13
Slide 14: Diversified Across Industry
Diversified Across Industry Investments across 43 distinct industries Sports Management, 2.4% Health/Fitness Franchisor, 2.8% Talent Acquisition Healthcare Services, 4.5% Software, 2.4% Education Services, 2.3% Investment Fund, 2.2% Structured Finance Securities, 2.7% Financial Services, 2.3% Direct
Slide 15: 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 $81,645 $80,000 $70,000 $60,000 $50,000 $42,877 $40,000 $30,000 $20,000 $13,398 $12,368 $8,495 $10,000 $4,874 $1,271 $3,276 $
Slide 16: 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 3.98x1^ Average Middle Market 9/30/2023 12/31/2023 All Senior 3.85x 3.98x 1st Lien/Mezz 5.53x 4.87x 1st Lien/2nd Lien 5.76x 5
Slide 17: 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 2019 ∆ 2020 ∆ 2021 ∆ 2022 ∆ 2023 ∆ Q1 Calendar* 2024 • ~61% of deal flow from private equity sponsors • ~39% of deals from private compani
Slide 18: Demonstrated Strong Track Record
Demonstrated Strong Track Record Realized Investments ^ Unrealized Investments 1 ^ (Gross Unlevered IRR%) (Gross Unlevered IRR%) $215.8m 20% 18.9% 20% $89.8m $560.9m 17.1% $917.0m 16.8% 15.7% 16% 15% $266.3m $513.7m 12.6% $1,209.5m 11.7% 12% 10.7% $480.1m 10% 8.4% 8% 5% 4% 0.0% 0.0% 0% 0% SBIC I SBI
Slide 19: SBIC II Fully Funded - SBIC III Availability
SBIC II Fully Funded - SBIC III Availability $300 $250 $21.0 $136.0m $200 debentures undrawn $ Millions $150 $9.8 $238.3 $100 $129.1 $50 21% 11% $0 SBIC II SBIC III ** SBIC II and III cash available for new originations and follow-ons in existing license. *** SBIC III has $136 million of available d
Slide 20: 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 $0.73 $0.72 $0.71 $0.70 reinvestment plan $0.69 $0.68 (“DRIP”) in 2014 $0.56 $0.56 • Increased dividend by $0.55 $0.54 $0.54 $0.53 $0.
Slide 21: SAR LTM Total Return Lagging BDC Index Creates Opportunity
SAR LTM Total Return Lagging BDC Index Creates Opportunity LTM Total Return (%) (April 2023 to April 2024) SAR +8% v BDC Index +30% 35.00% Hundreds 30.00% 25.00% 20.00% 15.00% 10.00% 5.00% 0.00% -5.00% -10.00% Apr-23 May-23 Jun-23 Jul-23 Aug-23 Sep-23 Oct-23 Nov-23 Dec-23 Jan-24 Feb-24 Mar-24 Apr-24
Slide 22: Long-Term Performance Beats BDC Industry
10 30 50 70 (70) (50) (30) (10) 0 50 (100) (50) -100 100 150 0 -50 50 HTGC CGBD HTGC PNNT FDUS FDUS CSWC BXSL CGBD BCSF HTGC GECC CSWC PNNT OCSL GBDC OBDC CION TSLX CSWC GAIN BBDC MAIN ARCC CGBD GBDC MAIN OBDC SCM PNNT CCAP ARCC GLAD BXSL OFS OBDC MAIN BCSF CCAP TSLX GAIN SCM BKCC FSK HRZN GSBD CION
Slide 23: 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% 12% 180% 12.9% 14.6% 10.8% 12.6% 12.5% 10.1% 170% 14% 10% 163.8% 12.8% 12.6% 12.0% 160% 12% 8% 150% 10.0% 10% 6% 140% 130% 8% 113.3 113.8 4% 2.5% 120% % % 8.0% 6% 2
Slide 24: 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 73c per share for the quarter ended February 29, 2024, up 6% over prior year,
Slide 25: 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 26: Questions?
Questions? & K' SARATOGA Pt INVESTMENT CORP.
Slide 27: Appendix
& K' SARATOGA Pt INVESTMENT CORP.
Slide 28: KPIs – Balance Sheet – Q4 FY24
KPIs – Balance Sheet – Q4 FY24 FMV Inve stme nt Po rtfo lio FMV Investment Portfolio Pe rio d (in millio ns) (in millions) Q4-22 $ 817.6 $1,200.0 Q1-23 $ 894.5 $1,100.0 Q2-23 $ 954.7 $1,000.0 Q3-23 $ 982.0 $900.0 Q4-23 $ 972.6 $800.0 Q1-24 $ 1,084.1 $700.0 Q2-24 $ 1,098.9 $600.0 Q4-22 Q1-23 Q2-23 Q3
Slide 29: KPIs – Income Statement – Q4 FY24
KPIs – Income Statement – Q4 FY24 Ne t Inte re st Margin Net Interest Margin Excluding CLO Pe rio d (in millio ns) (in millions) Q4-22 $ 9.0 Q1-23 $ 9.2 $22.0 Q2-23 $ 11.0 $20.0 $18.0 Q3-23 $ 14.5 $16.0 Q4-23 $ 15.2 $14.0 Q1-24 $ 17.5 $12.0 Q2-24 $ 19.6 $10.0 $8.0 Q3-24 $ 19.8 Q4-22 Q1-23 Q2-23 Q3-2
Slide 30: KPIs – Income Statement– Q4 FY24 (continued)
KPIs – Income Statement– Q4 FY24 (continued) EPS Pe rio d EPS $2.00 Q4-22 $ 0.70 $1.50 Q1-23 $ (0.12) Q2-23 $ 0.08 $1.00 Q3-23 $ 0.51 $0.50 Q4-23 $ 1.62 Q1-24 $ (0.02) $- Q2-24 $ 0.65 $(0.50) Q3-24 $ (0.31) Q4-24 $ 0.39 $(1.00) Q4-22 Q1-23 Q2-23 Q3-23 Q4-23 Q1-24 Q2-24 Q3-24 Q4-24 LTM ROE Pe rio d L
Slide 31: KPIs - SAR Net Interest Margin Continues to Grow
KPIs - SAR Net Interest Margin Continues to Grow SAR Net Interest Margin up 50% the past year and sevenfold since taking over management Net Interest Margin $78,605 $52,456 $38,964 $38,127 $30,236 $33,364 $24,185 $19,460 $17,309 $18,414 $14,096 $9,956 $11,904 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19