Saratoga Investment Corp. · NYSE:SAR
Saratoga Investment — Q1 2021 Earnings Presentation
28 slides from Saratoga Investment's earnings presentation, Jul 9, 2020
Slide 1: Fiscal First Quarter 2021 Shareholder Presentation
Saratoga Investment Corp. Fiscal First Quarter 2021 Shareholder Presentation July 9, 2020
Slide 2: Continued Strong Performance in Q1
Continued Strong Performance in Q1 Fiscal First Quarter 2021 Highlights: • Continued high quality portfolio and strong performance ▫ Investment quality remains strong 90.4% of loan investments with highest internal rating as of May 31, 2020 Valuations reflect impact of changes to market spreads,
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 $600 $516* 100% $500 98.6% 99.0% 90.4% $486 $483 80% 96.8% $400 94.1% $402 98.3% 60% $343 94.2% $300 $284 $293 82.4% 90.5% 40% 64.3% $200 $241 $206 $155 20% $100 $95 $80 $0 0% Investment
Slide 4: Q1 FY21: Strong Financial Foundation
Q1 FY21: Strong Financial Foundation Key Performance Metrics for the Fiscal Quarter For the quarter ended and as of May 31, 2019 Feb 29, 2020 May 31, 2020 ($ in millions except per share) $10,000 Net investment income $3,681 $66 $9,018 $0 $10,000 Adjusted net investment income* $4,635 $6,812 $5,768
Slide 5: Long-Term Accretive NAV Growth
Long-Term Accretive NAV Growth Net Asset Value (FY11 to Q1 FY21) in millions $350 7% decrease this quarter $300 51% increase year-over-year $304.3 227% increase in 9 years $282.2 $281.6 $250 $224.3 $200 $186.8 $180.9 $150 $143.7 $127.3 $122.6 $125.1 $100 $107.0 $113.0 $97.0 $86.0 $50 5
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 • No dilution from $0.05 ($0.01) increased shares ($0.31) $0.17 $0.61 $0.51 Adjusted NII per Increase in non-CLO Net Decrease in CLO Decrease in Increase in A
Slide 7: Dry Powder Remains Available
Dry Powder Remains Available Total Remaining Fixed / Borrowing Available Maturity Floating (As of May 31, 2020) Capacity Outstanding Liquidity Period Rate Secured Revolving $45.0 million $0.0 million $45.0 million 5 Years Floating Credit Facility SBIC $150.0 million $150.0 million $0.0 million 3-9 y
Slide 8: Portfolio Composition and Yield
Portfolio Composition and Yield Portfolio Composition – $483.0 m Portfolio Yield – 9.6% (Based on Fair Values (Weighted Average as of May 31, 2020) Current Yield of Existing Portfolio) Second Second Lien, Lien, 14.4% Unsecured 11.1% Unsecured Term Term Loans, Loans, 1.2% 6.7% Structured Structured F
Slide 9: Yield of BDC Remains Healthy
Yield of BDC Remains Healthy Weighted Average Current Yields Annual 13.4% 14.0% 11.8% 11.8% 11.1% 10.8% 11.1% 10.7% 9.3% 9.6% Totals* $500 11.4% 11.7% $450 9.5% based on cost $400 14.6% $350 5.9% 21.2% 9.8% 10.0% $ Millions $300 5.3% 7.6% 14.0% 10.9% 16.4% $250 11.2% 6.2% 11.0% 25.2% $200 6.2% 11.0%
Slide 10: Diversified Across Industry and Geography
Diversified Across Industry and Geography Investments diversified geographically Investments across 9 distinct industries Consumer Services West Structured Finance Healthcare Property Services Management Southwest Northeast Metals Other Consumer Business Products Services* Education Midwest Food and
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) $70,000 $59,584 $60,000 $50,000 $42,877 $40,000 $30,000 $20,000 $12,368 $10,000 $4,874 $3,276 $562 $1,271 $226 $8 $0 FY13 FY14 FY15 F
Slide 12: Strong Net Realized Gains Flow from Disciplined Underwriting
-13% 2% 7% -3% -8% GAIN 6.6% MVC 6.3% CSWC 5.7% SAR 3.6% SCM 2.3% WHF 2.2% FDUS 1.6% ARCC 0.9% GBDC 0.2% TPVG 0.1% ORCC 0.0% BBDC 0.0% HTGC -0.2% SLRC -0.2% BCSF -0.4% GLAD -0.5% TSLX -0.5% OXSQ -0.5% PSEC -0.6% NMFC -0.7% MAIN -0.7% 12 CGBD -0.8% FSK -0.9% OFS -0.9% SUNS -1.0% PFLT -1.2% past 3 yea
Slide 13: Exercising Disciplined Investment Judgment While Growing Origination Pace
Exercising Disciplined Investment Judgment While Growing Origination Pace SAR Debt Multiples/Deals Closed (2017-2020) Portfolio leverage with non-recurring revenue underwriting is 4.46x1 March 31, 2020* March 31, 2019* >7.0x 7.2% >7.0x 10.0% 6.0x-6.9x 28.6% 57.2% 80.0% 6.0x-6.9x 30.0% 5.0x-5.9x 21.4
Slide 14: Active Pipeline During Tough Execution Market
Active Pipeline During Tough Execution Market The number of new business opportunities remains strong, yet were impacted by COVID-19 - beginning to see some rebound in inquiries yet we remain as disciplined as ever LTM Q2 Calendar* 2017 ∆ 2018 ∆ 2019 ∆ 2020 • 50% of deal flow from private equity spo
Slide 15: Demonstrated Strong Track Record
Demonstrated Strong Track Record Realized Investments Unrealized Investments 1 (Gross Unlevered IRR%) (Gross Unlevered IRR%) $345.0m 20% 18.5% $483.0m 16% 18% 16.7% 16% 14% $289.8m 138.0m 14% 12% 11.5% $486.9m 12.3% 12% $101.8m 9.9% 10% 10% $95.3m 8.3% 8% 7.0% 8% 6% 6% 4% 4% 2% 2% $0.0m 0% 0% SBIC I
Slide 16: SBIC I Fully Funded - SBIC II Mostly Available
SBIC I Fully Funded - SBIC II Mostly Available $300 SBIC I Assets* SBIC first license provided $171m, $143m, $105m, $51m, $42m, $19m, $17m, $10m and $9m of available capacity in FY13, FY14, FY15, $250 FY16, FY17, FY18, FY19, FY20 and $41.8 $17.2 $10.5 $8.8 Q1FY21, respectively (debt and $50.9 $19.1
Slide 17: Long-Term Dividend Growth
Long-Term Dividend Growth • Established dividend policy to pay regular Dividends Per Share* quarterly cash dividends to 0.56 0.56 stockholders 0.51 0.52 0.53 0.54 0.55 0.50 pursuant to dividend 0.47 0.48 0.49 0.45 0.46 reinvestment plan 0.41 0.43 0.44 0.40 0.40 (“DRIP”) in 2014 0.36 • Increased divi
Slide 18: SAR LTM Total Return In Line with BDC Index
SAR LTM Total Return In Line with BDC Index LTM Total Return (%) (June 2019 to June 2020) SAR -26% v BDC Index -22% 18
Slide 19: Long-Term Performance at Top of BDC Industry
10 30 (70) (50) (30) (10) 110 5 55 10 60 (95) (45) (90) (40) SSSS SSSS GAIN HRZN GAIN NEWT GAIN NEWT TSLX TSLX OCSL HTGC RAND HRZN HRZN HTGC ARCC WHF GSBD CSWC SAR PSEC TSLX MAIN SUNS HTGC GLAD ARCC OCSI ARCC SLRC TPVG SLRC WHF WHF TPVG GLAD MAIN SUNS OCSL SUNS PSEC NEWT SAR GSBD ORCC SLRC SCM MAIN
Slide 20: Strongly Differentiated Outperformance
Strongly Differentiated Outperformance Interest % on Portfolio LTM NII Yield LTM ROE 12.0% 11% 15% 10.0% 9.9% 10% 9.5% 9.9% 10.0% 9.5% 9.2% 9.3% 10% 9% 8.0% 5% 8% 6.0% 0% 7% 4.0% -5% 6% 2.0% 5% -10% -8.3% 0.0% 4% -15% -12.2% SAR BDC BDC SAR BDC BDC SAR BDC BDC Mean Median Mean Median Mean Median LTM
Slide 21: 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 $0.40c for the quarter ended May 31, 2020 representing current dividend yiel
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 FY21
KPIs – Balance Sheet – Q1 FY21 FMV Investment Portfolio FMV Investment Portfolio Period (in millions) Q3-18 $ 338.8 (in millions) Q4-18 $ 342.7 $500.0 Q1-19 $ 343.4 $450.0 Q2-19 $ 392.9 $400.0 Q3-19 $ 443.8 $350.0 Q4-19 $ 402.0 $300.0 Q1-20 $ 409.5 $250.0 Q2-20 $ 486.9 Q3-18 Q4-18 Q1-19 Q2-19 Q3-19
Slide 26: KPIs – Income Statement – Q1 FY21
KPIs – Income Statement – Q1 FY21 Net Interes t Margin Period (in millions ) Q3-18 $ 5.4 Net Interest Margin Excluding CLO Q4-18 $ 5.8 Q1-19 $ 6.0 (in millions) Q2-19 $ 6.5 $10.0 Q3-19 $ 7.2 $8.0 Q4-19 $ 6.4 $6.0 Q1-20 $ 6.3 Q2-20 $ 6.4 $4.0 Q3-20 $ 7.7 $2.0 Q4-20 $ 7.8 Q3-18 Q4-18 Q1-19 Q2-19 Q3-19
Slide 27: KPIs – Income Statement – Q4 FY20 (continued)
KPIs –Income Statement– Q4 FY20 (continued) Period EPS Q3-18 $ 0.71 $2.50 EPS Q4-18 $ 0.89 $2.00 Q1-19 $ 0.61 $1.50 Q2-19 $ 0.45 $1.00 Q3-19 $ 0.49 $0.50 Q4-19 $ 1.04 $- Q1-20 $ 0.99 $(0.50) Q2-20 $ 0.91 $(1.00) Q3-20 $ 1.37 $(1.50) Q4-20 $ 2.39 $(2.00) Q1-21 $ (2.02) $(2.50) Q3-18 Q4-18 Q1-19 Q2-19
Slide 28: KPIs - SAR Net Interest Margin
KPIs - SAR Net Interest Margin SAR has almost quadrupled its Net Interest Margin since taking over management Net Interest Margin $35,432 $33,364 14% increase in LTM $30,236 276% increase in 9 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