Saratoga Investment Corp. · NYSE:SAR
Saratoga Investment — Q4 2020 Earnings Presentation
31 slides from Saratoga Investment's earnings presentation, May 7, 2020
Slide 1: Fiscal Fourth Quarter and Fiscal Year 2020 Shareholder Presentation
Saratoga Investment Corp. Fiscal Fourth Quarter and Fiscal Year 2020 Shareholder Presentation May 7, 2020
Slide 2: Continued Growth and Outperformance in Q4 & FY20
Continued Growth and Outperformance in Q4 & FY20 Fiscal Year-End and Fourth Quarter 2020 Highlights: • Continued high quality portfolio and strong performance ▫ Investment quality remains strong 99.0% of loan investments with highest internal rating as of February 29, 2020 ▫ Return on equity of 23
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 $600 100% $500 $486 98.6% 99.0% 80% $400 96.8% $402 94.1% 98.3% $300 $343 60% 94.2% $284 $293 90.5% $200 $241 82.4% $206 40% 64.3% $155 $100 $95 20% $80 $0 0% Investments at Fair Value (
Slide 4: Q4 FY20: Strong Financial Foundation and Momentum
Q4 FY20: Strong Financial Foundation and Momentum Key Performance Metrics for the Fiscal Quarter For the quarter ended and as of Feb 28, 2019 Nov 30, 2019 Feb 29, 2020 ($ in millions except per share) $5,000 Net investment income $4,091 $4,575 $66 $0 $10,500 $7,000 Adjusted net investment income* $4
Slide 5: FY20: Strong Financial Foundation and Momentum
FY20: Strong Financial Foundation and Momentum Key Performance Metrics for the Fiscal Year For the year ended and as of Feb 28, 2018 Feb 28, 2019 Feb 29, 2020 ($ in millions except per share) $15,000 Net investment income $12,732 $18,302 $13,278 $0 $15,000 Adjusted net investment income* $13,651 $18
Slide 6: NAV Growth Continues Accretively
NAV Growth Continues Accretively Net Asset Value (FY11 to FY20) in millions $350 8% increase this quarter $300 68% increase year-over-year $304.3 254% increase in 9 years $282.2 $250 $224.3 $200 $186.8 $180.9 $150 $143.7 $125.1 $127.3 $122.6 $100 $107.0 $113.0 $97.0 $86.0 $50 6
Slide 7: 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 ($0.24) $0.30 $0.01 ($0.01) ($0.06) $0.61 $0.61 Adjusted NII per Increase in non-CLO Net Decrease in CLO Increase in Decrease in Dilution from Adjusted NII pe
Slide 8: Annual Reconciliation of NII and NAV per Share
Annual Reconciliation of NII and NAV per Share • Impacts are shown net Reconciliation of Annual Adjusted NII per Share of incentive fee ($0.10) ($0.03) ($0.14) $0.50 $0.10 ($0.66) $0.19 $2.63 $2.49 Adjusted NII per Increase in Increase in CLO Increase in Increase in Base Increase in Decrease in Dilu
Slide 9: Dry Powder Remains Available
Dry Powder Remains Available Total Remaining Fixed / Borrowing Available Maturity Floating (As of Feb 29, 2020) Capacity Outstanding Liquidity Period Rate Secured Revolving $45.0 million $0.0 million $45.0 million 5.5 Years Floating Credit Facility SBIC $150.0 million $150.0 million $0.0 million 3-9
Slide 10: Portfolio Composition and Yield
Portfolio Composition and Yield Portfolio Composition – $485.6 m Portfolio Yield – 9.3% (Based on Fair Values (Weighted Average as of Feb 29, 2020) Current Yield of Existing Portfolio) Second Second Lien, Lien, 15.1% Unsecured 10.7% Unsecured Term Term Loans, Loans, 0.9% 9.3% Structured Structured F
Slide 11: 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% Totals* $500 11.4% $450 $400 14.6% $350 5.9% 21.2% 9.8% $ 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% 18.6% $150 27.1% 11.1% 10.6% $100 1
Slide 12: Diversified Across Industry and Geography
Diversified Across Industry and Geography Investments diversified geographically Investments across 9 distinct industries Consumer Structured Services Finance West Property Healthcare Management Services Southwest Northeast Metals Consumer Other Products Business Midwest Services* Education Food and
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) $70,000 $59,576 $60,000 $50,000 $42,877 $40,000 $30,000 $20,000 $12,368 $10,000 $4,874 $3,276 $562 $1,271 $226 $0 FY13 FY14 FY15 FY16
Slide 14: Strong Net Realized Gains Flow from Disciplined Underwriting
Strong Net Realized Gains Flow from Disciplined Underwriting Last 3 Year Average Net Realized Gains (Loss) 15% as a Percentage of Portfolio at Cost* 11.0% 10% SAR is one of only 10 BDCs to have 7.3% 6.1% positive net realized gains for the 4.2% 5% past 3 years. 2.4% 1.7% 0.8% 0.6% 0.5% 0.3% 0.0% 0%
Slide 15: Exercising Disciplined Investment Judgment While Growing Origination Pace
Exercising Disciplined Investment Judgment While Growing Origination Pace SAR Debt Multiples/Deals Closed (2016-2019) Total Portfolio Leverage with EBITDA underwriting is 4.33x1 March 31, 2020* March 31, 2019* >7.0x 0.1% >7.0x 6.7% 66.7% 76.7% 6.0x-6.9x 33.3% 6.0x-6.9x 23.3% 5.0x-5.9x 33.3% 5.0x-5.9
Slide 16: Robust and Growing Pipeline During Tough Execution Market
Robust and Growing Pipeline During Tough Execution Market The number of new business opportunities remains strong, yet we remain as disciplined as ever – reduction reflects early impact of Covid-19 during March 2020 LTM Q1 Calendar* 2017 ∆ 2018 ∆ 2019 ∆ 2020 • 50% of deal flow from private equity sp
Slide 17: Demonstrated Strong Track Record
Demonstrated Strong Track Record Realized Investments Unrealized Investments 1 (Gross Unlevered IRR%) (Gross Unlevered IRR%) $70.0m $345.0m 18% 17.0% $474.4m $279.0m $458.4m 20% 18.5% 16% 18% 16.9% 13.7% 13.5% 14% $129.4m $109.4m 16% 12% 10.7% 14% 12.7% 12% 10% 10% 8% 8% 6% 6% 4% 4% 2% $0.0m 2% 0% 0
Slide 18: 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 and $10m of available capacity in FY13, FY14, FY15, $250 FY16, FY17, FY18, FY19 and FY20, $41.8 $17.2 $10.5 respectively (debt and equity at 2:1 $50.9 $19.1 leve
Slide 19: Year-Over-Year Quarterly Dividend Growth at Top of Industry
-40% -30% -20% -10% 0% 10% 20% 30% 40% BBDC 33.3% MVC 13.3% CSWC 11.1% NEWT 10.0% MAIN 5.1% TSLX 5.1% SAR 3.7% HTGC 3.2% GBDC 3.1% ARCC 2.6% Source: Raymond James report as of 4/9/2020 OXSQ 0.5% AINV 0.0% BCSF 0.0% CGBD 0.0% CPTA 0.0% FDUS 0.0% FSK 0.0% GAIN 0.0% GECC 0.0% GLAD 0.0% 19 GSBD 0.0% Ind
Slide 20: Dividend Deferred In Light of COVID-19 Uncertainty
Dividend Deferred In Light of COVID-19 Uncertainty • Established dividend policy to pay regular Dividends Per Share* quarterly cash dividends to stockholders pursuant 0.53 0.54 0.55 0.56 0.56 0.52 to dividend 0.48 0.49 0.50 0.51 0.47 reinvestment plan 0.43 0.44 0.45 0.46 0.41 (“DRIP”) 0.40 0.36 • In
Slide 21: SAR LTM Total Return In Line with BDC Index
SAR LTM Total Return In Line with BDC Index LTM Total Return (%) (April 2019 to April 2020) SAR -36% v BDC Index -36% 21
Slide 22: BDC Total Return Comparison
0 (80) (60) (40) (100) (20) 100 150 0 0 20 40 60 50 (80) (60) (40) (20) (50) (100) (100) ORCC SSSS SSSS GAIN GAIN NEWT TSLX NEWT SAR GAIN HRZN TSLX ARCC OCSL MAIN NEWT TSLX ARCC HRZN CSWC GLAD HTGC ARCC HRZN OCSI HTGC OCSI PSEC ORCC SCM BBDC GLAD SUNS OCSL MAIN SLRC GLAD SAR GBDC MAIN SUNS WHF SUNS
Slide 23: Strongly Differentiated Outperformance
Strongly Differentiated Outperformance Interest % on Portfolio LTM NII Yield LTM ROE 12.0% 11% 25% 23.6% 9.8% 10.2% 9.9% 9.7% 10% 10.0% 9.2% 9.1% 20% 9% 8.0% 8% 15% 6.0% 7% 8.8% 10% 8.5% 4.0% 6% 2.0% 5% 5% 0.0% 4% 0% SAR BDC BDC SAR BDC BDC SAR BDC BDC Mean Median Mean Median Mean Median Year-over-Y
Slide 24: Establishing Competitive Edge vs. Other BDCs
Establishing Competitive Edge vs. Other BDCs Outstanding performance characteristics Strong and growing Paid an LTM dividend yield of approx. 13.9%; increased quarterly dividend by 211% since ► long-term dividend program launched; significant management ownership of 11% Strong return on LTM ROE of 2
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 available financing to b
Slide 26: Questions?
Questions? & K' SARATOGA Pt INVESTMENT CORP.
Slide 27: Appendix
& K' SARATOGA Pt INVESTMENT CORP.
Slide 28: KPIs – Balance Sheet – Q4 FY20
KPIs – Balance Sheet – Q4 FY20 FMV Investment Portfolio FMV Investment Portfolio Period (in millions) Q3-18 $ 338.8 (in millions) $500.0 Q4-18 $ 342.7 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 Q2-20 $ 486.9 $250.0 Q3-20 $ 487.0 Q3-18 Q4-18 Q1-1
Slide 29: KPIs – Income Statement – Q4 FY20
KPIs – Income Statement – Q4 FY20 Net Interest Margin Net Interest Margin Excluding CLO Period (in millions) (in millions) Q3-18 $ 5.4 Q4-18 $ 5.8 $8.0 Q1-19 $ 6.0 Q2-19 $ 6.5 $7.0 Q3-19 $ 7.2 Q4-19 $ 6.4 $6.0 Q1-20 $ 6.3 Q2-20 $ 6.4 $5.0 Q3-20 $ 7.7 Q3-18 Q4-18 Q1-19 Q2-19 Q3-19 Q4-19 Q1-20 Q2-20 Q
Slide 30: KPIs – Income Statement – Q4 FY20 (continued)
KPIs –Income Statement– Q4 FY20 (continued) Period EPS EPS Q3-18 $ 0.71 $2.60 $2.40 Q4-18 $ 0.89 $2.20 Q1-19 $ 0.61 $2.00 $1.80 Q2-19 $ 0.45 $1.60 $1.40 Q3-19 $ 0.49 $1.20 Q4-19 $ 1.04 $1.00 $0.80 Q1-20 $ 0.99 $0.60 Q2-20 $ 0.91 $0.40 $0.20 Q3-20 $ 1.37 $- Q4-20 $ 2.39 Q3-18 Q4-18 Q1-19 Q2-19 Q3-19
Slide 31: KPIs - SAR Net Interest Margin
KPIs - SAR Net Interest Margin SAR has more than tripled its Net Interest Margin since taking over management Net Interest Margin $33,364 10% increase in LTM $30,236 253% 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 FY19 FY