Saratoga Investment Corp. · NYSE:SAR
Saratoga Investment — Q3 2020 Earnings Presentation
29 slides from Saratoga Investment's earnings presentation, Jan 9, 2020
Slide 1: Saratoga Investment Corp. Fiscal Third Quarter 2020 Shareholder Presentation
Saratoga Investment Corp. Fiscal Third Quarter 2020 Shareholder Presentation January 9, 2020
Slide 2: Continued Growth and Outperformance in Q3 FY20
Continued Growth and Outperformance in Q3 FY20 Fiscal Third Quarter 2020 Highlights: • Continued high quality portfolio and strong performance ▫ Investment quality remains strong 99.0% of loan investments with highest internal rating ▫ Return on equity of 17.6% for LTM and 21.7% for Q3, beating BD
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 $487 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 $0 0% Investments at Fair Value (
Slide 4: Q3 FY20: Strong Financial Foundation and Momentum
Q3 FY20: Strong Financial Foundation and Momentum Key Performance Metrics for the Fiscal Quarter For the quarter ended and as of Nov 30, 2018 Aug 31, 2019 Nov 30, 2019 ($ in millions except per share) $10,000 Net investment income $5,139 $4,956 $4,575 $0 $7,000 $3,500 Adjusted net investment income*
Slide 5: NAV Growth Continues Accretively
NAV Growth Continues Accretively Net Asset Value (FY11 to FY20) in millions 26% increase this quarter $282.2 $270 63% increase year-over-year 228% increase in 9 years $220 $224.3 $186.8 $170 $180.9 $143.7 $120 $125.1 $127.3 $122.6 $107.0 $113.0 $97.0 $86.0 $70 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015
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 ($0.01) $0.10 ($0.07) ($0.01) $0.04 ($0.12) $0.68 $0.61 Adjusted NII per Increase in non-CLO Decrease in CLO Decrease in Increase in Base Increase in Dilution
Slide 7: Dry Powder Remains Available
Dry Powder Remains Available Total Remaining Fixed / Borrowing Available Maturity Floating (As of Nov 30, 2019) Capacity Outstanding Liquidity Period Rate Secured Revolving $45.0 million $0.0 million $45.0 million 6 Years Floating Credit Facility SBIC $150.0 million $150.0 million $0.0 million 4-9 y
Slide 8: Portfolio Composition and Yield
Portfolio Composition and Yield Portfolio Composition – $487.0 m Portfolio Yield – 9.8% (Based on Fair Values (Weighted Average as of Nov 30, 2019) Current Yield of Existing Portfolio) Unsecured Unsecured Term Term Loans, Loans, 0.4% 0.0% Second Second Lien, Lien, 20.8% Structured 11.4% 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% 9.8% Totals* $500 $450 14.9% $400 $350 14.6% 5.9% 21.2% 10.1% $ 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
Slide 10: Diversified Across Industry and Geography
Diversified Across Industry and Geography Investments diversified geographically Investments across 9 distinct industries Consumer Services West Property Northeast Management Southwest Healthcare Services Structured Finance Metals Other Consumer Business Products Services Midwest Education 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) $35,000 $29,309 $30,000 $25,000 $20,000 $15,000 $12,368 $12,610 $10,000 $4,874 $5,000 $3,276 $562 $1,271 $226 $0 FY13 FY14 FY15 FY16
Slide 12: Strong Net Realized Gains Flow from Disciplined Underwriting
-20% -15% -10% 0% 5% -5% 10% MVC 7.3% GAIN 6.1% CSWC 4.2% SAR 2.8% WHF 2.4% ARCC 1.7% MAIN 0.8% OFS 0.6% GBDC 0.5% PFLT 0.3% ORCC 0.0% BCSF -0.2% SLRC -0.2% SCM -0.3% PNNT -0.5% Calculated as realized gains as proportion of average cost TSLX -0.5% SUNS -0.6% CGBD -0.6% FDUS -0.7% HTGC -0.7% -0.7% 12
Slide 13: 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 is 4.86x1 New Portfolio 8 7 8 9 Companies Number of executed investments 16 18 24 22 10 Multiples for SAR 8 8 deals at low end of 8 8 YTD industry 7 average
Slide 14: 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. Calendar* 2016 ∆ 2017 ∆ 2018 ∆ 2019 • 60% of deal flow from private equity sponsors • 40% of deals from private companies without Deals institution
Slide 15: Demonstrated Strong Track Record
Demonstrated Strong Track Record Realized Investments Unrealized Investments 1 (Gross Unlevered IRR%) (Gross Unlevered IRR%) $66.1m $306.0m 20% $435.4m $283.3m 17.8% 18% 15.6% $129.4m $455.1m 16% 14.8% 16% 14.7% 14.1% 14% 12.7% 14% $105.7m 12% 12% 10.1% 10% 10% 8% 8% 6% 6% 4% 4% 2% $0.0m 2% 0% 0% SB
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 and $22m of available capacity in FY13, FY14, FY15, $250 FY16, FY17, FY18, FY19 and $41.8 Q3FY20, respectively (debt and $17.2 $22.3 $50.9 $19.1 equity at 2:1 le
Slide 17: Strong Long-Term Dividend Growth
Strong Long-Term Dividend Growth • Established dividend policy to pay regular Dividends Per Share* quarterly cash dividends to stockholders 0.55 0.56 0.56 0.54 pursuant to dividend 0.49 0.50 0.51 0.52 0.53 reinvestment plan 0.48 0.47 0.45 0.46 0.44 0.43 (“DRIP”) 0.40 0.41 • Increased dividend 0.33 0
Slide 18: Year-Over-Year Quarterly Dividend Growth at Top of Industry
-50% -40% -30% -10% -20% 0% 10% 20% 30% 40% 50% 60% BBDC 50.0% NEWT 42.0% CSWC 17.6% MAIN 7.0% SAR 5.7% HTGC 3.2% ARCC 2.6% OXSQ 0.5% OCSI 0.0% GAIN 0.0% FDUS 0.0% Source: Raymond James report as of 12/13/2019 ICMG 0.0% OCSL 0.0% SLRC 0.0% NMFC 0.0% MVC 0.0% SCM 0.0% GEOC 0.0% GLAD 0.0% 18 TPVG 0.0%
Slide 19: SAR LTM Total Return Outperforms BDC Index
SAR LTM Total Return Outperforms BDC Index LTM Total Return (%) (December 2018 to December 2019) SAR +31% v BDC Index +27% 40 35 30 25 20 15 10 5 0 -5 -10 -15 Dec-18 Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 SAR US Equity WFBDC Index 19
Slide 20: Performance at Top of BDC Industry
0 10 20 30 40 50 60 70 100 120 140 100 150 200 250 300 0 0 20 40 60 80 50 (40) (20) (50) GAIN ABDC GAIN GAIN AINV CSWC SAR HTGC SAR MAIN GLAD TPVG WHF TPVG SCM TSLX OHAI TSLX SCM ARCC CSWC OCSL HRZN ARCC SAR WHF GLAD CPTA GLAD ARCC SUNS MAIN MAIN FDUS SSSS FDUS TPVG SUNS SUNS SLRC HTGC BCSF NMFC OFS
Slide 21: Strongly Differentiated Outperformance
Strongly Differentiated Outperformance Interest % on Portfolio LTM NII Yield LTM ROE 10.5% 11% 20% 10.2% 17.6% 10.4% 18% 10.4% 10% 9.3% 9.2% 16% 10.3% 9% 14% 10.2% 8% 12% 10.1% 10.1% 10% 10.1% 7% 7.6% 7.6% 8% 10.0% 6% 6% 9.9% 5% 4% 2% 9.8% 4% 0% SAR BDC BDC SAR BDC BDC SAR BDC BDC Mean Median Mean M
Slide 22: Establishing Competitive Edge vs. Other BDCs
Establishing Competitive Edge vs. Other BDCs Outstanding performance characteristics Strong and growing Paying a current dividend yield of approx. 9.0%; increased quarterly dividend by 211% ► dividend since program launched; significant management ownership of 14% LTM ROE of 17.6% factors in both in
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 available financing to b
Slide 24: Questions?
Questions? & K' SARATOGA Pt INVESTMENT CORP.
Slide 25: Appendix
& K' SARATOGA Pt INVESTMENT CORP.
Slide 26: KPIs – Balance Sheet – Q3 FY20
KPIs – Balance Sheet – Q3 FY20 FMV Inve stme nt Po rtfo lio FMV Investment Portfolio Pe rio d (in millio ns) (in millions) Q2-18 $ 330.0 Q3-18 $ 338.8 $500.0 Q4-18 $ 342.7 $450.0 Q1-19 $ 343.4 $400.0 Q2-19 $ 392.9 $350.0 Q3-19 $ 443.8 $300.0 Q4-19 $ 402.0 $250.0 Q1-20 $ 409.5 Q2-18 Q3-18 Q4-18 Q1-19
Slide 27: KPIs – Income Statement – Q3 FY20
KPIs – Income Statement – Q3 FY20 Ne t Inte re st Margin Net Interest Margin Excluding CLO Pe rio d (in millio ns) (in millions) Q2-18 $ 5.5 Q3-18 $ 5.4 $8.0 Q4-18 $ 5.8 $7.0 Q1-19 $ 6.0 $6.0 Q2-19 $ 6.5 $5.0 $4.0 Q3-19 $ 7.2 $3.0 Q4-19 $ 6.4 $2.0 Q1-20 $ 6.3 Q2-18 Q3-18 Q4-18 Q1-19 Q2-19 Q3-19 Q4-1
Slide 28: KPIs –Income Statement– Q3 FY20 (continued)
KPIs –Income Statement– Q3 FY20 (continued) Pe rio d EPS EPS Q2-18 $ 1.15 $1.60 Q3-18 $ 0.71 $1.40 Q4-18 $ 0.89 $1.20 Q1-19 $ 0.61 $1.00 Q2-19 $ 0.45 $0.80 Q3-19 $ 0.49 $0.60 Q4-19 $ 1.04 $0.40 Q1-20 $ 0.99 $0.20 Q2-20 $ 0.91 $- Q3-20 $ 1.37 Q2-18 Q3-18 Q4-18 Q1-19 Q2-19 Q3-19 Q4-19 Q1-20 Q2-20 Q3-2
Slide 29: 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 $32,821 $30,194 9% increase in LTM 248% 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 Q3F