Saratoga Investment Corp. · NYSE:SAR
Saratoga Investment — Q1 2023 Earnings Presentation
29 slides from Saratoga Investment's earnings presentation, Jul 7, 2022
Slide 1: Fiscal First Quarter 2023 Shareholder Presentation
Saratoga Investment Corp. Fiscal First Quarter 2023 Shareholder Presentation July 7, 2022
Slide 2: Continued Growth and Strong Long-Term Performance
Continued Growth and Strong Long-Term Performance Fiscal First Quarter 2023 Highlights: • Continued high quality portfolio and strong performance ▫ Investment quality remains strong 95.0% of loan investments with highest internal rating and only one non-accrual ▫ Return on equity of 6.9% for LTM
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 $1,000 100% $900 98.5% $895 99.0% 95.0% $800 93.3% $818 98.6% $700 96.8% $600 98.3% 98.3% $500 $554 80% $486 94.2% $400 90.5% $402 82.4% $300 $343 $284 $293 $200 $241 $206 $100 $155 $95
Slide 4: Q1 FY23: Strong Financial Foundation and Momentum
Q1 FY23: Strong Financial Foundation and Momentum Key Performance Metrics for the Fiscal Quarter For the quarter ended and as of May 31, 2021 Feb 28, 2022 May 31, 2022 ($ in millions except per share) $10,000 Net investment income $2,556 $5,797 $7,976 $0 $6,500 Adjusted net investment income* $6,254
Slide 5: Long-Term Accretive NAV and NAV Per Share Growth
Long-Term Accretive NAV and NAV Per Share Growth Net Asset Value and NAV per Share (FY11 to Q1FY23) NAV: 3% decrease this quarter. 301% increase since Saratoga took over management. NAV/Share: 2% decrease this quarter. Unchanged year-over-year. 31% increase since FY17 with increases 17 of the last 2
Slide 6: Quarterly Reconciliation of NII and NAV per Share
Quarterly Reconciliation of NII and NAV per Share • Impacts are shown net of incentive fee Reconciliation of Quarterly Adjusted NII per Share • Zero net accretion/dilution from share repurchase plan, DRIP and ATM equity offering. ($0.11) $0.17 ($0.06) $0.53 $0.53 Adjusted NII per Increase in non-CLO
Slide 7: Dry Powder Remains Available
Dry Powder Remains Available Total Remaining Fixed / Borrowing Available Maturity Floating (As of May 31, 2022) Capacity Outstanding Liquidity Period Rate Secured Revolving Credit $50.0 million $25.0 million $25.0 million 2.5 Years Floating Facility SBIC I $86.0 million $86.0 million $0.0 million 2-
Slide 8: Portfolio Composition and Yield
Portfolio Composition and Yield Portfolio Composition – $894.5 m Portfolio Yield – 7.7% (Based on Fair Values (Weighted Average as of May 31, 2022) Current Yield of Existing Portfolio) Structured Common Structured Second Finance Equity, Finance Lien, 4.3% Second Securities, 9.9% Securities, Lien, 7.
Slide 9: Yield of BDC Will Grow With Rising Rates
Yield of BDC Will Grow 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% 7.7% Totals* $800 8.0% $700 10.5% $600 11.6% 8.5% $ Millions $500 11.4% 8.5% $400 14.6% 9.6% 5.9% 21.2% 9.8% $300 7.6% 5.3% 16.4% 14.0% 10.9% 6.2% 25.2% 11.2
Slide 10: Diversified Across Geography
Diversified Across Geography Investments Diversified Geographically Southwest 11.6% Northeast West 10.4% 23.9% Other 6.5% Midwest 17.4% Southeast Northwest 29.9% 0.3% 10
Slide 11: Diversified Across Industry
Diversified Across Industry Investments across 38 distinct industries Specialty Food Retailer , Structured Finance HVAC Services and Sales, 3.2% Marketing Orchestration Direct Selling Software, Securities(1), 3.7% 3.9% Software, 3.2% 2.9% Education Services, 4.0% Sports Talent Acquisition Software,
Slide 12: 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) $80,000 $73,159 $70,000 $60,000 $50,000 $42,877 $40,000 $30,000 $20,000 $12,368 $13,398 $10,000 $4,874 $3,276 $562 $1,271 $226 $22 $1
Slide 13: Strong Net Realized Gains Flow from Disciplined Underwriting
Strong Net Realized Gains Flow from Disciplined Underwriting Last 3 Year Average Realized Gains (Loss) as a Percentage of Portfolio at Cost* 6.0% SAR is one of only 14 BDCs to 3.5% have positive net realized gains 3.2% 3.0% 4.0% 2.2% for the past three years. 0.9% 1.3% 0.7% 0.6% 2.0% 0.4% 0.1% 0.1%
Slide 14: Exercising Disciplined Investment Judgment While Growing Origination Pace
Exercising Disciplined Investment Judgment While Growing Origination Pace SAR Debt Multiples/Deals Closed (2018-2022) Portfolio leverage with non-recurring revenue underwriting is 4.29x1 Average Middle Market December 31, 2021 March 31, 2022 All Senior 4.08x 4.08x 1st Lien/Mezz 5.22x 5.41x 4.29x 1st
Slide 15: Pipeline Growth Interrupted by COVID-19
Pipeline Growth Interrupted by COVID-19 New business opportunities severely impacted by COVID-19 but healthy success in term sheets and deals executed driven by investments in team and strong reputation LTM ◊ Q1- Q1- Q2 ◊ Q2 Q2 Calendar* 2018 ∆ 2019 ∆ 2020 ∆ 2021 ∆ 2022 ◊ 2021 ∆ 2022 ◊ •~78% of deal
Slide 16: Demonstrated Strong Track Record
Demonstrated Strong Track Record Realized Investments Unrealized Investments 1 (Gross Unlevered IRR%) (Gross Unlevered IRR%) $440.1m 20% $89.8m 17.8% 17.6% $768.7m 16% 18% 16.3% $330.5m $148.2m 16% 14% 13.2% $838.7m $238.8m $359.9m 12.0% 12.0% 14% 13.0% 12% 10.9% 12% 10% 10% 8% 8% 6% 6% 4% 4% 2% 2%
Slide 17: SBIC I Fully Funded - SBIC II Still Available
SBIC I Fully Funded - SBIC II Still Available $300 SBIC second license SBIC I Assets* provided $103m, $107m, $78m and $47m of available capacity in FY20, FY21, FY22 and Q1FY23 $250 respectively (debt and $41.8 $10.5 equity at 2:1 leverage) $17.2 $50.9 $19.1 $6.6 $2.6 $1.8 SBIC II Assets* $200 $104.9
Slide 18: Long-Term Dividend Growth
Long-Term Dividend Growth • Established dividend policy to pay regular quarterly cash dividends Dividends Per Share* to stockholders pursuant to dividend reinvestment plan (“DRIP”) in 2014 $0.56 $0.56 $0.55 $0.54 $0.53 $0.53 $0.53 $0.53 $0.52 $0.52 $0.51 • Increased dividend by $0.50 $0.49 $0.48 $0.
Slide 19: SAR LTM Total Return Outperforms BDC Index
SAR LTM Total Return Outperforms BDC Index LTM Total Return (%) (June 2021 to June 2022) SAR -3% v BDC Index -9% 20.00% Hundreds 15.00% 10.00% 5.00% 0.00% -5.00% -10.00% -15.00% Jun-21 Jul-21 Aug-21 Sep-21 Oct-21 Nov-21 Dec-21 Jan-22 Feb-22 Mar-22 Apr-22 May-22 Jun-22 Pricing Date SAR-Total Return (
Slide 20: Long-Term Performance at Top of BDC Industry
100 150 200 0 50 100 0 20 40 60 80 0 5 (25) (20) (10) (15) (5) SSSS CGBD SSSS OCSL PTMN EQS GAIN SAR FDUS NEWT BCSF PSEC CSWC BKCC OCSL FDUS NMFC GAIN ARCC SCM HTGC TCPC HTGC PNNT PFX TPVG WHF WHF SAR TSLX TSLX WHF OFS FSK TSLX GLAD GSBD HRZN ARCC Average GLAD PFLT GLAD PFLT ORCC CGBD OFS CCAP CCAP
Slide 21: Solid Long-Term Performance
Solid Long-Term Performance Interest % on Portfolio Regulatory Debt/Equity** LTM NII Yield LTM ROE 10.0% 9.3% 10% 116% 9.2% 14% 113.7% 9.0% 8.5% 8.5% 9.0% 11.9% 11.2% 114% 9% 12% 8.0% 112% 7.0% 8% 7.7% 10% 110% 6.0% 108% 8% 6.9% 105.4% 5.0% 7% 106% 6% 103.2% 4.0% 104% 6% 3.0% 4% 102% 2.0% 5% 100% 2%
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 recent deferral; Latest Strong long-term ► dividend dividend declared of 53c per share for the quarter ended May 31, 2022, up 20% last twelve months,
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 – Q1 FY23
KPIs – Balance Sheet – Q1 FY23 FMV Investment Portfolio FMV Investment Portfolio Period (in millions) (in millions) Q1-21 $ 482.9 $900.0 Q2-21 $ 508.1 $800.0 Q3-21 $ 546.9 $700.0 Q4-21 $ 554.3 $600.0 Q1-22 $ 677.8 $500.0 Q2-22 $ 666.1 $400.0 Q3-22 $ 661.8 Q1-21 Q2-21 Q3-21 Q4-21 Q1-22 Q2-22 Q3-22 Q4
Slide 27: KPIs – Income Statement – Q1 FY23
KPIs – Income Statement – Q1 FY23 Net Interest Margin Net Interest Margin Excluding CLO Period (in millions) (in millions) Q1-21 $ 8.6 Q2-21 $ 7.8 Q3-21 $ 7.7 $9.5 Q4-21 $ 8.7 $8.5 Q1-22 $ 7.7 Q2-22 $ 8.6 $7.5 Q3-22 $ 8.0 Q1-21 Q2-21 Q3-21 Q4-21 Q1-22 Q2-22 Q3-22 Q4-22 Q1-23 Q4-22 $ 9.0 Q1-23 $ 9.2
Slide 28: KPIs – Income Statement– Q1 FY23 (continued)
KPIs – Income Statement– Q1 FY23 (continued) EPS $2.50 Period EPS $2.00 Q1-21 $ (2.02) $1.50 Q2-21 $ 1.95 $1.00 Q3-21 $ 0.57 $0.50 Q4-21 $ 0.83 $- Q1-22 $ 1.88 $(0.50) Q2-22 $ 0.71 $(1.00) Q3-22 $ 0.73 $(1.50) Q4-22 $ 0.70 $(2.00) Q1-23 $ (0.12) $(2.50) Q1-21 Q2-21 Q3-21 Q4-21 Q1-22 Q2-22 Q3-22 Q4-2
Slide 29: KPIs - SAR Net Interest Margin
KPIs - SAR Net Interest Margin SAR has quadrupled its Net Interest Margin since taking over management Net Interest Margin $39,678 2% increase in LTM $38,964 $38,127 299% increase in 11 years $33,364 $30,236 $24,185 $19,460 $17,309 $18,414 $14,096 $11,904 $9,956 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY