Saratoga Investment Corp. Announces Fiscal First Quarter 2025 Financial Results
Saratoga Investment Corp. (NYSE:SAR) announced its fiscal first-quarter 2025 results, highlighting a net investment income (NII) per share of $1.05, down from $1.35 last year but up from $0.94 in the previous quarter. The adjusted NII per share remained at $1.05. The company's annualized dividend of $0.74 per share implies a 13.1% yield, supported by its current earnings yielding 18.6%. The overall portfolio experienced a 19% increase in recurring net interest margin due to a 9% rise in average assets under management (AUM). However, the net asset value (NAV) per share decreased to $26.85 from $28.48 last year. Investment income grew by 11.7% year-over-year to $38.7 million. Despite these gains, portfolio adjustments led to a net reduction in portfolio value by $7.3 million this quarter. The company's liquidity remains strong with $93.3 million in cash and cash equivalents.
- Net investment income per share increased to $1.05, up from $0.94 in the previous quarter.
- Investment income grew 11.7% year-over-year to $38.7 million.
- Annualized dividend yield of 13.1%, supported by an 18.6% earnings yield.
- 19% increase in recurring net interest margin.
- Stable AUM at $1.096 billion, up 1.1% year-over-year.
- Net asset value per share decreased to $26.85 from $28.48 last year.
- Net reduction in portfolio value by $7.3 million this quarter.
- Realized losses of $21.2 million on Netreo and Zollege investments.
- Return on equity for the last twelve months down to 4.4% from 7.2%.
Insights
Saratoga Investment Corp's latest financial results show a blend of positive and negative elements. First, the Net Investment Income (NII) per share at
The decrease in Net Asset Value (NAV) from
Overall, the quarterly performance portrays a company that is managing to grow despite setbacks in specific investments. The consistent increase in dividends is a positive signal for shareholders, though the decline in NAV per share from
The company's decision to focus on follow-on investments rather than new portfolio companies this quarter is revealing. Originations stood at
The management has also highlighted the challenge of two specific investments, Pepper Palace and Zollege. The markdowns taken on these investments and the subsequent actions to restructure them indicate proactive management. While these restructurings resulted in short-term losses, they may lead to long-term value recovery if the new strategies prove effective.
Saratoga's strategy of maintaining a high percentage of first lien term loans, which are typically less risky than other types of debt, is another positive. The weighted average yield of
From a credit perspective, Saratoga's results present a mixed picture. While the company's net leverage has increased to
The ongoing issues with Pepper Palace and Zollege are notable. The markdowns and restructurings highlight the risks inherent in BDC portfolios. However, the fact that these issues are being actively managed and have not broadly impacted the overall portfolio's performance is reassuring. Furthermore, Saratoga's credit quality remains strong with
Investors should keep an eye on the management's ability to navigate these challenges and leverage the company's strong underwriting standards to maintain overall portfolio quality.
NEW YORK, July 09, 2024 (GLOBE NEWSWIRE) -- Saratoga Investment Corp. (NYSE:SAR) (“Saratoga Investment” or “the Company”), a business development company (“BDC”), today announced financial results for its 2025 fiscal first quarter, with Net Investment Income (“NII”) per share of
Saratoga Investment’s annualized first quarter dividend of
Summary Financial Information
The Company’s summarized financial information is as follows:
| For the three months ended and as of May 31, 2024 | For the three months ended and as of February 29, 2024 | For the three months ended and as of May 31, 2023 | ||||||||||
| ($ in thousands except per share) | ||||||||||||
| AUM | 1,095,559 | 1,138,794 | 1,084,098 | |||||||||
| NAV | 367,855 | 370,224 | 337,451 | |||||||||
| NAV per share | 26.85 | 27.12 | 28.48 | |||||||||
| Investment Income | 38,678 | 37,233 | 34,632 | |||||||||
| Net Investment Income per share | 1.05 | 0.94 | 1.35 | |||||||||
| Adjusted Net Investment Income per share | 1.05 | 0.94 | 1.08 | |||||||||
| Earnings per share | 0.48 | 0.39 | (0.02 | ) | ||||||||
| Dividends per share (declared) | 0.74 | 0.73 | 0.70 | |||||||||
| Return on Equity – last twelve months | 4.4 | % | 2.5 | % | 7.20 | % | ||||||
| – annualized quarter | 7.2 | % | 5.8 | % | (0.2 | )% | ||||||
| Originations | 39,301 | 43,217 | 139,819 | |||||||||
| Repayments | 75,703 | 11,023 | 11,067 | |||||||||
“Interest rates continue to remain stable, and market expectations appear to be for minimal changes for most of this calendar year. This has resulted in elevated recurring net interest margins on our portfolio relative to the past year. In addition, our strong reputation and differentiated market positioning, combined with our ongoing development of sponsor relationships, continues to create attractive investment opportunities from high quality sponsors. We appear to be seeing the early stages of a potential increase in M&A in the lower middle market, reflected in multiple repayments over the past few months,” said Christian L. Oberbeck, Chairman and Chief Executive Officer of Saratoga Investment.
“Saratoga’s solid overall performance is reflected in our continued strong key performance indicators this past quarter, including: (i) sequential adjusted NII per share increases of
“At the foundation of our strong operating performance is the high-quality nature, resilience and balance of our
“We continue to remain prudent and discerning in terms of new commitments in the current volatile environment. Originations this quarter demonstrate that, despite an overall robust pipeline, there are periods when investments we review do not meet our high-quality credit and pricing standards, like this quarter where we originated no new portfolio company investments while benefitting from sixteen follow-on investments in existing portfolio companies we know well with strong business models and balance sheets. With originations this quarter totaling
“As we navigate through the uncertainties in our current environment, we remain confident in our experienced management team, high underwriting standards and ability to steadily grow portfolio size and maintain quality and investment performance over the long-term.”
Discussion of Financial Results for the Quarter ended May 31, 2024:
As of May 31, 2024, Saratoga Investment’s AUM was
Since Saratoga Investment took over the management of the BDC,
For the three months ended May 31, 2024, total investment income of
As compared to the quarter ended May 31, 2023, adjusted net investment income for the quarter increased
Total expenses for first fiscal quarter 2025, excluding interest and debt financing expenses, base management fees and incentive fees, and income and excise taxes, increased from
The weighted average common shares outstanding increased from 11.9 million to 13.6 million to 13.7 million for the quarters ended May 31, 2023, February 29, 2024 and May 31, 2024, respectively.
Net investment income yield as a percentage of average net asset value (“Net Investment Income Yield”) was
Return on equity (“ROE”) for the last twelve months ended May 31, 2024 was
NAV was
NAV per share was
Investment portfolio activity for the quarter ended May 31, 2024:
- Cost of investments made during the period:
$39.3 million , including zero investments in new portfolio companies and sixteen follow-ons. - Principal repayments during the period:
$75.7 million , including one restructuring, one sales transaction, and one full and three partial repayments of existing investments, plus amortization.
Portfolio and Investment Activity
As of May 31, 2024, the fair value of Saratoga Investment’s portfolio was
As of May 31, 2024, the weighted average current yield on Saratoga Investment’s portfolio based on current fair values was
Liquidity and Capital Resources
As of May 31, 2024, Saratoga Investment had
With
Saratoga Investment has an active equity distribution agreement with Ladenburg Thalmann & Co. Inc., Raymond James and Associates, Inc, Lucid Capital Markets, LLC and Compass Point Research and Trading, LLC, through which Saratoga Investment may offer for sale, from time to time, up to
On June 14, 2024, Saratoga Investment and its wholly owned financing subsidiary, Saratoga Investment Funding III LLC (“SIF III”), entered into the First Amendment and Lender Joinder to the Credit and Security Agreement (the “Amendment” and the Credit and Security Agreement as amended by the Amendment, the “Credit Agreement”), by and among SIF III, as borrower, the Company, as collateral manager and as equityholder, the lenders parties thereto, and Live Oak Banking Company, as administrative agent and as collateral agent, relating to the special purpose vehicle financing credit facility (the “Live Oak Credit Facility”). The Amendment, among other things: (i) increased the borrowings available under the Live Oak Credit Facility from up to
Dividend
On May 23, 2024, Saratoga Investment announced that its Board of Directors declared a quarterly dividend of
The Company previously declared in fiscal 2024 a quarterly dividend of
Shareholders have the option to receive payment of dividends in cash or receive shares of common stock, pursuant to the Company’s DRIP.
Share Repurchase Plan
In fiscal year 2015, the Company announced the approval of an open market share repurchase plan that allows it to repurchase up to 200,000 shares of its common stock at prices below its NAV as reported in its then most recently published financial statements. Since then, the Share Repurchase Plan has been extended annually, and the Company has periodically increased the amount of shares of common stock that may be purchased under the Share Repurchase Plan, most recently to 1.7 million shares of common stock. On January 8, 2024, our board of directors extended the Share Repurchase Plan for another year to January 15, 2025.
As of May 31, 2024, the Company purchased 1,035,203 shares of common stock, at the average price of
2025 Fiscal First Quarter Conference Call/Webcast Information
| When: | Wednesday, July 10, 2024 | |
| 10:00 a.m. Eastern Time (ET) | ||
| How: | Webcast: Interested parties may access a live webcast of the call and find the Q1 2025 presentation by going to the “Events & Presentations” section of Saratoga Investment Corp.’s investor relations website, Saratoga events and presentations). A replay of the webcast will also be available for a limited time at Saratoga events and presentations). | |
| Call: | To access the call by phone, please go to this link (Registration Link), and you will be provided with dial in details. To avoid delays, we encourage participants to dial into the conference call fifteen minutes ahead of the scheduled start time. | |
About Saratoga Investment Corp.
Saratoga Investment is a specialty finance company that provides customized financing solutions to U.S. middle-market businesses. The Company invests primarily in senior and unitranche leveraged loans and mezzanine debt, and, to a lesser extent, equity to provide financing for change of ownership transactions, strategic acquisitions, recapitalizations and growth initiatives in partnership with business owners, management teams and financial sponsors. Saratoga Investment’s objective is to create attractive risk-adjusted returns by generating current income and long-term capital appreciation from its debt and equity investments. Saratoga Investment has elected to be regulated as a business development company under the Investment Company Act of 1940 and is externally managed by Saratoga Investment Advisors, LLC, an SEC-registered investment advisor focusing on credit-driven strategies. Saratoga Investment Corp. owns two active SBIC-licensed subsidiaries, having surrendered its first license after repaying all debentures for that fund following the end of its investment period and subsequent wind-down. Furthermore, it manages a
Forward Looking Statements
This press release contains historical information and forward-looking statements with respect to the business and investments of the Company, including, but not limited to, the statements about future events or our future performance or financial condition. Forward-looking statements can be identified by the use of forward looking words such as “outlook,” “believes,” “expects,” “potential,” “continues,” “may,” “will,” “should,” “seeks,” “approximately,” “predicts,” “intends,” “plans,” “estimates,” “anticipates” or negative versions of those words, other comparable words or other statements that do not relate to historical or factual matters. The forward-looking statements are based on our beliefs, assumptions and expectations of our future performance, taking into account all information currently available to us. These statements are not guarantees of future performance, condition or results and involve a number of risks and uncertainties. Actual results may differ materially from those in the forward-looking statements as a result of a number of factors, including, but not limited to: changes in the markets in which we invest; changes in the financial, capital, and lending markets; an economic downturn and its impact on the ability of our portfolio companies to operate and the investment opportunities available to us; the impact of interest rate volatility on our business and our portfolio companies; the impact of supply chain constraints and labor shortages on our portfolio companies; and the elevated levels of inflation and its impact on our portfolio companies and the industries in which we invests, as well as those described from time to time in our filings with the Securities and Exchange Commission.
Any forward-looking statement speaks only as of the date on which it is made. The Company undertakes no duty to update any forward-looking statements made herein or on the webcast/conference call, whether as a result of new information, future developments or otherwise, except as required by law. Readers should not place undue reliance on any forward-looking statements and are encouraged to review the Company’s Annual Report on Form 10-Q for the fiscal quarter ended May 31, 2024 and subsequent filings, including the “Risk Factors” sections therein, with the Securities and Exchange Commission for a more complete discussion of the risks and other factors that could affect any forward-looking statements.
Financials
| Saratoga Investment Corp. Consolidated Statements of Assets and Liabilities | ||||||||
| May 31, 2024 | February 29, 2024 | |||||||
| (unaudited) | ||||||||
| ASSETS | ||||||||
| Investments at fair value | ||||||||
| Non-control/Non-affiliate investments (amortized cost of | $ | 1,016,275,510 | $ | 1,019,774,616 | ||||
| Affiliate investments (amortized cost of | 28,593,356 | 27,749,137 | ||||||
| Control investments (amortized cost of | 50,690,574 | 91,270,036 | ||||||
| Total investments at fair value (amortized cost of | 1,095,559,440 | 1,138,793,789 | ||||||
| Cash and cash equivalents | 32,228,082 | 8,692,846 | ||||||
| Cash and cash equivalents, reserve accounts | 61,068,835 | 31,814,278 | ||||||
| Interest receivable (net of reserve of | 9,618,449 | 10,298,998 | ||||||
| Management fee receivable | 335,056 | 343,023 | ||||||
| Other assets | 1,686,122 | 1,163,225 | ||||||
| Current tax receivable | 15,431 | 99,676 | ||||||
| Receivable from open trade | 1,269,231 | - | ||||||
| Total assets | $ | 1,201,780,646 | $ | 1,191,205,835 | ||||
| LIABILITIES | ||||||||
| Revolving credit facilities | $ | 45,500,000 | $ | 35,000,000 | ||||
| Deferred debt financing costs, revolving credit facilities | (1,538,040 | ) | (882,122 | ) | ||||
| SBA debentures payable | 214,000,000 | 214,000,000 | ||||||
| Deferred debt financing costs, SBA debentures payable | (5,543,363 | ) | (5,779,892 | ) | ||||
| 20,000,000 | 20,000,000 | |||||||
| Discount on | (87,537 | ) | (112,894 | ) | ||||
| Deferred debt financing costs, | (3,667 | ) | (4,777 | ) | ||||
| 12,000,000 | 12,000,000 | |||||||
| Discount on | (162,963 | ) | (193,175 | ) | ||||
| Deferred debt financing costs, | (20,211 | ) | (24,210 | ) | ||||
| 5,000,000 | 5,000,000 | |||||||
| Deferred debt financing costs, | (60,707 | ) | (74,531 | ) | ||||
| 175,000,000 | 175,000,000 | |||||||
| Premium on | 502,419 | 564,260 | ||||||
| Deferred debt financing costs, | (1,495,746 | ) | (1,708,104 | ) | ||||
| 75,000,000 | 75,000,000 | |||||||
| Discount on | (283,594 | ) | (313,010 | ) | ||||
| Deferred debt financing costs, | (946,373 | ) | (1,033,178 | ) | ||||
| 15,000,000 | 15,000,000 | |||||||
| Deferred debt financing costs, | (255,476 | ) | (273,449 | ) | ||||
| 105,500,000 | 105,500,000 | |||||||
| Discount on | (114,881 | ) | (123,782 | ) | ||||
| Deferred debt financing costs, | (2,047,886 | ) | (2,224,403 | ) | ||||
| 46,000,000 | 46,000,000 | |||||||
| Deferred debt financing costs, | (1,186,999 | ) | (1,274,455 | ) | ||||
| 60,375,000 | 60,375,000 | |||||||
| Deferred debt financing costs, | (1,460,917 | ) | (1,563,594 | ) | ||||
| 57,500,000 | 57,500,000 | |||||||
| Deferred debt financing costs, | (1,577,477 | ) | (1,680,039 | ) | ||||
| Base management and incentive fees payable | 8,567,315 | 8,147,217 | ||||||
| Deferred tax liability | 4,136,772 | 3,791,150 | ||||||
| Accounts payable and accrued expenses | 1,324,378 | 1,337,542 | ||||||
| Interest and debt fees payable | 4,935,426 | 3,582,173 | ||||||
| Due to Manager | 370,091 | 450,000 | ||||||
| Total liabilities | 833,925,564 | 820,981,727 | ||||||
| Commitments and contingencies | ||||||||
| NET ASSETS | ||||||||
| Common stock, par value | 13,699 | 13,654 | ||||||
| Capital in excess of par value | 372,068,726 | 371,081,199 | ||||||
| Total distributable deficit | (4,227,343 | ) | (870,745 | ) | ||||
| Total net assets | 367,855,082 | 370,224,108 | ||||||
| Total liabilities and net assets | $ | 1,201,780,646 | $ | 1,191,205,835 | ||||
| NET ASSET VALUE PER SHARE | $ | 26.85 | $ | 27.12 | ||||
| Asset Coverage Ratio | 159.6 | % | 161.1 | % | ||||
| Saratoga Investment Corp. Consolidated Statements of Operations (unaudited) | ||||||||
| For the three months ended | ||||||||
| May 31, 2024 | May 31, 2023 | |||||||
| INVESTMENT INCOME | ||||||||
| Interest from investments | ||||||||
| Interest income: | ||||||||
| Non-control/Non-affiliate investments | $ | 31,224,277 | $ | 26,310,793 | ||||
| Affiliate investments | 496,840 | 727,086 | ||||||
| Control investments | 1,997,112 | 2,045,860 | ||||||
| Payment in kind interest income: | - | |||||||
| Non-control/Non-affiliate investments | 63,830 | 124,895 | ||||||
| Affiliate investments | 241,104 | 207,589 | ||||||
| Control investments | 283,313 | 141,563 | ||||||
| Total interest from investments | 34,306,476 | 29,557,786 | ||||||
| Interest from cash and cash equivalents | 624,631 | 804,289 | ||||||
| Management fee income | 804,456 | 816,788 | ||||||
| Dividend income(*): | ||||||||
| Non-control/Non-affiliate investments | 249,491 | 17,420 | ||||||
| Control investments | 1,297,050 | 1,823,510 | ||||||
| Total dividend from investments | 1,546,541 | 1,840,930 | ||||||
| Structuring and advisory fee income | 410,843 | 1,429,222 | ||||||
| Other income | 985,203 | 183,028 | ||||||
| Total investment income | 38,678,150 | 34,632,043 | ||||||
| OPERATING EXPENSES | ||||||||
| Interest and debt financing expenses | 12,962,081 | 11,692,822 | ||||||
| Base management fees | 4,982,580 | 4,564,189 | ||||||
| Incentive management fees expense (benefit) | 3,584,734 | 103,348 | ||||||
| Professional fees | 999,310 | 486,050 | ||||||
| Administrator expenses | 1,075,000 | 818,750 | ||||||
| Insurance | 77,596 | 81,901 | ||||||
| Directors fees and expenses | 113,000 | 89,068 | ||||||
| General and administrative | 609,127 | 830,728 | ||||||
| Income tax expense (benefit) | (60,283 | ) | 6,237 | |||||
| Total operating expenses | 24,343,145 | 18,673,093 | ||||||
| NET INVESTMENT INCOME | 14,335,005 | 15,958,950 | ||||||
| REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS | ||||||||
| Net realized gain (loss) from investments: | ||||||||
| Non-control/Non-affiliate investments | - | 90,691 | ||||||
| Control investments | (21,194,997 | ) | - | |||||
| Net realized gain (loss) from investments | (21,194,997 | ) | 90,691 | |||||
| Net change in unrealized appreciation (depreciation) on investments: | ||||||||
| Non-control/Non-affiliate investments | 14,156,825 | (1,728,134 | ) | |||||
| Affiliate investments | 601,223 | (245,284 | ) | |||||
| Control investments | (826,617 | ) | (14,348,889 | ) | ||||
| Net change in unrealized appreciation (depreciation) on investments | 13,931,431 | (16,322,307 | ) | |||||
| Net change in provision for deferred taxes on unrealized (appreciation) depreciation on investments | (461,001 | ) | 59,407 | |||||
| Net realized and unrealized gain (loss) on investments | (7,724,567 | ) | (16,172,209 | ) | ||||
| NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | $ | 6,610,438 | $ | (213,259 | ) | |||
| WEIGHTED AVERAGE - BASIC AND DILUTED EARNINGS (LOSS) PER COMMON SHARE | $ | 0.48 | $ | (0.02 | ) | |||
| WEIGHTED AVERAGE COMMON SHARES OUTSTANDING - BASIC AND DILUTED | 13,683,314 | 11,862,163 | ||||||
* Certain prior period amounts have been reclassified to conform to current period presentation.
Supplemental Information Regarding Adjusted Net Investment Income, Adjusted Net Investment Income Yield and Adjusted Net Investment Income per Share
On a supplemental basis, Saratoga Investment provides information relating to adjusted net investment income, adjusted net investment income yield and adjusted net investment income per share, which are non-GAAP measures. These measures are provided in addition to, but not as a substitute for, net investment income, net investment income yield and net investment income per share. Adjusted net investment income represents net investment income excluding any capital gains incentive fee expense or reversal attributable to realized and unrealized gains. The management agreement with the Company’s advisor provides that a capital gains incentive fee is determined and paid annually with respect to cumulative realized capital gains (but not unrealized capital gains) to the extent such realized capital gains exceed realized and unrealized losses for such year. In addition, Saratoga Investment accrues, but does not pay, a capital gains incentive fee in connection with any unrealized capital appreciation, as appropriate. All capital gains incentive fees are presented within net investment income within the Consolidated Statements of Operations, but the associated realized and unrealized gains and losses that these incentive fees relate to, are excluded. As such, Saratoga Investment believes that adjusted net investment income, adjusted net investment income yield and adjusted net investment income per share is a useful indicator of operations exclusive of any capital gains incentive fee expense or reversal attributable to gains. The presentation of this additional information is not meant to be considered in isolation or as a substitute for financial results prepared in accordance with GAAP. The following table provides a reconciliation of net investment income to adjusted net investment income, net investment income yield to adjusted net investment income yield and net investment income per share to adjusted net investment income per share for the quarters ended May 31, 2024 and May 31, 2023.
| For the Quarters Ended | ||||||||
| May 31, 2024 | May 31, 2023 | |||||||
| Net Investment Income | $ | 14,335,005 | $ | 15,958,950 | ||||
| Changes in accrued capital gains incentive fee expense/ (reversal) | - | (3,109,822 | ) | |||||
| Adjusted net investment income | $ | 14,335,005 | $ | 12,849,128 | ||||
| Net investment income yield | 15.5 | % | 18.7 | % | ||||
| Changes in accrued capital gains incentive fee expense/ (reversal) | - | (3.7 | )% | |||||
| Adjusted net investment income yield(1) | 15.5 | % | 15.0 | % | ||||
| Net investment income per share | $ | 1.05 | $ | 1.35 | ||||
| Changes in accrued capital gains incentive fee expense/ (reversal) | - | (0.27 | ) | |||||
| Adjusted net investment income per share(2) | $ | 1.05 | $ | 1.08 | ||||
| (1) | Adjusted net investment income yield is calculated as adjusted net investment income divided by average net asset value. | |
| (2) | Adjusted net investment income per share is calculated as adjusted net investment income divided by weighted average common shares outstanding. | |
Contact: Henri Steenkamp
Saratoga Investment Corp.
212-906-7800
Lena Cati
The Equity Group Inc.
212-836-9611
FAQ
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