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Aug 31, 2023
Saratoga Investment Q2 2024 Earnings Report
Announced fiscal second quarter 2024 financial results, showing growth in AUM and improved margins from rising rates.
Key Takeaways
Saratoga Investment Corp. reported financial results for its fiscal second quarter 2024, featuring a substantial year-over-year increase in earnings driven by growth in AUM, stable portfolio performance, and margin improvement from rising rates. Adjusted NII per share remained steady at $1.08, up 86% from the previous year. The company's portfolio remains strong, with 84.6% of the portfolio in first liens, and a continued high level of investment quality in loan investments, with 98.2% of its loans this quarter at its highest internal rating.
Adjusted NII per share was $1.08, unchanged from the previous quarter and up 86% year-over-year.
Assets under management grew to $1.099 billion.
The dividend increased to $0.71 per share, a 31% increase from Q2 last year.
84.6% of the portfolio is in first liens, with 98.2% of loans at the highest internal rating.
Saratoga Investment
Saratoga Investment
Forward Guidance
Saratoga Investment remains confident in its experienced management team, high underwriting standards, and ability to steadily grow portfolio size and maintain quality and investment performance over the long-term.
Positive Outlook
- Rising interest rates are producing increased margins on our growing portfolio.
- General contraction of available credit and our ongoing investment in sponsor relationships are creating an abundant flow of attractive investment opportunities from high quality sponsors at competitive pricing, terms and absolute rates.
- Saratoga continues to be well positioned for this environment on the asset side, with 85% first lien floating rate assets and a combined core portfolio yield of 12.6%, up from 9.9% last year.
- Saratoga is well positioned on the liability side with largely fixed rate, interest only, essentially covenant free and non-amortizing liabilities, with final maturities occurring well into the future, primarily two through ten years out.
- The rapid increase in our earnings, more than 85% year-over-year, has resulted in substantial overearning of our dividend and a 17.8% earnings yield, building NAV and further supporting growth.
Challenges Ahead
- We continue to remain prudent and discerning in terms of new commitments in the current environment.
- This quarter demonstrates that, despite an overall robust pipeline, there are periods where many of the investments we review do not meet our high quality credit standards.
- This quarter’s unrealized depreciation of $5.7 million primarily reflects the markdown of our Pepper Palace investment by $15 million, significantly offset by broad appreciation across the rest of our core and broadly syndicated loan portfolios.
- Availability under the Encina credit facility can change depending on portfolio company performance and valuation.
- Certain follow-on investments in SBIC I and the BDC will not qualify for SBIC II or III funding.