Saratoga Investment Corp. (NYSE:SAR) (“Saratoga Investment” or “the
Company”), a business development company (“BDC”), today announced
financial results for its 2024 fiscal first quarter, with Net
Investment Income (“NII”) per share up 67% and 105% over last
quarter and last year’s first quarter, respectively, and adjusted
NII per share up 10% and 104%, respectively, over those same
periods. These substantial increases in earnings reflect growth in
Assets under Management (“AUM”) and margin improvement from rising
rates on Saratoga Investment’s largely floating rate assets, which
comprise approximately 99% of the Company’s AUM, while costs of
financing liabilities remain largely fixed.
Summary Financial Information
The Company’s summarized financial information
is as follows:
|
For the three months ended and as of May 31,
2023 |
For the three months ended and as of February 28,
2023 |
For the three months ended and as of May 31,
2022 |
|
($ in thousands except per share) |
AUM |
1,084,098 |
|
972,590 |
|
894,533 |
|
NAV |
337,451 |
|
346,958 |
|
345,236 |
|
NAV per share |
28.48 |
|
29.18 |
|
28.69 |
|
Investment Income |
34,632 |
|
32,315 |
|
18,679 |
|
Net Investment Income per share |
1.35 |
|
0.81 |
|
0.66 |
|
Adjusted Net Investment Income per share |
1.08 |
|
0.98 |
|
0.53 |
|
Earnings per share |
(0.02 |
) |
1.62 |
|
(0.12 |
) |
Dividends per share (declared) |
0.70 |
|
0.69 |
|
0.53 |
|
Return on Equity – last twelve months |
7.2 |
% |
7.2 |
% |
6.9 |
% |
– annualized quarter |
(0.2 |
%) |
22.5 |
% |
(1.7 |
%) |
Originations |
139,819 |
|
40,036 |
|
97,198 |
|
Repayments |
11,067 |
|
60,175 |
|
10,089 |
|
|
|
|
|
|
|
|
“Higher and rising interest rates are producing
increased margins on our portfolio, and the general contraction of
available credit is creating an abundant flow of attractive
investment opportunities from high quality sponsors at increasingly
improving 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 12.7%, up from 8.5% last year and 12.1% last quarter, as well as
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,” said Christian L. Oberbeck, Chairman, Chief
Executive Officer and President of Saratoga Investment.
“Saratoga’s improved performance is reflected in
to our many record key performance indicators this past quarter,
including: (i) sequential quarterly adjusted NII per share
increases of 33% in Q3 (58c to 77c), 27% in Q4 (77c to 98c per
share), and 10% in Q1 (98c to $1.08 per share), (ii) current assets
under management growing to more than $1.084 billion with net
originations of approximately $129 million since year-end, (iii)
dividend increasing to 70c per share, up 32% from 53c per share in
Q1 last year and over earned by 54% as compared to this quarter’s
$1.08 per share adjusted NII, and (iv) recently raised $77.5
million in long-term, fixed rate, callable in most cases, capital
to support this record growth, while maintaining our BBB+
investment grade rating.”
“Saratoga’s annualized first quarter dividend of
$0.70 per share and adjusted net investment income of $1.08 per
share imply a 10.2% dividend yield and 15.7% earnings yield based
on its recent stock price of $27.43 per share on July 7, 2023. This
substantial overearning of the dividend by 38c this quarter, or
$1.52 annualized per share, increases NAV and also provides both
support for increased growth and a cushion against adverse
events.”
“Most importantly, at the foundation of our
performance is the high-quality nature and resilience of our $1.084
billion portfolio, marked down just 0.9% overall as compared to our
cost and with our core non-CLO portfolio’s fair value exceeding our
cost by 1.3% , reflecting the strength of our underwriting in our
solid, growing portfolio companies and sponsors in well selected
industry segments. This quarter’s unrealized depreciation of $16.3
million reflects the interest rate, market and economic volatility
in the current environment across our diverse assets, including
both our core and broadly syndicated loan portfolios.”
“While continuing to remain prudent and
discerning in terms of new commitments in the current environment,
this quarter demonstrates our robust pipeline. We originated seven
new portfolio company investments this fiscal quarter and twenty
follow-on investments in existing portfolio companies we know well
with strong business models and balance sheets. Originations this
quarter totaled $139.8 million, with $11.1 million of repayments
and amortization. Our credit quality for this quarter remained high
at 96.5% of credits rated in our highest category, with still only
one credit on non-accrual. With 85% of our investments at
quarter-end in first lien debt and generally supported by strong
enterprise values and balance sheets in industries that have
historically performed well in stressed situations, we believe our
portfolio and leverage is well structured for future economic
conditions and uncertainty.”
“As we navigate through this challenging and
volatile 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, 2023:
As of May 31, 2023, Saratoga Investment’s AUM
was $1.084 billion, an increase of 21.2% from $894.5 million as of
May 31, 2022, and an increase of 11.5% from $972.6 million as of
February 28, 2023. The quarterly increase consists of $139.8
million in originations, offset by $11.1 million of repayments and
amortizations, reflecting the continued strong pace of deal flow in
strong credits. In addition, during the first quarter the fair
value of the portfolio was offset by $16.3 million of net
realized and unrealized losses, driven by the impact of changes to
market spreads, EBITDA multiples and/or revised portfolio company
performance on the quarter-end valuations. This represented a 1.7%
reduction in value of the overall portfolio, of which 0.6% is
related to the core portfolio separate from the CLO and JV.
Saratoga Investment’s portfolio remains strong, with 84.7% of the
portfolio in first liens, and a continued high level of investment
quality in loan investments, with 96.5% of its loans this quarter
at its highest internal rating. Saratoga Investment’s portfolio has
an overall fair value that is 0.9% below its cost basis, with the
fair value of its core non-CLO portfolio exceeding its cost basis
by 1.3%. Since Saratoga Investment took over the management of the
BDC, $907.7 million of repayments and sales of investments
originated by Saratoga Investment have generated a gross unlevered
IRR of 15.6%.
For the three months ended May 31, 2023, total
investment income of $34.6 million increased by $15.9 million, or
85.4%, from $18.7 million as compared to the three months ended May
31, 2022. As compared to the quarter ended February 28, 2023, total
investment income grew by $2.3 million, or 7.2%, from $32.3
million. This quarter’s investment income was generated by (i) the
impact of higher interest rates, both base rates and spreads, with
the weighted average current coupon on non-CLO BDC investments
increasing from 8.5% to 12.7% year-over-year, and from 12.1% last
quarter, (ii) average non-CLO BDC assets increasing by 22.2%
year-over-year, and by 5.7% since last quarter, and (iii) other
income including both the structuring and advisory fees generated
from the higher level of originations, as well as a $1.8 million
dividend received from the Saratoga Investment JV.
For the three months ended May 31, 2023,
adjusted net investment income of $12.8 million increased by
$6.5 million, or 100.8%, from $6.4 million for the
quarter ended May 31, 2022, and by $1.3 million, or 10.9%,
from $11.6 million for the quarter ended February 28,
2023. The increases in investment income were offset by (i)
increased interest expense resulting from the various new Notes
Payable and SBA debentures issued during the past year and quarter
and (ii) increased base and incentive management fees from higher
AUM and earnings.
Total expenses for the first fiscal quarter
2024, excluding interest and debt financing expenses, base
management fees and incentive fees and income and excise taxes,
increased from $2.0 million to $2.3 million as
compared to the first fiscal quarter 2023, and remained unchanged
from the last quarter ended February 28, 2023. This represented
0.8% of average total assets on an annualized basis, down from 0.9%
at Q1 last year and unchanged from last quarter.
Investment portfolio activity for the quarter
ended May 31, 2023:
-
Cost of investments made during the period: $139.8 million,
including seven investments in new portfolio companies and twenty
follow-ons.
-
Principal repayments during the period: $11.1 million, including
one partial repayment of an existing investment, plus
amortization.
Additional Financial Information
For the fiscal quarter ended May 31, 2023,
Saratoga Investment reported NII of $16.0 million, or $1.35 on a
weighted average per share basis, and net realized and unrealized
losses on investments of $16.2 million, or $1.36 on a weighted
average per share basis, resulting in a net decrease in net assets
from operations of $0.2 million, or $0.02 on a weighted average per
share basis. The $16.2 million net realized and unrealized loss on
investments was comprised of $16.3 million in net unrealized
depreciation on investments, offset by $0.09 million in net
realized gain on investments and $0.06 million in net change in
provision for deferred taxes on unrealized depreciation on
investments.
The $0.09 million net realized gain on
investments comprises various escrow payments on previously sold
equity investments. The $16.3 million net unrealized
depreciation primarily reflects (i) the $11.0 million of unrealized
depreciation on the Company’s CLO and JV equity investments,
reflecting both the volatility in the broadly syndicated loan
market as of quarter-end, as well as the reduction in the value of
certain defaulted assets in the CLO portfolio, (ii) $3.3 million of
unrealized depreciation on the Company’s Netreo equity investment,
reflecting increased company leverage, reducing the investment’s
net unrealized appreciation to $5.0 million and (ii) approximately
$2.0 million of net unrealized depreciation across the remainder of
the portfolio, most of which reflects current market spreads.
Portfolio and Investment Activity
As of May 31, 2023, the fair value of Saratoga
Investment’s portfolio was $1.1 billion, excluding $53.2 million in
cash and cash equivalents, principally invested in 56 portfolio
companies and one collateralized loan obligation fund (the “CLO”)
and one joint venture fund (the “JV”). The overall portfolio
composition consisted of 84.7% of first lien term loans, 1.4% of
second lien term loans, 1.9% of unsecured term loans, 3.1% of
subordinated notes in CLOs and 8.9% of common equity.
For the fiscal quarter ended May 31, 2023,
Saratoga Investment invested $139.8 million in seven new portfolio
companies with twenty follow-ons in existing portfolio companies
and had $11.1 million in aggregate amount of one partial exit and
repayments, including realized gains, resulting in net originations
of $128.7 million for the quarter.
As of May 31, 2023, the weighted average current
yield on Saratoga Investment’s portfolio based on current fair
values was 11.4%, which was comprised of a weighted average current
yield of 12.9% on first lien term loans, 5.4% on second lien term
loans, 9.8% on unsecured term loans, 9.3% on CLO subordinated notes
and 0.0% on equity interests.
Liquidity and Capital Resources
As of May 31, 2023, Saratoga Investment had
$35.0 million in outstanding borrowings under its recently
increased $65.0 million senior secured revolving credit
facility with Encina. At the same time, Saratoga Investment had
$27.0 million SBA debentures in its SBIC I license outstanding,
$175.0 million SBA debentures in its SBIC II license outstanding,
$0.0 million SBA debentures in its SBIC III license outstanding,
$269.4 million of listed baby bonds issued, $250.0 million of
unsecured unlisted institutional bond issuances, five unlisted
issuances of $52.0 million in total, and an aggregate of $53.2
million in cash and cash equivalents.
On March 31, 2023 and May 1, 2023, we issued
$10.0 million and $10.0 million, respectively, in aggregate
principal amount of our 8.75% 2024 Notes (the “8.75% 2024 Notes”)
for net proceeds in each issuance of approximately $9.6 million
after deducting underwriting discounts of 3.50%. Interest on the
8.75% 2024 Notes is paid quarterly in arrears on February 28, May
31, August 31 and November 30, beginning on May 31, 2023, at a rate
of 8.75% per year. The 8.75% 2024 Notes will mature on March 31,
2024, unless extended to March 31, 2025 at the sole discretion of
the Company. The net proceeds from the offering were used to make
investments in middle-market companies in accordance with
our investment objective and strategies (including investments made
through SBIC III LP) and for general corporate purposes.
On April 14, 2023, we issued $50.0 million in
aggregate principal amount of 8.50% fixed-rate notes due 2028 (the
“8.50% 2028 Notes”) for net proceeds of $48.2 million, based on a
public offering price of 100% of par, after deducting underwriting
commissions of approximately $1.6 million. On April 25, 2023, the
underwriters exercised their option in full to purchase an
additional $7.5 million aggregate principal amount of 8.50% 2028
Notes. Net proceeds were $7.3 million after deducting underwriting
commissions of approximately $0.2 million. Interest on the 8.50%
2028 Notes is paid quarterly in arrears on February 28, May 31,
August 31 and November 30, at a rate of 8.50% per year, beginning
May 31, 2023. The 8.50% 2028 Notes mature on April 15, 2028, and
commencing April 14, 2025, may be redeemed in whole or in part at
any time or from time to time at our option. The net proceeds of
the offering were used to repay a portion of outstanding
indebtedness under the Encina Credit Facility, make investments
in middle-market companies in accordance with our
investment objective and strategies (including investments made
through SBIC III LP) and for general corporate purposes. The 8.50%
2028 Notes are listed on the NYSE under the trading symbol “SAZ”
with a par value of $25.00 per share.
With $35.0 million available under the
credit facility and $53.2 million of cash and cash equivalents
as of May 31, 2023, Saratoga Investment has a total
of $88.2 million of undrawn borrowing capacity and cash
and cash equivalents for new investments or to support its existing
portfolio companies in the BDC. In addition, Saratoga
Investment has $148.0 million in undrawn SBA debentures
from its recently approved SBIC III license. Availability under the
Encina credit facility can change depending on portfolio company
performance and valuation. In addition, certain follow-on
investments in SBIC I and the BDC will not qualify for SBIC II or
III funding. Overall outstanding SBIC debentures is limited to
$350.0 million across all three SBIC licenses. As of
quarter-end, Saratoga Investment had $83.7
million of committed undrawn lending commitments
and $59.3 million of discretionary funding
commitments.
On July 30, 2021, Saratoga Investment entered
into an equity distribution agreement with Ladenburg Thalmann &
Co. Inc. and Compass Point Research and Trading, LLC, through which
Saratoga Investment may offer for sale, from time to time, up to
$150.0 million of common stock through an ATM offering. On July 10,
2023, Saratoga Investment increased the maximum amount of shares of
common stock to be sold through the ATM Program to $300.0 million
from $150.0 million. As of May 31, 2023, the Company sold 4,840,361
shares for gross proceeds of $123.9 million at an average price of
$25.61 for aggregate net proceeds of $122.4 million (net of
transaction costs). During the three ended May 31, 2023, there were
no shares sold pursuant to the equity distribution agreement.
Dividend
On May 22, 2023, Saratoga Investment announced
that its Board of Directors declared a quarterly dividend of $0.70
per share for the fiscal quarter ended May 31, 2023, paid on June
29, 2023, to all stockholders of record at the close of business on
June 13, 2023.
The Company previously declared in fiscal 2023 a
quarterly dividend of $0.69 per share for the quarter ended
February 28, 2023, $0.68 per share for the quarter ended November
30, 2022, $0.54 per share for the quarter ended August, 31, 2022
and $0.53 per share for the quarter ended May 31, 2022. During
fiscal year 2022, the Company declared a quarterly dividend of
$0.53 per share for the quarters ended February 28, 2022 and
November 30, 2021, $0.52 per share for the quarter ended August 31,
2021, $0.44 per share for the quarter ended May 31, 2021 and $0.43
per share for the quarter ended February 28, 2021.
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, on January 9, 2023, our board of
directors extended the Share Repurchase Plan for another year to
January 15, 2024, increasing the number of shares that may be
repurchased under the Share Repurchase Plan to 1.7 million shares
of common stock.
As of May 31, 2023, the Company purchased
898,033 shares of common stock, at the average price of $21.65 for
approximately $19.5 million pursuant to the Share Repurchase Plan.
During the three months ended May 31, 2023, the Company purchased
94,071 shares of common stock, at the average price of $23.17 for
approximately $2.1 million pursuant to the Share Repurchase
Plan.
2024 Fiscal First Quarter Conference
Call/Webcast Information
When: |
|
Tuesday, July 11, 202310:00 a.m. Eastern Time (ET) |
|
|
|
How: |
|
Webcast: Interested parties may access a live
webcast of the call and find the Q1 2024 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 three SBIC-licensed
subsidiaries, manages a $650 million collateralized loan
obligation (“CLO”) fund and co-manages a joint venture (“JV”) fund
that owns a $400 million collateralized loan obligation
(“JV CLO”) fund. It also owns 52% of the Class F and 100% of
the subordinated notes of the CLO, 87.5% of both the unsecured
loans and membership interests of the JV and 87.5% of the Class E
notes of the JV CLO. The Company’s diverse funding sources,
combined with a permanent capital base, enable Saratoga Investment
to provide a broad range of financing solutions.
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-K for the fiscal year ended
February 28, 2023 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, 2023 |
|
February 28, 2023 |
|
(unaudited) |
|
|
ASSETS |
|
|
|
Investments at fair value |
|
|
|
Non-control/Non-affiliate investments (amortized cost of
$934,686,593 and $819,966,208, respectively) |
$ |
941,021,051 |
|
|
$ |
828,028,800 |
|
Affiliate investments (amortized cost of $40,471,309 and
$25,722,320, respectively) |
|
42,809,576 |
|
|
|
28,305,871 |
|
Control investments (amortized cost of $119,161,637 and
$120,800,829, respectively) |
|
100,267,501 |
|
|
|
116,255,582 |
|
Total investments at fair
value (amortized cost of $1,094,319,539 and $966,489,357,
respectively) |
|
1,084,098,128 |
|
|
|
972,590,253 |
|
Cash and cash equivalents |
|
21,987,196 |
|
|
|
65,746,494 |
|
Cash and cash equivalents,
reserve accounts |
|
31,165,969 |
|
|
|
30,329,779 |
|
Interest receivable (net of
reserve of $3,517,085 and $2,217,300, respectively) |
|
7,831,749 |
|
|
|
8,159,951 |
|
Management fee receivable |
|
362,026 |
|
|
|
363,809 |
|
Other assets |
|
667,906 |
|
|
|
531,337 |
|
Current tax receivable |
|
99,676 |
|
|
|
436,551 |
|
Total assets |
$ |
1,146,212,650 |
|
|
$ |
1,078,158,174 |
|
|
|
|
|
LIABILITIES |
|
|
|
Revolving credit facility |
$ |
35,000,000 |
|
|
$ |
32,500,000 |
|
Deferred debt financing costs, revolving credit facility |
|
(1,227,903 |
) |
|
|
(1,344,005 |
) |
SBA debentures payable |
|
202,000,000 |
|
|
|
202,000,000 |
|
Deferred debt financing costs, SBA debentures payable |
|
(4,675,691 |
) |
|
|
(4,923,488 |
) |
8.75% Notes Payable 2024 |
|
20,000,000 |
|
|
|
- |
|
Discount on 8.75% notes payable 2024 |
|
(613,891 |
) |
|
|
- |
|
Deferred debt financing costs, 8.75% notes payable 2024 |
|
(26,441 |
) |
|
|
- |
|
7.00% Notes Payable 2025 |
|
12,000,000 |
|
|
|
12,000,000 |
|
Discount on 7.00% notes payable 2025 |
|
(280,244 |
) |
|
|
(304,946 |
) |
Deferred debt financing costs, 7.00% notes payable 2025 |
|
(36,119 |
) |
|
|
(40,118 |
) |
7.75% Notes Payable 2025 |
|
5,000,000 |
|
|
|
5,000,000 |
|
Deferred debt financing costs, 7.75% notes payable 2025 |
|
(115,704 |
) |
|
|
(129,528 |
) |
4.375% Notes Payable 2026 |
|
175,000,000 |
|
|
|
175,000,000 |
|
Premium on 4.375% notes payable 2026 |
|
775,264 |
|
|
|
830,824 |
|
Deferred debt financing costs, 4.375% notes payable 2026 |
|
(2,340,565 |
) |
|
|
(2,552,924 |
) |
4.35% Notes Payable 2027 |
|
75,000,000 |
|
|
|
75,000,000 |
|
Discount on 4.35% notes payable 2027 |
|
(378,163 |
) |
|
|
(408,932 |
) |
Deferred debt financing costs, 4.35% notes payable 2027 |
|
(1,291,709 |
) |
|
|
(1,378,515 |
) |
6.25% Notes Payable 2027 |
|
15,000,000 |
|
|
|
15,000,000 |
|
Deferred debt financing costs, 6.25% notes payable 2027 |
|
(326,976 |
) |
|
|
(344,949 |
) |
6.00% Notes Payable 2027 |
|
105,500,000 |
|
|
|
105,500,000 |
|
Discount on 6.00% notes payable 2027 |
|
(149,633 |
) |
|
|
(159,334 |
) |
Deferred debt financing costs, 6.00% notes payable 2027 |
|
(2,750,119 |
) |
|
|
(2,926,637 |
) |
8.00% Notes Payable 2027 |
|
46,000,000 |
|
|
|
46,000,000 |
|
Deferred debt financing costs, 8.00% notes payable 2027 |
|
(1,534,920 |
) |
|
|
(1,622,376 |
) |
8.125% Notes Payable 2027 |
|
60,375,000 |
|
|
|
60,375,000 |
|
Deferred debt financing costs, 8.125% notes payable 2027 |
|
(1,869,394 |
) |
|
|
(1,944,536 |
) |
8.50% Notes Payable 2028 |
|
57,500,000 |
|
|
|
- |
|
Deferred debt financing costs, 8.50% notes payable 2028 |
|
(1,942,032 |
) |
|
|
- |
|
Base management and incentive
fees payable |
|
9,624,844 |
|
|
|
12,114,878 |
|
Deferred tax liability |
|
2,802,635 |
|
|
|
2,816,572 |
|
Accounts payable and accrued
expenses |
|
1,898,623 |
|
|
|
1,464,343 |
|
Interest and debt fees
payable |
|
4,485,867 |
|
|
|
3,652,936 |
|
Directors fees payable |
|
- |
|
|
|
14,932 |
|
Due to manager |
|
359,073 |
|
|
|
10,935 |
|
Total liabilities |
|
808,761,802 |
|
|
|
731,200,132 |
|
|
|
|
|
Commitments and
contingencies |
|
|
|
|
|
|
|
NET ASSETS |
|
|
|
Common stock, par value
$0.001, 100,000,000 common shares authorized, 11,847,742 and
11,890,500 common shares issued and outstanding, respectively |
|
11,848 |
|
|
|
11,891 |
|
Capital in excess of par
value |
|
320,793,316 |
|
|
|
321,893,806 |
|
Total distributable
earnings |
|
16,645,684 |
|
|
|
25,052,345 |
|
Total net assets |
|
337,450,848 |
|
|
|
346,958,042 |
|
Total liabilities and net
assets |
$ |
1,146,212,650 |
|
|
$ |
1,078,158,174 |
|
NET ASSET VALUE PER SHARE |
$ |
28.48 |
|
|
$ |
29.18 |
|
|
|
|
|
Asset Coverage Ratio |
|
155.7 |
% |
|
|
165.9 |
% |
|
|
|
|
|
|
|
|
Saratoga Investment Corp. |
Consolidated Statements of Operations |
|
|
|
|
|
For the three months ended |
|
May 31, 2023 |
|
May 31, 2022 |
INVESTMENT INCOME |
|
|
|
Interest from investments |
|
|
|
Interest income: |
|
|
|
Non-control/Non-affiliate investments |
$ |
26,310,793 |
|
|
$ |
13,851,146 |
|
Affiliate investments |
|
727,086 |
|
|
|
1,050,148 |
|
Control investments |
|
2,045,860 |
|
|
|
1,546,130 |
|
Payment-in-kind interest income: |
|
|
|
Non-control/Non-affiliate investments |
|
124,895 |
|
|
|
85,681 |
|
Affiliate investments |
|
207,589 |
|
|
|
- |
|
Control investments |
|
141,563 |
|
|
|
73,221 |
|
Total interest from
investments |
|
29,557,786 |
|
|
|
16,606,326 |
|
Interest from cash and cash
equivalents |
|
804,289 |
|
|
|
717 |
|
Management fee income |
|
816,788 |
|
|
|
815,964 |
|
Dividend Income |
|
1,840,930 |
|
|
|
300,129 |
|
Structuring and advisory fee
income |
|
1,429,222 |
|
|
|
851,728 |
|
Other income |
|
183,028 |
|
|
|
104,268 |
|
Total investment income |
|
34,632,043 |
|
|
|
18,679,132 |
|
|
|
|
|
OPERATING EXPENSES |
|
|
|
Interest and debt financing
expenses |
|
11,692,822 |
|
|
|
6,871,513 |
|
Base management fees |
|
4,564,189 |
|
|
|
3,802,063 |
|
Incentive management fees
expense (benefit) |
|
103,348 |
|
|
|
(1,903,985 |
) |
Professional fees |
|
486,050 |
|
|
|
417,325 |
|
Administrator expenses |
|
818,750 |
|
|
|
750,000 |
|
Insurance |
|
81,901 |
|
|
|
87,310 |
|
Directors fees and
expenses |
|
89,068 |
|
|
|
110,000 |
|
General and
administrative |
|
830,728 |
|
|
|
667,416 |
|
Income tax expense
(benefit) |
|
6,237 |
|
|
|
(98,732 |
) |
Total operating expenses |
|
18,673,093 |
|
|
|
10,702,910 |
|
NET INVESTMENT INCOME |
|
15,958,950 |
|
|
|
7,976,222 |
|
|
|
|
|
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS |
|
|
|
Net realized gain (loss) from
investments: |
|
|
|
Non-control/Non-affiliate investments |
|
90,691 |
|
|
|
162,509 |
|
Net realized gain (loss) from
investments |
|
90,691 |
|
|
|
162,509 |
|
Income tax (provision) benefit
from realized gain on investments |
|
- |
|
|
|
69,250 |
|
Net change in unrealized
appreciation (depreciation) on investments: |
|
|
|
Non-control/Non-affiliate investments |
|
(1,728,134 |
) |
|
|
(634,289 |
) |
Affiliate investments |
|
(245,284 |
) |
|
|
567,606 |
|
Control investments |
|
(14,348,889 |
) |
|
|
(9,266,766 |
) |
Net change in unrealized
appreciation (depreciation) on investments |
|
(16,322,307 |
) |
|
|
(9,333,449 |
) |
Net change in provision for
deferred taxes on unrealized (appreciation) depreciation on
investments |
|
59,407 |
|
|
|
(361,951 |
) |
Net realized and unrealized
gain (loss) on investments |
|
(16,172,209 |
) |
|
|
(9,463,641 |
) |
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM OPERATIONS |
$ |
(213,259 |
) |
|
$ |
(1,487,419 |
) |
|
|
|
|
WEIGHTED AVERAGE - BASIC AND
DILUTED EARNINGS (LOSS) PER COMMON SHARE |
$ |
(0.02 |
) |
|
$ |
(0.12 |
) |
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING - BASIC AND DILUTED |
|
11,862,163 |
|
|
|
12,112,372 |
|
|
|
|
|
|
|
|
|
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. In addition, adjusted net investment income in fiscal 2023
also excludes the interest expense and amortization of
deferred financing costs related to the 2025 SAK Notes during the
period while the 2027 SAT Notes were already issued and
outstanding. These expenses are directly attributable to the
issuance of the 2027 SAT Notes and the subsequent repayment of the
2025 SAK Notes. 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, 2023 and May 31, 2022.
|
For the Quarters Ended |
|
May 31, 2023 |
|
|
May 31, 2022 |
|
|
|
|
|
|
|
|
Net
Investment Income |
$ |
15,958,950 |
|
|
$ |
7,976,222 |
|
Changes
in accrued capital gains incentive fee expense/ reversal |
|
(3,109,822 |
) |
|
|
(1,903,985 |
) |
Interest
expense on SAK Notes during the period |
|
- |
|
|
|
325,384 |
|
Adjusted
net investment income |
|
12,849,128 |
|
|
|
6,397,621 |
|
|
|
|
|
|
|
|
|
Net
investment income yield |
|
18.7 |
% |
|
|
9.1 |
% |
Changes
in accrued capital gains incentive fee expense/ reversal |
|
(3.7 |
)% |
|
|
(1.9 |
)% |
Interest
expense on SAK Notes during the period |
|
- |
|
|
|
0.1 |
% |
Adjusted
net investment income yield (1) |
|
15.0 |
% |
|
|
7.3 |
% |
|
|
|
|
|
|
|
|
Net
investment income per share |
$ |
1.35 |
|
|
$ |
0.66 |
|
Changes
in accrued capital gains incentive fee expense/ reversal |
|
(0.27 |
) |
|
|
(0.16 |
) |
Interest
expense on SAK Notes during the period |
|
- |
|
|
|
0.03 |
|
Adjusted
net investment income per share (2) |
$ |
1.08 |
|
|
$ |
0.53 |
|
|
|
|
|
|
|
|
|
(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 SteenkampSaratoga
Investment Corp.212-906-7800
Roland TomfordeBroadgate
Consultants212-232-2222
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