Saratoga Investment Corp. (NYSE:SAR) (“Saratoga Investment” or “the
Company”), a business development company (“BDC”), today announced
financial results for its 2024 fiscal second quarter, with Net
Investment Income (“NII”) per share down 15% from last quarter
though up 80% over last year’s second quarter, and adjusted NII per
share unchanged from last quarter, and up 86% from last year. The
substantial year-over-year increase in earnings reflect growth in
Assets under Management (“AUM”), stable overall portfolio
performance and margin improvement from rising rates on Saratoga
Investment’s largely floating rate assets, with costs of financing
liabilities remaining largely fixed.
Saratoga Investment’s annualized second quarter
dividend of $0.71 per share and adjusted net investment income of
$1.08 per share imply an 11.7% dividend yield and 17.8% earnings
yield based on its recent stock price of $24.24 per share on
October 6, 2023. This substantial overearning of the dividend by
37c this quarter, or $1.48 annualized per share, increases Net
Asset Value (“NAV”), and also provides both support for increased
growth and a cushion against adverse events.
Summary Financial Information
The Company’s summarized financial information
is as follows:
|
For the threemonths ended andas of August
31,2023 |
For the threemonths ended andas of May
31,2023 |
For the threemonths ended andas of August
31,2022 |
|
($ in thousands except per share) |
AUM |
1,098,945 |
|
1,084,098 |
|
954,664 |
|
NAV |
362,079 |
|
337,451 |
|
337,213 |
|
NAV per share |
28.44 |
|
28.48 |
|
28.27 |
|
Investment Income |
35,514 |
|
34,632 |
|
21,853 |
|
Net Investment Income per share |
1.15 |
|
1.35 |
|
0.64 |
|
Adjusted Net Investment Income per share |
1.08 |
|
1.08 |
|
0.58 |
|
Earnings per share |
0.65 |
|
(0.02 |
) |
0.08 |
|
Dividends per share (declared) |
0.71 |
|
0.70 |
|
0.54 |
|
Return on Equity – last twelve months |
9.6% |
|
7.2% |
|
4.8% |
|
– annualized quarter |
9.0% |
|
(0.2%) |
|
1.1% |
|
Originations |
27,447 |
|
139,819 |
|
140,612 |
|
Repayments |
6,036 |
|
11,067 |
|
75,079 |
|
|
|
|
|
|
|
|
“Rising interest rates are producing increased
margins on our growing portfolio, and both the 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, 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 and Chief Executive Officer of
Saratoga Investment.
“Saratoga’s strong and improving performance is
reflected in our continued strong 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), 10% in Q1 (98c to $1.08 per share), and steady at $1.08
per share in Q2, (ii) current assets under management growing to
$1.099 billion, and (iii) dividend increasing to 71c per share, up
31% from 54c per share in Q2 last year and over earned by 52% as
compared to this quarter’s $1.08 per share adjusted NII. 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.”
“With regards to improving our balance sheet to
further support the growth of our portfolio companies, Saratoga
Investment raised $34 million in equity at net asset value since
the end of Q1, with $24 million of equity raised in Q2 and another
$10 million since quarter-end. This equity supports our strong
originations, strengthens our capital structure and reduces our
regulatory leverage.”
“Most importantly, at the foundation of our
performance is the high-quality nature, resilience and balance of
our $1.099 billion portfolio, marked down just 1.4% overall as
compared to our cost and with our core non-CLO portfolio’s fair
value exceeding our cost by 0.2%, 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 $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.”
“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. We originated one new portfolio
company investment this fiscal quarter and had seventeen smaller
follow-on investments in existing portfolio companies we know well
with strong business models and balance sheets. Originations this
quarter totaled $27.5 million, with $6.0 million of repayments and
amortization. Our credit quality for this quarter remained high at
98.2% of credits rated in our highest category, with a second
credit added to non-accrual, being previously on our on yellow
watchlist. 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 August 31, 2023:
As of August 31, 2023, Saratoga Investment’s AUM
was $1.099 billion, an increase of 15.1% from $954.7 million as of
August 31, 2022, and an increase of 1.4% from $1.084 billion as of
May 31, 2023. The quarterly increase consists of $27.5 million in
originations, offset by $6.0 million of repayments and
amortizations, continuing the consistent long-term growth of the
portfolio driven by our strong deal flow pipeline. In addition,
during the second quarter the fair value of the portfolio was
offset by $5.7 million of net unrealized depreciation,
driven by (i) the unrealized markdown of our Pepper Palace
investment by $15.4 million due to company performance, and (ii)
the impact of changes to market spreads, EBITDA multiples and/or
revised portfolio company performance on the quarter-end
valuations. This represented a 0.5% reduction in value of the
overall portfolio, with the Pepper Palace markdown offset by $3.9
million unrealized appreciation across the core BDC portfolio and
$5.8 million unrealized appreciation related to the CLO and JV.
Saratoga Investment’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. Saratoga Investment’s portfolio has
an overall fair value that is 1.4% below its cost basis, with the
fair value of its core non-CLO portfolio exceeding its cost basis
by 0.2%. 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 August 31, 2023,
total investment income of $35.5 million increased by $13.6
million, or 62.5%, from $21.9 million as compared to the three
months ended August 31, 2022. As compared to the quarter ended May
31, 2023, total investment income grew by $0.9 million, or 2.5%,
from $34.6 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 9.9% to 12.6% year-over-year, (ii)
average non-CLO BDC assets increasing by 16.4% year-over-year, and
by 2.2% since last quarter, and (iii) other income including a $1.6
million dividend received from the Saratoga Investment JV.
For the three months ended August 31, 2023,
adjusted net investment income of $13.2 million increased by
$6.2 million, or 89.0%, from $7.0 million for the quarter
ended August 31, 2022, and by $0.4 million, or 2.4%,
from $12.8 million for the quarter ended May 31, 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 second fiscal quarter
2024, excluding interest and debt financing expenses, base
management fees and incentive fees and income and excise taxes,
decreased from $2.3 million to $2.1 million as
compared to the first fiscal quarter 2024, and increased from $1.6
million from the last quarter ended August 31, 2022. This
represented 0.7% of average total assets on an annualized basis,
down from 0.8% at both Q2 last year and last quarter.
Net investment income on a weighted average per
share basis was $1.15 for the quarter ended August 31, 2023.
Adjusted for the incentive fee accrual related to net capital
gains, the net investment income on a weighted average per share
basis was $1.08. This compares to adjusted net investment income
per share of $0.58 and $1.08 for the quarters ended August 31,
2022, and May 31, 2023, respectively. The weighted average common
shares outstanding of 12.2 million this quarter increased from 12.0
million and 11.9 million for the quarters ended August 31, 2022 and
May 31, 2023, respectively.
Net investment income yield as a percentage of
average net asset value (“Net Investment Income Yield”) was 16.0%
for the quarter ended August 31, 2023. Adjusted for the
incentive fee accrual related to net capital gains, the Net
Investment Income Yield was 15.0%. In comparison, adjusted Net
Investment Income Yield was 8.2% and 15.0% for the quarters
ended August 31, 2022 and May 31, 2023,
respectively.
Return on equity for the last twelve months
ended August 31, 2023 was 9.6%, up from 7.2% last quarter
and 4.8% for the comparable period last year.
Net Asset Value (“NAV”) was $362.1
million as of August 31, 2023, an increase of $24.9
million from $337.2 million as of August 31,
2022, and an increase of $24.6 million from $337.5
million as of May 31, 2023. This includes $24.3 million
of equity raised at NAV during the fiscal second quarter.
NAV per share was $28.44 as
of August 31, 2023, compared to $28.27 as
of August 31, 2022, and $28.48 as of May 31,
2023.
Investment portfolio activity for the quarter
ended August 31, 2023:
-
Cost of investments made during the period: $27.5 million,
including one investment in a new portfolio company and seventeen
follow-ons.
-
Principal repayments during the period: $6.0 million, including two
repayments of existing investments, plus amortization.
Additional Financial Information
For the fiscal quarter ended August 31, 2023,
Saratoga Investment reported NII of $35.5 million, or $1.15 on a
weighted average per share basis, net realized and unrealized
losses on investments of $6.0 million, or $0.49 on a weighted
average per share basis, and a $0.1 million realized loss on the
extinguishment of debt, or $0.01 on a weighted average per share
basis, resulting in a net increase in net assets from operations of
$7.9 million, or $0.65 on a weighted average per share basis. The
$6.0 million net realized and unrealized loss on investments was
comprised of $5.7 million in net unrealized depreciation on
investments, and $0.2 million in net change in provision for
deferred taxes on unrealized appreciation on investments.
This quarter we saw no net realized gains in the
portfolio. The $5.7 million net unrealized depreciation primarily
reflects the $15.4 million of unrealized depreciation on the
Company’s Pepper Palace investment, offset by (i) approximately
$3.9 million of net unrealized appreciation across the core BDC
portfolio, driven relatively evenly by current company performance
and market spreads, as well as (ii) $5.8 million unrealized
appreciation on the Company’s CLO and JV equity investments,
reflecting the volatility in the broadly syndicated loan market as
of quarter-end.
Portfolio and Investment Activity
As of August 31, 2023, the fair value of
Saratoga Investment’s portfolio was $1.1 billion, excluding $48.4
million in cash and cash equivalents, principally invested in 55
portfolio companies and one collateralized loan obligation fund
(the “CLO”) and one joint venture fund (the “JV”). The overall
portfolio composition consisted of 84.6% of first lien term loans,
1.4% of second lien term loans, 1.6% of unsecured term loans, 3.2%
of subordinated notes in CLOs and 9.2% of common equity.
For the fiscal quarter ended August 31, 2023,
Saratoga Investment invested $27.5 million in one new portfolio
company with seventeen follow-ons in existing portfolio companies
and had $6.0 million in aggregate amount of two exit and
repayments, including realized gains, resulting in net originations
of $21.5 million for the quarter.
As of August 31, 2023, the weighted average
current yield on Saratoga Investment’s portfolio based on current
fair values was 11.3%, which was comprised of a weighted average
current yield of 12.8% on first lien term loans, 5.6% on second
lien term loans, 10.0% on unsecured term loans, 8.9% on CLO
subordinated notes and 0.0% on equity interests.
Liquidity and Capital Resources
As of August 31, 2023, Saratoga Investment had
$35.0 million in outstanding borrowings under its
$65.0 million senior secured revolving credit facility with
Encina. At the same time, Saratoga Investment had $0.0 million SBA
debentures in its SBIC I license outstanding, $175.0 million SBA
debentures in its SBIC II license outstanding, $14.0 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 $48.4 million in cash and
cash equivalents.
With $30.0 million available under the
credit facility and $48.4 million of cash and cash equivalents
as of August 31, 2023, Saratoga Investment has a total
of $78.4 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 $161.0 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 $57.8
million of committed undrawn lending commitments
and $82.8 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 August 31, 2023, Saratoga Investment
sold 5,692,773 shares for gross proceeds of $148.3 million at an
average price of $26.06 for aggregate net proceeds of $146.8
million (net of transaction costs). During the three and six months
ended August 31, 2023, Saratoga Investment sold 852,412 shares for
gross proceeds of $24.3 million at an average price of $28.56 for
aggregate net proceeds of $24.3 million (net of transaction
costs).
Dividend
On August 14, 2023, Saratoga Investment
announced that its Board of Directors declared a quarterly dividend
of $0.71 per share for the fiscal quarter ended August 31, 2023,
paid on September 28, 2023, to all stockholders of record at the
close of business on September 14, 2023. This is Saratoga
Investment’s fourteenth quarterly dividend increase in a row.
The Company previously declared in fiscal 2024 a
quarterly dividend of $0.70 per share for the quarter ended May 31,
2023. During fiscal year 2023, the Company declared 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 August 31, 2023, the Company had purchased
1,035,203 shares of common stock, at the average price of $22.05
for approximately $22.8 million pursuant to the Share Repurchase
Plan. During the three months ended August 31, 2023, the Company
did not purchase any shares of common stock pursuant to the Share
Repurchase Plan. During the six months ended August 31, 2023, the
Company purchased 88,576 shares of common stock, at the average
price $24.36 for approximately $2.2 million pursuant to the Share
Repurchase Plan.
2024 Fiscal Second Quarter Conference
Call/Webcast Information
When: |
|
Tuesday, October 10, 2023 |
|
|
10:00 a.m. Eastern Time (ET) |
|
|
|
How: |
|
Webcast: Interested parties may access a live
webcast of the call and find the Q2 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. |
|
|
|
Information: |
|
Saratoga Investment Corp.’s Form 10-Q for the fiscal quarter ended
August 31, 2023 will be filed around 7:00am on Tuesday, October 10,
2023 with the Securities and Exchange Commission (“SEC”), following
the SEC’s federal holiday on Monday, October 9, 2023. |
|
|
|
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.
PART I. FINANCIAL
INFORMATION
Item 1. Consolidated Financial
Statements
|
Saratoga Investment Corp.Consolidated
Statements of Assets and Liabilities |
|
|
|
|
|
|
|
August 31, 2023 |
|
February 28, 2023 |
|
|
|
|
|
ASSETS |
|
|
|
|
Investments at fair value |
|
|
|
|
Non-control/Non-affiliate investments (amortized cost of
$953,247,363 and $819,966,208, respectively) |
|
$ |
947,924,370 |
|
|
$ |
828,028,800 |
|
Affiliate investments (amortized cost of $44,385,672 and
$25,722,320, respectively) |
|
|
46,763,587 |
|
|
|
28,305,871 |
|
Control investments (amortized cost of $117,270,707 and
$120,800,829, respectively) |
|
|
104,256,803 |
|
|
|
116,255,582 |
|
Total investments at fair
value (amortized cost of $1,114,903,742 and $966,489,357,
respectively) |
|
|
1,098,944,760 |
|
|
|
972,590,253 |
|
Cash and cash equivalents |
|
|
19,305,025 |
|
|
|
65,746,494 |
|
Cash and cash equivalents,
reserve accounts |
|
|
29,127,875 |
|
|
|
30,329,779 |
|
Interest receivable (net of
reserve of $4,673,871 and $2,217,300, respectively) |
|
|
8,032,228 |
|
|
|
8,159,951 |
|
Management fee receivable |
|
|
364,717 |
|
|
|
363,809 |
|
Other assets |
|
|
436,947 |
|
|
|
531,337 |
|
Current tax receivable |
|
|
99,676 |
|
|
|
436,551 |
|
Total assets |
|
$ |
1,156,311,228 |
|
|
$ |
1,078,158,174 |
|
|
|
|
|
|
LIABILITIES |
|
|
|
|
Revolving credit facility |
|
$ |
35,000,000 |
|
|
|
32,500,000 |
|
Deferred debt financing costs, revolving credit facility |
|
|
(1,111,801 |
) |
|
|
(1,344,005 |
) |
SBA debentures payable |
|
|
189,000,000 |
|
|
|
202,000,000 |
|
Deferred debt financing costs, SBA debentures payable |
|
|
(5,640,013 |
) |
|
|
(4,923,488 |
) |
8.75% Notes Payable 2024 |
|
|
20,000,000 |
|
|
|
- |
|
Discount on 8.75% notes payable 2024 |
|
|
(435,518 |
) |
|
|
- |
|
Deferred debt financing costs, 8.75% notes payable 2024 |
|
|
(18,465 |
) |
|
|
- |
|
7.00% Notes Payable 2025 |
|
|
12,000,000 |
|
|
|
12,000,000 |
|
Discount on 7.00% notes payable 2025 |
|
|
(251,800 |
) |
|
|
(304,946 |
) |
Deferred debt financing costs, 7.00% notes payable 2025 |
|
|
(32,121 |
) |
|
|
(40,118 |
) |
7.75% Notes Payable 2025 |
|
|
5,000,000 |
|
|
|
5,000,000 |
|
Deferred debt financing costs, 7.75% notes payable 2025 |
|
|
(101,880 |
) |
|
|
(129,528 |
) |
4.375% Notes Payable 2026 |
|
|
175,000,000 |
|
|
|
175,000,000 |
|
Premium on 4.375% notes payable 2026 |
|
|
718,718 |
|
|
|
830,824 |
|
Deferred debt financing costs, 4.375% notes payable 2026 |
|
|
(2,128,206 |
) |
|
|
(2,552,924 |
) |
4.35% Notes Payable 2027 |
|
|
75,000,000 |
|
|
|
75,000,000 |
|
Discount on 4.35% notes payable 2027 |
|
|
(347,969 |
) |
|
|
(408,932 |
) |
Deferred debt financing costs, 4.35% notes payable 2027 |
|
|
(1,204,903 |
) |
|
|
(1,378,515 |
) |
6.25% Notes Payable 2027 |
|
|
15,000,000 |
|
|
|
15,000,000 |
|
Deferred debt financing costs, 6.25% notes payable 2027 |
|
|
(309,003 |
) |
|
|
(344,949 |
) |
6.00% Notes Payable 2027 |
|
|
105,500,000 |
|
|
|
105,500,000 |
|
Discount on 6.00% notes payable 2027 |
|
|
(141,155 |
) |
|
|
(159,334 |
) |
Deferred debt financing costs, 6.00% notes payable 2027 |
|
|
(2,573,601 |
) |
|
|
(2,926,637 |
) |
8.00% Notes Payable 2027 |
|
|
46,000,000 |
|
|
|
46,000,000 |
|
Deferred debt financing costs, 8.00% notes payable 2027 |
|
|
(1,447,465 |
) |
|
|
(1,622,376 |
) |
8.125% Notes Payable 2027 |
|
|
60,375,000 |
|
|
|
60,375,000 |
|
Deferred debt financing costs, 8.125% notes payable 2027 |
|
|
(1,766,716 |
) |
|
|
(1,944,536 |
) |
8.50% Notes Payable 2028 |
|
|
57,500,000 |
|
|
|
- |
|
Deferred debt financing costs, 8.50% notes payable 2028 |
|
|
(1,882,934 |
) |
|
|
- |
|
Base management and incentive
fees payable |
|
|
9,169,859 |
|
|
|
12,114,878 |
|
Deferred tax liability |
|
|
2,786,512 |
|
|
|
2,816,572 |
|
Accounts payable and accrued
expenses |
|
|
1,965,484 |
|
|
|
1,464,343 |
|
Interest and debt fees
payable |
|
|
3,231,853 |
|
|
|
3,652,936 |
|
Directors fees payable |
|
|
- |
|
|
|
14,932 |
|
Due to manager |
|
|
378,598 |
|
|
|
10,935 |
|
Total liabilities |
|
|
794,232,474 |
|
|
|
731,200,132 |
|
|
|
|
|
|
Commitments and
contingencies |
|
|
|
|
|
|
|
|
|
NET ASSETS |
|
|
|
|
Common stock, par value
$0.001, 100,000,000 common shares authorized, 12,729,781 and
11,890,500 common shares issued and outstanding, respectively |
|
|
12,730 |
|
|
|
11,891 |
|
Capital in excess of par
value |
|
|
345,876,725 |
|
|
|
321,893,806 |
|
Total distributable earnings
(deficit) |
|
|
16,189,300 |
|
|
|
25,052,345 |
|
Total net assets |
|
|
362,078,755 |
|
|
|
346,958,042 |
|
Total liabilities and net
assets |
|
$ |
1,156,311,229 |
|
|
$ |
1,078,158,174 |
|
NET ASSET VALUE PER SHARE |
|
$ |
28.44 |
|
|
$ |
29.18 |
|
Asset Coverage Ratio |
|
|
159.7 |
% |
|
|
165.9 |
% |
|
Saratoga Investment Corp.Consolidated
Statements of Operations(Unaudited) |
|
|
|
|
|
For the three months ended |
|
|
August 31, 2023 |
|
August 31, 2022 |
INVESTMENT INCOME |
|
|
|
|
Interest from investments |
|
|
|
|
Interest income: |
|
|
|
|
Non-control/Non-affiliate investments |
|
$ |
28,489,719 |
|
|
$ |
16,197,470 |
|
Affiliate investments |
|
|
907,064 |
|
|
|
1,322,501 |
|
Control investments |
|
|
2,085,448 |
|
|
|
1,513,666 |
|
Payment-in-kind interest income: |
|
|
|
|
Non-control/Non-affiliate investments |
|
|
493,338 |
|
|
|
85,746 |
|
Affiliate investments |
|
|
215,547 |
|
|
|
29,167 |
|
Control investments |
|
|
142,289 |
|
|
|
84,220 |
|
Total interest from
investments |
|
|
32,333,405 |
|
|
|
19,232,770 |
|
Interest from cash and cash
equivalents |
|
|
539,093 |
|
|
|
34,435 |
|
Management fee income |
|
|
817,250 |
|
|
|
817,024 |
|
Dividend Income* |
|
|
1,631,583 |
|
|
|
212,688 |
|
Structuring and advisory fee
income |
|
|
45,000 |
|
|
|
1,408,086 |
|
Other income* |
|
|
147,814 |
|
|
|
147,843 |
|
Total investment income |
|
|
35,514,145 |
|
|
|
21,852,846 |
|
|
|
|
|
|
OPERATING EXPENSES |
|
|
|
|
Interest and debt financing
expenses |
|
|
12,413,462 |
|
|
|
7,922,025 |
|
Base management fees |
|
|
4,840,899 |
|
|
|
4,104,105 |
|
Incentive management fees
expense |
|
|
2,481,473 |
|
|
|
589,840 |
|
Professional fees |
|
|
486,673 |
|
|
|
368,165 |
|
Administrator expenses |
|
|
904,167 |
|
|
|
772,917 |
|
Insurance |
|
|
81,901 |
|
|
|
90,226 |
|
Directors fees and
expenses |
|
|
111,000 |
|
|
|
110,000 |
|
General &
administrative |
|
|
467,116 |
|
|
|
299,445 |
|
Income tax expense
(benefit) |
|
|
(237,330 |
) |
|
|
(101,891 |
) |
Total operating expenses |
|
|
21,549,361 |
|
|
|
14,154,832 |
|
NET INVESTMENT INCOME |
|
|
13,964,784 |
|
|
|
7,698,014 |
|
|
|
|
|
|
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS |
|
|
|
|
Net realized gain (loss) from
investments: |
|
|
|
|
Non-control/Non-affiliate investments |
|
|
- |
|
|
|
7,943,838 |
|
Net realized gain (loss) from
investments |
|
|
- |
|
|
|
7,943,838 |
|
Income tax (provision) benefit
from realized gain on investments |
|
|
- |
|
|
|
- |
|
Net change in unrealized
appreciation (depreciation) on investments: |
|
|
|
|
Non-control/Non-affiliate investments |
|
|
(11,657,451 |
) |
|
|
(13,878,470 |
) |
Affiliate investments |
|
|
39,648 |
|
|
|
2,600,434 |
|
Control investments |
|
|
5,880,232 |
|
|
|
(1,980,420 |
) |
Net change in unrealized
appreciation (depreciation) on investments |
|
|
(5,737,571 |
) |
|
|
(13,258,456 |
) |
Net change in provision for
deferred taxes on unrealized (appreciation) depreciation on
investments |
|
|
(221,206 |
) |
|
|
(230,154 |
) |
Net realized and unrealized
gain (loss) on investments |
|
|
(5,958,777 |
) |
|
|
(5,544,772 |
) |
Realized losses on
extinguishment of debt |
|
|
(110,056 |
) |
|
|
(1,204,809 |
) |
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM OPERATIONS |
|
$ |
7,895,951 |
|
|
$ |
948,433 |
|
|
|
|
|
|
WEIGHTED AVERAGE - BASIC AND
DILUTED EARNINGS (LOSS) PER COMMON SHARE |
|
$ |
0.65 |
|
|
$ |
0.08 |
|
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING - BASIC AND DILUTED |
|
|
12,158,440 |
|
|
|
11,963,276 |
|
|
|
|
|
|
|
|
|
|
|
Saratoga Investment Corp.Consolidated
Statements of Operations(Unaudited) |
|
|
|
|
|
For the six months ended |
|
|
August 31, 2023 |
|
August 31, 2022 |
INVESTMENT INCOME |
|
|
|
|
Interest from investments |
|
|
|
|
Interest income: |
|
|
|
|
Non-control/Non-affiliate investments |
|
$ |
54,800,512 |
|
|
$ |
30,048,616 |
|
Affiliate investments |
|
|
1,634,150 |
|
|
|
2,372,649 |
|
Control investments |
|
|
4,131,308 |
|
|
|
3,059,796 |
|
Payment-in-kind interest income: |
|
|
|
|
Non-control/Non-affiliate investments |
|
|
618,233 |
|
|
|
171,427 |
|
Affiliate investments |
|
|
423,136 |
|
|
|
29,167 |
|
Control investments |
|
|
283,852 |
|
|
|
157,441 |
|
Total interest from
investments |
|
|
61,891,191 |
|
|
|
35,839,096 |
|
Interest from cash and cash
equivalents |
|
|
1,343,382 |
|
|
|
35,152 |
|
Management fee income |
|
|
1,634,038 |
|
|
|
1,632,988 |
|
Dividend Income* |
|
|
3,472,513 |
|
|
|
512,817 |
|
Structuring and advisory fee
income |
|
|
1,474,222 |
|
|
|
2,259,814 |
|
Other income* |
|
|
330,842 |
|
|
|
252,111 |
|
Total investment income |
|
|
70,146,188 |
|
|
|
40,531,978 |
|
|
|
|
|
|
OPERATING EXPENSES |
|
|
|
|
Interest and debt financing
expenses |
|
|
24,106,284 |
|
|
|
14,793,538 |
|
Base management fees |
|
|
9,405,088 |
|
|
|
7,906,168 |
|
Incentive management fees
expense |
|
|
2,584,821 |
|
|
|
(1,314,145 |
) |
Professional fees |
|
|
972,723 |
|
|
|
785,490 |
|
Administrator expenses |
|
|
1,722,917 |
|
|
|
1,522,917 |
|
Insurance |
|
|
163,802 |
|
|
|
177,536 |
|
Directors fees and
expenses |
|
|
200,068 |
|
|
|
220,000 |
|
General &
administrative |
|
|
1,297,844 |
|
|
|
966,861 |
|
Income tax expense
(benefit) |
|
|
(231,093 |
) |
|
|
(200,623 |
) |
Total operating expenses |
|
|
40,222,454 |
|
|
|
24,857,742 |
|
NET INVESTMENT INCOME |
|
|
29,923,734 |
|
|
|
15,674,236 |
|
|
|
|
|
|
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS |
|
|
|
|
Net realized gain (loss) from
investments: |
|
|
|
|
Non-control/Non-affiliate investments |
|
|
90,691 |
|
|
|
8,106,347 |
|
Net realized gain (loss) from
investments |
|
|
90,691 |
|
|
|
8,106,347 |
|
Income tax (provision) benefit
from realized gain on investments |
|
|
- |
|
|
|
69,250 |
|
Net change in unrealized
appreciation (depreciation) on investments: |
|
|
|
|
Non-control/Non-affiliate investments |
|
|
(13,385,585 |
) |
|
|
(14,512,759 |
) |
Affiliate investments |
|
|
(205,636 |
) |
|
|
3,168,040 |
|
Control investments |
|
|
(8,468,657 |
) |
|
|
(11,247,186 |
) |
Net change in unrealized
appreciation (depreciation) on investments |
|
|
(22,059,878 |
) |
|
|
(22,591,905 |
) |
Net change in provision for
deferred taxes on unrealized (appreciation) depreciation on
investments |
|
|
(161,799 |
) |
|
|
(592,105 |
) |
Net realized and unrealized
gain (loss) on investments |
|
|
(22,130,986 |
) |
|
|
(15,008,413 |
) |
Realized losses on
extinguishment of debt |
|
|
(110,056 |
) |
|
|
(1,204,809 |
) |
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM OPERATIONS |
|
$ |
7,682,692 |
|
|
$ |
(538,986 |
) |
|
|
|
|
|
WEIGHTED AVERAGE - BASIC AND
DILUTED EARNINGS (LOSS) PER COMMON SHARE |
|
$ |
0.64 |
|
|
$ |
(0.04 |
) |
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING - BASIC AND DILUTED |
|
|
12,011,180 |
|
|
|
12,037,855 |
|
|
|
|
|
|
|
|
|
|
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 three and six months ended August 31, 2023 and August 31,
2022.
|
For the Quarters Ended |
|
August 31, 2023 |
|
August 31, 2022 |
|
|
|
Net Investment Income |
$ |
13,964,784 |
|
|
$ |
7,698,014 |
|
Changes in accrued capital gains
incentive fee expense/ reversal |
|
(808,452 |
) |
|
|
(1,068,406 |
) |
Interest expense on SAK Notes
during the period |
|
- |
|
|
|
329,921 |
|
Adjusted net investment
income |
|
13,156,332 |
|
|
$ |
6,959,529 |
|
|
|
|
Net investment income yield |
|
16.0 |
% |
|
|
9.0 |
% |
Changes in accrued capital gains
incentive fee expense/ reversal |
|
(1.0 |
)% |
|
|
(0.9 |
)% |
Interest expense on SAK Notes
during the period |
|
- |
|
|
|
0.1 |
% |
Adjusted net investment income
yield(1) |
|
15.0 |
% |
|
|
8.2 |
% |
|
|
|
Net investment income per
share |
$ |
1.15 |
|
|
$ |
0.64 |
|
Changes in accrued capital gains
incentive fee expense/ reversal |
|
(0.07 |
) |
|
|
(0.09 |
) |
Interest expense on SAK Notes
during the period |
|
- |
|
|
|
0.03 |
|
Adjusted net investment income
per share(2) |
$ |
1.08 |
|
|
$ |
0.58 |
|
|
|
|
|
|
|
|
|
(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.
|
For the Six Months Ended |
|
August 31, 2023 |
|
August 31, 2022 |
|
|
|
Net Investment Income |
$ |
29,923,734 |
|
|
$ |
15,674,236 |
|
Changes in accrued capital gains
incentive fee expense/(reversal) |
|
(3,918,274 |
) |
|
|
(2,972,391 |
) |
Interest expense on SAK Notes
during the period |
|
- |
|
|
|
655,305 |
|
Adjusted net investment
income |
$ |
26,005,460 |
|
|
$ |
13,357,150 |
|
|
|
|
Net investment income yield |
|
17.2 |
% |
|
|
9.1 |
% |
Changes in accrued capital gains
incentive fee expense/(reversal) |
|
(2.3 |
%) |
|
|
(1.6 |
)% |
Interest expense on SAK Notes
during the period |
|
- |
|
|
|
0.2 |
% |
Adjusted net investment income
yield(1) |
|
14.9 |
% |
|
|
7.7 |
% |
|
|
|
Net investment income per
share |
$ |
2.49 |
|
|
$ |
1.30 |
|
Changes in accrued capital gains
incentive fee expense/(reversal) |
|
(0.32 |
) |
|
|
(0.24 |
) |
Interest expense on SAK Notes
during the period |
|
- |
|
|
|
0.05 |
|
Adjusted net investment income
per share(2) |
$ |
2.17 |
|
|
$ |
1.11 |
|
|
|
|
|
|
|
|
|
(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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