Saratoga Investment Corp. Announces Fiscal First Quarter 2026 Financial Results
Reports 17.9% Increase in Adjusted NII Per Share and 0.9% Increase in NAV from Previous Quarter
Quarterly ROE of 14.1% Generates LTM ROE of 9.3% and Beats the BDC Industry Average of 7.0%
NEW YORK, July 08, 2025 (GLOBE NEWSWIRE) -- Saratoga Investment Corp. (NYSE:SAR) ("Saratoga Investment" or "the Company"), a business development company ("BDC"), today announced financial results for its fiscal first quarter 2026 ended May 31, 2025.
Summary Financial Information The Company's summarized financial information is as follows:
For the three months ended and as of
($ in thousands, except per share)
May 31, 2025
February 28, 2025
May 31, 2024
Assets Under Management (AUM)
968,318
978,078
1,095,559
Net Asset Value (NAV)
396,369
392,666
367,855
NAV per share
25.52
25.86
26.85
Total Investment Income
32,319
31,295
38,678
Net Investment Income (NII) per share
0.66
0.56
1.05
Adjusted NII per share
0.66
0.56
1.05
Earnings per share
0.91
(0.05
)
0.48
Dividends per share (declared)
0.75
0.74
0.74
Return on Equity, last twelve months
9.3
%
7.5
%
4.4
%
– annualized quarter
14.1
%
(0.7
%)
7.2
%
Originations
50,086
41,802
39,301
Repayments
64,330
15,867
75,703
Christian L. Oberbeck, Chairman and Chief Executive Officer of Saratoga Investment, commented, "This quarter's highlights include a 17.9% increase in adjusted NII per share from the previous quarter, continued growth of NAV, a strong return on equity beating the industry, two new portfolio company investments and most importantly, a continued solid performance from the core BDC portfolio in a volatile macro environment."
"Building on our strong dividend distribution history, we announced a base dividend of $0.25 per share per month, or $0.75 per share in aggregate for the second quarter of fiscal 2026. Our annualized second quarter dividend of $0.75 per share represents an 11.8% yield based on the stock price of $25.44 as of July 7, 2025, offering strong current income from an investment value standpoint. Our Q1 adjusted NII of $0.66 per share continues to reflect the impact of the past twelve-month trend of decreasing levels of short-term interest rates and spreads on Saratoga Investment's largely floating rate assets, and the continued impact of the recent repayments. This has resulted in $224.3 million of cash, as of May 31, 2025, available to be deployed accretively in investments or repay existing debt."
"During the quarter, we continued to see a slower level of deal volume and M&A activity in the lower middle market following the recent tariff developments that had a stifling effect on new debt issuances. Despite these macro factors, our portfolio had multiple debt repayments and an equity realization in Q1, in addition to healthy new originations. These realizations generated $2.9 million of realized gains, while we originated $50.1 million in two new portfolio companies and six follow-ons, as well as closing on new investments in multiple BB CLO debt securities. 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 continue to remain prudent and discerning in terms of new commitments in the current volatile environment."
"Saratoga's overall performance is reflected in our key performance indicators this past quarter, including: (i) Q1 ROE of 14.1% generating LTM ROE of 9.3%, beating the BDC industry average of 7.0%, (ii) deleveraging from 159.6% regulatory leverage last year to 163.8% this year, due in part to the NAV increase of $28.5 million during the last twelve months ($367.9 million to $396.4 million), (iii) adjusted NII of $0.66 per share versus $0.56 per share last quarter, (iv) EPS of $0.91 per share, up from $(0.05) loss in the previous quarter, and (v) dividends of $0.75 per share, up $0.01 per share from $0.74 per share last year. Of note is that the change to monthly dividends resulted in the March and April dividend record dates that would normally have been a Q2 event both falling into this first quarter, adding a one-time additional $0.50 per share dividend to the second quarter. This increased the dividends for the quarter from $0.75 per share to $1.25 per share, thus reducing NAV per share by $0.50. Excluding this one-time occurrence resulting from the change in the dividend payment policy, NAV per share would have risen to $26.02 this quarter, reflecting a 0.6% increase."
"At the foundation of our strong operating performance is the high-quality nature, resilience and balance of our $968.3 million portfolio in the current environment. Where we have encountered significant challenges in four of our portfolio companies over the past eighteen months, we have completed decisive actions and resolved all four of these situations through two sales and two restructurings. Our current core non-CLO portfolio was marked up by $2.6 million this quarter, and the CLO and JV were marked down by $0.2 million. We also had $0.2 million of net appreciation in our new BB investments, $0.6 million net realized appreciation on an equity realization and numerous debt repayments that generated $2.2m of life-to-date realized gains, and further net realized gains of $0.7 million from escrow payments on the Netreo and Hema Terra investments, resulting in the fair value of the portfolio increasing by $3.8 million during the quarter. As of quarter-end, our total portfolio fair value was 2.1% below cost, while our core non-CLO portfolio was 1.7% above cost. The overall financial performance and solid earnings power of our current portfolio reflects strong underwriting in our growing portfolio companies and sponsors in well-selected industry segments."
"Additionally, during the quarter our net interest margin expanded meaningfully from $13.7 million last quarter to $15.6 million, driven by a $1.4 million increase in non-CLO interest income as the full benefit of Q4 originations was realized, while repayments largely occurred late in Q1. Average yields were relatively unchanged. This was further supported by a $0.5 million decrease in interest expense, reflecting the full quarter benefit of repaying $44 million in SBIC II debentures at year-end and the partial period impact of redeeming the $20 million 8.75% baby bond this quarter. In addition, the full-period impact of the 1.2 million shares issued through the ATM program in Q4, and the partial impact of the additional 0.2 million shares issued in Q1, resulted in a $0.04 per share dilution to NII per share."
"Our quarter-end cash position increased from $204.7 million last quarter to $224.3 million in the current quarter, a strong level of cash availability in a very volatile macro environment. This level of cash improves our current regulatory leverage of 163.8% to 188.1%, netting available cash against outstanding debt."
"Our overall credit quality for this quarter remained steady at 99.7% of credits rated in our highest category, with the two investments remaining on non-accrual status being Zollege and Pepper Palace, both of which have been successfully restructured, representing only 0.3% and 0.6% of fair value and cost, respectively. With 86.9% 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 company leverage is well structured for future economic conditions and uncertainty."
Mr. Oberbeck concluded, "As we continue to navigate the challenges posed by the current geopolitical landscape and the volatility seen in the broader macro environment, we remain confident in our experienced management team, robust pipeline, strong leverage structure, and high underwriting standards to continue to steadily increase the size, quality and investment performance of our portfolio over the long-term, and deliver exceptional risk adjusted returns to shareholders."
Discussion of Financial Results for the Quarter ended May 31, 2025:
AUM as of May 31, 2025 was $968.3 million, a decrease of 11.6% from $1.095 billion as of May 31, 2024, and a decrease of 1.0% from $978.1 million as of last quarter.
Total investment income for the three months ended May 31, 2025 was $32.3 million, a decrease of $6.4 million, or 16.4%, from $38.7 million for the quarter ended May 31, 2024, and an increase of $1.0 million, or 3.3%, as compared to $31.3 million for the quarter ended February 28, 2025. This quarter's investment income decrease as compared to last year was due to both this past year's interest base rate decreases as well as lower recent AUM levels, reflecting the significant net repayments the last six months. This quarter's sequential increase is driven by the full period impact of Q4 originations. Investment income reflects a weighted average interest rate on the core BDC portfolio of 11.5%, unchanged as compared to 11.5% as of February 28, 2025 and down from 12.6% as of May 31, 2024, with the yield reduction primarily reflecting SOFR base rate decreases over the past year.
Total expenses for the quarter ended May 31, 2025, excluding interest and debt financing expenses, base management fees and incentive fees, and income and excise taxes, decreased $0.1 million to $2.8 million as compared to $2.9 million for the quarter ended May 31, 2025, and increased $1.4 million as compared to $1.4 million for the quarter ended February 28, 2025. This represented 0.8% of average total assets on an annualized basis, unchanged from last quarter and down from 1.0% last year.
Adjusted NII for the quarter ended May 31, 2025, was $10.1 million, a decrease of $4.2 million, or 29.3%, from $14.3 million in the quarter ended May 31, 2024, and an increase of $2.1 million, or 26.2% from $8.0 million in the quarter ended February 28, 2025. This quarter's increase in adjusted NII as compared to the prior quarter was primarily due to the non-recurrence this quarter of the $2.4 million annual excise tax recognized last quarter. The decrease from the previous year was largely due to lower AUM and base interest rates, as previously noted.
NII Yield as a percentage of average net asset value was 10.3% for the quarter ended May 31, 2025. Adjusted for the incentive fee accrual related to net capital gains, the NII Yield was also 10.3%. In comparison, adjusted NII Yield was 15.5% for the quarter ended May 31, 2024, and 8.4% for the quarter ended February 28, 2025.
NAV was $396.4 million as of May 31, 2025, an increase of $28.5 million from $367.9 million as of May 31, 2024, and an increase of $3.7 million from $392.7 million as of February 28, 2025.
NAV per share was $25.52 as of May 31, 2025, compared to $26.85 as of May 31, 2024, and $25.86 as of February 28, 2025.
Return on equity ("ROE") for the last twelve months ended May 31, 2025 was 9.3%, up from 4.4% for the comparable period last year, and 7.5% for the twelve months ended February 28, 2025. ROE on an annualized basis for the quarter ended May 31, 2025, was 14.1%, up from 7.2% for the comparable period last year, and (0.7)% for the previous period ended February 28, 2025.
The weighted average common shares outstanding for the quarter ended May 31, 2025 was 15.3 million, increasing from 14.5 million and 13.7 million for the quarters ended February 28, 2025 and May 31, 2024, respectively.
Portfolio and Investment Activity for the Quarter Ended May 31, 2025
Fair value of Saratoga Investment's portfolio was $968.3 million, excluding $224.3 million in cash and cash equivalents, principally invested in 46 portfolio companies, one collateralized loan obligation fund (the "CLO"), one joint venture fund (the "JV"), and nine BB CLO debt investments.
Cost of investments made during the quarter ended May 31, 2025 were $50.1 million, including two investments in new portfolio companies and six follow-ons.
Principal repayments during the quarter ended May 31, 2025 were $64.3 million, including one equity realization, four full repayments of existing investments and five partial repayments of existing investments, plus debt amortization.
For the quarter ended May 31, 2025, the fair value of the portfolio increased by $3.8 million of net realized gains and unrealized appreciation, consisting of (1) $2.6 million net appreciation in our core non-CLO portfolio, including Pepper Palace and Zollege, (ii) net unrealized depreciation in the CLO of $0.3 million, and net unrealized appreciation of $0.1 million in the JV, (iii) $0.2 million of net unrealized appreciation in our new BB CLO debt investments, (iv) $0.6 million net realized appreciation on our Identity investment equity realization and numerous debt repayments that generated $2.2 million of life-to-date realized gains, and (v) further net realized gains of $0.7 million on escrow payments received on our Netreo and Hema Terra investments.
Since taking over management of the BDC in 2010, the Company has generated $1.26 billion of repayments and sales of investments originated by Saratoga Investment, generating a gross unlevered IRR of 15.0%. Total investments originated by Saratoga are $2.36 billion in 122 portfolio companies.
The overall portfolio composition consisted of 86.9% of first lien term loans, 0.7% of second lien term loans, 1.7% of unsecured term loans, 2.8% of structured finance securities, and 7.9% of common equity.
The weighted average current yield on Saratoga Investment's portfolio based on current fair values was 10.7%, which was comprised of a weighted average current yield of 11.3% on first lien term loans, 16.8% on second lien term loans, 10.6% on unsecured term loans, 15.6% on structured finance securities and 0.0% on equity interests.
Liquidity and Capital Resources
Outstanding Borrowings:
As of May 31, 2025, Saratoga Investment had a combined $70.0 million in outstanding combined borrowings under its $65.0 million senior secured revolving credit facility with Encina and its $75.0 million senior secured revolving credit facility with Live Oak.
At the same time, Saratoga Investment had $131.0 million of SBA debentures in its SBIC II license outstanding, $39.0 million of 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, four unlisted issuances of $32.0 million in total, and an aggregate of $224.3 million in cash and cash equivalents.
Undrawn Borrowing Capacity:
With $70.0 million available under the two credit facilities and $224.3 million of cash and cash equivalents as of May 31, 2025, Saratoga Investment has a total of $294.3 million of undrawn credit facility borrowing capacity and cash and cash equivalents to be used for new investments or to support existing portfolio companies in the BDC and the SBIC.
In addition, Saratoga Investment has $136.0 million in undrawn SBA debentures available from its existing SBIC III license.
Availability under the Encina and Live Oak credit facilities can change depending on portfolio company performance and valuation. In addition, certain follow-on investments in SBIC II and the BDC will not qualify for SBIC III funding. Overall outstanding SBIC debentures are limited to $350.0 million across all active SBIC licenses.
Total Saratoga Investment undrawn borrowing capacity is therefore $430.3 million.
As of May 31, 2025, Saratoga Investment had $58.6 million of committed undrawn lending commitments and $77.7 million of discretionary funding commitments.
Additionally:
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 the Company may offer for sale, from time to time, up to $300.0 million of common stock through an ATM offering.
As of May 31, 2025, Saratoga Investment has sold 8,089,547 shares for gross proceeds of $214.3 million at an average price of $26.37 for aggregate net proceeds of $212.6 million (net of transaction costs).
During the three months ended May 31, 2025, Saratoga Investment sold a total of 244,831 shares for gross proceeds of $6.4 million at an average price of $26.31 for aggregate net proceeds of $6.4 million (net of transaction costs).
Dividend
On June 12, 2025, Saratoga Investment announced that its Board of Directors declared a base quarterly dividend of $0.75 per share in aggregate for the second quarter of fiscal 2026, declaring the following three monthly $0.25 per share dividends for the quarter ended August 31, 2025:
Month
Amount Per Share
Record Date
Payment Date
June 2025
$0.25
July 8, 2025
July 24, 2025
July 2025
$0.25
August 6, 2025
August 21, 2025
August 2025
$0.25
September 5, 2025
September 24, 2025
Shareholders have the option to receive payment of dividends in cash or receive shares of common stock, pursuant to the Company's DRIP. Shares issued under the Company's DRIP is issued at a 5% discount to the average market price per share at the close of trading on the ten trading days immediately preceding (and including) the payment date.
The following table highlights Saratoga Investment's dividend history over the past fourteen quarters:
Period (Fiscal Year ends Feb)
Base Dividend Per Share
Special Dividend Per Share
Total Dividend Per Share
Fiscal Q2 2026 (August 2025)
$0.25
-
$0.25
Fiscal Q2 2026 (July 2025)
$0.25
-
$0.25
Fiscal Q2 2026 (June 2025)
$0.25
-
$0.25
Fiscal Q1 2026 (May 2025)
$0.25
-
$0.25
Fiscal Q1 2026 (April 2025)
$0.25
-
$0.25
Fiscal Q1 2026 (March 2025)
$0.25
-
$0.25
Full Year Fiscal 2026
$1.50
-
$1.50
Fiscal Q4 2025
$0.74
-
$0.74
Fiscal Q3 2025
$0.74
$0.35
$1.09
Fiscal Q2 2025
$0.74
-
$0.74
Fiscal Q1 2025
$0.74
-
$0.74
Full Year Fiscal 2025
$2.96
$0.35
$3.31
Fiscal Q4 2024
$0.73
-
$0.73
Fiscal Q3 2024
$0.72
-
$0.72
Fiscal Q2 2024
$0.71
-
$0.71
Fiscal Q1 2024
$0.70
-
$0.70
Full Year Fiscal 2024
$2.86
-
$2.86
Fiscal Q4 2023
$0.69
-
$0.69
Fiscal Q3 2023
