SAR - Earnings call transcript Q4 2020 | Saratoga Investment Corp.

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Operator

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Saratoga Investment Corp's Fiscal Fourth Quarter and Fiscal Year 2020 Financial Results Conference Call. Please note that today's call is being recorded.

During today's presentation, all parties will be in a listen-only mode.

we the remarks, for prepared management's will line open questions. Following Instructions] [Operator

like I Chief call over Sir, Financial turn to the Compliance would ahead. Mr. please to Officer, Saratoga go Steenkamp. Henri and Investment Corp's

Henri Steenkamp

our you. the projections. fiscal quarter call. We to Corp's Today's ask would Saratoga earnings includes SEC call to year fourth to everyone you and welcome Thank to most I forward-looking with Investment conference XXXX fiscal recent filings conference like cause statements refer extra forward-looking Today, could to to differ We for not presentation these that important by update we required results materially from referencing a statements during statements do law. factors be do so unless projections. our and will our call. undertake to forward-looking and

night. and will quarter XX. fiscal from presentation of release to fourth press replay fiscal this year A earnings to events refer Please today call shareholder our in conference in website. release our find of IR Xpm earnings can our section distributed A presentation and for the Investor the press our details. Relations link available is XXXX page be through last also May You

will introductory Chief like I our making and call Oberbeck, turn Executive remarks. few be who Officer, over to Chairman a Christian to the would now

Christian Oberbeck

our these and We're health Saratoga by we as unprecedented today's portfolio our of the and into forward and safety heading employees off all everyone. presented is a performance, our on year optimizing of recent a Thank in capital well you, record challenges ongoing calamitous business summarizing operating Henri, of the our in structure as We our ensuring been business solidity COVID-XX activities. reviewing the company couple believe Coming and world. the significant focused economic with welcome, achievements working while The strong look its management to The pandemic. this of our collaboratively results, months liquidity have constituents past to the and impact the employees navigate on companies, across the call. is of of environment. position most in

taken we've effectively personnel instance, operate to that our For ensure necessary remotely. can the steps

Our remain staff and remotely. senior and fully capable of working management team engaged

and experienced necessary providing of any support our significant or that We capable operational may portfolio require. limitations, have remain service fully not any companies

We time. conservative believe that spillover historically investing, sheet some this of leverage of to good of balance levels our into fortune liquidity, position conservative and maintenance us put to management, strength approach have our going and challenging solid strongest date uncertain in utilization,

how management grave the the us our business anticipate liquidity, will economy long clarity challenges in the structure, organization, While by have presented global the experience market we no Coronavirus. displacement with effectively to enable that can and last, and will capital confidence navigate

us of has this quality propelled reaffirmed our year, our The term. underwriting, further competitors the of ranks over BDC the long top to

increase Our on remarkably many, the our $XX SBIC XX.X%, performance the gains metrics for during return of license, of strong, realized equity million XX% with in per this full-year of challenges provides which foundation the our growth and total furthers NAV market. momentum future asset the deal strong to net all in year, accomplishments second the and of receipt for and and current including our fiscal share, increase our XXXX value, of XX% a were the

And highest industry the the on and generating by at for significantly rating credit million ROE by $XX.X NAV of previously year, level investments, recognized continuing million to on gross our of realized in Increasing year total this total realized million as a strengthen reflecting unlevered mean or quarter Slide of our X.X%, including QX of BDC return the maintaining gain year-end, of have XX.X% in Easy in XX.X% a on our have $XX.X year share, equity on gains To high census to a on a investment highlights unlevered credit with and on a XX.X% year. the discussed the quality, of our of financial ahead both our total of gains registered and the $X.XX trailing realizations foundation past X, we IRR investment BDC we our quarter unrealized unrealized per this XX-month gross briefly the million. first a end, and highest basis, on loan $XXX recap to the past Ice XX% of and of date net investments $XX.X continued industry QX. IRR portfolio,

quarter offset by steady under from Easy our unchanged originations. QX QX, Second, this remained but assets the new at relatively million, $XXX repayment management Ice

investments year year, this the last our a $XXX redemptions, million gains, detail of fiscal to $XXX of including repayments we million originate new demonstrated discuss $XXX.X of platform end. keep originated with the as record from of million will AUM XXXX. ability and which our Mike quarter For pace post in to follow-ons is year, again with the ongoing With end, both new origination We've XX% realized continued more up later. investments during

look to the preservation particularly economy, paramount. pandemic and challenges businesses, and liquidity, we numerous ahead to small as are the balance sheet NAV presents Third, COVID-XX that strength, the

long-term history, XXX%, of Our leverage $XX translates This supporting strongest of free $XXX XXX% current million of requirement. debt. is million our with capital Saratoga's exceeding structure covenant the regulatory non-SBIC substantially into in equity,

Our year-end debt X.X%. credit existing portfolio fund committed of is to our support million to we commitments note, in and in companies, portfolio facilities cost dedicated million million the opportunities of $XX have available lending are to outstanding other $XXX The of not to $XXX approximately with as undrawn support new liquidity SBIC-X new companies. total portfolio and of our all companies. available Of this of currently SBIC-X

of increases of Finally, we proud are our five-year record in dividends. consecutive

interests liquidity the also sufficient remaining to of challenging to retain have of portfolio in the support invest the companies ensure in times, our that dramatic investments and XX, Saratoga's our policy. of performance during while fund therefore economy in uncertainties has believes However, Directors Board Board NAV we small a new defer to and positioned long future creditworthy The in, dividend operating in of in maintain to decided the these the companies the for approach and quarter ended the and shareholders our is our February light businesses we in cautious to term best need. to it we XXXX. responsibility dividend conservative preserve near

as quarterly provides call flexibility economy discuss We position on this, portfolio our the will for basis, least on also continue decision. spillover to liquidity this visibility gain better at performance. that in reassess and We'll company this favorable a on later we enhancing

and and key our noted compared November February performance performance above, quarters equity indicators, within year, ended as XX, continued quarter, solid on return strong XX, delivered Saratoga performance as and the this XXXX XXXX. to

quarter, XX% versus and XX% this last million versus $X.X is NII up $X.X $X.X million last adjusted year, up million quarter. Our

last Our adjusted in last $X.XX XX% from NII unchanged reflecting from count. and share increase primarily per year, share $X.XX $X.XX quarter, is down this $X.XX quarter, the

high. ago, steadily Latest AUM for credit our trend Easy to year XX and our last quarter. since XX Slide while capital, time, and on credits our we quality remain environment. working we management positive see continue the We're at of BDC over took risen the appropriately cautious available the of this this has X, in as can diligently you years the as from detail $XX.XX $XX.XX, XX.X% XX.X% almost offset But most same share deploy And NAV XX.X% being up more last changed up last quarter. will $XX.XX is months return on this equity X% up this Originations per the and is quarter. year, last later. provide Ice repayment from Henri part from quarter, XX%

Henri to With would back results, review like and financial that, the our I composition the to over well of to portfolio. call as performance our turn

Henri Steenkamp

quarter, increased XX, adjusting was adjusted $X.X NII to ended the year's capital NII XX% as fee The per up for per share $X.XX from Thank highlights the from the number decrease calculation, $X.XX up X share last When $X.XX per accrual from last and in NII since net last and year million NII Slide last $X.X metrics increase last you, for from while was million in for due quarter. XX% XXXX. outstanding adjusted of increase last number from a key compared from in $X.XX gains periods of unchanged adjusted Chris. quarter to unchanged second down performance the related both and last year to last our Adjusted XX% year, the a incentive and XX% quarter. per incentive quarter February shares fee share QX. from weighted was share $X.X primarily million

adjusted for shares impact of when growing X.X% for XX, year the three was the the from yield year, XX.X and Weighted February was and X.X% yield accrual. XX.X% ended in NII XX hand XXXX, Adjusted year. the last quarter in million and our AUM million on XX% to cash respectively. February our by ended shares months down XX, outstanding increase common and XXXX, compared November is XX, XXXX, end. million three fee of year X.X average shares reflecting from primarily QX this at incentive months shares the This substantial effect impact undeployed offset the last increased for to last NAV This

quarter, by appreciation net increase net share, a on per $XX.X weighted $X.XX share. gain or million in $X.XX net million in $XX.X assets on Investment's million For resulting realized benefit gain, $XX.X experienced subsidiaries, on average million deferred net or offset this and comprised in appreciation. a also $X.X in million total we net unrealized in of fourth of investments net per gain $XX.X of of million unrealized $X.X blocker The Saratoga was tax investments

following investment of unrealized the relates loss The $X.X Easy previously the unrealized the million investments. company's of legacy The appreciation primarily net equity equity on the $XX.X reflects million couple realized the appreciation million on preferred recognized company's million appreciation million million gain investment. by a communications MC $X.X to reversal CLO $XX.X $X.X offset gain realized $X.X company's The Ice on of realization Easy the things. and and Ice related net

recognized partially offset following communications. appreciation $X.X the previously realization by of million MC the of was first, This reversal

and with other smaller between seven $XXX,XXX other with investments appreciation Second, appreciations. investments third, numerous and $XXX,XXX, of

to and on income. a of investment This QX of within of January the reflected In its this is in we net addition, the XXXX during past in the recognized operations extinguishment million repayment December line $X.X statement notes year. in SAB loss own related

and adjusted up was from fee highlights net decrease NII share, gains year. last key to metrics Slide per average XX% million yield for the the Adjusted down year. down is effect incentive our quarter in share share $XX.X of from X was million year-over-year partially NAV outstanding, $X.XX reflecting adjusting The NII When a per cash end. by to capital X.X% XX% at reflecting primarily NII increase $XX.X substantial performance higher year. $X.XX per last Adjusted was similar related weighted our for XX.X% year. adjusted the the offset $X.XX This year of shares undeployed of yield from last the XX% NII. AUM the accrual the is with up our for impact growing year

we $XX.X block million the weighted of experienced $XX.X was of comprised For net increase million offset in million of a net The net million million in year, average a million $X.XX $X.X share. $X.X in investments gain per Saratoga's gain gain and assets full deferred in share, in $XX.X appreciation. realized by and resulting of net or $X.XX benefit per of on net unrealized total subsidiaries or dollars appreciation net $XX.X unrealized

an remains includes us, both on for indicator unrealized realized gains. equity Return and which important performance

we industry equity up the LTM XX.X% last average was XX.X% in BDC from the the of on highest industry. an believe months, last ROE This BDC well and is for return Our of recurrently ROE X.X% XX the year. above

of assets. for benefit Quickly tax and expenses touching fees on financing year. this and the expenses, debt management year interest increased $X.X the last management Total total base year as million remained incentive X.X% unchanged to in same million period $X.X income but fees, excluding expenses from average

margin quarters metrics interest that have added the trends the XX and in the XX through Of of upward historical XX, we XX net last the over than management how Slide our balance also end Slides appendix also of the maintained. more and note is past KPIs and for rate the took at since sheet highlighting the in shows tripled has by We presentation statement year. run XX% Saratoga since increased have particular our BDC income

million a Moving year. increase or $XXX.X to million X. of as was XX% year-end million $XXX.X $XXX.X Slide on last from NAV

end, NAV up QX, X% from was $XX.XX $XX.XX or was as and $XX.X ago. up XX year $XX.XX share for million XX% as per NAV from from Just of quarter last at QX. up X% months of

which quarters and we nine So not XX NAV growth the quarters. time per share NAV five in of NAV now increased increases sequential had total increased during XX% has per last only in in dollars, has have share

this see on referenced Slide XX. You the previously can

$XX.X net dividends year, declared. million appreciation by of appreciation unrealized realized of the million gain benefit of unrealized in net blockers million our NII, million partially $XX.X offset deferred was of $X.X past net For earned and million and $X.X of tax $XX.X our

In ATM made dividend were proceeds $XX.X addition, million. equity stock through $X.X net the million the distributions shares of and of X.X reinvestment dividend plan through were for sold million offering company's

increased Our asset net our creative since earnings realized benefit issuances. our growing performance, of strong has stock value history and and of reflecting the and steadily XXXX, our credit primarily unrealized gains consistent

increase compared deferred remained tax increases in as a Easy in Ice full at $X.XX both from the primarily $X.XX other last ATM sequential shares of from $X.XX X, the significant reconciliation on quarterly dilution simple the Slide by a you offset resulting to NII top, impact the sale the Starting and per unchanged NAV income of the decrease share On programs. a increase blocker DRIP the major benefits, from in basis. a were the of and per period at The changes $X.XX and share will share per see quarter. a NII

and reconciles for Moving NII realized $X.XX $X.XX gains qX record the dividend our QX. $X.XX and QX by partially the with the half DRIP the and on programs net unrealized the a impact by This were of quarter, offset of in generated to net declared lower our ATM for increase dilutive date NAV share QX in slide. per the the $X.XX $X.XX and

were both and the and in per the as increase increase a $X.XX top, $X.XX decrease fiscal upsized $X.XX share per Ice Easy programs. a of NII Slide income this to X CLO. deferred $X.XX $X.XX $X.XX fees, year. the in from from Starting in significant These a AUM $X.XX fiscal full interest per the the sale interest same were has blocker for offset in impact $X.XX shares benefit increase of reconciliation base higher management of from at The other a non-CLO increase from after in DRIP XXXX. time and dilution increases but income CLO the increase share XXXX $X.XX expenses, decreased reflecting increased ATM the share income, A by in the $X.XX at a a increases operating tax and

and partially and year for NAV $X.XX the the and to generated for This the Moving and on ATM $X.XX programs slide. DRIP offset unrealized gains by of increase in year. fiscal timing were share lower for half NII dividend by declared to The $X.XX the $X.XX mathematical $X.XX count reconciles our the the our year. the share the per of the XXXX net realized impact

debentures which Slide million. X consists us year-end, available outlines facility. dry $XXX.X This powder to the of as available of our undrawn cash, SBA undrawn totals Madison and

with for based $XXX new and license SBIC debentures the capital SBA into SBICX form the companies, approved undrawn has dropped of SBICX. powder currently on added million million portfolio $XX second down already recently existing to million Our in our of dry $XXX available

this used also investments originate composition million million of since capacity The or quarter cash, of $XX.X follow end. we includes on to $XX.X net new of which

In this to X.XX% of we QX, addition, bonds. SAB our used during redeem past cash our some available fully baby

term all is long all years reminder, our three plus. a As in nature, debt actually

positions. of in of Slides of fund to XX, first-lien assets like XX one investment of which investments of to and quickly invested our that with and in Starting through Now, review is move our on last companies I our in and the first-lien, XX% out and composition portfolio $XXX.X would are XX% Slide XX yield CLO are million XX portfolio.

significantly is last composition XX% from quarter. first-lien up Our

you core obviously the and our then. changed year-end CLO continue pressure Slide on place quarter continues how has see to dropped market LIBOR excluding assets since as yield can On XX, just This has BDC XX% as yield. our to bias downward friendly a under of to on this decline

Our X.X% reflecting overall from yields decreasing to XX.X% asset X.X% X.X%. last yield from to quarter, core decreased

X% floor. Our rate and at discount XX.X% this in our for from also we LIBOR floors to the quarter. When tighten the a the the used range have is having with investments all X.X% reflecting LIBOR CLO the of well now CLO way up our above LIBOR half in decreased at look lowest XX.X%, a portfolio, in yield All all least floor X.XX%. core X% them reductions CLO below floors of our a to

XX. Turning to Slide

and two portfolio follow five million proceeds the plus on $XX.X new During of investments amortizations. had made quarter in million and realized two of and investments in $XX exits we refinancing companies

including $XX.X quarter. gains With the the our million net also realized for proceeds

as diversified in of highly across industries provide services. category businesses industry, as industries. and distinct a services business, by asked on often companies remain nine classification well a investments variety investments education with terms over this large represents as that healthcare geography business to type focus about services in spread We Our the wide of and specific other

This As end, end XX strategy. our of business our portfolio, important of consists services, investment interest advisory, breakdown and restaurants provided includes remain whose overall featured part of other resources total in in to education to investment an is broadly our different from Of services the classification investments companies, presentation currently XX human services financial X% total. in on our year which IT at management equity range many supply, website. quarter

million. past this During realized net gains we had year, of $XX.X

demonstrated past investments. sale of other For net eight on had redemption and realized XX, fiscal or of interest from combined gains equity of the Slide million a sale as we the years early $XX.X or

the historically BDC accretive we fully up the reminder, NAV. loss carried resulting year, took when from were in that to had of this over unused being a gains capital these carryforwards to management As over Saratoga

gain a capital fully grow remaining gain, currently our our in net capital resulted quarter's long our term these has gain undistributed. and in helped are is This $XX.X healthy the ROI. highlights and credit utilized loss carryforwards Ice consistent performance million Following this portfolio quality, now Easy reflected NAV

That the turn our investment market. concludes will the and Officer my financial of and I overview for Michael Investment Chief now portfolio Grisius, President call over review. to an

Michael Grisius

and you, of last we the portfolio current years. similar over Thank as market the the comment our of Well, to in that a was impact considerably. couple very quarter light last COVID-XX. unprecedented Henri. then of market dynamics the of minutes persisted XXXX the on strategy I'll and impact The environment market of performance see current it had take has to pandemic couple of describe altered fiscal the investment

New in processes platform better M&A nearly suspended the while market have pandemic. our to halt. have Most and originations understand of the been come sellers wait a buyers impact to

As market are rather considerably growth thresholds. leverage in portfolio are either with being in or new that is a deals this getting companies but platforms with result, pursuing new is lower initiatives deployed current done generally and liquidity. not are that seeking market the that this generally existing higher spreads capital The at

In underwriting usual, is addition, the bar than current the economic reflecting much uncertainty. higher

be institutions out market practically of deployment new for to the Some altogether. capital appear

result companies. with engaged economic actively our been portfolio As conditions, a we have current of

our that their right effects companies long on portfolio of to term found are and both have We help businesses. generally near mitigate taking the steps COVID-XX

loan Coronavirus Economic also Act under programs Program package them or Act, market PPP to evaluating able Many themselves Our companies Security and the actively of and navigate portfolio lower stimulus them Paycheck COVID-XX of the to that middle relief. the CARES Protection businesses. on impact been have assist have their avail or as Aid available be been may Relief the they relief of

except non-accrual Roscoe no are in paying payment their additional of terms year-end. Investment, loans to our our are since All there and according portfolio

due to of to amended two also account our modified borrowers to necessary, or COVID-XX. we many have unsecured for portfolio our impact on We modifying COVID-XX underperformance loan PPP When agreements is The to access permit our agreements loan the loans. of of have process in uncertain.

Coronavirus ultimate some virtually remains any in unknown. of the individual company has level near portfolio term, While had impact on the every business of impact the

valued expected by that portfolio lower and An or time COVID-XX overall to our important could the the based portfolio. February reminder GAAP the conformity that U.S. time. in that U.S. months of known us the valuations XXXX, caused at volatility facts result future GAAP is at has conformity to that be end, circumstances with that in during we as in investments known reasonably or on XX, conducted any pandemic our Due our the fair value in a followed now of year with

economic historically far first attributes industries that supported thus in of that lien remain we values Now portfolio will the portfolio environment debt, we us performed by of have certain situations. this are overall said, generally that expect help our there in well durability our as and stressful portfolio. we navigate XX% is our of in in enterprise and through strong confident

We energy have no exposure. direct

that demonstrated portfolio degree produce addition, In our of revenue historically high a have revenue the of majority retention. comprised is of strong and businesses recurring

will the we increases on of appreciation including do the recognized in related and performance our negative declines and realized the anticipate portfolio overall but not economy that lead credit impacts effects COVID-XX in market market unrealized company-specific in underlying being on quarters. However, in market adverse operating and the potentially coming to to conditions multiples, limited spreads

this to put respect With that sheet, balance our leverage footing maintaining our solid historically of approach on uncertain time. we liquidity even during Saratoga and investing, levels significant conservative challenging to and utilization believe own

can last, believe economy in our that market us the anticipate well-constructed structure business will presented the clarity this by no the with will While displacement Coronavirus. and long capital navigate to how help challenges we global

strategy serve face. continue our in will we and has currently We to believe the especially sticking best, market to

always BDC A has always We assess Slide working Saratoga. remains space. at paramount the underlying the long accretive with capital underwriting underwriting. business each over approach ownership endeavor understand the best long quality objective to strengths see to this into our businesses, culture of XX, sought of producing of our have invested We has a and model. its shareholders at business And, strong possible company returns risk-adjusted management characteristics. the investment the order in strength being thoroughly resulted you approach We the top the portfolio term. for approach Our in our can with on performance as and its as appear and accurately durable as focus on and the been term directly to of to deeply

XX% has since us rating year-end. Our and our for quality successful current positioned returns $XX.X at remained downturn. of our believe and also of With million internal million as net gains are reflect well approach, of $XX.X how approach contributed credit underwriting taking over of this past exist has in economic We the this year team XXXX; management typically to and realized market. performed. also portfolio strength pleased that has of in overall portfolio with our portfolio the underwriting we results quality We believe the opportunities and our these our

leverage have leverage maintain year-to-date from able above down at we slide and XX, significantly investments Through quarter, are EBITDA underwritten market leverage multiples, all five for throughout. the portfolio the profile to volatility, our was relatively which below a well across been previous total X.XX Looking on times using past industry. average for modest the overall risk times, well

seeing signs leverage market. that are We early current in the is tightening

we highlight, confident the value than of investing investment. the exceed just focus models, our that our businesses where will attractive leverage, in of profiles and risk on with strong remains we rather the last are credits dollar considering As frequently enterprise exceptionally business sustainably return

be economic will more these believe types businesses of volatility. to the current We resistant also

an of are consideration, we While absolute an leverage strength underlying evaluate also the business. important to leverage metrics always relative

their expertise utilizing credit through deliver gross service diverse we retention, Good with widely that a our services industries as and platform a margins. a continued For set businesses of across in have exceptional businesses to recurring example, software software lending customer characteristics revenue, a terrific can have platform.

multiples are average. for result, corresponding higher debt valuations than also and these businesses a the high As the are

fiscal credit type. since we with also returns of economic profile many of of resistant unique to of our of in-person of strong, the to company businesses, risk models less is to unusual dependence lending businesses because step current more in end the the some we often downturn. believe Due on And a these the these providing developments businesses the year-end, so good business are taking participation the will post-quarter be achieve this nature However, attractive these can adjusted update.

originated investment also approximately quarter has end, companies $XX of Saratoga investment approximately Subsequent numerous drawdowns one This for million. portfolio has the had executed of company's as existing of facilities new to delay $X.X Xth, included That and net new nine million. May totaling million, delayed of companies originations facilities outstanding in to draw $X.X has $XX approximately to portfolio committed and million two repayment $X.X XXXX. reduced million exposure new committed of draw

skillset, business has and continue relationships our mature significant Now, new relationships deals. new sources and our team to to on become experience development for have focus led strategic that

number during The XX As difficult with reflecting source March dropped term COVID-XX see reasons, newly is sheets and term can months sheets has our the notably, you March. on slide same slightly formed slightly of up over our sourcing XX, three for of deals the from issued environment also companies XX% XX to of impact last XXXX, combined are but months almost the the relationships. XX the down issued portfolio past of during new immediate

a from of variety solid efforts. development seen reflecting greater as We we expand progress deals have business our more sources, generally

that we our say also of say culture to breadth The investment continue evidenced of continue ingrained will deals, deal no maintaining has in especially opportunities know if is this of and change shareholders credit to for expect we current value do will is Saratoga the discipline. this how funnel maintain and not discipline our our fit environment. no to We our enterprise but to lot preserve we grow and in how don't profile. We our a

with gain return $XX.X census equity XXXX, Saratoga realizations. in our $XX.X on million we on million gross saw unleveraged investment made a again year, approximately And realized in a demonstrating The exceptional this and gain. times IRR, of cost. team portfolio million million QX our dollar unrealized by investments has fiscal total our XX. performance $X and investment of XX.X% on on an realized Ice resulting $XXX management Easy million investment is Our $XX.X This overall been resulting Slide investment XX

to on combined right, chart fundamental over second $X.X weighted issues. Roscoe total $X.X and took slightly with lien is to see no significant performance, value BDC $XXX was investment that marks SBIC to remains reflect to you a update There non-accrual. medical management. equity IRR XX.X% up II million of continue These investment fair as that the the the Saratoga gross million million can our I, On our of unrealized operational unlevered is since as lien The investments quarter, marked well remaining both at also this zero. second weakened

with in and work lenders the to pursue strategic near-to-medium We sponsor term. continue senior the to alternatives

Now, with addition million gain and in interacts Easy advisory $X realized sale to great how NII. above, regards of premiums, a Easy of as year a included portfolio to and repayments million generated a high-quality fees the solid Master's This whole. example of prepayment and Ice was Ice also $X.X discussed transaction the in

can first And you year-end. moving license fully funded, with of is our as XX, $XXX see FDIC on to invested million slide

demonstrate primary portfolio, asset team on our overall changed strength in realizations and available second since confident we funded focus. dollars and year-end, $X and due The been preserving the the year, Easy has of Saratoga. of million intensely been and and of cash against million million the FDIC our our procedures. the we underwriting our remains which and and fiscal million remain has with Our license of value of has while last the equity, equity. $XX debentures Credit diligence £XXX results census quality team, already highlighted And of with future by remain currently of focused of Ice, platform deployed, $XX operating our world

the portfolio. our Chris. This concludes back of turn I'd to our review the market to over my call and CEO, like

Christian Oberbeck

Thank you, Mike.

XX, increased a quarterly the with slide every term. the single is the before the years. lead on cash and has exception We long increased dividend past the paid growth five A each highlighted over quarter, that dividend dividend last year, illustrated we and of for quarter. industry As

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and has flexibility historically to related to investment preserve liquidity pay conservative market result a challenging historical not required this As practice, management this current the earnings is of environment. in precious dividends to Saratoga

February as and dividend ended XXXX. the can reasons, quarter seen has of these be For to for the decided on XXth, our defer XX, Board slide Directors

continue we economy more to We quarterly basis, will as and gain decision visibility reassess company this a at on least performance. the on portfolio

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slide. is XX, Our longer next term our on outlined performance slide

XX, key three to places can metrics. On returns the certain the top five-year and all the industry performance us return beating BDCs, in industry three-year further outperformance the the you and see context our placed of of BDC with averages. five slide broader in Our both easily specific

XX growth ratio actual NII receiving, of realized the the our expenses. and shareholders Notably, return marks the includes dividend being recognized operating been achieve return months value value categories, our as average incentive asset outperformance across the with being return fee outperform interest million to high related equity net gain that five XX and continue equity years XX to it expense gain outside portfolio, and have months diverse industry share with year latest this We for latest value reflects per last $XX.X months the is yield, share for our on the per net XX% growing year-over-year consistently on latest Operating year, on XX.X%. the high on latest the XX yield including asset months growth. equity,

slide investment base, Moving this attractive adding institutions. capital the community. on XX, and investor markets competitive are make BDC discussed including characteristics decisions quality Saratoga in is that to differentiated We of this to to our drive all and believe of slide the our designed initiatives, that will a outlined on more our call highly achievements help today size

with ownership return XX%, share, equity SBIC our rating, percentage-wise cost sold support maintaining has investment low-cost NAV Our NAV growing received triple share by a management differentiating sub attractive levels grade expansion NII investments, profile. portfolio accretive recent to historic X.X% at second industry Access include B risk of by characteristics of yield, per decreased and which and make an one equity license to management. result historic AUM of highest providing not and strong which on the of liquidity, in accompanied long-term the as a and by and liquidity, issuances, earnings-per-share solid high-quality and our

our historically conventionally industry. contains credit to In high including and gas industries, exposure addition, oil minimal quality portfolio the cyclical

We strategy us that balance experienced and the will this current liquidity underwriting Saratoga and remain substantial in and challenges well serve investment near environment our historically team, will and management long-term. strong confident benefit structure our that through sheet, standards, the shareholders tested battling capital in in

In closing, their for now ongoing call I all I the open to again thank for would to our shareholders like support. questions. would like

Operator

first Our Instructions] question from comes Hayes FBR. [Operator Tim B. you. of Riley Thank

Your line open. is

Timothy Hayes

portfolio Congrats your many a first have comments payments but and requested have this really hope April some of credit you forbearance missed any companies or so well. about that and guys. And point? point? couple you're I portfolio know how trends, this payments May at doing made morning, good far, in Hey, at just all here, year a on on company My strong question

Michael Grisius

missed nobody payment. juncture, a this has At

which agreements I accommodate we're for of think are remarks, prepared in portfolio to loan COVID-XX. amended as actively- the I companies we've described there two their effects the

the One completed and of amendments other has those been one underway. is

Timothy Hayes

what forward covenants? or increase, deferring to You payments? And more you interest provide about is measures just high then you modify taking and two requests know, Or forbearance you know, are you principal loans? mentioned, some from again, just what measures these that relief? loans as a it going level, are know, to reducing taking you And, are you

Michael Grisius

questions. it's the are is too tell. good answer early to Those that And

I as to accommodate agreements know, their managing you described, effects were more couple companies the in portfolio loan a that of think, active I COVID-XX.

than virtually impacted every to will really I being will so some some impacts that business tell the more others. But be. is what know, this. You early it's It's to question, just say degree, answer difficult to

our that We allow portfolio PPP that hopefully for have have in generally, the forgiven are make down access that the sheet of the companies really COVID-XX. the to for our had not been effects except accommodate we've accommodations which the for program, most I modifications beneath and debt, unsecured have made, we date, made is balance modifications the by-and-large have or the of to those to companies that certainly throughout we've covenant road. to two the we any modifications But portfolio, made. to mentioned, for But us

I it's that But out just would really point early.

as their We're of feel so none going XX% really some effects place we us we're in but very on think a what of time performance, those team is taking top are we're I monitoring real doing and that's spending what very that of know portfolio this to comfortable time. of understanding be. we're actively, our our

it's many how few. but say a to difficult may more companies need modifications, far, it's so just been So

Timothy Hayes

of then, And PPP are received have borrowers how the funds? approved many tap and just applied trying program, on you PPP know either funding that. several size or approximately portfolio for companies helpful. have Can to That's been mentioned you your I how many

Michael Grisius

majority can of the I that tell them have. you

about the our standards market. think the you PPP program, that to core size relate that's If

like as to potentially by that qualify can and the they're into the comes PPP of program and So majority accessed to then PPP the the are feel the program in extent has But most PPP impacted received attest cases, funds can on There restrictions some accessing being of private has well. equity any portfolio them COVID-XX, so they that applying. funding. play, sometimes

Timothy Hayes

in are dividend, defensive reflects a decision there? we little getting to me no the to to expect as or your know [Technical but one color If could just- back is starting to decision just power view and I'll and possible we or queue. be in Difficulty]. happen, is But And saying, occur the more good position to then term view of deterioration a see this the If hop that the touch just truly what bit hearing. of Okay, or defer in maybe hear. want you to your it's we step on earnings most credit this this more reflects maybe idea need occur near-to-intermediate could I decision, I have you the get for the on first board

Christian Oberbeck

for that question. this you Tim, Well, Chris, thank is

sheet, if I also, dollars the to to saying but don't the gone exactly know and very Mike what in think you going the it's a system was the well about answered been think, to the of you to number, trillions said, you into portfolio, happen. I multi, There's Fed. it balance tell second into multi, have stimulus what's just tremendous I too listen Fed's our early thing put that's multi exact system, the

You welcome, a how for important us that have to it's and it's back liquidity And a stimulus important in the comes this the is all or and form, the it's solution. know all I economy CARES think don't but until of shape program, these all going just you to some not really remember PPP, but have we affect businesses. bridge,

retail you're it's been not what's indicative businesses in that's or a business disaster that clearly, software-type revenue impact, like sporting we're you're in the no come. right a or has of of like taxi if and or but some restaurants lot businesses to things recurring essentially now, of our obviously, if complete other Now events in, that

back be to just we quarter, next coming different now much we back, back so come questions. there's with they're what going to, don't know And so continued spillover. going negative now driven, but every with and going to have going negative, PPP and is more is a but happen not magnitude So that super and There's businesses be what's to and more single to we we're our more then visibility, one lot worked, around slowly, it's had day, scenario, don't big know. we've learning and those of companies PPP coming States are information some

impacts So into thing, those may of estate people like we spill like of the practices that, situations in not and go retail even things can't affected over real directly back these may though other some by to or be restaurants the get dental or may areas, dentist.

so, And starting that of way system, they're just fifth, derivative but sixth third, going the how work lot fourth, and their a to there's exactly as through companies. to they're impact are effects evident effects the knock-on not

just to who knowledge, we what know And going of we So, portfolio really we've magnitude all don't in really, we they're companies the is support and a want need. of the absence what know got support don't know. do the

one though capital we can is What And what know liquidity? position? is our is, our thing so, the

with that Charlie we're seen, so, emerge you he that To do to on quote biggest And to typhoon, make when anyone's side what to headed position mean, is said, liquidity. Munger, a lot just ever you're maximize trying Hathaway, you for other you into I sure you're the know know, want sure in of liquidity. the a

knowledge, focused talked A and In been how they their a about point think of in makes I And and that lot but have on lot we we've metrics. but would they status. people we're just don't best Rick heart, are into status. other thing must spillover, dividends whole by or many people to because words, maintain know about year our ever of right into that taken to And maintain right have paying the absence to our also are [ph] conservatism this BDCs out have are lot they year-end we've [ph] their off super pay focused sense. so, this Rick really a that, that, to. of lot deeply dividends And of spillover, after that, coming a of I

our necessarily is to In do go So we have a ourselves liquidity. the flexibility income instances. to instances, many or dividend in not and are current, on precious voluntary we so pay a that spillover decision managed taxes because preserve the have our into that to obligation ordinary

what all evaluating completely the going it so a Again, we know don't so private, lot of there's see available, if dynamic each things in quarter. this markets decision, partially we're to that's it's that certainly will look that, capital do at And are be is to shut, a what's point we've elected unknown. continuously, to And public, time. shut, BDC we for

mode. been so our of the year, business business- have got just into since the Madison we we've have next we're us And XXth our XX one, facility in have highly for into constantly- this years all so and a drawn we've we've and but going week, undrawn. conservative we ourselves it's the into going we continuously secured structured downturn, indebtedness, again, you no after followed in this And the last

fixed debt term to obligations rate, our long covenant-free, unsecured, are consider. with no of All almost current maturities

the a well. and liquidity available So, a new that which our sure sheet very big is structured big there, make is is have is SBIC other for our really lot to is we II, tremendous have the number also, And number at we only of and liquidity piece balance but investments. a to facility, that it we when but look our

in one we in needs can part, quality support make to are number that and the got kind we to position portfolio the Mike businesses a our credit support his support be in that on elaborated we we investments have that And can the are on to so at that company, the available satisfied, criteria of SBIC or elsewhere, for II so, make that in funding sufficiently sure SBIC I liquid BDC that we followed is we need Holding sure not those.

background. So that's really the

Timothy Hayes

That's go a color, very Chris. ahead, Mike. good Yes,

Michael Grisius

environment. here. it's for lot We anyone but in an time to on this a jump spent question, this me one a important of in natural ask and Let one

I one Chris is said to what I would that. thing add think

step we at we our we feel If the really good as and as quality of situation, underwriting. to management continue back, about look the you

is has at lot seen sure, how the The tell next be team is underwriting, can world, really But cycles. COVID-XX And you related recovery of what if risk underwriting of We've in- in this we're Nothing anyone over primary is, long a for the world, quality a good feel feels our a yourself, don't premier make business. good Our believe your I track about I a historically underwriting as the changed ask the out management lot measured what also, your time. risk? risk like how senior and a months, has a going our businesses through grow the of things. teams play And in really in and record supports about V several point. our of in and we you feel around does to unknown. been normalized and are been the we've you Well, portfolio confidence think is the we then normalized COVID-XX is you portfolio. one in this- careful and investments invest the to we it's not that for

real point talk time. was of of There developing one in that that, of stuff all is

so point, make that back it, And expect at to to of ensure recognizing to to really at every to we sure case that scenario liquidity and assess liquidity, so, we other end is to liquidity the take the precaution look these can they future to risk, do to COVID-XX and strong uncertain. get portfolio a just turn we when normalcy, their of of with the this that that enjoy in need companies and some this level we want have in but them support we enough it's experience manage business get

Timothy Hayes

comments the to Yes, going the Mike. hop stay I'm that well. makes in appreciate there, back and sense, queue I

Christian Oberbeck

much. very you Thank

Operator

you. Thank

is from comes open. question Casey Alexander, next Our your line Point, Compass

Casey Alexander

additional into with cooperative canyon that what of and couple private market congratulations One, hear are what those experience lower-middle to like the curious most your their market that get Mike; the Good unlike cash upper market side get your sponsors outcome, the fabulous it, Easy two has people lower-middle companies other equity we've represent the been. on in questions. and sale. more heard that A been help anecdotally in of on fortunate I'd be than private I'd of companies morning your on and dialogue companies middle the Ice investing first have to them actually and for investment questions, to equity projected, sponsors portfolio. timing to view your

Michael Grisius

Casey. morning, good - dialogues Our

the to into Sorry, question. just right jump

willing with good. evidence And healthy has of willingness and support larger compares be we've businesses really of lots our very sponsors seen to and the but by-and-large, by been how they're market, supportive speak to dialogue to that Our as our the very of their sponsors very of their that portfolio seen can't to large. and constructive we've indicate I their end investments necessary.

Casey Alexander

Okay.

but of leverage portfolio, the six much carry But your of companies companies market lending for point programs? given the many of mentioned the most after times a point, PPP, it's which companies any considered and main broadly your with you attachment average going the lending program, the street the doesn't issues. attachment affiliation not there's also most available it's point middle Secondly, portfolio main market Have middle portfolio loan, the your some after to companies. of applicable attachment to likely street really

Michael Grisius

- it it's in couldn't less is we loans down seen the to-date. understanding other seen to-date. the My that road. are be expected haven't attractive change, that We ways, mean that some that forgiven That but in to doesn't of that though, program, haven't that not

people the so but falls loan program think that the I within our size result, So are portfolio at and as a looking of probably differently the core PPP less latter. group slightly

Casey Alexander

they it's it's Now, could additional still cheaper capital than you. that likely get from

Michael Grisius

have a not in and activity change in that portfolio. factor big but could that be seen our respect don't much anticipate to We that we

Christian Oberbeck

well. through So now. a retention XX% just for just a in It of also a that think its infancy. comment period jump come second there's I in program I as as is just that and I believe

parts moving one in that. major and And up still some bank it. were on there's of So with they a inside speed to not conversation

I very lot the it. It's it's several stages. be in think now, earliest think, really just more weeks I probably from just, information on there'll a

that content again, to on So more today. than come

Casey Alexander

availed to Is Okay. it subsequent the regarding liquidity, it the comments of not quarter? of - yourself share have the repurchase you program to fair given your say also is end that

Christian Oberbeck

correct. That's

Casey Alexander

Okay.

XX/XX was with you go me I dividend why to thereby the familiar available very did BDCs with quarterly the you that because go XX/XX investors? before to Let not to with dividends, the choose ask interrupt contract actually the days and you is scheme not a and that have scheme paying you the company paid your a back dividend question

Christian Oberbeck

Okay.

us supporters been of back we did So then I give I I early that. And question. do days appreciate those to a and and appreciate of in with that having lot and followers recall consideration us. your

the continuation elements dilution years the And participate that all of metrics get in dilutive they One things and terms and the pro effects, is not and stock in of on shareholders you of like that. for then they massive of effects all change go necessarily rata that. in sorts

So zero - would registered one that With year the these after us build right one. but then we is. spillover, company, extent something for of the this non-receipt definitely of the that's no to deferring on more December but dividends, that dividends to with the early regard now shareholders is of gets that on that consider, I'm resort us a or receipt not XX the talking is whatever about spillover than be cost the think of cost dividends, X% the to are we rather paying of this an is, deferring the and later ultimately to now. to is how cost relative company essentially viewing the

cost the of ultimately, X%. be in the future So deferral could

for baby prices Again, market-indicated what number the for to a costs that's baby market in for bonds, large are very example, relative bonds. days, these not

cost completely back some So we've believe not been to moment we're you it's They not I dip They going notice, - people the alternative And not going to zero a they things the But some purchase. one did this not the terms people this Hathaway for this anything pandemic if anything. unique civil to is really Hathaway a come a in basically back conservative. people is. the in. people and the this We And Berkshire - are Warren said overly of to did done dividends, is this once to player real the back of back start far downturn. XXs, scenario going And event COVID-XX purchase Berkshire how have analogies struggling in up in we that Meeting did dividend year. and buy March. a war, just are - of like Buffet dividends. severe we're with Annual essentially And go in just number so doing hopefully

their sold they all stocks. fact, airline In

hand said, And quote, billion 'We all from then isn't on single a worst And these we possibilities.' '$XXX are some that own case quotes huge Knox'. their when momentum'. ourselves to problems He also you position another And a said, don't Warren sometimes prepare ourselves think create 'Well, about Fort prepare Buffett. stay be he he said, our that will problem, for for

think still about with market, right and into, put Berkshire profound I think he's we these now. don't well. - the but not he just out as - So, very worried. That are million I dollars And what was concerned hand GE. And on anything in Hathaway a XXXX stocks - doing he we $XXX at billion are piled very he bailed put Goldman we is it know. mean, informs and sold buying he that is statements how on

we're that. So of informed by kind

what liquidity We've singular or or said, And can. our event company. as the earned obligation, for as not this we still And we team are deferring liquidity dividend trying moving single We're the our This deferring. is we're shareholder canceling to the company, largest management trying and that standpoint, cutting position single team the in we're of creating our a management moving are when shareholder, largest share; this from we, is a largest is the we shareholder. do This a But from dividend flexibility. in supporting we're the This dividend forward. it like the direction. supports NAV. It's supporting as return forward. stock. our company be so moving And is to inside and And still the have flexibility on the supporting just our got not the cautious is different it total NAV, we're not a we dividend. position, Saratoga spent

you that We've requirement the the best they also of our lot total need appreciate students a if - stocks returns. for one been We of year these dividends and student the And really for firm a produced the existence. probably have for certainly dividends dividends. our the I it there look total power our but last returns, and out for the and of best the the and return. total And you at buy know for XX% And of retail you're entire investors dividend, return total buy we NAV appreciation. understand

a cost the to the that's a moment at deferring lot cents company we're and terms the liquidity in the is So this sizeable what and zero of looking zero obligation improvement. company thinking. This and dividend total a we're in costs of in produces time flexibility. and return dollars And buys

Casey Alexander

my gone income end of quarter during distributing deferred been omission? fiscal is and because appreciate mean I ever times I'm this created at the an to tend always this unusual year term you have or deferred that not really sure to revisit the presented that that see dividends up me to before. it was things vocabulary true expand has how dividend, may the Does can look

Christian Oberbeck

Casey I Well, I wouldn't - say just take would guess spill possibility. but are like would to you degree commit is feel to say anything, a that what certain I I that's just guess [indiscernible]. I want a We to

Okay.

because from that of Right? So hadn't the actually sat their tax have. it's out. other lot spill they've not They've they not over like past If in have have a words, They paid the In reversed current companies stayed could borrowing with it been spillover. future. obligations.

We doing haven't that. been

dividend entire arrearages then distribution have your is actually, Rules allow Rick an our to in of position. you tax of So and and position your effect year

opposed we're of as in to spillover an and are creating a we asset are So still as effect liability. kind as

pay all got all just know owe. up everything. right to rules, you dividends the regard with don't now. So the to I you've out And It's as income that catching to it the mean you got pay taxable out we

markets as possibility, into but where catching up so about a Yes, on up for question fall. that than are we that the think I scenario your possibility and is the to among be recovery dividend, a is move in like. BDCs very And that'd possibilities now. a right reasonable should a at on should depending - the we and back open different get many that we capital the we And we're

the on are things we management and said, I largest here. team shareholders the are all so as the table And

partners pursuing of that personally seriously. with We're not very And we very, that the investors our affects as dividend all us well. take and

to trying do best. we're what's So

last help position to be want solid. portfolio bridge. the so in Our company companies. have responsibility fund a comes other to also responsibility to and and that is strong we of the maintain the all And the is this where the do thing to we And out company it end can't we

the to supportive, over were times run, our not As Mike and involved to value with. a for that's shareholders, now need companies bridge also with in are going that but only day, then because companies like grid was sponsors some you're the year, make the the can but to these describing going of support in be in and time. through want We end a need our position long you relationships franchise assistance. sponsors the is. And they be may what we franchise earlier, They're some between at a may to this, of if sure portfolio in create value fine that

Casey Alexander

approach ask rather catching? me you Did quarter you the more consider more thoughtful with surprise. paying a me, Did think thoughtful of whether one believe not Let a your Because investors such question. have by than or this you by low to caught that liquidity, more this as dividends approach potential year shareholders played time, was you depending caught statement deferral strong you've items leverage, how produced this at surprise the this. a by your record point the on and truly in super record - NAV, the same table Because out. super you upon

Christian Oberbeck

we give amount it did say tremendous When a thought. thoughtful, of you more

essentially, of and the I kind that that month ended that was regular wonderful on year of year today, XXth circumstance March incredibly February people And are beginning. our really and reporting COVID. reporting - month unique of incredible the and think months they're in are two in one way next at we

So not lot results reflect of do going these what's really on. a

because report that going - have they everybody's to going much be will quarter people next going going then and a time. different the the say I'm that's down so And be on June, to is picture. not to when picture things going what's may up by

the ancient truly last don't on on credibility but decisions our like that's moment. I more make by just physician, would we the perhaps liquidity knows So to on much the can informed said than to have he's they that [indiscernible] current to right the we but we as want everybody And inside marketplace. moment, in many direction. want sound lean don't love this But now. to that's our got - current history don't information we what I And people are almost times, maintaining but year, make they're Warren saying into in I as what's that. until going want luxury that they Buffet, Casey. as And going more actually We extraordinary truly, terms of essentially cash possibly back it's in sure many, some - see of and the

you I a vacuum I of well information.' your that's said, well. 'We're And And I said. mean, you very in one and think so, mean, very write reports in of

and of step. off vacuum taking anything vacuum do, - you we're information in a are, a We information you're not a of then better

gone what doing, very they've it but later gone more have precious a to hope holding going off going do lot wonderful. Yes, better we're after some done they're to that would position still You're through. going people be we're probably proved see liquidity doing back. certainly that regret that shouldn't to And we're a in they're wrong Unfortunately, I through we're we that having this. where

Casey Alexander

assume investments be I'm safe? that's be would that the the the but Considering understand liquidity because just safe new question. where to new likely restricted - mean restricted SBIC that what I to new second outside, last one simply that's subsidiary? and it companies. will it Is majority I companies Is is? any

Christian Oberbeck

Yeah Mike, go ahead.

Michael Grisius

but likely. a - liquidity, I more playbook to is portfolio if as to our support starting think that Clearly to - defer is defer than it's the our was XXX%, the I dividend preserve necessarily this mean, time it's in desire case say, that the we'll stick to Chris just to to necessary. not decision it's

how to out are preserve SBIC higher they're really would of answer companies much the there's already new lot lot begin your continue to to question underwrite. bar a purely But investments say than is perform going that to likely to that so affected uncertainty more going a desire just what directly with. well, our bar affected, as I keeping and relates be it be that in our high this in with higher, very to is which because going be to you industries can environment investments, to As to considered which really would too. more liquidity are new It's

Casey Alexander

for All Thank right, you taking questions. great. my

Christian Oberbeck

Okay. much, Thank Casey. very you

Operator

Thank you.

question comes Schleien of Mickey next Your Ladenburg. from

Line open. is Your

Mickey Schleien

I a good you with in the So beat can I price. dead Casey and that caught want Listen, agree morning, don't stock everyone. surprise to that completely horse, everyone by but see you've

in up I want capital gain follow of distributions. to terms So just

I'm had basis, capital ordinary a no you but as also want Is remaining mistaken, So undistributed you forwards. loss confirm on not you if that have I carry no income noted, to that correct? tax

Christian Oberbeck

through And dividend. do have forwards to under it capital and through capital We deemed and Rules. do carry alternative a have have our a loss obligation Rick gain that gone also we we an retain

XXth year decision. to make December the until until end have We of the that

Mickey Schleien

census, ECI to since referring you're And which.

Christian Oberbeck

Right.

Mickey Schleien

what I and thought wrong. say Henri amounts remarks? Henri reiterated gains to you those some numbers. in I I XX share, be prepared but about were think $X.XX [ph] XX, which might per the did

Henri Steenkamp

the so million was actual for gain ECI. $XX Yes,

took we some NAV. We that gain planning other and also that some actions helped into strategies that had some tax preserve of

And as Mickey, capital the to distributed out as now as gain. around that also be long-term that long-term amount classified mentioned, the prepared And I options, with future. guess only It further shared actual that needs is we that. remarks Chris to the in distribute have provides how into various one million. gain $XX forward that's I carry so And is capital my as

Mickey Schleien

understand, I completely $X share. but that's a still roughly

lines is Casey the distribute of cash distribution to at what that either that in supplement was use or to now the asking question of a sort my dividend point? along have given team that So why some you'll not

Christian Oberbeck

guess that cavalier know. correct. that. again, say in now. And is slip with substantial that, very of - what don't I think I degree said out surprise everybody by and end 'We by the I be That's surprise.' no living our one caught investors but answer we're and caught I'm I the not into caught any it pandemic what else to really, And that a would both way, you trying And COVID to be in us and March ripe is not by to - And surprise. surprise, knows still Casey

And relative the this December there and payments - - occurred time decision our any February of so reaction the that's until there. back XXth so about XXXX; event - your some that. by not actually make make our reaction, question need actions is don't do payment or or to that by post XXth decision to to We're not we that to that anyway, so which so required going to and

that what actions our are all maintaining So in are, liquidity. all geared - they're consistent consistently of towards

of at think this moment their dividend, how kind get there's would predictable no be Once economic that position. time. quality be call should and be might That's would now, projections. it we of BDC a judged why third back do normalized to we're different. BDCs one in deals look their projections, BDC, there. there's liquidity about But And criteria what in a right no we're people some we not lot mean, or new projections, of the environment, we for analysts, second, read you not now. their our no would the would- There's That's look, no notice right I And the stability. in BDCs looking But at make and how of that, least say must all at and derivative and do at anything. years I fundamental number lot three at you we're of managers. a of be you of, reports not And particular one relevant. out really history, it's really sort change things can look NAV,

of to environments, of whatever sort preparation what on, to really liquidity. you're So kind which go. this the in not you is And you with go direction is we're sure in go have want make prepared to to those tricky. really moment, as And fraught much

Mickey Schleien

terms cash many, of CLO valuation now do the I question do pretty that market in was equity CLO as and of more And agencies weak made feel of investors this ratings extremely many it's I And have project investors- pre-COVID, flows closely. is discount have And a have because and proactively your assumptions higher applied NAV, what rates determine to been pessimistic follow this to Chris. worth. that, appreciate many, downgrading as a quarters equity for investment, they generally across is result about I the board.

the XX.X, I me discount of So understand why is went lowered XX.X I from rate which the can From investment? help to would you actually what see, it you what your have down expected. CLO opposite equity value can to

Christian Oberbeck

the gas have out downturns, obviously you- very know, of notable quite mark answer proven Before but asset of credit then, oil like COVID as a as asset through different has but side and because just a and exceptions you that's you complex life class, the fundamental historically high, of class CLO general, and the resilient. highly be in that, particular rightly but follow that, inside assets, with a Henri and factors have there's to with quality I'll you like quality the overview of all in ratings. one that kinds CLOs, you say been credit syndicated And it, loans, that is retail to things around question. the strong like Obviously, point the I on underlying very question have CLO broadly instrument. clearly which- you

And on and self-correct, robust so, ultimately, be it disrupted, did it can flows turned quite to the the the whole on and downturn, But in as the cash the perceptions can quite ratings and side. of out timing be time, last although messy. instrument between, the somewhat flows in it other based in on be the cash can

talk do to want Henri, that? you to

Henri Steenkamp

Sure, Mickey.

the calculate this rate from because firstly two used income big our mentioned, rate, discount driver XX% there's interest P&L, effective think interest terms, actually into you weighted went distribution but it's weighted then a equity average we quarter there's XX%, there's is I different which the which interest to also it XX%. the allocation of rate, effective the up. that to tighten And and actually discount went average XX% from this of that down the to actually was, rate then

a And discount the interest factors rate, other of in is rate rate resulted up and XX%. to the going discounted so, down which going by the discount effective average couple weighted

rate the So X%. up went discount actually

Mickey Schleien

Okay.

mentioned how in made, So much you investment quarter when lastly, that's going and always the numbers to can made? And that on. you subsequent have a maybe was given describe I read it, may reverse, is the but possibility you new the

Michael Grisius

somewhere well-heeled amount well-funded I supported software equity from by a And Yes, but was monitor is that that capital networks. - and at of it's an the middle efficiency successful near helps businesses and enormous made one company the don't end of It's the software investment a equity the exact private an of March. date business gosh, know of firms. it in of March, their IoT most

Mickey Schleien

that it. Mike, like sounds that fortunately like extreme doesn't it sound COVID So, attached to has something risk

Michael Grisius

businesses portion are being as are of largely, delivering other is affected platform. not revenue Because, in business our We of fortunate their we have businesses that cases, portfolio that many are their retention large are retention. human-facing. high in that And most as these north invested certainly a many a the XXX%. in models revenue really product and of invest And SaaS businesses is through that much, those actually ones

so, And newer many this those investment of characteristics. has

COVID-XX, businesses meeting environment, or likely being their end, Now, it's is perhaps exposed recurring high high a is that buying affected more pleased having where high rate, talk new engage affect yes, a business a have revenue a were our revenue. really portfolio to of to to product in those software experience chunk little that invested degree of that to by and even that but we it's our in retention of to it harder this are growth that about extent a a businesses to the

Mickey Schleien

is it dividend what's can that the likely would and finish confusing confusion you I'll and behaving is… be there just comment. the And Mike. guess you seem what notwithstanding understand of the I it given just The would is COVID, that's that's what's with level support, I some mark, way a happening said, stock with that why

Christian Oberbeck

don't if it XX% one that of so observation, can make talking from do like investment $X it Well, funded or that there's just was Mickey, not I know, Holding has $X incremental- because XXX% like, million, into million There about, that. required some- for Mike's I that investment to XX%, and perhaps almost with no II completely debentures. was of like the and went SBIC company was by that

consumer So important level, that have place a our the was not BDC supports what to at most of is operations. liquidity, all that's the because liquidity

new anyway, that so, the SBIC II. And to went directly investment

Michael Grisius

with capitalized if of to season, the goes will I SBIC And $XX that's been I Chris, sort and initially, up - but correctly, you then SBA million one-to-one that a there's that companies mean, of two-to-one… season I far reporting, of equity. recall II- so lot lever I let it know think

Christian Oberbeck

equity correct you there the invested. do me limited, of can but have Henri, number equity, third but two-to-one the we your only So, a it's and only two-to-one on basically it's exact on we're really

for limited was incremental investments over. went still is there why II, that little which But go. million, $XX little to million million to SBIC over we're a in $XX bit just $XX a So we have

Henri?

Henri Steenkamp

Yes, that's right.

Christian Oberbeck

They $XX SBIC as our sub- criteria what is being the million, businesses an or investment. Henri? be require decision long $XX as whole the for no And million capital would meet it,

Henri Steenkamp

moment. XX, the yes, at

Mickey Schleien

time Thank me. your today. appreciate it and understand you. I from That's Okay.

Henri Steenkamp

you. Thank

Michael Grisius

Thank you.

Operator

question of Our Ben Rubenstein from next comes Robotti.

is line Your open.

Ben Rubenstein

looking a competitors position on II guys your that same liquidity companies forward, in and looking for like congrats impeccable is SBIC - I more the Ice, regarding Easy timing. given, pipeline, question small of My Greetings, have there's lot seeing? are you capital what just have. type the imagine yields you don't Just

pipeline? of the seeing, type you what just in So yields are you know,

Michael Grisius

yields COVID-XX answer at this by and The points, evolving answer more. The effects we are least increasing feel - good are a that deal The perhaps rapidly. XXX like Hi, is is Mike. basis of

our are some open some indications not have business. typical for realistically seen that we really certainly so competitors And of

supply-demand result, to considerably at and changed higher our opportunity investments equation deploy new As think in a capital exists. has much certainly I the yields

on early hard I an much, going that to a too way our that Where those. emphasize new what there we're cautious, got and comfortable extremely we're that. want enough feel business already before things out by to a to with bar, taking We investment just, a want the visibility to are really should to respect. we as being be so you capital. investors. know, impact tell. but be is that deploy we before, any for COVID-XX little that in are that extremely the so definitely cautious be the deploy is? at to opportunities are we It's And We do though will capital we're mentioned really us changing look we've will opportunity But on make accretive and that be of I high. sure a that in much And excited make notion think there's uncertainty highly for there seeing

Christian Oberbeck

could that. add if I just And to

We you characteristics. is our know, also, super super, solid criteria credit and

may that one is fortify very yield just support, expect, additional so, credit, result there as there have the profile. with the so, And company possibility their of not in very, to might out themselves, as robust ways which investments the but from a not a solid credit credit

we're at as of those So, looking well. a number

Ben Rubenstein

be at equity there's you in in that and do built? envision next more advantage sort more - if - the I there's of future liquidity investments - guess, scenario, more looking look of kind months, looking it months, the look position do of aggressive, better I do to guess. in come how I if then, five or do how forward be you opportunity would different blue may and you've and what take things a envision or then, And few a sectors aggressive Is we lot you, hopefully you mean, - sky six months, an clarity. taking that How you like? have

Christian Oberbeck

XXXX as that to probably so have you you quite equity things and what now know, would a earlier, be of not a think put consensus deals enough out. down, right years if post Rates and look warrants again, at will coming and I of fair we've Mike some But money to amount there's gone level think SBIC were the II, equation participation, said, Well, to out, that. really got have, bit. - the is probably liquidity XXXX I understand And, is. competition and really like were supply-demand strong, we very anticipate XXXX, incredible we our - right, going

So environment and robust, and I will be be demand. can't expand think it quite supply given pricing - the

thing, for come opportunities. this capital companies as a have out for we of great substantial a And need of there's lot that

for Again, overly we want be I So to we there want think to don't though, that. aggressive. be

cost like, I solid think have returns. to get capital - the don't and our to of to with we stretch structure, our really super able be

credit And I very, out, important. to the solidity very going think, of characteristics so, be the coming are

we're equity the generally not has to But out. because fraction equity sort small we're interested are. capital been we Not say a absolutely that of in of putting

of So we're is the that make secure. going very larger that fraction to sure capital

Michael Grisius

and every the make any our money of to having bit, that's for shareholders, our and and really losing lose these well time, think about that investments money I foremost, first portfolio in don't done know, we Just where of part money long chance as as, constructing think such a a is the investment. We is we to for add And little our in sure investors. to want way a this is for what saying, business to we low. how Chris is of by that this make

much a playing along basis. We the at respect. And our is premise, of this the And investments step or tend of then making let's so environment specific deal on go is look broad about very industries you we specific high. all bets why in to bar equity so the and is to start which market in positions uncertain that with that with next or know, kind then, macro higher less related company

opportunities. And tell we'll mean, opportunity I marketplace there's there, in lot this to very because we chance, it's at be that are capital a debt too a we us invest And it's comfortable much the to one, and very will deploying chance really very is out that a an to we equity, how be uncertainty can make risk money be. could big and of good the But if early accretive a us exciting it's excited those and really all opportunity for high. adjusted the likelihood about way. that over return in going feel is to lose low see point for We're the really that chance we and the

Ben Rubenstein

And guys questions. the appreciate taking thanks. you Great. I Well,

Christian Oberbeck

Thanks, Ben.

Ben Rubenstein

you. Thank

Operator

Thank you.

comes National from Bryce Securities. of Next Rowe question

open. line Your is

Bryce Rowe

belabor of about call, might to the record where wanted ask liquidity. terms to coming sorry your earnings I hear Chris, call. Thanks, from. be I this of you're in BDC a a concept preserving

you fees keep BDC? management the liquidity incentive considered So to fees curious, I of have deferring help either portion at was or a

Christian Oberbeck

That doing not to are table that That, extreme this moment. clearly an some parties on out that that that think that state consider. - something the goes is I at to always are if that obviously, we have something there. is liquidity

think well if performance, historic look pretty you I past the our - that is year. in at

properly in in of just has And so performance. terms I terms earned incentive think been of that received what we've fees

much Exactly as mystery. it's not are of how this is a forward, out not other go known. known shakes a still many lot forward things going is we As still

considering, not but that that obviously at liquidity so, the we And in could are we in future. although, you something consider considered is it moment actively and to something be know, time, component this one of

Bryce Rowe

Okay, that's - that's fair.

Second question. question, only second and last

last - raise You the how guys much higher leverage the the you especially in use in happened seen to of of COVID change Does equity couple kind level balance-sheet Does we've in future what - with leverage before with that as past, what the to as over able balance-sheet the GAAP operated a to - use you as what's you'll past? you inform months? were have. ATM GAAP happened much capital

Christian Oberbeck

mean, I could guess right a again, now. I just sort I going what's clearly. on I wish that piece, of answer right? know We don't - it's

as want we conservative be And as so possible. to

long term and right an at recovering, some did they've but have raising baby-bond. in the capital, anyone's could a attractive FSK However, private mean, closed. public like alternative. those now, just are rate been be I don't bonds. baby-bond. we private been there the a baby-bonds past if through done a markets fixed as has know I But

structured So and be clearly, as past, and sources we openly are out, attractive can is so, been for have capital future. now, rightly actively capital to of the the would much be want - were and in type to looking us type that and and for source the leveraging, And and are as we more liquidity it at character of you we all we looking we're we of if that of do the some for has now. pointed

interest, attractive And some most SBIC, percent are so, basically I the with mean, of no sub our XX-year as debentures X.X% like current maturity, covenants.

attractive and can increase in have certainly have leverage we finance something the recently those that we fits criteria, we II availing SBIC the of something extent we it that to have to would investment done we So, that's opportunities, of leverage. absolutely several extent ourselves are our the and our

leverage significant have criteria. that there. our has do facility we We have and Madison do it's So, – an facility, ability base asset undrawn with

We availability have that. under

investments are continue believe fit sound things would So, all we Those that that are that investments and fit extent there all to to we'll consider. the that that are and that. the going forward absolutely we the would criteria solid fit criteria

invest, has until have investments. - available is information what more really certainty we very changed anything our way a the hard about we about to decision. we according And about that's haven't So, how make to we there go the the investment it's changed process,

trigger. it, we're need the you and of it's of place there's lot know, to fundamentals us lot to for in so lenders Right, We're - speculators. pull be and a a a and investors kind science to not of that

you you're so, using it very can is especially And leverages, if know, dangerous. speculation be

feel not so don't speculators. to we kind you be be in that And careful, of it speculative. anything very do to for want environment you have to be We this

Bryce Rowe

Appreciate it. Okay. for your time. you Thank

Christian Oberbeck

you. Thank

Operator

this to over I'd closing questions remarks. for you. Oberbeck to further turn like call back time. Thank no any I'm at sure Christian the

Christian Oberbeck

clear thought we're phone given hope appreciate more welcome the we consideration and over everyone the they've from. on and well. spent and company and investors the who time everyone recent - Again, the much to understands where so years even we as We coming

as with And shareholders. We our context. are view every decision block ourselves and company that partners we the shareholder the in we is largest in make

invest in your And as future. the along and continue will very much your so investors, we to you hope time very and you we support appreciate Thank with much. and us support today us

Operator

concludes Thank for participating. conference. Thank and you. Ladies gentlemen, this today's you

You may now disconnect.

Saratoga Investment (SAR) 7 May 202020 Q4 Earnings call transcript