SAR - Earnings call transcript Q4 2024 | Saratoga Investment Corp 8.00%

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Operator

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to Saratoga Investment Corp's 2024 Fiscal Year-End and Fourth Quarter Financial Results Conference Call. Please note that today's call is being recorded. [Operator Instructions]

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

Henri Steenkamp

Thank not you and to Corp's you. differ and includes forward-looking Call. important like to law. projections. call to the that I could do Investment do We our and Saratoga to recent ask Today's SEC welcome conference projections. XXXX refer results Quarter statements Fourth forward-looking for to everyone factors to Year-End statements Earnings forward-looking to Conference materially Fiscal would with our these filings actual from required update statements undertake We cause unless by so most

Today, a during we call. be our presentation referencing will

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

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

Christian Oberbeck

for Saratoga's as for Henri, as to thank welcome, Well, last and per increased to by year X.X% net decreased last compared X% QX compared year everyone. and income investment share to you, last and quarter. the XX% adjusted year as compared

income, strong and decrease from $X.XX from quarterly in with share year-over-year increased substantial on assets, includes include; investments equity robust portfolio up from The advisory financing last year's dilution deployed And floating rates per mix at prepayment Saratoga's issuances year NII on the ATM XX% AUM, and a quality of yearly overall interest down investments. spreads taxes largely were income other less margin a year of excise ago fourth cost in recent this M&A environment. growth the higher fees, from last from a reflects XX% QX NAV, $X.XX lower from year's yet resulting quarter. structuring, liabilities and have including Higher once over this increased up year-over-year and new Perspectives performance items, $X.XX which not quarter improvement a year-over-year share or recurring which XX%, count largely increase in of fixed. were rate largely been income versus remaining and performance

taxable interest the This quarter's $X.XX earnings of dividend income recent above, recent excise in our the of exceeded recently to relative in by significantly rates stabilized annual undistributed stabled year. tax -- in the portfolio resulting of growing once level The inclusive margins $X.XX increased the our past on noted XX%. on elevated quarter,

elevated continues of In level and years. industry-leading volume We despite margins believe positioned maturities pricing addition, ongoing the rates, Saratoga rates future for create continues attractive substantially covenant-free, years at positioned credit of investment with economic incorporating sponsor the to interest-only opportunities couple dividend interest to long-duration absolute debt out, structure us development well increased our sponsors has terms XX challenges. high-quality be over M&A Saratoga's coverage. primarily attractive and of well and largely from general X potential with constrained the past opportunities delivering relationships to of

our $X.XXX billion of the foundation resilience approximately the and portfolio. nature, at importantly, balance our Most of performance is high-quality

$XX.X net in appreciation million and Zollege, quarter offset which of markdowns JV, is BDC implementing value. and million cost, year-end this management which potential increases future are rest recovery written-down structure have actively we X is X.X% Palace $X.X core $X.X capital of BDC Our remaining portfolio, and CLO the including is by the discrete unrealized X portfolio. and credits. Pepper of of core in the down value in partially changes versus The excluding improvements, for at these our million, fair credits

The in strength portfolio underwriting of solid, our current of of the growing earnings reflects the overall power financial industry our segments. portfolio and companies performance strong in well-selected

We of commitments environment. current market the terms discernment new approach prudence continue in in and the to with

Our robust pipeline, one, the of do that, overall there review this investments standards. not our current despite demonstrate are quarter an like meet credit originations high-quality we the many periods where

Originations the with and portfolio totaled million, know $XXX new this smaller of by X with $XX strong full balance offset in During million QX, investments business in we originated repayments investments follow-on XX investments and existing in million XX $XX year, models company well, million $XX This which we portfolio originated companies, had and follow-on sheets. repayments. amortization. includes year in

is this for highest of currently end first of XX% remained investments at category With still debt with quality rated our enterprise our overall historically credit high our portfolio and have X We well conditions quarter challenging non-accrual. in for by that at in industries on performed investments situations. and portfolio credits sheets XX.X% lien Our generally quarter in and leverage in believe our supported strong values structured uncertainty. balance economic stress and well

NAV, investment yield Saratoga's adjusted earnings per per a share by income and as annualized increases May net of $X.XX as per share, XX% $X.XX yield on and $XX.XX level based imply annualized of share or price the this against quarter on recent share well adverse fourth dividend a of stock The quarter per and its dividend cushion $X.XX XXXX. dividend a X, of supports overearning XX.X% dividend events. growth increasing providing portfolio the $X.XX

liquidity as preservation economic strength, we for volatile currently paramount NAV sheet are remain In experiencing, balance such us. conditions and

issuance shortfall QX, leverage NAV that period, reduces February XX, XXXX, XX, helping our we $XX price May sold. million our balance below so NAV million $XXX at of overall NAV additional subsidized sheet NAV received BDC all this supports of provides regulatory the the full equity during This manager as a strong $XXX the and shares as for First, raised of strength, originations. our to end XXXX. equity trading With shares million from the since increase of

we $XX our $XXX million $XXX facility at investment to we a available expanded Second, support and companies newly And our financing March with our through cash. in up million entered a $XX facility, XX, and amount million. XXXX, fund, purpose substantial vehicle on in new an to special borrowings SBIC $XX maintained credit incremental III third, year-end, aggregate revolving million for which capacity of approved portfolio million of X-year provides a credit into from

key XX, Saratoga a quarter quarters February XXXX. solid our and demonstrated with the XX, of Investment's fourth level performance compared ended indicators November to as XXXX, performance

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

year quarter. from of from months earlier. Our adjusted from down X.X% NII from in per tax last share and $X.XX $X.XX factors dilution is noted last XX X% this on quarter, equity excise down X.X% quarter, $X.XX inclusive return Latest down is down last the $X.XX X.X%, year, last

share $XXX and $XXX $XX.XX, is last year million $XX.XX Our from year million is last NAV quarter. and down down from last X% up and $XX.XX from last X% $XXX per quarter-end NAV our quarter, million

is related million up per year, up KPIs is share from share per to Importantly, last earnings year. year, and last power this $XX fiscal $X.XX adjusted per year $XX full XX% for NII million, are: NII XX% from XXXX Adjusted share $X.XX

X.X%, return equity number Slide have past this past of fiscal quarter average is BDC beating on decade, over and the the year the has X the seen over well our While industry consistently the average portfolio, long-term years. past X in past XX credits remained a years at core BDC small to markdowns above XX of strong the industry, how our XX.X% industry's illustrates and versus

only BDC years As quarter. since you can credits unchanged X see XX we management over credits took assets with on last and ago, consistently under the quality our our the risen X, Slide of nonaccrual, have from solid on steadily remains and

management the capital same in our working as we this time trend while and credit at diligently Our positive team this being to appropriately is our pipeline, volatile evolving deploy available environment. into continue cautious

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

Henri Steenkamp

Chris. highlights which February XXXX, the for key already most you, XX, metrics Slide Chris fourth Thank of ended X our highlighted. quarter fiscal performance

the million year last shares million year increased weighted shares this down of last quarter, last from the note, last as unchanged but from relatively up a weighted compared increasing current rates, increased non-CLO with last Adjusted coupon XX.X quarter, million and BDC quarter. common from first, year-over-year, on Of interest XX.X quarter. of from, QX year, higher average investments and and to primarily from NII XX.X% spreads average in last X.X% rates both XX.X% base from to XX.X impact outstanding XX.X%

slightly and And non-CLO yield by venture from yield BDC average third, other by since year-over-year up increasing the was year XX.X% received million a last received XX.X% Investment Adjusted is joint for This quarter. from the last last quarter. including dividend million from income, $X.X quarter. and for $X.X and Second, the year Saratoga X.X% NII XX.X%. XX.X% assets down

interest debt for quarter, a fees in $X.X appendix Also, quarter. tax incentive basis, last end quarters presentation we KPI financing assets in year excluding annualized Total metrics have on the base the balance decreased QX expenses, from margin excise and last fourth this and at This X this and expenses and year and slides both both that the XX% an million our average year. again for over the trends quarter. of and the upward to sheet including million X.X% fiscal shows management past represented last have statement quarter added for income for we through XX total maintained and XX and increase of $X.X net income the interest from past fees the last down X.X%

operating year key Slide with X metrics same fiscal the the highlights year-over-year most for metrics. full increases significant in performance

last NAV of same quarter Slide $XX.X last million a as from X. $XXX.X Moving quarter quarter increase to $XX.X the a year. million from on increase end, was million and this

per of received discussed. $XX quarters, past share, QX respectively. quarter, all as company raised chart also and per or NAV important contributed of purchases. manager this NAV includes the for issuances, This of During asset XX specific above the our of share, and The BDC down metric equity $XX.X was equity historical at $X.X highlights which net how that the value, year reflecting increased $X.XX and XX million this the with million primarily has [indiscernible] of markdowns part million new the

has Over as by and this the the increase since NAV has long per share. term, our net demonstrated value been steadily asset growth accretive, increased in long-term XXXX,

years, XX.X%. $X.XX the share up NAV past X or Over is per

realized unrealized consistent of history our and from benefit gains. to continue We

net issued net and interest recent million other in in ATM excise the offerings and December, expenses. operating income $X.X taxes On by share adjusted and Starting sequential simple you $X.XX basis. NII will primarily per see in at share on $X.XX a NII reconciliation of major to adjusted the the the per taxable and down $X.XX income on shares the top, Slide increased in owed NAV dilution undistributed was additional X, offset from equity partially quarterly a decreased changes due

the half depreciation to On primarily NAV by the due share $X.XX recognized dividend $X.XX, the exceeding the GAAP the slide, lower NII. decreased $X.XX net of $X.XX per in quarter in the unrealized and

reconciliation to X, $X.XX share, you increased sequential interest in the Starting top, Slide and now at will due see last from the income share $X.XX year rates same but annual AUM. net adjusted per from on basis. On NII share to interest increase higher per the per mainly a

year. NAV the On $X.XX share plan of accretion NII half during by $X.XX the repurchases $X.XX more than the dividends lower The GAAP the $X.XX year. the for unrealized the DRIP $X.XX paid of from net ATM and There was a reconciles of during share depreciation decrease the net and was this offset the slide, year. of per

Slide XX secured our which was available outlines as spread dry debentures undrawn cash, totaled to between facility. SBA end, of powder million. undrawn the $XXX credit This available us and quarter

SBA its additional for available to XX% allows fully This of deployed, us $XX $XXX very by low-cost also and thus NII pricing, quarter when with to without quarter-end and with need million of external liquidity million available an our of grow the available level end accretive accretive. financing, assets cash debentures

future callable decreasing our shows We interest creating debt. available next to protection if us percent net also column within our showing rates, natural needed. is that year, bonds, options allow which effectively million our a should protect interest here debt, to against X-plus baby all the a $XXX any include margin, call potential This of

that all immediately. closed of diverse Since can and and we X way million public We the almost with with that conservative such of nature covenants available nature our long-term BDC quarter balance non-SBIC our is our almost available sheet, volatile that fully sources structured fact in no the be X-year liquidity, such liquidity end, debt especially no access new have credit on account our years. our within position, maturing we a times. data remain the including debt stressed secured Also, overall a is and in next during leverage also both and into pleased $XX to private taking revolving facility,

Now to billion in portfolio. and review at highlights on I we would is invested XX and of fair venture. of X XX portfolio fund yield and $X.XX CLO through our investment have X like the Slides companies, value, to move XX now joint XX this and composition that AUM Slide

Our of XX% out XX% which lien first is first our lien is last total positions. percentage investments, of in

On can XX, you how excluding has X on BDC Slide our yield see changed the years. over CLO the assets, especially our time, core past

The up This points unchanged The quarter, performing to CLO yield base is yield our last total X.X% basis slightly by rates remained CLO XX.X% was relatively current. XX core BDC and from at quarter. with unchanged.

portfolio the the and our structured our spread the which included over CLO in on industry see JV, throughout and U.S. how XX XX, XX can distinct addition Slide to diversified are in securities. shows investments as you finance that And breadth Slide represents, diversity our industries are investments

quality, to our investment million or had in from NAV financial the sale of which X.X% XX. of our remain gain past for portfolio realized on performance XX That concludes early ROE. our our portfolio net part equity This interest, interest realized has Moving healthy consistent and sale my of credit and we other portfolio that reflected investments. our the is highlights grow $XX.X review. long-term overall years, helped redemption gains or slide Slide investment of of combined This shows important fiscal strategy. of a consists an equity

I will Grisius, market. an the Officer, overview now of our Investment for the over call Michael to Chief investment turn

Michael Grisius

I'll on and take describe portfolio Thank market, you, our the to then on our Henri. a and minutes the few investment perspective current state current comment performance of strategy.

market macro holding environment. than periods. reflect deal in a deal pattern overall happens in slower in historical to see a and of to M&A seems volume to broader be The continues bit It activity what the

deal abundant, high among demand liquidity new firms levels constrain outlook, equity and elevated an private which much remains drives market, financing While continue the for inflation equity economic to costs of private opaque credits. of the

narrow. industry supply-demand of time, the as we're amongst to leverage same some market see creep at reentered have lenders the some participants. have economic margin and abated the is the starting slowdown an At and equation This fears shifting spreads up

by for to assets continue and the remain capital Now that strong on risk-adjusted capitalizations. equity returns first-lien said, deals exceptional structures new be supported

the it while to continues a capital compete. deal market be new at market where the Overall, is for modest, especially favorable volume deployment, middle lower end we of

side and being experienced has credit flip importance management is first, from made making our portfolio. redemptions. the Saratoga The aware experience addition, In managed has our has particularly and through moderate managing number in a M&A the being cycles successfully portfolio proactive that investment of; that churn team of a disciplined of little when market decisions; us of very second,

interest rates we stayed inflation rates, portfolio. focused economy and rising on that managing our a steady shifting and In in other our to few follow-on growth among robust largely activity year expectations spreads, seen portfolio very rising earnings. the growth supporting in for us wider and has ever healthy allowed due factors, redemptions to of combination our achieve size portfolio deal The and

Our to underwriting deploy find high usual, capital. bar opportunities we remains continue yet as to

delayed as has asset this XX, continued which to recent continue. As demonstrated draws, year, deployment to performance existing calendar companies expect Slide seen our on been follow-ons XX portfolio characterized by more we with including

Overall, portfolio consistent While focus this a remains discrete resources supporting in few and of year, time and challenged much strong, managing X towards our deal market calendar and recently, the new flow we invested increasingly investments had calendar credits. our of our still competitive platform More the and our to new over during added strength new long ability is companies, we investments. XX a follow-on ours. first term quarter, despite investments dynamics ever-changing generate portfolio but we

healthy There our management experiencing are and management we actively quarter on Portfolio stress with that with I remain critically that be will levels teams. close of touch and specifically are is continues general, situations. debt above in historically in companies in we XX% varying in have supported generally contact and enterprise stress our important results credits in portfolio down companies marked of portfolio prior couple the quarter, or industries financial values performed strong this that first-lien of But by XX% to of at portfolio is a generating our shortly. are and that have portfolio well our engaged our

direct no have We exposure. or commodities energy

of still have is portfolio namely a Knowland, and and historically In Palace that last produce majority of have we on high quarter, addition, comprised revenue of demonstrated nonaccrual, Pepper Consistent X Zollege. revenue degree the strong our retention. investments recurring with businesses

again same at investing Looking not Pepper multiples slightly is industry above emphasize attractive at had industry for levels. we're have year Xx to now sake. from come Knowland, our see while slide, portfolio and the X.Xx, for the Total was seeing, that, Zollege, leverage on we our it excluding high growing success the debt you aiming and and we've can important this as the simply Palace historical leverage. are deal that overall leverage down in Despite their flow highly grow healthy portfolio businesses growth's to always, is

confidence durable will and bar business always to deployment be investment our upon accretive is in a incremental and capital Our conditioned healthy that high is each is shareholders.

discussed, deeper continue we've multiple business to on new it significant portfolio progress new sources strengthens are of is and past X more companies made development. to demonstrating provides remain on in our and months in best that our formed XX to ability dependability become reflecting data building relationships, highly mature significant how flow to over investments. we XX on the relationships new have experience deal Slide strategic deal the skill in newly of has opportunities of selective reinforces investments focus marketplace deals. as our our and because set, our the and development previously flow team's led rigorously screen Two our broader the the execute from business relationships The noteworthy relationships ongoing

As credit our solid. quality on you portfolio see overall Slide remains XX, can

credits, possible, be we of approach. While strive underwriting models a few cautious that value reasonable veered we exceed the deploying thought strong confident are our last perfect, dollar facing to in take remains but capital enterprise moment and perfect on scenarios, under the our as team I the challenges as of all will from We where presently that business in focused to I'd highlight are can't we investment. businesses thorough be have sustainably our we not and a

all Over that the We've of years unleveraged invested returns on taking we've write-downs working on had time $X.X investments. just those we've been realizations. $XXX return and investments, realized Even dozen we've on realized in invested loss account few into successfully together, XX combined current one XXX portfolio of equals plus same realized unrealized achieving Over that gross billion a credits, companies. of capital of million exited our XX.X%. discrete the frame, XX.X%

attractive We portfolio think with constructed first predominantly for this debt. profile lien is senior a particularly performance

investments and classified mark, Zollege this saw We and recent as yellow. an as the quarter in red moderate to Knowland reflecting on Palace Knowland and a have on for yellow X improvement QX and Pepper with business nonaccrual liquidity. the been while, improvement has

performance this million. suffer investment Pepper of The the value and liquidity reflecting issues, fair further $X.X is million $X.X from remaining markdown poor this continued Palace quarter. to

manage the working restructuring actively the on turnaround specialist business. the We with are a including sheet, to balance sponsor installing

progressing are control business. agreement that of we an finalized, not have Saratoga would toward While the take

significantly equity operating, CEO down in this successful performance and situations, the resulting Board this invest a million continued specialist, the liquidity would And experience investment in to a from business significant become plan, has similar As us million. fair $XX.X and $X.X past and turnaround suffered part who substantial of quarter by the continue this required of in value marking Zollege to member.

company immediately week restructuring over in started on this the sheet, managing last founder working resulting actively investment. taking a We balance prior and with us and the the owner of

the us have levels. We have that would dollars levels in and framework objective goal profitability business meaningful previous immediate with with of returning the an business the in to owner its the ultimate place partnership for the and in agreement of former a work those exceeding invest

a In investment solutions year. addition an to for autonomous these nonaccrual on want by global Subsequent was faced Netreo investments, this that highlight update we BMC, acquired Netreo to year-end, digital leader software challenges to in also enterprises.

full to closing repayment partial a our received received loan, held at with conditions. we subject escrow of certain interest, accrued and including equity lien X, May future first for term On in additional proceeds amounts distributions

that without escrow through both potential equity, investment taking important of X% Now could is into it yield our and IRR positive and a any to this a approximately produced account taken our including achieved whole, residual earn-out. debt as enhancement that be note

partially have by market addition, CLO this and JV of the credits. to due In positive appreciation, offset $X.X unrealized individual million markdowns reflecting quarter, appreciation

quarter. of note is well, of Of appreciation portfolio prior across to that has of our QX. or in portfolio the at BDC in companies rest the unrealized portfolio continued XX% resulting core the perform net XX above million generating is financial $X.X remaining results our

overall realized Our performance our yielded our and strong seen this record of remained approach invested as recovery by returns investment on slide. track our has and long-term exceptional capital,

to on Slide moving Now XX.

has following see been license can our You down. merged its wind into the first BDC

we new $XXX market. This continue million available, SBIC of small support existing. funded up Our lower new deployed. us my concludes businesses, the review and currently license second and U.S. allowing our fully SBIC with license III both are to undrawn debentures And ramping is of to cost

over like to CEO. our to Chris? turn I'd back call the And

Christian Oberbeck

Thank you, Mike.

the the X Slide a XXXX, respectively. and ended X on share past This is years, of quarterly our on was in quarter our and and reflects for $X.XX dividend outlined As paid XX% increase XX, XX, largest dividend March latest the XX, X% over per history February XXXX.

evaluate environment's over-earning economic current company interest expectations Recognizing economic $X.XX for in and by cushion Directors substantial on fourth XX%, both share cuts factors, earnings. our rate on rate basis, interest quarter, will versus its dividend at to where quarter when level pace of $X.XX continue on commence as should well Saratoga's Board of quarterly the what provides divergence the opinions including will general conditions economy, least rates the the impact this The and of decline. base deteriorate per dividend as at considering

Moving XX. to Slide

Our uncharacteristically total total the for has unperforming BDC dividends, generated of XX both the for period. the months, same includes capital index returns XX% appreciation last return which and X%, of

our is Our XX. longer-term Slide outlined next on performance

return X-year in the XXX.X%. line took while been slightly X-year places Our in us XXXX, the has total the our versus with Saratoga index management our over industry's Since ahead. of return XXX.X% BDC is BDC performance

XX, broader the you Slide metrics. On can context performance to key further see of our in certain performance placed specific and the industry

We shareholders return such continue equity, of which focus yield to long-term dividend growing per receiving. coverage, reflects NAV on our all and metrics the our as NII on growth are and value share,

While discussed. ROE to NAV the we the primarily nonaccruals lagging are due discrete year, per this X past industry that is previously have share and

on to and continue long-term the be return done have remains have BDCs to accretively, long equity one the grown long-term We industry of our X.Xx few the average. and NAV we it over term

markets call on designed our Moving ownership in leading base, on this and many management aligned drive are of The of the our more XX%, at highest to including include Slide previously attractive levels the we size adding initiatives We discussed, institutions. will quality one help with maintaining differentiating BDC our discussed characteristics is shareholders. All the industry to ensuring believe XX. capital investor of the slide a outlined that to our this performance that are differentiated Investment community. on Saratoga make characteristics,

will capital market-tested team, strong balance reputation, confident management And the and we liquidity well sheet, in underwriting historically on near and in ahead shareholders long future through remain time that and the opportunities term. strategy that Saratoga's will XX, our our and investment experienced uncovering current Slide structure challenges environment. standards serve us navigating and and in benefit Looking

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

Operator

[Operator comes Zwick of of Instructions] Group. first from Erik Hovde Our question line the

Erik Zwick

leverage, bit Wanted to mentioned start the your a backdrop, are much in you to last market tighter, investments. fiscal seeing today of up on a any the and certainly, at portfolio in getting for be bit, weighted similar Kind opportunities look couple spreads you heavily as thoughts more activity quarters little you maybe was the expect the little going maybe had towards with investments? and year you you Or of would new just more given add-on weighting add-on improvement towards are today? that next the

Michael Grisius

good question. before can of the future even is This of right up I tightening look crystal have margin spreads with at at It's we say never were little in some at seeing bit and the margin a participants a now, we're what ball to the Mike. at because We leverage interesting. that holds. where the the creeping That's a sidelines would kind terms this, starting enter market.

on first-lien the more in competition. that can just gross there's you securities. little think risk-adjusted of bit So are the get of We a terms returns the market just return in fabulous

flow, open for given overall capital. What has seen though, to business we've is the just looking happened, opportunities that where rates that uncertainty is certainly and down. the in the and certainly for general, economy, we're in deal So deploy are M&A

affected in redemptions us that all. at many our certainly also It's investment that's affected we had haven't new So velocity. -- investment

of that So opportunities we for we're and well that but flip like, is have side as many that the hungry new holding seeing a capital. we not up portfolio do is that's really

favorable that have a but foreseen of probably I waiting those would the a better, of they're market. sold would bit more earlier, businesses a have businesses lot those little owners for probably they of some think

and their grow do continue they're instead, so business. to acquisitions continuing to And

of up, very as capital that. and And we've few of think other the will add it be have we've the that as investment will does of carefully your in equation. and also deploy so, done. X a in thing that with think there's of So our we've in some our activity on -- But add-on discrete been, the will as been plenty opportunities is credits I there that the I answer -- focused on probably attention. this and that our that supporting question, for sort to very we taken us companies, focused market, do accordance and that's time sides We've hopefully that directly, we'll volume more seen market would well, that move to picks portfolio you've

Erik Zwick

I appreciate, that's the detailed answer there.

Next equity revolving the looking credit utilizing like got with now a one year fiscal approved levels now you're II, of on the additional in you've $XX capacity It in agreement. the third million the fairly good new facility. last looks liquidity question, and distribution just active terms also the at SBIC fairly

at to well. your point distribution thoughts about around to So raise just curious additional agreement this continuing the capital use equity as

Christian Oberbeck

I also very a think that's question. Well, good

of I diversified And And highly is the important. many reasons. important learned over equity cornerstone the capital for the of of equity BDC source space. things in very is having so is done kind a much what's think is of utilizing we've think one of the that I important ATM time

In always we're at think the where I was period capital can try different have markets a highly those because did another institutional we're and time terms capital baby looking to go diversified time period was where come we markets and there raise of these of of then other and to There of levels. source bonds, facilities, able changed. a and

all and then in overall decide the what us then these flexibility. basically we you as and allow to is to time at on back move swing went baby There's financing to they of if adjust outstanding sort we important for can investments, are and of the over but serve quickly residual credit very some will, And bonds marketplace. lines, level right facilities times, also and that

But opportunistic pretty those any the evolve. plan have think don't time, at any markets at this how It well. we depends capital in sources this of specific we're time. are in well realistically, also But moment of financed. point particular our for just as kind I So

Erik Zwick

and for aside. me one last step And then I'll

The second kind is objectives bullet the of on and to for your team future process. management to potentially your add

managers it's I'm if is to And market other like for So curious out are where well? investment professionals or Saratoga, banks how other opportunities investment sources you is finding just best from as what the join market that finding today? asset there competitive or the now new

Michael Grisius

Yes, Mike. this is

that. Let me jump on

and team look if the just for been XX-plus in our years. that's senior management team you continuity. just things the together management And of team worked has One incredible there's our interesting, general, at

culture I that of that and been certain developed risk we've built management successful. together, senior that's prepared record assessing has been in the track that way credit remarks So team referenced a that a by

really we're about cautious been senior in -- careful, very the your people careful bringing so into And have management team.

make right little that by in view bit or business of like, to We like new they're we up you generally not a when training in, have you, It's dogs it's tricks teach really our -- take one younger their old somebody hard money as people they careers. where what And apprenticeship it, in the in get a money. their in an way risk careers, people type really losing so you well is continuity credit at way as and trained growing of have are think. way, the almost that we right, to credit do looking

And is so from getting building what bottom on to the therefore, up. more I'm that, focused we're

school, X, our largely We've years X And that the We've done analyst out augment we've starting associates that investment talented of to programs. efforts. bringing banking that an business are X people this in got of development new out are got also successfully starting summer. over we're where years

ago So is a favorable to the right We're young on seeing others. professionals, years hold couple kind trying less was less everybody their from some for and of hiring it competition was to more activity of ripe market now professionals. than where talented

into jumping up. to we're and build so trying our bottom talent void the And from that

Christian Oberbeck

in starting And increase starting the there and rate substantially. we're one in general seeing 'XX, sort as of was that's of that the comment very market moderate compensation well -- is a to 'XX,

so of of what Saratoga. our philosophy availability is greater maybe the well Mike sort think in general. of explained But And that's in professionals I pretty a beginning

Operator

comes of question James. of Raymond next the line from Robert Dodd Our

Robert Dodd

you origination the didn't mean do metrics. pipeline, and activity platform about you talked and companies lot of your On things the But a I activity. didn't quality some any follow-on hit new quarter, maybe in

of obviously, industries? your it nonetheless. great Can So the give for the you you book, into can new which mean checking platforms, always new to us not to -- what any ticking that's to color have. deploy that? now, they that some to coming On I color too you deployed us on any market capital not the more for are things businesses meeting willing requirements, is the is asking much leverage, long Is you capital existing more boxes there? give be

Michael Grisius

be majority a bar. I think and the at credit the Sure. them But it's deals hard we we decided were not to about if -- of took too did that hard met general. And pass, just give look to businesses our that feel

the we that that of XXX%, that a in majority credit that on. than didn't was passed. probably not or That's pricing we couple the we at in We more businesses see reason passed leverage of it that's competition, at anything, just themselves case. So really deals more It but the but the margin bar. lost the and looked things we met our wasn't the that metrics were of

Now mean? what does that

time, Yet us But stronger years are there's deals. the of equal, job until the plus want observing just And the on like on right always perhaps look more to definitively, businesses there opportunities quality very It development doing dozen getting course, some what's over all favorable is haven't could lens, they to in are observation a a This as market. out be own it's do at kind as last have hold develop significant to are the been our business end through we just market. we're of people Absolutely. feel a not plenty that to marketplace. right? the we quality the see marketplace hard of like of feel that we're I to presence has at good -- really expand many deciding the don't do businesses say feel strong worked the front? like now, that, seen healthy that just else self-reflective, that we same lower in like, our middle of the feels mean we and we a I of the it but at we are

Robert Dodd

appreciate it. Got it. color. Got that I

little terms incremental us is where markdown in is On that? Or Palace which improving a gave biggest bit color in it where play. the is is performance the on obviously being of play Pepper out? anything Or business going everything mark business you're on the of And to et there to as well operated, just satisfied is the how is either Knowland for that Zollege, quarter, [indiscernible]. You improving in there with on underway there's process it's time in something cetera? take a the whole underway

Michael Grisius

significantly And a of made given longer I Yes. that made. pretty just that but good another not in -- not team support, a for is question, word, But takes. felt business. as mean terms management probably word, finding sponsor bit especially and result, stronger little worse that started I'm had too no undertake since the orphaned That the decision equity that a private things was -- mark it I'll no support some result, a action we was it they course to of -- that too. it No, I'm as decision that the the comment to but order, a a actions stronger that a in made going was short to of one. second, some make it's changed were they the a longer desperate

we in agreement of of an him be did to profitability take which very now. he's So operating in got former in Chief dollars general that in and he investing resurrecting on framework they control and of that discussions the focused we're be past. old pretty where of And a the to levels for engaging active his business. he worse owner have the jump in we and the of will will some was with founder, sort team enjoyed start with a company, the what person to him quickly fast front things as is and business, member who a and doing reacted the get Board and start Officer, And Restructuring

good look the the we that think is at liked we lot -- initially business, we place. that a fundamentals remain the news business about in the of when We core

we successfully And so I then i.e., things to that the in respects. strategic there mean, underperformance was mismanagement undertake some were in decisions that we had good track, a feel that back the done is much we've like not of a much approaches this if There's a on of chance. do the lot of get And company the right, past, can it. that get do juncture much, business And there's even. founder to confidence lot -- we of the than it can that at wood chop, what like former before. of lot that better and the has it good owner looked got to a our but a back chance can

our we level that work So shareholders. optimism to of a reasonable recover we we've some hard for can but value to work together got do, have

Operator

Ladenburg. Our of next Schleien the from line of comes question Mickey

Mickey Schleien

call, uncertain this repayment a for nice you quarter, in the received current outlook Netreo. the Chris, everyone's mentioned economy. This from

uncertain is reinvest taking proceeds curious outlook or you off you're proceeds? I'm do given those take the leverage So some thinking balance pipeline whether about those to to think the sheet, interesting enough economic the

Christian Oberbeck

Well, structure. we of callable. I number at think instruments looking and our our our as you debt can have liability And always a are capital appreciate, we're structure

credit revolving And have do that some. so the can some we flexibility do We call to have we repay.

repay be We also would be you cost want what them. replacement to if the of mindful

that And into account. all taking so obviously we are

terms was investment of but our uncertain uncertain really what maybe more always drives -- in it's kind environment, before, it the today I think that's of not we than activity.

haven't the companies find the driven by generally activity past we more way, come quarter. investment Our in as seen our or that before. is of see either them indicated quality really this quarter We Mike we earlier. the And did

to and always our we're we So companies to the or portfolio ready lookout, make prepared existing and on want further be support investments.

side. the opportunity side with plan specific And proceeds we're said, Netreo, don't have for we both liability evaluating but so asset the that always and the repayment a optimization for

Mickey Schleien

of sort the And of side question. understand. follow-up a balance right-hand I sheet

climbed income well north taxable correctly, undistributed I'm year. $X last your calculating meaningfully it of And if it's expected, share. As a

Board the distribution meaningful of are more to don't, my it needs do But that's rewarding doing that's that a So or leaning tax toward or also the with occurring to to resulting -- what can you top I decide else off something and excise me. accruals, UTI. in remember their when deemed patients head, shareholders for retaining some all not

Christian Oberbeck

a that's question. think important I and Well, good

and earnings reflection incremental overearning retained you the tax dividend that. out, creating our of is excise I is of rightly pointed think a as

I that having think tax that the the is of excise characteristic X%. of cost one outstanding is

environment. character this good a quite that is consider liability a you of today's X% rate if a on debt, so in And as debt rate actually

it's -- advantageous of to utilize to that will. think you source run if I So capital,

I us for of was our had no that may spillover. covered SBIC were than almost actually substantially time, at some a where of long, time you've there so think we Mickey, recall, X%. you we capital I at think on since less period borrowing And

-- some was ago, of high able So actually we that access. many rate years not the were things not to was a X%, to relative sort of

paid And building when some characteristic. rightly are an There's out, that taxable we to So a you that gets and and needs deferred be some income. pointed I that's that's one as that think internally something ongoing discussion make is as paid that. be will how is we to probably in the the summer determination on we'll coming and our final that address amount later

Operator

for Oberbeck would concludes like closing I session. over to This comments. now question-and-answer Christian turn the to

Christian Oberbeck

today, forward us speaking next and like for quarter. you to I'd with to Well, thank look everyone joining we

Operator

you Thank conclude in does the program. today's for your conference. participation This

You may disconnect. now

Saratoga Investment Corp 8.00% (SAJ) 7 May 242024 Q4 Earnings call transcript