Saratoga Investment Corp. (NYSE:SAR) (“Saratoga Investment” or “the
Company”), a business development company (“BDC”), today announced
financial results for its 2022 fiscal second quarter.
Summary Financial Information
The Company’s summarized financial information
is as follows:
|
For the quarterended and as ofAug 31, 2021 |
For the quarterended and as ofMay 31, 2021 |
For the quarterended and as ofAug 31, 2020 |
|
($ in thousands except per share) |
AUM |
666,097 |
|
677,773 |
|
508,117 |
|
NAV |
324,112 |
|
320,345 |
|
298,177 |
|
NAV per share |
28.97 |
|
28.70 |
|
26.68 |
|
Investment Income |
18,442 |
|
16,816 |
|
13,856 |
|
Net Investment Income per share |
0.57 |
|
0.23 |
|
0.48 |
|
Adjusted Net Investment Income per share |
0.63 |
|
0.56 |
|
0.49 |
|
Earnings per share |
0.71 |
|
1.88 |
|
1.95 |
|
Dividends per share (declared) |
0.52 |
|
0.44 |
|
0.41 |
|
Return on Equity – last twelve months |
14.4 |
% |
19.4 |
% |
14.3 |
% |
– annualized quarter |
9.9 |
% |
27.0 |
% |
30.1 |
% |
Originations |
116,015 |
|
119,166 |
|
31,709 |
|
Repayments |
134,846 |
|
14,941 |
|
23,282 |
|
|
|
|
|
“As we reflect upon our Fiscal 2022 second
quarter performance, we are pleased with the resilience and
strength of Saratoga and our portfolio companies. For the second
quarter in a row, our NAV per share of $28.97 has reached an
historic high for us, and we continue to believe Saratoga is well
positioned for potential future economic opportunities and
challenges,” said Christian L. Oberbeck, Chairman, Chief Executive
Officer and President of Saratoga Investment. “Our second quarter
results continue to highlight the strength of our financial
position and portfolio performance. These quarterly metrics include
LTM return on equity of 14.4%, adjusted NII per share of $0.63, and
NAV per share quarterly growth of $0.27 per share, or 1%. While we
see a substantial ramp-up in market activity, we continue to
believe that balance sheet and liquidity strength, and NAV
preservation, remains paramount both for our BDC and our portfolio
companies. Our current capital structure at quarter-end was strong,
with $324 million of equity supporting $238 million of long-term
and covenant-free non-SBIC debt and $172 million of long-term
covenant free SBIC debentures. Our quarter-end regulatory leverage
of 236% provides substantial cushion above our 150% requirement,
and in addition to the $45 million we have available through our
revolving credit facility, we have $73 million of quarter-end cash
to support our existing portfolio companies, and $111 million of
available SBIC II facilities to finance new opportunities. When
deployed, we expect all of this capital to be highly accretive to
earnings. In addition, in July we raised an additional $125 million
of new unsecured bonds at an effective yield of 4.125% while
repaying our existing $60 million 6.25% SAF baby bonds, adding
further liquidity and reducing our existing cost of capital by over
200 basis points. And just this week we closed a new $50 million
credit facility with Encina Lender Finance, replacing our existing
Madison facility and further reducing our cost of capital on this
form of capital by 100 basis points. These results allowed our
Board of Directors in August to increase our quarterly dividend by
8c per share, or 18%, and declare a 52c per share dividend for the
quarter ended August 31, 2021 – an endorsement of the current
strength of our portfolio performance.”
“As always, we continue to remain prudent and
discerning in terms of originations in the current environment.
Identifying numerous strong opportunities recently, this quarter
was again a big one for us in terms of originations, almost
matching our record Q1 quarter. At the same time, we had a record
repayments quarter as well, including a $6.4 million realized gain
on our Passageways equity investment. We continue to bring new
platform investments into the portfolio, with investments in four
new companies added this fiscal quarter, in addition to the success
we continue to have with follow-ons in existing borrowers with
strong business models and balance sheets. Total originations in Q2
totaled $116 million invested, outpaced by record repayments of
$135 million. Our credit quality remained at a high level at
quarter-end, with 93% of credits rated in our highest category,
with no credits remaining on non-accrual. With 74% of our
investments at quarter-end in first lien debt and generally
supported by strong enterprise values and balance sheets in
industries that have historically performed well in stressed
situations, we believe our portfolio is well structured for future
market conditions. We remain confident in our experienced
management team, high underwriting standards and ability to
steadily grow portfolio size and maintain quality and investment
performance over the long-term.”
Discussion of Financial Results for the Quarter
ended August 31, 2021:
As of August 31, 2021, Saratoga Investment’s
assets under management (“AUM”) was $666.1 million, an increase of
31.1% from $508.1 million as of August 31, 2020, and a decrease of
1.7% from $677.8 million as of May 31, 2021. The decrease this past
quarter consists of $116.0 million in originations, offset by
$134.8 million of repayments and amortizations, reflecting both
continued strong pace of originations as well as the ongoing lumpy
nature of repayments. In addition, the fair value of the portfolio
increased by $1.5 million of realized gains and $3.4
million of unrealized appreciation, representing an increase
of 0.7% to the overall portfolio, driven by the impact of changes
to market spreads, EBITDA multiples and/or revised portfolio
company performance on the quarter-end valuations. Saratoga
Investment’s portfolio remains strong, with 74.1% of the portfolio
in first liens, and a continued high level of investment quality in
loan investments, with 93.2% of its loans this quarter at its
highest internal rating. Saratoga Investment’s portfolio has a fair
value that is 3.8% in excess of its cost basis. This quarter’s
originations include four investments in new platforms, and six
follow-ons in existing portfolio companies, including drawdowns on
committed facilities. Since Saratoga Investment took over the
management of the BDC, $698.0 million of repayments and sales of
investments originated by Saratoga Investment have generated a
gross unlevered IRR of 16.1%.
For the three months ended August 31, 2021,
total investment income of $18.4 million increased by $4.5 million,
or 33.1%, when compared to $13.9 million for the three months ended
August 31, 2020. This quarter’s investment income was generated
from an investment base that has grown by 31.1% since last year.
This asset growth was offset by lower interest rates, with the
weighted average current coupon on non-CLO BDC investments
decreasing from 9.9% to 9.0% year-over-year. In addition, this
quarter’s investment income was up 9.7% on a quarter-on-quarter
basis from $16.8 million for the quarter ended May 31, 2021,
primarily due to the full-period impact of originations closed last
quarter, as well as the release of the $0.6
million interest reserve to interest income for the Taco
Mac investment that returned to accrual status this
quarter.
As compared to the three months ended August 31,
2020, adjusted net investment income increased $1.5 million, or
27.5%, from $5.5 million to $7.0 million. The $4.5
million increase in investment income was offset by (i)
increased interest expense resulting from the various new Notes
Payable issued during the past year and quarter, (ii) increased
base and incentive management fees generated from the management of
this larger pool of investments, and (iii) increased total
expenses, excluding interest and debt financing expenses, base
management fees and incentive fees and income taxes, that increased
from $1.4 million to $1.8 million. This represented
1.1% of average total assets, also unchanged from last year. As
compared to the three months ended May 31, 2021, adjusted net
investment income increased $0.7 million, or 12.0%, from $6.3
million last quarter.
Net investment income on a weighted average per
share basis was $0.57 for the quarter ended August 31, 2021.
Adjusted for the incentive fee accrual related to net capital gains
and the interest on the 6.25% Notes Payable 2025 during the call
period, the net investment income on a weighted average per share
basis was $0.63. This compares to adjusted net investment income
per share of $0.56 for the quarter ended May 31, 2021, and $0.49
for the quarter ended August 31, 2020. During these periods,
weighted average common shares outstanding remained largely
unchanged at approximately 11.2 million for the three months ended
August 31, 2020, May 31, 2021, and August 31, 2021.
Net investment income yield as a percentage of
average net asset value (“Net Investment Income Yield”) was 7.9%
for the quarter ended August 31, 2021. Adjusted for the incentive
fee accrual related to net capital gains, the Net Investment Income
Yield was 8.7%. In comparison, adjusted Net Investment Income Yield
was 8.0% and 7.6% for the quarters ended May 31, 2021, and August
31, 2020, respectively.
Net Asset Value (“NAV”) was $324.1 million as of
August 31, 2021, an increase of $3.8 million from $320.3 million as
of May 31, 2021, and an increase of $25.9 million from $298.2
million as of August 31, 2020.
-
For the three months ended August 31, 2021, $6.4 million of net
investment income, $1.5 million in net realized gains from
investments and $3.4 million of net unrealized appreciation were
earned, offset by $0.4 million income tax provision on realized
gains, $1.3 million deferred tax provision on unrealized
appreciation from investments, $1.6 million realized losses on
extinguishment of debt and $4.9 million of dividends declared. In
addition, $0.8 million of stock dividend distributions were made
through the Company’s dividend reinvestment plan (“DRIP”), and $0.2
million of shares were issued under the Company’s equity ATM
program, partially offset by $0.2 million of shares repurchased
pursuant to the share repurchase plan.
NAV per share was $28.97 as of August 31, 2021,
compared to $28.70 as of May 31, 2021, $27.25 as of February 28,
2021, and $26.68 as of August 31, 2020.
-
For the three months ended August 31, 2021, NAV per share increased
by $0.27 per share, reflecting the $0.57 per share net investment
income and $0.44 per share net realized gains and unrealized
appreciation on investments, offset by $0.16 per share net change
in income and deferred taxes on realized gains and unrealized
appreciation, the $0.44 per share first quarter dividend paid out
this quarter and $0.14 per share in realized losses on the
extinguishment of debt. There was no net impact this quarter from
the combination of the DRIP issuances, share repurchases and ATM
equity issuances.
-
This is the highest level of NAV per share since Saratoga took over
the management of the Company, and reflects the fourteenth increase
in NAV per share over the past seventeen quarters.
Return on equity for the last twelve months
ended August 31, 2021, was 14.4%, up slightly from 14.3% for the
comparable period last year.
Earnings per share for the quarter ended August
31, 2021, was $0.71, compared to $1.88 for the quarter ended May
31, 2020, and $1.95 for the quarter ended August 31, 2020.
Investment portfolio activity for the quarter
ended August 31, 2021:
-
Cost of investments made during the period: $116.0 million,
including investments in four new portfolio companies.
-
Principal repayments during the period: $134.8 million, including
six repayments of existing investments, plus amortization.
Additional Financial Information
For the fiscal quarter ended August 31, 2021,
Saratoga Investment reported net investment income of $6.4 million,
or $0.57 on a weighted average per share basis, and net realized
and unrealized gains on investments of $3.1 million, or $0.28 on a
weighted average per share basis, offset by $1.6 million realized
losses on extinguishment of debt, or $0.14 on a weighted average
per share basis, resulting in a net increase in net assets from
operations of $7.9 million, or $0.71 on a weighted average per
share basis. The $3.1 million net gain on investments was comprised
of $3.4 million in net unrealized appreciation on investments and
$1.5 million in net realized gains on investments, offset by $1.3
million of net change in provision for deferred taxes on unrealized
appreciation on investments, and $0.4 million of income tax
provision from realized gains on investments.
The $1.5 million net realized gain on
investments primarily comprises a $6.4 million realized gain on the
sale of the Company’s Passageways investment, offset by the
recognition of a $4.9 million realized loss on the final write-down
of the Company’s My Alarm Center investment. The $3.4
million net unrealized appreciation reflects (i) the $6.5
million reversal of previously recognized appreciation on
the Passageways realization, (ii) the $4.9 million
reversal of previously recognized depreciation on the My Alarm
Center write-off and (iii) a 1.1% increase in the total value of
the remaining portfolio, primarily related to improvements in
market spreads, EBITDA multiples and/or revised portfolio company
performance – all of the net reduction in the value of the non-CLO
portfolio in the first quarter of last year has been more than
reversed since May 31, 2020, and the overall portfolio fair
value is now 3.8% above cost. This is compared to the fiscal
quarter ended August 31, 2020, with net investment income of $5.3
million, or $0.48 on a weighted average per share basis, and a net
realized and unrealized gain on investments of $16.5 million, or
$1.47 on a weighted average per share basis, resulting in a net
increase in net assets from operations of $21.8 million, or $1.95
on a weighted average per share basis.
Portfolio and Investment Activity
As of August 31, 2021, the fair value of
Saratoga Investment’s portfolio was $666.1 million (excluding $73.3
million in cash and cash equivalents), principally invested in 43
portfolio companies and one collateralized loan obligation fund
(“CLO”). The overall portfolio composition consisted of 74.1% of
first lien term loans, 6.7% of second lien term loans, 0.4% of
unsecured term loans, 6.7% of subordinated notes in a CLO and 12.1%
of common equity.
For the fiscal quarter ended August 31, 2021,
Saratoga Investment invested $116.0 million in four new and six
existing portfolio companies and had $134.8 million in aggregate
amount of exits and repayments, including realized gains, resulting
in net repayments of $18.8 million for the quarter.
As of August 31, 2021, the weighted average
current yield on Saratoga Investment’s portfolio based on current
fair values was 8.2%, which was comprised of a weighted average
current yield of 8.9% on first lien term loans, 11.0% on second
lien term loans, 8.3% on unsecured term loans, 13.2% on CLO
subordinated notes and 0.0% on equity interests.
Liquidity and Capital Resources
As of August 31, 2021, Saratoga Investment had
no outstanding borrowings under its $45 million senior secured
revolving credit facility with Madison Capital Funding LLC. At
the same time, Saratoga Investment had $108.0 million SBA
debentures in its SBIC I license outstanding, $64.0 million in SBA
debentures in its SBIC II license outstanding, $43.1 million of
listed baby bonds issued, an unsecured unlisted $175.0 million
institutional bond issuance, upsized this past quarter by $125.0
million, and three unlisted issuances of $20.0 million in total,
and an aggregate of $73.3 million in cash and cash equivalents.
With $45.0 million available under the
credit facility and the $73.3 million of cash and cash
equivalents as of August 31, 2021, Saratoga
Investment has a total of $118.3 million of undrawn
borrowing capacity and cash and cash equivalents for new
investments or to support its existing portfolio companies in the
BDC. In addition, Saratoga Investment has $111.0
million in undrawn SBA debentures from the most recently
approved SBIC II license to finance new SBIC-eligible portfolio
companies. During the quarter, the Company dropped down
another $3.5 million into its SBIC II license, increasing
its capital there from $84.0 million to the maximum
allowable $87.5 million. Availability under the Madison credit
facility can change depending on portfolio company performance and
valuation. In addition, certain follow-on investments in SBIC I and
the BDC will not qualify for SBIC II funding. As of
quarter-end, Saratoga Investment had $15.5
million of committed undrawn lending commitments
and $43.2 million of discretionary funding
commitments.
On July 15, 2021, the Company issued $125.0
million aggregate principal amount of the Company’s 4.375% Notes
due 2026 (the “New 2026 Notes”) for net proceeds of approximately
$123.5 million, based on the public offering price of 101.00% of
the aggregate principal amount of the New 2026 Notes, after
deducting the underwriting discount of $2.5 million and the
estimated offering expenses of approximately $0.2 million payable
by the Company. At August 31, 2021, the total 4.375% Notes
outstanding was $175.0 million.
On August 9, 2021, the Company exchanged its
existing $17.9 million Class F-R-3 Notes for $8.5 million Class
F-1-R-3 Notes and $9.4 million Class F-2-R-3 Notes at par. On
August 11, 2021, the Company sold its Class F-1-R-3 Notes to third
parties, resulting in a realized loss of $0.1 million.
On August 28, 2021, the Company redeemed $60.0
million in aggregate principal amount of issued and outstanding
2025 Notes. The 2025 Notes were listed on the NYSE under the
trading symbol “SAF” with a par value of $25.00 per share, and have
been delisted following the redemption.
The Company has formed a wholly-owned special
purpose entity, Saratoga Investment Funding II LLC, a Delaware
limited liability company (“SIF II”), for the purpose of entering
into a $50.0 million senior secured revolving credit facility with
Encina Lender Finance, LLC (the “Lender”), supported by loans held
by SIF II and pledged to the Lender under the credit facility. This
facility closed on October 4, 2021. During the first two years
following the closing date, SIF II may request an increase in the
commitment amount to up to $75.0 million. The terms of the credit
facility require a minimum drawn amount of $12.5 million at all
times during the first six months following the closing date, which
increases to the greater of $25.0 million or 50% of the commitment
amount in effect at any time thereafter. The term of the credit
facility is three years. Advances under the credit facility bear
interest at a floating rate per annum equal to LIBOR plus 4.0%,
with LIBOR having a floor of 0.75%, with customary provisions
related to the selection by the Lender and the Company of a
replacement benchmark rate. Concurrently with the closing of this
credit facility, all remaining amounts outstanding on the Company’s
existing revolving credit facility with Madison Capital Funding,
LLC was repaid and the facility terminated.
On March 16, 2017, we entered into an equity
distribution agreement with Ladenburg Thalmann & Co. Inc.,
through which we may offer for sale, from time to time, up to $30.0
million of our common stock through an ATM offering. Subsequent to
this, BB&T Capital Markets and B. Riley FBR, Inc. were also
added to the agreement. On July 11, 2019, the amount of the common
stock to be offered was increased to $70.0 million, and on October
8, 2019, the amount of the common stock to be offered was increased
to $130.0 million. This agreement was terminated as of July 29,
2021, and as of that date, the Company had sold 3,922,018 shares
for gross proceeds of $97.1 million at an average price of $24.77
for aggregate net proceeds of $95.9 million (net of transaction
costs).
On July 30, 2021, we entered into an equity
distribution agreement with Ladenburg Thalmann & Co. Inc. and
Compass Point Research and Trading, LLC, through which we may offer
for sale, from time to time, up to $150.0 million of our common
stock through an ATM offering. As of and for the three months ended
August 31, 2021, the Company sold 5,441 shares for gross proceeds
of $0.2 million at an average price of $28.86 for aggregate net
proceeds of $0.2 million (net of transaction costs).
Dividend
On August 26, 2021, Saratoga Investment
announced that its Board of Directors declared a quarterly dividend
of $0.52 per share for the fiscal quarter ended August 31, 2021,
payable on September 28, 2021, to all stockholders of record at the
close of business on September 14, 2021.
In fiscal year 2022, the Company also declared a
quarterly dividend of $0.43 per share for the fiscal quarter ended
February 28, 2021 and $0.44 per share for the fiscal quarter ended
May 31, 2021.
In fiscal year 2021, the Company declared
quarterly dividends of $0.42 per share for the quarter ended
November 30, 2020, $0.41 per share for the quarter ended August 31,
2020 and $0.40 per share for the quarter ended May 31, 2020, for
total dividends in fiscal year 2021 of $1.23 per share. Total
dividends declared for the fiscal years ended February 29, 2020 and
February 28, 2019, were $2.21 per share and $2.06 per share,
respectively.
Shareholders have the option to receive payment
of dividends in cash or receive shares of common stock, pursuant to
the Company’s DRIP.
Share Repurchase Plan
In fiscal year 2015, the Company announced the
approval of an open market share repurchase plan that allows it to
repurchase up to 200,000 shares of its common stock at prices below
its NAV as reported in its then most recently published financial
statements. During fiscal year 2017, the share repurchase plan was
increased to 600,000 shares of common stock, and during fiscal
years 2018, 2019 and 2020, this share repurchase plan was extended
for another year at the same level of approval, currently through
January 15, 2021. On May 4, 2020, the Board of Directors increased
the share repurchase plan to 1.3 million shares of common stock.
During the three months ended August 31, 2021, the Company
purchased 9,623 shares of common stock, at the average price of
$25.85 for approximately $0.2 million pursuant to the Share
Repurchase Plan. During the six months ended August 31, 2021, the
Company purchased 49,623 shares of common stock, at the average
price of $25.23 for approximately $1.3 million pursuant to the
Share Repurchase Plan.
2022 Fiscal Second Quarter Conference
Call/Webcast Information
When: |
|
Wednesday, October 6, 2021, 10:00 a.m. Eastern Time (ET) |
|
|
|
Call: |
|
Interested parties may participate by dialing (877) 312-9208 (U.S.
and Canada) or (678) 224-7872 (outside U.S. and Canada) |
|
|
|
|
|
A replay of the call will be available from 1:00 p.m. ET on
Wednesday, October 6, 2021 through 1:00 p.m. ET on Wednesday,
October 13, 2021 by dialing (855) 859-2056 (U.S. and Canada) or
(404) 537-3406 (outside U.S. and Canada), passcode for both replay
numbers: 6767044. |
|
|
|
Webcast: |
|
Interested parties may access a simultaneous webcast of the call
and find the Q2 2022 presentation by going to the “Events &
Presentations” section of Saratoga Investment Corp.’s investor
relations website,
http://ir.saratogainvestmentcorp.com/events-presentations |
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About Saratoga Investment Corp.
Saratoga Investment is a specialty finance
company that provides customized financing solutions
to U.S. middle-market businesses. The Company invests
primarily in senior and unitranche leveraged loans and mezzanine
debt, and, to a lesser extent, equity to provide financing for
change of ownership transactions, strategic acquisitions,
recapitalizations and growth initiatives in partnership with
business owners, management teams and financial
sponsors. Saratoga Investment's objective is to
create attractive risk-adjusted returns by generating current
income and long-term capital appreciation from its debt and equity
investments. Saratoga Investment has elected to be
regulated as a business development company under the Investment
Company Act of 1940 and is externally-managed by Saratoga
Investment Advisors, LLC, an SEC-registered investment advisor
focusing on credit-driven strategies. Saratoga
Investment owns two SBIC-licensed subsidiaries and manages
a $650 million collateralized loan obligation ("CLO")
fund. It also owns 52% of the Class F and 100% of the subordinated
notes of the CLO. The Company's diverse funding sources, combined
with a permanent capital base, enable Saratoga
Investment to provide a broad range of financing
solutions.
Forward Looking Statements
Statements included herein contain certain “forward-looking
statements” within the meaning of the Private Securities Litigation
Reform Act of 1995, which relate to future events or our future
performance or financial condition. Forward-looking statements can
be identified by the use of forward looking words such as
“outlook,” “believes,” “expects,” “potential,” “continues,” “may,”
“will,” “should,” “seeks,” “approximately,” “predicts,” “intends,”
“plans,” “estimates,” “anticipates” or negative versions of those
words, other comparable words or other statements that do not
relate to historical or factual matters. The forward-looking
statements are based on our beliefs, assumptions and expectations
of our future performance, taking into account all information
currently available to us. These statements are not guarantees of
future performance, condition or results and involve a number of
risks and uncertainties. Actual results may differ materially from
those in the forward-looking statements as a result of a number of
factors, including but not limited to the impact of the COVID-19
pandemic and the pandemic's impact on the U.S. and global economy,
as well as those described from time-to-time in our filings with
the Securities and Exchange Commission. Any forward-looking
statement speaks only as of the date on which it is made. Saratoga
Investment Corp. undertakes no duty to update any forward-looking
statements made herein or on the webcast/conference call, whether
as a result of new information, future developments or otherwise,
except as required by law.
Financials
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Saratoga
Investment Corp. |
Consolidated
Statements of Assets and Liabilities |
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August 31, 2021 |
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February 28, 2021 |
|
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(unaudited) |
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ASSETS |
|
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Investments
at fair value* |
|
|
|
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Non-control/Non-affiliate investments (amortized cost of
$525,118,034 and $471,328,212, respectively) |
|
$ |
531,442,136 |
|
|
$ |
476,139,943 |
|
Affiliate investments (amortized cost of $48,669,364 and
$17,331,707, respectively) |
|
|
56,449,385 |
|
|
|
13,174,291 |
|
Control investments (amortized cost of $67,821,806 and $61,353,761,
respectively) |
|
|
78,205,835 |
|
|
|
64,998,481 |
|
Total
investments at fair value (amortized cost of $641,609,204 and
$550,013,680, respectively) |
|
|
666,097,356 |
|
|
|
554,312,715 |
|
Cash and
cash equivalents |
|
|
60,268,602 |
|
|
|
18,828,047 |
|
Cash and
cash equivalents, reserve accounts |
|
|
13,040,805 |
|
|
|
11,087,027 |
|
Interest
receivable (net of reserve of $0 and $1,152,086, respectively) |
|
|
5,114,727 |
|
|
|
4,223,630 |
|
Due from
affiliate (See Note 6) |
|
|
- |
|
|
|
2,719,000 |
|
Management
fee receivable |
|
|
364,374 |
|
|
|
34,644 |
|
Other
assets |
|
|
926,156 |
|
|
|
947,315 |
|
Total assets |
|
$ |
745,812,020 |
|
|
$ |
592,152,378 |
|
|
|
|
|
|
LIABILITIES |
|
|
|
|
Revolving
credit facility |
|
$ |
- |
|
|
$ |
- |
|
Deferred debt financing costs, revolving credit facility |
|
|
(782,102 |
) |
|
|
(639,983 |
) |
SBA
debentures payable |
|
|
172,000,000 |
|
|
|
158,000,000 |
|
Deferred debt financing costs, SBA debentures payable |
|
|
(3,632,458 |
) |
|
|
(2,642,622 |
) |
6.25% Notes
Payable 2025 |
|
|
- |
|
|
|
60,000,000 |
|
Deferred debt financing costs, 6.25% notes payable 2025 |
|
|
- |
|
|
|
(1,675,064 |
) |
7.25% Notes
Payable 2025 |
|
|
43,125,000 |
|
|
|
43,125,000 |
|
Deferred debt financing costs, 7.25% notes payable 2025 |
|
|
(1,238,426 |
) |
|
|
(1,401,307 |
) |
7.75% Notes
Payable 2025 |
|
|
5,000,000 |
|
|
|
5,000,000 |
|
Deferred debt financing costs, 7.75% notes payable 2025 |
|
|
(211,573 |
) |
|
|
(239,222 |
) |
4.375% Notes
Payable 2026 |
|
|
175,000,000 |
|
|
|
- |
|
Premium on 4.375% notes payable 2026 |
|
|
1,229,376 |
|
|
|
- |
|
Deferred debt financing costs, 4.375% notes payable 2026 |
|
|
(3,813,346 |
) |
|
|
- |
|
6.25% Notes
Payable 2027 |
|
|
15,000,000 |
|
|
|
15,000,000 |
|
Deferred debt financing costs, 6.25% notes payable 2027 |
|
|
(451,613 |
) |
|
|
(476,820 |
) |
Base
management and incentive fees payable |
|
|
11,424,984 |
|
|
|
6,556,674 |
|
Deferred tax
liability |
|
|
3,512,481 |
|
|
|
1,922,664 |
|
Accounts
payable and accrued expenses |
|
|
2,760,847 |
|
|
|
1,750,267 |
|
Interest and
debt fees payable |
|
|
2,468,265 |
|
|
|
2,645,784 |
|
Directors
fees payable |
|
|
- |
|
|
|
70,500 |
|
Due to
manager |
|
|
308,740 |
|
|
|
279,065 |
|
Excise tax
payable |
|
|
- |
|
|
|
691,672 |
|
Total liabilities |
|
|
421,700,175 |
|
|
|
287,966,608 |
|
|
|
|
|
|
Commitments
and contingencies |
|
|
|
|
|
|
|
|
|
NET
ASSETS |
|
|
|
|
Common
stock, par value $0.001, 100,000,000 common shares |
|
|
|
|
authorized, 11,188,912 and 11,161,416 common shares issued and
outstanding, respectively |
|
|
11,189 |
|
|
|
11,161 |
|
Capital in
excess of par value |
|
|
305,520,631 |
|
|
|
304,874,957 |
|
Total
distributable earnings (deficit) |
|
|
18,580,025 |
|
|
|
(700,348 |
) |
Total net assets |
|
|
324,111,845 |
|
|
|
304,185,770 |
|
Total
liabilities and net assets |
|
$ |
745,812,020 |
|
|
$ |
592,152,378 |
|
NET ASSET
VALUE PER SHARE |
|
$ |
28.97 |
|
|
$ |
27.25 |
|
|
|
|
|
|
* Certain
prior period amounts have been reclassified to conform to current
period presentation. |
|
|
|
|
|
|
|
|
|
Asset
Coverage Ratio |
|
|
236.1 |
% |
|
|
347.1 |
% |
|
|
|
|
|
|
Saratoga
Investment Corp. |
Consolidated
Statements of Operations |
(unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended |
|
|
August 31, 2021 |
|
August 31, 2020 |
INVESTMENT
INCOME |
|
|
|
|
Interest
from investments |
|
|
|
|
Interest income:* |
|
|
|
|
Non-control/Non-affiliate investments |
|
$ |
11,298,024 |
|
|
$ |
10,375,636 |
|
Affiliate investments |
|
|
936,508 |
|
|
|
220,136 |
|
Control investments |
|
|
2,059,101 |
|
|
|
1,249,971 |
|
Payment-in-kind interest income: |
|
|
|
|
Non-control/Non-affiliate investments |
|
|
710,329 |
|
|
|
328,938 |
|
Affiliate investments |
|
|
- |
|
|
|
48,018 |
|
Control investments |
|
|
109,971 |
|
|
|
37,771 |
|
Total
interest from investments |
|
|
15,113,933 |
|
|
|
12,260,470 |
|
Interest
from cash and cash equivalents |
|
|
1,071 |
|
|
|
1,610 |
|
Management
fee income |
|
|
814,622 |
|
|
|
625,436 |
|
Dividend
income |
|
|
658,881 |
|
|
|
- |
|
Structuring
and advisory fee income |
|
|
1,038,250 |
|
|
|
940,000 |
|
Other
income |
|
|
814,926 |
|
|
|
28,060 |
|
Total investment income |
|
|
18,441,683 |
|
|
|
13,855,576 |
|
|
|
|
|
|
OPERATING
EXPENSES |
|
|
|
|
Interest and
debt financing expenses |
|
|
5,184,184 |
|
|
|
3,328,447 |
|
Base
management fees |
|
|
3,002,097 |
|
|
|
2,209,052 |
|
Incentive
management fees expense (benefit) |
|
|
2,018,163 |
|
|
|
1,529,677 |
|
Professional
fees |
|
|
460,753 |
|
|
|
367,553 |
|
Administrator expenses |
|
|
712,500 |
|
|
|
602,083 |
|
Insurance |
|
|
86,318 |
|
|
|
67,727 |
|
Directors
fees and expenses |
|
|
100,500 |
|
|
|
75,000 |
|
General
& administrative |
|
|
453,225 |
|
|
|
333,824 |
|
Income tax
expense (benefit) |
|
|
30,682 |
|
|
|
7,501 |
|
Total operating expenses |
|
|
12,048,422 |
|
|
|
8,520,864 |
|
NET
INVESTMENT INCOME |
|
|
6,393,261 |
|
|
|
5,334,712 |
|
|
|
|
|
|
REALIZED AND
UNREALIZED GAIN (LOSS) ON INVESTMENTS |
|
|
|
|
Net realized
gain (loss) from investments: |
|
|
|
|
Non-control/Non-affiliate investments |
|
|
1,641,462 |
|
|
|
11,929 |
|
Control investments |
|
|
(139,867 |
) |
|
|
- |
|
Net realized
gain (loss) from investments |
|
|
1,501,595 |
|
|
|
11,929 |
|
Income tax
(provision) benefit from realized gain on investments |
|
|
(448,883 |
) |
|
|
- |
|
Net change
in unrealized appreciation (depreciation) on investments:* |
|
|
|
|
Non-control/Non-affiliate investments |
|
|
2,256,932 |
|
|
|
10,532,000 |
|
Affiliate investments |
|
|
2,681,640 |
|
|
|
706,760 |
|
Control investments |
|
|
(1,562,033 |
) |
|
|
5,341,641 |
|
Net change
in unrealized appreciation (depreciation) on investments |
|
|
3,376,539 |
|
|
|
16,580,401 |
|
Net change
in provision for deferred taxes on unrealized (appreciation)
depreciation on investments |
|
|
(1,328,711 |
) |
|
|
(116,521 |
) |
Net realized
and unrealized gain (loss) on investments |
|
|
3,100,540 |
|
|
|
16,475,809 |
|
Realized
losses on extinguishment of debt* |
|
|
(1,552,140 |
) |
|
|
- |
|
NET INCREASE
(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS |
|
$ |
7,941,661 |
|
|
$ |
21,810,521 |
|
|
|
|
|
|
WEIGHTED
AVERAGE - BASIC AND DILUTED EARNINGS (LOSS) PER COMMON SHARE |
|
$ |
0.71 |
|
|
$ |
1.95 |
|
WEIGHTED
AVERAGE COMMON SHARES OUTSTANDING - BASIC AND DILUTED |
|
|
11,175,436 |
|
|
|
11,207,142 |
|
|
|
|
|
|
* Certain
prior period amounts have been reclassified to conform to current
period presentation. |
|
|
|
|
|
|
|
|
|
|
Saratoga
Investment Corp. |
Consolidated
Statements of Operations |
(unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
For the six months ended |
|
|
August 31, 2021 |
|
August 31, 2020 |
INVESTMENT
INCOME |
|
|
|
|
Interest
from investments |
|
|
|
|
Interest income:* |
|
|
|
|
Non-control/Non-affiliate investments |
|
$ |
22,534,761 |
|
|
$ |
20,499,197 |
|
Affiliate investments |
|
|
1,277,020 |
|
|
|
450,507 |
|
Control investments |
|
|
3,914,086 |
|
|
|
2,383,556 |
|
Payment-in-kind interest income: |
|
|
|
|
Non-control/Non-affiliate investments |
|
|
887,095 |
|
|
|
910,884 |
|
Affiliate investments |
|
|
- |
|
|
|
94,241 |
|
Control investments |
|
|
187,646 |
|
|
|
72,553 |
|
Total
interest from investments |
|
|
28,800,608 |
|
|
|
24,410,938 |
|
Interest
from cash and cash equivalents |
|
|
1,593 |
|
|
|
13,406 |
|
Management
fee income |
|
|
1,632,854 |
|
|
|
1,260,008 |
|
Dividend
income |
|
|
1,057,498 |
|
|
|
- |
|
Structuring
and advisory fee income |
|
|
2,340,125 |
|
|
|
1,253,306 |
|
Other
income |
|
|
1,424,995 |
|
|
|
215,060 |
|
Total investment income |
|
|
35,257,673 |
|
|
|
27,152,718 |
|
|
|
|
|
|
OPERATING
EXPENSES |
|
|
|
|
Interest and
debt financing expenses |
|
|
9,525,096 |
|
|
|
5,892,323 |
|
Base
management fees |
|
|
5,761,005 |
|
|
|
4,369,580 |
|
Incentive
management fees expense (benefit) |
|
|
7,280,699 |
|
|
|
(328,633 |
) |
Professional
fees |
|
|
967,814 |
|
|
|
754,441 |
|
Administrator expenses |
|
|
1,406,250 |
|
|
|
1,158,333 |
|
Insurance |
|
|
172,636 |
|
|
|
135,453 |
|
Directors
fees and expenses |
|
|
192,500 |
|
|
|
135,000 |
|
General
& administrative |
|
|
943,876 |
|
|
|
684,638 |
|
Income tax
expense (benefit) |
|
|
58,601 |
|
|
|
(1,444 |
) |
Total operating expenses |
|
|
26,308,477 |
|
|
|
12,799,691 |
|
NET
INVESTMENT INCOME |
|
|
8,949,196 |
|
|
|
14,353,027 |
|
|
|
|
|
|
REALIZED AND
UNREALIZED GAIN (LOSS) ON INVESTMENTS |
|
|
|
|
Net realized
gain (loss) from investments: |
|
|
|
|
Non-control/Non-affiliate investments |
|
|
3,551,605 |
|
|
|
20,409 |
|
Control investments |
|
|
(139,867 |
) |
|
|
- |
|
Net realized
gain (loss) from investments |
|
|
3,411,738 |
|
|
|
20,409 |
|
Income tax
(provision) benefit from realized gain on investments |
|
|
(448,883 |
) |
|
|
- |
|
Net change
in unrealized appreciation (depreciation) on investments:* |
|
|
|
|
Non-control/Non-affiliate investments |
|
|
8,772,357 |
|
|
|
(14,212,906 |
) |
Affiliate investments |
|
|
4,677,451 |
|
|
|
(1,415,479 |
) |
Control investments |
|
|
6,739,309 |
|
|
|
258,417 |
|
Net change
in unrealized appreciation (depreciation) on investments |
|
|
20,189,117 |
|
|
|
(15,369,968 |
) |
Net change
in provision for deferred taxes on unrealized (appreciation)
depreciation on investments |
|
|
(1,558,855 |
) |
|
|
151,219 |
|
Net realized
and unrealized gain (loss) on investments |
|
|
21,593,117 |
|
|
|
(15,198,340 |
) |
Realized
losses on extinguishment of debt* |
|
|
(1,552,140 |
) |
|
|
- |
|
NET INCREASE
(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS |
|
$ |
28,990,173 |
|
|
$ |
(845,313 |
) |
|
|
|
|
|
WEIGHTED
AVERAGE - BASIC AND DILUTED EARNINGS (LOSS) PER COMMON SHARE |
|
$ |
2.59 |
|
|
$ |
(0.08 |
) |
WEIGHTED
AVERAGE COMMON SHARES OUTSTANDING - BASIC AND DILUTED |
|
|
11,172,787 |
|
|
|
11,212,315 |
|
|
|
|
|
|
* Certain
prior period amounts have been reclassified to conform to current
period presentation. |
|
|
|
|
|
|
|
|
|
Supplemental Information Regarding Adjusted Net
Investment Income, Adjusted Net Investment Income Yield and
Adjusted Net Investment Income per share
On a supplemental basis, Saratoga Investment
provides information relating to adjusted net investment income,
adjusted net investment income yield and adjusted net investment
income per share, which are non-GAAP measures. These measures are
provided in addition to, but not as a substitute for, net
investment income, net investment income yield and net investment
income per share. Adjusted net investment income represents net
investment income excluding any capital gains incentive fee expense
or reversal attributable to realized and unrealized gains. The
management agreement with the Company’s advisor provides that a
capital gains incentive fee is determined and paid annually with
respect to cumulative realized capital gains (but not unrealized
capital gains) to the extent such realized capital gains exceed
realized and unrealized losses for such year. In addition, Saratoga
Investment accrues, but does not pay, a capital gains incentive fee
in connection with any unrealized capital appreciation, as
appropriate. All capital gains incentive fees are presented within
net investment income within the Consolidated Statements of
Operations, but the associated realized and unrealized gains and
losses that these incentive fees relate to, are excluded. As such,
Saratoga Investment believes that adjusted net investment income,
adjusted net investment income yield and adjusted net investment
income per share is a useful indicator of operations exclusive of
any capital gains incentive fee expense or reversal attributable to
gains. In addition, adjusted net investment income also
excludes the interest expense and amortization of deferred
financing costs related to the 2025 notes during the call notice
period while the 2026 notes were already issued and outstanding.
Both these expenses are directly attributable to the issuance of
the 2026 notes and the subsequent repayment of the 2025 notes, and
are deemed to be non-recurring in nature and not representative of
the operations of Saratoga Investment. The presentation of
this additional information is not meant to be considered in
isolation or as a substitute for financial results prepared in
accordance with GAAP. The following table provides a reconciliation
of net investment income to adjusted net investment income, net
investment income yield to adjusted net investment income yield and
net investment income per share to adjusted net investment income
per share for the three and six months ended August 31, 2021, and
August 31, 2020.
|
For the three months ended August
31 |
|
For the six months ended August
31 |
|
2021 |
|
2020 |
|
2021 |
|
2020 |
|
|
|
|
|
|
|
|
|
|
|
|
Net Investment Income |
$6,393,261 |
|
|
$5,334,713 |
|
|
$8,949,196 |
|
|
$14,353,027 |
|
Changes in accrued capital
gains incentive fee expense/reversal |
335,237 |
|
|
156,235 |
|
|
4,033,357 |
|
|
(3,094,003 |
) |
Interest expense on 2025 Notes
during call period (3) |
274,439 |
|
|
- |
|
|
274,439 |
|
|
- |
|
Adjusted net investment
income |
$7,002,937 |
|
|
$5,490,948 |
|
|
$13,257,092 |
|
|
$11,259,024 |
|
|
|
|
|
|
|
|
|
Net investment income
yield |
7.9 |
% |
|
7.4 |
% |
|
5.7 |
% |
|
9.7 |
% |
Changes in accrued capital
gains incentive fee expense/reversal |
0.5 |
% |
|
0.2 |
% |
|
2.5 |
% |
|
(2.1 |
%) |
Interest expense on 2025 Notes
during call period (3) |
0.3 |
% |
|
- |
|
|
0.2 |
% |
|
- |
|
Adjusted net investment income
yield (1) |
8.7 |
% |
|
7.6 |
% |
|
8.4 |
% |
|
7.6 |
% |
Net investment income per
share |
$0.57 |
|
|
$0.48 |
|
|
$0.80 |
|
|
$1.28 |
|
Changes in accrued capital
gains incentive fee expense/reversal |
$0.04 |
|
|
$0.01 |
|
|
$0.37 |
|
|
($0.28 |
) |
Interest expense on 2025 Notes
during call period (3) |
$0.02 |
|
|
- |
|
|
$0.02 |
|
|
- |
|
Adjusted net investment income
per share (2) |
$0.63 |
|
|
$0.49 |
|
|
$1.19 |
|
|
$1.00 |
|
(1) Adjusted net investment income yield is
calculated as adjusted net investment income divided by average net
asset value.
(2) Adjusted net investment income per share is
calculated as adjusted net investment income divided by weighted
average common shares outstanding.
(3) Interest and amortization of deferred
financing costs on 2025 notes during call period is presented net
of the incentive fee accrual
Contact: Henri
SteenkampSaratoga Investment Corp.212-906-7800
Roland TomfordeBroadgate
Consultants212-232-2222
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