SAR Q2 2026 Earnings Call Summary

Net Asset Value (NAV): Increased to $410.5 million, up 10.3% year-over-year and 3.6% quarter-over-quarter.
NAV per Share: $25.61, down from $27.07 year-over-year but up from $25.52 last quarter.
Adjusted Net Investment Income (NII): $9.1 million, down 50.1% year-over-year and 10.5% quarter-over-quarter; adjusted NII per share was $0.58, down 56.4% year-over-year.
Adjusted NII Yield: 9%, down from 19.7% year-over-year.
Return on Equity (ROE): 9.1%, up from 5.8% year-over-year and above the industry average of 7.3%.
Dividend: Maintained at $0.75 per share for 2026, representing a 12.3% yield based on the stock price of $24.41.

Continued NAV growth and solid performance from the core BDC portfolio despite macroeconomic volatility.
Successful return of the Zollage investment to accrual status, reducing nonaccrual investments to just one, representing 0.2% of portfolio fair value.
Originated $52.2 million in new investments, including follow-ons and CLO debt securities, with a focus on high-quality sponsors.
Strong liquidity position with $407 million of investment capacity, including $201 million in cash available for deployment.
Portfolio quality remains robust, with 84.3% in first lien debt and a fair value above cost for the core non-CLO portfolio.

Management remains optimistic about future economic opportunities and challenges, emphasizing a disciplined approach to underwriting.
Confident in the ability to deploy significant capital from available cash and undrawn credit facilities.
Expectation of improved deal flow as M&A activity potentially rebounds, which may enhance investment opportunities.

Adjusted NII and yield have significantly declined due to lower interest rates and repayments of successful investments, impacting dividend coverage.
Competitive pressures in the market have intensified, with larger participants entering the lower middle market, leading to tighter spreads and more aggressive terms.
Concerns about the sustainability of current portfolio companies in the face of potential disruptions from AI technologies in the software sector.
The market remains volatile, and the company is cautious about deploying capital in the current environment.

Management acknowledged the challenge of maintaining dividend coverage amid declining NII but emphasized a focus on long-term portfolio health and NAV growth.
Discussion on the competitive landscape revealed that while the company has a strong reputation, it faces challenges from competitors offering more aggressive terms.
Management is committed to maintaining high underwriting standards despite competitive pressures and is actively expanding business development efforts to enhance deal flow.
Questions regarding the company's exposure to CLO securities were addressed, with management highlighting the quality and historical performance of the debt tranches being targeted.
The potential for future M&A activity was discussed, with management expressing optimism about a rebound in deal volume and the ability to capitalize on new investment opportunities.

SAR — Saratoga Investment Corp.