Summary of Saratoga Investment Corp Q2 2026 Earnings Call

1Key Financial Results and Metrics

Net Asset Value (NAV): $410.5 million, up 10.3% year-over-year and 3.6% sequentially.

NAV per Share: $25.61, down from $27.07 last year but up from $25.52 last quarter.

Adjusted Net Investment Income (NII): $9.1 million, a decline of 50.1% year-over-year and 10.5% sequentially; adjusted NII per share was $0.58, down 56.4% year-over-year and 12.1% sequentially.

Adjusted NII Yield: 9%, down from 19.7% last year and 10.3% last quarter.

Return on Equity (ROE): 9.1%, up from 5.8% last year, slightly down from 9.3% last quarter.

Dividend: Announced a base dividend of $0.25 per share per month, totaling $0.75 for the year, yielding 12.3% based on the stock price of $24.41 as of October 6, 2025.

2Strategic Updates and Business Highlights

Continued growth in NAV and a strong return on equity, with a focus on maintaining a high-quality portfolio.

Successful resolution of historically challenged investments, with only one remaining on nonaccrual status, representing 0.2% of portfolio fair value.

Originated $52.2 million in new investments, including double B and triple B CLO debt securities, and maintained a strong pipeline with three new portfolio companies in closing.

Cash reserves of $201 million available for new investments or debt repayment, enhancing liquidity and balance sheet strength.

3Forward Guidance and Outlook

Management expressed confidence in the ability to deploy capital effectively in the current environment, despite competitive pressures.

Anticipated continued focus on disciplined underwriting and maintaining high credit quality.

Expectation of increased deal flow as M&A activity potentially picks up, which could improve investment opportunities and NII coverage for dividends.

4Bad News, Challenges, or Points of Concern

Declining Adjusted NII: Significant decrease in adjusted NII and yield, primarily due to lower AUM and interest rates.

Competitive Pressures: Increased competition from larger market participants offering aggressive terms, which may impact deal execution and pricing.

Market Volatility: Ongoing geopolitical tensions and macroeconomic uncertainties pose risks to portfolio performance and investment opportunities.

Dividend Coverage: Current NII is below the dividend payout, raising concerns about sustainability and the need for potential adjustments.

5Notable Q&A Insights

Management acknowledged the challenges in maintaining dividend coverage amid declining NII and competitive pressures but emphasized a robust pipeline and strong balance sheet as mitigating factors.

Discussion on the strategic shift towards CLO debt investments, with management confident in the quality and performance of these securities compared to historical equity investments in CLOs.

Concerns raised about the impact of AI on software companies within the portfolio, with management indicating a careful approach to underwriting in this sector.

Management reiterated their commitment to maintaining high underwriting standards despite market pressures and emphasized the importance of their established reputation in securing quality deals.