On July 9, 2024, Saratoga Investment Corp (SAR, Financial) released its 8-K filing for the fiscal first quarter of 2025, showcasing a solid financial performance. Saratoga Investment Corp is a specialty finance company that provides customized financing solutions to U.S. middle-market businesses, primarily investing in senior and unitranche leveraged loans, mezzanine debt, and equity.
Performance Highlights
Saratoga Investment Corp reported a Net Investment Income (NII) per share of $1.05, surpassing the analyst estimate of $0.94. This compares to $1.35 in the same quarter last year and $0.94 in the previous quarter. The company's total investment income for the quarter was $38.7 million, an increase from $34.6 million in the same period last year and $37.2 million in the previous quarter.
Key Financial Metrics
| Metric | Q1 2025 | Q4 2024 | Q1 2024 |
|---|---|---|---|
| Assets Under Management (AUM) | $1.096 billion | $1.139 billion | $1.084 billion |
| Net Asset Value (NAV) | $367.9 million | $370.2 million | $337.5 million |
| Investment Income | $38.7 million | $37.2 million | $34.6 million |
| Net Investment Income per share | $1.05 | $0.94 | $1.35 |
| Adjusted Net Investment Income per share | $1.05 | $0.94 | $1.08 |
| Earnings per share | $0.48 | $0.39 | $(0.02) |
| Dividends per share | $0.74 | $0.73 | $0.70 |
Financial Achievements and Challenges
Saratoga Investment Corp's performance this quarter reflects its elevated earnings power and quality, with a 19% increase in recurring Net Interest Margin (NIM) driven by a 9% increase in average Assets Under Management (AUM) and sustained levels of increased rates and spreads on its largely floating rate assets. The company declared a quarterly dividend of $0.74 per share, implying a 13.1% dividend yield and an 18.6% earnings yield based on its recent stock price of $22.59 per share.
“Saratoga’s solid overall performance is reflected in our continued strong key performance indicators this past quarter, including: (i) sequential adjusted NII per share increases of 12% over the past quarter ($0.94 to $1.05 per share), (ii) current assets under management stable at $1.096 billion, and (iii) dividends increasing to 74c per share, up 6% from 70c per share in Q1 last year and over-earned by 42% as compared to this quarter’s $1.05 per share adjusted NII,” said Christian L. Oberbeck, Chairman and Chief Executive Officer of Saratoga Investment.
Income Statement and Balance Sheet Overview
For the three months ended May 31, 2024, Saratoga Investment Corp reported total investment income of $38.7 million, up 11.7% from $34.6 million in the same period last year. The company's net investment income for the quarter was $14.3 million, an increase of 11.6% from $12.8 million in the same period last year. Total expenses for the quarter, excluding interest and debt financing expenses, base management fees, and incentive fees, increased to $2.9 million from $2.3 million in the same period last year.
As of May 31, 2024, Saratoga Investment Corp's total assets were $1.202 billion, with total liabilities of $833.9 million. The company's NAV per share was $26.85, compared to $28.48 in the same period last year and $27.12 in the previous quarter.
Analysis and Outlook
Saratoga Investment Corp's strong financial performance this quarter, despite market challenges, underscores its robust business model and strategic positioning. The company's ability to generate substantial investment income and maintain a high dividend yield is a testament to its effective management and investment strategies. However, the company faces challenges with certain portfolio companies, such as Pepper Palace and Zollege, which have been marked down further this quarter. The company's proactive measures to address these challenges, including management changes and capital structure improvements, are expected to mitigate potential risks and enhance future recovery values.
Overall, Saratoga Investment Corp's solid financial performance, strong dividend yield, and strategic initiatives position it well for continued growth and value creation for its shareholders.
Explore the complete 8-K earnings release (here) from Saratoga Investment Corp for further details.
