Q2 2026 Saratoga Investment Corp Earnings Call Transcript
Key Points
- Saratoga Investment Corp (SAR) reported continued NAV growth from the previous quarter and year, with NAV per share also increasing.
- The company announced a strong return on equity, surpassing the industry average, and maintained a solid dividend distribution history with a 12.3% yield.
- SAR's portfolio saw a reduction in non-accrual investments to just one, representing only 0.2% of portfolio fair value, indicating strong credit quality.
- The company has a substantial $407 million of investment capacity, allowing for significant growth without the need for external financing.
- SAR's management team is focused on disciplined underwriting and has a strong track record of realized returns, with only three realized economic losses out of 122 portfolio companies over 15 years.
- Adjusted NII was down 50.1% from last year and 10.5% from last quarter, reflecting lower AUM and base interest rates.
- The net interest margin decreased due to a $2.1 million decrease in non-CLO interest income, driven by lower average assets and yields.
- SAR's dividend coverage is currently below the peer mean, raising concerns about sustainability given the outlook for lower short-term rates.
- The company faces a challenging market environment with historically low M&A volumes and increased competition, leading to tighter spreads and full leverage.
- SAR's CLO investments, while providing attractive yields, may not align with traditional BDC investor expectations, as highlighted by concerns over the inclusion of structured CLO securities.
Good morning ladies and gentlemen.
Thank you for standing by. Welcome to Saratoga Investment Corp's fiscal second quarter 2026 financial results conference call. Please note that today's call is being recorded. During today's presentation, all parties will be in a listen-only mode. Following management's prepared remarks, we will open the line for questions. At this time, I would not like to turn the call over to Saratoga Investment Corp's Chief Financial and Chief Compliance Officer, Mr. Henry Steenkamp. Please go ahead.
Thank you. I would like to welcome everyone to Saratoga Investment Corp's fiscal second quarter 2026 earnings conference call. Today's conference call includes forward-looking statements and projections. We ask you to refer to our most recent findings with the SEC for important factors that could cause actual results to differ materially from these forward-looking statements and projections. We do not undertake
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