Saratoga Investment Corp

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Saratoga Investment Corp Fiscal Second Quarter 2020 Financial Results Conference Call. Please note that today's call is being recorded. During the presentation, all parties will be in a listen-only mode. Following management's prepared remarks, we will open the lines for questions. At this time, I would like to turn the call over to Saratoga Investment Corp's Chief Financial and Compliance Officer, Mr. Henri Steenkamp. Sir, please go ahead.

Thank you. I would like to welcome everyone to Saratoga Investment Corp's fiscal second quarter 2020 earnings conference call. Today's conference call includes forward-looking statements and projections. We ask you to refer to our most recent filings 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 to update our forward-looking statements unless required to do so by law. Today we will be referencing a presentation during our call. You can find our fiscal second quarter 2020 shareholder presentation in the events and presentations section of our investor relations website. A link to our IR page is in the earnings press release distributed last night. A replay of this conference call will also be available from 1pm today through October 17th. Please refer to our earnings press release for details. I would now like to turn the call over to our Chairman and Chief Executive Officer, Christian Oberbeck, who will be making a few introductory remarks.

Thank you, Henri, and welcome everyone. This second fiscal quarter has been a particularly strong and important one for us, with many significant accomplishments. All of this quarter's achievements will support our efforts to build upon our industry leadership within the BDC sector and grow our high-quality portfolio, utilizing our strength in capital and liquidity base. While a challenging and competitive environment persists, our origination efforts combined with our flexible capital solutions and diversified sources of cost-effective liquidity continue to support our robust pipeline of available deal sources driving greater scale. To briefly recap this past quarter's highlights on slide two. First, we received approval for a second SBIC license providing us access up to $175 million and additional long-term cost-effective capital in the form of SBA debentures to further enable us to support our core small business constituency. Second, we continue to strengthen our financial foundation this quarter by maintaining a high level of investment credit quality with 99% of our loan investments having our highest rating, generating a return on equity of 14.3% on a trailing 12-month basis, 14.7% annualized in Q2, both significantly beating the BDC industry mean of 8.7%. Increasing NAV by a net $2.6 million realized and unrealized gain in this quarter and registering a gross unlevered IRR of 13.5% on our total unrealized portfolio and a gross unlevered IRR of 14% on total realizations to date of $393 million. Third, our asset center management grew to $487 million this quarter, a 19% increase from $410 million as of last quarter, and a 24% increase from $393 million as of the same time last year. This quarter continues to demonstrate the success of our growing origination platform with a healthy $93 million of originations. This importantly, our new originations included four new portfolio company investments with two more closed since quarter end and eight in total since year end. Fourth, the continued strengthening of our financial foundation has enabled us to increase our quarterly dividend for the 20th consecutive quarter, representing five consecutive years of dividend increases. We are one of only two BDCs that have achieved that record. We paid a quarterly dividend of 56 cents per share for the second fiscal quarter on September 26, 2019. This was an increase of one cent per share over the past quarter's dividend of 55 cents per share. All of our dividend payments have been exceeded by our adjusted net investment income for the same periods. We are one of only eight BDCs having increased dividends over the past year. And finally, Our capital structure and base of liquidity increased and strengthened meaningfully in this quarter. In addition to the receipt of the SBIC license in August with its long-term benefits and potential accretive returns, we also sold 1.4 million common shares with gross proceeds of $34.1 million through our ATM offering during the quarter. These shares were sold at a gross premium of 3.3% resulting in a $0.06 accretion to NAV per share. Subsequent to quarter end, we sold another 543,000 shares with gross proceeds of $13.6 million also at a similar premium to NAV for a total issuance of $47.7 million. These share issuances provide initial equity capitalization for our new SBIC subsidiary while also funding further BDC asset growth. The total equity capitalization required for the second license is $87.5 million in order to access the $175 million of debentures pursuant to a two-to-one debt-to-equity ratio. The most recent debenture pooling priced on September 17th at a 2.283%, with added fees and expenses combining for an all-in rate of approximately 3% on recent SBIC debentures. We now have significantly increased dry powder to address future investment opportunities in a changing credit and pricing environment. Our existing available quarter end liquidity of $244 million allows us to grow our current assets under management by 50% without any new external financing. Saratoga delivered strong return on equity performance this quarter and year to date as noted above. and continued solid performance within our key performance indicators as compared to the quarters ended August 31st, 2018 and May 31st, 2019. Our adjusted NII is $5.6 million this quarter up 18% versus $4.8 million last year and up 22% versus $4.6 million last quarter. Our adjusted NII per share is 68 cents this quarter down from 69 cents last year and up 13% from $0.60 last quarter. Our NAV per share is $24.47, up 6% from $23.16 last year and up 2% from $24.06 last quarter. Henri will provide more detail later. As you can see on slide three, our assets under management has steadily risen since we took over management of the BDC more than nine years ago and the quality of our credits remains high. We are working diligently to continue this positive trend. With that, I would like to now turn the call back over to Henri to review our financial results as well as the composition and performance of our portfolio.