Saratoga Investment Corp

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to Saratoga Investment Corporation's Fiscal Third Quarter 2021 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 like to turn the call over to Saratoga Investment Corporation Chief Financial Outcompliance Officer, Mr. Henry Steenkamp. Sir, please go ahead.

Thank you. I would like to welcome everyone to Saratoga Investment Corps' Fiscal Third Quarter 2021 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 third quarter 2021 shareholder presentation in the events and presentation 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 1 p.m. today through January 14th. 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, Henry, and welcome, everyone. Another volatile and challenging quarter across our businesses and the world, we continue to see improvement in market conditions and improved visibility on the immediate prospects of our portfolio companies. We continue to believe that Saratoga and our portfolio companies are positioned well at this point in time to weather potential future economic challenges. We look forward to presenting our most recent results and reviewing the solid structure of our capitalization and continued improvement in liquidity on today's call. While no business can anticipate with clarity how long the displacement in the market and global economy will last, we have confidence that our historically conservative approach to investing, strong capital structure, solid levels of liquidity, organization, and management experience will enable us to effectively navigate this challenging current and uncertain future environment. To briefly recap the past quarter on slide two. First, we continue to strengthen our financial foundations quarter by maintaining a high level investment credit quality with nearly 93% of our loan investments retaining our highest credit rating after incorporating the impact of changes to market spreads, EBITDA multiples, and or revised portfolio company performance related to COVID-19. This is up from 90% in Q1. Importantly, more than two-thirds of the reduction in the valuation of the overall portfolio in the first quarter has been reversed since May 31, 2020, generating a return on equity of 11% on a trailing 12-month basis in Q3, net of the nine-month COVID-19 impact to the portfolio. This significantly exceeds the BDC industry average of negative 3.6%, and registering a gross unlevered IRR of 16.6% on total realizations of $523 million. Second, our assets under management increased to $547 million this quarter, an 8% increase from $508 million as of last quarter, and up 13% from $486 million as of year end. Despite the unprecedented uncertainty and turmoil in the markets, we originated a healthy $51 million of new investments, offset by $18 million of repayments. Importantly, our new originations included three new portfolio company investments. Our capital structure, portfolio performance, and recently improved liquidity have enabled us to remain open for business, an important differentiator in today's market. Third, as we continue to look ahead to the persistent challenges presented by the COVID-19 pandemic to the economy and particularly to small businesses, liquidity and NAV preservation are paramount, both for our portfolio companies and ourselves. Our current capital structure at quarter end was strong, with $300 million of mark-to-market equity supporting $108 million of long-term covenant-free non-SBIC debt and $176 million of SBIC debt. Our available liquidity enables us to grow our AUM by 42% currently. We had $30 million of committed undrawn lending commitments as of quarter end and $19 million of discretionary funding commitments. Our quarter end regulatory leverage of 377% substantially exceeds our 150% requirement. Finally, Reflecting on our improved liquidity and overall portfolio resiliency, the Board of Directors decided to increase our quarterly dividend by one cent to 42 cents per share for the quarter ended November 30th, 2020. We will continue to reassess the amount of our dividends on at least a quarterly basis as we gain better visibility on the long-term economy and fundamental business performance. As discussed on previous calls, we have historically managed our compliance obligations conservatively, such that we have had no ordinary income obligations going into this fiscal year and therefore substantial spillover flexibility and consequent liquidity. Payment of this increased dividend further preserves our spillover liquidity position. This quarter saw continued solid performance within our key performance indicators as compared to the quarters ended November 30th, 2019 and August 31st, 2020. and considering the current economic environment. Our adjusted NII is $5.5 million this quarter, unchanged versus $5.5 million last quarter, and down 10 percent versus $6.1 million last year. Our adjusted NII per share is 50 cents this quarter, up from 49 cents last quarter, and down from 61 cents last year. Latest 12 months return on equity is 11 percent, currently the second highest in the BDC industry. And our NAV per share is $26.84, up 6% from $25.30 last year and up 1% from $26.68 last quarter. This is the 11th quarterly increase in the past 13 quarters and the highest year-over-year growth in the BDC industry, with only one other BDC having grown NAV per share over the last 12 months. Henry will provide more detail later. As in the past, we remain committed to further advancing the overall long-term size and quality of our asset base. As you can see on slide three, our assets under management have steadily risen since we took over the BDC, and the quality of our credits remains high. AUM increased to $547 million at fair value in Q3, an 8% increase since last quarter. With that, I would now like to turn the call back over to Henry to review our financial results, as well as the composition and performance of our portfolio.