Saratoga Investment Corp

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Saratoga Investment Corp's Fiscal First Quarter 2022 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 lines for questions. At this time, I would like to turn the call over to Saratoga Investment Corp's Chief Financial Officer and Compliance Officer, Mr. Henry Steenkamp. Sarah, please go ahead.

Thank you. I would like to welcome everyone to Saratoga Investment Corp's Fiscal First Quarter 2022 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 first quarter 2022 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 July 15th. 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. Reflecting on this quarter versus the challenges of the same time last year, this quarter has underscored the resilience of Saratoga and our portfolio companies. Despite the unprecedented impact of COVID-19, which we all felt so strongly over the past year, we feel very fortunate, given the devastation of this tragic pandemic, from a financial perspective, to have demonstrated our ability to weather and overcome the challenges, as well as to capitalize on the financial recovery opportunity and transition aggressively to the substantial ramp up in market activity. This quarter, we grew our assets under management to $678 million with $119 million of originations, both reaching their highest levels, while maintaining our credit quality and the extremely high credit bar we set for all new originations. The performance of our existing portfolio also grew our NAV per share by 5% this quarter to $28.70, also a record. Our latest 12 months return on equity as of this quarter was 19.4 percent. We look forward to presenting our most recent results in reviewing our financial and portfolio performance and the solid structure of our capitalization. To briefly recap the past quarter on slide two. First, we continue to strengthen our financial foundation this quarter by maintaining a high level of investment credit quality with 93 percent of our loan investments continuing to have our highest rating at quarter end. generating a return on equity of 19.4% on a trailing 12-month basis in Q1, ahead of the 17.6% BDC industry average. As of Q1, registering a gross unlevered IRR of 13% on our total unrealized portfolio, with our current fair value 3% of our total cost for our portfolio. and a gross unlevered IRR of 16.5 percent on total realizations to date of $573 million. Second, our assets under management increased to $678 million this quarter, a 22 percent increase from $554 million as of last quarter, and a 40 percent increase from $483 million as of the same time last year. We originated a record $119 million of new investments, offset by $15 million of repayments this quarter. Importantly, our new originations included four new portfolio company investments, as well as nine follow-ons with existing portfolio companies, and the current pipeline is robust. Third, despite improving economic conditions, balance sheet strength, liquidity, and NAV preservation remain paramount for us. Our current capital structure at quarter end was strong, with $320 million of mark-to-market equity, supporting $173 million of long-term, covenant-free, non-SBIC debt. Our quarter end regulatory leverage of 251% substantially exceeds our 150% requirement and includes a $39 million draw on our credit facility at quarter end. We have $157 million of available liquidity at quarter end available to support our portfolio companies, with $131 million of the total dedicated to new opportunities in our SBIC2 fund. The all-in cost of this new SBIC2 debt is currently less than 2%. Our total committed undrawn lending commitments outstanding to existing portfolio companies are $15 million. In March, we issued a $50 million, 4.375% five-year unsecured bond that strengthens both our capital and liquidity position, and also importantly reduces our current cost of non-SPIC capital by almost 200 basis points. Finally, reflecting on our strong performance and overall portfolio resiliency, the Board of Directors decided to again increase our quarterly dividend by one cent to 44 cents per share for the quarter ended May 31st, 2021, paid on June 29th, 2021. We will continue to evaluate our dividend payments on at least a quarterly basis as we gain better visibility on the intermediate term economy and fundamental portfolio performance. This quarter saw strong performance within our key performance indicators as compared to the quarters ended May 31, 2020 and February 28, 2021. Our adjusted NAI is $6.3 million this quarter, up 8% versus $5.8 million both last year and last quarter. Our adjusted NAI per share is $0.56 this quarter, up $0.05 from $0.51 last year, and up $0.04 from $0.52 last quarter. Latest 12 months return on equity is 19.4%, up from 9.9% last year and 5% last quarter. Our NAV per share is $28.70, up 14% from 25-11 last year, and up 5% from 27-25 last quarter, significantly exceeding industry performance. Henry will provide more detail on these matters 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 and consistently risen since we took over the BDC more than 10 years ago, and the quality of our credits remains high. We are working diligently to continue this positive trend as we deploy our available capital into our growing pipeline, while at the same time being appropriately cautious in this evolving credit environment. With that, I would like to now turn the call back over to Henry to review our financial results, as well as the composition and performance of our portfolio.