Saratoga Investment Corp

Good morning, ladies and gentlemen, and thank you for standing by. Welcome to Saratoga Investment Corp's Fiscal Third 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 line for questions. At this time, I would like to turn the call over to Saratoga Investment Corp's Chief Financial and Compliance Officer, Mr. Henry Steenkamp. Please go ahead, sir.

Thank you. I would like to welcome everyone to Saratoga Investment Corp's fiscal third 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 third quarter 2022 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 1 p.m. today through January 13th. 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 Overbeck, who will be making a few introductory remarks.

Thank you, Henry, and welcome, everyone. Our fiscal 2022 third quarter performance continues to reflect the strength and resilience of our financial position and portfolio companies. Despite the unprecedented global impact and continuation of COVID-19 impacts, we feel very fortunate to have overcome its challenges thus far and to be in a position to benefit from the upside of the ongoing recovery and substantial increase in market activity. We believe Saratoga continues to be well-positioned for potential future economic opportunities and challenges. Our existing portfolio companies are performing well, and our current business development activities allow us to find and evaluate a healthy level of new investments. Our AUM contracted slightly this quarter to $662 million as we originated $59 million in new platforms or follow-on investments, offset by $66 million of repayments, including a $7.3 million realized gain on the sale of our Gray-Heller investment and a $2.6 million realized gain on our Texas Teachers investment. These investment gains demonstrate how our strategy of taking equity positions in our portfolio companies when available and when it makes sense to us, has paid off well, with this quarter's $10 million of realized gains increasing our total net realized gains earned to $61 million, or approximately $5 per quarter and outstanding shares, over the past four years. We continue to bring new platform investments into the portfolio, with two added this fiscal quarter, and all of our originations were made in an extremely high credit bar we set for all investments. The performance of our existing portfolio also grew our NAV per share by 1 percent this quarter to $29.17. Again, a historical record for the BDC with this quarter's increase being the 16th increase in the past 18 quarters. To briefly recap the past quarter on slide two, first, we continue to strengthen our financial foundation in Q3 by maintaining a high level of investment credit quality with over 95 percent of our loan investments retaining our highest credit rating at quarter end, up from 93 percent last quarter, generating a return on equity of 14.6 percent on a trailing 12-month basis, and registering a gross unlevered IRR of 11.9 percent on our total unrealized portfolio, with our current fair value 3 percent above the total cost of our portfolio, and a gross unlevered IRR of 16.4 percent on total realizations of $753 million. Second, our assets under management decreased slightly to $662 million this quarter, a 1% decrease from $666 million as of last quarter. This remains a 21% increase from $547 million at the same time last year, and a 19% increase from $554 million as of year end. Our new originations included two new portfolio companies, and six follow-on investments, and our current pipeline remains robust with almost $120 million of net originations since quarter end. Third, despite improving economic conditions, balance sheet strength and liquidity and NAV preservation remain paramount for us. Our current capital structure at quarter end was strong. $343 million of mark-to-market equity supported by $238 million of long-term covenant-free non-SBIC debt, $207 million of long-term covenant-free SBIC debentures, and $12.5 million of long-term revolving credit borrowings. Our quarter-end regulatory leverage of 237 percent substantially exceeds our 150 percent requirement. We have $258 million of liquidity at quarter-end available to support our portfolio companies with $76 million of the total dedicated to new and follow-on opportunities in our SBIC II fund, and $144 million of cash that will be fully accretive to earnings when deployed, of which more than three-quarters has already been deployed since . The all-in cost of this new SBIC is currently less than 2 percent, and the total committed undrawn lending commitments outstanding to existing portfolio companies are $21 million. And finally, based on our overall performance, including improved liquidity, the overall portfolio and financial performance and the recent deployments of cash, the Board of Directors increased our quarterly dividend by one cent to 53 cents per share for the quarter ended November 30th, 2021, payable on January 19th, 2021. We will continue to evaluate the amount of our dividends on a quarterly basis as we gain improved visibility on the economy and fundamental business performance. This quarter saw a strong performance within our key performance indicators as compared to the quarters ended November 30th, 2020 and August 31st, 2021. Our adjusted NII is $6.1 million this quarter, up 10% versus $5.5 million last year, and down 13% versus $7 million last quarter. Our adjusted NII per share is 53 cents this quarter, up from 50 cents last quarter, and down from 63 cents last quarter. Latest 12 months return on equity is 14.6 percent, up from 11 percent last year, and up from 14.4 percent last quarter. Our NAB per share is $29.17, up 9 percent from $26.84 last year, and up 1 percent from $28.97 last quarter. This is the highest quarterly NAB per share for Saratoga Investment since inception of our management in 2010. and we will provide more detail later. As you can see on slide three, our assets under management have steadily and consistently risen since we took over the BDC more than 11 years ago, and the quality of our credits remains high with no non-accruals currently. Our management team is 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.