Saratoga Investment Corp

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Saratoga Investment Corp's Fiscal Fourth Quarter and Fiscal Year 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'll call over to Saratoga Investment Corp's Chief Financial Officer and Compliance Officer, Mr. Henry Stinkap. Please go ahead.

Thank you. I would like to welcome everyone to Saratoga Investment Corp's Fiscal Fourth Quarter and Fiscal Year 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 year-end and fourth 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 4 p.m. today through May 12th. 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. Our fiscal year 2022 and fourth quarter performance continues to reflect the strength and resilience of our financial position and portfolio companies. Despite the current global market volatility and continuation of COVID-19 impacts, We feel very fortunate to have navigated through these 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 as well as challenges. Our existing portfolio companies are performing well and our current business development pipeline remains robust with positive metrics and term sheets issued and deals executed. Our AUM grew significantly this quarter to $818 million as we originated $164 million in new platforms or follow-on investments, offset by $11 million of repayments. Year-to-date saw significant achievement across all growth and credit metrics, with record originations of $458 million, net realized gains of $13 million, and net unrealized appreciation of $17 million. all contributing to our fiscal 2022 net AUM growth of $263 million and the latest 12 months' return on equity of 13.9%. The investment gains also demonstrate how our strategy of taking equity positions in our portfolio companies, when available and when it makes sense to us, has been rewarded. We continue to bring new platform investments onto the portfolio, with three added this fiscal quarter, and all of our originations were made while maintaining the extremely high credit bar we set for all investments. The performance of our existing portfolio also drove our NAV per share growth by 0.5 percent this quarter to $29.33, again, a historical record for the BDC. Notably, this quarter's increase is the 17th increase in the past 19 quarters. To briefly recap the past quarter on slide two, First, we continue to strengthen our financial foundation in Q4 by maintaining a high level of investment credit quality with over 98 percent of our loan investments, retaining our highest credit rating at quarter end, up from 95 percent last quarter, generating a return on equity of 13.9 percent on a trailing 12-month basis, and registering a gross unlevered IRR of 12.2 percent on our total unrealized portfolio. with our current fair value 3% above the total cost of our portfolio and a gross unlevered IRR of 16.4% on total realizations of $764 million. Second, our assets under management increased substantially to $818 million this quarter, a 24% increase from $662 million as of last quarter and a 47% increase from $554 million as of the same time last year. Our new originations included three new portfolio companies and 19 follow-on investments, and our current pipeline remains robust with approximately $79 million of net originations since quarter end. Third, in volatile economic conditions such as we are currently experiencing, balance sheet strength, liquidity, and NAV preservation remain paramount for us. Our capital structure at quarter end was strong. $356 million of mark-to-market equity supported $313 million of long-term covenant-free non-SBIC debt, $185 million of long-term covenant-free SBIC debentures, and $12.5 million of long-term revolving borrowings. Our total uncommitted undrawn lending commitments outstanding to existing portfolio companies are $29 million. Our quarter-end regulatory leverage of 209% substantially exceeded our 150% requirement. We had $166 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 SVIC II fund and $53 million of cash that would be fully accretive to earnings when deployed. As of today, all this cash has been deployed and We demonstrated our ability to be opportunistic with the issuance of our new $87.5 million 6% 2027 baby bond last week, which more than replenished the $53 million of cash on hand invested since quarter end. As far as we know, this is the only baby bond issued this year. Finally, based on our overall performance and liquidity, the Board of Directors declared our quarterly dividend of 53 cents per share for the quarter ended February 28, 2022, which was paid on March 28, 2022. This quarter saw strong performance within our key performance indicators as compared to the quarters ended February 28, 2021 and November 30, 2021. Our adjusted NII is $6.4 million this quarter, up 10% versus $5.8 million last year, and up 5% versus $6.1 million last quarter. Our adjusted NII is $0.53 this quarter, up from $0.52 last year, and unchanged from last quarter. Notably, there was a $0.02 dilutive impact from the $27 million of proceeds the ATM equity shares issued the past two quarters and not yet fully deployed. Latest 12 months return on equity is 13.9%, up from 5% last year, and down from 14.6% last quarter. And our NAV per share is $29.33, up 8% from 27.25 last year, and up 1% from 29.17 last quarter. This is the highest quarterly NAV per share for Saratoga Investment since the inception of our management in 2010. Comparing the two fiscal years, Adjusted NII is up 14% from $22.6 million to $25.7 million, while the adjusted NII per share this year is $2.24, up from $2.02 last year. 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 almost 12 years ago, and the quality of our credits remain high, with no current non-accruals. 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.