Saratoga Investment Corp

Chief Financial and Chief Compliance Officer, Mr. Henry Steenkamp. Please go ahead.

Thank you. I would like to welcome everyone to Saratoga Investment Corp's fiscal second quarter 2026 earnings conference call. Today's conference call includes forward-looking statements and projections. We ask you to refer to our most recent funds 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 2026 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. For everyone new to our story, please note that our fiscal year end is February 28th, so any reference to Q2 results reflects our August 31st quarter end period. A replay of this conference call will also be available. 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. Saratoga Investment Corp. highlights this quarter include continued NAV growth from the previous quarter and year, and NAV per share growth from the previous quarter. A strong return on equity beating the industry, net originations of $22.4 million, and importantly, continued solid performance from the core BDC portfolio in a volatile macro environment, including the return of our Zolage investment to accrual status, thereby reducing our non-accrual investments to just one, representing only 0.2% of portfolio fair value. Continuing our historical strong dividend distribution history, we announced a base dividend of $0.25 per share per month, or $0.75 per share in aggregate for the third quarter of fiscal 2026. Our annualized third quarter dividend of $0.75 per share represents a 12.3% yield based on the stock price of $24.41 as of October 6, 2025, offering a strong current income from an investment value standpoint. Our Q2 adjusted NII of 58 cents per share continues to reflect the impact of the past 12-month trend of decreasing levels of short-term interest rates and spreads on Saratoga Investment's largely floating-rate assets and the continued effect of the recent repayments, which has contributed to the buildup of $201 million of cash as of quarter end, available to be deployed accretively in investments or to repay existing debt. During the quarter, we continue to see very competitive market dynamics. These macro factors, our portfolio again saw multiple debt repayments in Q2, in addition to solid new originations. We originated $52.2 million, including three follow-ons and new investments in multiple BBB and BBB CLO debt securities. Our strong reputation and differentiated market positioning, combined with our ongoing development of sponsor relationships, continues to create attractive investment opportunities for high-quality sponsors, which continued post-quarter end with three new portfolio company investments that are closed or in closing in Q3 so far. We continue to remain prudent and discerning in terms of the new commitments in the current volatile environment. We believe Saratoga continues to be favorably situated for potential future economic opportunities as well as challenges. At the foundation of our strong operating performance is the high-quality nature and resilience of our $995.3 million portfolio in the current environment, with all four historically challenged portfolio company situations resolved. One of these restructurings, Zolage, is seeing improved financial performance and has been returned to accrual status this quarter. core non-CLO portfolio was marked up by $3.9 million this quarter, and the CLO and JV were marked down by $0.3 million. We also had $0.2 million of net appreciation in our new BBB and BBB CLO debt investments and a further net realized gains of $0.1 million from an escrow payment on our modern campus investment, resulting in fair value of the portfolio increasing by $3.8 million during the quarter. As of quarter end, our total portfolio fair value was 1.7% below cost, while our core non-CLO portfolio was 2.1% above cost. The overall financial performance and solid earnings power of our current portfolio reflects strong underwriting in our growing portfolio companies and sponsors in well-selected industry segments. During the second quarter, our net interest margin decreased from $15.1 million last quarter to $13.1 million, driven by a $2.1 million decrease in non-CLO interest income. This decrease was due, first, average assets decreased approximately $11 million, or 1.1%, to $954 million. Second, the timing of originations and repayment closings during the current and previous quarter, with repayments more fully reflected in earnings, and the full impact of new originations still having to flow through. And third, the absolute yields on the non-CLO portfolio decreasing from 11.5% to 11.3% as a result of SOFR rates resetting from earlier reductions, combined with the impact of lower yielding new originations during the quarter. In addition, the full period impact of the 0.2 million shares issued to the ATM program in Q1 and a partial impact of the additional 0.4 million shares issued in Q2 resulted in a $0.02 per share dilution to NII per share. Our overall credit quality for this quarter remains steady at 99.7% of credits rated in our highest category, with now just one investment remaining on non-accrual status, Pepper Palace, which has been successfully restructured, representing only 0.2% and 0.3% of fair value and cost, respectively. With 84.3% of our investments at quarter end in first lien debt, and generally supported by strong enterprise values and balance sheets in industries that have historically performed well in stress situations, we believe our portfolio and company leverage is well-structured for future economic conditions and uncertainty. As we continue to navigate the challenges posed by the current geopolitical tensions and the volatility seen in the broader underwriting and macro environment, we remain confident in our experienced management team, robust pipeline, strong leverage structure, and disciplined underwriting standards to continue to steadily increase the size, quality, and investment performance of our portfolio over the long term and deliver attractive risk-adjusted returns to shareholders. As always, and particularly in the current uncertain environment, balance sheet strength, liquidity, and NAV preservation remain paramount for us. At a quarter end, we maintained a substantial $407 million of investment capacity to support our portfolio companies with $136 million available through our existing SBIC III license, $70 million from our two revolving credit facilities, and $201 million in cash. This level of cash improves our current regulatory leverage of 166.6% to 186.5% net leverage, netting available cash against outstanding debt. Moving on to Saratoga Investments' fiscal 2026 second quarter, Key performance indicators as compared to the quarters ended August 31st, 2024, and May 31, 2025 are our quarter end NAV was $410.5 million, up 10.3% from $372.1 million last year, and up 3.6% from $396.4 million last quarter. Our NAV per share was $25.61, down from $27.07 last year, and up from 25.52 last quarter. Our adjusted NII was $9.1 million this quarter, down 50.1 percent from last year and down 10.5 percent from last quarter. Our adjusted NII per share was 58 cents this quarter, down 56.4 percent from last year and down 12.1 percent from last quarter. Adjusted NII yield was 9 percent this quarter, down from 19.7 percent last year and 10.3% last quarter. And latest 12 months return on equity was 9.1%, up from 5.8% last year, and down slightly from 9.3% last quarter, and above the industry average of 7.3%. While last year saw markdowns due to a small number of credits in our core BDC, slide three illustrates how our recent results have delivered an ROE of 9.1% for the last 12 months. above the industry average of 7.3%. Additionally, our long-term average return on equity over the past 11 years of 10.1% is well above the BDC industry average of 7%. Our long-term return on equity has remained strong over the past decade plus, beating the industry eight of the past 11 years and consistently positive every year. As you can see on slide four, our assets under management have steadily and consistently risen since we took over the BDC 15 years ago, despite a slight pullback recently reflecting significant repayments. This quarter saw originations again outpacing repayments, resulting in an increase in AUM as compared to the previous quarter. The recent AUM decline over the past year does not detract from our expectation of long-term AUM growth. The quality of our credits remains strong, and with just one recently restructured investment remaining on non-accrual, Pepper Palace, Our management team is working diligently to continue this positive long-term trend as we deploy our significant levels of available capital into our pipeline, while at the same time being appropriately cautious in this evolving and volatile credit and economic environment. With that, I would like to now turn the call over to Henry to review our financial results, as well as the composition and performance of our portfolio.