Saratoga Investment Corp

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to Saratoga Investment Corp's fiscal year-end and fourth quarter 2026 financial results conference call. Please note that today's call is being recorded. During today's presentation, all parties will be in 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 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 year-end and fourth quarter 2026 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 2026 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. For everyone new to our story, please note that our fiscal year end is February 28th, so any reference to Q4 results reflects our February 28th quarter and year 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 net positive originations generated from our strong pipeline, including five new portfolio companies originated in the quarter, sustained long-term AUM growth, a strong 9.1% latest 12-month return on equity, beating our prior year and more than doubled the industry, and importantly, continued solid performance from the core BDC portfolio in a challenging and volatile macro environment. Continuing our historical strong dividend distribution history, we announced a monthly base dividend of 25 cents per share, or 75 cents share in aggregate for the first quarter of fiscal 2027. which when annualized represents a 12.6% yield based on the stock price of 2389 as of May 4th, 2026, offering strong current income from an investment value standpoint. Originations in AUM growth were strong during the quarter, contributing to adjusted NII of 53 cents per share, including the impact of a $1.7 million excise tax expense, Adjusted for this excise tax, NII was 61 cents per share, consistent with the prior quarter. Overall, our adjusted NII continues to reflect the impact of declining short-term interest rates and tightening spreads on our largely floating-rate asset base. During the quarter, we saw a meaningful increase in deal activity, reflecting our own business development activities, despite persistent sector headwinds and the cautious sentiment that has taken hold across the broader private credit sector. market dynamics continued to be very competitive. While our portfolio saw multiple debt repayments in Q4, our strong origination activity more than offset those exits, resulting in net originations of $101.1 million for the quarter from $135.1 million in new originations across five new investments and 15 follow-ons. Our strong reputation differentiated market positioning, and the ongoing development of sponsor relationships continue to create attractive investment opportunities from high-quality sponsors. Investment activity continues post-quarter end with one new portfolio company investment and multiple follow-ons already closed. We remain prudent and discerning in our underwriting approach, particularly in light of the current volatile and uncertain environment. We believe Saratoga continues to be favorably situated for potential future economic opportunities as well as challenges. Our total $1.109 billion portfolio was marked down 1% or $9.6 million during the quarter, including net depreciation of $3.1 million in the non-CLO core portfolio and unrealized depreciation of $5.5 million in the CLO and JV. Our investment in Zolage that previously had been restructured and written off continues to perform strongly with $3.3 million of unrealized appreciation recognized in this quarter. As of quarter end, our core non-CLO portfolio remains 1.6% above cost, with our total portfolio valuation 2.4% below cost. These results reflect the quality of our direct lending underwriting, the strength of our portfolio companies and their sponsors, and our focus on well-selected industry segments with favorable risk-adjusted returns. During the fourth quarter, our core BDC net interest margin decreased by 4% from $13.5 million last quarter to $13 million. This was driven primarily by the average SOFR rate used in the portfolio decreasing by 12 basis points from last quarter, accelerated OID of $0.9 million on the sale of the JVCLO's eNote from last quarter not repeating, spreads on originations this quarter being almost 200 basis points lower than on the repayments they replaced, and the timing of originations and repayments in Q4, partially offset by the 5.6% increase in average core assets. Our overall credit quality for this quarter decreased slightly to 96.8% of credits rated in our highest category. We have just two investments on non-accrual status, Pepper Palace, which has been restructured, and our CLO's F-Note, that has been put on non-accrual for the first time this quarter, representing 0.2% of fair value and 1.2% of cost, well below the industry average of 3.3%. With 82.1% 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 composition and leverage profile are well-structured for future economic conditions and uncertainty. As always, and particularly in the current uncertain environment, balance sheet strength, liquidity, and NAV preservation remain paramount for us. At quarter end, we maintained a substantial $211 million investment capacity to support our portfolio companies, with $99 million available to our existing SBIC III license, $90 million from our two revolving credit facilities, and $21.8 million in cash. Our quarter in cash position decreased meaningfully from $169.6 million last quarter due in large part to strong origination activity and the refinancing of the $175 million institutional note. The refinancing of this debt included the issuance of $150 million of new bonds and our regulatory leverage remained unchanged at 168.4% quarter over quarter. As we kick off our fiscal year 2027, the macro environment remains complex, shaped by geopolitical tensions, evolving U.S. tariff policies, and concerns about AI and software. All of these aspects, combined with an uncertain interest rate environment, combine to create elevated volatility and continued uncertainty on credit spreads across the private credit sector. While negative press and sentiment weighs on the public BDC market, At this time, it appears that these very negative perceptions are not commensurate with the current market performance in the broader private credit market. As we continue to focus on underwriting strong credit and long-term growth, we continue to grow our team, having added three new associates and two new managing director hires this year, including most recently David DeSantis, who joined Saratoga as Chief Operating Officer and Senior Managing Director. David brings a wealth of private credit experience and organizational leadership, significantly expanding our C-suite resources to further enhance Saratoga's performance and growth opportunities. David will be making his debut presentation today, addressing the market and Saratoga's portfolio. Moving on to Saratoga Investments' fiscal 2026 fourth quarter key performance indicators as compared to the quarters ended February 28, 2025, and November 30th, 2025. Our quarter end NAV was $396.2 million, up 0.9% from $392.7 million last year, and down 4.1% from $413.2 million last quarter. Our NAV per share was $24.42, down from $25.86 last year and $25.59 last quarter. Year-over-year NAV per share is down $1.44, with total NAI of $2.32 versus total dividend distributions of $3.74. The $1.42 of distributions in excess of NAI approximates the entire $1.44 of 12-month reduction in NAV per share. This excess distribution represents previously undistributed NAI profits from prior years. Our adjusted NII was $8.5 million this quarter, up 6.2% from last year and down 12.8% from last quarter. Our adjusted NII per share was 53 cents this quarter, down 5.4% from last year and 13.1% from last quarter. Excluding the excise tax, adjusted NII for Q4 was 61 cents unchanged from last quarter. Adjusted NII yield was 8.4 percent this quarter, unchanged from 8.4 percent last year, and down from 9.5 percent last quarter. And latest 12 months return on equity was 9.1 percent, up from 7.5 percent last year, down from 9.7 percent last quarter, and above the industry average of 4.3 percent. This past year saw a $5 million overall net realized and unrealized gain for the year. And slide three illustrates how these combined portfolio and financial results have delivered a return on equity of 9.1% for the last 12 months, above the industry average of 4.3%. Additionally, our long-term average return on equity over the past 12 years of 10.1% is well above the BDC industry average of 6.7%. Our long-term return on equity has remained strong over the past decade plus, beating the industry nine of the past 12 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 in fiscal 2025, reflecting significant repayments. This quarter saw significant originations, again outpacing repayments, resulting in a meaningful increase in AUM as compared to the previous quarter, The quality of our credits remains solid with just two investments on non-accrual, Pepper Palace, which has been restructured, and our CLO's F note that has been put on non-accrual for the first time this quarter. 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'd like to turn the call over to Henry to review our financial results, as well as the composition and performance of our portfolio.