Saratoga Investment Corp. Earnings Recaps
Saratoga shares fell 5.3% after earnings, with the likely disappointment being a $25.9 million decline in NAV, driven partly by markdowns in three credits, alongside higher interest costs from refinancing. Adjusted NII slipped to $0.46 per share from $0.47, while management described the credit environment as competitive and uncertain.
Key takeaways
- NAV declined by $25.9 million; management attributed $0.82 per share to performance in three credits and $0.30 per share to dividends exceeding NII, partly offset by $0.09 per share of accretion from share repurchases.
- Portfolio markdowns totaled $14.4 million, including $13.1 million in Madison Logic, Exigo and Chronus; Zollege contributed $4.5 million of unrealized appreciation.
- Adjusted NII was $0.46 per share, down from $0.47 the prior quarter. Higher interest expense from refinancing partly offset income from portfolio growth.
- Originations were $76.1 million against $39 million of repayments, for $37.1 million of net positive originations. AUM grew 2.1% to a record $1.15 billion.
- Saratoga reported zero nonaccruals following the resolution of its remaining nonaccrual investments; its core non-CLO portfolio was 1.6% below cost and the total portfolio was 4.9% below cost.
Saratoga Investment Corp. shares fell 3.8% following the quarter as margin compression and a cautious outlook amid declining short-term rates and tightening spreads disappointed investors. Despite solid origination activity, lower net interest margin and portfolio markdowns weighed on sentiment.
Key takeaways
- Adjusted net investment income (NII) was $0.53 per share, or $0.61 excluding a $1.7 million excise tax, consistent with the prior quarter but pressured by declining short-term interest rates.
- Core BDC net interest margin declined 4%, driven by a 12 basis point drop in average SOFR and lower yields on new asset repayments.
- Total portfolio marked down 1% ($9.6 million), with the overall portfolio valuation 2.4% below cost despite some unrealized appreciation in select investments.
- Net originations totaled $101.1 million during the quarter, including five new investments and 15 follow-ons, offsetting multiple debt repayments.
- Credit quality remained stable with only 0.2% of fair value on nonaccruals, below industry averages, and 82.1% of investments in first lien debt.
Saratoga Investment Corp delivered strong fiscal Q3 2026 results with a stable NAV per share, a notable increase in net interest income, and solid portfolio performance amid ongoing market volatility.
Key takeaways
- NAV per share maintained at $25.59, reflecting a 10.2% increase year-over-year and a slight rise from the previous quarter.
- Net Interest Income rose by $0.03 per share to $0.61, despite challenging market conditions impacting short-term interest rates.
- Net originations totaled $17.2 million, with strong new investments and repayments, highlighting robust portfolio management.
- Fourth quarter dividend announced at $0.75 per share, showcasing a 12.9% annualized yield based on current stock price.
- Credit quality improved with 99.8% of assets rated in the highest category and a well-structured portfolio positioned for future economic uncertainties.