Saratoga Investment Corp. Reports Fiscal Year and Q4 2024 Results
Net Investment Income (NII) per Share: Reported at $0.94 for the fourth quarter, slightly below the estimated earnings per share of $0.95.
Annual Dividend: Announced at $0.73 per share for the fourth quarter, with a 12.4% dividend yield based on the recent stock price, indicating strong dividend coverage.
Assets Under Management (AUM): Increased to $1.139 billion, up 17.1% year-over-year, driven by robust portfolio growth and new originations.
Net Asset Value (NAV) per Share: Decreased to $27.12 from $29.18 year-over-year, reflecting market and portfolio adjustments.
Investment Income: Grew by 45.0% annually to $143.7 million, fueled by higher interest rates and an expanded asset base.
Adjusted Net Investment Income: Rose 52.4% year-over-year to $51.9 million, showcasing strong earnings power and operational efficiency.
Portfolio Performance: Reported a net unrealized depreciation of $7.1 million for the quarter, with significant write-downs in specific investments, countered by overall portfolio growth.
Saratoga Investment Corp (NYSE:SAR) released its 8-K filing on May 6, 2024, disclosing its financial outcomes for the fiscal year and fourth quarter ended February 29, 2024. The company reported a Net Investment Income (NII) per share increase of 53% year-over-year and 16% for the fourth quarter. Adjusted NII per share saw a rise of 44% from the previous year but experienced a 4% decrease from the last quarter.
Saratoga Investment Corp is a specialty finance company that provides tailored financing solutions to U.S. middle-market businesses. The company primarily invests in senior and unitranche leveraged loans, mezzanine debt, and, to a lesser extent, equity. These investments are generally in companies with annual EBITDA under $50 million, through direct lending and loan syndicates.
Financial Highlights and Challenges
The company's annualized fourth-quarter dividend was reported at $0.73 per share, with an adjusted net investment income of $0.94 per share, indicating a 12.4% dividend yield and a 16.0% earnings yield based on the recent stock price. Despite the positive growth in NII and adjusted NII, the company faced challenges including a less robust M&A environment and increased excise taxes, which rose 71% over the last year's fourth quarter.
Furthermore, the company highlighted issues with two of its portfolio companies, Pepper Palace and Zollege, leading to a combined markdown of $13.8 million. However, the core non-CLO portfolio and the CLO and JV segments saw an appreciation, partially offsetting the markdowns.
Income Statement and Balance Sheet Overview
For the fiscal year ended February 29, 2024, Saratoga Investment reported a substantial increase in total investment income to $143.7 million, up 45% from the previous year. This increase was primarily due to higher interest rates and an expanded asset base. However, the company also noted a net increase in net assets from operations of $8.9 million, down from the previous year, reflecting the mixed financial impacts.
The balance sheet showed a growth in assets under management (AUM) to $1.139 billion, up 17.1% from the previous year. Net Asset Value (NAV) per share slightly decreased to $27.12 from $29.18 the previous year, influenced by the equity raised above net asset value and the operational challenges faced.
Strategic Moves and Market Position
Christian L. Oberbeck, Chairman and CEO, emphasized the company's strong market positioning and ongoing development of sponsor relationships, which continue to generate high-quality investment opportunities. Despite the current market volatilities, Saratoga Investment has maintained a robust investment pipeline, ensuring careful selection to meet their high-quality standards.
The company remains focused on managing its portfolio effectively, navigating through market uncertainties with a strong emphasis on maintaining high underwriting standards and operational resilience.
In conclusion, Saratoga Investment Corp's fiscal year and Q4 2024 results demonstrate a company capable of navigating market complexities while positioning itself for sustainable growth. Investors and stakeholders may find reassurance in the company's strategic adjustments and ongoing commitment to high-quality investments.
Explore the complete 8-K earnings release (here) from Saratoga Investment Corp for further details.
This article first appeared on GuruFocus.
