SAR Saratoga Investment

Henri Steenkamp CFO, CCO, Treasurer, and Secretary
Chris Oberbeck Chairman and CEO
Mike Grisius President and CIO
Casey Alexander Compass Point Research
Mickey Schleien Ladenburg Thalmann
Christopher Testa National Securities Corporation
William James Merrill Lynch
Call transcript
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Good morning, ladies and gentlemen. Thank you for standing by. Welcome to Saratoga Investment Corps Fiscal Third Quarter 2018 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.

we the remarks, for prepared management’s will line open questions. Following Mr. to time, Chief call Officer, I this turn Financial would Compliance Corp's At Investment like the Saratoga over and to Henri Steenkamp. Sir, ahead. please go

Henri Steenkamp

from required like these to cause quarter the our forward-looking do Today most actual results refer third conference so a statements Thank you. materially projections. earnings our referencing for I welcome projections. to update to important ask Corp's factors presentation XXXX call by Saratoga conference Today's with to We recent be statements SEC that everyone We call. forward-looking defer not our could and call. and forward-looking to law. filings to fiscal undertake will during statements Investment includes we unless to would you do

available press Chairman Christian making XXXX through IR our few You Events the link Presentation will Please section can find over website. this conference is our third page earnings to A in distributed introductory and our to call our fiscal to Executive Chief A presentation details. the Relations January release be now call X today for be refer press turn I to earnings XXth. last Investor Oberbeck night. would release of replay PM who'll our Officer, of and from in like remarks. shareholder quarter the a

Chris Oberbeck

Thank you everyone. Henri welcome and

pleased fiscal long-term we're quality recent As and and credit most of to the we objectives growth continued look at back of core quarter note progress our this earnings.

assets of to and available of support pipeline robust liquidity and structure effective scale. sources continues capital flexible diversified greater Our deal sources growing a cost

X.X% this remain Investment we continue on in terms our credit quality environment level environment our equity of and having the high meaningful risen XX of basis first investment top on on consistent our by to consistent Generating return quarter of a maintaining up quality and loan from far with financial challenging trailing originations million. BDC with XX.X% our last last beating highest foundation our to industry past unlevered and a month recap a the investments mean quarter a strong. unrealized credit categories quarter. and rating XX.X% competitive returns portfolio in maintaining performance key our the To on at total slide the total remains briefly IRR X.X% this and persists, gross quarter indicators Saratoga of While has for of generating of unlevered many IRR and and industry on competition of of our XXX.X gross realizations X, outpaces shareholders. with XX.X% a strengthen Within XX.X%

the management of as assets XX% Second, XXX% longer time of Taking we from year year-end million increase a to XXX our same increase million expanded from million, increase as and current year. from under last end fiscal a of perspective, XXXX. term XXX a our XX% reflects at a the XXX million AUM $XX

quarter maintaining we and strong a reinforced challenging are in the origination operating discipline. of the This environment importance

to X originations offset amortizations on many based X our million of risk our credit and of million sourcing saw view pipeline, repayments through we by While quality limited reward. deals and our

our increase continues in to pipeline confidence continued growth. us Our giving

past per to paid quarter's on quarter a continued foundation We increase of our fiscal dividend third XXXX over for the the enabled for share. XXXX. per quarter. quarterly XX, an was of This $X.XX consecutive financial has share per the Third, of dividend us $X.XX December $X.XX quarterly strengthening XXth share the our increase dividend of

same All income periods. of payments exceeded our investment have adjusted dividend our been the net by for

XX%, comfortably overearning from currently dividend result, which our us by a BDCs. As distinguishes most still are we other

the base five one only of to potential year. our the improve. over and Fourth, increased has dividends of past strong having BDCs are liquidity We remains

continue to preserve significant environment. powder credit to changing in and pricing future We opportunities potential meet a dry

existing & year-end entered XX% to into without management grow an us equity time through And any assets we by with agreement through sale ATM our new March for an under Thalmann current liquidity may finally which XX Saratoga allows stock on XXXX, available Ladenburg to of time from up aftermarket XX, common Our offer external financing. offering. Company distribution its or million to

company As above of of shares gross an XX.XX. November XX, million XXX,XXX sold price $X at proceeds for XXXX, NAV of average the

as within to and performance XXXX quarters indicators the quarter August XX, our key This November XXXX. saw XX, ended compared strong continued performance

XX% X.X Our adjusted million down last year, NII million quarter. is X.X but quarter, up versus X.X last X% versus million this

$X.XX remain per share Our per year-end and is at $X.XX from is last quarter. progress. will more XX.XX our detail from any highlighted XX.XX, October. particularly we pleased our Henri $X.XX XX.XX accomplishments down these but and that call year the adjusted and in on temporarily last last on quarter; quarter NII investments we later our call up provide NAV in from significant and variances share this with up outsized benefiting -- Overall quarter, last our

remain asset its often further quality. high overall while past long-term advancing base the committed As size maintaining we mentioned the we've in to of our

to growth well can to turn on basis quality this Henri would to like of that remain back composition financial management since credits our high. year-end portfolio. risen our have see the the year-by-year of to as performance continuing on look steadily review you assets with and over results slide As call positive comparative forward X, our I trend. and With as our a under We healthy the

Henri Steenkamp

per from higher and investments unrealized to earned to from capital as Across and up $X.XX increased $X.XX, $X.X income up assets QX, to adjusting due our XX, Ice Adjusted quarter. up and year. both million adjusted primarily Thank our for results the increase down compared from TileRedi that incentive the interest per from QX $X.XX in the share interest last you, share benefiting and of QX. last calculation, net Chris. ended this metrics our positive usual the with quarter-on-quarter higher last second last incentive our to The lower impact AUM levels downsizing Easy of fee share quarter. reflects $X.X from million from following occurred related quarter level for accrual XX% and per was XXXX year income last the of the $X.X investments The in X.X% year gains anticipated XX.X% with planned higher of last $X.XX $X.XX X key can second decrease of fee was primarily the down NII performance half was from for year's most NII in quarter million metrics of Slide see in our highlights November you format. these results. When all quarter the

resulted revenue for in basis NII reasons addition, to from pardon due the X.X% also yield These up when down last quarter. yield points points the last In from was X.X% this XXX is $X.XXX adjusted during previously -- This the mentioned. year basis XX originations adjusted but lower for incentive accrual. fewer of quarter fee impacts XX.X%

$X.X in gain third operations experienced net gains weighted a and million on appreciation realized $X.X from gains. equity to appreciation. on includes million per our $X.X quarter net unrealized share. $XX,XXX investment The million remains Saratoga comprised net realized Return Investments’ unrealized we performance in in this and for total $X.X of resulting assets net per investments on million Elyria Courion of gain net and improved in investments due unrealized both net which lien was appreciation $X.X For unrealized was of second important performance $X.X million Corporation reflecting a The increase primarily indicator unrealized or term on on equity loan. appreciation resulting $X.XX an us, average million or share $X.XX

return BDC mean XX and is on X.X%. XX.X% the for Our months was equity above of well the industry last

with to becoming cash earned figure the visible. interest continue to increased the improve expect further for our XX grow base we month benefits ROE of scale and deploy period, as more We full and asset assets

now slide from Of expect quarter a average and reflecting total trends of from same of the than in accelerated our end million net percentage quarters particular last slide expenses, filer. also note to professional of year KPI slide $X.XX operating and unchanged financing at the $X.X the it balance at to how as and statement Saratoga an past Despite expenses a new our has activities of the higher starting excluding metrics XX, assets expenses is the that percentage the is income fees stabilize QX in increased Oxley maintained. period We the sheet more a is fees that assets. this interest BDC. X.X%. shows million note XX expenses, also due our management increased debt for remain again and presentation management Sarbanes this added primarily took over and margin base We've doubled the company have interest we since highlighting to diminish quick fees as management total incentive on A expenses nine upward

Moving on as end $X.X of of million an from was $XX.XX and and million slide as of million of XXXX, NAV from was year-end. increase NAV to NAV per NAV quarter of a as last as X million $XX.XX quarter last this $XXX.X XX, of $XXX.X November $XX.X up of million $XX.XX quarter $XXX.X from share increase as quarter year-end.

by of declared. ended were of unrealized $X.X dividends investment million $X.X income million nine and the of million months and gains For realized net this offset net quarter earned $X.X

were made million company's addition company's through program. In $X.X stock and shares million distributions dividend ATM the sold of $X.X dividend plan was through the of reinvestment

our dilution $X.XX changes income and our net and gains. This net the were incentive NII expenses a we a changes share from offset Starting by see a The realized and Madison $X.XX Ice and share consistent share $X.XX adds all interest NAV financing since in in program. $X.XX QX. reflecting increased investments, to basis. our total per you fees. reduction NII value income share from were on to TileRedi at of On downsizing other grip a has Easy increased reconciliation all and history reflecting ATM from up decrease of benefit quarterly to from QX a to decrease steadily of a of of level borrowings. X anticipated in the slide These shown originations, Our changes major continue $X.XX decrease will asset sequential in lower share in per due simple and a and interest XXXX total low per $X.XX from $X.XX top debt decreased decreases are decrease significant the in per

remain The reconciles the from generated half on this quarter. for depreciation dilutive impact The for our X and for undrawn declared end ATM the powder QX Madison offset of net to available $XX.X investments DRIP is spread as slide, outlines $X.XX. with NAV $X.XX SBA dry million. by lower available liquidity of actually nature, that QX all undrawn increase the share Moving QX into QX facility. date. years the between this of debentures, We position on $X.XX to per us quarter by $X.XX especially record the to at conservative pleased issuances is This quarter debt balance which taking of the cash, the nature sheet our for dividend totaled in $XX.XX Slide the our NII all and the our and our were the was with long-term fact and six plus. overall $XX.XX account

rising part borrowings have rate. we fixed our rate except our fixed this being interest in the most our facility environment all also with Madison cost For primarily

continue external In to by ability addition assets financing. to our for need without we XX% grow the the have

of rates remain side and which Now are rates. of have slide short-term balance we asset moving a are flows across rising LIBOR of over to X we they them means our sheet all the although floating investments big of our XX% through on

quarters, done changes potential have past have interest investments. of income rates we interest analyzed we in As from in impact on the

without per were Assuming by and November basis of as for income any were our quarter to existing interest the increase XXX a existing approximately interest in interest that constant to full actions rate This terms, quarter. alter all $XXX,XXX is other to a XXXX XX, taken points our remain fiscal earnings would increase our changes. investment hypothetical of incremental no rates

yields repayments BDC like years and first XX would XX% and of yield CLO X XX, XX% remained current of companies XX continued move several assets I well how of in review composition slide levels our portfolio. and our a as investment On in syndicated assets. relatively consistent the you the can for past see to X CLO one shows these yield consistent and Now high that with average despite our lien. as million core our the range assets pause investments almost loan on composition replacement through invested the yield total has in Slide our our with to excluding of portfolio fund and and on slide $XXX remain and weighted

our asset all quarter to yield This syndicated from yields assets our in a asset overall yields increasing our increase this XX.X%, our yield to increasing XX.X% increasing to CLO slightly yield increased reflects slight XX.X%, XX.X%, with core to X.X%. and

slide one $X.X the one during one the of had resulting follow of million. Year-to-date we fiscal $X.X investments BDC. investments in $XX increase $X.X originations and million Turning exceeded XX, net $XX to amortizations of in million considerably quarter in a company million in new our exit repayments portfolio and million made plus on for third quarter at of

have gas business, on portfolio and X.X% to overall important services total by part spread oil diversified we Of well direct of over highly industry, In at industries investment the a to nine we of remain $XX,XXX. that realized remain strategy. moment us investments fact served X Our a and which investment has net and our as a of terms gain continue of no QX consists in the industry focus geography distinct well. an our experienced with exposure type education large as

due indicator Alarm net for Despite As rest This helped year past this equity the gains our sale from accumulated one-time losses This realized or $X.X approximately good and our QX. Center credit our of set interest the consistent million was of be $XX grow five loss of million a on has to My million net redemption year was years we in other continues the portfolio of of performance early turn investments. which in realized of to market. review. was half or by during gains this $X.X other loss loss recognition for President Officer realized investment realized portfolio million over I is realized and and fiscal a will slide Investment offset NAV, you to That the can reclassified XX, to concludes investment of ROE. of the is the $X.X long-term unrealized a quarter. our Michael this overview Grisius, the from this reflected Chief see in had now past loss healthy, realized and financial my call primarily an the of qualities, primarily and

Mike Grisius

describe have strategy. see portfolio performance transaction And as continued broader Thank since then the run the is you in it's than data same I market showing Henri. as spreads minutes conditions on value we to period competitive by is And trailing will narrowing I'll current it last of take is to is we total as extremely comment market the couple imbalance available intensifies for annualized middle middle just also year. have number lower Slide period to number below for XX impact far rate. market's deals. in U.S. supply spreads not our spoke at indicates we it, consistent worsen capital a what investment continued in The now. year of for which last a some and was time market downward last ended trend already transactions seen as in volume, starting and the demand significantly of million. The significantly compared this Published outstrips is the XX, and driven XXXX with last significantly are the of in down the the tightening that quality deal quarter to competition lower same November $XX the transactions sizes October. last well

-- and spread entrants for benign some expectation changing continued and continued overall led counterbalance into junior compression. investor capital economic higher Now storied to exposed for growth, to yield me. cycle, and pricing increase credit continued An have new receptivity LIBOR has liquidity appetite with again provided and thankfully senior attract to market. quarter has profiles, extended dynamics this This the changes has excess to stress excuse to to sectors giving new paper, leverage challenges, secular an

us to continued that because best allows the XX aggressive the the market can to year work. appeals this to pursuit their transactions through middle lower marketplace likely in money On extremely most companies returns are shareholders. sheer XXXX the industry of course calendar we sift over remained to of highlight, putting be believe and us of to number adjusted deliver end frequently we of to As at our the see high lenders debt multiples that slide risk you as find

September of a risk investing maintaining we our enterprise results are As risk XX, strong a of attractive continue compared With above been to leverage for our able exceptionally investment. our value modest models backdrop relatively this to times, Total profile. XXXX confident levels of are focus is and exceed last multiples credits to business leverage the we've the achieve five XX% X.X the overall market. of low times. rest portfolio leverage will dollar where while the that of businesses of the with we profiles sustainably on return Irrespective the as

repayments one focused the healthy follow originations of purely we this successful originations record is ability long-term as believe We this not addition market can rests saw quarterly are XX slide this including on level we short-term judgment our applying lumpy Therefore numbers good quality. new low always a We investments sound investing that year origination a in market be last taking quarter. demonstrated by credit tough on approach. and the slide. of despite unpredictable decision fazed In and criteria. example originations time and next year's sourcing investment seven or is on, dynamics. In quarterly emphasize as irrespective to over on on continuous steady at discipline basis another of we XX established ahead our calendar an companies paced quarter difficult a generate With have new consistent illustrates while consistent and XXXX portfolio

our perspective cautious in the naturally credit performance growth decisions Our the approach long-term capital this or volume. our XX% results We our since drive disciplined considering bar to apply confident that From remain the portfolio approach produce to of be investments. structure our Quarterly can grow cannot same year origination invest lumpy the year but with should steadily will when non-first demonstrated as we when again lien AUM over determining end. where underwriting we credit always higher continue companies.

circumstances quite Nevertheless the also seek majority our lien lien is For in to under capital entire the first attractive investments. certain across not us structure. only be do investments we believe of continue non-first investments portfolio can we and

that goal For investing underwriting The is business of in determination sustainability these the the each would to dictates as consider we're in enterprise and due we flow. made one, two, in so diligence our the respect of assessment the cash to like an factors its investment value overarching if with of as potential make where of and to invest. long-term an volatility interested structure making others well capital we whether and its

whether with all First and lien, first foremost our investment discipline. approach equity, lien, or prudence traditional we of mezzanine second and decisions

teams continue strategic new relationships development and our deals. has Now moving set, and on that to focus experience, our business significant relationships led on for new to slide skill to become XX mature sources have

The origination this As sourced from our XX% market deal despite our and discipline. conditions. of number you private underscores has companies ownership, equity over institutional evaluated past deals increased chart of from these come couple see come without materially rest of sponsors. also the years the can on slide and competitive

XXX sourced size to deals sheets XXXX deals of have percentage. the sourced has of XXXX. increasing not grown in Term by same the While XXX in the the from issued top increased tunnel

deals existing top same to of quality overarching we pipe no that to to development the maintain our at portfolio seven in have goal on also deals fundamental to high investments many outcome. portfolio is new the XX especially line our in our means past the due noteworthy how strength harder credit by the past in at platform completed numerous Communication, Easy companies the Vector, we get similar to businesses business looking same recognizing see others growth matter ability Identity deals and is we quality. Automation, such outsized supporting has a further demonstrating us to In enabled with of return What It that of our the Giving number value Ice, follow over is time. same shareholders their Nevertheless in years. to time order at Cleo quality more as to as strengthening validation fact level many find and we now have supporting months. work close high companies inconsistent of the and deals we're deliver

Our us even in strong overall quality only originated over assets taking account XXXX. BDC the since management and into taking the credit portfolio stronger of by is when

on As in approximately Saratoga our the gross on you can basis investments is Investment see on million realized million invested XX.X% $XXX.X on unlevered combined XX.X% by of team on is slide realizations. XX.X% made the the IRR a in On XX, XX.X management rest BDC. gross $XXX.X SBIC unlevered approximately and of invested IRR million

of is On past company have non-accrual that several can our closely BDC been months took lien year XX.X% other options. fundamentals. investments gross IRR currently and unrealized there on above over pursue right SBIC million while Taco also and $X.X Saratoga lien They investment of the various chart track last lenders Mac. developments to first this combined the numbers unrealized first million The weighted unlevered since put $XXX.X work investment carries see a management. on the to with we in depreciation record reflecting a includes QX We called declining discussed $X.X continue on the million business and you

non-accrual this We this investment keep until will on resolved. is

our net this as of our unrealized sale and reminder million investments. losses equally million high My quarter the Alarm being loss such well interacts example a of loss other year a good on $X.X $X.X gain Network Despite offset as portfolio of fair Mercury realizations values other the whole. of Center a My year-to-date as with realized quality a gained as by appreciation of the last and Alarm gains the recognition and on of $X.X is Center how million As solid,

our and leverage the see SBIC of comprised at market in our when of with profile you to compared low of investments investments senior the times slide lien mix securities overall conservative portfolio was of XX.X% XX on leverage. especially XX relatively debt As remains the first X.X investments can these

program risk from to of the accretive Our out on capital cost stretching highly spectrum. us favorable allows to shareholders this returns our deliver without

XX, slide on million as our see from you committed this demonstrate growing $XXX.X growing remains ended capabilities increase XXXX XXXX we note within assets the had quality important quarter XX, XX.X of November culminating approximately required selection overall market. can tough XX% within strength quality This due our focus It capacity us procedures and represents million our and underwriting the really leading high to review November up quarter turn total to available SBIC the million that concludes is August our to our XX as long-term. of our SBIC call assets investment available base over Producing to to results capacity these license. Credit asset including I'd market Moving of like leverage of to is as of to as This as remain top of $XXX.X well Overall and of quality cash high and of approach. million SBIC sourcing extremely results we a a has in CEO, diligence diligent Chris. XXXX. my the over total origination XX, in to of which operating capacity XX this firm end. quarter's our remain

Chris Oberbeck

Mike. Thank you,

has program our since As XX, slide the outlined XXX% launched. dividend by quarterly payment cash grown program on

and raising XXXX year dividend through declared dividends $X.XX year. the we gradually paid During per of fiscal the share

most fiscal $X.XX per per share last and December to per continued share. including share we've addition dividends a for share year per is In increasing and quarterly year $X.XX year, dividends XXXX for $X.XX declared far for XXXX regularly fiscal for QX, $X.XX pay thus in during QX per Total throughout $X.XX QX, recently QX. share paid

are the earning XX.X% higher BDC We dividend coverages by our one giving dividend over still industry. of also in the us

-- can the us our which see top of past dividends one on and easily places had you have X.X% the growth only year-over-year have we slide year. of dividend very grown top BDC's in five near As peers XX

BDC's now within size marketplace. of truly increases differentiated no of have their dividend or sequential payments. the had the had We dividend continually either has increasing decreased have XX while our We quarters us believe dividend most increases

pleased industry. also are continuing outperform to We SAR see to the

XX has beating slide of to which when the viewed dividends significantly appreciation horizon generated And slide see longer total the months can on and returns a two which year is BDC's the industry. XX one when the us return placed return XX, our our the see outperformance context On can the places our of as of seven in in BDC, total we Moving top three respectively. over BDC all and took XX% index both XX%. for you management XX over includes capital slide you and of further broader last time of

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growth for We are Investment open that excited for ahead a questions. to and for and Corp the I call Saratoga now like lies would profitability


line Casey begin. [Operator our the question Instructions]. first comes And may And from you of Alexander. sir,

Casey Alexander

good and you morning. Thank

regaining what you turning you starting value, been I see its earning all to this pick to it's mean of to interest asset? a your I an comes control Can potential eventually But I not value in it's that is of how it, finally some your you as up can legacy know this give know years -- and where dispose ability color can investment but some has are eventually your chances finally some around what control Foundry. First investment, us you investment, fate a it Elyria you before and do into for time. of it are

Chris Oberbeck

past it caused you cycled cyclical of legacy levels. Casey, its is in low, correct, has question. for Everything is It it well get investment. some it it elements – what unlike the said you hard our in reached very lot a EBITDA portfolio, a we highly value and which to basically some its low very in have thank that

that do and that, have we exposure other coming However, in we made done have have for changes company a management have new up, itself picks some cycle things compressors back to partner is gas, and significant the there's some acquisitions and business are they oil developments. gas and the has example, They like as and the some pipeline turning. the and

increase the company inside that earnings. substantial aspects positive value very that some increase in and driven been in have there of have So,

there's it's investment We much on entity are but company. not equity that investment, a small investor an the debt and that in minority

So, been aligned with say ultimately aligned with that recent other at throughout our would I can't timing; the process, our we've the exit the drive investor. highly we process, however, –

that think of a be will on amount right we that too investment. fair exit dynamics at but given there some moment, you if our and in is the don't ahead runway positive we an there so will, see And the partner of holding long,

Casey Alexander

Chris. great, Okay, very helpful. that's Thank you

be your walk comfortable this scratch might would that investors income Secondly, little should I of that so think have feel asked income us at before, and PIK with Mike new color? their I composition through investors bit, statement I level the you looking helpful are if could very of a why know PIK heads but the income the

Henri Steenkamp

PIK a income, income Casey did think Well, there the sort note and relates that Ice comprise they just or at the of first our year-to-date investment PIK that I and of to transaction of in but you because important half spoken couple why don’t obviously investments that we've have we stab at everything breakdown, income our to Easy our consist we just than I it's PIK about driving past. more take the of of are the look when sort

PIK up in as If during the probably we've a both look that of at the year. you to them there's and of Vector had year-to-date PIK that components investments four realizations make there actually Identity the of instruments represent remaining such about couple but investments, those six

So it's to component increased. I PIK although The decreased. actually due component, look primarily Ice it increased a of is have at remaining number the that's guess PIK investments the way to Easy has

Mike Grisius

the from it add Ice. of is Easy Casey coming that's that And I'll the amount thing to

us look you within gives comfort of instruments, those at that those think that we PIK enterprise If well is the investment. what ultimate value are with the recognizing that instruments income

Casey Alexander

in to this for us how the end okay, you the who Right, people originations going very this forward often quarter, the lumpy the at kind before important it I of give for some haven't again feel nature looked from quarter? Mike those think and facts. past cadence was can a a quiet you've just of reiterate it's you detailed of see

Mike Grisius

in respect. to Obviously be careful that you have

and the -- that we prepared said function, the just success to I hard think up feel our do had exceed pace very that development our repayments. remarks should our with that It's business that sheet the we've balance we grow in to I as origination building confident can continue its quarter-to-quarter.

We have give and confidence probably forward-looking. that can that's you as relates to grow we the answer best can it I

Casey Alexander

activity there, your some XX on deals year-to-date right, exist deals the But as it like the I funnel looking you XX million, what looks in if a of accurate? showed out your that read versus are at Mike that approximately on below guys percent that deal slides, you is of couple

Mike Grisius

may diamonds the the market that got to we end know find And one and middle thousands you grain obviously get thousands have looking a those of is sources highly comment we pipeline market see function, you some our of that we be. in that we're are a of on if a ourselves things I that's one that's can bit fragmented at and slide salt. and when do. lower about we've that that It of is the you've activity as to being is origination a of accurate the make often is, market good transaction so there you there But one wonderful as companies really rough. take mean do with up the out it's that set in what that and tough

Casey Alexander

my taking alright for great. it. Okay, questions, appreciate I Thanks

Chris Oberbeck

Thanks Casey.


the from question of And Mickey comes line Schleien. our next

You may begin.

Mickey Schleien

is the the that because hard Yes, the highly down morning meanwhile last portfolio it's may market certainly my the everyone. and not sense is lately it's But abating, or follow say. competition level to of road, healthy that change may Casey's on good been in it's I to increasing not up but question concentrated. want is

understand expansion else? and or you origination capacity underlies of your that, just some grow confidence an that the something ability is what So expressed to what sheet to your balance in I'd is like

Mike Grisius

-- have have it's the we we things. Well mostly origination a of few things side it's but

much you took management, If had. predecessor Saratoga different the this when than really over back to business is model go a

was, know into in and of it Saratoga us. time there are out and folks are doing took out letting getting space that there some who marketplace people our know plenty deals So still that don't actively really the

just reflective time We've getting we're seeing efforts the quality And is put so our so allocated in forward lot name a resources opportunities. also of and that more the of it we've reputation there that best person out person to marketplace all one but was focused development, the had XXX% to that upon got execution a business the -- deals. one people in so on who once for we've addition we scouring

of that's three have people who we much see grow. reasons pretty XXX% you effort one Now that pipeline are focused the on the and

yield thing not and can't get and is that's experience is certainly good think thing opportunities going I remain are folks that team but been overemphasize you now us people, as deals. And that is done much and important partners those some this We're a give getting here the probability that we we're has business we we've them because -- referring call is decide that deals to if delightful just Another to stretch a remain I know the we management disciplined we time marketplace those to referrals like the going how for in it it of we are definitely all happened seasoned. with very disciplined. that us of I that proprietary they wouldn't higher done better

last last a of market gets you very yield. do is thing seen lot chase should can thing here, we've when cycles. you So do these competitive The

sheet. and for feel market and the of really quality what as is ourselves difficult and Having said go we're got going always that. to remind do to all to I that done what we've still that's You've hard the and shape that credit that's we can continue long it's have how we the pace. feel peg a quarter-to-quarter exactly -- we is healthy but to going balance grow to over a little It well takes the can confident at that that run we that be do grow

Mickey Schleien

me Saratoga doing? their platform portion pre-limited other also if funds, to is correctly if but diversification have order BDC's I'm Saratoga expanded and of considering is remember correct in their improve that something that expenses I to Mike wrong leverage across private the

Chris Oberbeck

it that's Mickey, definitely of funds Chris are into there, an is and private we've it's BDC's credit -- is like we've space. looked something interesting that a and This public there's that out not lot

year longer This -- performance and healthy have a and basis substantial that's made think was And here. little our don't a says really our a feel on I objective I moment where this of the and look and at of characteristics steady you history. sort climb As very like been two we've any light mean as management we kind our a the that's was we're years, getting we're are one where pipeline progress quarter has concentrating before growth had changing. given SAR see and probably Mike to right but and we we been over in we But we of a see that where very be good year-over-year, the on range a mean good. if quarter it we prospects own portfolio one it size path efforts And number really is really our on are focused this scale. good very

Henri Steenkamp

to building things business, we we it but the existing time laser know it consider didn't on being or not value as touched but could you Okay, that with focused in investment think to add felt bit, The we our line complimented would creating that consideration as that as and be on give conflict to not certainly of we anyway. that can. we're we ones SAR wouldn't I say much shareholders funds it's Mickey, that would for say Chris wouldn't to other vehicles it's to I a private

off aren't table focused not really at And this means where so but we're that's those by present the any moment.

Mickey Schleien

do the dividend at you upside maybe envision they're further dividends around now that might around realize and Okay, speaking up but do in it's another I this road and moving question dividends keep to down is so the the now -- NII time you do of policy, running roughly terms or of NII, if dividend think XX% needed? the down in be level it special then consider it

Chris Oberbeck

that's something we dividend every we question, very good that of declare a Well and mean factors consider to new time a a that's lot got Mickey we've evaluate. I

really it -- on our is really depends base. asset growth it of think I the

incremental from have and We the that asset can would what profitability growth now now. powder have sizable would earnings a access marginal we than dry significant be at that right we that incremental be higher

that deploying just earnings. increase alone So our should

the rising which had we've So and and had we've deploy the at rate a is consistent facts that consistent a assets. I the think rising question we basis on at on And quarter what time. also based revaluate each dividend

to point a So they're think want kind I I situation mean we've one. I good where a think of cut back is your got with to grow your in on don't is we up linked that get dividend an to curve we and any we occur to to redemptions it, might can so we relative grow it that of want want originations. rates excess so absorb kind point

So, specifically right. facts to your questions you are recite the answer

and that consideration. We another to going to But we would to are on at remain if ratio would if we a were XX% quarter payout and grow basis. by one evaluate that be flat a we're be quarter were that

Mickey Schleien

Taco give restructuring understand. Mac an in where stands? can if last question, you that us and update of terms And possible I process my on that Okay,

Henri Steenkamp

couple it obviously a we valued reflective so have we careful to ongoing has the be our non-accrual as can as what of -- private is and as have of are real of can that discussions been I the well having we It's the a senior performance a say where obviously. that convey. which company group Well the is marketplace. in this things, now -- we company the challenged lender

Mickey Schleien

morning. enough. Alright for Thanks this time your fair

Henri Steenkamp

Mickey. Thanks


Securities. Thank National line from Testa you comes the Christopher you. And begin. our may question of next from Sir,

Christopher Testa

how significant market, significantly up just per taking yields bps were compression The the pretty roughly quarter, went pretty could credit in this yields up you color my spread questions. wondering Hey, there good the thanks quarter? XX on provide guys, for structured CLO some is morning some if

Henri Steenkamp

rate mean our mean… our Do you own you effective interest interest own -- or

Christopher Testa

Well, yes.

Henri Steenkamp

more Yeah, well you the and effective are was and collections. that LIBOR it we points. the at -- over Chris if the was of down increase cash distribution projection flows are we an is the by increased projected a had obviously effectively Because because I offset what future our own well being in just was basis derived slightly look XX than interest obviously earning mean but CLO. rate you function projected saw QX as what by that by the that was period valuation our

probably period. reflected valuation the that I rate which which wasn't obviously in I an quarterly increase, So the bps the was for was cash think the it had in about impact effective interest increase quarter big on interest drove XX then flows the slightly. a up partially it or income the mean in in a actual XXX the

Christopher Testa

so it, for your projections, holding though? to in Got reinvestment expectations static is environment the say prefer increases that your of current LIBOR that, increases that kind the

Henri Steenkamp

to reinvestment managed flows the -- any there had -- I we we've reinvestment of have that's think to cash keep it's we why and why a opportunities I mean repayments had. positive out healthy pretty the through we've seen pretty been have Well, possible

Christopher Testa

were PIK made substantially quarter? and quarter-over-quarter on Ice touching something what increase jumped and constant the PIK pretty the was the in portion interest, other in jump lien asking of the kind then PIK income Casey were second Okay, in what about and up the the preferred just tender both rates but, total Easy the investments that during on quarter, during

Henri Steenkamp

full for well as period portion obviously both had accrued the was which last the primarily the lien because was of a quarter. think in I you it period Easy the Ice preferred full being second as

So, I Ice. think it Easy was primarily

because going being not more. repaid see going reduction Vector a forward and of any and Identity picking now to You're slight

Mike Grisius

Not Vector but Targus.

Henri Steenkamp

Mike to not me, Targus correcting sorry, thanks Mike. am is I Vector.

Christopher Testa

and are lower Identity the came income? Targus so So PIK should ones that off, that

Henri Steenkamp

Easy had Yeah, period. yeah forward. full going Then they so those partially on we the have them two slightly would lead for Ice and that PIK realizations were you continuing

Christopher Testa

Got okay, that's it, helpful.

Chris Oberbeck

have pay between the on our Ice a then Easy about PIK. our but on at the PIK an we senior I we and rate think PIK we in I mean and on have and there's less Chris would it's And had probably nuance interplay talked this rate senior. just calls, further Easy prior credit Ice the one we could higher

a of cost kind are that be But our as kind we helping cost the from but but those in our having a senior we've low rock capital it's -- said how of on lower situation by -- standpoint get we of our overall variable softening solid Mike on So earnings pick instrument. are of supporting paid. it's earlier been sort that

Christopher Testa

second the for first further is and the stability lien definitely. Right, on indicative increases this that your yields just LIBOR? of makes And sense quarter in

Chris Oberbeck

has we that. competition about, continuing spread to think increase been in see we've and that I the thankfully compression and yes Yes, the all talking LIBOR offset are

Christopher Testa

kind I'm is you know debt, some curious out And having your and with first second in for it just provide getting one sub I given detail comfort on the of more What that SBIC, in seems two this have leverage XX% your composition guys capacity sense a level secured your at put of what's increased -- -- into Could you to it like within lien would that? lien, vehicle. it is the SBIC that break make just more vehicle. more roughly how senior assets you the to

Henri Steenkamp

good a It's question.

that be think SBIC leverage good super put in there the aggressive, we risk a is credit of let's to just adjusted to it's to almost make place that the and entirely though doing the think and most carefully money that second -- or sure sheet. which way this accretive of attractive it healthier is we But the we think are mix SBIC SBICs whether it a there. candidly separate shareholders. the an from think balance on SBICs economics and a of offering and going evaluate most if on that so we than that reside to business the lien look think for very we it there. we want lien each we at senior based right though investment is structure look good we're return The shareholders it's if opportunity so are qualifies our the presents out the out say and we that at is in SBICs even instead We asset where think is to really be this our capital about first what the that two I to capital one don't are

Christopher Testa

regulatory on it, or commentary should on very Obviously leverage leverage. expect down Got and the ramping about be one the maybe has very, we that's of very, as the you curious very, And we leverage your onward? kind come debt should measured the been we in okay order just portfolio kind just last should being leverage helpful. and of usage flat, the target pipeline course just little your would given have me how from strong ATM think the to bolster roughly to expect pretty ATM issuance ROE a of equity guys and

Chris Oberbeck

think I good a that's Well question.

what one a what portfolio marketplace the is in past of friendly know, can structure, our are ATM the which we you is all market able to issue a our and equity capital things receptivity as think of from outlook because what we -- see maintain to good issuance characteristics. what but the were fair said I listening I intention consider. manner regards just how you consider the trading very amount to mean our for is our with to growth, is we

point that all our situation evaluate each factor biggest looking at and in view the our we growth. and really at it's at factor a So structure probably look time on dynamic capital together in portfolio we that how is we

Christopher Testa

taking me. That's my for questions Okay, from Thanks guys. all that’s fair.


from our begin. of you next comes may from Merrill, line and the you Thank question James William

William James

you XX% interest the then XX% -- Chris, elimination starting for that Hi and of deduction new the X% with tax exalts moves and up bill to and outlines it of EBITDA are EBIT. expense

and question guys how existing then to your portfolio affect these opportunities my that does for suffer shortfalls? does any you total are for create going is in flow So free that cash debt that companies

Chris Oberbeck

and substantially interesting the other going it out side rate. That very the a tax Well play case deductibility entity question that's a a kind got lower play Corp is by it's on if case C it's to on basis. of a

economics leverage the a that those there a that view -- that all is absolute turns. by so there leverage and clear from absolute sort of is the fully analysis. trying out discourage writers they're It's to few actual case are case how So should bill high shake tax be those discouraged extra of

we we stock flexibility we I instruments practical we up as credit to more business might of ways can wind with think the our a preferred in many matter designing and have our in different little work come leverage addition -- in the constructively a debt to us their we I tax manage an of our instrument up companies structures. because really will something capital absolute mean with think optimization can deductibility. with company's it's favor to portfolio and

I think I there's that was this in think dynamics some of pernicious potentially question. part your where

the I into might highly their decline think just to EBITDA moment having be declines runs actually that are deductibility there they're and interest as that problems a other cash is company going troubles of flow at sudden of levered same problems. and

company's to accelerant be well may there an as a distress bill. So of a this result

cash they're at also retail large pretty these with companies. a your the be -- adverse might some is and might, one than have not cash flow time rising looking come and flow, some generalized could if in at precisely certain an to for set up deductibility -- But in capital obviously And having if sectors this consequences the But out are portfolio and in some dynamics that's wrong Now would pretty example world creates good of a solutions. with issues. give accretive that that that you dynamics in for tax, we're others. rise challenges the downturn more the economy generally opportunity they're some

So as ahead. Go you...

William James

go sorry, ahead. am I

Chris Oberbeck

is be to it's risen, it's and that. all be by evaluating definitely that change change dynamic will said to so of case a case just I opportunity and we change but And there. out going it's highly has -- be and going

William James

adjusting do of look total free So where maybe going and see issuance to portfolio and of cash issues these be portfolio? stock your through percentage capital but your moving guys you there's the what debt the as preferred you flow you portfolio exposure in to structures

Chris Oberbeck

don't time. inside of portfolio at think moment in see I don't we time at this our issues this -- we any major see

as Now in tax mean I they're for bill January season, of are required companies. calendar and lot so budget passed a we year. is year The to companies budgets it the are give lender and just projections right.

our and everything the by by marketplace. really seen growth So because portfolio and it's that be to all so everybody something us watched coming. we companies our haven't of that's out this portfolio going by brand And is new in is

don't think quarter the -- This company on basis by we'll are I lot benefit the precisely a what's company -- of have because I of towards we think a to this visibility in probably dynamics have the going from about know people what and into driven tax of we tax what end quarter more benefit our equations. the events companies. bill by being But bill budgets the again and anticipate credit have companies putting our their flow buy cash we the to portfolio

William James

existing these or industries and what EBITDAs and looks deal flow are leverage as at EBITDA Okay, as you year last portfolio, all the the you economy look of the the of flow across spectrums look deal these at is our growing just over in potential companies your investment sense that you buying depends do just and buying but to therefore know true forth this good CAPEX is back on and family there sense I be… are arbitrage return or growing? people it that out EBITDAs and upon And industry

Mike Grisius

economic we're is that -- colored see one business for that Yeah, the not of assets exceptional that our rate companies we the growing so uncommon that perspective highly the is fundamentals by us it's that and the on it business is invest selective that our necessarily that portfolio because not companies does an thing we They're growing at pace to in budgeting large overall performance broader strong of seeing trends. positive. not so same of a have good all of are sort having and by at is success. indicator necessarily but we're that model But it's the over the said that that year they're

Chris Oberbeck

I their think -- positive. it I also where is think outlook

us coming to for companies to recalibrate a sense the their of us A invest want with our because acquisitions. of to of to number We they portfolio portfolio are companies are lets lot a more coming businesses. There's invest in seeing future.

the we coming want our growth out mindset have that very is think portfolio. So much to of we see

William James

the appreciate I color. Great,


have Steenkamp. at like we looks to further time. Thank questions this it pass over it Henri no you and I like now to Mr. would

Chris Oberbeck

everyone I interest Chris appreciate to aim Well, want us to your is speaking just and you this joining thank next and here. and today. We for time quarter. Saratoga support for with


may program Ladies and today's for This participating Everyone day. great does you in the conclude disconnect. you and thank conference. have a gentlemen all