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SAR Saratoga Investment

Participants
Henri Steenkamp Chief Financial and Compliance Officer
Christian Oberbeck Chairman and Chief Executive Officer
Michael Grisius President and Chief Investment Officer
Mickey Schleien Ladenburg
Casey Alexander Compass Point
Michael Smyth B. Riley Securities
Call transcript
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Operator

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to Saratoga Investment Corporation’s Fiscal Second Quarter 2021 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 Corporation’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 second 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 differ 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

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

Christian Oberbeck

Thank everyone. you, and Henri welcome

the and companies. our across portfolio immediate and gained of the quarter world, on market experienced visibility prospects challenging and businesses volatile another improved improvement we Following in conditions our

continued point the presenting are in look in liquidity economic today’s companies our portfolio calamitous environment. to and recent this reviewing We on improvement our solid believe time at results most health We Saratoga this continue of capitalization to our well and of call. structure and to forward and weather positioned

experience conservative X. the the we approach global challenging confidence in how the economy anticipate historically business effectively displacement quarter clarity of our have future to capital on navigate solid liquidity, enable strong uncertain long no recap Slide To the structure, While last, and us will can this environment. levels in briefly will management to and with investing market and current past organization

our in by relatively First, of over revised this portfolio XX% to to after incorporating maintaining of credit foundation our related retaining to credit XX% changes multiples EBITDA from financial COVID-XX. a QX. quality market quarter investment high This our rating performance strengthen we of is level loan impact investments the continue spreads, highest with company and/or up

half basis this of of fair resulted a QX, the this a in on trailing return reduction unrealized in than of value QX recovering that equity more Importantly, quarter, XX-month generating XX.X% on significantly realizations the a total IRR and X-month impact un-levered the BDC by industry portfolio. million. exceeds gross to COVID-XX X.X% registering negative $XXX of XX.X% the of on XX.X% of average This

we offset under $XXX Despite $XXX and time to $XXX increased increase $XX.X new markets, quarter, Second, repayments. originated of as same million this our the million by assets management last and quarter a turmoil in million of X% as million of the healthy $XX.X million year. uncertainty last unprecedented the investments of a from

new today’s to market. portfolio improved in Importantly, differentiator performance enabled and structure investments have important liquidity capital an new company included portfolio originations business, us our open our two recently for remain

and that ourselves. Third, paramount, COVID-XX portfolio both businesses, the preservation the as presents small and NAV to balance and sheet we ahead challenges for particularly companies strength, economy pandemic look to are our liquidity the numerous

includes our existing which of debt we in bond $XX.X debt. an can finance support QX. increased in that our and at opportunities, cost $XXX SBIC substantially quarter million strong, capital baby addition with free available this This current X the our all-in equity, $XXX mark-to-market of to $XXX – structure to of end long-term was covenant This was million supporting portfolio less million million raised million cash new used new of of facilities, Our $XXX public non-SBIC liquidity companies to be X%. BDC with available SBIC and than

period million We million XXXX our credit committed extended with We date. commitments XXXX lending funding quarter to un-drawn also Madison discretionary commitments. end of the facility change had to and draw September maturity $XX no of as $XX of

requirement. Our quarter substantially our exceeds at XXX% leverage XXX% end regulatory

portfolio overall of our quarterly our has Board XX, Finally, decided August Directors raise to share by reflecting liquidity for and and recent the dividend $X.XX on improved baby resiliency, ended bond quarter $X.XX XXXX. per the increase the to

the continue basis to performance. and as visibility on we on better gain quarterly our at economy dividends of fundamental business amount reassess will We least a the

calls, previous spillover spillover have liquidity no flexibility RIC further in managed into our position. in consequent had that such spillover compliance conservatively substantial obligations year obligations, discussed our going Payment As fiscal we income ordinary historically and this of dividend preserves this we increased therefore liquidity.

performance solid key as quarters saw XX, ended our and XX, the considering indicators the economic continued quarter current to with environment. This and August performance May XXXX compared XXXX

$X.X down million quarter, quarter. last X.X% versus last versus X% is down million million $X.X NII adjusted Our $X.X this year and

share XX NII detail share quarter. that $X.XX is provide BDC of XX.X% is year and are highest later. $XX.XX, share X% X% the down one Henri over months we from year-over-year This the in on the return actually industry up and grown industry NAV BDCs XX last growth that the three $XX.XX and from per highest per from last down last only this BDC $X.XX have will adjusted year per in $XX.XX more last quarter. NAV is up Our from is $X.XX currently on our last quarter, and the Latest equity months.

further of the the remain to – long-term and advancing committed base. past, we in future to As asset quality overall size our

under and increase high. quarter. see since took we BDC our quality $XXX has can our the to Slide million in X% QX, you As AUM of risen management, credits last steadily on assets over X, the since remains increased

to last $XXX million, increased to cost an composition as increase quarter. review Our call from portfolio. performance financial and results Henri as X% a With the increase from to our now of last like I X% would and basis the back to that, our is year which well over turn

Henri Steenkamp

year. NII. Thank QX SAB still impact QX. from The recognized accrual increased adjusted year new you, down cost benefit from also last incentive the decrease the quarter $X.X year million and per partially LIBOR was Once The quarter. from from of from AUM up expense key Adjusted of offset per share of the million last last to highlights Chris. to X.X% reflects accretive year as When adjusted last share the with the million net last capital primarily the will $X.XX $X.XX, $X.X to rates from interest non-recurrence deployed, fee be cash XXXX. by related NII fee baby performance metrics adjusting per down last quarter all the in undeployed. for $X.XX and NII from second resulting for compared last a due from lower August higher ended $X.XX our X% and lower down and calculation, repayment of X Slide $X.X last incentive investments XX, income at baby primarily down X.X% fully the of impact the SAK $XX.X to expense following was was gains bonds share private year that level year’s tax bonds interest million NII decrease in with of $X.XX and the the

million this the our is outstanding the above, XXX year share NII Weighted basis and points capital. the XXXX shares year. points of LIBOR In This over higher this shares shares X.X%. increased quarter, XX NAV, reduced last NII period growing the shares reflecting from the to addition common yield for from primarily XX, adjusted was due to X.X% our yield down QX ended in number down currently May XXXX last the from by outstanding and was impact and XX.X X August of from the months to last undeployed effect year decrease X.X basis respectively. XX, per last Adjusted XX% XX.X% year million average of

on fair the operations of $XX.X investments in more unrealized this year $XX.X or CX by recovering were investments value net million from night, net began million no multiples subsidiaries. revised total COVID-XX million The unrealized comprised each, for which a increase six investments experienced on with remains an the million as $X.XX a appreciation weighted $X $X.XX the offset and reflects deferred as spreads, both the on of are $XX.X us, depreciation of than performance and/or reductions follows. unrealized $X net we million about half depreciation with that Form improved million COVID-XX equity of $X.X The last changes X.X% market to total Education with of the Return was or on share. appreciation from million. realized than per performance, net quarter, in of benefit a assets in that Thinking and There our QX. in is in resulting total unrealized the Services, of XX-Q portfolio in million X-month reductions of impact in of portfolio MD&A related more to cumulative important only company value the net – filed unrealized but sorry, EBITDA and largest $X.X tax million now second Group increase $XX.X impact reduction in resulted $X.X with are the since Knowland $XX.X gain in impact two on The gains. million and blocker share, in QX. per appreciation $X.XX our more outlined and than both indicator primarily gain For net includes realized investments year-to-date resulting and average investments gains million

equity Our represents the top return above which as the average well incentive base and to us last months, excluding the of compared at year’s quarters. remained of for for this the assets average total million Total last expenses expenses, for financing period of all debt three last on and XX at negative This management was unchanged industry quarter both X.X%. interest $X.X and places QX. fees, and X.X% industry and XX.X%

also have highlighting and has XX, the statement increase has presentation added our particular balance run-rate to KPI upward Slide took how the XX shows slides in again through income BDC the sheet XX Of quadrupled the for in our in the note, we Slides from We past that the at have almost and QX. metrics margin of interest quarters of end starting over XX the net management since trends continued Saratoga maintained. and appendix

last $XXX.X $XX.X year. end, quarter per NAV and Moving NAV share increase million of of as increase to of ago. quarter from XX quarter of $XX.X X, $XX.XX last quarter $XX.XX a was from was quarter from this last months from million as up million Slide and end, same on a $XX.XX the up as as

quarter, benefit net million This million our by and net income declared. blocker unrealized deferred appreciation earned $X.X dividends of net on and investment $X.X million tax subsidiaries, $X.X million in appreciation were of unrealized offset of $XX.X

the shares were addition, XX,XXX repurchase were in In of DRIP purchased dividend the all pursuant for $X.X distributions and to plan, made company’s share million this stock million plan quarter. through $X.X

just BDCs Our since steadily have alone. only increased have is value year share. it share, XXXX the past per been importantly, NAV per year the we past very others all. like asset NAV increase two have And at No has net in demonstrated grown other by in and growth has accretive as the and grown up this XX%

realized benefit from in $X.XX and a A the Slide per reconciliation QX. to consistent in other per gains. from in of NII NII increase per non-CLO interest share decreased quarterly of share basis. changes you top, was in continue share the net $X.XX income. Starting to NAV offset X, $X.XX major by a on last income and per sequential quarter our at a partially We decrease $X.XX simple share unrealized see history will On

$X.XX and Moving outlines to dividend unrealized XXXX, the slide, increase XX, totaled August investments, the share half facility. paid the $X.XX available undrawn from share net $X.XX the NAV spread as appreciation our this Madison $X.XX the of Slide the and repurchase accretion cash, net undrawn in were to plan us quarter, NII, available between QX. offset This million. lower for DRIP by on dry debentures X of powder of and the SBA the was per reconciles of $XXX.X $X.XX which

cost very financing, and deployed liquidity us cash quarter our by it of XX% end available for that’s allows accretive level external when million assets the it of also additional all-in million to accretive. fully This X%, than of and an debentures, without an $XXX of less $XX grow SBA to need with with NII being

BDC During maturity, raise trading a $XX.X non-core raising baby available bond the the first the a BDC quarter, we SAK, also X-year increased X-year becoming liquidity baby under ticker, in bond our since began. by X.XX%, public million COVID-XX to

with $X private is a nature the position, issued that fact debt into We baby of bond. also and actually our X million our the taking We overall years all our all nature, balance account remain liquidity especially conservative pleased in long-term plus. sheet of

to move Slide and changed of and X have portfolio million the of at fair review past. yields or at slightly yield companies Now, cost to $XXX Slides our CLO X XX in investment XX I value the would to million composition portfolio. compared We and on shows average have composition and as weighted current AUM invested $XXX now fund. like our that through one

is first-lien of to investments, can core XX% how see BDC remains out below our increased CLO, the last of as yield you XX% in assets, our X, as assets Slide which has well our percentage and yield total first-lien yet Our excluding dropped our has total On positions. XX% healthy.

absorbed our This QX. yields based quarter, remain existing Core quarter X.X%. additional the on decrease at that yield asset at was the demonstrates X.X%, X.X% to effectively compared from to LIBOR costs remained decreased XX.X% floors. but This this as overall unchanged unchanged by

reminder, is to LIBOR lowest The CLO not see increased do and our CLO as points current. floor, income performing conditions we is As a so further expect to in XX.X% market XX.X% much. from impact decreases CLO XXX improved. currently yield interest basis

second of made for in exit investments portfolio resulting a net we two fiscal quarter. new and one had $XX.X and the the Slide follow-ons $X.X quarter, amortizations, investments of X XX, in during to million $XX.X Turning million companies million increase in in plus

of investments Our diversified in and industry. by remain as highly type as geography well terms

and listing might reflect breadth note, represents. updated our you that of our investments industry have schedule the As diversity to we portfolio and industry

services, Our is included on consist X.X% and education structured which investments addition focus of in software, our portfolio, total XX of healthcare spread a education part securities. are investment services, in large an which and Of healthcare strategy. equity remain IT distinct over investment our CLO industries important overall with to software as our interest, the finance investment

highlights redemption X fully that other due grow our past to helped long-term carried were or QX, net over years, has carry-forwards we a million of the portfolio NAV the unused the the equity interest Saratoga gains credit About BDC. from and of these sale capital took For over ROE. to investments. realized our of of when loss in of is $XX.X including management our had from This combined early consistent fiscal sale NAV were reflected accretive of quality two-thirds performance healthy gains

the Michael now for market. year investment return equity That X-year to portfolio XX%, on our of over not X%. President financial Grisius, our my concludes overview below average Investment fact, now X I is and review. will In officer almost an Chief the with and call turn

Michael Grisius

to QX. starting to impact of understand spoke has inquiries were pandemic. height cautiously we couple Thank processes spoke well see and renewed as Most loosened of competition. and throughout market performance describe The waited of strategy When our to of pandemic. – to current it when portfolio July, COVID-XX, at you, the but the pickup are were the Henri. buyers still impact comment the while the up sellers continue by signs investment as better be minutes last I of continued light we see we affected loan in halt current a on Market coming to of nearly COVID-XX. on starting M&A will activity as we state the to deal hold, of then in take renewed after conditions and the market a

the the platforms As seen in initiatives with we pursuing new often are current deals existing throughout more have are market less companies are portfolio liquidity. the crisis, seeking that getting growth that with done either or and frequently

new more market. to are beginning we Now that opportunities said, come to see platform

deals For market on usual. healthy equity have albeit bar In also underwriting to levels. to and disciplined pricing uncertain much leverage economic Lenders tightening, is higher and are our quality these not times, deals, our pre-COVID quite widening than staying we covenants requiring capitalization. are in seeing

deploy highly However, support those we capital and environment. strength by risk deploying compelling that be in We durability that capital. are adjusted actively demonstrated achieved midst seeking returns difficult select opportunities believe have in the this to can of businesses of

quarter We have platform one including onset invested since of in end. investments X new pandemic, since the the

with portfolio We continue engaged to companies. actively our be very

our long-term that COVID-XX avail the or PPP loan have were on Paycheck companies to of them Program themselves relief. taken generally to and their help near found the have of able Protection both We businesses. mitigate right effect portfolio to Many steps

All of are challenges Roscoe. and Mac, our have payment according for Investments in some time portfolio terms, remain experienced for paying now non-accrual. our their Roscoe Alarm and except loans My to Taco on

valuations reflected stress QX primarily will reflects of half we recovered performance our COVID-XX the us to Our of that as of values in believe overall quarter. and in remain strong reduction expect than first-lien far strong been through and our this total impact that of economic the portfolio situations. the has and XX% value thus the performed attributes a X.X% navigate related We reduction more by that enterprise in durability have portfolio, certain in supported we portfolio generally help this of environment debt historically this is industries confident our of portfolio. well we in

We have no direct energy exposure.

of demonstrated a revenue retention. comprised portfolio high degree our historically revenue of and is the produce of that addition, strong recurring majority businesses In have

in limited and not uncertainties negative being potentially still and therefore future our COVID-XX performance overall could in conditions realized However, future. market declines of effects economy, are on depreciation credit multiples, operating unrealized to on recognized in increases lead spreads of underlying in the to plenty company-specific market impacts the potential but portfolio adverse market there and related including, and the

anticipate and We market the business how especially us currently believe we well-constructed us will capital by will in with no that economy the to face. and serve challenges coronavirus. While continue presented the navigate global last, clarity continue best, can the structure in to help has the liquidity displacement that to will our to our and we long market believe sticking strategy

the portfolio to been in quality at as a Our see approach can the as of has with XX, the net has being underwriting. of performance focus at gains you And BDC on approach space our respect to realized of on percentage Slide always this our cost. resulted top portfolio

at of list of are positive We a number the years. a top over the past had XX only that BDCs X

Now, into and objective business We its to underlying in best at its Saratoga. always deeply We and capital long and the management with have term producing businesses assess risk accretive adjusted endeavor shareholders We directly to soft invested order a culture business and working strong understand over the term. ownership strengths thoroughly with long as possible as for peer underwriting of returns each the remains durable the characteristics. to model. accurately approach the paramount of company investment the strength our

the to Total remained can Our portfolio last leverage unchanged debt see last of for capitalization. COVID end, quality XX, XX% that reflecting quarter, company of Slide X.XXx strengthened on shows up multiples looking quarter from portfolio at decreasing rating impact as credit at you was internal QX. and calendar leverage our credit overall quarter. our reflects from industry QX rating And our highest XX% of portfolio from

leverage, just where sustainably are last the value focus than remains attractive that investing in our will models the the businesses we rather considering enterprise and on dollar exceed highlight, confident frequently profiles, risk business return investment. credits strong we with exceptionally of As

the slide this new dynamics. generate market despite over ability illustrates to our addition, difficult long-term, In consistent investments

XX grow despite this long-term. AUM portfolio as number activity, the since and quarters, can There of we X added the in And steadily companies in in over our portfolio are well the also as calendar factors that company. three During new end deal environment that we a new continue give the decline us confidence follow-on we first precipitous investments. to invested of measured current September, made another

several reach with formed our is newly grow marketplace to the into continue it investments made as we by recently the we have relationships. First, evidenced

deep, established of Second, firms their relationships numerous we preferred us look active have developed as financing. and term source long with to that

more pace the expect the wane we impact markets is COVID to payoff of recover Third, and fully known. of financing until

that Moving to our focus on experience significant for to become impacted strategic skillset, been sources has new on The our new relationships to relationships COVID-XX. by led business and deals. number that opportunities generally team’s is Slide and XX, development new of continue have mature business

our Although formed company of deal past four more we see pleasing seven one as sheet that what newly our especially investments XX over development And issued our reflecting the active is term new business solid from is to are efforts. pipeline, beginning are third a but portfolio months. of we progress relationships, expand

of total the Slide you mentioned right, management our portfolio wide IRR QX. than on took markdowns reflected in Education The which on form our Investments, As of Since long solid. our view quality XXQ Group, depreciations BDC human CX We back depreciation what our unrealized do unrealized can on more in-person investments across largest of of can credit is all believe performance. over SBIC on companies. the as fundamental unlevered million are and are And Henri term Saratoga on remains you earlier variety interaction. more dependent see and chart the gross a bounced QX and not the the have is half weighted in XX, $XXX overall remaining three combined the remains in ArbiterSports see of our changes Knowland XX.X%.

single The has realized the $XXX XX.X%. in investment IRR gross on an of made investments had on Our returns. exceptional yielded realizations. Saratoga is IRR The approach million by team approximately repayment QX our realized of Investment XX.X% Management unleveraged

$XXX.X quarter to invested you our first funded end. can of million SBIC as Now with is fully see moving Slide XX on license

team, $XXX and $X.X debentures the equity, against there already QX, looking well equity. strength license portfolio million of that be and at Our debentures million and resilient of and we SBA procedures. world has remains underwriting COVID-XX million and value. overall our the And $XX portfolio, the focus. Credit significantly due intensely changed equity against second platform our cash been and really demonstrating year, has focused remain on quality of SBIC available this the preserving of have back funded this diligence primary still quarter our while asset we remain $XX.X And team itself Saratoga. future And which proven to are This way currently confident in of of in been my deployed, over concludes impact has back CEO, of fore the would market. our turn to call to constructed came to our review the the the the I for to like the And million Chris.

Christian Oberbeck

Mike. you, Thank

performance company a As ended and of quarter factors. Saratoga Investment’s outlined considering bond $X.XX this recent baby least quarterly have of dividend following Directors, economic its both and for current per The on decided a from basis, increase This August $X.XX the the XXXX. continue at last Board share to reflects to raise XX, of Board a quarter. on XX, portfolio, declare the Directors will reassess Slide

Moving XX with COVID-XX, constraints smaller million $XXX in severe which particularly returns volatility, BDCs with BDCs market months and below caused by has the liquidity to was for impacted our average total total varies markets, LTM at the closer Slightly NAV dividends to months negative capital return both negative of includes and has XX%, generated total returns appreciation BDC Slide below for XX negative index last XX%. dislocations impacting which XX%. return XX, many

XX. longer next outlined term in our slide is Our performance

and the XX horizons. XX respectively, of X-year all both Our time BDCs in places X returns top for and

can Over outperformance context interest placed the On metrics on of negative our above equity and exceeded the per latest categories years, performance return months the to actually average portfolio and latest share certain our index the key XX% return industry key across XX the in return yield negative diverse the return on months you exceeded broader specific XX% past greatly including our Slide NAV the XX% and growth. industry X% past the in but XX index we X remain of see the return. X over XX, further years,

of are NAV accretively growing have which Not per to of it continue our have receiving. one equity only done We whole have growing XX per we reflects the share past one X are NAV also on months are return number the share, BDCs focus least outperformance, X NAV that by grown the and on the done year. or only shareholders BDCs few for to we both who industry and value

Moving size call help Slide drive in believe are institutions. the initiatives will on capital this highly all attracted this adding slide characteristics XX Investment quality We on to to competitive that differentiated community. of make that is our to Saratoga discussed more of investor our including designed BDC and outlined markets a the our base,

historic profile. a NAV and on bond accompanied and than not high of NII Our transfers per which receipt earnings our NAV of portfolio compensation-related long-term cost one sold return for managers which access BBB characteristics management, historic private by per a of second XX%, maintaining AUM purposes, risk SBIC by include low investment ownership issuances. us putting percentage differentiating the license the at support providing sub at with to X% of the accretive quality solid equity in growing strong highest liquidity, issuance, levels other has and our wise industry among new baby And expansion liquidity both yield result attractive decreased the make for public share top and grade investments, and management as a cost share, shares by in industry they of rating and of recent equity

environment. of our to shareholders and like I shareholders balance would well team the contains quality serve will credit term. our underwriting And historically experienced questions. ongoing call future benefit for in liquidity Saratoga oil the to us again will our structure I cyclical minimal our in to conventionally in all near gas and that challenges strategy strong standards current support. capital historically high substantial the including and and and industry. thank addition, industries, sheet In tested the their closing, exposure In confident portfolio long management We the battling investment through open for want remain now

Operator

first comes Your Schleien of from Mickey question Instructions] from the [Operator Ladenburg. line

now open. line Your is

Mickey Schleien

about Yes, for raising good I if mentioned like CLO CLO, reinvestment interest an additional this capital capital questions would with or ending everyone. period new new just for few you a be have CLO? of the expansion I may. believe in existing to start I clarify, morning, to soon. for And It’s would the CLOs. I wanted is

Christian Oberbeck

Yes, looks actively like Christian. on the as period place, a Mickey, spreads it’s early we in developments this raise in up for high would which our market Hello. when in evolving our quality Thank pretty are last It firming who of the marketplace. to banker market take And and have you in that XXXX. refinancing helped the one. very exactly really ending investment now question. us is is right subject we liabilities, are the are retained And direction rapidly. that coming is for investment

certainly of additional last to want be it on In are they terms time CLO requirement equity or lower require markets it today, of upsize a leverage upsize. also a if we the requirements, not, may for depending have there than been levels, an refinance, capital for as little the it because additional on out. may also And – certainly may a

a refinance some be may capital there portfolio. existing on of So required our

Mickey Schleien

in be to years follow-up, could the distributions terms couple Chris, last CLO If equal, the or similar of would market? of less The current the of all you been to then it’s that be profitable? equity where else given terms think CLO do the it I in would profitability

Christian Oberbeck

really else on the put a this might of and the that’s answer, as hand, other that spreads on we same, be if in the being market But the on to equity, at it the obviously, point a time, the liabilities, question guess as and difficult return pricing more depends of equity need well valuation lower. assets. to the all I on

So, had conversation I six the dramatically. we would last a if mean, the has would the this been have less, substantially month in four improved to definitely ago, market answer weeks,

is where not when right able will market So, refinance. just are to effectively we now. the precisely something be we This on comment that

Mickey Schleien

and made in that to Henri distribution in that understand. the And equal CLO distribution was Does think, last is I in question, I CLO’s that imply my compliance. mentioned July? the the still September

Christian Oberbeck

have on is all So two we early October, exceeded date and that date test that requirements. test the have past is things we now our and one

is on or a calculated. would our distribution. estimates amount precise distribution this at it of being time are October, was July. later for equity – at we it’s generally in So, But, in be that than The level it is track that higher

Mickey Schleien

I you clearly remarks, and capital say have Mike of been Most in think underwriting in that everyone with August expanded have to and multiples still would bit results. I and work put a spreads that. little looking behaving difficult a in prepared multiples Chris, recently, Okay. How what tightened saw the spreads appreciate have little we to that. September, and some your the environment? is in market bit, a and mentioned

Christian Oberbeck

that? address like would And, Mike, you to

Michael Grisius

capital Absolutely. has Mickey. and in a the that we certainly Good observation And is marketplace. that thing one changed. still the morning, It’s in good COVID, one are of not midst plenty facing that of there is

that that companies for we that, for seeking is there observed have capital. is certainly are to we are what businesses well, so are the competition performing support, And

materialize. so that starting is And to

if come basis you greater, bit. had a deal I the XXX asked was in to spreads a how little even in much on XX bit deal this few would would but I that’s ago, months in specific, me widened, somewhere market points, it depending say maybe the probably think, a specific is

in such One SBIC than got is nice has into little. it’s thing equal, recent all-time take pricing our a and that else of benefit certainly debt XX has points XX forth the mentioned X%. basis our an debt at bit Henri debentures to probably is of is, that certainly, cases priced, SBIC than well, very come is all but debt I as remarks from, in fees prepared that, think most some cost quite wider financing that and that that, financing a even that low, come in account the so think little bit we pre-COVID, financing, roughly all So I more a the in cost

in So that very accretive still do shareholders. is very work feel put and to in our to we can capital a that good it we opportunities confident way

Mickey Schleien

exit? out right a the helpful. head. and because, terms is were Thanks deals which refinanced of my that, now not, the looking you obviously, caused FMG FMG, if of for that nail for follow-up software Mike. asked, is of you And software the sort And And question, what or, is hit company? on in I That’s everyone

Michael Grisius

we years are market we ago. that were that delighted into many entrance Yes, early

just company portfolio got be pre-COVID. expectation have time sold, we well. they where it and and on we it that uncertainty it it the selling, was or, durability of I strength to from of think the that not was a continue it got exercise, to as of to the COVID, to So then a the just to was face lot space really it’s was the and the in the in bit, sale was perform and so strong And in have best actually relationships that. some reengaged little sold But going for that height be was be will that continued that market of our on company shareholders put because there sold, a was so well, evident our with the shelf benefited

performing of usually We are pace risk than still natural We distinguishing the be match we we transaction. think from for than themselves expect you very a still control we are less equal, those subject can else what and to that change all well, watching But companies markets. much it’s normal are And just think pace to repayments reasons. don’t will prepayment usually face. repayment of in is repayments, get, you less it for the

Mickey Schleien

or capital it And Mike, that you mistaken your correct to Understand. leverage due partially sounded think sponsors. injected by mentioned being – Is portfolio like am equity I comment? declined that I

Michael Grisius

reflective really of Not Yes. just much improvement from in so EBITDA. it’s that,

equation the that that of it’s So profile. part the leverage improved

Mickey Schleien

too, second-lien And and I a a because right, FMG the was there guess exit, presumably higher multiple. at

Michael Grisius

Right.

Mickey Schleien

just EBITDA And can give in average terms your sense Okay. the us investors where understand the in portfolio, a stands now? risk lastly, borrower you of helping of

Michael Grisius

divulge, are companies. private to of all don’t sense trying we get usually these a am I

at don’t that that an we divulge or… So, for absolute level. amount But are dollar asking you

Mickey Schleien

closer no, at a average? general? No, we are portfolio, to we Is the where $X weighted average across $XX it million in an million

Michael Grisius

I don’t readily number available. have that

I are you have value seek companies the about businesses strong our very every we delivering middle Mickey the done say in that for out is of distinguished they that do what at have got would one their well is niche. to in company their And lower smaller of investing excellent of good customers. even And very, proposition market, are they the opportunities we market. characteristics, is deploy are to They really though they we larger portfolio that end are teams, to capital what businesses we I in that we think the end that think respect. are just of that management I operate prospects in thing the and have leaders got have at growth,

durability have have end they those customer strong really markets are their So business operating the sets, revenues of good from diverse they They repeat have customers. got that and tailwinds. in,

we and market superior trick we of those what features think the but have that returns, that that well better can lower oh, actually to we make middle covenants, all have And of upper the end All deals we people to the characteristics, usually of leverage. those middle get found businesses lower that, well-structured the say, have done is is ones are market. end

in are end you what in market we will upper see to think constructed competing have that risk so where adjusted of And points. everybody is the way the superior middle returns on we the portfolio our basis the

Mickey Schleien

Right.

Christian Oberbeck

I that? if to can Mickey, add just And,

Mickey Schleien

Sure.

Christian Oberbeck

have Just very companies dynamic answer software, and right? give just of companies point than of of are and there to as some – a to involved a growing a with, have service meaningful on a size different appreciate, we your metric, trying have a so, it there question sort to that. I that, the the answer us of let what one can – you to EBITDA got we and lot thought a do lot I is sounds is right? further find because going give sense like that, are Because the don’t get to we companies reinvestment are Because now. think right in think as of so, they you is

Mickey Schleien

Yes.

Christian Oberbeck

do meaningful statistic but we to to And, that. to address would we some can so do sure put us have on maybe work it make the that in some was work let And a future. out, that

Mickey Schleien

a what we apply, portfolio new this asking I very is that your investors is you And upper I in $X which middle done Chris, there. lender and am lower expected would EBITDA just were $X $XX don’t fine. have know trying company. the But am understand. build imply are meaningful question, that million deal upper times, is the That’s market, portfolio, to COVID, outperform, but have to investment. quandary out, market companies why leverage there middle average I a that if example a to That’s would your middle a for just is if had it��s that’s sole portfolio the or middle of or well. lower the risk disparity has to market, million four I market is million prior

Christian Oberbeck

Yes.

way a little think, saying, Mike, was just articulated portfolio. with Mike unique how our to is of assess as the to a and think, repeat essence, I in we we certainly think But what part risk, portfolio. at retrospectively look that, I that I is have right, earlier, bit performed

has Now, uniquely it’s and every by us. by selected been underwritten company, that’s us portfolio on our

And lot. frankly, $XX like companies underwriting so each based average dynamic, – and number to metric, an equity of a because of on that doesn’t goes into of the grow the in put them sort level the the that these quite grouping, on a EBITDA these necessarily of capture million sub credit

investments in them. We equity have

single so out easily not metric. slice And it’s so by a broken

Mickey Schleien

that this morning. No, I I environment. clarification. on very a Those good all difficult understand. in Christian, Congratulations questions quarter are appreciate very my a

Michael Grisius

Mickey Thanks

Christian Oberbeck

you. Thank

Operator

line from the question Compass comes Your Point. next Casey Alexander of from

open. now is line Your

Casey Alexander

morning. Hi. Good

Christian Oberbeck

Casey. morning, Good

Casey Alexander

One thing Good morning. –

of as you in dividend, that And reinstated during shares that. the relation to discount deployment, that similar repurchasing have the the least last ago, and the given current you the stock how of today, dividend shares? price the in Even and continuing change the is expression we with to two to stock which were in now, shareholders of you portion the capital appreciate current at have program you capital read do are during to exercise And, think repurchase your quarter. shares it to guys during you should repurchase should think repurchase I are harvest some of chose a truly questions your some capital you quarter, share strategically, deferred I fact secondly, couple the some that confidence the about quarters quarter? using it? this you some the to

Henri Steenkamp

that goes profound that’s look whatever And you basis, on times, newspaper Well, want COVID, think several at the a there’s you at, the at not good not in a outlook, a question. or week that’s sorts headlines sort all or of by, just change something very to months, we etcetera. the analyze, related, Casey things, clearly, very, in about, of economic for way a discuss, dramatic last look other, one all

going those what happened, were they these by been the going more did I have lot a risks the from how we definitely revenue see so projections with be? our government the muted those be, come and on from based portfolio, became the it bit and early sort we of the uncertainties and by, Fed do? do we hardest to think, would a volatile looking how stimulus, time PPP, to some So of or system to And to the seasonality, of a is what, I stimulus time, to predict think know went performance, and have future government and is fantastic and like, are of one of came a the that would had had had summer or, much think interventions, government in of enormous what of, important had very somehow continue etcetera. the, to government, long for I of as in amount very portfolio as tremendous amount are our as more April between etcetera. forward things portfolios clear, substantially to period the the time, And questions perform, you of fiscal going job for and May, of the kind terms organic can fall, that what in in some our and a the

we of our amount tremendous all portfolios considered. very basically and And well, so through performed this environment, things visibility, gained

has view based our so see, think on it is on improved. We right what thought relative risk we and of much to now, portfolio as improved. And what profile, was, risk our, know, we

kind if our some differentiated lot of we that capital, come of private to might of very where, addition, of opportunistic we a are, baby and times a we lot to and balance did have are some we In a we taken have interesting new very June, flow be to our preparing source liquidity. from, a of diversified smaller in more very create or that And, so for bond, private, could deal times, either relative bond sheet steps open competitors. substantial a open we business following our way, raised difficult for baby as avenues that

by, So all terms share dividend back is we relative to dividend very place, of then, the our us, in the repurchase. are only not of rate but in specifics putting recognized that raising has the substantially evolved, and

of kind to large, well our it share a discount. purchases be countering, could I portfolio intention repurchase think stock is your buying The that and we very was best hand, dilution sales. some of substantial ahead, of on that not a just is look amount repurchase, is about that if the through around if set the point one at you of repurchase more particular investments, at taken, dividend it our our more of any

did time. our we And kind on a bargain drip quarter, decision what what we dilution amount, countering that what don’t is more have forward this going recognize do terms this depending it we that We were quite the of we the recognize also last this a but But quarter, at set of might moment. is stock as think another trading outlook much than we so, that repurchase and that potential be, our forward. with in was go portfolio to that our growth of those and might going to un-deployed we look our things leveraged equation also, debt, our is in as a how growth whether value much we capability proper level, dependent have terms balance is consideration in how this outlook float the and equity environment on at all into and to of substantial equity

Casey Alexander

sense? I make the Chris. least program for of thank at certainly a think you of questions that be question. continue couple Mike. that would that, level you you, A the would Alright, I communicate this dividend dilution if would shareholders lot especially for got a pleased, from reinvestment I discount at And that to offset

have gave Roscoe it. some but you it that what and CEO that First the little you particular the helpful? components, color services of Medical breaking I we an two education for was also on company all, new also originations that that their and the lot, information up give I share? in level, could what Roscoe you for them the of you into growing has and quarter. business most be in in you two done So And that just quarter, give too you opportunity know current so and a they then an improved at would as industries have are originations Did in comfort Medical, quarter, in a once into the blanketed that attractive? because a us granular substantially that this create can can that’s at things this but people’s LINQ specifically I EMS acquisition constituent thank follow-on to bit First it all, for add-on new you will did made that, heard if go

Michael Grisius

Okay.

see got all if me of I Let those. have

are industry businesses one product really is the in commercial that two in that estate both companies the don’t but that real new way so product the portfolio is by in business serving affected we is greatly estate real model, are think fundamental industry, a SaaS volumes So a is much delivering commercial their the constructed.

is a so field think electrical business and of that nature. HVAC is that things service contractors in management of other business, the The and

with in related as good well. all very well SaaS ownership capitalized mentioned that businesses two terrific So, that characteristics have look we and that businesses for the fundamentals we before and have think businesses of I

of are EMS going do In business is this, business highlight, one we specific the if to typically companies, a terms paid don’t LINQ, that you has but it been off.

And post well, It holding end. we business. so exited was transaction up but recapitalized quarter out we that get did that of have

our performance the see that portfolio, some be noting that and well by would we their in downturn category, we Roscoe performance one has fall to companies actually up the would of into so the many of correct are are that You are and during has held in pleased markedly improved companies, encouraged that.

lot that to of We months, but will reasons are will over about company’s for improve. that next X wait value see how as out grow us to continues their be performance there how shakes optimistic to coming X, a the

Casey Alexander

it That’s Mickey a mine. lot for great. of Okay, got me.

taking somebody into some questions So for back I Thank and will the you stop there, ask queue morning. let go else questions. my this

Christian Oberbeck

Casey. Thanks,

Michael Grisius

Thank you.

Operator

from Your Tim the next line of Securities. question B. comes from Hayes Riley

is line Your open. now

Michael Smyth

Mike Tim. actually is this Hey, for on

quick dividend. the on a one Just

about mode into to to anticipate increase bit little talk kind given the is see go given just back this uncertainty? idle exactly what So, to just the a you went $X.XX. decision, Can all macroeconomic and and increased coverage cash quarter $X.XX of or before a it you the this by you recommending you just board are do wait in something like in-place

Henri Steenkamp

Well, thank you question. for that

right is I reality So, we occur and world dramatic I been along, in have much in can are long-term we and consistent don’t them think now, declare that make pretty at in timeframes. our time changes there perception important practice is dividends. as the make we And short all such projections on where dividend particularly both in we decisions the think we our such

set weeks make there cutback based And increased that. on a business didn’t out earnings quarter have underlying at the and as and was confidence conservative based we been the we based moment in so decided don’t of we the on current be from the knew And as our substantial to on setback. in macro our we quarter the number that power you BDC now, that, increase to dividends to like view we rolled time. existing can feel the we got the our our for At into we have companies, X performance but what projection $X.XX would future that we right, are on and see to dividend environment our all any hasn’t when set any as had want from in we

but are make at in in again we earnings, future, the to and is So, dividend in we earning to of that excess projection past again it coverage any time. backwards existing the will kind don’t high of as our reported as our thinking looking of want similar our certainly dividend that our quarter circumstances, be on applied quarter. make this why was we and raised And at at will we our some that next decision those well depending

Michael Smyth

helpful. very Thank for That’s taking it. my Got you questions.

Operator

further time. this There at no questions are

you So continue. may

Christian Oberbeck

us quarter. to with for And Okay. Well, you next joining thank forward today. look you everyone we speaking

Operator

gentlemen, and does for call. participating. conference today’s you Ladies conclude that Thank

disconnect. now may You