Quarterly ROE of 13.8% Generates LTM ROE of 9.1% and Beats the BDC Industry Average of 7.3%
Zollege Investment Returned to Accrual Status; Only One Investment Remains on Non-Accrual, Representing 0.2% of Portfolio at Fair Value and 0.3% at Cost
NEW YORK, Oct. 07, 2025 (GLOBE NEWSWIRE) -- Saratoga Investment Corp. (NYSE:SAR) ("Saratoga Investment" or "the Company"), a business development company ("BDC"), today announced financial results for its fiscal second quarter 2026 ended August 31, 2025.
Summary Financial Information The Company's summarized financial information is as follows:
For the three months ended and as of
($ in thousands, except per share)
August 31, 2025
May 31, 2025
August 31, 2024
Assets Under Management (AUM)
995,295
968,318
1,040,711
Net Asset Value (NAV)
410,500
396,369
372,054
NAV per share
25.61
25.52
27.07
Total Investment Income
30,626
32,319
43,003
Net Investment Income (NII) per share
0.58
0.66
1.33
Adjusted NII per share
0.58
0.66
1.33
Earnings per share
0.84
0.91
0.97
Dividends per share (declared)
0.75
0.75
0.74
Return on Equity, last twelve months
9.1
%
9.3
%
5.8
%
– annualized quarter
13.8
%
14.1
%
14.4
%
Originations
52,222
50,086
2,584
Repayments
29,824
64,330
60,140
Christian L. Oberbeck, Chairman and Chief Executive Officer of Saratoga Investment, commented, "This quarter's highlights include continued NAV and NAV per share growth from the previous quarter and year, a strong return on equity beating the industry, net originations of $22.4 million, and importantly, continued solid performance from the core BDC portfolio in a volatile macro environment, including the return of our Zollege investment to accrual status reducing our non-accrual investments to just one, representing only 0.2% of portfolio fair value."
"Continuing our strong dividend distribution history, we announced a base dividend of $0.25 per share per month, or $0.75 per share in aggregate for the third quarter of fiscal 2026. Our annualized second quarter dividend of $0.75 per share represents a 12.3% yield based on the stock price of $24.41 as of October 6, 2025, offering strong current income from an investment value standpoint. Our Q2 adjusted NII of $0.58 per share continues to reflect the impact of the past twelve-month trend of decreasing levels of short-term interest rates and spreads on Saratoga Investment's largely floating rate assets, and the continued impact of the recent repayments. This has resulted in $200.8 million of cash, as of August 31, 2025, available to be deployed accretively in investments or repay existing debt."
"During the quarter, we continued to see very competitive market dynamics. Despite these macro factors, our portfolio again saw multiple debt repayments in Q2, in addition to solid new originations. We originated $52.2 million in three follow-ons, as well as closing on new investments in multiple BB and BBB structured credit securities. Our strong reputation and differentiated market positioning, combined with our ongoing development of sponsor relationships, continues to create attractive investment opportunities from high quality sponsors, which is continuing post quarter-end with three new portfolio company investments either closed or in closing in Q3 so far, which further improves our run rate earnings. We continue to remain prudent and discerning in terms of new commitments in the current volatile environment"
"Saratoga's overall performance is reflected in our key performance indicators this past quarter, including: (i) Q2 ROE of 13.8% generating LTM ROE of 9.1%, beating the BDC industry average of 7.3%, (ii) deleveraging from 159.6% regulatory leverage last year to 166.6% this year, due in part to the NAV increase of $38.4 million during the last twelve months ($372.1 million to $410.5 million), (iii) an increase in NAV per share of $0.09 per share from $25.52 per share the previous quarter to $25.61 per share, (iv) an increase in AUM of $27.0 million, or 2.8%, to $995.3 million from the previous quarter, (v) adjusted NII of $0.58 per share versus $0.66 per share last quarter, (vi) EPS of $0.84 per share versus $0.91 per share last quarter, and (vii) dividends of $0.75 per share, up $0.01 per share from $0.74 per share last year.
"At the foundation of our strong operating performance is the high-quality nature, resilience and balance of our $995.3 million portfolio in the current environment. Where we have encountered significant challenges in four of our portfolio companies over the past two years, we have completed decisive actions and resolved all four of these situations through two sales and two restructurings. And one of the restructurings, Zollege, is seeing improved financial performance and has been returned to accrual status this quarter. Our current core non-CLO portfolio was marked up by $3.9 million this quarter, and the CLO and JV markdown of $0.3 million was largely offset by $0.2 million of net appreciation in our new BB investments and further net realized gains of $0.1 million from an escrow payment on our Modern Campus investment. This all resulted in the fair value of the portfolio increasing by $3.8 million during the quarter. As of quarter-end, our total portfolio fair value was 1.7% below cost, while our core non-CLO portfolio was 2.1% above cost. The overall financial performance and solid earnings power of our current portfolio reflects strong underwriting in our growing portfolio companies and sponsors in well-selected industry segments."
"During the quarter, our net interest margin decreased from $15.1 million last quarter to $13.1 million, driven by a $2.1 million decrease in non-CLO interest income. This decrease was due to (i) average assets decreasing approximately $11.0 million, or 1.1%, to $954.0 million, (ii) the timing of originations and repayments closings during the current and previous quarter, with repayments more fully reflected in earnings and the full impact of new originations still having to flow through, and (iii) the absolute yields on the non-CLO portfolio decreasing from 11.5% to 11.3% as a result of SOFR rates resetting from earlier reductions combined with the impact of lower yielding new originations during the quarter. In addition, the full-period impact of the 0.2 million shares issued through the ATM program in Q1, and the partial impact of the additional 0.4 million shares issued in Q2, resulted in a $0.02 per share dilution to NII per share."
"Though our quarter-end cash position decreased from $224.3 million last quarter to $200.8 million in the current quarter, we have maintained a strong level of cash availability in a very volatile macro environment. This level of cash improves our current regulatory leverage of 166.6% to 186.5%, netting available cash against outstanding debt."
"Our overall credit quality for this quarter remained steady at 99.7% of credits rated in our highest category. There is just one investment remaining on non-accrual status, Pepper Palace, which has been successfully restructured, representing only 0.2% and 0.3% of fair value and cost, respectively. With 84.3% of our investments at quarter-end in first lien debt and generally supported by strong enterprise values and balance sheets in industries that have historically performed well in stressed situations, we believe our portfolio and company leverage is well structured for future economic conditions and uncertainty."
Mr. Oberbeck concluded, "While geopolitical tensions and macroeconomic uncertainty remain ongoing factors, we are encouraged by the resilience of our portfolio and the continued strength of our pipeline. Backed by our experienced management team, disciplined underwriting, and solid balance sheet, we are well positioned to further expand the size and quality of our portfolio, drive consistent investment performance, and deliver attractive risk-adjusted returns for our shareholders over the long term."
Discussion of Financial Results for the Quarter ended August 31, 2025:
AUM as of August 31, 2025 was $995.3 million, a decrease of 4.4% from $1.041 billion as of August 31, 2024, and an increase of 2.8% from $968.3 million as of last quarter.
Total investment income for the three months ended August 31, 2025 was $30.6 million, a decrease of $12.4 million, or 28.8%, from $43.0 million for the quarter ended August 31, 2024, and a decrease of $1.7 million, or 5.2%, as compared to $32.3 million for the quarter ended May 31, 2025. This quarter's investment income decreases as compared to last year were due to (i) non-recurrence of $7.9 million interest income related to the Knowland investment recognized last year that was previously on non-accrual, (ii) this past year's interest base rate decreases, and (iii) lower recent AUM levels, reflecting outsized repayments in the last twelve months. This quarter's sequential decrease is driven by the full period impact of Q1 repayments not offset by the partial impact of Q2 originations. Investment income reflects a weighted average interest rate on the core BDC portfolio of 11.3%, slightly down from 11.5% as of May 31, 2025 and down from 12.6% as of August 31, 2024, with the yield reduction primarily reflecting SOFR base rate decreases over the past year.
Total expenses for the quarter ended August 31, 2025, excluding interest and debt financing expenses, base management fees and incentive fees, and income and excise taxes, increased $0.3 million to $2.5 million as compared to $2.2 million for the quarter ended August 31, 2024, and decreased $0.3 million as compared to $2.8 million for the quarter ended May 31, 2025. This represented 0.8% of average total assets on an annualized basis, unchanged from 0.8% last quarter and up from 0.7% last year.
Adjusted NII for the quarter ended August 31, 2025, was $9.1 million, a decrease of $9.1 million, or 50.1%, from $18.2 million in the quarter ended August 31, 2024, and a decrease of $1.0 million, or 10.5% from $10.1 million in the quarter ended May 31, 2025. Both decreases were due to lower AUM and base interest rates, with the year-over-year decrease primarily due to the non-recurrence of the Knowland investment interest income, all as previously noted.
NII Yield as a percentage of average net asset value was 9.0% for the quarter ended August 31, 2025. Adjusted for the incentive fee accrual related to net capital gains, the NII Yield was also 9.0%. In comparison, adjusted NII Yield was 19.7% for the quarter ended August 31, 2024, and 10.3% for the quarter ended May 31, 2025.
NAV was $410.5 million as of August 31, 2025, an increase of $38.4 million from $372.1 million as of August 31, 2024, and an increase of $14.1 million from $396.4 million as of May 31, 2025.
NAV per share was $25.61 as of August 31, 2025, compared to $27.07 as of August 31, 2024, and $25.52 as of May 31, 2025.
Return on equity ("ROE") for the last twelve months ended August 31, 2025 was 9.1%, up from 5.8% for the comparable period last year, and down slightly from 9.3% for the twelve months ended May 31, 2025. ROE on an annualized basis for the quarter ended August 31, 2025, was 13.8%, down from 14.4% for the comparable period last year, and 14.1% for the previous period ended May 31, 2025.
The weighted average common shares outstanding for the quarter ended August 31, 2025 was 15.8 million, increasing from 15.3 million and 13.7 million for the quarters ended May 31, 2025 and August 31, 2024, respectively.
Portfolio and Investment Activity for the Quarter Ended August 31, 2025
Fair value of Saratoga Investment's portfolio was $995.3 million, excluding $200.8 million in cash and cash equivalents, principally invested in 44 portfolio companies, one collateralized loan obligation fund (the "CLO"), one joint venture fund (the "JV"), and twenty BB and BBB CLO debt investments.
Cost of investments made during the quarter ended August 31, 2025 were $52.2 million, including three follow-on investments.
Principal repayments during the quarter ended August 31, 2025 were $29.8 million, including two full repayments of existing investments and four partial repayments of existing investments, plus debt amortization.
For the quarter ended August 31, 2025, the fair value of the portfolio increased by $3.8 million of net realized gains and unrealized appreciation, consisting of (1) $3.9 million net appreciation in our core non-CLO portfolio, including Pepper Palace and Zollege, (ii) net depreciation in the CLO and JV of $0.3 million, (iii) $0.2 million of net appreciation in our new BB CLO portfolio, (iv) and further net realized gains of $0.05 million on an escrow payment received on our Modern Campus investment.
Since taking over management of the BDC in 2010, the Company has generated $1.29 billion of repayments and sales of investments originated by Saratoga Investment, generating a gross unlevered IRR of 14.9%. Total investments originated by Saratoga are $2.34 billion in 122 portfolio companies.
The overall portfolio composition consisted of 84.3% of first lien term loans, 0.7% of second lien term loans, 1.7% of unsecured term loans, 5.4% of structured finance securities, and 7.9% of common equity.
The weighted average current yield on Saratoga Investment's portfolio based on current fair values was 10.4%, which was comprised of a weighted average current yield of 11.0% on first lien term loans, 16.9% on second lien term loans, 10.5% on unsecured term loans, 12.2% on structured finance securities and 0.0% on equity interests.
Portfolio Update:
Subsequent to quarter-end, Saratoga Investment has closed or currently has in closing approximately $52.3 million of new originations in three new portfolio companies and two follow-ons, including delayed draws, and had two repayments of $12.8 million, for a net anticipated increase in investments of approximately $39.5 million.
Liquidity and Capital Resources
Outstanding Borrowings:
As of August 31, 2025, Saratoga Investment had a combined $70.0 million in outstanding combined borrowings under its $65.0 million senior secured revolving credit facility with Encina and its $75.0 million senior secured revolving credit facility with Live Oak.
At the same time, Saratoga Investment had $131.0 million of SBA debentures in its SBIC II license outstanding, $39.0 million of SBA debentures in its SBIC III license outstanding, $269.4 million of listed baby bonds issued, $250.0 million of unsecured unlisted institutional bond issuances, three unlisted issuances of $27.0 million in total, and an aggregate of $200.8 million in cash and cash equivalents.
Undrawn Borrowing Capacity:
With $70.0 million available under the two credit facilities and $200.8 million of cash and cash equivalents as of August 31, 2025, Saratoga Investment has a total of $270.8 million of undrawn credit facility borrowing capacity and cash and cash equivalents to be used for new investments or to support existing portfolio companies in the BDC and the SBIC.
In addition, Saratoga Investment has $136.0 million in undrawn SBA debentures available from its existing SBIC III license.
Availability under the Encina and Live Oak credit facilities can change depending on portfolio company performance and valuation. In addition, certain follow-on investments in SBIC II and the BDC will not qualify for SBIC III funding. Overall outstanding SBIC debentures are limited to $350.0 million across all active SBIC licenses.
Total Saratoga Investment undrawn borrowing capacity is therefore $406.8 million.
As of August 31, 2025, Saratoga Investment had $47.0 million of committed undrawn lending commitments and $49.2 million of discretionary funding commitments.
Additionally:
Saratoga Investment has an active equity distribution agreement with Ladenburg Thalmann & Co. Inc., Raymond James and Associates, Inc, Lucid Capital Markets, LLC and Compass Point Research and Trading, LLC, through which the Company may offer for sale, from time to time, up to $300.0 million of common stock through an ATM offering.
As of August 31, 2025, Saratoga Investment has sold 8,532,953 shares for gross proceeds of $225.7 million at an average price of $26.37 for aggregate net proceeds of $224.0 million (net of transaction costs).
During the three months ended August 31, 2025, Saratoga Investment sold a total of 443,406 shares for gross proceeds of $11.4 million at an average price of $25.86 for aggregate net proceeds of $11.4 million (net of transaction costs). During the six months ended August 31, 2025, Saratoga Investment sold 688,237 shares for gross proceeds of $17.8 million at an average price of $25.86 for aggregate net proceeds of $17.8 million (net of transaction costs).
Dividend
On September 11, 2025, Saratoga Investment announced that its Board of Directors declared a base quarterly dividend of $0.75 per share in aggregate for the third quarter of fiscal 2026, declaring the following three monthly $0.25 per share dividends for the quarter ended November 30, 2025:
Month
Amount Per Share
Record Date
Payment Date
September 2025
$0.25
October 7, 2025
October 23, 2025
October 2025
$0.25
November 4, 2025
November 20, 2025
November 2025
$0.25
December 2, 2025
December 18, 2025
Shareholders have the option to receive payment of dividends in cash or receive shares of common stock, pursuant to the Company's DRIP. Shares issued under the Company's DRIP is issued at a 5% discount to the average market price per share at the close of trading on the ten trading days immediately preceding (and including) the payment date.
The following table highlights Saratoga Investment's dividend history over the past fifteen quarters:
Period (Fiscal Year ends Feb)
Base DividendPer Share
Special DividendPer Share
Total DividendPer Share
Fiscal Q3 2026 (November 2025)
$0.25
-
$0.25
Fiscal Q3 2026 (October 2025)
$0.25
-
$0.25
Fiscal Q3 2026 (September 2025)
$0.25
-
$0.25
Fiscal Q2 2026 (August 2025)
$0.25
-
$0.25
Fiscal Q2 2026 (July 2025)
$0.25
-
$0.25
Fiscal Q2 2026 (June 2025)
$0.25
-
$0.25
Fiscal Q1 2026 (May 2025)
$0.25
-
$0.25
Fiscal Q1 2026 (April 2025)
$0.25
-
$0.25
Fiscal Q1 2026 (March 2025)
$0.25
-
$0.25
Full Year Fiscal 2026
$2.25
-
$2.25
Fiscal Q4 2025
$0.74
-
$0.74
Fiscal Q3 2025
$0.74
$0.35
$1.09
Fiscal Q2 2025
$0.74
-
$0.74
Fiscal Q1 2025
$0.74
-
$0.74
Full Year Fiscal 2025
$2.96
$0.35
$3.31
Fiscal Q4 2024
$0.73
-
$0.73
Fiscal Q3 2024
$0.72
-
$0.72
Fiscal Q2 2024
$0.71
-
$0.71
Fiscal Q1 2024
$0.70
-
$0.70
Full Year Fiscal 2024
$2.86
-
$2.86
Fiscal Q4 2023
$0.69
-
$0.69
Fiscal Q3 2023
$0.68
-
$0.68
Fiscal Q2 2023
$0.54
-
$0.54
Fiscal Q1 2023
$0.53
-
$0.53
Full Year Fiscal 2023
$2.44
-
$2.44
Share Repurchase Plan
As of August 31, 2025, the Company purchased 1,035,203 shares of common stock, at the average price of $22.05 for approximately $22.8 million pursuant to its existing Share Repurchase Plan. During the three and six months ended August 31, 2025, the Company did not purchase any shares of common stock pursuant to its Share Repurchase Plan.
Previously, in fiscal year 2015, the Company announced the approval of an open market share repurchase plan (the "Share Repurchase Plan") that allows it to repurchase up to 200,000 shares of its common stock at prices below its NAV as reported in its then most recently published financial statements. Since then, the Share Repurchase Plan has been extended annually, and the Company has periodically increased the amount of shares of common stock that may be purchased under the Share Repurchase Plan, most recently to 1.7 million shares of common stock. On January 7, 2025, its Board of Directors extended the Share Repurchase Plan for another year to January 15, 2026.
Fiscal Second Quarter 2026 Conference Call/Webcast Information
When:
October 8, 202510:00 a.m. Eastern Time (ET)
How:
Webcast: Interested parties may access a live webcast of the call and find the Q2 2026 presentation by going to the "Events & Presentations" section of Saratoga Investment Corp.'s investor relations website (Saratoga events and presentations). A replay of the webcast will also be available for a limited time at Saratoga events and presentations.
Call:
To access the call by phone, please go to this link (Registration Link) and you will be provided with dial in details. To avoid delays, we encourage participants to dial into the conference call fifteen minutes ahead of the scheduled start time
About Saratoga Investment Corp.
Saratoga Investment is a specialty finance company that provides customized financing solutions to U.S. middle-market businesses. The Company invests primarily in senior and unitranche leveraged loans and mezzanine debt, and, to a lesser extent, equity to provide financing for change of ownership transactions, strategic acquisitions, recapitalizations and growth initiatives in partnership with business owners, management teams and financial sponsors. Saratoga Investment's objective is to create attractive risk-adjusted returns by generating current income and long-term capital appreciation from its debt and equity investments. Saratoga Investment has elected to be regulated as a business development company under the Investment Company Act of 1940, as amended, and is externally managed by Saratoga Investment Advisors, LLC, an SEC-registered investment advisor focusing on credit-driven strategies. Saratoga Investment Corp. owns two active SBIC-licensed subsidiaries, having surrendered its first license after repaying all debentures for that fund following the end of its investment period and subsequent wind-down. Furthermore, it ...
