Saratoga Investment AUM rises to $1.126 billion in Q1
Saratoga Investment reported fiscal Q1 adjusted NII of $0.47 per share, missing analyst estimates, as AUM grew 1.6% to $1.126 billion. NAV decreased 4.5% sequentially to $23.23 following portfolio markdowns, including a write-off of Pepper Palace. The company declared a $0.75 per share dividend for Q2.
*this image is generated using AI for illustrative purposes only.
Saratoga Investment reported Assets Under Management of $1.126 billion for the fiscal first quarter ended May 31, 2026, representing a 1.6% increase from the prior quarter. The business development company missed analyst expectations for the period, with adjusted earnings per share of $0.47 falling short of the $0.55 consensus estimate. This represents a 28.8% decrease from earnings of $0.66 per share in the same period last year. Quarterly sales of $30.777 million also missed the $31.258 million estimate by 1.54%, a 4.77% decrease year-over-year.
Financial Performance
Total Investment Income for the quarter was $30.8 million, a decrease from $32.3 million in the same period last year. Net Investment Income per share stood at $0.47, compared to $0.66 in the prior year. The company reported a net loss per share of $(0.42) for the quarter, compared to earnings per share of $0.91 in the year-ago period. Adjusted Net Investment Income per share was $0.47. The decline in earnings reflects the impact of significantly lower short-term interest rates and tightening spreads on the company's largely floating rate asset base.
Asset Valuation and Portfolio
Net Asset Value decreased to $378.5 million as of May 31, 2026, down 4.5% from $396.2 million in the prior quarter. NAV per share fell to $23.23 from $24.40 in the prior quarter. The portfolio fair value was marked down by $15.2 million during the quarter, primarily due to unrealized depreciation in the non-CLO core portfolio. Specific credits such as Pepper Palace, Exigo, and Chronus contributed significantly to the markdowns. Pepper Palace was written down to zero, while Exigo was moved to a red watch list status.
Capital and Liquidity
Saratoga Investment held $60.8 million in cash and cash equivalents at quarter-end. The company had total undrawn borrowing capacity of $196.8 million as of May 31, 2026, including $46 million available through its SBI3 license and $90 million from revolving credit facilities. Outstanding borrowings totaled $817.4 million, including amounts under senior secured revolving credit facilities and various debentures and notes.
Dividend Declaration
The Board of Directors declared a base quarterly dividend of $0.75 per share for the second quarter of fiscal 2027. This dividend will be paid in three monthly installments of $0.25 per share in June, July, and August 2026, with record dates in July, August, and September respectively. The annualized yield represents 14% based on the stock price of $21.42 as of July 6, 2026.
| Metric | Q1 FY27 (May 31, 2026) | Q4 FY26 (Feb 28, 2026) | Q1 FY26 (May 31, 2025) |
|---|---|---|---|
| Assets Under Management ($ in thousands) | 1,126,334 | 1,109,134 | 968,318 |
| Net Asset Value ($ in thousands) | 378,455 | 396,156 | 396,369 |
| NAV per share ($) | 23.23 | 24.42 | 25.52 |
| Total Investment Income ($ in thousands) | 30,777 | 31,123 | 32,319 |
| Net Investment Income per share ($) | 0.47 | 0.48 | 0.66 |
| Earnings per share ($) | (0.42) | (0.16) | 0.91 |
| Dividends per share ($) | 0.75 | 1.00* | 0.75 |
| Return on Equity - last twelve months | 4.0% | 9.1% | 9.3% |
| Originations ($ in thousands) | 79,151 | 135,139 | 50,086 |
| Repayments ($ in thousands) | 48,415 | 34,020 | 64,330 |
*Includes special dividend.
How will the company manage the sustainability of the $0.75 dividend given that Net Investment Income per share of $0.47 currently falls short of this payout?
What specific strategic shifts or credit protections does Sararatoga plan to implement to stabilize the portfolio following the significant markdowns on credits like Pepper Palace and Exigo?
With the decline in earnings attributed to lower short-term interest rates, what is the management's outlook for net interest margin compression if rates remain suppressed?
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