Executive Summary
In QQ3 2025, Saratoga Investment Corp (SAR) reported a robust financial performance characterized by a net income of $8.83 million, translating to an EPS of $0.64. This represents a significant increase in net income of 317.84% year-over-year, despite a sequential decrease from the previous quarter. The company sees sustained support for its dividend due to over-earning amidst valuable investments, with a quarterly dividend yield of 12.2% based on a closing stock price of $24.21. Despite experiencing some challenges including outsized repayments and markdowns in specific assets, the firm continues to exhibit resilience powered by strong cash generated from operations totaling $94.16 million, enabling continued support for existing portfolio companies and new investments. Management remains optimistic, indicating a favorable outlook due to strong relationships with sponsors and indications of potential M&A activity in the lower middle market.
Key Performance Indicators
QoQ: -14.10% | YoY:117.62%
QoQ: -25.24% | YoY:1 188.14%
QoQ: -33.83% | YoY:363.13%
QoQ: -33.66% | YoY:317.84%
QoQ: -34.02% | YoY:306.45%
Key Insights
**Financial Performance Overview:**
1. **Revenue:** $24.88 million, YoY growth of 117.62%, QoQ decrease of 14.10%.
2. **Cost of Revenue:** $13.04 million, resulting in a gross profit of $11.84 million and gross profit margin of 47.58%.
3. **Net Income:** $8.83 million, reflecting a net income margin of 35.51%.
4. **Adjusted Net Investment Income (NII):** $12.40 million, demonstrating a decline of 5.3% YoY and 31.7% from Q2.
5. **NAV per Share:** $26.95, down 1.7% YoY, with a total NAV ...
Financial Highlights
Financial Performance Overview:
1. Revenue: $24.88 million, YoY growth of 117.62%, QoQ decrease of 14.10%.
2. Cost of Revenue: $13.04 million, resulting in a gross profit of $11.84 million and gross profit margin of 47.58%.
3. Net Income: $8.83 million, reflecting a net income margin of 35.51%.
4. Adjusted Net Investment Income (NII): $12.40 million, demonstrating a decline of 5.3% YoY and 31.7% from Q2.
5. NAV per Share: $26.95, down 1.7% YoY, with a total NAV of $374.9 million up from $359.6 million last year.
6. Cash Position: Grew to $250 million, primarily from outsized repayments.
7. Return on Equity: Improved to 9.2%, above the industry average of 8.5%.
Income Statement
| Metric |
Value |
YoY Change |
QoQ Change |
| Revenue |
24.88M |
117.62% |
-14.10% |
| Gross Profit |
11.84M |
1 188.14% |
-25.24% |
| Operating Income |
9.00M |
363.13% |
-33.83% |
| Net Income |
8.83M |
317.84% |
-33.66% |
| EPS |
0.64 |
306.45% |
-34.02% |
Key Financial Ratios
operatingProfitMargin
36.2%
operatingCashFlowPerShare
$1.32
freeCashFlowPerShare
$6.83
dividendPayoutRatio
101.4%
Management Commentary
- Management Outlook: CEO Christian Oberbeck stated, "The substantial over-earning of the dividend this quarter continues to support the current level of dividends," emphasizing the solid performance of ongoing investments.
- Cash and Investment Capacity: CFO Henri Steenkamp outlined, "We maintain a substantial $474 million of investment capacity... $250 million in cash" showcasing financial stability.
- Investment Pipeline: Michael Grisius indicated, "We expect to be able to continue to support our existing portfolio companies... our origination platform remains strong," pointing to continued growth areas despite current market uncertainties.
"We believe Saratoga continues to be favorably situated for potential future economic opportunities as well as challenges." - Christian Oberbeck
— Christian Oberbeck
"We remain pleased with our available liquidity and leverage position... with $250 million of quarter end cash available and thus fully accretive to NII when deployed" - Henri Steenkamp
— Henri Steenkamp
Forward Guidance
Management remains cautiously optimistic about the future, highlighting increasing interest in M&A activities in the lower middle market. While they're wary of potential economic challenges, they believe in their structural flexibility and established market relationships to capitalize on forthcoming opportunities. Specifically, they see potential for more robust origination activity in the near future as market conditions stabilize. Key metrics to monitor include debt repayment levels and adjusted NII to affirm cash flow sustainability and dividend prospects. Management will also watch for signs of M&A activity to gauge future investment opportunities.