Fiscal second quarter 2027
Filed Oct 6, 2026Saratoga Investment Corp. Announces Fiscal Second Quarter 2027 Financial Results Reports Quarterly Asset Growth of 2.1% and Net Originations of $37.1 Million
AUM, investment income and originations increased, while adjusted NII was relatively stable sequentially. However, investment markdowns drove a loss, NAV declined, and adjusted NII per share was below the quarterly dividend.
Key metrics
shortened, hover for the filing’s print| Metric | Value | q/q | y/y |
|---|---|---|---|
| Assets Under Management (AUM) as of August 31, 2026other | $1.15B | 2.1% | 15.6% |
| Total investment income for the three months ended August 31, 2026GAAP | $31,169,224 | 1.3% | 2.0% |
| Total operating expenses for the three months ended August 31, 2026GAAP | $23,864,060 | – | – |
| Total expenses excluding interest and debt financing expenses, base management fees, incentive fees, and income and excise taxes for the three months ended August 31, 2026GAAP | $2.9M | – | – |
| Net investment income for the three months ended August 31, 2026GAAP | $7,305,164 | – | – |
| Net investment income per share for the three months ended August 31, 2026GAAP | $0.45 | – | – |
| Adjusted net investment income for the three months ended August 31, 2026non-GAAP | $7,427,974 | – | – |
| Adjusted net investment income per share for the three months ended August 31, 2026non-GAAP | $0.46 | – | – |
| Net investment income yield for the three months ended August 31, 2026GAAP | 8.0% | – | – |
| Adjusted net investment income yield for the three months ended August 31, 2026non-GAAP | 8.1% | – | – |
| Net realized and unrealized gain (loss) on investments for the three months ended August 31, 2026GAAP | $(13,966,343) | – | – |
| Net increase (decrease) in net assets resulting from operations for the three months ended August 31, 2026GAAP | $(6,661,179) | – | – |
| Earnings (loss) per common share for the three months ended August 31, 2026GAAP | $(0.41) | – | – |
| Net asset value (NAV) as of August 31, 2026GAAP | $352.6M | – | – |
| Net asset value per share as of August 31, 2026GAAP | $22.15 | 4.6% decrease | – |
| Return on equity for the last twelve months ended August 31, 2026GAAP | (1.1)% | – | – |
| Return on equity on an annualized basis for the quarter ended August 31, 2026GAAP | (7.3)% | – | – |
| Originations for the quarter ended August 31, 2026other | $76.1M | – | – |
| Principal repayments for the quarter ended August 31, 2026other | $39M | – | – |
| Net originations for the quarter ended August 31, 2026other | $37.1M | – | – |
| Weighted average interest rate on the core BDC portfolio as of August 31, 2026other | 10.6% | – | – |
| Weighted average current yield on the portfolio based on current fair values as of August 31, 2026other | 9.9% | – | – |
| Total investment income for the six months ended August 31, 2026GAAP | $61,946,149 | – | – |
| Net investment income for the six months ended August 31, 2026GAAP | $14,898,151 | – | – |
| Adjusted net investment income for the six months ended August 31, 2026non-GAAP | $15,020,961 | – | – |
| Earnings (loss) per common share for the six months ended August 31, 2026GAAP | $(0.84) | – | – |
Capital returns
- The Board declared a base quarterly dividend of $0.75 per share in aggregate for the third quarter of fiscal 2027, comprising three monthly $0.25 per share dividends.
- The September 2026 dividend of $0.25 per share has a record date of October 6, 2026 and payment date of October 22, 2026.
- The October 2026 dividend of $0.25 per share has a record date of November 5, 2026 and payment date of November 24, 2026.
- The November 2026 dividend of $0.25 per share has a record date of December 3, 2026 and payment date of December 22, 2026.
- The Company repurchased 444,124 shares at an average price of $18.91 per share for approximately $8.4 million during the quarter.
- The repurchases generated approximately $0.11 per share of NAV accretion and fully offset shares issued under the dividend reinvestment plan.
- As of August 31, 2026, the Company had purchased 1,481,822 shares at an average price of $21.11 for approximately $31.3 million under the Share Repurchase Plan.
What drove it
- AUM growth reflected $76.1 million of investments made, including two new portfolio companies and nine follow-on investments, compared with $39.0 million of principal repayments.
- Investment income increased primarily from the full-quarter impact of Q1 originations and the partial-quarter impact of Q2 originations more than offsetting repayments.
- Adjusted NII declined sequentially because recent capital-structure changes increased interest expense, other income declined with lower structuring, advisory and prepayment fees, and base management fees increased with AUM.
- Portfolio marks included $13.1 million of markdowns in Madison Logic, Exigo and Chronus, a $1.5 million reversal of previously recognized unrealized appreciation from Gen4 and Modis sales, and $4.5 million of unrealized appreciation in Zollege.
- The Company completed the sixth Saratoga CLO refinancing on September 17, 2026, establishing approximately $350 million in assets, extending the reinvestment period to October 2029 and legal maturity to October 2037.
Concerns
- NAV declined by $25.9 million from the previous quarter and NAV per share declined to $22.15 from $23.23.
- Net realized and unrealized loss on investments was $(13,966,343), resulting in a net decrease in net assets from operations of $(6,661,179).
- Adjusted NII per share of $0.46 was below dividends per share of $0.75.
- The Company cited additional interest expense from higher-cost debt while asset spreads had not yet widened.
- Non-accrual investments represented 0.0% of portfolio fair value and 1.3% of portfolio cost at quarter-end, although Pepper Palace and the CLO F-Note were sold after quarter-end.
- The Company described continued private-credit competition, geopolitical uncertainty, persistent inflation, interest-rate volatility and AI-related disruption concerns within the software sector.
What to watch
- The effect of recent base-rate increases on investment income and the impact of refinancing-related interest expense on NII.
- Subsequent exits of Pepper Palace, the CLO F-Note and Exigo red, including the resulting portfolio credit-quality and valuation effects.
- Whether new originations and portfolio growth support adjusted NII relative to the $0.75 per share quarterly dividend.
- The development of markdowns in Madison Logic, Exigo, Chronus and other equity positions.
- Deployment of available borrowing capacity, additional SBA debenture capacity and the refinanced Saratoga CLO.
Balance sheet and cash flow
- Cash and cash equivalents were $80,087,303 and cash and cash equivalents in reserve accounts were $15,786,427 as of August 31, 2026.
- The Company reported $95.9 million of cash and cash equivalents as of August 31, 2026.
- Borrowings outstanding were $902.4 million as of August 31, 2026.
- Total liabilities were $903,686,035 as of August 31, 2026.
- Total assets were $1,256,262,858 as of August 31, 2026.
- Asset coverage ratio was 171.9% as of August 31, 2026.
- On August 26, 2026, the Company issued $85.0 million aggregate principal amount of 8.00% fixed-rate notes due 2031 for net proceeds of approximately $82.3 million.
- On September 18, 2026, the Company redeemed $105.5 million aggregate principal amount of 6.00% 2027 Notes.
- Total undrawn borrowing capacity was $136.0 million as of August 31, 2026.
- Committed undrawn lending commitments were $120.0 million and discretionary funding commitments were $61.1 million as of August 31, 2026.
Analysis
Saratoga reported AUM of $1.150 billion as of August 31, 2026, up 2.1% sequentially and 15.6% from August 31, 2025. The company originated $76.1 million of investments and received $39.0 million of principal repayments, producing $37.1 million of net originations. Total investment income was $31,169,224, up 2.0% from the prior-year quarter and 1.3% from the prior quarter. Management attributed the increase to the full-quarter impact of Q1 originations and the partial-quarter impact of Q2 originations.
Income growth did not translate into stronger NII. GAAP net investment income was $7,305,164, or $0.45 per share, versus $9,080,733, or $0.58 per share, a year earlier. Adjusted NII was $7,427,974, or $0.46 per share, compared with $0.47 per share in the preceding quarter and $0.58 per share a year earlier. The company identified higher interest expense from refinancing, lower structuring, advisory and prepayment fees, and higher base management fees as the drivers of the sequential decline. The declared fiscal third-quarter dividend is $0.75 per share in aggregate.
Portfolio valuation was the principal pressure point. Net realized and unrealized loss on investments was $(13,966,343), and the company reported a net decrease in net assets resulting from operations of $(6,661,179), or $(0.41) per share. NAV was $352.6 million and NAV per share was $22.15, compared with $378.5 million and $23.23, respectively, at May 31, 2026. The company cited markdowns in Madison Logic, Exigo and Chronus, reversals of unrealized appreciation from the Gen4 and Modis equity conversions, a JV write-down, and a partial offset from Zollege appreciation.
Credit indicators were comparatively favorable at period-end. The core BDC portfolio was 1.6% below cost and the total portfolio was 4.9% below cost. The company reported 96.0% of credits in its highest internal category, while Pepper Palace and the CLO F-Note represented 0.0% of portfolio fair value and 1.3% of portfolio cost on non-accrual. Both positions were sold after quarter-end. The portfolio was 81.5% first lien debt, and its weighted average current yield was 9.9%.
Capital actions focused on refinancing and NAV accretion. The company issued $85.0 million of 8.00% notes due 2031 during the quarter and subsequently completed additional issuances, while redeeming $105.5 million of 6.00% 2027 Notes on September 18, 2026. It also refinanced the Saratoga CLO, extending the reinvestment period to October 2029. Share repurchases totaled 444,124 shares for approximately $8.4 million and fully offset DRIP issuance. The company reported $95.9 million of cash and cash equivalents, $902.4 million of borrowings outstanding, and $136.0 million of total undrawn borrowing capacity as of August 31, 2026.
Management, verbatim
Our second-quarter results demonstrate the resilience of our platform despite the continued pressure affecting private credit markets. We grew assets under management by 2.1% to $1.150 billion, generating $37.1 million of net originations, while adjusted NII remained relatively stable at $0.46 per share including the cost of our recently refinanced capital structure.
Christian L. Oberbeck, Chairman and Chief Executive Officer of Saratoga Investment
NAV per share is down by 4.6% from $23.23 per share last quarter to $22.15 per share in Q2. Of the $1.08 per share reduction this quarter, $0.90 per share was attributable to unrealized depreciation on investments discussed below, and $0.30 per share distribution of dividends in excess of earnings, partially offset by $0.09 per share of accretion from net share repurchases.
Christian L. Oberbeck, Chairman and Chief Executive Officer of Saratoga Investment
At Saratoga, however, the NAV decline this quarter was concentrated in a limited number of company-specific situations and does not appear to reflect broad-based deterioration across the portfolio.
Christian L. Oberbeck, Chairman and Chief Executive Officer of Saratoga Investment
Not in the filing
stated, not guessed- Formal forward financial guidance for revenue, gross margin, operating expenses, tax rate, NII, NAV or EPS was not provided.
- Prior-release outlook was not provided.
- Segment revenue and segment profitability were not provided.
- Gross margin was not reported.
- Operating cash flow and free cash flow were not reported.
- A tax rate was not reported.
- Share-price reaction, consensus estimates, price targets and analyst expectations were not provided. The filing header identifies the issuer ticker as SAJ, while the earnings release identifies Saratoga Investment as NYSE: SAR.
AlphAI analysis generated from the company’s SEC earnings filing (Form 8-K Item 2.02, or Form 6-K for a foreign private issuer). Every figure was cross-checked against the filing text; consensus estimates, price targets and share-price reactions are not shown because they are not in the filing. AI-generated research, not investment advice.