Saratoga Investment Corp. (SAZ) released its fiscal third‑quarter 2026 earnings on January 7 2026. The company reported adjusted net investment income (NII) per share of $0.61, topping the consensus estimate of $0.59, and total investment income of $31.7 million, above the $31.4 million expected by analysts. Assets under management rose to $1.016 billion, a 5.8 % year‑over‑year increase, while the net asset value (NAV) per share fell to $25.59 from $26.95 a year earlier. The quarter’s return on equity (ROE) reached 13.5 %, well above the 6.6 % industry average for business development companies.
The earnings beat was driven by a combination of disciplined cost management and robust originations. Adjusted NII per share climbed $0.03 from the prior quarter, reflecting a $13.5 million net interest margin that benefited from lower interest expense after the repayment of baby bonds. Net originations totaled $17.2 million, supported by $72.1 million in new investments, including three new portfolio companies. These factors offset the decline in NAV per share and helped the company maintain a strong ROE.
Management highlighted the resilience of the core BDC portfolio amid a volatile macro environment. Chairman and CEO Christian L. Oberbeck noted that “the quarter’s highlights include continued NAV growth from the previous quarter and year with stable NAV per share, an increase in NII of $0.03 per share from the previous quarter, a strong 13.5 % return on equity beating the industry, net originations of $17.2 million, including three new portfolio companies, and importantly, continued solid performance from the core BDC portfolio in a volatile macro environment.” He added that “we began to see an increase in M&A activity despite continued competitive market dynamics.”
Headwinds remain in the form of a volatile macro environment and competitive market dynamics, but the company’s liquidity position—$395.6 million in undrawn borrowing capacity—provides a buffer for deploying capital into new opportunities. The management team emphasized that the increase in M&A activity represents a tailwind that could offset some of the macro‑related pressures on the portfolio. CFO Henri Steenkamp reported that adjusted NII was $9.8 million this quarter, down 21.3 % from last year but up 7.8 % from the prior quarter, underscoring the company’s focus on maintaining profitability while navigating a challenging environment.
Investor sentiment was positive following the earnings release, with the market reacting favorably to the earnings beat and the company’s strong ROE. The beat on both adjusted NII per share and total investment income was the primary driver of the positive reaction, reflecting confidence in Saratoga’s ability to generate consistent returns despite macro‑economic headwinds.
Saratoga’s outlook remains cautiously optimistic. The company’s robust liquidity, strong ROE, and continued originations position it well to capitalize on opportunities in a recovering M&A market, while the decline in NAV per share and the year‑over‑year drop in total investment income signal areas that will require close monitoring in the coming quarters.
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