Q1 2025 Saratoga Investment Corp Earnings Call

Operator: Good morning, ladies and gentlemen. Thank you for standing by. Welcome to Saratoga Investment Corp.'s 2025 Fiscal First Quarter Financial Results Conference call. Please note that today's call is being recorded. During today's presentation, all parties will be in a listen-only mode.

Operator: Good morning, ladies and gentlemen. Thank you for standing by. Welcome to Saratoga Investment Corps 2025 Fiscal First Quarter Financial Results Conference Call. Please note that today's call is being recorded.

Speaker Change: Good morning, ladies and gentlemen. Thank you for standing by. Welcome to Saratoga Investment Corp's 2025 Fiscal First Quarter Financial Results Conference Call. Please note that today's call is being recorded.

Operator: During today's presentation, all parties will be in a listen-only mode.

Operator: Following management's prepared remarks, we will open the line for questions. At this time, I would like to turn the call over to Saratoga Investment Corps' Chief Financial Officer and Chief Compliance Officer, Mr. Henri Steenkamp. Sir, please go ahead.

Operator: Falling management's paper marks will open online for questions.

Operator: At this time, I'd like to turn the call over to Saratoga Investment Corp's Chief Financial Officer and Chief Compliance Officer.

Speaker Change: During today's presentation, all parties will be in a listen-only mode. Following management's prepared remarks, we will open the line for questions. At this time, I'd like to turn the call over to Saratoga Investment Corp's Chief Financial Officer and Chief Compliance Officer, Mr. Henri Steenkamp. Sir, please go ahead.

Henri Steenkamp: Mr. Henri Steenkamp, sir, please go ahead.

Henri Steenkamp: Thank you.

Henri J. Steenkamp: Thank you. I would like to welcome everyone to Saratoga Investment Corp.'s 2025 Fiscal First Quarter Earnings Conference Call. Today's conference call includes forward-looking statements and projections. We ask you to refer to our most recent filings with the SEC for important factors that could cause actual results to differ materially from these forward-looking statements and projections. We do not undertake to update our forward-looking statements unless required to do so by law.

Henri Steenkamp: I would like to welcome everyone to Saratoga Investment Corp's 2025 fiscal first quarter earnings conference call. Today's conference call includes forward-looking statements and projections. We ask you to refer to our most recent filings with the SEC for important factors that could cause actual results to differ materially from these forward-looking statements and projections. We do not undertake to update our forward-looking statements unless required to do so by law.

Speaker Change: Thank you. I would like to welcome everyone to Saratoga Invtmt Corp's 2025 Fiscal First Quarter Earnings Conference Call.

Speaker Change: Today's conference call includes forward-looking statements and projections.

Speaker Change: We ask you to refer to our most recent filings with the SEC for important factors that could cause actual results to differ materially from these forward-looking statements and projections. We do not undertake to update our forward-looking statements unless required to do so by law.

Henri Steenkamp: Today, we will be referencing a presentation during our call. You can find our fiscal first quarter 2025 shareholder presentation in the Events and Presentation section of our Investor Relations website. A link to our IR pages in the earnings press release distributed last night. A replay of this conference call will also be available. Please refer to our earnings press release for details.

Henri J. Steenkamp: Today we will be referencing a presentation during our call. You can find our fiscal first quarter 2025 shareholder presentation in the events and presentations section of our investor relations website. A link to our IR page is in the earnings press release distributed last night. A replay of this conference call will also be available; please refer to our earnings press release for details. I would now like to turn the call over to our Chairman and Chief Executive Officer, Christian Oberbeck, who will make a few introductory remarks. Thank you, Henri, and welcome, everyone.

Speaker Change: Today, we will be referencing a presentation during our call. You can find our fiscal first quarter 2025 shareholder presentation in the events and presentation section of our investor relations website. A link to our IR page is in the earnings press release distributed last night.

Christian Oberbeck: I would now like to turn the call over to our Chairman and Chief Executive Officer, Christian Overbex, who will be making a few introductory remarks.

Christian L. Oberbeck: Saratoga's adjusted net investment income per share for the quarter increased by 12% as compared to the previous quarter as stable interest rates resulted in elevated recurring net interest margins on our portfolio relative to the past year. This quarter's earnings reflects elevated earnings power and quality versus a year ago, with a 19% increase in recurring net interest margin generated by the 9% increase in average assets under management and the sustained levels of increased interest rates and spreads on Saratoga Invtmt's largely floating rate assets, while costs of long-term balance sheet liabilities are largely fixed.

Henri J. Steenkamp: A replay of this conference call will also be available, please refer to our earnings press release for details. I would now like to turn the call over to our Chairman and Chief Executive Officer, Christian Oberbeck, who will be making a few introductory remarks. Thank you, Henri, and welcome everyone.

Christian Oberbeck: Thank you, Henry, and welcome everyone. Saratoga's adjusted net investment income per share for the quarter increased by 12% as compared to last quarter, as stable interest rates have resulted in elevated recurring net interest margins on our portfolio relative to the past year. This quarter's earnings reflects elevated earnings power in quality versus a year ago, with a 19% increase in recurring net interest margin generated by the 9% increase in average assets under management and the sustained levels of increased interest rates and spreads on Saratoga's investments, largely floating rate assets, while costs of long-term balance sheet liabilities are largely fixed.

Christian L. Oberbeck: This quarter's net investment income of $1.05 per share significantly exceeded our recently increased $0.74 dividend by 42%. In addition, our ongoing development of sponsor relationships continues to create attractive investment opportunities from high-quality sponsors, despite the constrained general volume of M&A over the last couple of years. We believe Saratoga is favorably situated for potential future economic opportunities as well as challenges.

Henri J. Steenkamp: Saratoga's adjusted net investment income per share for the quarter increased by 12% as compared to last quarter as stable interest rates have resulted in elevated recurring net interest margins on our portfolio relative to the past year.

Henri J. Steenkamp: This quarter's earnings reflects

Henri J. Steenkamp: Elevated earnings power and quality versus a year ago, with a 19% increase in recurring net interest margin generated by the 9% increase in average assets under management and the sustained levels of increased interest rates and spreads on Saratoga's investments' largely floating rate assets.

Christian Oberbeck: This quarter's net investment income of $1.5 per share significantly exceeded our recently increased 74 cents dividend by 42%. In addition, our ongoing development of sponsor relationships continues to create attractive investment opportunities from high-quality sponsors despite the constrained general volume of M&A over the last couple of years. We believe Saratoga continues to be favorably situated for potential future economic opportunities, as well as challenges. Saratoga's largely fixed rate interest only covenant-free, long-duration credit structure with maturities primarily two to 10 years out positions the company well with the elevated level of interest rates delivering substantially increased margins and industry leading dividend coverage versus largely fixed credit costs and limits risks from creditors in crisis situations.

Henri J. Steenkamp: while costs of long-term balance sheet liabilities are largely fixed.

Henri J. Steenkamp: This quarter's net investment income of $1.05 per share significantly exceeded our recently increased $0.74 dividend by 42%.

Henri J. Steenkamp: In addition, our ongoing development of sponsor relationships continues to create attractive investment opportunities from high-quality sponsors, despite the constrained general volume of M&A over the last couple of years.

Henri J. Steenkamp: We believe Saratoga continues to be favorably situated for potential future economic opportunities as well as challenges.

Christian L. Oberbeck: Saratoga's largely fixed-rate, interest-only, covenant-free, long-duration credit structure with maturities primarily two to ten years out positions the company well with the elevated level of interest rates delivering substantially increased margins and industry-leading dividend coverage versus largely fixed credit costs and limits risks from creditors in crisis situations. Most importantly, at the foundation of our elevated level of NII performance is the high quality, resilience, and balance of our approximately $1.96 billion portfolio of $1.096 billion.

Henri J. Steenkamp: Saratoga's largely fixed-rate, interest-only, covenant-free, long-duration credit structure with maturities primarily two to ten years out positions the company well with the elevated level of interest rates delivering substantially increased margins.

Henri J. Steenkamp: and industry-leading dividend coverage versus largely fixed credit costs and limits risks from creditors in crisis situations.

Christian Oberbeck: Most importantly, at the foundation of our elevated level of NII performance is the high-quality nature, resilience, and balance of our approximately $1.96 billion portfolio, $1.096 billion portfolio. Our core BDC portfolio fair value, excluding our CLO and JV and our two restructured Pepper Palace and sewage investments, exceeds its cost by 3.3%. We have taken decisive action with respect to Pepper Palace in Zology, assuming full control of both investments through consensual restructurings with the prior sponsors and establishing a combined remaining fair value of $4.4 million. The Zology restructuring was completed during the first quarter, and the Pepper Palace restructuring is imminent.

Henri J. Steenkamp: Most importantly, at the foundation of our elevated level of NII performance is the high-quality nature, resilience, and balance of our approximately $1.96 billion portfolio, $1.096 billion portfolio.

Christian L. Oberbeck: Our core BDC portfolio fair value, excluding our CLO and JV and our two restructured Pepper Palace and Tholage investments, exceeds its cost by 3.3%. We have taken decisive action with respect to Pepper Palace and Zolidge, assuming full control over both investments through consensual restructurings with the prior sponsors and establishing a combined remaining fair value of $4.4 million. The Zolidge restructuring was completed during the first quarter, and the Pepper Palace restructuring is imminent.

Henri J. Steenkamp: Our core BDC portfolio fair value, excluding our CLO and JV, and our two restructured Pepper Palace and Tholage investments, exceeds its cost by 3.3%.

Speaker Change: We have taken decisive action with respect to Pepper Palace and Soledge, assuming full control over both investments through consensual restructurings with the prior sponsors and establishing a combined remaining fair value of $4.4 million.

Christian Oberbeck: We are actively implementing management changes, capital structure improvements, and business plan adjustments, which have the potential for future increases in recovery value. With these two restructurings substantially completed, we resolved uncertainties related to two of the three portfolio companies on our watch list. The overall financial performance and strong earnings power of our current remaining portfolio reflects the strength of the underwriting and our solid growing portfolio of companies in well-selected industry segments. We continue to approach the market with prudence and discernment in terms of new commitment and the current environment. Our originations this quarter demonstrate that, despite an overall robust pipeline, there are periods like the current one where many of the investments we review do not meet our high-quality credit standards.

Christian L. Oberbeck: We are actively implementing management changes, capital structure improvements, and business plan adjustments, which have the potential for future increases in recovery value. With these two restructurings substantially completed, we have resolved uncertainties related to two of the three portfolio companies on our watch list. The overall financial performance and strong earnings power of our current remaining portfolio reflects the strength of the underwriting in our solid, growing portfolio of companies in well-selected industry sectors.

Henri J. Steenkamp: The Zoology restructuring was completed during the first quarter, and the Pepper Palace restructuring is imminent. We are actively implementing management changes, capital structure improvements, and business plan adjustments, which have the potential for future increases in recovery value.

Henri J. Steenkamp: With these two restructuring substantially completed, we have resolved uncertainties related to two of the three portfolio companies on our watch list.

Henri J. Steenkamp: The overall financial performance and strong earnings power of our current, remaining portfolio reflects the strength of the underwriting in our solid, growing portfolio of companies in well-selected industry segments.

Christian L. Oberbeck: We continue to approach the market with prudence and discernment in terms of new commitments in the current environment. Our originations this quarter demonstrate that despite an overall robust pipeline, there are periods, like the current one, where many of the investments we review do not meet our high-quality credit standards. During the quarter, we originated no new portfolio company investments while benefiting from 16 smaller follow-on investments in existing portfolio companies we know well, with strong business models and balance sheets.

Henri J. Steenkamp: We continue to approach the market with prudence and discernment in terms of new commitments in the current environment.

Henri J. Steenkamp: Our originations this quarter demonstrate that despite an overall robust pipeline, there are periods, like the current one, where many of the investments we review do not meet our high-quality credit standards.

Christian Oberbeck: During the quarter, we originated no new portfolio company investments while benefiting from 16 smaller follow-on investments in existing portfolio companies we know well with strong business models and balance sheets. With the originations this quarter told length 39 million versus 76 million of repayments in amortization, our quarter end cash position has grown to $93.3 million, improving effective leverage from 159.6% regulatory leverage to 171.2% net leverage, netting available cash against outstanding debt. Including the increase in cash since quarter end through this week, net leverage improves further to 186%. Our credit quality for this quarter remained high at 98.3% of credits rated in our highest category, with three investments currently still a non-accrual, representing 1.6% of fair value.

Henri J. Steenkamp: During the quarter, we originated no new portfolio company investments while benefiting from 16 smaller follow-on investments in existing portfolio companies we know well, with strong business models and balance sheets.

Christian L. Oberbeck: With originations this quarter totaling $39 million versus $76 million of repayments and amortization, our quarter-end cash position has grown to $93.3 million, improving effective leverage from 159.6% regulatory leverage to 171.2% net leverage. Netting available cash against outstanding debt, including the increase in cash since quarter end through this week, net leverage improves further to 186 percent. Our credit quality for this quarter remained high at 98.3% of credits rated in our highest category, with three investments currently still on non-accrual, representing 1.6% of fair value.

Henri J. Steenkamp: With originations this quarter totaling $39 million versus $76 million of repayments and amortization.

Henri J. Steenkamp: Our quarter-end cash position has grown to $93.3 million, improving effective leverage from 159.6% regulatory leverage to 171.2% net leverage, netting available cash against outstanding debt.

Speaker Change: Including the increase in cash since quarter end through this week, net leverage improves further to 186%.

Speaker Change: Our credit quality for this quarter remained high at 98.3% of credits rated in our highest category, with three investments currently still on non-accrual, representing 1.6% of fair value.

Christian Oberbeck: With 86% of our investments at quarter end in first-line debt and our overall portfolio generally supported by strong enterprise values and balance sheets and industries that historically performed well in stressed situations, we believe our portfolio and leverage is well-structured for challenging economic conditions and uncertainty.

Christian L. Oberbeck: With 86% of our investments at quarter end in first lien debt and our overall portfolio generally supported by strong enterprise values and balance sheets in industries that have historically performed well in stress situations, we believe our portfolio and leverage are well structured for challenging economic conditions and uncertainty. Saratoga's annualized first quarter dividend of $0.74 per share and adjusted net investment income of $1.05 per share imply a 13.1% dividend yield and an 18.6% earnings yield based on a recent stock price of $22.59 per share on July 8, 2024.

Speaker Change: With 86% of our investments at quarter end in first lien debt and our overall portfolio generally supported by strong enterprise values.

Speaker Change: and balance sheets in industries that have historically performed well in stress situations.

Speaker Change: We believe our portfolio and leverage is well-structured for challenging economic conditions and uncertainty.

Christian Oberbeck: Saratoga's annualized first quarter dividend of $0.74 per share and adjusted net investment income of $1.5 per share imply a 13.1% dividend yield and an 18.6% earnings yield based on recent stock price of $22.59 per share on July 8, 2024. The overerning of the dividend by $0.31 this quarter or $1.24 annualized per share increases NAV, supports the increasing dividend level and portfolio growth, as well as providing a cushion against adverse events. In volatile economic conditions such as we are currently experiencing, balance sheet strength, liquidity, and NAV preservation remain paramount for us.

Speaker Change: Saratoga's annualized first quarter dividend of $0.74 per share and adjusted net investment income of $1.05 per share imply a 13.1% dividend yield.

Speaker Change: and an 18.6% earnings yield based on a recent stock price of $22.59 per share on July 8, 2024.

Christian L. Oberbeck: The over-earning of the dividend by 31 cents this quarter, or $1.24 annualized per share, increases NAV, supports the increasing dividend level and portfolio growth, as well as provides a cushion against adverse events. In volatile economic conditions, such as we are currently experiencing, balance sheet strength, liquidity, and NAV preservation remain paramount for us. On March 27, 2024, we entered into a special-purpose vehicle and a new three-year financing credit facility with Live Oak Bank, which provides for incremental borrowings in an aggregate amount of up to $50 million.

Speaker Change: The over-earning of the dividend by 31 cents this quarter, or $1.24 annualized per share, increases NAV, supports the increasing dividend level and portfolio growth, as well as providing a cushion against adverse events.

Speaker Change: In volatile economic conditions, such as we are currently experiencing, balance sheet strength, liquidity, and NAV preservation remain paramount for us.

Christian Oberbeck: On March 27, 2024, we entered into a special purpose vehicle and a new three-year financing credit facility with Live Oak Bank, which provides for incremental borrowings and an aggregate amount of up to $50 million. We upsized this to $75 million in June and added two new banking relationships. Including this new facility at quarter end, we maintained a substantial $299 million of investment capacity to support our portfolio companies with $136 million available through our newly approved SBIC-3 fund, $70 million from our two revolving credit facilities, and $93 million in cash. Our adjusted NII is $14.3 million this quarter, up 12% from last year and last quarter.

Speaker Change: On March 27, 2024, we entered into a Special Purpose Vehicle.

Speaker Change: and a new three-year financing credit facility with Live Oak Bank, which provides for incremental borrowings in an aggregate amount of up to $50 million. We upsized this to $75 million in June and added two new banking relationships.

Christian L. Oberbeck: We upsized this to $75 million in June and added two new banking relationships. Including this new facility at Quarter End, we maintained a substantial $299 million of investment capacity to support our portfolio company, with $136 million available through our newly approved SBIC III fund, $70 million from our two revolving credit facilities, and $93 million in cash. Saratoga Invtmt's first quarter demonstrated a solid level of performance on our key performance indicators as compared to the quarters ended May 31st, 2023 and February 29th, 2024.

Speaker Change: Including this new facility at Quarter End, we maintained a substantial $299 million of investment capacity to support our portfolio companies, with $136 million available through our newly approved SBIC III fund.

Speaker Change: $70 million from our two revolving credit facilities and $93 million in cash.

Christian L. Oberbeck: Our adjusted NII is $14.3 million this quarter, up 12% from last year and last quarter. Our adjusted NII per share is $1.05 this quarter, down 3% from $1.08 last year and up 12% from $0.94 last quarter. Adjusted NII yield is 15.5% this quarter, up from 15% last year and up from 14% last quarter.

Speaker Change: Saratoga Invtmt's first quarter demonstrated a solid level of performance with our key performance indicators as compared to the quarters ended May 31, 2023 and February 29, 2024.

Speaker Change: Our adjusted NII is $14.3 million this quarter, up 12% from last year and last quarter. Our adjusted NII per share is $1.05.

Henri Steenkamp: Our adjusted NII per share is $1.5 this quarter, down 3% from $1.8 last year and up 12% from 94% last quarter. Adjusted NII yield is 15.5% this quarter, up from 15% last year and up from 14% last quarter. Latest 12 months return on equity is 4.4%, down from 7.2% last year and up from 2.5% last quarter. Our NIV per share is $26.85, down 6% from $28.48 last year and down 1% from $27.12 last quarter. And our quarter end NIV is $368 million, up from $337 million last year and slightly down from $370 million last quarter.

Speaker Change: down 3% from $1.08 last year and up 12% from $0.94 last quarter.

Speaker Change: Adjusted NII yield is 15.5% this quarter, up from 15% last year, and up from 14% last quarter. Latest 12 months return on equity is 4.4%, down from 7.2% last year, and up from 2.5% last quarter.

Christian L. Oberbeck: The latest 12 months return on equity is 4.4%, down from 7.2% last year and up from 2.5% last quarter. Our NAV per share is $26.85, down 6% from $28.48 last year and down 1% from $27.12 last quarter. And our quarter-end NAV is $368 million, up from $337 million last year and slightly down from $370 million last quarter. While this past year has seen markdowns on a small number of credits in our core BDC portfolio, Slide 3 illustrates how our long-term average return on equity over the last 10 years is well above the BDC industry average at 10.5% versus the industry's 6.7% and has remained consistently strong over the past decade, beating the industry in 8 of the past 10 years.

Speaker Change: Our NAV per share is $26.85, down 6% from $28.48 last year, and down 1% from $27.12 last quarter.

Speaker Change: And our quarter-end NAV is $368 million, up from $337 million last year, and slightly down from $370 million last quarter.

Henri Steenkamp: While this past year has seen mark downs to a small number of credits in our core BDC portfolio, slide 3 illustrates how our long-term average return equity over the last 10 years is well above the BDC industry average at 10.5% versus the industry's 6.7%, and has remained consistently strong over the past decade, beating the industry 8 of the past 10 years. As you can see on slide 4, our assets under management have steadily and consistently risen since we took over the BDC 14 years ago, and the quality of our credits remained solid, with only three credits on non-accrual unchanged from last quarter.

Speaker Change: While this past year has seen markdowns to a small number of credits in our core BDC portfolio, Slide 3 illustrates how our long-term average return on equity over the last 10 years is well above the BDC industry average at 10.5%.

Speaker Change: versus the industry's 6.7%, and has remained consistently strong over the past decade, beating the industry 8 of the past 10 years.

Christian L. Oberbeck: As you can see on slide 4, our assets under management have steadily and consistently risen since we took over the BDC 14 years ago, and the quality of our loans remains solid, with only three credits on non-accrual unchanged from last quarter. Our management team is working diligently to continue this positive trend as we deploy our available capital into our pipeline while at the same time being appropriately cautious in this volatile and evolving credit environment. With that, I would like to turn the call back over to Henri to review our financial results as well as the composition and performance of our portfolio. Thank you, Chris.

Speaker Change: As you can see on slide four, our assets under management have steadily and consistently risen since we took over the BDC 14 years ago, and the quality of our credits remain solid, with only three credits on non-accrual, unchanged from last quarter.

Henri Steenkamp: Our management team is working diligently to continue this positive trend as we deploy our available capital into our pipeline, while at the same time being appropriately cautious in this volatile and evolving credit environment.

Speaker Change: Our management team is working diligently to continue this positive trend as we deploy our available capital into our pipeline while at the same time being appropriately cautious in this volatile and evolving credit environment.

Henri Steenkamp: With that, I would like to turn the call back over to Henry to review our financial results as well as a composition and performance of our portfolio.

Speaker Change: With that, I would like to turn the call back over to Henri to review our financial results as well as the composition and performance of our portfolio. Thank you, Chris. Slide five highlights our key performance metrics for the fiscal first quarter ended May 31, 2024, most of which Chris already highlighted.

Henri Steenkamp: Thank you, Chris. Slide 5 highlights our key performance metrics for the fiscal first quarter ended May 31, 2024, most of which Chris already highlighted. Of note, the weighted average common shares outstanding of 13.7 million shares in Q1 and Q4 increased from 11.9 million last year. Adjusted NII increased this quarter up 11.6% from last year and up 12.1% from last quarter. The increases in investment income from higher average assets were offset by first increased interest expense resulting from the various new notes payable and SBA debentures issued during the past year. And two increased base and incentive management fees from higher AUM and earnings.

Henri J. Steenkamp: Slide five highlights our key performance metrics for the fiscal first quarter ended May 31, 2024, most of which Chris already highlighted. Of note, the weighted average common shares outstanding of 13.7 million shares in Q1 and Q4 increased from 11.9 million last year. Adjusted NII increased this quarter, up 11.6% from last year and up 12.1% from last quarter. However, the increases in investment income from higher average assets were offset by first, increased interest expense resulting from the various new notes payable and SBA debentures issued during the past year, and two, increased base and incentive management fees from higher AUM and earnings.

Speaker Change: Of note, the weighted average common shares outstanding of 13.7 million shares in Q1 and Q4 increased from 11.9 million last year.

Speaker Change: Adjusted NII increased this quarter up 11.6% from last year and up 12.1% from last quarter.

Speaker Change: The increases in investment income from higher average assets were offset by first, increased interest expense resulting from the various new notes payable and SBA debentures issued during the past year, and two, increased base and incentive management fees from higher AUM and earnings.

Henri Steenkamp: Toto expenses for this quarter, excluding interest and debt financing expenses, base management fees and incentive fees, and income and excise taxes, increased from $2.3 million to $2.9 million as compared to last year and from $1.9 million for last quarter. Increased expenses this quarter primarily related to legal expenses incurred with the restructuring activities, as well as increased general regulatory, accounting, and compliance requirements.

Henri J. Steenkamp: Total expenses for this quarter, excluding interest and debt financing expenses, base management fees, and incentive fees, and income and excise taxes, increased from $2.3 million to $2.9 million as compared to last year and from $1.9 million for last quarter.

Speaker Change: Total expenses for this quarter, excluding interest and debt financing expenses, base management fees and incentive fees, and income and excise taxes, increased from $2.3 million to $2.9 million as compared to last year, and from $1.9 million for last quarter.

Henri J. Steenkamp: This represented 1.0% of average total assets on an annualized basis, up from 0.8% last year and 0.7% last quarter. Additionally, increased expenses this quarter, primarily related to legal expenses incurred with the restructuring activities, as well as increased general regulatory, accounting, and compliance requirements. Also, we have again added KPI slides 26 through 29 in the appendix at the end of the presentation that show our income statement and balance sheet metrics for the past nine quarters, including a 36% increase in net interest margin over the past year.

Speaker Change: This represented 1.0% of average total assets on an annualized basis, up from 0.8% last year and 0.7% last quarter.

Speaker Change: Increased expenses this quarter, primarily related to legal expenses incurred with the restructuring activities, as well as increased general regulatory, accounting, and compliance requirements.

Henri Steenkamp: Also, we have again added the KPI slides 26 through 29 in the appendix at the end of the presentation that shows our income statement and balance sheet metrics for the past nine quarters, including a 36% increase in net interest margin over the past year. Moving on to slide 6, NAV was $367.9 million as of this quarter end, a $2.3 million decrease from last quarter and a $30.4 million increase from the same quarter last year. This chart also includes our historical NAV per share, which highlights how this important metric has increased 21 of the past 27 quarters, with Q1 down 27 cents per share and with this quarter and recent reductions primarily reflecting the specific asset markdowns already discussed.

Speaker Change: Also, we have again added the KPI slides 26 through 29 in the appendix at the end of the presentation that shows our income statement and balance sheet metrics for the past nine quarters, including a 36% increase in net interest margin over the past year.

Henri J. Steenkamp: Moving on to slide 6, NAV was $367.9 million as of this quarter end, a $2.3 million decrease from last quarter and a $30.4 million increase from the same quarter last year. This chart also includes our historical NAV per share, which highlights how this important metric has increased 21 of the past 27 quarters, with Q1 down 27 cents per share and with this quarter and recent reductions primarily reflecting the specific asset markdowns already discussed.

Speaker Change: Moving on to slide 6, NAV was $367.9 million as of this quarter end, a $2.3 million decrease from last quarter, and a $30.4 million increase from the same quarter last year.

Speaker Change: This chart also includes our historical NAV per share, which highlights how this important metric has increased 21 of the past 27 quarters.

Speaker Change: with Q1 down 27 cents per share and with this quarter and recent reductions primarily reflecting the specific asset markdowns already discussed.

Henri Steenkamp: Over the long term, our net asset value has steadily increased since 2011, and this growth has been accretive, as demonstrated by the long-term increase in NAV per share. Over the past five years, NAV per share is up $2.79 per share, or 11.6%. We continue to benefit from our history of consistent realized and unrealized gains.

Henri J. Steenkamp: Over the long term, our net asset value has steadily increased since 2011, and this growth has been accretive, as demonstrated by the long-term increase in NAV per share. For the past five years, NAV per share is up $2.79 per share, or 11.6%. We continue to benefit from our history of consistent realized and unrealized gains. On slide 7, you will see a simple reconciliation of the major changes in adjusted NII and NAV per share on a sequential quarterly basis.

Speaker Change: Over the long term, our net acid value has steadily increased since 2011 and this growth has been accretive as demonstrated by the long-term increase in NAV per share.

Speaker Change: Over the past five years, NAV per share is up $2.79 per share or 11.6%. We continue to benefit from our history of consistent realized and unrealized gains.

Henri Steenkamp: On slide 7, you will see a simple reconciliation of the major changes in adjusted NAI and NAV per share on a sequential quarterly basis. Starting at the top, adjusted NAI per share was up 11 cents, primarily due to the 4 cent increase in non-CLO NAI from higher average AUM and 5 cent decrease in operating expenses. On the lower half of the slide, NAV per share decreased by 27 cents primarily due to the 53 cents net realized loss and unrealized appreciation more than offsetting the gap NII excess earned over the Q4 dividend. Slide 8 outlines the dry powder available to us as of quarter end, which totaled $299 million.

Speaker Change: On slide 7, you will see a simple reconciliation of the major changes in adjusted NII and NAV per share on a sequential quarterly basis.

Henri J. Steenkamp: Starting at the top, adjusted NII per share was up $0.11, primarily due to the $0.04 increase in non-CLO NII from higher average AUM and $0.05 decrease in operating expenses. On the lower half of the slide, NAV per share decreased by $0.27, primarily due to the $0.53 net realized loss and unrealized depreciation more than offsetting the GAAP NII excess earned over the Q4 dividend. Slide 8 outlines the dry powder available to us as of quarter end, which totaled $299 million.

Speaker Change: Starting at the top, adjusted NII per share was up $0.11, primarily due to the $0.04 increase in non-CLO NII from higher average AUM and $0.05 decrease in operating expenses.

Speaker Change: On the lower half of the slide, NAV per share decreased by $0.27, primarily due to the $0.53 net realized loss and unrealized depreciation more than offsetting the GAAP NII excess earned over the Q4 dividend.

Speaker Change: Slide 8 outlines the dry powder available to us as of quarter end, which totaled $299 million. This was spread between our available cash, undrawn SBA debentures, and undrawn secured credit facilities.

Henri Steenkamp: This was spread between our available cash. Andro and HBA debentures and Andro secured credit facilities. This quarter-end level of available liquidity allows us to grow our assets by an additional 27% without the need for external financing. With $93 million of quarter-end cash available and thus fully accretive to NAI when deployed, and $136 million of available SBA debentures with its low-cost pricing, also very accretive. We also include a column showing any call options of our debt. This shows that our $321 million of baby bonds, effectively all out 6% plus debt, is callable within the next year, creating a natural protection against potential future decreasing interest rates, which should allow us to protect our net interest margin if needed.

Henri J. Steenkamp: This was spread between our available cash, undrawn SBA debentures, and undrawn secured credit facilities. This quarter-end level of available liquidity allows us to grow our assets by an additional 27% without the need for external financing, with $93 million of quarter-end cash available and thus fully accretive to NII when deployed, and $136 million of available SBA debentures, with its low-cost pricing, also very acc We also include a column showing any call options on our debt.

Speaker Change: This quarter-end level of available liquidity allows us to grow our assets by an additional 27% without the need for external financing. With $93 million of quarter-end cash available and thus fully accretive to NII when deployed,

Speaker Change: and $136 million of available SBA debentures with its low-cost pricing, also very accretive.

Speaker Change: We also include a column showing any call options of our debt.

Speaker Change: This shows that our $321 million of baby bonds, effectively all our 6% plus debt, is callable within the next year, creating a natural protection against potential future decreasing interest rates, which should allow us to protect our net interest margin if needed.

Henri Steenkamp: Also new to our capital structure and liquidity is the Live Oak Bank, $350 million secured, revolving credit facility that we closed in March this year, and subsequently upsized to $75 million in June. We remain pleased with our available liquidity and leverage position, including our access to diverse sources of both public and private liquidity, and especially taking into account the overall conservative nature of our balance sheet. The fact that almost all our debt is long term in nature, and with almost no non-SBIC debt maturing within the next two years. Also, our debt is structured in such a way that we have no BDC governance that can be stressed during volatile times.

Henri J. Steenkamp: This shows that our $321 million of baby bonds, effectively all of our 6% plus debt, is callable within the next year, creating a natural protection against potential future decreasing interest rates, which should allow us to protect our net interest margin if needed. Also new to our capital structure and liquidity is the Live Oak Bank 3-year $50 million secured revolving credit facility that we closed in March this year and subsequently upsized to $75 million in June.

Speaker Change: Also new to our capital structure and liquidity is the Live Oak Bank three-year $50 million secured revolving credit facility that we closed in March this year and subsequently upsized to $75 million in June .

Henri J. Steenkamp: We remain pleased with our available liquidity and leverage position, including our access to diverse sources of both public and private liquidity, and especially taking into account the overall conservative nature of our balance sheet, the fact that almost all our debt is long-term in nature, and with almost no non-SBIC debt maturing within the next two years. Also, our debt is structured in such a way that we have no BDC covenants that can be stressed during volatile times.

Speaker Change: We remain pleased with our available liquidity and leverage position, including our access to diverse sources of both public and private liquidity, and especially taking into account the overall conservative nature of our balance sheet.

Speaker Change: The fact that almost all our debt is long-term in nature and with almost no non-SBIC debt maturing within the next two years. Also, our debt is structured in such a way that we have no BBC covenants that can be stressed during volatile times.

Henri Steenkamp: Now we'd like to move on to slides 9 through 12 and review the composition and yield of our investment portfolio. Slide 9 highlights that we now have $1.096 billion of AUM at fair values, and this is invested in 53 portfolio companies, one CLO fund, and one joint venture. Our first percentage is 86% of our total investments, of which 34% is in first lean last out positions. On slide 10, you can see how the yield and our core BDC assets, excluding our CLO, has changed over time, especially the past two years. This quarter, our core BDC yield remained the same at 12.6% with base rates relatively unchanged.

Henri J. Steenkamp: Now I would like to move on to slides 9 through 12 and review the composition and yield of our investment portfolio. Slide 9 highlights that we now have $1.096 billion of AUM at fair value, and this is invested in 53 portfolio companies, one CLO fund, and one joint venture. Our first lien percentage is 86% of our total investments, of which 34% is in first lien lost out positions. On slide 10, you can see how the yield in our core BDC acids, excluding our CLO, has changed over time, especially in the past two years. This quarter, our core BDC yield remained the same at 12.6% with base rates relatively unchanged. The CLO yield decreased slightly to 12.4% from last quarter.

Speaker Change: Now, I would like to move on to slides 9 through 12 and review the composition and yield of our investment portfolio.

Speaker Change: Slide 9 highlights that we now have $1.096 billion of AUM at fair value, and this is invested in 53 portfolio companies, one CLO fund, and one joint venture.

Speaker Change: Our first lien percentage is 86% of our total investments, of which 34% is in first lien last out positions.

Speaker Change: On slide 10 you can see how the yield in our core BDC assets, excluding our CLO, has changed over time, especially the past two years.

Speaker Change: This quarter our core BDC yield remained the same at 12.6% with base rates relatively unchanged.

Henri Steenkamp: The CLO yield decreased slightly to 12.4% from last quarter. The CLO is performing and current.

Speaker Change: The CLO yield decreased slightly to 12.4% from last quarter. The CLO is performing and current.

Henri Steenkamp: Slide 11 shows how our investments are diversified through the US, and on slide 12 you can see the industry breadth and diversity that our portfolio represents, spread over 43 distinct industries, in addition to our investments in the CLO and JV, which are included as structured finance securities. Moving on to slide 13, 8.4% of our investment portfolio consists of equity interests, which remain an important part of our overall investment strategy. This slide shows that for the past 12 fiscal years we had a combined $60.5 million of naturalized gains from the sale of equity interests, or sale or early redemption of other investments.

Henri J. Steenkamp: The CLO is performing and current. Slide 11 shows how our investments are diversified across the U.S. And on slide 12, you can see the industry breadth and diversity that our portfolio represents, spread over 43 distinct industries, in addition to our investments in the CLO and JV, which are included as structured finance securities. Moving on to slide 13, 8.4% of our investment portfolio consists of equity interests, which remain an important part of our overall investment strategy.

Speaker Change: Slide 11 shows how our investments are diversified through the U.S. And on slide 12, you can see the industry breadth in diversity that our portfolio represents, spread over 43 distinct industries, in addition to our investments in the CLO and JV, which are included as structured finance securities.

Speaker Change: Moving on to slide 13, 8.4% of our investment portfolio consists of equity interests, which remain an important part of our overall investment strategy.

Henri J. Steenkamp: This slide shows that for the past 12 fiscal years, we had a combined $60.5 million of net realized gains from the sale of equity interests or sale or early redemption of other assets. This is Nate of the Zollage and Natria Realized Losses this past quarter.

Speaker Change: This slide shows that for the past 12 fiscal years, we had a combined $60.5 million of net realized gains from the sale of equity interest or sale or early redemption of other investments. This is net of the Zolidge and Net Realized Losses this past quarter.

Henri Steenkamp: This is net of the solid and naturalized losses this past quarter. This consistent realized gain performance continues to highlight our portfolio credit quality and has helped grow our NAV and is reflected in our healthy long-term ROE.

Michael Joseph Grisius: This consistent realized gain performance continues to highlight our portfolio credit quality and has helped grow our NAV and is reflected in our healthy long-term ROE. That concludes my financial and portfolio review. I will now turn the call over to Michael Grisius, our Chief Investment Officer, for an overview of the investment market. Thanks, Henry.

Speaker Change: This consistent realized gain performance continues to highlight our portfolio credit quality and has helped grow our NAV and is reflected in our healthy long-term ROE.

Henri Steenkamp: That concludes my financial and portfolio review.

Michael Grisius: I will now turn the call over to Michael Grishis, our Chief Investment Officer, for an overview of the investment market. Thanks, Henry. It's only been two months since we last caught up, so I'll focus on our perspective on the changes in the market since then, and then comment on our current portfolio performance and investment strategy.

Speaker Change: That concludes my financial and portfolio review. I will now turn the call over to Michael Grisius, our Chief Investment Officer, for an overview of the investment market.

Michael Joseph Grisius: It's only been two months since we last caught up, so I'll focus on our perspective on the changes in the market since then and then comment on our current portfolio performance and investment strategy. The overall deal market continues to reflect slower deal volume and M&A activity than in historical periods. While liquidity among private equity firms remains abundant, high financing costs and elevated levels of inflation continue to constrain the private equity deal market, which drives much of the demand for new credit.

Michael Joseph Grisius: Thanks, Henry.

Michael Joseph Grisius: It's only been two months since we last caught up, so I'll focus on our perspective on the changes in the market since then, and then comment on our current portfolio performance and investment strategy.

Michael Grisius: The overall deal market continues to reflect slower deal volume and M&A activity than in historical periods. While liquidity among private equity firms remains abundant, high financing costs and elevated levels of inflation continue to constrain the private equity deal market, which drives much of the demand for new credits. At the same time, some lenders have re-entered the market as they've grown more confident in the macroeconomic climate. The combination of historically low M&A volume and an abundant supply of capital is causing spread to tighten as lenders compete to win deals. As a result, we're anticipating some pickup in payoffs due to lenders offering extremely aggressive pricing on some of our low leverage assets.

Michael Joseph Grisius: The overall deal market continues to reflect slower deal volume and M&A activity than in historical periods.

Michael Joseph Grisius: While liquidity among private equity firms remains abundant, high financing costs and elevated levels of inflation continue to constrain the private equity deal market, which drives much of the demand for new credits.

Michael Joseph Grisius: At the same time, some lenders have re-entered the market as they've grown more confident in the macroeconomic climate. The combination of historically low M&A volume and an abundant supply of capital is causing spreads to tighten as lenders compete to win deals.

Michael Joseph Grisius: At the same time, some lenders have re-entered the market as they've grown more confident in the macroeconomic climate.

Michael Joseph Grisius: The combination of historically low M&A volume and an abundant supply of capital is causing spreads to tighten as lenders compete to win deals.

Michael Joseph Grisius: As a result, we're anticipating some pickup in payoffs due to lenders offering extremely aggressive pricing on some of our low leverage assets. However, that said, we believe the risk-adjusted gross yields on first lien assets remain exceptional, and capital structures for new deals continue to be supported by strong equity capitalization. Overall, while new deal volume is modest as compared to our historical levels, it continues to be a favorable market for capital deployment, especially at the lower end of the middle market where we can.

Michael Joseph Grisius: As a result, we're anticipating some pickup in payoffs due to lenders offering extremely aggressive pricing on some of our low leverage assets.

Michael Grisius: Now that said, we believe the risk-adjusted gross yields on firstly assets remain exceptional, and capital structures for new deals continue to be supported by strong equity capitalizations.

Michael Joseph Grisius: Now that said, we believe the risk adjusted gross yields on first lien assets remain exceptional and capital structures for new deals continue to be supported by strong equity capitalizations.

Michael Grisius: Overall, while new deal volume is modest as compared to our historical levels, it continues to be a favorable market for capital deployment, especially at the lower end of the middle market where we compete.

Michael Joseph Grisius: Overall, while new deal volume is modest as compared to our historical levels, it continues to be a favorable market for capital deployment.

Michael Grisius: The Saratoga Management team has successfully managed through a number of credit cycles, and that experience has made us particularly aware of the importance of first being disciplined when making investment decisions, and second being proactive in managing our portfolio. In an environment that has seen ever-shifting expectations for the economy due to inflation and rising interest rates, among other factors, we have stayed largely focused on managing and supporting our portfolio. Our underwriting bar remains high as usual, yet we continue to find opportunities to deploy capital. As seen on slide 14, our more recent performance has been characterized by continued asset deployment in existing portfolio companies, as demonstrated with 24 filamons thus far this calendar year, including delayed draws, which we expect to continue.

Michael Joseph Grisius: The Saratoga management team has successfully managed through a number of credit cycles, and that experience has made us particularly aware of the importance of, first, being disciplined when making investment decisions and, second, being proactive in managing our portfolio. In an environment that has seen ever-shifting expectations for the economy due to inflation and rising interest rates, among other factors, we have stayed largely focused on managing and supporting our portfolio. Our underwriting bar remains high as usual, and yet we continue to find opportunities to deploy capital.

Michael Joseph Grisius: especially at the lower end of the middle market where we compete.

Michael Joseph Grisius: The Saratoga management team has successfully managed through a number of credit cycles, and that experience has made us particularly aware of the importance of, first, being disciplined when making investment decisions, and second, being proactive in managing our portfolio.

Michael Joseph Grisius: In an environment that has seen ever-shifting expectations for the economy due to inflation and rising interest rates, among other factors, we have stayed largely focused on managing and supporting our portfolio.

Michael Joseph Grisius: Our underwriting bar remains high as usual, yet we continue to find opportunities to deploy capital.

Michael Joseph Grisius: As seen on slide 14, our more recent performance has been characterized by continued asset deployment in our existing portfolio, as demonstrated with 24 follow-ons thus far this calendar year, including delayed draws, which we expect to continue. While we have invested in no new platform investments this calendar year as yet, we have focused much of our time and resources on supporting our portfolio and managing a discrete view challenge credit. Overall, our deal flow remains strong, and our consistent ability to generate new investments over the long term, despite ever-changing and increasingly competitive market dynamics, is a strength of ours.

Michael Joseph Grisius: As seen on slide 14, our more recent performance has been characterized by continued asset deployment in existing portfolio companies.

Michael Joseph Grisius: as demonstrated with 24 follow-ons thus far this calendar year, including delayed draws, which we expect to continue.

Michael Grisius: While we invested in no new platform investments this calendar year as of yet, we focus much of our time and resources on supporting our portfolio and managing a discrete-viewed challenge credits. Overall, our deal flow remains strong, and our consistent ability to generate new investments over the long term, despite ever-changing and increasingly competitive market dynamics, is a strength of ours.

Michael Joseph Grisius: While we invested in no new platform investments this calendar year as of yet, we focused much of our time and resources on supporting our portfolio and managing a discrete view challenge credits.

Michael Joseph Grisius: Overall, our deal flow remains strong and our consistent ability to generate new investments over the long term, despite ever-changing and increasingly competitive market dynamics, is a strength of ours.

Michael Grisius: Portfolio Management continues to be critically important, and we remain actively engaged with our portfolio companies and in close contact with our management teams. The few discrete credits discussed in previous quarters that are experiencing various levels of stress remain unchanged, and I will touch on them shortly. But in general, our portfolio companies are healthy, and 79% of our portfolio is generating financial results at or above the prior quarter. 86% of our portfolios in first-line debt, and generally supported by strong enterprise values, in industries that have historically performed well in stress situations. We have no direct energy or commodity exposure.

Michael Joseph Grisius: Portfolio management continues to be critically important, and we remain actively engaged with our portfolio companies and in close contact with our management. The few discrete credits discussed in previous quarters that are experiencing various levels of stress remain unchanged, and I will touch on them shortly. But in general, our portfolio companies are healthy, and 79% of our portfolio is generating financial results at or above the prior quarter. 86% of our portfolio is in first lien debt and generally supported by strong enterprise values in industries that have historically performed well in stress situations. We have no direct energy or commodity exposure.

Michael Joseph Grisius: Portfolio management continues to be critically important.

Michael Joseph Grisius: And we remain actively engaged with our portfolio companies and in close contact with our management teams.

Michael Joseph Grisius: The few discrete credits discussed in previous quarters that are experiencing various levels of stress remain unchanged.

Michael Joseph Grisius: and I will touch on them shortly. But in general, our portfolio companies are healthy, and 79% of our portfolio is generating financial results at or above prior quarter.

Michael Joseph Grisius: 86% of our portfolio is in first lien debt and generally supported by strong enterprise values in industries that have historically performed well in stress situations.

Michael Grisius: In addition, the majority of our portfolios comprise the businesses that produce a high degree of recurring revenue and have historically demonstrated strong revenue retention. Consistent with last quarter, we still have three investments on non-accrual, namely Noland, Pepper Palace, and Solage.

Michael Joseph Grisius: In addition, the majority of our portfolio is comprised of businesses that produce a high degree of recurring revenue and have historically demonstrated strong revenue retention. Consistent with last quarter, we still have three investments on non-accrual, namely Noland, Pepper Palace, and Solid. Now looking at leverage on this same slide, you can see that industry debt multiples have continued to come down slightly this year from their historically high levels. Total leverage of our portfolio was 4.27 times, excluding Nolan, Pepper, Palace, and Zolid.

Michael Joseph Grisius: We have no direct energy or commodities exposure.

Michael Joseph Grisius: In addition, the majority of our portfolio is comprised of businesses that produce a high degree of recurring revenue and have historically demonstrated strong revenue retention.

Michael Joseph Grisius: Consistent with last quarter, we still have three investments on non-accrual, namely Noland, Pepper Palace, and Zalich.

Michael Grisius: Now looking at leverage on this same slide, you can see that industry debt multiples have continued to come down slightly this year from their historically high levels. Total leverage of our portfolio was 4.27 times, excluding. Despite the success we've had investing in highly attractive businesses and growing our portfolio over the years, it is important to emphasize that we are not aiming to grow simply for growth safe. Our capital deployment bar is always high and is conditioned upon healthy confidence that each incremental investment is in a durable business and will be accretive to our shareholders.

Michael Joseph Grisius: Looking at leverage on this same slide, you can see that industry debt multiples have continued to come down slightly this year from their historically high levels.

Michael Joseph Grisius: Total leverage of our portfolio was 4.27 times, excluding Nolan, Pepper-Powell, and Zalich, while the industry is now again above five times leverage.

Michael Joseph Grisius: Well, the industry is now, again, above five times leverage. Despite the success we've had investing in highly attractive businesses and growing our portfolio over the years, it is important to emphasize that we are not aiming to grow simply for growth's sake. Our capital deployment bar is always high and is conditioned upon healthy confidence that each incremental investment is in a durable business and will be accretive to our shareholders.

Michael Joseph Grisius: Despite the success we've had investing in highly attractive businesses and growing our portfolio over the years

Michael Joseph Grisius: It is important to emphasize that we are not aiming to grow simply for growth's sake. Our capital deployment bar is always high and is conditioned upon healthy confidence that each incremental investment is in a durable business and will be accretive to our shareholders.

Michael Grisius: Slide 15 provides more data on our deal flow. As you can see, the top of our deal pipeline is down from prior periods, in part because we made a conscious effort to improve the quality of our deal funnel, and in part because market activity is down considerably, as previously discussed. Overall, the significant progress we've made in building broader and deeper relationships in the marketplace is noteworthy because it strengthens the dependability of our deal flow and reinforces our ability to remain highly selective as we rigorously screen opportunities to execute on the best investments.

Michael Joseph Grisius: Slide 15 provides more data on our deal flow. As you can see, the top of our deal pipeline is down from prior periods, in part because we made a conscious effort to improve the quality of our deal funnel, and in part because market activity is down considerably, as previously discussed. Overall, the significant progress we've made in building broader and deeper relationships in the marketplace is noteworthy because it strengthens the dependability of our deal flow and reinforces our ability to remain highly selective as we rigorously screen opportunities to execute on the best investments.

Michael Joseph Grisius: Slide 15 provides more data on our deal flow.

Michael Joseph Grisius: As you can see, the top of our deal pipeline is down from prior periods, in part because we made a conscious effort to improve the quality of our deal funnel, and in part because market activity is down considerably, as previously discussed.

Michael Joseph Grisius: Overall, the significant progress we've made in building broader and deeper relationships in the marketplace is noteworthy because it strengthens the dependability of our deal flow and reinforces our ability to remain highly selective as we rigorously screen opportunities to execute on the best investments.

Michael Joseph Grisius: As you can see on slide 16, our overall portfolio quality remains solid. While we are presently facing challenges in a few credits, I thought I'd take a moment to highlight that our team remains focused on deploying capital in strong business models where we are confident that, under all reasonable scenarios, the enterprise value of the business will sustainably exceed the last dollar of our investment. We can't be perfect, but we strive to be as perfect as possible, and we have not feared from our thorough and cautious underwriting approach. Over the dozen-plus years that we've been working together, we've invested $2.2 billion in 116 portfolios. We've had just two realized losses on investment.

Michael Grisius: As you can see on slide 16, our overall portfolio quality remains solid. While we are presently facing challenges in a few credits, I thought I'd take a moment to highlight that our team remains focused on deploying capital in strong business models where we are confident that, under all reasonable scenarios, the enterprise value of the business will sustainably exceed the last dollar of our investment. We can't be perfect, but we strive to be as perfect as possible, and we have not feared from our thorough and cautious underwriting approach.

Michael Joseph Grisius: As you can see on slide 16, our overall portfolio quality remains solid.

Speaker Change: While we are presently facing challenges in a few credits, I thought I'd take a moment to highlight that our team remains focused on deploying capital in strong business models where we are confident that, under all reasonable scenarios, the enterprise value of the business will sustainably exceed the last dollar of our investment.

Speaker Change: We can't be perfect, but we strive to be as perfect as possible, and we have not feared from our thorough and cautious underwriting approach.

Michael Joseph Grisius: Over that same time frame, we've successfully exited 69 of those investments, achieving gross unlevered realized returns of 15.4% on $978 million of real estate. Even taking into account the current write-downs of a few discrete credits, our combined realized and unrealized returns on all capital invested equals 13.5%. We think this performance profile is particularly attractive for a portfolio predominantly constructed with first lien senior debt. We continue to have three investments on non-accrual, with Pepper Pallas and Zalich classified as red, and Noland as yellow.

Michael Grisius: Over the dozen-plus years that we've been working together, we've invested $2.2 billion in 116 portfolio companies. We've had just two realized losses on investment. Over that same time frame, we've successfully exited 69 of those investments, achieving gross unlevered realized returns at 15.4% on $978 million of realizations. Even taking into account the current write downs of a few discrete credits, are combined, realized, and unrealized returns on all capital invested equals 13.5%. We think this performance profile is particularly attractive for a portfolio predominantly constructed with first lean senior debt. We continue to have three investments on non-accrual, with Pepper Palace and Solids classified as red, and Nolan is yellow.

Speaker Change: Over the dozen plus years that we've been working together, we've invested 2.2 billion dollars in 116 portfolio companies.

Speaker Change: We've had just two realized losses on investments.

Speaker Change: Over that same time frame, we've successfully exited 69 of those investments, achieving gross unlevered realized returns of 15.4% on $978 million of realizations.

Speaker Change: Even taking into account the current write-downs of a few discrete credits, our combined realized and unrealized returns on all capital invested equals 13.5%.

Speaker Change: We think this performance profile is particularly attractive for a portfolio predominantly constructed with first lien senior debt.

Speaker Change: We continue to have three investments on non-accrual, with Pepper Palace and Zalich classified as red and Nolan as yellow.

Michael Grisius: Nolan has been on yellow for a while, and this quarter saw an improvement in the Q3 mark for the second quarter in a row, reflecting recent modern improvement in the business and liquidity. Pepper Palace continued to suffer from poor performance and liquidity issues, reflecting the further $0.6 million markdown this quarter. The remaining fair value of this investment is $2.4 million. A transaction is imminent whereby we will restructure the balance sheet and take maturity control of the business. As part of this restructuring, the turnaround specialist we have been working with, who has substantial successful experience in similar situations, will invest significant equity in the business and become the CEO and a board member.

Michael Joseph Grisius: Nolan has been on the yellow for a while, and this quarter saw an improvement in the Q3 mark for the second quarter in a row, reflecting recent moderate improvement in the business and liquidity. Pepper Palace continues to suffer from poor performance and liquidity issues, reflecting the further $0.6 million markdown this quarter.

Speaker Change: Nolan has been on yellow for a while, and this quarter saw an improvement in the Q3 mark for the second quarter in a row, reflecting recent moderate improvement in the business and liquidity.

Speaker Change: Pepper Palace continued to suffer from poor performance and liquidity issues reflecting the further 0.6 million dollar markdown this quarter. The remaining fair value of this investment is 2.4 million dollars.

Michael Joseph Grisius: The remaining fair value of this investment is $2.4 million. A transaction is imminent whereby we will restructure the balance sheet and take maturity control of the business. As part of this restructuring, the turnaround specialist we have been working with, who has substantial successful experience in similar situations, will invest significant equity in the business and become the CEO and a board member. And a solid restructuring on the balance sheet was completed during this first quarter, resulting in us taking over the company and actively managing this investment.

Speaker Change: A transaction is imminent whereby we will restructure the balance sheet and take maturity control of the business.

Speaker Change: As part of this restructuring, the turnaround specialist we have been working with, who has substantial successful experience in similar situations, will invest significant equity in the business and become the CEO and a board member.

Michael Grisius: And the solid restructuring on the balance sheet was completed during this first quarter, resulting in us taking over the company and actively managing this investment. We have in place a framework for an agreement that would have the previous owner invest meaningful dollars in the business and work in partnership with us, with the immediate goal of returning the business to its former profitability levels and the ultimate objective of exceeding those levels. As part of the restructuring, we realized the $15.1 million realized loss for accounting, although we still have equity and a first lead term loan in the company with a current value of $2 million.

Speaker Change: The solid restructuring on the balance sheet was completed during this first quarter, resulting in us taking over the company and actively managing this investment.

Michael Joseph Grisius: We have in place a framework for an agreement that would have the previous owner invest meaningful dollars in the business and work in partnership with us with the immediate goal of returning the business to its former profitability levels and the ultimate objective of exceeding those goals. As part of the restructuring, we realized a $15.1 million realized loss in accounting. Although we still have equity and a first lien term loan in the company with a current value of $2 million.

Speaker Change: We have in place a framework for an agreement that would have the previous owner invest meaningful dollars in the business and work in partnership with us with the immediate goal of returning the business to its former profitability levels and the ultimate objective of exceeding those levels.

Speaker Change: As part of the restructuring, we realized a $15.1 million realized loss for accounting, although we still have equity and a first lien term loan in the company with a current value of $2 million.

Michael Grisius: As previously communicated during the quarter, our natural investment was paid off, and we realized the $6.1 million loss on our equity. It is important to note, however, that this investment, taken as a whole, including both our debt and equity, produced a positive IRR of approximately 5% without taking into account any potential yield enhancement that could be achieved through our residual escrow and earn out. In addition, the CLO and JV had $5 million of unrealized depreciation this quarter, reflecting primarily marked down as due to individual credits in our original CLO. Of note, is the rest of the core BDC portfolio has continued to perform well, resulting in $1.2 million of net unrealized A appreciation across our remaining 51 portfolio companies in Q1.

Michael Joseph Grisius: As previously communicated, during the quarter, our NETRIO investment was paid off, and we realized a $6.1 million loss on our equity. It is important to note, however, that this investment, taken as a whole, including both our debt and equity, produced a positive IRR of approximately 5% without taking into account any potential yield enhancement that could be achieved through our residual escrow and earn out. In addition, the CLO and JV had $5 million of unrealized depreciation this quarter, reflecting primarily markdowns due to individual credits in our original CLO.

Speaker Change: As previously communicated, during the quarter, our Netrio investment was paid off and we realized a $6.1 million loss on our equity.

Speaker Change: It is important to note, however, that this investment, taken as a whole, including both our debt and equity, produced a positive IRR of approximately 5% without taking into account any potential yield enhancement that could be achieved through our residual escrow and earn-out.

Speaker Change: In addition, the CLO and JV had $5 million of unrealized depreciation this quarter, reflecting primarily markdowns due to individual credits in our original CLO.

Michael Joseph Grisius: Of note is that the rest of the core BDC portfolio has continued to perform well, resulting in $1.2 million of net unrealized appreciation across our remaining 51 portfolio companies in Q1. Our overall investment approach has yielded exceptional realized returns and recovery of our invested capital, and our long-term performance remains strong, as seen by our track record on this slide. Now moving on to slide 17, you can see our second SBIC license is fully funded and deployed.

Speaker Change: Of note is the rest of the core BDC portfolio has continued to perform well, resulting in $1.2 million of net unrealized appreciation across our remaining 51 portfolio companies in Q1.

Michael Grisius: Our overall investment approach has yielded exceptional realized returns and recovery of our invested capital, and our long-term performance remains strong, as seen by our track record on this slide.

Speaker Change: Our overall investment approach has yielded exceptional realized returns and recovery of our invested capital, and our long-term performance remains strong, as seen by our track record on this slide.

Michael Grisius: Now moving on to slide 17, you can see our second SBIC license is fully funded and deployed, and we are currently ramping up our new SBIC-3 license with $136 million of lower cost, undrawn debentures available, allowing us to continue to support U.S. small businesses, both new and existing.

Speaker Change: Moving on to slide 17, you can see our second SBIC license is fully funded and deployed, and we are currently ramping up our new SBIC-3 license.

Christian L. Oberbeck: And we are currently ramping up our new SBIC 3 license, with $136 million of lower-cost, undrawn debentures available, allowing us to continue to support U.S. small businesses, both new and existing. So this concludes my review of the market, and I'd like to turn the call back over to our CEO, Chris. Thank you, Mike. As outlined on slide 18, our latest dividend of 74 cents per share for the quarter ended May 31, 2024, was paid on June 27, 2024.

Speaker Change: with $136 million of lower-cost, undrawn debentures available, allowing us to continue to support U.S. small businesses, both new and existing.

Christian Oberbeck: Now this concludes my review of the market, and I'd like to turn the call back over to our CEO, Chris.

Christian Oberbeck: Thank you, Mike. As outlined on slide 18, our latest dividend of 74 cents per share for the quarter ended May 31st, 2024, was paid on June 27th, 2024. This is the largest quarterly dividend in our history and reflects a 6% and 40% increase over the past 1 and 2 years, respectively.

Speaker Change: Now this concludes my review of the market and I'd like to turn the call back over to our CEO , Chris.

Christian L. Oberbeck: This is the largest quarterly dividend in our history and reflects a 6% and 40% increase over the past one and two years, respectively. The Board of Directors will continue to evaluate the dividend level on at least a quarterly basis, considering both company and general economic factors, including the current interest rate environment's impact on our earnings. Recognizing the divergence of opinions on when interest rate cuts will commence and at what pace, as well as expectations for the economy, Saratoga's Q1 over-earning of its dividend by 42%, $1.05 vs. $0.74 per share this quarter, deleverages by building NAV, and also provides substantial cushion should economic conditions deteriorate or base rates decline.

Chris: Thank you, Mike.

Chris: As outlined on slide 18, our latest dividend of 74 cents per share for the quarter ended May 31st, 2024 was paid on June 27th, 2024. This is the largest quarterly dividend in our history and reflects a 6% and 40% increase over the past one and two years, respectively.

Christian Oberbeck: The board of directors will continue to evaluate the dividend level on at least a quarterly basis, considering both company and general economic factors, including the current interest rate environment's impact on our earnings. Recognizing the divergence of opinions on when interest rate cuts will commence and in what pays, as well as expectations for the economy, Saratoga's Q1 over earning of its dividend by 42 percent, $1.5 versus 74 cents per share of this quarter, de-leverages by building an AV and also provide substantial cushion should economic conditions deteriorate or base rates decline.

Chris: The Board of Directors will continue to evaluate the dividend level on at least a quarterly basis, considering both company and general economic factors, including the current interest rate environment's impact on our earnings.

Chris: Recognizing the divergence of opinions on when interest rate cuts will commence and at what pace, as well as expectations for the economy,

Chris: Saratoga's Q1 over-earning of its dividend by 42%, $1.05 vs. $0.74 per share this quarter, deleverages by building NAV and also provides substantial cushion should economic conditions deteriorate or base rates decline.

Christian Oberbeck: Moving to slide 19, our total return to the last 12 months, which includes both capital appreciation and dividends, has generated total returns of negative 5%. Uncharacteristically low and underperform the BDC index of 27% for the same period.

Christian L. Oberbeck: Moving to slide 19, our total return for the last 12 months, which includes both capital appreciation and dividends, has generated total returns of negative 5 percent, uncharacteristically low and underperforming the BDC index of 27 percent for the same period. Our longer-term performance is outlined on our next slide, 20. Our five-year return places us almost in line with the BDC index, while our three-year performance is now slightly below the index, being impacted by the recent recent 12-month performance. Since Saratoga took over management of the BDC in 2010, our total return has been 655% versus the industry's 276%.

Speaker Change: Moving to slide 19, our total return for the last 12 months, which includes both capital appreciation and dividends, has generated total returns of negative 5 percent, uncharacteristically low and underperforming the BDC index of 27 percent for the same period.

Christian Oberbeck: Our longer-term performance is outlined on our next slide, 20. Our five-year return places us almost in line with the BDC index, while our three-year performance is now slightly below the index, being impacted by the recent latest 12-month performance.

Speaker Change: Our longer-term performance is outlined on our next slide, 20.

Speaker Change: Our five-year return places us almost in line with the BDC index, while our three-year performance is now slightly below the index, being impacted by the recent latest 12-month performance.

Christian Oberbeck: Since Saratoga took over management of the BDC in 2010, our total return has been 655% versus the industry's 276%. On slide 21, you can further see our performance placed in the context of the broader industry and specific to certain key performance metrics. We continue to focus on our long-term metrics, such as return on equity and AV per share in our IELD and dividend growth and coverage, all of which reflects the growing value our shareholders are receiving. While return on equity and NAV per share are lagging the industry for this past year, that is primarily due to three discrete non-accruals we have previously discussed.

Saratoga: Since Saratoga took over management of the BDC in 2010, our total return has been 655% versus the industry's 276%.

Christian L. Oberbeck: On slide 21, you can further see our performance placed in the context of the broader industry and specific to certain key performance metrics. We continue to focus on our long-term metrics, such as return on equity, NAV per share, NAI yield, and dividend growth and coverage, all of which reflect the growing value our shareholders are receiving. While return on equity and NAV per share are lagging the industry this past year, that is primarily due to three discrete non-accruals we have previously discussed.

Saratoga: On slide 21, you can further see our performance placed in the context of the broader industry and specific to certain key performance metrics.

Saratoga: We continue to focus on our long-term metrics, such as return on equity, NAV per share, NAI yield, and dividend growth and coverage, all of which reflects the growing value our shareholders are receiving.

Saratoga: While return on equity and NAV per share are lagging the industry for this past year, that is primarily due to three discrete non-accruals we have previously discussed.

Christian Oberbeck: Our dividend coverage and dividend growth has been one of the strongest in the industry.

Christian L. Oberbeck: Our dividend coverage and dividend growth has been one of the strongest in the industry. We also continue to be one of the few BDCs to have grown NAV over the long term, and we have done it creatively, and our long-term return on equity remains 1.6 times the long-term industry average. Moving on to slide 22, all of the initiatives discussed in this call are designed to make Saratoga Investment a leading BDC that is attractive to the capital markets community.

Christian Oberbeck: We also continue to be one of the few BDC's of grown NAV over the long-term, and we have done it accretively, and our long-term return on equity remains 1.6 times the long-term industry average.

Saratoga: Our dividend coverage and dividend growth has been one of the strongest in the industry. We also continue to be one of the few BDCs to have grown NAV over the long term, and we have done it accretively. And our long-term return on equity remains 1.6 times the long-term industry average.

Christian Oberbeck: Moving on to slide 22, all of our initiatives discussed on this call are designed to make Saratoga Investment a leading BDC that is attractive to the capital markets community. We believe their differentiated performance characteristics outlined in this slide will help drive the size and quality of our investor base, including adding more institutions. These differentiating characteristics, many previously discussed, include maintaining one of the highest levels of management ownership in the industry at 12.5%, ensuring we are aligned with our shareholders.

Saratoga: Moving on to slide 22, all of our initiatives discussed in this call are designed to make Saratoga Investment a leading BDC that is attractive to the capital markets community. We believe that our differentiated performance characteristics outlined in this slide will help drive the size and quality of our investor base, including adding more institutions.

Christian L. Oberbeck: We believe that our differentiated performance characteristics outlined in this slide will help drive the size and quality of our investor base, including adding more institutions. These differentiating characteristics, many of which have been discussed, include maintaining one of the highest levels of management ownership in the industry at 12.5 percent, ensuring we are aligned with our shareholders.

Saratoga: These differentiating characteristics, many previously discussed, include maintaining one of the highest levels of management ownership in the industry at 12.5%, ensuring we are aligned with our shareholders.

Christian Oberbeck: Looking ahead on slide 23, we remain confident that our reputation, experience management team, historically strong underwriting standards, and time- and market-tested investment strategy will serve us well in navigating through challenges and uncovering opportunities in the current and future environment, and that our balance sheet, capital structure, and liquidity will benefit Saratoga shareholders in the near and long term.

Christian L. Oberbeck: Looking ahead on slide 23, we remain confident that our reputation, experienced management team, historically strong underwriting standards, and time and market-tested investment strategy will serve us well in navigating through challenges and uncovering opportunities in the current and future environment, and that our balance sheet, capital structure, and liquidity will benefit Saratoga's shareholders in the near and long term. In closing, I would again like to thank all of our shareholders for their ongoing support, and I would now like to open the call for questions.

Speaker Change: Looking ahead on slide 23, we remain confident that our reputation

Saratoga: experienced management team, historically strong underwriting standards, and time and market-tested investment strategy will serve us well in navigating through challenges and uncovering opportunities in the current and future environment.

Saratoga: and that our balance sheet, capital structure, and liquidity will benefit Saratoga's shareholders in the near and long term.

Operator: In closing, I would again like to thank all of our shareholders for their ongoing support, and I would like to now open the call for questions.

Speaker Change: In closing, I would again like to thank all of our shareholders for their ongoing support, and I would like to now open the call for questions.

Christian L. Oberbeck: Thank you. Ladies and gentlemen, if you have a question or a comment at this time, please press star 11 on your telephone. If your question has been answered, you are to remove yourself from the queue. Please press star 11 again.

Operator: Thank you, ladies and gentlemen.

Operator: If you have a question or a comment at the time, please press star 1-1 on your telephone. If your question has been answered, you will assume it yourself from the queue. Please press star 1-1 again.

Speaker Change: Thank you. Ladies and gentlemen, if you have a question or a comment at this time, please press star 11 on your telephone. If your question has been answered and you wish to remove yourself from the queue, please press star 11 again. We will pause for a moment while we compile our Q&A roster.

Operator: We will pause for a moment while we compile our Q&A roster. [inaudible] Our first question comes from Bryce Rowe. Your line is open. Thanks, good morning all.

Operator: We will pause for a moment while we compile our queue in a roster.

Bryce Rowe: The first question comes from Bryce Rowe.

Bryce Wells Rowe: I wanted to maybe start on just the environment for investing, you know, made some comments here around, you know, repayment activity, possibly picking up, and then Chris, you made a comment about... Bryce, can you pause for one moment? [inaudible] Operator, can you hear us? Yes, I can hear you. Can you hear me?

Bryce Rowe: Your line is open. Thanks.

Speaker Change: Mr. Forrest.

Bryce Rowe: Good morning all. Can you communicate with the operator? I wanted to maybe start on just the environment for investing. You know, make some comments here around repayment activity, possibly picking up, and then, of course, you made a comment about it. Can you pause for a moment? Here. Operator, can you hear us? Yes, I can hear you. Can you hear me? Operator, are you still dead? One, can you guys hear me? Kevin, we can hear you. You just disappeared there for a short while. Okay.

Speaker Change: Our first question comes from Bryce Rowe. Your line is open.

Speaker Change: Thanks, good morning all. Communicate with the operator.

Speaker Change: I wanted to maybe start on just the environment for investing, you know, making comments here around, you know, repayment activity possibly picking up, and then Chris, you made a comment about... Bryce, can you pause for one moment? Sure. Thank you.

Speaker Change: Yeah. Oh, I'm running.

Speaker Change: Operator, can you hear us? Yes, I can hear you.

Speaker Change: Can you hear me?

Operator: Operator, are you still there? One moment, Bryce, it looks like they're having some technical issues. Can you guys hear me?

Speaker Change: Operator, are you still there?

Operator: Yeah, Kevin, we can hear you. You just disappeared there for a short while. Okay, so Bryce, you can go ahead and ask your question. Okay. Hopefully, you guys can hear me.

Speaker Change: One moment, Bryce. It looks like they're having a little technical issues. Can you guys hear me? Yeah, Kevin, we can hear you. You just disappeared there for a short while. Okay, so Bryce, you can go ahead and ask your question.

Bryce Rowe: Bryce, you can go ahead and ask your question. Hopefully, you guys can hear me. I wanted to hear you on the investing environment. You made some comments around the payment activity possibly. Taking up, and of course you talked about cash having come in, I guess subsequent to quarter, and if you could just provide a little bit more commentary around that. And it also wanted to kind of get a feel for the environment for new transactions. Obviously, it's been pretty skinny over the last 12 months in terms of new deals into the portfolio.

Bryce Wells Rowe: I wanted to hear about the investing environment. You made some comments around repayment activity possibly picking up. And then, Chris, you talked about cash having come in, I guess, subsequent to quarter end. If you could just provide a little bit more commentary on that. And then also wanted to kind of get a feel for the environment for new transactions. Obviously, it's been pretty thin over the last 12 months in terms of new deals into the portfolio.

Speaker Change: Okay.

Speaker Change: Hopefully you guys can hear me.

Speaker Change: On the investing environment, you made some comments around kind of repayment activity possibly.

Speaker Change: Picking up and Chris, you talked about, you know, cash having come in, I guess, subsequent to quarter end. If you could just provide a little bit more commentary around around that. And then also wanted to kind of get a feel for

Speaker Change: The environment for new transactions, obviously, it's been pretty skinny over the last 12 months in terms of new deals into the portfolio. What is it that you'd like to see that maybe you're not seeing?

Bryce Wells Rowe: What is it that you'd like to see that maybe you're not seeing to get some of these newer opportunities across the finish line? Let me try to tackle that, Bryce, and all good questions. First of all, let me, let me give you a little bit of context on that.

Bryce Rowe: What is it that you'd like to see that maybe you're not seeing to get some of these newer opportunities across the finish line?

Bryce Rowe: Let me try to tackle that, Bryce.

Michael Joseph Grisius: And I'm sure you're aware, deal volume overall, for the US, especially for private equity-backed deals, I think the corporate M&A environment is starting to pick up. But for PE-backed deals, overall M&A activity is down, you know, kind of to record lows, even below, you know, any recent period in years, except for kind of the height of the COVID experience, that first half of 2020. As a result, we're not seeing as much activity and opportunities to invest in new portfolio companies. However, we're still seeing plenty of opportunities to exist or to support our existing portfolio companies. And you've seen us do that, you know, quite, quite actively in the last few quarters.

Speaker Change: to get some of these newer opportunities across the baseline.

Bryce Rowe: And all good questions.

Bryce Rowe: First of all, let me give you a little bit of context for that. And I'm sure you're aware the deal volume overall in the U.S., especially for private equity-backed deals. I think the corporate M&A environment is starting to pick up, but for PE back deals, overall M&A activity is down, kind of record lows. Even below any recent period in years, except for kind of the height of the COVID experience, that first half of 2020. As a result, we're not seeing as much activity and opportunities to invest in new portfolio companies. Now, we're still seeing plenty of opportunities to exist or to support our existing portfolio companies.

Speaker Change: Let me try to tackle that, Bryce, and all good questions. First of all, let me give you a little bit of context for that, and I'm sure you're aware.

Speaker Change: You know, the deal volume overall in the U.S., especially for private equity-backed deals

Speaker Change: I think the corporate M&A environment is starting to pick up, but for

Speaker Change: For PE-backed deals, overall M&A activity is down, you know, kind of record lows, even below, you know, any recent period in years, except for kind of the height of the

Speaker Change: of the COVID experience, that first half of 2020. As a result, we're not seeing as much activity and opportunities to invest in new portfolio companies now. We're still seeing plenty of opportunities.

Michael Joseph Grisius: We have also had the benefit of not experiencing as many payoffs as a result of, you know, lower M&A activity. What is new, and as we pointed out, is that I think the combination of all of the capital that's sitting on the sidelines and the low new deal activity is causing some competition on price. And so you're seeing in certain credits, you're seeing people start to get pretty aggressive in deploying capital.

Bryce Rowe: And you've seen us do that quite actively in the last few quarters. We have also had the benefit of not experiencing as many payoffs as a result of lower M&A activity. What is new, and as we pointed out, is that I think the combination of all of the capital that's sitting on the sidelines and the low new deal activity is causing some competition on price. And so you're seeing in certain credits, you're seeing people start to get pretty aggressive to deploy capital. And so for some of our lower leverage deals where there are kind of obvious targets where we've seen kind of more senior lender types, etc.

Speaker Change: to support our existing portfolio companies, and you've seen us do that.

Speaker Change: you know, quite actively in the last few quarters.

Speaker Change: We have also had the benefit of

Speaker Change: We're not experiencing as many payoffs as a result of lower M&A activity. What is new, and as we pointed out, is that I think...

Speaker Change: The combination of all of the...

Speaker Change: Capital that's sitting on the sidelines and the low

Speaker Change: New Deal activity is causing some competition on price and so you're seeing in certain credits you're seeing people start to get pretty aggressive to deploy capital and so for some of our lower leverage kind of

Michael Joseph Grisius: And so for some of our lower leverage kind of, you know, deals where they're kind of obvious targets, where we've seen kind of more senior lender types, etc., come in and offer more attractive financing, I think we may have some payoff experience there.

Speaker Change: [inaudible]

Bryce Rowe: come in and offer more attractive financing. I think we may have some payoff experience there. But generally, stepping back, we feel very comfortable that where we sit in the market at the lower end of the middle market and with the breadth of our relationships as well as our portfolio, that will continue to have plenty of opportunities to deploy capital. And in the long run, that will outpace kind of repayment activity that we may experience. I would highlight, just as we step back and think about it, we think being in the lower end of the middle market is a great place to be from a credit quality standpoint, also in terms of just deal activity and our opportunity to generate new deals.

Michael Joseph Grisius: But generally, you know, sort of stepping back, we feel very comfortable that where we sit in the market, at the lower end of the middle market, and with the breadth of our relationships, as well as our portfolio, we'll continue to have plenty of opportunities to deploy capital, and that, in the long run, that'll outpace, you know, the kind of repayment activity that we may experience. I would highlight, you know, just as we step back and think about it, we think being in the lower end of the middle market is a great place to be from a credit quality standpoint, also in terms of just, you know, deal activity and our opportunity to generate new deals.

Speaker Change: We feel very comfortable that where we sit in the market, at the lower end of the middle market, and with the breadth of our relationships...

Speaker Change: as well as our portfolio, that we'll continue to have plenty of opportunities to deploy capital and that, in the long run, that'll outpace, you know, the kind of repayment activity that we...

Speaker Change: may experience, I would highlight

Speaker Change: You know, just as we step back and think about it, we think being in the lower end of the middle market is a great place to be from a credit quality standpoint also in terms of just...

Bryce Rowe: We think that we've got really strong depth at that end of the middle market with really good relationships that will fuel more opportunities to deploy capital. We feel really good about the verticals that we're in, generally being non-cyclical and verticals that, if you know them well, you can deploy capital very smartly. We feel terrific about the quality of our team. We think that our underwriting and our team is among the very best in the industry. And the risk-adjusted returns that you can get in senior debt, complemented with equity co-investments. We think it's just a great, great strategy.

Michael Joseph Grisius: We think that we've got really strong depth at that end of the middle market with really good relationships that'll fuel more opportunities to deploy capital. We feel really good about the verticals that we're in, you know, generally being non-cyclical and verticals that, if you know them well, you can deploy capital very smartly. We feel terrific about the quality of our team.

Speaker Change: Deal Activity and our opportunity to generate.

Speaker Change: new deals. We think that we've got really strong depth at that end of the middle market with really good relationships that will fuel more opportunities to deploy capital.

Speaker Change: We feel really good about the verticals that we're in, generally being non-cyclical and verticals that if you know them well, you can deploy capital very smartly.

Michael Joseph Grisius: We think that our underwriting and our team are among the very best in the industry. And the risk-adjusted returns that you can get in senior debt complemented with equity co-investments, we think it's just a great, great strategy. And in the long run, you know, that'll continue to benefit our investors just as it has historically. In the present moment, though, and you know, how this will play out. We've been through a lot. It's sort of what we're working through, if you will. Got it. That's helpful, Mike.

Speaker Change: We feel terrific about the quality of our team. We think that our underwriting and our team is among the very best in the industry.

Speaker Change: and the risk adjusted returns that you can get in senior debt complemented with equity co-investments.

Bryce Rowe: And in the long run, that will continue to benefit our investors just as it has historically. In the present moment, though, and this will play out, we've been through a lot of different cycles. In the present moment, there's not as much deal activity, and it's kind of... Yeah, sort of what we're working through, if you will.

Speaker Change: We think it's just a great, great strategy and in the long run, you know, that will continue to

Speaker Change: Benefit our investors just as it has historically. In the present moment though, and you know, this will play out. We've been through a lot of different cycles. In the present moment, there's not as much deal activity and, you know, it's kind of sort of what we're working through, if you will.

Bryce Rowe: Got it.

Henri J. Steenkamp: And I mean, and then again, on the maybe a couple of follow-ups, the comment about cash coming in, you know, post-quarter end, can you just give us a kind of maybe a pro forma cash balance since you did make that comment? And then also, I wanted to ask about the undistributed position and how you're kind of thinking about that, you know, as we think about, you know, maybe moving into the second half of 2020.

Bryce Rowe: That's awful, Mike. I mean, and then again, on the maybe a couple follow-ups, the comment about cash coming in, you know, post-corder add can just give us a kind of maybe a pro forma cash balance, since you did make that comment. And then also wanted to ask about the undistributed positions. And how you're kind of thinking about that, you know, as we think about, you know, maybe moving into the second half of 2024.

Speaker Change: Got it. That's helpful, Mike. I mean, and then again on the...

Speaker Change: Maybe a couple follow-ups. The comment about cash coming in, you know, post-quarter end, can you just give us a kind of maybe a pro forma cash balance since you did make that comment?

Speaker Change: Also wanted to ask about the undistributed position and how you're kind of thinking about that, you know, as we as we think about, you know, maybe moving into the second half of 2024.

Bryce Rowe: I might start with a cash position. You know, we don't generally disclose that prize, but we did mention, as you said, you know, we had another, another deal repay and we have a couple of others that, you know, could potentially for the reasons that Mike described. And so therefore we felt it was worthwhile to, you know, just mention that, you know, obviously there's this sort of net cash coming in thus far being only, you know, a month into the new quarter.

Henri J. Steenkamp: I might start with the cash position. We don't generally disclose that, Bryce, but we did mention, as you said, we had another deal repay, and we have a couple of others that could potentially, for the reasons that Mike described, and so therefore, we felt it was worthwhile to just mention that obviously there's sort of net cash coming in thus far, being only a month into the new quarter. With regard to the spillover question, the undistributed; that is an equation we're still working on.

Speaker Change: I might start with the cash position. You know, we don't generally disclose that, Bryce, but we did mention, as you said, you know, we had another...

Speaker Change: Another deal repay and we have a couple of others that you know could potentially for the reasons that that Mike described And so therefore we felt it was worthwhile to you know just mention that you know obviously there's This sort of net cash coming in thus far being only you know a month into the into the new quarter

Bryce Rowe: And with regards to the spillover question, the undistributed, you know, that is an equation we're still working on. There's a lot of technical aspects to it as it is timing of declared dividends, magnitude of dividends, and the like. And that's something that we will be focusing, you know, more closely on as we, as we in our next quarter.

Speaker Change: And with regards to the spillover question, the undistributed, that is an equation we're still working on. There's a lot of technical aspects to it. It has to do with timing of declared dividends, magnitude of dividends, and the like. And that's something that we will be focusing more closely on in our next quarter.

Bryce Rowe: Okay.

Bryce Rowe: Appreciate you guys taking the questions. I'll jump back in. Thank you. Thanks, Brian.

Speaker Change: Okay, appreciate you guys taking the questions. I'll jump back in queue.

Casey Alexander: Our next question comes from Casey, Alexander with Compass Point; July is open. Hi. Can you hear me? I know we had a little trouble there for a while. Great. Good morning. A couple of questions.

Henri J. Steenkamp: There are a lot of technical aspects to it as to the timing of declared dividends, magnitude of dividends, and the like. That's something that we will be focusing more closely on in our next quarter. Appreciate you guys taking the questions; I'll jump back in queue. Our next question comes from Casey Alexander with Compass Point. Your line is open. Hi, can you hear me?

Speaker Change: Our next question comes from Casey Alexander with Compass Points. Your line is open.

Casey Jay Alexander: I know we had a little trouble there for a while. Good morning, Davey. Okay, great. Good morning, Davey. A couple of questions. First one for Mike.

Speaker Change: Hi, can you hear me? I know we had a little trouble there for a while.

Casey Alexander: First one for Mike. The LSEG lender survey has suggested that, you know, some larger private credit platforms, because of the lack of deal flow in the upper middle and the traditional middle market, have been coming down market. Have you seen that form of competition creeping into your market? We haven't seen much of it. Casey, but a little bit. I think one of the deals that we reference where, you know, we might be facing a payoff is one where it's, it's a really large senior lending institution that's pricing the deal at a level that, candidly, doesn't make any sense for us.

Casey Jay Alexander: The LSEG lender survey suggested that some larger private credit platforms, because of the lack of deal flow in the upper middle and the traditional middle market, have been coming down the market some. Have you seen this form of competition creeping into your market? We haven't seen much of it, Casey, but a little bit. I think one of the deals that we reference where, you know, we might be facing a payoff is one where it's a really large senior lending institution that's pricing the deal at a level that candidly doesn't make any sense for us, and we'll probably get paid off there, but, you know, outside of that, we haven't seen it much, but we are seeing a little bit of that, which suggests to me Okay, that's that's great. I will say this again.

Speaker Change: Great, good morning. A couple of questions. First one for Mike, the LSEG lender survey

Speaker Change: has suggested that some larger private credit platforms

Speaker Change: because of the lack of deal flow in the upper middle and the traditional middle market, have been coming down market some. Have you seen that form of competition creeping into your market?

Speaker Change: We haven't seen much of it, Casey, but a little bit. I think one of the deals that we reference where we might be facing a payoff is one where it's a really large senior lending institution that's pricing the deal at a level that

Casey Alexander: And we'll probably get paid off there. But, you know, outside of that, we haven't seen it much, but we are seeing a little bit of that, which suggests to me that, you know, there are players that are probably sitting on capital and are just looking for ways to deploy it, even if the pricing isn't really sensible. Okay. That's great.

Speaker Change: Candidly, it doesn't make any sense for us, and we'll probably get paid off there. But outside of that, we haven't seen it much, but we are seeing a little bit of that, which suggests to me that there are players that are probably sitting on capital and are just looking for ways to deploy it, even if the pricing isn't really sensible.

Michael Joseph Grisius: I should say this though, just before we depart, from a day-to-day kind of where we play in the marketplace and who we compete against, it's not those. You know, are we subject to somebody, an institution like that, looking at a portfolio company that's been in its portfolio for a while, doing really well, and they can come in and try to knock that off? Yeah, you know, we're always subject to that a little bit, and this environment is probably ripe for that type of activity.

Casey Alexander: I should say this though, just before we depart that from a day to day kind of where we play in the marketplace and who we compete against. It's not those groups. You know, are we subject to somebody, an institution like that looking at a portfolio company that's been in portfolio for a while doing really well and they can come in and try to knock that off? Yeah, you know, we're always subject to that a little bit, and this environment probably is right for that type of activity. But in terms of what we do and where we play in the market, we don't see those by folks.

Speaker Change: Okay that's that's that's great. I will say this, I should say this though just before we depart that.

Speaker Change: From a day-to-day kind of where we play in the marketplace and who we compete against, it's not those groups.

Speaker Change: You know, are we subject to somebody, an institution like that, looking at a portfolio company that's been in portfolio for a while, doing really well, and they can come in and try to knock that off?

Speaker Change: Yeah, you know, we're always subject to that a little bit and this environment probably is right for that type of activity, but in terms of what we do and where we play in the market, we don't see those folks. They're not really set up to be

Michael Joseph Grisius: But in terms of what we do and where we play in the market, we don't see those folks. They're not really set up to be underwriting the types of credits with the rigor that we do and the process that we use.

Casey Alexander: They're not really set up to be underwriting the types of credits with the rigor that we do and the process that we do. And most of the deals that we do aren't really in their size range out of the box. So most of what we're doing tends to be smaller, and you'll note that with just about all of our top 10 investments, all started off quite small. And then they grow over time as we support their growth. So you know, in terms of what we're doing on a new portfolio activity standpoint and kind of. building our portfolio over time in the marketplace that we reside in.

Michael Joseph Grisius: And most of the deals that we do aren't really in their size range out of the box. So most of what we're doing tends to be smaller, and you'll note that with just about all of our top ten investments. They all started off quite small, and then they grew over time as we supported their growth, building our portfolio over time. In the marketplace that we reside in, we don't really see those large institutions very much.

Speaker Change: underwriting the types of credits with the rigor that we do and the process that we do. And most of the deals that we do aren't really in their size range out of the box. So most of what we're doing tends to be smaller.

Speaker Change: And you'll note that with just about all of our top 10 investments, all started off quite small. And then they grow over time as we support their growth. So, you know, in terms of what we're doing on a new portfolio activity standpoint, and kind of...

Casey Alexander: We don't really see those large institutions very much. Companies don't grow up to the point where you're subjected to that.

Speaker Change: Building our portfolio over time in the marketplace that we reside in, we don't really see those large institutions very much. Companies can grow up though to that point, whether you're subject to that.

Michael Joseph Grisius: Companies can grow up, though, to a point. Right, that makes some sense that they might be a taker of your late cycle investments that you've bolted on to over time. So that makes some sense. Thanks.

Casey Alexander: Right, that makes some sense that they might be a taker of your late cycle investments that you've bolted on to over time, so that makes some sense. Thank you.

Speaker Change: Right, that makes some sense that they might be a taker of your late cycle investments that you've bolted on to over time. So that makes some sense. Thank you.

Casey Jay Alexander: Henry, for you... We have the Live Oak facility, and it looks like you're adding banks to the Live Oak facility. How would you characterize the cost in terms of Live Oak compared to Encino? Is it your plan to continue to add banks to that Live Oak facility and, ultimately, just have it replace the Encino facility? Yeah, I mean, it's a great question, Casey. I think, firstly, you know, what we loved about having the second facility is that it allows us to broaden our relationships with new banks in a way that still achieves our goals of, you know, having a credit facility with a really strong structure.

Henri Steenkamp: Henri, for you, we have the Live Oak facility, and it looks like you're adding banks to the Live Oak facility. How would you characterize the cost in the terms of Live Oak compared to Encino? Is it your plan to continue to add banks to that Live Oak facility and ultimately just have it replace the Encino facility? Yeah, I mean, it's a great question, Casey. I think, firstly, what we loved about having the second facility is it allows us to broaden our relationships with new banks in a way that still achieves our goals of having a credit facility with a really strong structure.

Henri J. Steenkamp: Henri, for you...

Henri J. Steenkamp: And we have the Live Oak facility, and it looks like you're adding back to the Live Oak facility.

Henri J. Steenkamp: How would you characterize the cost in the terms of Live Oak compared to Encino and is it your plan to continue to add banks to that Live Oak facility and ultimately just have it replace the Encino facility?

Speaker Change: Yeah, I mean it's a great question Casey. I think firstly you know what we loved about

Speaker Change: Having the second facility, it allows us to broaden our relationships with new banks.

Casey Jay Alexander: So, you know, when that opportunity came along with a firm we knew, Live Oak, it was a great opportunity. And then the upsize, you know, as important as the extra 25 was, just because it created more availability, we added two new banks to that in addition to Live Oak.

Speaker Change: in a way that still achieves our goals of having a credit facility with a really strong structure.

Henri Steenkamp: When that opportunity came along with the firm, we know Live Oak was a great opportunity, and then the up size, as important as the extra 25 was, just because it creates more availability, we added two new banks to that in addition to Live Oak. And as you probably know, in the Encino facility there's also another bank as well, so we effectively now have five new relationships in the last two years in these two facilities. Encino still has, I think, almost two years left on it, so we don't need to make any decisions now around, do we, at some point, go back to one facility that's just much larger, but they operate in a way that it really doesn't create much more cost or work for us in having the two facilities versus the one.

Speaker Change: When that opportunity came along with the firm we know, Live Oak, it was a great opportunity. And then the upsize, as important as the extra 25 was, just because it creates more availability.

Henri J. Steenkamp: And as you probably know, in the Encina facility, there's also another bank as well. So, you know, we effectively now have five, you know, new relationships in the last two years in these two facilities. Encina still has, I think, almost two years left on it.

Speaker Change: We added two new banks to that in addition to Live Oak.

Speaker Change: And as you probably know, in the Antena facility, there's also another bank as well. So, you know, we effectively now have five, you know, new relationships in the last two years.

Henri J. Steenkamp: So, you know, we don't need to make any decisions now around, you know, do we at some point go back to one facility that's just much larger. But they operate in a way that it really doesn't create much more cost or work for us in having the two facilities versus the one. You know, it's just two different SPVs.

Speaker Change: in these two facilities. Encina still has, I think, almost two years left on it. So, you know, we don't need to make any decisions now around, you know, do we at some point go back to one facility that's just much larger?

Henri J. Steenkamp: But we're set up in process-wise to deal with two versus one. It's not a problem. From a cost perspective, very similar. The Live Oak facility just has tiering, and so from a how do you know how much we actually draw, the rate comes down. So it starts off at the same rate, but as we draw more, every 25% more that we draw, we save 25 basis points. Yeah, well, the reason that I bring up the question is because Encino is not the cheapest facility in the world, and it has a pretty meaningful minimum draw.

Speaker Change: But they operate in a way that it really doesn't create much more cost or work for us in having the two facilities versus the one. It's just two different SPVs, but we're set up process-wise to deal with two versus one. It's not a problem. From a cost perspective, it's...

Henri Steenkamp: It's just two different SBVs, but we're set up in a process-wise to deal with two versus one; it's not a problem. From a cost perspective, it's very similar. The Live Oak facility just has a tiering, and so from how much we actually draw, the rate comes down. So it starts off at the same rate, but as we draw more, every 25% more that we draw, we save 25 basis points.

Speaker Change: It's very similar. The Live Oak facility just has a tiering from how much we actually draw.

Speaker Change: The rate comes down. So it starts off at the same rate, but as we draw more, every 25% more that we draw, we save 25 basis points.

Henri Steenkamp: Yeah, well, I mean the reason that I bring up the question is because the Encino is not the cheapest facility in the world, and it has a pretty meaningful minimum draw, and so here we are sitting on $93 million of cash, and yet we have a minimum. It feels like an inefficient use of capital to a certain extent. Yeah, I think it's a balancing act for us, and around having available liquidity for those moments when you not only just need to fund a deal, but you need it for much more important market activities or functions, et cetera. And so we sort of accept that as a cost of doing business to have a very well-structured facility.

Encino: Yeah, well, I mean the reason that that I bring up the question is because the Encino is It's not the cheapest facility in the world and it has a pretty meaningful minimum draw and so here we are sitting on ninety three million dollars of cash and yet we have a minimum it Seems feels it feels like an inefficient use of capital to a certain extent

Henri J. Steenkamp: And so here we are sitting on $93 million of cash, and yet we have a minimum. It feels like an inefficient use of capital to a certain extent. I think it's a balancing act for us around having available liquidity for those moments when you not only just need to fund a deal, but you need it for much more important market activities or functions, etc. So we sort of accept that as a cost of doing business to have a very well-structured facility. But I hear you.

Encino: Yeah, I think it's a balancing act for us and you know around Having available liquidity for those moments when you not only just need to fund a deal But you need it for you know much more important market activities or functions etc

Encino: So, you know, we sort of accept that as a cost of doing business to have a very well-structured facility. But I hear you. Obviously, every single day, you know, I wake up and we try to make sure we optimize our capital and our cash in the most efficient way.

Henri Steenkamp: But I hear you obviously every single day. You know, I wake up and we try to make sure we optimize our capital and our cash in the most efficient way. Understood.

Henri J. Steenkamp: Obviously, every single day, I wake up, and we try to make sure we optimize our capital and our cash in the most efficient way. Last question, and I think you've done a much better job on the income statement of detailing where some of the other sources of income are coming from, such as the dividend income and the structuring and advisory fee income. It's still there this quarter.

Casey Alexander: Last question, and I think you've done a much better job on the income statement of detailing where some of the other sources of income are coming from, such as the dividend income and the structuring and advisory fee income. It's still in this quarter; you had about $0.9 a share, or let's call it $0.7 a share, after accounting for incentive fee of other income. What's the texture of that other income? How much of that should we think of as one time this quarter? You know, it's a pretty meaningful amount to be just dropped down into other.

Encino: Last question, and I think you've done a much better job on the income statement of detailing where some of the other sources of income are coming from, such as the dividend income and the structuring and advisory fee income.

Henri J. Steenkamp: You had about $0.09 a share, or let's call it $0.07 a share after accounting for the incentive fee on other income. What's the texture of that other income? How much of that should we think of as one time this quarter? It's a pretty meaningful amount to be just dropped down into other. Yeah, no, I totally agree with you.

Encino: It's still in this quarter you had about nine cents a share or let's call it seven cents a share

Encino: after accounting for incentive fee of other income. What's the texture of that other income? How much of that should we think of as one time this quarter? You know, it's a pretty meaningful amount to be just dropped down into other.

Casey Alexander: Yeah, no, I totally agree with you. We have split out the income statement in more detail as sort of the sources of that other income has expanded, you know dividends become a bigger part of it. There's really an other income now; there's it's primarily either amendment fees or prepayment fees that fall in there. And then I guess a little bit of monitoring fees as well. But, but probably two thirds of that, I would say, is transactional in nature, Casey. So, you know, it's one off in that quarter related to a specific deal, but you tend to have those types of events occur more recurring.

Henri J. Steenkamp: We have split out the income statement in more detail as sort of the sources of that other income have expanded, you know, dividends have become a bigger part of it. There's really, in other income now, it's primarily either amendment fees or prepayment fees that fall in there. And then I guess a little bit of monitoring fees as well. But probably two-thirds of that, I would say, is transactional in nature, Casey. So you know, it's a one-off in that quarter related to a specific deal, but you tend to have those types of events occur more frequently.

Encino: Yeah, no I totally agree with you We have split out the income statement in more detail as sort of the sources of that other income has expanded You know dividends become a bigger part of it

Encino: There's really, in other income now, it's primarily either amendment fees or prepayment fees that fall in there, and then I guess a little bit of monitoring fees as well. But probably two-thirds of that, I would say, is transactional in nature, Casey.

Encino: You know, it's one-off in that quarter related to a specific deal, but you tend to have those types of events occur.

Casey Alexander: So it's a little bit of a, it's one-off items that sort of are recurring in nature because you obviously have prepayments that occur almost every single quarter. And you also have amendments that occur almost every single quarter, but it can be a little lumpy at some point. But I wouldn't view all of it as one time.

Henri J. Steenkamp: So it's a little bit of a, it's one-off items that sort of are recurring in nature because you obviously have, you know, prepayments that occur almost every single quarter. And you also have amendments that occur almost every single quarter.

Encino: more recurring. So it's a little bit of a combo. It's one-off items that sort of are

Encino: recurring in nature because you obviously have prepayments that occur almost every single quarter and you also have amendments that occur almost every single quarter. But it can be a little lumpy at some point, but I wouldn't view all of it as one time.

Casey Alexander: Yeah, okay. Well, given your comments about, you know, at least having one payoff that you know of coming up in this quarter and your sense that some more are coming, it would thus be reasonable to expect some meaningful other income in the coming quarter. Yeah, I mean, that could be the case. It's obviously specific to every deal, but you know, that's the unreasonable assumption. Yeah. Okay, great.

Henri J. Steenkamp: But it can be a little lumpy at some point, but I wouldn't view all of it as one-time. Yeah, okay. Well, given your comments about at least having one payoff that you know of coming up in this quarter and your sense that some more are coming, would it be reasonable to expect some meaningful other income in the coming quarter? Yeah, I mean, that could be the case.

Encino: Yeah, okay. Well, given your comments about, you know, at least having one payoff that you know of coming up in this quarter and your sense that some more are coming.

Speaker Change: It would thus be reasonable to expect some meaningful other income in the coming quarter.

Henri J. Steenkamp: It's obviously specific to every deal, but, you know, that's an unreasonable assumption. Okay, great. Thank you.

Speaker Change: Yeah, I mean, that could be the case. It's obviously specific to every deal, but that's not an unreasonable assumption. Yep. Okay, great. Thank you. That's all of my questions. Thank you.

Casey Alexander: Thank you. That's all of my questions. Thank you.

Robert Dodd: Our next question comes from Robert Dodd with Raymond James; your line is open. Hi, guys. A couple of questions or focus areas first on the number of calls. I mean, last quarter, for example, on a lot of knowledge, you gave us a lot of detail about what was going on and all the drivers of the issues of that business. I'm not looking to retread all of that, but with the restructuring and the partial realization right down, for example, there. I mean, was there anything that kind of trended differently that drove out, or was that all kind of part of the plan when you gave us the detail last quarter into the restructuring.

Casey Jay Alexander: That's all of my questions. Our next question comes from... Robert Dodd with Raymond James. Your line is open. Hi, guys.

Speaker Change: Our next question comes from...

Robert James Dodd: A couple of questions or focus areas. First, on the NOLA course. Last quarter, for example, on knowledge, you gave us a lot of detail about what was going on and all the drivers of the issues in that business. I'm not looking to retread all of that.

Speaker Change: Robert Dodd with Raymond James, your line is open.

Speaker Change: Hi, guys.

Robert James Dodd: A couple of questions, I'll focus on this. First, on the Nonna course, I mean, last quarter, for example, on Zolidge, you gave us a lot of detail about what was going on and all the drivers.

Robert James Dodd: of the issues of that business. I'm not looking to retread all of that.

Robert James Dodd: But with the restructuring and the partial realization write-down, for example, was there anything that kind of trended differently that drove that? Or was that all kind of part of the plan when you gave us the details last quarter in terms of the restructuring? Has anything changed, or was that just a continuation of what you already saw?

Robert James Dodd: But with the restructuring and the partial realization right down, for example, there, I mean, was there anything that kind of...

Robert James Dodd: trended differently that drove that or was that all kind of part of the plan when you gave us the detail last quarter in terms of the restructuring of the oil is anything changed or was that just a continuation of what you already saw going on?

Robert Dodd: Is anything changed, or was that just the continuation of what you already saw going on? It was a continuation of what we already saw going on. We felt like those discrete credits are meaningful enough that we wanted to discuss it again and keep people informed of events there. But these are both credits that we are actively working, and I think there are a lot of elements of certainly those credits that we liked from the beginning that we still feel fundamentally are there in those credits. And we're going to work hard to try to recover as much capital as we can in each of those situations.

Michael Joseph Grisius: It was a continuation of what we already saw going on. We felt like those discrete credits are meaningful enough that we wanted to, you know, discuss it again and keep people informed of events there. But, you know, these are both credits that we are actively working, and, you know, I think there are a lot of elements of, uh... certainly those credits that we liked from the beginning that we still feel fundamentally uh... are there in those credits and we're going to work hard to try to recover as much capital as we can in each of those situations uh... but both of them uh... we've got a lot of wood to chop And Robert, I would also just add that although we've restructured them now and there's a big component to some of the securities, we continue to keep them on non-accrual, as you probably noted, that we continue to say we have three investments on non-accrual going, Got it. I appreciate that, Alan.

Robert James Dodd: It was a continuation of what we already saw going on. We felt like those discrete credits are meaningful enough that we wanted to discuss it again and keep people informed of events there.

Robert James Dodd: You know, these are both credits that we are actively working

Robert James Dodd: Certainly those credits that we liked from the beginning that we still feel fundamentally are there in those credits and we're going to work hard to try to recover as much capital as we can in each of those situations. But both of them, we've got a lot of wood to chop.

Robert Dodd: But both of them, we've got a lot of wood to chop. And Robert, I also just add that although we've restructured them now and there's a pick component to some of the securities, we continue to keep them on non-accrual. As you probably noted, that we continue to say we have three investments on non-accrual going on. Got it. I appreciate that. Thank you. That the market color point that you always, you're very helpful on government and all that. I mean, like on, you know, all the significant number 16 follow once. Can you give us any color on what the nature of the, I mean, is this follow-on acquisition?

Robert James Dodd: And Robert, I would also just add that, you know, although we've restructured them now and there's a big component to some of the securities, we continue to keep them on non-accrual, as you probably noted, that we continue to say we have three investments on non-accrual going forward.

Michael Joseph Grisius: Thank you. On the second one, I mean, the market color point that you always, you're always very helpful in giving and all that. I mean, like on... What was it?

Robert James Dodd: Got it. I appreciate that, Pala. Thank you. On the second one, I mean, the market color point that you always, you're always very helpful on giving and all that. I mean, like, on...

Robert James Dodd: A significant number, 16 follow-ons. Can you give us any color on what the nature of the... I mean, is this follow-on acquisitions that these portfolio companies are making? Is it incremental working capital that you're funding? Or can you give us any color on the nature of when you make a follow-on? What's the kind of thing that it's being used for today? Because obviously, no new platforms, but a lot of follow-on activity. So any color on what that is?

Robert James Dodd: you know, a significant number, 16 follow-ons. Can you give us any color on what the nature of the... I mean, is this follow-on acquisitions that these portfolio companies are making? Is it incremental working capital that you're funding? Can you give us any color on...

Robert Dodd: These portfolio companies are making, is it incremental working capital that you're funding off? Can you give us any color on the nature of when you make a follow on what's the kind of thing that that's being used for today? Because obviously not, no new platforms, but a lot of follow-on activity. So, any color on what that is?

Robert James Dodd: on the nature of when you make a follow-on. What's the kind of thing that that's being used for today? Because obviously not, no new platforms, but a lot of follow-on activity. So any color on what that is?

Robert Dodd: Sure, most of the businesses that we invest in, not all of them, but most of them are pretty, have a pretty healthy appetite for additional capital, and most of that is to drive growth through M&A activity, through add-on activity, and so the majority of those follow-ons were really to do tuck-in acquisitions in existing platforms. And that's something that's worked out really well for us over the years, where we've come in, and in some cases lent. I think our biggest portfolio company right now was one that started off as a $6 million debt piece with a $2 million equity co-investment, and that company kept coming back to market to execute on acquisitions that have worked out really well. So that strategy is kind of fundamental to what we do, and that's what the majority of those follow-ons are for.

Michael Joseph Grisius: Sure, most of the businesses that we invest in, not all of them, but most of them have a pretty healthy appetite for additional capital, and most of that is to drive growth through M&A activity and add-on activity. And so the majority of those follow-ons were really to do tuck-in acquisitions on the existing platform. And that's something that's, you know, worked out really well for us over the years, where we've come in and, in some cases, lent money. I think our biggest portfolio company right now was one that started off as a $6 million debt piece with a $2 million equity co-investment.

Speaker Change: Sure, most of the businesses that we invest in, not all of them but most of them are pretty

Speaker Change: have a pretty healthy appetite for additional capital and most of that is to drive growth through M&A activity, through add-on activity. And so the majority of those follow-ons were really to do tuck-in acquisitions in existing platforms.

Speaker Change: and that's something that's...

Speaker Change: You know, worked out really well for us over the years where we've come in and in some cases lent. I think our biggest portfolio company right now is one that started off as a six million dollar company.

Michael Joseph Grisius: And that company, you know, kept coming back to market to, you know, execute on acquisitions that have worked out really well. So that strategy is kind of fundamental to what we do, and that's what the majority of those follow-ons were for. Got it, got it. I appreciate it. That's what I expected you to say.

Speaker Change: debt piece with a $2 million equity co-investment and that company kept coming back to market to you know.

Speaker Change: execute on acquisitions that have worked out really well. So that strategy is kind of fundamental to what we do and that's what the majority of those follow-ons were for.

Robert Dodd: I appreciate that's what I expected you to say, so can you reconcile for me, because I'm just not getting something about the market, not about what you're saying? I mean, as you said, the P activity is low for new platforms. Most of the businesses you're involved with have a P sponsor, but they're very active on the add-on front; they're not active on the new platform fund, even though the cost of financing for both is relatively elevated. So what can you, can you walk me through? Yeah, why is the differential driver, I mean, obviously multiple below efforts for add-ons maybe, but what's the drive of why people, the P sponsors are perfectly willing to pay the incremental financing cost on an add-on, but not willing to make a new platform acquisition?

Robert James Dodd: So, can you explain it to me, because I'm just not understanding something about the market, not about what you're saying. I mean, as you said, PE activity is low for new platforms. Most of the businesses you're involved with have a PE sponsor, but they're very active on the add-on front. They're not active on the new platform front, even though, you know, the cost of financing for both is relatively elevated. So what can you... Can you walk me through it? Yeah, what is the differential driver?

Speaker Change: Got it, got it. I appreciate it. That's what I expected you to say. So, can you reconcile for me, because I'm just not getting something about the market, not about what you're saying.

Speaker Change: I mean, as you said, PE activity is low for new platforms.

Speaker Change: Most of the businesses you're involved with have a PE sponsor, but they're very active on the add-on front, they're not active on the new platform front, even though the cost of financing for both is relatively elevated.

Michael Joseph Grisius: I mean, obviously, multiples are lower for add-ons, maybe. But what's the driver of why people, the key sponsors, are perfectly willing to pay the incremental financing cost for an add-on but not willing to make a new platform acquisition? What's the disconnect there? Is it the pricing or what? It's a really good question.

Speaker Change: What is the differential driver? I mean obviously multiples are lower for add-ons maybe, but what's the drive of why people, the PE sponsors, are perfectly willing to pay the incremental financing cost on an add-on?

Robert Dodd: What's the disconnect there? It's a really good question, and now this is a generalization, but it's, I think, the right perspective. A new platform opportunity typically yields a pretty healthy multiple, and so when a sponsor is looking at a new platform, they usually pay up for that new platform. It's gotten to a certain scale, it's something that gets marketed through a really competitive process, et cetera. In a lot of these businesses, private equity firms have been very successful doing bolt-on acquisitions that are a bit smaller, that are very complimentary to their core platform business and very accretive to execute with an add-on. But often those add-on acquisitions don't command platform multiples; they're typically a bit smaller businesses that may not have the value that you get for a platform. So you can execute on an add-on at a lower multiple and make it very accretive to shareholders, and we've seen that, or to the owners, and we've seen that play out very effectively in other markets. But certainly in this market, I think a lot of the private equity firms are saying, geez, I think there's a marketplace where I can command a better exit on my business. It's performing really well, so now it's not the time to sell. Let's kind of hold and figure out the best time to exit, but in the meantime, let's continue to do what we've done, which is go out and continue to build the business, and some of that includes add-on activity at multiples that are lower than where they execute on the original acquisition.

Speaker Change: but not willing to make a new platform acquisition. What's the disconnect there?

Michael Joseph Grisius: And now this is a generalization, but it's, I think, the right perspective. You know, a new platform opportunity typically yields a pretty healthy multiple. And so when a sponsor is looking at a new platform, they usually pay up for that new platform. It's gotten to a certain scale.

Speaker Change: It's a really good question and now this is a this is a generalization but it's it's I think the the right perspective.

Speaker Change: A new platform opportunity typically yields a pretty healthy multiple.

Speaker Change: And so when a sponsor is looking at a new platform, they usually pay up for that new platform. It's gotten to a certain scale. It's something that gets marketed through a really.

Michael Joseph Grisius: It's something that gets marketed through a really competitive process, et cetera. And in a lot of these businesses, private equity firms have been very successful doing bolt-on acquisitions that are a bit smaller, that are very complementary to their core platform business and very accretive to execute with an add-on. But often those add-on acquisitions don't command platform multiples. They're typically a bit smaller businesses that may not have the value that you'd get for a platform.

Speaker Change: competitive process, et cetera.

Speaker Change: And in a lot of these businesses...

Speaker Change: Private equity firms have been very successful doing bolt-on

Speaker Change: complimentary to their core platform business.

Speaker Change: across the board, and very accretive to execute with an add-on, but often those add-on acquisitions

Speaker Change: Don't command platform multiples. They're typically a bit smaller businesses that may not have the value that you'd get for a platform. So you can execute on an add-on at a lower multiple and make it...

Michael Joseph Grisius: So you can execute on an add-on at a lower multiple and make it very accretive to the owners. And we've seen that play out very effectively in other markets, but certainly in this market, I think a lot of the private equity firms are saying, geez, I think there's a marketplace where I can command a better exit on my business. It's performing really well.

Speaker Change: very accretive to the owners, and we've seen that play out, you know, very effectively, you know.

Speaker Change: in other markets, but certainly in this market, I think a lot of the private equity firms are saying.

Speaker Change: Geez, I think there's a marketplace where I can command a better exit on my business. It's performing really well.

Michael Joseph Grisius: So now is not the time to sell. Let's kind of hold on and figure out the best time to exit. But in the meantime, let's continue to do what we've done, which is go out and continue to build the business, and some of that includes add-on activity at multiples that are lower than where they executed on the original acquisition. Got it. Thank you, thank you, for that. How would you last one, if I could, how would you characterize this spread to your point and spread between what add-on acquisitions are going for right now or can be found for versus platform acquisitions? Obviously, from your color, there's a big gap.

Speaker Change: So now's not the time to sell. Let's kind of hold and...

Speaker Change: and they are the ones that are going to figure out the best time to exit. But in the meantime, let's continue to do what we've done, which is go out and continue to build the business. And some of that includes…

Speaker Change: Thank you.

Robert Dodd: Thank you for that. How was your last one, if I can? How would you characterize like this red tip to your point? The spread between what add-on acquisitions are going for right now can be found for versus platform acquisitions. Obviously, from your color, there's a big gap. Is that, I mean, is that ab not yet historically large, presumably, or there'd be some different behavior in there? But I mean, how wide is that today versus are the periods that you've seen in the market? I don't know that it's much wider when private equity firms are executing on a new platform.

Robert James Dodd: Is that, I mean, is that historically large? Presumably, or there'd be some different behavior in there. But I mean, how wide is that today versus the periods that you've seen in the market? I don't know that it's much wider.

Speaker Change: Got it. Thank you for that. Last one, if I can. How would you characterize this spread, to your point, the spread between what add-on acquisitions are going for right now or can be found for versus platform acquisitions? Obviously, from your color, there's a big gap. Is that, I mean...

Speaker Change: Is that historically large? Presumably, or there'd be some different behavior in there. But I mean, how wide is that today versus other periods that you've seen in the market?

Michael Joseph Grisius: When private equity firms are executing on a new platform, it's very commonplace for them to be thinking, "what acquisitions can we do?" There's an organic growth component. There's certainly a place where the primary goal is to go and do acquisitions, and much of that's driven by the delta between what they think they can sell the company at a larger scale versus what they can do when they execute on smaller add-ons. And so that delta, I'm not sure it's much different. Certainly, there's variability depending on where you're in the market and what end market they're operating in. But I wouldn't say that they're much, much different in this environment than they are in others.

Speaker Change: I don't know that it's much wider. When private equity firms are executing on a new platform, it's very commonplace for them to be thinking, what acquisitions can we do? There's an organic growth component, there's a

Robert Dodd: It's very commonplace for them to be thinking, what acquisitions can we do? There's an organic growth component. There's certainly somewhere the primary goal is to go and do acquisitions. And much of that's driven by the delta between what they think they can do. They can sell the company at larger scale versus what they can do when they execute on smaller add-ons. And so that delta, I'm not sure it's much different. Certainly there's variability depending on where you're in the market and what end market they're operating in. But I wouldn't say that they're much, much different in this environment than they are in others.

Speaker Change: There's certainly some where the primary goal is to go and do acquisitions. And much of that's driven by the delta between what they think they can sell the company at larger scale versus what they can do when they execute on smaller add-ons.

Speaker Change: And so, you know, that delta, I'm not sure it's much different. Certainly, there's...

Speaker Change: variability depending on where you're in the market, what end market they're operating in. But I wouldn't say that they're, you know, much, much different in this environment than they are in others. Yes. And one further comment I'd make on that is, you know, again, it's all specific to the given investment, but some of these platforms... Mm-hmm.

Michael Joseph Grisius: Yeah, and one further comment I'd make on that is, again, it's all specific to the given investment. But some of these platforms, while they're acquiring a business at an X multiple, pro forma for the synergies and the cost savings and things like that, it can be a significant discount. And so you get a multiple arbitrage on what you go in at, but then your pro forma arbitrage is even greater. And so that's, you know, that's really the economics of these buildups that people have done very well on. Yeah, got it. That's a very good point.

Robert Dodd: Yeah, one further comment I'd make on that is, again, it's all specific to the given investment, but some of these platforms, while they're acquiring a business at an X multiple pro forma for the synergies and the cost savings and things like that, it can be a significant discount. And so you get a multiple arbitrage on what you go in at, but then your pro forma arbitrage is even greater. And so that's really the economics of these buildups, and people have done very well on that. Yeah, got it. There's a very good point. So very often the seller and the add-on view the sale as though they're getting X dollars for it, X multiple for it.

Speaker Change: You know, while they're acquiring, you know, a business at an X multiple, pro forma for the synergies and the cost savings and things like that, it can be a significant discount.

Speaker Change: And so you get, you know, so you get a multiple arbitrage on what you go in at, but then your pro forma arbitrage is even greater. And so that's, you know, that's really the economics of these buildups. People have done very well on them.

Michael Joseph Grisius: So very often the seller and an add-on view the sale as though they're getting x dollars for it, right x multiple for it. But the buyer can look at the cost structure and say, I don't really need a lot of that redundant cost. So I'm actually buying it for something less than that. So there's a win-win. Yeah, yeah, no. I appreciate that, Cora.

Speaker Change: Got it. Thank you. That's a very good point. So very often the seller in an add-on...

Robert Dodd: But the buyer can look at the cost structure and say, I don't really need a lot of that redundant cost. So I'm actually buying it for something less than that. So there's kind of a win-win. Yeah, no, I appreciate that call. It makes a lot of sense, but it seems like, you know, a lot of those dynamics, like the bin ask, etc. So that's true at any point in the market cycle, and it just seems that it's unusually skewed, not just for you, whoever you unusually spawns right now. And something's going to give at some point, but thank you for you.

Speaker Change: views the sale as though they're getting x dollars for it, x multiple for it. But the buyer can look at the cost structure and say,

Speaker Change: I don't really need a lot of that redundant cost.

Speaker Change: So I'm actually buying it for something less than that. So there's kind of a win-win.

Robert James Dodd: It all makes a lot of sense, but... It seems like, you know, a lot of those dynamics like the bid-ask, etc. That's true at any point in the market cycle, and it just seems that it's unusually skewed, not just for you, but for everybody. It's unusually skewed.

Speaker Change: Yeah, yeah, no, I appreciate that, Cora. It all makes a lot of sense, but...

Speaker Change: It seems like, you know, a lot of those dynamics like the bid-ask etc, that's true at any point in the market cycle and it just seems that it's unusually skewed, not just for you, for everybody, unusually skewed.

Michael Joseph Grisius: I think it's also different markets. Some of these smaller deals are owned by individuals, owned by families, owned by management teams, and they're selling into a private equity institutional environment. And so they're selling for different reasons. They might be selling because of the life cycle, maybe they want to retire, or estate planning. It's sort of like individually driven decisions, where I think in the private equity market, there are much more market decisions going on.

Robert Dodd: Well, yeah, you call that. Actually, I think you know you had just a very good question. And I think maybe one other, you know, perspective on it, which again, gross generalization. But I think it's also different markets; you know, some of these smaller deals are, you know, kind of there, they're owned by individuals, owned by families, owned by management teams. And they're selling into a private equity institutional environment. And so, you know, they're selling for different reasons. You know, they might be selling because at life cycle, maybe they're, you know, even one of retired, you know, state planning, you know, you've taken as long as they, you know, they sort of like individually driven decisions, where I think in the private equity market, it's much more of a market decisions going on.

Speaker Change: on the slide now.

Speaker Change: and something's got to give at some point, but thank you for your your your color.

Speaker Change: Actually, I think, you know, it's a very good question and I think maybe one other, you know, perspective on it, which again is a gross generalization, but...

Speaker Change: I think it's also different markets. Some of these smaller deals are owned by individuals, owned by families, owned by management teams.

Speaker Change: And they're selling into a private equity institutional environment. And so they're selling for different reasons. They might be selling because of life cycle. Maybe they want to retire, estate planning.

Speaker Change: It's sort of like individually driven decisions.

Robert Dodd: You know, people may have paid certain multiples, and they're not going to sell until they get a certain rate of return, and they're just going to hold until they get that or, you know, can't hold any longer. You know, so, so I think that the private equity platform marketplace is a different marketplace than this other one because different drivers, different factors. You know, it's not pure rate of return; you know, timing, you know, like a private equity firm would say, well, I'm going to hold this for another two years. But, you know, the 65-year-old manager, he's like, this is the time to sell my company.

Michael Joseph Grisius: People may have paid certain multiples, and they're not going to sell until they get a certain rate of return, and they're just going to hold until they get that or can't hold any longer. So I think that the private equity platform marketplace is a different marketplace than this other one because there are different drivers, and different factors. It's not pure rate of return or timing, like a private equity firm could say, well, I'm going to hold this for another two years. But the 65-year-old manager is like, this is the time to sell my company. I want to move to Florida or do whatever I want to do.

Speaker Change: where I think in the private equity market, it's much more of a market decision going on. People may have paid certain multiples and they're not going to sell until they get a certain rate of return, and they're just going to hold until they get that.

Speaker Change: You know, can't hold any longer, you know, so so so I think that the the private equity platform marketplace is a different marketplace than this other one, because different drivers, different factors, you know, it's not pure rate of return, you know, timing, you know, like a private equity firm could say, well, I'm going to hold this for another two years.

Robert Dodd: You know, I want to, you know, I want to move to Florida or do whatever I want to do. And so, he's not going to say, I want to wait on 67 because I don't like the market to kind of ready to move on. Yeah, yeah, understood.

Speaker Change: But, you know, the 65-year-old manager, he's like, this is the time to sell my company. You know, I want to move to Florida or do whatever I want to do. And so he's not going to say, I want to wait until I'm 67 because I don't like the market. He's kind of ready to move on.

Robert Dodd: Thank you.

Speaker Change: Yeah, yeah. Understood.

Eric Zwick: Our next question comes from Eric Zwick with Lucid Capital Markets. Your line is open. Thank you. Good morning, everyone.

Michael Joseph Grisius: And so he's not going to say, I want to wait until I'm 67 because I don't like the market. He's kind of ready to move on. Yeah, yeah, I understand. Thanks. Our next question comes from Erik Zwick with Lucid Capital Markets. Your line is open. Thank you. Good morning, everyone.

Erik Edward Zwick: Maybe I should follow up on the fact that there were no new investment commitments in the quarter, and you mentioned that it didn't meet your standards. Curious if you could provide a little coverage, a little color to that in terms of leverage, spread, and covenants. And I'm curious if it's all reflective of some weakening in the economy, or you're seeing some potentially sectors that you're just wanting to avoid more. I was wondering if you could provide some thoughts there. Good question.

Speaker Change: Our next question comes from Erik Zwick with Lucid Capital Markets. Your line is open.

Eric Zwick: Maybe first, a follow-up on the; in fact, there were no new investment commitments in the quarter, and you mentioned that they didn't meet your standards. Chris, it could provide a little cover to that in terms of the leverage, spread, covenants, and I'm curious at all, it's all reflective of, at all reflective of, you know, some weakening in the economy or you're seeing some, you know, potentially sectors that you're just wanting to avoid more. So, what are you going to provide some else about there? Good question. I think it's not; I can't tell you that it's spread or leverage per se.

Erik Edward Zwick: Thank you. Good morning everyone. Maybe first a follow-up on the fact that there were no new investment commitments.

Erik Edward Zwick: in the quarter, and you mentioned that it didn't meet your standards. Curious if you could provide a little coverage, you know, a little color to that in terms of...

Erik Edward Zwick: Was it leverage, spread, covenants, and I'm curious, it's all reflective of some weakening in the economy, or are you seeing some potentially sectors that you're just wanting to avoid more? So I'm wondering if you could provide some thoughts there.

Michael Joseph Grisius: I think it's not, and I can't tell you that it's spread or leverage per se. I think the deal volume is down quite considerably, and we're already highly selective when we decide to support a portfolio company. And so when you take the combination of much lower deal volume and then just the rigor that we apply to any of our new investment opportunities, it just hasn't paid off. I think one of the things that we're getting attuned to, I would say, is that pricing's come down pretty considerably.

Erik Edward Zwick: Good question. I think it's not, I can't tell you that it's spread or leverage per se. I think the deal volume is down quite considerably and we're already highly selective.

Eric Zwick: I think the deal volume is down quite considerably, and we're already highly selective when we decide to support a portfolio company. And so, when you take the combination of much lower deal volume and then just our rager that we apply to any of our new investment opportunities, that just hasn't yielded results. I think, I think one of the things that we're getting attuned to, I would say, is that pricing's come down pretty considerably. And so, if you look at where pricing is on deals now, let's say, versus even a year ago, we've seen in some cases that pricing is 100 plus basis points lower than where it was.

Erik Edward Zwick: when we decide to support a portfolio company. So when you take the combination of much lower deal volume

Erik Edward Zwick: and then just our...

Michael Joseph Grisius: And so if you look at where pricing is on deals now, let's say, versus even a year ago, we've seen in some cases that pricing is down, hundreds of basis points lower than where it was. And so, you kind of have to react to that in competitive processes as time goes on. So that probably, you know, in a couple of cases probably came into play as well.

Erik Edward Zwick: Rigor that we apply to any of our new investment opportunities. It just hasn't yielded

Erik Edward Zwick: I think one of the things that we're getting attuned to, I would say, is that pricing has come down pretty considerably.

Erik Edward Zwick: And so if you look at where pricing is on deals now, let's say, versus even a year ago, we've seen in some cases that pricing is...

Eric Zwick: And so, you know, you kind of have to react to that in competitive processes as this time goes on. So, that probably, you know, in a couple cases, probably, came into play as well. Got it. Thank you.

Erik Edward Zwick: 100 plus basis points lower than where it was. And so, you know, you kind of have to react to that in competitive processes as time goes on. So that probably, you know, in a couple cases probably came into play as well.

Erik Edward Zwick: Thank you. And another one for me, just with respect to the restructuring of Zolidge and Pepper Palace. You know, you mentioned there's potential to create some future increases in recovery value, and I know it's early days for both of those just kind of completing the restructurings. But how do you think about that from a, you know, time standpoint? Have you set or will you set, say, like, six months, one year, two years targets for improvement in the KPIs at those companies? Or how do you think about it from a timing perspective?

Eric Zwick: And other one from me, just with respect to the restructurings of Exology and Pepper Palis. You know, you mentioned there's a potential to create some computer increases and recovery value. And I know it's early days for both of those, just kind of completing the restructurings. But how do you think about that from a, you know, time standpoint? Have you set or will you set, say, like, you know, six months, one year, two year targets for improvement in the KPIs at those companies, or how do you think about it from a timing perspective? We don't set targets in terms of, you know, we're going to give us sort of date certain and evaluate, and otherwise make a, you know, kind of fundamental decision.

Erik Edward Zwick: Got it, thank you. And other one for me, just with respect to restructurings of Zolidge and Pepper Palace, you know you mentioned there's potential to create some future increases in recovery value and I know it's early days for both of those just kind of completing.

Erik Edward Zwick: But how do you think about that from a time standpoint? Have you set or will you set, say, six month, one year, two year targets for improvement in the KPIs at those companies or how do you think about it from a timing perspective?

Michael Joseph Grisius: We don't set targets in terms of, you know, we're going to give a sort of date certain and evaluate and otherwise make a, you know, kind of fundamental decision. I think, like anything, we are constantly evaluating what the opportunities are, where we're positioned, where the company is positioned, and, you know, the best way to try to maximize value. And that's something that you're constantly assessing. And then you make a decision based on those facts.

Erik Edward Zwick: We don't set targets in terms of, you know, we're going to give a sort of date certain and evaluate and otherwise make a

Eric Zwick: I think, like, like anything, we are constantly evaluating what the opportunities are, where we're positioned, where the company is positioned, and, you know, the best way to try to maximize value. And that's something that you're constantly assessing. And then you make a decision based on those facts. I think in both these deals, as I mentioned, there's some elements of the businesses that we think are attractive, but certainly have a lot of wood to chop. As I mentioned, we've got work to do to, you know, get them to a better place. So time will, time will tell.

Erik Edward Zwick: you know, kind of fundamental decision, I think, like...

Erik Edward Zwick: Like anything, we are constantly evaluating what the opportunities are, where we're positioned.

Erik Edward Zwick: where the company is positioned and, you know, the best way to try to...

Erik Edward Zwick: I think in both these deals, as I mentioned, there are some elements of the businesses that we think are attractive but certainly have a lot of wood to chop. As I mentioned, we've got work to do to, you know, get them to a better place. So time will tell.

Erik Edward Zwick: maximize value and that's something that you're constantly assessing and then you you make a decision based on those facts.

Erik Edward Zwick: I think in both these deals, as I mentioned, there are some elements of the businesses that we think are attractive, but certainly have a lot of wood to chop. As I mentioned, we've got work to do to get them to a better place, so time will tell.

Eric Zwick: And maybe one last follow-up on that one, just in terms of the new management teams that are putting in place, you know, how are we having sourced those? And I just kind of, that's the crux of the question there. Well, I think in, uh, solid just case. We actually went to the original founder of the business who had sold the business to the private equity sponsor and was still involved at a much lesser level, and we approached him to get involved in the business, and he's essentially kind of helping us operate it today. He's the one that we referenced that we've got a framework for a deal going forward where he'll invest capital.

Michael Joseph Grisius: And maybe one last follow-up on that one, just in terms of the new management teams that are being put in place, you know, how or where have you sourced those, and I guess kind of that's the crux of the question there. Well, in Zalich's case... We actually, um..., went to the original founder of the business, who had sold the business to the private equity sponsor and was still involved at a much lesser level.

Speaker Change: And maybe one last follow-up on that one, just in terms of the new management teams that are putting in place, you know, how or where have you sourced those? And I guess kind of that's the crux of the question there.

Speaker Change: went to the original founder of the business.

Speaker Change: who was still, who had sold the business to the private equity sponsor and was still involved.

Michael Joseph Grisius: And we approached him to get involved in the business, and he's essentially kind of helping us operate it today. And he's the one that we mentioned that we've got a framework for a deal going forward where he'll invest capital. So he was a natural person who had started that business from scratch and had made it quite successful. So we've got measured optimism that with kind of a renewed approach to thinking about the business and taking advantage of the market opportunities and some of the elements of the business model that we think are very sound, there's a runway for us to improve its performance. And he feels that way, obviously, because he's investing capital, new capital, into the business.

Speaker Change: at a much lesser level, and

Speaker Change: We approached him to get involved in the business and he's essentially...

Speaker Change: He's kind of helping us operate it today and he's the one that we reference that we've got framework for a deal going forward where he'll invest

Eric Zwick: So he was a natural person who had started that business from scratch and had made it quite successful. So we've got, you know, measured optimism that with kind of a renewed approach to thinking about the business and taking advantage of the market opportunities and some of the elements of the business model that we think are very sound, that there's a runway for us to improve its performance, and he feels that way obviously because he's investing capital, new capital into the business. In the Pepper Palace case, we came upon somebody who had, in a number of situations, gotten involved in distressed credits and had made capital investments in those credits and turned around the businesses very successfully.

Speaker Change: Capital. So he was a natural person who had started that business from scratch and had made it quite successful.

Speaker Change: So we've got, you know, measured optimism that with

Speaker Change: kind of a renewed approach to thinking about the business and taking advantage of the market opportunities and some of the elements of the business model that we think are

Speaker Change: very sound that there's a runway for us to improve its performance and he feels that way obviously because he's investing capital, new capital into the business.

In the Pepper Palace case, we came upon somebody who had, in a number of situations, gotten involved in distressed credits and had made capital investments in those credits and turned around the businesses very successfully. So the person that we're working with there also has a track record of... Turnarounds just like this in similar businesses, and that person will also be investing meaningful dollars in Pepper Palace. Very helpful. Thanks for taking my questions today.

Speaker Change: In the Pepper Palace case, we came upon somebody who had, in a number of situations, gotten involved in distressed credits.

Speaker Change: and had made capital investments in those credits and turned around the businesses very successfully. So the person that we're working with there also has a track record of

Eric Zwick: So the person that we're working with there also has a track record of turn around just like this in similar type businesses, and that person will also be investing meaningful dollars in Pepper Palace. Very helpful. Thanks for taking my questions today. Thank you.

Speaker Change: Turnarounds just like this in similar type businesses and that person will also be investing meaningful dollars in Pepper Palace.

Thank you. And I'm not showing any further questions at this time. I'd like to turn the call back over to Christian Oberbeck for any closing remarks. Again, we thank you for your support, and we look forward to speaking to you next quarter. Thank you, ladies and gentlemen. This does conclude today's presentation. You may now disconnect. Have a wonderful day.

Operator: I'm not showing any further questions at this time.

Speaker Change: Very helpful. Thanks for taking my questions today.

Christian Oberbeck: I might turn the call back over to a Christian Overback for any closing remarks. Again, we thank you for your support and move forward to speaking to you next quarter. Thank you, ladies and gentlemen.

Speaker Change: Thank you. And I'm not showing any further questions at this time. I'd like to turn the call back over to Christian Oberbeck for any closing remarks.

Christian L. Oberbeck: Again, we thank you for your support and we look forward to speaking to you next quarter.

Operator: That's conclude today's presentation. You may now disconnect and have a wonderful day. Thank you.

Christian L. Oberbeck: Thank you ladies and gentlemen. This concludes today's presentation. You may now disconnect and have a wonderful day.