Saratoga Investment (SAR) 10 Jul 242025 Q1 Earnings call transcript

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 Instructions]

At this time, I'd like to turn the call over to Saratoga Investment Corp.'s, Chief Financial Officer and Chief Compliance Officer, Mr. Steenkamp. Henri ahead. go please Sir,

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

will conference our Chief will release now quarter and earnings a the page remarks. release can our our details. I would is also distributed Please website. of press earnings to You replay few A be last presentation our to in Relations XXXX Chairman Presentations available. turn over fiscal press of IR call Oberbeck, refer section introductory who the this Events for Officer, first call Christian in Investor our to find be like night. link making to the Executive and shareholder A

year. income Thank last margins XX% on everyone. adjusted you, elevated per interest net interest portfolio in increased recurring as Saratoga's Henri, rates quarter our share to stable as net and the quarter investment for to past the welcome, by compared have relative resulted

on cost management assets, largely earnings long-term sustained power increase generated increase investments of X% reflects and rate quality by largely liabilities elevated XX% fixed. margin under of in are floating while and interest ago rates levels average quarter's This balance interest a assets the in sheet spreads increased a net Saratoga's earnings and versus year recurring with the

per exceeded $X.XX significantly This recently dividend $X.XX XX%. of share our by increased investment income quarter's net

the potential the continues constrained sponsor last largely ongoing volume of our addition, of despite over billion the rates years increased balance well out, investment industry-leading M&A X to portfolio fixed is development of the credit -- covenant-free as positions years. as Saratoga our Most be economic primarily We elevated importantly, general portfolio. foundation interest-only high-quality of coverage with delivering credit and believe maturities nature, from level attractive crisis XX from NII of of situated sponsors opportunities substantially with to our versus elevated margins dividend continues creditors billion long-duration interest challenges. Saratoga's relationships situations. future well company costs resilience and limits the risks at structure couple to for rate $X.XXX $X.XX and the create level of and largely In opportunities fixed high-quality approximately favorably performance

our value, cost investments and Our X.X%. excluding its and Pepper JV core BDC exceeds CLO portfolio restructured Zollege Palace X our and fair by

restructuring is to with the value have during restructuring restructurings We consensual sponsors Pepper and Palace through imminent. fair Pepper $X.X investments Zollege control remaining and Zollege, and decisive Palace action with the was prior quarter, a taken combined assuming both establishing The first completed full respect million. of over the

have We capital for are adjustments, plan changes, increases actively future improvements implementing recovery which the management business and value. structure in potential

the list. our portfolio current X substantially underwriting of in our our of to portfolio and power financial strength well-selected segments. resolved solid on With industry related earnings the we The X strong portfolio X of the growing of and companies completed, these uncertainties performance watch remaining restructurings reflects companies overall

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

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

with in has existing position and million cash of million the strong no versus from business quarter leverage leverage net amortization, originations XX know well including cash and During $XX.X million sheets. $XX end models smaller further while increase investments outstanding portfolio companies company repayments originated investments we in end $XX through XXX%. balance totaling benefiting debt, new against quarter follow-on week, this the XXX.X% cash grown we With quarter, quarter netting improving regulatory to our net leverage, effective available leverage from to since to XXX.X% this portfolio improves

performance stock earning economic XX.X% share of conditions on first yield share dividend of for X credits of balance growth stressed quality XXXX. debt historically highest the leverage dividend as investments first quarter quarter providing over at We new banking to as amount of with our financing June NAV, Our or investment for currently industries Live cushion have with $XX XX.X% We uncertainty. Saratoga's available per sheets share income companies of at well are newly imply generally adjusted well representing of well new incremental a maintained and lien substantial into is March economic to and an cash. Saratoga of entered added credit conditions, With annualized million our high portfolio in still dividend events. fund, purpose us. On $X.XX dividend relationships. of $XX XX, and category that from Including indicators quarter $XXX nonaccrual, XXXX, quarter increasing overall end million. support million price May a an as investment our share experiencing, and our credit for our recent X, believe and XX% SBIC annualized of and III structured X-year and this million our facility in vehicle in Bank, challenging XX, remain we first enterprise investments this X.X% which this and of per $X.XX July In for preservation compared situations. performed XX.X% portfolio strength, level to based quarter XXXX. our in capacity new $X.XX against we a ended earnings Oak paramount investments such XXXX, net quarter our yield and fair a values as $XXX $XX.XX X special a portfolio strong with volatile level quarters we solid rated balance on The through the in value. by million to approved on provides end, $X.XX increases at $XX facility a per liquidity adverse per the $XX borrowings upsized key facilities and million supported and with credit NAV February this XX, X portfolio our by demonstrated up remained and supports currently sheet in aggregate revolving performance

last XX% year million and $XX.X adjusted up quarter. Our from NII last is quarter, this

this up X.X%, per quarter, last return on from X% from $X.XX down X.X% this last last Our $X.XX equity year NII is from from last up XX% year is from quarter, from up and NII up adjusted XX% share X.X% yield Adjusted last XX $X.XX down year XX.X% and XX% last is and quarter. months quarter. Latest quarter.

X% from from million year last million, down Our down share end $XX.XX our slightly quarter quarter. And year up from million from X% $XX.XX last is NAV $XXX quarter. per and down $XXX NAV last last and $XX.XX, is $XXX

over XX BDC return small portfolio, past average equity long-term year credits last our seen on how Slide of illustrates a to markdowns number core this the While years in has our X X past the industry's the years. X.X%, well the past consistently strong above the over industry leading is versus and industry has XX.X% of decade BDC the average remained XX at

solid see remain can and have and of since risen credits X, took with credits quality nonaccrual, our BDC unchanged our on XX last steadily assets ago, you quarter. over management X on Slide As the consistently from under the we years only

as diligently working credit at performance same environment. With and as the of our appropriately our turn continue back to that, is team as well to the financial our our available and being in this cautious to positive trend capital I the would evolving we review portfolio. to over composition call deploy management Our Henri pipeline this into volatile while like time results

year, to Thank KPI -- debt increased increases our million last This management common and X investment from in with incurred increase that accounting appendix last by of the $X.X and income assets various annualized X.X% shares quarter. Of to debentures increased financing and XX, from quarter taxes fiscal last last first excise and from this base Increased on as the most income during issued and interest and year; higher higher for May you, fees of up compared average the base total up average performance XX.X% primarily last from $X.X excluding and QX which represented million million increased incentive XX.X% X.X% from last legal from quarter. year fees to the and million related expenses basis, NII quarter. $X.X this and increased resulting quarter, year. presentation through we and were QX margin for quarter Chris. offset average interest assets quarters, X.X% for restructuring XX% sheet ended our including expense from in past added The regulatory, income expenses two, earnings. Total the well weighted AUM an X.X% and past have as expenses already expenses, XX.X balance from Adjusted year year. shares increased compliance highlights of first outstanding last increased up statement the Chris XX requirements. Also, X end over in for this note, quarter, as general and the interest slides again and net in the new XXXX, past fees million SBA from highlighted. at activities of shows the XX XX.X up notes Slide key metrics the the management a and incentive from metrics payable

of past from on per chart specific a year. NAV and decrease same has the quarter and and important quarters, of share includes was end, how $XX.X from NAV with quarter with this our which also Moving reductions million historical down primarily highlights Slide asset a million million the per markdowns reflecting quarter increased XX last $X.XX This share, recent as X. this last XX discussed. metric increase quarter $XXX.X already QX $X.X to the this

increased the by and value long-term the as this increase Over long accretive, demonstrated has has per growth our asset term, share. steadily in XXXX, net been NAV since

X share past per is NAV or per years, XX.X%. the $X.XX Over up share

per share consistent sequential Slide you X, expenses. NII primarily reconciliation average and will We our unrealized NII adjusted on a Starting of adjusted higher in from gains. On at operating the in $X.XX, AUM NAV increase and in changes top, due a see history NII per was decrease and share $X.XX major of the to continue realized $X.XX quarterly to simple the basis. benefit from non-CLO up

half due NII GAAP the net excess share decreased primarily and lower the of the to loss over than NAV earned by $X.XX, realized the offsetting more $X.XX unrealized On slide, per depreciation the This million. available QX dividend. Slide dry and spread to us SBA the available between credit undrawn powder of $XXX our quarter outlines secured debentures end, undrawn facilities. totaled was as X which cash,

$XX quarter with the level additional also us available an low-cost without fully assets available external allows with $XXX quarter of thus very NII grow of debentures need and when SBA end accretive. of for available, liquidity to cash to deployed, accretive financing, This million and end our million pricing, by XX% its

a term in facility shows any We Also that us to Live interest is column our BDC in effectively credit to plus debt against almost protect including capital million stressed volatile $XX sources the within our of almost nature $XXX X-year access remain next be structure rates, Oak such we in that non-SBIC callable no this position, liquidity of if that nature we Bank $XX also needed. conservative our is all sheet. times. X no new This showing margin, debt. decreasing allow subsequently and options the in liquidity protection secured with our covenants liquidity is public especially net available diverse private of our our fact our million June. We with into future that the the The and creating our debt bonds, a Also, is closed should a account years. pleased and debt and long that year balance to include and during million next and can call year, taking structured both overall have revolving natural our debt baby within upsized maturing interest X% which way potential leverage March of to our all

billion to of through now portfolio. to of yield and like that move XX $X.XXX review Slides fund is values, in X would on this the Slide and at X highlights invested fair composition our and X we and investment I XX companies, X portfolio venture. AUM joint have CLO Now

CLO, last lien time, investments, the our core assets, total X BDC in first the our of changed past can which first over Our percentage XX% especially how on is positions. On Slide excluding XX% see years. out lien you of has is yield our XX,

our the to unchanged. at The quarter, same investments last yield are addition is the relatively included diversity core CLO U.S. the XX.X% the through our rates remained This and see The JV, to can industry diversified finance And in in XX from on quarter. current. Slide with breadth performing structured as Slide over CLO BDC and portfolio which XX.X% yield XX, represents base that you our industries XX CLO investments shows are decreased distinct spread slightly how our securities. and

past realized had of shows other Slide performance portfolio my investment a financial realized or from Netreo of Moving and the and consists interest or has portfolio of ROE. That equity reflected over grow that will This important This is to X.X% Michael I to realized XX. million gains market. Grisius, Zollege the of of strategy. the our and to Officer, XX of Investment which an combined net review. concludes losses overall our is of This the an our credit investment for continues call in past on sale our remain investments. quarter. for quality we turn now interest, fiscal helped overview long-term highlight slide part healthy our redemption of sale equity portfolio this early Chief $XX.X net years, NAV the our consistent gain investment and

we the X activity M&A in on I'll The then performance reflect up, slower in overall the portfolio last comment periods. on since been only changes so focus market on It's and continues Henri. and than perspective and since our current our market historical then investment Thanks, months strategy. caught deal to volume deal

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

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XX, quality our overall you as remains portfolio And on can see solid. Slide

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years combined we've those achieving equals into dozen time that same investments. billion companies. that credits, we've realizations. gross of together, Over been taking of few unrealized investments, $X.X of we've Over working returns invested capital had unlevered write-downs Even of frame, on losses all we've a and returns the current invested XX.X% our XXX on portfolio XX account plus discrete exited just the X realized successfully in realized XX.X%. $XXX on million realized

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

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portfolio resulting due $X across original Of the BDC had quarter perform of CLO. In of depreciation CLO and JV rest addition, our has this net of to $X.X our individual primarily unrealized unrealized in to in remaining markdowns million appreciation well, million credits core companies continued in QX. XX is note the the reflecting portfolio

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

Now moving on to Slide XX.

are license currently You our both funded allowing support debentures III second new us can U.S. available. and of new to undrawn lower continue to businesses, ramping we SBIC is up our small $XXX license fully see million with deployed, SBIC cost and existing. and

turn concludes CEO. And this market. the I'd like Now my back over to to call our the of review Chris?

Thank you, Mike.

company Slide reflects XXXX. X% quarter in on $X.XX May ended outlined X the of past continue quarterly basis, factors, the and both XX, on is and our on X was XXXX, respectively. on our including The the XX, a evaluate economic share and a XX, As Directors Board interest largest to history, environment's June considering paid current least dividend will general the This dividend over the rate latest earnings. per and dividend our impact at increase of for years, XX% quarterly level

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XX. Slide to Moving

return the dividends, negative X%, capital the same returns Our index XX% months, uncharacteristically for appreciation XX of generated which low for includes total has both period. the total BDC and underperformed last and of

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performance industry certain see key our in and further context of specific performance XX, metrics. On the can broader Slide placed you to the

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

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Moving Slide on XX. to

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

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

Instructions] Our Rowe. comes Bryce first from [Operator question

start the environment I wanted on to for just maybe investing.

And made Chris, about... comment up. then, You you here activity possibly a some made comments repayment picking around

Bryce, can a moment? you or pause

Sure.

hear you Operator, can us?

looks hear Can they're you. guys technical hear moment it hear you you can Bryce, like having me? One a issues. me? Can I Yes, little

can you. Yes, Kevin, hear we

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you and Bryce, your Okay. ahead can Yes, go question. ask

of here Okay. Hopefully, subsequent up. possibly to comments cash you And having some about I the end. Chris, environment, then, talked you picking kind to repayment guys quarter in can made get wanted thoughts hear activity your investing you I me. around on come guess,

of What opportunities the could new bit it like around of over environment skinny pretty get you that new a been feel terms the just a not also you'd finish then portfolio. get is across in months XX see it's transactions. for the the that newer more little seeing of deals And line? kind If for I some maybe into wanted to to you're that. commentary Obviously, last provide these to

try me questions. that, Let good and to tackle all Bryce,

for corporate is First private record a kind of the deals, years, aware kind of half except up of sure of overall or you're of me -- the in And equity-backed recent PE-backed that of pick context bit starting that. lows, to COVID of you for little M&A for deal below deals, XXXX. M&A let environment is all, I'm I the the but for volume U.S., give overall especially activity even height down, for first the experience in any period the think

As we're a opportunities much as in activity not companies. invest and to seeing portfolio result, new

last our we're of portfolio few to support opportunities Now -- the in to you've companies, do still plenty seeing exist existing and seen us that quarters. actively quite

price. many had on the new, M&A pointed capital on the sitting is payoffs causing lower as of experiencing of the is some that out, competition activity. the What and of as benefit of a is activity that's deal not combination as result all and also the have think we new sidelines low We I

you're start capital. -- get deploy to to certain seeing you're aggressive people pretty seeing so credits, And in

And so where types, cetera, in there we've where lender offer for deals are more some obvious et kind of kind lower of of targets leverage seen attractive financing. come more our and of kind senior

opportunities strategy. that you that more good smartly. middle payoff experience the in noncyclical that fuel in, and will it's also can of in have to really we're verticals generally, is will the some deploy would will opportunity lot credit continue a and generally our great if place them just feel know We as well as being the lower of capital. lower the standpoint well, We about capital through our complemented run, deploy terms really we it's market what of activity very verticals from opportunities very of great we'll activity being deal to you depth that stepping has the at will in of really the senior to and think if portfolio middle industry. we're our of about long as continue deploy among best got is we the good long kind with our just a a repayment outpace comfortable of market end sit in kind moment, team. with we investors to relationships we relationships in may of that the deals. We our equity the about with though, through, at market it, and out, and you plenty quality risk-adjusted of end terrific debt of the -- cycles, to activity capital highlight, I breadth we the the deal much have the run, there. But there's and you of end been that And and very where be middle that that historically. In feel in our we may quality We new sort I in that of will. the can And team returns not just it in we think market think back working that get as this think we've that and back generate the co-investments, feel step play our present different just that a strong the as we've think moment, sort think experience. that to underwriting present benefit

couple about the maybe kind pro give follow-ups. quarter thinking cash us cash moving of about make Mike. forma the you how maybe balance again, I then post think XXXX? into as that half just you a you're it. -- coming end. I Can and we of The And then also helpful, and That's the since a -- comment in second mean wanted Got maybe to position about on of comment? that of ask kind about did undistributed

We reasons we the I with might cash had price for start the we disclose of described. that position. could don't that we couple said, repay, deal mention, as another have but you others potentially did a generally that, and Mike

coming new worthwhile it thus there's being that we therefore, so obviously, month And into the felt only cash of just sort net quarter. mention was a in to far

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

from Casey Compass next Alexander comes with Point. Our question

questions. A of couple

First upper seen lender competition platforms middle survey one Mike. The of been larger in Have of market, creeping traditional some. coming some for flow suggested and because the into that has LSEG the lack private market market? deal your you that have of middle down credit form the

little a We haven't it, bit. but Casey, seen much of

where for and doesn't ways we deals But probably outside a are just me of of even suggests sense if pricing might there candidly we haven't that, off think a facing which referenced that the looking a deploy really sensible. bit make get a are at that the us institution I senior isn't payoff to were will is it's sitting but pricing any and seen we that, we paid that seeing deal probably one level one the to lending capital much that's be really there. are are on that players it for large it of little

Okay. great. That's

somebody, subject this to --I been From looking I kind this we just knock before those and in aren't always that's be groups. that types of compete and we a for really a that that that do. will where a play underwriting market, see the company say the folks. They're what right portfolio like do of Are who we their we those to we're day-to-day in it's they where we come to the the don't can subject we this, well, for probably and activity. by marketplace of an in portfolio at doing in that. we that terms rigor of against, off. we of and out play really environment But do a depart is size with the we the not try in set process not the while that deals And we should though, institution type yes, say most to bit. in little up And credits really of and that do range box.

over started as just to all time be their growth. of of XX most that our note small quite all tends smaller you'll off we grow doing and they So top investments then about what support and with

building and over in, institutions whether new kind see marketplace So in of large point, have standpoint on subject don't portfolio the terms doing those of reside activity really we to that. to portfolio that what in our we're that time Companies you're a much. we very up grow to

you've taker be makes time. bolted to That cycle investments over on might that a Right. your of sense that late some they

the and Oak Oak it makes you, plan terms adding the So Oak Live have that continue just to add Henri, And sense. and banks like your the would in you to it the the Live looks you're Live Encina? to facility to that to back facility? of Live How cost some replaced ultimately is facility. Encina we have it as Oak for compared characterize facility, --

Casey. Yes. a it's I question, mean great

firstly, think broaden with facility a having our goal structure. is facility that strong still relationships to about of credit I our allows loved new we having second really the a what with it way us in a banks achieves

that a opportunity more banks as as great just added the also Live opportunity. with another then And when was it Live was to came along to Oak in there's We firm as facility, because availability. upside, important Encina bank as the extra you well. X creates addition know that probably we new a the know, So And Oak. in XX

new years it. left has, the facilities. X still years relationships think, X now almost X have in effectively we on I X in So these Encina last

in facility go So different up facility facilities one. in perspective, X, X a has set The the But similar. the just we're just having It's versus we they make that a cost it much deal very operate some it's don't around, at we, Live or doesn't back need problem. From more versus larger. just much tiering. any SPVs. that's point, But now X work create X in us with Oak a to cost a one it's to really for do not to decisions process-wise way

much And down. so rate we comes the actually how from draw

same but points. So XX% it as more that the more, every at XX we save off draw, we rate draw we basis starts

up the meaningful world, the and facility I is Well, Yes. cheapest in reason because the it draw. Encina question that is bring the mean, minimum has a I the pretty not

million And it cash, of so feels here to inefficient we yet minimums of we are and like on capital a -- have an use $XX sitting certain extent.

Yes.

having functions, but I and market much more need for cetera. it activities you need deal when think it's fund not balancing to important act around us a the available for moments you et or those only liquidity just for

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

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

totally Yes. No, with I agree you.

a of sort part in now, in it's of other has split it. more of primarily would have We out of the income that fees then, guess, I fees that a in fees or expanded. the Casey. sources really as income detail as income There's other in bigger nature, Dividends statement -- become say, there. is that, X/X probably transactional well. either fall monitoring I little amendment And bit prepayment of But

to in but recurring. to deal, one-off tend it's quarter a of related more specific events have those types you occur that So

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

Yes.

this of quarter your given about But meaningful one reasonable in your coming least you other coming, more thus sense be coming up comments expect the in would know to quarter? that and having Okay. some some income payoff at that it

Yes. I assumption, every the that's It's case. specific yes. be that mean, to obviously an deal unreasonable but could

Robert Dodd from Raymond with comes question next James. Our

A couple this. of questions [ to focus ] on

was in you differently that going of last all Or continuation of quarter, write-down, kind mean, there. that the was saw last you drove realization trended the part going the when us of to all that of I I that? example, Or already with gave changed? the detail us kind non-accruals, there restructuring? of and the anything the a on? the business. but looking of a that drivers that not mean, was just for that example, the was you on Has what lot and terms quarter what plan anything detail I'm of on Zollege restructuring First, partial gave all reiterate about issues for of

what of and meaningful from we each these we are credits discuss hard we there. people we we as But those try of capital feel credits certainly I them, wanted of in got credits still continuation to there the think are wood can events and work liked going that again beginning we're to felt as are credits, chop. situations. It to enough a to But in that lot of much a actively those keep we both and it discrete lot working, was saw that of fundamentally a that are are we've those of those recover elements already there to going on. like now We informed of both

a restructured to we of the them also that keep we've would big there's on some to I although just add component now Robert, securities, them And continue nonaccrual. and

on continue going X forward. you As say that probably nonaccrual have investments to we noted we

Got it. color. I appreciate that

not on when What's of color always the you a companies mean, on the you make that was it mean, that nature incremental thing working us platforms, market for a -- kind are funding Can whole. any any give it lot the activity. number, acquisitions but very you give today? Because of. On new is on that's this I -- nature XX the of one, that like you follow-on mean, no I us helpful point follow-on the making? that what used second color being as significant Is Can you're obviously, of follow-ons. capital follow-on? a I color portfolio these given

what color that is? any So on

that that businesses all not to is through the are of most Most activity activity. pretty for invest through them we of but appetite them, additional Sure. of most in, add-on capital. -- a have of drive healthy growth And M&A pretty

were of those the in to and majority And follow-ons where so out really us that's years worked in that's we've well come some cases, really in lent. the over something existing do And acquisitions platforms. for tuck-in

a right now I million kept biggest worked $X company debt a on equity back acquisitions that started market company as coming $X off is out to have portfolio think with and that one to really well. our that piece million co-investment, execute

So to of fundamental is those that and what kind the majority strategy were what of we do, for. that's follow-ons

what That's it. Got I to expected you it. I appreciate say.

just platforms. about new the I'm you're activity not because low I you can mean So some for add-on is Most of I reconcile what but about for very on on PE the the They're market, sponsored platform even new financing for they're not active getting though active not your mean PE -- cost saying. the elevated. both fund, front. relatively a have in is of involved you're the businesses

sponsors costs perfectly on what? acquisition? incremental a not why I an So comment are may lower -- mean, is add-on obviously, willing Is you driver pay new multiples it the what people platform -- willing can pricing there? what's financing add-ons the What's disconnect or is PE be. driver? make But of the the the for differential are on what the but so to -- to

platform And I a new question. a a multiple. yields generalization, perspective. think, the pretty It's healthy but it's, this right typically now is a opportunity good really

for to platform of gotten bit a very certain scale. competitive a are to new execute successful et so platform. through And new when sponsor to smaller, their a something complementary acquisitions marketed that businesses, looking in are equity with pay that very really firms very bolt-on at accretive core that up process, It's an And these It's doing they lot been a business a is that a usually cetera. and platform, gets have private add-on.

platform you a on those often, multiples. you add-on that command shareholders. execute to at value get bit have can acquisitions And make for the typically smaller may so lower very an we've platform it add-on that But businesses, don't a seen accretive and multiple not They're a think It's effectively seen think the are on out performing the in equity in certainly can better play but my this we've owners other firms there's private of and command exit markets, lot very marketplace I that market, I jeez, saying, business. where really a well. a a I to

not So to the now sell. time it's

figure the that some out activity execute where business, are hold the of they at build kind But Let's the that in lower to includes and do to than on best continue multiples meantime, done, time what and add-on let's and exit. original continue is the acquisition. of to out we've which go

presumably the historically be in add But it. big there? behavior I different versus are like to spread right for add-on your that a -- that other be found How can. for was between last Obviously, if going what you the Got point, seen now, that can market? I periods mean, large acquisitions platform one, your how you've would How from there'd spread characterize -- today some there's acquisitions? gap. or versus color, in is Is I what mean, wide that is

don't on common organic to executing driven scale It's go a they when that very some When do they growth new what for firms they to know platform. a component, of acquisitions. what the versus can at where delta they larger thinking it's place sell goal There's by do can can them think is there's on what -- between I smaller much we there's a are the primary and much execute acquisitions certainly And an a is the do. add-ons. be private equity that wider. company

the depending market I on this wouldn't delta, different others. they end they're that in. than And in in different. But there's environment not they're say it's in I'm and what much operating are so variability market you're that where much Certainly, sure much,

on that some make they're that, I'd forma investment. specific comment further x one all platforms given a the But an discount. business significant these it's be cost like a and pro And and again, at of the for while multiple to it things the can acquiring savings synergies Yes. is,

so you've forma And go arbitrage in get your on you so even you what got a arbitrage -- then is multiple greater. but pro at

that. economics very have well that's done these so people the really And of buildups, on

good very a point. That's

the it. win-win. that." actually right, an seller the cost, views need really "I there's lot sale for often, and something But redundant cost buyer for of getting a kind it multiple a that they're dollars the as don't the though structure it's look at it, very add-on So can less say, x -- than so buying for of So ex I'm

at Yes. unusually at cycle for give some color. point. and But in all you, a it No, makes is now the bid color. lot just skewed like that bonds like seems it just the seems of unusually true dynamics to But right that for a it's thank those lot your [indiscernible] not and something appreciate I you going ask, any It everybody, of that's et point sense. cetera, market for

which think a on again, gross think good think one it's it, I a perspective question. And different other But generalization. also I very it's Actually, maybe I markets.

institutional owned of environment. equity a they're and management by by smaller owned families, selling deals they're Some by private these kind into are owned of individuals, teams,

People estate be selling they're equity and private taken driven much certain as of it's there's and get market, going But as multiples they they're rate or like more hold so think the that until of certain return a market individually in life decisions sell planning, might long paid can't of to they selling they're any decisions. They until have maybe because get And for may sort longer. want I -- to going of reasons. different going on. they hold retire a to cycle, not

other say, that manager different equity a private return, drivers, pure of XX-year-old private to time different whatever one the equity not is I it's is this do marketplace like because It's a for to marketplace platform move could So a firm to years. different the to is I the think want than this well, like sell to X company. do. rate this I factors. I'm Florida. my want timing, But hold I another going

of because so like market don't And I XX I not to to ready he's say, going move on the wait on. to want kind

question Our Markets. with Capital from comes Erik next Zwick Lucid

reflective follow-up all you Maybe no all your seeing wondering all thoughts that a first on are curious Or And that mentioned I'm commitments and in you in were So to you provide potentially curious you of sectors little provide could of -- just you're the that didn't quarter, you avoid if there. could the a there meet investment some leverage in wanting was I if new terms covenants. at to reflective the spread, standard. I'm more? color some fact it's some of economy? it weakening on that

Good question.

you I spread think se. leverage it's not I it's -- per tell can't that or

support we when selective company. a already the highly think volume deal decide considerably, to I portfolio quite down and is we're

when the rigor that our volume, so much And opportunities results. that deal hasn't you take to apply combination lower our just and investment we of of yielded any then new just

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

lower look than let's you if in that pricing year we've it some so seen, was. on now, pricing basis And even where at where versus ago, is deals points cases, say, XXX-plus is a

processes kind you to react this that time of have as so in on. And goes to competitive

probably play well. a into cases, probably, of came couple that So as in

for one other And me.

targets Palace, days mentioned And of restructuring it in you future about value. respect but the time both about restructurings year, with said say, increases from those Zollege kind you Henri companies? months, I for Just a improvement potential of how perspective? some you you do Or like there's X standpoint? the Pepper think completing from or early Have those just do KPIs it's timing a X to at and X year a recovery that know think to for will of the how create in

sort of fundamental and We targets give and terms to set us date otherwise certain decision. going of of kind make evaluate in don't we're

think make way try positioned, based like where constantly evaluating the constantly positioned anything, to a and you're and facts. those are what company to the opportunities is we we're maximize I you and where that's best on assessing the are, something then that decision value,

chop. lot businesses I I of that are think in but attractive there certainly as deals, elements these think mentioned, a wood we have some to of the both are

As to I we've work mentioned, to got place. better a do to get them

will time So tell.

follow-up maybe one that on And last one.

or where there. Just kind teams in the management have that's those? guess the putting of I question place, of in terms how of are sourced that new And the crux you

invest we framework business where us I case, original was approached one of to we Well, we'll lesser a sold business that got the -- that was at the sponsor for the went operate and him to the equity the private a in business, founder who the and much still referenced think today, still to he's level. involved involved he's And a deal it Zollege's actually helping kind we've going essentially get who capital. in had we forward and of

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

runway are feels of kind business. he's the to think capital advantage that elements performance. investing new model And for and business opportunities and very we of there's obviously, way, the market got that because the the a we've that capital -- So he sound that a thinking about with improve to measured us its some approach taking the into business renewed of optimism of

we investments In very the turned in credits involved had businesses a gotten who number successfully. in situations, upon distressed of around came had and somebody and Palace case, the made those in credits Pepper capital

turnarounds record type businesses, a just So the also Palace. in meaningful has of that there also that will track in investing and this like dollars person person be we're working Pepper similar with

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

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

conclude does this gentlemen, and today's Ladies you. presentation. Thank

a may You have and disconnect, day. now wonderful