Executive Summary

Q2 FY2026 results were resilient but below consensus: Total Investment Income was $30.626M vs Wall Street consensus $32.377M; Primary EPS (NII per share) was $0.58 vs consensus $0.6825, while GAAP EPS was $0.84 . Consensus estimates retrieved from S&P Global.*
NAV increased 3.6% QoQ to $410.5M and NAV/share rose to $25.61 (+$0.09 QoQ), with annualized quarterly ROE at 13.8% (LTM 9.1%) .
Portfolio health improved: Zollege returned to accrual; only one non‑accrual (Pepper Palace) remains, representing 0.2% of fair value and 0.3% of cost; credit quality at 99.7% in highest category .
Liquidity/capital remains strong: $200.8M cash, $406.8M total undrawn borrowing capacity, and monthly base dividend of $0.25 per share maintained for Q3 FY2026 ($0.75 aggregate) .
Key catalysts: estimate miss driven by lower non‑CLO interest income, SOFR reset/lower base rates, and timing of repayments vs originations; dividend stability and improving credit quality support medium‑term confidence .

What Went Well and What Went Wrong

What Went Well

NAV and NAV/share growth: NAV rose to $410.5M (+$14.1M QoQ) and NAV/share to $25.61 (+$0.09 QoQ) . CEO: “continued NAV and NAV per share growth from the previous quarter and year” .
Credit quality improved: Zollege returned to accrual; only one non‑accrual remaining at 0.2% FV/0.3% cost; 99.7% of credits rated highest category .
Net originations and earnings power: $52.2M originations and $29.8M repayments drove $22.4M net originations; fair value increased by $3.8M from net realized/unrealized gains .
Liquidity and dividend: $200.8M cash and $406.8M undrawn capacity; monthly dividend maintained at $0.25/share for Q3 FY2026 (total $0.75) .

What Went Wrong

Estimate miss: Total Investment Income $30.626M vs consensus $32.378M*, and Primary EPS (NII/share) $0.58 vs consensus $0.6825*; driven by lower non‑CLO interest income, lower average assets, and SOFR/base rate resets . Consensus from S&P Global.*
Sequential revenue and NII decline: Total Investment Income down 5.2% QoQ and 28.8% YoY; Adjusted NII fell to $9.1M (−10.5% QoQ; −50.1% YoY) .
Net interest margin pressure: NIM decreased from $15.1M to $13.1M QoQ due to decreased non‑CLO interest income, average assets −1.1%, yield reduction (11.5% → 11.3%), and ATM dilution ($0.02/share) .

Financial Results

Metric	Q2 2025 (YoY base)	Q1 2026	Q2 2026
Total Investment Income ($USD Millions)	$43.003	$32.319	$30.626
GAAP EPS ($)	$0.97	$0.91	$0.84
NII per share ($)	$1.33	$0.66	$0.58
Adjusted NII per share ($)	$1.33	$0.66	$0.58
NAV ($USD Millions)	$372.054	$396.369	$410.500
NAV per share ($)	$27.07	$25.52	$25.61
ROE – annualized quarter (%)	14.4%	14.1%	13.8%

Estimate comparison (consensus vs actual):

Metric	Consensus*	Actual	Beat/Miss
Primary EPS (NII/share) ($)	0.6825*	0.58	Miss
Revenue (Total Investment Income) ($USD Millions)	32.378*	30.626	Miss
# of EPS Estimates	8*	—	—
# of Revenue Estimates	7*	—	—

Values retrieved from S&P Global.*

Segment composition and yields:

Metric	Q1 2026	Q2 2026
First lien term loans (% of portfolio)	86.9%	84.3%
Second lien term loans (%)	0.7%	0.7%
Unsecured term loans (%)	1.7%	1.7%
Structured finance securities (%)	2.8%	5.4%
Equity interests (%)	7.9%	7.9%
Weighted avg current yield – portfolio (%)	10.7%	10.4%
Yield – first lien (%)	11.3%	11.0%
Yield – second lien (%)	16.8%	16.9%
Yield – unsecured (%)	10.6%	10.5%
Yield – structured finance (%)	15.6%	12.2%

Key KPIs and balance sheet:

KPI	Q2 2025	Q1 2026	Q2 2026
AUM ($USD Millions)	$1,040.711	$968.318	$995.295
Originations ($USD Millions)	$2.584	$50.086	$52.222
Repayments ($USD Millions)	$60.140	$64.330	$29.824
Fair value change (net gains/appreciation) ($USD Millions)	—	+$3.8	+$3.8
NII Yield (%)	19.7%	10.3%	9.0%
Non‑accruals (% FV / % cost)	—	0.3% / 0.6%	0.2% / 0.3%
Cash & cash equivalents ($USD Millions)	—	$224.3	$200.8
Total undrawn capacity ($USD Millions)	—	$430.3	$406.8
Regulatory leverage (Asset Coverage Ratio)	—	163.8%	166.6%

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Base dividend per share (monthly)	Q3 FY2026	$0.25/month ($0.75 total)	$0.25/month ($0.75 total)	Maintained
Dividend schedule (record/payment dates)	Q3 FY2026	—	Sep/Oct/Nov monthly $0.25 schedule as disclosed	New dates disclosed
Revenue, margins, OpEx, OI&E, tax rate	Q3 FY2026	Not provided	Not provided	N/A
ATM equity program capacity	Ongoing	Up to $300.0M	Up to $300.0M	Maintained

Earnings Call Themes & Trends

Note: Q2 FY2026 earnings call transcript was not available in our document set; themes are drawn from press releases.

Topic	Previous Mentions (Q4 FY2025 and Q1 FY2026)	Current Period (Q2 FY2026)	Trend
Macro rates and yields	Yield reduction from SOFR decreases; Q4 portfolio yield 10.8% (first lien 11.3%), NIM dynamics; transition to monthly dividends	Non‑CLO yields decreased (11.5% → 11.3%); portfolio yield 10.4%; NIM down to $13.1M	Slightly deteriorating yields
Tariffs/macro and deal flow	Tariff discussions stifled M&A in lower middle market; cautious commitments	Competitive market dynamics; originations continued; prudent underwriting	Stable cautious stance
Credit quality / non‑accruals	Two non‑accruals (Zollege, Pepper Palace) successfully restructured	Zollege back to accrual; one non‑accrual remains; 99.7% highest category	Improving
Liquidity/leverage	Cash $204.7M (Q4) rising to $224.3M (Q1); leverage improved when netting cash	Cash $200.8M; total undrawn capacity $406.8M; regulatory leverage 166.6%	Strong, stable
Originations/repayments	Q4: $41.8M originations; Q1: $50.1M originations, $64.3M repayments	Q2: $52.2M originations, $29.8M repayments; fair value +$3.8M	Improving net deployments
Dividend policy	Shift to monthly dividends; $0.75/qtr base	Maintained $0.25/month for Q3 FY2026	Stable

Management Commentary

“This quarter’s highlights include continued NAV and NAV per share growth from the previous quarter and year, a strong return on equity beating the industry, net originations of $22.4 million, and importantly, continued solid performance from the core BDC portfolio… including the return of our Zollege investment to accrual status reducing our non‑accrual investments to just one” — CEO Christian Oberbeck .
“Our strong reputation and differentiated market positioning… continues to create attractive investment opportunities… post quarter‑end with three new portfolio company investments either closed or in closing in Q3 so far, which further improves our run rate earnings” .
“Our net interest margin decreased from $15.1 million last quarter to $13.1 million, driven by a $2.1 million decrease in non‑CLO interest income… average assets decreased… and the absolute yields on the non‑CLO portfolio decreased from 11.5% to 11.3%… [and] ATM program… resulted in a $0.02 per share dilution to NII per share” .
“We are well positioned to further expand the size and quality of our portfolio… and deliver attractive risk‑adjusted returns for our shareholders over the long term” .

Q&A Highlights

Q2 FY2026 earnings call transcript was not available in our document set; therefore, Q&A themes and any real‑time guidance clarifications cannot be extracted. We will update if the transcript becomes available.

Estimates Context

Primary EPS (NII/share) missed: $0.58 vs consensus $0.6825*; Revenue missed: $30.626M vs consensus $32.378M*. Headwinds were explicitly cited: lower non‑CLO interest income, smaller average asset base, SOFR/base rate resets, lower‑yield new originations, and timing of repayments vs originations .
Estimate dispersion: 8 EPS estimates and 7 revenue estimates*, suggesting moderate coverage. Values retrieved from S&P Global.*
Implication: Street models likely need to reflect softer yields on floating assets, near‑term NIM pressure, and dilution impact from ATM issuance; improving post‑quarter originations and return to accrual support forward run‑rate earnings .

Key Takeaways for Investors

Near‑term: The dual miss vs consensus on NII/share and revenue is a potential negative trading catalyst; watch for updated Street revisions and any subsequent portfolio deployment updates . Consensus from S&P Global.*
Credit quality remains a differentiator: With Zollege back to accrual and only 0.2% FV non‑accruals, SAR’s risk posture is improving, a supportive factor for valuation .
Liquidity optionality: $200.8M cash and $406.8M total undrawn capacity provide flexibility to fund accretive originations or de‑lever, important in a highly competitive market .
Yield pressure watch‑items: SOFR resets and lower‑yield new originations compressed NIM; monitor base rate trajectory and mix shift toward structured credit (rising to 5.4%) .
Dividend stability: Maintained $0.25/month ($0.75/quarter) base dividend underpins income profile; DRIP at 5% discount may modestly increase share count .
Post‑quarter pipeline: ~$52.3M in new originations in early Q3 with net anticipated increase ~$39.5M suggests improving earnings run rate into next quarter .
Medium‑term thesis: Strong underwriting, high proportion of first‑lien exposure, and improving portfolio marks support NAV defensibility; valuation sensitivity will hinge on deployment pace, yield stabilization, and fee accruals .

Notes on source coverage:

Q2 FY2026 8‑K earnings press release and embedded financials fully reviewed –.
Prior two quarters’ earnings press releases reviewed (Q1 FY2026 and Q4 FY2025) for trend context – –.
No separate Q2 FY2026 earnings call transcript or additional press releases were found in the document set during the specified period.

SARATOGA INVESTMENT CORP. (SAR)·Q2 2026 Earnings Summary