Good afternoon and welcome to the Pennant Park Investment Corporation's third fiscal quarter 2026 earnings conference call. Today's conference is being recorded. At this time, all participants have been placed in a listen-only mode. The call will be open for a question and answer session following the speaker's remarks. If you would like to ask the question at that time, simply press star one on your telephone keypad. If you would like to withdraw your question, press star 2 on your telephone keypad. It is now my pleasure to turn the call over to Mr. Art Penn, Chairman and Chief Executive Officer of Pennant Park Investment Corporation. Mr. Penn, you may begin your conference.

Good afternoon, everyone, and thank you for joining Pennant Park Investment Corporation's third fiscal quarter 2026 earnings conference call. I'm joined today by Rick Allorto, our Chief Financial Officer. Rick, please start off by disclosing some general conference call information and include a discussion about forward-looking statements.

Thank you, Art. I'd like to remind everyone that today's call is being recorded and is the property of Penn and Park Investment Corporation. Any unauthorized broadcast of this call in any form is strictly prohibited. An audio replay of the call will be available on our website. I'd also like to call your attention to the customary safe harbor disclosure in our press release regarding forward-looking information. Our remarks today may include forward-looking statements and projections. Please refer to our most recent SEC filings for important factors that could cause actual results to differ materially from these projections. We do not undertake to update our forward-looking statements unless required by law. To obtain copies of our latest SEC filings, please visit our website at pennandpark.com or call us at 212-905-1000. At this time, I'd like to turn the call back to our Chairman and Chief Executive Officer, Art Penn.

Thanks, Rick. I'll begin with an overview of our third quarter results and a review of the portfolio. I'll then discuss the current market environment and how we believe PNNT is positioned going forward. Rick will follow up with a detailed review of our financial results, after which we will open up the call for questions. For the quarter ended June 30th, our core NII net investment income was $0.14 per share. This exceeded our base dividend of $0.04 per share per month, or $0.12 per share for the quarter. As of June 30th, our NIV per share was $6.56, which is down 2.5% from the prior quarter. As we've previously communicated, PNNT has a considerable balance of undistributed taxable income, which we are required to distribute to shareholders. PNNT is utilizing the supplemental dividends to make such distributions, and the decline in NAV was primarily attributable to the supplemental dividend payments. Our portfolio remains highly diversified and conservatively positioned. Median debt to EBITDA was 4.7 times Median interest coverage of 2.1 times and median loan-to-value was 45%. We ended the quarter with four non-accrual investments representing 2.5% of the portfolio cost and 0.8% at market value. As of June 30th, our portfolio totaled $1.2 billion and during the quarter, we continued to originate attractive investment opportunities and invested a total of $77 million at a weighted average yield of 8.9% including $13 million invested in five new platform investments with a median debt EBITDA of 2.3 times, interest coverage of 4.2 times, and loan to value of 30%. Our PSLF joint venture portfolio continues to be a significant contributor to our core NII. Over the last 12 months, P&NT's average cash yield on invested capital in the JV was 15.1%. As of June 30th, the JV portfolio totaled $1.3 billion and has the capacity to increase its portfolio to approximately $1.5 billion. In June, the JV amended its revolving credit facility and reduced the interest rate to SOFR plus 2.1% from SOFR plus 2.25%. Additionally, in July, the JV partially refinanced its $300 million debt securitization. The JV refinanced the AAA tranches and decreased the securitization's weighted average spread by 97 basis points to 1.69% from 2.66%. We expect additional growth in the JV portfolio and the decrease in its cost of capital will enhance P&NT's earnings momentum in future quarters. During the quarter, we generated a meaningful realization from our equity co-investment in a leading defense technology company. We received approximately $15 million in total proceeds on our original $1.1 million investment representing nearly 14 times multiple uninvested capital. Government services and defense continues to be one of our highest conviction investment sectors and has consistently been among our best performing verticals. Since inception, we've invested approximately $3 billion across the sector including roughly $780 million through PNNT. For these investments, they were 92% first lien senior secured and generated an overall IRR of 12.2%, demonstrating our ability to identify businesses operating in strategically important markets. We remain highly constructive on the long-term outlook for government services and defense because the sector possesses several characteristics that align well with our investment philosophy. Demand has historically been supported by durable federal funding priorities and long-term contracts that provide meaningful revenue visibility and stability. Many of these businesses exhibit resilient cash flow profiles, variable cost structures, and are generally less sensitive to broader economic cycles than many commercial industries. In addition, the sector continues to benefit from active M&A markets and strong valuation support. thereby providing multiple avenues for value creation. Our portfolio is concentrated in businesses supporting the Department of War and other mission critical government agencies. We focus on companies addressing high priority national security initiatives, including modernization of defense systems and digital infrastructure, cyber and electronic warfare capabilities, modeling and simulation, Counter Drone Technologies, and Next Generation Autonomous Systems. We believe these priorities will remain central to US defense spending for years to come, creating a favorable backdrop for continued investment opportunities. On a combined basis, including the joint venture portfolio, government services and defense represents approximately 11% of total investments. And given our experience, sourcing capabilities, and the attractive opportunity set, We intend to increase that exposure over time. Software remains an area of focus for market participants. Our exposure is limited to approximately 4.6% of the portfolio and is structured consistently with our core middle market strategy. These investments are primarily cash pay, covenant protected loans with moderate leverage and relatively short durations. They're concentrated in mission critical enterprise software businesses serving regulated end markets including defense, healthcare, and financial services. Let me now turn to the broader market environment. M&A activity has increased over the past six to nine months, although overall conditions remain uneven. Private equity sponsors remain active, and we are seeing a growing pipeline of attractive opportunities across both new originations and add-on investments. We are optimistic that activity levels will remain elevated throughout the back half of this year. We expect increased transaction activity to drive repayments across the portfolio, including opportunities to monetize equity co-investments and redeploy that capital into income generating investments. In the core middle market, the pricing for high quality first lien term loans remains attractive, typically ranging from SOFR plus 500 to 550 basis points with leverage of approximately four and a half times EBITDA. Importantly, these structures continue to include meaningful covenant protections in contrast to the covenant-like structures prevalent in the upper middle market. We believe the current environment favors lenders with established private equity-sponsored relationships, consistent access to deal flow, and disciplined underwriting. And these are long-standing strengths of our Penn and Park platform. We continue to believe that the core middle market offers an attractive risk-adjusted opportunity. Companies in this segment generally have EBITDA of $10 to $50 million and often operate below the practical threshold of the broadly syndicated loan and high yield markets. As a result, lenders can typically conduct extensive diligence, negotiate meaningful financial covenants, structure transactions with appropriate leverage and equity cushions, and maintain regular access to company financial information. Since our inception nearly 19 years ago, P&NT has invested $9.4 billion and an average yield of 11.1%, while maintaining a loss ratio on invested capital of roughly 20 basis points annually, a testament to our consistent and disciplined approach through multiple market cycles. As a provider of strategic capital, we fuel the growth of our portfolio companies. In many cases, we participate in the upside of the company by making an equity co-investment. Our returns on these equity co-investments have been excellent over time, Overall for our platform from inception through June 30th, we've invested over $629 million in equity co-investments and have generated an IRR of 25% at a multiple uninvested capital of two times. Looking ahead, our experienced team and broad origination platform position us well to generate attractive deal flow. We remain steadfast in our commitment to capital preservation and maintaining a disciplined Thank you, Art. For the quarter ending June 30th, GAAP and core net investment income were $0.14 per share.

Investment income was comprised of $20 million in interest income, $4.5 million in dividend income, and $0.3 million in other income. Operating expenses for the quarter were as follows. Interest and credit facility expenses were $8.8 million. Base management and incentive fees were $5.4 million. General and administrative expenses were $1.5 million. and provision for excise taxes was 0.2 million. Net realized and unrealized change on investments and debt, including provision for taxes, was a loss of 4.4 million. As of June 30th, our NAV was $6.56 per share compared to $6.73 per share last quarter. At quarter end, our debt to equity ratio was 1.29 times and our capital structure is diversified across multiple funding sources, including both secured and unsecured debt. As of June 30th, our key portfolio statistics were as follows. Our portfolio remains highly diversified with 159 companies across 37 different industries. The weighted average yield on our debt investments was 11%. The portfolio is comprised of 46% first lien senior secured debt, 2% second lien secured debt, 15% subordinated notes to PSLF, 7% other subordinated debt, 6% equity in PSLF, and 24% in other preferred and common equity co-investments. 87% of the debt portfolio is floating rate. With that, I'll turn the call back to Art for closing remarks.

Thanks, Rick. In conclusion, we remain committed to delivering consistent performance, preserving capital, and creating long-term value for all stakeholders. Thank you to our team for their dedication and our shareholders for their continued partnership and confidence in Penn and Park. That concludes our remarks at this time. I would like to open up the call to questions.

Thank you. And if you would like to ask the question, please signal by pressing star 1 on your telephone keypad. If you are using a speakerphone, please make sure that your mute function is turned off to allow your signal to reach our equipment. Again, you can press star 1 to ask a question and we'll pause for just a moment to allow everyone an opportunity to signal for questions. will now take your first question coming from the line of Chris Mueller with Citizens Capital Market.

Hey guys, thanks for taking the questions. So I wanted to touch on originations. It looked like they were outpaced by repayments in the quarter, but I guess, how are you guys thinking about net deployment in the coming quarters? Should we expect that dynamic to continue or can we see some net portfolio growth ahead?

Yeah, thanks Chris. You know, I think we're balancing a bunch of different factors. You know, we're looking at a target leverage ratio here of about 1.3 times debt to equity, which is kind of where we are. So, you know, we're looking to grow the JV over time. We're looking to manage debt to equity here at PNNT. So kind of, you know, I think right now we're looking to keep it flat. And obviously a big goal here is to rotate the equity. Get that equity rotation going and redeploy that into cash payment yield instruments.

Got it. And then it was nice to see the subsequent refinance. 100 basis points is a meaningful reduction there. And I think I heard you guys say it was 300 million facility size. I guess, what will the cost savings per share be from that combined with the revolver refi?

Yeah, so this was in our JV. I'm going to look to Rick. I think I know, but I think Rick knows for sure kind of how the about 100 basis points savings from the JV flows through to P&NT. Rick, do you want to answer that one?

Yeah, sure. So the two refinancings within the JV, the revolver and the securitization, are going to be about a half a penny per share flow through to P&NT per quarter. So about two cents on an annual basis.

Got it. That's very helpful. I appreciate you guys taking the questions today.

Thank you.

Your next question will come from the line of Alex Brewer with Truist Securities.

Hey, this is Alex Brewer on behalf of Aaron. I was just curious if you could add any color. on spreads on new deals and how they're holding up with new commitments this quarter at 77 million. And he said weighted average yield at 8.9%. Thank you.

Yeah, so I think spreads are relatively consistent quarter to quarter. They've kind of been flat here, kind of in the 500 to 550 zone on average. and then we'll just have to see where we go year-end you know supply demand how much of supply of new deals are there how much is M&A going to be active and then demand side you know kind of the cash flows into the into the space certainly institutional investors continue to deploy to the space retail the wealth channels as you know and as everyone knows have been have been a bit more challenged so we'll see where the supply demand curve goes but we we certainly think we can maintain the 500 to 550 spread for a period of time.

That's great. Thank you.

Thank you.

Your next question will come from the line of Christopher Nolan with Lattenberg Bauman.

Hey, Rick, what's the spillover income in the quarter, please?

So the spillover balance is 56 cents per share.

Okay, and then, I mean, the total dividend really exceeds net I.I. per share. Do you wait until spillover goes near zero, or how far should we expect the spillover to be distributed?

Yeah, so we've communicated the supplemental dividend through the end of this calendar year. at which point we think the spillover will decline down to about 40 cents per share. We'll reevaluate obviously at that point in time, but we think at that point that remaining spillover is manageable. To put it back in context again, we had a starting point of a little over a dollar per share Not that long ago. So, you know, at that 40 cent level, I think, again, it's manageable.

Okay. Thank you.

Thanks, Chris.

Your next question will come from the line of Jason Stewart with Compass Point.

Hey, thanks. Follow up on Chris's question. I guess, you know, you've made some meaningful progress rotating out of equity. And if we continue to reduce the equity position, we see a little bit of top line compression on yields offset by some improvement in cost of funds. Have you thought about how those dynamics land in terms of ROE at the end of this year when the dividend discussion has to come up again? Or are we just too soon to be thinking that far out?

Yeah, it's a good question, Jason. Obviously, it's at the top of our mind. on the equity rotation we have a wide variety of different equity co-invest which are I'll call them singles and doubles which is is they're important and hopefully we see more M&A in the in the economy which will you know rotate a bunch of those there's two control positions that are are sizable one is AKW and the other is Flock Financial Those are going to take a little while to work through. They're both doing well, but to get the right value and to rotate that equity in a meaningful way, it's going to be a little while before we, you know, we were able to rotate those at least a year, maybe two years out. So we're going to chip away at the smaller equity co-invests and then work hard to make sizable inroads on those two big names.

Okay. Okay. Shifting gears a little bit to the credit. I mean, non-accruals are relatively low on just an absolute basis. Anything underlying trends or movements underneath the surface we should keep an eye on or that you're keeping an eye on closely?

Yeah. So, look, thankfully we don't have much in software, which we talked about. You know, we and most of the industry have a little bit of what we'll call this kind of post-COVID vintage technology. Deals where you had a zero interest rate environment. Consumers were flush with capital. People thought online buying would go to the moon. The one meaningful NAV deal that was down this quarter was one of those. It was a company called Kinetic Systems, KNS. and it was a shoe company that was you know with a consumer orientation which was doing very well post-COVID. The combination of reversion to the mean in terms of consumer purchases along with tariffs about a year and a half ago you know were really a series of unfortunate events for this particular company so You know, that's indicative of a little bit, you know, we don't have much going on in terms of monocrystals, thankfully. But, you know, kind of if you look at where it has been, it's kind of been in that post-COVID, COVID zero-registrated environment deals.

Got it. Okay. Thanks for the call.

Thanks, Jason.

Your next question will come from the line of Hong Vang with JP Morgan.

Yeah, hey, this is Hold on for Rick. I guess you talked about having capacity to grow the JV portfolio over time. Could you attach, could you provide some color on how much you could grow that portfolio, say, in the next, well, 16 months? And what do you think are the biggest constraints in the near term?

Yeah, look, I think the portfolio in the JV can probably grow another couple hundred million over the next year, year and a half. Constraints are, you know, kind of deal flow to get to the JV. Obviously, it's a joint venture, so we and our partner Pantheon need to see eye to eye, and we see no reason we're not, but We need to see eye to eye on the opportunity. So deal flow opportunity, then capital. How do we balance capital? We want to kind of stay in this rough leverage zone for PNNT of roughly 1.3 times area. So balancing all those things out means that we would hope and expect it to grow over time. It'll probably be a gradual move, though.

Got it. Thanks.

Thanks, Tom.

and it appears there are no further questions at this time. I'll turn it back to Mr. Art Penn at this time for any additional or closing remarks.

I want to thank everybody for participating on the call today. We look forward to speaking to you next in November. That's our annual 10K filing, so we'll be a little behind a lot of the others in the industry, but we look forward to speaking to you then right around Thanksgiving. In the meantime, wishing everybody a great summer. Thank you very much.

This concludes today's call. Thank you for your participation. You may now disconnect.