PennantPark Investment Corporation (PNNT) Earnings

Management highlights

### Portfolio and Financial Results - Core NII of $0.14 per share exceeded the $0.12 per share quarterly base dividend, and PNNT has a large balance of undistributed taxable income that it distributes via supplemental dividends. - The portfolio remains highly diversified across 159 companies and 37 industries, with conservative underwriting metrics: median debt-to-EBITDA of 4.7x, median interest coverage of 2.1x, and median loan-to-value of 45%. - A $15 million realization was generated from a legacy equity co-investment in a leading defense technology company, representing a nearly 14x multiple on the original $1.1 million investment. ### PSLF Joint Venture Updates - The JV completed two cost of capital improvements in June and July 2026: it amended its revolving credit facility to reduce the interest rate to SOFR + 2.1% from SOFR + 2.25%, and refinanced the AAA tranches of its $300 million debt securitization, cutting the weighted average spread by 97 basis points to 1.69% from 2.66%. These reductions will improve future earnings for PNNT. - The JV currently has $200 million of available capacity to grow its portfolio to its $1.5 billion limit. ### Sector Strategy - Government services and defense is a high-conviction sector for PNNT, with $780 million invested across the platform to date, 92% of which is first lien senior secured. The sector benefits from durable federal funding, long-term contracts with high revenue visibility, resilient cash flows, lower sensitivity to economic cycles, and active M&A activity that supports valuations. - PNNT focuses on companies supporting high-priority U.S. national security initiatives, and plans to increase its sector exposure over time from the current 11% of total investments. - Software exposure is limited to 4.6% of the portfolio, structured in line with PNNT's conservative middle market strategy: investments are primarily cash-pay, covenant-protected loans with moderate leverage and short duration, concentrated in mission-critical enterprise software serving regulated end markets (defense, healthcare, financial services). ### Market Environment and Core Strategy - M&A activity has increased over the past 6-9 months, with a growing pipeline of attractive new origination and add-on investment opportunities, and management expects elevated activity to continue through the second half of FY2026. Higher transaction activity is expected to drive portfolio repayments and equity co-investment monetization, allowing capital to be redeployed into higher-yielding income-generating investments. - Pricing for high-quality core middle market first lien term loans remains attractive, typically ranging from SOFR + 500 to 550 basis points at ~4.5x leverage, with strong covenant protections that are less common in the upper middle market. - PNNT's long-standing strengths (established private equity relationships, consistent deal flow access, disciplined underwriting) position it well to capitalize on current market opportunities. Since inception, PNNT has invested $9.4 billion with an average yield of 11.1% and an annual loss ratio of just 20 basis points on invested capital across multiple market cycles.

Guidance

- Management targets a stable debt-to-equity ratio of approximately 1.3x for PNNT, which is where the firm currently stands, so no material net portfolio growth is expected at the standalone level in coming quarters, with a focus on rotating out of legacy equity positions and redeploying capital into cash-yielding investments. - The combined PSLF JV portfolio is expected to grow gradually by approximately $200 million over the next 12 to 16 months, within its existing $1.5 billion capacity limit, depending on available deal flow and capital alignment between JV partners. - The two JV refinancing transactions are expected to generate approximately $0.005 per quarter (or $0.02 annually) in incremental net income for PNNT. - Supplemental dividends to distribute undistributed taxable income are planned through the end of the 2026 calendar year, at which point the undistributed spillover balance is expected to decline to ~$0.40 per share from its starting level of just over $1.00 per share; management will reevaluate distribution policy at that time. - Management expects new deal spreads for high-quality first lien loans to remain in the 500 to 550 basis point range over the near term.

Segment performance

Pennant Park Investment Corporation (PNNT) reports core and GAAP net investment income (NII) of $0.14 per share for Q3 FY2026, exceeding the $0.12 per share base quarterly dividend. Total investment income for the quarter was $24.8 million, consisting of $20 million in interest income, $4.5 million in dividend income, and $0.3 million in other income. Operating expenses totaled $15.9 million, including $8.8 million in interest and credit facility expenses, $5.4 million in base management and incentive fees, $1.5 million in general and administrative expenses, and $0.2 million in excise tax provisions. As of June 30, 2026: net asset value (NAV) per share was $6.56, down 2.5% from the prior quarter primarily due to supplemental dividend distributions; total standalone portfolio value was $1.2 billion, with a debt-to-equity ratio of 1.29x. The PSLF joint venture (JV) portfolio had a total value of $1.3 billion, with available capacity to grow to $1.5 billion. By asset class, the PNNT portfolio composition is: 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% other preferred and common equity co-investments. By sector, government services and defense represents 11% of total combined investments (including the JV), while software represents approximately 4.6% of the standalone portfolio. Non-accrual investments make up 2.5% of the portfolio by cost and 0.8% by market value. The weighted average yield on debt investments was 11% for the standalone portfolio, with 87% of debt investments being floating rate; new originations in the quarter had a weighted average yield of 8.9%. Over the last 12 months, the average cash yield on PNNT's invested capital in the PSLF JV was 15.1%. Since inception, equity co-investments have generated a 25% IRR at a 2.0x multiple on invested capital, and government services/defense investments have generated a 12.2% IRR.

Risks & headwinds

- Retail and wealth channel investor demand for middle market lending products has been weaker than institutional demand, which could impact future supply/demand dynamics and put pressure on new deal spreads over time. - PNNT has two large, concentrated control equity positions (AKW and Flock Financial) that will take 1-2 years to exit at attractive valuations, slowing the pace of equity portfolio rotation in the near term. - Post-COVID-vintage investments that were underwritten during the zero-interest rate environment face elevated credit risk, particularly in consumer-facing and unprofitable technology segments; one such post-COVID investment (consumer shoe company Kinetic Systems) recorded a meaningful NAV decline in Q3 FY2026 due to post-pandemic consumer spending reversion and tariff impacts. - Growth of the PSLF JV is constrained by the need for mutual agreement on investment opportunities between PNNT and JV partner Pantheon, as well as the requirement to maintain PNNT's target 1.3x debt-to-equity leverage ratio.

Analyst Q&A

• Q: With originations outpaced by repayments this quarter, what is the outlook for net portfolio deployment in coming quarters? /

  A: Management is targeting a stable 1.3x debt-to-equity leverage ratio at the standalone PNNT level, which matches the firm's current position. The main priority is rotating out of legacy equity positions and redeploying that capital into cash-yielding income instruments, so the overall standalone portfolio is expected to remain roughly flat in coming quarters, with gradual growth limited to the PSLF joint venture. (312 characters)

• Q: What annual cost savings will flow through to PNNT per share from the two PSLF JV refinancings? /

  A: Combined savings from the revolving credit facility amendment and the securitization refinancing will equal approximately 0.5 cents per share per quarter, which translates to 2 cents of incremental earnings per share on an annual basis. (203 characters)

• Q: What are the key dynamics around the planned distribution of the existing undistributed taxable income spillover balance? /

  A: The current undistributed spillover balance is $0.56 per share. Supplemental dividends to distribute this balance are planned through the end of the 2026 calendar year, at which point the spillover is expected to decline to $0.40 per share from over $1.00 per share recently. Management will reevaluate distribution policy at that point, and views the remaining $0.40 balance as manageable. (358 characters)

• Q: How does equity portfolio rotation impact the outlook for ROE and future dividend policy? /

  A: Most smaller equity co-investments can be rotated gradually as M&A activity accelerates, but the two largest concentrated control equity positions (AKW and Flock Financial) will likely take 1-2 years to exit at attractive valuations. Management is actively focused on this dynamic as it prepares for future dividend policy discussions, but notes that it will take time to fully rotate the sizable positions. (341 characters)

• Q: How much can the PSLF JV portfolio grow over the next 16 months, and what are the key near-term constraints? /

  A: Management expects the JV portfolio can grow by approximately $200 million over the next 12-16 months within its existing $1.5 billion capacity. The main constraints are availability of attractive deal flow that meets mutual approval from both JV partners (PNNT and Pantheon), and balancing capital deployment to keep PNNT at its target 1.3x leverage ratio. Growth is expected to be gradual. (336 characters)