PennantPark Investment Corporation Q1 FY2026 earnings call

• Began with an overview of first quarter results and forward dividend strategy: base dividend $0.04 per share, supplemental dividend $0.04 per share, expected to maintain supplemental through December 2026. - Exited investment in JF Holdings, received $68M and realized a $63M gain, monetizing 20% of equity portfolio. - Market environment: increase in M&A transaction activity in private middle market, expanding investment pipeline, expecting repayments from portfolio investments. - Portfolio performance: 4 nonaccrual investments (2.2% at cost, 1.1% at market), strong credit metrics due to rigorous underwriting. - Core middle market focus: companies with $10M to $50M EBITDA, attractive terms, meaningful covenants, substantial equity cushions. - Equity co-investments: over $615M invested, IRR 25%, MOIC 1.9x.

For the quarter ended December 31, core net investment income was $0.14 per share. The portfolio is diversified with 48% first lien secured debt, 3% second lien secured debt, 14% subordinated notes to PSLF, 6% other subordinated debt, 6% equity in PSLF, and 23% in other preferred and common equity co-investments. The weighted average yield on the debt investment was 10.9%. The portfolio had 158 companies across 37 industries, with a median leverage of 4.5x and median interest coverage of 2.1x.

• Dividend: base dividend $0.04 per share, supplemental dividend $0.04 per share, expected to maintain supplemental through December 2026. - Anticipate M&A activity to drive repayments and new investments. - JV portfolio has capacity to increase to $1.5B, expected to enhance earnings momentum.

• Market volatility could impact M&A activity and portfolio performance. - Software risk, though only 4.4% of portfolio, if not managed properly could affect performance. - Equity exposure reduction effort may face challenges.

Q: On the dividend, clarification on the supplemental program.

A: Correct, the supplemental program will remain in place through December 2026.

Q: On equity rotation and M&A.

A: M&A hasn't slowed down, sectors like defense and health care have active M&A activity.

Q: On dividend adjustment and insider buying.

A: Obligated to pay supplemental dividends, consider buybacks but mindful of credit ratings and debt-to-equity.

Q: On JV leverage and equity markdown.

A: JV leverage is manageable, securitization technology helps, equity co-invest program mitigates losses.