PennantPark Investment Corporation (NYSE:PNNT) Q2 2023 Earnings Conference Call May 11, 2023 ET Company Participants Art Penn - Chairman and CEO Rick Allorto - CFO Conference Call Participants Paul Johnson - KBW Robert Dodd - Raymond James Kyle Joseph - Jefferies Mickey Schleien - Ladenburg Mark Hughes - Truist. Melissa Wedel - JP Morgan Casey Alexander - Compass Point Operator Good afternoon and welcome to the PennantPark Investment Corporation's Second Fiscal Quarter 2023 Earnings Conference Call. Today's ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2023 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO COMMISSION FILE NUMBER: 814-00736 PENNANTPARK INVESTMENT CORPORATION (Exact name of registrant as specified in its charter) (State or other jurisdiction of ...

PennantPark Investment Corporation (NYSE:PNNT) Q1 2023 Earnings Conference Call February 9, 2023 12:00 PM ET Company Participants Art Penn - Founder, Managing Partner, Chairman and CEO Rick Allorto - CFO Conference Call Participants Robert Dodd - Raymond James Ryan Lynch - KBW Casey Alexander - Compass Point Mickey Schleien - Ladenburg Thalmann Mike Ramirez - Truist Securities Melissa Wedel - JPMorgan Operator Good afternoon and welcome to the PennantPark Investment Corporation's First Fiscal Quarter 2023 ...

Portfolio Overview - As of December 31, 2022, the company's portfolio totaled $1,196.0 million, consisting of $661.2 million in first lien secured debt, $130.8 million in second lien secured debt, $148.6 million in subordinated debt, and $255.4 million in preferred and common equity[207]. - The overall portfolio had a net unrealized depreciation of $167.5 million as of December 31, 2022, with an average investment size of $9.6 million across 125 companies[207]. - As of September 30, 2022, the portfolio totaled $1,226.3 million, with a weighted average yield on interest-bearing debt investments of 10.8%[208]. - As of December 31, 2022, the PennantPark Senior Loan Fund's portfolio totaled $734.7 million, consisting of 83 companies with a weighted average yield on debt investments of 10.6%[211]. - The investment portfolio of PSLF consisted of debt investments in 83 portfolio companies as of December 31, 2022, up from 80 companies as of September 30, 2022[268]. Investment Activity - For the three months ended December 31, 2022, the company invested $86.2 million in six new and 29 existing portfolio companies, achieving a weighted average yield on debt investments of 11.2%[209]. - For the three months ended December 31, 2021, the company invested $295.1 million in 15 new and 30 existing portfolio companies, with a weighted average yield on debt investments of 8.1%[210]. - The company aims to create a diversified portfolio by investing approximately $10 million to $50 million in middle-market companies, defined as those with annual revenues between $50 million and $1 billion[198]. Financial Performance - For the three months ended December 31, 2022, investment income was $30.0 million, an increase from $28.3 million in the same period of 2021, primarily due to higher cost yield of the debt portfolio[240]. - Net investment income for the three months ended December 31, 2022, was $10.3 million, or $0.16 per share, compared to $12.5 million, or $0.19 per share in the prior year[242]. - Total expenses for the three months ended December 31, 2022, were $19.6 million, up from $15.8 million in the same period of 2021, with debt-related interest and expenses increasing significantly[241]. - The company declared distributions of $0.17 per share for a total of $10.8 million during the three months ended December 31, 2022, up from $0.12 per share totaling $8.0 million in the prior year, indicating a 35% increase in total distributions[285]. Valuation and Risk Management - The fair value of investments is determined using a multi-step valuation process, with most investments classified as Level 3 due to lack of readily available market values[219]. - The company does not accrue PIK interest on loans and debt investments if it is deemed uncollectible based on portfolio company valuations[225]. - The company’s quarterly valuation process includes independent appraisals for investments where market quotations are not readily available[222]. - The board of directors periodically assesses material valuation risks and has complied with SEC Rule 2a-5 under the 1940 Act since before its compliance date[220]. Debt and Liabilities - As of December 31, 2022, the company had $380.9 million in outstanding borrowings under the Truist Credit Facility, with a weighted average interest rate of 6.6%[251]. - The company reported liabilities of $688.003 million as of December 31, 2022, compared to $696.825 million as of September 30, 2022, showing a decrease of 1.2%[282]. - The weighted average cost of debt for the three months ended December 31, 2022, was 5.6%, compared to 4.0% in the same period of 2021[250]. Cash and Equivalents - As of December 31, 2022, cash and cash equivalents amounted to $28.6 million, down from $52.7 million as of September 30, 2022[265]. - Total cash and cash equivalents held is $35.71 million[276]. Interest Rate Sensitivity - The debt portfolio consisted of 96.0% variable-rate investments and 4.0% fixed-rate investments as of December 31, 2022[292]. - A 1% decrease in interest rates results in a decrease of $5,378 in net interest income, equating to a $0.08 decrease in expense per share[294]. - A 1% increase in interest rates results in an increase of $5,378 in net interest income, equating to a $0.08 increase in expense per share[294]. - The company's net investment income is dependent on the difference between borrowing rates and investment rates, as well as the level of leverage[295]. Shareholder Equity - Members' equity stands at $88.94 million, reflecting a 100.0% increase[276]. - The net increase in members' equity resulting from operations for the three months ended December 31, 2022, was $1.608 million, down from $3.725 million in the same period of the previous year, a decrease of 56.9%[282].

Financial Data and Key Metrics Changes - For the quarter ended September 30, core net investment income was $0.18 per share, excluding one-time financing costs, while net investment income totaled $0.14 per share including $0.01 per share of other income [20][37] - The company's net asset value (NAV) per share decreased by 6.9% to $8.98 from $9.65 in the prior quarter, primarily due to unrealized mark-to-market adjustments [21][40] - The weighted average yield to maturity on the debt portfolio increased to 10.8% from 9.3% in the previous quarter [15] Business Line Data and Key Metrics Changes - The debt portfolio remains diversified with 123 companies across 32 different industries, with 51% in first lien secured debt and 11% in second lien secured debt [41] - The company invested $134 million in new and existing portfolio companies during the quarter, with sales and repayments totaling $176 million [19] Market Data and Key Metrics Changes - Approximately 96% of the company's assets are floating rate, compared to 47% of liabilities that are fixed rate, positioning the company well to benefit from rising interest rates [15] - The weighted average debt-to-EBITDA ratio on the portfolio was 4.6 times, and the average interest coverage ratio was 3.6 times, indicating a strong capacity to cover interest expenses [31] Company Strategy and Development Direction - The company focuses on capital preservation and is well-positioned as a lender in the current market environment characterized by inflation and rising interest rates [9][10] - The strategy includes optimizing the portfolio and balance sheet, growing the PSLF joint venture to $1 billion, and rotating out of equity investments into cash pay yield instruments [22] - The company aims to generate attractive risk-adjusted returns through income while preserving capital, targeting high-growth middle market companies with strong free cash flow [35] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the quality of new loans and the attractiveness of the current vintage, citing lower leverage and tighter covenants [19][34] - The company believes that the borrowers in its investment portfolio are performing well and is optimistic about future quarters [31] Other Important Information - The Board of Directors approved a quarterly dividend increase to $0.165 per share, payable on January 3, 2023 [13] - The company completed an amendment and extension of its Truist Credit Facility, increasing its size from $465 million to $500 million and extending the maturity to 2027 [17] Q&A Session Summary Question: Ability to buy first lien loans in the secondary market - Management indicated that these loans are typically from companies they have previously financed, allowing them to buy at a discount and expect a return to par over time [49][50] Question: Upfront fee for credit facility amendment - Management explained that the upfront fee is taken as a one-time expense due to accounting obligations, which is considered shareholder-friendly as it avoids ongoing expenses [52][54] Question: Mark on RAM Energy investment - Management clarified that RAM Energy is performing well, and the markdown was influenced by external market factors, particularly the price of oil and gas [70][72] Question: Evaluation of secondary purchases - Management stated that each investment is evaluated on its own merits, comparing potential returns from secondary purchases against new loans [76] Question: Equity co-investment strategy - Management emphasized that equity co-investments are generally part of their strategy, particularly in buy-and-build scenarios, and are not typically a trade-off against yield [80][81]

Investment Strategy and Portfolio Composition - The company targets an investment size of $10 million to $50 million in middle-market companies, with a focus on highly leveraged, unrated firms [45]. - The portfolio is expected to consist primarily of first lien secured debt, second lien secured debt, subordinated debt, and equity investments, with up to 30% in non-qualifying assets [46]. - As of September 30, 2022, the top portfolio companies include RAM Energy Holdings LLC (7%), PT Network, LLC (12%), and AKW Holdings Limited (4%) among others, reflecting a diverse investment strategy [75]. - The consolidated portfolio assets are primarily allocated across various industries, with Business Services at 18%, Healthcare, Education and Childcare at 12%, and Consumer Products at 8% [75]. - The company expects to hold most investments to maturity or repayment, with potential early exits during liquidity events [67]. - The company may invest up to 100% of its assets in privately negotiated transactions, subject to certain restrictions under the 1940 Act [100]. - The company is required to invest at least 70% of its total assets in U.S. private or thinly traded public companies, which may limit its ability to capitalize on attractive investment opportunities [167]. - The company must ensure that qualifying assets represent at least 70% of its total assets to comply with the 1940 Act [101]. - The company must maintain its election to be treated as a RIC under Subchapter M of the Code, requiring annual distributions of at least 90% of ordinary income and realized net short-term capital gains [123]. Financial Performance and Fees - For the fiscal year ended September 30, 2022, the Investment Adviser earned base management fees of $19.8 million, an increase from $17.3 million in 2021 [78]. - The base management fee is set at an annual rate of 1.00% for gross assets exceeding 200% of the Company's total net assets, reduced from 1.50% [78]. - The incentive fee structure includes a hurdle rate of 1.75% per quarter, with 100% of Pre-Incentive Fee Net Investment Income above this rate being eligible for fees [80]. - For the fiscal year ended September 30, 2022, the Investment Adviser earned $2.7 million in incentive fees on net investment income [80]. - The Investment Adviser did not accrue an incentive fee on capital gains for the years ended September 30, 2022, 2021, and 2020 [82]. Regulatory Compliance and Risk Management - The company is classified as a Business Development Company (BDC) under the 1940 Act and intends to maintain its election as a Regulated Investment Company (RIC) [99]. - The company is subject to periodic examinations by the SEC and SBA for compliance with the 1940 Act and 1958 Act [118]. - The company must certify the accuracy of its financial statements as per the Sarbanes-Oxley Act, ensuring compliance with internal controls over financial reporting [121]. - The company has implemented written policies to prevent violations of federal securities laws, with annual reviews for adequacy and effectiveness [120]. - The company restricts access to non-public personal information about stockholders to employees with a legitimate business need [115]. - The company is required to distribute dividends to avoid a 4% nondeductible federal excise tax, which necessitates careful management of income and capital gains distributions [125]. - The company must ensure that at least 50% of its assets consist of cash, cash equivalents, U.S. government securities, and other specified securities to meet diversification tests [130]. - The company is exposed to risks associated with changes in interest rates, which may affect its cost of capital and net investment income [156]. - The company has adopted a joint code of ethics and a code of conduct to establish procedures for personal investments and restrict certain personal securities transactions [106]. Leverage and Capital Structure - The asset coverage requirement for senior securities was reduced from 200% to 150%, allowing $2 of debt for each $1 of equity [44]. - The company is authorized to borrow up to $175.0 million, which is twice its regulatory capital, and a maximum of $350.0 million as part of a group of SBICs under common control [141]. - The company had outstanding borrowings of $720.9 million as of September 30, 2022, with a weighted average interest rate of 4.8% [193]. - The company expects to securitize loans in the future to generate cash for new investments, which may expose it to losses if the securitization is unsuccessful [190]. - The company may issue preferred stock in the future, which would rank senior to common stock and could affect distributions to common stockholders [196]. - Any future debt issuance will increase leverage and may be subordinate to existing debt, magnifying potential risks [189]. - The company is exposed to risks associated with leverage, including increased risk of loss and higher expenses, which are ultimately borne by common stockholders [197]. - The company has the ability to incur additional leverage due to legislation enacted in 2018, allowing a reduction in the asset coverage ratio from 200% to 150% [175]. Market and Economic Risks - Economic downturns could lead to increased non-performing assets and a decrease in portfolio value, potentially resulting in financial losses and a material decrease in revenues and net income [235]. - Portfolio companies may face defaults if they fail to meet financial covenants, which could jeopardize their ability to meet obligations and adversely affect the company's business [236]. - The company invests in illiquid assets, and the valuation of these assets may differ materially from the values realized upon disposition, leading to uncertainty in financial reporting [220]. - A general disruption in credit markets could materially damage the company's business and impair its ability to meet debt maturities [226]. - The company is classified as a non-diversified investment company, which may lead to greater fluctuations in NAV due to concentration in a small number of issuers [234]. - The impact of recent financial reform legislation, such as the Dodd-Frank Act, remains uncertain and could affect competition and regulatory conditions for the company [215]. - The company may face significant adverse effects on its business if it fails to extend or refinance its existing indebtedness, potentially leading to the sale of investments at disadvantageous prices [200]. Management and Operational Risks - The company is highly dependent on its Investment Adviser to effectively manage future growth and investment objectives, which may be hindered by the need to hire and manage new employees [164]. - A failure in the company's information systems could lead to material adverse effects on its business and financial condition [165]. - The company must maintain effective internal controls over financial reporting to prevent fraud and ensure accurate financial results, as deficiencies could harm investor confidence and stock price [166]. - The board of directors has the authority to modify investment objectives and strategies without prior notice, which could impact business operations and stock value [218]. - The company may face stockholder activism, which could incur significant expenses and divert management's attention from business operations [219].

Pennantpark Investment Corp (NYSE:PNNT) Q3 2022 Earnings Conference Call August 4, 2022 12:00 PM ET Company Participants Arthur Penn - Founder, Chairman, Managing Partner & CEO Richard Allorto - CFO Conference Call Participants Paul Johnson - KBW Robert Dodd - Raymond James & Associates Mickey Schleien - Ladenburg Thalmann & Co. Casey Alexander - Compass Point Research & Trading Melissa Wedel - JPMorgan Chase & Co. Operator Good afternoon, and welcome to the PennantPark Investment Corporation's Third Fisca ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2022 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO COMMISSION FILE NUMBER: 814-00736 PENNANTPARK INVESTMENT CORPORATION (Exact name of registrant as specified in its charter) MARYLAND 20-8250744 (State or ot ...

PennantPark Investment Corporation (NYSE:PNNT) Q2 2022 Earnings Conference Call May 5, 2022 12:00 PM ET Company Participants Art Penn – Chairman and Chief Executive Officer Richard Cheung – Chief Financial Officer Conference Call Participants Paul Johnson – KBW Robert Dodd – Raymond James Mickey Schleien – Ladenburg Melissa Wedel – JPMorgan Operator Good afternoon, and welcome to the PennantPark Investment Corporation's Second Fiscal Quarter 2022 Earnings Conference Call. Today's conference is being recorde ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2022 (Exact name of registrant as specified in its charter) MARYLAND 20-8250744 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.) 1691 Michigan Avenue, Miami Beach, Florida 33319 (212) 905-1000 (Registrant's Telephone Number, Including Ar ...