PennantPark Investment (US:PNNT)2025-08-11 20:06PART I. CONSOLIDATED FINANCIAL INFORMATION Item 1. Consolidated Financial Statements Presents PennantPark's unaudited consolidated financial statements for Q2 2025, covering key financial statements and investment schedules, with auditor review Consolidated Statements of Assets and Liabilities Total assets and liabilities decreased as of June 30, 2025, leading to a decline in total net assets to $480.6 million and NAV per share to $7.36 Consolidated Balance Sheet Highlights (in thousands, except per share data) | Metric | June 30, 2025 (unaudited) | September 30, 2024 | | :--- | :--- | :--- | | Total Investments at Fair Value | $1,171,624 | $1,328,050 | | Total Assets | $1,252,888 | $1,389,086 | | Total Liabilities | $772,303 | $895,178 | | Total Net Assets | $480,585 | $493,908 | | Net Asset Value per Share | $7.36 | $7.56 | Consolidated Statements of Operations Net investment income for Q2 2025 decreased to $11.8 million ($0.18/share), while net assets from operations increased to $8.2 million due to lower losses Statement of Operations Summary (in thousands, except per share data) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Nine Months Ended June 30, 2025 | Nine Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Total Investment Income | $29,555 | $37,004 | $94,423 | $107,318 | | Net Expenses | $17,757 | $21,258 | $58,204 | $61,661 | | Net Investment Income | $11,798 | $15,746 | $36,219 | $45,657 | | Net Realized & Unrealized Loss | $(3,648) | $(12,000) | $(2,529) | $(15,173) | | Net Increase in Net Assets | $8,150 | $3,746 | $33,690 | $30,484 | | Net Investment Income per Share | $0.18 | $0.24 | $0.55 | $0.70 | | Net Increase in Net Assets per Share | $0.12 | $0.06 | $0.52 | $0.47 | Consolidated Statements of Changes in Net Assets Net assets decreased by $13.3 million for the nine months ended June 30, 2025, primarily due to stockholder distributions exceeding operational increases - Net assets decreased from $493.9 million to $480.6 million for the nine months ended June 30, 202516 - Distributions to stockholders of $47.0 million were the primary driver for the net asset decrease, surpassing the $33.7 million net increase from operations16 Consolidated Statements of Cash Flows Net cash provided by operating activities was $212.6 million for the nine months ended June 30, 2025, leading to a $20.7 million increase in cash and equivalents Cash Flow Summary (in thousands) | Cash Flow Activity | Nine Months Ended June 30, 2025 | Nine Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net Cash from Operating Activities | $212,562 | $(167,739) | | Net Cash from Financing Activities | $(192,014) | $188,116 | | Net Increase in Cash | $20,548 | $20,377 | | Cash and Cash Equivalents, End of Period | $70,546 | $59,152 | Consolidated Schedules of Investments The investment portfolio totaled $1.17 billion as of June 30, 2025, diversified across debt and equity, with first lien secured debt as a primary component Portfolio Composition by Investment Type (June 30, 2025) | Investment Type | Fair Value ($ thousands) | % of Net Assets | | :--- | :--- | :--- | | First Lien Secured Debt | $476,461 | 84.3% | | Second Lien Secured Debt | $18,011 | 3.7% | | Subordinate Debt/Corporate Notes | $53,884 | 6.4% | | Preferred Equity/Partnership Interests | $284,954 | 3.9% | | Common Equity/Partnership Interests/Warrants | $132,039 | 27.5% | | U.S. Government Securities | $124,697 | 25.9% | | Total Investments | $1,171,624 | 243.8% | - The portfolio is categorized into non-controlled non-affiliated ($729.8 million), non-controlled affiliated ($7.5 million), and controlled affiliated ($434.4 million) investments124346 Notes to Consolidated Financial Statements (unaudited) Provides detailed explanations of the company's organization, accounting policies, related party transactions, investment valuation, and debt structure - Organization: PennantPark is a BDC investing primarily in U.S. middle-market companies through debt and equity, externally managed by PennantPark Investment Advisers, LLC85 - Accounting Policies: Financial statements adhere to GAAP (ASC 946), with illiquid investments valued by the board; four portfolio companies were on non-accrual status as of June 30, 20259396100 - Related Party Transactions: The Investment Adviser receives a base management fee (1.50% on average adjusted gross assets, reduced to 1.00% on assets exceeding 200% of net assets) and a two-part incentive fee126127128 - Debt: The company maintains a $500 million Truist Credit Facility and $315 million in unsecured notes, with an asset coverage ratio of 176% as of June 30, 2025198200201 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial condition and operational results, noting decreased investment income due to a smaller portfolio and lower yields, covering portfolio, operations, and liquidity Portfolio and Investment Activity The portfolio value decreased to $1.17 billion as of June 30, 2025, with a lower weighted average yield and significant investment activity Portfolio Summary | Metric | June 30, 2025 | September 30, 2024 | | :--- | :--- | :--- | | Total Portfolio Value | $1,171.6M | $1,328.1M | | Number of Portfolio Companies | 158 | 152 | | Weighted Avg. Yield on Debt | 11.5% | 12.3% | | Non-Accrual (Cost Basis) | 2.8% | 4.1% | | Non-Accrual (Fair Value) | 0.7% | 2.3% | - For the nine months ended June 30, 2025, investment activity included $560.2 million in new and existing investments and $749.0 million in sales and repayments, with $462.8 million sold to the PSLF joint venture236 Results of Operations Investment income and net investment income decreased for Q2 2025, while the net increase in net assets from operations improved due to lower losses - Investment income for the nine months ended June 30, 2025, decreased to $94.4 million from $107.3 million, driven by a smaller portfolio and lower weighted average yield272 - Expenses for the nine months ended June 30, 2025, decreased to $58.2 million from $61.7 million, primarily due to lower interest expenses and incentive fees273 - Net investment income for the nine months ended June 30, 2025, was $36.2 million ($0.55 per share), a decrease from $45.7 million ($0.70 per share) in 2024274 Liquidity and Capital Resources Liquidity is supported by operations and debt financings, with $70.5 million in cash and a 176% asset coverage ratio as of June 30, 2025 - As of June 30, 2025, the company held $70.5 million in cash and equivalents and $183.5 million in unused borrowing capacity under its Truist Credit Facility282291 - The asset coverage ratio stood at 176% as of June 30, 2025, exceeding the 150% regulatory minimum281 - Cash from operations for the nine months ended June 30, 2025, was $212.6 million, a significant improvement from $167.7 million used in the prior year, driven by higher investment sales proceeds292293 Item 3. Quantitative and Qualitative Disclosures About Market Risk The company faces market risk primarily from interest rate changes, with 90% of its debt portfolio in variable-rate investments, impacting net investment income - As of June 30, 2025, 90% of the company's debt portfolio consists of variable-rate investments, making its income sensitive to interest rate fluctuations324 Annualized Impact of Hypothetical Interest Rate Changes | Change in Interest Rates | Change in Net Interest Income (in thousands) | Change in Net Interest Income Per Share | | :--- | :--- | :--- | | Down 1% | $(3,044) | $(0.05) | | Up 1% | $3,044 | $0.05 | | Up 2% | $6,088 | $0.09 | | Up 3% | $9,132 | $0.14 | Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal control - The CEO and CFO affirmed the effectiveness of the company's disclosure controls and procedures as of June 30, 2025329 - No material changes to internal control over financial reporting occurred during the quarter330 PART II. OTHER INFORMATION Item 1. Legal Proceedings No material legal proceedings are currently pending against the company, its Investment Adviser, or Administrator - No material legal proceedings are currently against the company, its Investment Adviser, or Administrator331 Item 1A. Risk Factors Key risks include potential negative impacts from changes in U.S. trade policies and significant cybersecurity threats to systems and data - Changes to U.S. trade policies and tariffs could adversely affect portfolio companies' performance by increasing costs or reducing demand333 - Significant cybersecurity risks, including data breaches and system failures, could impact operations and financial results despite mitigation efforts334335 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds No unregistered sales of equity securities occurred during the reporting period - None337 Item 3. Defaults Upon Senior Securities No defaults upon senior securities occurred during the reporting period - None337 Item 5. Other Information No other information is reported for the period - None339 Item 6. Exhibits Lists exhibits filed with Form 10-Q, including CEO/CFO certifications and Inline XBRL data files - Exhibits filed include CEO and CFO certifications (Rule 13a-14 and Section 906) and Inline XBRL documents341