Financial Data and Key Metrics Changes - Net investment income (NII) per share was $0.38 for Q3 2025, corresponding to an annualized return on equity (ROE) of 10.3% [6] - GAAP net income per share was $0.29 for the quarter, corresponding to an annualized ROE of 8% [7] - Net asset value (NAV) per share was $14.66 at the end of September, down 0.6% compared to the prior quarter [7] - Total investment income for the September quarter was approximately $82.6 million, up $1.3 million, or 1.6% compared to the prior quarter [25] Business Line Data and Key Metrics Changes - MFIC made $138 million of new commitments across 21 transactions during the September quarter [7] - The weighted average spread on the directly originated corporate lending portfolio was 559 basis points, down 9 basis points compared to the end of June [21] - The weighted average yield at cost of the directly originated lending portfolio was 10.3% for the September quarter, down from 10.5% for the June quarter [25][21] Market Data and Key Metrics Changes - The U.S. economy has remained resilient, easing recession concerns, although inflation remains elevated [16] - The Federal Reserve cut interest rates by 25 basis points in both September and October [16] - There is an increase in sponsor M&A activity due to reduced volatility from tariffs and a more stable financing environment [16][17] Company Strategy and Development Direction - MFIC's strong position is a competitive advantage, with over half of new commitments made to existing portfolio companies [8] - The company aims to maintain a disciplined underwriting approach despite competitive pressures [17] - MFIC is focused on building a portfolio of predominantly first lien loans to sponsor-backed companies [10] Management's Comments on Operating Environment and Future Outlook - Management noted that the increase in M&A activity is expected to continue into 2026, driven by private equity firms needing to deploy capital [42] - The company is actively working on initiatives to offset the impact of declining base rates on net investment income [14] - Management expressed confidence in the ability to navigate the current market environment and maintain portfolio quality [10][22] Other Important Information - The board declared a quarterly dividend of $0.38 per share, payable on December 23, 2025 [13] - The company has no exposure to certain troubled companies, indicating a focus on portfolio health [19] Q&A Session Summary Question: What is driving the increase in non-accruals? - Management indicated that there is no common theme among the companies that went on non-accrual, with issues being idiosyncratic [35] Question: Is the increase in M&A activity sustainable through 2026? - Management believes ongoing demand for M&A will continue due to private equity firms needing to deploy capital and a more stable financing environment [42] Question: How is the company addressing the impact of lower base rates on dividends? - Management is evaluating the timing of initiatives to offset lower base rates and is committed to maintaining the current dividend level while monitoring the situation [62]

PennantPark Overview - PennantPark is an independent private credit platform investing since 2007, with over $26 billion of capital deployed[3] and $10 billion of AUM as of March 31, 2025[3] - The firm targets profitable, growing, and cash-flowing companies with $10 million to $50 million of EBITDA[9] - PennantPark actively covers 770+ middle market PE sponsors in the U S[11], closing deals with 240+ PE sponsors[11] Investment Strategy & Performance - PennantPark focuses on capital preservation, resulting in low annualized loss rates of 0 08% on first lien loans[17, 18] - The cumulative default rate on PennantPark's first lien loans is 3 34% based on capital invested[18] with a recovery rate of 72 8% on principal proceeds only and 91 8% on all proceeds[18] - PFLT's portfolio consists of 159 direct investments with a market value of $2 3 billion as of March 31, 2025[35] PFLT Financial Highlights - PFLT reported $25 0 million of Net Investment Income (NII) during the fiscal second quarter, with $0 28 of core NII per share[36] - PFLT's total assets were $2 472 billion as of March 2025, with a Net Asset Value of $1 067 billion[40] - PFLT has a historically consistent monthly dividend of $0 1025, with an annualized dividend yield on NAV of 11 1% during the quarter[36]

Financial Data and Key Metrics Changes - The first quarter results for 2025 were disappointing, with GAAP net investment income and core NII at $6,800,000 or $0.02 per share, down from $8,000,000 or $0.03 per share in Q4 2024 [6][19] - NAV per share decreased by approximately 1.6% to $12.11 from the prior quarter, impacted by net realized losses and markdowns totaling $2,600,000 [6][19] - The weighted average effective yield on income-producing debt investments decreased to 12.1% from 12.5% in the previous quarter [9][19] Business Line Data and Key Metrics Changes - Gross capital deployments in Q1 totaled $45,500,000, with net deployments of $26,100,000 after repayments and sales of $19,400,000 [6][9] - The portfolio mix at the end of Q1 was approximately 90.3% first lien, senior secured debt, with a mix of 2:3 sponsor to non-sponsor deals [8][9] - Nonaccrual investments increased to 8.8% of the debt portfolio from 7.2% in the prior quarter [13][19] Market Data and Key Metrics Changes - The STRS JV portfolio had an aggregate fair value of $310,200,000, with an average effective yield of 10.8%, down from 11.1% in Q4 [9][21] - The lending market has seen increased volatility, with a 25 to 50 basis point increase in direct lending market prices, although most of that premium has dissipated [15][19] - The M&A market has slowed significantly, with many deals being put on hold due to negative sentiment and tariff negotiations [14][45] Company Strategy and Development Direction - The company continues to focus on the non-sponsor market, where there are better risk-return profiles and less competition [16][19] - A new coverage region was added in Nashville, Tennessee, to enhance non-sponsor and off-the-run sponsor origination capabilities [16][19] - The company is actively monitoring tariff risks and has expanded its analysis to include other countries with potential tariffs [11][19] Management's Comments on Operating Environment and Future Outlook - Management noted that challenges in the quarter were more company-specific rather than related to the overall economy, with no signs of a recession yet in the portfolio [10][19] - The company expects a decent amount of refinancing activity in the second half of the year as prepayment penalties on higher-rate deals expire [51][19] - Management is cautious about the environment for deal closures in Q3, anticipating a relative quiet period [46][19] Other Important Information - The company declared a first-quarter distribution of $0.03 per share, consistent with the prior quarter, and will continue to evaluate quarterly distributions based on core earnings power [24][19] - Cash resources at the end of Q1 were approximately $19,600,000, with an asset coverage ratio of 177.2%, above the minimum requirement [22][19] Q&A Session Summary Question: Update on Telestream and its return to accrual status - Management indicated progress on restructuring Telestream, hoping to complete it by May, which would allow a portion of the existing debt to return to cash-paying status [28][19] Question: Insights on dividend and spillover income - Spillover income was approximately $28,400,000, with a current dividend run rate equating to about $8,950,000 in distributions, highlighting a shortfall in Q1 [39][19] Question: Market conditions regarding bid-ask spreads - Management noted that good companies without significant risks are trading at high multiples, while those with recession or tariff risks are seeing buyers being cautious [44][19] Question: Expectations on repayment activity - Management observed a slowdown in repayment activity due to recent market volatility, with a light visible repayment pipeline currently [53][19]