PennantPark (PNNT) Q2 2026 Earnings Transcript

Motley Fool Transcribing, The Motley Fool Sat, May 9, 2026 at 12:11 AM GMT+7 20 min read PNNT Image source: The Motley Fool. Chairman and Chief Executive Officer — Arthur Penn [Unspecified Finance Department Representative] Need a quote from a Motley Fool analyst? Email pr@fool.com Arthur Penn: Good afternoon, everyone, and thank you for joining PennantPark Investment Corporation s second fiscal quarter 2026 earnings call. I am joined today by Jose Briones, Senior Partner at PennantPark. Rick Alordo, our CFO, is unable to be with us today due to a prior commitment. Jose, please start off by disclosing some general conference call information and include a discussion about forward-looking statements. Jose Briones: Thank you, Art. I would like to remind everyone that today s call is being recorded and is the property of PennantPark Investment Corporation. Any unauthorized broadcast of this call in any form is strictly prohibited. An audio replay of the call will be available on our website. I would also like to call your attention to the customary safe harbor disclosure in our press release regarding forward-looking information. Our remarks today may include forward-looking statements and projections. Please refer to our most recent SEC filings for important factors that could cause actual results to differ materially from these projections. We do not undertake to update our forward-looking statements unless required by law. To obtain copies of our latest SEC filings, please visit our website at pennantpark.com or call us at (212) 905-1000. At this time, I would like to turn the call back to our Chairman and Chief Executive Officer, Arthur Penn. Arthur Penn: Thanks, Jose. I will begin with an overview of our second quarter results including a review of the portfolio. I will then share our perspective on the current market environment and how we believe PNNT is positioned going forward. Jose will follow up with a detailed review of our financial results after which we will open up the call for questions. For the quarter ended March 31, core NII was $0.14 per share. As of March 31, our portfolio totaled $1.2 billion. During the quarter, we continued to originate attractive investment opportunities and invested a total of $108 million, including six new platform investments, at a median debt-to-EBITDA of 3.0x, interest coverage of 3.4x, and loan-to-value of only 28%. Our portfolio remains conservatively positioned, with median leverage of 4.7x, median interest coverage of 2.0x, and median loan-to-value of 45%. We ended the quarter with four nonaccrual investments representing 2.7% of the portfolio at cost and 1.3% at market value. Our PSLF joint venture portfolio continues to be a significant contributor to our core NII. At March 31, the JV portfolio totaled $1.3 billion, and over the last 12 months, PNNT s average NII yield on invested capital in the JV was 15.8%. The JV has the capacity to increase its portfolio to $1.5 billion. We expect that with this additional growth, the JV investment will enhance PNNT s earnings momentum into the future. Turning to software exposure, which has been an area of recent market focus, our exposure remains limited at approximately 4.6% of the portfolio and is structured consistently with our core middle market strategy. These investments are primarily cash-pay, covenant-protected loans with moderate leverage and shorter durations. Importantly, they are concentrated in mission-critical enterprise software serving regulated industries such as defense, health care, and financial institutions. We believe this represents a meaningful point of differentiation relative to our peers. Turning to the market environment, we believe that the current environment favors lenders with strong private equity sponsor relationships and disciplined underwriting, areas where we have a clear competitive advantage. In the core middle market, the pricing on high-quality first lien term loans remains attractive, typically ranging from SOFR plus 500 to 550 basis points with leverage of approximately 4.5x EBITDA. Importantly, we continue to get meaningful covenant protections in contrast to the covenant-light structures prevalent in the upper middle market. M&A activity has increased over the past six to nine months, although overall conditions remain uneven. Private equity sponsors remain active, and we are seeing a growing pipeline of attractive opportunities across both new originations and add-on investments. However, activity levels remain below the unusually strong levels observed in 2024 as the market transitions toward a more normalized backdrop. We expect increased transaction activity to drive repayments across the portfolio, including opportunities to monetize equity co-investments, and we will redeploy that capital into income-generating investments. Notably, we expect a meaningful realization from our equity co-investment in Echelon this quarter. Echelon is a leading defense techn

PennantPark (PNNT) Q2 2026 Earnings Transcript

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PennantPark (PNNT) Q2 2026 Earnings Transcript

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