Operator: Good afternoon, and welcome to the PennantPark Investment Corporation's Third Fiscal Quarter 26 Earnings Conference Call. Today's conference is being recorded. The call will be open for a question and answer session following the speakers' remarks. If you would like to ask a question at that time, simply press *1 on your telephone keypad. If you would like to withdraw your question, press *2 on your telephone keypad. It is now my pleasure to turn the call over to Mr. Arthur Howard Penn, Chairman and Chief Executive Officer of PennantPark Investment Corporation. Mr. Penn, you may begin your conference.

Arthur Howard Penn: Good afternoon, everyone, and thank you for joining PennantPark Investment Corporation's third fiscal quarter 26 earnings conference call. I am joined today by Richard Allorto, our Chief Financial Officer. Rick, please start off by disclosing some general conference call information and include a discussion about forward looking statements.

Richard Thomas Allorto Jr.: Thank you, Arthur. 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) 905-1 thousand. At this time, I would like to turn the call back to our Chairman and Chief Executive Officer, Arthur Howard Penn.

Arthur Howard Penn: Thanks, Rick. I will begin with an overview of our third quarter results. And a review of the portfolio. I will then discuss the current market environment and how we believe PNNT is positioned going forward. Rick 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 June 30, our core NII net investment income was $0.14 per share. This exceeded our base dividend of $0.04 per share per month or $0.12 per share for the quarter. As of June 30, our NAV per share was $6.56. Which is down 2.5% from the prior quarter. As we have previously communicated, PNNT has a considerable balance of undistributed taxable income which we are required to distribute to shareholders. PNNT is utilizing the supplemental dividends to make such distributions and the decline in NAV was primarily attributable to the supplemental dividend payments. Our portfolio remains highly diversified and conservatively positioned. Median debt to EBITDA was 4.7x, median interest coverage of 2.1x, and median loan to value was 45%. We ended the quarter with 4 nonaccrual investments, representing 2.5% of the portfolio cost and 0.8% at market value. As of June 30, our portfolio totaled $1.2 billion During the quarter, we continued to originate attractive investment opportunities and invested a total of $77 million a weighted average yield of 8.9% including $13 million invested in 5 new platform investments with a median debt to EBITDA of 2.3x interest coverage of 4.2x, loan to value of 30%. Our PSLF joint venture portfolio continues to be a significant contributor to our core NII. Over the last 12 months, PNNT's average cash yield on invested capital in the JV was 15.1%. As of June 30, the JV portfolio totaled $1.3 billion and has the capacity to increase its portfolio to approximately $1.5 billion. In June, the JV amended its revolving credit facility reduced the interest rate to SOFR plus 2.1% from SOFR plus 2.25%. Additionally, in July, the JV partially refinanced its $300 million debt securitization. The JV refinanced the AAA tranches and decreased the securitization's weighted average spread by 97 basis points to 1.69% from 2.66%. We expect additional growth in the JV portfolio and the decrease in its cost of capital will enhance PNNT's earnings momentum in future quarters. During the quarter, we generated a meaningful realization from our equity co investment in a leading defense technology company. We received approximately $15 million in total proceeds on our original $1.1 million investment representing nearly 14x multiple on invested capital. Government services and defense continues to be 1 of our highest conviction investment sectors. And has consistently been among our best performing verticals since inception we have invested approximately $3 billion across the sector including roughly $780 million through PNNT. For these investments, they were 92% first lien senior secured and generated an overall IRR of 12.2%. Demonstrating our ability to identify businesses operating in strategically important markets. We remain highly constructive on the long term outlook for government services and defense because the sector possesses several characteristics that align well with our investment philosophy. Demand has been historically been supported by durable federal funding priorities and long term contracts that provide meaningful revenue visibility and stability. Many of these businesses exhibit resilient cash flow profiles, variable cost structures, and are generally less sensitive to broader economic cycles than many commercial industries. In addition, the sector continues to benefit from active M&A markets and strong valuation support. Thereby providing multiple avenues for value creation. Our portfolio is concentrated in businesses supporting the Department of War, and other mission critical government agencies. We focus on companies addressing high priority national security initiatives. Including modernization of defense systems and digital infrastructure, cyber and electronic warfare capabilities, modeling and simulation, counter drone technologies, and next generation autonomous systems. We believe these priorities will remain central to US defense spending for years to come creating a favorable backdrop for continued investment opportunities. On a combined basis, including the joint venture portfolio, Government Services and Defense represents approximately 11% of total investments. And given our experience sourcing capabilities and the attractive opportunity set, we intend to increase that exposure over time. Software remains an area of focus for market participants. Our exposure is limited to 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 relatively short durations. They are concentrated in mission critical enterprise software businesses serving regulated end markets, including defense, health care, financial services. Let me now turn to the broader market environment. M&A activity has increased over the past 6 to 9 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. We are optimistic that activity levels will remain elevated throughout the back half of this year. We expect increased transaction activity to drive repayments across the portfolio including opportunities to monetize equity co investments, and redeploy that capital into income generating investments. In the core middle market, the pricing for high quality first lien term loans remains attractive. Typically ranging from silver plus 500 to 550 basis points with leverage of approximately 4.5x EBITDA. Importantly, these structures continue to include meaningful covenant protections in contrast to the covenant light structures prevalent in the upper middle market. We believe the current environment favors lenders with established private equity sponsor relationships, consistent access to deal flow, and disciplined underwriting. And these are long standing strengths our PennantPark platform. We continue to believe that the core middle market offers an attractive risk adjusted opportunity Companies in this segment generally have EBITDA of $10 million to $50 million and often operate below the practical threshold of the broadly syndicated loan and high yield markets. As a result, lenders can typically conduct extensive diligence negotiate meaningful financial covenants, structure transactions with appropriate leverage and equity cushions and maintain regular access to company financial information. Since our inception nearly 19 years ago, PNNT has invested $9.4 billion at an average yield of 11.1% while maintaining a loss ratio on invested capital of roughly 20 basis points annually. A testament to our consistent and disciplined approach through multiple market cycles. As a provider of strategic capital, we fuels the growth of our portfolio companies. In many cases, we have participated in the upside of the company by making an equity co investment. Our returns on these equity co investments have been excellent over time, overall for our platform from inception through June 30. We have invested over $629 million in equity co investments and have generated an IRR of 25% at a multiple on invested capital of 2x. Looking ahead, our experienced team and broad origination platform position us well to generate attractive deal flow. We remain steadfast in our commitment to capital preservation and maintaining a disciplined patient investment approach. We continue to focus on investing in high quality middle market companies with strong free cash flow generation. We capture that valuation through senior secured loans, and we pay out those contractual cash flows in the form of dividends to our shareholders. With that overview, I will turn the call over to Rick for a more detailed review of our financial results.

Richard Thomas Allorto Jr.: Thank you, Arthur. For the quarter ending June 30, GAAP and core net investment income were $0.14 per share. Investment income was comprised of $20 million in interest income $4.5 million in dividend income, and $300 thousand in other income. Operating expenses for the quarter were as follows: Interest and credit facility expenses were $8.8 million Casey management and incentive fees were $5.4 million General and administrative expenses were $1.5 million and provision for excise taxes was $200 thousand. Net realized and unrealized change on investments and debt including provision for taxes, was a loss of $4.4 million As of June 30, our NAV was $6.56 per share compared to $6.73 per share last quarter. At quarter end, our debt to equity ratio was 1.29x and our capital structure is diversified across multiple funding sources, including both secured and unsecured debt. As of June 30, our key portfolio statistics were as follows. Our portfolio remains highly diversified with 159 companies across 37 different industries. The weighted average yield on our debt investments was 11%. The portfolio is comprised of 46% first lien senior secured debt 2% second lien secured debt, 15% subordinated notes to PSLF, 7% other subordinated debt, 6% equity in PSLF, and 24% in other preferred and common equity co investments. 87% of the debt portfolio is floating rate With that, I will turn the call back to Arthur for closing remarks.

Arthur Howard Penn: Thanks, Rick. In conclusion, we remain committed to delivering consistent performance preserving capital and creating long term value for all stakeholders. Thank you, to our team for their dedication and our shareholders. For their continued partnership and confidence in PennantPark. That concludes our remarks at this time. I would like to open up the call to questions.

Operator: Thank you. And if you would like to ask the question, please signal by pressing *1 on your telephone keypad. If you are using a speakerphone, please make sure that your mute function is turned off. To allow your signal to reach our equipment. Again, you could press *1 to ask a question, and we will pause for just a moment to allow everyone an opportunity to signal for questions. We will now take your first question coming from the line of Christopher Mueller with Citizens Capital Market.

Chris Mueller: Hey, guys. Thanks for taking the questions. So I wanted to touch on originations. It looked like they were outpaced by repayments in the quarter. But I guess, how are you guys thinking about net deployment in the coming quarters? Should we expect that dynamic to continue? Or could we see some net portfolio growth ahead?

Arthur Howard Penn: Yes. Thanks, Christopher. I think we are balancing a bunch of different factors. You know, we are looking at a target leverage ratio here of about 1.3x debt to equity, which is kind of where we are. So we are looking to grow the JV over time. We are looking to manage debt to equity here at PNNT. So I think right now, we are going to-- we are looking to keep it flat. And, obviously, a big goal here is to rotate the equity And you know, get that equity rotation going and redeploy that into cash paying yield instruments. Got it.

Chris Mueller: And then it was nice to see the subsequent refinance, 100-basis-points as a meaningful reduction there. And I think I heard you guys say it was $300 million facility size. I guess, what will the cost savings per share be from that combined with the revolver refi?

Arthur Howard Penn: Yeah. So this was in our JV. I am going to look to Rick. I think I know, but I think Rick knows for sure kind of how the about 100-basis-points savings from the JV flows through to PNNT. Rick, do you want to answer that 1?

Richard Thomas Allorto Jr.: Yeah. Sure. So the 2 refinancings within the JV, the revolver and the securitization, are going to be about a $0.005 a penny per share flow through to PNNT. Per quarter. So about the about $0.02 on an annual basis.

Chris Mueller: Got it. that is very helpful. Appreciate you guys taking the questions today.

Arthur Howard Penn: Thank you.

Operator: Your next question will come from the line of Alex Brewer with Truist Securities.

Alex Brewer: Hey. This is Alex Brewer on behalf of Arren. I was just curious if you could add any color on spreads on new deals and how they are holding up, with new commitments this quarter at $77 million, and I think you said weighted average yield at 8.9%? Thank you.

Arthur Howard Penn: Yeah. So, I think spreads are relatively quarter to quarter. They have kind of been flat here, of in the 500 to 55 zone on average. And then we will just have to see where we go year end, you know, supply demand, how much of supply of new deals are there, how much is M&A going to be active. And then demand side, the cash flows into space. Certainly, investors continue to deploy to the space. Retail, wealth channels, as you know, and as everyone knows, have been a bit more challenged. So we will see where the supply demand curve goes. But certainly think we can maintain the 500 to 55 spread for a period of time. Okay.

Alex Brewer: Thank you.

Arthur Howard Penn: Thank you.

Operator: Your next question will come from the line of Christopher Nolan with Ladenburg Thalmann.

Christopher Nolan: Rick. what is the spillover income in the quarter, please?

Richard Thomas Allorto Jr.: So the spillover balance is $0.56 per share. Okay.

Christopher Nolan: And then I mean, the total dividend really exceeds net NII per share. Do you wait till spillover goes near zero or how far should we expect the spillover to That would be distributed?

Arthur Howard Penn: So Rex?

Richard Thomas Allorto Jr.: Yeah. So we have yep, we have communicated the supplemental dividend through the end of this calendar year. At which point we think the spillover will decline down to $0.40 per share You know, we will reevaluate, obviously, at that point in time, but, you know, we think at that point, that remaining spillover is manageable. Kind of con to put it back in context, again, we had a starting point of, you know, a little over a dollar per share. Not that long ago. So, you know, at that $0.40 level, I think, again, it is it is manageable. Okay.

Arthur Howard Penn: Thank you. Thanks, Christopher.

Operator: Your next question will come from the line of Jason Stewart with Compass Point.

Jason Stewart: Hey. Thanks. Follow-up on Christopher's question. I guess you have made some meaningful progress rotating out of equity. And if we continue to reduce the equity position, we see a little bit of top line compression on yields. Offset by some improvement in cost of funds. Have you thought about how those dynamics land in terms of ROE at the end of this year when the dividend discussion has to come up again? Or are we just too soon to be thinking that far out?

Arthur Howard Penn: Yeah. The it is a good question, Jason. Obviously, it is tip to the top of our mind. On the equity rotation, we have a wide variety of different equity co-investments which are I will call them singles and doubles, which is they are important. And, hopefully, we see more M&A in the economy, which will rotate a bunch of those. there is 2 control positions that are sizable. 1 is AKW, and the other is Flock Financial. Those are going to take a little while to work through. They are both doing well, but to get the right value and to rotate that equity in a meaningful way, it is gonna be a little while before we were able to rotate those at least a year, maybe 2 years out. So we are going to chip away at the smaller equity co-investments and then work hard to make sizable inroads on those on those 2 big names. Okay. Okay.

Jason Stewart: Shifting gears a little bit to the credit. I mean, nonaccruals relatively low on just an absolute basis. Anything under, underlying trends or movements underneath the surface we should keep an eye on or that you are keeping an eye on closely?

Arthur Howard Penn: Yeah. So, look, we thankfully, we do not have much in software, which we talked about. You know, we and most of the industry have a little bit of what we will call this kind of post COVID vintage deals where you had a zero interest rate environment. Consumers were flush with capital, People thought, you know, online buying would, you know, go to the moon. So the 1 meaningful NAV deal that was down this quarter was 1 of those. It was a company called Kinetic Systems, K-N-S. And it was a shoe company that was, you know, with a consumer orientation. Which was doing very well post COVID. The combination of reversion to the mean in terms of consumer purchases along with tariffs about 1.5 years ago. Were really a series of unfortunate events for this particular company. So you know, that is indicative of a little bit. We do not have much going on in terms of non-accruals, thankfully. But, kind of if you look at where it has been, it is kind of been in that post COVID zero interest rate environment deals. Got it. Okay. Thanks for the color.

Jason Stewart: Thanks, Jason.

Operator: Your next question will come from the line of Hong Zhang with JPMorgan.

Hong Zhang: Yeah. Hey. This is calling on for Rick. I guess we talked about adding capacity to grow the JV portfolio over time. Could you provide some color on how much you could you could grow that portfolio, say, the next 12 to 16 months? And what do you think are the biggest constraints in the near term?

Arthur Howard Penn: Yeah. Look, I think the portfolio and the JV can probably grow another couple hundred million. Over the next year, year and a half. Constraints are you know, you know, kinda deal flow to get to the JV, Obviously, it is a joint venture, so we and our partner, Pantheon, need to see eye to eye, and we see no reason we are not. But, you know, we need to see eye to eye on the opportunity. So deal flow opportunity then capital. You know, how do we balance capital? We wanna kinda stay in this rough leverage zone for PNNT of roughly 1.3x area. So, you know, balancing all those things out, means that we would hope and expect it to grow over time. It will be probably a gradual move, though. Got it.

Hong Zhang: Thanks.

Arthur Howard Penn: Thanks, Hong.

Operator: And it appears there are no further questions at this time. I will turn it back to mister Arthur Howard Penn at this time. For any additional or closing remarks.

Arthur Howard Penn: I want to thank everybody for participating, on the call today. We look forward to speaking to you next in November. that is our annual 10-K filing, so we will be a little behind the a lot of the others in the industry, but we look forward to speaking to you then right around Thanksgiving. In the meantime, wishing everybody a great summer. Thank you very much.

Operator: This concludes today's call. You for your participation. You may now disconnect.