Executive Summary

PNNT delivered steady Q4 fundamentals: NII/share was $0.22 and NAV/share rose 0.5% sequentially to $7.56, driven by net positive valuation adjustments; portfolio yield eased on spread compression, but credit remained solid with two non‑accruals (4.1% cost; 2.3% fair value) .
The company upsized its PSLF joint venture (JV), adding $127M of capital and expanding the JV credit facility to $400M, positioning the platform to scale “to over $1.5B,” a key earnings lever for 2025 as JV ROIC ran ~19% over the last 12 months .
Expenses rose year over year amid higher interest costs; NII/share declined YoY (to $0.22 from $0.24) on higher debt expense and lower dividend income, though sequential NAV improved on positive valuation marks .
No formal quantitative guidance was issued; dividend remains $0.08/month ($0.24/quarter) and was declared for November. Management reiterated focus on core middle market first‑lien lending and the JV as the growth engine; near‑term catalysts include JV ramp and potential equity co‑invest monetizations as M&A improves .

What Went Well and What Went Wrong

What Went Well
- NAV/share increased 0.5% QoQ to $7.56 on “net positive valuation adjustments,” and portfolio diversified to 152 companies; weighted average yield on debt investments was 12.3% .
- PSLF JV upsize and facility increase to $400M support scaling “to over $1.5B”; PNNT cites a 19.2% ROIC in the JV over the last 12 months. “Our earnings stream continues to be robust due to strong credit performance and the excellent returns generated by our PSLF joint venture.” .
- Core middle market credit metrics remain attractive (low leverage, tighter covenants); spreads appear to have “plateaued” at 5.0–5.5% over risk‑free, supporting durable double‑digit yields on first lien assets .
What Went Wrong
- Investment yield moderated on spread compression (down from 12.7% in Q3 to 12.3% in Q4), pressuring asset income trajectory if base rates fall .
- NII/share fell YoY ($0.22 vs $0.24) due to higher debt interest expense and lower dividend income; total expenses increased YoY with higher interest costs .
- Non‑accruals persisted (2 names; 4.1% cost/2.3% fair value); management also discussed a partial non‑accrual (Pragmatic) accruing PIK to its mark due to valuation and collectibility considerations .

Financial Results

Headline results – prior year, prior quarter, current quarter

Metric	Q4 2023	Q3 2024	Q4 2024
Investment Income ($mm)	$34.04	$37.00	$36.50
Net Investment Income ($mm)	$15.61	$15.75	$14.42
NII per Share ($)	$0.24	$0.24	$0.22
Net Increase in Net Assets from Operations per Share ($)	$0.19	$0.06	$0.28
GAAP/Adjusted NAV per Share ($)	$7.70	$7.52	$7.56
Distributions Declared per Share ($)	$0.21	$0.22	$0.24

Profitability ratios (derived)

Metric	Q4 2023	Q3 2024	Q4 2024
NII Margin = NII / Investment Income	45.8% (15.61/34.04)	42.5% (15.75/37.00)	39.5% (14.42/36.50)

Portfolio composition and credit snapshot

Metric	Q3 2024	Q4 2024
Portfolio Fair Value ($mm)	$1,259.9	$1,328.1
First Lien Secured Debt (% / $mm)	54% / $675.9	50% / $667.9
Second Lien Secured Debt (% / $mm)	5% / $65.6	5% / $67.2
Subordinated Debt incl. PSLF (% / $mm)	13% / $163.7 (incl. $115.9 in PSLF)	14% / $181.7 (incl. $115.9 in PSLF)
Preferred & Common Equity incl. PSLF (% / $mm)	23% / $294.9 (incl. $69.7 in PSLF)	23% / $311.7 (incl. $67.9 in PSLF)
U.S. Gov’t Securities (% / $mm)	5% / $59.8	7% / $99.6
Weighted Avg Yield on Debt Investments	12.7%	12.3%
Floating-Rate Debt (% of debt portfolio)	96%	94%
Non‑accruals (% of cost / FV)	4.2% / 2.5%	4.1% / 2.3%
Number of Portfolio Companies	144	152

Balance sheet and leverage

Metric	Q3 2024	Q4 2024
Truist Credit Facility Outstanding ($mm)	$450.5	$461.5
Weighted Avg Interest Rate – Truist Facility	7.7%	7.2%
Unused Borrowing Capacity – Truist ($mm)	$24.5	$13.5
Debt-to-Equity Ratio	1.50x	1.57x (regulatory 1.58x)
Cash & Equivalents ($mm)	$59.2	$49.9

PSLF JV highlights

Metric	Q3 2024	Q4 2024
PSLF Portfolio ($mm)	$926.1	$1,031.2
JV Facility Size ($mm)	$325 (pre‑increase)	$400 (post‑increase)
JV Capital Additions (Quarter)	—	PNNT $52.5; Partner $75.0
12‑mo ROIC on PNNT JV Capital	19.5% (to 6/30)	19.2% (to 9/30)

Notes: Where values are derived (e.g., margins), they are calculated from the cited source numbers.

Guidance Changes

Metric/Item	Period	Previous Guidance/Status	Current Guidance/Status	Change
Monthly Dividend	Ongoing	$0.08 (raised effective June; Q2 call)	$0.08 (Nov distribution declared)	Maintained
Quarterly Distribution Run‑Rate	Q3–Q4 2024	$0.22 (Q3 declared)	$0.24 (Q4 declared)	Raised vs Q3 actual declared
PSLF JV Target Capacity	Forward	~Up to $1.1B (pre‑upsize context)	“Over $1.5B” after facility to $400M and new capital	Raised
JV Leverage Target	Forward	~2.0x (commentary)	~2.0–2.25x zone (commentary)	Clarified/maintained range

No formal revenue/EPS guidance provided; management emphasized dividend sustainability supported by portfolio earnings, JV ramp, and spillover income (~$1/share referenced previously) .

Earnings Call Themes & Trends

Topic	Q2 2024 (Mar 31)	Q3 2024 (Jun 30)	Q4 2024 (Sep 30)	Trend
JV Returns & Strategy	ROIC ~17.5%; capacity to $1.1B; potential upsize	ROIC ~19.5%; discussing upsize; special JV dividend paid	ROIC ~19.2%; upsize executed; facility to $400M; capacity >$1.5B	Improving scale; high‑teens ROIC sustained (rate/credit sensitive)
Spreads / Yields	First‑lien spreads tightened ~50 bps over 6 months	Yields still attractive; spreads ~550 bps over risk‑free	Spreads plateaued at 500–550 bps; relative value vs BSL persists	Stabilizing spreads; modest yield pressure
Credit Quality / Non‑accruals	2 non‑accruals; low PIK (2.9% of income)	3 non‑accruals; NPLs 4.2% cost/2.5% FV	2 non‑accruals; NPLs 4.1% cost/2.3% FV; partial non‑accrual discussed	Stable to slightly better QoQ
Sector Focus	Core middle market; 5 sectors; lower leverage, tighter covenants	Same focus; equity co‑invest optionality emphasized	Health care and gov/defense remain attractive; selective leverage	Consistent strategy
Equity Monetization	Goal to rotate equity as M&A returns	Maintaining goal; special situations highlighted	M&A picking up; potential monetization (e.g., J&F mark‑up)	Improving backdrop
Leverage / Balance Sheet	D/E ~1.4x; use T‑bills to manage 30% bucket	D/E ~1.5x; “full leverage,” use JV to de‑lever over time	D/E ~1.57x; payable for investments affects effective leverage; JV ramp accretive	Elevated but managed via JV rotation

Management Commentary

“We are pleased to announce another quarter of solid performance from both an NAV and Net Investment Income perspective… Our earnings stream continues to be robust due to strong credit performance and the excellent returns generated by our PSLF joint venture.” — Arthur Penn, CEO .
“For the quarter ended September 30, our GAAP and core net investment income was $0.22 per share. GAAP and adjusted NAV increased 0.5% to $7.56 per share… due primarily to net positive valuation adjustments in the investment portfolio.” — Arthur Penn .
“Our deals are typically right now on the senior side, 5 to 5.50 spread over the risk‑free rate… we think [spreads] have plateaued here.” — Arthur Penn .
“Over the last 12 months, PNNT earned a 19.2% return on invested capital in the JV… this additional capital will allow the JV to scale its investment portfolio to over $1.5 billion.” — Arthur Penn .
“Operating expenses for the quarter were… interest and credit facility expenses $12.3M; base management and incentive fees $7.4M; G&A $1.75M; provision for excise taxes $0.7M.” — Richard Allorto, CFO .

Q&A Highlights

JV return sustainability: Management reiterated upper‑teens ROIC is achievable but sensitive to interest rates and credit performance; JV leverage targeted around 2.0–2.25x and financed with floating‑rate facilities/CLOs .
Spread environment: Spreads have plateaued at 500–550 bps over risk‑free; management is not modeling further tightening; relative value remains favorable versus BSLs .
Non‑accrual/partial non‑accrual mechanics: Discussed “Pragmatic” on partial non‑accrual accruing PIK to the mark given valuation and collectibility .
Portfolio activity mix: ~85% of “add‑on” activity tied to revolver draws rather than maintenance capital; management emphasized growth financing via DDTLs .
Equity rotation and monetizations: Management noted opportunities as M&A picks up (e.g., J&F equity marked higher) but avoided overpromising on timing .

Estimates Context

Consensus estimates: S&P Global (Capital IQ) Wall Street consensus data were not available at time of analysis due to API rate limits; as a result, we cannot definitively characterize Q4 results as a beat or miss versus consensus. Values retrieved from S&P Global were unavailable at time of request.*
Observations absent consensus: The quarterly dividend ($0.24) exceeded NII/share ($0.22), but management previously highlighted ~$1/share of spillover income and expects JV ramp and equity rotation to support coverage over time .

Key Takeaways for Investors

PNNT continues to execute its core middle market strategy with prudent credit metrics; NAV/share rose sequentially despite modest yield pressure, signaling resilient asset marks and selectivity .
The PSLF JV upsize (capital + facility) is the quarter’s core catalyst, providing line‑of‑sight to further earnings leverage as assets scale toward >$1.5B; sustained upper‑teens JV ROIC is a medium‑term earnings driver, albeit rate‑ and credit‑sensitive .
Spread compression appears to have stabilized; management does not model further tightening, supporting durable double‑digit senior yields if credit quality holds .
NII/share (0.22) trails the quarterly distribution (0.24), but prior spillover and JV ramp provide a buffer; watch for equity co‑invest monetizations to improve coverage and rotate into income‑producing loans .
Leverage is elevated (~1.57x); management is using JV transfers and portfolio rotation to manage risk and optimize NII; monitor payable for investments and JV asset transfers’ timing .
Credit watch items: partial non‑accrual (Pragmatic) and any new NPLs; overall NPL levels improved QoQ and remain manageable given diversification (152 companies) .
Near‑term trading lens: positive narrative around JV scale/NAV uptick vs. modest NII slippage and leverage; catalysts include additional JV funding draws, CLO liability execution, and potential equity exits .

Additional Context and Press Releases (Q4 2024)

Press release update: PNNT issued an updated Q4 press release on Nov 26 to correct prior information; updated results include positive net realized gains for the quarter and $0.28 per share net increase in net assets from operations .
Monthly distribution: Declared $0.08 for November (payable Dec 2) .
Platform fundraising: Adviser announced $610M final close of PCOF IV, underscoring platform fundraising momentum (broader PennantPark platform context) .

*Estimates disclaimer: S&P Global (Capital IQ) consensus values were unavailable at time of request due to daily request limits; therefore, no estimate comparisons are shown.

PENNANTPARK INVESTMENT CORP (PNNT)·Q4 2024 Earnings Summary