PennantPark Floating Rate Capital Q1 2026 PennantPark Floating Rate Capital Ltd Earnings Call | AllMind AI Earnings | AllMind AI
Q1 2026 PennantPark Floating Rate Capital Ltd Earnings Call
Operator: Please stand by. Good morning and welcome to the PennantPark Floating Rate Capital's First Fiscal Quarter 2026 Earnings Conference Call. Today's conference is being recorded. At this time, all participants have been placed in a listen-only mode. The call will be open for a question-and-answer session following the speaker's 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. Art Penn, Chairman and Chief Executive Officer of PennantPark Floating Rate Capital. Mr. Penn, you may begin your conference.
Operator: Good morning and welcome to the PennantPark Floating Rate Capital's First Fiscal Quarter 2026 Earnings Conference Call. Today's conference is being recorded. At this time, all participants have been placed in a listen-only mode. The call will be open for a question-and-answer session following the speaker's remarks. If you would like to ask a question at that time, simply press star one on your telephone keypad. If you would like to withdraw your question, press star two on your telephone keypad. It is now my pleasure to turn the call over to Mr. Art Penn, Chairman and Chief Executive Officer of PennantPark Floating Rate Capital. Mr. Penn, you may begin your conference.
Speaker #1: mode. The call will be open for a question and answer session At this time, all following the speaker's remarks. If you would like to ask a question at that time, simply press *1 on your telephone keypad.
Speaker #1: press *2 on your telephone If you would like to withdraw your question, keypad. It is now my pleasure to turn the call over to Mr. Art Penn, Chairman and Chief Executive Officer of PennantPark Floating Rate Capital.
Speaker #1: Mr. Penn, you may begin your conference.
Speaker #1: Mr. Penn, you may begin your conference.
Speaker #2: Thank you and good morning, everyone. fiscal quarter 2026 earnings Welcome to PennantPark Floating Rate Capital's first conference call. I'm joined today by Rick Allorto, our Chief Financial Officer.
Operator: Thank you and good morning, everyone. Welcome to PennantPark Floating Rate Capital's First Fiscal Quarter 2026 Earnings Conference Call. I'm joined today by Rick Allorto, our Chief Financial Officer. Rick, please start off by disclosing some general conference call information and include a discussion about forward-looking statements.
Art Penn: Thank you and good morning, everyone. Welcome to PennantPark Floating Rate Capital's First Fiscal Quarter 2026 Earnings Conference Call. I'm joined today by Rick Allorto, our Chief Financial Officer. Rick, please start off by disclosing some general conference call information and include a discussion about forward-looking statements.
Q1 2026 PennantPark Floating Rate Capital Ltd Earnings Call
Speaker #2: Rick, please start off by disclosing some general conference call information and include a discussion about forward-looking statements.
Richard Allorto: Thank you, Art. I'd like to remind everyone that today's call is being recorded and is the property of PennantPark Floating Rate Capital. 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'd also like to call your attention to the customary safe harbor disclosure in our press release regarding forward-looking information. Our remarks today may also 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'd like to turn the call back to our Chairman and Chief Executive Officer, Art Penn.
Richard Allorto: Thank you, Art. I'd like to remind everyone that today's call is being recorded and is the property of PennantPark Floating Rate Capital. 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'd also like to call your attention to the customary safe harbor disclosure in our press release regarding forward-looking information. Our remarks today may also 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'd like to turn the call back to our Chairman and Chief Executive Officer, Art Penn.
Speaker #3: Art. I'd like to remind everyone that today's call is being recorded and Thank you, is the property of PennantPark Floating Rate Capital. Any unauthorized broadcast of this call in any form is strictly prohibited.
Speaker #3: An audio replay of the call will be available also like to call your attention to the on our website. I'd customary Safe Harbor disclosure in our press release regarding forward-looking information.
Speaker #3: Our remarks today may also include forward-looking statements and recent SEC filings for important factors that could cause actual results to differ materially projections. Please refer to our most from these projections.
Speaker #3: 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.
Speaker #3: At this time, I'd like to turn the call back to our Chairman and Chief Executive Officer, Art.
Speaker #3: Penn. Thanks,
Art Penn: Thanks, Rick. I'll begin with an overview of our first quarter results and recent strategic initiative: the launch of our new joint venture, PSSL2, which commenced investment activities during the quarter. I will then share our perspective on the current market environment and how PFLT is positioned for continued growth. Rick will follow up with a detailed review of the financials, and then we will open up the call for questions. For the quarter ended 31 December, core net investment income for the quarter was $0.27 per share. During the quarter, we began investing in our new joint venture, PSSL2. PSSL2 invested $197 million during the quarter and an additional $133 million after quarter end. Its total portfolio is currently $326 million.
Art Penn: Thanks, Rick. I'll begin with an overview of our first quarter results and recent strategic initiative: the launch of our new joint venture, PSSL2, which commenced investment activities during the quarter. I will then share our perspective on the current market environment and how PFLT is positioned for continued growth. Rick will follow up with a detailed review of the financials, and then we will open up the call for questions. For the quarter ended 31 December, core net investment income for the quarter was $0.27 per share. During the quarter, we began investing in our new joint venture, PSSL2. PSSL2 invested $197 million during the quarter and an additional $133 million after quarter end. Its total portfolio is currently $326 million.
Speaker #2: Rick, I'll begin with an overview of our first quarter results and recent strategic initiative—the launch of our new joint venture, PSSL2, which commenced investment activities during the quarter.
Speaker #2: I will then share our perspective on the current market environment and how PFLT is positioned for continued growth. Rick will follow up with a detailed review of the financials, and then we will open up the call for questions.
Speaker #2: quarter ended December For the 31st, core net investment income for the quarter was $27 per share. During the quarter, we began investing in our new joint venture, PSSL2.
Speaker #2: PSSL2 invested $197,00,000 during the quarter, and an additional $133,000,000 after quarter end. Its total portfolio is currently $326,000,000. . PSSL2 recently closed on an additional $100,000,000 commitment to the credit facility bringing the total to $250,000,000, and the credit facility has an accordion feature to increase commitments to $350,000,000.
Art Penn: PSSL2 recently closed on an additional $100 million commitment to the credit facility, bringing the total to $250 million, and the credit facility has an accordion feature to increase commitments to $350 million. Our objective is to scale PSSL2 to over $1 billion in assets consistent with our existing joint ventures. Our run rate NII is projected to cover our current dividend as we ramp that portfolio. Turning to the market environment, we are seeing an increase in M&A transaction activity across the private middle market. This trend is expanding our pipeline of new investment opportunities. We also expect that this increase in M&A activity will drive repayments of our existing portfolio investments, including opportunities to exit some of our equity co-investments and rotate that capital into new current income-producing investments.
Art Penn: PSSL2 recently closed on an additional $100 million commitment to the credit facility, bringing the total to $250 million, and the credit facility has an accordion feature to increase commitments to $350 million. Our objective is to scale PSSL2 to over $1 billion in assets consistent with our existing joint ventures. Our run rate NII is projected to cover our current dividend as we ramp that portfolio. Turning to the market environment, we are seeing an increase in M&A transaction activity across the private middle market. This trend is expanding our pipeline of new investment opportunities. We also expect that this increase in M&A activity will drive repayments of our existing portfolio investments, including opportunities to exit some of our equity co-investments and rotate that capital into new current income-producing investments.
Speaker #2: Our objective is to scale PSSL2 to over $1 billion in assets ventures. Our run rate NII is projected to cover our current dividend as we ramp that portfolio.
Speaker #2: Turning to the market environment, we are seeing an increase in M&A transaction activity across the private middle market. This trend is expanding our pipeline of new investment opportunities.
Speaker #2: We also expect that this increase in M&A activity will drive repayments of our existing portfolio investments including opportunities to exit some of our equity co-investments and rotate that capital into new current income-producing investments.
Speaker #2: We continue to believe that the current environment favors lenders with strong private equity-sponsored relationships and disciplined underwriting. Areas where we have a clear competitive advantage.
Art Penn: We continue to 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 475 to 525 basis points, with leverage of approximately 4.5 times EBITDA. Importantly, we continue to get meaningful covenant protections in contrast to the covenant-lite structures prevalent in the upper middle market. Our portfolio remains conservatively structured. As of December 31, PIK interest represented just 2.5% of total interest income among the lowest levels in the industry. Median leverage across the portfolio is 4.5 times, with median interest coverage of 2.1 times. During the quarter, we originated four new platform investments with a median debt-to-EBITDA ratio of 4 times, interest coverage of 2.9 times, and the loan-to-value ratio of 43%.
Art Penn: We continue to 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 475 to 525 basis points, with leverage of approximately 4.5 times EBITDA. Importantly, we continue to get meaningful covenant protections in contrast to the covenant-lite structures prevalent in the upper middle market. Our portfolio remains conservatively structured. As of December 31, PIK interest represented just 2.5% of total interest income among the lowest levels in the industry. Median leverage across the portfolio is 4.5 times, with median interest coverage of 2.1 times. During the quarter, we originated four new platform investments with a median debt-to-EBITDA ratio of 4 times, interest coverage of 2.9 times, and the loan-to-value ratio of 43%.
Speaker #2: In the core middle market, the pricing on high-quality first-lean term loans remains attractive. Typically ranging from SOFR plus 475 to $525 basis points, with leverage of approximately 4.5 times EBITDA.
Speaker #2: Importantly, we continue to get meaningful covenant protections, in contrast to the covenant-lite structures prevalent in the upper middle market. Our portfolio remains conservatively structured.
Speaker #2: As of December 31st, PIC interest represented just 2.5% of total interest income, among the lowest, levels in the industry. Median leverage across the portfolio is 4.5 times, with median interest coverage of 2.1 times.
Speaker #2: During the quarter, we originated four new platform investments with a median debt to EBITDA ratio of four times, interest coverage of 2.9 times, and the loan-to-value ratio of 43%.
Speaker #2: With regard to the software risk that has been a recent market focus, we have stuck to our knitting. Only 4.4% of the overall portfolio is software, and that 4.4% is structured consistently with how we invest in the core middle market.
Art Penn: With regard to the software risk that has been a recent market focus, we have stuck to our knitting. Only 4.4% of the overall portfolio is software, and that 4.4% is structured consistently with how we invest in the core middle market: primarily all cash-pay loans with covenants, with leverage of 5.3x, and matures in only 3.4 years on average. It's enterprise software that is integral to the customer's businesses, the vast majority of which is focused on heavily regulated industries such as defense, healthcare, and financial institutions, where safety, security, and data privacy are paramount and where change will be slower. Peers typically invested much larger percentages of their portfolios in software: 20% to 30%, at much higher leverage, 7x+, or loans against revenue, not EBITDA, with substantial PIK, covenant-lite, and long maturities. This story is a significant differentiator from our peers.
Art Penn: With regard to the software risk that has been a recent market focus, we have stuck to our knitting. Only 4.4% of the overall portfolio is software, and that 4.4% is structured consistently with how we invest in the core middle market: primarily all cash-pay loans with covenants, with leverage of 5.3x, and matures in only 3.4 years on average. It's enterprise software that is integral to the customer's businesses, the vast majority of which is focused on heavily regulated industries such as defense, healthcare, and financial institutions, where safety, security, and data privacy are paramount and where change will be slower. Peers typically invested much larger percentages of their portfolios in software: 20% to 30%, at much higher leverage, 7x+, or loans against revenue, not EBITDA, with substantial PIK, covenant-lite, and long maturities. This story is a significant differentiator from our peers.
Speaker #2: Primarily, all cash-pay loans, with covenants, with leverage of 5.3 times, and matures in only 3.4 years on average. It's enterprise software that is integral to the customer's businesses, the vast majority of which is focused on heavily regulated industries such as defense, healthcare, and financial institutions, where safety, security, and data privacy are paramount, and where change will be slower.
Speaker #2: Peers typically invested much larger percentage of their portfolios in software, 20 to 30 percent, and much higher leverage, seven times plus or loans against revenue not EBITDA, with substantial PIC, covenant-light, and long maturities.
Speaker #2: This story is a significant differentiator from our peers. We ended the quarter with four non-accrual investments, representing only 0.5% of the portfolio at cost, and 0.1% at market
Art Penn: We ended the quarter with 4 non-accrual investments representing only 0.5% of the portfolio at cost and 0.1% at market value. These results reflect the rigor of our underwriting process and the discipline of our investment approach. We continue to believe that our focus on core middle market provides us with attractive investment opportunities where we provide important strategic capital to our borrowers. Core middle market companies, typically those with $10 to 50 million of EBITDA, operate below the threshold of the broadly syndicated loan or high-yield markets. In the core middle market, because we are an important strategic lending partner, the process and package of terms we receive is attractive. We have many weeks to do our diligence. We thoughtfully structure transactions with sensible leverage, meaningful covenants, substantial equity cushions to protect our capital, attractive spreads, and equity co-investment.
Art Penn: We ended the quarter with 4 non-accrual investments representing only 0.5% of the portfolio at cost and 0.1% at market value. These results reflect the rigor of our underwriting process and the discipline of our investment approach. We continue to believe that our focus on core middle market provides us with attractive investment opportunities where we provide important strategic capital to our borrowers. Core middle market companies, typically those with $10 to 50 million of EBITDA, operate below the threshold of the broadly syndicated loan or high-yield markets. In the core middle market, because we are an important strategic lending partner, the process and package of terms we receive is attractive. We have many weeks to do our diligence. We thoughtfully structure transactions with sensible leverage, meaningful covenants, substantial equity cushions to protect our capital, attractive spreads, and equity co-investment.
Speaker #1: Could value . These were these results reflect the rigor of our underwriting process and the discipline of our investment approach . continue to We believe that our focus on core middle market provides us with opportunities where attractive investment we provide important that our middle continue focus on we core to believe market provides us provide strategic where we with opportunities attractive investment our capital to borrowers important middle .
Speaker #1: market Core companies , typically those 10 to 50 million of with EBITDA , operate below the threshold of the broadly syndicated yield loan or high markets in the core middle market .
Speaker #1: Because we are an important strategic partner , the process and package of terms we receive is attractive . We have many weeks to do our diligence .
Speaker #1: We thoughtfully structure transactions with sensible leverage , meaningful covenants , substantial equity cushions to protect our capital , attractive spreads and equity co-investment .
Art Penn: Additionally, from a monitoring perspective, we receive monthly financial statements to help us stay informed on the performance of our portfolio companies. Regarding covenant protections, while the upper market has seen significant erosion, our originated first-lien loans consistently include meaningful covenants that safeguard our capital. Our credit quality since inception over 14 years ago has been excellent. PFLT has invested $8.7 billion in 545 companies, and we have experienced only 26 non-accruals. Since inception, our loss ratio on invested capital is only 13 basis points annually. As a provider of strategic capital, who fuels the growth of our portfolio companies, in many cases, we participate in the upside of the company by making an equity co-investment. Our returns on these equity co-investments have been excellent over time.
Art Penn: Additionally, from a monitoring perspective, we receive monthly financial statements to help us stay informed on the performance of our portfolio companies. Regarding covenant protections, while the upper market has seen significant erosion, our originated first-lien loans consistently include meaningful covenants that safeguard our capital. Our credit quality since inception over 14 years ago has been excellent. PFLT has invested $8.7 billion in 545 companies, and we have experienced only 26 non-accruals. Since inception, our loss ratio on invested capital is only 13 basis points annually. As a provider of strategic capital, who fuels the growth of our portfolio companies, in many cases, we participate in the upside of the company by making an equity co-investment. Our returns on these equity co-investments have been excellent over time.
Speaker #1: Additionally , from a monitoring perspective , we received monthly financial statements to help us stay informed on the of our performance portfolio companies regarding covenant protections .
Speaker #1: While the upper market has seen significant erosion , our originated first lien loans consistently include meaningful covenants that capital , our credit Since quality .
Speaker #1: over 14 years ago has been excellent . Flt has invested $8.7 billion in and we have 545 companies , experienced only 26 Non-accruals since inception .
Speaker #1: Our loss ratio on invested is only 13 basis points annually , as a provider of strategic capital , he fuels the growth of our portfolio companies .
Speaker #1: In many cases, we participate in the upside of the company by making an equity co-investment. Our returns on these equity co-investments have been excellent over time.
Art Penn: Overall, for our platform, from inception through 31 December, we've invested over $615 million in equity co-investments and have generated an IRR of 25% and a multiple on invested capital of 1.9x. During the quarter, we continued to originate attractive investment opportunities and invested $301 million at a weighted average yield of 10%. $95 million was invested in new portfolio companies, and $206 million was invested in existing portfolio companies. From an outlook perspective, our experienced and talented team and our wide origination funnel are well-positioned to generate strong deal flow. Our mission and goal are a steady, stable, and protected dividend stream coupled with the preservation of capital. Everything we do is aligned to that goal. We seek to find investment opportunities in growing middle market companies that have high free cash flow conversion.
Art Penn: Overall, for our platform, from inception through 31 December, we've invested over $615 million in equity co-investments and have generated an IRR of 25% and a multiple on invested capital of 1.9x. During the quarter, we continued to originate attractive investment opportunities and invested $301 million at a weighted average yield of 10%. $95 million was invested in new portfolio companies, and $206 million was invested in existing portfolio companies. From an outlook perspective, our experienced and talented team and our wide origination funnel are well-positioned to generate strong deal flow. Our mission and goal are a steady, stable, and protected dividend stream coupled with the preservation of capital. Everything we do is aligned to that goal. We seek to find investment opportunities in growing middle market companies that have high free cash flow conversion.
Speaker #1: Overall , our for platform from inception through December 31st , we've over invested $615 million in equity . Co-investments have and generated an IRR of 25% .
Speaker #1: And the multiple on invested capital of 1.9 times during the quarter. We continued to originate attractive investments and opportunities, investing $301 million at a weighted average yield of 10%.
Speaker #1: 95 million was invested in new portfolio companies , and 206 million was in existing invested portfolio companies . From an outlook perspective , our experienced and talented team and our wide origination funnel are well positioned to generate strong deal flow .
Speaker #1: Our mission and goal are a steady , stable and protected dividend stream coupled with a preservation of capital . Everything we do is aligned to that goal .
Art Penn: We capture that free cash flow primarily in first-lien senior secured instruments, and we pay out those contractual cash flows in the form of dividends to our shareholders. With that overview, I'll turn it over to Rick for a more detailed review of our financial results.
Art Penn: We capture that free cash flow primarily in first-lien senior secured instruments, and we pay out those contractual cash flows in the form of dividends to our shareholders. With that overview, I'll turn it over to Rick for a more detailed review of our financial results.
Speaker #1: We seek to find investment opportunities in growing middle market companies that have high free cash flow conversion. We capture that free cash flow primarily in first-lien senior secured instruments, and we pay out those contractual cash flows in the form of dividends to our shareholders.
Richard Allorto: Thank you, Art. For the quarter ended 31 December, GAAP net investment income and core net investment income were both $0.27 per share. Our operating expenses for the quarter were as follows: interest and expenses on debt were $27.2 million, base management and performance-based incentive fees were $13.5 million, general and administrative expenses were $2.1 million, provision for taxes was $0.2 million, and credit facility amendment costs were $0.5 million. For the quarter ended 31 December, net realized and unrealized change on investments, including provision for taxes, was a loss of $30 million. As of 31 December, NAV was $10.49 per share, which is down 3.1% from $10.83 per share last quarter. As of 31 December, our debt-to-equity ratio was 1.57x, and our capital structure is diversified across multiple funding sources, including both secured and unsecured debt.
Richard Allorto: Thank you, Art. For the quarter ended 31 December, GAAP net investment income and core net investment income were both $0.27 per share. Our operating expenses for the quarter were as follows: interest and expenses on debt were $27.2 million, base management and performance-based incentive fees were $13.5 million, general and administrative expenses were $2.1 million, provision for taxes was $0.2 million, and credit facility amendment costs were $0.5 million. For the quarter ended 31 December, net realized and unrealized change on investments, including provision for taxes, was a loss of $30 million. As of 31 December, NAV was $10.49 per share, which is down 3.1% from $10.83 per share last quarter. As of 31 December, our debt-to-equity ratio was 1.57x, and our capital structure is diversified across multiple funding sources, including both secured and unsecured debt.
Speaker #1: With that overview , I'll turn it over to Rick for a more detailed review of our financial results .
Speaker #2: Thank you . Art , for the quarter ended December 31st , GAAP net investment income and core net investment were income both $0.27 per share .
Speaker #2: Our operating expenses were as for the follows quarter . Interest and expenses on debt were 27.2 million based management and performance based incentive fees were 13.5 million .
Speaker #2: General and administrative expenses were 2.1 million . Provision for taxes was 0.2 million , and credit Facility amendment costs were 0.5 million . For the quarter ended December 31st , net realized and unrealized change .
Speaker #2: On investments , including provision for taxes , was a loss of $30 million as of December 31st , Nav was $10.49 per share , which is down 3.1% from $10.83 per last share quarter .
Speaker #2: As of December 31st , our debt to equity ratio was 1.57 times , and our capital structure is diversified across multiple funding sources , including both secured and debt unsecured .
Richard Allorto: Subsequent to quarter end, we sold $27 million of assets to the PSSL1 joint venture and $133 million of assets to the PSSL2 joint venture. We used the net proceeds from these sales to pay down our revolving credit facility and reduce our debt-to-equity ratio to 1.5 times, which is within our target range of 1.4 to 1.6 times. As of December 31, our key portfolio statistics were as follows: the portfolio remains well-diversified, comprising 160 companies across 50 industries. The weighted average yield on our debt investments was 9.9%, and approximately 99% of the debt portfolio is floating rate. PIK income equaled only 2.5% of total interest income. The portfolio is comprised of 89% first-lien senior secured debt, less than 1% in second-lien and subordinated debt, 4% in equity of PSSL1 and PSSL2, and 7% in equity co-investments.
Richard Allorto: Subsequent to quarter end, we sold $27 million of assets to the PSSL1 joint venture and $133 million of assets to the PSSL2 joint venture. We used the net proceeds from these sales to pay down our revolving credit facility and reduce our debt-to-equity ratio to 1.5 times, which is within our target range of 1.4 to 1.6 times. As of December 31, our key portfolio statistics were as follows: the portfolio remains well-diversified, comprising 160 companies across 50 industries. The weighted average yield on our debt investments was 9.9%, and approximately 99% of the debt portfolio is floating rate. PIK income equaled only 2.5% of total interest income. The portfolio is comprised of 89% first-lien senior secured debt, less than 1% in second-lien and subordinated debt, 4% in equity of PSSL1 and PSSL2, and 7% in equity co-investments.
Speaker #2: Subsequent to quarter end , sold we $27 million of assets to the SL1 joint venture and $133 million of assets to the SL2 joint venture .
Speaker #2: We use the net proceeds from these sales to pay down our revolving credit facility and reduce our debt to equity ratio to 1.5 times , which is our within target range of 1.4 to 1.6 times as of December 31st .
Speaker #2: Our key portfolio statistics were as follows . The portfolio remains well diversified , comprising 160 companies across 50 industries . The weighted average yield on our debt investments was 9.9% , and approximately 99% of the debt portfolio is floating rate pick equaled only 2.5% of total interest income .
Speaker #2: The portfolio is comprised of first lien 89% senior secured debt , less than 1% line , and in second subordinated debt , 4% in equity of SL1 and Sglt2 , and 7% in equity .
Richard Allorto: The debt-to-EBITDA on the portfolio is 4.5 times, and interest coverage was 2.1 times. With that, I'll turn the call back to Art for closing remarks.
Richard Allorto: The debt-to-EBITDA on the portfolio is 4.5 times, and interest coverage was 2.1 times. With that, I'll turn the call back to Art for closing remarks.
Speaker #2: Co-investments. The debt to EBITDA on the portfolio is 4.5 times and interest coverage was 2.1 times. With that, I'll call back to Art for closing remarks.
Art Penn: Thanks, Rick. In conclusion, I'd like to thank our exceptional team for their continued dedication and our shareholders for their trust and partnership. We remain focused on delivering durable earnings, preserving capital, and creating long-term value for our stakeholders. That concludes our remarks. At this time, I would like to open up the call to questions.
Art Penn: Thanks, Rick. In conclusion, I'd like to thank our exceptional team for their continued dedication and our shareholders for their trust and partnership. We remain focused on delivering durable earnings, preserving capital, and creating long-term value for our stakeholders. That concludes our remarks. At this time, I would like to open up the call to questions.
Speaker #1: Thanks , Rick . In conclusion , I'd like to thank our exceptional team for their continued dedication and our shareholders for their trust and partnership .
Speaker #1: We remain focused on delivering durable earnings , preserving capital and creating long term value for our stakeholders . That concludes our remarks . At this time , I would like to open up the call to questions .
Operator: Thank you. If you would like to ask a question, please signal by pressing star 1 on your telephone keypad. If you are using a speakerphone, please make sure your mute function is turned off to allow the signal to reach our equipment. Again, press star 1 to ask a question. We'll pause for just a moment to assemble the queue. We will take our first question from Paul Johnson with KBW.
Operator: Thank you. If you would like to ask a question, please signal by pressing star one on your telephone keypad. If you are using a speakerphone, please make sure your mute function is turned off to allow the signal to reach our equipment. Again, press star 1 to ask a question. We'll pause for just a moment to assemble the queue. We will take our first question from Paul Johnson with KBW.
Speaker #3: Thank you . If you would like to ask a signal by please telephone one on your pressing Star keypad . If you are using a speakerphone , please make sure your mute function is turned off to allow the signal to reach our equipment .
Speaker #3: Again , press star one to ask a question . We'll pause for just a moment to assemble the queue . We will take our first question from Johnson Paul with KBW .
Paul Johnson: Yeah, good morning. Thanks for taking my questions. Interesting to hear that you guys have what I would consider an underweight software exposure in the portfolio. I know you've mentioned software as a defensive sector in the past. You've obviously done loans there in the past. I'm just curious, why is software such a low exposure within the portfolio? Was that a strategic investment decision you guys had made, or is there anything else driving that?
Paul Johnson: Yeah, good morning. Thanks for taking my questions. Interesting to hear that you guys have what I would consider an underweight software exposure in the portfolio. I know you've mentioned software as a defensive sector in the past. You've obviously done loans there in the past. I'm just curious, why is software such a low exposure within the portfolio? Was that a strategic investment decision you guys had made, or is there anything else driving that?
Speaker #4: Yeah . Good Thanks morning . for taking my questions . Interesting to hear that you guys have what I would underweight software exposure in the consider an portfolio .
Speaker #4: I know you've mentioned software as a defensive sector in the past. You've obviously done loans there in the past. I'm just curious, why is software such a low exposure within the portfolio?
Art Penn: Thanks, Paul. It's a good question. We basically just kind of stick to our knitting, which is cash flow loans at a reasonable multiple where we think there's great defensibility, where we can get covenants, where we can get cash interest. And obviously, we saw this massive parade of software loans come by, and much of them were marching at 7x leverage, 8x leverage, leverage against revenues ARR loans. We saw many of them covenant-lite or PIK. And for us, those were not comfortable loans for us to make. So we have done some software, about 4% of the portfolio, where there are reasonable multiples of cash flow, where we get our maintenance tests, where we feel safe as enterprise software that's integral to their customers' lives.
Art Penn: Thanks, Paul. It's a good question. We basically just kind of stick to our knitting, which is cash flow loans at a reasonable multiple where we think there's great defensibility, where we can get covenants, where we can get cash interest. And obviously, we saw this massive parade of software loans come by, and much of them were marching at 7x leverage, 8x leverage, leverage against revenues ARR loans. We saw many of them covenant-lite or PIK. And for us, those were not comfortable loans for us to make. So we have done some software, about 4% of the portfolio, where there are reasonable multiples of cash flow, where we get our maintenance tests, where we feel safe as enterprise software that's integral to their customers' lives.
Speaker #4: that a Is strategic investment decision ? You guys have made or is there anything else driving that ?
Speaker #1: Thanks , Paul . Thanks . It's a good question . know , we You kind of our stick to basically just you know , which knitting , cash is flow at a reasonable multiple where we think there's great defensibility where we can get covenants or cash we can get interest .
Speaker #1: And , you know , we saw obviously we saw this massive parade of software loans much of come them were . And at seven times .
Speaker #1: marching Leverage eight times leverage , leverage against revenues , IRR loans . We saw many of them covenant light pick or . And for us that was not those were not comfortable loans for us to make .
Speaker #1: So we have done some software . About 4% of the portfolio where , you know , they're reasonable multiples of cash flow , where we get our maintenance tests , where they're , you know , we feel safe as enterprise software .
Art Penn: In industries that are heavily regulated, where data privacy, safety, and security mean that any change that may happen will take some time. So that's kind of military. That's healthcare. That's financial services. We have maturities today at about three years, an average maturity of about three years on that 4% of the portfolio that's software-related. So we feel very safe and comfortable. So we basically just stuck to our knitting and didn't chase the supply that was coming through.
Art Penn: In industries that are heavily regulated, where data privacy, safety, and security mean that any change that may happen will take some time. So that's kind of military. That's healthcare. That's financial services. We have maturities today at about three years, an average maturity of about three years on that 4% of the portfolio that's software-related. So we feel very safe and comfortable. So we basically just stuck to our knitting and didn't chase the supply that was coming through.
Speaker #1: That's integral to their customers lives . in And industries that are heavily regulated , where data privacy , safety and security mean that change any that may happen will be , it will take some time .
Speaker #1: So that's kind of military . That's health care , that's financial services . And you know , we have maturities today about three years and average maturity of about three years on , you know , that 4% of the of the portfolio that software related .
Speaker #1: So we feel very safe and comfortable . And so we basically just stuck to our knitting and didn't didn't , you know , chase the supply .
Paul Johnson: Got it. Very helpful. And then the last question I would just have is just on the NII this quarter, mostly in relation to the new JV. You guys had mentioned that you expect to cover the dividend, and I believe most of the plug there was from ramping the second JV. So I'm curious, when you say that you expect to ultimately cover the distribution with NII, does that assume essentially the JV at the $1 billion asset target and generating sort of run rate earnings from the JV, so essentially full optimization there, or does it not necessarily assume full deployment within the JV, as well as I would ask about the Fed cut, the Fed rate cuts? Does that assume Fed rate cuts in the meantime?
Paul Johnson: Got it. Very helpful. And then the last question I would just have is just on the NII this quarter, mostly in relation to the new JV. You guys had mentioned that you expect to cover the dividend, and I believe most of the plug there was from ramping the second JV. So I'm curious, when you say that you expect to ultimately cover the distribution with NII, does that assume essentially the JV at the $1 billion asset target and generating sort of run rate earnings from the JV, so essentially full optimization there, or does it not necessarily assume full deployment within the JV, as well as I would ask about the Fed cut, the Fed rate cuts? Does that assume Fed rate cuts in the meantime?
Speaker #1: That was coming through .
Speaker #4: Got it . Very helpful . And then the last question I would just have is just on the the NII this quarter , mostly in relation to the to the new JV .
Speaker #4: You guys have mentioned you expect to cover the dividend and I believe most of the plug there was from ramping the second JV .
Speaker #4: So I'm curious when you're when you say expect that you to ultimately cover distribution with II , does that assume essentially the JV at the $1 billion asset target and generating sort of a run rate earnings from the JV ?
Speaker #4: So essentially full optimization there or does it not necessarily assume full deployment within the JV as well as I would ask about the fed cut the fed rate cuts , does that assume fed rate cuts in the meantime ?
Art Penn: Yeah. No, that's a great question. And you can look at it. It's all public information. We have JV1 in PFLT, PSSL1 with Kemper. We have a JV over at PNNT with Pantheon. And so this is our third. You can look at those two as models in terms of ramp, in terms of income generation, and percentages of the vehicle that each BDC owns. So basically, the way we look at it is once you get up to about $1 billion with our 75% ownership, we should be covering we should be covering that dividend. When is that going to happen? It's not going to be next quarter, but we're off to a good start. We're at about $330 million now from a standing start last quarter. A lot of it will depend on M&A, and M&A is obviously the feedstock that will populate this JV.
Art Penn: Yeah. No, that's a great question. And you can look at it. It's all public information. We have JV1 in PFLT, PSSL1 with Kemper. We have a JV over at PNNT with Pantheon. And so this is our third. You can look at those two as models in terms of ramp, in terms of income generation, and percentages of the vehicle that each BDC owns. So basically, the way we look at it is once you get up to about $1 billion with our 75% ownership, we should be covering we should be covering that dividend. When is that going to happen? It's not going to be next quarter, but we're off to a good start. We're at about $330 million now from a standing start last quarter. A lot of it will depend on M&A, and M&A is obviously the feedstock that will populate this JV.
Speaker #1: Yeah . No , that's a it's a great question . So look and you can look at it . It's all public information .
Speaker #1: We have JV one in Flt one with Kemper . We have a JV over a NNT with pantheon . And so this is our third .
Speaker #1: You can look at those two as models in terms of ramp terms of in income generation , you know , and percentages of of the vehicle that each BDC owns , you know .
Speaker #1: So basically the way we look once you get up to at it is about $1 billion , you know , with our 75% ownership , you know , we should be we should be covering we should be covering that dividend .
Speaker #1: When is that going to happen ? It's not going to be next quarter . But we're we're off to a good start . We're over .
Speaker #1: You know we're at about 330 million now from a standing start . You know last quarter a lot of it will depend on M&A and M&A is obviously the feedstock that will populate this JV .
Art Penn: But we feel pretty good about it helping us cover that dividend. That does not include any equity rotation. We do expect if M&A happens, which we think it will, it will not only populate the JV, it will also imply some equity rotation on the existing portfolio, which will be helpful. And then you model in whatever base rate decrease you'd like, 50 basis points, 100 basis points. We can go. Rick can go through the model with you at some other time or a model with you. But there's a bunch of offsets, but we feel like we're well set up to have a pathway to cover that dividend.
Art Penn: But we feel pretty good about it helping us cover that dividend. That does not include any equity rotation. We do expect if M&A happens, which we think it will, it will not only populate the JV, it will also imply some equity rotation on the existing portfolio, which will be helpful. And then you model in whatever base rate decrease you'd like, 50 basis points, 100 basis points. We can go. Rick can go through the model with you at some other time or a model with you. But there's a bunch of offsets, but we feel like we're well set up to have a pathway to cover that dividend.
Speaker #1: But we feel pretty good about it . You know , helping us cover that dividend . That does not include any equity rotation .
Speaker #1: We do expect if M&A which we happens , think it will , it will not only populate the JV , it will also imply some equity rotation on the existing portfolio , which will be helpful .
Speaker #1: And then you model in whatever base rate , you know , decrease you'd like 50 basis points , 100 basis points . You know , we can go , you know Rick Rick can go through the model with you at some other time or a model with you .
Speaker #1: But , you know , there's a bunch of offsets . But we feel like we're well set we feel up to have a pathway to cover that dividend .
Paul Johnson: Got it. Appreciate it, Art. That's all the questions for me. Thank you very much.
Paul Johnson: Got it. Appreciate it, Art. That's all the questions for me. Thank you very much.
Art Penn: Thank you.
Art Penn: Thank you.
Speaker #4: Got it . Preciate it . Art . That's all the questions for me . Thank you very much .
Operator: We will take our next question from Robert Dodd with Raymond James.
Operator: We will take our next question from Robert Dodd with Raymond James.
Speaker #1: Thank you .
Robert Dodd: Hi, guys. On the software question, right? I mean, your portfolio is a fraction over 4% in terms of software, where if I understand right, that's where software is the product of the business. Can you give us any thought? I mean, how much of the portfolio is kind of software exposed? I mean, where it's not producing software, but it might be in the business of implementing software for the government or anybody else, or where software is a core part of the business, but the business is not producing software itself?
Robert Dodd: Hi, guys. On the software question, right? I mean, your portfolio is a fraction over 4% in terms of software, where if I understand right, that's where software is the product of the business. Can you give us any thought? I mean, how much of the portfolio is kind of software exposed? I mean, where it's not producing software, but it might be in the business of implementing software for the government or anybody else, or where software is a core part of the business, but the business is not producing software itself?
Speaker #3: We will take our next question from Robert Dodd with Raymond James.
Speaker #5: Hi guys . on On the the software question . Right . I mean , you your portfolio is just a fraction over 4% in terms of software , where if I understand , right , that's where software is the product of the business .
Speaker #5: Can you give us any thought ? I mean , how much of the portfolio is , is kind of software exposed ? I mean , it's not producing software , but it might be in the business of implementing software for the government or anybody else or , or where software is a core part of the business .
Art Penn: Yeah. It's a great question, which is kind of how you define it and where you draw the line. And zooming out to the bigger picture, the bigger picture question is, how does AI impact every company and every portfolio, right? So that's above our pay grade, for sure. The difference here is software is the main product. That's how we define it. And I think it's pretty kind of including where software is a big, big element of the company. Almost all of our companies use software in some way, shape, or form. AI can be a help, or it could be a hindrance. But we tried to really hone in on where it was the product itself, where there's a human being attached to it, where we feel very good that AI is not going to impact the human nature of the job anytime soon.
Art Penn: Yeah. It's a great question, which is kind of how you define it and where you draw the line. And zooming out to the bigger picture, the bigger picture question is, how does AI impact every company and every portfolio, right? So that's above our pay grade, for sure. The difference here is software is the main product. That's how we define it. And I think it's pretty kind of including where software is a big, big element of the company. Almost all of our companies use software in some way, shape, or form. AI can be a help, or it could be a hindrance. But we tried to really hone in on where it was the product itself, where there's a human being attached to it, where we feel very good that AI is not going to impact the human nature of the job anytime soon.
Speaker #5: But the business is not producing software itself .
Speaker #1: Yeah , it's a great question , which is , you know , where kind of how define it and you you where you draw the line zooming out to the bigger and picture , the bigger picture question is , is how does AI impact , you know , every and every in company every portfolio , right .
Speaker #1: So it's—that's a, we, we—that's above our pay grade for sure. You know, the difference is, the difference here is software is the main product.
Speaker #1: That's how we define it . You know , and I think that's it's pretty , you know , kind of including where software is a a .
Speaker #1: Is a is a big , big element of of of the company . A lot of our , almost all of our companies use software in some way , shape or form .
Speaker #1: AI can be a , a help or it could be a , a hindrance . But we tried to really hone in on where where , you know , it was the product itself , where where there's a human being attached to it , where we feel good very that AI is not going to the impact human nature of the job anytime soon .
Art Penn: We do have service businesses. We have a bunch of home service businesses where it's HVAC repair and plumbing. And okay, that's probably not that impacted by AI. AI could be a help. So that's one end of the spectrum. And then we do have a lot of military defense, government services exposure. That's less likely for safety, security, and privacy reasons to move to AI quickly. It could adopt AI, but requires human analysis. There's a lot of government services that ultimately a human being needs to analyze, needs to synthesize. AI could very well help those companies. So I don't know. I mean, we're all grappling with how you define it and what is in the bucket and what isn't and where AI kind of impacts portfolios.
Art Penn: We do have service businesses. We have a bunch of home service businesses where it's HVAC repair and plumbing. And okay, that's probably not that impacted by AI. AI could be a help. So that's one end of the spectrum. And then we do have a lot of military defense, government services exposure. That's less likely for safety, security, and privacy reasons to move to AI quickly. It could adopt AI, but requires human analysis. There's a lot of government services that ultimately a human being needs to analyze, needs to synthesize. AI could very well help those companies. So I don't know. I mean, we're all grappling with how you define it and what is in the bucket and what isn't and where AI kind of impacts portfolios.
Speaker #1: You know , that did not that did not . You know , we have we have a bunch of we do have service businesses , you know , we have we have a bunch of home service businesses where it's , you know , HVAC repair and plumbing and okay , that's probably not that impacted by AI .
Speaker #1: AI could be a be a help . So that's that's one end of the spectrum . And then you have , you know , kind of , you know , we do have a lot of military defense , government services , exposure , you know , a that's less for likely security and safety , privacy reasons to move to , to AI quickly .
Speaker #1: It could adopt AI . But , you know , requires human analysis . Like there's a lot of services government ultimately that human being needs to be needs to analyze .
Speaker #1: Needs to synthesize . AI could help those very well companies . So I don't know . I mean , it's all it's we're grappling with , you know , how you define it and what and what bucket isn't is in the where , and where AI kind of , you know , impacts portfolios .
Art Penn: So we tried to be with this 4.4% or whatever. We tried to be really pure as to what, where software really was the product. And I know I'm rambling, but I don't know if I gave you any color there, Robert.
Art Penn: So we tried to be with this 4.4% or whatever. We tried to be really pure as to what, where software really was the product. And I know I'm rambling, but I don't know if I gave you any color there, Robert.
Speaker #1: tried to So we be this with 4.4% or whatever . We you know , tried to be , really pure as to what where software really know , the You was .
Robert Dodd: No, no, no. That was really helpful. Thank you. So yeah, I mean, it's a difficult topic. Next one, I'm kind of going to copy and paste. On the JV, like you said, I mean, you've gotten up to north of $300 million already from kind of a standing start. Now, some of that, I do think you've kind of had, in a sense, pre-stocked the on-balance sheet portfolio so that you could drop things down. And obviously, you've done it post-quarter end as well. So the initial ramp was possibly faster than we'd should expect on a quarterly basis, would be my guess. I mean, if the market is normal (good luck defining that), how long, what's plausible to get to a $1 billion? Is it another three or four quarters, or is it 8 to 12s?
Robert Dodd: No, no, no. That was really helpful. Thank you. So yeah, I mean, it's a difficult topic. Next one, I'm kind of going to copy and paste. On the JV, like you said, I mean, you've gotten up to north of $300 million already from kind of a standing start. Now, some of that, I do think you've kind of had, in a sense, pre-stocked the on-balance sheet portfolio so that you could drop things down. And obviously, you've done it post-quarter end as well. So the initial ramp was possibly faster than we'd should expect on a quarterly basis, would be my guess. I mean, if the market is normal (good luck defining that), how long, what's plausible to get to a $1 billion? Is it another three or four quarters, or is it 8 to 12s?
Speaker #1: product . And I know I'm rambling , but I don't know if I gave you there . any color Robert .
Speaker #6: was no , no , that really that was really helpful . No ,
Speaker #6: Thank
Speaker #6: you .
Speaker #5: yeah , I mean , it's it's it's So difficult a topic on just on kind of copy and put on the , you know , like JV you said , I mean you've gotten up to , to north Million of 300 .
Speaker #5: already from kind of a start . standing Now some of that I do think you kind of had in a sense , pre-stocked the on balance sheet portfolio that could so that you you could things down and you've done obviously drop quarter end as it post well .
Speaker #5: So you know that what that the was , was initial than , than we faster should possibly ramp on , you expect on mean guess .
Speaker #5: , if , would be my quarterly market if the is a basis normal . Good luck I defining that long you know , what's what's .
Art Penn: I would just like to throw it out there because it gives me a lot of range because this is going to be a lot driven by M&A, right? Right? Which last year, a meteor struck in the M&A market called Liberation Day. M&A was spiked for most of the rest of the year. It feels like it's coming back here. We had JNF and PNNT. That's an early indication that maybe this time it happens. We are feeling it. We're seeing it in our backlog of deals that we're looking at. So I'll throw out 18 months just as a big, broad kind of number, which gives me a lot of wiggle room on either side of the 12 to 24 months. You want to do a range? You want to do a 24-month outside case? You can model that in.
Art Penn: I would just like to throw it out there because it gives me a lot of range because this is going to be a lot driven by M&A, right? Right? Which last year, a meteor struck in the M&A market called Liberation Day. M&A was spiked for most of the rest of the year. It feels like it's coming back here. We had JNF and PNNT. That's an early indication that maybe this time it happens. We are feeling it. We're seeing it in our backlog of deals that we're looking at. So I'll throw out 18 months just as a big, broad kind of number, which gives me a lot of wiggle room on either side of the 12 to 24 months. You want to do a range? You want to do a 24-month outside case? You can model that in.
Speaker #5: plausible Is it . Is to get to How Another . 3 or 4 quarters a billion . or is 8 to 12 ? it
Speaker #1: just just to there because it I would throw it out a lot gives me of range because this is this is gonna be a lot driven by M&A , right ?
Speaker #1: Yeah . Which , Right . you know , last year meteor struck called the Liberation M&A market Day . M&A was , you know , spiked for most of the rest of the year .
Speaker #1: It feels like it's coming back here . You know we had we JNF and NNT . That was an ex . That's an an early indication that maybe you know maybe this time this time it happens .
Speaker #1: We are feeling it . We're seeing it backlog in our looking at . So of deals that we're I'll throw out 18 months just as a big broad .
Speaker #1: You know , kind of number , which gives me wiggle room a lot of on on either side of the , you know , 12 to 24 months , you want to want to you know , range , you do a , 24 months outside case .
Art Penn: But quite frankly, it's going to be driven by M&A.
Art Penn: But quite frankly, it's going to be driven by M&A.
Robert Dodd: Got it. Thank you.
Robert Dodd: Got it. Thank you.
Speaker #1: You can model that, but quite frankly, it's going to be driven by M&A.
Operator: We will take our next question from Brian McKenna with Citizens.
Operator: We will take our next question from Brian McKenna with Citizens.
Speaker #6: Got it . Thank you .
Brian McKenna: Thanks. Good morning, everyone. Sorry if I missed this, but can you walk through the drivers of the unrealized marks in the quarter? And then when you look across the portfolio and the watchlist today, are there any additional markdowns coming over the next quarter or two? And I'm just trying to think through some of the puts and takes and what that means for the trajectory of NAV moving forward.
Brian McKenna: Thanks. Good morning, everyone. Sorry if I missed this, but can you walk through the drivers of the unrealized marks in the quarter? And then when you look across the portfolio and the watchlist today, are there any additional markdowns coming over the next quarter or two? And I'm just trying to think through some of the puts and takes and what that means for the trajectory of NAV moving forward.
Speaker #3: We will take our next question from Brian McKenna with Citizens.
Speaker #7: Thanks . Good Sorry if everyone . morning I missed this , but can you walk through the drivers of the unrealized marks in the quarter ?
Speaker #7: Then, when you look across the portfolio and the watch list today, are there any additional markdowns coming over the next quarter or two?
Art Penn: Yeah. Most of the markdowns I'll call out are, and good question, Brian. We have a little bit of this that we'll call the 2021 vintage, which was the post-COVID vintage where people thought that consumers were not going into stores again, where logistics and supply chain stuff was really doing very well. So we have a little bit of that. Thankfully, it's not that large. And that is kind of what is working its way through the pipeline here of markdowns. I'll point out a company called PL Acquisition. It stands for Pink Lily, which is a direct-to-consumer women's apparel business. I'll point out Research Now or Dynata, which is a marketing services business, which has been softer. And I'll point out in the JV a company called Wash & Wax, which is a car wash company known as Zips.
Art Penn: Yeah. Most of the markdowns I'll call out are, and good question, Brian. We have a little bit of this that we'll call the 2021 vintage, which was the post-COVID vintage where people thought that consumers were not going into stores again, where logistics and supply chain stuff was really doing very well. So we have a little bit of that. Thankfully, it's not that large. And that is kind of what is working its way through the pipeline here of markdowns. I'll point out a company called PL Acquisition. It stands for Pink Lily, which is a direct-to-consumer women's apparel business. I'll point out Research Now or Dynata, which is a marketing services business, which has been softer. And I'll point out in the JV a company called Wash & Wax, which is a car wash company known as Zips.
Speaker #7: And I'm just trying to think through some of the puts and takes and what means for the that trajectory of Nav moving forward .
Speaker #1: most of Yeah . You know , the markdowns I'll call are and good Brian question . Most of the markdowns I'll call I'll call are and we have a little bit of this that we'll call the 2021 vintage which was the post Covid vintage where , you know , people thought , you know , that consumers were not going into stores again , where , you know , logistics supply and chain stuff was was really doing very well .
Speaker #1: So we have a little bit of that . Thankfully , it's not that large . And that is kind of what is working its way through the pipeline here of of markdowns .
Speaker #1: I'll point out a company called PL acquisition . It stands for pink Lily , which is a direct to consumer women's apparel business .
Speaker #1: I'll point out research now or Dynata , which is a marketing services business , which which has been softer . And I'll point out in the JV , a company called Wash and Wax , which is a car wash company known as Zips , zips people were were doing a lot of car post washing Covid .
Art Penn: People were doing a lot of car washing post-COVID. So I think they're washing their cars again with all the bad weather in the north in the last couple of weeks. So seen a little bit of bounce in car washing. But I'd say that's generally the theme. You've seen much bigger movements with some other BDCs that have reported NAV diminution due to Amazon relationships and home furnishing stuff. So we've got a little bit of that here. It's kind of working its way through. We don't really see much more, quite frankly, in that. It's kind of here we are five years later. And I think with M&A starting to move, hopefully, we're going to start to see some upside in equity and some equity rotation to offset what I'll call a little bit of this 2021 vintage.
Art Penn: People were doing a lot of car washing post-COVID. So I think they're washing their cars again with all the bad weather in the north in the last couple of weeks. So seen a little bit of bounce in car washing. But I'd say that's generally the theme. You've seen much bigger movements with some other BDCs that have reported NAV diminution due to Amazon relationships and home furnishing stuff. So we've got a little bit of that here. It's kind of working its way through. We don't really see much more, quite frankly, in that. It's kind of here we are five years later. And I think with M&A starting to move, hopefully, we're going to start to see some upside in equity and some equity rotation to offset what I'll call a little bit of this 2021 vintage.
Speaker #1: So I think they're washing their cars again with with all the bad weather in the , in the north in the last couple weeks .
Speaker #1: So seeing a little bit of bounce in car washing . But generally the you know , I'd say theme you've seen much bigger with , movements with some other BDCs that have reported , you know , Nev diminution due to , you know , Amazon relationships and home furnishing stuff .
Speaker #1: So we've got a little bit of that here . It's kind of working its way through . We don't really see much more quite frankly , in that .
Speaker #1: It's kind of here we are five years later and and I think with M&A starting to to move , hopefully we're going to start to see some upside in equity and some equity rotation to offset what I'll call a little bit of this 2021 vintage .
Brian McKenna: Got it. That's helpful. Then just to follow up there, if you look at your portfolio today, what's the mix of loans just by the vintage year? I'm curious, how much of your portfolio has turned over since 2021?
Brian McKenna: Got it. That's helpful. Then just to follow up there, if you look at your portfolio today, what's the mix of loans just by the vintage year? I'm curious, how much of your portfolio has turned over since 2021?
Speaker #7: That's Got it . helpful . And then just to follow up there , if you look at your portfolio today , you know , what's the mix of loans just by , you know , the vintage year .
Art Penn: We don't have that handy right now. Let us do some work, and we can chat at a convenient time. And look, presumably, that that is in there. Anyone we and you could sit there and look at the origination date of the portfolio. But I think it might be some good work for a research analyst to do, just an idea.
Art Penn: We don't have that handy right now. Let us do some work, and we can chat at a convenient time. And look, presumably, that that is in there. Anyone we and you could sit there and look at the origination date of the portfolio. But I think it might be some good work for a research analyst to do, just an idea.
Speaker #7: And I'm curious how much of your portfolio has turned over since 2021 .
Speaker #1: You know , I we don't that have handy right now . Let us do some . And work and we can chat at a convenient time and look presumably that that is in there , you know , anyone we and we you could sit there and look at the , the origination of of But I think portfolio .
Brian McKenna: Sounds great. I'll leave it there. Thanks, guys.
Brian McKenna: Sounds great. I'll leave it there. Thanks, guys.
Speaker #1: it might be some good work for research analyst to , to do just , just an idea .
Operator: We will take our next question from Christopher Nolan with Ladenburg Thalmann.
Operator: We will take our next question from Christopher Nolan with Ladenburg Thalmann.
Speaker #7: I'll leave it Sounds great . there . Thanks , guys .
Christopher Nolan: Hey, guys. Rick, the $3.6 million charge related to the credit amendment and debt issuance costs, I presume that's non-recurring. Is that related to the $75 million debt issuance in January?
Christopher Nolan: Hey, guys. Rick, the $3.6 million charge related to the credit amendment and debt issuance costs, I presume that's non-recurring. Is that related to the $75 million debt issuance in January?
Speaker #3: We will take our next question from Christopher Nolan with Ladenburg Thalmann .
Speaker #8: guys Hey . Rick , the $3.6 million , I presume related to the credit charge amendment and debt issuance costs . I presume that's non-recurring .
Speaker #8: And is that related to the $75 million debt issuance in January?
Richard Allorto: Sure. The first part, for PFLT, it was about $500,000, not 3.6. And yes, that is a one-time item. And no, it was not related to, again, the $75 million that was raised was at PNNT.
Richard Allorto: Sure. The first part, for PFLT, it was about $500,000, not 3.6. And yes, that is a one-time item. And no, it was not related to, again, the $75 million that was raised was at PNNT.
Speaker #1: Sure . The first part for for Flt . It was 500,000 , about not 3.6 . And yes , that is a one time , one time item is was not .
Christopher Nolan: Thank you. Okay. My press release was also, just as a follow-up, on the M&A comments, is there a lot of activity around the software sector? I'm just kind of curious, given everything going on with AI, whether or not software is sitting out.
Christopher Nolan: Thank you. Okay. My press release was also, just as a follow-up, on the M&A comments, is there a lot of activity around the software sector? I'm just kind of curious, given everything going on with AI, whether or not software is sitting out.
Speaker #1: to And no , it related again , the 75 million that was raised was was at Pant are .
Speaker #8: Thank you . Okay . My is release press and also just as a follow up on the M&A comments . What is the is there any is there a lot of activity around the software sector ?
Art Penn: Yeah. Yeah. We haven't, as you can tell, we're not one of the big software lenders, so we're probably not the best party to ask around M&A and the software sector. My presumption would be, when you have times of kind of like this where the market's trying to figure things out in the sector, my assumption would be M&A would be lower for a while as things settle down and people revalue both equity and debt in the space. But again, we're probably not the best people to ask.
Art Penn: Yeah. Yeah. We haven't, as you can tell, we're not one of the big software lenders, so we're probably not the best party to ask around M&A and the software sector. My presumption would be, when you have times of kind of like this where the market's trying to figure things out in the sector, my assumption would be M&A would be lower for a while as things settle down and people revalue both equity and debt in the space. But again, we're probably not the best people to ask.
Speaker #8: I'm just kind of curious , given everything going on with AI , whether or not software is not .
Speaker #1: Yeah . You know , we have we have you know , we're as you can tell , we're not one of the big software lenders .
Speaker #1: So we're probably not the best party to ask around M&A in the software sector . My , my presumption would be when you , you know , have times of of kind of like this where the market's trying to figure things out in a sector .
Speaker #1: My assumption would be M&A would be lower for a while as things settle down and people revalue both equity and debt the space .
Christopher Nolan: Great. That's it for me. Apologies for confusing companies there. Thanks.
Christopher Nolan: Great. That's it for me. Apologies for confusing companies there. Thanks.
Art Penn: No problem. The good news is, at noon, you have an opportunity to ask the same questions again.
Art Penn: No problem. The good news is, at noon, you have an opportunity to ask the same questions again.
Speaker #1: But again , we're probably not the best people to ask .
Speaker #8: it for me . And apologies for confusing companies Great . That's there . Thanks .
Christopher Nolan: Yeah. That's right. Thanks.
Christopher Nolan: Yeah. That's right. Thanks.
Speaker #1: No problem . Good news is you have an opportunity to ask the same questions again .
Operator: Gentlemen, there are no further questions at this time. I will now turn the conference back over to Mr. Penn for any additional or closing remarks.
Operator: Gentlemen, there are no further questions at this time. I will now turn the conference back over to Mr. Penn for any additional or closing remarks.
Speaker #8: right . Thanks Yeah that's .
Speaker #3: And gentlemen , there are no further questions at this time . I will now turn the over to Mr. conference back Penn for any additional or closing remarks
Art Penn: Thanks, everybody, for your participation this morning. We look forward to speaking with you next in early May. Have a great day.
Art Penn: Thanks, everybody, for your participation this morning. We look forward to speaking with you next in early May. Have a great day.
Speaker #3: . everybody , for your
Speaker #1: participation Thanks , this morning . We look forward to speaking with you next in early May . Have a great day .
Operator: This concludes today's call. Thank you for your participation. You may now disconnect.
Operator: This concludes today's call. Thank you for your participation. You may now disconnect.
