Good morning, welcome to the PennantPark Floating Rate Capital Ltd.'s first fiscal quarter 2023 earnings conference call. Today's conference is being recorded, and 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 Ltd.. Mr. Penn, you may begin your conference. Thank you. Good morning, everyone. I'd like to welcome you to PennantPark Floating Rate Capital Ltd.'s first fiscal quarter 2023 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. Thank you, Art. I'd like to remind everyone that today's call is being recorded. Please note that this call is the property of PennantPark Floating Rate Capital Ltd., that 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. Today's conference call may also include forward-looking statements and projections, We ask that you refer to our most recent filings with the SEC for important factors that could cause actual results to differ materially from those 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 over to our Chairman and Chief Executive Officer, Art Penn. Thanks, Rick. We're going to spend a few minutes discussing how we fared in the quarter ended December 31st, how the portfolio is positioned for the upcoming quarters, our capital structure and liquidity, a detailed review of the financials. Then open it up for Q&A. Combination of excellent credit quality and higher yields on our portfolio matched with a visible pathway to more optimized balance sheets at PFLT and the JV positions us for stable and growing NII over the coming quarters. For the quarter ended December 31st, our net investment income was $0.30 per share. The credit quality of the portfolio remains solid. As we guided last quarter, we have placed one new loan on non-accrual. As of December 31st, we had only three non-accruals out of 126 different names in PFLT. This represents only 1.9% of the portfolio at cost and 0.6% at market value. Our credit statistics are among the most conservative in the industry, with an average debt-to-EBITDA on our underlying portfolio of 4.7x. With a debt portfolio that is 100% floating rate, we are well-positioned to continue to grow our net investment income as base rates rise. For the quarter ended December 31st, our weighted average yield to maturity was 11.3%, which is up from 10% last quarter and 7.5% last year. With this backdrop of consistent earnings and stable portfolio, the board of directors has approved an increase in the monthly distribution to $0.10 per share beginning with the March distribution. This represents a 5.3% increase in the monthly distribution. We believe net investment income can continue to grow as we optimize the balance sheets of both PFLT and our JV. With PFLT leverage at 1.3x debt-to-equity and target leverage of 1.4x to 1.6x, we plan on thoughtfully moving towards our target. GAAP NAV decreased to $11.30 or 2.7%, which was due primarily to market-related fair value adjustments to our equity portfolio and our new non-accrual, partially offset by an increase in GAAP NAV due to fair value adjustments on our credit facility and notes and net investment income in excess of the dividend. During the quarter, we continued to originate attractive investment opportunities for both the PFLT portfolio as well as the JV portfolio. For the quarter, PFLT invested $66 million in new and existing portfolio companies at a weighted average yield of 11.2% and had sales and repayments of $63 million. For the new investments in new portfolio companies, the weighted average debt-to-EBITDA was 3.7x, the weighted average interest coverage was 2.3x, and the weighted average loan-to-value was 22%. At quarter end, the JV portfolio was $751 million. We will continue to execute on our plan to grow the JV portfolio to $1 billion of assets. We believe that the increase in scale and the JV's attractive ROE will also enhance PFLT's earnings momentum. We believe that the current vintage of middle market directly originated loans should be excellent. Leverage is lower, spreads and upfront fees and OID are higher. Covenants are tighter. In January, we issued 4.25 million shares and raised $48 million, which provides the company with additional capital to invest in this excellent vintage in order to grow NII. From an overall perspective, in this market environment of inflation, rising interest rates, geopolitical risk, and a potentially weakening economy, we believe that we are well-positioned. We like being positioned for capital preservation as a senior secured first lien lender focused on the United States, where floating rates on our loans can protect us against rising inflation. We continue to believe that our focus on the core middle market provides the company with attractive investment opportunities where we are an important strategic capital to our borrowers. We have a long-term track record of generating value by successfully financing high growth middle market companies in five key sectors. These are sectors where we have substantial domain expertise, know the right questions to ask, and have an excellent track record. They are business services, consumer, government services and defense, healthcare, and software and technology. These sectors have also been resilient and tend to generate strong free cash flow. It is important to note that we do not have any crypto exposure in our software and technology investments. In many cases, we are typically part of the first institutional capital into a company, and the loans that we provide are important strategic capital that fuel the growth and helps that $10 million to $20 million EBITDA company grow to $30 million, $40 million, $50 million of EBITDA or more. We typically participate in the upside by making an equity co-investment. Our returns on these equity co-investments have been excellent over time. Overall for our portfolio and overall for our platform from inception through December 31st, we have invested over $375 million in equity co-invests and have generated an IRR of 27% and a multiple on invested capital of 2.3x. 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 with care. We thoughtfully structure transactions with sensible credit statistics, meaningful covenants, substantial equity cushions to protect our capital, attractive upfront fees and spreads, and an equity co-investment. Additionally, from a monitoring perspective, we receive monthly financial statements to help us stay on top of the companies. With regard to covenants, virtually all of our originated PSSL loans have meaningful covenants which help protect our capital. This is one reason why our default rate and our performance during COVID was so strong, and why we believe we are well-positioned in this environment. This sector of the market, companies with $10 million to $50 million of EBITDA is the core middle market. The core middle market is below the threshold and does not compete with the broadly syndicated loan or high yield markets. Many of our peers who focus on the upper middle market state that those bigger companies are less risky. That may make some intuitive sense, but the reality is different. According to S&P, loans to companies with less than $50 million of EBITDA have a lower default rate and a higher recovery rate than loans to companies with higher EBITDA. We believe that the meaningful covenant protections of core middle market loans, more careful diligence and tighter monitoring have been an important part of this differentiated performance. The borrowers in our investment portfolio are generally performing well. As we said earlier, as of December 31st, the weighted average debt-to-EBITDA on the portfolio was 4.7x, and the average interest coverage ratio, the amount by which cash in-income exceeds the cash interest expense, was 2.8x calculated upon LTM interest expense. The interest expense coverage ratio when calculated using the annualized interest expense at the current LIBOR and SOFR base rates is 2.2x. This compares very favorably to the market average of 1.6x, which is according to Lincoln International. Credit quality since inception over 10 years ago has been excellent. PFLT has invested $5.1 billion in 455 companies. We have experienced only 16 non-accruals. Since inception, PFLT's loss ratio is only 6 basis points annually. Our experienced and talented team and our wide origination funnel is producing active deal flow. Our continued focus remains on capital preservation and being patient investors. Our mission and goal are a steady, stable, and protected dividend stream, coupled with 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. We capture that free cash flow primarily in first lien senior secured instruments and pay out those contractual cash flows in the form of dividends to our shareholders. Let me now turn the call over to Rick, our CFO, to take us through the financial results in more detail. Thank you, Art. For the quarter ended December 31, net investment income was $0.30 per share and operating expenses for the quarter were as follows: interests and expenses on debt were $9.9 million. Base management and performance-based incentive fees were $6.4 million. General and administrative expenses were $850,000. Provision for taxes were $534,000. For the quarter ended December 31, net realized and unrealized change on investments, including provision for taxes, was a loss of $15.4 million or $0.34 per share. The unrealized appreciation on our credit facility and notes for the quarter was $2.1 million or $0.05 per share. As of December 31st, our GAAP NAV was $11.30, which is down 2.7% from $11.62 per share. Adjusted NAV, excluding the mark-to-market of our liabilities, was $11.22 per share, down from $11.59 last quarter. Our capital structure is diversified across multiple funding sources, including both secured and unsecured debt. Our GAAP debt-to-equity ratio was 1.3 x. As of December 31st, our key portfolio statistics were as follows: Our portfolio remains highly diversified with 126 companies across 44 different industries. The portfolio was invested in 87% first lien senior secured debt, including 17% in PSSL, less than 1% in second lien debt, and 13% in equity, including 4% in PSSL. Our overall debt portfolio has a weighted average yield of 11.3%, and 100% of the portfolio is floating rate. Now let me turn the call back to Art. Thanks, Rick. In closing, I'd like to thank our dedicated and talented team of professionals for their continued commitment to PFLT and its shareholders. Thank you all for your time today and for your investment and confidence in us. That concludes our remarks. At this time, I would like to open up the call to questions. Gentlemen, thank you. To our audience today, if you would like to ask a question, please signal us by pressing star and one on your telephone keypad. If you're using a speakerphone, please make sure that your mute function is turned off to allow your signal to reach our equipment. Again, please press star and one if you would like to ask a question. We'll go first to the line of Mickey Schleien at Ladenburg. Please go ahead. Your line is open. Art, wanted to understand your view on the outlook for credit. You know, there are certain investments in the portfolio marked in the eighties or even below, which obviously indicates some distress. Meanwhile, we had a very strong January jobs number and, you know, perhaps the possibility of a soft landing is even more real than we thought maybe even a quarter ago. The consumer's retrenching. You know, when we think about all of that, what do you see in terms of trends in terms of the portfolio's credit quality as this year progresses? Thanks, Mickey. It's a really good question. Let me just state that when we underwrite new deals today we're assuming a soft economy out of the gates. That's our going-in assumption. That's how we need to underwrite. Usually when you're in our business, when you're doing a 5-7-year loan, you need to put a downside or a recession case in the model at some point anyway, because odds are over a 5-7-year period, you're gonna hit a period of economic weakness. When we're underwriting our new deals, we're assuming that there's a weak economy, you know, out of the gates. That said, it's not. You're right, it's not as clear, given the data that we're all seeing, that there really is that much of a soft economy, at least at this point. Certainly the consumer area is one of most focus and how the consumer is doing. Walker Edison, our 1 new non-accrual, is evidence of that. We've done extra scanning of our consumer portfolio recently in light of that. Consumer, we always upfront put less leverage on out of the gates than we did the rest of our portfolio. Even though the rest of our portfolio at inception may have been underwritten at debt to EBITDA of 4.5x, our consumer names we would typically underwrite even before this kind of with a three handle on the 3x, 3.5x zone debt to EBITDA. We were always upfront, kind of extra cautious on that. You know, we've done an extra scan of the consumer companies. We've had external scrubbing, we feel actually pretty good that the companies we've collected in that space have a real reason to be. People care about them. Their customers care about them. Their margins are sustainable. They've got real brands that have value. You know, there's never any guarantee, but we feel, you know, fairly decent about, you know, that piece of the portfolio. The rest of the portfolio, which is in our key industries, healthcare, government services, business services, you know, technology and software, those names to date are performing pretty well. You know, we feel pretty good about that. Again, the comfort you get or we get is we're conservative going in. We underwrite to low multiples. That was the, that's been the key of PFLT from the get-go. We've specifically wanted a lower risk portfolio, knowing we would get lower yield as part of that. Now for 11 years, that seems to be working out. I appreciate that, in-depth explanation. That's really helpful. Just one follow-up question. On the right-hand side of the balance sheet, the balance of the principal on the 2023 notes is due at the end of the year. Just from a use of proceeds of the common equity offering, are you targeting some of those proceeds to go towards that? Or, you know, do you expect to use the credit facility or just proceeds from sales and repayments? How should we think about financing the maturity of that, of those notes? For Mickey. The maturity is the December of this year. Right now, we're not specifically earmarking some of the equity proceeds for that refinancing. We do have the capability today to repay those bonds using the revolving credit facility. We're, you know, we're continuing to look at, you know, other refinancing options, knowing that, you know, we could use the revolving credit facility we have in place today to refinance that debt. I understand. Those are all my questions this morning. I appreciate your time. Thank you. Thank you. Our next question comes from Paul Johnson at KBW. Good morning, guys. Thanks for taking my questions. Just given the overlap portfolio with the JV, just wondering if you had any thoughts around the non-accrual Walker Edison, and if that should affect the ROE or the distribution rate from the joint venture at all? Yeah. Thanks, Paul. No, the JV, it's a relatively small piece of the JV. It's a relatively small piece of PFLT. Given the JV's high credit quality other than Walker Edison, as well as the anticipated growth, I think the JV was about $7 or $50 million of assets at quarter end. We're targeting over time to get that to about $1 billion. We feel as though the NII there coming out or the ROE coming out of that JV should continue to grow. Okay. Thanks. Just one investment. I had a question on one particular credit, Research Now. It was just marked down this quarter. I'm just curious if that was credit related, if there's any sort of, you know, mark to market going on there and just, you know, any sort of description of what exactly that investment company is? Research Now is traded and actively traded in the BSL market. It's a company we've financed for a long time. It's one of the predecessor companies called Survey Sampling. We did a private loan for, we followed it over the years. You know, we thought the credit, you know, was a solid credit. It did hit a little pocket of weakness recently. We don't feel as though at this point there's accrual risk with Research Now. They seem to have ample liquidity. There's a big slug of second lien beneath it and a big chunk of equity beneath that. We feel our loan-to-value is in good shape, and that even with if they have soft results going forward, you know, even with its continued soft results, the first lien will be, you know, money good, in any scenario. Okay. Thank you. That's helpful. Yep, those are all the questions that I have today. Thank you. Thanks, Paul. Thank you. Our next question today comes from Kevin Fultz at JMP Securities. Hi. Good morning, guys. Thank you for taking my questions. My first question is a platform level one on your deal selectivity rate and deal volume. Could you remind me what your historical average deal selectivity rate is and how that has trended recently? Second, could you give us an idea of the total dollar value or number of deals you review on an annual basis? Yeah. I mean, our deal activity rate's usually typically around 5% of what we track. There's a lot of deals which come in that are kind of, you know, what we call desk kills that don't even kind of get logged into our system. It's amazing once you have a publicly traded BDC or an SBIC license, the amount of incoming emails that an organization can get. Very high seal activity. The good news is our team knows really what fits our box. You know, we have these five key, you know, vertical sectors where we have domain expertise. We can get to kind of what's a PennantPark deal really quickly, what's not a PennantPark deal, and then it's always about how you look at all the shades of gray and figure out whether you actually want to, wanna commit capital. You know, usually it's about, you know, 1,000 deals a year. We usually pick 50 or 60, and that's kind of been the historical, the historical kind of hit ratio. You know, in terms of deal activity, certainly it's slowed down and that could be at least this past the quarter we're in today, the quarter ends in March. Could be a couple reasons for that. One, there's a typical seasonal slowdown. You know, Q1, if anyone wanted to get a deal, typically they'd like to get it done before December 31st. Part of it's that. Part of it is, we're sure that there's some slowdown due to the new equilibrium in the market. You know, are people paying the multiples that they were paying a year ago or are they gonna pay multiples a little bit less? Are sellers gonna accept those multiples that are now less than they thought they could get a year ago? Like in any market that's shifting, the equilibrium needs to, you know, the buyers and sellers need to find their equilibrium, and we sense that that's going on right now as we speak. We're still active. We still get lots of pings. We're still deploying capital. As we stated, it's a really good vintage. You know, leverage is low, the interest coverage is high, and loan-to-value still is excellent. I think the stat I threw out there was like 22% loan-to-value, 25% loan-to-value. It's, it's really attractive. You know, we'll take it as it comes deal by deal, you know, try to pick the right deals. I don't know if I answered your question, Kevin, or anything else that you had in that question I needed to answer. No, you hit all the points. Thank you. You know, my follow-up is... Thank you. ...just on how you're structuring new originations. now that we're in a higher rate environment, are you negotiating higher interest rate floors in the new deals that you're doing? The new deals that are coming in, just to give you a sense on the senior side, a year ago, we might have been LIBOR or SOFR 575. You know, 4.5x debt to EBITDA. Today we're more like LIBOR, SOFR 650, maybe 700. You know, the stat I quoted for the actual deals we did was under 4x debt to EBITDA, but call it 4x debt to EBITDA. Less leverage, more spread, more yield obviously, because base rates are much higher. These new loans are 11%-12%, you know, yielding loans. The thing you gotta look at is obviously interest coverage. You know, the interest coverage statistic is, you know, because we're getting now 11%, 12% versus 7%, 8%, the interest coverage, you know, credit stat is one that we all need to look at more carefully and make sure that the companies are in good stead. You know, the types of companies we finance typically are more services businesses with low CapEx, working capital that's not that high. You know, 2 x, 2.25 x interest coverage, you know, we still feel pretty strong about with our companies. We'll take our next question from the line of Mark Hughes at Truist. Yeah, thank you. Good morning. Art, is there any notable trend in EBITDA among your portfolio companies, generating growth, the pace of that growth over the last 12 months, say? Yeah, look, as I said... Good question, Mark. As I said a moment ago, the only sector where we're seeing a little bit of weakness is consumer. The other sectors, we're still seeing a revenue and EBITDA growth, you know, call it 5% to 10% year-over-year on average. Consumer's been the one that's been flattish. You know, some of the consumer names are up, some are flat, and then some, you know, like Walker Edison, are down. That's the only one where we're seeing a more mixed picture that sector. The mix, when you look at your new commitments, new investments in the quarter, how much of that was with existing borrowers versus new borrowers? How's that trended lately? Yeah. I mean, most of it's been new. You know, most of it's been new, but there are, you know, delayed draws that we, you know, that we have in the portfolio where that's part of the arrangement we have when we get involved with these companies that are these middle market growth companies where there's add-on acquisitions to do. They wanna grow their EBITDA. We will, in many cases, do the initial term loan and then structure a delayed draw term loan, where there's, you know, an add-on to finance, you know, add-on acquisitions or growth. That's usually a substantial part of the pipeline as well. Yeah. I know this probably depends on market circumstances, but what's your latest thought in terms of timing? You wanna grow the JV to $1 billion. Any thoughts on the pace you can do that? You're right. It depends on deal activity. You know, if our bites there are $15 million or $20 million, and we're at $750 million now and we're trying to grow to a $1 billion, you know, that's, you know, kinda eight to 12 deals. That's probably a 12-month, methodical, growing of that JV. Great. Thank you very much. At this time, we have no further signals from our audience. Mr. Penn, I will turn it back to you, sir, for any additional or closing remarks. Just wanna thank everybody for their participation this morning. The next call we'll be doing is in early May. We look forward to speaking to you then, and we appreciate all your support. This does conclude today's conference, and thank you for your participation. You may now disconnect.