PennantPark Investment Corporation (PNNT) Q3 2022 Earnings Report, Transcript and Summary

Good afternoon, and welcome to the PennantPark Investment Corporation's Third Fiscal Quarter 2022 Earnings Conference Call. Today's conference is being recorded. [Operator Instructions]. It is now my pleasure to turn the call over to Mr. Art Penn, Chairman and Chief Executive Officer of PennantPark Investment Corporation. Mr. Penn, you may begin your conference.

Good afternoon, everyone. I'd like to welcome you to PennantPark Investment Corporation's Third Fiscal Quarter 2022 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 Investment Corporation and that any unauthorized broadcast of this call in any form is strictly prohibited. Audio replay of the call will be available by using the telephone numbers and PIN provided in our earnings press release as well as 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, and 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 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 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.

Thanks, Rick. And I'd like to welcome you as the new CFO of our BDCs. We're going to spend a few minutes and comment on our target market environment, provide a summary of how we fared in the quarter ended June 30, how the portfolio is positioned for the upcoming quarters, our capital structure and liquidity, a detailed review of the financials, then open up for Q&A. From an overall perspective in this era of inflation, rising interest rates and geopolitical risk, we believe we are well positioned as a lender focused on the United States, where floating interest rates on our loans can protect against rising interest rates and inflation. We are pleased to be lending into the core middle market where we are important strategic capital to our borrowers. We believe we are well positioned as a company that has a clear game plan for growth of net investment income and dividends. We continue to execute on our plan to increase long-term shareholder value, and I'm pleased to announce that the Board of Directors has approved another increase of our quarterly dividend to $0.15 per share payable on October 3 to shareholders of record as of September 19. Additionally, we continued buying shares under our stock buyback program and purchased approximately 718,000 shares during the quarter for $5 million. The purchases were accretive to NAV by $0.03 per share. In total, we have bought back $12 million or 1.6 million shares. Some highlights for the quarter ended June 30 were as follows: we recorded an additional net unrealized gain of $12 million or $0.19 per share on our equity investment in RAM Energy. RAM continues to expand operations and drilling, and our equity investment increased in value from the prior quarter. We expect RAM to explore strategic options in the coming quarters. Number two, after quarter end, we completed the amendment, extension and expansion of the Truist Credit Facility. The size increased from $465 million to $500 million, and the maturity was extended 3 years until 2027. Thank you to our lending partners for their confidence and support of the company. Number three, we continue to grow our PSLF JV. The JV grew from $446 million to $608 million during the quarter and continues to generate an attractive double-digit ROE for PNNT. Subsequent to quarter end, the JV has continued investing and growing its investment portfolio. And PNNT and Pantheon Ventures increased their capital commitments to the JV by $76 million. We are targeting $1 billion vehicle over time, which can drive substantial growth in NII at PNNT. With the rise in base interest rates, PNNT is well positioned to grow NII as 96% of the debt portfolio is in floating rate assets. Holding everything else constant in the portfolio, a 1% increase in base rates should increase NII by $0.02 per share per quarter and a 2% base rate increase would result in a $0.04 per share per quarter increase. Choppier market is creating what looks to be an attractive vintage of new loans for the remainder of 2022 and 2023. In the last couple of months, we have seen spreads widen out approximately 100 basis points, an increase in upfront fees or original issue discount, lower leverage and tighter covenant packages. Now to review the operating results. For the quarter ended June 30, the net investment income was $0.16 per share including $0.02 per share and other income. During the quarter, we placed our investment in MailSouth nonaccrual as a result of continued underperformance. Our GAAP NAV decreased by 4%, driven primarily by a decrease in investment valuations. The decrease was largely attributed to mark-to-market adjustments resulting from the overall choppy market as opposed to specific credit-driven items within the portfolio. We increased the investment portfolio by $101 million during the quarter, and our leverage ratio or debt to equity increased from 1.16x, up from 0.8x. As regard to increasing net investment income, our strategy remains focused on: number one, optimizing the portfolio and balance sheet at PNNT as we move towards our target leverage ratio of 1.25x debt to equity; number two, growing our PSLF JV with Pantheon to $1 billion of assets from approximately $608 million of assets at quarter end; and number three, rotating out of our equity investments over time and redeploying the capital into cash pay yield instruments. We have a long-term track record of generating value by successfully financing high-growth middle market companies in 5 key sectors. These are sectors where we have substantial domain expertise, know the right questions to ask and have an excellent track record. There are business services, consumer, government services and defense, healthcare and software technology. These sectors have also been resilient and tend to generate strong free cash flow. As an aside, government services and defense is approximately 10% of the portfolio inclusive of the JV and should be a beneficiary of the geopolitical environment. In many cases, we are typically part of the first institutional capital into a company where a founder, entrepreneur or family are selling their company to a middle market private equity firm. In these situations, there's typically a defined game plan in place with substantial equity support from the private equity firm to significantly grow the company through add-on acquisitions or organic growth. The loans that we provide are important strategic capital that fuels 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 the platform from inception through June 30, our $335 million of equity co-investments have generated an IRR of 28% at a multiple on invested capital of 2.5x. 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 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 first lien loans have meaningful covenants, which help protect our capital. This is one reason why our default rate and performance during COVID was so strong. This sector of the market, companies with $10 million to $50 million of EBITDA, is the core middle market. Within the core middle market, we think our capital can add the most value, and we believe the opportunity to get the strongest package of risk return is in the $10 million to $30 million of EBITDA range. The core middle market is below the threshold and does not compete with a broadly syndicated loan or high-yield markets. As many of you know, there's been an enormous amount of capital raised by some of our large peers. And as such, they are forced to focus on the upper middle market, which are companies with over $50 million of EBITDA. Those upper middle market companies can typically also efficiently access the broadly syndicated loan market. As a result, in the upper middle market, our large peers need to aggressively compete with the broadly syndicated loan market and among themselves. This results in transactions where leverage is high, covenants are light or nonexistent, spreads and upfront fees are compressed and the decisions need to be made quickly. Additionally, from a monitoring perspective, they generally receive financial statements quarterly. The argument you'll hear is that bigger companies are less risky. That is a perception and 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 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. Borrowers in our investment portfolio are performing well, and we believe are well positioned for future quarters. As of June 30, the weighted average debt-to-EBITDA in the portfolio was 4.4x. And the average interest coverage ratio, the amount by which cash income exceeds cash interest expense, was 3.7x. This provides substantial cushion to support stable investment income even when interest rates rise. Based on this substantial cushion, even with a 350 basis point rise in base rates and flat EBITDA, our portfolio companies will cover their interest 2.2x on average. As of June 30, we had one nonaccrual on our books in PNNT. This represents 0.9% of the portfolio cost and 0.5% of the portfolio of market value. Since inception, PNNT has invested $7.2 billion at an average yield of 11%. This compares to a loss ratio of approximately 9 basis points annually. This strong track record includes our energy investments primarily subordinated debt investments made prior to the financial crisis and recently, the pandemic. With regard to the outlook, new loans in our target market are attractive, and this vintage should be particularly attractive. 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. We want to reiterate our mission. Our goal is to generate attractive risk-adjusted returns through income, coupled with long-term 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 through debt instruments, and we 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.

Thank you, Art. For the quarter ended June 30, net investment income totaled $0.16 per share, including $0.02 per share of other income. Operating expenses for the quarter were as follows: base management fees were $4.9 million, interest expense was $6.7 million general and administrative expenses were $1 million and provision for taxes were $0.2 million. For the quarter ended June 30, net realized and unrealized change on investments, including provision for taxes was a loss of $29 million or $0.44 per share. Provision for taxes of $8 million or $0.12 per share was due primarily to the increase in the value of RAM Energy. Change in the value of our credit facility increased our NAV by $0.14 per share. Our net investment income was in excess of our dividend by $0.015 per share. We repurchased approximately 718,000 shares during the quarter at an average purchase price of $6.91, resulting in accretion to NAV of $0.03 per share. As of June 30, our NAV per share was $9.65, which is down 4% from $10.05 per share from the prior quarter. Our GAAP debt-to-equity ratio net of cash was 1.16x. As of June 30, our key portfolio statistics were as follows: our portfolio remains highly diversified with 118 companies across 31 different industries. The portfolio was invested in 55% first lien secured debt; 10% in second lien secured debt; 9% in subordinated debt, including 6% in PSLF; and 26% in preferred and common equity, including 4% in PSLF. The weighted average yield on debt investments was 9.3%. 96% of the debt portfolio is floating rate with an average LIBOR floor of 1%. As base interest rates rise, we are well positioned to participate on the upside. Holding everything else constant in the portfolio, a 1% increase in base rates translates into $0.08 per share of NII upside per year, a 2% increase translates into $0.16 per share increase in NII per year. Now let me turn the call back to Art.

Thanks, Rick. In closing, I'd like to thank our extremely talented team of professionals for their commitment and dedication. Thank you all for your time today and for your continued investment and confidence in us. That concludes our remarks. At this time, I'd like to open up the call for questions.

[Operator Instructions]. And we will go to our first question from Paul Johnson of KBW.

As far as RAM Energy goes, I'm just curious, when you say you're exploring strategic alternatives for the company. I'm just curious, what's the difference between, I guess, what you're doing now with the company versus prior getting the company ready for sale?

Well, we've -- thanks, Paul, for the question. It's a good one. RAM has been performing very, very well. Recently, the well performance has been good, and they've got an excellent track record in geography in East Texas. And with the environment that we're seeing with oil and gas prices, natural gas prices and the company's operations, we think it's an appropriate time to explore strategic options. Just really wanted to -- in particular, these last 2 wells, I wanted to drill those wells. And have the good results that we've had on those 2 wells, reaffirming the quality of the acreage, the quality of the opportunity. We think with these last 2 wells, it's -- you're creating a package that's even more attractive for potential buyers.

Got it. And so does that mean have you guys retained like any firm to assist in that sale and look for options? Or is this just more essentially that's basically officially on the block for sale?

Yes. I think I'll just reiterate, we're going to explore strategic options over the coming quarters. I think I want to just leave it at that at this point.

Got it. Appreciate that. My next question, just on interest income quarter. I'm just curious why it was actually down or roughly flat, I guess, with the prior quarter given all the net growth this quarter? And what -- was that due to a timing issue or perhaps the nonaccrual was -- what drove that?

What we did, we did have the one nonaccrual. We did -- we were very active, as you saw, most of that probably came in towards the tail end of the quarter. So I think those 2 items probably offset each other. We are well positioned, the portfolio -- we are kind of getting to kind of our target 1.25x debt-to-equity ratio. At PNNT, the JV is growing. And of course, the base rates, LIBOR, SOFR, are growing nicely. So we think from a revenue standpoint, from an interest income standpoint, we're well positioned to see some upside in this quarter.

Got it. Appreciate that. And then you mentioned that you get monthly financial statements from your portfolio companies, gives you a snapshot of the ongoing performance, I guess, for the year. I'm curious, do you also receive any sort of updated forecast for the businesses throughout the year? Or if you had conversations, I guess, with sponsors? I'm just curious how those conversations, if you've had them, how they've gone and have things changed? Is there more pressure on businesses to cut costs, that sort of thing? Anything that you've seen there?

Yes. So look, clearly, we're in a different economic environment than we were kind of in that post COVID. I don't know -- what do you call it? A honeymoon period. But clearly, our management teams are seeing an environment where the economic landscape is different. Putting interest rates aside, it's what elements of the economy are going to be under more of a microscope. And I think good executives are very sober minded about the environment and working hard to optimize their revenues and their cost structures. And again, we're lenders. We -- flat is okay. We're still seeing obviously reasonable growth. So from the standpoint of where we sit, where we're kind of 3x cash interest coverage and have plenty of cushion and are generally in debt securities, primarily first lien and some second lien. We feel like it's a fine environment. We're also excited about the vintage. The vintage, this upcoming vintage that we're headed into late '22 and 2023, should be a good one. Leverage levels are coming down, spreads are widening. Capital is again scarce or -- so covenants can be even more meaningful. Our diligence path can be even more thorough. The whole package of risk-adjusted return that we are getting and can get in this newer environment as a very -- good prior vintages roll off inevitably, if we're doing our underwriting well, we get paid off and that we still get payoffs. And even in this environment, we're still getting taken out. And we'll rotate those proceeds into this kind of upcoming vintage, which should be a really good one.

Got it. Last question for me. Just asking 1 loan in the portfolio. I -- popped out to, I mean, this marked a little bit lower, still at 88% of cost AKW Holdings. I'm just curious if you just given the size alone, if you can give me any color on that description?

I think that mark is really just because it's British pound sterling. So it's like our one U.K. company. I think you probably would have seen somewhere in there an offsetting gain from the current -- we borrow in pound -- we have a U.K. company, we borrow in pounds, so it's kind of hedged, but the credits, if you were to take out currency at the par credit.

We'll hear next from Robert Dodd with Raymond James.

Kind of going back to one of Paul's question a little bit. In terms of timing of deployments or anything like that, I mean, was there -- I mean the portfolio did grow, but to -- the interest income didn't move that much. Were the deployments timely in the quarter or maybe the repayments early in the quarter? Or was there anything unusual about that? Or is it just kind of normal inter-quarter activity this quarter?

Yes, we think it was kind of a normal active quarter. Clearly base rates LIBOR, SOFR, started spiking towards the end of the quarter. And I think we ended up with a very healthy underlying LIBOR of -- underlying base rate of 1.8% or 1.9%, which is, I think, up from the 1% floors that we had last quarter. So that's clicking in and more so due to the movement since quarter end. There's nothing really else notable to talk about. The one nonaccrual, which is not a big one, the activity we had and then the rise in the base rates.

Got it. Got it. Okay. On the JV, I mean, 2 -- kind of 2 questions. One, I mean, obviously, it's $600 million in assets now. I mean you've got a plan to get it to $1 billion. Ultimately, you're on 60% of that. Any -- it's grown pretty -- it's almost doubled in the size over the last, call it, 2 years. Is that the kind of pace, I mean, not doubling again, obviously. But is that the kind of pace you're comfortable with growing that thing? Or when would you potentially expect it to get to that target size, especially in a wider spread environment where maybe deploying capital is even more attractive right now?

Yes. It's a good point, and we do like the vintage that we're experiencing. So I'd say at the tight end, it's probably a year, at the wide end is probably 2 years. So sometime -- we're hoping to optimize and get to that $1 billion between 12 and 24 months.

Got it. And then another one on that. I mean, looking at -- I mean, the dividend was flat sequentially, but if I think about -- I've done the math right that the dividend to you versus the NII that the [indiscernible] is actually and is about 75%, but you only you own -- so it seems to be, at the moment, at least this year, over distributing versus earnings? I mean, is that math right? And can you give us any explanation about why it may be doing that? Maybe it's got retained earnings for the past? Or is that going to continue going forward?

Yes. No, we had some big early wins. The way we think about it is the junior capital we're putting in, which is the combination of the sub debt and the equity, that should be getting a 13-ish percent return, the combination of the debt instrument and the equity. Certainly, we're looking for that to grow over time. Hence, why we're now over $600 million. We've grown it since quarter end and why we and Pantheon have agreed to commit more junior capital to the enterprise really to be able to optimize that ROE. And yes, to get to $1 billion, we're going to need to use some CLO technology again to do so, which we like for these first lien low-risk assets. We like the efficiency of the financing like the long-term nature of the financing. We already have one middle market CLO in there. We may want to do another at some point in time. And I think, again, over the next 12 to 24 months, we're going to leg into it. It could be sooner. You're right, the vintage is looking attractive, we might accelerate. But we now have the capital to do so and the strong partnership from our JV partner, Pantheon. And hopefully, as PNNT has -- is getting more optimized from a debt to equity standpoint, the PNNT just becomes a -- as we rotate out of older deals, we put them into newer deals in this new vintage, it becomes about rotating the equity investments, and it becomes about how we can optimize that joint venture. So those are the levers. We have multiple ways of growing income. We -- obviously, we got LIBOR and so forth going up. So there's -- we think of -- basically it's like 4 different ways to grow income in PNNT, which gives us real confidence. Hopefully, all 4 happen. We're pretty sure that the base rates going up are definitely happen. We're pretty sure that spread widening is happening. We're hoping we can rotate equity, and we're pretty sure that the JV can grow. So those are the levers and the tools and how we think about it, and we should be able hit on a few of these and bring NII up over time.

Congrats on the quarter and the dividend increase again.

Thank you.

[Operator Instructions]. We will go next to Mickey Schleien of Ladenburg Thalmann.

Art, just as a housekeeping question, did you reverse any previous accruals of income for MailSouth this quarter?

No.

Okay. And a bigger picture question -- or given your tenure in the credit markets, I just wanted to ask you sort of a 30,000-foot high-level question. We have -- loan price is weak, credit spreads gapping out, obviously. GDP growth has been negative. A lot of headwinds from that perspective. But when I look back and think about all the earnings calls I've been through so far, and just looking at published numbers on leveraged loans, credit is just not really deteriorating from a very high level. Certainly, there's idiosyncratic things going on. So it almost feels like there's a big head fake occurring in the markets or these credit problems are going to come up, perhaps later this year or next year. And the spreads that we're seeing now and the NAVs that we're seeing now make more sense. So what's your gut telling you in terms of the outlook for the rest of this year and going into next year?

Good question. I think it turns to kind of, obviously, what's in the underlying books of our BDCs, of other BDCs. Most of us in the industry have been around a while, tend to focus on recession-resilient industries. And of course, anybody worth their salt in our industry, in their underwriting analysis put the recession case in. These loans are 5 to 7 years. Of course, you have to model a recession. And of course, you have to try to create a portfolio that's recession-resilient and recession resistant. So why do we like healthcare? Why do we like defense, government services, et cetera, et cetera? Because we believe these to be industries that are steady, stable, even in a recessionary environment. But yes, if you go to the leverage loan index or the high-yield index, and there's going to be industries that are going to be more cyclical by definition. You saw during COVID why did BDC credits perform or direct lending credit performed better than the high-yield index? Well, we don't do a lot in airlines, right? We don't do a lot in energy. We don't do a lot in other big cyclicals, pulp, paper, chemicals, lodging, hospitality. And if you look at the leveraged loan and high-yield index, you had a lot of hospitality. You had a lot of hotels. You had a lot of airlines. So one of the reasons we and others in our industry performed better than the overall credit markets is because we specifically are focused and try to stay away from the fray on stuff that's more cyclical. So that was COVID. We're now going into what looks to be more of a garden-variety recession. This one, too, will be different in some way that's different than the other ones, but we're going into -- we are potentially going into an economic slowdown. So we look at these things and say, gee, if EBITDA goes down x percent, what does that mean? For us, the recession after the global financial crisis, EBITDA went down 7%. That was our most draconian scenario as the recession after the GFC. This recession may be that draconian and I doubt it will be, but it could be. So we build these books with substantial cushion with real thought that we want them to be recession resistant. And that's perhaps why you're feeling -- you're probably sensing a little bit of confidence from us and our colleagues in this industry because we specifically play for this kind of environment.

Yes, I appreciate that and I agree with you. And I guess my follow-up would be that given your remarks just now, a lot of the depreciation we've seen in NAVs this quarter, maybe the previous quarter have just been technical because of spreads widening. It sounds to me that we may see some of that in Pennant's case reverse over time as these credits mature and your payback at par. Is that a reasonable assumption on our behalf as it relates to PNNT?

Yes. That's right. The credit book is down kind of in line with the industry. It's the loans were marked down a point or 2 based on the market, not necessarily on credit performance. The bigger moves in NAV were due to our equity portfolio, which, by definition, should be a little bit more up and down because it's equity. So the big movers in our portfolio PNNT were mostly some of our equity investments.

We'll go next to Casey Alexander with Compass Point.

Let me ask sort of -- get it, Mickey's question maybe in a little bit different way here. I mean this upcoming or period of economic certainty that we're in or call it a recession seems to be quite different from the last year. I mean the great financial crisis was a massive system-wide shock, COVID was sprung upon all of us virtually overnight with wholesale business shutdowns. This is more of a Fed-inspired slowdown to combat inflation. Does this give your portfolio companies with this sort of telegraphing from the Fed, a better opportunity to prepare bolstering their balance sheets, managing down their expenses and keeping their inventories at levels of expected demand for a period of economic slowdown? Is that an advantage that your companies have in this particular cycle?

Yes, absolutely. I mean COVID was a shock. Was it a real recession or was it a shock? We can debate that, but it was quick. And we had such a decent -- and such a good performance during COVID, precisely because the sponsors and the management teams who lived through the global financial crisis which was also a shock, but less of an immediate shock, but still that was like a slow-moving train wreck, which became a shock in the middle of September of '08. One of the big lessons drawn from that shock and/or recession was moved with speed kind of cut what you need to cut expense-wise, CapEx. Manage your working capital appropriately, roll up your sleeves quickly. Those who moved slowly during both the recession after the GFC as well as COVID got hurt. So to a company really during COVID, the speed with which our companies moved was really, really interesting and positive. And you're right, this is a well telegraphed -- maybe it's a slow-moving situation, and you could see. So it absolutely does give these companies time to foresee and to project and to -- they need to tighten the belt and cut some costs and manage their working capital, manage their CapEx and do so in an appropriate fashion. So I think you're right that it's different. This one may be consumer we'll see. I mean, it seems like they're very much trying to kind of get the consumer to calm down a bit. The consumer is still spending a lot of money on travel and experiences and spending less money now on goods. And the consumers are the majority of the economy in the United States. Ultimately, it filters through everywhere else -- or not everywhere else, but a lot of other places. May not filter through to our defense, government services, less so to health care or whatever, but kind of consumer is a big part of the economy. So we'll see how it plays through. We're on top of it with our monthly numbers. We're talking to the companies every month, stand on top of it. And it also gives us a chance to prepare and to try to be helpful in these situations.

Right. Secondly, I appreciate your comments about the strategic option for RAM. I think most of us who are listening to the call are centered pretty much on the sale of RAM. But maybe you could outline what some of the other potential strategic options are for RAM and how those might benefit shareholders?

That's a great question. RAM is generating good cash flow. And kind of the wells have been successful, the prices that you can get for oil and natural gas are attractive. So there's other options. You continue to run the company, turn out cash flow, pay down the Main Street loan. If warranted, drill more wells, will be the wells that seem to have a good return on investment. And cash flow -- if it gets cash flow, and that cash flow can -- we get cash flow to our shareholders in many different ways. So clearly, there's a focus on strategic options with the potential exit, but there's also other options that can be attractive just based on the returns that the company can get on this CapEx these days, which should generate value and cash flow for our shareholders.

Okay. Well, and lastly, I think shareholders do appreciate certainly the return of capital and share repurchase programs when the stock is trading at 65% of book. It's hard to replicate that in your own investing opportunities. So I would wonder if the Board would at least reload the plan when it fills up or if not even that 65% of book accelerate the plan. You've done a lot of good things in terms of working down some of the equity portion of the portfolio. And certainly, if RAM comes off, what are the hopes of perhaps accelerating that to some extent?

Yes. that's a great point. And we're not shy about this kind of program. And this is our third buyback. And we've -- we're in it to win it, and we've done it before. We'll do it again if need be. And certainly, you're right, if we can get some nice exits, that could accelerate.

We'll hear next from Melissa Wedel of JPMorgan.

Following on the equity rotation theme, is it fair to say that RAM would represent the sort of -- to the extent there is any low-hanging fruit on the equity rotation side, would that be sort of the most obvious candidate? Or are there some other things happening in the background that we're -- haven't really surfaced on this call?

Yes. It's a good question. And anyone can look -- and we can do this off-line or anyone can look at our statement of investments and go into that equity piece of the SOI. And where you see markups of equity versus costs that are substantial, knowing that many of our equity co-investments are in line with financial sponsors by definition at some point. Those sponsors, indeed may be looking at strategic options themselves. I'm just kind of looking at some of these, there's a company called Gauge Lashco invest, that's what's called Lilly Lashes, it's a cosmetic-type company, big nice market. There is one example. There's a company called Green Varsity, underlying company there. There's a -- called Veritext. It's a court reporting business. It would have been a nice embedded markup there. None of these, by themselves, are amazingly transformational, but they're singles and doubles that can certainly add to the stream of income that's coming out of PNNT. So those are just 2 examples, but we've got, I don't know, some 30 equity co-investments. And it's easy enough to look and see where the embedded gains are.

Okay. Appreciate that context, Art. And I think just as a follow-up, I apologize if I missed it. Could you elaborate a little bit on Cascade? I think that was restructured in the quarter. Could you just walk us through that briefly? I know you touched on it last quarter. Would just like to understand that from -- through the finish line.

Yes, sure. Yes. So Cascade completed its restructuring this past quarter. Our securities were converted into equity securities. So we're now a relatively large equity investor in this -- new financiers came in as a first lien, second lien package. The new capital gives the company the ability to do add-on acquisitions. For this company to grow its equity value, that's very important. I think it's a nice roll-up strategy. It was hurt by COVID. The numbers more recently post-COVID have been strong. Those numbers have come in kind of post restructuring. So we'll see. We're optimistic this company is an environmental drilling company. And the states and the cities kind of put a lot of that on hold during COVID, and they're now turning back on the switch. Now with the capital structure that can allow the company to do add-on acquisitions. So we'll see. We're optimistic, of course, that with this new capital structure, the new fresh capital and with the support of us as an equity shareholder as well as the original sponsor who is a major equity shareholder that -- together, we can drive value for the company over time and hopefully do relatively well on the equity investment that we retain.

And with no further questions in queue, I will now turn the conference back over to Art Penn for any additional or closing remarks.

Just want to thank everybody for being on the call today. A reminder that this next quarter is our fiscal year-end, September 30 is our fiscal year-end. So we'll be filing our 10-K, and that will happen kind of in mid-November. So a little later than our normal Qs. Our 10-K will be filed in mid-November. We look forward to talking to everybody at that point in time. And again, Thanks, everybody, for participating. Everyone, have a great rest of the summer.

And that does conclude this call. Thank you for your participation. You may now disconnect.