Palladyne AI Corp.

Strong Q2 performance; record income and coverage - Q2 total investment income: $149.1M (+5.4% QoQ, +8.5% YoY)—record quarter. - Q2 net investment income (NII): $92.9M ($0.50/share), +5.5% QoQ, +4.7% YoY. - Dividend coverage: NII covered the base distribution by 125% (also full distribution by 106%, including the $0.07 supplemental). - Management emphasized this as part of 24 consecutive quarters of paying a supplemental distribution.

Scale and origination momentum (but with a more defensive funding posture) - First-half 2026 record originations: $2.74B (+35.6% YoY); record fundings: $1.35B (+8.5% YoY). - Q2 commitments and fundings: $927M+ in new commitments; $647M+ in gross fundings. - Q3 deployment expected to be seasonally lower, but management still expects a robust Q3 because Q3 is historically the low point. - Pipeline described as “as strong as I can recall,” but with quality concerns in parts of the market—management expects many deals to have debt-raising difficulty.

Prepayments drove yields/leverage improvement; Q3 prepayment normalization forecast - Q2 early repayments/prepayments: $572.1M, above the top of guidance. - Management expects prepayments to normalize in Q3 to $200M–$300M (could change as quarter progresses). - Surprising/positive implication: higher prepayments were largely supported by M&A and balance-sheet cash (management stated ~60% from those sources). - Credit and funding impact: elevated prepayment revenue boosted effective yield in Q2; core yields anticipated to normalize as the portfolio rebalances.