Core Viewpoint - Prospect Capital Corporation reported its financial results for the fiscal quarter ending September 30, 2025, showing a net investment income of $79.35 million, a slight increase from the previous quarter, but a decrease compared to the same quarter last year. The company also declared distributions to common shareholders and highlighted its investment strategy focusing on first lien senior secured loans and real estate investments. Financial Results - Net Investment Income ("NII") for the quarter was $79,350,000, compared to $79,043,000 in the previous quarter and $89,877,000 in the same quarter last year [2] - NII per Common Share remained at $0.17, unchanged from the previous quarter but down from $0.21 year-over-year [2] - Total Assets decreased to $6,641,870,000 from $6,804,938,000 in the previous quarter and $7,592,705,000 year-over-year [2] - Net Income applicable to Common Shareholders was $48,087,000, a significant recovery from a loss of $226,369,000 in the previous quarter and a loss of $165,069,000 in the same quarter last year [2] - Distributions to Common Shareholders totaled $62,393,000, slightly up from $61,181,000 in the previous quarter but down from $77,358,000 year-over-year [2] Investment Strategy - The company has focused on first lien senior secured middle market loans, increasing its first lien mix by 701 basis points to 71.1% from June 2024 [7] - The second lien senior secured middle market loans decreased by 292 basis points to 13.5% [7] - The company exited its subordinated structured notes portfolio, reducing its mix to 0.3% [7] - Investments in real estate properties have yielded an unlevered investment-level gross cash IRR of 24% since the inception of this strategy in 2012 [9] Portfolio Update - Total Investments as of September 30, 2025, were $6,532,842,000, down from $6,693,501,000 in the previous quarter and $7,329,338,000 year-over-year [12] - The number of portfolio companies decreased to 92 from 97 in the previous quarter and 117 year-over-year [12] - The annualized current yield for all investments was 9.1%, down from 9.6% in the previous quarter [12] Capital and Liquidity - The company has a diversified funding profile, including a $2.1 billion revolving credit facility and various debt instruments [15] - On October 30, 2025, the company completed an institutional issuance of approximately $168 million in senior unsecured notes due 2030 [16] - The weighted average cost of unsecured debt financing was 4.54%, reflecting a slight increase from the previous periods [20] Dividend Information - The company declared monthly cash distributions of $0.0450 per share for November 2025, December 2025, and January 2026 [5] - Cumulative distributions to common shareholders since inception amount to approximately $4.6 billion, with $21.79 per share distributed [5]

Company Overview - Prospect Capital Corporation (PSEC) has total assets of $7.0 billion[7,10] - PSEC has invested over $21 billion since inception across over 450 investments, exiting over 325 of these investments[7,10] - Insider ownership is strong at 29%, representing approximately $0.9 billion of net asset value[8] Portfolio Composition - 80.2% of the portfolio is comprised of first lien, secured, or underlying secured assets[7] - Non-accrual loans remain low at 0.6%[7] - The portfolio includes 114 investments across 33 industries[7,10] - Real Estate accounts for 19.9% of the portfolio at fair value[24] Financial Performance & Funding - Net debt leverage is low at 0.41x[8,36] - Net investment income less preferred dividends exceeded cash common distributions by 103% for LTM March 2025[8] - 93% of total investment income for Q3 FY 2025 is from interest income[8,22] - Unencumbered assets are approximately $4.4 billion, representing 63% of total assets[10,33]

Financial Data and Key Metrics Changes - For the quarter ending March, the company's net investment income (NII) was $83.5 million, or $0.19 per common share, with a net asset value (NAV) of $3.2 billion, or $7.25 per common share [5] - The net debt to total assets ratio stood at 28.7%, with unsecured debt plus unsecured preferred accounting for 87.5% of total debt plus preferred [5] Business Line Data and Key Metrics Changes - The portfolio at fair value comprised 65.5% first lien debt, up 650 basis points from the prior year, while senior secured second lien debt decreased to 10.5%, down 410 basis points [7] - The company originated $196 million in investments during the quarter, with $149 million (76%) in first lien loans [12] - The real estate property portfolio yielded an income of 4.5% for the quarter, with an unrealized gain of $460 million as of March [10] Market Data and Key Metrics Changes - The weighted average EBITDA per portfolio company was just under $100 million, with non-accruals as a percentage of total assets at approximately 0.6% [11] - The company experienced $192 million in repayments and exits, resulting in net originations of $4.5 million for the quarter [12] Company Strategy and Development Direction - The company focuses on lower middle market lending, prioritizing first lien senior secured loans, and aims to rotate its portfolio to enhance yields [24][26] - The strategy includes a gradual reduction of the National Property REIT Corp (NPRC) portfolio while exploring additional asset sales [21] Management's Comments on Operating Environment and Future Outlook - Management noted that the current operating environment is affected by macroeconomic factors, including interest rate hikes, which have slowed the pacing of exits from the real estate portfolio [21] - The company is under-levered compared to peers, with a debt to total capital ratio around 30%, allowing for potential leverage to enhance net investment income [27] Other Important Information - The company has a strong liquidity position with $1.7 billion in combined balance sheet cash and undrawn revolving credit facility commitments [13] - The weighted average cost of unsecured debt financing was 4.33% as of March [16] Q&A Session Summary Question: Regarding low other income from NPRC this quarter - Management explained that the slowdown in other income is due to the pacing of exits being affected by macroeconomic conditions, but they expect normalization in the future [20][22] Question: On dividend coverage and potential levers to pull - Management indicated that they are prioritizing lower middle market lending and are exploring portfolio rotation to boost yields, while also considering leverage options [24][27] Question: Anticipation of preferreds ramping up - Management confirmed that they will prioritize both unsecured debt and preferred financing, emphasizing their diverse financing sources [29][30]

Financial Data and Key Metrics Changes - For the third fiscal quarter, the company's net investment income (NII) was $83.5 million, equating to $0.19 per common share, with a net asset value (NAV) of $3.2 billion or $7.25 per common share [4] - The net debt to total assets ratio stood at 28.7%, with unsecured debt plus unsecured preferred making up 87.5% of total debt plus preferred [4] - The company has distributed over $4.5 billion or $21.57 per share since inception, with monthly common shareholder distributions of $0.45 per share announced for May, June, July, and August [5] Business Line Data and Key Metrics Changes - The portfolio at fair value comprised 65.5% first lien debt, up 650 basis points from the prior year, while senior secured second lien debt decreased to 10.5%, down 410 basis points [6] - The company originated $196 million in investments during the quarter, with $149 million (76%) in first lien loans [11] - The real estate property portfolio yielded an income of 4.5% for the quarter, with an unrealized gain of $460 million as of March [9] Market Data and Key Metrics Changes - The company held 114 portfolio companies across 33 different industries, with an aggregate fair value of $6.9 billion [6] - The weighted average EBITDA per portfolio company was just under $100 million [10] - Non-accruals as a percentage of total assets were approximately 0.6% [10] Company Strategy and Development Direction - The company focuses on first lien senior secured loans, with a strategy to continue investing primarily in this area [8] - The management aims to achieve a value-maximizing orderly reduction in the size of the real estate portfolio, which has historically provided strong returns [20] - The company is under-levered compared to peers, with a debt to total capital ratio around 30%, reflecting a conservative approach [27] Management's Comments on Operating Environment and Future Outlook - Management noted that the current operating environment is affected by macroeconomic factors, including interest rate hikes, which have slowed the pacing of exits from real estate investments [20] - The company is optimistic about future opportunities to enhance net investment income through portfolio rotation and leveraging its diversified funding sources [28] - Management emphasized the importance of maintaining a strong balance sheet and liquidity to capitalize on attractive investment opportunities [12] Other Important Information - The company has a combined balance sheet cash and undrawn revolving credit facility commitments of $1.7 billion, with $4.4 billion of unencumbered assets [12] - The weighted average cost of unsecured debt financing was 4.33% as of March [15] Q&A Session Summary Question: Other income from NP REIT was low this quarter; should this bounce back? - Management indicated that the low other income reflects a slowdown in exits due to macroeconomic conditions, but they expect normalization over time [20] Question: How does the company plan to manage dividend coverage with SOFR trends? - Management highlighted a focus on lower middle market lending and portfolio rotation to enhance yields, while also considering leverage options [27][28] Question: Will the company prioritize preferred financing over traditional unsecured debt? - Management stated that both unsecured debt and preferred financing will be prioritized, with a focus on maintaining a diverse funding strategy [30]