Prospect Capital Q3 2026 Earnings Report

Prospect Capital EPS Results

• Actual EPS: $0.16
• Consensus EPS: $0.11
• Beat/Miss: Beat by +$0.05
• One Year Ago EPS: N/A

Prospect Capital Revenue Results

• Actual Revenue: $150.07 million
• Expected Revenue: $163.23 million
• Beat/Miss: Missed by -$13.16 million
• YoY Revenue Growth: N/A

Prospect Capital Announcement Details

• Quarter: Q3 2026
• Date: 5/7/2026
• Time: After Market Closes
• Conference Call Date: Friday, May 8, 2026
• Conference Call Time: 9:00AM ET

Prospect Capital (NASDAQ:PSEC) is a publicly traded business development company listed on the Nasdaq stock exchange that specializes in providing private debt and equity financing solutions to middle-market companies across the United States. Structured as a closed-end, non-diversified management investment company under the Investment Company Act of 1940, Prospect Capital offers investors access to a diversified portfolio of senior secured loans, subordinated debt and selective equity interests in privately held businesses.

Since its founding in 2004, Prospect Capital has focused on tailoring financing structures to meet the growth, acquisition and recapitalization needs of its portfolio companies. The firm’s lending strategies include first lien senior secured loans, second lien loans and mezzanine debt, while its opportunistic equity investments allow participation in potential upside. As an externally managed vehicle, Prospect Capital leverages the resources and investment capabilities of its advisor, Prospect Capital Management, L.P., to execute sourcing, underwriting and portfolio monitoring activities.

Headquartered in New York City, Prospect Capital serves U.S.-based businesses operating in a broad range of industries, including manufacturing, business services, healthcare, energy and technology. By targeting established companies with proven cash flows and experienced management teams, the firm seeks to deliver financing solutions that may not be readily available from traditional lenders, helping clients achieve strategic objectives and navigate transitional periods.

The company’s leadership is spearheaded by Joseph R. Idzfenco, President and Chief Executive Officer, who brings extensive experience in private credit and investment management. Under his direction, a seasoned investment team employs a disciplined underwriting process and active portfolio oversight to pursue stable, risk-adjusted returns for shareholders. Through deep industry relationships and a commitment to partnership, Prospect Capital aims to foster long-term value creation for both its investors and portfolio companies.

Prospect Capital Q3 2026 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Prospect reported net investment income of $78 million ($0.16 per share), a NAV of ~$3 billion ($6.05 per share), net debt/total assets of 27%, and declared monthly common distributions of $0.035 for May–August (cumulative distributions ~$4.8 billion since IPO).
• Positive Sentiment: The firm is materially rotating into its core middle‑market strategy, with the first‑lien senior secured mix rising to 72% (up 790 bps since June 2024) while second‑lien and subordinated structured notes have been reduced substantially.
• Positive Sentiment: Long‑term portfolio metrics cited were strong: exited investment gross IRRs of ~14–17% for various cohorts, very low annualized realized loss rates (10–20 bps), and EBITDA‑to‑interest coverage of ~205% overall (≈230% for the core target segment).
• Positive Sentiment: Balance sheet and funding position highlighted as robust — $1.8 billion of combined cash and undrawn revolver, $4.2 billion of unencumbered assets (~65% of portfolio), $2.12 billion in bank commitments, and a weighted average unsecured debt cost of 4.71%.
• Positive Sentiment: Management emphasized active capital recycling and capital preservation, with $222 million of repayments/exits in the quarter (net repayments of $107 million) and continued real‑estate property exits whose proceeds are expected to be redeployed into first‑lien loans.

Presentation

[Operator]

Good morning, and welcome to the Prospect Capital third quarter 2026 earnings release and conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on a touch-tone phone. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to John Barry, Chairman and CEO. Please go ahead, sir.

[John Barry, Chairman and CEO at Prospect Capital]

Thank you, Drew. Joining me on the call today are Grier Eliasek, our President and Chief Operating Officer, and Kristin Van Dask, our Chief Financial Officer. Kristin.

[Kristin Van Dask, CFO at Prospect Capital]

Thanks, John. This call contains forward-looking statements that are intended to be subject to Safe Harbor protection. Future results are highly likely to vary materially. We do not undertake to update our forward-looking statements. For additional disclosure, see our earnings press release and 10-K filed previously and available on our website prospectstreet.com. Now I'll turn the call back over to John.

[John Barry, Chairman and CEO at Prospect Capital]

Thank you, Kristin. In the March quarter, our net investment income, or NII, was $78 million or $0.16 per common share. Our NAV was approximately $3 billion or $6.05 per common share. At March 31st, our net debt to total assets ratio was 27%. Unsecured debt plus unsecured perpetual preferred was 88% of total debt plus preferred. We are announcing monthly common shareholder distributions of $0.035 per share for each of May, June, July, and August. Since our IPO nearly 22 years ago through our August 2026 declared distribution, we will have distributed approximately $4.8 billion or $22.07 per share. Our preferred shareholder cash distributions continue at their contract rates.

[John Barry, Chairman and CEO at Prospect Capital]

We continue to progress our strategic priorities, including rotation of assets into an increased focus on our core business of first lien, senior secured, middle market loans, with our first lien mix increasing 790 basis points to 72% since June 2024. We are focusing on new investments in companies with less than $50 million of EBITDA, including companies with smaller funded private equity sponsors, independent sponsors, and no third-party financial sponsors. Number two, reduction in second lien, senior secured, middle market loans with our second lien mix decreasing 404 basis points to 12.4% since June 2024. Exiting subordinated structured notes with our subordinated structured notes mix decreasing 837 basis points to near zero since June 2024.

[John Barry, Chairman and CEO at Prospect Capital]

Number four, exiting targeted equity-linked assets, including real estate, with five additional properties sold in the current fiscal year and certain corporate investments, including the exit of Echelon Transportation in February 2026, with other exits targeted and in progress. Number five, enhancement of portfolio company operating performance and profitability, including through adoption of artificial intelligence and automation initiatives focused on enhancing revenues and reducing costs. Number six, utilization of our cost-effective floating rate revolver, which significantly matches our floating rate assets. Thank you. I will now turn the call over to Grier.

[Grier Eliasek, President and COO at Prospect Capital]

Thank you, John. Over the past two decades, Prospect Capital Corporation has invested approximately $13.4 billion in over 350 exited investments out of over $22 billion invested in over 450 total investments that have earned a 12% unlevered investment level gross cash IRR to Prospect Capital Corporation. This multi-decade time period predates and includes the GFC and has been dominated in general by low prevailing market interest rates. In Prospect's primary business of middle-market lending over the same nearly 22-year time period. Prospect's exited investments resulted in an investment-level exited gross IRR of approximately 14.4% based on total capital invested of approximately $11.4 billion and total proceeds from such exit investments of about $14.7 billion, with an annualized realized loss rate of 20 basis points.

[Grier Eliasek, President and COO at Prospect Capital]

In Prospect's core targeted business of middle-market lending to companies with less than $50 million of EBITDA over the same nearly 22-year time period. Prospect's exited investments resulted in an investment-level exited gross IRR of approximately 16.9% based on total capital invested of around $6.5 billion and total proceeds from such exit investments of about $8.6 billion, with an annualized net realized loss rate of 10 basis points. Prospect's EBITDA to interest coverage for our primary business of middle-market lending is about 205%, which increases to around 230% for Prospect's core targeted middle-market lending to companies with less than $50 million of EBITDA. As of March 2026, we held 89 portfolio companies across 31 different industries with an aggregate fair value of $6.3 billion.

[Grier Eliasek, President and COO at Prospect Capital]

Our portfolio at fair market value included 2.5% of investments in software companies, which is significantly less than the 23% average across BDCs with publicly traded unsecured bonds from a Wall Street fixed income research report in the last couple of months. We primarily focus on senior and secured debt, which was 84% of our portfolio at cost as of March. Our middle-market lending strategy is the primary focus of our company, with such strategy as of March representing 85% of our investments at cost, an increase of 875 basis points in our business mix from June of 2024. Middle market lending comprised 94% of our originations during the March quarter, with a continued focus on first lien senior secured loans.

[Grier Eliasek, President and COO at Prospect Capital]

Investments during the quarter included follow-on investments in existing portfolio companies to support acquisitions, working capital needs, organic growth initiatives and other objectives. We've essentially completed the exit of our subordinated structured notes portfolio as of March, with such portfolio representing nearly 0% of our investment portfolio at cost and representing a reduction of 837 basis points from 8.4% in June of 2024. Our real estate property portfolio at National Property REIT Corp., NPRC, totaled 14% of our investments at cost as of March and continued to focus on developed and occupied cash flow multifamily investments. Since inception of this strategy 14 years ago in 2012 and through March of 2026, we have exited 57 property investments, earning an unlevered investment-level gross cash IRR of 24% and cash-on-cash multiple of 2.4x.

[Grier Eliasek, President and COO at Prospect Capital]

We exited five property investments in the current fiscal year through March 2026, earning an unlevered investment-level gross cash IRR of 18% and cash-on-cash multiple of 2.3x. The remaining real estate property portfolio included 53 properties and paid us an income yield of 5.2% for the March quarter, providing an opportunity for potential income enhancement at Prospect from a portfolio rotation strategy into more corporate first lien senior secured middle market originations. Prospect's aggregate investments in NPRC included a $229 million unrealized gain as of March. We expect to continue to redeploy future real estate property exit proceeds primarily into more first lien senior secured loans with selected equity-linked investments. Our interest income for the 12-month period ending March 2026 was 92% of total investment income, reflecting a strong recurring revenue profile of our business.

[Grier Eliasek, President and COO at Prospect Capital]

Payment-in-kind interest income for the last 12-month period ending March 2026 was reduced by 41% from the prior 12-month period and was 11% of total investment income for the quarter. Non-accruals as a percentage of total assets as of March stood at around 0.7% based on fair market value consistent with the prior quarter. Investment originations in the March quarter aggregated $115 million and consisted of 94% middle market investments with a significant majority first lien senior secured loans. We also experienced $222 million in repayments and exits as a validation of our capital preservation objective, resulting in net repayments of $107 million. Thank you. I'll now turn the call over to Kristin. Kristin?

[Kristin Van Dask, CFO at Prospect Capital]

Thanks, Grier. We believe our prudent leverage, diversified access to matched book funding, substantial majority of unencumbered assets weighting toward unsecured fixed-rate debt, and avoidance of unfunded asset commitments all demonstrate balance sheet strengths as well as substantial liquidity to capitalize on attractive opportunities. Our company has locked in a ladder of liabilities extending 25 years into the future. On October 30th, 2025, we successfully completed the institutional issuance of approximately $168 million in aggregate principal amount of senior unsecured 5.5% notes due 2030, which mature on December 31st, 2030. Our unfunded eligible commitments to portfolio companies total approximately $20 million, of which $17 million are considered at our sole discretion, representing approximately 0.4% and 0.3% of our total assets as of March 26th, 2026, respectively.

[Kristin Van Dask, CFO at Prospect Capital]

Our combined balance sheet cash and undrawn revolving credit facility commitments stood at $1.8 billion as of March, and we held $4.2 billion of our assets as unencumbered assets, representing approximately 65% of our portfolio. The remaining assets are pledged to Prospect Capital Funding, a non-recourse SPV. We currently have $2.12 billion of commitments from 48 banks, demonstrating strong support of our company from the lender community with a diversity unmatched by any other company in our industry. The facility does not mature until June 2029 and revolves until June 2028. Our drawn pricing continues to be SOFR plus 2.05%. Outside of our revolver, we have access to diversified funding sources across multiple investor types and have successfully issued securities in an array of markets.

[Kristin Van Dask, CFO at Prospect Capital]

Prospect has issued multiple types of unsecured debt, institutional non-convertible bonds, institutional convertible bonds, retail baby bonds, and retail program notes. All of these types of unsecured debt have no asset restrictions and no cross defaults with our revolver. We've tapped the unsecured term debt market on multiple occasions to ladder our maturities and to extend our liability duration out 25 years with our debt maturities extending through 2052. With so many banks and debt investors across so many unsecured and non-recourse debt tranches, we have substantially reduced our counterparty risk. At March 31st, 2026, our weighted average cost of unsecured debt financing was 4.71%. I'll turn the call back over to John.

[John Barry, Chairman and CEO at Prospect Capital]

Kristin, thank you very much. We can now answer any questions.

[Operator]

Thank you, sir. We will now begin the question-and-answer session. To ask a question, you may press star then one on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. Again, it is star then one to ask a question. At this time, we will pause momentarily to assemble our roster. This concludes our question-and-answer session. I would like to turn the conference back over to John Barry, Chairman and CEO, for any closing remarks.

[John Barry, Chairman and CEO at Prospect Capital]

Okay. Well, thank you, everyone. Have a wonderful day and a wonderful weekend. Bye now.

[Operator]

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Participants

Executives

• Grier Eliasek, President and COO
• John Barry, Chairman and CEO
• Kristin Van Dask, CFO