Prospect Capital (PSEC) Financials

Prospect Capital (NASDAQ: PSEC) has shown varied financial performance over the last four years, with a recent trend of declining profitability and rising expenses despite stable interest income.

• Consistent total interest income around $147M to $205M quarterly from 2022 through early 2025, showing stable core earnings from investments.
• Increasing net cash from continuing operating activities—from negative $76.9M in Q1 2023 to a positive $78.6M in Q3 2025—indicating improving cash flow generation.
• Stable to growing common equity base, with total common equity approximately $3.25B to $3.9B in recent quarters, supporting capital adequacy.
• No reported interest expense over the periods analyzed, suggesting effective use of interest-free liabilities or no debt interest costs recognized.
• Preferred stock dividends remain substantial, around $9M to $33M quarterly, representing a fixed charge on earnings but consistent for dividend policy.
• Substantial and widening net realized and unrealized capital losses, especially in 2025 quarters with losses of $160M in Q3 2025 and $121M in Q1 2025, impacting total non-interest income and net income negatively.
• Significant non-interest expenses consistently over $80M to $110M per quarter, with insurance policy acquisition costs and other operating expenses increasing recently, pressuring margins.
• Consistent net losses reported in 2025, especially a sharp $171M net loss to common shareholders in Q3 2025, indicating profitability challenges.
• Net cash used in financing activities increasingly negative, up to -$83.8M in Q3 2025, due to high debt repayments and dividend payments, demonstrating cash outflows to investors and creditors.
• Declining retained earnings over time, reaching -$1.06B by Q3 2025 from approximately -$107M in Q1 2023, signaling accumulated losses eroding shareholder equity.

Overall, while Prospect Capital maintains a solid base of interest income and growing cash flow from operations, the company faces significant challenges from capital losses, elevated costs, and sustained net losses. These factors have eroded retained earnings and pressured financing cash flows. Investors should monitor capital gains/losses trends and expense management closely as these heavily influence the company's profitability and equity value.