Prospect Capital (PSEC) Financials

Prospect Capital’s latest quarter showed a sharp earnings reversal. Investment securities interest income increased modestly to $151.7 million in Q4 2026 from $148.2 million in Q3, but this was overwhelmed by an $85.7 million non-interest income loss, including an $80.9 million net investment loss. Revenue fell to $66.0 million from $207.6 million, and Prospect reported a $30.4 million pretax loss. After preferred dividends, the loss attributable to common shareholders was $38.1 million, or $0.08 per share.

The broader trend remains uneven. Interest income has declined from approximately $205.5 million in Q1 2024 to $151.7 million in Q4 2026, while quarterly earnings have repeatedly been affected by investment valuation swings. Common EPS moved from $0.10 in Q1 2026 to negative $0.01 in Q2, positive $0.05 in Q3 and negative $0.08 in Q4. This volatility makes recurring income and dividend coverage more important than any single quarter’s reported net income.

Cash flow was also inconsistent. Operating cash flow was positive in the first three quarters of fiscal 2026, reaching $195.7 million in Q3, before turning negative at $44.0 million in Q4. Financing activities generated $52.9 million in Q4, largely because $355.9 million of debt issuance exceeded $236.4 million of repayments. The company paid $80.1 million in dividends during the quarter while also paying $33.4 million of cash interest.

At the latest reported balance-sheet date, March 31, 2026, trading account securities were $6.40 billion and total assets were $6.38 billion, down from $7.86 billion and $7.91 billion, respectively, in March 2024. Debt declined over that period, but retained earnings became increasingly negative, reaching -$1.38 billion. The supplied Q3 2026 balance-sheet data also contains a presentation inconsistency: total assets do not reconcile with reported liabilities and equity, so leverage and book-value comparisons should be treated cautiously until confirmed against the company’s filing.

• Investment securities interest income remained relatively stable sequentially, rising to $151.7 million from $148.2 million.
• Debt balances were lower at March 31, 2026 than a year earlier, with short-term and long-term debt totaling approximately $1.73 billion versus $2.02 billion at March 31, 2025.
• Operating cash flow was positive in Q1 through Q3 of fiscal 2026, indicating that reported earnings volatility did not consistently translate into cash outflows.
• Q4 financing activity produced a $9.0 million increase in cash overall despite negative operating cash flow and $80.1 million of dividend payments.
• Non-interest income has been highly dependent on realized and unrealized investment gains, producing strong gains in some quarters but significant losses in others.
• The company’s securities portfolio remains large at roughly $6.4 billion, but the data does not provide enough detail to assess portfolio credit quality, concentration or unrealized-loss exposure.
• The reported balance sheet contains a reconciliation issue, with total assets not matching the supplied total liabilities and equity figure; investors should verify the final filing before relying on book-value or leverage calculations.
• Interest income has trended lower over the available period, falling about 26% from $205.5 million in Q1 2024 to $151.7 million in Q4 2026.
• Q4 2026 produced a $38.1 million loss attributable to common shareholders, following a $26.4 million profit in Q3 and a $6.6 million loss in Q2.
• Retained earnings deteriorated from negative $304.9 million in March 2023 to negative $1.38 billion in March 2026, while weighted-average basic shares increased from approximately 399.7 million to 479.9 million, creating potential dilution and pressure on common shareholder value.