Prospect Capital Corporation — Q3 2026 Earnings Summary

Financial Performance:

• Net Investment Income (NII) for the quarter ended September 30, 2026, was $76.4 million, down from $79.4 million in the same period in 2025 and $77.7 million in the quarter ended June 30, 2026.
• NII per common share was $0.15 for the quarter, compared to $0.17 in Q3 2025 and $0.15 in Q2 2026.
• Net loss applicable to common shareholders was $53.4 million ($0.10 per share) for the quarter, a significant decline from the $48.1 million net income ($0.10 per share) in Q3 2025 and a loss of $38.1 million ($0.08 per share) in Q2 2026.
• Distributions to common shareholders totaled $55.3 million ($0.105 per share) for the quarter, down from $62.4 million ($0.135 per share) in Q3 2025 and $58.0 million ($0.115 per share) in Q2 2026.
• Total assets were $6.04 billion as of September 30, 2026, down from $6.64 billion in Q3 2025 and $6.45 billion in Q2 2026.
• Net Asset Value (NAV) per common share was $5.36 as of September 30, 2026, down from $6.45 in Q3 2025 and $5.71 in Q2 2026.
• Net of cash debt to total assets ratio was 25.0% as of September 30, 2026, improved from 28.2% in Q3 2025 and 28.6% in Q2 2026.
• Interest coverage ratio was 375% for the quarter, up from 339% in Q3 2025 and 366% in Q2 2026.
• Total investment income was $151.7 million for the quarter, down from $157.6 million in Q3 2025.
• Net realized losses on investments were $71.6 million for the quarter, driven by a $203.2 million loss on non-control/non-affiliate investments offset by a $131.6 million gain on control investments.
• Net change in unrealized losses on investments was $27.0 million for the quarter.

Guidance and Future Outlook:

• No specific forward guidance or future growth targets were provided in the press release.
• Management indicated continued focus on exiting lower-yielding equity-linked assets and real estate properties to recycle capital into higher-yielding corporate first lien senior secured loans.
• The company expects to close the sale of its 8.3% equity stake in RGIS Services, LLC within 45 days of signing (October 27, 2026), subject to approvals.
• The company intends to use net proceeds from the $300 million 2031 Notes offering (expected to close November 5, 2026) primarily to refinance existing indebtedness, including the November 2026 Notes and/or borrowings under the Revolving Credit Facility.

Business Segments and Product Lines:

• Middle market lending represented 84% of investments at cost as of September 30, 2026, with first lien senior secured loans comprising 71.5% of the portfolio (up 740 basis points from June 2024).
• Second lien senior secured loans decreased to 11.1% of the portfolio (down 534 basis points from June 2024).
• Subordinated structured notes were exited, reducing the mix to 0.0% from 0.3% in Q3 2025.
• Real estate property portfolio (National Property REIT Corp.) totaled 15.3% of investments at cost, with 50 properties remaining after exiting six in the last twelve months.
• Originations for the quarter were $90.5 million, with 83% allocated to middle market investments.
• Total repayments and sales for the quarter were $257.4 million.
• The company exited Echelon Transportation, LLC in February 2026 and Valley Electric Company, Inc. in July 2026.
• Software company investments represented 1.8% of the portfolio at fair value.

Market and Competitive Landscape:

• The company's middle-market net leverage average was 4.8x, compared to a reference median of 6.1x from the KBRA Private Credit Q2 2026 Middle Market Compendium.
• The company's middle-market cash interest coverage average was 211%, compared to a reference median of 160%.
• The company's annualized net realized loss rate was 0.2%, compared to a reference rate of 1.0%.
• Prospect's exited investments since inception have resulted in an investment-level exited gross IRR of approximately 12% overall and 14.5% for middle-market lending.

Risks and Challenges:

• The press release notes that actual developments may vary materially from forward-looking statements due to unknowable future events.
• There is no assurance that investment opportunities will be consummated or that acquired assets will not be subject to future write-downs.
• The company faces risks associated with the realization of gains or losses on investments, particularly given the $203.2 million net realized loss on non-control/non-affiliate investments in the quarter.
• The company manages risks related to debt maturities and refinancing, having retired multiple upcoming maturities and announcing the redemption of $263.2 million in November 2026 Notes.

Management Commentary and Tone:

• John Barry, Chairman and CEO, stated that AI is the "most transformational game changer to come along in a generation" and expects profit-enhancing results from AI and automation initiatives.
• Management highlighted a history of innovation and first-to-market accomplishments in the BDC industry.
• The tone reflects a strategic shift towards optimizing the business by rotating assets into core first lien senior secured middle market loans and exiting lower-yielding assets.
• Management noted the company operates with one of the lowest debt leverage levels in the industry (25.0% net of cash debt to total assets).

Other Key Points:

• The Board of Directors increased the share repurchase program authorization to an aggregate of $200.0 million on November 3, 2026.
• Prospect declared monthly distributions of $0.0350 per share for November 2026, December 2026, and January 2027.
• Cumulative distributions to common shareholders since inception through January 2027 are estimated at $4.9 billion ($22.24 per share).
• Senior management and employees own 26% of all common shares outstanding, valued at approximately $0.7 billion at NAV.
• The company reduced outstanding debt principal by $341.4 million (18%) during the quarter, lowering total debt liabilities to $1.5 billion.
• The company successfully issued $300.0 million in 2031 Notes on October 29, 2026, with net proceeds of approximately $283.4 million.
• The company gave notice to redeem all $263.2 million of outstanding November 2026 Notes, with redemption expected by November 13, 2026.
• The company has a track record of prepaying and repaying unsecured bondholders totaling $5.5 billion over 959 tranches.
• Unencumbered assets totaled $4.01 billion as of September 30, 2026, representing 66.4% of total assets.