Prospect Capital (PSEC) 8 Nov 242025 Q1 Earnings call transcript

Good day, and welcome to the Prospect Capital First Fiscal Quarter Earnings Release and Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to John Barry, CEO. Please go ahead.

Thank you, Dave.

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

John. to are highly are to vary statements to Thanks, do harbor forward-looking likely contains not statements. We be undertake safe results to our subject that Future protection. materially. call This update intended forward-looking

release prospectstreet.com. For additional our previously website, and filed disclosure, see and our available XX-Q earnings press on

. I'll turn back call Now over to John. the

Thank you, Kristin.

to of apologize shouldn't said an wanted Finian tells we O'Shea earnings I I Before John have get after what to on call. for started, you you that. call, earnings When your last said our the love life

said shouldn't know You instantly have that. you

founded feel questions scratch, people and business people forward in deal. your temper Prospect of our our you've all blast But a unfair. of to criticism and from Finnie years When for the firms, this and other been on sometimes can and doing Prospect best furnaces you XX years other tough saying, come. we at from we working the Wells with have have like appreciate I to and look I at

official was share. net quarter, the In income or per investment NII to September on $XX.X Now $X.XX business. or million our common

plus per Our debt Unsecured plus $X.XX was for to NAV $X.XX September ratio billion of Prospect. was XX.X%. preferred debt, common XX, total total At share. preferred or our XX% assets net debt is

per X.Xx declared Wednesday we billion $XX.XX X.Xx or inception closing. common September representing over ago $X.X share distributed our Since will per have January and years price our NAV distribution XX stock through share, XXXX XXXX

each and share of January. $X.XXX announcing are shareholder monthly November, December We for of per common distributions

of announcing shareholder our next February. We plan on in distributions set

estate shareholder including market and return real selected common our sometimes execute CLO into equity long-term co-investments. of first secured we by our rate middle our loans income senior to lien equity business strategies rotating total and credit, investments core distribution rightsizing as structured continue are We with

equity shareholder equity estate gross contractual have business. Our exited in attractive continue such CLO real generated and and real at of and CLO such respectively. distributions. XX% inception XXXX But level, XXXX, for since with more core XX% preferred the property investments estate for investment distributions investments, compared cash strategies cash IRRs to rates variability of unlevered our

recurring As into shown the by our XXX we for percent middle-market income an total over period. points of investments, interest XX% as income, rotate corporate has income basis variability lower of reached a increase quarterly year-over-year as

real developed less strategies. and as going fund strategy Management We be to to Prospect risk-adjusted Capital targeted CLO Corporation new this continue sheet an Capital managed Prospect investments investment another with affiliate equity in CLO balance investments estate perceive of attractive to still on intend be We forward. and focus to by

decreased equity CLO senior Similarly us. growing as the in in with XXXX our of X% XX, lien on cash-on-cash to lending September mix core XX% first yields, our yields we our rotation has CLO business we thereby significantly on Prospect lower to reduce real such typically emphasize tend higher years to be assets the initial more of at strategy such equity resulting for focusing years versus estate. with secured as later Corporation. generates seek attractive by but that Capital while to in variability execute

fit a periods rates. been during Capital a return solid Prospect of total medium-term that is for Real strategy low interest and short-term Corporation estate investing has

strong years exited net after income dozens the performance. in rent achieving past have several of properties our We and operating value-add

had recently such fewer we We the have as exit-related income have exit-related from generated over also property substantial estate exits. income with sales decreasing real years

future exit-related to attractive we the returns, with real are pace expect cautious While about monetize property investments, of we further estate income.

XX reversed forward, basis shareholder the increases Over has may for rates which last reductions hurt prior distribution expectations book lower points the short-term all market more interest that across going with rate of credit weeks, industries. future our X Fed related

We rates our declaration distribution the shareholder interest for for factored forward today. have short-term common curve in already declining

over now Thank Grier. I'll turn to you. the call

you, John. Thank

Capital such Over the that over Corporation has $XX.X This earned cash past investments has XX% invested general includes X in rates. investment been reference and peer have been period time majority battle-tested the downturn Prospect GFC exited have other The of Capital level Corporation. headwinds. gross in decades, X-decade interest XXX Prospect low by billion a to dominated unlevered by general not IRR economic BDCs and

secured attributes. to originated non-syndicated with offers lien sometimes companies, selected directly middle-market first equity loans co-investments of business U.S. core compelling senior Our multiple

that as basis are larger points loans much end commoditized more increase opportunity of offers the XXX business of market. period. quarterly investments now over spreads have with lien a an for than loans experiencing total proprietary of flow percentage and focused to core XX%, which lenders on larger First year-over-year for higher competitive spread Such other lending compression companies the reached significant

such often for thereby by Middle better when Such often rates rates short-term during higher interest larger protection and XXX interest X decline. offer loans XXX greatly basis comparison, Capital the last Prospect floors income companies Fed market providing sharply loans the only to to to when Corporation have which benefited versus yield reduced GFC. basis XXX rate points higher floors, point floors,

we estate warrants, to middle in returns financing helping net objective and facility, market our and equity With also further investments, investments preferences. an yields have liquidation to secured efficient business upside, middle sometimes market investments With such current risk-adjusted and fashion. revolving an through loans, and prudent total debt for our different maximize with opportunity First real credit income. investment from structure a enhance to eligible CLO Xx also are with cost core equity senior convertible favorable lien including

our are returns With by XX% credit yields enhanced lift Many current XX% XX% total total unlevered unlevered or underwriting to and levered returns currently XX% more. facility targeted such to have to that or such to we further targeted investments and of double-digit more. yields returns

Discovery such Logistics, capture RK City, Druid also illustrate like upside. investments middle-market and Point where nonsyndicated focus we Recent equity

synergistic potential portfolio market creation middle Industries also multiple add-on With R-V Our Comet value with substantial purchasing examples, companies have acquisitions. Valley drive and making acquisitions. including to the

With we add that acquisition areas. ability a experienced value have from management strategic XXX add-on to important professionals operational team planning, our greater market teams over areas of other Board prospect such benefit assistance, executive investments, to recruiting, supervision, middle sourcing in in like

market to additional going its loans substantial forward. build first secured benefits Our shareholders which with selected Corporation to pipeline expect with lien to and continues we Capital senior co-investments, equity Prospect middle non-syndicated deliver

investments down the plan underlying borrower-pledged risk. first the of in first in prior year, quarter, that's second up resulting subordinated the mix from portfolio portfolio lien X.X% our executing reducing continued and first For assets pleased our fair being X.X% from second notes debt equity the year, lien X.X% at that's X.X% -- our prior secured our comprised to September debt while collateral, benefiting That's increase from our thereby down prior exposure, with our the subordinated down secured structured and lien debt XX.X% from success X.X% XX.X% notes debt. and lien year prior XX.X% that's investments, with structured collateral. underlying year. value XX.X% unsecured We're from with lien reducing

and that as is of XX.X% investments, generates of approach interest-bearing performing yields, an yield attractive risk-adjusted we're one September. Prospect's our annualized generating

strong revenue was of to business. in XX% the investment recurring total reflecting September income income, quarter profile interest our Our a

September, of a portfolio As value billion. XXX we $X.X with companies of fair held

concentration. a also avoiding We diversified different cyclicality in many invest industry for continue a preference company and across portfolio to fashion industries with

stood asset concentration our September, leisure sector industry at in hotel, of As in only stood the only at X.X%. X.X% restaurant and energy

retail total approximately of average in And net assets stood low stood at a at stood as X.X% X.Xx the September. in where only Weighted of at have industry market EBITDA. X.X% we cyclical percentage as Nonaccruals middle exposure. portfolio examples leverage industries

$XXX million. EBITDA million. average aggregated weighted September in Originations quarter stood per $XXX company the portfolio Our at

We $XXX experienced our million repayments of validation $X of and also capital million. resulting net exits as objective, a originations in preservation of

September comprised quarter, middle lending the XX.X% X.X%; and and estate X.X% originations middle market our buyouts. market lending, During real

we quarter, million originations So $XX booked repayments. and in far experienced current million $XXX in the of December

now Thank call over you. I'll to the Kristin. Kristin? turn

leverage, toward Thanks, weighting and to to believe commitments unfunded demonstrate of debt, capitalize unencumbered balance liquidity opportunities. sheet of on avoidance maturities of attractive as Grier. asset funding, majority lack prudent substantial near-term rate diversified our fixed both assets access substantial strength . well book unsecured We matched as

has in company Our liabilities the XX years into locked a extending ladder future. of

Our million X.X% total totals unfunded approximately companies eligible our commitments to of assets. representing $XX portfolio approximately

and revolving stand cash currently billion. facility undrawn credit balance combined commitments sheet at Our $X.X

of June, as completed of pledged billion our to we assets a unmatched $X.X nonrecourse X-year an community from maturity. new of banks, of In a company unencumbered the company . The Prospect SPV. our funding, Capital XX $X.XX assets, lender approximately As held from other by successfully strong any our are extended remaining demonstrating of industry. currently and September, credit with diversity amended the we billion XX% facility our support portfolio. assets in We representing commitments have with

us. The by with a distributions amortization year interest continuing XXXX, facility of allowed be revolves June until followed to to

continues SOFR bonds, investment-grade unsecured Capital unencumbered of and program past Outside at Our in convertible bonds be revolver bonds, Corporation, our of few multiple drawn the to Prospect notes. types debt, including our years, issued we've pricing X.XX%. assets, and baby plus institutional from benefiting including

X debt financial on ladder our with out defaults industry. and covenants, with our and revolver. our unsecured term We've these through debt XXXX. company types maturities restrictions have currently of have XX to than occasions tapped our All our cross investment-grade ratings to liability multiple more extending debt no duration maturities We of other now any the extend years in market unsecured no no asset

and XX, across weighted reduced With our debt our investors substantially of so risk. so we debt counterparty unsecured banks cost At financing and debt was nonrecourse X.XX%. September have unsecured tranches, average many XXXX, many

back Now I'll call to . turn the over John.

Thank you, Kristin.

it's you questions us we think if any. have for much. take very to I time Thank

O'Shea Our Instructions] Wells Fargo comes with Finian from Securities. question first [Operator

the appreciate John. opening remarks, I

voice. your Welcome back. hear to We're delighted

BDC. Likewise, we good about always I have when know a time talking like both to

on the just dividend. So this one quarter

weighs it's yield a more isn't ideal. course, BDC, it a still now, book. which rightsized valuation comparatively low for So on of And feels but that on

are driving book on -- of things, some like you I what help But you can on those So outline you sort pockets CLO or you quantify you return. think, what and for rotation. can much improved an rotate strive can where touched how

to I'm gave Grier, I'm a I beginning. have questions. perspective. sure we but hear little not from Actually, Grier allowed he to, why I'd my the do answer slightly [indiscernible] different love at will any because

Fannie, Sure. you thank your for question.

we we're that amortizing cash GAAP a from the actually And a And in not during robust income reasonably enjoying therefore, is, while standpoint. yield life segment, of we're CLO So talked weighted front-end tends income flows, the much and to be how the recognizing about deal. significantly. book

off with yield which equity that GAAP think along been getting X% of middle I upside CLOs, many core is in we're somewhere which on the double-digit our successful has obviously earn quite lending, below robust can market plus investments. of yields recent or X% well business cases we

So earnings book total boost. terrific a highlighted by but which the Area every and portfolio. We're current also quarter of that a That is lot continues real #X. we drop #X, CLOs. on opposed basis. area is in continuing book about exit as and to you return driven a a amortize return percentage is That's should as the more strategy, now the estate, in of of at to to see X% amortize it provide which

obviously we'll we of X When maybe high estate some yield and SOFR here, plus at of a XX Fed return middle bps was had that pacing market the and depending only getting weeks was competitive sort upside single-digit with had point, that. real lending, to on X We've beyond upon cuts. near

think core middle do of workforce to has to that's as value-add successful we environment, is into and prudent we've equity and market appreciated with in real expect our that not through rotate as in continued current a housing. and the and again, orderly real of lending upside in to monetizing prudent competitive much estate investing And our do estate fashion our business

we time we total also to and was #X, a standpoint once to and we right fashion #X to middle a number particular equity, market investments. of permanent income capital we business, our efficiency into exiting be that and deals from exit area running So what new appreciated produce the again current capital it's think equity hold area where examine a foregone successful in hold slate deals to again is often would higher and that's return rotate where discipline potentially a do a prudent return

party examined a And third to yield then we've foregone and if our concluded to sell hurdle below IRR foregone we'd rather both rotate. we then rates are

to upside which Thank our this you. focused think return going we relentlessly business forward equity, our significant on So provides to on. boost we're

closing turn question-and-answer Barry like session. for would John I over back to to our any concludes the conference This remarks.

quarter. thank we'll much. Bye Okay. so everyone. you, Have you wonderful and morning, a Well, see Thanks in a now.

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

now may disconnect. You