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PROSPECT CAPITAL CORP (PSEC)·Q1 2026 Earnings Summary

Executive Summary

  • Q1 FY2026 delivered stable core earnings: Net Investment Income (NII) $79.35M and $0.17 NII per share, flat sequentially and down year-over-year; GAAP net income to common turned positive at $48.09M ($0.10 per share) after two loss-making quarters .
  • Revenue (Total Investment Income) fell to $157.62M, down 5.6% q/q and 19.7% y/y, and came in below thin Wall Street consensus ($169.53M, 1 estimate); GAAP EPS modestly missed consensus ($0.11, 1 estimate) with actual $0.10 .
  • Portfolio quality continued to rotate toward first lien senior secured loans (71.1% at cost), while non‑accruals rose to 0.7% of total assets (fair value) from 0.3% in Q4; NAV/share edged down to $6.45 from $6.56 .
  • Liquidity strengthened (cash + undrawn RCF $1.52B) and funding ladder extended via $168M senior unsecured 5.5% Series A Notes due 2030, supporting ongoing portfolio rotation and refinancing .
  • Catalysts: continuing $0.045 monthly common dividends through January, portfolio de‑risking toward first lien loans, and NPRC property exits with attractive IRRs; near‑term debate centers on revenue miss, NAV drift, and rising non‑accruals .

What Went Well and What Went Wrong

What Went Well

  • First lien mix increased 70 bps q/q and 701 bps vs June 2024 to 71.1% (cost), reinforcing credit quality and seniority focus .
  • NPRC executed three additional property exits post July 1, 2025 generating ~$59M proceeds and an unlevered gross cash IRR of 22.8% (2.3x multiple); aggregate NPRC unrealized gain was ~$320M as of quarter end .
  • Funding profile improved: $168M new 5.5% unsecured notes due 2030 and liquidity rose to $1.52B (cash + undrawn RCF), with unsecured + perpetual preferred at 80.8% of capital stack .

What Went Wrong

  • Total Investment Income declined to $157.62M (−5.6% q/q; −19.7% y/y), reflecting portfolio repayments and mix shifts; origination activity was net negative (−$143.09M) .
  • Non‑accruals rose to 0.7% of total assets (fair value) from 0.3% in Q4 and 0.5% a year ago, elevating credit risk discussion .
  • NAV/share slipped to $6.45 from $6.56 in Q4, pressured by distributions and modest net unrealized losses; revenue missed Street consensus and GAAP EPS slightly missed* .

Financial Results

Core and GAAP Results vs Prior Periods

MetricQ3 2025Q4 2025Q1 2026
Total Investment Income ($USD Millions)$170.716 $166.946 $157.624
Net Investment Income ($USD Millions)$83.489 $79.043 $79.350
NII per Common Share ($USD)$0.19 $0.17 $0.17
Net Income applicable to common ($USD Millions)$(171.331) $(226.369) $48.087
GAAP EPS ($USD, Net Income per Common Share)$(0.39) $(0.50) $0.10
NAV per Common Share ($USD)$7.25 $6.56 $6.45
Total Assets ($USD Millions)$6,996.312 $6,804.938 $6,641.870

YoY context (Q1 2026 vs Q1 2025): Total Investment Income $157.624 vs $196.308; NII $79.350 vs $89.877; GAAP EPS $0.10 vs $(0.38) .

Estimates vs Actuals

MetricQ3 2025Q4 2025Q1 2026
Primary EPS Consensus Mean ($)0.14*0.127*0.11*
GAAP EPS Actual ($)(0.39) (0.50) 0.10
Revenue Consensus Mean ($USD Millions)174.290*167.080*169.531*
Revenue Actual ($USD Millions)170.716 166.946 157.624
EPS # of Estimates1*1*1*
Revenue # of Estimates1*1*1*

Notes: Values retrieved from S&P Global*. Significant surprises: Revenue miss in Q1 2026 (−$11.9M vs consensus; −7.0%); GAAP EPS slight miss (−$0.01). Coverage is thin (single estimate), so interpret with caution*.

Portfolio Mix and Yield

Metric (at Cost unless noted)Q3 2025Q4 2025Q1 2026
First Lien Debt (% of investments at cost)65.5% 70.5% 71.1%
Second Lien Debt (% at cost)10.5% 14.4% 13.5%
Subordinated Structured Notes (% at cost)4.2% 0.6% 0.3%
Equity Investments (% at cost)19.7% 14.4% 15.0%
Annualized Current Yield – Performing Interest Bearing Investments11.5% 12.2% 11.8%
Non‑Accrual Loans (% of total assets, fair value)0.6% 0.3% 0.7%

KPIs and Capital

KPIQ3 2025Q4 2025Q1 2026
Number of Portfolio Companies114 97 92
Number of Industries33 33 32
Net of Cash Debt to Total Assets Ratio28.7% 30.4% 28.2%
% Interest‑Bearing Assets at Floating Rates77.5% 76.8% 75.7%
Unsecured Debt + Perpetual Preferred as % of Total Debt + Preferred87.5% 77.1% 80.8%
Balance Sheet Cash + Undrawn RCF ($USD Millions)$1,716.035 $1,315.967 $1,524.462

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Common dividend ($/share/month)Nov 2025Expected declaration in Nov (from Q4 PR) $0.045 for Nov, Dec, Jan with stated record/payment dates Maintained
Preferred dividends (7.50%, 6.50%, 5.50% series)Dec 2025–Feb 2026Prior schedules through Nov 2025 Monthly amounts declared: $0.15625 (7.50%), $0.135417 (6.50%), $0.114583 (5.50%) with record/payment dates Maintained
Revenue/Margins/OpEx/TaxQ2 FY2026 and FY26Not providedNot providedN/A

Dividend DRIP remains in place with 5% discount via DTC election .

Earnings Call Themes & Trends

Note: A public earnings call transcript for Q1 FY2026 was not available in our document set; call was scheduled for Nov 7, 2025 .

TopicPrevious Mentions (Q-2: Q4 2025; Q-1: Q3 2025)Current Period (Q1 2026)Trend
Portfolio rotation to first lienFirst lien 70.5% (cost) and plan to further increase First lien 71.1% (cost); originations largely first lien ($74.2M of $91.6M) Strengthening
Exit of subordinated structured notesDown to 0.6% (cost) by Q4 Down to 0.3% (cost) De‑risking
NPRC real estate exits and performance58 properties; 24% IRR, 2.4x multiple; $378M unrealized gain 55 exits LT; 22.8% IRR on recent exits; $320M unrealized gain; additional sales in process Active recycling
Capital/liquidity actionsRCF extended; redeemed 3.706% notes due 2026 in June 2025 Issued $168M 5.5% notes due 2030; liquidity $1.52B Term extended
Non‑accruals0.3% (fair value) in Q4 0.7% (fair value) Slight deterioration
Revenue trajectoryTII $166.95M in Q4; $170.72M in Q3 TII $157.62M Down

Management Commentary

  • Strategic priorities: “Rotation of assets into and increased focus on our core business of first lien senior secured middle market loans… reduction in our second lien… exit of our subordinated structured notes… exit of targeted equity linked assets… enhancement of portfolio company operating performance; and greater utilization of our cost efficient revolving floating rate credit facility.”
  • Middle‑market lending focus: “We continued our focus on first lien senior secured loans during the quarter, with such investments totaling $74.2 million of our $91.6 million of originations.”
  • NPRC update: “We exited three property investments after July 1, 2025 for approximately $59 million of net proceeds… unlevered investment‑level gross cash IRR of 22.8%.”
  • NPRC transaction quote: “This sale highlights our disciplined investment approach and focus on long-term value creation… allows Prospect Capital Corporation to redeploy capital into opportunities that further Prospect’s strategic objectives.” — Mack Levine, VP, NPRC .

Q&A Highlights

A full earnings call transcript was not available in the documents, and we could not retrieve Q&A content; the call was scheduled for Nov 7, 2025 . No Q&A highlights can be provided based on available primary sources.

Estimates Context

  • EPS: GAAP EPS of $0.10 modestly missed the Primary EPS consensus mean of $0.11 (1 estimate); prior quarters also missed on GAAP EPS amid realized/unrealized losses .
  • Revenue: Total Investment Income of $157.62M missed consensus of $169.53M (1 estimate)*; sequential decline aligns with net repayments and sales outpacing originations .
  • Coverage: Only one estimate for EPS and revenue per quarter, limiting statistical significance; investors should focus on NII trajectory and portfolio mix over GAAP volatility in BDCs*.

Notes: Values retrieved from S&P Global*.

Key Takeaways for Investors

  • Core earnings stability: NII held at ~$79M and $0.17/share; focus on NII sustainability is appropriate given GAAP volatility from marks and realized losses .
  • Credit quality tilt: First lien senior secured exposure rose to 71.1% (cost), with structured notes nearly exited; supports lower loss severity if credit cycle worsens .
  • Watch credit trend: Non‑accruals increased to 0.7% (fair value); monitor Q2 for further movement and any idiosyncratic credits driving the change .
  • NAV pressure vs distributions: NAV/share dipped to $6.45; distributions maintained at $0.045/month through January, implying continued cash returns but potential NAV drag absent capital gains .
  • Funding and liquidity: $1.52B liquidity and $168M new 2030 notes extend runway for refinancing and originations; unsecured + preferred remain majority of the capital stack .
  • Revenue/consensus gap: Revenue and GAAP EPS missed thin consensus*, a likely short‑term narrative headwind; however, Street coverage is limited and NII is the more relevant earnings lens for BDCs*.
  • Medium‑term thesis: De‑risked portfolio, NPRC monetizations with attractive IRRs, and a long duration/liquidity profile support balance sheet resilience; execution hinges on maintaining NII and controlling non‑accruals .
Sources: All financials and commentary from PSEC Q1 FY2026 8-K press release and exhibits **[1287032_0001287032-25-000342_a2025-9x30xpsecearningsrel.htm:0]** **[1287032_0001287032-25-000342_a2025-9x30xpsecearningsrel.htm:1]** **[1287032_0001287032-25-000342_a2025-9x30xpsecearningsrel.htm:2]** **[1287032_0001287032-25-000342_a2025-9x30xpsecearningsrel.htm:3]** **[1287032_0001287032-25-000342_a2025-9x30xpsecearningsrel.htm:6]** **[1287032_0001287032-25-000342_a2025-9x30xpsecearningsrel.htm:7]** **[1287032_0001287032-25-000342_a2025-9x30xpsecearningsrel.htm:8]** **[1287032_0001287032-25-000342_a2025-9x30xpsecearningsrel.htm:9]** **[1287032_0001287032-25-000342_psec-20251106.htm:2]**; prior quarters from Q4 FY2025 and Q3 FY2025 8-K press releases **[1287032_0001287032-25-000235_a2025-6x30xpsecearningsrel.htm:0]** **[1287032_0001287032-25-000235_a2025-6x30xpsecearningsrel.htm:2]** **[1287032_0001287032-25-000235_a2025-6x30xpsecearningsrel.htm:3]** **[1287032_0001287032-25-000235_a2025-6x30xpsecearningsrel.htm:6]** **[1287032_0001287032-25-000235_a2025-6x30xpsecearningsrel.htm:8]** **[1287032_0001287032-25-000117_a2025-3x31xpsecearningsrel.htm:0]** **[1287032_0001287032-25-000117_a2025-3x31xpsecearningsrel.htm:3]** **[1287032_0001287032-25-000117_a2025-3x31xpsecearningsrel.htm:4]** **[1287032_0001287032-25-000117_a2025-3x31xpsecearningsrel.htm:7]** **[1287032_0001287032-25-000117_a2025-3x31xpsecearningsrel.htm:9]** **[1287032_0001287032-25-000117_a2025-3x31xpsecearningsrel.htm:10]**; NPRC press release **[1287032_58cf85b8970146918a40157673ceb162_0]**.
Estimates: S&P Global consensus means and # of estimates (asterisked values in tables and text).*