Executive Summary

Q4 FY2025 results: Total Investment Income was $166.946M, Net Investment Income (NII) was $79.043M ($0.17 per common share), and GAAP net loss applicable to common was $(226.369)M ($(0.50) per share) .
Versus estimates: EPS beat ($0.17 vs $0.127*) while revenue was a slight miss ($166.946M vs $167.080M*); this continues a pattern of EPS beats and revenue misses across prior two quarters *.
Strategic rotation accelerated: first-lien exposure rose, subordinated structured notes were largely exited, and NPRC executed property sales to redeploy into secured loans; management reiterated focus on first-lien senior secured middle-market lending .
Distributions: common monthly cash distributions maintained at $0.045 for Nov 2025–Jan 2026, with preferred distributions announced across tranches—supporting an income-focused shareholder base .

What Went Well and What Went Wrong

What Went Well

Ongoing de-risking: “rotation of assets into and increased focus on our core business of first lien senior secured middle market loans,” and exit of subordinated structured notes—down to 0.5% (fair value) by June; first-lien mix reached 66.9% (FV) in Q4 and 67.6% (FV) by September .
Cash distribution stability: common distributions held at $0.045 per month for Nov–Jan, supporting dividend continuity .
Real estate execution: NPRC sold three properties after July 1, 2025 and separately exited Crown Point Apartments for $151.75M with a 19.1% IRR and 2.6x multiple, enabling redeployment to first-lien loans .

Management quotes:

“Drivers focused on optimizing our business include: (1) rotation of assets into and increased focus on our core business of first lien senior secured middle market loans… (3) exit of our subordinated structured notes portfolio… (4) exit of targeted equity linked assets, including real estate properties…” .
“In our middle market lending strategy… we continued our focus on first lien senior secured loans during the quarter…” .

What Went Wrong

GAAP loss and NAV compression: GAAP net loss $(226.369)M with $(0.50) per share; NAV/share fell to $6.56 from $7.25 in Q3 and $8.74 in prior year, driven by realized and unrealized losses on non-control investments .
Revenue softness vs expectations: Total Investment Income of $166.946M missed consensus $167.080M*; a similar pattern occurred in Q3 and Q2 *.
Funding cost drift higher: weighted average cost of unsecured debt rose to 4.52% (from 4.33% in Q3), modestly pressuring NII and returns .

Financial Results

Metric	Q2 2025 (Dec 2024)	Q3 2025 (Mar 2025)	Q4 2025 (Jun 2025)
Total Investment Income ($USD Millions)	$185.466	$170.716	$166.946
Net Investment Income ($USD Millions)	$86.431	$83.489	$79.043
NII per Common Share ($)	$0.20	$0.19	$0.17
GAAP Net Income applicable to Common ($USD Millions)	$(30.993)	$(171.331)	$(226.369)
GAAP Net Income per Common Share ($)	$(0.07)	$(0.39)	$(0.50)
NII Margin (%)	46.6%	48.9%	47.4%
NAV per Common Share ($)	$7.84	$7.25	$6.56

Segment/Portfolio mix (fair value basis unless noted):

Portfolio Mix	Q2 2025 (Dec 2024)	Q3 2025 (Mar 2025)	Q4 2025 (Jun 2025)
First Lien Debt (% FV)	64.9%	65.5%	66.9%
Second Lien Debt (% FV)	10.2%	10.5%	11.5%
Subordinated Structured Notes (% FV)	5.8%	4.2%	0.5%
Equity Investments (% FV)	19.0%	19.7%	21.0%
Total Senior & Secured Debt (% FV)	80.9%	76.0%	78.4%
Non-Accrual Loans (% of Total Assets, FV)	0.4%	0.6%	0.3%

KPIs and balance sheet:

KPI	Q2 2025 (Dec 2024)	Q3 2025 (Mar 2025)	Q4 2025 (Jun 2025)
Number of Portfolio Companies	114	114	97
Annualized Current Yield – All Investments (%)	9.1%	9.2%	9.6%
Annualized Current Yield – Performing Interest-Bearing Investments (%)	11.2%	11.5%	12.2%
Balance Sheet Cash + Undrawn RC ($USD Millions)	$1,879.738	$1,716.035	$1,315.967
Net of Cash Debt/Equity Ratio (%)	39.8%	40.8%	44.4%
Weighted Avg Cost of Unsecured Debt (%)	4.49%	4.33%	4.52%

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Common Dividend ($/share)	Sep–Oct 2025	Not previously declared in Q2; expected declaration in Aug	$0.045 per month declared (Sep, Oct)	Maintained regular monthly cadence
Common Dividend ($/share)	Nov 2025–Jan 2026	Expected Nov declaration noted in Aug	$0.045 per month declared (Nov, Dec, Jan)	Maintained
Preferred Dividends (7.50%, 6.50%, 5.50%)	Dec 2025–Feb 2026	N/A	Monthly distributions declared per tranche	New period declarations
Funding Outlook	FY2025–FY2026	Next institutional bond maturity Nov 2026	Issued ~$168M 5.5% Series A Notes due 2030 (Oct 30, 2025)	Extended ladder, refinanced

Earnings Call Themes & Trends

Topic	Previous Mentions (Q2 2025)	Previous Mentions (Q3 2025)	Current Period (Q4 2025)	Trend
First-lien shift	First lien 64.9% FV; structured notes 5.8% FV; emphasis on rotation	First lien 65.5% FV; structured notes 4.2% FV	First lien 66.9% FV; structured notes 0.5% FV; first-lien originations $166.7M in Q4	Positive de-risking
Exit of structured notes	Portfolio reduced; exits since 2011 with 12.1% gross cash IRR	Continued amortization and exits	Essentially exited by June; 0.5% FV	Completed/near-complete
Real estate (NPRC)	59 properties; income yield 6.9%; $522M unrealized gain	58 properties; 4.5% yield; $460M unrealized gain	58 properties in June; 5.1% yield in Sept; exits continue (3 properties post-July)	Active recycling
PIK income	Total PIK $20.199M (Q2)	PIK $19.526M; “down nearly 50% from June 2024 quarter” in context	PIK $17.384M (Q4)	Declining (de-risking)
Non-accruals	0.4% (FV)	0.6% (FV)	0.3% (FV)	Stable/low
Funding	Unsecured debt cost 4.49%; laddered maturities	4.33%	4.52%; new 2030 notes	Slightly higher cost; ladder extended
Technology/distribution	N/A	N/A	Real estate credit strategy accessible via iCapital/SEI Access	Platform expansion

Management Commentary

Strategy: “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, including real estate properties…” .
NPRC pipeline: “NPRC has multiple additional properties in various stages of sale process… remaining portfolio paid us an income yield of 5.1% for the quarter ended September 30, 2025” .
Alignment: “senior management team and employees own 28.5% of all common shares outstanding… approximately $0.9 billion of our common equity as measured at NAV” .

Q&A Highlights

The Q4 FY2025 earnings call transcript was not available in the document catalog at the time of this analysis; the company provided dial-in and replay details but no transcript to review .
No Q&A-specific clarifications can be cited; key operational points were drawn from the furnished press releases and 8-Ks .

Estimates Context

Metric	Q2 2025 Est.*	Q2 2025 Actual	Q2 Result	Q3 2025 Est.*	Q3 2025 Actual	Q3 Result	Q4 2025 Est.*	Q4 2025 Actual	Q4 Result
EPS (Primary) ($)	0.14*	0.20	Beat	0.14*	0.19	Beat	0.127*	0.17	Beat
Revenue (Total Investment Income, $USD Millions)	189.673*	185.466	Miss	174.290*	170.716	Miss	167.080*	166.946	Miss

Values retrieved from S&P Global.*
Note: Analyst coverage is limited (Primary EPS - # of Estimates = 1*; Revenue - # of Estimates = 1*) across the examined quarters, reducing the robustness of consensus comparisons.*

Key Takeaways for Investors

NII resiliency: Despite GAAP losses from realized/unrealized marks, NII remained stable at $0.17 per share, supporting the maintained $0.045 monthly common dividend .
Portfolio de-risking is real and near complete: structured notes largely exited and first-lien mix increased—reducing downside risk while preserving double-digit performing yields .
NAV pressure persists: continued GAAP losses drove NAV/share to $6.56; monitor mark dynamics on non-control investments to gauge potential stabilization .
Revenue vs estimates: ongoing slight revenue misses suggest portfolio pacing/originations and repayments (net negative in Q4) are key drivers; watch origination momentum and repayments in coming quarters .
Funding costs: modest uptick in unsecured debt costs (4.52%) and new 2030 notes issuance extend the ladder but slightly raise financing cost—important for NII trajectory .
Real estate monetization remains a lever: NPRC exits provide cash redeployment into first-lien credit; property sale IRRs and multiples demonstrate value realization .
Consensus context: EPS consistently beats, revenue modestly misses; with only one estimate per quarter*, consensus may adjust as coverage deepens and the first-lien rotation fully flows through to income.*

S&P Global estimates disclaimer applies where marked with an asterisk.*

PROSPECT CAPITAL CORP (PSEC)·Q4 2025 Earnings Summary