Prospect Capital Corp. Reports Decrease in Investment Income for Q2 and H1 2024

Prospect Capital Corp. (PSEC) reported its financial performance for the three and six months ended December 31, 2024, in its recent 10-Q filing. Investment income totaled $185.5 million for the three-month period, compared to $210.9 million for the same period in 2023. This decrease was primarily driven by lower interest income ($168.8 million vs. $194.6 million) and lower income from structured credit securities ($4.05 million vs. $8.88 million). Operating expenses for the three months ended December 31, 2024 were $99 million, compared to $114 million for the same period in 2023. Net investment income for the quarter was $86.4 million, down from $96.9 million in the prior-year period. The company reported a net loss per common share of $0.07 for the quarter, compared to a loss of $0.13 in the prior-year period.

For the six-month period ended December 31, 2024, Prospect Capital Corp. reported investment income of $381.8 million, a decrease of $65.4 million compared to the $447.2 million reported for the same period in 2023. This decrease was primarily due to lower interest income ($353.4 million vs. $397.1 million) and lower dividend income ($9.4 million vs. $4.4 million). Operating expenses for the six months ended December 31, 2024 were $205.5 million, compared to $224.6 million for the same period in 2023. Net investment income for the six-month period was $176.3 million, down from $222.5 million in the prior-year period. The company reported a net loss per common share of $0.45 for the six-month period, compared to a net income of $0.10 in the prior-year period.

Significant changes in the company's financial performance were attributed to several factors, including repayments and originations at lower rates than the average existing portfolio yield, a decline in SOFR rates, and decreases in income from structured credit investments. The company also noted that changes in the economic environment, financial markets, and creditworthiness of issuers in its investment portfolio could cause actual results to differ materially from its present expectations. The filing also detailed various transactions, including debt issuances and redemptions, equity issuances and redemptions, and exchanges of preferred stock.

Prospect Capital Corp. reported that as of December 31, 2024, it had $7,132,928 (in thousands) in total investments at fair value, representing 207.4% of its net assets applicable to common shares. The company's investment portfolio consisted of control investments, affiliate investments, and non-control/non-affiliate investments. The company's investment strategy focuses on debt and equity investments in middle-market privately-held companies. The company's portfolio is diversified across various industries, with significant holdings in Equity Real Estate Investment Trusts (REITs), Health Care Providers & Services, and Consumer Finance.

The company's outlook and forward-looking statements included in the filing highlight the inherent risks and uncertainties associated with its investment activities, including market risk, credit risk, liquidity risk, interest rate risk, prepayment risk, and structured credit-related risk. The company also noted the potential impact of global events and economic conditions on its business and financial performance. The company's management discussed its critical accounting estimates, particularly those related to the valuation of its investment portfolio, emphasizing the use of various valuation techniques and the inherent uncertainties involved.