Prospect Capital Corp. Reports $139.9 Million Net Loss for Q1 2025

Prospect Capital Corp. (PSEC) reported a net loss of $139.9 million for the three months ended March 31, 2025, compared to a net income of $144.4 million for the same period in 2024. This significant decrease resulted from a combination of factors, including net realized losses from investments of $63.2 million and a net change in unrealized losses of $160.9 million. Investment income decreased to $170.7 million from $202.2 million, while operating expenses increased to $87.2 million from $107.8 million. Basic and diluted earnings per share were both a loss of $(0.39) for the quarter, compared to earnings of $0.27 and $0.20, respectively, in the prior-year period.

The nine-month period ending March 31, 2025, showed a net loss of $274.0 million, a stark contrast to the $233.3 million net income reported for the same period in 2024. This difference stemmed from net realized losses of $210.2 million and a net change in unrealized losses of $324.7 million. Investment income for the nine months decreased to $552.5 million from $649.4 million, while operating expenses rose to $292.7 million from $332.5 million. Basic and diluted earnings per share were both a loss of $(0.84) for the nine-month period, compared to earnings of $0.38 and $0.33, respectively, in the prior-year period.

During the three-month period, the company repaid $156.2 million in convertible notes at maturity and repurchased $33.3 million of 2026 notes, resulting in a net realized gain of $693,000 from the extinguishment of debt. Additionally, $145,859,000 in Prospect Capital InterNotes® were issued, generating net proceeds of $143,779,000. The company also issued 1,640,751 shares of common stock through its dividend reinvestment plan and experienced conversions of 5.50% and 6.50% preferred stock to common stock, resulting in a loss from redemption of preferred stock of $1,619,000. Further, 1,029,590 shares of Series A5 Preferred Stock and 181,260 shares of Series M5 Preferred Stock were issued.

Significant changes in the composition of the investment portfolio occurred during the reporting period. As of March 31, 2025, the company held investments totaling $6.9 billion at fair value, with 114 long-term portfolio investments and CLOs. Control investments comprised $3.7 billion (53.6% of the portfolio), affiliate investments $22.7 million (0.3%), and non-control/non-affiliate investments $3.2 billion (46.0%). The company's qualifying assets represented 83.74% of total assets. The filing details numerous transactions with controlled companies, including interest income, managerial assistance, and reimbursements for legal and tax services.

The company's outlook is characterized by uncertainty due to macroeconomic factors such as inflation, interest rates, and geopolitical instability. Forward-looking statements indicate that the company's future operating results, business prospects, and investment returns are subject to various risks and uncertainties. The company's ability to meet its payment obligations and maintain its RIC status depends on its ability to generate sufficient cash flow. The filing includes detailed disclosures about the company's debt, preferred stock, and equity offerings, along with explanations for changes in financial performance and valuation methodologies.