PROSPECT CAPITAL CORP Q2 FY2025 earnings call

• Net investment income in the December quarter was $86.4 million or $0.20 per common share. NAV was $3.4 billion with $7.84 per common share. - Net debt to total assets was 28.1% at December 31st, and unsecured debt plus unsecured preferred is 91.9% of total debt plus preferred. - Since inception over twenty years ago, over $4.4 billion or $21.39 per share has been distributed. - Announced monthly common shareholder distributions of $0.045 per share for February, March, and April, and plan to announce next set of shareholder distributions in May. - Continue to rotate assets into first lien senior secured middle market loans sometimes with select equity investments, amortize subordinated structured notes, exit from equity-linked assets including real estate, enhance portfolio company operating performance, and utilize revolver. - Over the past two decades, invested $11.7 billion in over 300 exited investments with a 13% unlevered investment level gross cash IRR. - In middle market lending strategy, provided loans and equity investments to companies like Taos Footwear, Druid City Infusion, etc. - Subordinated structured notes portfolio was 5.8% of the investment portfolio, reduced from 7.9% in December 2023. Exited 15 subordinated structured notes investments since 2011 with an unlevered investment level gross cash IRR of 12.1% and cash on cash multiple of 1.3 times. - Real estate property portfolio at NPRC had exited 51 property investments since 2012, and remaining 59 properties had an income yield of 6.9% in the December 2024 quarter. - Performing interest-bearing investments had an annualized yield of 11.2% as of December. Interest income for the December quarter was 91% of total investment income. - Investment originations in the December quarter aggregated $135 million, with $120 million of first lien senior secured loans. So far in the current March 2025 quarter, $111 million in originations have been booked.

In the December quarter, net investment income (NII) was $86.4 million or $0.20 per common share. NAV was $3.4 billion with $7.84 per common share. Net debt to total assets was 28.1% at December 31st, and unsecured debt plus unsecured preferred is 91.9% of total debt plus preferred. Since inception, over $4.4 billion or $21.39 per share has been distributed. For the investment portfolio: At December, 64.9% was first lien debt, 10.2% was second lien debt, 5.8% was subordinated structured notes, and 19.1% was unsecured debt and equity investments. Subordinated structured notes portfolio was 5.8% of the investment portfolio, a reduction from 7.9% in December 2023. In the real estate property portfolio at NPRC, 51 property investments were exited since 2012 with an unlevered investment level gross cash IRR of 24.3% and cash on cash multiple of 2.5 times. The remaining 59 properties paid an income yield of 6.9% in the December 2024 quarter. Performing interest-bearing investments had an annualized yield of 11.2% as of December. Interest income for the December quarter was 91% of total investment income. Payment in kind income for the quarter ended December 2024 was $20 million, down 39% from the prior quarter. Non-accruals as a percentage of total assets stood at approximately 0.4% in December. Investment originations in the December quarter aggregated $135 million, with $120 million of first lien senior secured loans. So far in the current March 2025 quarter, $111 million in originations have been booked, with 86.4% being middle market lending and 13.6% real estate.

• Announced monthly common shareholder distributions of $0.045 per share for February, March, and April. Plan to announce next set of shareholder distributions in May. - Expect to continue to amortize subordinated structured notes portfolio and to reinvest primarily into first lien senior secured middle market loans. - Expect to continue to redeploy future asset sale proceeds primarily into both property value at capital expenditures as well as more broadly first lien senior secured middle market loans.

• This call contains forward-looking statements that are intended to be subject to Safe Harbor Protection. Future results are highly likely to vary materially. Do not undertake to update forward-looking statements. For additional disclosure, see earnings press release and 10-Q filed previously and available on website prospectstreet.com.

Q: Hey, everyone. Good morning. Question on the debt specifically the unsecured can you talk about how the rating changes will impact how you shape that going forward. If you intend to replace the over the next year or two, the public maturities in similar channels, or might you lean more on the revolver there?

A: Thanks, Finian, for that question. We don't anticipate significant changes in our financing strategy. Recall Prospect is the pioneer that basically introduced to the BDC industry. We have been doing this for over two decades. First issue a convertible bond, first issue an institutional bond, first to issue a program known as preferreds. Many, many types of financing that the rest of the industry enjoys today as a result of our leadership. We're big believers in having diversified array of markets to tap into, We do plan on utilizing our facility that matches on a floating rate basis with our assets that are dominated by floating rate. We have a well-diversified set of strong bank relationships close to fifty in that facility. We plan on continuing to tap the bond markets over time, the program notes markets, as well, and our preferred markets our credit spread versus treasuries, is actually tighter now than where it was in July of 2024. Which I think is a reflection of our strong credit profile as a company.

Q: Okay. Thanks. That's helpful. And just one on the preferreds. There was a think I disclosed offer at the end of January for an exchange. I know it's just a few days in, but if you could talk about how that's going if there's a lot of participation, and then I think 7.5% is the rate for the new securities if that's indicative on where you would issue a new class of preferreds. Thanks.

A: Sure. I'll take those two questions in turn. In terms of exchanges, we have selectively offered for various not convertible tranches of older series to exchange their paper into non-convertible, but still perpetual preferreds and still providing, you know, credit support to our bonds as junior capital for same and attractive financing. For our common equity. We've had strong participation in those exchange offers historically and would expect the same going forward. In terms of our new preferred series, yes, you have the coupon correct for that, which is a reflection in balancing decisions across different fixed income markets. Short term rates are down a little bit, but a medium five to ten year rates are up a bit. We had previously had a floater with a floor based on short term that had declined to the floor level and we saw a lot of demand at, you know, the prior level where we're issuing sort of last summer on more of a fixed basis, decided to move away from using a floater with the floor. Turns out people like floaters and rates are going up. Big surprise and not so much when rates are going down. Did that help, Finian?