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DATE

Friday, May 8, 2026 at 9 a.m. ET

CALL PARTICIPANTS

  • Chairman and CEO — John F. Barry
  • President and COO — Michael Grier Eliasek
  • CFO and Treasurer — Kristin Van Dask

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TAKEAWAYS

  • Net Investment Income (NII) -- $78 million, or $0.16 per common share.
  • Net Asset Value (NAV) -- $3 billion, or $6.05 per common share.
  • Net Debt to Total Assets -- 27% reported as of March 2026.
  • Unsecured Debt Plus Unsecured Perpetual Preferred -- 88% of total debt plus preferred stock.
  • Monthly Distributions Declared -- $35 per common share for May, June, July, and August.
  • First Lien Mix -- Increased 790 basis points to 72% of investments since June 2024.
  • Second Lien Mix -- Decreased 404 basis points to 12.4% since June 2024.
  • Subordinated Structured Notes Mix -- Fell 837 basis points to near zero since June 2024.
  • Portfolio Fair Value -- 89 portfolio companies across 31 industries totaling $6.3 billion as of March 2026.
  • Middle Market Lending -- Comprised 94% of originations in the March quarter and reached 85% of investments at cost, up 875 basis points since June 2024.
  • Real Estate Portfolio at Cost -- National Property REIT Corp. investments were 14% of the portfolio; five properties exited in the fiscal year through March 2026.
  • Interest Income Recurrence -- 92% of total investment income for the trailing 12 months ending March 2026.
  • Payment-in-Kind (PIK) Interest -- 11% of total investment income for the quarter, down 41% from the prior 12 months.
  • Non-Accruals -- around 0.7% of total assets at fair market value as of March.
  • Investment Originations and Repayments -- $115 million in new originations (94% middle market); $222 million in repayments, resulting in net repayments of $107 million.
  • Unfunded Eligible Commitments -- $28 million total, including $17 million at sole discretion, representing 0.4% and 0.3% of total assets, respectively.
  • Liquidity -- Combined cash and undrawn revolver commitments of $1.8 billion as of March 2026.
  • Unencumbered Assets -- $4.2 billion, or approximately 65% of the portfolio, as of March 2026.
  • Bank Credit Facility -- $2.12 billion in commitments from 48 banks, maturing June 2029 and revolving until June 2028; pricing at SOFR plus 2.05%.
  • Weighted Average Cost of Unsecured Debt -- 4.71% as of March 31, 2026.
  • Recent Senior Note Issuance -- approximately $168 million of 5.5% senior unsecured notes due 2030 issued on October 30, 2025.

SUMMARY

The call presented clear evidence of a strategic portfolio shift away from subordinated and equity-linked assets toward first lien, senior secured middle market loans, with substantial increases in first lien mix and middle market lending at cost. The company emphasized the nearly completed exit from subordinated structured notes and continued disposition of real estate holdings, while maintaining high recurring interest income and low non-accruals. Management highlighted robust access to diversified funding, including substantial undrawn revolver commitments and multiple tranches of unsecured debt, supporting liquidity and liability management. Long-term return statistics were disclosed, including a 16.9% gross IRR in core middle market lending to companies with less than $50 million EBITDA and a 10 basis point realized annualized net loss rate in that segment over nearly 22 years.

  • President and COO Eliasek said, "Our portfolio at fair market value included 2.5% of investments in software companies, which is significantly less than the 23% average across BDCs with publicly traded unsecured bonds from a Wall Street fixed income research report in the last couple of months."
  • Reported real estate yields and property exits could signal reduced real estate exposure and redeployment toward higher-yielding corporate loans, based on the call's stated asset rotation strategy.
  • CFO Van Dask emphasized, "With so many banks and debt investors across so many unsecured and nonrecourse debt tranches, we have substantially reduced our counterparty risk."
  • The call confirmed no new unfunded asset commitments beyond those reported, and all unsecured debt vehicles contain no cross-defaults with the revolver facility.

INDUSTRY GLOSSARY

  • First Lien Senior Secured Loan: A loan backed by specified collateral and prioritized ahead of other debts in a bankruptcy scenario.
  • Second Lien Loan: Debt secured by the same collateral as a first lien loan but subordinate in repayment priority.
  • Subordinated Structured Notes: Securities representing subordinated tranches in structured finance deals, which absorb losses before senior tranches.
  • Payment-in-Kind (PIK) Interest: Interest paid via additional securities rather than cash, often indicating higher portfolio risk or illiquidity.
  • Non-Accruals: Defaulted or impaired loans for which interest income is no longer recognized due to payment uncertainty.
  • Unencumbered Assets: Assets not pledged as collateral, available for unsecured borrowing or liquidity needs.

Full Conference Call Transcript

John Barry: Thank you, Kristin. In the March quarter, our net investment income, or NII, was $78 million, or $0.16 per common share. Our NAV was approximately $3 billion, or $6.05 per common share. At March 31, our net debt to total assets ratio was 27%. Unsecured debt plus unsecured perpetual preferred was 88% of total debt plus preferred. We are announcing monthly common shareholder distributions of $35 per share for each of May, June, July, and August. Since our IPO nearly 22 years ago, through our August 2026 declared distribution we will have distributed approximately $4.8 billion, or $22.07 per share. Our preferred shareholder cash distributions continue at their contract rates.

We continue to progress our strategic priorities including rotation of assets into an increased focus on our core business of first lien senior secured middle market loans, with our first lien mix increasing 790 basis points to 72% since June 2024. We are focusing on new investments in companies with less than $50 million of EBITDA, including companies with smaller funded private equity sponsors, independent sponsors, and no third-party financial sponsors. Number two, reduction in second lien senior secured middle market loans with our second lien mix decreasing 404 basis points to 12.4% since June 2024. Number three, exiting subordinated structured notes, with our subordinated structured notes mix decreasing 837 basis points to near zero since June 2024.

Number four, exiting targeted equity-linked assets, including real estate, with five additional properties sold in the current fiscal year and certain corporate investments, including the exit of Echelon Transportation in February 2026, with other exits targeted and in progress. Number five, enhancement of portfolio company operating performance and profitability, including through adoption of artificial intelligence and automation initiatives focused on enhancing revenues and reducing costs. And number six, utilization of our cost-effective floating-rate revolver, which significantly matches our floating-rate assets. Thank you. I will now turn the call over to Michael Grier Eliasek.

Michael Grier Eliasek: Thank you, John. Over the past two decades, Prospect Capital Corporation has invested approximately $13.4 billion in over 350 exited investments out of over $22 billion invested in over 450 total investments that have earned a 12% unlevered investment-level gross cash IRR to Prospect Capital Corporation. This multi-decade time period predates and includes the GFC, and has been dominated in general by low prevailing market interest rates.

In Prospect Capital Corporation’s primary business of middle market lending, over the same nearly 22-year time period, Prospect Capital Corporation’s exited investments resulted in an investment-level exited gross IRR of approximately 14.4%, based on total capital invested of approximately $11.4 billion and total proceeds from such exited investments of about $14.7 billion, with an annualized realized loss rate of 20 basis points.

In Prospect Capital Corporation’s core targeted business of middle market lending to companies with less than $50 million of EBITDA, over the same nearly 22-year time period, Prospect Capital Corporation’s exited investments resulted in an investment-level exited gross IRR of approximately 16.9%, based on total capital invested of around $6.5 billion and total proceeds from such exited investments of about $8.6 billion, with an annualized net realized loss rate of 10 basis points. Prospect Capital Corporation’s EBITDA-to-interest coverage for our primary business of middle market lending is about 205%, which increases to around 230% for Prospect Capital Corporation’s core targeted middle market lending to companies with less than $50 million of EBITDA.

As of March 2026, we held 89 portfolio companies across 31 different industries, with an aggregate fair value of $6.3 billion. Our portfolio at fair market value included 2.5% of investments in software companies, which is significantly less than the 23% average across BDCs with publicly traded unsecured bonds from a Wall Street fixed income research report in the last couple of months. We primarily focus on senior and secured debt, which was 84% of our portfolio at cost as of March. Our middle market lending strategy is the primary focus of our company, with such strategy, as of March, representing 85% of our investments at cost, an increase of 875 basis points in our business mix from June 2024.

Middle market lending comprised 94% of our originations during the March quarter, with a continued focus on first lien senior secured loans. Investments during the quarter included follow-on investments in existing portfolio companies to support acquisitions, working capital needs, organic growth initiatives, and other objectives. We have essentially completed the exit of our subordinated structured notes portfolio as of March, with such portfolio representing nearly 0% of our investment portfolio at cost and representing a reduction of 837 basis points from 8.4% in June 2024. Our real estate property portfolio at National Property REIT Corp., NPRC, totaled 14% of our investments at cost as of March and continued to focus on developed and occupied cash-flow multifamily investments.

Since inception of this strategy 14 years ago, in 2012, and through March 2026, we have exited 57 property investments, earning an unlevered investment-level gross cash IRR of 24% and a cash-on-cash multiple of 2.4x. We exited five property investments in the current fiscal year through March 2026, earning an unlevered investment-level gross cash IRR of 18% and a cash-on-cash multiple of 2.3x. The remaining real estate property portfolio included 53 properties and paid us an income yield of 5.2% for the March quarter, providing an opportunity for potential income enhancement at Prospect Capital Corporation from a portfolio rotation strategy into more corporate first lien senior secured middle market originations.

Prospect Capital Corporation’s aggregate investments in NPRC included a $229 million unrealized gain as of March. We expect to continue to redeploy future real estate property exit proceeds primarily into more first lien senior secured loans, with selected equity-linked investments. Our interest income for the 12-month period ending March 2026 was 92% of total investment income, reflecting a strong recurring revenue profile of our business. Payment-in-kind interest income for the last 12-month period ending March 2026 was reduced by 41% from the prior 12-month period and was 11% of total investment income for the quarter. Non-accruals, as a percentage of total assets as of March, stood at around 0.7% based on fair market value, consistent with the prior quarter.

Investment originations in the March quarter aggregated $115 million and consisted of 94% middle market investments, with a significant majority first lien senior secured loans. We also experienced $222 million in repayments and exits as a validation of our capital preservation objective, resulting in net repayments of $107 million. Thank you. I will now turn the call over to Kristin. Kristin?

Kristin Van Dask: Thanks, Grier. We believe our prudent leverage, diversified access to matched-book funding, substantial majority of unencumbered assets, weighting toward unsecured fixed-rate debt, and avoidance of unfunded asset commitments all demonstrate balance sheet strengths, as well as substantial liquidity to capitalize on attractive opportunities. Our company has locked in a ladder of liabilities extending 25 years into the future. On 10/30/2025, we successfully completed the institutional issuance of approximately $168 million in aggregate principal amount of senior unsecured 5.5% notes due 2030, which mature on 12/31/2030. Our unfunded eligible commitments to portfolio companies total approximately $28 million, of which $17 million are considered at our sole discretion, representing approximately 0.4% and 0.3% of our total assets as of March 2026, respectively.

Our combined balance sheet cash and undrawn revolving credit facility commitments stood at $1.8 billion as of March, and we held $4.2 billion of our assets as unencumbered assets, representing approximately 65% of our portfolio. The remaining assets are pledged to Prospect Capital Funding, a non-recourse SPV. We currently have $2.12 billion of commitments from 48 banks, demonstrating strong support of our company from the lender community with a diversity unmatched by any other company in our industry. The facility does not mature until June 2029 and revolves until June 2028. Our drawn pricing continues to be SOFR plus 2.05%.

Outside of our revolver, we have access to diversified funding sources across multiple investor types and have successfully issued securities in an array of markets. Prospect Capital Corporation has issued multiple types of unsecured debt: institutional non-convertible bonds, institutional convertible bonds, retail baby bonds, and retail program notes. All of these types of unsecured debt have no asset restrictions and no cross-defaults with our revolver. We have tapped the unsecured term debt market on multiple occasions to ladder our maturities and to extend our liability duration out 25 years, with our debt maturities extending through 2052. With so many banks and debt investors across so many unsecured and nonrecourse debt tranches, we have substantially reduced our counterparty risk.

At 03/31/2026, our weighted average cost of unsecured debt financing was 4.71%. Now I will turn the call back over to John.

John Barry: Kristin, thank you very much. We will now open the call for questions.

Operator: Thank you, sir. We will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then 2. Again, it is star then 1 to ask a question. At this time, we will pause momentarily to assemble our roster. This concludes our question and answer session. I would like to turn the conference back over to John Barry for any closing remarks.

John Barry: Thank you, everyone. Have a wonderful day and a wonderful weekend. Bye now.

Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.