On February 8, 2024, Prospect Capital Corp (PSEC, Financial) released its 8-K filing, revealing the financial results for the fiscal quarter ended December 31, 2023. The company, a closed-end investment firm that focuses on income generation and long-term capital appreciation through debt and equity investments, announced a decrease in Net Investment Income (NII) to $96.9 million, down from $125.6 million in the previous quarter and $106.7 million year-over-year. The NII per common share also decreased to $0.24 from $0.31 in the previous quarter and $0.27 in the same quarter of the previous year.
Despite the drop in NII, Prospect Capital maintained its dividend, declaring the 80th consecutive monthly cash distribution of $0.06 per share. This consistency underscores the company's commitment to shareholder returns, even as it reported a net loss applicable to common shareholders of $51.4 million for the quarter, a stark contrast to the net income of $94.0 million in the previous quarter and $55.6 million in the same quarter of the previous year.
Financial Position and Portfolio Performance
Prospect Capital's total assets slightly decreased to $7.78 billion, compared to $7.89 billion as of December 31, 2022. The company's total liabilities stood at $2.59 billion, with preferred stock at $1.50 billion. The Net Asset Value (NAV) to common shareholders also saw a decrease, moving from $9.94 per common share year-over-year to $8.92 per common share.
The company's investment portfolio showed a slight decrease in total investments at fair value, standing at $7.63 billion, down from $7.77 billion year-over-year. The number of portfolio companies decreased from 130 to 126 in the same period. The portfolio's composition shifted slightly, with first lien debt increasing to 58.7% from 53.0% year-over-year, while equity investments decreased to 17.8% from 19.3%.
Capital and Liquidity
Prospect Capital reported a robust liquidity position, with balance sheet cash and undrawn revolving credit facility commitments totaling approximately $1.19 billion. The company's net of cash debt to equity ratio stood at 46.2%, and the net of cash asset coverage of debt ratio was 316%. The company's investment activity for the quarter included $171.7 million in total originations and $131.3 million in total repayments and sales.
The company's capital structure included $1.95 billion in a revolving credit facility, program notes, institutional bonds, convertible bonds, listed preferred stock, and program preferred stock. Prospect Capital also highlighted its investment grade ratings from multiple agencies, emphasizing its commitment to maintaining a prudent asset, liability, and risk management strategy.
In summary, Prospect Capital Corp's third fiscal quarter of 2023 presented a mixed financial picture, with a decrease in net investment income and a net loss recorded. However, the company's consistent dividend payments and strong liquidity position may continue to appeal to value investors focused on income generation and long-term capital appreciation.
For additional insights and detailed financial analysis, investors are encouraged to review the full 8-K filing and consider joining the earnings conference call scheduled for February 9, 2024.
Explore the complete 8-K earnings release (here) from Prospect Capital Corp for further details.
