Prospect Capital Corporation (NASDAQ:PSEC) Q1 2019 Earnings Conference Call Transcript

Nov 07, 2018 • 10:00 am ET

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Prospect Capital Corporation (NASDAQ:PSEC) Q1 2019 Earnings Conference Call Transcript

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Presentation
Operator
Operator

Good day everyone and welcome to the Prospect Capital Corporation First Fiscal Quarter Earnings Release and Conference Call. All participants will be in listen-only mode. (Operator Instructions) Please note, this event is being recorded.

I would now like to turn the conference over to Chairman and CEO, John Barry. Please go ahead.

Executive
John Francis Barry

Thank you, William. Joining me on the call today are Grier Eliasek, our President and Chief Operating Officer; and Kristin Van Dask, our Chief Financial Officer. Kristin.

Executive
Kristin Lea Van Dask

Thanks, John. This call is the property of Prospect Capital Corporation. Unauthorized use is prohibited. This call contains forward-looking statements within the meaning of the securities laws that are intended to be subject to safe harbor protection. Actual outcomes and results could differ materially from those forecast due to the impact of many factors. We do not undertake to update our forward-looking statements unless required by law. For additional disclosure, see our earnings press release, our 10-Q and our corporate presentation filed previously and available on the Investor Relations tab on our website prospectstreet.com.

Now, I'll turn the call back over to John.

Executive
John Francis Barry

Thank you, Kristin. For the September 2018 quarter, our net investment income or NII was $85.2 million or $0.23 per share, up $0.01 from the prior quarter and exceeding our current dividend rate of $0.18 per share by $0.05. NII increased due to higher dividend income. In the September 2018 quarter, our net debt-to-equity ratio was 75.1%, up 3.5% from the prior year. Our net income for the quarter was $83.8 million or $0.23 per share, down $0.08 from the prior quarter.

We are announcing monthly cash distributions to shareholders of $0.06 per share for each of November, December and January, representing 126 consecutive shareholder distributions. We plan on announcing our next series of shareholder distributions in February. Since our IPO nearly 15 years ago through our January 2019 distribution at our current share count, we will have paid out $16.98 per share to original shareholders, exceeding $2.7 billion in cumulative distributions to all shareholders.

Our NAV stood at $9.39 per share at September 2018, up $0.04 from the prior quarter. Our balance sheet as of September 2018 comprised 87.8% floating rate interest earning assets and 85% fixed rate liabilities, positioning us to benefit from rate increases. Our percentage of total investment income from interest income was 88.4% in the September 2018 quarter, a decrease of 3.4% from the prior quarter, as we increased our quarterly dividend income from NPRC and other controlled investments while continuing to focus on recurring income compared to onetime structuring fees.

We believe there is no greater alignment between management and shareholders than for management to purchase a significant amount of stock, particularly when management has purchased stock on the same basis as other shareholders in the open market. Prospect management is the largest shareholder in Prospect and has never sold a single share. Management and affiliates on a combined basis have purchased at cost over $350 million of stock in Prospect.

Our management