Good day, and welcome to the Prospect Capital Second Fiscal Quarter 2026 Earnings Release and Conference Call. Please note, this event is being recorded. I would now like to turn the conference over to John Barry, Chairman and CEO. Please go ahead.

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

Thanks, John. This call contains forward-looking statements that are intended to be subject to safe harbor protection. Future results are highly likely to vary materially. We do not undertake to update our forward-looking statements. For additional disclosure, see our earnings press release and 10-Q filed previously and available on our website, prospectstreet.com. Now I'll turn the call back over to John.

Okay. Thank you, Kristin. In our December quarter, our net investment income was $91 million or $0.19 per common share. Our NAV was approximately $3 billion, $6.21 per common share. At December 31, our net debt to total assets ratio was 28.2%. Unsecured debt plus unsecured perpetual preferred was 85.3% of total debt plus preferred. We are announcing monthly common shareholder distributions of $0.045 per share for each of February, March and April. Since our IPO nearly 22 years ago, through our April 2026 declared distribution, we will have distributed $4.7 billion or $21.93 per share. Our preferred shareholder cash distributions continue at their contract rates. We continue to make progress with our strategic priorities, including: number one, rotation of assets into our core business of first lien senior secured middle market loans with our first lien mix increasing 728 basis points to 71.4% 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 371 basis points to 12.7% since June 2024. Number three, exiting subordinated structured notes with our subordinated structured notes mix decreasing 818 basis points to near 0 since June 2024. Number four, exiting targeted equity-linked assets, including real estate, with 5 additional real estate properties sold in the current fiscal year more targeted and certain corporate investments sold, including significant assets within Echelon Transportation in July and December 2025 and other exits targeted. Number five, enhancement of portfolio company operations, especially where we hold equity-linked investments; and number six, utilization of our cost-efficient floating rate revolver, which significantly matches our floating rate assets. Thank you. I'll now turn the call over to Grier.

Thank you, John. Over the past 2-plus decades, Prospect Capital Corporation has invested approximately $13.1 billion in over 350 exited investments out of over $22 billion 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 includes the GFC and has been dominated in general by low prevailing market interest rates. In Prospect's primary business of middle market lending over the same nearly 22-year time period, Prospect's exited investments resulted in an investment level exited gross IRR of approximately 14.5% based on total capital invested of about $11.2 billion and total proceeds from such exited investments of about $14.3 billion with an annualized realized loss rate of 0.2%. In Prospect'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's exited investments resulted in an investment level exited gross IRR of approximately 17.2% based on total capital invested of about $6.3 billion and total proceeds from such exited investments of about $8.3 billion, with an annualized net realized loss rate in this segment of 0.1%. Prospect's EBITDA to interest coverage for our primary business of middle market lending is about 210%, which increases to about 230% for Prospect's core targeted middle market lending to companies with less than $50 million of EBITDA. As of December 2025, we held 91 portfolio companies across 32 different industries with an aggregate fair value of $6.4 billion. Our portfolio at cost included 2.8% of investments in software companies, which is significantly less than the 22% average across business development companies with publicly traded unsecured bonds from a recent Wall Street Fixed Income Research report. We primarily focus on senior and secured debt, which was 84% of our portfolio at cost as of December. Our middle market lending strategy is the primary focus of our company, with such strategy as of December representing 85% of our investments at cost, an increase of 878 basis points from June 2024. Middle market lending comprised 100% of our originations during the December quarter with a continued prioritization of 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've essentially completed the exit of our subordinated structured notes portfolio as of December with such portfolio representing only 0.2% of our investment portfolio at cost, which represents a reduction of 818 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 December and continued its focus on developed and occupied cash flow multifamily investments. Since the inception of this strategy, 14 years ago in 2012 and through December 2025, we've exited 56 property investments, earning an unlevered investment level gross cash IRR of 24% and cash-on-cash multiple of 2.4x. We exited 4 property investments in the current fiscal year through December 2025 that earned an unlevered investment level gross cash IRR of 21% and cash-on-cash multiple of 2.4x. NPRC exited one additional property investment after December 31, 2025, and has multiple additional properties in various stages of an exit process. The remaining real estate property portfolio included 54 properties and paid us an income yield of 5.4% for the December quarter, providing an opportunity for potential income enhancement from a portfolio rotation strategy. Prospect's aggregate investments in NPRC included a $270 million unrealized gain as of December. 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 December 2025 was 92% of our total investment income, reflecting a strong recurring revenue profile for our business. Payment in kind interest income for the last 12-month period ended December 2025 was reduced by 46% from the 12-month period ending December 2024 and was 8.6% of total investment income for the December 2025 quarter. Nonaccruals as a percentage of total assets as of December stood at approximately 0.7% based on fair market value. Investment originations in the December quarter aggregated $80 million and consisted of 100% middle market investments with a significant majority of first lien senior secured loans. We also experienced $79 million in repayments and exits as a validation of our capital preservation objective, resulting in net repayments of $1 million.

Thanks, Grier. We believe our prudent leverage, diversified access to match book funding, substantial majority of unencumbered assets, weighting toward unsecured fixed rate debt and avoidance of unfunded asset commitments all demonstrate balance sheet strength as well as substantial liquidity to capitalize on attractive opportunities. Our company has locked in a ladder of liabilities extending 26 years into the future. On October 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 December 31, 2030. Our unfunded eligible commitments to portfolio companies totaled approximately $34 million, of which $23 million are considered at our sole discretion, representing approximately 0.5% and 0.3% of our total assets as of December 2025, respectively. Our combined balance sheet cash and undrawn revolving credit facility commitments stood at $1.6 billion as of December, and we held $4.2 billion of our assets as unencumbered assets, representing approximately 64% of our portfolio. The remaining assets are pledged to Prospect Capital Funding, a nonrecourse SPV. We currently have $2.12 billion of commitments from 48 banks, demonstrating strong support of our company from the lender community with the 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 has issued multiple types of unsecured debt, institutional nonconvertible bonds, institutional convertible bonds, retail baby bonds and retail program notes. All of these types of unsecured debt have no financial covenants, no asset restrictions and no cross defaults with our revolver. We've tapped the unsecured term debt market on multiple occasions to ladder our maturities and to extend our liability duration out 26 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 December 31, 2025, our weighted average cost of unsecured debt financing was 4.68%. Now I'll turn the call back over to John.

Thank you, Kristin. We will now answer any questions.

And your first question today comes from Finian O'Shea with Wells Fargo.

I wanted to ask on Tower, sort of a 2-parter. One is to the extent that tax refunds are higher this year, do you anticipate that's a headwind to loan balances? And then seeing Tower, it's been a really big winner for you. Is that part of the optimization strategy to say, exit the equity-linked types of investments? Or is that still one of sort of a firm hold for now, one that you definitely want to keep?

Well, Fini, this is John. I would say that we want to stick with our great winners and First Tower is absolutely one of them. We have a fabulous CEO there; frankly, it would be very hard to find a better CEO. So we have no current plans to do anything but continue to work with Frank. Grier?

Thank you for your questions, Finian. Regarding the potential exit from Tower, we have no such plans, as John mentioned. We have significant tax advantages as a regulated investment company, paying no income taxes as a business development company. The income generated by First Tower is favorable under our tax system, allowing us to hold First Tower as a tax partnership instead of a C-corporation, avoiding an extra level of taxation. A prospective buyer of Tower, given its scale, would likely either be a C-corp or have future plans to IPO, which would require it to be a C-corp and create additional tax burdens. This means that we are the most tax-efficient owner of that business. It's also a highly productive strategy for us. Every time we open a new branch, we typically expect an IRR of well over 30%. It's an attractive income business with low-cost third-party ABL financing that is decreasing, enhancing yields as SOFR continues to drop, part of the forward curve. The business is performing well, with record low delinquencies and charge-offs. We’ve optimized our strategy by expanding prudently into new states and offices; Florida and Tennessee offer significant expansion opportunities alongside Texas. The business is on track, and we have no plans to exit. Regarding your first question about tax refunds, the pattern of consumers borrowing for holiday spending in December and repaying in the first half of the year based on tax refunds isn't new. This has created some seasonality, but it's manageable. I haven't seen indications that tax refunds will be unusually large or negatively impact Tower's business. There are various factors driving consumer demand beyond holiday spending, influenced by trends in the bank and nonbank lending markets. Entering the nonbank installment finance business has high barriers, and there isn’t much new lending to new entrants; most lenders prefer established banks, which benefits those already in the business like Tower, with over 40 years of history. We see strong demand, and many companies, including Tower, have optimized their operations based on this insight. The best indicator of consumer credit health is your existing customers and their repayment history over time. Providing larger loans to these established customers is a smart strategy for boosting profitability while reducing the risk associated with new borrowers whom we lack credit experience. Tower has been a strong investment since we first engaged in 2012-2013, and after about 12 to 14 years with this management team, we are very pleased with their performance and growth initiatives.

That's great. I appreciate the color. A follow-up on the preferreds. Conversions are stable. One thing you've touched on in the past, you've given us color on that market. In terms of impacts from other products in the nontraded channel. So today, as we all know, there are a lot of headlines kind of hitting the larger nontraded BDC market. Does that have an impact, good or bad, on your convertible preferred product line?

I don't think it's a direct impact. Interest rates are certainly important. In the current situation, some investors are choosing to avoid floating rate investments or assets that have significant floating rate exposure. While everyone enjoys higher yields, they aren't as thrilled about lower yields. This trend is evident not just in nontraded BDCs, which experienced increases from 6% yields to 10% and are now experiencing reductions in distributions due to lower payments from underlying loans as SOFR declines. This shift is also seen in interval funds and other floating rate instruments. As a result, fixed-rate investments in our sector become more attractive. I'm referring not only to our fixed-rate preferreds, which constitute all our preferreds and the newly issued ones, but also to bonds for BDCs. We observe that investors are now leaning towards fixed rate and are eager to secure favorable yields as rates potentially decrease further, at least in the short term, as indicated by the forward curve. This is a notable trend that may influence investors to remain committed to fixed-rate investments.

That's helpful as well. I try to stay disciplined according to convention. If I could ask a bonus question, you have historically avoided software, which seems to be beneficial for you right now. This is causing some concern in the market. Do you think the current situation is becoming too burdensome? Is it time to consider moving into enterprise SaaS software, which is a staple in many of your peers' portfolios? That would be all from me.

Grier, just one second. Fini, thank you for your questions. I always hesitate to comment on what other people are doing or their investment strategies, whether I have an opinion or not. I'm very focused on our company. So I really don't know what's happening or going to happen with AI, software. And I don't think anybody else does. So I just want to preface anything that anyone has to say here with intellectual modesty and admitting that not only am I unable to forecast what might be happening in that sector. I have no first-hand information about what any of our competitors are doing. So that's my two cents on that, an admission of intense ignorance, if you will. All right, Grier?

Sure. Yes, we can only speak as to our own underwriting and thoughts. It's really a big difference in private credit compared to the broadly syndicated market for what the exposures are for software in the 2. In the broadly syndicated market, there's a nontrivial amount of software, I think, 10% or so, give or take, last I saw. And in that market, they tend to be cash flowing software companies. And the reason for that is you need to get a rating. That's a very rating-centric market. With the BDC market, less rating-centric. And what a lot of folks have done is to invest in annual recurring revenue loans that have less than a 1.0x fixed charge coverage. Those loans, when you go get a rating, whether it's credit estimate or private rating or what have you, tend to come back as CCC and with the lower type of rating. And of course, there's risk attached to that because there's no cash flow exit when you're below 1.0x fixed charge coverage; you're consuming cash and you need growth of the business to enable repayment, coupled with liquidity of a burgeoning software market. And that was always antithetical or has been to date to our underwriting culture of seeking multiple sources of repayment, seeking downside protection, principal protection in the loans we make. We'd like to see delevering occur from the underlying cash flow available for debt service out of the business. We historically have underwritten with around a 1.5x fixed charge coverage or better with each deal. And those annual recurring revenue or ARR deals never offered those, and we thought looked quite risky from our point of view. So we passed on every single one of them. We've never done a single such deal. We understand that others in the industry have pursued that sector, and we'll see what happens. I don't think we're in a position to prognosticate on what's going to happen with AI impacting those software companies. We'll just note that if anyone, whether they're an equity investor or a bond investor is worried about software exposure, then you not worry about it when it comes to Prospect Capital Corporation. We are the absolute lowest with software exposure at less than 3% compared to the BDC average, which is around 22% for bond issuers.

Seeing no additional questions, this concludes our question-and-answer session. I would like to turn the conference back over to John Barry for any closing remarks.

Okay. Well, thank you, everyone. Have a wonderful day now. Bye.

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