Executive Summary

Net investment income of $0.32 per share, up sequentially from $0.28 and covering both the regular $0.26 and special $0.05 dividend; total investment income was $72.4 million. EPS beat consensus ($0.32 vs $0.274) and revenue beat consensus ($72.4M vs $69.7M) driven by dividend income (Flywheel) and lower incentive fees due to fee cap and unrealized depreciation impacts .*
NAV per share declined to $11.10 from $11.18, primarily on net unrealized depreciation ($0.08 per share) and small net realized losses ($0.01), partially offset by NII exceeding total dividends by $0.01 .
Portfolio activity: $78.6M in new investments and $70.2M of add-ons; $93.6M of debt sold to JVs; exits included one restructuring (–$4.8M realized) and a $16.7M equity sale (+$5.6M realized). Weighted average yield on performing debt investments was 9.8%; spreads on new investments (>560 bps) exceeded spreads on assets exited (~520 bps) .
Funding strengthened via $300M of 5.200% senior unsecured notes due 2028 (net ~$294.7M); unsecured debt ~78% of outstanding balances; Series B notes repaid on Nov 4. Regular dividend of $0.26 declared for Q4; spillover income stands at $0.65 per share, supporting dividend stability .
Leadership transition: Tom McDonald named incoming CEO effective Jan 1, 2026; expected continuity with Eric Lloyd as Executive Chairman. Potential stock catalysts: continued buybacks below NAV, dividend stability, portfolio rotation to higher-spread assets, and leadership transition signaling continuity .

What Went Well and What Went Wrong

What Went Well

NII per share rose to $0.32 from $0.28, fully covering regular and special dividends; CFO cited dividend income from Flywheel and lower incentive fees under the cap as drivers .
Credit quality strong: non‑accruals at 0.4% of fair value (ex‑CSA), down from 0.5%, and risk ratings 4+5 stable at 7%; interest coverage at 2.4x, above industry averages .
Funding profile improved with $300M unsecured notes at T+200 bps; unsecured debt ~78% of balances; proceeds used to reduce revolver and cover note maturities, enhancing ALM and flexibility .

Management quote: “Our portfolio continued to deliver… net investment income of $0.32 per share, fully covering both our regular and special dividends… we remain confident in the durability of our portfolio” .

What Went Wrong

NAV per share decreased to $11.10 (–$0.08 QoQ unrealized; –$0.01 net realized), reflecting credit/fundamentals (–$13.9M), market moves (–$1.9M), and FX (–$1.5M), partly offset by forward FX contract gains (+$7.3M) and CSA mark (+$1.6M) .
Net realized losses totaled $1.3M, including –$4.8M from one restructuring; sequentially improved from Q2’s larger realized losses but still a headwind .
Base rates drifting lower modestly reduced portfolio yield versus prior periods; management highlighted the need to offset base rate declines with spread support and portfolio rotation over time .

Financial Results

P&L and Per-Share Metrics vs Prior Periods and Estimates

Metric	Q3 2024	Q2 2025	Q3 2025	Wall St Consensus (Q3 2025)
Total Investment Income ($USD Millions)	$70.9	—	$72.4	$69.7*
Net Investment Income ($USD Millions)	$30.2	$29.8	$33.6	—
NII per Share ($)	$0.29	$0.28	$0.32	$0.274*
Net Increase in Net Assets per Share ($)	$0.21	$0.20	$0.22	—
NAV per Share ($)	—	$11.18	$11.10	—

Notes:

Consensus estimates from S&P Global indicated an EPS beat and revenue beat in Q3 2025. Values retrieved from S&P Global.*

Margins and Coverage

Metric	Q3 2024	Q2 2025	Q3 2025
NII Margin (% of Investment Income)	42.6%	—	46.4%
Dividend Coverage (NII / Total Dividends) (x)	1.12x	0.90x	1.03x

Balance Sheet and Leverage

Metric	Dec 31, 2024	Mar 31, 2025	Jun 30, 2025	Sep 30, 2025
Investment Portfolio at Fair Value ($USD Millions)	$2,449.3	$2,571.2	$2,623.9	$2,536.3
Total Assets ($USD Millions)	$2,695.7	$2,791.3	$2,793.3	$2,821.9
Debt Outstanding (Principal) ($USD Millions)	$1,463.6	$1,522.3	$1,572.3	$1,629.0
Total Net Assets ($USD Millions)	$1,190.4	$1,188.8	$1,175.8	$1,166.8
NAV per Share ($)	$11.29	$11.29	$11.18	$11.10
Debt-to-Equity (x)	1.23x	1.28x	1.34x	1.40x
Net Debt-to-Equity (x)	1.16x	1.24x	1.29x	1.26x

KPIs

KPI	Q1 2025	Q2 2025	Q3 2025
Weighted Avg Yield on Performing Debt (at principal)	9.9%	9.8%	9.8%
Non‑Accruals (% of FV; ex‑CSA)	0.6%	0.5%	0.4%
Risk Ratings 4+5 (% of FV)	8%	7%	7%
Interest Coverage (weighted avg, x)	2.4x	2.4x	2.4x
New vs Exited Asset Spreads (bps)	—	—	~560 vs ~520

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Regular Dividend per Share ($)	Q4 2025	$0.26 (Q3 declaration)	$0.26 declared; record 12/3, pay 12/10	Maintained
Special Dividend per Share ($)	Q3 2025	$0.05 (3rd of three installments)	No special declared for Q4	Concluded (no Q4 special)
Net Leverage Target (x)	Ongoing	0.9–1.25 target; running towards high end	1.26x at Q3; “largely in line” with target range; comfortable with stability	Maintained (operating slightly above)
Funding Mix (Unsecured Share)	Ongoing	~65–70% (Q2 commentary)	~78% unsecured of outstanding balances; added $300M 2028 notes	Raised unsecured share
Share Repurchase Program	12-month from Mar 1, 2025	Authorized up to $30M; 250k shares through Nov 6	No repurchases in Q3 due to blackout; likely activity in coming quarters per Q&A	Maintained (timing constraints)

Earnings Call Themes & Trends

Topic	Previous Mentions (Q1 & Q2)	Current Period (Q3)	Trend
Macro/tariffs and uncertainty	Tariff high-impact <5%; broader uncertainty freezing hiring/capex	Private credit headlines deemed hyperbolic; no exposure to flagged names; continued macro vigilance	Narrative steady; reaffirmed conservative stance
Yield/spreads vs base rates	Rates/spreads compressed; hope for spread offset to rate declines	Base rates drifting lower; new asset spreads >560 bps vs 520 bps exits	Improving spread support despite lower base rates
Portfolio rotation and credit	Rotation to income-producing assets; low non‑accruals; de‑risk legacy MVC/Sierra	Barings-originated 95% of FV; non‑accruals 0.4%; CSA value +$1.6M; continued Sierra run‑off	Continued de‑risking and quality
Leverage/ALM	Target leverage 0.9–1.25x; run high end near-term	Net leverage 1.26x; unsecured ~78%; $300M 2028 notes	Strengthened balance sheet; steady leverage
Capital returns	Special dividends (3 installments in 2025); buybacks authorized	Regular $0.26 maintained; buybacks constrained in Q3 but likely ahead; spillover $0.65/sh	Sustained distributions; optionality on buybacks
Leadership/strategy	Emphasis on alignment, core middle market	CEO transition to Tom McDonald; continuity emphasized	Leadership change, continuity signal

Management Commentary

Eric Lloyd: “Net investment income for the quarter was $0.32 per share… Our board declared a fourth-quarter dividend of $0.26 per share… We believe our portfolio is on strong footing” .
Matt Freund: “Weighted average spread across assets exited… ~520 bps, while… new investments was above 560 bps… Interest coverage… 2.4 times… Non-accruals… 0.4% of assets on a fair value basis” .
Elizabeth Murray: “NII… $0.32 per share… higher earnings… driven by dividends from… Flywheel and lower incentive fees… net leverage… 1.26x… unsecured… roughly 78%… issued $300 million of senior unsecured notes” .
Press release: “Total investment income of $72.4 million, net investment income of $33.6 million… Net asset value per share… $11.10” .

Q&A Highlights

Repayments and JV sales: Elevated repayments partly reflect sales to the JV; management expects a moderate uptick in repayment velocity into year-end without materially impacting deployed capital .
Share buybacks: Activity slowed due to blackout restrictions; management “consistently evaluate[s]” buybacks and expects some activity in coming quarters .
Dividend sustainability: With the current forward curve and an 8.25% hurdle rate, management remains comfortable with dividend coverage near term; spillover income of $0.65/sh provides cushion .
Industry headlines: No exposure to cited troubled names; management views recent headlines as hyperbolic and reiterates focus on core middle-market and defensive sectors .

Estimates Context

Q3 2025 EPS: Actual $0.32 vs consensus $0.274 — beat of $0.046 per share.*
Q3 2025 Revenue: Actual $72.4M vs consensus $69.7M — beat of ~$2.7M.*
Coverage: 5 EPS estimates; 4 revenue estimates; target price consensus $9.95 across 5 estimates.*

Values retrieved from S&P Global.*

Key Takeaways for Investors

Core earnings resilient with sequential NII per share growth and full dividend coverage; spread tailwinds on new deployments partially offset base rate headwinds .
Credit metrics remain best‑in‑class (non‑accruals 0.4%, risk ratings stable), supporting running leverage near the high end of the target range .
Balance sheet further de‑risked and extended via $300M unsecured 2028 notes; unsecured share at ~78% enhances flexibility and ALM .
NAV decline driven by unrealized marks and FX; portfolio rotation into higher‑spread assets and continued Sierra run‑off/CSA support should aid ROE over time .
Capital return remains a priority: regular $0.26 dividend maintained and potential buybacks below NAV could be accretive when blackout windows allow .
Leadership transition effective Jan 1, 2026 signals continuity; strategic focus on core middle market and defensive sectors continues to differentiate .
Near-term trading: EPS/revenue beats and secure dividend may support sentiment; medium-term thesis hinges on maintaining credit quality, spread capture, and disciplined ALM amidst lower base rates .

Barings BDC, Inc. (BBDC)·Q3 2025 Earnings Summary