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KA

Kayne Anderson BDC, Inc. (KBDC)·Q1 2025 Earnings Summary

Executive Summary

  • Net investment income per share was $0.40 and GAAP EPS was $0.31; total investment income was $55.2M, down sequentially on lower SOFR and a new non‑accrual, while NII fell with the expiration of the incentive fee waiver .
  • Portfolio deployment was robust: $340.2M of new commitments and $294.3M fundings drove net funded investment growth of $180.8M and leverage to 0.86x, with management reiterating a path to 1.0x–1.25x by Q2–Q3 2025 .
  • Borrowing costs declined after dual SPV facility repricings (to SOFR+2.15% and +2.25%), expected to benefit NII as utilization rises; Board declared a Q2 regular dividend of $0.40 and extended the $100M buyback to May 2026 .
  • Versus S&P Global consensus, investment income was below ($55.2M actual vs $57.8M* consensus) and “Primary EPS” (interpreted by the street as NII/share) was slightly below ($0.40 actual vs $0.424* consensus); GAAP EPS was $0.31 .
  • Near‑term catalysts: continued origination at ~SOFR+550 bps, leverage ramp to target range, winding down lower‑spread BSLs, and reduced borrowing costs supporting dividend coverage .

What Went Well and What Went Wrong

What Went Well

  • “One of our strongest first quarters of investment activity since KBDC’s inception” with $340.2M commitments and $294.3M fundings, evidencing origination strength in core middle market loans .
  • New funding drove net deployment ($180.8M) and leverage to 0.86x; management expects to reach the low end of the 1.0x–1.25x target over the next two quarters .
  • Both SPV facilities amended to extend maturities, increase commitments and reduce spreads (SOFR+2.15% and +2.25%), which management expects will benefit NII as utilization rises .

What Went Wrong

  • Sequential NII decline ($0.48 → $0.40 per share) as incentive fee waiver expired; investment income fell modestly on lower SOFR and a newly placed non‑accrual (Siegel Egg, ~$0.6M impact) .
  • Unrealized losses ($6.5M) driven by watchlist names and BSL marks, plus amortization of OID; GAAP EPS fell to $0.31 .
  • Non‑accruals rose to 1.6% of debt fair value (4 positions), and weighted average portfolio yield eased to 10.4% amid the rate backdrop .

Financial Results

Sequential and Operating Metrics

MetricQ3 2024Q4 2024Q1 2025
Total Investment Income ($USD Millions)$57.819 $56.340 $55.245
Net Investment Income ($USD Millions)$37.053 $34.023 $28.741
NII per Share ($USD)$0.52 $0.48 $0.40
GAAP EPS ($USD)$0.53 $0.50 $0.31
NAV per Share ($USD)$16.70 $16.70 $16.51
Debt-to-Equity (x)0.66x 0.72x 0.86x
Weighted Avg Yield on Debt Investments (%)11.3% 10.6% 10.4%
Non‑accrual % of Debt Investments (%)1.0% 1.3% 1.6%

Year-over-Year

MetricQ1 2024Q1 2025
Total Investment Income ($USD Millions)$46.494 $55.245
Net Investment Income ($USD Millions)$23.803 $28.741
NII per Share ($USD)$0.52 $0.40
GAAP EPS ($USD)$0.61 $0.31
NAV per Share ($USD)$16.63 $16.51

Consensus vs Actual (Q1 2025)

MetricConsensusActualOutcome
Primary EPS (Street “EPS”, NII/share)$0.424*$0.40 MISS
Revenue (Total Investment Income)$57.788M*$55.245M MISS

Values retrieved from S&P Global.*

Portfolio KPIs and Activity

KPIQ3 2024Q4 2024Q1 2025
Funded Investments at Fair Value ($USD Billions)$1.943 $1.995 $2.167
Portfolio Companies (count)110 110 116
First Lien (% of FV)98% 98% 98.1%
Broadly Syndicated Loans FV ($USD Millions)$270 $253 $224
Gross New Commitments ($USD Millions)$182.6 $230.6 $340.2
Fundings ($USD Millions)$184.6 $208.5 $294.3
Repayments/Sales ($USD Millions)$85.0 $157.1 $113.5
Net Funded Amount ($USD Millions)$99.6 $51.4 $180.8

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Regular Dividend per ShareQ2 2025$0.40 declared for Q1 2025 $0.40 declared (payable Jul 16, 2025; record Jun 30, 2025) Maintained
Special Dividend per Share2025$0.10 paid Mar 18, 2025; one additional special planned $0.10 to be paid Jun 24, 2025 (final special) Maintained schedule
Leverage (Debt-to-Equity) TargetQ2–Q3 2025Target 1.0x–1.25x; reaching low end by Q2–Q3 2025 Reiterated; expect low end by Q2–Q3 2025 Maintained
Funding Facility Pricing (SOFR spread)2025Corporate facility reduced to SOFR+2.10% in Nov 2024 Funding Facility to SOFR+2.15%; Funding Facility II to SOFR+2.25% Lowered borrowing costs
Share Repurchase PlanThrough May 2026$100M plan in place Extended to May 24, 2026; up to $100M below NAV thresholds Extended
BSL Portfolio Strategy2025~$253M FV in Q4; net repayments ongoing Continue wind‑down; repayments $26.9M in Q1 Ongoing reduction

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2024 and Q4 2024)Current Period (Q1 2025)Trend
Origination Pipeline & SpreadsStrong origination; first lien focus; yields 11.3% and 10.6% on debt investments $340M commitments; spreads ~SOFR+5.49%; continued opportunities 5%–6% over SOFR Positive pipeline; spreads resilient
Leverage TrajectoryBelow target; aiming for low end of 1.0x–1.25x by Q2–Q3 2025 Leverage at 0.86x; expectation reiterated to reach low end by Q2–Q3 2025 Progressing toward target
Borrowing Costs & FacilitiesCorporate spread cut to SOFR+2.10%; commitments raised SPV facilities extended/increased; spreads cut to SOFR+2.15% and +2.25%; expected NII benefit Funding cost tailwind
Non‑Accruals/Credit HealthNon‑accruals 1.0%–1.3% of debt FV Non‑accruals at 1.6% (4 positions); Siegel Egg added Mild deterioration but still low
Macro/Tariff ExposureNoted diversified industries; stable segments Company‑by‑company tariff analysis; limited direct exposure; pricing power seen to pass through costs Vigilant monitoring; manageable risk
BSL Rotation~$270M→$253M FV; net repayments ~$224M FV; plan to wind down through 2025 Ongoing de‑risking/return uplift

Management Commentary

  • “We are pleased to report one of our strongest first quarters of investment activity since KBDC’s inception.” — Doug Goodwillie, Co‑CEO .
  • “We remain on target to reach the lower end of our debt‑to‑equity target range of 1.0x – 1.25x over the next two quarters.” — Ken Leonard, Co‑CEO .
  • “The reduction to our borrowing cost and higher utilization of our credit facilities… should be beneficial to net investment income over the balance of the year.” — Terry Hart, CFO .
  • “Our new investment spreads were around 5.49% over SOFR… we’re reasonably optimistic… over the next 2 quarters.” — Ken Leonard .
  • “We plan to continue to wind down our broadly syndicated loan portfolio over the course of the year.” — Douglas Goodwillie .

Q&A Highlights

  • Timeline to leverage target: Management expects net positive portfolio growth in Q2 and to reach the low end of the 1.0x–1.25x range within two quarters without changing investment parameters .
  • Spread environment: New investments at ~SOFR+5.49%; current opportunity set remains in the 5%–6% over SOFR range, with closing fees/spreads consistent with recent quarters .
  • Strategy clarification: Continue rotating out of lower‑spread BSLs; reduced borrowing costs and facility utilization expected to support NII and dividend coverage as leverage ramps .

Estimates Context

  • For Q1 2025, S&P Global consensus “Primary EPS” was $0.424* vs actual NII/share of $0.40, a slight MISS; consensus revenue was $57.8M* vs actual investment income of $55.2M, a MISS .
  • Street models may need to reflect: reduced borrowing costs (tailwind), higher leverage utilization through Q2–Q3 2025, and BSL wind‑down replacing lower‑spread assets with middle‑market originations .

Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Origination strength and spread discipline continue; Q1 activity positions KBDC to reach leverage targets and enhance NII as assets ramp .
  • Borrowing cost reductions across SPV facilities create structural NII tailwinds as utilization increases .
  • Modest credit headwinds emerged (non‑accruals to 1.6%; unrealized losses) but remain manageable given first‑lien, covenant‑heavy posture and diversified industries .
  • Dividend policy steady at $0.40 regular; final $0.10 special to be paid June 24, 2025; buyback extended to May 2026, providing downside support below NAV .
  • Near‑term stock drivers: continued leverage ramp, visible origination at ~SOFR+550 bps, BSL runoff, and facility repricings; any increase in non‑accruals or spread compression would be watch items .
  • Sequential estimate misses were driven by rate moves (lower SOFR) and fee waiver expiration rather than fundamental deterioration; modeling should incorporate lower funding spreads and leverage normalization .