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KA

Kayne Anderson BDC, Inc. (KBDC)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 delivered stable net investment income of $0.40 per share, flat sequentially, with earnings per share of $0.35 and total investment income rising to $57.3 million, driven by rotation out of lower-yield broadly syndicated loans into middle market loans and full-quarter impact of Q1 additions .
  • Portfolio quality remained conservative: 98% first lien, 100% floating-rate, weighted average portfolio yield of 10.4%, and non-accruals steady at 1.6% of debt at fair value; NAV per share declined to $16.37 primarily due to a $0.10 special dividend and $0.06 of unrealized losses .
  • Leverage increased to debt-to-equity of 0.91x; management reiterated its plan to reach the low end of the 1.0x–1.25x target in Q3 2025, supported by origination activity and facility capacity .
  • The Board declared a regular Q3 2025 dividend of $0.40 per share; NII of $0.40 per share covered the regular dividend in Q2, reinforcing income stability .
  • Strategic investment in SG Credit ($80M term loan, $34M DDTL, $12M equity at 11% debt rate; 22.5% equity stake) adds differentiated lower middle market exposure and is described as immediately accretive to shareholders .

What Went Well and What Went Wrong

  • What Went Well

    • Origination resilience in a softer lending backdrop: $128.7M of new private credit/equity commitments at ~540bps over SOFR, with net funded increase of $56.6M, supporting portfolio growth and spread quality .
    • Portfolio quality and discipline: 98% first lien, 100% floating-rate, and non-accruals steady at 1.6% of debt at fair value; weighted average yield on debt investments at 10.4% .
    • Dividend coverage and shareholder returns: NII of $0.40 per share covered the regular dividend; Q3 2025 dividend declared at $0.40, with active buybacks of 561,983 shares ($8.8M) in Q2 .

  • What Went Wrong

    • Expenses rose to $28.6M from $26.5M QoQ due to higher average borrowings and partial expiration of the base management fee waiver, pressuring operating leverage .
    • Unrealized losses of $3.5M (driven by negative fair value changes and OID amortization, partially offset by upfront fees), contributing to a $0.06 per-share NAV headwind .
    • PIK income ticked up to 3.6% of total interest income (elevated vs prior quarters due to one investment’s interest converting to PIK), a modest quality concern to monitor .

Financial Results

MetricQ4 2024Q1 2025Q2 2025
Total Investment Income ($USD Millions)$56.340 $55.245 $57.298
Net Investment Income ($USD Millions)$34.023 $28.741 $28.709
Net Investment Income per Share ($)$0.48 $0.40 $0.40
Earnings per Share ($)$0.50 $0.31 $0.35
NAV per Share ($)$16.70 $16.51 $16.37
Debt-to-Equity (x)0.72x 0.86x 0.91x
Weighted Avg Yield on Debt Investments (%)10.6% 10.4% 10.4%
Non-Accruals (% of Debt at FV)1.3% 1.6% 1.6%

YoY comparison:

MetricQ2 2024Q2 2025
Total Investment Income ($USD Millions)$52.453 $57.298
Net Investment Income ($USD Millions)$34.393 $28.709
Net Investment Income per Share ($)$0.51 $0.40
Earnings per Share ($)$0.46 $0.35

Actual vs Consensus (Q2 2025):

MetricActualConsensus
EPS ($)$0.40 $0.402*
Revenue ($USD Millions)$57.298 $58.850*
EPS - # of Estimates—5*
Revenue - # of Estimates—2*

Values marked with * retrieved from S&P Global.

Segment breakdown (at fair value):

Segment (%)Q4 2024Q1 2025Q2 2025
First Lien98% 98.1% 98.0%
Subordinated Debt0.9% 0.8% 0.8%
Equity1.1% 1.1% 1.2%

Key KPIs and balance sheet:

KPIQ4 2024Q1 2025Q2 2025
Portfolio Fair Value ($USD Millions)$1,995 $2,167 $2,175
Number of Portfolio Companies110 116 114
Weighted Avg Yield – Private Credit (%)11.1% 10.8% 10.7%
Weighted Avg Yield – BSL (%)7.1% 6.9% 6.9%
Non-Accruals at FV ($USD Millions)$25.0 $33.3 $34.5
Total Debt Outstanding ($USD Millions)$858.0 $1,015.5 $1,054.0
Cash & Equivalents ($USD Millions)$71.1 $46.0 $44.4
Undrawn Commitments ($USD Millions)$442.0 $384.5 $346.0

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Debt-to-Equity (target 1.0x–1.25x)Q3 2025Achieve low end by 2Q/3Q 2025 Expects to achieve low end in Q3 2025 Maintained timeline to Q3
Regular Dividend per ShareQ3 2025Regular dividend set at $0.40; Q2 declared $0.40 Declared Q3 2025 regular dividend $0.40 Maintained
Special Dividends1H 2025$0.10 specials in Dec-2024, Mar-2025, Jun-2025 No new specials; Q2 paid $0.10 special; Q3 guidance regular only Concluded special program
Corporate Credit Facility CommitmentAs of Aug 8, 2025Reduced to $400M on Feb 14, 2025 Increased to $475M; pricing unchanged Raised capacity
Share Repurchase PlanThrough May 24, 2026Extended authorization up to $100M on May 1, 2025 Active usage: 561,983 shares/$8.8M repurchased in Q2 Maintained program; increased execution
Portfolio Growth OutlookFY 2025Target low-end leverage by 2Q/3Q; rotate out of BSL Confident in continued portfolio growth; origination platform complemented by SG Credit Reinforced growth narrative

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2024 & Q1 2025)Current Period (Q2 2025)Trend
Leverage trajectoryPlan to reach 1.0x–1.25x low end by 2Q/3Q; strong Q1 origination Expects to reach low end in Q3 2025 On track, slightly later within prior window
Pricing/spreads2024 private credit spreads ~575bps; Q1 new investments ~550bps over SOFR New investments ~540bps over SOFR Slight compression, still attractive
BSL wind-downIntent to wind down BSL exposure; repayments in Q4/Q1 $46.5M of BSL repayments in Q2 Continuing wind-down
Tariffs/macroPortfolio review; pricing power; limited direct exposure; sector mix stable No new specific Q2 call transcript; portfolio remained stable Monitoring; stable credit
Credit quality/non-accrualsNon-accruals at 1.3% (Q4) and 1.6% (Q1) of FV Non-accruals 1.6% of FV; 5 investments Stable at modest levels
Dividend coverage/spilloverNII covered dividend; spillover ~$0.32 (12/31) to ~$0.22 (3/31) NII covered regular dividend; Q3 regular declared Coverage maintained
Facility costs/liquidityReduced facility spreads; extended maturities; increased commitments Corporate facility increased to $475M commitments; liquidity $390.4M Strong capacity maintained

Management Commentary

  • “During the second quarter when lending activity declined broadly, we were able to grow our private credit portfolio while maintaining an average spread on new investments of 540bps over SOFR… conservative positioning with a portfolio of 98% first lien loans… non-accruals flat quarter over quarter at 1.6% of fair value… our net investment income of $0.40 per share, covered our regular quarterly dividend.” — Ken Leonard, Co-CEO .
  • “We are encouraged by the increase in KBDC’s origination activity in the first half of the year and are confident… we will continue to grow the portfolio over the remainder of the year… KBDC’s significant strategic investment into SG Credit… complements our direct lending portfolio… immediately accretive to our shareholders.” — Doug Goodwillie, Co-CEO .
  • Q1 reinforcing spread discipline and leverage trajectory: “We made $340 million of total commitments… maintain an average spread over SOFR of 5.49% and weighted average net senior leverage ratio of 4x… on pace to hit our target range of 1 to 1.25x in the next 2 quarters.” — Doug Goodwillie .
  • Q1 macro/tariffs context: diversified by stable sectors; pricing power to pass through costs; limited direct tariff exposure observed in portfolio review — Management .

Q&A Highlights

  • Leverage timeline: Management reiterated reaching the low end of target leverage by end of Q2 or early Q3 (as of Q1), supported by robust pipelines and attractive spreads .
  • Tariffs exposure: Detailed review suggests limited direct exposure; many borrowers possess pricing flexibility; health care reimbursement risks assessed but viewed as manageable given portfolio mix .
  • Underwriting terms: Leverage multiples consistent around ~4x across vintages; modest spread compression (~50–75bps) vs 2024, with disciplined structures and covenants maintained .
  • Note: A Q2 2025 earnings call transcript was not available in our document set; these highlights reflect the most recent Q1/Q4 transcripts [ListDocs 2025-08 range returned none; see Q1/Q4 transcripts] .

Estimates Context

  • EPS was essentially in line with consensus ($0.40 actual vs $0.402* consensus; 5 estimates*). Total investment income modestly missed consensus ($57.3M actual vs $58.9M* consensus; 2 estimates*) .
  • Given modest revenue shortfall and stable NII, estimate revisions are likely minimal; continued leverage ramp, facility cost reductions, and BSL wind-down may support forward NII coverage assumptions .

Values marked with * retrieved from S&P Global.

Key Takeaways for Investors

  • Income stability: NII of $0.40 per share covered the regular dividend, reinforcing the durability of cash distributions despite a softer lending environment .
  • Spread quality and rotation: New originations at ~540bps over SOFR and continued rotation out of lower-yield BSLs underpin portfolio yield resilience and earnings visibility .
  • Leverage trajectory: Debt-to-equity rose to 0.91x, with management reaffirming low-end target achievement by Q3 2025—an earnings catalyst as asset yields are monetized on higher deployed capital .
  • Credit discipline: 98% first lien, robust covenants, diversified industry mix, and non-accruals steady at 1.6% of debt at fair value mitigate credit risk in a choppy macro backdrop .
  • Liquidity and cost of capital: $390.4M of liquidity (cash plus undrawn commitments) and reduced facility spreads support growth and potential NII accretion as utilization increases .
  • Strategic optionality: SG Credit investment broadens exposure to lower middle market credit with immediate accretion and an equity upside component, offering additional earnings levers .
  • Near-term focus: Monitor unrealized marks and PIK uptick; watch leverage progression and originations pace as primary drivers of dividend coverage and potential supplemental distributions beyond the now-concluded special program .

Additional Press Releases and Prior Quarters Reviewed

  • Q2 2025 press release and earnings presentation (EX-99.1, EX-99.2); declared Q3 2025 dividend and highlighted SG Credit investment and facility changes .
  • Q1 2025 press release and presentation: regular dividend declaration; facility amendments (increased commitments, reduced spreads); share repurchase plan extension .
  • Q4 2024 press release and presentation: regular dividend; facility amendments; non-accruals at 1.3%; spread context and plan to wind down BSL .