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KA

Kayne Anderson BDC, Inc. (KBDC)·Q3 2025 Earnings Summary

Executive Summary

  • KBDC delivered a solid quarter with investment income of $61.37M and net investment income (NII) of $30.0M ($0.43 per share), while net income per share was $0.35; NAV per share declined slightly to $16.34 due to unrealized losses partially offset by dividend coverage and accretive buybacks .
  • Against Wall Street consensus, KBDC posted a beat: Primary EPS $0.43 vs $0.395* and revenue $61.37M vs $59.02M*, a ~$0.03 EPS beat and ~$$2.35M revenue beat; dividend maintained at $0.40 for Q4 2025, supporting a ~9.8% regular yield on quarter-end NAV .
  • Leverage reached the low end of the target range (debt-to-equity 1.01x; asset coverage 199%), with ~$296M of new commitments and rotation out of lower-yield broadly syndicated loans; non‑accruals improved to 1.4% of fair value .
  • Strategic financing: closed a $200M private notes placement and swapped fixed tranches to floating to better match predominantly floating-rate assets; continued share repurchases ($13.9M in Q3; $19.2M post-quarter through Nov 5) .
  • Near-term stock catalysts: EPS/revenue beats, dividend confirmation, leverage at target, strong origination pipeline and improved credit metrics; watch unrealized marks and higher interest expense as balance sheet scales .

What Went Well and What Went Wrong

What Went Well

  • EPS and revenue beats vs consensus; dividend coverage improved (NII $0.43 > $0.40 regular dividend). Management highlighted “strong origination activity, stable credit performance and a high-quality earnings mix” .
  • Origination momentum: ~$296M of new commitments at ~568 bps over SOFR; portfolio rotation away from lower-yield BSLs; floating-rate exposure at 96% .
  • Credit quality: non‑accruals fell to 1.4% of debt fair value; portfolio ~94% first‑lien senior secured; leverage reached target range (1.01x), supporting growth .

Quote: “We delivered another solid quarter marked by strong origination activity, stable credit performance and a high-quality earnings mix” — Co‑CEO Doug Goodwillie .
Quote: “Our… portfolio specifically continue to demonstrate strong fundamentals… non-accrual rate of just 1.4%” — Co‑CEO Ken Leonard .

What Went Wrong

  • Unrealized losses: net change in unrealized losses of $(4.983)M; NAV per share down $0.03 QoQ, driven by negative fair value changes and OID amortization .
  • Higher expenses with scale: net expenses rose to $31.3M (from $28.6M in Q2) due to higher average borrowings and partial fee waiver effects; interest expense increased to $20.2M .
  • Slight yield compression in private middle market loans (10.7% vs 10.9% in Q2); portfolio company count declined (108 vs 114) as BSL runoff continued .

Financial Results

Core Financials vs Prior Periods

MetricQ3 2024Q1 2025Q2 2025Q3 2025
Total Investment Income ($USD Millions)$57.82 $55.25 $57.30 $61.37
Net Investment Income per Share ($USD)$0.52 $0.40 $0.40 $0.43
Earnings per Share ($USD)$0.53 $0.31 $0.35 $0.35
NAV per Share ($USD)$16.70 $16.51 $16.37 $16.34
Debt-to-Equity (x)0.66x 0.86x0.91x 1.01x

Actuals vs Wall Street Consensus (S&P Global)

MetricQ1 2025 ActualQ1 2025 Consensus*Q2 2025 ActualQ2 2025 Consensus*Q3 2025 ActualQ3 2025 Consensus*
Investment Income ($USD Millions)$55.25 $57.79*$57.30 $58.85*$61.37 $59.02*
Primary EPS ($USD)$0.40 $0.424*$0.40 $0.402*$0.43 $0.395*

Values retrieved from S&P Global.*

Portfolio Composition (Fair Value)

Asset ClassQ1 2025Q2 2025Q3 2025
First Lien Debt98.1% 98.0% 93.7%
Subordinated Debt0.8% 0.8% 4.6%
Equity1.1% 1.2% 1.7%

KPIs and Credit Metrics

KPIQ1 2025Q2 2025Q3 2025
Non‑Accruals (% of debt FV)1.6% 1.6% 1.4%
Weighted Avg Yield (Total Debt, FV)10.4% 10.4% 10.6%
Portfolio Companies (#)116 114 108
Floating‑Rate Debt (%)100% 100% 96%
PIK Income (% of interest)0.6% 3.6% 3.5%

Liquidity and Capital Resources

MetricQ1 2025Q2 2025Q3 2025
Cash & Cash Equivalents ($M)$46.0 $44.4 $46.1
Undrawn Commitments ($M)$384.5 $346.0 $322.0
Total Debt Outstanding ($M, principal)$1,015.5 $1,054.0 $1,153.0

Dividends

Per ShareQ1 2025Q2 2025Q3 2025Q4 2025 (Declared)
Regular Dividend$0.40 $0.40 $0.40 $0.40 (payable Jan 16, 2026)
Special Dividend$0.10 $0.10 – –

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Debt-to-Equity TargetOngoing1.0x–1.25x; “below target but expected to reach low end in Q3” Reached low end (1.01x) in Q3; expect continued private credit growth Achieved low end; maintain range
Regular DividendQ4 2025$0.40 per share in prior quarters $0.40 per share declared Nov 4, 2025 Maintained
Corporate FacilityOngoing$400M commitment Increased to $475M on Aug 8, 2025; rates unchanged Raised capacity
Senior Unsecured NotesOngoing$75M outstanding Closed $200M private placement; swapped fixed to floating to match assets Expanded & hedged
Share Repurchase PlanThrough May 2026Amended to allow up to $100M; extended to May 24, 2026 $13.9M repurchased in Q3; $19.2M post‑quarter; $65.7M remaining under 10b5‑1 plan Ongoing execution

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2 2025)Current Period (Q3 2025)Trend
Origination Activity & SpreadsStrong Q1 commitments ($340M); Q2 commitments $129M in slower market; average spread ~540 bps over SOFR ~$296M new commitments; avg spread ~568 bps over SOFR; increased M&A‑related financing Improving
Portfolio Rotation (BSL → MM loans)Rotations out of lower‑yield BSLs; continued in Q2 Sales/repayments of BSLs $113.0M; continued rotation Continuing
Leverage Trajectory0.86x (Q1) → 0.91x (Q2); expected to reach low end in Q3 Achieved 1.01x; asset coverage 199% Reached target
Credit Quality (Non‑Accruals)1.6% in Q1 & Q2 1.4% non‑accruals; 94% first‑lien Improving
Dividend CoverageNII per share $0.40 covered regular dividend NII $0.43 > $0.40; regular dividend maintained Improving
Macro/Private Credit HeadlinesGeneral caution notedManagement emphasized defensive posture amid market volatility Heightened focus
Platform ExpansionSG Credit investment announced July 15 Notes issuance and swaps to align liabilities with floating assets Strengthening funding

Management Commentary

  • “We delivered another solid quarter… With nearly $300 million in new private credit investments at an average spread of 568bps over SOFR, we continue to see healthy deal flow… driven in-part by a recent pickup in M&A-related financing opportunities” — Doug Goodwillie, Co‑CEO .
  • “We remain defensively positioned with 94%… first‑lien senior secured loans… lending at an average leverage level of 4.2x… and… pleased with credit performance… non‑accrual rate of just 1.4%” — Ken Leonard, Co‑CEO .
  • Leadership updates: “Frank Karl to President… Andy Wedderburn‑Maxwell to Senior Vice President” .

Q&A Highlights

  • The company hosted its call on Nov 11, 2025; external transcripts indicate EPS $0.43 beat by ~$$0.03 and revenue $61.37M beat by ~$2.35M, consistent with company filings .
  • Prepared remarks and exhibits emphasized origination strength, rotation to middle-market first-lien loans, and reaching the leverage target while maintaining credit discipline .
  • Call participation included UBS and RBC analysts per external transcript sources .

Estimates Context

  • Q3 2025 Primary EPS $0.43 vs consensus $0.395*; Investment income $61.37M vs consensus $59.02M* — a beat on both lines. Consensus for Q1–Q3 shows a stable EPS range (~$0.40–$0.42*) and a modest sequential uptick in revenue estimates, which KBDC exceeded in Q3.*
  • Implication: Models likely revise higher for NII and investment income trajectory, with leverage now at target and origination spreads attractive; watch higher interest expense and unrealized marks as offsetting factors .

Values retrieved from S&P Global.*

Key Takeaways for Investors

  • EPS and revenue beats alongside confirmed $0.40 dividend signal resilient earnings power and coverage; leverage at target supports portfolio scale-up .
  • Strong origination pipeline (avg spread ~568 bps over SOFR) and rotation away from lower-yield BSLs should sustain NII, particularly with predominantly floating-rate assets .
  • Credit quality trends are favorable (non‑accruals 1.4%, 94% first‑lien), reducing tail risk and supporting dividend durability .
  • Liability optimization via $200M notes and swaps enhances asset‑liability matching and reduces rate mismatch risk as the balance sheet grows .
  • NAV volatility from unrealized marks persists; focus near-term on watchlist names, OID amortization, and fee dynamics (waiver effects rolling off) .
  • Buybacks remain accretive; ~$65.7M capacity under 10b5-1 plan provides downside support and NAV accretion if discounts persist .
  • Tactical positioning: constructive near-term given beats/dividend/leverage, but monitor marks/interest expense; medium-term thesis anchored in mid-market first‑lien lending discipline, sponsor backing, and spread capture .