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KA

Kayne Anderson BDC, Inc. (KBDC)·Q4 2024 Earnings Summary

Executive Summary

  • Net investment income per share was $0.48 ($0.49 excluding excise tax) and EPS was $0.50; total investment income was $56.3M, down sequentially primarily on lower SOFR and a new non-accrual, while NAV per share remained flat at $16.70 despite paying $0.50 in total dividends in the quarter .
  • Origination remained robust: $230.6M of new commitments and $208.5M of fundings; net funded investments rose $51.4M, with BSL repayments of $18.0M aiding the planned rotation out of broadly syndicated loans .
  • Leverage increased to 0.72x (from 0.66x), and management reiterated a target of reaching the low end of 1.00x–1.25x by Q2–Q3 2025; facility repricings in November/February reduced spreads by 25–60 bps, a tailwind for NII as the portfolio scales .
  • Board declared a regular dividend of $0.40 for Q1 2025 and paid the first of three $0.10 special dividends tied to IPO lock-ups; spillover NII at year-end was ~$0.32 per share, with $0.20 to be distributed via remaining specials in March and June 2025 .
  • Key catalyst: facility repricing and origination momentum into 1H25 coupled with leverage ramp; NAV stability alongside special distributions is a supportive narrative for total return and dividend coverage once steady-state leverage is reached .

What Went Well and What Went Wrong

What Went Well

  • “We generated net investment income of $0.48 per share and net income of $0.50 a share… at year-end 2024, KBDC held approximately $0.32 per share of spillover income” — NAV stayed flat at $16.70 despite $0.50/share of total dividends .
  • Strong origination: $231M commitments across 16 businesses, $209M total fundings; early Q1 2025 fundings exceed $200M, setting up one of the largest origination quarters since inception .
  • Lower borrowing costs from facility amendments (SOFR+2.10%, +2.15%, +2.25%) and extended maturities, increasing committed capacity by $175M; management expects this to benefit NII through 2025 .

What Went Wrong

  • Sequential investment income decline to $56.3M from $57.8M driven largely by lower SOFR and placing Sundance on non-accrual ($0.7M impact), with PIK interest only 1.1% of interest income .
  • Non-accruals rose to 1.3% of debt investments at fair value (three positions), up from 1.0% in Q3; one new non-accrual added in the quarter .
  • Expense pressures: excise tax of $0.8M and higher interest expense on increased borrowings raised net expenses to $22.3M vs. $20.8M in Q3 .

Financial Results

Quarterly Comparison (oldest → newest)

MetricQ2 2024Q3 2024Q4 2024
Total Investment Income ($USD Millions)$52.453 $57.819 $56.340
Net Investment Income ($USD Millions)$34.393 $37.053 $34.023
Net Investment Income per share ($USD)$0.51 $0.52 $0.48
Earnings per share ($USD)$0.46 $0.53 $0.50
NAV per share ($USD)$16.57 $16.70 $16.70
Debt-to-Equity (x)0.53x 0.66x 0.72x
NII Margin % (NII/Investment Income)65.6% 64.1% 60.4%

Year-over-Year (Q4 2024 vs Q4 2023)

MetricQ4 2023Q4 2024
Total Investment Income ($USD Millions)$42.695 $56.340
Net Investment Income per share ($USD)$0.54 $0.48
Earnings per share ($USD)$0.55 $0.50
Non-accruals (FV, $USD Millions)$5.9 $25.1
Weighted Avg Yield on Debt Investments (%)12.5% 10.6%

Portfolio Composition (at fair value)

Asset Class (%)Q2 2024Q3 2024Q4 2024
First Lien97.8% 98.0% 98.0%
Subordinated Debt1.2% 0.9% 0.9%
Equity1.0% 1.1% 1.1%

KPIs

KPIQ2 2024Q3 2024Q4 2024
Portfolio Companies (#)106 110 110
Average Position Size ($USD Millions)$17.4 $17.7 $18.1
Non-accruals (% of debt FV)1.0% 1.0% 1.3%
% Floating Rate Debt100.0% 100.0% 100.0%
Weighted Avg Yield – Private Credit12.3% 11.9% 11.1%
Weighted Avg Yield – Broadly Syndicated Loans8.3% 7.8% 7.1%
Weighted Avg Yield – Debt Investments11.7% 11.3% 10.6%
Debt Outstanding ($USD Millions)$622 $788 $858

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Leverage targetReach 1.00x–1.25x“Over coming quarters” (Q3 commentary) Achieve low end of 1.00x–1.25x by Q2–Q3 2025 Raised specificity (timing)
Regular dividendQ1 2025$0.40/share (unchanged) $0.40/share declared Feb 19, 2025; payable Apr 15, 2025 Maintained
Special dividendsDec 2024, Mar/Jun 2025Three $0.10 specials tied to lockups (pre-announced) First $0.10 paid Dec 20, 2024; next $0.10 Mar 18, 2025; $0.10 Jun 24, 2025 Maintained schedule
Borrowing costs (Corporate Facility)Facility pricingSOFR + 2.35% SOFR + 2.10% (maturity extended) Lowered cost
Borrowing costs (Funding Facilities)Facility pricingSOFR + 2.375–2.50% and +2.70% SOFR + 2.15% and +2.25% (maturities extended, commitments +$175M) Lowered cost, raised capacity
Capital markets plan2025N/AMay opportunistically issue unsecured notes to add capacity once low-end leverage achieved New disclosure

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 & Q3)Current Period (Q4)Trend
Origination activityQ2: $171.8M commitments; Q3: $182.6M commitments; ramp in sponsor activity $231M commitments; Q1 2025 on track as one of largest origination quarters since inception Accelerating
Spreads over SOFRQ2/Q3 implied portfolio yields declining moderately Existing portfolio ~609 bps over SOFR; 2024 new deals ~575 bps; early 2025 ~550 bps; signs of stabilization Slight compression, stabilizing
Leverage & timingTarget 1.0x–1.25x, below target in Q2/Q3 Plan to reach low end by Q2–Q3 2025 via robust originations More specific timeline
Non-accruals/credit qualityNon-accruals 1.0% in Q2–Q3 Non-accruals 1.3%; one new non-accrual; overall portfolio “performing well” Slightly weaker but manageable
Rotation out of BSLQ2/Q3 noted BSL holdings; repayments modest $18M BSL repayments; plan to continue wind-down to improve spreads Ongoing de-risking
Dividend policy & spillover NIIRegular $0.40; specials declared $0.40 Q1 2025; specials Mar/Jun; spillover NII ~$0.32, with $0.20 to be paid via specials Consistent, clarifying payout timing
Tariffs/macro riskNot previously highlightedPortfolio exposure analysis; importer COGS thresholds; pricing flexibility; low “stroke of the pen” risk Heightened monitoring

Management Commentary

  • “We generated net investment income of $0.48 per share and net income of $0.50 a share… KBDC held approximately $0.32 per share of spillover income.” — Ken Leonard .
  • “First quarter 2025 is on track to be one of KBDC’s largest origination quarters since its inception… we continue to see very good risk-adjusted lending opportunities.” — Ken Leonard .
  • “Total investment income… was $56.3 million… decrease… primarily driven by the reduction to SOFR and the $0.7 million impact of placing Sundance on nonaccrual… only 1.1% of interest income… related to PIK interest.” — Terry Hart .
  • “We amended our corporate credit facility to… pricing to SOFR plus 2.1%… amended both SPV credit facilities… decrease the interest rate… The reduction to our borrowing costs… should be beneficial to net investment income over the balance of the year.” — Terry Hart .
  • Press release highlights: NII $34.0M ($0.48/share), NAV $16.70, debt $858M, 98% first-lien, non-accruals 1.3%, declared $0.40 regular dividend .

Q&A Highlights

  • Leverage timing: Management expects reaching the low end of the 1.0x–1.25x target by late Q2 or early Q3 2025 driven by strong origination pace; target does not assume BSL rotation .
  • Tariff/geo-political exposure: Portfolio analysis shows limited direct exposure; importers with >10% COGS from China ~25% and from Canada/Mexico ~20%, with pricing flexibility; minimal “stroke of the pen” risk and low reimbursement risk in health care exposure (~8%) .
  • Terms & pricing: Leverage on new deals consistent (~4x), LTV discipline maintained; spreads seen ~575 bps in 2024, ~550 bps in early 2025; closing fees trending slightly lower .

Estimates Context

  • Wall Street consensus estimates (S&P Global) for EPS and revenue could not be retrieved due to a data access limit at the time of request; therefore, beat/miss vs. consensus cannot be assessed for Q4 2024. Values unavailable; anchor comparisons omitted pending access restoration.

Key Takeaways for Investors

  • NAV stability while paying both regular and special dividends underscores earnings power and disciplined distribution policy; watch continued spillover monetization and supplemental dividends post-lockup expirations .
  • Facility repricing and extended maturities lower funding costs and enhance earnings leverage as assets scale; this should support NII coverage as debt-to-equity approaches 1.0x .
  • Robust origination pipeline into 1H25 coupled with rotation out of lower-spread BSLs is a positive spread-mix shift; monitor spread stabilization and upfront fees contribution to unrealized gains .
  • Credit quality remains solid with conservative structuring (98% first-lien, 100% floating) and sponsor backing; non-accruals ticked up modestly to 1.3% and merit monitoring .
  • Expense cadence (higher interest expense, excise tax in Q4) can moderate alongside facility repricing and fee waivers timing; note incentive fee waiver expired Dec 31, 2024 .
  • Dividend maintenance at $0.40 and special payouts ($0.10 in Mar/Jun) are clear near-term return drivers; longer-term, opportunistic unsecured issuance could add capacity at low-end target leverage .
  • Tactical angle: NAV flat despite $0.50/share distributions plus funding cost reductions are supportive into earnings ramp; a continued beat/miss narrative requires restored consensus data access to assess Q1 2025 dynamics.

Additional Press Releases and Materials

  • Fourth Quarter 2024 Earnings Release and Conference Call announcement (Jan 30, 2025) .
  • December 31, 2024 Financial Results and Q1 2025 Dividend press release (Mar 3, 2025) .
  • September 30, 2024 Financial Results and Q4 2024 Dividend press release (Nov 13, 2024) .
  • June 30, 2024 Financial Results and Q3 2024 Dividend press release (Aug 13, 2024) .