Group 1 - FS KKR Capital Corp. plans to release its second quarter 2025 results after the close of trading on August 6, 2025 [1] - A conference call to discuss the second quarter 2025 results will be held on August 7, 2025, at 9:00 a.m. Eastern Time, accessible via live webcast [2] - An investor presentation of financial information will be available on the company's website after the market close on August 6, 2025 [4] Group 2 - FS KKR Capital Corp. is a publicly traded business development company focused on providing customized credit solutions to private middle market U.S. companies [5] - The company primarily invests in senior secured debt and, to a lesser extent, subordinated debt of private middle market companies [5] - FS KKR is advised by FS/KKR Advisor, LLC, a partnership between FS Investments and KKR Credit [6] Group 3 - FS Investments manages over $85 billion in assets and provides access to a broad suite of alternative asset classes and strategies [7] - The firm has more than 500 employees across offices in the U.S., Europe, and Asia, and is headquartered in Philadelphia [7] - KKR Credit, a subsidiary of KKR & Co. Inc., aims to generate attractive investment returns through a disciplined investment approach [8]

Group 1 - The focus is on growth and dividend income as a strategy for retirement planning [1] - The portfolio is structured to generate monthly dividend income that grows through reinvestment and annual increases [1] - The author holds long positions in several companies including JEPI, TGT, BP, MO, and FSK [1] Group 2 - The article is presented as personal opinion and not as professional investment advice [2] - It emphasizes the importance of conducting personal research before making investment decisions [2] - The views expressed may not reflect those of Seeking Alpha as a whole [3]

Group 1 - FS KKR Capital's quarterly earnings met expectations, indicating stable financial performance [1] - The quality of FS KKR Capital's balance sheet improved quarter-over-quarter, suggesting enhanced financial health [1] - The company supported its dividend through net investment income, reflecting strong operational performance [1] Group 2 - FS KKR Capital is actively growing its portfolio through new investments, indicating a strategic focus on expansion [1]

Financial Data and Key Metrics Changes - For Q1 2025, the company generated net investment income of $0.67 per share and adjusted net investment income of $0.65 per share, compared to public guidance of approximately $0.66 and $0.64 per share respectively [11] - The company ended the quarter with approximately $3.2 billion of available liquidity [11] - The net asset value per share decreased from $23.64 at the end of Q4 2024 to $23.37 at the end of Q1 2025 [30] Business Line Data and Key Metrics Changes - The company originated approximately $2 billion of new investments during the first quarter, with 45% focused on add-on financings to existing portfolio companies [18] - New investments included approximately 63% in first lien loans, 19% in asset-based finance, and 15% in capital calls to the joint venture [19] - The weighted average yield on accruing debt investments decreased to 10.8% as of March 31, down from 11% at the end of Q4 2024 [28] Market Data and Key Metrics Changes - Approximately 8% of the portfolio could have direct exposure to tariff policies, while low to mid single-digit exposure to DOGE is estimated [15] - Non-accruals represented 3.5% of the portfolio on a cost basis and 2.1% on a fair value basis, showing slight improvement from 3.7% and 2.2% respectively at the end of Q4 2024 [21] Company Strategy and Development Direction - The company aims to maintain a stable income for investors by keeping a consistent distribution strategy, with a declared second quarter distribution of $0.70 per share [11] - The focus remains on upper middle market companies with EBITDA between $50 million and $150 million, which are believed to have more resilience during challenging periods [20] - The company is actively managing exposure to tariffs and has exited two portfolio companies deemed to have higher risks related to tariffs [16] Management's Comments on Operating Environment and Future Outlook - The management expressed concerns about the worsening economic outlook and increased volatility in debt and equity markets [8] - The expectation is that the macroeconomic environment will stabilize by early next year, providing clearer insights into interest rates and other economic drivers [10] - The management remains cautious about the potential for a recession but believes that the company is well-positioned to navigate the current uncertainties [49] Other Important Information - The company closed on its second middle market CLO, raising $380 million of low-cost secured debt [33] - The management team has amended the Morgan Stanley funding facility, reducing the spread and extending the maturity date [33] Q&A Session Summary Question: Timing of deployments and rate changes impact - Management noted that the origination number was satisfactory and that the decline in rates has mostly flowed through as of the end of Q1 [38][40] Question: Market share and competitive environment - Management indicated that they are gaining market share through diversified origination sources and strong sponsor relationships, although M&A activity has slowed [41][43] Question: Macro group insights on recession odds - The macro group sees a higher likelihood of a recession, albeit potentially muted, and is actively monitoring economic indicators [48] Question: Yield compression expectations - Management acknowledged the potential for additional yield compression as the portfolio churns, with new money yields expected to be lower than previous repayments [50][52] Question: Asset-based financing risks - Management highlighted that consumer-related risks in the asset-based finance portfolio are being monitored, with a focus on secured, high FICO score borrowers [62] Question: Interest coverage trends - Management explained that the lag effect in interest coverage metrics is due to the timing of rate changes and portfolio adjustments [84]

Financial Data and Key Metrics Changes - For Q1 2025, the company generated net investment income of $0.67 per share and adjusted net investment income of $0.65 per share, slightly above public guidance of $0.66 and $0.64 per share respectively [11] - The total investment income decreased by $7 million quarter over quarter to $400 million, primarily due to two fewer days in the first quarter compared to the fourth quarter and the paydown of higher yielding investments [29] - The net asset value per share decreased from $23.64 at the end of Q4 2024 to $23.37 at the end of Q1 2025 [31] Business Line Data and Key Metrics Changes - The company originated approximately $2 billion in new investments during Q1 2025, with 45% focused on add-on financings to existing portfolio companies [19] - New investments included approximately 63% in first lien loans, 1% in other senior secured debt, 19% in asset-based finance, 15% in capital calls to the joint venture, and 2% in equity and other investments [20] - Non-accruals represented 3.5% of the portfolio on a cost basis and 2.1% on a fair value basis, showing slight improvement from 3.7% and 2.2% respectively at the end of Q4 2024 [22] Market Data and Key Metrics Changes - Approximately 8% of the portfolio could have direct exposure to tariff policies, with low to mid single-digit exposure to DOGE [14] - The weighted average yield on accruing debt investments decreased to 10.8% as of March 31, down from 11% at the end of Q4 2024 [29] - The portfolio companies reported a weighted average year-over-year EBITDA growth rate of approximately 10% [21] Company Strategy and Development Direction - The company aims to maintain a stable income for investors by keeping a healthy balance of spillover income during periods of higher interest rates [8] - The focus remains on investing in high-quality companies with strong defensive positions, particularly in the upper middle market [21] - The company is actively managing exposure to tariffs and has exited two portfolio companies deemed to have higher risks related to tariffs [16] Management's Comments on Operating Environment and Future Outlook - Management noted that the economic outlook has worsened, with increased volatility in debt and equity markets and major geopolitical risks [7] - The expectation is that the macroeconomic environment will stabilize by early next year, providing clearer insights into interest rates and other economic drivers [9] - The company anticipates that the second quarter of 2025 GAAP net investment income will approximate $0.64 per share, with adjusted net investment income expected to be around $0.62 per share [32] Other Important Information - The company closed on its second middle market CLO, raising $380 million of low-cost secured debt [33] - As of March 31, 2025, the company had approximately $3.2 billion in available liquidity [34] Q&A Session Summary Question: Timing of deployments and rate changes impact - Management indicated that the origination number was satisfactory and that the declining rates have mostly flowed through as of the end of Q1 [38][39] Question: Pipeline activity and market share - Management noted that while the M&A market has slowed, they continue to benefit from a large existing book and diversified origination sources [41][42] Question: Macro group insights on recession odds - Management acknowledged that the chances of a recession are more likely than not, but it could be muted [46][48] Question: Yield compression expectations - Management confirmed that additional yield compression is expected as the portfolio churns, with new money yields lower than previous repayments [49][51] Question: Preferred leverage ranges - Management stated that the target leverage range remains unchanged, with a focus on diversified funding sources [60] Question: Asset-based financing risks - Management highlighted that consumer risk in the asset-based finance portfolio is small, with a focus on secured, higher FICO score risks [62] Question: Continued strength in ABF group - Management indicated that while ABF dividends may vary, there is continued strength in the joint venture's dividends [70] Question: Trends in portfolio leverage and interest coverage - Management explained that the divergence in trends is likely due to a lag effect in interest coverage calculations [82][84] Question: Deal activity in different market segments - Management suggested that larger company activity may be more muted due to reliance on a more active M&A market [87]

Core Insights - FS KKR Capital reported revenue of $400 million for the quarter ended March 2025, a decrease of 7.8% year-over-year, with EPS at $0.65 compared to $0.73 in the same quarter last year [1] - The revenue exceeded the Zacks Consensus Estimate of $396.62 million by 0.85%, while the EPS also surpassed the consensus estimate of $0.64 by 1.56% [1] Financial Performance Metrics - Investment income from interest was reported at $240 million, below the average estimate of $262.37 million [4] - Dividend and other income amounted to $81 million, exceeding the estimated $74.59 million [4] - Fee income reached $17 million, surpassing the average estimate of $10.68 million [4] - Paid-in-kind interest income was reported at $62 million, slightly below the estimate of $65.13 million, but showed a significant year-over-year increase of 77.1% [4] Stock Performance - Over the past month, FS KKR Capital's shares returned +9%, compared to a +10.6% change in the Zacks S&P 500 composite [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating expected performance in line with the broader market in the near term [3]

This quarterly report represents an earnings surprise of 1.56%. A quarter ago, it was expected that this business development company would post earnings of $0.67 per share when it actually produced earnings of $0.66, delivering a surprise of -1.49%. Over the last four quarters, the company has surpassed consensus EPS estimates three times. FS KKR Capital, which belongs to the Zacks Financial - SBIC & Commercial Industry industry, posted revenues of $400 million for the quarter ended March 2025, surpassing ...

Financial Performance - Net Investment Income (NII) was $187 million, or $0.67 per share, for the quarter ended March 31, 2025, compared to $171 million, or $0.61 per share, for the previous quarter[2] - Adjusted Net Investment Income (Adjusted NII) was $182 million, or $0.65 per share, for the quarter ended March 31, 2025, compared to $185 million, or $0.66 per share, for the previous quarter[2] - Net Asset Value (NAV) per share as of March 31, 2025, was $23.37, compared to $23.64 as of December 31, 2024[2] - The Adjusted NII / total dividend coverage ratio was 93% for the quarter ended March 31, 2025[2] Investment Activity - New investment fundings in the first quarter were approximately $2 billion[2] - Net investment activity in the first quarter was $881 million, including $290 million of sales to Credit Opportunities Partners JV, LLC (COPJV)[2] Capital Structure and Liquidity - $3.2 billion of liquidity in undrawn debt, cash, and unsettled trades[2] - 54% of drawn leverage was unsecured as of March 31, 2025, and the weighted average effective rate on borrowings was 5.5%[2] - In the first quarter, KKR FSK CLO 2 was closed, issuing $380 million of notes to third parties at a weighted average rate of S+1.58%[2] - 89% of liabilities mature in 2027 and beyond[2] Portfolio Composition - The fair value of investments was $14.1 billion with 224 portfolio companies[9] - Senior secured investments total 72.6% of the portfolio, looking through to the investments in COPJV as of March 31, 2025[14]

Conference Call - FS KKR Capital Corp. will host a conference call on May 8, 2025, at 9:00 a.m. (Eastern Time) to discuss its Q1 2025 results[4] - The press release announcing the conference call was dated April 10, 2025[4] Stock Information - The company is registered on the New York Stock Exchange under the trading symbol FSK[2]

Investment Activity - For the three months ended March 31, 2025, total purchases amounted to $1,998 million, while sales and repayments were $1,407 million, resulting in a net portfolio activity of $591 million[329]. - Senior secured loans—first lien represented 63% of new investment activity with purchases of $1,256 million and repayments of $853 million[329]. - The company’s investment portfolio primarily consists of senior secured loans and second lien secured loans of private middle market U.S. companies[317]. - The number of portfolio companies increased to 224 as of March 31, 2025, up from 214 at the end of 2024[332]. - The joint venture, Credit Opportunities Partners JV, LLC, had total debt investments of $3,380.3 million as of March 31, 2025, compared to $3,019.6 million at the end of 2024[339]. - The largest investment in a single portfolio company within COPJV was $128.0 million as of March 31, 2025[339]. - The portfolio composition by industry classification showed that the capital goods sector accounted for 12.6% of the total portfolio as of March 31, 2025[341]. Financial Performance - The company generated revenues primarily from interest income on debt investments, along with non-recurring fees such as commitment, closing, and performance-based fees[323]. - Total investment income for the three months ended March 31, 2025, was $400 million, a decrease of 7.8% from $434 million for the same period in 2024[344]. - Interest income decreased to $240 million (60.0% of total income) in Q1 2025 from $315 million (72.6% of total income) in Q1 2024, primarily due to declining base rates[344][346]. - Net investment income for Q1 2025 was $187 million ($0.67 per share), down from $212 million ($0.76 per share) in Q1 2024[352]. - The net change in unrealized appreciation for Q1 2025 was $(50) million, compared to $207 million in Q1 2024, driven by reduced valuations of certain portfolio companies[355]. - Operating expenses decreased to $213 million in Q1 2025 from $222 million in Q1 2024, primarily due to lower subordinated income incentive fees[349][350]. Portfolio Valuation - As of March 31, 2025, the total fair value of the investment portfolio was $14,122 million, an increase from $13,490 million as of December 31, 2024[330]. - The total fair value of direct originations was $13,767.5 million as of March 31, 2025, up from $13,010.9 million[334]. - The percentage of variable rate debt investments based on fair value rose to 67.2% from 65.8%[332]. - The percentage of investments rated 1 (performing) remained stable at 69% for both March 31, 2025, and December 31, 2024, while the percentage of investments rated 3 (underperforming) increased from 4% to 6%[343]. Cash and Securities - As of March 31, 2025, the company had $472 million in cash and cash equivalents, with $2,635 million available under financing arrangements[357]. - The total outstanding amount of senior securities issued was $8,009 million, with an asset coverage ratio of 182% as of March 31, 2025[358][359]. - The fair value of the 3.400% Notes was approximately $987 million as of March 31, 2025[7]. - The fair value of the 6.125% Notes was approximately $720 million as of March 31, 2025[7]. - The carrying value of the 6.875% Notes increased by $9 due to effective hedge accounting[8]. - The company has issued $29 million in standby letters of credit under the Senior Secured Revolving Credit Facility as of March 31, 2025[6]. Dividends and Taxation - The company declared total dividends of $0.70 per share for the three months ended March 31, 2025, compared to $0.75 per share for the same period in 2024[368]. - The board of directors declared a regular quarterly distribution of $0.70 per share on May 5, 2025, to be paid on or about July 2, 2025[369]. - The company intends to make distributions of at least 90% of its investment company taxable income to maintain RIC tax status[363]. - The company is subject to a 4% nondeductible federal excise tax on certain undistributed income unless timely distributions are made[365]. Risk Management - The company aims to maintain rigorous portfolio monitoring to anticipate negative credit events within its portfolio[319]. - The weighted average annual yield on accruing debt investments was 11.0% as of March 31, 2025, consistent with the previous quarter[334]. - A 250 basis point increase in interest rates would result in a $240 million decrease in interest income and a $115 million decrease in net interest income[390]. - The net contractual amount of foreign currency forward contracts totaled $197.9 million as of March 31, 2025, all related to hedging foreign currency denominated debt investments[397]. - The company utilizes interest rate swap strategies to hedge against interest rate risks[389]. - A prolonged reduction in interest rates may adversely affect the company's net investment income[388]. - A 10% unfavorable change in foreign currency exchange rates would reduce the fair value of investments denominated in foreign currencies by approximately $89.7 million[395]. - The company is typically a net receiver of foreign currencies related to its international investment positions, benefiting from a weaker U.S. dollar[396].