Core Viewpoint - FS KKR Capital Corp. reported strong financial results for the quarter ended March 31, 2025, with a declared distribution of $0.70 per share, reflecting stability amid market volatility [1][4][3]. Financial and Operating Highlights - Adjusted Net Investment Income was $0.65 per share, with net investment income of $0.67 per share, compared to $0.61 per share for the previous quarter [8][28]. - The company originated approximately $2.0 billion in new investments during the quarter [3]. - Total investment income for the quarter was $400 million, down from $434 million in the same quarter of the previous year [24]. Portfolio Highlights - The total fair value of investments increased to $14.1 billion from $13.5 billion at the end of 2024 [6][9]. - Senior secured loans represented 58.1% of the portfolio, with 67.2% of debt investments being variable rate [6][9]. - Investments on non-accrual status were 2.1% of the total investment portfolio at fair value [9]. Leverage and Liquidity - The net debt to equity ratio was 114%, with total debt outstanding of $8.0 billion and stockholders' equity of $6.5 billion [10][8]. - Cash and cash equivalents stood at $472 million, with an additional $2.6 billion available under financing arrangements [10]. Earnings and Distributions - Earnings per share for the quarter were $0.43, down from $0.52 in the previous quarter [8][25]. - The company paid distributions totaling $0.70 per share to stockholders [8][4]. Additional Information - FS KKR Capital Corp. focuses on providing customized credit solutions to private middle-market U.S. companies, primarily investing in senior secured debt [14].

Group 1 - The Cash Flow Kingdom Income Portfolio aims to achieve an overall yield in the range of 7% to 10% by combining various income streams for a steady payout [1] - FS KKR Capital Corp (NYSE: FSK) is a Business Development Company that has experienced a decline in share price, resulting in an increased dividend yield of 15% [1] - The Cash Flow Club, where Jonathan Weber is a contributing author, focuses on company cash flows and access to capital, offering features like a personal income portfolio targeting 6%+ yield and coverage of various sectors [1] Group 2 - Jonathan Weber has been active in the stock market and as a freelance analyst since 2014, primarily focusing on value and income stocks [2]

Company Overview - FS KKR Capital Corp. (NYSE: FSK) is a publicly traded business development company (BDC) 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] Upcoming Financial Results - FS KKR Capital Corp. plans to release its first quarter 2025 results after the close of trading on the New York Stock Exchange on May 7, 2025 [1] - A conference call to discuss the results will be hosted via live webcast on May 8, 2025, at 9:00 a.m. (Eastern Time) [2] Investor Participation - Research analysts wishing to participate in the conference call must register a day in advance or at least 15 minutes before the call [3] - A replay of the call will be available shortly after its conclusion on the Investor Relations section of FSK's website [4] Advisory and Management - FS KKR Capital Corp. is advised by FS/KKR Advisor, LLC, a partnership between FS Investments and KKR Credit [6] - FS Investments manages over $85 billion in assets and provides access to a broad suite of alternative asset classes and strategies [7] - KKR Credit, a subsidiary of KKR & Co. Inc., focuses on generating attractive investment returns through a disciplined investment approach [8]

Core Viewpoint - FS KKR Capital (NYSE: FSK) is highlighted as a strong Business Development Company (BDC) investment opportunity, offering both high recurring dividend income and potential for upside revaluation [1] Financial Performance - The non-accrual percentage for FS KKR Capital slightly deteriorated in Q4'24, indicating a minor decline in the quality of its loan portfolio [1]

Financial Data and Key Metrics Changes - In Q4 2024, FSK generated net investment income of $0.61 per share and adjusted net investment income of $0.66 per share, compared to guidance of approximately $0.63 and $0.68 per share respectively [16][17] - The net asset value per share decreased to $23.64 from $23.82 in Q3 2024, impacted by a decrease in the overall value of the investment portfolio and the total quarterly distribution paid [36][40] - Total investment income decreased by $34 million quarter over quarter to $407 million, primarily due to a decline in base rates and delayed closings of new investments [34][35] Business Line Data and Key Metrics Changes - In Q4, FSK originated $891 million of new investments, compared to $1.46 billion of exits, with no sales to the joint venture during the quarter [22][23] - New direct lending investments had a weighted average EBITDA of approximately $206 million and a weighted average coupon of approximately SOFR plus 516 basis points [24] - Non-accruals represented 3.7% of the portfolio on a cost basis and 2.2% on a fair value basis, a slight improvement from 3.8% and 1.7% respectively in Q3 2024 [25][26] Market Data and Key Metrics Changes - The weighted average yield on accruing debt investments decreased to 11% as of December 31, 2024, down from 11.5% in Q3 2024, primarily due to a decline in base rates and spread compression [33] - The current macroeconomic environment is characterized by a balancing act between growth desires, inflationary pressures, and interest rate adjustments, impacting M&A activity [20][21] Company Strategy and Development Direction - The company aims to improve credit quality and overall portfolio stability, having reduced non-accrual investments by 58% during 2024 [11] - FSK plans to maintain a disciplined origination strategy, entering 2025 with significant liquidity to capitalize on expected increases in M&A activity [12][15] - The company expects to provide shareholders with total distributions of at least $2.80 per share in 2025, consisting of a quarterly base distribution of $0.64 and a supplemental distribution of $0.06 [15][38] Management's Comments on Operating Environment and Future Outlook - Management expressed caution regarding the timing of increased M&A activity, suggesting it may take longer to materialize than some industry observers forecast [20] - The company remains optimistic about the direct lending market fundamentals, noting strong revenue and earnings growth among borrowers [21] - Management highlighted the importance of maintaining downside protection in underwriting deals, especially in a borrower-friendly market [122] Other Important Information - FSK's investment portfolio had a fair value of $13.5 billion as of December 31, 2024, consisting of 214 portfolio companies [31] - The company issued $700 million of unsecured notes due 2030 during Q4, which were swapped to floating rates [39] - Available liquidity stood at $4.8 billion, with a significant portion of the balance sheet comprised of unsecured debt [40] Q&A Session Summary Question: Dividend outlook and spillover income - Management confirmed confidence in the dividend outlook, emphasizing the importance of spillover income and maintaining a base and supplemental distribution strategy [44][46] Question: Spread trends and risk characterization - Management noted spread compression across credit markets, with current direct lending deals yielding around 10% total return, indicating a more borrower-friendly market [50][52] Question: New originations and pipeline fill - Management indicated that a few deals rolled over from Q4 to Q1, with a growing pipeline driven by private equity sponsors needing to liquidate back books [56][60] Question: M&A activity and asset-backed finance outlook - Management characterized the asset-backed finance market as having significant activity, with expectations for continued interest and unique origination opportunities [70][73] Question: Areas of weakness in the portfolio - Management acknowledged some idiosyncratic issues affecting specific issuers but maintained a generally constructive outlook on the economy and portfolio performance [75][78] Question: Fee income and repayment activity - Management indicated that fee income may fluctuate, with expectations for additional repayments in Q1, and emphasized the importance of discipline in deal-making [112][120]

Financial Data and Key Metrics Changes - In 2024, the company reduced non-accrual investments by 58% to 3.7% on a cost basis and 2.2% on a fair value basis [11][25][26] - The net investment income for the fourth quarter was $0.61 per share, while adjusted net investment income was $0.66 per share, compared to guidance of approximately $0.63 and $0.68 per share respectively [16][37] - The weighted average yield on accruing debt investments decreased to 11% as of December 31, 2024, down from 11.5% as of September 30, 2024 [33] Business Line Data and Key Metrics Changes - The company originated $891 million of new investments in the fourth quarter, compared to $1.46 billion of exits [22] - New originations consisted of approximately 63% in first lien loans, 36% in asset-based finance investments, and 1% in equity or other investments [23] - The weighted average EBITDA of new direct lending investments was approximately $206 million, with a weighted average coupon of approximately SOFR plus 516 basis points [24] Market Data and Key Metrics Changes - The company reported a 12.1% yield on average net asset value for shareholders in 2024, with a total return of 23% [19] - Credit defaults remained largely contained across the industry, with borrowers continuing to generate revenue and earnings growth [21] - The company noted that the current macroeconomic environment is a balancing act between growth desires, inflationary pressures, and interest rate adjustments [20] Company Strategy and Development Direction - The company aims to improve credit quality and overall portfolio stability, maintain a strong balance sheet, and provide shareholders with an annual distribution of $2.80 per share [12][13][15] - The company plans to utilize its relationships to originate attractive investments and expects M&A activity to increase materially in 2025 and beyond [12][15] - The focus remains on senior secured investments, with approximately 58% of the portfolio in first lien loans as of December 31, 2024 [32] Management's Comments on Operating Environment and Future Outlook - Management expressed caution regarding the timing of increased M&A activity, suggesting it may take longer to materialize than some industry observers forecast [20] - The company remains optimistic about the direct lending market fundamentals, citing strong tailwinds and reduced interest burdens for portfolio companies [21] - Management highlighted the importance of maintaining discipline in origination, even if it means passing on certain transactions [12] Other Important Information - The company issued $700 million of unsecured notes due in 2030 during the fourth quarter, which were swapped to floating rates [39] - As of December 31, 2024, the investment portfolio had a fair value of $13.5 billion, consisting of 214 portfolio companies [31] - The company expects to provide total distributions of at least $2.80 per share in 2025, with a combination of base and supplemental distributions [38] Q&A Session Summary Question: Dividend outlook and spillover income - Management indicated confidence in the dividend outlook, noting that spillover income is a significant factor [43][44] - The base distribution is set at $0.64 per share, with a supplemental distribution of $0.06 per share [44][46] Question: Spread compression and risk - Management acknowledged spread compression across credit markets, with a current direct lending deal yielding around 5% before fees [48][49] Question: New originations and pipeline fill - Management noted that a few deals slipped from Q4 to Q1, impacting fee income, but the pipeline is filling with private equity sponsors looking to offload back books [55][60] Question: M&A activity and asset-backed finance outlook - Management characterized the asset-backed finance market as having significant activity, with a focus on proprietary origination angles [70][73] Question: Areas of concern in the portfolio - Management indicated that any issues observed have been idiosyncratic to specific issuers, with overall portfolio EBITDA growth at approximately 16% [74][76] Question: Fee income and repayment activity - Management expects a certain amount of additional repayments in Q1, with a better balance of new deals versus repayments anticipated [120]

Group 1 - FS KKR Capital (FSK) is a notable stock within the Finance group, which is currently ranked 1 in the Zacks Sector Rank, indicating strong performance relative to other sectors [2][3] - The Zacks Rank system highlights stocks with characteristics that are likely to outperform the market, and FS KKR Capital has a Zacks Rank of 2 (Buy), suggesting a positive outlook [3] - Over the past 90 days, the Zacks Consensus Estimate for FSK's full-year earnings has increased by 0.4%, indicating improved analyst sentiment and a stronger earnings outlook [4] Group 2 - Year-to-date, FS KKR Capital has gained approximately 5.4%, outperforming the average gain of 4.4% for Finance stocks [4] - FS KKR Capital is part of the Financial - SBIC & Commercial Industry, which includes 37 stocks and is currently ranked 54 in the Zacks Industry Rank, with an average gain of 3.9% year-to-date [6] - In comparison, another Finance stock, Alexander's (ALX), has returned 6.9% year-to-date and has a Zacks Rank of 1 (Strong Buy), indicating strong performance within the sector [5][7]

Quarter and Year Ended December 31, 2024 All information is as of December 31, 2024 unless otherwise noted Summary of Quarterly Results FS KKR Capital Corp. F i n a n c i a l I n f o r m a t i o n | | • Net investment income (NII) for the quarter ended December 31, 2024 was $171 million, or $0.61 per share, as compared to $215 million, or $0.77 per share, for the quarter ended September 30, 2024. | | --- | --- | | | • Adjusted net investment income (Adjusted NII) for the quarter ended December 31, 2024 was ...

Core Insights - FS KKR Capital reported a revenue of $407 million for the quarter ended December 2024, reflecting a year-over-year decline of 9% and an EPS of $0.66 compared to $0.75 a year ago [1] - The reported revenue fell short of the Zacks Consensus Estimate of $421.81 million, resulting in a surprise of -3.51%, while the EPS also missed the consensus estimate of $0.67 by -1.49% [1] Financial Performance Metrics - Investment income from fee income was reported at $7 million, significantly lower than the estimated $21.43 million by analysts [4] - Dividend and other income from investments was $76 million, exceeding the average estimate of $66.02 million [4] - Paid-in-kind interest income showed a substantial year-over-year increase of 105.6%, reported at $74 million compared to the estimated $62.28 million [4] - Interest income was reported at $257 million, slightly below the average estimate of $274.63 million [4] Stock Performance - Over the past month, shares of FS KKR Capital have returned +1.9%, contrasting with the Zacks S&P 500 composite's decline of -2.3% [3] - The stock currently holds a Zacks Rank 2 (Buy), suggesting potential outperformance against the broader market in the near term [3]

Group 1: Earnings Performance - FS KKR Capital reported quarterly earnings of $0.66 per share, missing the Zacks Consensus Estimate of $0.67 per share, and down from $0.75 per share a year ago, representing an earnings surprise of -1.49% [1] - The company posted revenues of $407 million for the quarter ended December 2024, missing the Zacks Consensus Estimate by 3.51%, and down from $447 million year-over-year [2] - Over the last four quarters, FS KKR Capital has surpassed consensus EPS estimates three times and topped consensus revenue estimates three times [2] Group 2: Stock Performance and Outlook - FS KKR Capital shares have increased approximately 7.8% since the beginning of the year, outperforming the S&P 500's gain of 1.3% [3] - The company's earnings outlook is crucial for investors, as it includes current consensus earnings expectations for upcoming quarters and any recent changes to these expectations [4] - The current consensus EPS estimate for the upcoming quarter is $0.66 on revenues of $407.37 million, and for the current fiscal year, it is $2.60 on revenues of $1.62 billion [7] Group 3: Industry Context - The Financial - SBIC & Commercial Industry, to which FS KKR Capital belongs, is currently in the top 20% of over 250 Zacks industries, indicating a favorable outlook for the sector [8] - Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions, suggesting that tracking these revisions can be beneficial for investors [5] - The Zacks Rank for FS KKR Capital is currently 2 (Buy), indicating expectations for the stock to outperform the market in the near future [6]