FS KKR Capital (FSK) - 2024 Q1 - Quarterly Results

Financial and Operating Highlights FSK reported strong Q1 2024 results with $0.73 Adjusted Net Investment Income per share, 10% annualized ROE, and improved leverage - The CEO highlighted an active start to 2024, with strong earnings, increased investment activity, and significant progress on restructuring non-accruing investments, expressing confidence in the company's ability to deliver attractive distributions[4] - Investment activity in Q1 2024 included $1.44 billion in purchases and $1.86 billion in sales and repayments[6] - The net debt-to-equity ratio improved, decreasing from 113% at the end of Q4 2023 to 109% at the end of Q1 2024[6] Q1 2024 vs. Q4 2023 Key Financial Metrics (per share) | Metric | Q1 2024 | Q4 2023 | | :--- | :--- | :--- | | Net Investment Income | $0.76 | $0.71 | | Adjusted Net Investment Income | $0.73 | $0.75 | | Net Asset Value | $24.32 | $24.46 | | Total Net Realized/Unrealized Loss | ($0.14) | ($0.39) | | Earnings Per Share | $0.62 | $0.32 | Declaration of Distribution The Board declared a total Q2 2024 distribution of $0.75 per share, comprising regular and special components Q2 2024 Distribution Details | Distribution Type | Amount per Share | Record Date | Payment Date | | :--- | :--- | :--- | :--- | | Regular (Base + Supplemental) | $0.70 | June 12, 2024 | July 2, 2024 | | Special | $0.05 | May 15, 2024 | May 29, 2024 | Portfolio Highlights FSK's $14.2 billion portfolio, primarily senior secured loans, saw non-accrual investments decrease to 4.2% with a 12.5% weighted average yield - Investments on non-accrual status decreased significantly, from 5.5% of the total portfolio at fair value as of Dec 31, 2023, to 4.2% as of March 31, 2024[9] - The weighted average annual yield on accruing debt investments was 12.5% as of March 31, 2024, slightly down from 12.7% as of December 31, 2023[9] Portfolio Composition by Asset Class (Fair Value) | Asset Class | March 31, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Senior Secured Loans — First Lien | 57.0% | 58.2% | | Senior Secured Loans — Second Lien | 7.1% | 7.5% | | Asset Based Finance | 14.6% | 14.2% | | Credit Opportunities Partners JV, LLC | 9.8% | 9.5% | | Equity/Other | 8.1% | 7.7% | Leverage and Liquidity FSK maintained strong liquidity with a 109% net debt-to-equity ratio, $242 million cash, and $3.6 billion available financing, with 65% unsecured debt - The net debt-to-equity ratio was 109% as of March 31, 2024, based on $8.0 billion in total debt and $6.8 billion in stockholders' equity[10] - Total available liquidity was approximately $3.84 billion, comprising $242 million in cash and foreign currency and $3.6 billion in availability under financing arrangements[10] - As of March 31, 2024, 65% of the company's total debt was unsecured, with the remaining 35% being secured[10] Financial Statements The consolidated financial statements show Q1 2024 net investment income of $212 million, a $173 million net asset increase, and $24.32 NAV per share Consolidated Statements of Operations Q1 2024 operations generated $434 million total investment income, $212 million net investment income, and a $173 million net asset increase Q1 2024 Statement of Operations Highlights (in millions) | Line Item | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Total Investment Income | $434 | $456 | | Total Operating Expenses | $222 | $227 | | Net Investment Income | $212 | $229 | | Total Net Realized and Unrealized Loss | ($39) | ($30) | | Net Increase in Net Assets from Operations | $173 | $199 | Consolidated Balance Sheets As of March 31, 2024, FSK reported $15.15 billion in total assets, $8.34 billion in liabilities, $6.81 billion in equity, and $24.32 NAV per share Balance Sheet Highlights (in millions) | Line Item | March 31, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Total Investments, at fair value | $14,221 | $14,649 | | Total Assets | $15,152 | $15,469 | | Total Liabilities | $8,340 | $8,620 | | Total Stockholders' Equity | $6,812 | $6,849 | | Net Asset Value per Share | $24.32 | $24.46 | Non-GAAP Financial Measures FSK uses non-GAAP measures like Adjusted Net Investment Income to clarify operational performance, reporting $0.73 per share for Q1 2024 - FSK uses non-GAAP measures internally and believes they are useful for investors to evaluate ongoing results and trends by excluding items such as merger accounting impacts and certain non-recurring expenses[31][34] Reconciliation of GAAP to Non-GAAP Measures (per share) | Metric | Q1 2024 | Q4 2023 | | :--- | :--- | :--- | | GAAP Net Investment Income | $0.76 | $0.71 | | Adjustments | ($0.03) | $0.04 | | Adjusted Net Investment Income | $0.73 | $0.75 | | GAAP Net Realized/Unrealized Loss | ($0.14) | ($0.39) | | Adjustments | $0.03 | $0.03 | | Adjusted Net Realized/Unrealized Loss | ($0.11) | ($0.36) | Company and Event Information FSK is a BDC advised by FS/KKR Advisor, LLC, providing credit to U.S. middle-market companies, with Q1 2024 results discussed on a May 9 conference call - FSK is a BDC that primarily invests in senior secured debt of private middle-market U.S. companies and is advised by FS/KKR Advisor, LLC, a partnership between FS Investments and KKR Credit[14][15] - A conference call to discuss Q1 2024 results was held on May 9, 2024. A webcast replay and investor presentation are available on the company's investor relations website[11][12][13]