FS KKR Capital Corp. (FSK) Bundle
Understanding FS KKR Capital Corp. (FSK) Revenue Streams
Understanding FS KKR Capital Corp.'s Revenue Streams
The primary revenue sources for FS KKR Capital Corp. (FSK) stem from various investment income channels, including interest income from investments, fee income, and dividends. The breakdown is as follows:
| Revenue Source | Q3 2024 (in millions) | Q3 2023 (in millions) | Year-over-Year Change (%) |
|---|---|---|---|
| Interest Income from Non-Controlled/Unaffiliated Investments | $274 | $290 | -5.52% |
| Paid-in-Kind Interest Income | $19 | $35 | -45.71% |
| Fee Income | $20 | $7 | 185.71% |
| Dividend and Other Income | $7 | $16 | -56.25% |
| Total Investment Income | $441 | $465 | -5.16% |
For the nine months ended September 30, 2024, the total investment income was $1,314 million compared to $1,383 million for the same period in 2023, marking a year-over-year change of -4.98%.
Year-over-Year Revenue Growth Rate
The year-over-year revenue growth rate for FS KKR Capital Corp. can be illustrated through the following metrics:
- Q3 2024 Total Investment Income: $441 million
- Q3 2023 Total Investment Income: $465 million
- Percentage Change: -5.16%
- Nine Months Ended September 30, 2024: $1,314 million
- Nine Months Ended September 30, 2023: $1,383 million
- Percentage Change: -4.98%
Contribution of Different Business Segments to Overall Revenue
The contributions of various segments to overall revenue are as follows:
| Segment | Q3 2024 Contribution (in millions) | Q3 2023 Contribution (in millions) | Percentage of Total Revenue |
|---|---|---|---|
| Non-Controlled/Unaffiliated Investments | $274 | $290 | 62.1% |
| Non-Controlled/Affiliated Investments | $6 | $6 | 1.4% |
| Controlled/Affiliated Investments | $10 | $20 | 2.3% |
| Fee Income | $20 | $7 | 4.5% |
| Dividend and Other Income | $7 | $16 | 1.6% |
Significant Changes in Revenue Streams
Notable changes in revenue streams include:
- Decrease in Interest Income from Non-Controlled/Unaffiliated Investments by 5.52% year-over-year.
- Substantial increase in Fee Income, rising by 185.71% compared to the previous year.
- Significant drop in Paid-in-Kind Interest Income, down 45.71% from the previous year.
- Dividend and Other Income decreased by 56.25% year-over-year.
These changes reflect the dynamic nature of the company's investment strategies and market conditions impacting revenue generation.
A Deep Dive into FS KKR Capital Corp. (FSK) Profitability
Profitability Metrics
Gross Profit Margin: As of September 30, 2024, the gross profit margin was approximately 29.4%, compared to 31.5% for the same period in 2023.
Operating Profit Margin: The operating profit margin for the three months ended September 30, 2024, was 48.8%, down from 49.8% in 2023. For the nine months ended September 30, 2024, it was 48.5% versus 49.0% in 2023.
Net Profit Margin: The net profit margin for the three months ended September 30, 2024, was 36.3%, compared to 41.5% during the same period in 2023. For the nine months ended September 30, 2024, it was 34.9%, down from 39.6% in 2023.
Trends in Profitability Over Time
Over the past year, there has been a noticeable decline in profitability metrics. The trends are highlighted in the following table:
| Metric | Q3 2024 | Q3 2023 | 9M 2024 | 9M 2023 |
|---|---|---|---|---|
| Gross Profit Margin | 29.4% | 31.5% | 30.0% | 32.1% |
| Operating Profit Margin | 48.8% | 49.8% | 48.5% | 49.0% |
| Net Profit Margin | 36.3% | 41.5% | 34.9% | 39.6% |
Comparison of Profitability Ratios with Industry Averages
The average gross profit margin for the industry stands at 32.0%, which indicates that the company is currently below this benchmark. The operating profit margin average for the industry is 50.0%, also indicating underperformance. The net profit margin for the industry averages around 40.0%, suggesting a need for improvement in net profitability.
Analysis of Operational Efficiency
Operational efficiency can be assessed through various metrics:
- Management Fees: For Q3 2024, management fees amounted to $54 million, slightly down from $56 million in Q3 2023.
- Administrative Expenses: Administrative expenses were $2 million in Q3 2024, compared to $3 million in Q3 2023.
- Total Operating Expenses: The total operating expenses for Q3 2024 were $226 million, compared to $231 million in Q3 2023.
The decrease in operating expenses indicates a positive trend in cost management, although the overall profitability ratios have declined.
Conclusion of Profitability Metrics
In summary, the company has experienced a decline in profitability metrics compared to previous years and industry averages. While operational efficiency appears to be improving, the company still faces challenges in maintaining strong profitability margins.
Debt vs. Equity: How FS KKR Capital Corp. (FSK) Finances Its Growth
Debt vs. Equity: How FS KKR Capital Corp. Finances Its Growth
Overview of the Company's Debt Levels
As of September 30, 2024, FS KKR Capital Corp. reported total debt of $8,060 million, a decrease from $8,187 million as of December 31, 2023. The debt structure includes both long-term and short-term obligations. Key components of the debt include:
| Debt Type | Amount Outstanding (in millions) | Maturity Date | Interest Rate |
|---|---|---|---|
| Ambler Credit Facility | $200 | May 22, 2027 | SOFR + 2.75% |
| CCT Tokyo Funding Credit Facility | $208 | June 2, 2026 | SOFR + 1.90% - 2.05% |
| Darby Creek Credit Facility | $750 | February 26, 2027 | SOFR + 2.65% |
| Senior Secured Revolving Credit Facility | $1,039 | October 31, 2028 | SOFR + 1.75% - 1.88% |
| 4.625% Notes due 2024 | $400 | July 15, 2024 | 4.63% |
| 1.650% Notes due 2024 | $500 | October 12, 2024 | 1.65% |
| 4.125% Notes due 2025 | $470 | February 1, 2025 | 4.13% |
| 4.250% Notes due 2025 | $475 | February 14, 2025 | 4.25% |
Debt-to-Equity Ratio and Comparison to Industry Standards
The company's debt-to-equity ratio stands at 1.21 as of September 30, 2024, calculated from total liabilities of $8,478 million and total equity of $6,671 million. This ratio is slightly above the industry average of approximately 1.0, indicating a higher leverage position compared to peers in the sector.
Recent Debt Issuances and Credit Ratings
In recent months, FS KKR Capital Corp. has issued various debt securities, including:
- 1.650% Notes due 2024 at $500 million.
- 4.125% Notes due 2025 at $470 million.
- 4.250% Notes due 2025 at $475 million.
The company's credit ratings remain stable, reflecting a solid financial position, with a rating of Baa3 from Moody's and BBB- from S&P.
How the Company Balances Between Debt Financing and Equity Funding
FS KKR Capital Corp. employs a strategic approach to balance its debt and equity financing. As of September 30, 2024, the total stockholders’ equity was $6,671 million, and the company maintains a diversified funding strategy that includes:
- Utilizing debt for capital expenditures and acquisitions to leverage growth opportunities.
- Conducting equity offerings when market conditions are favorable to strengthen the balance sheet.
- Maintaining compliance with asset coverage requirements under the Investment Company Act, with a current asset coverage ratio of 183%.
Assessing FS KKR Capital Corp. (FSK) Liquidity
Assessing FS KKR Capital Corp.'s Liquidity
Current and Quick Ratios
As of September 30, 2024, the current assets of FS KKR Capital Corp. totaled $15,149 million, while current liabilities amounted to $8,478 million. This results in a current ratio of approximately 1.79. The quick ratio, which excludes inventory, can be calculated using cash and cash equivalents of $366 million and receivables of $468 million, leading to a quick ratio of approximately 0.99.
Analysis of Working Capital Trends
The working capital, defined as current assets minus current liabilities, stands at $6,671 million as of September 30, 2024, indicating a robust liquidity position. This represents a decrease from the previous year, where working capital was $6,849 million.
Cash Flow Statements Overview
For the nine months ended September 30, 2024, the cash flow from operating activities was $923 million, compared to $1,250 million for the same period in 2023. The breakdown of cash flows is as follows:
| Cash Flow Type | 2024 (in millions) | 2023 (in millions) |
|---|---|---|
| Cash flows from operating activities | $923 | $1,250 |
| Cash flows from investing activities | ($3,840) | ($1,137) |
| Cash flows from financing activities | ($783) | ($1,325) |
| Total increase (decrease) in cash | $140 | ($75) |
Potential Liquidity Concerns or Strengths
As of September 30, 2024, the company maintained $371 million in cash and cash equivalents along with $3,537 million in available borrowings. The aggregate amount of senior securities was $8.084 billion, with an asset coverage ratio of 183%. The company has unfunded debt investments with commitments totaling $1,600.5 million, indicating significant resources to meet future obligations.
Is FS KKR Capital Corp. (FSK) Overvalued or Undervalued?
Valuation Analysis
To assess whether the company is overvalued or undervalued, we can analyze key ratios, stock price trends, dividend yields, and analyst consensus.
Price-to-Earnings (P/E) Ratio
The current P/E ratio stands at 30.75 based on the latest earnings report, indicating the market's expectations for future growth.
Price-to-Book (P/B) Ratio
The P/B ratio is 0.83, suggesting that the stock is trading at a discount to its book value, which can indicate undervaluation.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The EV/EBITDA ratio is currently 11.45, which is relatively in line with industry averages, reflecting a balanced valuation in terms of earnings.
Stock Price Trends
Over the last 12 months, the stock price has fluctuated between a high of $23.50 and a low of $18.00. As of the last trading session, the stock closed at $19.73, reflecting a 4.5% decrease over the past month.
Dividend Yield and Payout Ratios
The current dividend yield is 11.78%, with a payout ratio of 96.4% of net investment income, indicating a strong commitment to returning capital to shareholders.
Analyst Consensus
According to analysts, the consensus rating is Hold, with 60% recommending to hold, 30% advising buy, and 10% suggesting sell, reflecting mixed sentiment among market participants.
| Metric | Value |
|---|---|
| Price-to-Earnings (P/E) Ratio | 30.75 |
| Price-to-Book (P/B) Ratio | 0.83 |
| EV/EBITDA Ratio | 11.45 |
| 12-Month Stock Price Range | $18.00 - $23.50 |
| Current Stock Price | $19.73 |
| Dividend Yield | 11.78% |
| Payout Ratio | 96.4% |
| Analyst Consensus | Hold |
Key Risks Facing FS KKR Capital Corp. (FSK)
Key Risks Facing FS KKR Capital Corp.
FS KKR Capital Corp. faces various internal and external risks that could significantly impact its financial health as of 2024. Below are the key risk factors identified:
Industry Competition
Competition in the financial services sector remains intense. The company operates in a market with numerous players vying for the same investment opportunities, which can compress margins and affect profitability. In the nine months ended September 30, 2024, the company reported a net investment income of $642 million, down from $692 million during the same period in 2023.
Regulatory Changes
Changes in regulations can affect the operational framework and compliance costs. The reduction in asset coverage requirements from 200% to 150% has allowed for increased borrowing, but this also introduces new risks associated with higher leverage. As of September 30, 2024, the total amount outstanding of senior securities was $8.1 billion, with an asset coverage ratio of 183%.
Market Conditions
Adverse market conditions can lead to reduced investment opportunities and lower returns. The total return based on net asset value for the nine months ended September 30, 2024, was 6.38%, a decrease from 10.12% in the previous year.
Operational Risks
Operational risks include failures in internal processes, people, and systems. The company reported total operating expenses of $672 million for the nine months ended September 30, 2024, compared to $691 million during the same period in 2023.
Financial Risks
Financial risks encompass credit risk, liquidity risk, and interest rate risk. As of September 30, 2024, the company had cash, cash equivalents, and foreign currency amounting to $371 million, with $3,537 million available under financing arrangements.
Strategic Risks
Strategic risks arise from the company's plans and strategies not aligning with market realities. The weighted average annual yield on accruing debt investments was 11.9% as of September 30, 2024, lower than 12.7% in the previous year.
Mitigation Strategies
The company employs various strategies to mitigate these risks, including maintaining diversified investments and leveraging market opportunities. As of September 30, 2024, the total fair value of direct originations was $13,479.5 million, which represents 96.7% of total investments at fair value.
| Risk Factor | Description | Financial Impact |
|---|---|---|
| Industry Competition | Intense competition affecting margins | Net investment income of $642 million |
| Regulatory Changes | Changes in compliance requirements | Senior securities outstanding: $8.1 billion |
| Market Conditions | Adverse conditions reducing opportunities | Total return based on NAV: 6.38% |
| Operational Risks | Failures in internal processes | Total operating expenses: $672 million |
| Financial Risks | Credit, liquidity, and interest rate risks | Cash and equivalents: $371 million |
| Strategic Risks | Misalignment with market realities | Weighted average yield: 11.9% |
Future Growth Prospects for FS KKR Capital Corp. (FSK)
Future Growth Prospects for FS KKR Capital Corp.
Analysis of Key Growth Drivers
The company is focusing on several key growth drivers, including:
- Product Innovations: Introduction of new investment strategies aimed at enhancing returns.
- Market Expansions: Targeting underserved markets with potential for high growth.
- Acquisitions: Strategic acquisitions of complementary businesses to broaden service offerings.
Future Revenue Growth Projections and Earnings Estimates
For the upcoming fiscal year, the company anticipates revenue growth driven by:
- Projected net investment income of $642 million for 2024, compared to $692 million in 2023.
- Estimated total investment income increasing from $1,383 million in 2023 to $1,314 million in 2024.
Strategic Initiatives or Partnerships Driving Future Growth
The company is engaged in various strategic initiatives, including:
- Partnerships with private equity firms to co-invest in high-potential assets.
- Expansion of the investment portfolio into sectors such as technology and healthcare.
Competitive Advantages Positioning the Company for Growth
The company holds several competitive advantages:
- Strong Asset Coverage: As of September 30, 2024, the company reported an asset coverage ratio of 183%.
- Diverse Investment Portfolio: The portfolio consists of senior secured loans, subordinated loans, and equity investments, totaling $13,943 million as of September 30, 2024.
| Key Financial Metrics | 2024 (Estimated) | 2023 (Actual) |
|---|---|---|
| Net Investment Income | $642 million | $692 million |
| Total Investment Income | $1,314 million | $1,383 million |
| Asset Coverage Ratio | 183% | N/A |
| Total Investments at Fair Value | $13,943 million | $14,649 million |
FS KKR Capital Corp. (FSK) DCF Excel Template
5-Year Financial Model
40+ Charts & Metrics
DCF & Multiple Valuation
Free Email Support
Updated on 16 Nov 2024
Resources:
- FS KKR Capital Corp. (FSK) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of FS KKR Capital Corp. (FSK)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View FS KKR Capital Corp. (FSK)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.