Kayne Anderson BDC, Inc. (KBDC) Earnings

Management highlights

- Overall Portfolio Performance * Delivered solid resilient performance consistent with KBDC's value lending strategy amid broader sector headwinds * Maintains a defensive portfolio positioning with low exposure to volatile software and technology (only 2% of the portfolio, compared to 15-25% for many peer BDCs), focused on stable, staple sectors with durable cash flows and conservative borrower leverage * Maintains strong credit quality overall; two new assets were added to non-accrual status during the quarter (SCORE and Regiment), while Arborworks was moved off non-accrual with a clear path to further improvement; management expects Sundance and Regiment to exit non-accrual over the next 1-2 quarters via realization and sale processes respectively - Investment Activity * Maintained disciplined capital deployment, with $93 million in new private credit commitments and $99.1 million in total fundings (including draws on existing commitments) during the quarter; $74.6 million in repayments and $17.4 million in BSL sales generated net funded investment activity of $7.1 million * New floating rate originations averaged 549 basis points over SOFR, 20 basis points wider than in Q4 2025, reflecting a favorable pricing environment for lenders * Completed a $30 million delayed draw term loan add-on to SG Credit, an 11% fixed-rate investment; SG Credit now represents ~5% of the portfolio, supported by strong platform growth * Activity has picked up in early Q2 2026, with $150 million in new commitments closed or being finalized as of the call date - Balance Sheet & Capital Management * Holds a strong conservative balance sheet with leverage at the low end of the target range, providing ample dry powder for tactical opportunistic investing as market spreads widen * Completed a term extension for KBDC's largest credit facility led by Wells Fargo, and reduced the facility's interest rate by 20 basis points * Repurchased $21.4 million of shares at an average price of 86% of NAV during Q1 2026 under the existing $100 million repurchase program; the program was extended for one year and renewed for $100 million starting May 25, 2026 * Board of directors declared a 40 cent per share regular quarterly dividend for Q2 2026, payable July 16 to shareholders of record as of June 30, maintaining the dividend level from prior quarters - Market Dynamics * The private credit market is experiencing performance bifurcation, with stress concentrated in software/tech-focused portfolios; low software exposure has insulated KBDC from this stress * Overall M&A activity remains lower than forecast at the start of the year due to geopolitical tensions, but KBDC has seen a steady transaction flow in its core middle market segment with a noticeable uptick in activity over the four weeks prior to the call

Guidance

- Management reaffirms confidence in its ability to sustain the 40 cent per share quarterly dividend throughout 2026, consistent with prior guidance - KBDC will complete the rotation out of remaining lower-yielding BSL positions, with the majority of monetization expected in Q2 2026 and a small portion potentially slipping into Q3 2026 - Prepayment activity is expected to remain relatively slow through the first half of 2026, with a projected pickup in Q4 2026; full-year 2026 prepayments are expected to be slightly higher than 2025 levels - Management will maintain portfolio leverage at the lower end of the 1.0x to 1.25x target range (around 1.0x to 1.1x) to retain ample liquidity amid ongoing market dislocation, and will not deploy capital aggressively to reach the upper end of the range - Spreads on new originations are expected to continue increasing in both core and upper mid-market segments in the near term, as capital retreats from the private credit market and deal pipeline grows - KBDC expects healthy overall investment activity in 2026, and is tracking to nearly $200 million in new commitments for Q2 2026

Segment performance

KBDC is a single-segment business development company focused on private middle market credit investments. As of March 31, 2026, the total debt investment portfolio had a fair value of $2.2 billion plus $289 million in unfunded commitments. Key segment details: - 93% of the portfolio consists of first lien investments, 95% of debt investments are floating rate, and the weighted average portfolio yield (excluding non-accruals) is 10.1% - The portfolio is highly diversified across 105 companies, with an average position size of ~1% of fair value; the top 5 industry sectors (commercial services & supplies, healthcare, distributors, food products, containers & packaging) account for just over 50% of portfolio fair value - Non-accrual investments represent 2.5% of the debt portfolio at fair value, up from 1.4% in the prior quarter - Remaining broadly syndicated loan (BSL) exposure is $29.8 million at quarter end, down from prior levels as KBDC rotates out of BSLs into higher-spread private credit Financial results for Q1 2026: - Total investment income: $57.3 million, down from $61.9 million in Q4 2025 - Net investment income (NII) per share: 43 cents, down 1 cent from Q4 2025, covering the 40 cent quarterly dividend at 108% - Net income per share: 26 cents - Annualized return on equity: 10.6% - Net asset value (NAV) per share: $16.23, down 9 basis points from $16.32 in Q4 2025 - Realized losses: $2.3 million, primarily from a $2 million realized loss on the restructuring of Regiment Security Partners - Net unrealized losses: $9 million, up from $7.2 million in Q4 2025, driven by negative marks on four portfolio investments - Total assets: $2.3 billion, net assets: $1.1 billion, debt to equity ratio: 1.05x, within the target 1.0x to 1.25x range - Total liquidity: $569.7 million, consisting of $32.7 million in cash and $537 million in undrawn credit capacity

Risks & headwinds

- Geopolitical tensions have suppressed M&A activity below forecasted levels, and could continue to limit transaction volume and investment deployment - Rapid AI advancement has created significant uncertainty around the business model durability of software companies, leading to markdowns and credit performance pressure for BDCs with large software/tech exposure; while KBDC only has 2% exposure, the small BSL holding Tempo has been negatively impacted by AI-related market noise - Broader private credit market stress and prolonged market dislocation could create valuation challenges and pressure on portfolio performance - Market interest rate declines led to lower portfolio investment income in Q1 2026, and continued low rates could pressure future income generation - Non-accrual investment share increased from 1.4% to 2.5% quarter-over-quarter, and further credit deterioration could negatively impact net income and NAV - Public BDCs generally trade at a discount to NAV despite strong operational fundamentals, which can negatively impact shareholder returns and share repurchase economics

Analyst Q&A

• Q: Corey Johnson (UBS) asked if KBDC faces pricing or leverage competition from upper mid-market lenders, and what opportunities its clean balance sheet creates for expansion. /

  A: Doug Goodwillie responded that KBDC maintains consistent pricing and leverage discipline across all market environments. While overall M&A volume remains muted, KBDC has seen a Q2 uptick in activity and is on track to close ~$200 million in new commitments for the quarter. Upper mid-market players have reduced capital deployment due to private side redemptions, creating better pricing opportunities for KBDC on $75M-$100M EBITDA deals with strong covenants, rather than creating competitive pressure.

• Q: Kenneth Lee (RBC) asked about near-term prepayment trends, and whether leverage will lean toward the top or bottom of KBDC's target range. /

  A: Management noted prepayment speeds have been slower than the long-term 3-year average (closer to 4 years post-COVID) and expects a slight pickup in Q4 2026, with 2026 prepayments moderately higher than 2025. Management will keep leverage near the current 1.0x-1.1x range to retain liquidity through potential prolonged market dislocation, and will not deploy capital aggressively to reach the 1.25x upper leverage target.

• Q: Derek Hewitt asked how spreads are currently trending on new deals, and when BSL portfolio monetization will be completed. /

  A: Management reported spreads have already increased an additional ~20 basis points for core mid-market deals in early Q2, with larger spread increases in the upper mid-market. Further spread widening is expected as fundraising becomes harder for private credit providers and deal pipeline grows. Monetization of the remaining $29.8M BSL portfolio is expected to be mostly completed in Q2 2026, with only a small portion potentially slipping into Q3. Three of the four remaining holdings trade near cost, while the small AI-exposed position Tempo will be unwound as soon as possible.