FS KKR Capital (FSK) Financials

FS Investment (NYSE: FSIC) has demonstrated notable financial performance trends over the past four years, with detailed results through Q1 2025.

Positive financial highlights include:

• The company’s total interest income remained robust, reaching $400 million in Q1 2025, supporting consistent revenue generation.
• Net interest income improved significantly in Q1 2025 ($400 million) compared to prior quarters, indicating cost-effective interest management.
• Q1 2025 net income attributable to common shareholders was $120 million, showing growth compared to $90 million in Q4 2023 and demonstrating improving profitability.
• Diluted earnings per share were steady at $0.43 in Q1 2025, after some fluctuations in prior quarters, reflecting stable shareholder returns.
• The company maintained solid equity levels, with total common equity around $6.55 billion in Q1 2025, supporting financial strength.
• Operating cash flow, despite some quarterly fluctuations, was positive over several quarters (e.g., $978 million in Q4 2024), showcasing ability to generate cash from operations.
• Q1 2025 displayed a positive net change in cash and equivalents of $176 million, illustrating continued liquidity build-up.
• Long-term debt balance has been relatively stable around $8 billion, suggesting disciplined borrowing management.

Neutral aspects where performance was stable or showed expected variability:

• Non-interest income has been consistently zero or negligible, indicating the firm relies primarily on interest income rather than fee-based or other income streams.
• Salaries and employee benefits expense hovered steadily between $39 and $47 million, showing consistent cost control.
• Long-term debt interest expense has fluctuated but remained a significant expense item, typically around $110 million quarterly, as expected for a finance-focused REIT.
• Shares outstanding have been stable at approximately 280 million, indicating no major equity dilution or buybacks over the period.

Negative trends and risks to note:

• Other operating expenses showed significant volatility and unusually large negative amounts in some quarters (e.g., -$171 million in Q4 2024), which may indicate irregular charges or accounting anomalies worth monitoring.
• Consolidated net income includes substantial negative "Other Adjustments" each quarter (e.g., -$67 million in Q1 2025), which reduce net income and could reflect non-recurring or loss items.
• The company experienced negative net cash from continuing operating activities of -$418 million in Q1 2025, a sharp reversal from positive cash flow in prior quarters, possibly signaling working capital or operational cash management challenges.
• Q1 2025 amortization expense showed a negative value (-$4 million), which is unusual and might indicate adjustments or impairments requiring further investigation.
• Retained earnings have remained negative, around -$2.7 billion in recent quarters, despite positive net income, highlighting a history of accumulated losses or distributions above earnings.
• Despite strong operating results in recent years, FSIC's net income and earnings per share showed considerable fluctuation quarter-over-quarter, reflecting some earnings volatility.
• Cash interest paid remains high (e.g., $151 million in Q1 2025), which is a sizable ongoing expense that could pressure net income in a rising interest rate environment.

Summary: FS Investment has exhibited strong interest income and improving net interest income over the past year, with solid profitability and equity base. However, volatility in operating cash flows, large non-operating adjustments, and negative retained earnings are risks to watch. Overall, the company’s financials suggest a stable core business with some operational and accounting complexities that investors should monitor for sustainable future growth.