Earnings season has reached the business development sector and one of the first BDCs that reported earnings for Q1 2025 was Ares Capital Corp. (NASDAQ: ARCC ) , the biggest BDC in the industry by market capitalization.A financial researcher and avid investor with a keen eye for innovation and disruption, as well as growth buy-outs and value stocks. Keeping an eye on the pace of high tech and early growth companies, I write about current events and the biggest news surrounding the industry, and strive to pr ...

Core Viewpoint - The article discusses three ultra-high-yield dividend stocks that investors should consider, highlighting their strong performance and growth potential in the current market environment. Group 1: Ares Capital - Ares Capital has a forward yield of 9.3% and has maintained stable or growing payouts for 15 consecutive years [3][5] - The company has the highest regular dividend growth over the last 10 years among externally managed business development companies with a market cap over $700 million [3] - Ares Capital primarily provides capital to middle-market businesses, representing a $3 trillion opportunity, with an additional $2.4 trillion from companies with revenues over $1 billion [4] - The company is well-positioned to capture market share, being the largest publicly traded business development company with a strong balance sheet and deep industry relationships [5] - Concerns regarding the CEO transition are mitigated by the new CEO's extensive experience within the company and industry [6] Group 2: Enterprise Products Partners - Enterprise Products Partners offers a forward yield of 6.9% and has increased its distribution for 26 consecutive years [7] - The company has demonstrated resilience in its cash flows during economic downturns, including the Great Recession and the COVID-19 pandemic [8] - Global demand for liquid hydrocarbons is expected to grow, with the U.S. maintaining a competitive advantage due to low production costs, positively impacting Enterprise's growth prospects [9] Group 3: Verizon Communications - Verizon Communications has a forward dividend yield of 6.3% and has increased its payouts for 18 straight years [10] - Despite a declining stock market, Verizon's share price has risen due to limited exposure to tariffs and strong business performance [11][12] - The company is expanding its offerings through the acquisition of Frontier Communications, expected to close in Q1 2026, which will enhance its products and services for consumers and small businesses [13]

Core Insights - Ares Capital Corporation (ARCC) reported lower-than-expected results for Q1 2025, with core earnings of 50 cents per share, missing the Zacks Consensus Estimate of 54 cents, and reflecting a 15.3% decline from the prior-year quarter [1] - The company's total investment income improved to $732 million, up 4.4% year over year, but still fell short of the Zacks Consensus Estimate of $770 million [3] - Ares Capital's gross commitments to portfolio companies were $3.45 billion, slightly down from $3.55 billion in the prior-year quarter, while portfolio exits decreased to $2.86 billion from $3.41 billion [4] Financial Performance - GAAP net income for Q1 2025 was $241 million or 36 cents per share, down from $449 million or 76 cents per share in the prior-year quarter [2] - Total quarterly expenses decreased to $360 million, down 2.4%, primarily due to negative capital gains incentive fees [3] - As of March 31, 2025, total assets were $28.3 billion, with stockholders' equity at $13.7 billion and a net asset value of $19.82 per share, down from $19.89 [5] Portfolio and Balance Sheet - The fair value of Ares Capital's portfolio investments was $27.1 billion, with accruing debt and other income-producing securities valued at $23.9 billion as of March 31, 2025 [4] - Cash and cash equivalents totaled $647 million, an increase from $635 million as of December 31, 2024, with $5.4 billion available for additional borrowings under existing credit facilities [5] Market Outlook - The demand for customized financing is expected to drive growth in total investment income, while increased investment commitments may support ARCC's financials [6] - However, potential cost increases from expansion strategies and regulatory constraints are identified as significant challenges [6]

Financial Data and Key Metrics Changes - The company reported GAAP net income per share of $0.56 for Q1 2025, down from $0.76 in Q1 2024 and $0.55 in the previous quarter [19] - Core earnings per share were $0.50, compared to $0.59 a year ago and $0.55 in the prior quarter, primarily due to a decline in portfolio yields [19][20] - The total portfolio at fair value increased to $27.1 billion from $26.7 billion in the previous quarter and $23.1 billion a year ago [21] Business Line Data and Key Metrics Changes - The company originated $3.5 billion in new investment commitments during Q1 2025, with approximately 60% coming from existing borrowers [26] - The weighted average yield on debt and other income-producing securities at amortized cost was 11.1% at the end of Q4 2024, down to 10.1% by the end of Q1 2025 [20] - The average debt to EBITDA ratio for portfolio companies was 5.7 times, the lowest since Q1 2020, indicating improved leverage [29] Market Data and Key Metrics Changes - New transaction activity in the liquid loan market dropped significantly as banks became more cautious, while the direct lending market remained stable [10][11] - The company noted increased volatility and widening spreads in secondary loan markets, with banks transitioning to a risk-off position [10][11] - The company has a significant amount of available capital totaling nearly $6.8 billion, positioning it well for new investments [14] Company Strategy and Development Direction - The company aims to capitalize on opportunities arising from market volatility, leveraging long-standing relationships to source deals [12][13] - The focus remains on service-oriented businesses that are more insulated from tariff impacts, with proactive engagement with portfolio companies to mitigate risks [15][17] - The company declared a quarterly dividend of $0.48 per share, marking the 63rd consecutive quarter of stable or increasing dividends [17][24] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating future market conditions, citing a strong investment team and a healthy portfolio [12][13] - The company anticipates a slower M&A environment but believes long-term drivers for M&A remain intact [11] - Management highlighted the importance of proactive communication with market participants to ensure readiness for new opportunities [12] Other Important Information - The company has a low non-accrual rate of 1.5% at cost, down from 1.7% in the previous quarter, indicating strong credit quality [29] - The company has a significant taxable income spillover estimated at $883 million or $1.29 per share available for distribution in 2025 [24] Q&A Session Summary Question: Impact of private BDCs on pricing and competitive position - Management noted that spreads have already begun to widen, indicating a shift in the market dynamics, and expressed confidence in outperforming competitors [35][36] Question: Analysis of tariff exposure - Management conducted a thorough analysis of portfolio companies' exposure to tariffs, finding a mid-single-digit percentage of companies potentially impacted [39][41] Question: Outlook on M&A deal volume - Management acknowledged the slowdown in M&A activity but emphasized their ability to capture market share in the current environment [45][47] Question: Strategies for managing rising costs of liabilities - Management highlighted their historical ability to maintain consistent ROE and mentioned potential strategies such as leveraging and utilizing spillover income [51][54] Question: Backlog and deal closure uncertainty - Management indicated that while there may be some uncertainty regarding the backlog due to market volatility, they remain optimistic about closing existing deals [75][77]

Financial Data and Key Metrics Changes - The company reported GAAP net income per share of $0.60 for Q1 2025, down from $0.76 in Q1 2024 and $0.55 in the previous quarter [19] - Core earnings per share were $0.50, compared to $0.59 a year ago and $0.55 in the prior quarter, primarily due to a decline in portfolio yields [19][20] - The total portfolio at fair value increased to $27.1 billion from $26.7 billion in the previous quarter and $23.1 billion a year ago [21] Business Line Data and Key Metrics Changes - The company committed $3.5 billion in gross commitments during the first quarter, a 54% increase compared to the same period last year [9][10] - The weighted average yield on debt and other income-producing securities at amortized cost was 11.1% at the end of Q4 2024, down to 10.1% by the end of Q1 2025 [20] - The portfolio companies reported a 12% weighted average LTM EBITDA growth, up from 11% in the prior quarter [28] Market Data and Key Metrics Changes - New transaction activity in the liquid loan market dropped significantly as banks became more cautious, leading to increased volatility and widening spreads in secondary loan markets [10][11] - The direct lending market remained stable, with certain transactions shifting from the syndicated loan market to private credit solutions [11] Company Strategy and Development Direction - The company aims to leverage its strong liquidity and conservative balance sheet leverage to capitalize on potential investment opportunities in a potentially improving spread environment [10][14] - The focus remains on domestic service-oriented businesses, which are believed to be more insulated from the impacts of higher tariffs [15] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to navigate future market conditions, citing a seasoned investment team and strong relationships in the market [12][13] - The company declared a quarterly dividend of $0.48 per share, marking the 63rd consecutive quarter of stable or increasing dividends [17][24] Other Important Information - The company has nearly $6.8 billion in total available liquidity, positioning it well for future investments [22] - The non-accrual rate at cost ended the quarter at 1.5%, down from the previous quarter, indicating strong portfolio health [29] Q&A Session Summary Question: Will private credit provide similar or lower pricing than banks? - Management noted that spreads have already started to widen, indicating a shift in the market dynamics [35][36] Question: What is the exposure to tariffs for portfolio companies? - The company conducted a thorough analysis and found a mid-single-digit exposure to companies importing from high-tariff countries, emphasizing that this is an exposure analysis, not an impact analysis [39][41] Question: How does the company plan to manage earnings against rising costs of liabilities? - Management highlighted the ability to adjust leverage and utilize spillover income to manage costs effectively [50][54] Question: Is there a trend in portfolio stress or sectors experiencing issues? - Management indicated that there are no significant trends observed in portfolio stress at this time [102] Question: What is the outlook for new investment opportunities? - Management expressed optimism about the potential for larger deals in the private credit market, indicating a readiness to pivot as market conditions change [84][85]

First Quarter 2025 Earnings Presentation Credit Private Equity Real Estate Strategic Initiative s 0 42 65 155 112 42 4 94 109 127 127 127 0 42 65 2 87 133 71 126 163 120 163 198 BUSINESS SECTOR PALETTE GENERAL PALETTE Important Notice This presentation has been prepared for Ares Capital Corporation ("Ares Capitalˮ) for the benefit of its public stockholders. This presentation is solely for information purposes in connection with evaluating the business, operations and financial results of Ares Capital. This ...

Core Insights - Ares Capital reported $732 million in revenue for Q1 2025, a year-over-year increase of 4.4%, but fell short of the Zacks Consensus Estimate by 4.97% [1] - The earnings per share (EPS) for the quarter was $0.50, down from $0.59 a year ago, representing a surprise of -7.41% compared to the consensus estimate of $0.54 [1] Revenue and Earnings Performance - Dividend income was reported at $143 million, below the average estimate of $154.25 million from four analysts [4] - Other income reached $17 million, slightly above the average estimate of $16.73 million [4] - Capital structuring service fees totaled $46 million, close to the estimated $46.86 million [4] - Interest income from investments was $526 million, lower than the average estimate of $553.84 million [4] Stock Performance - Ares Capital's shares have returned -4.1% over the past month, compared to a -0.8% change in the Zacks S&P 500 composite [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating potential performance in line with the broader market in the near term [3]

Company Performance - Ares Capital reported quarterly earnings of $0.50 per share, missing the Zacks Consensus Estimate of $0.54 per share, and down from $0.59 per share a year ago, representing an earnings surprise of -7.41% [1] - The company posted revenues of $732 million for the quarter ended March 2025, missing the Zacks Consensus Estimate by 4.97%, compared to year-ago revenues of $701 million [2] - Over the last four quarters, Ares Capital has surpassed consensus EPS estimates just once and topped consensus revenue estimates two times [2] Market Outlook - Ares Capital shares have lost about 2.9% since the beginning of the year, while the S&P 500 has declined by 6% [3] - The company's earnings outlook will be crucial for future stock performance, with current consensus EPS estimate for the coming quarter at $0.54 on revenues of $780.46 million, and $2.17 on $3.15 billion in revenues for the current fiscal year [7] Industry Context - The Financial - SBIC & Commercial Industry, to which Ares Capital belongs, is currently in the bottom 44% of over 250 Zacks industries, indicating potential challenges ahead [8] - Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can impact Ares Capital's stock performance [5]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ý QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2025 OR o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____ to _____ ARES CAPITAL CORPORATION (Exact name of Registrant as specified in its charter) (State or other jurisdiction of (I.R.S. Employer incorporation or organiza ...

Exhibit 99.1 ARES CAPITAL CORPORATION ANNOUNCES MARCH 31, 2025 FINANCIAL RESULTS AND DECLARES SECOND QUARTER 2025 DIVIDEND OF $0.48 PER SHARE DIVIDEND DECLARATIONS New York, NY — April 29, 2025 — Ares Capital Corporation ("Ares Capital") (NASDAQ: ARCC) announced that its Board of Directors has declared a second quarter 2025 dividend of $0.48 per share. The second quarter 2025 dividend is payable on June 30, 2025 to stockholders of record as of June 13, 2025. MARCH 31, 2025 FINANCIAL RESULTS Ares Capital als ...