Ares Capital (NasdaqGS:ARCC) Q4 2025 Earnings call February 04, 2026 12:00 PM ET Company ParticipantsBrian McKenna - Director of Equity ResearchJana Markowicz - COOJim Miller - PresidentJohn Stilmar - Partner and Co-Head of the Ares Public Markets Investor RelationsKort Schnabel - CEOScott Lem - CFOConference Call ParticipantsArren Cyganovich - Managing Director and Senior Equity Research AnalystCasey Alexander - Managing Director and Senior Equity AnalystDerek Hewitt - AnalystDoug Harter - Director and Sen ...

Financial Data and Key Metrics Changes - The company reported GAAP net income per share of $0.41 for Q4 2025, down from $0.57 in the prior quarter and $0.55 in Q4 2024. For the full year, GAAP net income per share was $1.86, compared to $2.44 in 2024 [17] - Core earnings per share for Q4 2025 remained stable at $0.50, compared to $0.50 in the prior quarter but down from $0.55 a year ago. For the full year, core earnings per share were $2.01, down from $2.33 in 2024 [17] - The company generated a 10% core return on equity (ROE) for the year, consistent with historical averages [18] Business Line Data and Key Metrics Changes - The company achieved record gross originations of $15.8 billion in 2025, with Q4 originations exceeding $5.8 billion, a 50% increase from Q4 2024 [26] - New investment commitments accelerated in the second half of 2025, driven by M&A and LBO activities, with about half of new originations supporting M&A-driven transactions [26][27] - The portfolio at fair value increased to $29.5 billion, a 3% increase from the prior quarter and a 10% increase year-over-year [27] Market Data and Key Metrics Changes - The company added over 100 new borrowers in 2025, setting a new record, and ended the year with a diversified portfolio of 603 borrowers [27] - The weighted average organic EBITDA growth rate of portfolio companies was more than three times that of GDP, indicating strong performance relative to the broader economy [10] - Non-accruals at cost remained stable at 1.8%, consistent with prior levels and below historical averages [32] Company Strategy and Development Direction - The company emphasized its long-term competitive advantages, including team experience, market relationships, and rigorous credit standards, which are expected to support future performance [5] - The focus on specialized industry verticals, such as software and healthcare, has led to differentiated deal flow and a 50% increase in non-sponsored originations [9] - The company plans to maintain its dividend despite potential declines in short-term interest rates, supported by a strong balance sheet and spillover income [14][24] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to navigate economic volatility and capitalize on market opportunities, particularly in the software sector [56] - The company is closely monitoring market conditions and believes it is well-positioned to benefit from any dislocations in the capital markets [56] - Management highlighted the importance of maintaining a diversified capital base to support consistent lending activities [34] Other Important Information - The company reported a total portfolio at fair value of $29.5 billion, with a net asset value of $14.3 billion, or $19.94 per share, reflecting a slight decrease from the previous quarter [19] - The company has a strong liquidity position, totaling over $6 billion, including available cash [23] - The first quarter 2026 dividend is set at $0.48 per share, payable on March 31, 2026 [24] Q&A Session Summary Question: Concerns about AI's impact on software business performance - Management expressed confidence in their software portfolio, emphasizing that they invest in foundational infrastructure software resistant to technology risk, including AI [38][40] Question: Characterization of deal flow and market conditions - Management noted that most deal flow consists of add-on acquisitions for existing portfolio companies, with limited resurgence in dividend transactions [50] Question: Market dislocation and spread widening - Management explained that recent market volatility did not lead to sustained spread widening, attributing this to the quick recovery of the broadly syndicated market [72][74] Question: Share repurchase program - Management confirmed that share repurchases are always considered based on stock trading levels, but no specific plans were disclosed [76]

Ares Capital Corporation Earnings Presentation Fourth Quarter 2025 Important Notice This presentation has been prepared for Ares Capital Corporation ("Ares Capital") 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 presentation does not constitute, and shall not be construed as, an offer to buy or sell, or the solicitation of an offer to buy or sell, any securiti ...

Financial Performance - GAAP Net Income Per Share for Q3 2025 was $0.57, compared to $0.52 in Q2 2025 and $0.62 in Q3 2024[12] - Core EPS for Q3 2025 was $0.50, the same as Q2 2025, but lower than the $0.58 in Q3 2024[12] - Net Investment Income Per Share for Q3 2025 was $0.48, slightly down from $0.49 in Q2 2025 and $0.57 in Q3 2024[12] - Net Asset Value Per Share increased to $20.01 in Q3 2025 from $19.90 in Q2 2025 and $19.77 in Q3 2024[12] - Investment income for the three months ended September 30, 2025, was $782 million, compared to $745 million for the three months ended June 30, 2025[23] Portfolio Composition and Activity - Total Fair Value of Investments reached $28693 million in Q3 2025, up from $27886 million in Q2 2025 and $25918 million in Q3 2024[13] - Gross Commitments in Q3 2025 were $3924 million, compared to $2573 million in Q2 2025 and $3919 million in Q3 2024[13] - Exits of Commitments in Q3 2025 amounted to $2625 million, versus $1963 million in Q2 2025 and $2598 million in Q3 2024[13] - First Lien Senior Secured Loans constituted 61% of the portfolio at fair value as of September 30, 2025[19] - Floating Rate investments represented 71% of the portfolio at fair value as of September 30, 2025[19]

Financial Performance - GAAP Net Income Per Share for Q2 2025 was $052, matching Q2 2024, but up from $036 in Q1 2025[12] - Core EPS for Q2 2025 was $050, consistent with Q1 2025, but down from $061 in Q2 2024[12] - Net Investment Income Per Share for Q2 2025 was $049, down from $054 in Q1 2025 and $062 in Q2 2024[12] - Net Asset Value Per Share increased to $1990 in Q2 2025, compared to $1982 in Q1 2025 and $1961 in Q2 2024[12] - Investment income for the three months ended June 30, 2025, was $745 million, compared to $732 million for the three months ended March 31, 2025[23] Portfolio Composition and Activity - Total Fair Value of Investments reached $27886 million in Q2 2025, up from $27130 million in Q1 2025 and $24973 million in Q2 2024[13] - Gross Commitments were $2573 million in Q2 2025, lower than $3453 million in Q1 2025 and $3857 million in Q2 2024[13] - Exits of Commitments were $1963 million in Q2 2025, compared to $2857 million in Q1 2025 and $1376 million in Q2 2024[13] - First Lien Senior Secured Loans constituted 59% of the portfolio at fair value as of June 30, 2025[19] - As of July 24, 2025, Ares Capital had a backlog of approximately $26 billion[68]

Financial Performance - GAAP Net Income Per Share for Q1 2025 was $036, compared to $076 in Q1 2024[12] - Core EPS for Q1 2025 was $050, down from $059 in Q1 2024[12] - Net Investment Income Per Share for Q1 2025 was $054, slightly lower than $055 in Q1 2024[12] - Net Asset Value Per Share increased to $1982 in Q1 2025 from $1953 in Q1 2024[12] Portfolio Composition and Activity - Total Fair Value of Investments increased to $2713 billion in Q1 2025 from $23124 billion in Q1 2024[13] - Gross Commitments for Q1 2025 were $3453 billion, compared to $3554 billion in Q1 2024[13] - Exits of Commitments for Q1 2025 were $2857 billion, lower than $3414 billion in Q1 2024[13] - First Lien Senior Secured Loans accounted for 58% of the portfolio at fair value as of March 31, 2025[19] - Floating Rate investments represented 69% of the portfolio at fair value as of March 31, 2025[19] Debt and Dividends - The company estimates it will carry forward excess taxable income of approximately $883 million, or $129 per share, from 2024 for distribution to stockholders in 2025[77] - Unsecured Debt to Total Debt was 688% as of March 31, 2025[16]