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 ...

Core Viewpoint - Ares Capital (ARCC) reported quarterly earnings of $0.5 per share, matching the Zacks Consensus Estimate, but down from $0.55 per share a year ago [1]. Financial Performance - The company posted revenues of $793 million for the quarter ended December 2025, missing the Zacks Consensus Estimate by 0.38%, compared to $759 million in the same quarter last year [2]. - Over the last four quarters, Ares Capital has only surpassed consensus revenue estimates once [2]. Stock Performance - Ares Capital shares have declined approximately 5.4% since the beginning of the year, while the S&P 500 has gained 1.1% [3]. - The stock's immediate price movement will largely depend on management's commentary during the earnings call [3]. Future Outlook - The current consensus EPS estimate for the upcoming quarter is $0.49 on revenues of $782.55 million, and for the current fiscal year, it is $1.96 on revenues of $3.2 billion [7]. - The estimate revisions trend for Ares Capital was mixed ahead of the earnings release, resulting in a Zacks Rank 3 (Hold) for the stock, indicating expected performance in line with the market [6]. Industry Context - The Financial - SBIC & Commercial Industry, to which Ares Capital belongs, is currently in the top 38% of over 250 Zacks industries, suggesting a favorable outlook compared to the bottom 50% [8].

Asset Management and Investment Portfolio - The company managed approximately $14.6 billion in assets under management through its wholly owned portfolio company, Ivy Hill Asset Management, L.P. (IHAM) as of December 31, 2025[47]. - The investment portfolio primarily consists of first and second lien senior secured loans, subordinated debt, and preferred equity, with debt investments generally ranging between $30 million and $500 million each[39][40]. - The investment portfolio's industrial composition as of December 31, 2025, included 23.8% in Software and Services and 12.4% in Financial Services[55]. - The geographic composition of the portfolio as of December 31, 2025, included 22.9% in the Midwest and 20.3% in the West[57]. - The company monitors 603 portfolio companies, with 14% entitled to board seats or observation rights, representing approximately 24% of the portfolio at fair value[84]. - The company employs an investment rating system that categorizes investments on a scale of 1 to 4, with 1 indicating substantial risk and 4 indicating the least risk[89]. - The company has achieved a realized gross internal rate of return of approximately 13% on exited investments since its IPO, with total proceeds from exited investments amounting to approximately $71.7 billion[59]. Investment Strategy and Risk Management - The company has a rigorous investment selection process that includes extensive due diligence, with approximately 30-40% of initially reviewed investments proceeding to the due diligence phase[67]. - Approximately 10-15% of all investments initially reviewed by the company will be presented to the investment committee for approval[70]. - Only about 3-5% of the investments initially reviewed will result in the issuance of formal commitments and transaction closings[71]. - The company seeks to limit downside potential by requiring financial covenants that enhance credit quality, including leverage and cash flow covenants[77]. - The company has entered into hedging transactions to mitigate interest rate risk, but there is no assurance of their effectiveness[150]. - The company primarily invests in first and second lien senior secured loans, subordinated debt, and preferred equity, with terms generally ranging from three to ten years[72]. - The company may incur significant expenses for evaluating potential strategic acquisition transactions, which could be material to its business[83]. Financial Performance and Debt Management - As of December 31, 2025, the company's asset coverage was 189%, allowing it to borrow up to $2 for every $1 in assets[37]. - As of January 29, 2026, the company had $16.4 billion in total aggregate principal amount of outstanding debt under various debt instruments[124]. - The company had approximately $16.0 billion in aggregate principal amount of indebtedness outstanding as of December 31, 2025[173]. - The weighted average stated interest rate on the company's outstanding indebtedness was 4.9% as of December 31, 2025[169]. - The company must achieve annual returns on total assets of at least 2.5% to cover annual interest payments on its outstanding indebtedness[169]. - The company has completed three debt securitizations through collateralized loan obligations (CLOs) as of December 31, 2025, with total amounts of $476 million, $544 million, and $700 million for ADL CLO 1, ADL CLO 4, and ADL CLO 7 respectively[180]. Regulatory Compliance and RIC Status - The company is regulated as a BDC under the Investment Company Act, adhering to specific regulatory requirements[126]. - The company must distribute at least 90% of its investment company taxable income to maintain its RIC status, limiting available funds for new investments[158]. - Failure to maintain RIC status could result in corporate-level income taxes, adversely affecting net assets and distributions[203]. - The company may face challenges in meeting annual source of income and asset diversification requirements, risking RIC status[203]. - Compliance with RIC requirements may become impractical due to potential changes in relevant provisions of the Code[204]. Market Conditions and Economic Risks - Rising interest rates may increase the cost of debt for portfolio companies, potentially affecting their financial performance and ability to meet obligations[151]. - Inflation has adversely affected the business and financial condition of portfolio companies, increasing costs and impacting consumer spending[152]. - Economic downturns could impair portfolio companies' ability to repay loans, leading to increased non-performing assets and decreased portfolio value[240]. - Legislative actions related to taxes and changes in U.S. tax laws could negatively impact the company and its portfolio companies, affecting long-term financial outcomes[227]. - Changes in U.S. tariff and import/export regulations may harm portfolio companies, potentially leading to reduced access to suppliers or customers and negatively impacting financial results[229]. Strategic Opportunities and Challenges - The company is evaluating potential strategic acquisition opportunities, including other finance companies and asset managers, although no discussions have progressed to a probable completion[83]. - The company may seek to retire or repurchase its common stock and outstanding debt, depending on market conditions and liquidity requirements[125]. - The company faces competitive pressures from various entities, including BDCs, public and private funds, and commercial banks, which may adversely affect its business[183]. - The company competes based on its investment platform, experienced professionals, and focus on middle-market companies rather than interest rates[184]. - The company may lose investment opportunities if it does not match competitors' pricing, which could limit growth and decrease earnings[184]. ESG and Regulatory Scrutiny - The company is subject to increasing scrutiny regarding ESG matters, which may impose additional costs and risks, potentially affecting investor decisions[212]. - Compliance with new ESG regulations, such as the Corporate Sustainability Reporting Directive, could increase management burdens and costs for the company and its portfolio[217]. - Climate change poses significant risks to the company's operations and those of its portfolio companies, potentially leading to increased costs, including insurance[219]. - The company and its portfolio companies are subject to increasing regulatory scrutiny, particularly regarding non-bank lending, which could adversely affect operations and financial condition[225]. Operational Risks - The company relies on key personnel from Ares for future success, and their departure could materially affect operations[154]. - The company is highly dependent on the information systems of Ares Management, and operational risks, including system failures, could disrupt business and affect stock price[234]. - The company faces potential litigation and regulatory investigations, which could be time-consuming and costly, impacting its operations and financial condition[220]. - Increased negative publicity surrounding the private credit industry could harm the company's reputation and affect fundraising efforts[223].

Exhibit 99.1 ARES CAPITAL CORPORATION ANNOUNCES DECEMBER 31, 2025 FINANCIAL RESULTS AND DECLARES FIRST QUARTER 2026 DIVIDEND OF $0.48 PER SHARE DIVIDEND DECLARATIONS New York, NY — February 4, 2026 — Ares Capital Corporation ("Ares Capital") (NASDAQ: ARCC) announced that its Board of Directors has declared a first quarter 2026 dividend of $0.48 per share. The first quarter 2026 dividend is payable on March 31, 2026 to stockholders of record as of March 13, 2026. DECEMBER 31, 2025 FINANCIAL RESULTS Ares Capi ...

Key Takeaways ARCC to report Q4 and 2025 results on Feb. 4, with Q4 revenues expected to rise 2.3% y/y.ARCC's Q4 EPS estimate is unchanged at 50 cents, implying a 9.1% decline from last year.ARCC faces higher expenses and yield compression from the 2025 rate cuts, pressuring spreads.Ares Capital Corporation (ARCC) is scheduled to announce fourth-quarter and 2025 results on Feb. 4, before market close. Similar to the previous reported quarter, the company is expected to have recorded an improvement in total ...

Industry Overview - The private credit market has grown significantly, reaching approximately $2 trillion in 2020 and projected to grow by roughly 50% by early 2025, potentially reaching close to $5 trillion by 2029 [1] Concerns and Warnings - Experts, including Jeffery Gundlach and Jamie Dimon, have raised concerns about the quality of loans in the private credit market, with warnings about potential credit issues in the event of an economic downturn [1] - Wall Street is sounding alarms regarding a possible collapse in the private credit market, particularly affecting ultra-high-yield business development company (BDC) stocks [1] Company-Specific Insights - Prospect Capital (NASDAQ: PSEC) is highlighted as a BDC showing potential cracks, despite its long history and attractive forward dividend yield of 19.7%. However, its net asset value (NAV) has significantly eroded, and it relies heavily on issuing perpetual preferred stock, increasing fixed-payment obligations [3][4] - FS KKR Capital (NYSE: FSK) also presents problematic signs, with a forward dividend yield of 20.3% and non-accruals at 5% of its total investment portfolio as of Q3 2025. Fitch has lowered its outlook on FS KKR Capital to negative due to persistently elevated non-accruals [5] - Ares Capital (NASDAQ: ARCC) is presented as a more resilient direct lender that may weather potential market storms better than its peers [5]

Group 1 - Ares Capital (ARCC) and FS KKR Capital Corp. (FSK) are direct competitors in the Business Development Company (BDC) sector, both having access to institutional capital [1] - The analysis emphasizes the importance of identifying profitable and undervalued investment opportunities primarily in the U.S. market to build a high-yield, balanced portfolio [1] - The author combines macro-economic analysis with real-world trading experience to provide actionable investment ideas [1] Group 2 - The article does not provide any specific financial data or performance metrics related to ARCC or FSK [3]

Ares Capital ( ARCC ) and FS KKR Capital Corp. ( FSK ) are two direct competitors in the BDC sector. While they are similar in appearance due to their access to institutional capital fromMy professional journey in the investment field began in 2011. Today, I combine the roles of an Investment Consultant and an Active Intraday Trader. This synergistic approach allows me to maximize returns by leveraging deep knowledge in economics, fundamental investment analysis, and technical trading. What You Will Find in ...