Core Insights - Business development companies (BDCs) are increasingly attractive investments in the context of rising interest rates, indicating a shift in the investment landscape for bonds and private credit [1] Group 1: Industry Trends - The private credit industry has experienced extraordinary expansion in recent years, reshaping the investment environment [1]

Group 1 - The article emphasizes the importance of delivering alpha-generating investment ideas through a structured, evidence-based approach [1] - The investment strategy is generalist, focusing on sectors with perceived alpha potential compared to the S&P 500, with typical holding periods ranging from a few quarters to multiple years [1] - The article suggests reviewing the ratings history of published articles to gauge the author's investment recommendations and skill in generating alpha [1] Group 2 - The analyst has disclosed a beneficial long position in VOO shares, indicating personal investment interest [2] - The article expresses the author's own opinions and clarifies that no compensation is received beyond that from Seeking Alpha [2] - There is no business relationship with any company mentioned in the article, ensuring independence in the analysis [2]

Core Insights - Ares Capital Corporation (ARCC) reported lower-than-expected fourth-quarter 2024 core earnings of 55 cents per share, missing the Zacks Consensus Estimate of 58 cents, reflecting a 12.7% decline from the prior-year quarter [1][2] - Total investment income for the fourth quarter was $759 million, up 7.4% year over year, but below the Zacks Consensus Estimate of $785 million [4] - Total expenses increased to $387 million, a rise of 9.6% year over year, impacting overall profitability [5] Financial Performance - For the full year 2024, core earnings were $2.33 per share, missing the Zacks Consensus Estimate of $2.36, and reflecting a 1.7% decline from 2023 [3] - GAAP net income for the fourth quarter was $357 million, down from $413 million in the prior-year quarter [2] - Full-year total investment income reached $2.99 billion, up 14.4% year over year, but also lagged the Zacks Consensus Estimate of $3.02 billion [4] Portfolio Activities - In the fourth quarter, ARCC made gross commitments of $3.75 billion to new and existing portfolio companies, significantly higher than $2.38 billion in the prior-year quarter [6] - The company exited $2.72 billion of commitments compared to $1.43 billion a year ago [6] - The fair value of ARCC's portfolio investments was $26.7 billion as of December 31, 2024 [6] Balance Sheet Strength - As of December 31, 2024, cash and cash equivalents totaled $635 million, an increase from $535 million a year earlier [8] - The company had $5.1 billion available for additional borrowings under existing credit facilities, with total outstanding debt at $13.8 billion [8] - Total assets were $28.3 billion, and stockholders' equity was $13.4 billion, with a net asset value of $19.89 per share, up from $19.24 a year prior [8] Future Outlook - The demand for customized financing is expected to drive growth in total investment income in the upcoming quarters [9] - Increased investment commitments are likely to support the company's financials, although expansion strategies may lead to rising costs [9] - Regulatory constraints are identified as a significant headwind for the company [9]

Group 1 - The macroeconomic environment has shifted from uncertain to very uncertain since the Trump victory, impacting long-term yield development and creating headwinds from a strong dollar [1] - Roberts Berzins has over a decade of experience in financial management, focusing on shaping financial strategies for top-tier corporates and executing large-scale financings [1] - Efforts have been made to institutionalize the REIT framework in Latvia to enhance the liquidity of pan-Baltic capital markets [1] Group 2 - Development of national SOE financing guidelines and frameworks for channeling private capital into affordable housing stock has been a significant policy-level initiative [1] - Roberts Berzins holds a CFA Charter and an ESG investing certificate, and has experience with the Chicago Board of Trade [1] - Active involvement in thought-leadership activities supports the development of pan-Baltic capital markets [1]

Core Viewpoint - Ares Capital's recent earnings report and leadership transition were perceived negatively by investors, leading to a 3% decline in stock price despite a positive performance from the S&P 500 index [1] Financial Performance - Ares reported total investment income of $759 million for Q4 2024, an increase from $707 million in Q4 2023 [2] - Net income for the quarter decreased to $357 million ($0.55 per share) from $413 million in the same period last year [2] - Analysts had expected revenue to exceed $785 million and earnings per share to be $0.58 [3] Leadership Transition - CEO Kipp deVeer announced his resignation effective April 30, with co-president Kort Schnabel set to take over [4] - DeVeer will remain on the board of directors and continue as a member of Ares' investment advisor [4] Future Outlook - The company described 2024 as a successful year due to stable credit performance and record investment activity [3] - Ares anticipates benefiting from an active investing market for acquisition finance and growth capital opportunities in 2025 [3]

Financial Data and Key Metrics Changes - The company reported GAAP net income per share of $0.55 for Q4 2024, down from $0.62 in Q3 2024 and $0.72 in Q4 2023 [30] - For the full year, GAAP net income per share was $2.44, compared to $2.75 in 2023 [30] - Core earnings per share for Q4 2024 were $0.55, down from $0.58 in Q3 2024 and $0.63 in Q4 2023 [30] - The total portfolio at fair value increased to $26.7 billion, up from $25.9 billion in Q3 2024 and $22.9 billion a year ago [33] - Stockholders' equity ended the quarter at $13.4 billion, or $19.89 per share, marking a record high [34] Business Line Data and Key Metrics Changes - The company originated approximately $3.8 billion of new investment commitments in Q4 2024, a greater than 50% increase over Q4 2023 [41] - For the full year, over $15 billion of new commitments were originated, more than double the commitment volumes of 2023 [41] - The weighted average loan-to-value ratio was 44%, providing strong downside protection for loans [48] Market Data and Key Metrics Changes - The company reviewed a record volume of new opportunities totaling more than $650 billion in 2024 [20] - The organic weighted average LTM EBITDA growth rate of portfolio companies reached 11% in Q4 2024, up from 10% in Q3 2024 [24] Company Strategy and Development Direction - The company aims to out-originate its competition, which is seen as a key driver of long-term credit performance [21] - The focus on financing incumbent borrowers has increased, with over 70% of new commitments made to existing borrowers [22] - The company is well-positioned for a successful 2025, anticipating an increase in M&A activity due to a healthy economy and pressure on private equity sponsors [27] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's strong credit performance and the health of the underlying portfolio, despite a historically subdued M&A environment in 2024 [19][24] - The company does not expect any material direct impact from new government policies on its portfolio [25] - Management noted that the overall risk ratings remain stable, and the portfolio is diversified, which mitigates the impact of negative credit events [46] Other Important Information - The company declared a first-quarter 2025 dividend of $0.48 per share, consistent with the fourth-quarter 2024 dividend [38] - The company has a significant amount of dry powder, with nearly $6.7 billion of total available liquidity [36] Q&A Session Summary Question: Activity during the fourth quarter and its impact on NII - Management noted that Q4 activity levels were flat compared to Q3, with some delays due to the election, but January remained busy [55] Question: Asset allocation within the portfolio - Management confirmed that there is no change in the mix of the portfolio over time, maintaining a balance between junior and senior positions [59] Question: Sports franchise investment - Management explained that the investment in the Dolphins is part of a broader strategy to leverage the Ares credit platform and is seen as a unique opportunity [70] Question: Impact of base rate declines on portfolio yields - Management indicated that there is a lag effect in the impact of base rates on portfolio yields, with expectations of a similar level of decline in Q1 [83] Question: Outlook on credit losses - Management expressed confidence in the portfolio's performance, noting that non-accruals remain below historical averages and the underlying profit growth is strong [110] Question: Ivy Hill distribution increase - Management confirmed that Ivy Hill's increased distribution is due to growth and a special dividend, with a new run rate expected going forward [118] Question: Exposure to government contracts - Management stated that there is minimal exposure to government contracting within the portfolio, indicating it would not have a significant impact [120]

Ares Capital Corporation (NASDAQ:ARCC) Q4 2025 Earnings Conference Call February 5, 2025 12:00 PM ET Company Participants John Stilmar - Partner of Ares Public Markets IR Kipp DeVeer - CEO Kort Schnabel - Upcoming CEO Scott Lem - CFO Jim Miller - Co-President Conference Call Participants Melissa Wedel - JPMorgan Finian O'Shea - Wells Fargo Securities Casey Alexander - Compass Point Doug Harter - UBS Mark Hughes - Truist Securities Kenneth Lee - RBC Capital Markets Paul Johnson - KBW Robert Dodd - Raymond Ja ...

Earnings Presentation Fourth Quarter 2024 0 42 65 155 112 42 4 94 109 127 127 127 0 42 65 2 87 133 71 126 163 120 163 198 Credit Private Equity Real Estate Strategic Initiative s 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. Thi ...

Ares Capital (ARCC) reported $759 million in revenue for the quarter ended December 2024, representing a year-over-year increase of 7.4%. EPS of $0.55 for the same period compares to $0.63 a year ago.The reported revenue compares to the Zacks Consensus Estimate of $784.96 million, representing a surprise of -3.31%. The company delivered an EPS surprise of -5.17%, with the consensus EPS estimate being $0.58.While investors scrutinize revenue and earnings changes year-over-year and how they compare with Wall ...

Ares Capital (ARCC) came out with quarterly earnings of $0.55 per share, missing the Zacks Consensus Estimate of $0.58 per share. This compares to earnings of $0.63 per share a year ago. These figures are adjusted for non-recurring items.This quarterly report represents an earnings surprise of -5.17%. A quarter ago, it was expected that this private equity firm would post earnings of $0.59 per share when it actually produced earnings of $0.58, delivering a surprise of -1.69%.Over the last four quarters, the ...