Ares Capital Corporation Q4 FY2025 earnings call

• 2025 was a strong year with strong financial results, core EPS of $0.50 (Q4) and $2.01 (full year) covering dividends and driving over 10% ROE. • Rebound in transaction activity in the second half of 2025 led to meaningful acceleration in new investment commitments. • Specialized industry verticals like sports media, specialty healthcare, etc., saw non-sponsored originations grow over 50%. • Portfolio companies showed healthy performance: weighted average organic EBITDA growth over three times GDP, average portfolio leverage decreased, interest coverage ratio improved to 2.2 times. • Credit quality remained stable with non-accruals in line with prior levels, and pretax net realized gains on investments over $100 million in 2025. • Dividend outlook: confident in maintaining dividend despite short-term rate expectations, with multiple factors supporting earnings including low balance sheet leverage and incremental growth opportunities.

Core earnings per share for the fourth quarter was $0.50 and $2.01 for the full year 2025. Total new commitments in 2025 reached $15.8 billion, a new annual record. The portfolio at fair value ended the fourth quarter at $29.5 billion, up from prior periods. The core EPS fully covered dividends and drove an ROE in excess of 10% for both the fourth quarter and full year.

• Expect a $0.1 per share earnings headwind in 2026 due to decline in base rates, with consideration of seasonal origination patterns. • First quarter 2026 dividend of $0.48 per share payable on March 31. • Strong start to 2026 with nearly $1.4 billion in commitments through January 29, 2026, and backlog at $2.2 billion, 17% greater than prior period. • Confidence in maintaining dividend with spillover income providing cushion.

• Market volatility and macroeconomic uncertainties. • Impact of retail capital flows on competitive landscape for peers more concentrated in retail-oriented products. • Potential disruption from AI in software companies (though management sees minimal near-term risk). • Regulatory changes affecting banks' leveraged lending and its impact on the competitive landscape.

Q: Growth of SDLP and Ivy Hill and asset sales A: Historically, Ivy Hill has gone as high as 11% and STLP as high as 7%. They plan to continue focusing on these strategic investments, with assets sold to Ivy Hill in the fourth quarter and more assets potentially moved down to IVL over time, with the 30% non-qualifying asset cap as a governor