• NAV per Share: Record NAV per share of $19.89 at year-end 2024.
• GAAP Net Income per Share: $0.55 for Q4 2024, $2.44 for the full year 2024.
• Core Earnings per Share: $0.55 for Q4 2024.
• Total Portfolio at Fair Value: $26.7 billion at the end of Q4 2024.
• Weighted Average Yield on Debt and Other Income-Producing Securities: 11.1% at December 31, 2024.
• Debt-to-Equity Ratio: 0.99x net of available cash at the end of Q4 2024.
• Dividend: $0.48 per share declared for Q1 2025.
• Nonaccruals at Cost: 1.7% at the end of Q4 2024.
• Portfolio Companies: 550 companies at year-end 2024.
• New Investment Commitments: $3.8 billion in Q4 2024, $15 billion for the full year 2024.
• Backlog as of January 28, 2025: $1.8 billion.

• Warning! GuruFocus has detected 10 Warning Signs with ARCC.

Release Date: February 05, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Ares Capital Corp (NASDAQ:ARCC) reported a record NAV per share of $19.89, marking the eighth consecutive quarter of NAV growth.
• The company achieved one of the most active origination years in its history, with $15 billion of new commitments, more than double the commitment volumes of 2023.
• ARCC's portfolio companies showed strong performance, with an organic weighted average LTM EBITDA growth rate of 11% in the fourth quarter.
• The company secured ratings upgrades from two major credit rating agencies, making it the highest-rated BDC among the three major rating agencies.
• ARCC declared a first quarter 2025 dividend of $0.48 per share, maintaining a stable or increasing dividend for over 15 consecutive years.

Negative Points

• GAAP net income per share for the fourth quarter of 2024 was $0.55, down from $0.62 in the prior quarter and $0.72 in the fourth quarter of 2023.
• Core earnings per share declined due to a decrease in portfolio yields, impacted by a nearly 100 basis point drop in base rates by the end of 2024.
• The weighted average yield on debt and other income-producing securities decreased to 11.1% at the end of 2024, down from 12.5% at the end of 2023.
• Nonaccrual rates at cost increased to 1.7%, up 40 basis points from the prior quarter and year-end 2023.
• The company is monitoring potential impacts from changes in new government policies, which could affect the direct lending landscape.

Q & A Highlights

Q: Can you discuss the activity levels during the fourth quarter and any impact on net investment income (NII)? A: Kipp deVeer, CEO, noted that the fourth quarter was flat compared to the third quarter, with some delays possibly due to the election. However, January was busy, and they remain optimistic about deal flow and new transactions.

Q: How are you thinking about asset allocation within the portfolio, particularly regarding first lien investments? A: Kipp deVeer, CEO, stated there is no change in how they see the mix of the portfolio over time. They are responding to market conditions, and the overall philosophy of portfolio mix remains unchanged.

Q: Can you provide insights into the sports franchise investments, particularly the equity in the Dolphins? A: Kipp deVeer, CEO, explained that the investment in the Dolphins is part of a broader strategy in sports, media, and entertainment. The investment includes the team, stadium, real estate, and other assets, and is seen as a unique and attractive opportunity for ARCC shareholders.

Q: How do you view the potential for credit losses going forward? A: Kipp deVeer, CEO, expressed confidence in the portfolio's performance, noting that nonaccruals are below historical averages and the portfolio is holding up well. They believe it's a good time to be a credit investor with a healthy portfolio.

Q: What are your thoughts on the impact of potential government policy changes, such as tariffs, on the portfolio? A: Kipp deVeer, CEO, mentioned that while tariffs and other policy changes are being monitored, they have conducted analysis and feel confident that there is minimal impact on their portfolio. They remain vigilant and are prepared to adapt as necessary.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.