Here are 1-3 brief analogies to describe Ares Capital (ARCC):

• A specialized bank for private, mid-sized companies.
• A publicly traded investment company that lends to and invests in private, middle-market businesses.
• Like a REIT, but for business loans and investments in private companies instead of real estate.

• Senior Secured Loans: Providing capital to middle-market companies primarily through first and second lien senior secured loans, which are secured by the company's assets and have high repayment priority.
• Unitranche Loans: Offering a hybrid debt solution that combines both senior and subordinated debt into a single, comprehensive facility, simplifying capital structures for borrowers.
• Subordinated Debt: Supplying unsecured loans that rank below senior debt but above equity, often incorporating equity-like features such as warrants for additional returns.
• Equity Investments: Making direct minority equity investments in private middle-market companies, frequently alongside debt financing to provide a complete capital solution.

Ares Capital (ARCC) is a Business Development Company (BDC) that primarily provides debt and equity financing to middle-market companies. Therefore, its "customers" are the companies in which it invests, meaning it sells primarily to other companies rather than individuals.

Ares Capital maintains a highly diversified portfolio, typically consisting of hundreds of portfolio companies. As such, no single "customer" represents an overwhelming portion of its investments. However, based on its most recent public filings (e.g., 10-K for the fiscal year ended December 31, 2023), some of its largest portfolio companies by fair value of investment include:

• United States Infrastructure Corporation (USIC): A private company providing subsurface utility engineering and damage prevention services.
• Veritas Technologies LLC: A private company offering data protection, availability, and insights solutions.
• Ivy Technology Limited: A private company focused on customer interaction solutions and business process outsourcing.
• Integra Global Solutions, LLC (dba Integra): A private company providing IT and business services.
• Press Ganey Associates, Inc.: A private company offering patient experience and healthcare performance solutions.

These companies are currently private, and therefore do not have public stock symbols.

Ares Management Corporation (ARES)

JPMorgan Chase & Co. (JPM)

Bank of America Corporation (BAC)

Wells Fargo & Company (WFC)

Kort Schnabel, Chief Executive Officer

Kort Schnabel was appointed Chief Executive Officer of Ares Capital Corporation, effective April 30, 2025. He joined Ares Management Corporation in 2001 and was a founding member of its U.S. Direct Lending strategy in 2004. Prior to joining Ares, Mr. Schnabel was in the Corporate Development Group at Walker Digital Corporation, where he was responsible for corporate finance, merger and acquisition, and strategic planning activities. He previously worked in the Corporate Finance Group at Morgan Stanley, performing financial analyses for mergers and acquisitions, leveraged buyouts, and equity/debt offerings.

Scott Lem, Chief Financial Officer and Treasurer

Scott Lem has served as the Chief Financial Officer and Treasurer of Ares Capital Corporation since 2024. He joined Ares in July 2003 and previously held various executive officer roles, including Chief Accounting Officer from December 2013 and Vice President and Treasurer from May 2013. Prior to joining Ares, he was a Senior Associate at Ernst & Young LLP and Arthur Andersen LLP, where he conducted audits for clients in various industries.

Kipp deVeer, Director, Executive Vice President

Kipp deVeer served as Chief Executive Officer of Ares Capital Corporation from July 2014 to April 2025. He is currently a Director and Executive Vice President of Ares Capital Corporation. Mr. deVeer joined Ares in 2004. Previously, he was a Partner at RBC Capital Partners, where he led the firm's middle market financing and principal investment business. He also served as a Vice President in the Merchant Banking Group at Indosuez Capital. Mr. deVeer began his career at J.P. Morgan and Co.

Mitchell Goldstein, Co-Chairman of the Board of Directors

Mitchell Goldstein serves as a Director and Co-Chairman of the Board of Directors of Ares Capital Corporation. He joined Ares in May 2005. Prior to Ares, Mr. Goldstein was a Managing Director in the Financial Sponsors Group at Credit Suisse First Boston, and before that, a Principal at Indosuez Capital, where he was a member of the investment committee. His responsibilities at these firms included originating, structuring, and executing leveraged transactions.

Michael L. Smith, Co-Chairman of the Board of Directors

Michael L. Smith serves as a Director and Co-Chairman of the Board of Directors of Ares Capital Corporation. He joined Ares in May 2004. Prior to joining Ares, Mr. Smith was a Partner at RBC Capital Partners, where he led the firm's middle market financing and principal investment business. He previously worked at Indosuez Capital in their Merchant Banking Group, Kenter, Glastris & Company, and Salomon Brothers Inc in their Debt Capital Markets Group and Financial Institutions Group.

Ares Capital (ARCC) faces several key risks inherent to its business model as a Business Development Company (BDC) specializing in lending to middle-market companies. The most significant risks include:

1. Credit Risk and Economic Downturns: Ares Capital's primary business involves providing debt and equity financing to privately held U.S. middle-market companies. These companies are often highly leveraged and may be considered higher-risk than those served by traditional banks. Consequently, ARCC is significantly exposed to credit risk. During economic downturns or recessions, these portfolio companies are more vulnerable to financial distress, which can lead to increased loan defaults, a rise in non-accrual loans (loans where interest payments are significantly past due), and potential losses for Ares Capital. Maintaining the quality of its loan portfolio and managing non-accrual rates are critical aspects of its risk management.
2. Interest Rate Volatility: The company's revenue is largely derived from interest payments on its investments, a significant portion of which are floating-rate loans. This makes Ares Capital's net investment income highly sensitive to fluctuations in benchmark interest rates. While rising rates can increase interest income, a rapid or significant decline in interest rates could shrink the spread between the rates ARCC earns on its investments and its own cost of borrowing, thereby negatively impacting net investment income and potentially challenging its ability to sustain dividends.
3. Competition and Narrowing Lending Spreads: The direct lending market in which Ares Capital operates is highly competitive. An increase in competition among lenders can lead to compressed lending spreads, which means ARCC may have to accept lower returns for the risks it undertakes. This intensified competition could also force the company to take on more risk to achieve comparable returns, ultimately impacting its net investment income margins and profitability.

Ares Capital (ARCC) primarily operates in the direct lending and middle-market lending segments of the private credit market.

The addressable markets for Ares Capital's main products and services are substantial, particularly in the United States:

• Private Credit Market: The global private credit market reached approximately $3 trillion in assets under management (AUM) in 2024. It is projected to grow to $3 trillion by 2025 and an estimated $5 trillion by 2029. The United States accounts for a significant portion, representing about three-quarters of the global private credit market. Specifically, the U.S. private credit market was approximately $1.25 trillion in 2024 and is expected to reach $1.67 trillion in 2025 and $2.9 trillion by 2030.
• Direct Lending Market: As a subset of private credit, direct lending is a dominant strategy. Globally, direct lending represented about 50% of private credit AUM, totaling approximately $1.5 trillion in 2025. In the U.S., direct lending funds deployed roughly $500 billion in new loans in 2025. As of late 2023, direct lending constituted the largest private debt strategy in the U.S., with $241 billion in assets under management.
• Middle Market Lending: Ares Capital focuses on providing financing solutions to U.S. middle-market companies. The U.S. middle market comprises approximately 200,000 companies, which collectively generate $13 trillion in annual revenue and employ over 40 million people. In 2022, the total overall middle market lending activity in the U.S., including syndicated and direct lending, was approximately $280 billion. The lower middle market, which consists of companies with annual revenues between $10 million and $150 million, has seen average transaction values exceeding $400 billion per year since 2021.

1. Growth in Investment Portfolio and New Investment Commitments: Ares Capital consistently focuses on increasing its total investment portfolio through new commitments. For instance, in Q2 2025, the company originated over $2.5 billion in new investment commitments, leading to a 3% increase in its portfolio value to $27.9 billion. The portfolio at fair value further grew to $28.7 billion in Q3 2025, representing a nearly 3% quarter-over-quarter and over 10% year-over-year increase. This sustained expansion of the investment base directly contributes to higher interest and dividend income, which are primary revenue sources for the company.
2. Strategic Expansion into Higher-Yielding Opportunities and Off-Balance Sheet Vehicles: Ares Capital aims to capitalize on higher-yielding opportunities, particularly within its 30% non-qualifying asset basket, which includes strategic investments like Ivy Hill and SDLP. Additionally, the strategic expansion of off-balance sheet vehicles is a key component of ARCC's robust market positioning, allowing for expanded investment capacity and potential revenue generation.
3. Increased Transaction Activity and Velocity of Capital Deployment: The company anticipates more normalized transaction activity in the second half of 2025. Coupled with its significant origination scale, Ares Capital foresees a potential for increased velocity of capital deployment. A more active investment environment and efficient allocation of capital are expected to translate into a greater volume of revenue-generating investments.
4. Continued Focus on the Middle Market Segment: Ares Capital's strategic emphasis on the core middle market segment, which includes companies with $50-100 million in EBITDA, is crucial for its stable growth. This specialized market focus allows ARCC to leverage its expertise and relationships to secure consistent deal flow and maintain a robust pipeline of investment opportunities.

Ares Capital (ARCC) Capital Allocation Decisions (Last 3-5 Years)

Share Repurchases

• Ares Capital's board of directors authorized an amendment in April 2023 to increase the total stock repurchase program from $500 million to $1.0 billion.
• In February 2025, the stock repurchase program, with an authorization of up to $1.0 billion, was extended to expire on February 15, 2026.
• No shares were repurchased under the stock repurchase program during the year ended December 31, 2024.

Share Issuance

• For the fiscal year ended December 31, 2024, Ares Capital issued and sold 65.2 million shares of common stock through 'at the market' offerings, generating net proceeds of $1.36 billion.
• In October 2024, the company issued 30,000,000 shares of Series B mandatory convertible preferred stock for total proceeds of $1,462.5 million.
• During the third quarter of 2025, Ares Capital sold approximately 9.3 million shares for about $204 million.

Inbound Investments

• In November 2024, Ares Capital completed a $544 million term debt securitization (ADL CLO 4) to enhance its capital structure.
• In May 2025, Ares Capital priced a $750 million offering of 5.500% unsecured notes due 2030, aimed at bolstering financial flexibility.
• In July 2025, the company priced a $650 million public offering of 5.100% unsecured notes due 2031, with proceeds intended for existing debt repayment and general corporate purposes, including portfolio investments.

Outbound Investments

• Ares Capital's gross investment commitments were $15.6 billion in 2021, $9.9 billion in 2022, $6.0 billion in 2023, and $15.1 billion in 2024.
• In the first quarter of 2025, new investment commitments were approximately $3.5 billion, with about $2.2 billion funded, primarily in first lien senior secured loans (92%).
• As of September 30, 2025, the investment portfolio at fair value rose to $28.693 billion, and new investment commitments in Q3 2025 were $735 million (as of October 23, 2025), with 95% in first lien senior secured loans.

Capital Expenditures

• Ares Capital reported $0 in capital expenditures historically from 2020 through 2024 and projects $0 for the years 2025 through 2029.