Ares Capital Corporation

Good afternoon. Welcome to ARIES Capital Corporation's second quarter ended June 30th, 2025 earnings conference call. At this time, all participants are in a listen-only mode. As a reminder, this conference is being recorded on Tuesday, July 29th, 2025. I will now turn the call over to Mr. John Stillmar, a partner on ARIES Public Markets Investor Relations Team.

Great. Thank you very much, and good afternoon, everybody. Let me start with some important reminders. Comments made during the course of this conference call and webcast, as well as the accompanying documents, contain forward-looking statements and are subject to risks and uncertainties. The company's actual results could differ materially from those expressed in such forward-looking statements for any reason, including those listed in its SEC filings. Aries Capital Corporation assumes no obligation to update any such forward-looking statements. Please also note that past performance or market information is not a guarantee of future results. During this conference call, the company may discuss certain non-GAAP measures as defined by SEC Regulation G, which include factors such as core earnings for share or core EPS. The company believes that core EPS provides useful information to investors regarding the financial performance because it's one method that the company uses to measure its financial condition and the results of its operations. reconciliation of gap net income per share the most directly comparable gap measure to core eps can be found in the accompanying slide presentation for this call in addition reconciliation of these measures may also be found in our earnings release file this morning on form 8k with the sec certain information discussed in this conference call and the accompanying slide presentation including information related to portfolio companies It's derived from third-party sources and has not been independently verified. And accordingly, the company makes no representation or warranties with respect to this information. The company's second quarter ended June 30th, 2025 earnings presentation can be found on the company's website at www.AriesCapitalCorp.com by clicking on the second quarter 2025 earnings presentation link on the homepage of the investor resources section. Aries Capital Corporation's earnings release and form 10-Q are also available on the company's website. I'd like to now turn the call over to Mr. Court Schnabel, Aries Capital Corporation's chief executive officer. Court?

Thanks, John, and hello, everyone, and thanks for joining our earnings call today. I'm joined by Jim Miller, our president, Jana Markiewicz, our chief operating officer, Scott Lem, our chief financial officer, and other members of the management team who will be available during our Q&A session. Before we begin today's call, I want to take a moment to acknowledge the tragedy that occurred at 3 45 Park Avenue, just a few blocks from our New York office. This senseless act of violence has deeply affected our community and our hearts go out to everyone impacted. We extend our deepest condolences to the families and loved ones of the victims and to our friends and colleagues at Blackstone, KPMG, NFL, rooting and others who work at 345 Park Avenue, as well as the brave NYPD officer who lost his life protecting the building. In times like these, we are reminded of the importance of standing together as a community with compassion, resilience and support for one another. We are keeping all who have been affected in our thoughts. Let me now turn to our second quarter results. I will begin with a few quarterly highlights and we'll follow that with some thoughts on current market conditions. This morning, we reported solid second quarter results, delivering stable core earnings of 50 cents per share, representing an annualized return on equity of 10%, consistent with the prior quarter. Additionally, our net asset value per share increased both sequentially and year over year. The growth in our net asset value per share was supported by earnings in excess of our dividend and robust net investment gains, including strong net realized gains from our equity co-investment portfolio. These results support our position as one of the few BDCs to consistently generate NAV per share growth since our IPO. We are pleased with our profitability and the continued strength of our portfolio, particularly in light of the tariff-related volatility that led to economic uncertainty and reduced investment activity during the second quarter. Let me now discuss what we are seeing in our markets and our positioning. The second quarter began with policy-driven volatility, which temporarily slowed transaction activity, particularly in the liquid loan markets. During the early part of the quarter, we remained active, while traditional market participants retrenched and were not underwriting many new transactions, if any at all. We believe our ability to transact in varying market conditions and provide certainty in uncertain times yet again reinforced our value proposition and allowed us to garner enhanced terms and premium economics. As volatility subsided later in the quarter, the liquid credit markets reopened. Overall financing activity began to rebuild and has returned to a more normalized pace. As we have discussed many times in the past, we benefit from periods of volatility as our broad portfolio of 566 borrowers, extensive market relationships, and strong balance sheet positions us as a valuable partner to many market participants despite reductions in overall M&A volume. We saw this dynamic play out in the second quarter as nearly three-quarters of our gross commitments were from incumbent relationships. We continued to serve as a stabilizing force for our existing portfolio companies who are increasing their borrowings with us and enabling us to take share from other established lenders. For example, across our 10 largest transactions with incumbent borrowers in the second quarter, we more than doubled our previous lending commitments. And in doing so, increased our wallet share with these borrowers, which we view as some of our highest quality opportunities. As our track record illustrates, we believe we can generate attractive risk-adjusted returns and enhance our overall credit quality by supporting the capital needs of our existing portfolio companies. Beyond expanding our commitments with our existing borrowers, we remained proactive with our extensive sponsor relationships and continued to grow our presence among non-sponsored borrowers in our targeted industries. Despite overall declines in reported middle market M&A and transaction activity, we are continuing to review a growing number of opportunities, with the number of transactions we reviewed increasing 20% quarter over quarter. This growing level of opportunities reviewed should support greater investing volumes in the future, and it is particularly notable that June accounted for nearly half of the quarter's transaction activity. This momentum gives us visibility into a potentially more active second half of the year. As we have discussed in the past, we believe we are one of the only direct lenders with a meaningful presence across each of the lower, core, and upper middle markets. More recently, we have been particularly active in the upper end of the market, providing certainty of capital to potential borrowers in the face of market uncertainty. For example, as you have probably seen in media reports, we will serve as the lead left arranger for the largest private credit LBO on record, with the take private of Dun & Bradstreet, which is expected to close in the third quarter. Dun & Bradstreet is a longstanding, high-quality company with strong recurring cash flows, and this transaction clearly demonstrates our scale and leadership position in the market. We believe our ability to be a meaningful capital provider for larger borrowers alongside those in the core and lower middle market remains a notable differentiator for our platform. Importantly, we believe that the breadth of our origination capabilities is one of the key contributors to our long-term credit performance as it enables us to see a broader view of the market opportunity and then be highly selective in choosing where we invest. Shifting now to our existing portfolio, we are continuing to see healthy overall performance as our borrowers' weighted average organic EBITDA growth rates accelerated further into the double digits over the last 12 months. Supported by this underlying growth, borrower leverage levels are below our five-year average, and the portfolio average loan-to-value remains in the low 40% range. We also take comfort in the fact that our portfolio is focused on domestic service-oriented businesses that in our view carry lower policy risk from tariffs and other recently proposed and implemented government policies while we ended the second quarter with a modest uptick in non-accruals these levels still remain well below both our historical average and that the broader bdc peer group we remain highly confident in our ability to manage these idiosyncratic situations as we have an experienced veteran portfolio management and valuation team of approximately 50 dedicated professionals. We believe the deep credit experience of our team and our differentiated strategy of investing across the capital structure is a cornerstone of our track record and supports our generating realized gains well in excess of realized losses on our investments since inception. Specifically in the second quarter, we continued to build on this track record of gains in excess of losses as we exited several of our equity co-investments, realizing a three times multiple of our initial invested capital and generating a gross realized internal rate of return in the mid 20% range. In summary, we demonstrated stability amid significant market uncertainty in the second quarter. As we've seen in past periods of volatility, we believe these environments continue to reinforce our resilient business model and strong competitive positioning. We believe our consistent execution, disciplined approach, and differentiated platform leave us well positioned to navigate evolving market conditions and to capitalize on emerging opportunities. With that, I'll turn the call over to Scott to walk us through our financial results and the continued progress we're making on our strong balance sheet.