Ares Capital Corporation

Please stand by. Your meeting is about to begin. Good afternoon, everyone. Welcome to the Aries Capital Corporation's first quarter, ended March 31st, 2026, earnings conference call. At this time, all participants are in a listen-only mode. As a reminder, this conference is being recorded on Tuesday, April 28th, 2026. I will now turn the call over to Mr. John Stillmar, partner of Aries Public Markets Investor Relations. Please go ahead, sir.

Thank you. And good morning, 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 or 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, such as core earnings per share or core EPS. The company believes that core EPS provides useful information to investors regarding financial performance because it's one method the company uses to measure its financial condition and results of operation. A reconciliation of GAAP net income per share, the most directly comparable GAAP financial measure, to core EPS can be found in the accompanying slide presentation for this call. In addition, the reconciliation of these measures may also be found in an earnings release filed this morning with the SEC on Form 8-K. Certain information discussed in this conference call and the accompanying slide presentation, including credit ratings and information relating to portfolio companies, was derived from or obtained by 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 first quarter ended March 31st, 2026 earnings presentation can be found on the company's website at www.ariescapitalcorp.com by clicking on the first quarter 2026 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 Court Schnabel, Aries Capital Corporation's Chief Executive Officer. Court?

Thanks, John, and hello, everyone, and thank you for joining our earnings call today. I'm joined by Jim Miller, our president, Janet Markowitz, our chief operating officer, Scott Lim, our chief financial officer, and other members of the management team who will be available during our Q&A session. Let me start by providing a few thoughts on ARCC's performance, current market conditions, and our positioning in this environment. We believe we are off to a strong start in 2026 with solid earnings and strong fundamental portfolio performance. Our core earnings of 47 cents per share represents an annualized ROE of 9.6% in what has historically been a seasonally slow quarter for originations. Our overall portfolio quality remains healthy with continued low levels of non-accruing loans and problem assets. We are seeing an improving investment environment as terms and economics are becoming more attractive on new transactions. And we believe our strong balance sheet and available liquidity of approximately $6 billion provide us significant advantages in this environment. Let's now discuss the changes we are seeing in overall market conditions. Tightened capital markets volatility, geopolitical uncertainty, and net outflows from retail products exacerbated an already seasonally slow market period in the first quarter. These factors contributed to not only lower transaction volumes, but also diminished competition and improved lending conditions, as lenders more heavily dependent on retail flows have retrenched and and the syndicated bank loan market has been uneven, with many banks exhibiting diminished risk appetite. As a result, we are seeing a reset underway with wider spreads, lower leverage levels, and more attractive overall deal terms across the market. New transactions today are being discussed at 50 to 75 basis points of enhanced levels of fees and spread alongside a half to full turn of lower leverage and tighter documentation versus the second half of last year. As risk premiums widened during the first quarter, overall market activity slowed as the market searched for clearing prices during this period. However, over the past three to four weeks, we have seen a noticeable pickup in new deal activity as borrowers recalibrate expectations for economics and terms and continue to pursue their capital needs. One of the key themes we see unfolding is that the ability to provide capital at scale and with certainty is becoming increasingly differentiated. We believe these types of situations are creating greater economic opportunities for the largest and most stable platforms with capital. Our healthy levels of available capital combined with our connectivity to the broader ARIES U.S. Direct Lending Platform and its significant dry powder from institutional sources positions us well to capitalize on these market conditions. Our diverse, high-quality portfolio also continues to perform well. Our granular level of diversification further advantages us as loan concentration is one driver of growing dispersion in results across our market. With investments across 607 companies and an average position size of less than 20 basis points, We believe this level of diversification meaningfully limits idiosyncratic risk to any one position. Our borrowers generated organic weighted average LTN EBITDA growth of approximately 9% through the end of the first quarter, in line with ARCC's 10-year average and more than twice the growth rate of the companies within the broader syndicated loan benchmark. Portfolio fundamentals also remained solid with broadly stable interest coverage and leverage levels, low loan-to-value ratios by historical standards, and revolving credit facility utilization in line with historical norms. Our non-accruals also remained well below historical average levels. With this as context to the overall health of the portfolio, let me provide some important updates about our views on the specific strength and position of our software investments. As I articulated on our last earnings call, not all software companies carry the same level of AI disruption. And in fact, many are embracing AI and seeing enhanced growth. We believe the most important question is not how much software exposure we have, but what types of companies we have invested in and what staying power, risks, and opportunities our companies have through this latest technological cycle. Nearly all of our software companies are focused on what we view as foundational infrastructure for complex businesses, and this infrastructure often powers customers' core operating systems. These software products generally operate as systems of record in regulated end markets, have high switching costs, and benefit from proprietary data. Importantly, our software investments are supported by large, diversified businesses with a weighted average EBITDA of $340 million, strong cash flow, and meaningful equity cushions, even as valuation multiples have come down for most software companies broadly. Most of these companies are also protected by business models with strong contractual cash flows and continue to sign up new customer contracts as they move forward and invest in AI themselves. To pressure test this view of our software investments, we proactively engaged a top-tier global management consulting firm in the fourth quarter of 2025 to challenge our AI risk assessment across our software-oriented portfolio companies. Prior to engaging this firm, we conducted extensive diligence in the middle of 2025 and ultimately selected this firm not only for its deep technical expertise, but also for its reputation as a rigorous and objective evaluator. As part of this independent study, the consulting firm had direct access to each borrower, its financials, and, if relevant, the associated financial sponsors or other key owners of the business. This enabled them to assess whether AI is likely to be additive, whether it could enhance or hurt positioning depending on execution and product evolution, or whether it poses a direct risk to the core business absent significant strategy change. The consultant study found the largest differences between higher and lower list companies to be system of record positioning, high switching costs, the benefit of regulatory barriers, proprietary data modes, and control of data. The firm also assessed human dependency, data availability, risk of error, and task structure, among other dimensions. Overall, the independent review conducted over the past several months found that the AI-related risk across our software-oriented portfolio is relatively limited. Their report indicated that about 85% of our software portfolio at fair value represented low risk, with only a small subset of companies categorized as higher risk. These higher-risk companies represented only 1% of reviewed names by fair value and 2% by count, or only about 0.3% of ARCC's total investment portfolio at fair value. An additional 14% of reviewed companies by fair value and count were classified as medium-risk representing only about 3% of ARCC's total investment portfolio at fair value. Importantly, medium or higher risk classifications do not imply current business impairment. Rather, they reflect the need for continued investment and product evolution, with many of these companies well positioned to adapt within the time necessary. Of the 85% of names categorized as low risk, these companies are well positioned to adapt and, in the majority of cases, benefit from AI-driven enhancements. In these businesses, AI is primarily augmenting existing SaaS platforms through incremental or high-value features layered on top of core software, with existing revenue streams largely maintained and incremental AI upside accruing to incumbent vendors. While we believe we have a solid view of the positioning of our portfolio, we recognize the need to remain vigilant with our portfolio companies on this topic. We also will remain disciplined in allocating new capital to the software sector. As we seek to take advantages of opportunities in the current market, it is critical that we are supported by a conservatively constructed balance sheet and a stable capital base. As Scott will address, our substantial available liquidity of approximately $6 billion and our well-structured liability profile with minimal near-term maturities offer us the flexibility to pursue opportunities with both new and existing portfolio companies. Our outlook for relative stability in our earnings leads us to maintain a stable level of quarterly dividends. Importantly, core EPS, taken together with 15 cents per share of net realized gains, was well in excess of the dividend this quarter, providing a strong underlying foundation for current distributions. That foundation is further supported by ample spillover income, modest leverage, a more stable rate environment, and credit performance that aligns with our historical track record. Looking ahead, with spreads widening and terms improving, and given our strong competitive position, we continue to believe that ARCC's current dividend approximates the long-run underlying earnings power of our business. And our significant level of spillover income provides an added degree of flexibility and can serve as a short-term bridge during periods of seasonally slow transaction levels. These factors position us to continue building on our track record of stable or growing regular quarterly dividends over 16 consecutive years. With that, I will turn the call over to Scott to take us through more details on our financial results and balance sheet.