Ares Capital Corporation · NASDAQ:ARCC
Ares Capital — Q3 2019 Earnings Presentation
27 slides from Ares Capital's earnings presentation, Oct 30, 2019
Slide 1: Third Quarter 2019 Earnings Presentation
Third Quarter 2019 Earnings Presentation 1
Slide 2: Important Notice
Important Notice This presentation contains “forward looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, that are subject to risks and uncertainties. Actual outcomes and results could differ materially from those suggested by this presentation du
Slide 3: Financial and Portfolio Highlights
Financial and Portfolio Highlights Financial Highlights Q3-19 Q2-19 Q3-18 (all per share amounts, excluding net asset value per share, are basic and diluted) Core EPS*(1) $ 0.48 $ 0.49 $ 0.45 Net Investment Income Per Share $ 0.50 $ 0.49 $ 0.44 Net Realized Gains (Losses) Per Share $ (0.15) $ 0.05 $
Slide 4: Selected Historical Financial Information
Selected Historical Financial Information (dollar amounts in millions, except per share data and stock prices) As of and for the Three Months Ended 9/30/19 6/30/19 3/31/19 12/31/18 9/30/18 Core EPS – Basic and Diluted*(1) $ 0.48 $ 0.49 $ 0.48 $ 0.45 $ 0.45 Net Investment Income Per Share – Basic and
Slide 5: Selected Historical Financial Information (cont’d)
Selected Historical Financial Information (cont’d) (dollar amounts in millions) As of 9/30/19 6/30/19 3/31/19 12/31/18 9/30/18 Investments at Fair Value $ 13,892 $ 12,992 $ 13,064 $ 12,417 $ 11,220 Number of Portfolio Companies(9) 352 345 345 344 342 Asset Class (at fair value): First Lien Senior Se
Slide 6: Selected Historical Financial Information (cont’d)
Selected Historical Financial Information (cont’d) (dollar amounts in millions) For the Three Months Ended 9/30/19 6/30/19 3/31/19 12/31/18 9/30/18 Commitments: Gross Commitments $ 2,409 $ 1,307 $ 1,953 $ 2,709 $ 1,924 (2) Exits of Commitments (1,424) (1,348) (1,353) (1,021) (1,914) Net Commitments(
Slide 7: Quarterly Operating Results
Quarterly Operating Results (amounts in millions, except per share data) For the Three Months Ended 9/30/19 6/30/19 3/31/19 12/31/18 9/30/18 Investment income $ 387 $ 382 $ 373 $ 345 $ 342 Expenses, net of waiver of income based fees (14) 170 170 168 140 151 Net investment income before income taxes
Slide 8: Quarterly Operating Results Detail
Quarterly Operating Results Detail (amounts in millions) For the Three Months Ended 9/30/19 6/30/19 3/31/19 12/31/18 9/30/18 Net Investment Income Before Income Taxes: Investment Income: Interest income from investments $ 299 $ 296 $ 289 $ 263 $ 262 Capital structuring service fees 41 38 45 47 42 Di
Slide 9: Quarterly Gain/Loss Detail
Quarterly Gain/Loss Detail (amounts in millions) For the Three Months Ended 9/30/19 6/30/19 3/31/19 12/31/18 9/30/18 Net Realized and Unrealized Gains (Losses): Realized gains (losses) on investments: Gains $ 25 $ 20 $ 10 $ 37 $ 387 Losses (99) (2) (3) (16) (24) Net realized gains (losses) on invest
Slide 10: Quarterly Balance Sheets
Quarterly Balance Sheets (amounts in millions, except per share data) As of 9/30/19 6/30/19 3/31/19 12/31/18 9/30/18 ASSETS Investments at fair value $ 13,892 $ 12,992 $ 13,064 $ 12,417 $ 11,220 Cash and cash equivalents 253 572 572 296 799 Interest receivable 121 105 114 91 93 Operating lease right
Slide 11: Investment Portfolio by Issuer as of September 30, 2019
Investment Portfolio by Issuer as of September 30, 2019* 5.9% (11) 3.6% Top 15 Senior Direct Lending Program, LLC Investments Ivy Hill Asset Management, L.P. 2.6% 30.6% 2.1% Athenahealth, Inc. 1.8% Pathway Vet Alliance LLC 1.7% OTG Management, LLC 1.7% MacLean-Fogg Company 1.6% Singer Sewing Company
Slide 12: Investment Portfolio as of September 30, 2019
Investment Portfolio as of September 30, 2019* Asset Class Industry 8% 2% 2% 2% 3% 5% 3% 21% 3% 4% 4% 6% 4% 45% 4% 6% 21% 6% 32% 6% 6% 7% First Lien Senior Secured Loans(10) Business Services Automotive Services Second Lien Senior Secured Loans Healthcare Services Oil and Gas Senior Direct Lending P
Slide 13: Debt Summary
Debt Summary As of 6/30/19 As of 9/30/19 Aggregate Aggregate Weighted Principal Principal Average Amount Principal Carrying Value Amount Principal Carrying Value Stated Committed/ Amount of Outstanding Committed/ Amount of Outstanding Interest (dollar amounts in millions) Outstanding(17) Outstanding
Slide 14: Debt Summary
Debt Summary (Amounts in 000s) Debt Maturities* ($ in millions) ($ in millions) $5,000 $5,000 $4,000 $4,000 (21)(22)(23) $2,220 $3,000 (21)(22)(23) $3,000 $1,903 $2,000 $2,000 $1,730 $1,480 $1,000 $1,000 $600 $600 $750 $600 $600 $750 $388 $403 $388 $403 $0 $0 2019 2020 2021 2022 2023 Thereafter 2019
Slide 15: Quarterly Dividends
Quarterly Dividends $0.50 $0.02 $0.02 $0.02 $0.02 $0.40 $0.40 $0.40 $0.40 $0.40 $0.39 $0.39 $0.38 $0.38 $0.38 $0.38 $0.38 $0.38 $0.38 $0.38 $0.38 $0.38 $0.38 $0.30 $0.20 $0.10 $0.00 (24) Q4-15 Q1-16 Q2-16 Q3-16 Q4-16 Q1-17 Q2-17 Q3-17 Q4-17 Q1-18 Q2-18 Q3-18 Q4-18 Q1-19 Q2-19 Q3-19 Q4-19 Regular Div
Slide 16: Portfolio Activity
Portfolio Activity Gross Commitments by Asset Class Exits of Commitments by Asset Class 3% 2% 4% 3% 2% 2% 1% 1% 1% 1% 100% 3% 100% 1% 3% 1% 2% 3% 1% 4% 7% 2% 6% 10% 3% 7% 3% 12% 8% 13% 14% 7% 22% 1% 29% 11% 80% 23% 80% 2% 9% 20% 31% 28% 60% 39% 60% 90% 40% 40% 78% 72% 70% 73% 68% 63% 49% 50% 20% 42%
Slide 17: Portfolio Company EBITDA and Credit Statistics
Portfolio Company EBITDA and Credit Statistics $135.1 $136.7 $140.0 $130.0 $121.8 8.0x $120.0 $110.0 $99.0 $100.0 $92.9 6.0x 5.7x 5.7x PortfolioWeighted Portfolio WeightedAverage EBITDA(25)(26)(27) AverageEBITDA(25)** 5.5x $90.0 5.4x 5.4x $80.0 (25)(27) ($ Millions) $72.8 PortfolioAverage Portfolio
Slide 18: Investments on Non-Accrual Status
Investments on Non-Accrual Status Amortized Cost Fair Value 5.0% $800 5.0% $800 4.5% 4.5% $700 $700 4.0% 4.0% $600 $600 3.5% 3.5% $500 $500 3.0% 3.0% ($ Millions) ($ Millions) 2.7% 2.5% 2.5% 2.3% 2.3% $400 2.5% $400 2.0% 2.0% $324 $300 $300 $312 $314 $313 1.5% 1.5% 1.5% $200 $200 $211 1.0% 1.0% 0.6%
Slide 19: Portfolio By Grade
Portfolio By Grade(31) % By Fair Value % By Number of Companies 100% 100% 6% 4% 4% 4% 5% 11% 9% 11% 10% 8% 90% 90% 80% 80% 70% 70% 60% 60% 87% 86% 85% 85% 50% 50% 85% 84% 86% 84% 85% 87% 40% 40% 30% 30% 20% 20% 10% 10% 4% 3% 4% 4% 4% 4% 4% 4% 4% 4% 6% 6% 7% 6% 1% 1% 1% 1% 1% 5% 0% 0% Q3-18 Q4-18 Q1-
Slide 20: Investment Activity Since Quarter End
Investment Activity Since Quarter End Ø From October 1, 2019 through October 24, 2019, Ares Capital made approximately $360 million of new investment commitments • 90% were in first lien senior secured loans and 10% were in second lien senior secured loans • 100% were floating rate • Weighted averag
Slide 21: Backlog and Pipeline
Backlog and Pipeline Ø As of October 24, 2019, Ares Capital had a backlog and pipeline of approximately $665 million and $265 million, respectively(32) Ø The following is a breakdown of the backlog and pipeline by asset class and by industry Asset Class Industry 2% 7% 5% 21% 5% 30% 6% 5% 1% 21% 71%
Slide 22: Corporate Data
Corporate Data Board of Directors Investment Committee Corporate Officers Research Coverage Corporate Counsel MICHAEL AROUGHETI MARK AFFOLTER MICHAEL AROUGHETI BANK OF AMERICA MERRILL LYNCH KIRKLAND & ELLIS LLP Co-Chairman and Executive Vice President of Partner of the Ares Credit Group Executive Vi
Slide 23: Reconciliations of Core EPS
Reconciliations of Core EPS The following are reconciliations of basic and diluted earnings per share computed in accordance with GAAP to basic and diluted core earnings per share: For the Three Months Ended 9/30/19 6/30/19 3/31/19 12/31/18 9/30/18 Basic and Diluted Core EPS(1) $ 0.48 $ 0.49 $ 0.48
Slide 24: Endnotes
Endnotes 1) Basic and diluted Core EPS is a non-GAAP financial measure. Core EPS is the net per share increase (decrease) in stockholders’ equity resulting from operations less expense reimbursement from Ares Capital Management LLC (the "Ares Reimbursement"), net realized and unrealized gains and lo
Slide 25: Endnotes (cont’d)
Endnotes (cont’d) 12) As of September 30, 2019, excluding Ares Capital's investment in the subordinated certificates of the SDLP, 79% of the floating rate investments at fair value contained interest rate floor features. 13) Represents gross commitments or fundings less commitments or investments ex
Slide 26: Endnotes (cont’d)
Endnotes (cont’d) 23) The interest rate charged on the SMBC Funding Facility is based on an applicable spread of either 1.75% or 2.00% over LIBOR or 0.75% or 1.00% over a "base rate" (as defined in the agreements governing the SMBC Funding Facility), in each case, determined monthly based on the amo
Slide 27: Endnotes (cont’d)
Endnotes (cont’d) 31) Based on our investment adviser’s internal investment rating system scale from 1 to 4. Investments with a grade of 4 involve the least amount of risk to our initial cost basis and the trends and risk factors for these investments since origination or acquisition are generally f