Ares Capital Corporation · NASDAQ:ARCC
Ares Capital — Q3 2020 Earnings Presentation
27 slides from Ares Capital's earnings presentation, Oct 27, 2020
Slide 1: Third Quarter 2020 Earnings Presentation
Third Quarter 2020 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, including the impact of the novel coronavirus (“COVID-19”) pandemic and related changes in base
Slide 3: Financial and Portfolio Highlights
Financial and Portfolio Highlights Financial Highlights Q3-20 Q2-20 Q3-19 (all per share amounts, excluding net asset value per share, are basic and diluted) Core EPS*(1) $ 0.39 $ 0.39 $ 0.48 Net Investment Income Per Share $ 0.39 $ 0.39 $ 0.50 Net Realized Gains (Losses) Per Share $ (0.06) $ 0.02 $
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 9/30/20 6/30/20 3/31/20 12/31/19 9/30/19 Core EPS – Basic and Diluted*(1) $ 0.39 $ 0.39 $ 0.41 $ 0.45 $ 0.48 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 9/30/20 6/30/20 3/31/20 12/31/19 9/30/19 Investments at Fair Value $ 14,358 $ 13,842 $ 14,370 $ 14,426 $ 13,892 Number of Portfolio Companies(10) 347 352 355 354 352 Asset Class (at fair value): First Lien Senior S
Slide 6: Selected Historical Financial Information (cont'd)
Selected Historical Financial Information (cont’d) (dollar amounts in millions) For the Three Months Ended 9/30/20 6/30/20 3/31/20 12/31/19 9/30/19 Commitments: Gross Commitments(2) $ 706 $ 867 $ 1,272 $ 1,608 $ 2,409 (3) Exits of Commitments (352) (1,484) (918) (1,224) (1,424) Net Commitments(14) $
Slide 7: Quarterly Operating Results
Quarterly Operating Results (amounts in millions, except per share data) For the Three Months Ended 9/30/20 6/30/20 3/31/20 12/31/19 9/30/19 Investment income $ 352 $ 350 $ 369 $ 386 $ 387 Expenses, net of waiver of income based fees (15) 182 180 132 193 170 Net investment income before income taxes
Slide 8: Quarterly Operating Results Detail
Quarterly Operating Results Detail (amounts in millions) For the Three Months Ended 9/30/20 6/30/20 3/31/20 12/31/19 9/30/19 Net Investment Income Before Income Taxes: Investment Income: Interest income from investments $ 280 $ 287 $ 298 $ 296 $ 299 Capital structuring service fees 12 16 28 38 41 Di
Slide 9: Quarterly Gain/Loss Detail
Quarterly Gain/Loss Detail (amounts in millions) For the Three Months Ended 9/30/20 6/30/20 3/31/20 12/31/19 9/30/19 Net Realized and Unrealized Gains (Losses): Realized gains (losses) on investments: Gains $ 9 $ 33 $ 47 $ 21 $ 25 Losses (32) (23) (12) (99) (99) Net realized gains (losses) on invest
Slide 10: Quarterly Balance Sheets
Quarterly Balance Sheets (amounts in millions, except per share data) As of 9/30/20 6/30/20 3/31/20 12/31/19 9/30/19 ASSETS Investments at fair value $ 14,358 $ 13,842 $ 14,370 $ 14,426 $ 13,892 Cash and cash equivalents 233 278 460 167 179 Restricted cash 43 23 655 9 74 Interest receivable 124 116
Slide 11: Investment Portfolio by Issuer as of September 30, 2020
Investment Portfolio by Issuer as of September 30, 2020* 6.5% Top 15 (12) Investments Senior Direct Lending Program, LLC 4.8% 31.6% Ivy Hill Asset Management, L.P. 2.6% Athenahealth, Inc. 2.3% Singer Sewing Company 1.9% GHX Ultimate Parent Corporation 1.6% IRI Holdings, Inc. 1.6% Mac Lean-Fogg Compa
Slide 12: Investment Portfolio as of September 30, 2020
Investment Portfolio as of September 30, 2020* Asset Class Industry 8% 4% 2% 2% 5% 2% 2% 19% 4% 7% 4% 45% 5% 7% 14% 6% 6% 9% 7% 28% 7% 7% First Lien Senior Secured Loans(11) Health Care Services Automobiles & Components Second Lien Senior Secured Loans Software & Services Capital Goods Senior Direct
Slide 13: Portfolio Activity
Portfolio Activity Gross Commitments by Asset Class Exits of Commitments by Asset Class 2% 1% 4% 3% 2% 1% 1% 3% 2% 2% 100% 100% 1% 2% 1% 3% 4% 3% 7% 12% 3% 10% 6% 3% 2% 8% 17% 1% 1% 7% 18% 7% 80% 80% 5% 16% 9% 7% 39% 39% 60% 60% 90% 94% 92% 40% 40% 81% 75% 73% 69% 69% 51% 54% 20% 20% 0% 0% Q3-19 Q4-
Slide 14: Portfolio Company EBITDA and Credit Statistics
Portfolio Company EBITDA and Credit Statistics 10.0x $153.1 $160.0 $150.0 $138.9 $141.0 $136.7 $135.0 $140.0 8.0x $130.0 $120.0 $110.0 PortfolioWeighted Portfolio WeightedAverage EBITDA(16)(17)(18) AverageEBITDA(25)** $100.0 6.0x 5.7x 5.7x 5.7x 5.8x (16)(18) $90.0 ($ Millions) PortfolioAverage Portf
Slide 15: Portfolio By Grade
Portfolio By Grade(22) % By Fair Value % By Number of Companies 100% 100% 6% 9% 5% 6% 4% 8% 8% 10% 8% 10% 90% 90% 80% 80% 70% 70% 60% 60% 67% 71% 66% 70% 82% 85% 85% 85% 50% 87% 86% 50% 40% 40% 30% 30% 20% 20% 16% 16% 10% 19% 18% 10% 8% 4% 4% 8% 9% 8% 4% 5% 1% 1% 1% 2% 6% 5% 6% 1% 0% 0% Q3-19 Q4-19
Slide 16: Loans on Non-Accrual Status
Loans on Non-Accrual Status Amortized Cost Fair Value 10.0% $1,000 10.0% $1,000 9.0% $900 9.0% $900 8.0% $764 $800 8.0% $800 7.0% $657 $700 7.0% $700 6.0% $600 6.0% $600 ($ Millions) ($ Millions) $477 $457 5.0% $500 5.0% $500 5.1% 4.0% 4.4% $400 4.0% $356 $400 $272 3.0% $300 3.0% $300 $240 3.2% $211
Slide 17: Investment Activity from October 1, 2020 through October 21, 2020
Investment Activity from October 1, 2020 through October 21, 2020 Ø Ares Capital made approximately $419 million of new investment commitments • 51% were in first lien senior secured loans, 47% were in second lien senior secured loans, 1% were in preferred equity securities and 1% were in other equi
Slide 18: Backlog and Pipeline
Backlog and Pipeline Ø As of October 21, 2020, Ares Capital had a backlog and pipeline of approximately $1.5 billion and $75 million, respectively(23) Ø The following is a breakdown of the backlog and pipeline by asset class and by industry Asset Class Industry 2% 7% 5% 4% 9% 4% 9% 44% 17% 10% 67% 2
Slide 19: Debt Summary
Debt Summary As of 6/30/20 As of 9/30/20 Aggregate Aggregate Weighted Principal Principal Average Amount Principal Carrying Value Amount Principal Carrying Value Stated Committed/ Amount of Outstanding Committed/ Amount of Outstanding Interest (dollar amounts in millions) Outstanding(25) Outstanding
Slide 20: Debt Summary
Debt Summary (Amounts in 000s) Debt Maturities* ($ in millions) ($ in millions) $5,000 $5,000 $4,000 $4,000 (29)(30) $1,473 $3,000 (29)(30) $3,000 $2,339 $2,000 (29)(31) $2,000 (29)(31) $528 $402 $2,730 $900 $1,000 $1,000 $1,580 $900 $600 $600 $750 $750 $388 $403 $388 $403 $0 $0 2020 2021 2022 2023
Slide 21: Quarterly Dividends
Quarterly Dividends $0.50 $0.02 $0.02 $0.02 $0.02 $0.40 $0.40 $0.40 $0.40 $0.40 $0.40 $0.40 $0.40 $0.40 $0.39 $0.39 $0.38 $0.38 $0.38 $0.38 $0.38 $0.38 $0.38 $0.30 $0.20 $0.10 $0.00 (33) 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 Q1-20 Q2-20 Q3-20 Q4-20 Regular Div
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 Co-Chairman
Slide 23: Reconciliations of Core EPS
Reconciliations of Core EPS The following are reconciliations of basic and diluted net income (loss) per share computed in accordance with GAAP to basic and diluted core earnings per share: For the Three Months Ended 9/30/20 6/30/20 3/31/20 12/31/19 9/30/19 Basic and Diluted Core EPS(1) $ 0.39 $ 0.3
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 net realized and unrealized gains and losses, any capital gains incentive fees attributable to such net realized and unreal
Slide 25: Endnotes (cont'd)
Endnotes (cont’d) 13) As of September 30, 2020, excluding Ares Capital's investment in the subordinated certificates of the SDLP, 84% of the floating rate investments at fair value contained interest rate floor features. 14) Represents gross commitments or fundings less commitments or investments ex
Slide 26: Endnotes (cont'd)
Endnotes (cont’d) 22) 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
Slide 27: Endnotes (cont'd)
Endnotes (cont’d) 30) The interest rate charged on the Revolving Funding Facility is based on LIBOR plus 2.00% per annum or a “base rate” (as defined in the agreements governing the Revolving Funding Facility) plus 1.00% per annum. As of September 30, 2020, the interest rate in effect was LIBOR plus