Ares Capital Corporation · NASDAQ:ARCC
Ares Capital — Investor Presentation (March 2022)
46 slides from Ares Capital's investor presentation, Mar 31, 2022
Slide 1: Investor Presentation Quarter Ended March 31, 2022
Investor Presentation Quarter Ended March 31, 2022 Confidential – Not for Publication or Distribution
Slide 2: Disclaimer
Disclaimer IMPORTANT NOTICE: Statements included herein may constitute “forward-looking statements,” which may relate to future events or the future performance or financial condition of Ares Capital Corporation (“ARCC”), its investment adviser Ares Capital Management LLC (“ACM”), a subsidiary of Ar
Slide 3: Market Leading Company in Direct Lending
Market Leading Company in Direct Lending Market Leading Business Significant Development Company Competitive Advantages Attractive Portfolio and Compelling Track Record Diverse Sources of Funding Competitive Advantages $16.47 Largest publicly traded Incumbency from Large Durable Balance Sheet to BDC
Slide 4: Overview of Ares Management
Overview of Ares Management With approximately $306 billion in assets under management, Ares Management Corporation is a global alternative investment manager operating an integrated platform across five business groups Global Footprint2 Profile Founded 1997 AUM $325bn Employees ~2,195 Investment Pr
Slide 5: Market Opportunity and Industry Shift
Market Opportunity and Industry Shift We believe that addressable market continues to expand which provides additional opportunities for ARCC Banks Continue to Retrench from Middle Market Direct Lending1 Increased Borrower Size2,3,4 80.0% Banks Share of the Leveraged Loan Market ARCC Portfolio Weigh
Slide 6: We Believe ARCC is Well Positioned
We Believe ARCC is Well Positioned ARCC is one of the largest direct lenders with the scale and capabilities necessary to successfully invest across a variety of market environments, including a downcycle • Externally managed by Ares Management which amongst other things provides informational advan
Slide 7: Leading Investment Team
Leading Investment Team We believe ARCC benefits from a large, long tenured and highly experienced team with significant experience in direct lending and extensive middle market knowledge ARCC’s Team Brings Members of the Investment Committee Invested ~$79 billion 27 years average across over 1,730
Slide 8: Differentiated Portfolio Management Capabilities and Focus
Differentiated Portfolio Management Capabilities and Focus No comparable sized portfolio management team amongst any other direct lending manager in U.S.1 • 29 person dedicated portfolio management team is enhanced by Ares firm wide resources such as legal, industry experts, etc. • 10 have restructu
Slide 9: ARCC's Distinct Competitive Advantages
ARCC’s Distinct Competitive Advantages ARCC’s scale and flexibility lead to sourcing advantages and significant deal flow Relationships Incumbency Large Scale Ares Credit Group • 17+ year history in the • Incumbency allows us • Ability to commit $500 • Multi-asset class market to finance and grow mi
Slide 10: Key Elements to Our Investment Approach
Key Elements to Our Investment Approach We believe a credit-focused investment approach supports our 17+ years of leading performance • Leading market • Resilient, non-cyclical Fundamentally Strong share positions Attractive Industries industries Companies • Companies with long-term • Strong entry b
Slide 11: Highly Diversified and Predominately Senior Secured Portfolio
Highly Diversified and Predominately Senior Secured Portfolio Attractively positioned $19.5 billion1 highly diverse portfolio with significant downside protection 71% Senior Secured Loans2 Average Position Size 0.3%3 Largest investment is <1.5%4 Portfolio by Asset Class1 Issuer Concentration1 8% 7%
Slide 12: ARCC's Significant Portfolio Diversity vs. BDC Peer Averages
ARCC’s Significant Portfolio Diversity vs. BDC Peer Averages ARCC’s portfolio is designed to mitigate risk from any one issuer or industry Average Hold1 Number of Industries identified by S&P1,3 Peer Exposure to Industries 30 Not in ARCC’s Portfolio1,3 0.8% 23 Airlines 0.3% Construction ARCC BDC Pee
Slide 13: Industry Selection Supports High Quality Credit Portfolio
Industry Selection Supports High Quality Credit Portfolio Focus on selecting defensively positioned companies in less cyclical industries ARCC Portfolio by Industry1 vs. High Yield and Leveraged Loan Industry Exposure to Cyclical Industries 7% Hotel & Gaming Oil & Gas 2% 2% 20% 2% 14% 2% 4% 4% 7% 5%
Slide 14: We Believe ARCC is Well Positioned for Rising Interest Rates
We Believe ARCC is Well Positioned for Rising Interest Rates ARCC has an asset sensitive balance sheet that we believe will benefit from an expected rise in base interest rates Approximate Annual Earnings Per Share Impact Ability to Benefit from Rising Rates with a 100bps and 200bps Increase in Base
Slide 15: Consistent Track Record of Generating Meaningful Shareholder Value
Consistent Track Record of Generating Meaningful Shareholder Value ARCC has delivered the highest NAV per share and base dividend per share growth over the last 5 and 10 years1 5-Year 5-YearNAV NAV Per Share Share Growth Growth1 1 15.2% ARCC has also demonstrated leadership position in the 10-year p
Slide 16: ARCC Has a Compelling Track Record of Credit Performance
ARCC Has a Compelling Track Record of Credit Performance ARCC’s annual loss rate has been significantly better than the industry averages ARCC Credit Experience Since Inception1 First Lien Second Lien & Subordinated Period Measured1 2004 – Q4-21 2004 – Q4-21 Significant Capital Deployed1 $55 billion
Slide 17: Strong Credit and Investment Performance
Strong Credit and Investment Performance ARCC has generated strong core earnings1 and stable core ROE2 since its IPO ARCC generated nearly 220 bps of average annual Since IPO in October 2004 through March 31, 2022: incremental gain differential vs. Peers3 since 20044 1.4% Approximately Net realized
Slide 18: Deep and Diverse Access to Debt Financing
Deep and Diverse Access to Debt Financing Our deep bank and capital market relationships enhance our access to capital supported by our investment grade ratings Aggregate ARCC Has Long Standing Investment Grade Ratings Weighted Principal Amount Principal ($ in millions) Average Stated of Commitments
Slide 19: ARCC Has Stable and Broad Sources of Financing
ARCC Has Stable and Broad Sources of Financing Conservative balance sheet with a longstanding track record of accessing diverse sources of financing Simple Balance Sheet with Significant Liquidity Strong Liability and Funding Construction $691 Available Cash Excess $5.9b Total Available liquidity 2.
Slide 20: Deep Sources of Liquidity and Well Laddered Maturities
Deep Sources of Liquidity and Well Laddered Maturities Investment portfolio provides ample cash flows to support debt maturities Sales & Repayments Sources of Liquidity 70% as a % of Portfolio at ~$5.9 billion of Amortized Cost available borrowing $16,518 60% capacity3 50% $7,324 $ Millions 40% $10,
Slide 21: We Have Generated Attractive Long-Term Stock Returns
We Have Generated Attractive Long-Term Stock Returns ARCC has outperformed relative to indices through a variety of market environments since IPO Cumulative Shareholder Total Return Since Inception 10/8/04 – 3/31/221,2 800% 700% 600% 500% 400% 300% 200% 100% 0% ARCC 2 S&P 500 Index Banks 3 Note: Pas
Slide 22: Ares' Values and ESG Integration
Ares’ Values and ESG Integration Confidential – Not for Publication or Distribution
Slide 23: Ares' Values Driven Culture
Ares’ Values Driven Culture While our backgrounds are diverse, at Ares we are unified and guided in everything we do by our shared values Collaborative Purpose We achieve more We seek to be a catalyst for shared together prosperity and a better future Trustworthy We are dedicated stewards Vision We
Slide 24: Driving Investing & Organizational Excellence Through ESG Integration
Driving Investing & Organizational Excellence Through ESG Integration We strive to achieve better investment outcomes and leave a lasting positive impact on our companies and communities. Corporate Sustainability Responsible Investment Our Beliefs Our Beliefs We lead by example through Ares’ own cor
Slide 25: Conclusion
Conclusion Confidential – Not for Publication or Distribution
Slide 26: Conclusion
Conclusion We believe ARCC is well positioned to deliver differentiated results Strong and growing position in an expanding market Significant and meaningful competitive advantages driven by our scale and tenure in the market Attractively positioned and highly diversified senior oriented portfolio R
Slide 27: Appendix A
Appendix A Market and Additional Company Specific Investment Considerations Confidential – Not for Publication or Distribution
Slide 28: Ares Credit Group
Ares Credit Group Integrated scaled global platform combines direct origination, deep fundamental credit research and broad perspective of relative value Advantages $196.9 Billion AUM1 Access to ~65 Partners averaging 24 years of experience Deep Investment Differentiated Ability to Express 315+ dedi
Slide 29: Risk Position: Asset Mix Changes with Views on Risk and Return
Risk Position: Asset Mix Changes with Views on Risk and Return Our portfolio composition will change based on our view of market conditions and the returns available 100% 3% 6% 4% 4% 4% 4% 4% 5% 5% 5% 7% 7% 7% 7% 8% 8% 12% 11% 12% 3% 4% 4% 12% 4% 4% 4% 4% 3% 3% 1% 5% 6% 90% 6% 5% 3% 3% 4% 3% 3% 3% 5
Slide 30: Strong Investment Performance
Strong Investment Performance ARCC has generated strong net realized gains relative to the BDC peer group Annualized Net Realized Gain/Loss Rates1 Since 2004 or IPO for ARCC and BDCs >$1.5 billion portfolio at fair value or >$2 billion 2% combined portfolio at fait value if under common management2
Slide 31: ARCC's Portfolio Has Generated Higher Returns with Less Risk
ARCC’s Portfolio Has Generated Higher Returns with Less Risk Our investment strategy and competitive advantages have led to attractive returns with lower volatility Annualized Returns (Dividends & Change in NAV)1,2 3 Years 5 Years Since IPO (2004) 13.7% 12.9% 12.2% 8.9% 8.6% 8.1% 6.7% 7.1% 5.6% 6.1%
Slide 32: Dividend and Core Earnings Plus Net Realized Gains Track Record
Dividend and Core Earnings Plus Net Realized Gains Track Record ARCC has generated cumulative core earnings and net realized gains in excess of our dividends paid since our IPO We have out-earned our dividend with cumulative core earnings plus net realized gains $9,000 Cumulative Core Earnings Plus
Slide 33: Appendix B
Appendix B Management and Core Earnings Reconciliation Confidential – Not for Publication or Distribution
Slide 34: Management Team Overview
Management Team Overview Years of Relevant Years at Members of Investment Committee Experience Ares Background Michael Arougheti 29 18 RBC Capital Partners – Managing Partner Ares Capital Corporation – Co-Chairman of the Board of Indosuez Capital – Principal Directors and Executive Vice President Ar
Slide 35: Board of Directors
Board of Directors Director Title Experience Michael J Arougheti Co-Chairman /Director Ares Capital Corporation – Co-Chairman and Ares Credit Group - Partner and Member of U.S. Direct Executive Vice President Lending Investment Committee Ares – Director, Co-Founder, Chief Executive Officer Ares Comm
Slide 36: Reconciliation of Core Earnings
Reconciliation of Core Earnings Reconciliations of Core Earnings to GAAP Earnings For the years ended For the quarters ended (in millions) 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Q1-21 Q1-22 Core Earnings1 $ 381 $ 442 $ 473 $486 $504 $ 592 $ 718 $ 807 $ 736 $902 $186 $203 Professional fees
Slide 37: Index & ETF Definitions
Index & ETF Definitions Confidential – Not for Publication or Distribution
Slide 38: Index Definitions
Index Definitions Indices are provided for illustrative purposes only and not indicative of any investment. They have not been selected to represent appropriate benchmarks or targets for ARCC. Rather, the indices shown are provided solely to illustrate the performance of well known and widely recogn
Slide 39: Endnotes
Endnotes Endnotes Confidential – Not for Publication or Distribution
Slide 40: Endnotes
Endnotes Slide 3: Market Leading Company in Direct Lending 1. By market capitalization as of March 31, 2022. 2. Includes invested capital from inception on October 8, 2004 through March 31, 2022. Includes investments made through Ares Capital Corporation, the Senior Secured Loan Program and the Seni
Slide 41: Endnotes
Endnotes Slide 5: Market Opportunity and Industry Shift 1. Standard & Poor’s LCD Q1-22 Leveraged Lending Review. 2. The portfolio weighted average EBITDA and average EBITDA for the underlying borrowers includes information solely in respect of corporate investments in Ares Capital's portfolio and th
Slide 42: Endnotes
Endnotes Slide 6: We Believe ARCC is Well Positioned 1. At fair value. 2. Average number of years investing for all Investment Committee members. 3. Includes invested capital from inception on October 8, 2004 through December 31, 2021. Includes investments made through Ares Capital Corporation, the
Slide 43: Endnotes
Endnotes Slide 11: Highly Diversified and Predominately Senior Secured Portfolio 1. At fair value as of March 31, 2022. 2. Including First Lien Senior Secured Loans, Second Lien Senior Secured Loans and investments in the subordinated certificates of the Senior Direct Lending Program. 3. Average of
Slide 44: Endnotes
Endnotes Slide 17: Strong Credit and Investment Performance 1. Calculated as the net realized gains/losses from Ares Capital IPO in October 2004 to March 31, 2022. Excludes $196 million one‐time gain on the acquisition of Allied Capital Corporation in Q2‐10 and gains/losses from extinguishment of de
Slide 45: Endnotes
Endnotes Slide 28: Ares Credit Group • ARCC received the 2021 All-America Executive Team Most Honored designation alongside 136 other companies. Various Ares personnel received first place awards as part of the “Brokers, Asset Managers & Exchanges” category for: Investor Relations, CEO, CFO, Investo
Slide 46: Confidential – Not for Publication or Distribution
Confidential – Not for Publication or Distribution