Ares Capital Corporation · NASDAQ:ARCC
Ares Capital — Q3 2022 Earnings Presentation
28 slides from Ares Capital's earnings presentation, Oct 25, 2022
Slide 1: Third Quarter 2022 Earnings Presentation
Third Quarter 2022 Earnings Presentation
Slide 2: Important Notice
Important Notice This presentation contains “forward looking statementsˮ 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 rising interest rates in response to inflation, the war in Russia and Uk
Slide 3: Financial and Portfolio Highlights
Financial and Portfolio Highlights Financial Highlights Q3-22 Q2-22 Q3-21 (1) Core EPS* $ 0.50 $ 0.46 $ 0.47 Net Investment Income Per Share(2) $ 0.57 $ 0.52 $ 0.40 (2) Net Realized Gains (Losses) Per Share $ — $ (0.01) $ 0.33 Net Unrealized Gains (Losses) Per Share(2) $ (0.36) $ (0.29) $ — (2)(3) G
Slide 4: Selected Historical Financial Information
Selected Historical Financial Information As of and for the Three Months Ended (dollar amounts in millions, except per share data and stock prices) 9/30/22 6/30/22 3/31/22 12/31/21 9/30/21 Core EPS*(1) $ 0.50 $ 0.46 $ 0.42 $ 0.58 $ 0.47 Net Investment Income Per Share(2) $ 0.57 $ 0.52 $ 0.41 $ 0.52
Slide 5: Selected Historical Financial Information (cont'd)
Selected Historical Financial Information (cont’d) As of (dollar amounts in millions) 9/30/22 6/30/22 3/31/22 12/31/21 9/30/21 Investments at Fair Value $ 21,339 $ 21,170 $ 19,486 $ 20,009 $ 17,677 Number of Portfolio Companies(12) 458 452 395 387 371 Asset Class (at fair value): First Lien Senior S
Slide 6: Selected Historical Financial Information (cont'd)
Selected Historical Financial Information (cont’d) For the Three Months Ended (dollar amounts in millions) 9/30/22 6/30/22 3/31/22 12/31/21 9/30/21 Commitments: Gross Commitments(4) $ 2,242 $ 3,109 $ 2,001 $ 5,866 $ 3,110 Exits of Commitments(5) (1,996) (1,085) (2,551) (3,869) (2,263) Net Commitment
Slide 7: Quarterly Operating Results
Quarterly Operating Results For the Three Months Ended (amounts in millions, except per share data) 9/30/22 6/30/22 3/31/22 12/31/21 9/30/21 Investment income $ 537 $ 479 $ 440 $ 529 $ 442 Expenses 235 212 229 279 253 Net investment income before income taxes 302 267 211 250 189 Income tax expense,
Slide 8: Quarterly Operating Results Detail
Quarterly Operating Results Detail For the Three Months Ended (amounts in millions) 9/30/22 6/30/22 3/31/22 12/31/21 9/30/21 Net Investment Income Before Income Taxes: Investment Income: Interest income from investments $ 385 $ 319 $ 310 $ 336 $ 317 Capital structuring service fees 32 32 30 116 59 D
Slide 9: Quarterly Gain/Loss Detail
Quarterly Gain/Loss Detail For the Three Months Ended (amounts in millions) 9/30/22 6/30/22 3/31/22 12/31/21 9/30/21 Net Realized and Unrealized Gains (Losses): Realized gains (losses) on investments: Gains $ 71 $ 2 $ 81 $ 49 $ 233 Losses (93) (26) (12) (49) (110) Net realized gains (losses) on inve
Slide 10: Quarterly Balance Sheets
Quarterly Balance Sheets As of (amounts in millions, except per share data) 9/30/22 6/30/22 3/31/22 12/31/21 9/30/21 ASSETS Investments at fair value $ 21,339 $ 21,170 $ 19,486 $ 20,009 $ 17,677 Cash and cash equivalents 257 204 695 372 1,193 Restricted cash 105 57 19 114 20 Interest receivable 160
Slide 11: Investment Portfolio by Issuer as of September 30, 2022
Investment Portfolio by Issuer as of September 30, 2022* Top 15 Investments 27.6% Ivy Hill Asset Management, L.P. 9.2% (14) Senior Direct Lending Program, LLC 5.2% TibCo Software Inc. 1.4% Cornerstone OnDemand, Inc. 1.3% 1.1% AffiniPay Midco, LLC 1.1% 1.0% Symplr Software Inc. 1.0% IRI Holdings, Inc
Slide 12: Investment Portfolio as of September 30, 2022
Investment Portfolio as of September 30, 2022* Asset Class Industry 8% 11% 2% 9% 2% 23% 2% 3% 10% 3% 45% 4% 10% 5% 4% 5% 4% 9% 5% 18% 5% 8% 5% First Lien Senior Secured Loans(13) Software & Services Capital Goods Second Lien Senior Secured Loans Health Care Services Consumer Durables & Apparel Senio
Slide 13: Portfolio Activity
Portfolio Activity Gross Commitments by Asset Class Exits of Commitments by Asset Class 100% 3% 3% 3% 100% 1% 1% 3% 4% 1% 6% 5% 2% 4% 1% 6% 6% 2% 1% 3% 9% 5% 1% 3% 4% 18% 18% 3% 3% 8% 15% 14% 17% 8% 2% 5% 80% 3% 2% 80% 4% 3% 11% 17% 3% 9% 17% 11% 1% 1% % 4% 5% 5% 1% 60% 60% 40% 40% 79% 82% 76% 77% 7
Slide 14: Portfolio Company EBITDA and Credit Statistics
Portfolio Company EBITDA and Credit Statistics 12.0x $240.0 $213.3 10.0x $200.0 $179.7 $173.4 $162.0 $157.0 8.0x $160.0 $111.1 $138.5 ($ Millions) $127.4 $129.0 $131.3 6.2x 6.1x 6.3x 6.3x 6.0x 5.8x $120.0 4.0x $80.0 2.8x 3.0x 2.9x 2.4x 2.0x 2.0x $40.0 0.0x $0.0 Q3-21 Q4-21 Q1-22 Q2-22 Q3-22 Portfoli
Slide 15: Portfolio By Grade
Portfolio By Grade(24) % by Fair Value % by Number of Companies 100% 100% 11% 11% 13% 14% 13% 17% 15% 90% 19% 20% 20% 90% 80% 80% 70% 70% 60% 60% 50% 50% 77% 76% 82% 75% 78% 75% 78% 75% 75% 75% 40% 40% 30% 30% 20% 20% 10% 10% 7% 6% 6% 4% 6% 6% 1% 4% 1% 5% 1% 4% 1% 5% 5% 5% 5% 5% 4% 0% 0% Q3-21 Q4-21
Slide 16: Loans on Non-Accrual Status
Loans on Non-Accrual Status Amortized Cost Fair Value 5.0% $700 5.0% $700 $600 $600 4.0% 4.0% $500 $500 3.0% 3.0% ($ Millions) ($ Millions) $400 $400 $328 $338 $297 $300 $300 2.0% 2.0% $229 $194 1.7% $200 $171 $180 $200 $157 1.6% 1.6% 1.0% 1.0% $121 1.2% 1.0% $92 $100 0.9% $100 0.8% 0.9% 0.5% 0.6% 0
Slide 17: Investment Activity from October 1, 2022 through October 20, 2022
Investment Activity from October 1, 2022 through October 20, 2022 Ares Capital made approximately $1.1 billion of new investment commitments • 68% were in first lien senior secured loans, 31% were in second lien senior secured loans and 1% were in other equity • 98% were floating rate, 1% were non-i
Slide 18: Backlog and Pipeline
Backlog and Pipeline • As of October 20, 2022, Ares Capital had a backlog and pipeline of approximately $605 million and $0, respectively(25) • The following is a breakdown of the backlog and pipeline by asset class and by industry Asset Class Industry 7% 6% 4% 5% 23% 12% 5% 5% 6% 7% 15% 77% 9% 10%
Slide 19: Debt Summary
Debt Summary As of 6/30/22 As of 9/30/22 Aggregate Aggregate Weighted Principal Carrying Principal Carrying Average Amount Principal Value of Amount Principal Value of Stated Committed/ Amount Outstanding Committed/ Amount Outstanding Interest (dollar amounts in millions) Outstanding(27) Outstanding
Slide 20: Debt Maturities
Debt Summary Debt Maturities* ($ in millions) $5,000 $4,000 (30) $1,663 $3,000 (30) $1,438 $2,000 (30) $249 $2,450 $2,150 ** $1,000 $1,850 $900 $750 $403 $0 $0 — 2022 $0 2023 2024 $0 2025 2026 $0 Thereafter As of September 30, 2022 Convertible Unsecured Notes Other Unsecured Notes Secured Revolving
Slide 21: Quarterly Dividends
Quarterly Dividends $0.60 $0.50 $0.03 $0.48 $0.03 $0.03 $0.03 $0.02 $0.02 $0.02 $0.02 $0.43 $0.40 $0.42 $0.42 $0.41 $0.41 $0.40 $0.40 $0.40 $0.40 $0.40 $0.40 $0.40 $0.40 $0.40 $0.40 $0.39 $0.30 $0.20 $0.10 $0.00 (31) Q4-18 Q1-19 Q2-19 Q3-19 Q4-19 Q1-20 Q2-20 Q3-20 Q4-20 Q1-21 Q2-21 Q3-21 Q4-21 Q1-22
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 Partner, Co-Head of U.S. Direct Lending Co-Chai
Slide 23: Reconciliations of Core EPS
Reconciliations of Core EPS The following are reconciliations of core earnings per share to basic net income per share computed in accordance with GAAP: For the Three Months Ended 9/30/22 6/30/22 3/31/22 12/31/21 9/30/21 (1) Core EPS $ 0.50 $ 0.46 $ 0.42 $ 0.58 $ 0.47 Net realized and unrealized gai
Slide 24: Endnotes
Endnotes 1) Core EPS is a non-GAAP financial measure. Core EPS is the net 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 unrealized gains and losses, and a
Slide 25: Endnotes (cont'd)
Endnotes (cont'd) 11) Excludes realized and unrealized gains (losses), incentive fees attributable to net realized and unrealized gains (losses) and income tax expense, including excise taxes. 12) Includes portfolio companies for which there are outstanding commitments, but for which no amounts were
Slide 26: Endnotes (cont'd)
Endnotes (cont'd) 22) Portfolio weighted average interest coverage ratio represents the portfolio company’s EBITDA as a multiple of cash interest expense. The weighted average interest coverage ratio for the underlying borrowers in the SDLP was 2.7x, 2.6x, 2.5x, 2.2x and 1.9x as of 9/30/21, 12/31/21
Slide 27: Endnotes (cont'd)
Endnotes (cont'd) 30) See Note 5 to Ares Capital's consolidated financial statements included in the quarterly report on Form 10-Q for the three and nine months ended September 30, 2022 for more information regarding each of Ares Capital's secured revolving facilities. 31) Declared. In addition to t
Slide 28: Ares Capital Corporation
OD ARES ARES CAPITAL CORPORATION