Ares Capital Corporation · NASDAQ:ARCC
Ares Capital — Q1 2020 Earnings Presentation
27 slides from Ares Capital's earnings presentation, May 5, 2020
Slide 1: First Quarter 2020 Earnings Presentation
First 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 Q1-20 Q4-19 Q1-19 (all per share amounts, excluding net asset value per share, are basic and diluted) Core EPS*(1) $ 0.41 $ 0.45 $ 0.48 Net Investment Income Per Share $ 0.54 $ 0.44 $ 0.47 Net Realized Gains (Losses) Per Share $ 0.08 $ (0.18) $
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 3/31/20 12/31/19 9/30/19 6/30/19 3/31/19 Core EPS – Basic and Diluted*(1) $ 0.41 $ 0.45 $ 0.48 $ 0.49 $ 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 3/31/20 12/31/19 9/30/19 6/30/19 3/31/19 Investments at Fair Value $ 14,370 $ 14,426 $ 13,892 $ 12,992 $ 13,064 Number of Portfolio Companies(9) 355 354 352 345 345 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 3/31/20 12/31/19 9/30/19 6/30/19 3/31/19 Commitments: Gross Commitments $ 1,272 $ 1,608 $ 2,409 $ 1,307 $ 1,953 (2) Exits of Commitments (918) (1,224) (1,424) (1,348) (1,353) Net Commitments(13
Slide 7: Quarterly Operating Results
Quarterly Operating Results (amounts in millions, except per share data) For the Three Months Ended 3/31/20 12/31/19 9/30/19 6/30/19 3/31/19 Investment income $ 369 $ 386 $ 387 $ 382 $ 373 Expenses, net of waiver of income based fees (14) 132 193 170 170 168 Net investment income before income taxes
Slide 8: Quarterly Operating Results Detail
Quarterly Operating Results Detail (amounts in millions) For the Three Months Ended 3/31/20 12/31/19 9/30/19 6/30/19 3/31/19 Net Investment Income Before Income Taxes: Investment Income: Interest income from investments $ 298 $ 296 $ 299 $ 296 $ 289 Capital structuring service fees 28 38 41 38 45 Di
Slide 9: Quarterly Gain/Loss Detail
Quarterly Gain/Loss Detail (amounts in millions) For the Three Months Ended 3/31/20 12/31/19 9/30/19 6/30/19 3/31/19 Net Realized and Unrealized Gains (Losses): Realized gains (losses) on investments: Gains $ 47 $ 21 $ 25 $ 20 $ 10 Losses (12) (99) (99) (2) (3) Net realized gains (losses) on investm
Slide 10: Quarterly Balance Sheets
Quarterly Balance Sheets (amounts in millions, except per share data) As of 3/31/20 12/31/19 9/30/19 6/30/19 3/31/19 ASSETS Investments at fair value $ 14,370 $ 14,426 $ 13,892 $ 12,992 $ 13,064 Cash and cash equivalents 460 167 179 541 544 Restricted cash 655 9 74 31 28 Interest receivable 111 117
Slide 11: Investment Portfolio by Issuer as of March 31, 2020
Investment Portfolio by Issuer as of March 31, 2020* 5.8% Top 15 (11) 3.4% Investments Senior Direct Lending Program, LLC 28.3% 2.5% Ivy Hill Asset Management, L.P. 1.8% Athenahealth, Inc. 1.6% GHX Ultimate Parent Corporation 1.6% 1.5% Singer Sewing Company 1.4% Mac Lean-Fogg Company 1.4% The Ultima
Slide 12: Investment Portfolio as of March 31, 2020
Investment Portfolio as of March 31, 2020* Asset Class Industry 7% 5% 2% 5% 2% 2% 19% 3% 6% 3% 4% 6% 5% 48% 14% 6% 6% 28% 9% 6% 7% 7% First Lien Senior Secured Loans(10) Health Care Services Automobiles & Components Second Lien Senior Secured Loans Software & Services Capital Goods Senior Direct Len
Slide 13: Debt Summary
Debt Summary As of 12/31/19 As of 3/31/20 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(16) Outstandin
Slide 14: Debt Summary
Debt Summary (Amounts in 000s) Debt Maturities* ($ in millions) ($ in millions) $5,000 $5,000 $4,000 $4,000 (20)(21) (20)(21)(22) $3,074 $3,000 $3,189 $3,000 $2,000 $2,000 (20)(22) $579 $900 $1,000 $1,000 $900 $1,580 $600 $600 $750 $830 $750 $388 $403 $388 $403 $0 $0 2020 2021 2022 2023 2024 Thereaf
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 $0.40 $0.40 $0.39 $0.39 $0.38 $0.38 $0.38 $0.38 $0.38 $0.38 $0.38 $0.38 $0.38 $0.30 $0.20 $0.10 $0.00 (23) 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 Q1-20 Q2-20 Regular Div
Slide 16: Portfolio Activity
Portfolio Activity Gross Commitments by Asset Class Exits of Commitments by Asset Class 4% 3% 2% 1% 4% 1% 1% 1% 1% 3% 100% 100% 1% 1% 1% 4% 7% 12% 3% 6% 10% 6% 7% 3% 1% 8% 17% 8% 13% 29% 7% 7% 11% 80% 80% 5% 16% 9% 39% 31% 60% 39% 60% 90% 40% 40% 78% 81% 75% 73% 69% 70% 49% 51% 20% 42% 20% 0% 0% Q1-
Slide 17: Portfolio Company EBITDA and Credit Statistics
Portfolio Company EBITDA and Credit Statistics $136.7 $138.9 $135.1 $135.0 $140.0 $130.0 $121.8 8.0x $120.0 $110.0 $100.0 6.0x PortfolioWeighted Portfolio WeightedAverage EBITDA(25)(26)(27) AverageEBITDA(25)** 5.7x 5.7x 5.7x $90.0 5.5x 5.4x $80.0 (25)(27) ($ Millions) $80.6 PortfolioAverage Portfoli
Slide 18: Loans on Non-Accrual Status
Loans 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% 3.1% $500 $500 3.0% 3.0% ($ Millions) ($ Millions) $477 2.5% 2.3% 2.3% $400 2.5% $400 2.0% 1.9% 2.0% $300 1.7% $300 $314 $313 1.5% 1.5% $272 1.5% $200 $200 $211 0.9% 1.0% 1.0%
Slide 19: Portfolio By Grade
Portfolio By Grade(31) % By Fair Value % By Number of Companies 100% 100% 6% 4% 4% 5% 6% 4% 11% 10% 8% 8% 90% 90% 80% 80% 70% 70% 60% 60% 85% 82% 85% 86% 85% 85% 50% 87% 86% 50% 84% 85% 40% 40% 30% 30% 20% 20% 10% 10% 4% 8% 4% 4% 4% 5% 8% 7% 4% 1% 4% 1% 4% 1% 1% 1% 6% 6% 5% 6% 0% 0% Q1-19 Q2-19 Q3-1
Slide 20: Investment Activity from April 1, 2020 through April 29, 2020
Investment Activity from April 1, 2020 through April 29, 2020 Ø Ares Capital made approximately $169 million of new investment commitments • 67% were in first lien senior secured loans, 17% were in second lien senior secured loans and 16% were in preferred equity securities • 84% were floating rate
Slide 21: Backlog and Pipeline
Backlog and Pipeline Ø As of April 29, 2020, Ares Capital had a backlog and pipeline of approximately $210 million and $140 million, respectively(32) Ø The following is a breakdown of the backlog and pipeline by asset class and by industry Asset Class Industry 7% 6% 9% 28% 9% 12% 19% 17% 93% First L
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 3/31/20 12/31/19 9/30/19 6/30/19 3/31/19 Basic and Diluted Core EPS(1) $ 0.41 $ 0.4
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) 12) As of March 31, 2020, 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 exited
Slide 26: Endnotes (cont'd)
Endnotes (cont’d) 22) 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) 30) The EBITDA growth rate for each included portfolio company is calculated as the percentage change for the most recently reported fiscal year to date comparable periods and is weighted based on the fair value of the portfolio company investments to calculate the portfolio weight