Ares Capital Corporation · NASDAQ:ARCC
Ares Capital — Q4 2023 Earnings Presentation
28 slides from Ares Capital's earnings presentation, February 2024
Slide 1: Fourth Quarter 2023 Earnings Presentation
Fourth Quarter 2023 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. 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 Q4-23 Q3-23 Q4-22 FY-23 FY-22 (1)(2) GAAP Net Income Per Share $ 0.72 $ 0.89 $ 0.34 $ 2.75 $ 1.21 Core EPS*(3) $ 0.63 $ 0.59 $ 0.63 $ 2.37 $ 2.02 Net Investment Income Per Share(1) $ 0.60 $ 0.52 $ 0.68 $ 2.28 $ 2.19 Net Realized Gains (Losses)
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) 12/31/23 9/30/23 6/30/23 3/31/23 12/31/22 GAAP Net Income Per Share(1)(2) $ 0.72 $ 0.89 $ 0.61 $ 0.52 $ 0.34 Core EPS*(3) $ 0.63 $ 0.59 $ 0.58 $ 0.57 $
Slide 5: Selected Historical Financial Information (cont'd)
Selected Historical Financial Information (cont’d) As of (dollar amounts in millions) 12/31/23 9/30/23 6/30/23 3/31/23 12/31/22 Investments at Fair Value $ 22,874 $ 21,929 $ 21,496 $ 21,148 $ 21,780 Number of Portfolio Companies(12) 505 490 475 466 466 Asset Class (at fair value): First Lien Senior
Slide 6: Selected Historical Financial Information (cont'd)
Selected Historical Financial Information (cont’d) For the Three Months Ended (dollar amounts in millions) 12/31/23 9/30/23 6/30/23 3/31/23 12/31/22 Commitments: Gross Commitments(4) $ 2,384 $ 1,598 $ 1,218 $ 766 $ 2,519 Exits of Commitments(5) (1,427) (1,280) (1,138) (1,884) (2,333) Net Commitments
Slide 7: Quarterly Operating Results
Quarterly Operating Results For the Three Months Ended (amounts in millions, except per share data) 12/31/23 9/30/23 6/30/23 3/31/23 12/31/22 Investment income $ 707 $ 655 $ 634 $ 618 $ 640 Expenses 353 363 314 298 273 Net investment income before income taxes 354 292 320 320 367 Income tax expense,
Slide 8: Quarterly Operating Results Detail
Quarterly Operating Results Detail For the Three Months Ended (amounts in millions) 12/31/23 9/30/23 6/30/23 3/31/23 12/31/22 Net Investment Income Before Income Taxes: Investment Income: Interest income from investments $ 521 $ 495 $ 476 $ 470 $ 456 Capital structuring service fees 41 20 21 10 59 D
Slide 9: Quarterly Gain/Loss Detail
Quarterly Gain/Loss Detail For the Three Months Ended (amounts in millions) 12/31/23 9/30/23 6/30/23 3/31/23 12/31/22 Net Realized and Unrealized Gains (Losses): Realized gains (losses) on investments: Gains $ 19 $ 22 $ 25 $ 41 $ 83 Losses (14) (94) (93) (61) (82) Net realized gains (losses) on inve
Slide 10: Quarterly Balance Sheets
Quarterly Balance Sheets As of (amounts in millions, except per share data) 12/31/23 9/30/23 6/30/23 3/31/23 12/31/22 ASSETS Investments at fair value $ 22,874 $ 21,929 $ 21,496 $ 21,148 $ 21,780 Cash and cash equivalents 535 527 411 359 303 Restricted cash 29 78 42 18 34 Interest receivable 245 215
Slide 11: Investment Portfolio by Issuer as of December 31, 2023
Investment Portfolio by Issuer as of December 31, 2023* Top 15 Investments 29.5% 8.7% Ivy Hill Asset Management, L.P. (15) Senior Direct Lending Program, LLC (14) Neptune Bidco US Inc. 5.6% Cloud Software Group, Inc. 1.9% 1.6% Heelstone Renewable Energy, LLC 1.3% High Street Buyer, Inc. and High Str
Slide 12: Investment Portfolio as of December 31, 2023
Investment Portfolio as of December 31, 2023* Asset Class Industry 9% 9% 2% 23% 2% 9% 2% 3% 3% 44% 3% 11% 3% 4% 12% 5% 4% 6% 5% 10% 6% 16% 9% Software and Services Consumer Durables and Apparel First Lien Senior Secured Loans(13) Health Care Services Media and Entertainment Second Lien Senior Secure
Slide 13: Portfolio Activity
Portfolio Activity Gross Commitments by Asset Class Exits of Commitments by Asset Class 100% 1% 100% 2% 2% 3% 4% 6% 2% 3% 3% 2% 10% 9% 8% 3% 4% 1% 11% 37% 3% 7% 15% 1% 3% 8% 6% 21% 2% 2% 4% 11% 3% 2% 80% 80% 10% 2% 6% 13% 4% 6% 3% 2% 2% 14% 9% 21% 3% 60% 60% 3% 14% 7% 87% 87% 40% 40% 83% 70% 70% 72%
Slide 14: Portfolio Company EBITDA and Credit Statistics
Portfolio Company EBITDA and Credit Statistics 12.0x $400.0 10.0x $321.6 $307.7 $313.1 $294.0 $300.0 $275.4 8.0x ($ Millions) 6.2x 6.1x 6.1x 6.1x 6.0x 6.0x $200.0 $152.5 $156.1 $157.8 $146.6 $147.0 4.0x $100.0 2.0x 1.8x 1.7x 1.6x 1.6x 1.6x 0.0x $0.0 Q4-22 Q1-23 Q2-23 Q3-23 Q4-23 * Portfolio Weighted
Slide 15: Portfolio By Grade
Portfolio By Grade(24) % by Fair Value % by Number of Companies 100% 100% 16% 15% 13% 18% 17% 17% 90% 23% 23% 21% 90% 24% 80% 80% 70% 70% 60% 60% 50% 50% 70% 76% 70% 70% 74% 72% 75% 70% 68% 70% 40% 40% 30% 30% 20% 20% 10% 10% 9% 8% 9% 6% 7% 6% 6% 6% 6% 6% 1% 2% 1% 1% 1% 4% 5% 5% 5% 4% 0% 0% Q4-22 Q1
Slide 16: Loans on Non-Accrual Status
Loans on Non-Accrual Status Amortized Cost Fair Value 5.0% $600 5.0% $600 $496 $500 $500 4.0% 4.0% $444 $372 $400 $400 3.0% 3.0% ($ Millions) ($ Millions) $295 $300 $277 $300 $266 $241 $239 2.0% 2.3% 2.0% 2.1% $200 $200 1.7% $136 $136 1.0% 1.3% 1.0% 1.3% 1.2% 1.1% 1.1% $100 $100 0.6% 0.6% 0.0% $0 0.
Slide 17: Investment Activity from January 1, 2024 through February 1, 2024
Investment Activity from January 1, 2024 through February 1, 2024 Ares Capital made approximately $705 million of new investment commitments • 89% were in first lien senior secured loans, 3% were in second lien senior secured loans, 2% were in Ares Capital's subordinated loan investment in IHAM, 1%
Slide 18: Backlog and Pipeline
Backlog and Pipeline • As of February 1, 2024, Ares Capital had a backlog and pipeline of approximately $770 million and $340 million, respectively(25) • The following is a breakdown of the backlog and pipeline by asset class and by industry Asset Class Industry 8% 2% 3% 7% 5% 31% 5% 7% 8% 12% 10% 9
Slide 19: Debt Summary
Debt Summary As of 9/30/23 As of 12/31/23 Aggregate Aggregate Weighted Principal Carrying Principal Carrying Average Amount Principal Value of Amount Principal Value of Stated Committed/ Amount Outstanding Committed/ Amount Outstanding Interest (dollar amounts in millions) Outstanding(27) Outstandin
Slide 20: Debt Summary: Debt Maturities
Debt Summary Debt Maturities* ($ in millions) $5,000 $4,000 $3,000 $1,301 (30) $63 $1,733 (30) $2,000 (30) (30) $155 $1,000 $2,150 ** $900 $1,850 $1,400 $1,250 $700 $403 $0 — 2024 $— 2025 $— 2026 $— 2027 2028 $— Thereafter As of December 31, 2023 Convertible Unsecured Notes Other Unsecured Notes Sec
Slide 21: Quarterly Dividends
Quarterly Dividends $0.60 $0.50 $0.03 $0.48 $0.48 $0.48 $0.48 $0.48 $0.48 $0.03 $0.03 $0.03 $0.43 $0.40 $0.42 $0.42 $0.41 $0.41 $0.40 $0.40 $0.40 $0.40 $0.40 $0.40 $0.30 $0.20 $0.10 $0.00 (31) Q1-20 Q2-20 Q3-20 Q4-20 Q1-21 Q2-21 Q3-21 Q4-21 Q1-22 Q2-22 Q3-22 Q4-22 Q1-23 Q2-23 Q3-23 Q4-23 Q1-24 Regul
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 GAAP Net Income Per Share to Core EPS
Reconciliations of GAAP Net Income Per Share to Core EPS The following are reconciliations of net income per share computed in accordance with GAAP to core earnings per share: For the Three Months Ended 12/31/23 9/30/23 6/30/23 3/31/23 12/31/22 (1)(2) GAAP net income per share $ 0.72 $ 0.89 $ 0.61 $
Slide 24: Endnotes
Endnotes 1) Per share amounts and weighted average shares outstanding are basic. The basic weighted average shares outstanding for the three months ended December 31, 2023, September 30, 2023, June 30, 2023, March 31, 2023 and December 31, 2022 were approximately 572 million, 562 million, 547 millio
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. Fixed charges include interest and credit facility fees expense and amortization of debt issuance costs. 12
Slide 26: Endnotes (cont'd)
Endnotes (cont'd) 22) The interest coverage ratio represents portfolio companies' LTM EBITDA as a multiple of implied annualized cash interest expense based on the borrowing levels and market rates at quarter end. The portfolio weighted average interest coverage ratio is weighted based on the fair v
Slide 27: Endnotes (cont'd)
Endnotes (cont'd) 30) See Note 5 to Ares Capital's consolidated financial statements included in the annual report on Form 10-K for the year ended December 31, 2023 for more information regarding each of Ares Capital's secured revolving facilities. See Note 15 to Ares Capital's consolidated financia
Slide 28: Ares Capital Corporation
OD ARES ARES CAPITAL CORPORATION