Ares Capital Corporation · NASDAQ:ARCC
Ares Capital — Q4 2022 Earnings Presentation
28 slides from Ares Capital's earnings presentation, February 2023
Slide 1: Fourth Quarter 2022 Earnings Presentation
Fourth 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. 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 Q4-22 Q3-22 Q4-21 FY-22 FY-21 (1) Core EPS* $ 0.63 $ 0.50 $ 0.58 $ 2.02 $ 2.02 Net Investment Income Per Share(2) $ 0.68 $ 0.57 $ 0.52 $ 2.19 $ 1.66 (2) Net Realized Gains Per Share $ 0.05 $ — $ 0.04 $ 0.07 $ 0.54 Net Unrealized 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) 12/31/22 9/30/22 6/30/22 3/31/22 12/31/21 Core EPS*(1) $ 0.63 $ 0.50 $ 0.46 $ 0.42 $ 0.58 Net Investment Income Per Share(2) $ 0.68 $ 0.57 $ 0.52 $ 0.41
Slide 5: Selected Historical Financial Information (cont'd)
Selected Historical Financial Information (cont’d) As of (dollar amounts in millions) 12/31/22 9/30/22 6/30/22 3/31/22 12/31/21 Investments at Fair Value $ 21,780 $ 21,339 $ 21,170 $ 19,486 $ 20,009 Number of Portfolio Companies(12) 466 458 452 395 387 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) 12/31/22 9/30/22 6/30/22 3/31/22 12/31/21 Commitments: Gross Commitments(4) $ 2,519 $ 2,242 $ 3,109 $ 2,001 $ 5,866 Exits of Commitments(5) (2,333) (1,984) (1,085) (2,551) (3,869) Net Commitmen
Slide 7: Quarterly Operating Results
Quarterly Operating Results For the Three Months Ended (amounts in millions, except per share data) 12/31/22 9/30/22 6/30/22 3/31/22 12/31/21 Investment income $ 640 $ 537 $ 479 $ 440 $ 529 Expenses 273 235 212 229 279 Net investment income before income taxes 367 302 267 211 250 Income tax expense,
Slide 8: Quarterly Operating Results Detail
Quarterly Operating Results Detail For the Three Months Ended (amounts in millions) 12/31/22 9/30/22 6/30/22 3/31/22 12/31/21 Net Investment Income Before Income Taxes: Investment Income: Interest income from investments $ 456 $ 385 $ 319 $ 310 $ 336 Capital structuring service fees 59 32 32 30 116
Slide 9: Quarterly Gain/Loss Detail
Quarterly Gain/Loss Detail For the Three Months Ended (amounts in millions) 12/31/22 9/30/22 6/30/22 3/31/22 12/31/21 Net Realized and Unrealized Gains (Losses): Realized gains (losses) on investments: Gains $ 83 $ 71 $ 2 $ 81 $ 49 Losses (82) (93) (26) (12) (49) Net realized gains (losses) on inves
Slide 10: Quarterly Balance Sheets
Quarterly Balance Sheets As of (amounts in millions, except per share data) 12/31/22 9/30/22 6/30/22 3/31/22 12/31/21 ASSETS Investments at fair value $ 21,780 $ 21,339 $ 21,170 $ 19,486 $ 20,009 Cash and cash equivalents 303 257 204 695 372 Restricted cash 34 105 57 19 114 Interest receivable 176 1
Slide 11: Investment Portfolio by Issuer as of December 31, 2022
Investment Portfolio by Issuer as of December 31, 2022* Top 15 Investments 30.0% Ivy Hill Asset Management, L.P. 10.1% (14) Senior Direct Lending Program, LLC Neptune Bidco US Inc. 5.7% TibCo Software Inc. 2.0% Cornerstone OnDemand, Inc. 1.4% Ardonagh Midco 2 plc and Ardonagh Midco 3 plc 1.2% 1.1% A
Slide 12: Investment Portfolio as of December 31, 2022
Investment Portfolio as of December 31, 2022* Asset Class Industry 9% 7% 2% 2% 2% 22% 10% 3% 3% 43% 4% 9% 4% 11% 4% 5% 5% 6% 10% 5% 6% 10% 18% First Lien Senior Secured Loans(13) Software & Services Consumer Durables & Apparel Second Lien Senior Secured Loans Health Care Services Capital Goods Senio
Slide 13: Portfolio Activity
Portfolio Activity Gross Commitments by Asset Class Exits of Commitments by Asset Class 100% 3% 3% 3% 100% 1% 3% 1% 3% 6% 5% 4% 1% 4% 1% 3% 9% 2% 5% 2% 1% 4% 11% 3% 4% 18% 18% 15% 3% 8% 2% 2% 14% 17% 8% 2% 3% 80% 80% 3% 6% 17% 3% 1% 9% 17% 11% 1% 4% 14% 5% 1% 5% 60% % 60% 40% 40% 82% 83% 79% 77% 71%
Slide 14: Portfolio Company EBITDA and Credit Statistics
Portfolio Company EBITDA and Credit Statistics 12.0x $275.4 $280.0 $240.0 10.0x $213.3 $200.0 8.0x $179.7 $173.4 $162.0 ($ Millions) $138.5 $160.0 $146.6 6.2x 6.1x 6.3x 6.3x 6.2x 6.0x $127.4 $129.0 $131.3 $120.0 4.0x $80.0 3.0x 2.9x 2.4x 2.0x 2.0x 1.8x $40.0 0.0x $0.0 Q4-21 Q1-22 Q2-22 Q3-22 Q4-22 P
Slide 15: Portfolio By Grade
Portfolio By Grade(24) % by Fair Value % by Number of Companies 100% 100% 13% 14% 13% 15% 17% 19% 17% 90% 20% 20% 23% 90% 80% 80% 70% 70% 60% 60% 50% 50% 76% 75% 78% 75% 70% 78% 75% 75% 75% 70% 40% 40% 30% 30% 20% 20% 10% 10% 6% 6% 4% 6% 9% 4% 5% 1% 4% 6% 1% 1% 5% 1% 5% 5% 5% 4% 4% 0% 0% Q4-21 Q1-22
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) $372 $400 $400 $328 $338 $300 $300 2.0% 2.0% $229 $241 $194 1.7% $200 $180 $200 $157 1.6% 1.6% 1.0% 1.0% $121 1.2% $92 1.1% $100 0.9% $100 0.8% 0.9% 0.5% 0.6% 0
Slide 17: Investment Activity from January 1, 2023 through February 1, 2023
Investment Activity from January 1, 2023 through February 1, 2023 Ares Capital made approximately $226 million of new investment commitments • 90% were in first lien senior secured loans, 6% were in preferred equity and 4% were in other equity • 90% were floating rate, 4% were fixed rate, 4% were no
Slide 18: Backlog and Pipeline
Backlog and Pipeline • As of February 1, 2023, Ares Capital had a backlog and pipeline of approximately $210 million and $55 million, respectively(25) • The following is a breakdown of the backlog and pipeline by asset class and by industry Asset Class Industry 5% 18% 5% 18% 6% 1% 7% 18% 10% 81% 14%
Slide 19: Debt Summary
Debt Summary As of 9/30/22 As of 12/31/22 Aggregate Aggregate Weighted Principal Carrying Principal Carrying Average Amount Principal Value of Amount Principal Value of Stated Committed/ Amount Outstanding Committed/ Amount Outstanding Interest (dollar amounts in millions) Outstanding(27) Outstandin
Slide 20: Debt Summary: Debt Maturities
Debt Summary Debt Maturities* ($ in millions) $5,000 $4,000 $3,000 (30) $1,313 (30) $2,000 $338 (30) $2,091 $1,000 $2,150 $1,850 $1,950 ** $900 $750 $403 $500 $0 $— — 2023 2024 $— 2025 $— 2026 2027 $— Thereafter As of December 31, 2022 Convertible Unsecured Notes Other Unsecured Notes Secured Revolv
Slide 21: Quarterly Dividends
Quarterly Dividends $0.60 $0.50 $0.03 $0.48 $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 $0.30 $0.20 $0.10 $0.00 (31) 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 Q2-22
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 12/31/22 9/30/22 6/30/22 3/31/22 12/31/21 (1) Core EPS $ 0.63 $ 0.50 $ 0.46 $ 0.42 $ 0.58 Net realized and unrealized ga
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. 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) Portfolio weighted average interest coverage ratio represents the portfolio company’s EBITDA as a multiple of cash interest expense for the most recently completed period of four consecutive fiscal quarters. The weighted average interest coverage ratio for the underlying borrow
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, 2022 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