Ares Capital Corporation · NASDAQ:ARCC
Ares Capital — Q1 2019 Earnings Presentation
28 slides from Ares Capital's earnings presentation, Apr 30, 2019
Slide 1: First Quarter 2019 Earnings Presentation
First Quarter 2019 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. 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 Q1-19 Q4-18 Q1-18 (all per share amounts, excluding net asset value per share, are basic and diluted) Core EPS*(1) $ 0.48 $ 0.45 $ 0.38 Net Investment Income Per Share $ 0.47 $ 0.48 $ 0.34 Net Realized Gains (Losses) Per Share $ 0.13 $ 0.07 $ (
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 3/31/19 12/31/18 9/30/18 6/30/18 3/31/18 Core EPS – Basic and Diluted*(1) $ 0.48 $ 0.45 $ 0.45 $ 0.39 $ 0.38 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 3/31/19 12/31/18 9/30/18 6/30/18 3/31/18 Investments at Fair Value $ 13,064 $ 12,417 $ 11,220 $ 11,527 $ 12,199 Number of Portfolio Companies(9) 345 344 342 346 360 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 3/31/19 12/31/18 9/30/18 6/30/18 3/31/18 Commitments: Gross Commitments $ 1,953 $ 2,709 $ 1,924 $ 1,620 $ 1,792 (2) Exits of Commitments (1,353) (1,021) (1,914) (2,200) (1,342) Net Commitments(
Slide 7: Quarterly Operating Results
Quarterly Operating Results (amounts in millions, except per share data) For the Three Months Ended 3/31/19 12/31/18 9/30/18 6/30/18 3/31/18 Investment income $ 373 $ 345 $ 342 $ 333 $ 317 Expenses, net of waiver of income based fees (13) 168 140 151 165 168 Net investment income before income taxes
Slide 8: Quarterly Operating Results Detail
Quarterly Operating Results Detail (amounts in millions) For the Three Months Ended 3/31/19 12/31/18 9/30/18 6/30/18 3/31/18 Net Investment Income Before Income Taxes: Investment Income: Interest income from investments $ 289 $ 263 $ 262 $ 262 $ 254 Capital structuring service fees 45 47 42 25 29 Di
Slide 9: Quarterly Gain/Loss Detail
Quarterly Gain/Loss Detail (amounts in millions) For the Three Months Ended 3/31/19 12/31/18 9/30/18 6/30/18 3/31/18 Net Realized and Unrealized Gains (Losses): Realized gains (losses) on investments: Gains $ 10 $ 37 $ 387 $ 31 $ 11 Losses (3) (16) (24) (9) (11) Net realized gains (losses) on invest
Slide 10: Quarterly Balance Sheets
Quarterly Balance Sheets (amounts in millions, except per share data) As of 3/31/19 12/31/18 9/30/18 6/30/18 3/31/18 ASSETS Investments at fair value $ 13,064 $ 12,417 $ 11,220 $ 11,527 $ 12,199 Cash and cash equivalents 572 296 799 509 302 Interest receivable 114 91 93 89 89 Receivable for open tra
Slide 11: Investment Portfolio by Issuer Concentration as of March 31, 2019
Investment Portfolio by Issuer Concentration as of March 31, 2019* 6.1% (10) 4.1% Senior Direct Lending Program, LLC Top 15 2.8% Investments Ivy Hill Asset Management, L.P. 32.8% 2.1% Athenahealth, Inc. 2.0% Mac Lean-Fogg Company 1.8% American Academy Holdings, LLC 1.8% Pathway Vet Alliance LLC 1.8%
Slide 12: Investment Portfolio as of March 31, 2019
Investment Portfolio as of March 31, 2019* Asset Class Industry 9% 5% 2% 2% 5% 2% 22% 3% 6% 4% 4% 44% 6% 4% 5% 17% 5% 5% 30% 6% 8% 6% First Lien Senior Secured Loans Healthcare Services Automotive Services Second Lien Senior Secured Loans Business Services Restaurants and Food Services Senior Direct
Slide 13: Debt Summary
Debt Summary As of 12/31/18 As of 3/31/19 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 Maturities
Debt Summary (Amounts in 000s) Debt Maturities* $2,633 ($ in millions) ($ in millions) $3,000 $3,000 (20)(21)(22) (20)(21)(22) $2,500 $2,633 $2,500 $1,792 $2,000 $2,000 $1,500 $1,500 $1,580 $19(20) $47(20) $1,000 $1,000 $1,580 $17(20) $600 $42(20) $600 $500 $500 $600 $600 $388 $388 $403 $300 $0 $0 2
Slide 15: Quarterly Dividends
Quarterly Dividends $0.50 $0.05 $0.02 $0.02 $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 $0.38 $0.38 $0.38 $0.38 $0.38 $0.38 $0.38 $0.30 $0.20 $0.10 $0.00 Q3-14 Q4-14 Q1-15 Q2-15 Q3-15 Q4-15 Q1-16 Q2-16 Q3-16 Q4-16 Q1-17 Q2-17 Q3-17 Q4-17 Q1-18 Q2-18 Q3-18 Q4-1
Slide 16: Portfolio Activity
Portfolio Activity Gross Commitments by Asset Class Exits of Commitments by Asset Class 12% 1% 3% 2% 4% 1% 1% 2% 1% 1% 100% 1% 100% 1% 3% 3% 1% 2% 3% 6% 1% 7% 12% 7% 2% 3% 12% 8% 4% 14% 22% 1% 29% 80% 20% 25% 23% 80% 24% 2% 20% 3% 30% 28% 60% 39% 60% 18% 40% 40% 68% 72% 70% 67% 66% 63% 53% 50% 47% 2
Slide 17: Portfolio Company EBITDA and Credit Statistics
Portfolio Company EBITDA and Credit Statistics $130.0 $121.8 $120.0 8.0x $110.0 $99.0 $100.0 $92.9 $90.0 6.0x $82.4 PortfolioWeighted WeightedAverage EBITDA(25)(26)(27) AverageEBITDA(25)** $76.5 5.5x Portfolio 5.4x 5.4x 5.4x 5.4x $80.0 (25)(27) ($ Millions) PortfolioAverage Portfolio AverageEBITA EB
Slide 18: Investments on Non-Accrual Status
Investments 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% $500 $500 3.0% 3.0% ($ Millions) ($ Millions) 2.7% 2.7% 2.7% 2.5% 2.5% 2.3% $400 2.5% $400 2.0% 2.0% $332 $324 $300 $300 $304 $312 $314 1.5% 1.5% $200 1.0% $200 1.0% 1.0%
Slide 19: Portfolio By Grade
Portfolio By Grade(31) % By Fair Value % By Number of Companies 100% 100% 4% 4% 6% 4% 4% 11% 9% 11% 14% 16% 90% 90% 80% 80% 70% 70% 60% 60% 87% 87% 85% 87% 86% 50% 50% 84% 86% 84% 81% 79% 40% 40% 30% 30% 20% 20% 10% 10% 4% 3% 3% 4% 4% 4% 1% 4% 1% 4% 1% 4% 1% 4% 1% 5% 6% 6% 5% 6% 0% 0% Q1-18 Q2-18 Q3
Slide 20: Investment Activity Since Quarter End
Investment Activity Since Quarter End Ø From April 1, 2019 through April 24, 2019, Ares Capital made $183 million of new investment commitments • 51% were in first lien senior secured loans, 48% were in second lien senior secured loans and 1% were in the subordinated certificates of the SDLP • 100%
Slide 21: Backlog and Pipeline
Backlog and Pipeline Ø As of April 24, 2019, Ares Capital had a backlog and pipeline of approximately $1,055 million and $195 million, respectively(32) Ø The following is a breakdown of the backlog and pipeline by asset class and by industry Asset Class Industry 6% 10% 7% 5% 5% 7% 48% 30% 57% 9% 16%
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 Executive Vi
Slide 23: Reconciliations of Core EPS
Reconciliations of Core EPS The following are reconciliations of basic and diluted earnings per share computed in accordance with GAAP to basic and diluted core earnings per share: For the Three Months Ended 3/31/19 12/31/18 9/30/18 6/30/18 3/31/18 Basic and Diluted Core EPS(1) $ 0.48 $ 0.45 $ 0.45
Slide 24: Investments Acquired in the American Capital Acquisition
Investments Acquired in the American Capital Acquisition (Dollar amounts in millions) Net Investments at Fair Value as of Investments at Fair Value as of Change in January 3, 2017 March 31, 2019 Fair Value Yield at Yield at Fair Fair Value % of Total Fair Value Fair Value % of Total Value By Asset C
Slide 25: 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 expense reimbursement from Ares Capital Management LLC (the "Ares Reimbursement"), net realized and unrealized gains and lo
Slide 26: Endnotes (cont'd)
Endnotes (cont’d) 13) In connection with the acquisition of American Capital, Ltd. (the "American Capital Acquisition"), Ares Capital Management LLC agreed to waive, for each of the first ten calendar quarters beginning with the second quarter of 2017 and ending with the third quarter of 2019, the l
Slide 27: Endnotes (cont'd)
Endnotes (cont’d) 23) Declared. In addition to the second quarter 2019 regular dividend of $0.40 per share to be paid on June 28, 2019 to stockholders of record on June 14, 2019, the Company declared additional dividends totaling $0.08 per share for 2019, to be distributed in four consecutive quarte
Slide 28: Endnotes (cont'd)
Endnotes (cont’d) 31) Based on our investment adviser’s internal investment rating system scale from 1 to 4. Investments with a grade of 4 involve the least amount of risk to our initial cost basis and the trends and risk factors for these investments since origination or acquisition are generally f