Apollo Investment Corporation First Quarter 2016 Earnings Three Months Ended June 30, August 6, 2015

Transcription

1 Apollo Investment Corporation First Quarter 2016 Earnings Three Months Ended June 30, 2015 August 6, 2015

2 Disclaimers, Definitions, and Important Notes Forward-Looking Statements We make forward-looking statements in this presentation and other filings we make with the Securities and Exchange Commission ( SEC ) within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forwardlooking statements are subject to substantial risks and uncertainties, many of which are difficult to predict and are generally beyond our control. These forward-looking statements include information about possible or assumed future results of our business, financial condition, liquidity, results of operations, plans and objectives, including information about our ability to generate attractive returns while attempting to mitigate risk. When used in this release, the words "believe," "expect, "anticipate," "estimate," "plan," "continue," "intend," "should," "may" or similar expressions, are intended to identify forward-looking statements. Statements regarding the following subjects, among others, may be forward-looking: the return on equity; the yield on investments; the ability to borrow to finance assets; and risks associated with investing in real estate assets, including changes in business conditions and the general economy. The forward-looking statements are based on our beliefs, assumptions and expectations of our future performance, taking into account all information currently available to us. Forward-looking statements are not predictions of future events. These beliefs, assumptions and expectations can change as a result of many possible events or factors, not all of which are known to us. Some of these factors are described in the company's filings with the SEC. If a change occurs, our business, financial condition, liquidity and results of operations may vary materially from those expressed in our forward-looking statements. Any forward-looking statement speaks only as of the date on which it is made. New risks and uncertainties arise over time, and it is not possible for us to predict those events or how they may affect us. Except as required by law, we are not obligated to, and do not intend to, update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. This presentation may contain statistics and other data that in some cases has been obtained from or compiled from information made available by third-party service providers. Past Performance Past performance is not indicative nor a guarantee of future returns, the realization of which is dependent on many factors, many of which are beyond the control of Apollo Global Management, LLC; Apollo Investment Management, L.P.; and Apollo Investment Corporation (collectively Apollo ). There can be no assurances that future dividends will match or exceed historic ones, or that they will be made at all. Net returns give effect to all fees and expenses. Unless otherwise noted, information included herein is presented as of the date indicated on the cover page and may change at any time without notice. Apollo Investment Corporation (the Corporation ) is subject to certain significant risks relating to our business and investment objective. For more detailed information on risks relating to the Corporation, see the latest form 10-K and subsequent quarterly reports filed on Form 10-Q. Financial Data Financial data used in this presentation for the periods shown is from the Corporation s Form 10-K and Form 10-Q filings with the SEC during such periods. Unless otherwise indicated, the numbers shown herein are rounded and unaudited. 1

3 Summary of Quarterly Results First Fiscal Quarter 2016 (Three Months Ended June 30, 2015) and Other Recent Highlights Net investment income for the quarter ended June 30, 2015 was $51.0 million, or $0.22 per share, compared to $52.1 million or $0.22 per share for the quarter ended March 31, 2015 Net realized and unrealized losses for the quarter ended June 30, 2015 were $44.6 million, or $0.19 per share, compared to net realized and unrealized losses of $63.8 million or $0.27 per share for the quarter ended March 31, 2015 Net asset value per share as of June 30, 2015 was $8.01, compared to $8.18 as of March 31, 2015, a 2.1% decline Invested $509 million across 10 new and 20 existing portfolio companies Investments sold totaled $334 million and investments repaid totaled $198 million Net investment activity after sales and repayments was negative $23 million Board of Directors has declared a dividend of $0.20 per share for the first fiscal quarter of 2016, payable on October 6, 2015 to stockholders of record as of September 21, 2015 Adopted a plan for the purpose of repurchasing up to $50 million of common stock Held 2015 Annual Meeting of Stockholders and Special Meeting of Stockholders on August 5, At these meetings, stockholders approved the following proposals: Proposal 1a: Election of two Class II Directors Proposal 1b: Election of one Class III Director Proposal 2: Ratification of the selection of PricewaterhouseCoopers LLP as accounting firm Proposal 3: Authorization of flexibility to sell common shares below net asset value 2

4 Financial Highlights ($ in thousands, except per share data) 1Q'16 4Q'15 3Q'15 2Q'15 1Q'15 Operating Results (1) Net investment income $ 50,986 $ 52,071 $ 56,662 $ 65,688 $ 53,551 Net realized and unrealized gain (loss) on assets (44,596) (63,800) (76,114) (23,721) 11,085 Net increase (decrease) in net assets from operations $ 6,390 $ (11,729) $ (19,452) $ 41,967 $ 64,636 Net investment income per share $ 0.22 $ 0.22 $ 0.24 $ 0.28 $ 0.23 Net realized and unrealized gain (loss) per share (0.19) (0.27) (0.33) (0.10) 0.04 Earnings (Loss) per share - basic $ 0.03 $ (0.05) $ (0.09) $ 0.18 $ 0.27 Earnings (Loss) per share - diluted (2) $ 0.03 $ (0.05) $ (0.09) $ 0.18 $ 0.27 Dividend declared per common share $ 0.20 $ 0.20 $ 0.20 $ 0.20 $ 0.20 Select Balance Sheet and Other Data Investment portfolio (at fair value) $ 3,313,914 $ 3,349,827 $ 3,514,015 $ 3,665,226 $ 3,644,708 Debt outstanding $ 1,390,890 $ 1,498,759 $ 1,588,653 $ 1,577,472 $ 1,571,018 Total net assets $ 1,896,650 $ 1,937,608 $ 1,996,691 $ 2,063,491 $ 2,068,873 Net asset value per share $ 8.01 $ 8.18 $ 8.43 $ 8.72 $ 8.74 Debt-to-equity ratio 0.73 x 0.77 x 0.80 x 0.76 x 0.76 x Net leverage ratio (3) 0.72 x 0.72 x 0.74 x 0.76 x 0.75 x Number of portfolio companies, at period end Weighted Average Yields, at period end (4) Secured debt 11.5% 11.2% 11.0% 10.9% 10.9% Unsecured debt 11.3% 10.9% 11.1% 11.1% 11.5% Total debt portfolio 11.5% 11.2% 11.1% 11.0% 11.1% (1) Numbers may not sum due to rounding. (2) In applying the if-converted method, conversion shall not be assumed for purposes of computing diluted EPS if the effect would be anti-dilutive. (3) The Company s net leverage ratio is defined as debt outstanding plus payable for investments purchased, less receivable for investments sold, less cash, less foreign currency, divided by total net assets. (4) On a cost basis. Exclusive of securities on nonaccrual status 3

5 Summary Investment Activity ($ in thousands) 1Q'16 4Q'15 3Q'15 2Q'15 1Q'15 Portfolio Acitivty (1) Investments made $ 509,348 $ 371,701 $ 608,775 $ 581,092 $ 649,512 Investments sold (334,695) (336,316) (444,343) (229,050) (397,230) Net investment activity before repayments $ 174,653 $ 35,385 $ 164,431 $ 352,042 $ 252,282 Investments repaid (198,091) (139,316) (254,860) (330,071) (119,596) Net investment activity $ (23,437) $ (103,931) $ (90,428) $ 21,971 $ 132,686 Number of portfolio companies, at beginning of period Number of new portfolio companies Number of exited portfolio companies (13) (12) (17) (19) (19) Number of portfolio companies, at period end Number of investments in existing portfolio companies (2) (3) Yield on Acitivty Yield on investments made 10.5% 10.5% 10.4% 10.2% 10.1% Yield on sales and repayments 11.3% 10.7% 10.0% 11.6% 10.1% (1) Numbers may not sum due to rounding. (2) On a cost basis. (3) Restructured investments may impact the weighted average yield of the total debt portfolio but are not reflected in new, sold, or repaid investments. Yield on activity exclude select short-term trades. 4

6 Quarterly Investment Activity Investment Activity ($ in millions) Portfolio Yield (1) $650 $581 $609 $372 $ % 11.0% 11.1% 11.2% 11.5% ($397) ($120) ($229) ($330) ($444) ($255) ($336) ($334) ($139) ($198) Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 New Investments Sales Repayments Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Net Investment Activity ($ in millions) Yield on Investment Activity (2) $ % 11.9% 11.7% 11.2% $22 ($23) ($90) ($104) Jun-14 Sep-14 Dec-14 Mar-15 Jun % 10.4% 10.4% 10.5% 10.5% 10.1% 10.0% 10.1% 9.9% 10.0% 9.5% Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 New Investments Sales Repayments (1) Weighted average yield on total debt portfolio at period end, exclusive of investments on non-accrual status. (2) Restructured investments may impact the weighted average yield of the total debt portfolio but are not reflected in new, sold, or repaid investments. Yield on activity exclude select short-term trades. 5

7 Detailed Quarterly Investment Activity ($ in thousands) 1Q'16 4Q'15 3Q'15 2Q'15 1Q'15 Purchases ($) 1st lien (1) $ 190,287 $ 164,345 $ 214,976 $ 272,055 $ 221,654 2nd lien 119,456 27, , , ,497 Total secured debt 309, , , , ,151 Unsecured debt 91, ,334 98, , ,807 Structured products and other 45,541 12,668 41,572 47,969 78,724 Preferred equity 20,812 35,722 30,632-8,750 Common equity / Interests and warrants 41, , ,081 Total Purchases $ 509,348 $ 371,701 $ 608,775 $ 581,092 $ 649,513 Yield at Cost on Purchases (2) 1st lien 10.9% 10.7% 10.2% 11.2% 11.0% 2nd lien 9.8% 9.1% 10.0% 9.2% 10.1% Total secured debt 10.4% 10.5% 10.1% 10.5% 10.6% Unsecured debt 10.2% 10.2% 11.2% 8.4% 8.5% Preferred equity 11.0% 11.1% 11.1% n/a n/a Yield at Cost on Debt Investments 10.5% 10.5% 10.4% 10.0% 10.1% Sales/ Repayments ($) 1st lien (1) $ 159,234 $ 87,906 $ 221,910 $ 123,079 $ 101,964 2nd lien 53, , , , ,174 Total secured debt 212, , , , ,138 Unsecured debt 215, , , , ,419 Structured products and other 4,460 2,002 8,208 11,607 14,232 Preferred equity 62, Common equity / Interests and warrants 38,403 4,734 11,790 16,333 1,037 Total Sales / Repayments $ 532,785 $ 475,631 $ 699,203 $ 559,121 $ 516,826 Yield at Cost on Sales / Repayments (2) 1st lien 11.0% 10.5% 9.8% 11.2% 10.4% 2nd lien 9.6% 9.6% 9.7% 9.6% 9.2% Total secured debt 10.6% 9.9% 9.7% 10.3% 9.7% Unsecured debt 10.9% 11.4% 11.1% 12.4% 10.3% Preferred equity 13.9% n/a n/a n/a n/a Sales and Repayments 11.3% 10.6% 10.0% 11.3% 10.0% Yeld at Cost on Sales 11.3% 10.0% 9.9% 10.1% 9.5% Yiled at Cost on Repayments 11.2% 11.7% 10.4% 11.9% 11.3% (1) 1 st lien purchases include revolver drawdowns and 1 st lien sales / repayments includes revolver repayments. (2) Restructured investments may impact the weighted average yield of the total debt portfolio but are not reflected in new, sold, or repaid investments. Yield on activity exclude select short-term trades. 6

8 Net Asset Value For the quarter ended ($ in thousands, except per share data) 1Q'16 4Q'15 3Q'15 2Q'15 1Q'15 Per Share NAV, beginning of period $ 8.18 $ 8.43 $ 8.72 $ 8.74 $ 8.67 Net investment income Net realized and unrealized gain (loss) on assets (0.19) (0.27) (0.33) (0.10) 0.04 Net increase (decrease) in net assets resulting from operations 0.03 (0.05) (0.09) Net proceeds from shares sold, less offering costs Dividends to stockholders (1) (0.20) (0.20) (0.20) (0.20) (0.20) NAV, end of period $ 8.01 $ 8.18 $ 8.43 $ 8.72 $ 8.74 Total NAV, beginning of period $ 1,937,608 $ 1,996,691 $ 2,063,491 $ 2,068,873 $ 2,051,611 Net investment income 50,986 52,071 56,662 65,688 53,551 Net realized and unrealized gain (loss) on assets (44,596) (63,800) (76,114) (23,721) 11,085 Net increase (decrease) in net assets resulting from operations 6,390 (11,729) (19,452) 41,967 64,636 Net proceeds from shares sold, less offering costs - (6) - - (26) Dividends to stockholders (1) (47,348) (47,348) (47,348) (47,348) (47,348) NAV, end of period $ 1,896,650 $ 1,937,608 $ 1,996,691 $ 2,063,491 $ 2,068,873 Quarterly Net Asset Value Per Share $8.74 $8.72 $8.43 $8.18 $8.01 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Numbers may not sum due to rounding. (1) Dividends to stockholders represent dividends declared during the period. 7

9 Portfolio as of June 30, 2015 By Asset Class (1) Fixed vs. Floating (1) (2) Common Equity, Preferred Equity, and Warrants 14% Unsecured Debt 10% Structured Products 12% Secured Debt 64% Floating 59% Fixed 41% By Industry (1) (3) Sponsored vs. Non-sponsored (1) Hotel, Insurance Gaming, 2.4% Leisure, Restaurants 2.5% Energy Electricity 2.9% Chemicals, Plastics & Rubber 3.8% High Tech Industries 3.5% Transportation Cargo, Distribution 6.8% Other 15.8% Business Services 16.3% Energy Oil & Gas 16.0% Aviation and Consumer Transport 15.8% Diversified Investment Vehicles, Banking, Finance, Real Estate 14.2% Nonsponsored 56% Sponsored 44% (1) On a fair value basis. (2) Based on income-bearing portfolio. (3) Other consists of: Consumer Goods Durable; Aerospace & Defense; Telecommunications; Containers, Packaging & Glass ; Healthcare & Pharmaceuticals; Education; Utilities Electric; Utilities - Oil and Gas; Food & Grocery; Metals & Mining; Broadcasting & Subscription; Manufacturing, Capital Equipment; Environmental Industries; Wholesale; and Media Diversified & Production. 8

10 Portfolio Composition ($ in thousands) 1Q'16 4Q'15 3Q'15 2Q'15 1Q'15 Portfolio Composition, measured at fair value ($) 1st lien $ 1,201,144 $ 1,193,847 $ 1,219,842 $ 1,256,679 $ 1,116,300 2nd lien 912, , ,324 1,042,817 1,043,052 Total secured debt $ 2,113,963 $ 1,999,472 $ 2,131,166 $ 2,299,496 $ 2,159,352 Unsecured debt 323, , , , ,392 Structured products and other 412, , , , ,604 Preferred equity 128, , , , ,624 Common equity / Interests and warrants 336, , , , ,736 Total investment portfolio $ 3,313,914 $ 3,349,827 $ 3,514,015 $ 3,665,226 $ 3,644,708 Portfolio Composition, measured at fair value (%) 1st lien 36% 36% 35% 34% 30% 2nd lien 28% 24% 26% 29% 29% Total secured debt 64% 60% 61% 63% 59% Unsecured debt 10% 14% 15% 17% 22% Structured products and other 12% 11% 10% 9% 8% Preferred equity 4% 5% 4% 3% 3% Common equity and warrants 10% 10% 10% 8% 8% Income-bearing investment portfolio compositon, measured at fair value Fixed rate % 41% 48% 48% 51% 53% Floating rate % 59% 52% 52% 49% 47% Sponsored vs. Non-sponsored, measured at fair value Sponsored 44% 43% 46% 49% 51% Non-sponsosred 56% 57% 54% 51% 49% 9

11 Credit Quality During the quarter ended June 30, 2015, one investment was placed on non-accrual status. As of June 30, 2015, 2.5% of total investments at amortized cost, or 0.4% at fair value, were on non-accrual status. ($ in thousands) 1Q'16 4Q'15 3Q'15 2Q'15 1Q'15 Investments on Non-Accrual Status Non-accrual investments at amortized cost 83,736 $ 43,959 $ 34,549 $ 34,549 $ 34,549 Non-accrual investments / total portfolio. at amortized cost 2.5% 1.3% 1.0% 0.9% 1.0% Non-accrual investments at fair value 14,572 $ 3,073 $ 9,954 $ 15,744 $ 13,322 Non-accrual investments / total portfolio, at fair value 0.4% 0.1% 0.3% 0.4% 0.4% Portfolio Company Credit Metrics (1) Net Leverage 5.5 x 5.5 x 5.4 x 5.4 x 5.4 x Interest Coverage 2.5 x 2.6 x 2.5 x 2.5 x 2.3 x Investments on Non-Accrual Status as of June 30, 2015 Gryphon Colleges Corp. (Delta Educational Systems, Inc.), Preferred Stock, % PIK, 5/12/18 Indusry Par Amount / Shares Cost Fair Value Education 12,360 $ 27,685 $ 163 Gryphon Colleges Corp. (Delta Educational Systems, Inc.), Preferred Stock, % PIK Education 332,500 6,863 - Denver Parent Corp. (Venoco), 12.25% (13.00% PIK Toggle), 8/15/18 Energy - Oil & Gas 9,572 9, Magnetation, LLC, %, 5/15/18 Metals & Mining 38,454 39,777 13,475 Total $ 83,736 $ 14,572 (1) Source: Company data. Includes all portfolio company investments except structured products, common equities and warrants. Also excludes select investments where debt-to-ebitda is not a relevant metric or data is not available. Metrics at close and weighted average by cost. 10

12 Diversified Funding Sources as of June 30, 2015 Debt Facilities Debt Issued / Amended Final Maturity Date Interest Rate Amount Outstanding Senior Secured Facility ($1.31 billion) /24/2020 L bps $ 277 Senor Secured Notes /4/ % 225 Senor Secured Notes (Series A) /29/ % 29 Senor Secured Notes (Series B) /29/ % Unsecured Notes /15/ % Unsecured Notes /15/ % Unsecured Notes /3/ % 344 Convertible Notes /15/ % 200 Total Debt Outstanidng % (1) $ 1,391 Debt Outstanding ($ in millions) 11

13 Interest Rate Exposure as of June 30, 2015 Apollo Investment Corporation has taken several steps to prepare for higher interest rates including: (1) increasing the floating rate portion of the portfolio, and (2) issuing fixed rate debt. Investment Portfolio (1) (2) Funding Sources Floating 59% Fixed 41% Common Equity 58% Floating Rate Credit Facility 8% Fixed Rate Debt 34% Floating Rate Debt Floor (1) Net Investment Income Interest Rate Sensitivity (3) ($ in millions) Fair Value % of Floating Rate Portfolio Interest Rate Floors No Floor $ % < 1.25% $ % > 1,25% to < 1.75% $ % > 1.75% $ 144 9% Total $ 1, % ($ in thousands, except per share data) Annual Net Investment Income Annual Net Investment Income Per Share Basis Points Change Up 400 basis points $ 30,605 $ Up 300 basis points $ 20,121 $ Up 200 basis points $ 9,807 $ Up 100 basis points $ 708 $ (1) On a fair value basis. (2) Income-bearing investment portfolio. (3) The table shows the approximate annual impact on net investment income of base rate changes in interest rates (considering interest rate floors for variable rate instruments) to our loan portfolio and outstanding debt as of June 30, 2015, assuming no changes in our investment and borrowing structure. 12

14 Contact Information For more information, please contact: Elizabeth Besen Investor Relations Manager Phone: (212) Gregory W. Hunt Chief Financial Officer and Treasurer Phone: (212)

15 14