Ares Management Corporation · NYSE:ARES
Ares Management — Q4 2017 Earnings Presentation
41 slides from Ares Management's earnings presentation, Feb 15, 2018
Slide 1: Fourth Quarter and Full Year 2017 Earnings Presentation
Fourth Quarter and Full Year 2017 Earnings Presentation Exhibit 99.2
Slide 2: Important Notice
2 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
Slide 3: Fourth Quarter and Year Ended 2017 Highlights
3 Fourth Quarter and Year Ended 2017 Highlights 1. Net inflows represents gross commitments less redemptions. 2. Includes ARCC Part I Fees of $29.0 million and $105.5 million for the three months and year ended December 31, 2017, respectively. Difference between GAAP and unconsolidated management fe
Slide 4: Recent Developments Since Year End
4 Recent Developments Since Year End Election Details • Public unitholders will receive a final Schedule K-1 for the period from January 1, 2018 through February 28, 2018 • For distributions made after March 1, 2018, investors will receive income reported on a Form 1099- DIV • Ares elected to change
Slide 5: Gross New Capital Commitments – Fourth Quarter and Full Year 2017
5 Gross New Capital Commitments – Fourth Quarter and Full Year 2017(1) 1. Represents gross new commitments during Q4-17 and full year 2017, including equity and debt commitments and gross inflows into our open-ended managed accounts and sub-advised accounts. $ in millions Q4 2017 FY 2017 Full Year C
Slide 6: Assets Under Management
6 Assets Under Management 1. For FY 2017, distributions totaled approximately $5.7 billion and redemptions totaled approximately $2.9 billion. AUM of $106.4 billion as of December 31, 2017 increased 11.8% year over year • $16.7 billion in gross new capital commitments for 2017, including $10.0 billi
Slide 7: AUM, FPAUM and Management Fees by Duration
7 AUM, FPAUM and Management Fees by Duration As of December 31, 2017, approximately 72% of AUM, 70% of FPAUM and 81% of management fees had a duration longer than 3 years ◦ At time of fund closing, approximately 82% of AUM and 79% of FPAUM had a duration longer than 3 years ◦ In addition, approximat
Slide 8: Available Capital and AUM Not Yet Earning Fees
8 Available Capital and AUM Not Yet Earning Fees Available Capital as of December 31, 2017 increased 8.2% year over year ◦ The increase was primarily driven by new and additional commitments to U.S. direct lending funds, which were partially offset by capital deployment in the Credit, Private Equity
Slide 9: Incentive Eligible AUM and Incentive Generating AUM
9 Incentive Eligible AUM and Incentive Generating AUM . 1. ARCC Part II Fees are paid when cumulative aggregate realized capital gains exceed cumulative aggregate realized capital losses and aggregate unrealized capital depreciation less any amounts paid in previous periods. As of December 31, 2017,
Slide 10: AUM Not Yet Earning Fees Available for Future Deployment
10 $9,208 $860 $696 AUM Not Yet Earning Fees Available for Future Deployment: $10.8 billion AUM Not Yet Earning Fees As of December 31, 2017, AUM Not Yet Earning Fees of $14.5 billion could generate approximately $158.2 million in potential incremental annual base management fees, of which $118 mill
Slide 11: Capital Deployment
11 $3,065 $718 $168 Q4-17 Capital Deployment Breakdown: $4.0 billion Capital Deployment(1) Total gross invested capital for the year ended December 31, 2017 of $16.4 billion compared to $10.2 billion for the year ended December 31, 2016 ◦ Of the total amount, $12.6 billion was related to deployment
Slide 12: Consolidated Statements of Operations
12 $ in thousands, except share data Three Months Ended December 31, Year Ended December 31, 2017 2016 2017 2016 Revenues Management fees (includes ARCC Part I Fees of $29,031, $105,467 and $30,297, $121,181 for the three and twelve months ended December 31, 2017 and 2016, respectively) $186,429 $16
Slide 13: RI, ENI and Other Measures Financial Summary
13 RI, ENI and Other Measures Financial Summary 1. Includes ARCC Part I Fees of $29.0 million and $30.3 million for the three months ended December 31, 2017 and 2016, respectively, and $105.5 million and $121.2 million for the year ended December 31, 2017 and 2016, respectively. 2. Includes compensa
Slide 14: GAAP to Non-GAAP Reconciliation – Unconsolidated Reporting Basis
14 GAAP to Non-GAAP Reconciliation – Unconsolidated Reporting Basis Note: This table is a reconciliation of income (loss) before provision for income taxes on a consolidated basis to RI, ENI, FRE, PRE and DE on unconsolidated basis, which shows the results of the reportable segments on a combined ba
Slide 15: GAAP to Non-GAAP Reconciliation – Unconsolidated Reporting Basis (cont.)
15 GAAP to Non-GAAP Reconciliation – Unconsolidated Reporting Basis (cont.) Note: These tables are a reconciliation of consolidated performance fee income, realized and unrealized performance fee income and net investment income to unconsolidated basis, which assist in the reconciliation of GAAP Net
Slide 16: Credit Group
16 Credit Group(1) Note: Past performance is not indicative of future results. The Credit Group had ~235 investment professionals, over 1,450 portfolio companies and 139 active funds as of December 31, 2017. 1. Segment results are shown before the unallocated support costs of the Operations Manageme
Slide 17: Private Equity Group
17 Private Equity Group(1) Note: Past performance is not indicative of future results. The Private Equity Group had ~95 investment professionals, 33 portfolio companies, 63 U.S. Power and Energy Assets and 21 active funds as of December 31, 2017. 1. Segment results are shown before the unallocated s
Slide 18: Real Estate Group
18 Real Estate Group(1) Note: Past performance is not indicative of future results. The Real Estate Group had ~70 investment professionals, over 170 properties and 42 active funds as of December 31, 2017. 1. Segment results are shown before the unallocated support costs of the Operations Management
Slide 19: Realized Income per Unit Data
19 Realized Income per Unit Data 1. Pro forma units of 216,682,844 includes the sum of common units, Ares Operating Group Units that are exchangeable for common units on a one-for-one basis and the dilutive effects of the Company’s equity-based awards. 2. The Company has 12,400,000 of 7% Series A Pr
Slide 20: Economic Net Income per Unit Data
20 Economic Net Income per Unit Data 1. Pro forma units of 216,682,844 includes the sum of common units, Ares Operating Group Units that are exchangeable for common units on a one-for-one basis and the dilutive effects of the Company’s equity-based awards. 2. The Company has 12,400,000 of 7% Series
Slide 21: Distributable Earnings per Unit Data
21 $ in thousands, except share data Three Months Ended December 31, Year Ended December 31, 2017 2016 2017 2016 Distributable Earnings per Ares Operating Group Unit(1) outstanding Distributable Earnings $60,583 $79,470 $271,635 $264,306 (-) Preferred unit distribution(2) (5,425) (5,425) (21,700) (1
Slide 22: Balance Sheet Value and Liquidity
22 Substantial balance sheet value related to investments in Ares managed vehicles and net performance fees receivable ▪ $118.9 million in cash and cash equivalents, $616.2 million in debt obligations with $210.0 million drawn against the $1.065 billion revolving credit facility as of December 31, 2
Slide 23: Corporate Data
23 Corporate Data Board of Directors Michael Arougheti Co-Founder, Chief Executive Officer and President of Ares Paul G. Joubert Founding Partner of EdgeAdvisors and Investing Partner in Common Angels Ventures David Kaplan Co-Founder and Partner of Ares, Co-Head of Private Equity Group John Kissick
Slide 24: Appendix
Appendix
Slide 25: Financial Details – Segments (Q4 2017)
25 Financial Details – Segments 1. Includes results of the reportable segments on a combined basis together with the Operations Management Group. See “GAAP to Non-GAAP Reconciliation – unconsolidated Reporting Basis” on slides 14-15. Three Months Ended December 31, 2017 $ in thousands Credit Group P
Slide 26: Financial Details – Segments (Year Ended 2017)
26 1. Includes results of the reportable segments on a combined basis together with the Operations Management Group. See “GAAP to Non-GAAP Reconciliation – unconsolidated Reporting Basis” on slides 14-15. Year Ended December 31, 2017 $ in thousands Credit Group Private Equity Group Real Estate Group
Slide 27: AUM and FPAUM Rollforward
27 AUM and FPAUM Rollforward . Credit l AUM increased by 1.8% from Q3-17 driven by additional equity commitments to APCS and a new U.S. CLO and an increase in fund value across various strategies, partially offset by distributions and capital reductions l FPAUM increased by 1.7% from Q3-17, primaril
Slide 28: AUM and FPAUM by Strategy
28 AUM and FPAUM by Strategy(1) 1. As of December 31, 2017. 2. AUM includes ARCC, IHAM and SDLP AUM of $14.5 billion, $3.8 billion and $1.9 billion, respectively. ARCC’s wholly owned portfolio company, IHAM, an SEC registered investment adviser, manages 21 funds and serves as the sub-manager or sub-
Slide 29: Balance Sheet Investments by Strategy
29 Balance Sheet Investments by Strategy Note: Reflects the balance sheet of Ares Management, L.P. and its consolidated subsidiaries, excluding the effect of Consolidated Funds. *Through investments in Ares CLOs. $ in thousands December 31, 2017 December 31, 2016 Credit Syndicated Loans* $246,460 $1
Slide 30: Significant Fund Performance Metrics
30 Significant Fund Performance Metrics* The following table presents the performance data for significant funds in the Credit Group that are not drawdown funds: Note: Past performance is not indicative of future results. AUM and Net Returns as of December 31, 2017 unless otherwise noted. The above
Slide 31: Significant Fund Performance Metrics
31 Significant Fund Performance Metrics* Note: Past performance is not indicative of future results. AUM and Net Returns as of December 31, 2017 unless otherwise noted. The above table includes fund performance metrics for significant funds which includes those that contributed at least 1% of total
Slide 32: Significant Fund Performance Metrics Endnotes
32 Significant Fund Performance Metrics Endnotes Credit 1. Returns are time-weighted rates of return and include the reinvestment of income and other earnings from securities or other investments and reflect the deduction of all trading expenses. 2. Since inception returns are annualized. 3. Net ret
Slide 33: Significant Fund Performance Metrics Endnotes (cont’d)
33 Significant Fund Performance Metrics Endnotes (cont’d) Private Equity 1. Realized proceeds represent the sum of all cash dividends, interest income, other fees and cash proceeds from realizations of interests in portfolio investments. 2. Unrealized value represents the fair market value of remain
Slide 34: Weighted Average Unit Information
34 Weighted Average Unit Information 1. Represents units exchangeable for Ares Management, L.P. common units on a one-for-one basis. 2. We apply the treasury stock method to determine the dilutive weighted-average common units represented by our restricted stock to be settled in common units and opt
Slide 35: Additional Information
35 Additional Information Distributions Targeted Net Returns(1) Investor Base as % of AUM(1) Credit Group: Public Entity & Related: 21% l Ares declared a distribution of $0.40 per common unit for the five months ended February 28, 2018, inclusive of $0.25 per common unit for the fourth quarter and $
Slide 36: RI, ENI and Other Measures – Financial Data
36 RI, ENI and Other Measures –Financial Data(1) 1. Unconsolidated results represent the operating segments plus OMG but exclude the effect of Consolidated Funds. 2. Includes ARCC Part I Fees of $105.5 million, $121.2 million and $121.5 million for the years ended December 31, 2017, 2016 and 2015, r
Slide 37: GAAP to Non-GAAP Reconciliation – Unconsolidated Reporting Basis
37 GAAP to Non-GAAP Reconciliation – Unconsolidated Reporting Basis Note: This table is a reconciliation of income before provision for income taxes on a consolidated basis to RI, ENI, FRE, PRE and DE on a Stand Alone basis, which shows the results of the reportable segments on a combined basis toge
Slide 38: GAAP to Non-GAAP Reconciliation – Unconsolidated Reporting Basis (cont.)
38 GAAP to Non-GAAP Reconciliation – Unconsolidated Reporting Basis (cont.) Note: These tables are a reconciliation of consolidated performance fee income, realized and unrealized performance fee income and net investment income to a Stand Alone basis, which assist in the reconciliation of GAAP Net
Slide 39: Glossary
39 Glossary ARCC Part I Fees ARCC Part I Fees refers to a quarterly performance fee on the investment income from ARCC. ARCC Part II Fees ARCC Part II Fees refers to fees based on ARCC's net capital gains, which are paid annually. Ares Operating Group Units Ares Operating Group Unit refers to, colle
Slide 40: Glossary (cont’d)
40 Glossary (cont’d) Fee Paying Assets Under Management Fee paying AUM (or “FPAUM”) refers to the AUM on which we directly earn management fees. Fee paying AUM is equal to the sum of all the individual fee bases of our funds that directly contribute to our management fees. Fee Related Earnings Fee r
Slide 41: Glossary (cont’d)
41 Glossary (cont’d) Our Funds Our funds refers to the funds, alternative asset companies, co-investment vehicles and other entities and accounts that are managed or co-managed by the Ares Operating Group, and which are structured to pay fees. It also includes funds managed by Ivy Hill Asset Managem