Ares Management Corporation · NYSE:ARES
Ares Management — Q2 2020 Earnings Presentation
39 slides from Ares Management's earnings presentation, Aug 5, 2020
Slide 1: Second Quarter 2020 Earnings Presentation
Exhibit 99.2 Second Quarter 2020 Earnings Presentation
Slide 2: Important Notice
Important Notice This presentation is prepared for Ares Management Corporation (NYSE: ARES) for the benefit of its public stockholders. This presentation is solely for information purposes in connection with evaluating the business, operations and financial results of Ares Management Corporation (“A
Slide 3: Second Quarter 2020 Highlights
Second Quarter 2020 Highlights • Total Assets Under Management ("AUM") of $158.4 billion • Total Fee Paying AUM ("FPAUM") of $105.5 billion Assets Under • Available Capital of $39.2 billion Management • AUM Not Yet Paying Fees available for future deployment of $25.0 billion • Raised $9.1 billion in
Slide 4: Gross New Capital Commitments
#ACACAC #1E3154 Gross New Capital Commitments(1) #225070 #828282 $ in billions Q2 2020 Comments Credit Group ARCC and affiliates $0.7 Additional debt commitments to ARCC and IHAM #D2D2D2 #49749B Alternative Credit 0.9 Additional equity commitments to various funds U.S. Direct Lending 0.5 New and add
Slide 5: Assets Under Management
Assets Under Management AUM as of June 30, 2020 was $158.4 billion, an increase of 11.5% from prior year(1) • The increase of $16.3 billion was driven by capital raising primarily across U.S. and European direct lending, syndicated loans, which includes the acquisition of Crestline Denali Capital LL
Slide 6: Management Fees by Duration and Fund Type
Management Fees by Duration and Fund Type For the quarter ended June 30, 2020: • 77% of management fees were earned from funds with three or more years remaining in duration • 88% of management fees were earned from permanent capital, closed end funds and CLOs Duration Fund Type 1 1% 13% 4 % 7 2 % 2
Slide 7: AUM and FPAUM by Duration
AUM and FPAUM by Duration As of June 30, 2020, approximately 68% of AUM and 69% of FPAUM had a duration longer than 3 years • At time of funds' first close, the initial duration was greater than 7 years for approximately 73% of AUM AUM: $158.4 billion FPAUM: $105.5 billion 1 7 2 % 2 3% 4% 7 12% 14%
Slide 8: Available Capital and AUM Not Yet Paying Fees
Available Capital and AUM Not Yet Paying Fees Available Capital as of June 30, 2020 was $39.2 billion, an increase of 5.7% from prior year • The increase of $2.1 billion was driven primarily by fundraising in U.S. and European direct lending, alternative credit, and corporate private equity funds, i
Slide 9: AUM Not Yet Paying Fees
AUM Not Yet Paying Fees As of June 30, 2020, AUM Not Yet Paying Fees of $27.8 billion could generate approximately $278.9 million in potential incremental annual management fees, of which $253.0 million relates to the $25.0 billion of AUM available for future deployment(1) • The $25.0 billion of AUM
Slide 10: Incentive Eligible AUM and Incentive Generating AUM
Incentive Eligible AUM and Incentive Generating AUM Incentive Eligible AUM as of June 30, 2020 was $91.8 billion, an increase of 7.6% from prior year • The increase of $6.5 billion was primarily driven by capital raising across the following strategies: special opportunities, U.S. direct lending, al
Slide 11: Capital Deployment
Capital Deployment(1) Q2-20 Capital Deployment Breakdown: $5.9 billion • Total Gross Invested Capital during Q2-20 was $5.9 billion compared to $6.7 billion during Q2-19 ($ in billions) • Of the total amount, $4.7 billion was related to deployment by our drawdown funds compared to $4.1 billion for t
Slide 12: GAAP Statements of Operations
GAAP Statements of Operations $ in thousands, except share data Three months ended June 30, Six months ended June 30, 2020 2019 2020 2019 Revenues Management fees (includes ARCC Part I Fees of $41,306, $85,229 and $39,157, $77,550 for the three and six months ended June 30, 2020 and 2019, respective
Slide 13: RI and Other Measures Financial Summary
RI and Other Measures Financial Summary $ in thousands, except share data (and as otherwise noted) Three months ended June 30, Six months ended June 30, 2020 2019 % Change 2020 2019 % Change Management fees(1) $277,672 $246,279 13% $551,450 $479,291 15% Other fees 4,138 4,611 (10) 8,010 7,686 4 Comp
Slide 14: GAAP to Non-GAAP Reconciliation – Unconsolidated Reporting Basis
GAAP to Non-GAAP Reconciliation – Unconsolidated Reporting Basis $ in thousands Three months ended June 30, Six months ended June 30, 2020 2019 2020 2019 Realized Income and Fee Related Earnings: Income (loss) before taxes $241,097 $84,383 $(55,316) $220,343 Adjustments: Depreciation and amortizatio
Slide 15: GAAP to Non-GAAP Reconciliation – Unconsolidated Reporting Basis (cont'd)
GAAP to Non-GAAP Reconciliation – Unconsolidated Reporting Basis (cont'd) $ in thousands Three months ended June 30, Six months ended June 30, 2020 2019 2020 2019 Performance income and net investment income reconciliation: Carried interest allocation $303,278 $119,712 $72,402 $317,005 Incentive fee
Slide 16: Credit Group
Credit Group(1) • Management and other fees increased by 16% for Q2-20 compared to Q2-19, primarily driven by deployment in funds in the U.S. and European direct lending strategies and an increase in ARCC Part I Fees • Fee Related Earnings increased by 18% for Q2-20 compared to Q2-19, primarily driv
Slide 17: Private Equity Group
Private Equity Group(1) • Management and other fees increased by 2% for Q2-20 compared to Q2-19, primarily due to additional deployment in ASOF • Fee Related Earnings increased by 3% for Q2-20 compared to Q2-19, primarily driven by higher management fees • Realized Income increased by 29% for Q2-20
Slide 18: Real Estate Group
Real Estate Group(1) • Management and other fees increased by 5% for Q2-20 compared to Q2-19, primarily driven by additional management fees generated with the launch of our third U.S. opportunistic real estate equity fund subsequent to the second quarter of 2019 • Fee Related Earnings increased by
Slide 19: Realized Income per Share Data
Realized Income per Share Data Three months ended June 30, Six months ended June 30, $ in thousands, except share data 2020 2019 2020 2019 After-tax Realized Income, net of Series A Preferred Stock dividends Realized Income before taxes $115,248 $94,311 $249,393 $198,943 Entity level foreign, state
Slide 20: Balance Sheet
Balance Sheet • Substantial balance sheet value related to investments primarily in Ares managed vehicles and net accrued performance income • As of June 30, 2020, our balance sheet included $890.0 million in cash and cash equivalents and $642.5 million in debt obligations with no amounts drawn agai
Slide 21: Corporate Data
Corporate Data Board of Directors Executive Officers Research Coverage Investor Relations Contacts Michael Arougheti Michael Arougheti Bank of America Merrill Lynch Carl Drake Co-Founder, Chief Executive Officer and Co-Founder, Chief Executive Officer and Michael Carrier Partner/Head of Ares Managem
Slide 22: Appendix
Appendix
Slide 23: Financial Details – Segments Three Months Ended
Financial Details – Segments Three Months Ended June 30, 2020 Private Real Operations Credit Equity Estate Management $ in thousands Group Group Group Group Total(1) Management fees (Credit Group includes ARCC Part I Fees of $41,306) $200,788 $53,396 $23,488 $— $277,672 Other fees 4,101 30 7 — 4,138
Slide 24: Financial Details – Segments Six Months Ended
Financial Details – Segments Six Months Ended June 30, 2020 Private Real Operations Credit Equity Estate Management $ in thousands Group Group Group Group Total(1) Management fees (Credit Group includes ARCC Part I Fees of $85,229) $398,225 $105,553 $47,672 $— $551,450 Other fees 7,159 140 711 — 8,0
Slide 25: AUM and FPAUM Rollforward
AUM and FPAUM Rollforward Q2-20 Total AUM Rollforward LTM Total AUM Rollforward $ in millions Credit Private Equity Real Estate Total $ in millions Credit Private Equity Real Estate Total Q1-20 Ending Balance $112,512 $22,015 $14,112 $148,639 Q2-19 Ending Balance $105,505 $24,735 $11,868 $142,108 Ac
Slide 26: AUM and FPAUM by Strategy
AUM and FPAUM by Strategy As of June 30, 2020 $ in billions AUM % AUM FPAUM % FPAUM Credit Syndicated Loans $25.4 23% $24.8 33% High Yield 2.7 2 2.6 3 Multi-Asset Credit 2.8 2 2.2 2 Alternative Credit 8.8 7 5.4 7 U.S. Direct Lending(1) 50.8 43 28.7 36 European Direct Lending 26.9 23 15.0 19 Credit $
Slide 27: Balance Sheet Investments by Strategy
Balance Sheet Investments by Strategy(1) $ in millions June 30, 2020 December 31, 2019 Credit Syndicated Loans(2) $79.5 $104.7 Multi-Asset Credit 32.7 29.5 Alternative Credit 17.5 21.0 U.S. Direct Lending 59.4 61.3 European Direct Lending 33.2 32.8 Credit $222.3 $249.3 Private Equity ACOF I 0.2 0.2
Slide 28: Significant Fund Performance Metrics
Significant Fund Performance Metrics The following table presents the performance data for the significant funds in the Credit Group that are not drawdown funds: As of June 30, 2020 Returns (%)(1) Current Quarter Year-To-Date Since Inception(2) AUM Year of Inception ($ in millions) Gross Net Gross N
Slide 29: Significant Fund Performance Metrics (cont'd)
Significant Fund Performance Metrics (cont’d) The following table presents the performance data for our significant drawdown funds: As of June 30, 2020 Credit MOIC IRR(%) Year of Original Capital Capital Invested Realized Unrealized ($ in millions) Inception AUM Commitments to Date Proceeds(5) Value
Slide 30: Significant Fund Performance Metrics Endnotes
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 return
Slide 31: Significant Fund Performance Metrics Endnotes (cont'd)
Significant Fund Performance Metrics Endnotes (cont’d) Private Equity - Cont. 4. The net MoIC for USPF IV and SSF IV is calculated at the fund-level. The net MoIC for the corporate private equity and energy opportunities funds is calculated at the investment level. For all funds, the net MoIC is bas
Slide 32: Weighted Average Shares
Weighted Average Shares Q2-20 Q2-19 Common Shares, Common Shares, Total Shares As Adjusted(3) Total Shares As Adjusted(3) Weighted average shares of Class A common stock 133,639,194 133,639,194 105,188,966 105,188,966 Ares Operating Group Units exchangeable into shares of Class A common stock(1) 115
Slide 33: Additional Information: AUM Mix by Investor
Additional Information AUM Mix by Investor Institutional Direct - 68%(2) Public Entity & Related l 600+ institutional investors(1) (2) l 200,000+ retail investors across our public funds 14% 26% Total Direct Institutional Investors: 900+ 18% Pension Bank/ Private Bank Insurance 13% 4% Sovereign Weal
Slide 34: RI and Other Measures – Financial Data
RI and Other Measures –Financial Data(1) $ in thousands Year ended December 31, 2019 2018 Credit Group(2) $713,853 $564,899 Private Equity Group 211,614 198,182 Real Estate Group 87,063 73,663 Management fees $1,012,530 $836,744 Other fees 18,078 24,288 Compensation and benefits expenses (528,207) (
Slide 35: GAAP to Non-GAAP Reconciliation – Unconsolidated Reporting Basis
GAAP to Non-GAAP Reconciliation – Unconsolidated Reporting Basis $ in thousands Year ended December 31, 2019 2018 Realized Income and Fee Related Earnings: Income before taxes $425,180 $184,341 Adjustments: Depreciation and amortization expense(1) 40,602 25,087 Equity compensation expense 97,691 89,
Slide 36: GAAP to Non-GAAP Reconciliation – Unconsolidated Reporting Basis (cont'd)
GAAP to Non-GAAP Reconciliation – Unconsolidated Reporting Basis (cont'd) $ in thousands Year ended December 31, 2019 2018 Performance income and net investment income reconciliation: Carried interest allocation $621,872 $42,410 Incentive fees 69,197 63,380 Carried interest allocation and incentive
Slide 37: Glossary
Glossary ARCC Part I Fees ARCC Part I Fees refers to a quarterly performance income on the net investment income of Ares Capital Corporation (NASDAQ: ARCC) (“ARCC”). Such fees from ARCC are classified as management fees as they are predictable and recurring in nature, not subject to contingent repay
Slide 38: Glossary (cont'd)
Glossary (cont’d) Fee Related Earnings Fee Related Earnings or “FRE”, a non-GAAP measure, is used to assess core operating performance by determining whether recurring revenue, primarily consisting of management fees, is sufficient to cover operating expenses and to generate profits. FRE differs fro
Slide 39: Glossary (cont'd)
Glossary (cont’d) Performance Income Performance Income refers to income we earn based on the performance of a fund that is generally based on certain specific hurdle rates as defined in the fund’s investment management or partnership agreements and may be either an incentive fee or carried interest