Ares Management Corporation · NYSE:ARES
Ares Management — Q1 2023 Earnings Presentation
45 slides from Ares Management's earnings presentation, Apr 28, 2023
Slide 1: Earnings Presentation First Quarter 2023
Earnings Presentation First Quarter 2023 Exhibit 99.2
Slide 2: Important Notice
2 Important Notice This presentation is prepared for Ares Management Corporation (“Aresˮ) (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 and certain of
Slide 3: First Quarter 2023 Highlights
3 Assets Under Management Q1-23 Financial Results Corporate Actions Recent Developments First Quarter 2023 Highlights 1. Net inflows of capital represents gross capital commitments less redemptions. 2. Unconsolidated management fees includes $11.6 million from Consolidated Funds that are eliminated
Slide 4: Gross New Capital Commitments
4 Gross New Capital Commitments(1) 1. Represents gross new capital commitments during the period presented, including equity and debt commitments and gross inflows into our open-ended managed accounts and sub-advised accounts. Commitments denominated in currencies other than U.S. dollar have been co
Slide 5: Assets Under Management
5 Q1-22 Q4-22 Q1-23 Assets Under Management 1. AUM amounts include vehicles managed by Ivy Hill Asset Management, L.P., a wholly owned portfolio company of ARCC and a SEC-registered investment adviser (“IHAMˮ). AUM as of March 31, 2023 was $360.3 billion, an increase of 11% from prior year(1) • The
Slide 6: Perpetual Capital
6 Perpetual Capital Perpetual Capital AUM Perpetual Capital as of March 31, 2023 was $95.4 billion, an increase of 15% from prior year • The increase of $12.7 billion was primarily driven by: ◦ commitments in our U.S. direct lending and alternative credit strategies and our insurance platform and ca
Slide 7: AUM and Management Fees by Type
7 20% 7% 62% 11% 38% 6% 51% 5% AUM and Management Fees by Type 89% 1. Long-dated funds generally have a contractual life of five years or more at inception. For the quarter ended March 31, 2023: • 89% of assets under management were perpetual capital or long-dated funds • 95% of management fees were
Slide 8: Available Capital and AUM Not Yet Paying Fees
8 Q1-22 Q4-22 Q1-23 Available Capital and AUM Not Yet Paying Fees Available Capital as of March 31, 2023 was $88.6 billion, a decrease of 4% from prior year • The decrease of $3.8 billion was primarily driven by: ◦ net deployment in the U.S. and European direct lending and corporate private equity s
Slide 9: AUM Not Yet Paying Fees Available for Future Deployment
9 $50.5 $8.7 $1.5 $37.1 $5.6 $6.3 $1.5 AUM Not Yet Paying Fees Available for Future Deployment AUM Not Yet Paying Fees As of March 31, 2023, AUM Not Yet Paying Fees includes $50.5 billion of AUM available for future deployment that could generate approximately $483.0 million in potential incremental
Slide 10: Incentive Eligible AUM and Incentive Generating AUM
10 Q1-22 Q4-22 Q1-23 Incentive Eligible AUM and Incentive Generating AUM ($ in billions) ($ in billions) Credit(3) Private Equity Real Assets(3) Secondaries(3) Other Total Incentive Generating AUM $55.9 $20.7 $14.4 $6.3 $— $97.3 + Uninvested IEAUM 38.8 9.4 11.6 6.9 0.5 67.2 + IEAUM below hurdle 8.3
Slide 11: Capital Deployment
11 $8.7 $1.2 $1.1 $0.4 $1.5 Q1-23 Gross Capital Deployment Capital Deployment(1) ($ in billions) (2) Capital Deployment in Drawdown Funds ($ in billions) Total Gross Invested Capital during Q1-23 was $12.9 billion compared to $16.0 billion during Q1-22 • Deployment by our drawdown funds was $7.8 bil
Slide 12: GAAP Statements of Operations
12 Three months ended March 31, $ in thousands, except share data 2023 2022 Revenues Management fees $600,516 $477,332 Carried interest allocation 151,488 178,289 Incentive fees 8,923 16,422 Principal investment income 22,758 8,326 Administrative, transaction and other fees 29,677 34,630 Total reven
Slide 13: RI and Other Measures Financial Summary
13 RI and Other Measures Financial Summary Three months ended March 31, LTM ended March 31, $ in thousands, except share data (and as otherwise noted) 2023 2022 % Change 2023 2022 % Change Management fees(1) $602,619 $482,921 25% $2,272,226 $1,790,735 27% Fee related performance revenues 3,871 12,71
Slide 14: GAAP to Non-GAAP Reconciliation – Unconsolidated Reporting Basis
14 GAAP to Non-GAAP Reconciliation – Unconsolidated Reporting Basis Three months ended March 31, LTM ended March 31, $ in thousands 2023 2022 2023 2022 Realized Income and Fee Related Earnings: Income before taxes $241,122 $161,309 $590,619 $1,036,935 Adjustments: Amortization of intangibles(1) 38,2
Slide 15: GAAP to Non-GAAP Reconciliation – Unconsolidated Reporting Basis (cont'd)
15 GAAP to Non-GAAP Reconciliation – Unconsolidated Reporting Basis (cont'd) Note: These tables reconcile consolidated carried interest allocation and incentive fees reported in accordance with GAAP to unconsolidated realized performance income and consolidated GAAP other income to unconsolidated re
Slide 16: Credit Group
16 Credit Group(1) 1. This table is a financial summary only and segment results are shown before the unallocated support costs of the Operations Management Group. Please refer to “Financial Details - Segmentsˮ on slide 24 for complete financial results. 2. Composite returns are calculated by asset-
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, ~45 portfolio companies and ~10 active funds and related co-investment vehicles as of March 31, 2023. 1. This table is a financial summary only and segmen
Slide 18: Real Assets Group
18 Real Assets Group(1) Note: Past performance is not indicative of future results. The Real Assets Group had ~295 investment professionals, ~505 properties, ~60 infrastructure assets and ~60 active funds and related co-investment vehicles as of March 31, 2023. 1. This table is a financial summary o
Slide 19: Secondaries Group
19 Secondaries Group(1) Note: Past performance is not indicative of future results. The Secondaries Group had ~70 investment professionals, ~865 limited partnership interests and ~65 active funds and related co- investment vehicles as of March 31, 2023. 1. This table is a financial summary only and
Slide 20: Realized Income per Share Data
20 Realized Income per Share Data Three months ended March 31, $ in thousands, except share data 2023 2022 After-tax Realized Income Realized Income before taxes $254,292 $222,017 Entity level foreign, state and local taxes (5,282) (3,558) Realized Income 249,010 218,459 Income taxes(1) (16,983) (11
Slide 21: Balance Sheet Highlights
21 33% 43% 19% 5% Substantial balance sheet value related to investments primarily in Ares managed vehicles and net accrued performance income • As of March 31, 2023, our balance sheet included $272.2 million in cash and cash equivalents and $2,369.3 million in debt obligations, including $795.0 mil
Slide 22: Corporate Data
22 Corporate Data Board of Directors Michael Arougheti Co-Founder, Chief Executive Officer and President of Ares Ashish Bhutani Former Chairman and Chief Executive Officer of Lazard Asset Management and Former Vice Chairman of Lazard Ltd Antoinette Bush Senior Advisor to News Corp Kipp deVeer Head o
Slide 23: Appendix
Appendix
Slide 24: Financial Details – Segments
24 Financial Details – Segments Three months ended March 31, 2023 $ in thousands Credit Group Private Equity Group Real Assets Group Secondaries Group Other Operations Management Group Total(1) Management fees $405,650 $54,657 $97,470 $39,863 $4,979 $— $602,619 Fee related performance revenues 600 —
Slide 25: Weighted Average Shares
25 Weighted Average Shares 1. Represents proportional dilutive impact based upon the weighted average percentage of Ares Operating Group owned by Ares Management Corporation (60.14% and 59.51% as of March 31, 2023 and 2022, respectively). 2. We apply the treasury stock method to determine the diluti
Slide 26: AUM Rollforward
26 AUM Rollforward Credit • AUM increased by 14% from Q1-22, primarily driven by new commitments to U.S. direct lending funds, our sixth flagship European direct lending fund, our second flagship alternative credit fund and our first APAC direct lending fund Private Equity • AUM increased by 3% from
Slide 27: FPAUM Rollforward
27 FPAUM Rollforward Credit • FPAUM increased by 21% from Q1-22, primarily driven by deployment in U.S. and European direct lending and alternative credit Private Equity • FPAUM increased by 16% from Q1-22, primarily driven by deployment in special opportunities Real Assets • FPAUM increased by 13%
Slide 28: AUM and FPAUM by Strategy
28 AUM and FPAUM by Strategy 1. AUM includes ARCC, IHAM and Senior Direct Lending Program ("SDLP") AUM of $25.7 billion, $10.6 billion and $4.0 billion, respectively. ARCC’s wholly owned portfolio company, IHAM, an SEC- registered investment adviser, manages 22 vehicles and serves as the sub-manager
Slide 29: Balance Sheet Investments by Strategy
29 Balance Sheet Investments by Strategy(1) $ in millions March 31, 2023 December 31, 2022 Credit Liquid Credit(2) $92.4 $93.0 Alternative Credit 53.6 54.6 U.S. Direct Lending 114.3 111.9 European Direct Lending 39.4 33.4 Asia Credit 21.2 18.7 Credit $320.9 $311.6 Private Equity Corporate Private Eq
Slide 30: Significant Fund Performance Metrics
30 Significant Fund Performance Metrics The following table presents the performance data for the significant funds that are not drawdown funds: Note: Past performance is not indicative of future results. AUM and net returns are as of March 31, 2023 unless otherwise noted. The above table includes f
Slide 31: Significant Fund Performance Metrics (cont'd)
31 Significant Fund Performance Metrics (cont’d) Note: Past performance is not indicative of future results. Fund performance metrics for significant funds may be marked as “NMˮ as they may not be considered meaningful due to the limited time since the initial investment and/or early stage of capita
Slide 32: Significant Fund Performance Metrics (cont'd)
32 Note: Past performance is not indicative of future results. Fund performance metrics for significant funds may be marked as “NMˮ as they may not be considered meaningful due to the limited time since the initial investment and/or early stage of capital deployment. AUM and net returns are as of Ma
Slide 33: Significant Fund Performance Metrics Endnotes – Credit
33 Credit 1. Since inception returns are annualized. 2. 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. Net returns are calculated using the fund’s NAV and assu
Slide 34: Significant Fund Performance Metrics Endnotes (cont'd) – Private Equity
34 Significant Fund Performance Metrics Endnotes (cont’d) Private Equity 1. Realized value represents the sum of all cash dividends, interest income, other fees and cash proceeds from realizations of interests in portfolio investments. Realized value excludes any proceeds related to bridge financing
Slide 35: Significant Fund Performance Metrics Endnotes – Real Assets
35 Real Assets 1. Since inception returns are annualized. 2. Performance is measured by total return, which includes income and appreciation and reinvestment of all distributions for the respective time period. Returns are shown for institutional share class. Shares of other classes may have lower r
Slide 36: Significant Fund Performance Metrics Endnotes (cont'd) – Secondaries
36 Significant Fund Performance Metrics Endnotes (cont’d) Secondaries 1. Realized value represents the sum of all cash distributions to all limited partners and if applicable, exclude tax and incentive distributions made to the general partner. 2. Unrealized value represents the limited partners’ sh
Slide 37: Supplemental Performance Metrics
37 Supplemental Performance Metrics The following table presents the performance data for a non-drawdown fund that was previously reported as a significant fund: Note: Past performance is not indicative of future results. AUM and net returns are as of March 31, 2023 unless otherwise noted. Please re
Slide 38: Supplemental Performance Metrics (cont'd)
38 Supplemental Performance Metrics (cont'd) The following table presents the performance data for commingled funds that were previously reported as significant funds: As of March 31, 2023 Year of Inception Original Capital Commitments Capital Invested to Date Realized Value(1) Unrealized Value(2) T
Slide 39: Supplemental Performance Metrics Endnotes
39 Supplemental Performance Metrics Endnotes Credit 1. Since inception returns are annualized. 2. 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. Gross returns
Slide 40: Supplemental Performance Metrics Endnotes (cont'd) – Private Equity
40 Supplemental Performance Metrics Endnotes (cont’d) Private Equity (cont’d) 5. The gross IRR is an annualized since inception gross internal rate of return of cash flows to and from the fund and the fund’s residual value at the end of the measurement period. Gross IRRs reflect returns to the fee-p
Slide 41: Supplemental Performance Metrics Endnotes (cont'd) – Secondaries
41 Supplemental Performance Metrics Endnotes (cont’d) Secondaries 1. Realized value represents the sum of all cash distributions to all limited partners and if applicable, exclude tax and incentive distributions made to the general partner. 2. Unrealized value represents the limited partners' share
Slide 42: Glossary
42 Glossary ARCC Part II Fees ARCC Part II Fees refers to fees from Ares Capital Corporation (NASDAQ: ARCC) (“ARCCˮ) that are paid in arrears as of the end of each calendar year when the cumulative aggregate realized capital gains exceed the cumulative aggregate realized capital losses and aggregate
Slide 43: Glossary (cont'd)
43 Glossary (cont’d) Fee Related Earnings Fee Related Earnings or “FREˮ, a non-GAAP measure, is used to assess core operating performance by determining whether recurring revenue, primarily consisting of management fees and fee related performance revenues, is sufficient to cover operating expenses
Slide 44: Glossary (cont'd)
44 Glossary (cont’d) Operations Management Group In addition to our reportable segments, we have an Operations Management Group (the “OMGˮ) that consists of shared resource groups to support our reportable segments by providing infrastructure and administrative support in the areas of accounting/fin
Slide 45: Glossary (cont'd)
45 Glossary (cont’d) Realized Income Realized Income or “RIˮ, a non-GAAP measure, is an operating metric used by management to evaluate performance of the business based on operating performance and the contribution of each of the business segments to that performance, while removing the fluctuation