Ares Management Corporation · NYSE:ARES
Ares Management — Q2 2021 Earnings Presentation
46 slides from Ares Management's earnings presentation, Jul 29, 2021
Slide 1: Ares Management Corporation Reports Second Quarter 2021 Results
Ares Management Corporation Reports Second Quarter 2021 Results LOS ANGELES--Ares Management Corporation (NYSE:ARES) today reported its financial results for its second quarter ended June 30, 2021. GAAP net income attributable to Ares Management Corporation was $141.6 million for the quarter ended J
Slide 2: Conference Call and Webcast Information
Conference Call and Webcast Information Ares will host a conference call on July 29, 2021 at 12:00 p.m. (Eastern Time) to discuss second quarter results. All interested parties are invited to participate via telephone or the live webcast, which will be hosted on a webcast link located on the Home pa
Slide 3: Earnings Presentation Second Quarter 2021
Earnings Presentation Second Quarter 2021
Slide 4: 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 5: Second Quarter 2021 Highlights
Second Quarter 2021 Highlights ∙ Total Assets Under Management (“AUM”) of $247.9 billion ∙ Total Fee Paying AUM (“FPAUM”) of $153.7 billion Assets Under ∙ Available Capital of $76.0 billion Management ∙ AUM Not Yet Paying Fees available for future deployment of $42.6 billion ∙ Raised $20.3 billion i
Slide 6: Gross New Capital Commitments
Gross New Capital Commitments(1) $ in billions Q2 2021 Comments Credit Group U.S. Direct Lending $7.5 Primarily new and additional equity commitments to various funds, including new commitments of $5.1 billion for the second U.S. senior direct lending fund ARCC and affiliates 2.5 Additional debt and
Slide 7: Assets Under Management
Assets Under Management AUM as of June 30, 2021 was $247.9 billion, an increase of 56.5% from prior year(1) ∙ The increase of $89.5 billion was primarily driven by: ◦ fundraising from ACE V in European direct lending, Pathfinder in alternative credit, our sixth flagship corporate private equity fund
Slide 8: Management Fees by Duration and Fund Type
Management Fees by Duration and Fund Type For the quarter ended June 30, 2021: ∙ 76% of management fees were earned from funds with three or more years remaining in duration ∙ 90% of management fees were earned from permanent capital, closed end funds and CLOs Duration Fund Type 2% 2% 1% 12% 7% 6% 3
Slide 9: Available Capital and AUM Not Yet Paying Fees
Available Capital and AUM Not Yet Paying Fees Available Capital as of June 30, 2021 was $76.0 billion, an increase of 93.9% from prior year • The increase of $36.8 billion was primarily driven by: ◦ fundraising from ACE V in European direct lending, Pathfinder in alternative credit, our sixth flagsh
Slide 10: AUM Not Yet Paying Fees
AUM Not Yet Paying Fees As of June 30, 2021, AUM Not Yet Paying Fees of $47.1 billion could generate approximately $451.7 million in potential incremental annual management fees, of which $400.9 million relates to the $42.6 billion of AUM available for future deployment(1) ∙ The $42.6 billion of AUM
Slide 11: Incentive Eligible AUM and Incentive Generating AUM
Incentive Eligible AUM and Incentive Generating AUM Incentive Eligible AUM as of June 30, 2021 was $151.3 billion, an increase of 64.8% from prior year ∙ The increase of $59.5 billion was primarily driven by: ◦ capital raising across U.S. and European direct lending and alternative credit within the
Slide 12: Capital Deployment
Capital Deployment(1) Q2-21 Capital Deployment Breakdown ($ in billions) $0.1 $0.2 Total Gross Invested Capital during Q2-21 was $10.7 billion compared to $5.9 billion during Q2-20 $1.3 ∙ Of the total amount, $8.1 billion was related to deployment by our drawdown funds compared to $4.7 billion for t
Slide 13: GAAP Statements of Operations
GAAP Statements of Operations Three months ended June 30, Six months ended June 30, $ in thousands, except share data 2021 2020 2021 2020 Revenues Management fees $367,286 $266,867 $687,559 $530,716 Carried interest allocation 852,521 303,278 1,150,056 72,402 Incentive fees 15,904 331 18,724 (2,918)
Slide 14: RI and Other Measures Financial Summary
RI and Other Measures Financial Summary Three months ended June 30, Six months ended June 30, $ in thousands, except share data (and as otherwise noted) 2021 2020 % Change 2021 2020 % Change (1) Management fees $372,835 $277,672 34% $700,298 $551,450 27% Other fees 7,251 4,138 75 14,055 8,010 75 Com
Slide 15: GAAP to Non-GAAP Reconciliation – Unconsolidated Reporting Basis
GAAP to Non-GAAP Reconciliation – Unconsolidated Reporting Basis Three months ended June 30, Six months ended June 30, $ in thousands 2021 2020 2021 2020 Realized Income and Fee Related Earnings: Income (loss) before taxes $319,777 $241,097 $509,841 $(55,316) Adjustments: Amortization of intangibles
Slide 16: GAAP to Non-GAAP Reconciliation – Unconsolidated Reporting Basis (cont'd)
GAAP to Non-GAAP Reconciliation – Unconsolidated Reporting Basis (cont'd) Three months ended June 30, Six months ended June 30, $ in thousands 2021 2020 2021 2020 Performance income and net investment income reconciliation: Carried interest allocation $852,521 $303,278 $1,150,056 $72,402 Incentive f
Slide 17: Credit Group
Credit Group(1) ∙ Management and other fees increased by 30% for Q2-21 compared to Q2-20, primarily driven by deployment in funds in the U.S. and European direct lending strategies ∙ Fee Related Earnings increased by 46% for Q2-21 compared to Q2-20, primarily driven by the increase in management fee
Slide 18: Private Equity Group
Private Equity Group(1) ∙ Management and other fees decreased by 2% for Q2-21 compared to Q2-20, primarily due to the step down in fee rate and fee basis for ACOF V beginning Q1-21 as a result of the initiation of fees from our sixth flagship corporate private equity fund in Q4-20 ∙ Fee Related Earn
Slide 19: Real Estate Group
Real Estate Group(1) ∙ Management and other fees increased by 32% for Q2-21 compared to Q2-20, primarily driven by management fees generated from AREOF III and from our third European value add real estate equity fund, which included $3.1 million in catch-up fees ∙ Fee Related Earnings increased by
Slide 20: 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 2021 2020 2021 2020 After-tax Realized Income, net of Series A Preferred Stock dividends Realized Income before taxes $206,947 $115,248 $343,740 $249,393 Entity level foreign, state
Slide 21: 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, 2021, our balance sheet included $582.9 million in cash and cash equivalents and $1,088.1 million in debt obligations with no amounts drawn agai
Slide 22: Corporate Data
Corporate Data Board of Directors Executive Officers Research Coverage Investor Relations Contacts Michael Arougheti Michael Arougheti Bank of Montreal Carl Drake Co-Founder, Chief Executive Officer Co-Founder, Chief Executive Officer Rufus Hone Partner/Head of Ares Management, LLC and President of
Slide 23: Appendix
Appendix
Slide 24: Financial Details – Segments
Financial Details – Segments Three Months Ended June 30, 2021 Private Real Secondary Operations Credit Equity Estate Solutions Strategic Management $ in thousands Group Group Group Group(1) Initiatives Group Total(2) Management fees $260,234 $52,097 $30,810 $12,898 $16,796 $— $372,835 Other fees 6,7
Slide 25: Financial Details – Segments
Financial Details – Segments Six months ended June 30, 2021 Private Real Secondary Operations Credit Equity Estate Solutions Strategic Management $ in thousands Group Group Group Group(1) Initiatives Group Total(2) Management fees $493,111 $101,428 $60,442 $12,898 $32,419 $— $700,298 Other fees 12,6
Slide 26: AUM Rollforward
AUM Rollforward Q2-21 AUM Rollforward Secondary Strategic $ in millions Credit Private Equity Real Estate Solutions Initiatives Total Q1-21 Ending Balance $151,116 $29,019 $17,129 $— $9,894 $207,158 Acquisitions — — — 19,513 — 19,513 Net new par/equity commitments 11,430 340 1,938 100 480 14,288 Net
Slide 27: FPAUM Rollforward
FPAUM Rollforward Q2-21 FPAUM Rollforward Secondary Strategic $ in millions Credit Private Equity Real Estate Solutions Initiatives Total Q1-21 Ending Balance $91,615 $18,527 $10,820 $— $6,626 $127,588 Acquisitions — — — 16,839 — 16,839 Commitments 2,255 340 1,067 100 (68) 3,694 Subscriptions/deploy
Slide 28: AUM and FPAUM by Strategy
AUM and FPAUM by Strategy As of June 30, 2021 $ in billions AUM % AUM FPAUM % FPAUM Credit Syndicated Loans $29.3 17% $28.2 28% High Yield 3.2 2 3.1 3 Multi-Asset Credit 3.9 2 3.5 4 Alternative Credit 14.5 9 7.9 8 U.S. Direct Lending(1) 68.6 41 36.1 36 European Direct Lending 48.1 29 20.8 21 Credit
Slide 29: Balance Sheet Investments by Strategy
Balance Sheet Investments by Strategy(1) $ in millions June 30, 2021 December 31, 2020 Credit Syndicated Loans(2) $101.7 $107.7 Multi-Asset Credit 7.1 6.6 Alternative Credit 23.3 23.0 U.S. Direct Lending 62.6 53.5 European Direct Lending 47.2 35.7 Credit $241.9 $226.5 Private Equity ACOF IV $28.6 $2
Slide 30: Significant Fund Performance Metrics
Significant Fund Performance Metrics The following table presents the performance data for the significant funds in the Credit Group that are not drawdown funds: As of June 30, 2021 Returns(%)(1) Current Quarter Year -to-Date Since Inception (2) Primary Investment ($ in millions) Year of Inception A
Slide 31: Significant Fund Performance Metrics (cont'd)
Significant Fund Performance Metrics (cont’d) The following table presents the performance data for our significant drawdown funds (cont'd): As of June 30, 2021 Capital MOIC IRR(%) Year of Original Capital Invested to Realized Unrealized Total Primary Investment ($ in millions) Inception AUM Commitm
Slide 32: Significant Fund Performance Metrics (cont'd)
Significant Fund Performance Metrics (cont’d) The following table presents the performance data for our significant drawdown funds (cont'd): As of June 30, 2021 Capital MOIC IRR(%) Year of Original Capital Invested to Realized Unrealized Total Primary Investment ($ in millions) Inception AUM Commitm
Slide 33: 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 34: Significant Fund Performance Metrics Endnotes (cont'd)
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 financings.
Slide 35: Significant Fund Performance Metrics Endnotes (cont'd)
Significant Fund Performance Metrics Endnotes (cont’d) Real Estate 1. Realized value includes distributions of operating income, sales and financing proceeds received. 2. Unrealized value represents the fair market value of remaining investments. Unrealized value does not take into account any bridg
Slide 36: Significant Fund Performance Metrics Endnotes (cont'd)
Significant Fund Performance Metrics Endnotes (cont’d) Strategic Initiatives 1. Realized value represents the sum of all cash distributions to all partners and if applicable, exclude tax and incentive distributions made to the general partner. 2. Unrealized value represents the fund's NAV reduced by
Slide 37: Supplemental Performance Metrics
Supplemental Performance Metrics The following table presents the performance data for commingled funds that were previously reported as significant funds in prior years: As of June 30, 2021 Original MOIC IRR(%) Year of Capital Capital Invested Realized Unrealized Total Primary Investment ($ in mill
Slide 38: Supplemental Performance Metrics Endnotes
Supplemental Performance Metrics Endnotes Credit 1. Realized proceeds represent the sum of all cash distributions to all partners and if applicable, exclude tax and incentive distributions made to the general partner. 2. Unrealized value represents the fund's NAV reduced by the accrued incentive all
Slide 39: Supplemental Performance Metrics Endnotes (cont'd)
Supplemental Performance Metrics Endnotes (cont’d) Private Equity (cont’d) 5. For the corporate private equity and infrastructure and power funds, the gross IRR is an annualized since inception gross internal rate of return of cash flows to and from investments and the residual value of the investme
Slide 40: Weighted Average Shares
Weighted Average Shares Q2-21 Q2-20 Common Shares, Common Shares, Total Shares As Adjusted(3) Total Shares As Adjusted(3) Weighted average shares of Class A and non-voting common stock 164,793,968 164,793,968 133,639,194 133,639,194 Ares Operating Group Units exchangeable into shares of Class A comm
Slide 41: RI and Other Measures – Financial Data
RI and Other Measures – Financial Data(1) Year ended December 31, $ in thousands 2020 2019 Credit Group $841,138 $713,853 Private Equity Group 221,160 211,614 Real Estate Group 97,680 87,063 Strategic Initiatives 26,587 — Management fees 1,186,565 1,012,530 Other fees 19,948 18,078 Compensation and
Slide 42: GAAP to Non-GAAP Reconciliation – Unconsolidated Reporting Basis
GAAP to Non-GAAP Reconciliation – Unconsolidated Reporting Basis Year ended December 31, $ in thousands 2020 2019 Realized Income and Fee Related Earnings: Income before taxes $379,478 $425,180 Adjustments: Amortization of intangibles(1) 21,195 23,460 Depreciation expense 19,467 17,142 Equity compen
Slide 43: GAAP to Non-GAAP Reconciliation – Unconsolidated Reporting Basis (cont'd)
GAAP to Non-GAAP Reconciliation – Unconsolidated Reporting Basis (cont’d) Year ended December 31, $ in thousands 2020 2019 Performance income and net investment income reconciliation: Carried interest allocation $505,608 $621,872 Incentive fees 37,902 69,197 Carried interest allocation and incentive
Slide 44: Glossary
Glossary ARCC Part II Fees ARCC Part II Fees refers to fees 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 unrealized capital depreciation, less the aggregate amou
Slide 45: 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 46: Glossary (cont'd)
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 Management