Ares Management Corporation · NYSE:ARES
Ares Management — Q2 2022 Earnings Presentation
49 slides from Ares Management's earnings presentation, August 2022
Slide 1: Ares Management Corporation Reports Second Quarter 2022 Results
Ares Management Corporation Reports Second Quarter 2022 Results NEW YORK--Ares Management Corporation (NYSE:ARES) today reported its financial results for its second quarter ended June 30, 2022. GAAP net income attributable to Ares Management Corporation was $39.7 million for the quarter ended June
Slide 2: About Ares Management Corporation
About Ares Management Corporation Ares Management Corporation (NYSE: ARES) is a leading global alternative investment manager offering clients complementary primary and secondary investment solutions across the credit, private equity, real estate and infrastructure asset classes. We seek to provide
Slide 3: Earnings Presentation Second Quarter 2022
Earnings Presentation Second Quarter 2022
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 2022 Highlights
Second Quarter 2022 Highlights • Total Assets Under Management (“AUMˮ) of $334.3 billion • Total Fee Paying AUM (“FPAUMˮ) of $211.3 billion Assets Under • Available Capital of $91.0 billion Management • AUM Not Yet Paying Fees available for future deployment of $52.7 billion • Raised $16.4 billion i
Slide 6: Gross New Capital Commitments
Gross New Capital Commitments(1) $ in billions Q2 2022 Comments Credit Group Primarily new and additional debt and equity commitments to various funds, including $1.5 billion of additional equity U.S. Direct Lending $4.3 and debt commitments for our inaugural sports, media and entertainment fund and
Slide 7: Assets Under Management
Assets Under Management AUM as of June 30, 2022 was $334.3 billion, an increase of 35% from prior year(1) • The increase of $86.4 billion was primarily driven by: ◦ fundraising from SDL II, PCS II and our open-end core alternative credit fund in Credit, our second special opportunities fund in Priva
Slide 8: Perpetual Capital
Perpetual Capital Perpetual Capital as of June 30, 2022 was $86.7 billion, an increase of 60% from prior year • The increase of $32.4 billion was primarily driven by : ◦ the acquisition of Black Creek in Real Assets: and ◦ fundraising in our U.S. direct lending, European direct lending, alternative
Slide 9: AUM and Management Fees by Type
AUM and Management Fees by Type For the quarter ended June 30, 2022: • 88% of assets under management were perpetual capital or long-dated funds • 95% of management fees were earned from perpetual capital or long-dated funds AUM by Type Management Fees by Type 5% 12% 20% 36% 6% 88% 95% 53% 6% 62% Pe
Slide 10: Available Capital and AUM Not Yet Paying Fees
Available Capital and AUM Not Yet Paying Fees Available Capital as of June 30, 2022 was $91.0 billion, an increase of 20% from prior year • The increase of $15.0 billion was primarily driven by: ◦ fundraising from SDL II and our second special opportunities fund; and ◦ the acquisitions of Black Cree
Slide 11: AUM Not Yet Paying Fees
AUM Not Yet Paying Fees As of June 30, 2022, AUM Not Yet Paying Fees includes $52.7 billion of AUM available for future deployment which could generate approximately $505.2 million in potential incremental annual management fees(1) • The $52.7 billion of AUM Not Yet Paying Fees available for future
Slide 12: Incentive Eligible AUM and Incentive Generating AUM
Incentive Eligible AUM and Incentive Generating AUM Incentive Eligible AUM as of June 30, 2022 was $195.1 billion, an increase of 29% from prior year • The increase of $43.8 billion was primarily driven by: ◦ fundraising across U.S. direct lending, alternative credit and special opportunities, infra
Slide 13: Capital Deployment
Capital Deployment Total Gross Invested Capital during Q2-22 was $24.1 billion compared to $16.5 billion during Q2-21 • Of the total amount, $12.9 billion was related to deployment by our drawdown funds compared to $8.1 billion for the same period in 2021 • Of our drawdown funds, the most active inv
Slide 14: GAAP Statements of Operations
GAAP Statements of Operations Three months ended June 30, Six months ended June 30, $ in thousands, except share data 2022 2021 2022 2021 Revenues Management fees $520,560 $367,286 $997,892 $687,559 Carried interest allocation 47,304 852,521 225,593 1,150,056 Incentive fees 4,675 15,904 21,097 18,72
Slide 15: 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) 2022 2021 % Change 2022 2021 % Change Management fees(1) $524,881 $372,835 41% $1,007,802 $700,298 44% Fee related performance revenues 1,240 654 9
Slide 16: 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 2022 2021 2022 2021 Realized Income and Fee Related Earnings: Income before taxes $67,066 $319,777 $228,375 $509,841 Adjustments: Amortization of intangibles 33,799 1
Slide 17: 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 2022 2021 2022 2021 Performance income and net investment income reconciliation: Carried interest allocation $47,304 $852,521 $225,593 $1,150,056 Incentive f
Slide 18: Credit Group
Credit Group(1) • Management and other fees increased by 24% for Q2-22 compared to Q2-21, primarily driven by deployment in funds in the U.S. and European direct lending strategies and alternative credit • Fee Related Earnings increased by 30% for Q2-22 compared to Q2-21, primarily driven by the inc
Slide 19: Private Equity Group
Private Equity Group(1) • Management and other fees increased by 19% for Q2-22 compared to Q2-21, primarily driven by additional commitments in ACOF VI and by additional deployment in ASOF and our second special opportunities fund • Fee Related Earnings increased by 26% for Q2-22 compared to Q2-21,
Slide 20: Real Assets Group
Real Assets Group(1) • Management and other fees increased by 130% for Q2-22 compared to Q2-21, primarily due to the acquisitions of Black Creek and Infrastructure Debt, and due to management fees generated from our tenth U.S. real estate fund and our sixth European real estate fund, including $6.0
Slide 21: Secondary Solutions
Secondary Solutions(1) • Management and other fees includes $4.1 million in catch-up fees in Q2-22 from our 17th private equity secondaries fund and ninth real estate secondaries fund • Capital deployment totaled $0.8 billion for Q2-22, primarily driven by $0.5 billion in private equity secondaries
Slide 22: Strategic Initiatives
Strategic Initiatives(1) • Management and other fees increased by 4% for Q2-22 compared to Q2-21, primarily due to higher management fees driven by additional commitments to our sixth Asian special situations fund, including $0.3 million in catch-up fees in Q2-22 • Fee Related Earnings decreased by
Slide 23: 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 2022 2021 2022 2021 After-tax Realized Income Realized Income before taxes $247,245 $206,947 $469,262 $343,740 Entity level foreign, state and local taxes (4,438) (3,139) (7,996) (6
Slide 24: 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, 2022, our balance sheet included $252.9 million in cash and cash equivalents and $1,968.0 million in debt obligations, including $395.0 million
Slide 25: Corporate Data
Corporate Data Board of Directors Executive Officers Research Coverage Investor Relations Contacts Michael Arougheti Michael Arougheti Autonomous Carl Drake Co-Founder, Chief Executive Officer Co-Founder, Chief Executive Officer Patrick Davitt Partner/Head of Public Markets and President of Ares and
Slide 26: Appendix
Appendix
Slide 27: Financial Details – Segments
Financial Details – Segments Three months ended June 30, 2022 Private Real Secondary Operations Credit Equity Assets Solutions Strategic Management $ in thousands Group Group Group Group Initiatives Group Total(1) Management fees $323,171 $47,396 $90,733 $46,201 $17,380 $— $524,881 Fee related perfo
Slide 28: Financial Details – Segments
Financial Details – Segments Six months ended June 30, 2022 Private Real Secondary Operations Credit Equity Assets Solutions Strategic Management $ in thousands Group Group Group Group Initiatives Group Total(1) Management fees $626,330 $93,353 $163,220 $90,705 $34,194 $— $1,007,802 Fee related perf
Slide 29: Weighted Average Shares
Weighted Average Shares Q2-22 Q2-21 Common Shares, Common Shares, Total Shares As Adjusted(1) Total Shares As Adjusted(1) Weighted average shares of Class A and non-voting common stock 175,157,558 175,157,558 164,793,968 164,793,968 Ares Operating Group Units exchangeable into shares of Class A comm
Slide 30: AUM Rollforward
AUM Rollforward Q2-22 AUM Rollforward Secondary Strategic $ in millions Credit Private Equity Real Assets Solutions Initiatives Total Q1-22 Ending Balance $196,923 $33,565 $58,527 $23,468 $12,536 $325,019 Net new par/equity commitments 5,374 230 3,365 865 432 10,266 Net new debt commitments 4,183 —
Slide 31: FPAUM Rollforward
FPAUM Rollforward Q2-22 FPAUM Rollforward Secondary Strategic $ in millions Credit Private Equity Real Assets Solutions Initiatives Total Q1-22 Ending Balance $121,436 $16,141 $36,127 $18,070 $7,272 $199,046 Commitments 3,967 — 2,077 811 416 7,271 Subscriptions/deployment/increase in leverage 8,413
Slide 32: AUM and FPAUM by Strategy
AUM and FPAUM by Strategy As of June 30, 2022 $ in billions AUM % AUM FPAUM % FPAUM Credit Syndicated Loans $33.6 17% $32.1 25% High Yield 3.2 2 3.2 2 Multi-Asset Credit 5.4 3 4.9 4 Alternative Credit 19.2 10 12.4 10 U.S. Direct Lending(1) 92.7 46 51.8 40 European Direct Lending 47.8 22 25.3 19 Cred
Slide 33: Balance Sheet Investments by Strategy
Balance Sheet Investments by Strategy(1) $ in millions June 30, 2022 December 31, 2021 Credit Syndicated Loans(2) $85.5 $103.8 Multi-Asset Credit 10.8 12.0 Alternative Credit 30.7 27.5 U.S. Direct Lending 114.1 116.8 European Direct Lending 32.7 33.0 Credit $273.8 $293.1 Private Equity Corporate Pri
Slide 34: Significant Fund Performance Metrics
Significant Fund Performance Metrics The following table presents the performance data for the significant funds that are not drawdown funds: As of June 30, 2022 Returns(%)(1) Quarter-to-Date Year-to-Date Since Inception (2) Year of Primary Investment ($ in millions) Inception AUM Gross Net Gross Ne
Slide 35: 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, 2022 Original Capital MOIC IRR(%) Year of Capital Invested Realized Unrealized Total Primary Investment ($ in millions) Inception AUM Commitments to Date
Slide 36: 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, 2022 Capital MOIC IRR(%) Year of Original Capital Invested to Realized Unrealized Total Primary Investment ($ in millions) Inception AUM Commitm
Slide 37: 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, 2022 Capital MOIC IRR(%) Year of Original Capital Invested to Realized Unrealized Total Primary Investment ($ in millions) Inception AUM Commitm
Slide 38: 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 39: 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 40: Significant Fund Performance Metrics Endnotes (cont'd)
Significant Fund Performance Metrics Endnotes (cont’d) Real Assets 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.
Slide 41: Significant Fund Performance Metrics Endnotes (cont'd)
Significant Fund Performance Metrics Endnotes (cont’d) Secondary Solutions 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 partner
Slide 42: Supplemental Performance Metrics
Supplemental Performance Metrics The following table presents the performance data for commingled funds that were previously reported as significant funds: As of June 30, 2022 Original MOIC IRR(%) Year of Capital Capital Invested Realized Unrealized Total Primary Investment ($ in millions) Inception
Slide 43: Supplemental Performance Metrics Endnotes
Supplemental Performance Metrics Endnotes 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. Realized proceeds excludes any proceeds related to bridge financings. 2. Unrea
Slide 44: Supplemental Performance Metrics Endnotes (cont'd)
Supplemental Performance Metrics Endnotes (cont’d) Real Assets 1. For the infrastructure opportunities funds, realized proceeds represent the sum of all cash dividends, interest income, other fees and cash proceeds from realizations of interests in portfolio investments. Realized proceeds excludes a
Slide 45: Supplemental Performance Metrics Endnotes (cont'd)
Supplemental 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 the
Slide 46: Glossary
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 un
Slide 47: Glossary (cont'd)
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 and
Slide 48: Glossary (cont'd)
Glossary (cont’d) Operations Management In addition to our reportable segments, we have an Operations Management Group (the “OMGˮ) that consists of shared Group resource groups to support our reportable segments by providing infrastructure and administrative support in the areas of accounting/financ
Slide 49: Glossary (cont'd)
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 fluctuations o