Ares Management Corporation · NYSE:ARES
Ares Management — Q1 2020 Earnings Presentation
38 slides from Ares Management's earnings presentation, May 6, 2020
Slide 1: First Quarter 2020 Earnings Presentation
Exhibit 99.2 First 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: First Quarter 2020 Highlights
First Quarter 2020 Highlights • Total Assets Under Management ("AUM") of $148.6 billion • Total Fee Paying AUM ("FPAUM") of $102.0 billion Assets Under • Available Capital of $33.2 billion Management • AUM Not Yet Paying Fees available for future deployment of $21.0 billion • Raised $6.6 billion in
Slide 4: Gross New Capital Commitments
#ACACAC #1E3154 Gross New Capital Commitments(1) #225070 #828282 $ in billions Q1 2020 Comments Credit Group ARCC and affiliates $1.5 Additional debt and equity commitments to ARCC and IHAM #D2D2D2 #49749B Alternative Credit 0.9 New and additional equity commitments U.S. Direct Lending 0.9 New and a
Slide 5: Assets Under Management
Assets Under Management AUM as of March 31, 2020 was $148.6 billion, an increase of 8.8% from prior year(1) • The increase of $11.9 billion was driven by capital raising primarily across U.S. direct lending, syndicated loans, which includes the acquisition of Crestline Denali, and alternative credit
Slide 6: Management Fees by Duration and Fund Type
Management Fees by Duration and Fund Type For the three months ended March 31, 2020: • 78% of management fees are earned from funds with three or more years remaining in duration • 87% of management fees are earned from permanent capital, closed end funds and CLOs Duration Fund Type 1 3% 12% 4 % 7 2
Slide 7: AUM and FPAUM by Duration
AUM and FPAUM by Duration As of March 31, 2020, approximately 69% of AUM and 71% of FPAUM had a duration longer than 3 years • At time of fund closing, the initial duration was greater than 7 years for approximately 74% of AUM AUM: $148.6 billion FPAUM: $102.0 billion 1 7 2 % 2 3% 7 13% 4% 15% 17% %
Slide 8: Available Capital and AUM Not Yet Paying Fees
Available Capital and AUM Not Yet Paying Fees Available Capital as of March 31, 2020 was $33.2 billion, a decrease of 5.4% from prior year • The decrease of $1.9 billion was driven primarily by net deployment in U.S. and European direct lending, alternative credit, and corporate private equity funds
Slide 9: AUM Not Yet Paying Fees
AUM Not Yet Paying Fees As of March 31, 2020, AUM Not Yet Paying Fees of $23.1 billion could generate approximately $222.3 million in potential incremental annual management fees, of which $199.8 million relates to the $21.0 billion of AUM available for future deployment(1) • The $21.0 billion of AU
Slide 10: Incentive Eligible AUM and Incentive Generating AUM
Incentive Eligible AUM and Incentive Generating AUM Incentive Eligible AUM as of March 31, 2020 was $84.5 billion, an increase of 5.8% from prior year • The increase of $4.6 billion was primarily driven by capital raising across the U.S. direct lending, special opportunities, alternative credit and
Slide 11: Capital Deployment
Capital Deployment(1) Q1-20 Capital Deployment Breakdown: $6.5 billion • Total Gross Invested Capital during Q1-20 was $6.5 billion compared to $7.4 billion during Q1-19 ($ in billions) • Of the total amount, $5.5 billion was related to deployment in our drawdown funds compared to $6.4 billion for t
Slide 12: GAAP Statements of Operations
GAAP Statements of Operations $ in thousands, except share data Quarter Ended March 31, 2020 2019 Revenues Management fees (includes ARCC Part I Fees of $43,923 and $38,393 for the three months ended March 31, 2020 and 2019, respectively) $263,849 $224,659 Carried interest allocation (230,876) 197,2
Slide 13: RI and Other Measures Financial Summary
RI and Other Measures Financial Summary $ in thousands, except share data (and as otherwise noted) Quarter Ended March 31, LTM Ended March 31, 2020 2019 % Change 2020 2019 % Change Management fees(1) $273,778 $233,012 17% $1,053,296 $872,930 21% Other fees 3,872 3,075 26% 18,875 21,290 (11)% Compens
Slide 14: GAAP to Non-GAAP Reconciliation – Unconsolidated Reporting Basis
GAAP to Non-GAAP Reconciliation – Unconsolidated Reporting Basis $ in thousands Quarter Ended March 31, LTM Ended March 31, 2020 2019 2020 2019 Realized Income and Fee Related Earnings: Income (loss) before taxes $(296,413) $135,960 $(7,193) $258,255 Adjustments: Depreciation and amortization expens
Slide 15: GAAP to Non-GAAP Reconciliation (cont'd)
GAAP to Non-GAAP Reconciliation – Unconsolidated Reporting Basis (cont'd) $ in thousands Quarter Ended March 31, LTM Ended March 31, 2020 2019 2020 2019 Performance income and net investment income reconciliation: Carried interest allocation $(230,876) $197,293 $193,703 $185,574 Incentive fees (3,24
Slide 16: Credit Group
Credit Group(1) • Management and other fees increased by 21% for Q1-20 compared to Q1-19, 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 24% for Q1-20 compared to Q1-19, primarily driv
Slide 17: Private Equity Group
Private Equity Group(1) • Management and other fees increased for Q1-20 compared to Q1-19, primarily due to additional management fees generated with the launch of the special opportunities and corporate private equity continuation funds subsequent to the first quarter of 2019 • Fee Related Earnings
Slide 18: Real Estate Group
Real Estate Group(1) • Management and other fees increased by 33% for Q1-20 compared to Q1-19, primarily driven by new commitments and $0.4 million in one-time catch up fees from a U.S. real estate equity fund and by $2.0 million of one-time deferred fees across multiple European real estate equity
Slide 19: Realized Income per Share Data
Realized Income per Share Data Quarter Ended March 31, $ in thousands, except share data 2020 2019 After-tax Realized Income, net of Series A Preferred Stock dividends Realized Income before taxes $134,145 $104,632 Entity level foreign, state and local taxes (1,797) (1,839) Series A Preferred Stock
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 March 31, 2020, our balance sheet included $1,167.7 million in cash and cash equivalents and $1,046.8 million in debt obligations with $800.0 million d
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
Financial Details – Segments Three Months Ended March 31, 2020 Private Real Operations Credit Equity Estate Management (1) $ in thousands Group Group Group Group Total Management fees (Credit Group includes ARCC Part I Fees of $43,923) $197,437 $52,157 $24,184 $— $273,778 Other fees 3,058 110 704 —
Slide 24: AUM and FPAUM Rollforward
AUM and FPAUM Rollforward Q1-20 Total AUM Rollforward ($ in millions) LTM Total AUM Rollforward ($ in millions) Credit Private Equity Real Estate Total Credit Private Equity Real Estate Total Q4-19 Ending Balance $110,543 $25,166 $13,207 $148,916 Q1-19 Ending Balance $101,076 $23,778 $11,810 $136,66
Slide 25: AUM and FPAUM by Strategy
AUM and FPAUM by Strategy As of March 31, 2020 $ in billions AUM % AUM FPAUM % FPAUM Credit Syndicated Loans $24.7 22% $24.1 32% High Yield 2.8 2 2.9 4 Multi-Asset Credit 2.2 2 1.7 2 Alternative Credit 7.5 7 4.2 6 U.S. Direct Lending(1) 49.2 44 28.8 38 European Direct Lending 26.1 23 14.1 18 Credit
Slide 26: Balance Sheet Investments by Strategy
Balance Sheet Investments by Strategy(1) $ in millions March 31, 2020 December 31, 2019 Credit Syndicated Loans(2) $64.9 $104.7 Multi-Asset Credit 29.4 29.5 Alternative Credit 16.7 21.0 U.S. Direct Lending 75.6 61.3 European Direct Lending 32.2 32.8 Credit $218.8 $249.3 Private Equity ACOF I $0.1 $0
Slide 27: Significant Fund Performance Metrics
Significant Fund Performance Metrics The following table presents the performance data for the significant funds in the Credit Group that are not drawdown funds: As of March 31, 2020 Returns (%)(1) Current Quarter Year-To-Date Since Inception(2) AUM Year of Inception ($ in millions) Gross Net Gross
Slide 28: 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 March 31, 2020 Credit MOIC IRR(%) Year of Original Capital Cumulative Realized Unrealized (5) (6) (7) (8) (9) (10) ($ in millions) Inception AUM Commitments Inves
Slide 29: 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 30: 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 31: Weighted Average Shares
Weighted Average Shares Q1-20 Q1-19 Common Shares, Common Shares, Total Shares As Adjusted(3) Total Shares As Adjusted(3) Weighted average shares of Class A common stock 118,366,539 118,366,539 102,906,494 102,906,494 Ares Operating Group Units exchangeable into shares of Class A common stock(1) 116
Slide 32: Additional Information: AUM Mix by Investor
Additional Information AUM Mix by Investor Institutional Direct - 67%(2) Public Entity & Related l 650+ institutional investors(1) (2) l 200,000+ retail investors across our public funds 15% 25% Total Direct Institutional Investors: 850+ 18% Pension Bank/ Private Bank Insurance 13% Sovereign Wealth
Slide 33: 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 34: 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 35: GAAP to Non-GAAP Reconciliation (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 36: Glossary
Glossary ARCC Part I Fees ARCC Part I Fees refers to a quarterly performance income on the net investment income from ARCC. Such fees from ARCC are classified as management fees as they are paid quarterly, predictable and recurring in nature, not subject to contingent repayment and are typically cas
Slide 37: 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 f
Slide 38: 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 structured as either an incentive fee or as