Ares Management Corporation · NYSE:ARES
Ares Management — Q1 2021 Earnings Presentation
44 slides from Ares Management's earnings presentation, Apr 29, 2021
Slide 1: Ares Management Corporation Reports First Quarter Results
Ares Management Corporation Reports First Quarter Results LOS ANGELES--Ares Management Corporation (NYSE:ARES) today reported its financial results for its first quarter ended March 31, 2021. GAAP net income attributable to Ares Management Corporation was $58.4 million for the quarter ended March 31
Slide 2: Conference Call and Webcast Information
Conference Call and Webcast Information Ares will host a conference call on April 29, 2021 at 12:00 p.m. (Eastern Time) to discuss first 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 First Quarter 2021
Earnings Presentation First 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: First Quarter 2021 Highlights
First Quarter 2021 Highlights ∙ Total Assets Under Management ("AUM") of $207.2 billion ∙ Total Fee Paying AUM ("FPAUM") of $127.6 billion Assets Under ∙ Available Capital of $56.8 billion Management ∙ AUM Not Yet Paying Fees available for future deployment of $37.6 billion ∙ Raised $10.6 billion in
Slide 6: Gross New Capital Commitments
Gross New Capital Commitments(1) $ in billions Q1 2021 Comments Credit Group European Direct Lending $1.6 New and additional equity commitments to various funds ARCC and affiliates 1.9 Additional debt and equity commitments to ARCC and affiliates Alternative Credit 1.1 New and additional equity comm
Slide 7: Assets Under Management
Assets Under Management AUM as of March 31, 2021 was $207.2 billion, an increase of 39.4% from prior year(1) ∙ The increase of $58.6 billion was driven by capital raised within each of our segments, including ACE V, Pathfinder, our sixth flagship corporate private equity fund, ASOF, by each strategy
Slide 8: Management Fees by Duration and Fund Type
Management Fees by Duration and Fund Type For the quarter ended March 31, 2021: ∙ 77% of management fees were earned from funds with three or more years remaining in duration ∙ 89% of management fees were earned from permanent capital, closed end funds and CLOs Duration Fund Type 2% 1% 3% 12% 8% 33%
Slide 9: AUM and FPAUM by Duration
AUM and FPAUM by Duration As of March 31, 2021, approximately 67% of AUM and 68% of FPAUM had a duration longer than 3 years ∙ Initial duration exceeded 7 years for approximately 73% of AUM based on each fund's first close AUM FPAUM 6% 6% 12% 15% 17% 18% 10% 13% 67% 68% 10% 8% 19% 16% 26% 24% Perman
Slide 10: Available Capital and AUM Not Yet Paying Fees
Available Capital and AUM Not Yet Paying Fees Available Capital as of March 31, 2021 was $56.8 billion, an increase of 71.1% from prior year ∙ The increase of $23.6 billion was driven primarily by fundraising in U.S. and European direct lending, including ACE V, in alternative credit, including Path
Slide 11: AUM Not Yet Paying Fees
AUM Not Yet Paying Fees As of March 31, 2021, AUM Not Yet Paying Fees of $40.2 billion could generate approximately $423.1 million in potential incremental annual management fees, of which $395.7 million relates to the $37.6 billion of AUM available for future deployment(1) ∙ The $37.6 billion of AU
Slide 12: Incentive Eligible AUM and Incentive Generating AUM
Incentive Eligible AUM and Incentive Generating AUM Incentive Eligible AUM as of March 31, 2021 was $124.4 billion, an increase of 47.2% from prior year ∙ The increase of $39.9 billion was primarily driven by capital raising across U.S. and European direct lending and alternative credit within the C
Slide 13: Capital Deployment
Capital Deployment(1) Q1-21 Capital Deployment Breakdown ($ in billions) Total Gross Invested Capital during Q1-21 was $10.3 billion compared to $6.5 billion during Q1-20 $0.8 ∙ Of the total amount, $8.9 billion was related to deployment $1.4 by our drawdown funds compared to $5.5 billion for the sa
Slide 14: GAAP Statements of Operations
GAAP Statements of Operations Quarter ended March 31, $ in thousands, except share data 2021 2020 Revenues Management fees $320,273 $263,849 Carried interest allocation 297,535 (230,876) Incentive fees 2,820 (3,249) Principal investment income (loss) 25,100 (26,723) Administrative, transaction and o
Slide 15: RI and Other Measures Financial Summary
RI and Other Measures Financial Summary Quarter ended March 31, LTM ended March 31, $ in thousands, except share data (and as otherwise noted) 2021 2020 % Change 2021 2020 % Change (1) Management fees $327,463 $273,778 20% $1,240,250 $1,053,296 18% Other fees 6,804 3,872 76 22,880 18,875 21 Compensa
Slide 16: GAAP to Non-GAAP Reconciliation – Unconsolidated Reporting Basis
GAAP to Non-GAAP Reconciliation – Unconsolidated Reporting Basis Quarter ended March 31, LTM ended March 31, $ in thousands 2021 2020 2021 2020 Realized Income and Fee Related Earnings: Income (loss) before taxes $190,064 $(296,413) $865,955 $(7,193) Adjustments: Amortization of intangibles 8,822 1,
Slide 17: GAAP to Non-GAAP Reconciliation – Unconsolidated Reporting Basis (cont'd)
GAAP to Non-GAAP Reconciliation – Unconsolidated Reporting Basis (cont'd) Quarter ended March 31, LTM ended March 31, $ in thousands 2021 2020 2021 2020 Performance income and net investment income reconciliation: Carried interest allocation $297,535 $(230,876) $1,034,019 $193,703 Incentive fees 2,8
Slide 18: Credit Group
Credit Group(1) ∙ Management and other fees increased by 19% for Q1-21 compared to Q1-20, primarily driven by deployment in funds in the U.S. and European direct lending strategies ∙ Fee Related Earnings increased by 29% for Q1-21 compared to Q1-20, primarily driven by higher management fees ∙ Reali
Slide 19: Private Equity Group
Private Equity Group(1) ∙ Management and other fees decreased by 5% for Q1-21 compared to Q1-20, primarily due to the step down in fee rate and fee basis for ACOF V as a result of the initiation of fees for the sixth flagship corporate private equity fund in Q4-20 ∙ Fee Related Earnings decreased by
Slide 20: Real Estate Group
Real Estate Group(1) ∙ Management and other fees increased by 22% for Q1-21 compared to Q1-20, primarily driven by management fees generated from AREOF III, including $2.8 million in catch-up fees, and our third European value add real estate equity fund, including $0.6mm in catch-up fees ∙ Fee Rela
Slide 21: Realized Income per Share Data
Realized Income per Share Data Quarter ended March 31, $ in thousands, except share data 2021 2020 After-tax Realized Income, net of Series A Preferred Stock dividends Realized Income before taxes $136,793 $134,145 Entity level foreign, state and local taxes (3,261) (1,797) (1) Series A Preferred St
Slide 22: 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, 2021, our balance sheet included $609.9 million in cash and cash equivalents and $811.3 million in debt obligations with $168.0 million amounts
Slide 23: 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 Co-Founder, Chief Executive Officer Michael Carrier Partner/Head of Ares Management, LLC
Slide 24: Appendix
Appendix
Slide 25: Financial Details – Segments
Financial Details – Segments Three Months Ended March 31, 2021 Private Real Operations Credit Equity Estate Strategic Management $ in thousands Group Group Group Initiatives Group Total(1) Management fees $232,877 $49,331 $29,632 $15,623 $— $327,463 Other fees 5,969 108 648 79 — 6,804 Compensation a
Slide 26: AUM Rollforward
AUM Rollforward Q1-21 AUM Rollforward Strategic $ in millions Credit Private Equity Real Estate Initiatives Total Q4-20 Ending Balance $145,472 $27,439 $14,808 $9,261 $196,980 Net new par/equity commitments 4,519 (21) 730 700 5,928 Net new debt commitments 2,543 — 1,880 — 4,423 Capital reductions (5
Slide 27: FPAUM Rollforward
FPAUM Rollforward Q1-21 FPAUM Rollforward Strategic $ in millions Credit Private Equity Real Estate Initiatives Total Q4-20 Ending Balance $88,017 $21,172 $10,252 $6,596 $126,037 Commitments 1,585 79 496 (231) 1,929 Subscriptions/deployment/increase in leverage 4,539 592 337 538 6,006 Capital reduct
Slide 28: AUM and FPAUM by Strategy
AUM and FPAUM by Strategy As of March 31, 2021 $ in billions AUM % AUM FPAUM % FPAUM Credit Syndicated Loans $28.4 19% $26.9 29% High Yield 2.9 2 2.9 3 Multi-Asset Credit 3.3 2 2.8 3 Alternative Credit 14.0 9 7.0 8 U.S. Direct Lending(1) 59.4 39 32.3 35 European Direct Lending 43.1 29 19.7 22 Credit
Slide 29: Balance Sheet Investments by Strategy
Balance Sheet Investments by Strategy(1) $ in millions March 31, 2021 December 31, 2020 Credit Syndicated Loans(2) $106.6 $107.7 Multi-Asset Credit 6.7 6.6 Alternative Credit 23.5 23.0 U.S. Direct Lending 58.7 53.5 European Direct Lending 35.5 35.7 Credit $231.0 $226.5 Private Equity ACOF IV $28.6 $
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 March 31, 2021 Returns(%)(1) Current Quarter Year -to-Date Since Inception (2) Primary Investment ($ in millions) Year of Inception
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 March 31, 2021 Capital MOIC IRR(%) Year of Original Capital Invested to Realized Unrealized Total Primary Investment ($ in millions) Inception AUM Commit
Slide 32: 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 33: 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 34: 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 35: 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 March 31, 2021 Original MOIC IRR(%) Year of Capital Capital Invested Realized Unrealized Total Primary Investment ($ in mil
Slide 36: 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 37: 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 38: Weighted Average Shares
Weighted Average Shares Q1-21 Q1-20 Common Shares, Common Shares, Total Shares As Adjusted(3) Total Shares As Adjusted(3) Weighted average shares of Class A common stock 149,271,822 149,271,822 118,366,539 118,366,539 Ares Operating Group Units exchangeable into shares of Class A common stock(1) 112
Slide 39: 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 40: 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 41: 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 42: 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 43: 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 44: 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