Ares Management Corporation · NYSE:ARES
Ares Management — Q3 2023 Earnings Presentation
46 slides from Ares Management's earnings presentation, Oct 31, 2023
Slide 1: Earnings Presentation Third Quarter 2023
Earnings Presentation Third 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: Third Quarter 2023 Highlights
3 Assets Under Management Q3-23 Financial Results Corporate Actions Recent Developments Third Quarter 2023 Highlights 1. Net inflows of capital represents gross capital commitments less redemptions. 2. Unconsolidated management fees includes $12.2 million from Consolidated Funds that are eliminated
Slide 4: Gross New Capital Commitments
4 Gross New Capital Commitments(1) $ in billions Q3 2023 Commentary Credit Group U.S. Direct Lending $9.2 Debt and equity commitments to various funds, including equity commitments of $6.5 billion and debt commitments of $2.0 billion for our third U.S. senior direct lending fund Business Development
Slide 5: Assets Under Management
5 Q3-22 Q2-23 Q3-23 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 September 30, 2023 was $394.9 billion, an increase of 16% from prior year(1) •
Slide 6: Perpetual Capital
6 Perpetual Capital Perpetual Capital AUM Perpetual Capital as of September 30, 2023 was $103.7 billion, an increase of 17% from prior year • The increase of $14.8 billion was primarily driven by: ◦ commitments in our U.S. direct lending and alternative credit strategies, capital raised by ASIF and
Slide 7: AUM and Management Fees by Type
7 8% 7% 6% 5% 61% 13% 26% 8% 6% 5% 50% 5% AUM and Management Fees by Type 87% 1. Long-dated funds generally have a contractual life of five years or more at inception. For the quarter ended September 30, 2023: • 87% of assets under management were perpetual capital or long-dated funds • 95% of manag
Slide 8: Available Capital and AUM Not Yet Paying Fees
8 Q3-22 Q2-23 Q3-23 Available Capital and AUM Not Yet Paying Fees Available Capital as of September 30, 2023 was $104.6 billion, an increase of 19% from prior year • The increase of $16.8 billion was primarily driven by: ◦ commitments to the U.S. and European direct lending and alternative credit st
Slide 9: AUM Not Yet Paying Fees Available for Future Deployment
9 $65.7 $7.5 $1.1 $52.9 $5.2 $6.2 $1.4 AUM Not Yet Paying Fees Available for Future Deployment AUM Not Yet Paying Fees As of September 30, 2023, AUM Not Yet Paying Fees includes $65.7 billion of AUM available for future deployment that could generate approximately $647.4 million in potential increme
Slide 10: Incentive Eligible AUM and Incentive Generating AUM
10 Q3-22 Q2-23 Q3-23 Incentive Eligible AUM and Incentive Generating AUM ($ in billions) ($ in billions) Credit(3) Private Equity Real Assets Secondaries(3) Other Total Incentive Generating AUM $62.4 $21.1 $16.3 $6.8 $0.4 $107.0 + Uninvested IEAUM 52.5 7.8 10.4 7.0 1.0 78.7 + IEAUM below hurdle 8.2
Slide 11: Capital Deployment
11 $12.6 $1.0 $2.8 $0.4 Q3-23 Gross Capital Deployment Capital Deployment ($ in billions) (2) Capital Deployment in Drawdown Funds ($ in billions) Total Gross Capital Deployment during Q3-23 was $16.7 billion compared to $18.3 billion during Q3-22 • Deployment by our drawdown funds was $10.2 billion
Slide 12: GAAP Statements of Operations
12 Three months ended September 30, Nine months ended September 30, $ in thousands, except share data 2023 2022 2023 2022 Revenues Management fees $637,517 $548,458 $1,853,304 $1,546,350 Carried interest allocation (28,126) 192,186 541,828 417,779 Incentive fees 16,454 8,882 33,327 29,979 Principal
Slide 13: Financial Summary: RI and Other Measures
13 RI and Other Measures Financial Summary Three months ended September 30, Nine months ended September 30, $ in thousands, except share data (and as otherwise noted) 2023 2022 % Change 2023 2022 % Change Management fees(1) $643,649 $551,768 17% $1,868,020 $1,559,570 20% Fee related performance reve
Slide 14: GAAP to Non-GAAP Reconciliation – Unconsolidated Reporting Basis
14 GAAP to Non-GAAP Reconciliation – Unconsolidated Reporting Basis Three months ended September 30, Nine months ended September 30, $ in thousands 2023 2022 2023 2022 Realized Income and Fee Related Earnings: Income (loss) before taxes $226,872 $(60,378) $849,963 $167,997 Adjustments: Amortization
Slide 15: GAAP to Non-GAAP Reconciliation (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 24-25 for complete financial results. 2. Composite returns are calculated by ass
Slide 17: Private Equity Group
17 Private Equity Group(1) Note: Past performance is not indicative of future results. The Private Equity Group had ~100 investment professionals, ~45 portfolio companies and ~10 active funds and related co-investment vehicles as of September 30, 2023. 1. This table is a financial summary only and s
Slide 18: Real Assets Group
18 Real Assets Group(1) Note: Past performance is not indicative of future results. The Real Assets Group had ~310 investment professionals, ~510 properties, ~70 infrastructure assets and ~60 active funds and related co- investment vehicles as of September 30, 2023. 1. This table is a financial summ
Slide 19: Secondaries Group
19 Secondaries Group(1) Note: Past performance is not indicative of future results. The Secondaries Group had ~80 investment professionals, ~875 limited partnership interests and ~70 active funds and related co- investment vehicles as of September 30, 2023. 1. This table is a financial summary only
Slide 20: Realized Income per Share Data
20 Realized Income per Share Data Three months ended September 30, Nine months ended September 30, $ in thousands, except share data 2023 2022 2023 2022 After-tax Realized Income Realized Income before taxes $264,453 $243,442 $830,955 $712,704 Entity level foreign, state and local taxes (7,712) (4,3
Slide 21: Balance Sheet
21 36% 41% 19% 5% Substantial balance sheet value related to investments primarily in Ares managed vehicles and net accrued performance income • As of September 30, 2023, our balance sheet included $311.8 million in cash and cash equivalents and $2,340.2 million in debt obligations, including $765.0
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 (Q3 2023)
24 Financial Details – Segments 1. Includes results of the reportable segments on a combined basis together with the Operations Management Group. Please refer to “GAAP to Non-GAAP Reconciliation – Unconsolidated Reporting Basisˮ on slides 14-15. 2. Includes fee related performance compensation of $0
Slide 25: Financial Details – Segments (Nine Months 2023)
25 Nine months ended September 30, 2023 $ in thousands Credit Group Private Equity Group Real Assets Group Secondaries Group Other Operations Management Group Total(1) Management fees $1,272,273 $166,622 $285,463 $124,597 $19,065 $— $1,868,020 Fee related performance revenues 866 — 334 5,737 — — 6,9
Slide 26: Weighted Average Shares
26 Weighted Average Shares 1. Represents proportional dilutive impact based upon the weighted average percentage of Ares Operating Group owned by Ares Management Corporation (61.03% and 59.74% as of September 30, 2023 and 2022, respectively). 2. We apply the treasury stock method to determine the di
Slide 27: AUM Rollforward
27 Credit • AUM increased by 25% from Q3-22, primarily driven by commitments to U.S. direct lending funds, our sixth flagship European direct lending fund and Pathfinder II Private Equity • AUM decreased by 3% from Q3-22, primarily driven by distributions from ACOF IV Real Assets • AUM decreased by
Slide 28: FPAUM Rollforward
28 Credit • FPAUM increased by 19% from Q3-22, primarily driven by deployment of capital in funds across U.S. and European direct lending and alternative credit and capital raised by our business development companies Private Equity • FPAUM increased by 2% from Q3-22, primarily driven by deployment
Slide 29: AUM and FPAUM by Strategy
29 AUM and FPAUM by Strategy 1. AUM includes ARCC, IHAM and Senior Direct Lending Program ("SDLP") AUM of $27.3 billion, $11.2 billion and $4.0 billion, respectively. ARCC’s wholly owned portfolio company, IHAM, an SEC- registered investment adviser, manages 23 vehicles and serves as the sub-manager
Slide 30: Balance Sheet Investments by Strategy
30 Balance Sheet Investments by Strategy(1) $ in millions As of September 30, 2023 As of December 31, 2022 Credit Liquid Credit(2) $119.7 $93.0 Alternative Credit 55.9 54.6 U.S. Direct Lending 73.7 111.9 European Direct Lending 40.6 33.4 Asia Credit 25.9 18.7 Credit $315.8 $311.6 Private Equity Corp
Slide 31: Significant Fund Performance Metrics
31 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 September 30, 2023 unless otherwise noted. The above table includ
Slide 32: Significant Fund Performance Metrics (cont'd)
32 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 33: Significant Fund Performance Metrics (cont'd)
33 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 Se
Slide 34: Significant Fund Performance Endnotes: Credit
34 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 35: Significant Fund Performance Endnotes: Private Equity
35 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 36: Significant Fund Performance Endnotes: Real Assets
36 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 37: Significant Fund Performance Endnotes: Secondaries
37 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 38: Supplemental Performance Metrics
38 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 September 30, 2023 unless otherwise noted. Pleas
Slide 39: Supplemental Performance Metrics (cont'd)
39 Supplemental Performance Metrics (cont'd) The following table presents the performance data for commingled funds that were previously reported as significant funds: As of September 30, 2023 Year of Inception Original Capital Commitments Capital Invested to Date Realized Value(1) Unrealized Value(
Slide 40: Supplemental Performance Metrics Endnotes
40 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 41: Supplemental Performance Metrics Endnotes (cont'd)
41 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 42: Supplemental Performance Metrics Endnotes: Secondaries
42 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 43: Glossary
43 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 44: Glossary (cont'd)
44 Glossary (cont’d) Fee Paying AUM Fee Paying AUM or “FPAUMˮ refers to the AUM from which we directly earn management fees. FPAUM is equal to the sum of all the individual fee bases of our funds that directly contribute to our management fees. For our funds other than CLOs, our FPAUM represents the
Slide 45: Glossary (cont'd)
45 Glossary (cont’d) Net Inflows of Capital Net Inflows of Capital refers to net new commitments during the period, including equity and debt commitments and gross inflows into our open-ended managed accounts and sub-advised accounts, as well as new debt and equity issuances by our publicly-traded v
Slide 46: Glossary (cont'd)
46 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