Ares Management Corporation · NYSE:ARES
Ares Management — Q3 2022 Earnings Presentation
47 slides from Ares Management's earnings presentation, 2022
Slide 1: Earnings Presentation Third Quarter 2022
Exhibit 99.2 Earnings Presentation Third Quarter 2022
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: Third Quarter 2022 Highlights
Third Quarter 2022 Highlights • Total Assets Under Management (“AUMˮ) of $341.4 billion • Total Fee Paying AUM (“FPAUMˮ) of $218.6 billion Assets Under • Available Capital of $87.8 billion Management • AUM Not Yet Paying Fees available for future deployment of $45.8 billion • Raised $14.2 billion in
Slide 4: Gross New Capital Commitments
Gross New Capital Commitments(1) $ in billions Q3 2022 Comments Credit Group Primarily new and additional debt and equity commitments to various funds, including final equity commitments of $0.3 U.S. Direct Lending $2.7 billion for Ares Sports, Media and Entertainment Finance, L.P. (“SMEˮ) and relat
Slide 5: Assets Under Management
Assets Under Management AUM as of September 30, 2022 was $341.4 billion, an increase of 21% from prior year(1) • The increase of $59.4 billion was primarily driven by: ◦ fundraising from SDL II and our open-end core alternative credit fund in Credit, ASOF II in Private Equity and from funds in the r
Slide 6: Perpetual Capital
Perpetual Capital Perpetual Capital as of September 30, 2022 was $88.9 billion, an increase of 24% from prior year • The increase of $17.4 billion was primarily driven by: ◦ fundraising in our non-traded REITs and in our U.S. direct lending, alternative credit and real estate debt strategies Perpetu
Slide 7: AUM and Management Fees by Type
AUM and Management Fees by Type For the quarter ended September 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% 38% 6% 88% 95% 51% 62%
Slide 8: Available Capital and AUM Not Yet Paying Fees
Available Capital and AUM Not Yet Paying Fees Available Capital as of September 30, 2022 was $87.8 billion, an increase of 2% from prior year • The increase of $2.0 billion was primarily driven by: ◦ fundraising from ASOF II and our first APAC direct lending fund; and ◦ the acquisition of Infrastruc
Slide 9: AUM Not Yet Paying Fees
AUM Not Yet Paying Fees As of September 30, 2022, AUM Not Yet Paying Fees includes $45.8 billion of AUM available for future deployment which could generate approximately $441.3 million in potential incremental annual management fees(1) • The $45.8 billion of AUM Not Yet Paying Fees available for fu
Slide 10: Incentive Eligible AUM and Incentive Generating AUM
Incentive Eligible AUM and Incentive Generating AUM Incentive Eligible AUM as of September 30, 2022 was $197.7 billion, an increase of 16% from prior year • The increase of $27.2 billion was primarily driven by: ◦ fundraising across U.S. direct lending, alternative credit, special opportunities, inf
Slide 11: Capital Deployment
Capital Deployment Total Gross Invested Capital during Q3-22 was $18.3 billion compared to $19.3 billion during Q3-21 • Of the total amount, $12.7 billion was related to deployment by our drawdown funds compared to $11.0 billion for the same period in 2021 • Of our drawdown funds, the most active in
Slide 12: GAAP Statements of Operations
GAAP Statements of Operations Three months ended September 30, Nine months ended September 30, $ in thousands, except share data 2022 2021 2022 2021 Revenues Management fees $548,458 $448,262 $1,546,350 $1,135,821 Carried interest allocation 192,186 460,651 417,779 1,610,707 Incentive fees 8,882 696
Slide 13: RI and Other Measures Financial Summary
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) 2022 2021 % Change 2022 2021 % Change Management fees(1) $551,768 $453,950 22% $1,559,570 $1,154,248 35% Fee related performance revenue
Slide 14: GAAP to Non-GAAP Reconciliation – Unconsolidated Reporting Basis
GAAP to Non-GAAP Reconciliation – Unconsolidated Reporting Basis Three months ended September 30, Nine months ended September 30, $ in thousands 2022 2021 2022 2021 Realized Income and Fee Related Earnings: Income (loss) before taxes $(60,378) $246,988 $167,997 $756,829 Adjustments: Amortization of
Slide 15: GAAP to Non-GAAP Reconciliation – Unconsolidated Reporting Basis (cont'd)
GAAP to Non-GAAP Reconciliation – Unconsolidated Reporting Basis (cont'd) Three months ended September 30, Nine months ended September 30, $ in thousands 2022 2021 2022 2021 Performance income and net investment income reconciliation: Carried interest allocation $192,186 $460,651 $417,779 $1,610,707
Slide 16: Credit Group
Credit Group(1) • Management and other fees increased by 28% for Q3-22 compared to Q3-21, primarily driven by deployment in funds in the U.S. and European direct lending strategies and alternative credit • Fee Related Earnings increased by 32% for Q3-22 compared to Q3-21, primarily driven by the inc
Slide 17: Private Equity Group
Private Equity Group(1) • Management and other fees decreased by 8% for Q3-22 compared to Q3-21, primarily driven by one-time catch up fees that were generated in the prior year period from ACOF VI • Fee Related Earnings decreased by 37% for Q3-22 compared to Q3-21, primarily driven by the decrease
Slide 18: Real Assets Group
Real Assets Group(1) • Management and other fees increased by 43% for Q3-22 compared to Q3-21, primarily due to the acquisition of Infrastructure Debt, additional capital raised in our non-traded REITs, development fees from AIREIT and additional commitments to US X, which generated $1.8 million in
Slide 19: Secondaries Group
Secondaries Group(1) • Management and other fees increased by 8% for Q3-22 compared to Q3-21, primarily driven by additional commitments to our 17th private equity secondaries fund and our ninth real estate secondaries fund and related vehicles, including $5.1 million in catch-up fees in Q3-22 • Fee
Slide 20: Strategic Initiatives
Strategic Initiatives(1) • Management and other fees increased by 10% for Q3-22 compared to Q3-21, primarily driven by additional commitments to our sixth Asian special situations fund • Fee Related Earnings decreased by 6% for Q3-22 compared to Q3-21, primarily driven by higher compensation and ben
Slide 21: Realized Income per Share Data
Realized Income per Share Data Three months ended September 30, Nine months ended September 30, $ in thousands, except share data 2022 2021 2022 2021 After-tax Realized Income Realized Income before taxes $243,442 $198,876 $712,704 $542,616 Entity level foreign, state and local taxes (4,328) (2,955)
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 September 30, 2022, our balance sheet included $361.5 million in cash and cash equivalents and $2,018.5 million in debt obligations, including $445.0 mil
Slide 23: 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 24: Appendix
Appendix
Slide 25: Financial Details – Segments (Three Months)
Financial Details – Segments Three months ended September 30, 2022 Private Real Operations Credit Equity Assets Secondaries Strategic Management $ in thousands Group Group Group Group Initiatives Group Total(1) Management fees $345,871 $52,316 $91,013 $44,385 $18,183 $— $551,768 Fee related performa
Slide 26: Financial Details – Segments (Nine Months)
Financial Details – Segments Nine months ended September 30, 2022 Private Real Operations Credit Equity Assets Secondaries Strategic Management $ in thousands Group Group Group Group Initiatives Group Total(1) Management fees $972,201 $145,669 $254,233 $135,090 $52,377 $— $1,559,570 Fee related perf
Slide 27: Weighted Average Shares
Weighted Average Shares Q3-22 Q3-21 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 175,631,144 175,631,144 168,931,621 168,931,621 Ares Operating Group Units exchangeable into shares of Class A comm
Slide 28: AUM Rollforward
AUM Rollforward Q3-22 AUM Rollforward Strategic $ in millions Credit Private Equity Real Assets Secondaries Initiatives Total Q2-22 Ending Balance $201,911 $33,412 $62,577 $23,892 $12,521 $334,313 Net new par/equity commitments 3,684 1,337 2,166 441 1,108 8,736 Net new debt commitments 3,702 — 404 —
Slide 29: FPAUM Rollforward
FPAUM Rollforward Q3-22 FPAUM Rollforward Strategic $ in millions Credit Private Equity Real Assets Secondaries Initiatives Total Q2-22 Ending Balance $129,723 $17,691 $39,231 $17,554 $7,092 $211,291 Commitments 2,377 — 1,133 412 634 4,556 Subscriptions/deployment/increase in leverage 6,561 1,486 83
Slide 30: AUM and FPAUM by Strategy
AUM and FPAUM by Strategy As of September 30, 2022 $ in billions AUM % AUM FPAUM % FPAUM Credit Syndicated Loans $33.8 17% $32.8 24% High Yield 3.1 2 3.1 2 Multi-Asset Credit 5.3 3 4.8 4 Alternative Credit 20.3 10 14.3 11 U.S. Direct Lending(1) 96.3 47 53.5 40 European Direct Lending 45.7 21 25.8 19
Slide 31: Balance Sheet Investments by Strategy
Balance Sheet Investments by Strategy(1) $ in millions September 30, 2022 December 31, 2021 Credit Syndicated Loans(2) $82.2 $103.8 Multi-Asset Credit 10.6 12.0 Alternative Credit 61.9 27.5 U.S. Direct Lending 99.7 116.8 European Direct Lending 32.3 33.0 Credit $286.7 $293.1 Private Equity Corporate
Slide 32: Significant Fund Performance Metrics
Significant Fund Performance Metrics The following table presents the performance data for the significant funds that are not drawdown funds: As of September 30, 2022 Returns(%) Quarter-to-Date Year-to-Date Since Inception(1) Year of Primary Investment ($ in millions) Inception AUM Gross Net Gross N
Slide 33: 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 September 30, 2022 Original Capital MOIC IRR(%) Year of Capital Invested Realized Unrealized Total Primary Investment ($ in millions) Inception AUM Commitments to
Slide 34: 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 September 30, 2022 Capital MOIC IRR(%) Year of Original Capital Invested to Realized Unrealized Total Primary Investment ($ in millions) Inception AUM Co
Slide 35: Significant Fund Performance Metrics Endnotes
Significant Fund 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. Net returns a
Slide 36: 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 37: Significant Fund Performance Metrics Endnotes (cont'd)
Significant Fund Performance Metrics Endnotes (cont’d) 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 s
Slide 38: Significant Fund Performance Metrics Endnotes (cont'd)
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' share
Slide 39: Supplemental Performance Metrics
Supplemental Performance Metrics The following table presents the performance data for a non-drawdown fund that was previously reported as a significant fund: As of September 30, 2022 Returns(%) Quarter-to-Date Year-to-Date Since Inception(1) Year of Primary Investment ($ in millions) Inception AUM
Slide 40: Supplemental Performance Metrics (cont'd)
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, 2022 Original MOIC IRR(%) Year of Capital Capital Invested Realized Unrealized Total ($ in millions) Inception AUM
Slide 41: Supplemental Performance Metrics Endnotes
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 do
Slide 42: 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 43: 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 44: 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 45: 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 46: 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 47: 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