Ares Capital Corporation · NASDAQ:ARCC
Ares Capital — Q1 2024 Earnings Presentation
48 slides from Ares Capital's earnings presentation, May 1, 2024
Slide 1: Ares Management Corporation Reports First Quarter 2024 Results
Ares Management Corporation Reports First Quarter 2024 Results NEW YORK--Ares Management Corporation (NYSE:ARES) today reported its financial results for its first quarter ended March 31, 2024. GAAP net income attributable to Ares Management Corporation was $73.0 million for the quarter ended March
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, real estate, private equity and infrastructure asset classes. We seek to provide
Slide 3: Earnings Presentation First Quarter 2024
Earnings Presentation First Quarter 2024
Slide 4: Important Notice
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 it
Slide 5: First Quarter 2024 Highlights
First Quarter 2024 Highlights • Total Assets Under Management (“AUMˮ) of $428.3 billion • Total Fee Paying AUM (“FPAUMˮ) of $267.1 billion Assets Under • Available Capital of $114.6 billion Management • AUM Not Yet Paying Fees available for future deployment of $64.6 billion • Raised $17.4 billion i
Slide 6: Gross New Capital Commitments
Gross New Capital Commitments(1) $ in billions Q1 2024 Commentary Credit Group Equity and debt commitments to various funds, including debt commitments of $2.0 billion and equity commitments of $0.8 U.S. Direct Lending $4.0 billion for our third U.S. senior direct lending fund Business Development C
Slide 7: Assets Under Management
Assets Under Management AUM as of March 31, 2024 was $428.3 billion, an increase of 19% from prior year(1) • The increase of $68.0 billion was primarily driven by: ◦ commitments to U.S. direct lending funds, our sixth European direct lending fund and Pathfinder II within Credit; ◦ additional managed
Slide 8: Perpetual Capital
Perpetual Capital Perpetual Capital as of March 31, 2024 was $109.2 billion, an increase of 14% from prior year • The increase of $13.8 billion was primarily driven by: ◦ commitments to certain funds and SMAs in our U.S. direct lending and alternative credit strategies, capital raised by our busines
Slide 9: AUM and Management Fees by Type
AUM and Management Fees by Type For the quarter ended March 31, 2024: • 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% 8% 7% 26% 6% 5% 88% 95% 5% 50%
Slide 10: Available Capital and AUM Not Yet Paying Fees
Available Capital and AUM Not Yet Paying Fees Available Capital as of March 31, 2024 was $114.6 billion, an increase of 29% from prior year • The increase of $26.0 billion was primarily driven by: ◦ commitments to the U.S. and European direct lending and alternative credit strategies AUM Not Yet Pay
Slide 11: AUM Not Yet Paying Fees
AUM Not Yet Paying Fees As of March 31, 2024, AUM Not Yet Paying Fees includes $64.6 billion of AUM available for future deployment that could generate approximately $621.5 million in potential incremental annual management fees(1) • The $64.6 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 March 31, 2024 was $247.1 billion, an increase of 17% from prior year • The increase of $36.6 billion was primarily driven by: ◦ commitments to funds across our U.S. and European direct lending and alternative credit st
Slide 13: Capital Deployment
Capital Deployment Total Gross Capital Deployment during Q1-24 was $18.6 billion compared to $12.2 billion during Q1-23 • Deployment by our drawdown funds was $9.4 billion in Q1-24 compared to $7.8 billion in Q1-23 ◦ Of our drawdown funds, the investment strategies with the highest deployment were U
Slide 14: GAAP Statements of Operations
GAAP Statements of Operations Three months ended March 31, $ in thousands, except share data 2024 2023 Revenues Management fees $687,692 $600,516 Carried interest allocation (32,478) 151,488 Incentive fees 8,667 8,923 Principal investment income 7,050 22,758 Administrative, transaction and other fee
Slide 15: RI and Other Measures Financial Summary
RI and Other Measures Financial Summary Three months ended March 31, LTM ended March 31, $ in thousands, except share data (and as otherwise noted) 2024 2023 % Change 2024 2023 % Change Management fees(1) $693,365 $602,619 15% $2,662,259 $2,272,226 17% Fee related performance revenues 3,717 3,871 (4
Slide 16: GAAP to Non-GAAP Reconciliation – Unconsolidated Reporting Basis
GAAP to Non-GAAP Reconciliation – Unconsolidated Reporting Basis Three months ended March 31, LTM ended March 31, $ in thousands 2024 2023 2024 2023 Realized Income and Fee Related Earnings: Income before taxes $231,048 $241,122 $1,322,989 $590,619 Adjustments: Amortization of intangibles(1) 29,180
Slide 17: GAAP to Non-GAAP Reconciliation (cont'd)
GAAP to Non-GAAP Reconciliation – Unconsolidated Reporting Basis (cont'd) Three months ended March 31, LTM ended March 31, $ in thousands 2024 2023 2024 2023 Performance income and net investment income reconciliation: Carried interest allocation $(32,478) $151,488 $434,613 $431,211 Incentive fees 8
Slide 18: Credit Group
Credit Group(1) • Management and other fees increased by 18% for Q1-24 compared to Q1-23, primarily driven by deployment within U.S. and European direct lending and alternative credit ◦ Management fees in Q1-23 included catch-up fees from SSG VI of $0.7 million • Fee Related Earnings increased by 21
Slide 19: Real Assets Group
Real Assets Group(1) • Management and other fees decreased by 5% for Q1-24 compared to Q1-23, primarily due to lower management fees from the reduction in fee bases from AREOF III and IDF IV and from the decrease in the average capital base of AIREIT. The decrease was partially offset by higher mana
Slide 20: Private Equity Group
Private Equity Group(1) • Management and other fees increased by 17% for Q1-24 compared to Q1-23, primarily driven by the acquisition of Crescent Point • Fee Related Earnings increased by 68% for Q1-24 compared to Q1-23, primarily driven by increase in management fees and lower compensation and bene
Slide 21: Secondaries Group
Secondaries Group(1) • Management and other fees increased by 11% for Q1-24 compared to Q1-23 primarily driven by higher management fees from APMF and commitments to LREF IX and our third infrastructure secondaries fund ◦ Management fees in Q1-24 included catch-up fees of $0.2 million from our third
Slide 22: Investment Group Highlights Endnotes
Investment Group Highlights Endnotes The tables for each of the investment group highlights on slides 16-19 are 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 25 f
Slide 23: Realized Income per Share Data
Realized Income per Share Data Three months ended March 31, $ in thousands, except share data 2024 2023 After-tax Realized Income Realized Income before taxes $289,156 $254,292 Entity level foreign, state and local taxes (5,908) (5,282) Realized Income before corporate income taxes 283,248 249,010 C
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 March 31, 2024 • Our balance sheet included $346.3 million in cash and cash equivalents and $3,046.2 million in debt obligations, including $975.0 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/Senior Advisor to Public and President of Ares a
Slide 26: Appendix
Appendix
Slide 27: Financial Details – Segments
Financial Details – Segments Three months ended March 31, 2024 Real Private Operations Credit Assets Equity Secondaries Management $ in thousands Group Group Group Group Other Group Total(1) Management fees $510,966 $93,814 $34,933 $44,421 $9,231 $— $693,365 Fee related performance revenues 755 — —
Slide 28: Weighted Average Shares
Weighted Average Shares Q1-24 Q1-23 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 192,622,609 192,622,609 178,976,022 178,976,022 Ares Operating Group Units exchangeable into shares of Class A comm
Slide 29: AUM Rollforward
AUM Rollforward Q1-24 AUM Rollforward $ in millions Credit Real Assets Private Equity Secondaries Other Businesses Total Q4-23 Ending Balance $299,350 $65,413 $24,551 $24,760 $4,772 $418,846 Acquisitions — — — — 71 71 Net new par/equity commitments 7,735 408 315 969 1,515 10,942 Net new debt commitm
Slide 30: FPAUM Rollforward
FPAUM Rollforward Q1-24 FPAUM Rollforward $ in millions Credit Real Assets Private Equity Secondaries Other Businesses Total Q4-23 Ending Balance $185,280 $41,338 $13,124 $19,040 $3,575 $262,357 Acquisitions — — — — 55 55 Commitments 3,778 296 — 900 1,321 6,295 Deployment/subscriptions/increase in l
Slide 31: AUM and FPAUM by Strategy
AUM and FPAUM by Strategy As of March 31, 2024 $ in billions AUM % AUM FPAUM % FPAUM Credit Liquid Credit $46.2 15% $45.0 24% Alternative Credit 36.5 12 25.0 13 Opportunistic Credit 14.5 5 8.6 5 U.S. Direct Lending(1) 129.2 42 70.4 37 European Direct Lending 70.2 23 35.2 19 APAC Credit 11.7 2 5.6 2
Slide 32: Balance Sheet Investments by Strategy
Balance Sheet Investments by Strategy(1) $ in millions As of March 31, 2024 As of December 31, 2023 Credit Liquid Credit(2) $127.4 $127.3 Alternative Credit 43.3 37.8 Opportunistic Credit 44.8 42.8 U.S. Direct Lending 86.9 84.6 European Direct Lending 64.3 55.7 APAC Credit 17.0 32.9 Credit $383.7 $3
Slide 33: Significant Fund Performance Metrics
Significant Fund Performance Metrics The following table presents the performance data for the significant funds that are not drawdown funds: As of March 31, 2024 Returns(%) Quarter-to-Date Since Inception(1) Year of ($ in millions) Inception AUM Gross Net Gross Net Primary Investment Strategy Credi
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: As of March 31, 2024 Original Capital MoIC IRR(%) Year of Capital Invested to Realized Unrealized Primary Investment ($ in millions) Inception AUM Commitments Date Valu
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 (cont'd): As of March 31, 2024 Original Capital MoIC IRR(%) Year of Capital Invested to Realized Unrealized ($ in millions) Inception AUM Commitments Date Value(5) Value
Slide 36: 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 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) 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 39: 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 40: 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 March 31, 2024 Original Capital MoIC IRR(%) Year of Capital Invested to Realized Unrealized ($ in millions) Inception AUM Commitments Date
Slide 41: 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 March 31, 2024 Original Capital MoIC IRR(%) Year of Capital Invested to Realized Unrealized Primary Investment ($ in millions) In
Slide 42: Supplemental Performance Metrics Endnotes
Supplemental Performance Metrics Endnotes Credit 1. For the non-opportunistic credit funds, realized value represent the sum of all cash distributions to all partners and if applicable, exclude tax and incentive distributions made to the general partner. For the opportunistic credit funds, realized
Slide 43: Supplemental Performance Metrics Endnotes (cont’d)
Supplemental Performance Metrics Endnotes (cont’d) Real Assets (cont’d) 7. EF IV is made up of two parallel funds, one denominated in U.S. Dollars and one denominated in Euros. The gross and net MoIC presented in the table are for the Euro denominated parallel fund. The gross and net MoIC for the U.
Slide 44: Supplemental Performance Metrics Endnotes (cont’d)
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 of
Slide 45: Glossary
Glossary Ares Operating Group Ares Operating Group entities or an “AOG Entityˮ refers to, collectively, Ares Holdings, L.P. (“Ares Holdingsˮ) and any future Entities entity designated by our board of directors in its sole discretion as an Ares Operating Group entity. Ares Operating Group Ares Operat
Slide 46: Glossary (cont’d)
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 am
Slide 47: Glossary (cont’d)
Glossary (cont’d) Management Fees Management Fees refers to fees we earn for advisory services provided to our funds, which are generally based on a defined percentage of fair value of assets, total commitments, invested capital, net asset value, net investment income, total assets or par value of t
Slide 48: Glossary (cont’d)
Glossary (cont’d) Perpetual Capital Perpetual Capital refers to the AUM of: (i) our publicly-traded vehicles, including ARCC, Ares Commercial Real Estate Corporation (NYSE: ACRE) (“ACREˮ) and Ares Dynamic Credit Allocation Fund, Inc. (NYSE: ARDC) (“ARDCˮ); (ii) our non-traded vehicles, including ASI