Ares Management Corporation · NYSE:ARES
Ares Management — Q3 2017 Earnings Presentation
39 slides from Ares Management's earnings presentation, Nov 3, 2017
Slide 1: Third Quarter 2017 Earnings Presentation
Third Quarter 2017 Earnings Presentation Exhibit 99.2
Slide 2: Important Notice
2 Important Notice This presentation contains “forward looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, that are subject to risks and uncertainties. Actual outcomes and results could differ materially from those suggested by this presentation
Slide 3: Third Quarter Highlights
3 Third Quarter Highlights 1. Net inflows represents gross commitments less redemptions. 2. Includes ARCC Part I Fees of $24.0 million for the three months ended September 30, 2017. Difference between GAAP and Unconsolidated management fees represents $5.5 million from Consolidated Funds that is eli
Slide 4: Gross New Capital Commitments – Third Quarter of 2017
4 Gross New Capital Commitments(1) – Third Quarter of 2017 1. Represents gross new commitments during Q3-17, including equity and debt commitments and gross inflows into our open-ended managed accounts and sub-advised accounts. $ in millions Q3 2017 Comments Credit Group U.S. CLOs $1,645 Priced two
Slide 5: Assets Under Management
5 Assets Under Management . 1. As of September 30, 2017, AUM amounts include funds managed by Ivy Hill Asset Management, L.P., a wholly owned portfolio company of Ares Capital Corporation and a registered investment adviser. 2. For Q3-17, distributions totaled approximately $2.2 billion and redempti
Slide 6: AUM, FPAUM and Management Fees Duration
6 AUM, FPAUM and Management Fees Duration As of September 30, 2017, approximately 75% of AUM and 73% of FPAUM had a duration longer than 3 years, from which FPAUM generated 83% of management fees in Q3 2017 ◦ Within our Managed Accounts category, 57% of AUM and 64% of FPAUM has been with the firm lo
Slide 7: Incentive Eligible AUM and Incentive Generating AUM
7 Incentive Eligible AUM and Incentive Generating AUM . 1. ARCC Part II Fees are paid when the cumulative aggregate net capital gains exceed cumulative aggregate realized capital losses and aggregate unrealized capital depreciation less any amounts paid in previous periods. As of September 30, 2017,
Slide 8: Available Capital and AUM Not Yet Earning Fees
8 Available Capital and AUM Not Yet Earning Fees Available Capital of $25.8 billion as of September 30, 2017 increased 5.1% year over year ◦ The increase was primarily driven by new and additional commitments to U.S. direct lending funds, which was partially offset by capital deployment in the Credi
Slide 9: AUM Not Yet Earning Fees Available for Future Deployment
9 $8,941 $1,948 $832 AUM Not Yet Earning Fees Available for Future Deployment: $11.7 billion AUM Not Yet Earning Fees As of September 30, 2017, AUM Not Yet Earning Fees of $14.8 billion could generate approximately $159.0 million in potential incremental annual management fees, of which $121.4 milli
Slide 10: Capital Deployment
10 $3,892 $757 $355 Q3-17 Capital Deployment Breakdown: $5.0 billion Capital Deployment(1) • Total gross invested capital during Q3-17 of $5.0 billion compared to $2.7 billion in Q3-16 ◦ Of the total amount, $3.6 billion was related to deployment in our drawdown funds compared to $1.8 billion for th
Slide 11: Consolidated Statements of Operations
11 $ in thousands, except share data Three Months Ended September 30, Nine Months Ended September 30, 2017 2016 2017 2016 Revenues Management fees (includes ARCC Part I Fees of $24,036, $76,436 and $33,260, $90,884 for the three and nine months ended September 30, 2017 and 2016, respectively) $183,1
Slide 12: ENI and Other Measures Financial Summary
12 ENI and Other Measures Financial Summary 1. Includes ARCC Part I Fees of $24.0 million and $33.3 million for the three months ended September 30, 2017 and 2016, respectively, and $76.4 million and $90.9 million for the nine months ended September 30, 2017 and 2016, respectively. 2. Includes compe
Slide 13: GAAP to Non-GAAP Reconciliation – Unconsolidated Reporting Basis
13 GAAP to Non-GAAP Reconciliation – Unconsolidated Reporting Basis Note: This table is a reconciliation of income (loss) before provision for income taxes on a consolidated basis to ENI, FRE, PRE and DE on Unconsolidated basis, which shows the results of the reportable segments on a combined basis
Slide 14: GAAP to Non-GAAP Reconciliation – Unconsolidated Reporting Basis (cont.)
14 GAAP to Non-GAAP Reconciliation – Unconsolidated Reporting Basis (cont.) Note: These tables are a reconciliation of consolidated performance fee income, realized and unrealized performance fee income and net investment income to unconsolidated basis, which assist in the reconciliation of GAAP Net
Slide 15: Credit Group
15 Credit Group(1) Note: Past performance is not indicative of future results. The Credit Group had ~225 investment professionals, over 1,500 portfolio companies and 142 active funds as of September 30, 2017. 1. Segment results are shown before the unallocated support costs of the Operations Managem
Slide 16: Private Equity Group
16 Private Equity Group(1) Note: Past performance is not indicative of future results. The Private Equity Group had ~95 investment professionals, 32 portfolio companies, 63 U.S. Power and Energy Assets and 21 active funds and related co-investment vehicles as of September 30, 2017. 1. Segment result
Slide 17: Real Estate Group
17 Real Estate Group(1) Note: Past performance is not indicative of future results. The Real Estate Group had ~75 investment professionals, 170 properties and 42 active funds as of September 30, 2017. 1. Segment results are shown before the unallocated support costs of the Operations Management Grou
Slide 18: Economic Net Income per Unit Data
18 Economic Net Income per Unit Data 1. Pro forma units of 215,601,174 includes the sum of common units, Ares Operating Group Units that are exchangeable for common units on a one-for-one basis and the dilutive effects of the Company’s equity-based awards. 2. The Company has 12,400,000 of 7% Series
Slide 19: Distributable Earnings per Unit
19 Three Months Ended September 30, Nine Months Ended September 30, 2017 2016 2017 2016 Distributable Earnings per Ares Operating Group Unit(1) outstanding Distributable Earnings $100,451 $66,735 $211,052 $184,836 Preferred unit distribution(2) (5,425) (6,751) (16,275) (6,751) Distributable Earnings
Slide 20: Balance Sheet Highlights
20 • Substantial balance sheet value related to investments in Ares managed vehicles and net performance fees receivable ◦ $186.4 million in cash and cash equivalents, $486.0 million in debt obligations with $110.0 million drawn against our $1.065 billion revolving credit facility as of September 30
Slide 21: Corporate Data
21 Corporate Data Board of Directors Michael Arougheti Co-Founder and President of Ares Paul G. Joubert Founding Partner of EdgeAdvisors and Investing Partner in Common Angels Ventures David Kaplan Co-Founder and Partner of Ares, Co-Head of Private Equity Group John Kissick Co-Founder and Former Par
Slide 22: Appendix
Appendix
Slide 23: Financial Details – Segments (Three Months)
23 Financial Details – Segments 1. Includes results of the reportable segments on a combined basis together with the Operations Management Group. See “GAAP to Non-GAAP Reconciliation – Unconsolidated Reporting Basis” on slides 13-14. Three Months Ended September 30, 2017 $ in thousands Credit Group
Slide 24: Financial Details – Segments (Nine Months)
24 1. Includes results of the reportable segments on a combined basis together with the Operations Management Group. See “GAAP to Non-GAAP Reconciliation – Unconsolidated Reporting Basis” on slides 13-14. Nine Months Ended September 30, 2017 $ in thousands Credit Group Private Equity Group Real Esta
Slide 25: AUM and FPAUM Rollforward
25 AUM and FPAUM Rollforward Credit l AUM increased by 4.5% from Q2-17, primarily driven by new capital commitments to syndicated loans and direct lending strategies, partially offset by paydowns in U.S. syndicated loans (within CLOs) and other credit funds l FPAUM increased by 4.5% from Q2-17, prim
Slide 26: AUM and FPAUM by Strategy
26 AUM and FPAUM by Strategy(1) 1. As of September 30, 2017. 2. AUM includes ARCC, IHAM, and SDLP AUM of $14.5 billion, $3.9 billion, and $1.8 billion, respectively. ARCC’s wholly owned portfolio company, IHAM, an SEC registered investment adviser, manages 22 funds and serves as the sub-manager or s
Slide 27: Balance Sheet Investments by Strategy
27 Balance Sheet Investments by Strategy Note: Reflects the balance sheet of Ares Management, L.P. and its consolidated subsidiaries, excluding the effect of Consolidation. *Through investments in Ares CLOs. $ in thousands September 30, 2017 December 31, 2016 Credit Syndicated Loans* $205,586 $140,6
Slide 28: Significant Fund Performance Metrics
28 Significant Fund Performance Metrics* The following table presents the performance data for significant funds in the Credit Group that are not drawdown funds: Note: Past performance is not indicative of future results. AUM and Net Returns as of September 30, 2017 unless otherwise noted. The above
Slide 29: Significant Fund Performance Metrics
29 Significant Fund Performance Metrics* Note: Past performance is not indicative of future results. AUM and Net Returns as of September 30, 2017 unless otherwise noted. The above table includes fund performance metrics for significant funds which includes those that contributed at least 1% of total
Slide 30: Significant Fund Performance Metrics Endnotes
30 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 ret
Slide 31: Significant Fund Performance Metrics Endnotes (cont'd)
31 Significant Fund Performance Metrics Endnotes (cont’d) Real Estate 1. Realized proceeds include distributions of operating income, sales and financing proceeds received. 2. Unrealized value represents the fair market value of remaining investments. There can be no assurance that unrealized invest
Slide 32: Weighted Average Unit Information
32 Weighted Average Unit Information 1. Represents units exchangeable for Ares Management, L.P. common units on a one-for-one basis. 2. We apply the treasury stock method to determine the dilutive weighted-average common units represented by our restricted stock to be settled in common units and opt
Slide 33: Additional Information
33 Additional Information Distributions Targeted Net Returns(1) Investor Base as a % of AUM(1) Credit Group: Public Entity & Related: 21% l Ares declared a quarterly distribution of $0.41 per common unit, payable on December 1, 2017 to common unitholders of record at the close of business on Novembe
Slide 34: ENI and Other Measures – Financial Data
34 ENI and Other Measures –Financial Data(1) 1. Unconsolidated results represent the operating segments plus OMG but exclude the effect of Consolidated Funds. 2. Includes ARCC Part I Fees of $121.2 million and $121.5 million for the years ended December 31, 2016 and 2015, respectively. 3. Compensati
Slide 35: GAAP to Non-GAAP Reconciliation – Unconsolidated Reporting Basis
35 GAAP to Non-GAAP Reconciliation – Unconsolidated Reporting Basis Note: This table is a reconciliation of income before provision for income taxes on a consolidated basis to ENI, FRE, PRE and DE on unconsolidated basis, which shows the results of the reportable segments on a combined basis togethe
Slide 36: GAAP to Non-GAAP Reconciliation – Unconsolidated Reporting Basis (cont.)
36 GAAP to Non-GAAP Reconciliation – Unconsolidated Reporting Basis (cont.) Note: These tables are a reconciliation of consolidated performance fee income, realized and unrealized performance fee income and net investment income to an unconsolidated basis, which assist in the reconciliation of GAAP
Slide 37: Glossary
37 Glossary ARCC Part I Fees ARCC Part I Fees refers to a quarterly performance fee on the investment income from ARCC. ARCC Part II Fees ARCC Part II Fees refers to fees based on ARCC's net capital gains, which are paid annually. Ares Operating Group Units Ares Operating Group Unit refers to, colle
Slide 38: Glossary (cont'd)
38 Glossary (cont’d) Fee Paying Assets Under Management Fee paying AUM (or “FPAUM”) refers to the AUM on which we directly earn management fees. Fee paying AUM is equal to the sum of all the individual fee bases of our funds that directly contribute to our management fees. Fee Related Earnings Fee r
Slide 39: Glossary (cont'd)
39 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 Managem