Ares Management Corporation · NYSE:ARES
Ares Management — Q1 2019 Earnings Presentation
38 slides from Ares Management's earnings presentation, May 2, 2019
Slide 1: First Quarter 2019 Earnings Presentation
Exhibit 99.2 First Quarter 2019 Earnings Presentation
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: First Quarter Highlights
First Quarter Highlights • Total Assets Under Management ("AUM") of $136.7 billion • Total Fee Paying AUM ("FPAUM") of $87.2 billion Assets Under • Available Capital of $35.0 billion Management • AUM Not Yet Earning Fees available for future deployment of $23.8 billion • Raised $6.5 billion in gross
Slide 4: Gross New Capital Commitments
#ACACAC #1E3154 Gross New Capital Commitments(1) #225070 #828282 $ in millions Q1 2019 Comments Credit Group CLOs $2,122 Closed two new U.S. CLOs and priced one new U.S. CLO and one new European CLO #D2D2D2 #49749B Alternative Credit 1,267 New and additional equity commitments to various funds U.S.
Slide 5: Assets Under Management
Assets Under Management AUM of $136.7 billion as of March 31, 2019, an increase of 21.5% from prior year(1) • The increase of $24.2 billion was driven by fundraising, primarily across European and U.S. direct lending, syndicated loans and alternative credit funds in our Credit Group FPAUM of $87.2 b
Slide 6: Management Fees by Duration and Fund Type
Management Fees by Duration and Fund Type For the three month period ended March 31, 2019: ◦ 84% of management fees come from funds with three or more years remaining in duration ◦ 90% of management fees are derived from permanent capital, closed end funds and CLOs Q1-19 Unconsolidated Management Fe
Slide 7: AUM and FPAUM by Duration
AUM and FPAUM by Duration As of March 31, 2019, approximately 72% of AUM and 73% of FPAUM had a duration longer than 3 years ◦ At time of fund closing, the initial duration was greater than 7 years for approximately 75% of AUM AUM: $136.7 billion FPAUM: $87.2 billion 14% 17% 4% 22%4% 7% 12% 16% 7 17
Slide 8: Available Capital and AUM Not Yet Earning Fees
Available Capital and AUM Not Yet Earning Fees Available Capital of $35.0 billion as of March 31, 2019, an increase of 31.9% from prior year • The increase of $8.5 billion was driven by new commitments, primarily in European and U.S. direct lending funds in our Credit Group AUM Not Yet Earning Fees
Slide 9: AUM Not Yet Earning Fees
AUM Not Yet Earning Fees As of March 31, 2019, AUM Not Yet Earning Fees of $27.0 billion could generate approximately $258.9 million in potential incremental annual management fees, of which $224.1 million relates to the $23.8 billion of AUM available for future deployment(1) • The $23.8 billion of
Slide 10: Incentive Eligible AUM and Incentive Generating AUM
Incentive Eligible AUM and Incentive Generating AUM Incentive Eligible AUM of $79.9 billion as of March 31, 2019, an increase of 22.5% from prior year • The increase of $14.7 billion was primarily driven by fundraising across European and U.S. direct lending funds in our Credit Group Incentive Gener
Slide 11: Capital Deployment
Capital Deployment(1) • Total gross invested capital during Q1-19 of $7.4 billion compared to Q1-19 Capital Deployment Breakdown: $7.4 billion $5.8 billion in Q1-18 ($ in millions) ◦ Of the total amount, $6.4 billion was related to deployment in our drawdown funds compared to $4.5 billion for the sa
Slide 12: GAAP Statements of Operations
GAAP Statements of Operations $ in thousands, except share data Three Months Ended March 31, 2019 2018 Revenues Management fees (includes ARCC Part I Fees of $38,393 and $28,417 for the three months ended March 31, 2019 and 2018, respectively) $224,659 $189,515 Carried interest allocation 197,293 54
Slide 13: RI and Other Measures Financial Summary
RI and Other Measures Financial Summary $ in thousands, except share data (and as otherwise noted) Three Months Ended March 31, Twelve Months Ended March 31, 2019 2018 % Change 2019 2018 % Change Management fees(1) $233,012 $196,826 18% $872,930 $764,870 14% Other fees 3,075 6,073 (49)% 21,290 23,67
Slide 14: GAAP to Non-GAAP Reconciliation – Unconsolidated Reporting Basis
GAAP to Non-GAAP Reconciliation – Unconsolidated Reporting Basis $ in thousands Three Months Ended March 31, Twelve Months Ended March 31, 2019 2018 2019 2018 Realized Income and Fee Related Earnings: Income before taxes $135,960 $62,046 $258,255 $402,493 Adjustments: Amortization of intangibles 1,2
Slide 15: GAAP to Non-GAAP Reconciliation – Unconsolidated Reporting Basis (cont.)
GAAP to Non-GAAP Reconciliation – Unconsolidated Reporting Basis (cont.) $ in thousands Three Months Ended March 31, Twelve Months Ended March 31, 2019 2018 2019 2018 Performance income and net investment income reconciliation: Carried interest allocation $197,293 $54,129 $185,574 $622,576 Incentive
Slide 16: Credit Group
Credit Group(1) • Management and other fees increased by 21% for Q1-19 compared to Q1-18, primarily due to deployment in U.S. and European direct lending strategies and an increase in ARCC Part I Fees • Fee related earnings increased by 20% for Q1-19 compared to Q1-18, primarily driven by higher man
Slide 17: Private Equity Group
Private Equity Group(1) • Management and other fees increased 2% for Q1-19 compared to Q1-18 primarily driven by new commitments in our energy opportunities fund and deployment of capital within SSF IV • Fee related earnings decreased 3% primarily driven by an increase in compensation offset by high
Slide 18: Real Estate Group
Real Estate Group(1) • Management and other fees increased 23% for Q1-19 compared to Q1-18, primarily driven by capital deployment within two new equity funds in U.S. and Europe and to $1.0 million of catch-up fees attributable to the new equity fund in Europe • Fee related earning increased 22% for
Slide 19: Realized Income per Share Data
Realized Income per Share Data Three Months Ended March 31, $ in thousands, except share data 2019 2018 After-tax Realized Income, net of Series A Preferred Stock dividends Realized Income before taxes $104,632 $72,073 Entity level foreign, state and local taxes (1,839) (666) Series A Preferred Stoc
Slide 20: Balance Sheet
Balance Sheet • Substantial balance sheet value related to investments in Ares managed vehicles and net accrued performance income receivable ◦ As of March 31, 2019, $120.5 million in cash and cash equivalents, $566.1 million in debt obligations including $320.0 million drawn against our $1.065 bill
Slide 21: 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 and Co-Founder, Chief Executive Officer and Michael Carrier Partner/Head of Ares Managem
Slide 22: Appendix
Appendix
Slide 23: Financial Details – Segments
Financial Details – Segments Three Months Ended March 31, 2019 $ in thousands Private Real Operations Credit Equity Estate Management Group Group Group Group Total(1) Management fees (Credit Group includes ARCC Part I Fees of $38,393) $162,966 $51,396 $18,650 $— $233,012 Other fees 3,066 — 9 — 3,075
Slide 24: AUM and FPAUM Rollforward
AUM and FPAUM Rollforward Q1-19 Total AUM Rollforward ($ in millions) LTM Total AUM Rollforward ($ in millions) $ in thousands Credit Private Equity Real Estate Total $ in thousands Credit Private Equity Real Estate Total Q4-18 Ending Balance $95,836 $23,487 $11,340 $130,663 Q1-18 Ending Balance $77
Slide 25: AUM and FPAUM by Strategy
AUM and FPAUM by Strategy As of March 31, 2019 Strategy ($ in billions) AUM % AUM FPAUM % FPAUM Credit Syndicated Loans $21.2 21% $19.7 31% High Yield 4.2 4 4.2 7 Credit Opportunities 2.5 2 2.1 3 Alternative Credit 6.6 7 3.2 5 U.S. Direct Lending(1) 42.0 42 23.6 38 European Direct Lending 24.6 24 10
Slide 26: Balance Sheet Investments by Strategy
Balance Sheet Investments by Strategy $ in thousands March 31, 2019 December 31, 2018 Credit Syndicated Loans(1) $88,895 $75,029 Credit Opportunities 3,691 3,420 Alternative Credit 21,827 19,518 U.S. Direct Lending 60,832 58,970 European Direct Lending 52,926 47,854 Credit $228,171 $204,791 Private
Slide 27: Significant Fund Performance Metrics
Significant Fund Performance Metrics The following table presents the performance data for the significant fund in the Credit Group that is not a drawdown fund: As of March 31, 2019 Returns (%)(1) Current Quarter Year-To-Date Since Inception(2) Year of AUM Inception (in millions) Gross Net Gross Net
Slide 28: Significant Fund Performance Metrics (cont’d)
Significant Fund Performance Metrics (cont’d) The following table presents the performance data for all our significant drawdown funds: As of March 31, 2019 Credit Cumulative MOIC IRR Year of Original Capital Invested Realized Unrealized ($ in millions) Inception AUM Commitments Capital Proceeds(4)
Slide 29: 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 30: Significant Fund Performance Metrics Endnotes (cont’d)
Significant Fund Performance Metrics Endnotes (cont’d) Private Equity - Cont. 6. The net IRR is an annualized since inception net 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. Net IRRs reflect returns to the fee-paying
Slide 31: Weighted Average Shares
Weighted Average Shares Q1-19 Q1-18 Common Shares, Common Shares, GAAP Shares As Adjusted(3) Total Shares As Adjusted(3) Weighted average shares of Class A common stock 102,906,494 102,906,494 85,617,932 85,617,932 Ares Operating Group Units exchangeable into shares of Class A common stock(1) 116,99
Slide 32: Additional Information
Additional Information Targeted Net Returns(1) Investor Base as a % of AUM(1) Credit Group: Public Entity & Related: 17% l Syndicated Loans and High Yield Bonds: Benchmark Outperformance(2) l 700+ institutional investors (4) l Credit Opportunities: 8-12% l 200,000+ retail investors across our public
Slide 33: RI and Other Measures – Financial Data
RI and Other Measures –Financial Data(1) $ in thousands Year ended December 31, 2018 2017 Credit Group $564,899 $481,466 Private Equity Group 198,182 198,498 Real Estate Group 73,663 64,861 Management fees(2) $836,744 $744,825 Other fees $24,288 $22,431 Compensation and benefits expenses (456,255) (
Slide 34: GAAP to Non-GAAP Reconciliation – Unconsolidated Reporting Basis
GAAP to Non-GAAP Reconciliation – Unconsolidated Reporting Basis $ in thousands Year ended December 31, 2018 2017 Realized income and fee related earnings: Income before taxes $184,341 $149,859 Adjustments: Amortization of intangibles 9,032 17,850 Depreciation expense 16,055 12,631 Equity compensati
Slide 35: GAAP to Non-GAAP Reconciliation – Unconsolidated Reporting Basis (cont.)
GAAP to Non-GAAP Reconciliation – Unconsolidated Reporting Basis (cont.) $ in thousands Year ended December 31, 2018 2017 Performance income and net investment income reconciliation: Carried interest allocation $42,410 $620,454 Incentive fees 63,380 16,220 Carried interest allocation and incentive f
Slide 36: Glossary
Glossary ARCC Part I Fees ARCC Part I Fees refers to a quarterly performance income on the investment income from ARCC. Such fees from ARCC are classified as management fees as they are paid quarterly, predictable and recurring in nature, not subject to contingent repayment and are typically cash se
Slide 37: Glossary (cont’d)
Glossary (cont’d) Incentive Eligible Assets Incentive eligible AUM (or “IEAUM”) refers to the AUM of our funds that are eligible to produce performance income, regardless of Under Management whether or not they are currently generating performance income. It generally represents the NAV plus uncalle
Slide 38: Glossary (cont’d)
Glossary (cont’d) Realized Income Realized income (or “RI”), 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