Ares Capital Corporation · NASDAQ:ARCC
Ares Capital — Q2 2023 Earnings Presentation
48 slides from Ares Capital's earnings presentation, Jul 25, 2023
Slide 1: Ares Management Corporation Reports Second Quarter Results
Ares Management Corporation Reports Second Quarter Results NEW YORK--Ares Management Corporation (NYSE:ARES) today reported its financial results for its second quarter ended June 30, 2023. GAAP net income attributable to Ares Management Corporation was $144.5 million for the quarter ended June 30,
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, private equity, real estate and infrastructure asset classes. We seek to provide
Slide 3: Earnings Presentation Second Quarter 2023
Earnings Presentation Second Quarter 2023
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: Second Quarter 2023 Highlights
Second Quarter 2023 Highlights • Total Assets Under Management (“AUMˮ) of $377.6 billion • Total Fee Paying AUM (“FPAUMˮ) of $242.4 billion Assets Under • Available Capital of $95.8 billion Management • AUM Not Yet Paying Fees available for future deployment of $55.6 billion • Raised $17.4 billion i
Slide 6: Gross New Capital Commitments
Gross New Capital Commitments(1) $ in billions Q2 2023 Commentary Credit Group European Direct Lending $5.0 Equity commitments to various funds, including $3.9 billion for our sixth flagship European direct lending fund U.S. Direct Lending 4.1 Debt and equity commitments to various funds, including
Slide 7: Assets Under Management
Assets Under Management AUM as of June 30, 2023 was $377.6 billion, an increase of 13% from prior year(1) • The increase of $43.3 billion was primarily driven by: ◦ commitments to U.S. direct lending funds, our sixth flagship European direct lending fund, our second flagship alternative credit fund
Slide 8: Perpetual Capital
Perpetual Capital Perpetual Capital as of June 30, 2023 was $99.5 billion, an increase of 15% from prior year • The increase of $12.8 billion was primarily driven by: ◦ commitments in our U.S. direct lending, alternative credit strategies, our insurance platform and capital raised by ASIF Perpetual
Slide 9: AUM and Management Fees by Type
AUM and Management Fees by Type For the quarter ended June 30, 2023: • 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% 7% 88% 5% 95% 51% 7% 6
Slide 10: Available Capital and AUM Not Yet Paying Fees
Available Capital and AUM Not Yet Paying Fees Available Capital as of June 30, 2023 was $95.8 billion, an increase of 5% from prior year • The increase of $4.8 billion was primarily driven by: ◦ fundraising in the European direct lending, alternative credit, U.S. real estate equity and infrastructur
Slide 11: AUM Not Yet Paying Fees
AUM Not Yet Paying Fees As of June 30, 2023, AUM Not Yet Paying Fees includes $55.6 billion of AUM available for future deployment that could generate approximately $551.6 million in potential incremental annual management fees(1) • The $55.6 billion of AUM Not Yet Paying Fees available for future d
Slide 12: Incentive Eligible AUM and Incentive Generating AUM
Incentive Eligible AUM and Incentive Generating AUM Incentive Eligible AUM as of June 30, 2023 was $221.7 billion, an increase of 14% from prior year • The increase of $26.6 billion was primarily driven by: ◦ fundraising across U.S. and European direct lending, alternative credit, special opportunit
Slide 13: Capital Deployment
Capital Deployment Total Gross Invested Capital during Q2-23 was $15.2 billion compared to $23.7 billion during Q2-22 • Deployment by our drawdown funds was $9.1 billion in Q2-23 compared to $12.9 billion in Q2-22 ◦ Of our drawdown funds, the most active investment strategies were U.S. and European
Slide 14: GAAP Statements of Operations
GAAP Statements of Operations Three months ended June 30, Six months ended June 30, $ in thousands, except share data 2023 2022 2023 2022 Revenues Management fees $615,271 $520,560 $1,215,787 $997,892 Carried interest allocation 418,466 47,304 569,954 225,593 Incentive fees 7,950 4,675 16,873 21,097
Slide 15: RI and Other Measures Financial Summary
RI and Other Measures Financial Summary Three months ended June 30, Six months ended June 30, $ in thousands, except share data (and as otherwise noted) 2023 2022 % Change 2023 2022 % Change Management fees(1) $621,752 $524,881 18% $1,224,371 $1,007,802 21% Fee related performance revenues 854 1,240
Slide 16: GAAP to Non-GAAP Reconciliation – Unconsolidated Reporting Basis
GAAP to Non-GAAP Reconciliation – Unconsolidated Reporting Basis Three months ended June 30, Six months ended June 30, $ in thousands 2023 2022 2023 2022 Realized Income and Fee Related Earnings: Income before taxes $381,969 $67,066 $623,091 $228,375 Adjustments: Amortization of intangibles 35,464 3
Slide 17: GAAP to Non-GAAP Reconciliation – Unconsolidated Reporting Basis (cont'd)
GAAP to Non-GAAP Reconciliation – Unconsolidated Reporting Basis (cont'd) Three months ended June 30, Six months ended June 30, $ in thousands 2023 2022 2023 2022 Performance income and net investment income reconciliation: Carried interest allocation $418,466 $47,304 $569,954 $225,593 Incentive fee
Slide 18: Credit Group
Credit Group(1) • Management and other fees increased by 25% for Q2-23 compared to Q2-22, primarily driven by deployment within U.S. and European direct lending and alternative credit • Fee Related Earnings increased by 26% for Q2-23 compared to Q2-22, primarily driven by the increase in management
Slide 19: Private Equity Group
Private Equity Group(1) • Management and other fees increased by 18% for Q2-23 compared to Q2-22, primarily driven by deployment in ASOF II • Fee Related Earnings increased by 80% for Q2-23 compared to Q2-22, primarily driven by the increase in management fees and lower compensation and benefits • R
Slide 20: Real Assets Group
Real Assets Group(1) • Management and other fees increased by 8% for Q2-23 compared to Q2-22, primarily due to capital raised by our non-traded REITs, deployment in IDF V and commitments to our fourth U.S. opportunistic real estate equity fund, including catch-up fees of $0.4 million. Other fees in
Slide 21: Secondaries Group
Secondaries Group(1) • Management and other fees decreased by 10% for Q2-23 compared to Q2-22, primarily driven by a step down in fee base for LEP XV, and partially offset by commitments to our ninth real estate secondaries fund, including catch-up fees of $1.5 million. Management fees in Q2-22 incl
Slide 22: Realized Income per Share Data
Realized Income per Share Data Three months ended June 30, Six months ended June 30, $ in thousands, except share data 2023 2022 2023 2022 After-tax Realized Income Realized Income before taxes $312,210 $247,245 $566,502 $469,262 Entity level foreign, state and local taxes (5,804) (4,438) (11,086) (
Slide 23: Balance Sheet
Balance Sheet Substantial balance sheet value related to investments primarily in Ares managed vehicles and net accrued performance income • As of June 30, 2023, our balance sheet included $276.8 million in cash and cash equivalents and $2,299.7 million in debt obligations, including $725.0 million
Slide 24: 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 (646) 561-6
Slide 25: Appendix
Appendix
Slide 26: Financial Details – Segments
Financial Details – Segments Three months ended June 30, 2023 Private Real Operations Credit Equity Assets Secondaries Management $ in thousands Group Group Group Group Other Group Total(1) Management fees $422,662 $55,518 $95,239 $41,785 $6,548 $— $621,752 Fee related performance revenues 222 — 334
Slide 27: Financial Details – Segments
Financial Details – Segments Six months ended June 30, 2023 Private Real Operations Credit Equity Assets Secondaries Management $ in thousands Group Group Group Group Other Group Total(1) Management fees $828,312 $110,175 $192,709 $81,648 $11,527 $— $1,224,371 Fee related performance revenues 822 —
Slide 28: Weighted Average Shares
Weighted Average Shares Q2-23 Q2-22 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 182,999,515 182,999,515 175,157,558 175,157,558 Ares Operating Group Units exchangeable into shares of Class A comm
Slide 29: AUM Rollforward
AUM Rollforward Q2-23 AUM Rollforward $ in millions Credit Private Equity Real Assets Secondaries Other(1) Total Q1-23 Ending Balance $235,143 $34,647 $64,114 $22,894 $3,497 $360,295 Net new par/equity commitments 9,936 — 1,824 142 2,493 14,395 Net new debt commitments 2,835 — 150 — — 2,985 Capital
Slide 30: FPAUM Rollforward
FPAUM Rollforward Q2-23 FPAUM Rollforward $ in millions Credit Private Equity Real Assets Secondaries Other(1) Total Q1-23 Ending Balance $153,749 $18,750 $40,928 $17,747 $2,735 $233,909 Commitments 1,444 — 870 136 1,975 4,425 Deployment/subscriptions/increase in leverage 6,315 901 988 193 (118) 8,2
Slide 31: AUM and FPAUM by Strategy
AUM and FPAUM by Strategy As of June 30, 2023 $ in billions AUM % AUM FPAUM % FPAUM Credit Liquid Credit $44.7 18% $43.5 27% Alternative Credit 27.8 11 19.9 12 U.S. Direct Lending(1) 105.4 42 60.4 37 European Direct Lending 60.5 24 32.3 20 Asia Credit 11.4 4 5.6 4 Other 0.3 1 — — Credit $250.1 100%
Slide 32: Balance Sheet Investments by Strategy
Balance Sheet Investments by Strategy(1) $ in millions June 30, 2023 December 31, 2022 Credit Liquid Credit(2) $121.3 $93.0 Alternative Credit 52.3 54.6 U.S. Direct Lending 81.6 111.9 European Direct Lending 40.3 33.4 Asia Credit 27.1 18.7 Credit $322.6 $311.6 Private Equity Corporate Private Equity
Slide 33: Significant Fund Performance Metrics
Significant Fund Performance Metrics The following table presents the performance data for the significant funds that are not drawdown funds: As of June 30, 2023 Returns(%) Quarter-to-Date Year-to-Date Since Inception(1) Year of ($ in millions) Inception AUM Gross Net Gross Net Gross Net Primary Inv
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 June 30, 2023 Original Capital MoIC IRR(%) Year of Capital Invested to Realized Unrealized Primary Investment ($ in millions) Inception AUM Commitments Date Value
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 June 30, 2023 Original Capital MoIC IRR(%) Year of Capital Invested to Realized Unrealized Primary Investment ($ in millions) Inception AUM Commitments D
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) 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 38: 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 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 a non-drawdown fund that was previously reported as a significant fund: As of June 30, 2023 Returns(%) Quarter-to-Date Year-to-Date Since Inception(1) Year of ($ in millions) Inception AUM Gross Net Gross Net Gros
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 June 30, 2023 Original Capital MoIC IRR(%) Year of Capital Invested to Realized Unrealized Primary Investment ($ in millions) Inc
Slide 42: 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 43: Supplemental Performance Metrics Endnotes (cont’d)
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-payi
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 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 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) 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 vehi
Slide 48: 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