Ares Capital Corporation · NASDAQ:ARCC
Ares Capital — Q4 2023 Earnings Presentation
47 slides from Ares Capital's earnings presentation, Feb 7, 2024
Slide 1: Earnings Presentation: Fourth Quarter and Full Year 2023
Exhibit 99.2 Earnings Presentation Fourth Quarter and Full Year 2023
Slide 2: 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 3: Fourth Quarter and Full Year 2023 Highlights
Fourth Quarter and Full Year 2023 Highlights • Total Assets Under Management (“AUMˮ) of $418.8 billion • Total Fee Paying AUM (“FPAUMˮ) of $262.4 billion* • Available Capital of $111.4 billion Assets Under • AUM Not Yet Paying Fees available for future deployment of $62.9 billion Management • Raised
Slide 4: Gross New Capital Commitments
Gross New Capital Commitments(1) $ in billions Q4 2023 FY 2023 Full Year Commentary Credit Group Equity and debt commitments to various funds, including equity commitments of $8.3 billion and debt U.S. Direct Lending $3.7 $18.5 commitments of $2.0 billion for our third U.S. senior direct lending fun
Slide 5: Assets Under Management
Assets Under Management AUM as of December 31, 2023 was $418.8 billion, an increase of 19% from prior year(1) • The increase of $66.8 billion was primarily driven by: ◦ commitments to U.S. direct lending funds, our sixth European direct lending fund and Pathfinder II within Credit; ◦ additional mana
Slide 6: Perpetual Capital
Perpetual Capital Perpetual Capital as of December 31, 2023 was $104.3 billion, an increase of 13% from prior year • The increase of $11.6 billion was primarily driven by: ◦ commitments in our U.S. direct lending and alternative credit strategies, capital raised by our business development companies
Slide 7: AUM and Management Fees by Type
AUM and Management Fees by Type For the year ended December 31, 2023: • 87% 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% 13% 8% 7% 26% 5% 5% 87% 95% 50% 8%
Slide 8: Available Capital and AUM Not Yet Paying Fees
Available Capital and AUM Not Yet Paying Fees Available Capital as of December 31, 2023 was $111.4 billion, an increase of 32% from prior year • The increase of $26.8 billion was primarily driven by: ◦ commitments to the U.S. and European direct lending and alternative credit strategies AUM Not Yet
Slide 9: AUM Not Yet Paying Fees
AUM Not Yet Paying Fees As of December 31, 2023, AUM Not Yet Paying Fees includes $62.9 billion of AUM available for future deployment that could generate approximately $621.6 million in potential incremental annual management fees(1) • The $62.9 billion of AUM Not Yet Paying Fees available for futu
Slide 10: Incentive Eligible AUM and Incentive Generating AUM
Incentive Eligible AUM and Incentive Generating AUM Incentive Eligible AUM as of December 31, 2023 was $244.4 billion, an increase of 20% from prior year • The increase of $40.7 billion was primarily driven by: ◦ commitments to funds across our U.S. and European direct lending and alternative credit
Slide 11: Fee Related Performance Revenues
Fee Related Performance Revenues Fee related performance revenues were $180.4 million during FY-23, generated primarily in our U.S. and European direct lending strategies IGAUM by Strategy for Funds Generating Net Fee Related Performance Revenues(1) Fee Related Performance Revenues by Strategy ($ in
Slide 12: Capital Deployment
Capital Deployment(1) Total Gross Invested Capital during Q4-23 was $24.0 billion compared to $21.8 billion during Q4-22 • $15.4 billion was related to deployment by our drawdown funds in Q4-23 compared to $14.9 billion in Q4-22 ◦ Of our drawdown funds, the most active investment strategies were U.S
Slide 13: GAAP Statements of Operations
GAAP Statements of Operations Quarter ended December 31, Year ended December 31, $ in thousands, except share data 2023 2022 2023 2022 Revenues Management fees $697,846 $590,083 $2,551,150 $2,136,433 Carried interest allocation 76,751 40,233 618,579 458,012 Incentive fees 243,300 271,208 276,627 301
Slide 14: RI and Other Measures Financial Summary
RI and Other Measures Financial Summary Quarter ended December 31, Year ended December 31, $ in thousands, except share data (and as otherwise noted) 2023 2022 % Change 2023 2022 % Change Management fees(1) $703,493 $592,958 19% $2,571,513 $2,152,528 19% Fee related performance revenues 173,512 224,
Slide 15: GAAP to Non-GAAP Reconciliation – Unconsolidated Reporting Basis
GAAP to Non-GAAP Reconciliation – Unconsolidated Reporting Basis Quarter ended December 31, Year ended December 31, $ in thousands 2023 2022 2023 2022 Realized Income and Fee Related Earnings: Income before taxes $483,100 $342,809 $1,333,063 $510,806 Adjustments: Amortization of intangibles(1) 30,92
Slide 16: GAAP to Non-GAAP Reconciliation – Unconsolidated Reporting Basis (cont'd)
GAAP to Non-GAAP Reconciliation – Unconsolidated Reporting Basis (cont'd) Quarter ended December 31, Year ended December 31, $ in thousands 2023 2022 2023 2022 Performance income and net investment income reconciliation: Carried interest allocation $76,751 $40,233 $618,579 $458,012 Incentive fees 24
Slide 17: Credit Group
Credit Group(1) • Management and other fees increased by 19% and 23% for Q4-23 and FY-23, respectively, compared to Q4-22 and FY-22, primarily driven by deployment within U.S. and European direct lending and alternative credit • Fee related performance revenues increased by 183% and 134% for Q4-23 a
Slide 18: Private Equity Group
Private Equity Group(1) • Management and other fees increased by 18% and 16% for Q4-23 and FY-23, respectively, compared to Q4-22 and FY-22, primarily driven by the acquisition of Crescent Point and by deployment in ASOF II • Fee Related Earnings increased by 6% and 33% for Q4-23 and FY-23, respecti
Slide 19: Real Assets Group
Real Assets Group(1) • Management and other fees increased by 7% and 9% for Q4-23 and FY-23, respectively, compared to Q4-22 and FY-22, primarily due to higher management fees from increases in the average capital base of our non-traded REITs, deployment in IDF V and commitments to our fourth U.S. o
Slide 20: Secondaries Group
Secondaries Group(1) • Management and other fees increased by 21% for Q4-23 compared to Q4-22 and decreased by 1% for FY-23 compared to FY-22, primarily driven by the timing of catch-up fees. Management fees in Q4-23 and FY-23 included catch-up fees of $7.5 million and $7.9 million, respectively, fr
Slide 21: Realized Income per Share Data
Realized Income per Share Data Quarter ended December 31, Year ended December 31, $ in thousands, except share data 2023 2022 2023 2022 After-tax Realized Income Realized Income before taxes $434,573 $418,323 $1,265,528 $1,131,027 Entity level foreign, state and local taxes (9,808) (4,913) (28,606)
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 December 31, 2023, our balance sheet included $348.3 million in cash and cash equivalents and $2,965.5 million in debt obligations, including $895.0 mill
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/Senior Advisor to Public and President of Ares a
Slide 24: Appendix
Appendix
Slide 25: Financial Details – Segments
Financial Details – Segments Quarter ended December 31, 2023 Private Real Operations Credit Equity Assets Secondaries Management $ in thousands Group Group Group Group Other Group Total(1) Management fees $477,523 $63,629 $103,974 $50,345 $8,022 $— $703,493 Fee related performance revenues 166,467 —
Slide 26: Financial Details – Segments
Financial Details – Segments Year ended December 31, 2023 Private Real Operations Credit Equity Assets Secondaries Management $ in thousands Group Group Group Group Other Group Total(1) Management fees $1,749,796 $230,251 $389,437 $174,942 $27,087 $— $2,571,513 Fee related performance revenues 167,3
Slide 27: Weighted Average Shares
Weighted Average Shares Q4-23 Q4-22 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 189,762,660 189,762,660 176,996,146 176,996,146 Ares Operating Group Units exchangeable into shares of Class A comm
Slide 28: AUM Rollforward
AUM Rollforward Q4-23 AUM Rollforward $ in millions Credit Private Equity Real Assets Secondaries Other Total Q3-23 Ending Balance $268,881 $34,289 $63,915 $23,255 $4,602 $394,942 Acquisitions — 3,697 — — — 3,697 Net new par/equity commitments 7,984 1,524 2,329 1,873 1,668 15,378 Net new debt commit
Slide 29: FPAUM Rollforward
FPAUM Rollforward Q4-23 FPAUM Rollforward $ in millions Credit Private Equity Real Assets Secondaries Other Total Q3-23 Ending Balance $167,013 $19,368 $40,810 $17,869 $2,633 $247,693 Acquisitions — 1,692 — — — 1,692 Commitments 3,634 — 1,638 1,019 1,364 7,655 Deployment/subscriptions/increase in le
Slide 30: AUM and FPAUM by Strategy
AUM and FPAUM by Strategy As of December 31, 2023 $ in billions AUM % AUM FPAUM % FPAUM Credit Liquid Credit $47.3 17% $46.1 26% Alternative Credit 33.9 12 23.2 13 U.S. Direct Lending(1) 123.1 43 67.6 38 European Direct Lending 68.3 24 34.3 19 Asia Credit 11.9 3 5.6 4 Other 0.3 1 — — Credit $284.8 1
Slide 31: Balance Sheet Investments by Strategy
Balance Sheet Investments by Strategy(1) $ in millions As of December 31, 2023 As of December 31, 2022 Credit Liquid Credit(2) $127.3 $93.0 Alternative Credit 37.8 54.6 U.S. Direct Lending 84.6 111.9 European Direct Lending 55.7 33.4 Asia Credit 32.9 18.7 Credit $338.3 $311.6 Private Equity Corporat
Slide 32: Significant Fund Performance Metrics
Significant Fund Performance Metrics The following table presents the performance data for the significant funds that are not drawdown funds: As of December 31, 2023 Returns(%) Quarter-to-Date Year-to-Date Since Inception(1) Year of ($ in millions) Inception AUM Gross Net Gross Net Gross Net Primary
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 December 31, 2023 Original Capital MoIC IRR(%) Year of Capital Invested to Realized Unrealized Primary Investment ($ in millions) Inception AUM Commitments Date V
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 December 31, 2023 Original Capital MoIC IRR(%) Year of Capital Invested to Realized Unrealized ($ in millions) Inception AUM Commitments Date Value(1) Va
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 commingled funds that were previously reported as significant funds: As of December 31, 2023 Original Capital MoIC IRR(%) Year of Capital Invested to Realized Unrealized Primary Investment ($ in millions) Inceptio
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 December 31, 2023 Original Capital MoIC IRR(%) Year of Capital Invested to Realized Unrealized Primary Investment ($ in millions)
Slide 41: Supplemental Performance Metrics Endnotes
Supplemental Performance Metrics Endnotes Credit 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 accrued incentive alloc
Slide 42: 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 43: 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 44: Glossary
Glossary Ares Operating Group Ares Operating Group entities or an "AOG Entity" 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 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