Ares Capital Corporation · NASDAQ:ARCC
Ares Capital — Q1 2023 Earnings Presentation
47 slides from Ares Capital's earnings presentation, Apr 25, 2023
Slide 1: Ares Management Corporation Reports First Quarter 2023 Results
Ares Management Corporation Reports First Quarter 2023 Results NEW YORK--Ares Management Corporation (NYSE:ARES) today reported its financial results for its first quarter ended March 31, 2023. GAAP net income attributable to Ares Management Corporation was $94.0 million for the quarter ended March
Slide 2: Conference Call and Webcast Information
Conference Call and Webcast Information Ares will host a conference call on April 28, 2023 at 11:00 a.m. (Eastern Time) to discuss first quarter results. All interested parties are invited to participate via telephone or the live webcast, which will be hosted on a webcast link located on the Home pa
Slide 3: Earnings Presentation First Quarter 2023
Earnings Presentation First 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: First Quarter 2023 Highlights
First Quarter 2023 Highlights • Total Assets Under Management (“AUMˮ) of $360.3 billion • Total Fee Paying AUM (“FPAUMˮ) of $233.9 billion Assets Under • Available Capital of $88.6 billion Management • AUM Not Yet Paying Fees available for future deployment of $50.5 billion • Raised $16.0 billion in
Slide 6: Gross New Capital Commitments
Gross New Capital Commitments(1) $ in billions Q1 2023 Commentary Credit Group European Direct Lending $4.5 Equity commitments to various funds including $4.2 billion for our sixth flagship European direct lending fund Alternative Credit 3.1 Equity commitments to various funds, including $1.8 billio
Slide 7: Assets Under Management
Assets Under Management AUM as of March 31, 2023 was $360.3 billion, an increase of 11% from prior year(1) • The increase of $35.3 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 March 31, 2023 was $95.4 billion, an increase of 15% from prior year • The increase of $12.7 billion was primarily driven by: ◦ commitments in our U.S. direct lending and alternative credit strategies and our insurance platform and capital raised by ASIF and
Slide 9: AUM and Management Fees by Type
AUM and Management Fees by Type For the quarter ended March 31, 2023: • 89% 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% 11% 20% 38% 7% 89% 95% 51% 62% 6% P
Slide 10: Available Capital and AUM Not Yet Paying Fees
Available Capital and AUM Not Yet Paying Fees Available Capital as of March 31, 2023 was $88.6 billion, a decrease of 4% from prior year • The decrease of $3.8 billion was primarily driven by: ◦ net deployment in the U.S. and European direct lending and corporate private equity strategies AUM Not Ye
Slide 11: AUM Not Yet Paying Fees
AUM Not Yet Paying Fees As of March 31, 2023, AUM Not Yet Paying Fees includes $50.5 billion of AUM available for future deployment that could generate approximately $483.0 million in potential incremental annual management fees(1) • The $50.5 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, 2023 was $210.5 billion, an increase of 10% from prior year • The increase of $18.7 billion was primarily driven by: ◦ fundraising across U.S. and European direct lending, alternative credit, special opportuni
Slide 13: Capital Deployment
Capital Deployment(1) Total Gross Invested Capital during Q1-23 was $12.9 billion compared to $16.0 billion during Q1-22 • Deployment by our drawdown funds was $7.8 billion in Q1-23 compared to $11.0 billion in Q1-22 ◦ Of our drawdown funds, the most active investment strategies were U.S. and Europe
Slide 14: GAAP Statements of Operations
GAAP Statements of Operations Three months ended March 31, $ in thousands, except share data 2023 2022 Revenues Management fees $600,516 $477,332 Carried interest allocation 151,488 178,289 Incentive fees 8,923 16,422 Principal investment income 22,758 8,326 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) 2023 2022 % Change 2023 2022 % Change Management fees(1) $602,619 $482,921 25% $2,272,226 $1,790,735 27% Fee related performance revenues 3,871 12,711 (
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 2023 2022 2023 2022 Realized Income and Fee Related Earnings: Income before taxes $241,122 $161,309 $590,619 $1,036,935 Adjustments: Amortization of intangibles(1) 38,201
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 March 31, LTM ended March 31, $ in thousands 2023 2022 2023 2022 Performance income and net investment income reconciliation: Carried interest allocation $151,488 $178,289 $431,211 $1,954,305 Incentive fees
Slide 18: Credit Group
Credit Group(1) • Management and other fees increased by 28% for Q1-23 compared to Q1-22, primarily driven by deployment within the U.S. and European direct lending and alternative credit strategies • Fee related performance revenues decreased by 95% for Q1-23 compared to Q1-22, primarily due to the
Slide 19: Private Equity Group
Private Equity Group(1) • Management and other fees increased by 20% for Q1-23 compared to Q1-22, primarily driven by deployment in ASOF II • Fee Related Earnings increased by 15% for Q1-23 compared to Q1-22, primarily driven by the increase in management fees and partially offset by higher operatin
Slide 20: Real Assets Group
Real Assets Group(1) • Management and other fees increased by 29% for Q1-23 compared to Q1-22, primarily due to additional capital raised by our non-traded REITs, the acquisition of Infrastructure Debt and new commitments to various funds within our U.S. and European real estate equity strategies •
Slide 21: Secondaries Group
Secondaries Group(1) • Management and other fees decreased by 10% for Q1-23 compared to Q1-22, primarily driven by a step down in fee bases for LEP XV and LREP VIII, and partially offset by new commitments to LEP XVII. Management fees also included catch-up fees of $0.9 million from our ninth real e
Slide 22: Realized Income per Share Data
Realized Income per Share Data Three months ended March 31, $ in thousands, except share data 2023 2022 After-tax Realized Income Realized Income before taxes $254,292 $222,017 Entity level foreign, state and local taxes (5,282) (3,558) Realized Income 249,010 218,459 Income taxes(1) (16,983) (11,76
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 March 31, 2023, our balance sheet included $272.2 million in cash and cash equivalents and $2,369.3 million in debt obligations, including $795.0 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 March 31, 2023 Private Real Operations Credit Equity Assets Secondaries Management $ in thousands Group Group Group Group Other Group Total(1) Management fees $405,650 $54,657 $97,470 $39,863 $4,979 $— $602,619 Fee related performance revenues 600 — —
Slide 27: Weighted Average Shares
Weighted Average Shares Q1-23 Q1-22 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 178,976,022 178,976,022 174,215,251 174,215,251 Ares Operating Group Units exchangeable into shares of Class A comm
Slide 28: AUM Rollforward
AUM Rollforward Q1-23 AUM Rollforward $ in millions Credit Private Equity Real Assets Secondaries Other Total Q4-22 Ending Balance $225,579 $34,749 $66,061 $21,961 $3,647 $351,997 Net new par/equity commitments 9,859 50 765 1,246 2,662 14,582 Net new debt commitments 1,423 — — — — 1,423 Capital redu
Slide 29: FPAUM Rollforward
FPAUM Rollforward Q1-23 FPAUM Rollforward $ in millions Credit Private Equity Real Assets Secondaries Other Total Q4-22 Ending Balance $151,275 $18,447 $41,607 $17,668 $2,064 $231,061 Commitments 1,900 — 596 107 1,553 4,156 Deployment/subscriptions/increase in leverage 4,281 703 221 110 — 5,315 Capi
Slide 30: AUM and FPAUM by Strategy
AUM and FPAUM by Strategy As of March 31, 2023 $ in billions AUM % AUM FPAUM % FPAUM Credit Liquid Credit $44.5 19% $42.6 28% Alternative Credit 23.8 10 16.3 11 U.S. Direct Lending(1) 100.2 43 57.9 38 European Direct Lending 55.0 23 31.2 20 Asia Credit 11.3 4 5.7 3 Other 0.3 1 — — Credit $235.1 100%
Slide 31: Balance Sheet Investments by Strategy
Balance Sheet Investments by Strategy(1) $ in millions March 31, 2023 December 31, 2022 Credit Liquid Credit(2) $92.4 $93.0 Alternative Credit 53.6 54.6 U.S. Direct Lending 114.3 111.9 European Direct Lending 39.4 33.4 Asia Credit 21.2 18.7 Credit $320.9 $311.6 Private Equity Corporate Private Equit
Slide 32: Significant Fund Performance Metrics
Significant Fund Performance Metrics The following table presents the performance data for the significant funds that are not drawdown funds: As of March 31, 2023 Returns(%) Quarter-to-Date Since Inception(1) Year of ($ in millions) Inception AUM Gross Net Gross Net Primary Investment Strategy Credi
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 March 31, 2023 Original Capital MOIC IRR(%) Year of Capital Invested to Realized Unrealized Primary Investment ($ in millions) Inception AUM Commitments Date Valu
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 March 31, 2023 Original Capital MOIC IRR(%) Year of Capital Invested to Realized Unrealized Primary Investment ($ in millions) Inception AUM Commitments
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 a non-drawdown fund that was previously reported as a significant fund: As of March 31, 2023 Returns(%) Quarter-to-Date Since Inception(1) Year of ($ in millions) Inception AUM Gross Net Gross Net Primary Investme
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 March 31, 2023 Original Capital MOIC IRR(%) Year of Capital Invested to Realized Unrealized Primary Investment ($ in millions) In
Slide 41: 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 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 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 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