Ares Management Corporation · NYSE:ARES
Ares Management — Q1 2018 Earnings Presentation
38 slides from Ares Management's earnings presentation, May 3, 2018
Slide 1: First Quarter 2018 Earnings Presentation
First Quarter 2018 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: First Quarter Highlights
3 First Quarter Highlights 1. Net inflows represents gross commitments less redemptions. 2. Includes ARCC Part I Fees of $28.4 million for the three months ended March 31, 2018. Difference between GAAP and Unconsolidated management fees represents $7.3 million from Consolidated Funds that is elimina
Slide 4: Gross New Capital Commitments – First Quarter of 2018
4 Gross New Capital Commitments(1) – First Quarter of 2018 1. Represents gross new commitments during Q1-18, including equity and debt commitments and gross inflows into our open-ended managed accounts and sub-advised accounts. $ in millions Q1 2018 Comments Credit Group U.S. Direct Lending $2,964 N
Slide 5: Assets Under Management
5 Assets Under Management . 1. As of March 31, 2018, 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 Q1-18, distributions totaled approximately $1.1 billion and redemptions
Slide 6: AUM, FPAUM and Management Fees Duration
6 AUM, FPAUM and Management Fees Duration As of March 31, 2018, approximately 70% of AUM, 70% of FPAUM and 80% of management fees had a duration longer than 3 years ◦ At time of fund closing, approximately 82% of AUM and 80% of FPAUM had a duration longer than 3 years ◦ At inception, the initial dur
Slide 7: Available Capital and AUM Not Yet Earning Fees
7 Available Capital and AUM Not Yet Earning Fees Available Capital of $26.6 billion as of March 31, 2018 increased 9.8% year over year ◦ The increase was primarily driven by new and additional commitments to U.S. direct lending and E.U. real estate funds, which was partially offset by capital deploy
Slide 8: AUM Not Yet Earning Fees Available for Future Deployment
8 $11,915 $703 $771 AUM Not Yet Earning Fees Available for Future Deployment: $13.4 billion AUM Not Yet Earning Fees As of March 31, 2018, AUM Not Yet Earning Fees of $17.3 billion could generate approximately $172.0 million in potential incremental annual management fees, of which $126.3 million re
Slide 9: Incentive Eligible AUM and Incentive Generating AUM
9 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 March 31, 2018, the
Slide 10: Capital Deployment
10 $3,820 $1,590 $350 Q1-18 Capital Deployment Breakdown: $5.8 billion Capital Deployment(1) • Total gross invested capital during Q1-18 of $5.8 billion compared to $3.6 billion in Q1-17 ◦ Of the total amount, $4.5 billion was related to deployment in our drawdown funds compared to $2.6 billion for
Slide 11: Consolidated Statements of Operations
11 $ in thousands, except share data Three Months Ended March 31, 2018 2017 Revenues Management fees (includes ARCC Part I Fees of $28,417 and $33,257 for the three months ended March 31, 2018 and 2017, respectively) $189,515 $172,045 Carried interest allocation 54,129 52,007 Incentive fees 5,071 3,
Slide 12: RI, ENI and Other Measures Financial Summary
12 RI, ENI and Other Measures Financial Summary 1. Includes ARCC Part I Fees of $28.4 million and $33.3 million for the three months ended March 31, 2018 and 2017, respectively, and $100.6 million and $125.8 million for Q1-18 LTM and Q1-17 LTM, respectively. 2. Includes compensation and benefits exp
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 RI, ENI, FRE and PRE 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 income, realized and unrealized performance income and net investment income to unconsolidated basis, which assist in the reconciliation of GAAP Net Income
Slide 15: Credit Group
15 Credit Group(1) Note: Past performance is not indicative of future results. The Credit Group had ~240 investment professionals, over 1,500 portfolio companies and 145 active funds as of March 31, 2018. 1. Segment results are shown before the unallocated support costs of the Operations Management
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, 35 portfolio companies, 59 U.S. Power and Energy Assets and 22 active funds and related co-investment vehicles as of March 31, 2018. 1. Segment results ar
Slide 17: Real Estate Group
17 Real Estate Group(1) Note: Past performance is not indicative of future results. The Real Estate Group had ~70 investment professionals, 171 properties and 41 active funds as of March 31, 2018. 1. Segment results are shown before the unallocated support costs of the Operations Management Group. S
Slide 18: Realized Income per Share Data
18 Realized Income per Share Data 1. Pro forma shares of 222,115,121 includes the sum of common shares, Ares Operating Group Units that are exchangeable for common shares 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: Economic Net Income per Share Data
19 Economic Net Income per Share Data 1. Pro forma shares of 222,115,121 includes the sum of common shares, Ares Operating Group Units that are exchangeable for common shares 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% Ser
Slide 20: Balance Sheet
20 • Substantial balance sheet value related to investments in Ares managed vehicles and net performance income receivable ◦ $115.5 million in cash and cash equivalents, $590.2 million in debt obligations with $140.0 million drawn against our $1.065 billion revolving credit facility as of March 31,
Slide 21: Corporate Data
21 Corporate Data Board of Directors Michael Arougheti Co-Founder, Chief Executive Officer 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
Slide 22: Appendix
Appendix
Slide 23: Financial Details – Segments
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 March 31, 2018 $ in thousands Credit Group Priv
Slide 24: AUM and FPAUM Rollforward
24 AUM and FPAUM Rollforward Credit l AUM increased by 7.8% from Q4-17, primarily driven by new capital commitments to U.S. direct lending and syndicated loans strategies l FPAUM increased by 4.2% from Q4-17, primarily driven by new commitments to syndicated loans strategy and deployment in direct l
Slide 25: AUM and FPAUM by Strategy
25 AUM and FPAUM by Strategy(1) 1. As of March 31, 2018. 2. AUM includes ARCC, IHAM, and SDLP AUM of $15.0 billion, $4.1 billion, and $2.0 billion, respectively. ARCC’s wholly owned portfolio company, IHAM, an SEC registered investment adviser, manages 22 funds and serves as the sub-manager or sub-a
Slide 26: Balance Sheet Investments by Strategy
26 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 March 31, 2018 December 31, 2017 Credit Syndicated Loans* $296,148 $246,460 C
Slide 27: Significant Fund Performance Metrics
27 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 March 31, 2018 unless otherwise noted. The above tabl
Slide 28: Significant Fund Performance Metrics
28 Significant Fund Performance Metrics* Note: Past performance is not indicative of future results. AUM and Net Returns as of March 31, 2018 unless otherwise noted. The above table includes fund performance metrics for significant funds which includes those that contributed at least 1% of total man
Slide 29: Significant Fund Performance Metrics Endnotes
29 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 30: Significant Fund Performance Metrics Endnotes (cont'd)
30 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 31: Weighted Average Common Share Information
31 Weighted Average Common Share Information 1. Represents average units exchangeable for Ares common shares on a one-for-one basis. 2. We apply the treasury stock method to determine the dilutive weighted-average common shares represented by our restricted units to be settled in common shares and o
Slide 32: Additional Information
32 Additional Information Dividends Targeted Net Returns(1) Investor Base as a % of AUM(1) Credit Group: Public Entity & Related: 21% l Ares declared a quarterly dividend of $0.28 per common share, payable on June 29, 2018 to common shareholders of record at the close of business on June 15, 2018. l
Slide 33: RI, ENI and Other Measures – Financial Data
33 RI, ENI and Other Measures –Financial Data(1) 1. Unconsolidated results represent the operating segments plus the Operations Management Group but exclude the effect of Consolidated Funds. 2. Includes ARCC Part I Fees of $105.5 million and $121.2 million for the years ended December 31, 2017 and 2
Slide 34: GAAP to Non-GAAP Reconciliation – Unconsolidated Reporting Basis
34 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 RI, ENI, FRE, PRE and DE on unconsolidated basis, which shows the results of the reportable segments on a combined basis tog
Slide 35: GAAP to Non-GAAP Reconciliation – Unconsolidated Reporting Basis (cont.)
35 GAAP to Non-GAAP Reconciliation – Unconsolidated Reporting Basis (cont.) Note: These tables are a reconciliation of consolidated performance income, realized and unrealized performance income and net investment income to an unconsolidated basis, which assist in the reconciliation of GAAP Net Inco
Slide 36: Glossary
36 Glossary ARCC Part I Fees ARCC Part I Fees refers to a quarterly performance income 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, co
Slide 37: Glossary (cont'd)
37 Glossary (cont’d) Incentive Generating Assets Under Management Incentive generating AUM (or “IGAUM”) refers to the AUM of our funds that are currently generating, on a realized or unrealized basis, performance income. It generally represents the NAV of our funds for which we are entitled to recei
Slide 38: Glossary (cont'd)
38 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 fluctuati