Ares Management Corporation · NYSE:ARES
Ares Management — FY2019 Earnings Presentation
39 slides from Ares Management's earnings presentation, Feb 13, 2020
Slide 1: Fourth Quarter and Full Year 2019 Earnings Presentation
Exhibit 99.2 Fourth Quarter and Full Year 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: Fourth Quarter and Full Year 2019 Highlights
Fourth Quarter and Full Year 2019 Highlights • Total Assets Under Management ("AUM") of $148.9 billion • Total Fee Paying AUM ("FPAUM") of $96.9 billion • Available Capital of $34.6 billion Assets Under Management • AUM Not Yet Earning Fees available for future deployment of $25.2 billion • Raised $
Slide 4: Gross New Capital Commitments – Fourth Quarter and Full Year 2019
#ACACAC #1E3154 Gross New Capital Commitments – Fourth Quarter and Full Year 2019(1) #225070 #828282 $ in millions Q4 2019 FY 2019 Full Year Commentary Credit Group U.S. Direct Lending $1,139 $4,077 New debt commitments of $2.1 billion and new equity commitments of $1.9 billion #D2D2D2 #49749B CLOs
Slide 5: Assets Under Management
Assets Under Management AUM as of December 31, 2019 was $148.9 billion, an increase of 14.0% from prior year(1) • The increase of $18.2 billion was driven by capital raising, primarily across U.S. direct lending, syndicated loans, alternative credit and European direct lending funds in our Credit Gr
Slide 6: Management Fees by Duration and Fund Type
Management Fees by Duration and Fund Type For the year ended December 31, 2019: • 81% of management fees are earned from funds with three or more years remaining in duration • 90% of management fees are earned from permanent capital, closed end funds and CLOs Duration Fund Type 1 1% 11% 4 % 7 2 % 2
Slide 7: AUM and FPAUM by Duration
AUM and FPAUM by Duration As of December 31, 2019, approximately 70% of AUM and 71% of FPAUM had a duration longer than 3 years • At time of fund closing, the initial duration was greater than 7 years for approximately 73% of AUM AUM: $148.9 billion FPAUM: $96.9 billion 1 7 2 % 2 7 % 4% 4% % 12% 16%
Slide 8: Available Capital and AUM Not Yet Earning Fees
Available Capital and AUM Not Yet Earning Fees Available Capital as of December 31, 2019 was $34.6 billion, a decrease of 9.2% from prior year • The decrease of $3.5 billion was driven primarily by net deployment in U.S. and European direct lending, corporate private equity, and alternative credit f
Slide 9: AUM Not Yet Earning Fees
AUM Not Yet Earning Fees As of December 31, 2019, AUM Not Yet Earning Fees of $27.1 billion could generate approximately $255.6 million in potential incremental annual management fees, of which $233.5 million relates to the $25.2 billion of AUM available for future deployment(1) • The $25.2 billion
Slide 10: Incentive Eligible AUM and Incentive Generating AUM
Incentive Eligible AUM and Incentive Generating AUM Incentive Eligible AUM as of December 31, 2019 was $87.4 billion, an increase of 11.6% from prior year • The increase of $9.1 billion was primarily driven by capital raising across the U.S. direct lending, special opportunities, European real estat
Slide 11: Capital Deployment
Capital Deployment(1) Q4-19 Capital Deployment Breakdown: $5.1 billion • Total Gross Invested Capital for the year ended December 31, 2019 was $27.4 billion compared to $22.4 billion for the year ended December 31, 2018 ($ in millions) • Of the total amount, $21.5 billion was related to deployment i
Slide 12: GAAP Statements of Operations
GAAP Statements of Operations $ in thousands, except share data Quarter Ended December 31, Year Ended December 31, 2019 2018 2019 2018 Revenues Management fees (includes ARCC Part I Fees of $48,060, $164,396, $37,145, $128,805 for the quarter and year ended December 31, 2019, and 2018, respectively)
Slide 13: RI and Other Measures Financial Summary
RI and Other Measures Financial Summary $ in thousands, except share data (and as otherwise noted) Quarter Ended December 31, Year Ended December 31, 2019 2018 % Change 2019 2018 % Change Management fees(1) $273,261 $223,952 22% $1,012,530 $836,744 21% Other fees 5,049 7,122 (29)% 18,078 24,288 (26)
Slide 14: GAAP to Non-GAAP Reconciliation – Unconsolidated Reporting Basis
GAAP to Non-GAAP Reconciliation – Unconsolidated Reporting Basis $ in thousands Quarter Ended December 31, Year Ended December 31, 2019 2018 2019 2018 Realized Income and Fee Related Earnings: Income before taxes $101,261 $18,880 $425,180 $184,341 Adjustments: Depreciation and amortization expense(1
Slide 15: GAAP to Non-GAAP Reconciliation – Unconsolidated Reporting Basis (cont'd)
GAAP to Non-GAAP Reconciliation – Unconsolidated Reporting Basis (cont'd) $ in thousands Quarter Ended December 31, Year Ended December 31, 2019 2018 2019 2018 Performance income and net investment income reconciliation: Carried interest allocation $118,064 $(30,177) $621,872 $42,410 Incentive fees
Slide 16: Credit Group
Credit Group(1) • Management and other fees increased 29% and 24% for Q4-19 and FY-19, respectively, compared to Q4-18 and FY-18, primarily driven by deployment in funds in the U.S. and European direct lending strategies • Fee Related Earnings increased by 41% and 27% for Q4-19 and FY-19, respective
Slide 17: Private Equity Group
Private Equity Group(1) • Management and other fees increased by 5% and 6% for Q4-19 and FY-19, respectively, compared to Q4-18 and FY-18, primarily driven by new commitments in our energy opportunities fund and deployment in our special opportunities fund • Fee Related Earnings increased by 20% and
Slide 18: Real Estate Group
Real Estate Group(1) • Management and other fees decreased by 8% for Q4-19 compared to Q4-18, primarily driven by catch-up fees recognized in Q4-18 that did not occur in Q4-19. Management and other fees increased by 19% for FY-19 compared to FY-18, primarily driven by new commitments and $8.2 millio
Slide 19: Realized Income per Share Data
Realized Income per Share Data Quarter Ended December 31, Year Ended December 31, $ in thousands, except share data 2019 2018 2019 2018 After-tax Realized Income, net of Series A Preferred Stock dividends Realized Income before taxes $206,136 $123,851 $503,486 $395,396 Entity level foreign, state an
Slide 20: Balance Sheet
Balance Sheet • Substantial balance sheet value related to investments in Ares managed vehicles and net accrued performance income • As of December 31, 2019, our balance sheet included $138.4 million in cash and cash equivalents and $316.6 million in debt obligations with $70.0 million drawn against
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 (Three Months Ended)
Financial Details – Segments Three Months Ended December 31, 2019 Private Real Operations Credit Equity Estate Management (1) $ in thousands Group Group Group Group Total Management fees (Credit Group includes ARCC Part I Fees of $48,060) $200,093 $53,513 $19,655 $— $273,261 Other fees 4,945 21 83 —
Slide 24: Financial Details – Segments (Year Ended)
Financial Details – Segments Year Ended December 31, 2019 Private Real Operations Credit Equity Estate Management (1) $ in thousands Group Group Group Group Total Management fees (includes ARCC Part I Fees of $164,396) $713,853 $211,614 $87,063 $— $1,012,530 Other fees 17,124 162 792 — 18,078 Compen
Slide 25: AUM and FPAUM Rollforward
AUM and FPAUM Rollforward Q4-19 Total AUM Rollforward ($ in millions) FY-19 Total AUM Rollforward ($ in millions) Credit Private Equity Real Estate Total Credit Private Equity Real Estate Total Q3-19 Ending Balance $106,302 $25,515 $12,481 $144,298 Q4-18 Ending Balance $95,836 $23,487 $11,340 $130,6
Slide 26: AUM and FPAUM by Strategy
AUM and FPAUM by Strategy As of December 31, 2019 $ in billions AUM % AUM FPAUM % FPAUM Credit Syndicated Loans $22.3 20% $21.5 30% High Yield 3.5 3 3.5 5 Multi-Asset Credit 2.6 2 2.1 3 Alternative Credit 7.6 7 4.3 6 U.S. Direct Lending(1) 48.4 44 27.9 39 European Direct Lending 26.1 24 12.6 17 Cred
Slide 27: Balance Sheet Investments by Strategy
Balance Sheet Investments by Strategy(1) $ in millions December 31, 2019 December 31, 2018 Credit Syndicated Loans(2) $104.7 $75.0 Multi-Asset Credit 29.5 3.4 Alternative Credit 21.0 19.5 U.S. Direct Lending 61.3 59.0 European Direct Lending 32.8 47.9 Credit $249.3 $204.8 Private Equity ACOF I - II
Slide 28: Significant Fund Performance Metrics
Significant Fund Performance Metrics The following table presents the performance data for the significant fund in the Credit Group that is not a drawdown fund: As of December 31, 2019 Returns (%)(1) Current Quarter Year-To-Date Since Inception(2) AUM Year of Inception ($ in millions) Gross Net Gros
Slide 29: 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, 2019 Credit MOIC IRR Year of Original Capital Cumulative Realized Unrealized (4) (5) (6) (7) (8) (9) ($ in millions) Inception AUM Commitments Invest
Slide 30: 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 31: Significant Fund Performance Metrics Endnotes (cont’d)
Significant Fund Performance Metrics Endnotes (cont’d) Private Equity - Cont. 5. The gross IRR is an annualized since inception gross internal rate of return of cash flows to and from investments and the residual value of the investments at the end of the measurement period. Gross IRRs reflect retur
Slide 32: Weighted Average Shares
Weighted Average Shares Q4-19 Q4-18 Common Shares, Common Shares, Total Shares As Adjusted(3) Total Shares As Adjusted(3) Weighted average shares of Class A common stock 114,943,915 114,943,915 101,526,367 101,526,367 Ares Operating Group Units exchangeable into shares of Class A common stock(1) 116
Slide 33: Additional Information – AUM Mix by Investor
Additional Information AUM Mix by Investor Institutional Direct - 70%(2) Public Entity & Related l 725+ institutional investors (1) 12% l 200,000+ retail investors across our public funds (2) 26% Total Direct Institutional Investors: 878 18% 12% Pension Bank/ Private Bank Insurance 1% 5% 6% 11% Sove
Slide 34: RI and Other Measures – Financial Data
RI and Other Measures –Financial Data(1) $ in thousands Year ended December 31, 2019 2018 2017 Credit Group(2) $713,853 $564,899 $481,466 Private Equity Group 211,614 198,182 198,498 Real Estate Group 87,063 73,663 64,861 Management fees $1,012,530 $836,744 $744,825 Other fees $18,078 $24,288 $22,43
Slide 35: GAAP to Non-GAAP Reconciliation – Unconsolidated Reporting Basis
GAAP to Non-GAAP Reconciliation – Unconsolidated Reporting Basis $ in thousands Year ended December 31, 2019 2018 2017 Realized Income and Fee Related Earnings: Income before taxes $425,180 $184,341 $149,859 Adjustments: Depreciation and amortization expense(1) 40,602 25,087 30,481 Equity compensati
Slide 36: GAAP to Non-GAAP Reconciliation – Unconsolidated Reporting Basis (cont'd)
GAAP to Non-GAAP Reconciliation – Unconsolidated Reporting Basis (cont'd) $ in thousands Year ended December 31, 2019 2018 2017 Performance income and net investment income reconciliation: Carried interest allocation $621,872 $42,410 $620,454 Incentive fees 69,197 63,380 16,220 Carried interest allo
Slide 37: Glossary
Glossary ARCC Part I Fees ARCC Part I Fees refers to a quarterly performance income on the net 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 cas
Slide 38: Glossary (cont’d)
Glossary (cont’d) Incentive Eligible Assets Incentive Eligible AUM (or “IEAUM”) refers to the AUM of our funds from which performance income may be generated, regardless Under Management of whether or not they are currently generating performance income. It generally represents the NAV plus uncalled
Slide 39: 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