Ares Management Corporation · NYSE:ARES
Ares Management — FY2016 Earnings Presentation
40 slides from Ares Management's earnings presentation, Feb 24, 2017
Slide 1: Fourth Quarter and Full Year 2016 Earnings Presentation
Fourth Quarter and Full Year 2016 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: Fourth Quarter and Year Ended 2016 Highlights
3 Fourth Quarter and Year Ended 2016 Highlights 1. Net inflows represents gross commitments less redemptions. 2. Includes ARCC Part I Fees of $30.3 million and $121.2 million for the three months and year ended December 31, 2016, respectively. Difference between GAAP and Stand Alone management fees
Slide 4: Recent Developments since Quarter End
4 Recent Developments since Quarter End ARCC's Acquisition of ACAS On January 3, 2017, in conjunction with ARCC's acquisition of ACAS, we increased our assets under management by approximately $3.6 billion. The acquisition will increase our FPAUM by an estimated $3 billion based on pro forma Septemb
Slide 5: Gross New Capital Commitments – Fourth Quarter and Full Year 2016
5 Gross New Capital Commitments – Fourth Quarter and Full Year 2016(1) 1. Represents gross new commitments during Q4-16 and full year 2016, including equity and debt commitments and gross inflows into our open-ended managed accounts and sub-advised accounts. $ in millions Q4 2016 FY 2016 Comments Cr
Slide 6: Assets Under Management
6 Assets Under Management Note: For definitions of AUM and FPAUM please refer to the “Glossary” slide in the appendix. 1. For FY 2016, distributions totaled $5.2 billion and redemptions totaled $1.9 billion. 2. Includes approximately $3.6 billion in AUM from ARCC's acquisition of American Capital wh
Slide 7: AUM and FPAUM Duration
7 AUM and FPAUM Duration As of December 31, 2016, approximately 76% of AUM and 70% of FPAUM had a duration longer than 3 years ◦ Within our Managed Accounts category, 57% of AUM and 61% of FPAUM has been with the firm longer than 3 years as of December 31, 2016 14% 24% 7% 17% 7 % 30% 6% 22% 6% 20% P
Slide 8: Incentive Eligible AUM and Incentive Generating AUM
8 Q4-15 Q3-16 Q4-16 $22,249 $24,811 $24,708 $16,739 $19,158 $19,462 $6,784 $45,772 $7,221 $51,190 $6,577 $50,747 Incentive Eligible AUM and Incentive Generating AUM Note: For definitions of IGAUM and IEAUM please refer to the “Glossary” slide in the appendix. 1. ARCC Part II Fees are paid when cumul
Slide 9: Available Capital and AUM Not Yet Earning Fees
9 Available Capital and AUM Not Yet Earning Fees Available Capital as of December 31, 2016 increased 3.6% year over year ◦ The increase was primarily driven by $2.2 billion of additional commitments to ACOF V, which were largely offset by capital deployment, primarily in the Credit Group AUM Not Yet
Slide 10: AUM Not Yet Earning Fees Available for Future Deployment
10 $5,937 $8,927 $693 AUM Not Yet Earning Fees Available for Future Deployment: $15.6 billion AUM Not Yet Earning Fees As of December 31, 2016, AUM Not Yet Earning Fees of $18.0 billion could generate approximately $215.6 million in potential incremental annual management fees, of which $188.2 milli
Slide 11: Capital Deployment
11 $2,319 $84 $418 Q4-16 Capital Deployment Breakdown: $2.8 billion Capital Deployment(1) Total gross invested capital for the year ended December 31, 2016 of $10.2 billion compared to $13.2 billion for the year ended December 31, 2015 ◦ Of the total amount, $6.7 billion was related to deployment in
Slide 12: Consolidated Statements of Operations
12 $ in thousands, except share data Three Months Ended December 31, Year Ended December 31, 2016 2015 2016 2015 Revenues Management fees (includes ARCC Part I Fees of $30,297, $121,181 and $31,520, $121,491 for the three and twelve months ended December 31, 2016 and 2015, respectively) $161,505 $16
Slide 13: Stand Alone Financial Summary
13 Stand Alone Financial Summary 1.Includes ARCC Part I Fees of $30.3 million and $31.5 million for Q4-16 and Q4-15, respectively, and $121.2 million and $121.5 million for FY-16 and FY-15, respectively. 2.Includes compensation and benefits expenses attributable to OMG of $25.1 million and $26.4 mil
Slide 14: GAAP to Non-GAAP Reconciliation – Stand Alone Reporting Basis
14 GAAP to Non-GAAP Reconciliation – Stand Alone Reporting Basis Note: This table is a reconciliation of income (loss) before provision for income taxes on a consolidated basis to ENI, FRE, PRE and DE on a Stand Alone basis, which shows the results of the reportable segments on a combined basis toge
Slide 15: GAAP to Non-GAAP Reconciliation – Stand Alone Reporting Basis (cont.)
15 GAAP to Non-GAAP Reconciliation – Stand Alone Reporting Basis (cont.) Note: These tables are a reconciliation of consolidated performance fee income, realized and unrealized performance fee income and net investment income to a Stand Alone basis, which assist in the reconciliation of GAAP Net Inc
Slide 16: Credit Group
16 Credit Group(1) Note: The Credit Group had ~210 investment professionals, ~1200 portfolio companies and 133 active funds as of December 31, 2016. As of July 1, 2016, the special situations strategy moved out of our Credit Group and into our Private Equity Group. Historical results have been adjus
Slide 17: Private Equity Group
17 Private Equity Group(1) Note: The Private Equity Group had ~85 investment professionals, 28 portfolio companies, 75 U.S. Power and Energy Assets and 23 active funds as of December 31, 2016. As of July 1, 2016, the special situations strategy moved out of our Credit Group and into our Private Equi
Slide 18: Real Estate Group
18 Real Estate Group(1) Note: The Real Estate Group had ~75 investment professionals, ~160 properties and 42 active funds as of December 31, 2016. 1. Segment results are shown before the unallocated support costs of the Operations Management Group. See “GAAP to Non-GAAP Reconciliation – Stand Alone
Slide 19: Economic Net Income per Unit Data
19 Economic Net Income per Unit Data 1. Pro forma units of 214,208,695 includes the sum of common units, Ares Operating Group Units that are exchangeable for common units on a one-for-one basis and the dilutive effects of the Company’s equity-based awards. 2. The Company issued $310 million of 7% Se
Slide 20: Distributable Earnings per Unit
20 $ in thousands, except share data Three Months Ended December 31, Year Ended December 31, 2016 2015 2016 2015 Distributable Earnings per Ares Operating Group Unit(1) outstanding Distributable Earnings $79,470 $50,754 $264,306 $230,589 (-) Preferred unit distribution(2) (5,425) - (12,176) - Distri
Slide 21: Balance Sheet and Liquidity
21 • $342.9 million in cash and cash equivalents, $305.8 million in debt obligations with no amounts drawn against the $1.03 billion revolving credit facility as of December 31, 2016 • Substantial balance sheet value related to investments in Ares managed vehicles and net performance fees receivable
Slide 22: Corporate Data
22 Corporate Data Board of Directors Michael Arougheti Co-Founder 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 Co-Founder and Former Pa
Slide 23: Appendix
Appendix
Slide 24: Financial Details – Segments (Quarter)
24 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 – Stand Alone Reporting Basis” on slides 14-15. Three Months Ended December 31, 2016 $ in thousands Credit Group Priv
Slide 25: Financial Details – Segments (Year)
25 1. Includes results of the reportable segments on a combined basis together with the Operations Management Group. See “GAAP to Non-GAAP Reconciliation – Stand Alone Reporting Basis” on slides 14-15. Year Ended December 31, 2016 $ in thousands Credit Group Private Equity Group Real Estate Group To
Slide 26: AUM and FPAUM Rollforward
26 AUM and FPAUM Rollforward Note: For definitions of AUM and FPAUM please refer to the “Glossary” slide in the appendix. Credit l AUM was relatively flat from Q4-15 as $10.5 billion in new capital commitments across various strategies was partially offset by the wind down of ARCC’s SSLP, which acco
Slide 27: AUM and FPAUM by Strategy
27 AUM and FPAUM by Strategy(1) 1. As of December 31, 2016. 2. AUM includes ARCC, IHAM, SSLP and SDLP AUM of $10.6 billion, $3.4 billion, $1.9 billion and $1.2 billion, respectively. ARCC’s wholly owned portfolio company, IHAM, an SEC registered investment adviser, manages 19 funds and serves as the
Slide 28: Balance Sheet Investments by Strategy
28 Balance Sheet Investments by Strategy Note: Reflects the balance sheet of Ares Management, L.P. and its consolidated subsidiaries, excluding the effect of Consolidated Funds. *Through investments in Ares CLOs. $ in thousands December 31, 2016 December 31, 2015 Private Equity ACOF I - II $5,503 $9
Slide 29: Significant Fund Performance Metrics
29 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 December 31, 2016 unless otherwise noted. The above
Slide 30: Significant Fund Performance Metrics
30 Significant Fund Performance Metrics* Note: Past performance is not indicative of future results. AUM and Net Returns as of December 31, 2016 unless otherwise noted. The above table includes fund performance metrics for significant funds which includes those that contributed at least 1% of total
Slide 31: Significant Fund Performance Metrics Endnotes
31 Significant Fund Performance Metrics Endnotes 1. AUM equals the sum of the NAV for such fund, the drawn and undrawn debt (at the fund-level including amounts subject to restrictions) and uncalled committed capital. 2. Returns are time-weighted rates of return and include the reinvestment of incom
Slide 32: Significant Fund Performance Metrics Endnotes (cont’d)
32 Significant Fund Performance Metrics Endnotes (cont’d) 20. The net IRR for the U.S. power and infrastructure funds is an annualized since inception net 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. The cash flow date
Slide 33: Weighted Average Unit Information
33 Weighted Average Unit Information 1. Represents units exchangeable for Ares Management, L.P. common units on a one-for-one basis. 2. We apply the treasury stock method to determine the dilutive weighted-average common units represented by our restricted stock to be settled in common units and opt
Slide 34: Additional Information
34 Additional Information Distributions Targeted Net Returns(1) Capital Base by Duration(1) Credit Group: Permanent Capital: 13.2% l Ares declared a quarterly distribution of $0.28 per common unit, payable on March 24, 2017 to common unitholders of record at the close of business on March 10, 2017 l
Slide 35: Stand Alone – Financial Data
35 Stand Alone –Financial Data(1) *As of July 1, 2016, the special situations strategy moved out of our Credit Group and into our Private Equity Group. Historical results have been adjusted to conform with the current presentation. 1. Stand Alone results represent the operating segments plus OMG but
Slide 36: GAAP to Non-GAAP Reconciliation – Stand Alone Reporting Basis
36 GAAP to Non-GAAP Reconciliation – Stand Alone Reporting Basis Note: This table is a reconciliation of income before provision for income taxes on a consolidated basis to ENI, FRE, PRE and DE on a Stand Alone basis, which shows the results of the reportable segments on a combined basis together wi
Slide 37: GAAP to Non-GAAP Reconciliation – Stand Alone Reporting Basis (cont.)
37 GAAP to Non-GAAP Reconciliation – Stand Alone Reporting Basis (cont.) Note: These tables are a reconciliation of consolidated performance fee income, realized and unrealized performance fee income and net investment income to a Stand Alone basis, which assist in the reconciliation of GAAP Net Inc
Slide 38: Glossary
38 Glossary ARCC Part I Fees ARCC Part I Fees refers to a quarterly performance fee 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, colle
Slide 39: Glossary (cont’d)
39 Glossary (cont’d) Fee Paying Assets Under Management Fee paying AUM (or “FPAUM”) refers to the AUM on which we directly earn management fees. Fee paying AUM is equal to the sum of all the individual fee bases of our funds that directly contribute to our management fees. Fee Related Earnings Fee r
Slide 40: Glossary (cont’d)
40 Glossary (cont’d) Our Funds Our funds refers to the funds, alternative asset companies, co-investment vehicles and other entities and accounts that are managed or co-managed by the Ares Operating Group, and which are structured to pay fees. It also includes funds managed by Ivy Hill Asset Managem