Ares Management Corporation · NYSE:ARES
Ares Management — Q1 2017 Earnings Presentation
38 slides from Ares Management's earnings presentation, May 8, 2017
Slide 1: First Quarter 2017 Earnings Presentation
First Quarter 2017 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 $33.3 million for the three months ended March 31, 2017. Difference between GAAP and Stand Alone management fees represents $4.7 million from Consolidated Funds that is eliminated
Slide 4: Gross New Capital Commitments – First Quarter of 2017
4 Gross New Capital Commitments – First Quarter of 2017(1) 1. Represents gross new commitments during Q1-17, including equity and debt commitments and gross inflows into our open-ended managed accounts and sub-advised accounts. $ in millions Q1 2017 Comments Credit Group Junior Capital Private Direc
Slide 5: Assets Under Management
5 Assets Under Management Note: For definitions of AUM and FPAUM please refer to the “Glossary” slide in the appendix. 1. As of March 31, 2017, AUM amounts include funds managed by Ivy Hill Asset Management, L.P., a wholly owned portfolio company of Ares Capital Corporation and a registered investme
Slide 6: AUM and FPAUM Duration
6 AUM and FPAUM Duration As of March 31, 2017, approximately 78% of AUM and 76% of FPAUM had a duration longer than 3 years ◦ Within our Managed Accounts category, 61% of AUM and 66% of FPAUM has been with the firm longer than 3 years as of March 31, 2017 14% 24% 7% 17% 7 % 30% 6% 22% 6% 20% Permane
Slide 7: Incentive Eligible AUM and Incentive Generating AUM
7 Q1-16 Q4-16 Q1-17 $21,738 $24,708 $29,637 $19,294 $19,462 $19,652 $6,846 $47,878 $6,577 $50,747 $6,610 $55,899 Incentive Eligible AUM and Incentive Generating AUM Note: For definitions of IGAUM and IEAUM please refer to the “Glossary” slide in the appendix. 1. Includes $7.1 billion of incentive el
Slide 8: Available Capital and AUM Not Yet Earning Fees
8 Available Capital and AUM Not Yet Earning Fees Available Capital as of March 31, 2017 increased 5.3% year over year ◦ The increase was primarily driven by additional debt capacity available to ARCC and new commitments to other U.S. Direct Lending funds, which was partially offset by capital deploy
Slide 9: AUM Not Yet Earning Fees Available for Future Deployment
9 $7,572 $2,060 $646 AUM Not Yet Earning Fees Available for Future Deployment: $10.3 billion AUM Not Yet Earning Fees As of March 31, 2017, AUM Not Yet Earning Fees of $12.9 billion could generate approximately $138.1 million in potential incremental annual management fees, of which $107.8 million r
Slide 10: Q1-17 Capital Deployment Breakdown
10 $2,356 $1,030 $177 Q1-17 Capital Deployment Breakdown: $3.6 billion Capital Deployment(1) Total gross invested capital during Q1-17 of $3.6 billion compared to $1.4 billion in Q1-16 ◦ Of the total amount, $2.6 billion was related to deployment in our drawdown funds compared to $1.1 billion for th
Slide 11: GAAP Statements of Operations
11 $ in thousands, except share data Three Months Ended March 31, 2017 2016 Revenues Management fees (includes ARCC Part I Fees of $33,257 and $28,625 for the three months ended March 31, 2017 and 2016, respectively) $172,045 $158,433 Performance fees 55,172 (29,947) Administrative and other fees 14
Slide 12: Stand Alone Financial Summary
12 Stand Alone Financial Summary 1.Includes ARCC Part I Fees of $33.3 million and $28.6 million for Q1-17 and Q1-16, respectively, and $125.8 million and $121.1 million for Q1-17 LTM and Q1-16 LTM, respectively. 2.Includes compensation and benefits expenses attributable to OMG of $26.3 million and $
Slide 13: GAAP to Non-GAAP Reconciliation – Stand Alone Reporting Basis
13 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 14: GAAP to Non-GAAP Reconciliation – Stand Alone Reporting Basis (cont.)
14 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 15: Credit Group
15 Credit Group(1) Note: Past performance is not indicative of future results. The Credit Group had ~215 investment professionals, ~1300 portfolio companies and 139 active funds as of March 31, 2017. As of July 1 2017, the special situations strategy moved out of the Credit Group and into our Privat
Slide 16: Private Equity Group
16 Private Equity Group(1) Note: Past performance is not indicative of future results. The Private Equity Group had ~80 investment professionals, 30 portfolio companies, 63 U.S. Power and Energy Assets and 23 active funds and related co-investment vehicles as of March 31, 2017. As of July 1 2017, th
Slide 17: Real Estate Group
17 Real Estate Group(1) Note: Past performance is not indicative of future results. The Real Estate Group had ~75 investment professionals, ~165 properties and 41 active funds as of March 31, 2017. 1. Segment results are shown before the unallocated support costs of the Operations Management Group.
Slide 18: Economic Net Income per Unit Data
18 Economic Net Income per Unit Data 1. Pro forma units of 215,215,771 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 has 12,400,000 of 7% Series
Slide 19: Distributable Earnings per Unit
19 Three Months Ended March 31, 2017 2016 Distributable Earnings per Ares Operating Group Unit(1) outstanding Distributable Earnings $40,909 $41,281 (-) Preferred unit distribution(2) (5,425) - Distributable Earnings, net of preferred unit distribution $35,484 $41,281 x Ares Operating Group Units(1)
Slide 20: Balance Sheet and Liquidity
20 • $104.0 million in cash and cash equivalents, $488.2 million in debt obligations with $165.0 million drawn against the $1.04 billion revolving credit facility as of March 31, 2017 • Substantial balance sheet value related to investments in Ares managed vehicles and net performance fees receivabl
Slide 21: Corporate Data
21 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 Par
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 – Stand Alone Reporting Basis” on slides 13-14. Three Months Ended March 31, 2017 $ in thousands Credit Group Private
Slide 24: AUM and FPAUM Rollforward
24 AUM and FPAUM Rollforward Note: For definitions of AUM and FPAUM please refer to the “Glossary” slide in the appendix. Credit l AUM increased by 8.0% from Q4-16, primarily driven by ARCC's acquisition of ACAS and new capital commitments in liquid and direct lending strategies, partially offset by
Slide 25: AUM and FPAUM by Strategy
25 AUM and FPAUM by Strategy(1) 1. As of March 31, 2017. 2. AUM includes ARCC, IHAM, SSLP and SDLP AUM of $13.9 billion, $3.8 billion, $1.3 billion and $1.1 billion, respectively. ARCC’s wholly owned portfolio company, IHAM, an SEC registered investment adviser, manages 22 funds and serves as the su
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, 2017 December 31, 2016 Private Equity ACOF I - II $4,788 $5,503 ACO
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, 2017 unless otherwise noted. The above tab
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, 2017 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 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 30: Significant Fund Performance Metrics Endnotes (cont’d)
30 Significant Fund Performance Metrics Endnotes (cont’d) 20. The net IRR for the U.S. power and energy 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 fl
Slide 31: Weighted Average Unit Information
31 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 32: Additional Information
32 Additional Information Distributions Targeted Net Returns(1) Capital Base by Duration(1) Credit Group: Permanent Capital: 16% l Ares declared a quarterly distribution of $0.13 per common unit, payable on June 5, 2017 to common unitholders of record at the close of business on May 22, 2017 l Syndi
Slide 33: Stand Alone – Financial Data
33 Stand Alone –Financial Data(1) 1. Stand Alone results represent the operating segments plus OMG but exclude the effect of Consolidated Funds. 2. Includes ARCC Part I Fees of $121.2 million and $121.5 million for the years ended December 31, 2016 and 2015, respectively. 3. Compensation and benefit
Slide 34: GAAP to Non-GAAP Reconciliation – Stand Alone Reporting Basis
34 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 35: GAAP to Non-GAAP Reconciliation – Stand Alone Reporting Basis (cont.)
35 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 36: Glossary
36 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 37: Glossary (cont’d)
37 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 38: Glossary (cont’d)
38 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