10-Q: Ares Management Corporation Reports First Quarter 2024 Results
Summary
- Ares Management Corporation reported a net income of $73 million attributable to Class A and non-voting common stockholders for the first quarter of 2024, a decrease from $94 million in the same period of 2023.
- Management fees increased by 15% to $687.7 million, driven by capital deployment in credit strategies and the inclusion of fees from the Crescent Point acquisition.
- Carried interest allocation saw a significant decrease, moving from $151.5 million in Q1 2023 to a loss of $32.5 million in Q1 2024, primarily due to reversals in private equity and real estate funds.
- Total revenues decreased by 13% to $707.4 million, while total expenses decreased by 14% to $538.5 million.
- Fee related earnings (FRE) increased by 18% to $301.7 million, and realized income (RI) increased by 14% to $289.2 million.
- Assets under management (AUM) increased to $428.3 billion, with fee-paying AUM (FPAUM) reaching $267.1 billion.
- The company amended its Credit Facility, increasing commitments to $1.4 billion and extending the maturity to March 2029.
Sentiment
Score: 5
Explanation: The document presents mixed results with strong growth in management fees and AUM, but a significant decrease in net income and carried interest allocation. The overall sentiment is neutral to slightly negative due to the mixed financial performance.
Positives
- Management fees increased by 15% year-over-year, indicating strong growth in the core business.
- Fee related earnings (FRE) increased by 18%, demonstrating the company's ability to generate profits from recurring revenue.
- Realized income (RI) increased by 14%, reflecting solid operating performance.
- Total assets under management (AUM) reached $428.3 billion, demonstrating continued growth in managed assets.
- The company successfully amended its Credit Facility, increasing commitments and extending the maturity.
Negatives
- Net income attributable to common stockholders decreased by 22% year-over-year.
- Carried interest allocation decreased significantly to a loss of $32.5 million, primarily due to reversals in private equity and real estate funds.
- Total revenues decreased by 13% year-over-year, despite an increase in management fees.
Risks
- The company's results are subject to market fluctuations and economic conditions, which can impact the fair value of AUM and investment performance.
- The decrease in carried interest allocation highlights the volatility of performance-based income.
- The company's reliance on key personnel and the ability to retain and attract talent is a risk factor.
- Changes in interest rates and credit markets can impact the performance of the company's credit-oriented strategies.
- The company is subject to regulatory risks and legal proceedings, which can result in significant costs and expenses.
Future Outlook
The report contains forward-looking statements regarding future events, operations, and financial performance, which are subject to various risks and uncertainties. The company does not undertake any obligation to publicly update or review any forward-looking statement.
Management Comments
- Management believes that the company's disciplined investment philosophy contributes to the stability of its performance throughout market cycles.
- Management believes that certain market trends will be offset by continued strong fundamentals in property types that include multifamily and industrial.
- Management believes that the company's portfolios across all strategies are well positioned for a fluctuating interest rate environment.
Industry Context
The report notes that global markets began the year positively amid modest inflation and optimistic signaling by central banks. Private credit growth was supported by reduced lending activity by banks and limited capital accessibility. The private equity markets continue to experience a prolonged slowdown in deal activity. The commercial real estate markets continued to be impacted by the macroeconomic environment.
Comparison to Industry Standards
- The report provides returns of selected market indices, including high yield bonds, leveraged loans, equities, and real estate equities, for comparison.
- Ares' performance in high yield bonds and leveraged loans aligns with the positive returns seen in the U.S. and European markets.
- The company's real estate equity performance is below the market indices, reflecting the challenges in the commercial real estate sector.
- Ares' private equity performance is impacted by a slowdown in deal activity and downward pressure on valuations, which is consistent with broader industry trends.
- The company's credit strategies have benefited from rising interest rates on predominately floating-rate loans, which is a common trend in the private credit market.
Stakeholder Impact
- Shareholders may be concerned about the decrease in net income attributable to common stockholders.
- Employees may be impacted by changes in compensation and benefits.
- Investors in Ares funds may be impacted by the performance of the underlying investments.
- Customers may be impacted by changes in the company's product offerings and distribution channels.
Next Steps
- The company will continue to monitor market conditions and adjust its investment strategies accordingly.
- The company will focus on deploying capital in its various funds and generating returns for its investors.
- The company will continue to develop its distribution relationships and expand its retail product offerings.
Related Party Transactions
- Substantially all of the company's revenue is earned from its affiliates.
- The company has investment management agreements with the Ares Funds that it manages.
- Employees and other related parties may be permitted to participate in co-investment vehicles that generally invest in Ares Funds alongside fund investors.
Key Dates
- October 8, 2014: Origination date of the 2024 Senior Notes.
- June 15, 2020: Origination date of the 2030 Senior Notes.
- June 30, 2021: Origination date of the 2051 Subordinated Notes.
- January 21, 2022: Origination date of the 2052 Senior Notes.
- October 2, 2023: Date of the Crescent Point Acquisition.
- November 10, 2023: Origination date of the 2028 Senior Notes.
- March 28, 2024: Date of amendment to the Credit Facility.
- March 31, 2024: End of the reporting period for the first quarter results.
- May 2, 2024: Date of share count information.
- May 9, 2024: Date of report filing.
- June 14, 2024: Record date for the declared quarterly dividend.
- June 28, 2024: Payment date for the declared quarterly dividend.
Keywords
Filings with Classifications
Insider Transaction Report
- The sale of 2,250,000 shares by a significant insider (10% owner and director) like Ares Management LLC is generally perceived negatively by the market, as it can signal a lack of confidence or a strategic reduction in exposure to the company.
- Such a large divestment can put downward pressure on the stock price and may be interpreted as a bearish signal.
Quarterly Report
- Net income attributable to Ares Management Corporation Class A and non-voting common stockholders decreased to $21.9 million from $73 million in the prior year period.
Quarterly Report
- Ares Management Corporation's AUM surpassed $545 billion in Q1 2025, exceeding expectations.
- After-tax realized income reached $381.4 million, translating to $1.09 per share, which is better than anticipated.
- Fee related earnings were $367.3 million for the quarter, surpassing previous forecasts.
Earnings Release
- Ares Management reported record fundraising and AUM, indicating strong investor confidence and growth potential.
- The company's key financial metrics, such as Fee Related Earnings and Realized Income, showed significant increases compared to the previous year.
SEC Form 4 Filing
- Ares Management, a significant shareholder, selling shares is generally viewed negatively by the market as it can indicate a lack of confidence in the company's future prospects.
SEC Form 4 Filing
- The document indicates a reduction in stake by a major shareholder, which is generally viewed negatively by the market.
Quarterly Report
- In October 2024, Ares issued 30,000,000 shares of its Series B mandatory convertible preferred stock for total proceeds of $1,462.5 million.
- In October 2024, Ares issued $750.0 million in aggregate principal amount of 5.60% senior notes with a maturity date of October 2054.
Quarterly Report
- The company's total revenues, management fees, carried interest allocation, and net income all increased significantly compared to the same period last year.
Quarterly Report
- In October 2024, Ares issued 30,000,000 shares of its Series B mandatory convertible preferred stock, for total proceeds of $1,462.5 million (after deducting underwriting discounts but before offering expenses).
Quarterly Report
- The company's financial results exceeded expectations with strong growth in key metrics, including AUM, fee-related earnings, and realized income.
- The company's fundraising momentum and capital deployment were better than anticipated, leading to an optimistic outlook for the remainder of the year.
Debt Issuance
- Ares Management Corporation issued $750 million in senior notes.
- The company also entered into an underwriting agreement to issue 27,000,000 shares of 6.75% Series B Mandatory Convertible Preferred Stock, with an option for an additional 3,000,000 shares to cover over-allotments.
Capital Raise Announcement
- Ares Management Corporation issued 30 million shares of 6.75% Series B Mandatory Convertible Preferred Stock, raising $1.5 billion.
- The offering included an underwriter option for an additional 3 million shares, which was fully exercised.
- The net proceeds from the offering will be used to fund a portion of the cash consideration for the acquisition of GLP Capital Partners' international business and for general corporate purposes.
Merger Announcement
- Ares has secured a $2.0 billion bridge loan facility to finance the cash portion of the acquisition.
- The company expects to finance the cash portion of the acquisition with a combination of cash on hand and other equity or debt financing, which may include equity or debt securities issued in one or more capital markets transactions.
Quarterly Report
- The company issued and sold 2,650,000 shares of Class A common stock in an offering that closed on June 14, 2024, resulting in net proceeds of approximately $354.4 million.
- Subsequent to June 30, 2024, the underwriters exercised the 30-day option to purchase additional shares of Class A common stock, resulting in additional proceeds of $52.9 million.
Quarterly Report
- Net income attributable to common stockholders decreased compared to the same period last year.
- Carried interest allocation was negative for both the quarter and six months ended June 30, 2024, compared to positive figures in the same periods of 2023.
Quarterly Report
- The company achieved record gross fundraising and the second-highest level of capital deployment in its history, indicating better than expected operational performance.
Capital Raise Update
- Ares Management Corporation raised approximately $52.92 million through the sale of additional shares.
- The total net proceeds from the offering, including the initial sale, reached approximately $408.21 million.
Capital Raise Announcement
- Ares Management Corporation raised approximately $356 million through the sale of 2,650,000 shares of Class A common stock.
- The underwriters have an option to purchase an additional 397,500 shares within 30 days, which could result in further capital being raised.
Quarterly Report
- Net income attributable to common stockholders decreased by 22% year-over-year, indicating worse than expected results.
- Carried interest allocation decreased significantly to a loss of $32.5 million, primarily due to reversals in private equity and real estate funds, indicating worse than expected results.
Quarterly Report
- The company's AUM grew by 19% year-over-year, exceeding expectations.
- The company raised $17.4 billion in gross new capital, indicating strong investor confidence.
- Available capital reached a record high of $114.6 billion, positioning the company for future growth.
Quarterly Report
- The company's AUM, FPAUM, and available capital all reached record levels, indicating strong growth and investor confidence.
- The company's fundraising efforts were highly successful, exceeding expectations and positioning them for future growth.
- The company's after-tax realized income per share increased year-over-year, demonstrating improved profitability.
Disclaimer: This summary was generated by artificial intelligence and its accuracy is not guaranteed. The information provided here is for general informational purposes only and does not constitute financial advice, recommendation, or endorsement of any kind. It may contain errors or omissions. You should not rely on this information to make financial decisions. Always seek the advice of a qualified financial professional before making any investment or financial decisions. Use of this information is at your own risk.