Ares Management Corp Quarterly Report for Q1 Ended Mar 31, 2016

Summary

Ares Management Corp (ARES) reported a net loss attributable to common unitholders of $3,090,000 (or ($0.04) per diluted unit) for the first quarter of 2016, a significant decrease from a net income of $18,456,000 (or $0.23 per diluted unit) in the same period of the prior year. This decline was primarily driven by a substantial drop in performance fees, which fell from $104.9 million to a negative $29.9 million due to market conditions and the passage of time impacting internal rate of return calculations, leading to a reversal of previously recognized performance fees. Total revenues decreased by nearly 50% year-over-year, largely due to the performance fee decline. Expenses also saw a significant shift, with compensation and benefits increasing slightly while performance fee compensation decreased substantially in line with lower performance fees. Despite the reported net loss, Ares Management maintained a solid Assets Under Management (AUM) of $93.5 billion, with its Credit Group, Private Equity Group, and Real Estate Group each contributing significantly to the overall managed assets. The company's liquidity position remained stable with $109.9 million in cash and cash equivalents.

Key Highlights

• 1Ares Management reported a net loss of $3.09 million ($0.04 per diluted unit) for Q1 2016, compared to a net income of $18.46 million ($0.23 per diluted unit) in Q1 2015.
• 2Total revenues decreased by 49.6% to $136.0 million due to a significant decline in performance fees, which swung from $104.9 million in Q1 2015 to a net reversal of $29.9 million in Q1 2016.
• 3Compensation and benefits expense increased by 8.7% to $110.7 million, while performance fee compensation decreased by 127.9% due to the lower performance fees.
• 4Assets Under Management (AUM) remained robust at $93.5 billion as of March 31, 2016, with the Credit Group holding the largest portion at $60.0 billion.
• 5The company's liquidity remains stable with $109.9 million in cash and cash equivalents and $192.0 million in borrowings outstanding under its Credit Facility.
• 6Distributable Earnings (DE) decreased by 38.7% to $41.3 million, reflecting the impact of lower performance fees and higher operating expenses.
• 7The company reorganized its segments, combining the Tradable Credit Group and Direct Lending Group into a single 'Credit Group'.

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