10-QPeriod: Q3 FY2016

Ares Management Corp Quarterly Report for Q3 Ended Sep 30, 2016

Filed November 7, 2016For Securities:ARESARES-PB

Summary

Ares Management, L.P. (ARES) reported strong financial results for the nine months ended September 30, 2016, driven by significant growth in performance fees across its segments, particularly in Private Equity and Real Estate. Total revenues increased by 28% year-over-year to $841 million, with performance fees seeing a substantial $177 million increase. This surge in performance fees was a key driver of the company's overall profitability, as evidenced by the substantial increase in Economic Net Income (ENI) and Distributable Earnings (DE). The company's Assets Under Management (AUM) also saw healthy growth, reaching $97.3 billion as of September 30, 2016, up from $91.5 billion at the same time last year. This growth was particularly notable in the Credit and Real Estate segments. Ares Management also successfully managed its expense base, with general, administrative, and other expenses decreasing by 22% year-over-year, largely due to lower merger and acquisition-related expenses. The company maintained a strong liquidity position, with $336.8 million in cash and cash equivalents and no outstanding borrowings under its credit facility as of the end of the period.

Financial Highlights

19 data points
Beta

Revenue

$335.46M

Net Income

$43.30M

12.9% Net Margin

Total Assets

$5.32B

Free Cash Flow

-$331.28M

Financial Statements
Beta
Revenue$335.46M
Operating Expenses$283.37M
Net Income$43.30M

Key Highlights

  • 1Total revenues increased by 28% to $841 million for the nine months ended September 30, 2016, compared to the prior year, driven by a substantial 111% increase in performance fees.
  • 2Assets Under Management (AUM) grew to $97.3 billion as of September 30, 2016, from $91.5 billion as of September 30, 2015.
  • 3The Credit Group saw a 63% increase in Economic Net Income (ENI) to $90.3 million for the three months ended September 30, 2016, compared to the prior year.
  • 4The Private Equity Group reported a 120% increase in ENI to $58.4 million for the three months ended September 30, 2016, year-over-year.
  • 5General, administrative, and other expenses decreased by 22% year-over-year to $116.8 million for the nine months ended September 30, 2016, largely due to reduced M&A-related expenses.
  • 6The company issued $310 million in Series A Preferred Equity in June 2016, strengthening its capital position.
  • 7Cash and cash equivalents increased significantly to $336.8 million as of September 30, 2016, compared to $121.5 million as of December 31, 2015.

Frequently Asked Questions

The primary driver of revenue growth was the significant increase in performance fees, which surged by 111% year-over-year for the nine months ended September 30, 2016. This was particularly strong in the Private Equity and Real Estate segments, reflecting positive asset valuations and performance.

Ares Management's AUM grew from $91.5 billion to $97.3 billion as of September 30, 2016, an increase of approximately 6%. This growth was supported by net new commitments and positive changes in fund values across its segments.

As of September 30, 2016, Ares Management reported $336.8 million in cash and cash equivalents, a substantial increase from $121.5 million at the end of 2015. The company also had no outstanding borrowings under its $1.03 billion credit facility, indicating a strong liquidity position.

While compensation and benefits expenses increased year-over-year, driven by growth and merit increases, general, administrative, and other expenses decreased by 22% year-over-year. This reduction was largely due to lower merger and acquisition-related expenses, which had a positive impact on overall profitability.