10-QPeriod: Q2 FY2019

Ares Management Corp Quarterly Report for Q2 Ended Jun 30, 2019

Filed August 1, 2019For Securities:ARESARES-PB

Summary

Ares Management Corporation's 10-Q filing for the period ending June 30, 2019, reveals a strong performance, particularly in revenue generation. Total revenues surged by 88% year-over-year to $384.8 million, driven by a significant increase in management fees and a substantial recovery in carried interest allocation. The company's Credit Group, Private Equity Group, and Real Estate Group all demonstrated growth in Fee Related Earnings (FRE) and Realized Income (RI), reflecting successful asset deployment and fee generation across its diverse strategies. Despite an increase in compensation and benefits and other operating expenses, the company's net income attributable to Class A common stockholders turned positive, reaching $26.7 million from a loss of $17.2 million in the prior year's comparable period. This improvement was also aided by a lower income tax expense, partly due to one-time deferred tax items from the prior year's corporate tax election. Ares Management Corporation continues to expand its assets under management (AUM) across all segments, with total AUM reaching $142.1 billion, indicating positive investor sentiment and successful fundraising efforts.

Financial Highlights

24 data points
Beta

Revenue

$384.82M

Net Income

$32.14M

8.4% Net Margin

Total Assets

$10.98B

Cash & Equivalents

$247.22M

Free Cash Flow

-$941.47M

Financial Statements
Beta
Revenue$384.82M
Operating Expenses$335.70M
Net Income$32.14M

Key Highlights

  • 1Total revenues increased by 88% year-over-year to $384.8 million, primarily driven by a 23% increase in management fees and a significant turnaround in carried interest allocation, which swung from a negative to a positive $119.7 million.
  • 2Net income attributable to Class A common stockholders was $26.7 million, a substantial improvement from a net loss of $17.2 million in the prior year's comparable period.
  • 3Fee Related Earnings (FRE) increased by 24% year-over-year to $77.0 million, indicating healthy growth in the company's core, recurring revenue streams.
  • 4Total Assets Under Management (AUM) grew by 17% year-over-year to $142.1 billion, reflecting successful fundraising and capital deployment across all three segments: Credit, Private Equity, and Real Estate.
  • 5The company amended its Credit Facility to extend the maturity date to March 2024 and reduce borrowing costs.
  • 6Net cash provided by the Company's operating activities was $205.8 million for the six months ended June 30, 2019, compared to $371.3 million in the prior year, primarily due to the sale of CLO securities in the prior year.

Frequently Asked Questions

The significant revenue increase was primarily driven by a 23% rise in management fees, attributed to higher ARCC Part I Fees and increased Fee Paying Assets Under Management (FPAUM) from capital deployments and new commitments. Additionally, a substantial positive swing in carried interest allocation, from a negative $13.4 million in Q2 2018 to a positive $119.7 million in Q2 2019, significantly contributed to the overall revenue growth.

Ares Management Corporation demonstrated a significant improvement in profitability. Net income attributable to Class A common stockholders was $26.7 million for the quarter ended June 30, 2019, a substantial turnaround from a net loss of $17.2 million in the same period of the prior year. This improvement was supported by higher revenues, particularly from management fees and carried interest, and a decrease in income tax expense.

Total AUM grew by 17% year-over-year to $142.1 billion as of June 30, 2019. Fee Paying AUM (FPAUM) also saw a healthy increase, rising by 16% to $89.4 billion. This growth reflects Ares' ability to attract and deploy capital effectively across its Credit, Private Equity, and Real Estate segments.