10-QPeriod: Q3 FY2019

Ares Management Corp Quarterly Report for Q3 Ended Sep 30, 2019

Filed November 6, 2019For Securities:ARESARES-PB

Summary

Ares Management Corporation's (ARES) third-quarter 2019 results demonstrate robust growth across its segments, driven by strong performance in its Credit Group, which saw a significant increase in management fees and carried interest. Total revenues more than doubled year-over-year, primarily due to a substantial rise in carried interest allocation, reflecting strong investment performance. Net income attributable to Class A common stockholders saw a significant increase, demonstrating improved profitability. The company also saw growth in its Assets Under Management (AUM) across all three segments, with the Credit Group leading the expansion. While expenses, particularly compensation and benefits and performance-related compensation, also increased, they were largely in line with revenue growth and improved operational performance. The company maintained a strong liquidity position with ample cash on hand and an undrawn credit facility, enabling continued investment and strategic initiatives.

Financial Highlights

24 data points
Beta

Revenue

$466.49M

Net Income

$33.33M

7.1% Net Margin

Total Assets

$11.60B

Cash & Equivalents

$152.20M

Free Cash Flow

-$388.77M

Financial Statements
Beta
Revenue$466.49M
Operating Expenses$395.70M
Net Income$33.33M

Key Highlights

  • 1Total revenues surged by 94% year-over-year to $466.5 million for the quarter, driven by a 23% increase in management fees and a significant jump in carried interest allocation.
  • 2Net income attributable to Class A common stockholders rose by 166% to $27.9 million, indicating strong profitability improvement.
  • 3Assets Under Management (AUM) reached $144.3 billion, up 15% from the prior year, with the Credit Group showing particular strength.
  • 4Fee Related Earnings (FRE) increased by 35% to $86.7 million, highlighting the company's ability to generate consistent earnings from its management fees.
  • 5The company maintained a healthy liquidity position, with cash and cash equivalents of $152.2 million and no outstanding borrowings under its credit facility as of September 30, 2019.
  • 6Performance-related compensation increased significantly due to higher carried interest and incentive fees, reflecting the positive investment performance across the funds.

Frequently Asked Questions

The primary driver of Ares Management's revenue growth was a substantial increase in carried interest allocation, which rose significantly due to strong investment performance across various funds, particularly in the Credit and Private Equity segments. Management fees also contributed positively, growing by 23% year-over-year.

Ares Management demonstrated significant profitability improvement. Net income attributable to Class A common stockholders increased by 166% to $27.9 million for the third quarter of 2019, compared to $10.5 million in the same period of 2018. This was driven by strong revenue growth and effective cost management.

As of September 30, 2019, Ares Management maintained a strong liquidity position with $152.2 million in cash and cash equivalents. The company had no outstanding borrowings under its credit facility, which has a total capacity of $1.065 billion. Total debt obligations decreased to $246.4 million from $481.0 million at the end of 2018, primarily due to repayments on its credit facility and senior notes.

Total expenses increased by 74% year-over-year, primarily driven by a significant rise in performance-related compensation ($121.6 million increase) due to higher carried interest and incentive fees, and an increase in compensation and benefits expenses ($20.6 million increase) attributed to higher incentive compensation and headcount growth. General, administrative, and other expenses also increased by 55%, partly due to a $20 million impairment charge on intangible assets.