10-QPeriod: Q1 FY2022

Ares Management Corp Quarterly Report for Q1 Ended Mar 31, 2022

Filed May 9, 2022For Securities:ARESARES-PB

Summary

Ares Management Corporation (ARES) reported its first quarter 2022 results, demonstrating continued growth and resilience in a dynamic market environment. Total revenues increased by 9% year-over-year to $715.0 million, driven by a significant 49% rise in management fees, largely due to higher fee-paying assets under management (FPAUM) from capital deployment in direct lending funds and contributions from recent acquisitions. Despite a 40% decrease in carried interest allocation due to market depreciation in certain private equity investments, overall revenue growth was robust. Expenses also saw an increase, notably in compensation and benefits, up 54%, driven by headcount growth and strategic initiatives. The company successfully integrated recent acquisitions, including Landmark Partners, Black Creek Group, and the Infrastructure Debt Platform, contributing to expanded AUM and FPAUM across segments. The company's liquidity remains strong, with substantial cash reserves and credit facilities available, positioning it to manage operational needs and pursue strategic growth opportunities.

Financial Highlights

27 data points
Beta

Revenue

$715.00M

Net Income

$45.86M

6.4% Net Margin

Total Assets

$21.13B

Cash & Equivalents

$346.04M

Free Cash Flow

$224.15M

Financial Statements
Beta
Revenue$715.00M
SG&A Expenses$120.52M
Operating Expenses$611.68M
Interest Expense$15.65M
Net Income$45.86M

Key Highlights

  • 1Total revenues grew 9% year-over-year to $715.0 million, primarily driven by a 49% increase in management fees to $477.3 million.
  • 2Fee-paying assets under management (FPAUM) increased to $199.0 billion, up from $127.6 billion in the prior year period.
  • 3Acquisitions of Landmark Partners, Black Creek Group, and AMP Capital's Infrastructure Debt Platform have been successfully integrated, contributing to segment growth.
  • 4Compensation and benefits expense increased by 54% to $357.2 million, reflecting headcount growth and strategic initiatives.
  • 5Net income attributable to Ares Management Corporation Class A and non-voting common stockholders decreased by 13% to $45.9 million, or $0.24 per diluted share.
  • 6The company's total assets under management (AUM) increased to $325.0 billion.
  • 7Despite a challenging market environment with increased volatility and interest rate concerns, Ares Management maintained a disciplined investment approach and strong operational performance.

Frequently Asked Questions

The primary driver of revenue growth was a 49% increase in management fees, reaching $477.3 million. This growth was largely attributed to higher fee-paying assets under management (FPAUM) resulting from capital deployment in direct lending funds and contributions from recent acquisitions.

The acquisitions of Landmark Partners, Black Creek Group, and AMP Capital's Infrastructure Debt Platform have been successfully integrated and contributed to the growth of AUM and FPAUM across various segments, particularly in the Real Assets Group and Secondary Solutions Group. These acquisitions have also introduced new fee streams and expanded the company's service offerings.

Ares Management Corporation maintains a strong liquidity position with $346.0 million in cash and cash equivalents as of March 31, 2022. The company also has access to a $1.275 billion revolving credit facility. The company expects its liquidity to be sufficient for foreseeable working capital needs, contractual obligations, dividend payments, pending acquisitions, and strategic initiatives.

The decrease in carried interest allocation by 40% was primarily due to market depreciation in certain private equity investments, specifically impacting Ares Corporate Opportunities Fund IV, L.P. (ACOF IV), which led to a reversal of unrealized carried interest.

The 54% increase in compensation and benefits expense was primarily driven by headcount growth to support business expansion and strategic initiatives, including the integration of recent acquisitions. It also reflects higher incentive compensation related to increased fee revenues and payroll taxes associated with vested restricted units.