10-QPeriod: Q2 FY2022

Ares Management Corp Quarterly Report for Q2 Ended Jun 30, 2022

Filed August 5, 2022For Securities:ARESARES-PB

Summary

Ares Management Corporation (ARES) reported its second quarter 2022 financial results, showing a year-over-year decrease in total revenues, primarily driven by a significant drop in carried interest allocation, which fell from $852.5 million in Q2 2021 to $47.3 million in Q2 2022. This decline was partially offset by substantial growth in management fees, which increased by 42% year-over-year to $520.6 million, reflecting strong fundraising and deployment across various strategies, particularly in direct lending. Despite the challenging macroeconomic environment marked by rising inflation, tighter financial conditions, and recession risks, Ares Management demonstrated resilience. The company's Fee Related Earnings (FRE), a key metric for its recurring business, grew significantly, indicating the strength of its core advisory and management operations. While net income attributable to common stockholders saw a year-over-year decrease due to lower performance fees and principal investment losses, the company's diversified business model and long-term investment focus position it to navigate market volatility. The company's Assets Under Management (AUM) continued to grow, reaching $334.3 billion as of June 30, 2022, up from $247.9 billion in the prior year period.

Financial Highlights

27 data points
Beta

Revenue

$601.43M

Net Income

$39.73M

6.6% Net Margin

Total Assets

$21.23B

Cash & Equivalents

$252.87M

Free Cash Flow

-$792.35M

Financial Statements
Beta
Revenue$601.43M
SG&A Expenses$122.57M
Operating Expenses$552.87M
Interest Expense$17.22M
Net Income$39.73M

Key Highlights

  • 1Management fees increased by 42% year-over-year to $520.6 million in Q2 2022, driven by growth in Fee Paying Assets Under Management (FPAUM) and contributions from recent acquisitions.
  • 2Carried interest allocation significantly decreased by 94% year-over-year to $47.3 million in Q2 2022, reflecting market volatility impacting investment valuations.
  • 3Fee Related Earnings (FRE) increased by 49% year-over-year to $219.8 million in Q2 2022, demonstrating the underlying strength and recurring nature of the Company's core business.
  • 4Total AUM grew to $334.3 billion as of June 30, 2022, an increase of approximately 35% from the prior year period, highlighting continued fundraising success.
  • 5The company reported a net income attributable to common stockholders of $39.7 million for Q2 2022, a decrease from $125.0 million in Q2 2021, impacted by lower carried interest and principal investment losses.
  • 6General, administrative, and other expenses increased by 47% year-over-year, largely due to expenses associated with recent acquisitions and higher operating costs, partially offset by a decrease in acquisition-related costs.

Frequently Asked Questions

The primary driver of the revenue change was a significant decrease in carried interest allocation, down 94% year-over-year to $47.3 million. This was partially offset by strong growth in management fees, which increased 42% year-over-year to $520.6 million, driven by increased Fee Paying Assets Under Management (FPAUM) and contributions from recent acquisitions.

Ares Management's total AUM grew to $334.3 billion as of June 30, 2022, an increase of approximately 35% from $247.9 billion in the prior year period. This growth reflects successful fundraising and capital deployment across its various segments.

Fee Related Earnings (FRE) is a key non-GAAP metric that reflects the recurring revenue generated from management fees and fee-related performance revenues, after covering operating expenses. Ares Management's FRE increased by 49% year-over-year to $219.8 million in Q2 2022, indicating the underlying strength and stability of its core advisory and management business, even amidst market volatility.

Recent acquisitions, including Landmark Partners, Black Creek Group, and the Infrastructure Debt Platform, contributed positively to management fees and AUM growth. However, these acquisitions also led to increased compensation and benefits expenses, as well as general, administrative, and other expenses, due to headcount growth and associated operating costs.