What drove the significant decrease in net income for the quarter?

The decrease in net income was primarily driven by a substantial reduction in carried interest allocation, which fell by 58% year-over-year for the quarter and 74% for the nine-month period. This was due to weaker market performance and lower realized gains in several private equity and credit funds, impacting the performance fees recognized by Ares Management.

How did acquisitions impact the company's financials?

Recent acquisitions, including the Landmark Acquisition (June 2021), Black Creek Acquisition (July 2021), and Infrastructure Debt Acquisition (February 2022), contributed to growth in management fees and expanded Assets Under Management (AUM). However, these acquisitions also led to increased compensation and benefits expenses and, in the case of intangible assets acquired, resulted in significant non-cash impairment charges totaling $181.6 million during the quarter.

What is the company's liquidity position?

Ares Management reported $361.5 million in cash and cash equivalents as of September 30, 2022, with $445.0 million in borrowings outstanding under its Credit Facility. The company believes its current liquidity sources are sufficient to meet its foreseeable working capital needs, contractual obligations, dividend payments, and strategic initiatives, while remaining compliant with all covenants.

How is the company managing the current volatile market environment?

Ares Management highlights its disciplined investment philosophy across its distinct, complementary investment groups, which they believe contributes to performance stability through market cycles. Approximately 95% of their management fees are derived from perpetual capital vehicles and long-dated funds. The company also notes that approximately 90% of its debt assets and 59% of its total assets were floating rate instruments as of September 30, 2022, positioning them to manage a rising interest rate environment.

ARES/ARES-PB 10-Q Quarterly Report Q3 FY2022

Summary

Ares Management Corporation reported a net loss of $48.8 million for the third quarter of 2022, a significant decrease from a net income of $216.7 million in the same period of the prior year. This decline was primarily driven by a substantial decrease in carried interest allocation, which fell from $460.7 million to $192.2 million year-over-year, reflecting weaker market performance in private equity and credit funds. Despite the drop in carried interest, management and administrative fees saw robust growth, increasing by 22% and 62% respectively, driven by capital deployment in direct lending and recent acquisitions. The company's Assets Under Management (AUM) continued to grow, reaching $341.4 billion, up from $305.8 billion at the end of 2021, primarily supported by net new commitments and capital deployment across its segments. Operating expenses, however, rose significantly, driven by higher compensation and benefits due to headcount growth and strategic initiatives, as well as a substantial non-cash impairment charge of $181.6 million related to intangible assets, primarily the Landmark trade name and a management contract. The company's balance sheet remains solid, with total assets of $21.2 billion and total liabilities of $16.6 billion as of September 30, 2022. While the quarterly results reflect current market challenges, Ares Management continues to expand its AUM and management fee base, providing a foundation for future performance.

Financial Highlights

27 data points

Beta

Revenue

$801.29M

Net Income

-$35.55M

-0.0% Net Margin

Total Assets

$21.21B

Cash & Equivalents

$361.50M

Free Cash Flow

$24.59M

Financial Statements

Beta

Revenue	$801.29M
SG&A Expenses	$319.35M
Operating Expenses	$898.10M
Interest Expense	$18.31M
Net Income	-$35.55M

Key Highlights

1Revenue decline driven by a significant drop in carried interest allocation, down 58% year-over-year for the quarter and 74% year-over-year for the nine months.
2Management fees increased by 22% year-over-year for the quarter and 36% for the nine months, indicating growth in fee-generating assets under management.
3Total Assets Under Management (AUM) grew to $341.4 billion as of September 30, 2022, up from $305.8 billion at the end of 2021.
4A substantial $181.6 million in non-cash impairment charges were recorded on intangible assets, primarily related to rebranding efforts and lower-than-expected fundraising for certain acquired funds.
5Compensation and benefits expenses increased by 27% year-over-year for the quarter and 38% for the nine months, reflecting headcount growth and strategic acquisitions.
6Net cash used in investing activities was $330 million for the nine months ended September 30, 2022, largely due to the Infrastructure Debt Acquisition.
7The company maintained compliance with all debt covenants as of September 30, 2022.

Ares Management Corp Quarterly Report for Q3 Ended Sep 30, 2022

Summary

Financial Highlights

Key Highlights

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