10-QPeriod: Q2 FY2024

Ares Management Corp Quarterly Report for Q2 Ended Jun 30, 2024

Filed August 7, 2024For Securities:ARESARES-PB

Summary

Ares Management Corporation (ARES) reported its second quarter 2024 financial results, showing a decrease in net income attributable to common stockholders compared to the prior year. Total revenues declined significantly, largely due to a substantial drop in carried interest allocation, which swung from a strong positive in the prior year's comparable period to a negative in the current quarter. This was partially offset by strong growth in management fees, driven by capital deployment and new fund launches across various segments, particularly Credit and Real Assets. The company's Fee Related Earnings (FRE) saw a healthy increase, indicating resilience in its core, recurring revenue streams despite the overall revenue decline. Despite the headline revenue decrease, the company's operational execution appears solid, with Fee Related Earnings (FRE) growing 22% year-over-year, underscoring the sticky nature of its management fee base. Assets Under Management (AUM) and Fee Paying Assets Under Management (FPAUM) also continued to grow across key segments. Management's commentary highlights continued opportunities in private credit due to constrained bank lending and a focus on resilient industries in private equity. While the report indicates a challenging market for private equity realizations, Ares' diversified business model and focus on value-add strategies position it to navigate these conditions.

Financial Highlights

27 data points
Beta

Revenue

$788.68M

Net Income

$94.94M

12.0% Net Margin

Total Assets

$24.19B

Cash & Equivalents

$284.44M

Free Cash Flow

$432.17M

Financial Statements
Beta
Revenue$788.68M
SG&A Expenses$169.43M
Operating Expenses$564.54M
Net Income$94.94M

Key Highlights

  • 1Total revenues decreased by 28% year-over-year to $788.7 million, primarily driven by a significant decline in carried interest allocation.
  • 2Management fees increased by 17% year-over-year to $721.7 million, reflecting strong fundraising and capital deployment.
  • 3Fee Related Earnings (FRE) grew by 22% year-over-year to $324.5 million, demonstrating the strength of recurring revenue streams.
  • 4Net income attributable to Ares Management Corporation Class A and non-voting common stockholders decreased by 34% year-over-year to $94.9 million.
  • 5Total AUM grew to $447.2 billion, up from $418.8 billion at the end of 2023, with FPAUM increasing to $275.8 billion.
  • 6The company successfully raised new capital across its segments, with total AUM showing a positive trend.
  • 7The Credit Group's FRE increased by 23%, driven by growth in management fees from direct lending and alternative credit funds.

Frequently Asked Questions

The decrease in total revenues is primarily due to a significant reduction in carried interest allocation. Carried interest is performance-based income that can fluctuate significantly based on fund performance and market conditions, swinging from a positive contribution in the prior year's comparable period to a negative one in the current quarter.

Management fees showed strong growth, increasing by 17% year-over-year to $721.7 million. This growth was driven by successful capital deployment in direct lending, alternative credit, and opportunistic credit funds within the Credit Group, as well as new capital commitments for real estate and infrastructure funds in the Real Assets Group.

The increase in FRE by 22% year-over-year to $324.5 million is a positive indicator of the company's core operational performance. FRE represents recurring revenue streams from management fees, which are generally more stable and predictable than performance-based income like carried interest. This growth highlights the resilience of Ares' business model.

Total AUM continued to grow, reaching $447.2 billion as of June 30, 2024, up from $418.8 billion at the end of 2023. Fee Paying Assets Under Management (FPAUM) also increased to $275.8 billion, indicating continued fundraising success and capital deployment across the firm's various strategies.