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Ares Management Corp 8-K Report, Financial Results (Aug 2, 2024)

Reports
Earnings & Results·Regulation FD·Exhibits & Filings
Filing Date
Filed August 2, 2024
Period End
August 2, 2024
Securities
ARESARES-PB
In the record · 2016–202610-K1110-Q328-K128

ARES filed 11 annual reports (10-K), 32 quarterly reports (10-Q) and 128 current reports (8-K) between 2016 and 2026.

  1. Leadership change8-K · Dec ’17Dec ’17
  2. Leadership change8-K · Feb ’20Feb ’20
  3. Material agreement8-K · Apr ’22Apr ’22
  4. Material agreement8-K · May ’26May ’26

01—Abstract

Summary

Summary of the 8-K filed August 2, 2024. Cited figures are marked; the original filing is the authoritative source.

Ares Management (ARES) reported second quarter 2024 results on August 2, 2024, with GAAP net income attributable to Ares Management of $94.9 milliona, or $0.43 per share, down from $144.5 million ($0.75) a year earlier.

The more relevant headline metrics for investors are operating ones: After-tax Realized Income rose 14% year over year to $332.0 millionb ($0.99 per Class A share), and Fee Related Earnings grew 22% to $324.5 million, with the FRE margin at 42.1%. Fundraising was strong, with $26.0 billion of gross new capital commitments (the firm's highest quarterly gross fundraising level) and $25.1 billion of net inflows. Capital deployment of $26.4 billion was the second highest in the firm's history.

Assets under management reached $447.2 billionc, up 18% year over year, and fee-paying AUM reached $275.8 billion, up 14%. Available capital hit a record $122.1 billion, and AUM not yet paying fees rose to $83.4 billion, which management says could generate roughly $674.7 million in potential incremental annual fees once deployed. Management fees were $721.7 million on a GAAP basis, and the effective management fee rate held at 1.02%.

The company also declared a quarterly dividend of $0.93d per Class A share, payable September 30, 2024 to holders of record on September 16, 2024. The GAAP earnings decline is driven largely by volatile performance allocations: carried interest allocation swung to a $51.2 million loss in Q2 2024 from a $418.5 million gain in Q2 2023. Investors should therefore focus on the fee-based and realized metrics, which are more predictable, and on the sizable pipeline of AUM ready for deployment.

Realized Income, which excludes unrealized performance swings, is the metric management emphasizes. The filing contains forward-looking statements and non-GAAP measures that should be read alongside the company's SEC filings.

02—Key points

Key Highlights

  1. After-tax Realized Income rose 14% year over year to $332.0 million, or $0.99 per Class A share, versus $0.90 a year earlier.
  2. Fee Related Earnings increased 22% to $324.5 million, with a 42.1% FRE margin, reflecting growth in recurring management fees.
  3. GAAP net income attributable to Ares Management fell to $94.9 million ($0.43 per share) from $144.5 million ($0.75) in Q2 2023, mainly due to a swing to negative carried interest allocation (-$51.2 million vs. +$418.5 million).
  4. Gross new capital commitments reached a record $26.0 billion, with $25.1 billion in net inflows, and capital deployment totaled $26.4 billion.
  5. AUM grew 18% year over year to $447.2 billion; fee-paying AUM grew 14% to $275.8 billion.
  6. Available capital reached a record $122.1 billion, and AUM not yet paying fees of $83.4 billion includes $70.8 billion available for future deployment, which management estimates could generate about $674.7 million in annual management fees.
  7. The Board declared a quarterly dividend of $0.93 per Class A share, payable September 30, 2024 to holders of record as of September 16, 2024.

03—Questions

Frequently Asked Questions

  1. Why did GAAP net income fall year over year despite strong fee growth?

    GAAP results are heavily affected by unrealized performance income. Carried interest allocation was a $51.2 million loss in Q2 2024 compared with a $418.5 million gain in Q2 2023, and performance-related compensation moved in the opposite direction. Management fees and FRE grew, but these swings reduced GAAP net income attributable to Ares Management to $94.9 million from $144.5 million.

  2. What metric does management emphasize over GAAP earnings?

    Management emphasizes Fee Related Earnings (FRE) and After-tax Realized Income. Both exclude unrealized performance and investment gains and losses, so they better reflect the recurring operating performance of the business. After-tax Realized Income grew 14% to $332.0 million, or $0.99 per Class A share.

  3. How strong is the firm's capital-raising and deployment momentum?

    Momentum is strong. Ares raised $26.0 billion of gross new capital, the highest level in its history for gross fundraising, and deployed $26.4 billion, the second highest in its history. Drawdown funds deployed $13.0 billion, up from $9.1 billion a year earlier. Available capital of $122.1 billion provides significant room for future growth.

  4. What is the dividend, and is it supported by earnings?

    Ares declared a quarterly dividend of $0.93 per Class A share, payable September 30, 2024 to holders of record as of September 16, 2024. Under the company's dividend policy, dividends are aligned with expected annual FRE after current taxes. The company does not guarantee the dividend, and management notes it could reduce or suspend dividends if FRE cash flows were insufficient over a sustained period.

  5. What are the main risks behind the growth story?

    Key risks include the volatility of performance income, which can reverse sharply as seen in Q2 2024; reliance on fundraising and capital deployment in changing market conditions; weakness in some real assets, including a realized loss and lower Real Assets Fee Related Earnings; and the fact that $70.8 billion of available-for-deployment AUM depends on market opportunities and does not guarantee future fees. Investors should also review the risk factors in the company's SEC filings.

04—Continue

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