How did Ares perform on core operating profitability in Q3 2024?

Fee Related Earnings, the company's primary measure of recurring operating profit, rose 24% year over year to $339.3 million, and the FRE margin was 41.1%, roughly flat with the prior year. The growth was driven by higher management fees, which increased 18% on an unconsolidated basis, and by fee related performance revenues from perpetual capital vehicles.

Why does GAAP net income differ so much from the non-GAAP metrics Ares emphasizes?

GAAP results include unrealized carried interest allocations, performance-related compensation, equity compensation, amortization of intangibles, and the consolidation of certain funds. These items can swing sharply from quarter to quarter. Q3-24 GAAP net income of $118.5 million was depressed by a $219.7 million performance-related compensation expense, even though After-tax Realized Income was $316.0 million. Management emphasizes FRE and after-tax RI because they strip out these unrealized and non-recurring effects.

What does the record fundraising outlook mean for future earnings?

Management expects 2024 gross commitments in the mid-$80 billion range, which would be a record. New commitments add to AUM and, once deployed, convert AUM not yet paying fees into fee-paying AUM. With $74.1 billion of AUM available for future deployment that could generate about $721.5 million in potential annual management fees, a large share of this capital should support future fee growth. Actual fee realization depends on deployment pace, fee terms, and market conditions.

Is the $0.93 quarterly dividend supported by the company's earnings?

The dividend is set as a policy aligned with expected annual FRE after allocating current taxes. After-tax Realized Income per Class A share of $0.95 for Q3-24 covers the $0.93 quarterly payment, but the company's dividend methodology is based on FRE and can be reduced if FRE proves insufficient over a sustained period. The filing does not guarantee future dividend levels.

What are the key pending transactions and capital actions investors should track?

Ares agreed to acquire Walton Street Capital Mexico (AUM $2.1 billion, focused on Mexican industrial real estate) and the international business of GLP Capital Partners (AUM $44.0 billion, excluding Greater China). In October 2024 it also issued 30 million shares of 6.75% Series B mandatory convertible preferred stock for $1.46 billion in net proceeds before offering expenses. Investors should monitor closing timing, integration, and the effect of the preferred stock's conversion on share count and dilution.

ARES/ARES-PB 8-K: Earnings & Results & Regulation FD

01—Abstract

Summary

Summary of the 8-K filed November 1, 2024. Cited figures are marked; the original filing is the authoritative source.

Ares Management (NYSE: ARES) reported third-quarter 2024 results that showed strong top-line and fundraising momentum.

GAAP net income attributable to Ares Management Corporation was $118.5 million^a, or $0.55 per share, up from $61.8 million ($0.30 per share) a year earlier. The more important investor metrics are non-GAAP: Fee Related Earnings (FRE) rose 24% to $339.3 million with a 41.1% margin, and After-tax Realized Income per Class A share was $0.95, up 14% year over year. Management fees grew 18% to $757.3 million on an unconsolidated basis, driven by deployment across direct lending and alternative credit and by the Crescent Point acquisition.

Fundraising and deployment were the standout items. Ares raised $20.9 billion^b in gross new capital in the quarter, with net inflows of $19.8 billion, and has over $64 billion raised year to date. Management now expects 2024 to be a record fundraising year with gross commitments in the mid-$80 billion range.

Capital deployment reached $29.6 billion^c, up from $16.7 billion a year earlier. Total AUM grew 17% to $463.8 billion, and Fee Paying AUM rose 16% to $286.8 billion. Available capital stands at $125.3 billion, and AUM not yet paying fees is $85.2 billion, of which $74.1 billion is available for future deployment and could generate roughly $721.5 million in potential incremental annual fees.

This backlog supports management's expectation of meaningful future earnings growth. The filing also declared a quarterly Class A common dividend of $0.93^d per share, payable December 31, 2024 to holders of record on December 17, 2024. It also disclosed two pending acquisitions, Walton Street Capital Mexico (AUM of $2.1 billion) and the international business of GLP Capital Partners (AUM of $44.0 billion).

In October 2024, Ares issued 30 million Series B mandatory convertible preferred shares for proceeds of $1.46 billion. Investors should weigh the strong fee growth and fundraising against GAAP earnings that are volatile because of carried interest and performance compensation swings, and against a sizable fixed-cost base that grows with headcount and deal activity.

02—Key points

Key Highlights

Fee Related Earnings rose 24% year over year to $339.3 million, with a 41.1% FRE margin, and management fees grew 18% to $757.3 million on an unconsolidated basis.
After-tax Realized Income per Class A share was $0.95 for Q3-24, up 14% from $0.83, and total Realized Income was $338.8 million, up 28%.
GAAP net income attributable to Ares Management was $118.5 million ($0.55 per share), versus $61.8 million ($0.30 per share) a year earlier, though GAAP results are heavily affected by carried interest and performance compensation swings.
Gross new capital raised was $20.9 billion in the quarter, with net inflows of $19.8 billion, and management now expects a record 2024 fundraising year with gross commitments in the mid-$80 billion range.
Capital deployment reached $29.6 billion, up from $16.7 billion in Q3-23, and AUM grew 17% to $463.8 billion while FPAUM grew 16% to $286.8 billion.
Available capital of $125.3 billion and AUM not yet paying fees of $85.2 billion ($74.1 billion available for deployment, roughly $721.5 million in potential annual fees) provide a substantial future earnings runway.
The Board declared a $0.93 per share quarterly Class A dividend payable December 31, 2024, and the company agreed to acquire Walton Street Capital Mexico and the international business of GLP Capital Partners (AUM $44.0 billion), with an October 2024 Series B preferred issuance raising $1.46 billion.

03—Questions

Frequently Asked Questions

How did Ares perform on core operating profitability in Q3 2024?
Fee Related Earnings, the company's primary measure of recurring operating profit, rose 24% year over year to $339.3 million, and the FRE margin was 41.1%, roughly flat with the prior year. The growth was driven by higher management fees, which increased 18% on an unconsolidated basis, and by fee related performance revenues from perpetual capital vehicles.
Why does GAAP net income differ so much from the non-GAAP metrics Ares emphasizes?
GAAP results include unrealized carried interest allocations, performance-related compensation, equity compensation, amortization of intangibles, and the consolidation of certain funds. These items can swing sharply from quarter to quarter. Q3-24 GAAP net income of $118.5 million was depressed by a $219.7 million performance-related compensation expense, even though After-tax Realized Income was $316.0 million. Management emphasizes FRE and after-tax RI because they strip out these unrealized and non-recurring effects.
What does the record fundraising outlook mean for future earnings?
Management expects 2024 gross commitments in the mid-$80 billion range, which would be a record. New commitments add to AUM and, once deployed, convert AUM not yet paying fees into fee-paying AUM. With $74.1 billion of AUM available for future deployment that could generate about $721.5 million in potential annual management fees, a large share of this capital should support future fee growth. Actual fee realization depends on deployment pace, fee terms, and market conditions.
Is the $0.93 quarterly dividend supported by the company's earnings?
The dividend is set as a policy aligned with expected annual FRE after allocating current taxes. After-tax Realized Income per Class A share of $0.95 for Q3-24 covers the $0.93 quarterly payment, but the company's dividend methodology is based on FRE and can be reduced if FRE proves insufficient over a sustained period. The filing does not guarantee future dividend levels.
What are the key pending transactions and capital actions investors should track?
Ares agreed to acquire Walton Street Capital Mexico (AUM $2.1 billion, focused on Mexican industrial real estate) and the international business of GLP Capital Partners (AUM $44.0 billion, excluding Greater China). In October 2024 it also issued 30 million shares of 6.75% Series B mandatory convertible preferred stock for $1.46 billion in net proceeds before offering expenses. Investors should monitor closing timing, integration, and the effect of the preferred stock's conversion on share count and dilution.

04—Continue

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