Ares(US:ARES)2025-08-08 21:16PART I—FINANCIAL INFORMATION Item 1. Financial Statements The company presents its unaudited condensed consolidated financial statements and accompanying notes for the period ended June 30, 2025 Condensed Consolidated Financial Statements Total assets grew to $27.3 billion, with Q2 2025 revenues reaching $1.35 billion and net income of $111.8 million Condensed Consolidated Statements of Financial Condition (in thousands) | Metric | June 30, 2025 (unaudited) | December 31, 2024 | | :--- | :--- | :--- | | Total Assets | $27,264,941 | $24,884,308 | | Goodwill | $3,436,192 | $1,162,636 | | Intangible assets, net | $2,220,065 | $975,828 | | Total Liabilities | $18,425,558 | $17,485,922 | | Debt obligations | $3,675,154 | $2,558,914 | | Total Equity | $8,257,198 | $6,824,190 | Condensed Consolidated Statements of Operations (in thousands, except per share data) | Metric | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $1,350,128 | $788,682 | $2,438,933 | $1,496,045 | | Management fees | $900,622 | $721,681 | $1,717,609 | $1,409,373 | | Carried interest allocation | $323,901 | $(51,167) | $483,909 | $(83,645) | | Total Expenses | $1,137,578 | $564,544 | $2,151,906 | $1,103,037 | | Net Income | $225,980 | $276,251 | $349,481 | $480,066 | | Net income attributable to common stockholders | $111,750 | $94,938 | $133,607 | $167,965 | | Diluted EPS | $0.46 | $0.43 | $0.48 | $0.76 | Condensed Consolidated Statements of Cash Flows (in thousands) | Metric | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $2,409,904 | $1,142,217 | | Net cash used in investing activities | $(1,767,608) | $(63,309) | | Net cash used in financing activities | $(1,744,928) | $(1,125,531) | | Net change in cash and cash equivalents | $(998,320) | $(63,829) | Notes to the Condensed Consolidated Financial Statements The notes detail the $3.9 billion GCP acquisition, an upsized credit facility, and subsequent dividend declarations - On March 1, 2025, the Company completed the acquisition of GCP International for a total consideration of $3.9 billion, consisting of $1.79 billion in cash, $1.66 billion in equity, and $465 million in contingent consideration4950 GCP Acquisition Purchase Price Allocation (in thousands) | Assets Acquired / Liabilities Assumed | Fair Value | | :--- | :--- | | Total identifiable assets acquired | $1,844,322 | | Accounts payable, accrued expenses and other liabilities | $203,969 | | Net identifiable assets acquired | $1,640,353 | | Goodwill | $2,270,422 | | Net assets acquired | $3,910,775 | - In April 2025, the company amended its revolving Credit Facility, extending the maturity to April 2030 and increasing commitments to $1.84 billion from $1.40 billion93 - The company has contingent liabilities related to the GCP acquisition, including an earnout for the data center business (up to $1.0 billion) and the Japan business (up to $0.5 billion)112 - Subsequent to the quarter end, in July 2025, the board declared a quarterly dividend of $1.12 per share for Class A and non-voting common stock and $0.84375 per share for Series B preferred stock207208 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q2 2025 performance, the GCP acquisition's impact, AUM growth, and segment results Trends Affecting Our Business Global markets performed well in Q2 2025 despite volatility, with the company's portfolio well-positioned - Global equity and debt markets experienced volatility but largely performed well during Q2 2025, supported by positive trade developments and resilient macroeconomic indicators213 - Commercial real estate markets showed mixed performance; European markets began to recover due to interest rate cuts, while U.S. markets saw a slight decline214215 - Private equity transaction volume slowed during the quarter due to macroeconomic and global trade uncertainty, leading to a heightened focus on disciplined underwriting216 - As of June 30, 2025, approximately 85% of the company's debt assets and 52% of its total assets were floating rate instruments, positioning the portfolio for a fluctuating interest rate environment217 Managing Business Performance Key operating metrics show significant growth, with total AUM reaching $572.4 billion and FPAUM at $349.6 billion AUM and FPAUM Growth (in billions) | Metric | June 30, 2025 | June 30, 2024 | | :--- | :--- | :--- | | Total AUM | $572.4 | $447.2 | | Fee Paying AUM (FPAUM) | $349.6 | $275.8 | - As of June 30, 2025, AUM not yet paying fees was $86.8 billion, which could generate approximately $822.7 million in potential incremental annual management fees238 - Incentive Eligible AUM (IEAUM) was $421.9 billion and Incentive Generating AUM (IGAUM) was $229.9 billion as of June 30, 2025240 Consolidated Results of Operations Q2 2025 revenues grew 71% to $1.35 billion, while expenses rose 102%, driven by the GCP acquisition Consolidated Revenue Breakdown (in thousands) | Revenue Type | Q2 2025 | Q2 2024 | % Change | | :--- | :--- | :--- | :--- | | Management fees | $900,622 | $721,681 | 25% | | Carried interest allocation | $323,901 | $(51,167) | NM | | Administrative, transaction and other fees | $91,563 | $40,973 | 123% | | Total revenues | $1,350,128 | $788,682 | 71% | Consolidated Expense Breakdown (in thousands) | Expense Type | Q2 2025 | Q2 2024 | % Change | | :--- | :--- | :--- | :--- | | Compensation and benefits | $643,709 | $419,858 | 53% | | Performance related compensation | $234,706 | $(28,985) | NM | | General, administrative and other expenses | $232,156 | $169,432 | 37% | | Total expenses | $1,137,578 | $564,544 | 102% | - The increase in Compensation and Benefits for Q2 2025 was significantly impacted by the GCP acquisition, which included $40.8 million in equity-based compensation and $20.8 million in other cash compensation costs279 - The increase in General, Administrative and Other Expenses was also driven by the GCP acquisition, which contributed $54.7 million in Q2 2025285 Segment Analysis Segment performance varied, with strong FRE growth in Real Assets and Credit, leading to a 26% overall FRE increase Fee Related Earnings (FRE) by Segment - Q2 2025 vs Q2 2024 (in thousands) | Segment | Q2 2025 | Q2 2024 | % Change | | :--- | :--- | :--- | :--- | | Credit Group | $426,310 | $368,281 | 16% | | Real Assets Group | $113,645 | $51,643 | 120% | | Private Equity Group | $9,846 | $14,454 | (32)% | | Secondaries Group | $50,537 | $33,641 | 50% | | Total FRE | $409,111 | $324,516 | 26% | Realized Income (RI) by Segment - Q2 2025 vs Q2 2024 (in thousands) | Segment | Q2 2025 | Q2 2024 | % Change | | :--- | :--- | :--- | :--- | | Credit Group | $435,494 | $408,205 | 7% | | Real Assets Group | $97,648 | $41,069 | 138% | | Private Equity Group | $12,858 | $11,392 | 13% | | Secondaries Group | $48,715 | $26,544 | 84% | | Total RI | $397,814 | $363,158 | 10% | Liquidity and Capital Resources Liquidity is sufficient with $509.7 million in cash and $725.0 million available under the credit facility - As of June 30, 2025, the company had $509.7 million in cash and cash equivalents and $725.0 million available under its Credit Facility, with management believing these sources are sufficient432 Company Cash Flow Summary (in thousands) | Activity | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $1,164,527 | $879,653 | | Net cash used in investing activities | $(1,767,608) | $(63,309) | | Net cash used in financing activities | $(173,078) | $(878,127) | - The Tax Receivable Agreement (TRA) liability balance was $508.6 million as of June 30, 2025, with payments of $8.1 million for the first six months of 2025453 Item 3. Quantitative and Qualitative Disclosures About Market Risk No material changes in market risk exposures are reported for the six months ended June 30, 2025 - There have been no material changes in the company's market risks for the six months ended June 30, 2025458459 Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of June 30, 2025 - Management concluded that as of June 30, 2025, the company's disclosure controls and procedures were effective at a reasonable assurance level461 - There were no changes in internal control over financial reporting during the quarter ended June 30, 2025, that have materially affected, or are reasonably likely to materially affect, these controls462 PART II—OTHER INFORMATION Item 1. Legal Proceedings The company is not subject to any legal proceedings expected to have a material adverse effect - The company and its affiliates are subject to legal proceedings and regulatory investigations from time to time, but management does not expect any current matters to have a material impact on its financial results463 Item 1A. Risk Factors The report refers to the risk factors detailed in the company's 2024 Annual Report on Form 10-K - The report directs investors to the risk factors detailed in the company's Annual Report on Form 10-K for the year ended December 31, 2024, for a comprehensive understanding of potential risks464 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds No unregistered sales of equity securities were conducted during the reporting period - No unregistered sales of equity securities occurred during the period covered by this report465 Item 5. Other Information Certain executives and directors entered into Rule 10b5-1 trading plans during the second quarter of 2025 Rule 10b5-1 Trading Plans Adopted in Q2 2025 | Name and Title | Plan Date | Maximum Shares That May Be Sold | Plan Expiration Date | | :--- | :--- | :--- | :--- | | Antony Ressler, Executive Chairman & Co-Founder | May 21, 2025 | 2,000,000 | February 13, 2026 | | Naseem Sagati Aghili, General Counsel and Corporate Secretary | June 11, 2025 | 42,000 plus shares from vested RSUs | March 1, 2026 | Item 6. Exhibits This section lists all exhibits filed with the Form 10-Q, including key agreement amendments and certifications - Key exhibits filed with this report include Amendment No. 13 to the Credit Agreement, the Sixth Amended and Restated Exchange Agreement, and the Sixth Amended and Restated Limited Partnership Agreement of Ares Holdings L.P475