Ares(ARES) - 2024 Q1 - Quarterly Report

PART I—FINANCIAL INFORMATION Item 1. Financial Statements This section presents the unaudited condensed consolidated financial statements of Ares Management Corporation for the quarter ended March 31, 2024, including statements of financial condition, operations, comprehensive income, changes in equity, and cash flows, along with detailed notes explaining significant accounting policies, investments, debt, commitments, and segment reporting Condensed Consolidated Statements of Financial Condition The Condensed Consolidated Statements of Financial Condition show a slight decrease in total assets and liabilities from December 31, 2023, to March 31, 2024, while total equity remained relatively stable | Metric | March 31, 2024 (unaudited) | December 31, 2023 | |:---|:---|:---| | Total Assets | $24,413,270 | $24,730,500 | | Total Liabilities | $19,382,799 | $19,709,151 | | Total Equity | $4,477,072 | $4,474,313 | - Investments (including accrued carried interest) decreased from $4.624 billion to $4.484 billion[21] - CLO loan obligations, at fair value, decreased from $12.345 billion to $11.906 billion[21] Condensed Consolidated Statements of Operations For the three months ended March 31, 2024, total revenues decreased by 13% year-over-year, primarily due to a significant negative carried interest allocation, with net income attributable to Ares Management Corporation Class A and non-voting common stockholders also decreasing by 22% | Metric | Three months ended March 31, 2024 | Three months ended March 31, 2023 | Change ($) | Change (%) | |:---|:---|:---|:---|:---|\ | Total Revenues | $707,363 | $813,362 | $(105,999) | (13)% | | Total Expenses | $538,493 | $628,636 | $(90,143) | (14)% | | Net Income | $203,815 | $207,316 | $(3,501) | (2)% | | Net Income attributable to Ares Management Corporation Class A and non-voting common stockholders | $73,027 | $94,039 | $(21,012) | (22)% | | Basic EPS | $0.33 | $0.49 | $(0.16) | (32.7)% | | Diluted EPS | $0.33 | $0.49 | $(0.16) | (32.7)% | - Carried interest allocation significantly decreased from $151.488 million in Q1 2023 to $(32.478) million in Q1 2024[23] - Management fees increased by 15% from $600.516 million in Q1 2023 to $687.692 million in Q1 2024[23] Condensed Consolidated Statements of Comprehensive Income The Condensed Consolidated Statements of Comprehensive Income show a decrease in total comprehensive income from $213.955 million in Q1 2023 to $192.168 million in Q1 2024, primarily driven by negative foreign currency translation adjustments | Metric | Three months ended March 31, 2024 | Three months ended March 31, 2023 | |:---|:---|:---|\ | Net income | $203,815 | $207,316 | | Foreign currency translation adjustments, net of tax | $(11,647) | $6,639 | | Total comprehensive income | $192,168 | $213,955 | | Comprehensive income attributable to Ares Management Corporation | $68,177 | $96,680 | Condensed Consolidated Statements of Changes in Equity The Condensed Consolidated Statements of Changes in Equity detail the movements in various equity components, with total equity increasing slightly from $4.474 billion to $4.477 billion for the three months ended March 31, 2024 | Metric | December 31, 2023 | March 31, 2024 | |:---|:---|:---|\ | Total Equity | $4,474,313 | $4,477,072 | | Net income | $203,742 | $203,742 (attributable to Ares Management Corporation and non-controlling interests) | | Capital contributions | $169,707 | $169,707 | | Dividends/distributions | $(346,652) | $(346,652) | | Equity compensation | $92,422 | $92,422 | - Class A Common Stock outstanding increased from 187.069 million shares to 191.057 million shares[28] Condensed Consolidated Statements of Cash Flows Net cash provided by operating activities remained strong at $710.045 million for the three months ended March 31, 2024, comparable to the prior year, while net cash used in financing activities increased significantly | Metric | Three months ended March 31, 2024 | Three months ended March 31, 2023 | |:---|:---|:---|\ | Net cash provided by operating activities | $710,045 | $707,572 | | Net cash used in investing activities | $(34,071) | $(8,877) | | Net cash used in financing activities | $(666,632) | $(821,144) | | Net change in cash and cash equivalents | $(1,943) | $(117,738) | - Dividends and distributions increased from $(251.632) million in Q1 2023 to $(320.046) million in Q1 2024[33] - Taxes paid related to net share settlement of equity awards increased from $(113.431) million in Q1 2023 to $(186.731) million in Q1 2024[33] Notes to the Condensed Consolidated Financial Statements These notes provide detailed disclosures on the company's financial statements, covering its organizational structure, significant accounting policies, investments, debt obligations, and segment reporting 1. ORGANIZATION Ares Management Corporation is a global alternative investment manager operating across Credit, Real Assets, Private Equity, and Secondaries, consolidating certain funds which increases reported amounts but does not directly affect net income attributable to Ares Management Corporation - Ares Management Corporation operates integrated groups across Credit, Real Assets, Private Equity and Secondaries[36] - The Company consolidates certain Ares funds, co-investment vehicles, CLOs, and SPACs (Consolidated Funds), which increases reported assets, liabilities, revenues, expenses, and cash flows but has no direct effect on net income attributable to Ares Management Corporation[37][38] 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The unaudited condensed consolidated financial statements are prepared in accordance with GAAP for interim financial information, with new accounting standard updates (ASU 2023-07 and ASU 2023-09) effective for fiscal years ending December 31, 2024 and 2025, respectively, and their impacts currently being evaluated - ASU 2023-07 (Segment Reporting) is effective for the Company's fiscal year ending December 31, 2024, and interim periods beginning March 31, 2025, requiring expanded segment disclosures[42] - ASU 2023-09 (Income Taxes) is effective for the Company's fiscal year ending December 31, 2025, requiring disaggregated income taxes paid and standard categories for effective tax rate reconciliation[43] 3. GOODWILL AND INTANGIBLE ASSETS Intangible assets, net, decreased from $1.058 billion at December 31, 2023, to $1.030 billion at March 31, 2024, primarily due to amortization, while goodwill increased slightly to $1.130 billion with a reallocation of $55.7 million from Private Equity to Credit | Metric | March 31, 2024 | December 31, 2023 | |:---|:---|:---|\ | Intangible assets, net | $1,030,076 | $1,058,495 | | Goodwill | $1,130,085 | $1,123,976 | - Amortization expense for intangible assets was $29.2 million for the three months ended March 31, 2024, down from $33.6 million in the prior year, excluding a $7.8 million impairment charge in Q1 2023[45] - Goodwill of $55.7 million was reallocated from the Private Equity Group to the Credit Group due to the reorganization of the special opportunities strategy into opportunistic credit[49] 4. INVESTMENTS Total investments decreased from $4.624 billion at December 31, 2023, to $4.484 billion at March 31, 2024, with equity method investments, primarily carried interest, representing the largest portion | Investment Type | March 31, 2024 | December 31, 2023 | |:---|:---|:---|\ | Total investments (Company) | $4,484,884 | $4,624,932 | | Equity method investments | $4,370,203 | $4,412,066 | | Investments of Consolidated Funds, at fair value | $14,319,917 | $14,601,587 | - Equity method investments, particularly carried interest, accounted for 75.0% of total Company investments as of March 31, 2024[51] - Total other income, net, related to equity method investments decreased from $23.914 million in Q1 2023 to $10.127 million in Q1 2024[53] 5. FAIR VALUE This section details the fair value measurements of financial instruments for both the Company and its Consolidated Funds, categorized into Level I, II, and III, with Level III assets for the Company totaling $438.462 million and for Consolidated Funds totaling $2.005 billion as of March 31, 2024 | Metric | March 31, 2024 (Company) | December 31, 2023 (Company) | |:---|:---|:---|\ | Total assets, at fair value | $536,337 | $632,773 | | Level III Assets | $438,462 | $538,785 | | Total liabilities, at fair value | $(1,365) | $(2,645) | | Metric | March 31, 2024 (Consolidated Funds) | December 31, 2023 (Consolidated Funds) | |:---|:---|:---|\ | Total assets, at fair value | $14,325,507 | $14,610,713 | | Level III Assets | $2,005,782 | $1,930,513 | | Total liabilities, at fair value | $(11,913,461) | $(12,356,439) | - For the Company, Level III equity securities increased by $5.135 million in net unrealized appreciation, and fixed income investments increased by $1.388 million for the three months ended March 31, 2024[67] 6. DEBT The Company's total debt obligations increased to $3.046 billion as of March 31, 2024, from $2.965 billion at December 31, 2023, primarily due to an increase in the Credit Facility balance, while loan obligations of Consolidated CLOs decreased to $11.906 billion | Debt Type | March 31, 2024 (Carrying Value) | December 31, 2023 (Carrying Value) | |:---|:---|:---|\ | Credit Facility | $975,000 | $895,000 | | 2024 Senior Notes | $249,612 | $249,427 | | 2028 Senior Notes | $495,121 | $494,863 | | 2030 Senior Notes | $397,162 | $397,050 | | 2052 Senior Notes | $484,299 | $484,199 | | 2051 Subordinated Notes | $444,988 | $444,941 | | Total debt obligations | $3,046,182 | $2,965,480 | - The Credit Facility was amended on March 28, 2024, increasing revolver commitments from $1.325 billion to $1.400 billion and extending the maturity date from March 2027 to March 2029[83] - Loan obligations of Consolidated CLOs decreased from $12.345 billion to $11.906 billion[89] 7. COMMITMENTS AND CONTINGENCIES The Company has unfunded commitments to funds and strategic initiatives totaling $986.3 million as of March 31, 2024, with contingent liabilities including management incentive programs for Crescent Point Acquisition ($75.0 million maximum) and Infrastructure Debt Acquisition ($15.0 million maximum remaining), and carried interest subject to potential repayment of $77.7 million net of tax distributions - Aggregate unfunded commitments to invest in funds or support strategic initiatives were $986.3 million as of March 31, 2024 (down from $1.030 billion at December 31, 2023)[97] - The Crescent Point MIP represents a contingent liability not to exceed $75.0 million, based on revenue targets from future private equity fund fundraising[99] - The maximum contingent liability for the remaining Infrastructure Debt MIP was $15.0 million as of March 31, 2024[104] - Carried interest subject to potential repayment, net of tax distributions, was approximately $77.7 million as of March 31, 2024, with $53.9 million reimbursable by professionals[107] 8. RELATED PARTY TRANSACTIONS Substantially all of the Company's revenue is derived from affiliated funds, with related party balances including significant receivables for management and incentive fees from non-consolidated funds, and payables for tax receivable agreement liability and undistributed carried interest/incentive fees - Substantially all revenue is earned from affiliated funds of the Company[114] | Metric | March 31, 2024 | December 31, 2023 | |:---|:---|:---|\ | Due from affiliates—Company | $809,273 | $896,746 | | Management fees receivable from non-consolidated funds | $589,231 | $560,629 | | Incentive fee receivable from non-consolidated funds | $17,454 | $159,098 | | Due to affiliates—Company | $363,308 | $240,254 | | Tax receivable agreement liability | $236,135 | $191,299 | | Undistributed carried interest and incentive fees | $110,672 | $33,374 | 9. INCOME TAXES Income tax expense decreased to $27.233 million for the three months ended March 31, 2024, from $33.806 million in the prior year, primarily due to lower pre-tax income allocable to AMC, with the Company recording a net deferred tax asset of $87.2 million | Metric | Three months ended March 31, 2024 | Three months ended March 31, 2023 | |:---|:---|:---|\ | Income tax expense | $27,233 | $33,806 | - The Company recorded a net deferred tax asset of $87.2 million as of March 31, 2024, up from $21.5 million at December 31, 2023[124] 10. EARNINGS PER SHARE Basic and diluted earnings per share for Class A and non-voting common stock decreased to $0.33 for the three months ended March 31, 2024, from $0.49 in the prior year, primarily due to lower net income attributable to Ares Management Corporation and an increase in weighted-average shares outstanding | Metric | Three months ended March 31, 2024 | Three months ended March 31, 2023 | |:---|:---|:---|\ | Basic EPS | $0.33 | $0.49 | | Diluted EPS | $0.33 | $0.49 | | Basic weighted-average shares | 192,622,609 | 178,976,022 | | Diluted weighted-average shares | 192,622,609 | 178,976,022 | - Net income attributable to Class A and non-voting common stockholders decreased from $94.039 million in Q1 2023 to $73.027 million in Q1 2024[126] 11. EQUITY COMPENSATION Equity-based compensation expense for restricted units increased to $92.422 million for the three months ended March 31, 2024, from $69.252 million in the prior year, with approximately $1.087 billion in total compensation expense expected to be recognized in future periods | Metric | Three months ended March 31, 2024 | Three months ended March 31, 2023 | |:---|:---|:---|\ | Equity-based compensation expense (restricted units) | $92,422 | $69,252 | - As of March 31, 2024, 18.138 million unvested restricted units were outstanding, with a weighted average grant date fair value of $75.77 per unit[136] - The total compensation expense expected to be recognized in future periods associated with restricted units is approximately $1.087 billion over a remaining weighted average period of 3.9 years[136] 12. EQUITY AND REDEEMABLE INTEREST The Company's common stock includes Class A, non-voting, Class B, and Class C shares, with Ares Management Corporation's direct ownership interest in AOG Units increasing to 62.82% and redeemable interest in Consolidated Funds increasing to $529.787 million as of March 31, 2024 | Common Stock Class | December 31, 2023 (Shares) | March 31, 2024 (Shares) | |:---|:---|:---|\ | Class A common stock | 187,069,907 | 191,057,860 | | Non-voting common stock | 3,489,911 | 3,489,911 | | Class C common stock | 117,024,758 | 115,120,213 | - Ares Management Corporation's direct ownership interest in AOG Units increased from 61.95% at December 31, 2023, to 62.82% at March 31, 2024[145] - Redeemable interest in Consolidated Funds increased from $522.938 million at December 31, 2023, to $529.787 million at March 31, 2024[149] 13. SEGMENT REPORTING The Company operates through Credit, Real Assets, Private Equity, Secondaries, and Other groups, with the special opportunities strategy reclassified to the Credit Group, and Fee Related Earnings (FRE) increasing by 18% to $301.670 million and Realized Income (RI) increasing by 14% to $289.156 million for the three months ended March 31, 2024 - The special opportunities strategy was reclassified from the Private Equity Group to the Credit Group as opportunistic credit, effective January 1, 2024[150] | Metric | Three months ended March 31, 2024 | Three months ended March 31, 2023 | Change ($) | Change (%) | |:---|:---|:---|:---|:---|\ | Fee Related Earnings (FRE) | $301,670 | $254,637 | $47,033 | 18% | | Realized Income (RI) | $289,156 | $254,292 | $34,864 | 14% | - Credit Group FRE increased by 21% to $352.417 million, while Real Assets Group FRE decreased by 13% to $46.518 million[159][168] 14. CONSOLIDATION The Company consolidates Variable Interest Entities (VIEs) where it has control and significant economic interest, with maximum exposure to loss from non-consolidated VIEs at $399.885 million and from consolidated VIEs at $908.198 million as of March 31, 2024 | Metric | March 31, 2024 | December 31, 2023 | |:---|:---|:---|\ | Maximum exposure to loss (non-consolidated VIEs) | $399,885 | $503,376 | | Maximum exposure to loss (consolidated VIEs) | $908,198 | $910,600 | | Assets of consolidated VIEs | $15,335,745 | $15,484,962 | | Liabilities of consolidated VIEs | $13,058,395 | $13,409,257 | - Net income attributable to non-controlling interests related to consolidated VIEs increased from $37.131 million in Q1 2023 to $58.356 million in Q1 2024[177] 15. SUBSEQUENT EVENTS In May 2024, the Company's board of directors declared a quarterly dividend of $0.93 per share of Class A and non-voting common stock, payable on June 28, 2024 - A quarterly dividend of $0.93 per share of Class A and non-voting common stock was declared in May 2024, payable on June 28, 2024[197] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides a detailed discussion and analysis of Ares Management Corporation's financial condition and results of operations for the three months ended March 31, 2024, compared to the same period in 2023 Trends Affecting Our Business Ares's business performance is influenced by global financial markets, economic, and political environments, with U.S. and European high yield bonds and leveraged loans showing positive performance in Q1 2024, global equity markets rallying, and approximately 85% of Ares's debt assets and 56% of total assets being floating rate as of March 31, 2024 - 95% of management fees for the three months ended March 31, 2024, were derived from perpetual capital vehicles or long-dated funds, indicating stable performance[201] | Index Type | Region | Three months ended March 31, 2024 (%) | |:---|:---|:---|\ | High yield bonds (ICE BAML High Yield Master II Index) | U.S. | 1.5 | | High yield bonds (ICE BAML European Currency High Yield Index) | Europe | 1.7 | | Leveraged loans (Credit Suisse Leveraged Loan Index) | U.S. | 2.5 | | Leveraged loans (Credit Suisse Western European Leveraged Loan Index) | Europe | 2.0 | | Equities (S&P 500 Index) | U.S. | 10.6 | | Equities (MSCI All Country World Ex-U.S. Index) | Non-U.S. | 4.7 | | Real estate equities (FTSE NAREIT All Equity REITs Index) | U.S. | (2.3) | | Real estate equities (FTSE EPRA/NAREIT Developed Europe Index) | Europe | (3.5) | - Approximately 85% of debt assets and 56% of total assets were floating rate instruments as of March 31, 2024[206] Managing Business Performance Ares measures business performance using operating metrics such as Assets Under Management (AUM), Fee Paying Assets Under Management (FPAUM), Perpetual Capital AUM, Incentive Eligible AUM (IEAUM), and Incentive Generating AUM (IGAUM), with total AUM increasing to $428.3 billion and FPAUM growing to $267.1 billion as of March 31, 2024 Assets Under Management Total AUM increased by 2.3% from $418.8 billion at December 31, 2023, to $428.3 billion at March 31, 2024, primarily driven by $10.9 billion in net new par/equity commitments and $6.1 billion in net new debt commitments | Metric | December 31, 2023 | March 31, 2024 | |:---|:---|:---|\ | Total AUM | $418,846 | $428,339 | | Net new par/equity commitments | N/A | $10,942 | | Net new debt commitments | N/A | $6,112 | | Distributions | N/A | $(4,744) | | Redemptions | N/A | $(2,953) | | Change in fund value | N/A | $1,680 | - Credit Group AUM increased from $299.350 billion to $308.639 billion, while Real Assets Group AUM slightly decreased from $65.413 billion to $64.104 billion[210] Fee Paying Assets Under Management Total FPAUM increased by 1.8% from $262.4 billion at December 31, 2023, to $267.1 billion at March 31, 2024, primarily due to $6.3 billion in new commitments and $8.1 billion from deployment/subscriptions/increase in leverage | Metric | December 31, 2023 | March 31, 2024 | |:---|:---|:---|\ | Total FPAUM | $262,357 | $267,116 | | Commitments | N/A | $6,295 | | Deployment/subscriptions/increase in leverage | N/A | $8,144 | | Capital reductions | N/A | $(2,776) | | Distributions | N/A | $(4,202) | - Credit Group FPAUM increased from $185.280 billion to $189.826 billion[215] - 95% of management fees were earned from perpetual capital or long-dated funds for both Q1 2024 and Q1 2023[221] Available Capital and Assets Under Management Not Yet Paying Fees As of March 31, 2024, AUM Not Yet Paying Fees totaled $64.6 billion, representing potential incremental annual management fees of approximately $621.5 million, an increase from $50.5 billion and $483.0 million, respectively, in the prior year - AUM Not Yet Paying Fees (shadow AUM) was $64.6 billion as of March 31, 2024, up from $50.5 billion as of March 31, 2023[223] - This shadow AUM could generate approximately $621.5 million in potential incremental annual management fees, an increase from $483.0 million in the prior year[223] Incentive Eligible Assets Under Management and Incentive Generating Assets Under Management Incentive Eligible AUM (IEAUM) increased to $247.1 billion as of March 31, 2024, from $210.5 billion in the prior year, with Incentive Generating AUM (IGAUM) also increasing to $122.5 billion from $97.3 billion, primarily driven by the Credit Group - IEAUM increased to $247.1 billion as of March 31, 2024, from $210.5 billion as of March 31, 2023[223] - IGAUM increased to $122.5 billion as of March 31, 2024, from $97.3 billion as of March 31, 2023[223] - Perpetual capital IGAUM generating fee related performance revenues totaled $19.2 billion as of March 31, 2024, primarily from the Credit Group ($18.2 billion)[224] Fund Performance Metrics Fund performance information is provided for 'significant funds' (those contributing at least 1% of total management fees or FPAUM for two consecutive quarters), with this data not indicative of overall company performance and past performance not guaranteeing future results - Fund performance information is provided for 'significant funds' which are commingled funds that contributed at least 1% of total management fees or represented at least 1% of total FPAUM for the past two consecutive quarters[225] - Fund performance information is not indicative of overall company performance, and past performance is not indicative of future results[225] Consolidation and Deconsolidation of Ares Funds Consolidated Funds represented approximately 4% of AUM and 1% of total revenues for the three months ended March 31, 2024, with Ares consolidating 28 CLOs, 11 private funds, and one SPAC, which significantly impacts gross assets, liabilities, and cash flows but generally has no net effect on net income attributable to Ares Management Corporation - Consolidated Funds represented approximately 4% of AUM and 1% of total revenues for the three months ended March 31, 2024[227] - As of March 31, 2024, Ares consolidated 28 CLOs, 11 private funds, and one SPAC[227] - Consolidation has a significant gross-up effect on assets, liabilities, and cash flows but generally no net effect on net income attributable to Ares Management Corporation, as third-party interests are reflected as redeemable and non-controlling interests[228] Results of Operations Consolidated results for the three months ended March 31, 2024, show a 13% decrease in total revenues and a 22% decrease in net income attributable to Ares Management Corporation stockholders, primarily driven by a negative carried interest allocation, while management fees increased by 15% and expenses decreased by 14% Consolidated Results of Operations of the Company Total revenues decreased by 13% to $707.363 million, primarily due to a negative carried interest allocation of $(32.478) million, while management fees increased by 15% to $687.692 million, and total expenses decreased by 14% to $538.493 million, leading to a 22% decrease in net income attributable to Ares Management Corporation Class A and non-voting common stockholders | Metric | Three months ended March 31, 2024 | Three months ended March 31, 2023 | Change ($) | Change (%) | |:---|:---|:---|:---|:---|\ | Total Revenues | $707,363 | $813,362 | $(105,999) | (13)% | | Management fees | $687,692 | $600,516 | $87,176 | 15% | | Carried interest allocation | $(32,478) | $151,488 | $(183,966) | NM | | Total Expenses | $538,493 | $628,636 | $90,143 | (14)% | | Performance related compensation | $(50,532) | $111,658 | $162,190 | NM | | Net income attributable to Ares Management Corporation Class A and non-voting common stockholders | $73,027 | $94,039 | $(21,012) | (22)% | - Principal investment income decreased by 69% to $7.050 million[234] - Compensation and benefits increased by 14% to $412.951 million, driven by higher equity-based compensation and headcount growth[247][248] - Interest expense increased by 51% to $(37.824) million, primarily due to the issuance of 2028 Senior Notes[254][257] Consolidated Results of Operations of the Consolidated Funds The Consolidated Funds' operations showed a 16% increase in net income to $79.818 million for the three months ended March 31, 2024, primarily driven by a 222% increase in net realized and unrealized gains on investments and a 15% increase in interest and other income, partially offset by a 33% increase in interest expense | Metric | Three months ended March 31, 2024 | Three months ended March 31, 2023 | Change ($) | Change (%) | |:---|:---|:---|\ | Net realized and unrealized gains on investments of Consolidated Funds | $34,424 | $10,700 | $23,724 | 222% | | Interest and other income of Consolidated Funds | $257,276 | $222,938 | $34,338 | 15% | | Interest expense of Consolidated Funds | $(207,866) | $(156,687) | $(51,179) | (33)% | | Net income | $79,818 | $68,621 | $11,197 | 16% | - The results of Consolidated Funds are primarily attributable to third-party ownership interests and do not materially impact net income attributable to Ares Management Corporation[263] Segment Analysis Segment analysis, presented on a non-GAAP basis, shows Fee Related Earnings (FRE) increased by 18% to $301.670 million and Realized Income (RI) increased by 14% to $289.156 million for the three months ended March 31, 2024, with the Credit Group being the primary driver of growth | Metric | Three months ended March 31, 2024 | Three months ended March 31, 2023 | Change ($) | Change (%) | |:---|:---|:---|:---|:---|\ | Fee Related Earnings (FRE) | $301,670 | $254,637 | $47,033 | 18% | | Realized Income (RI) | $289,156 | $254,292 | $34,864 | 14% | - Credit Group FRE increased by 21% to $352.417 million, and RI increased by 21% to $355.968 million[268] - Real Assets Group FRE decreased by 13% to $46.518 million, and RI decreased by 13% to $45.396 million[268] - Operations Management Group (OMG) FRE decreased by 11% to $(140.304) million, and RI decreased by 10% to $(139.892) million, reflecting increased operating expenses[268] Credit Group—Three Months Ended March 31, 2024 Compared to Three Months Ended March 31, 2023 The Credit Group's Fee Related Earnings (FRE) increased by 21% to $352.417 million, driven by a 19% increase in management fees, with Realized Income (RI) also increasing by 21% to $356.0 million, benefiting from higher realized performance income, and AUM growing to $308.6 billion | Metric | Three months ended March 31, 2024 | Three months ended March 31, 2023 | Change ($) | Change (%) | |:---|:---|:---|:---|:---|\ | Management fees | $510,966 | $430,467 | $80,499 | 19% | | Fee Related Earnings | $352,417 | $291,640 | $60,777 | 21% | | Realized Income | $355,968 | $293,158 | $62,810 | 21% | - Management fees from funds launched after Q1 2023 (Pathfinder II, third U.S. senior direct lending fund, sixth European direct lending fund) contributed $16.9 million in additional management fees[276] - Part I Fees increased due to higher pre-incentive fee net investment income from ARCC and CADC, and new contributions from ASIF and AESIF[278] - Credit Group AUM increased from $299.350 billion to $308.639 billion, and FPAUM increased from $185.280 billion to $189.826 billion[292][295] Real Assets Group—Three Months Ended March 31, 2024 Compared to Three Months Ended March 31, 2023 The Real Assets Group's Fee Related Earnings (FRE) decreased by 13% to $46.518 million, and Realized Income (RI) also decreased by 13% to $45.396 million, primarily due to a 4% decrease in management fees, while AUM slightly decreased to $64.104 billion and FPAUM decreased to $40.836 billion | Metric | Three months ended March 31, 2024 | Three months ended March 31, 2023 | Change ($) | Change (%) | |:---|:---|:---|\ | Management fees | $93,814 | $97,470 | $(3,656) | (4)% | | Fee Related Earnings | $46,518 | $53,662 | $(7,144) | (13)% | | Realized Income | $45,396 | $52,143 | $(6,747) | (13)% | - Management fees decreased due to early termination of advisory agreements for two U.S. industrial real estate equity funds (generating $3.3 million in prior year) and a decrease in average capital base for AIREIT[309] - Real Assets Group AUM decreased from $65.413 billion to $64.104 billion, and FPAUM decreased from $41.338 billion to $40.836 billion[322][327] Private Equity Group—Three Months Ended March 31, 2024 Compared to Three Months Ended March 31, 2023 The Private Equity Group's Fee Related Earnings (FRE) increased by 68% to $15.371 million, driven by a 17% increase in management fees, primarily from funds acquired through the Crescent Point Acquisition, while Realized Income (RI) increased by 18% to $10.330 million despite a significant decrease in realized net performance income | Metric | Three months ended March 31, 2024 | Three months ended March 31, 2023 | Change ($) | Change (%) | |:---|:---|:---|:---|:---|\ | Management fees | $34,933 | $29,840 | $5,093 | 17% | | Fee Related Earnings | $15,371 | $9,123 | $6,248 | 68% | | Realized Income | $10,330 | $8,783 | $1,547 | 18% | | Realized net performance income | $544 | $3,420 | $(2,876) | (84)% | - Management fees increased by $7.4 million from funds managed as a result of the Crescent Point Acquisition[338] - Compensation and benefits decreased by 11% due to lower incentive-based compensation, partially offset by headcount growth from the Crescent Point Acquisition[339] - Private Equity Group AUM remained stable at $24.476 billion, and FPAUM decreased from $13.124 billion to $12.565 billion[347][353] Secondaries Group—Three Months Ended March 31, 2024 Compared to Three Months Ended March 31, 2023 The Secondaries Group's Fee Related Earnings (FRE) remained stable, increasing by 1% to $25.605 million, with management fees increasing by 11% to $44.421 million, while Realized Income (RI) decreased by 5% to $23.117 million, primarily due to increased interest expense | Metric | Three months ended March 31, 2024 | Three months ended March 31, 2023 | Change ($) | Change (%) | |:---|:---|:---|:---|:---|\ | Management fees | $44,421 | $39,863 | $4,558 | 11% | | Fee Related Earnings | $25,605 | $25,430 | $175 | 1% | | Realized Income | $23,117 | $24,350 | $(1,233) | (5)% | - Management fees from APMF increased by $3.0 million due to additional capital raised and a higher fee rate (from 0.25% to 1.40%)[362] - General, administrative and other expenses increased by 111% due to $3.5 million in supplemental distribution fees for APMF[362][367] - Secondaries Group AUM increased from $24.760 billion to $25.641 billion, and FPAUM increased from $19.040 billion to $19.891 billion[374][379] Operations Management Group—Three Months Ended March 31, 2024 Compared to Three Months Ended March 31, 2023 The Operations Management Group (OMG) reported a decrease in Fee Related Earnings (FRE) by 11% to $(140.304) million and Realized Income (RI) by 10% to $(139.892) million, primarily due to an 11% increase in compensation and benefits and a 9% increase in general, administrative, and other expenses, driven by headcount growth and business expansion | Metric | Three months ended March 31, 2024 | Three months ended March 31, 2023 | Change ($) | Change (%) | |:---|:---|:---|\ | Fee Related Earnings | $(140,304) | $(126,499) | $(13,805) | (11)% | | Realized Income | $(139,892) | $(126,617) | $(13,275) | (10)% | | Compensation and benefits | $(94,157) | $(84,967) | $(9,190) | (11)% | | General, administrative and other expenses | $(50,480) | $(46,172) | $(4,308) | (9)% | - Average headcount increased by 13% to 1,593 professionals, supporting global fundraising and business operations[390] - Occupancy costs, information services, and information technology costs collectively increased by $5.1 million to support growing headcount and business expansion[391] Liquidity and Capital Resources Ares maintains strong liquidity with $346.3 million in cash and cash equivalents and $425.0 million available under its Credit Facility as of March 31, 2024, with net cash provided by operating activities at $710.0 million and net cash used in financing activities increasing to $666.6 million - Cash and cash equivalents were $346.3 million as of March 31, 2024[395] - The Company has $425.0 million available under its Credit Facility as of March 31, 2024[395] | Cash Flow Activity | Three months ended March 31, 2024 | Three months ended March 31, 2023 | |:---|:---|:---|\ | Net cash provided by operating activities | $710,045 | $707,572 | | Net cash used in investing activities | $(34,071) | $(8,877) | | Net cash used in financing activities | $(666,632) | $(821,144) | - Dividends paid to Class A and non-voting common stockholders increased to $(190.504) million, and AOG unitholder distributions increased to $(129.542) million[409] - The Tax Receivable Agreement (TRA) liability balance was $236.1 million as of March 31, 2024, up from $191.3 million at December 31, 2023[414] Critical Accounting Estimates The Company's financial statements rely on assumptions, estimates, and judgments, particularly in applying GAAP, with actual results potentially differing from these estimates, and a summary of critical accounting estimates available in the Annual Report on Form 10-K - The Company's financial statements are prepared in accordance with GAAP and involve assumptions, estimates, and judgments that affect reported amounts[416] - Estimates are based on historical experience and reasonable assumptions, but actual results may differ[416] Recent Accounting Pronouncements Information regarding recent accounting pronouncements and their potential impact on the Company is detailed in Note 2 to the unaudited condensed consolidated financial statements - Information on recent accounting pronouncements and their impact is provided in Note 2, 'Summary of Significant Accounting Policies'[417] Commitments and Contingencies The Company enters into contractual obligations and off-balance sheet arrangements, including derivatives, guarantees, and capital commitments, with further details provided in Note 7 to the unaudited condensed consolidated financial statements - The Company engages in contractual obligations and off-balance sheet arrangements, including derivatives, guarantees, and capital commitments[418] - Further discussion of these arrangements can be found in Note 7, 'Commitments and Contingencies'[419] Item 3. Quantitative and Qualitative Disclosures About Market Risk Ares Management Corporation's primary market risk exposure relates to the fair value movements of its funds' investments, impacting management fees, performance income, and investment income, with no material changes in market risks reported for the three months ended March 31, 2024 - Primary market risk exposure is related to movements in the fair value of fund investments, affecting management fees, performance income, and investment income[420] - The Company and its funds are exposed to exchange rate risk from foreign currency denominated investments and operations, managed through operating activities and derivative instruments[423][424] - Credit risk arises from counterparty defaults and investments in lower-rated or distressed instruments, mitigated by rigorous investment approach and limiting counterparties to reputable financial institutions[425][426] - No material changes in market risks were reported for the three months ended March 31, 2024[428] Item 4. Controls and Procedures Management, including the CEO and CFO, evaluated the effectiveness of disclosure controls and procedures as of March 31, 2024, concluding they were effective at a reasonable assurance level, with no material changes in internal control over financial reporting during the quarter - Disclosure controls and procedures were evaluated as effective at the reasonable assurance level as of March 31, 2024[429] - No material changes in internal control over financial reporting occurred during the quarter ended March 31, 2024[430] PART II—OTHER INFORMATION Item 1. Legal Proceedings The Company and its affiliates are periodically involved in legal actions and regulatory proceedings in the ordinary course of business, incurring significant costs and expenses, though management believes no current legal proceeding or claim would materially affect its results of operations, financial condition, or cash flows - The Company is subject to legal actions and regulatory proceedings in the ordinary course of business, incurring significant costs[432] - Management believes no current legal proceeding or claim would individually or in aggregate materially affect its results of operations, financial condition, or cash flows[108] Item 1A. Risk Factors Readers should carefully consider the risk factors detailed in the Company's Annual Report on Form 10-K for the year ended December 31, 2023, as these and other unknown risks could materially and adversely affect the business, financial condition, and operating results - Risk factors described in the Annual Report on Form 10-K for the year ended December 31, 2023, should be carefully considered[433] - These risks, along with additional unknown or immaterial risks, may materially and adversely affect the Company's business, financial condition, and operating results[433] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds No unregistered equity securities were sold during the reporting period, and all unregistered purchases of equity securities were previously disclosed in current or quarterly reports - No unregistered equity securities were sold during the period covered by this report[434] - All unregistered purchases of equity securities were previously disclosed in Form 8-K or 10-Q reports[434] Item 3. Defaults Upon Senior Securities There were no defaults upon senior securities during the reporting period Item 4. Mine Safety Disclosure This item is not applicable to the Company Item 5. Other Information This section details Rule 10b5-1 trading plans entered into by certain executive officers and directors during the three months ended March 31, 2024, for selling Class A common stock Rule 10b5-1 Trading Plans Several executive officers and directors established Rule 10b5-1 trading plans in February and March 2024 to sell shares of Class A common stock, with these plans complying with Rule 10b5-1(c) under the Exchange Act - R. Kipp deVeer, Director and Head of Credit Group, entered a plan on February 28, 2024, to sell up to 41,676 shares by February 28, 2025[437] - Bennett Rosenthal, Director, Co-Founder and Chairman of Private Equity Group, entered a plan on March 1, 2024, to sell up to 250,000 shares by January 31, 2025[437] - David Kaplan, Director and Co-Founder, entered a plan on March 1, 2024, to sell up to 250,000 shares by January 31, 2025[437] - These plans were adopted during an authorized trading period, without material non-public information, and are intended to satisfy the affirmative defense of Rule 10b5-1(c)[438] Item 6. Exhibits This section lists all exhibits filed or furnished as part of the report, including organizational documents, compensation plans, credit agreements, and certifications - Exhibit 3.1: Second Amended and Restated Certificate of Incorporation of Ares Management Corporation[440] - Exhibit 10.3: Amendment No. 12 to the Sixth Amended and Restated Senior Credit Agreement, dated March 28, 2024[440] - Exhibits 31.1 and 31.2: Certifications of the Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a-14(a)[440] SIGNATURES The report is duly signed on behalf of Ares Management Corporation by Michael J Arougheti, Co-Founder, Chief Executive Officer & President, and Jarrod Phillips, Chief Financial Officer, on May 9, 2024 - The report was signed by Michael J Arougheti, Co-Founder, Chief Executive Officer & President, and Jarrod Phillips, Chief Financial Officer, on May 9, 2024[444]