Ares(US:ARES)2020-05-07 01:29Financial Data and Key Metrics Changes - The first quarter marked the 12th consecutive quarter of sequential fee-related earnings (FRE) growth, with FRE of $93.1 million, an increase of 31% from the same period last year [12][39] - Management fees reached a new record, contributing to a FRE margin of 34%, up from 32% in the previous quarter and 30% in the first quarter of 2019 [39][40] - Realized income for the quarter totaled $134.1 million, representing a 28% increase compared to the first quarter of 2019 [41] Business Line Data and Key Metrics Changes - The company reported record fee-paying assets under management (AUM) exceeding $100 billion for the first time, with a total AUM of $148.6 billion, a 9% increase from the prior year [43][44] - Fee-paying AUM increased to over $102 billion, marking a significant milestone [44] - The company ended the quarter with approximately $33 billion of dry powder available for investment [14][44] Market Data and Key Metrics Changes - The company experienced limited exposure to heavily impacted sectors such as oil and gas, travel, and leisure, with only about 1% of AUM in oil and gas exploration [19][67] - The impact of the COVID-19 pandemic is expected to unfold in three phases, with the first phase marked by severe market disruptions and the second phase characterized by significant fiscal and monetary stimulus [18][20] Company Strategy and Development Direction - The company maintains a management fee-centric business model, primarily generating revenue from permanent capital vehicles and long-dated closed-end fund structures, providing visibility to growing fee-related earnings [13] - The strategic partnership with Sumitomo Mitsui Financial Group aims to enhance distribution in the Japanese market and leverage their balance sheet for growth opportunities [34][35] - The company is focused on providing rescue capital to high-quality companies and is well-positioned to capitalize on potential strategic growth opportunities in the current market environment [16][20] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to navigate the current economic challenges, emphasizing a long U-shaped recovery rather than a quick snapback [48][49] - The company anticipates a prolonged period of less competition, allowing for attractive investment opportunities as the market stabilizes [21][49] - Management highlighted the importance of having robust investment sourcing and capital access capabilities to succeed in the current environment [49] Other Important Information - The company declared a second-quarter common dividend of $0.40 per share, a 25% increase over the prior year's quarterly dividend [7] - The company has at least eight large successor funds and new commingled funds in the market, targeting over $25 billion of incremental capital [25][30] Q&A Session Summary Question: Impact of fundraising timing and pace - Management indicated that fundraising is proceeding as originally scheduled, with some strategies seeing accelerated fundraising due to their suitability for the current environment [52][53] Question: Competitive landscape and bank participation - Management clarified that reduced competition is expected across the entire competitive set, with banks currently less active in underwriting and syndicating leveraged finance products [57][59] Question: Update on energy and travel sector exposure - Management reported that only about 1% of AUM is in oil and gas exploration, with a focus on renewable energy and midstream infrastructure, indicating a well-distributed exposure across the portfolio [67]