Ares Management 2025 Q1 Earnings Mixed Performance as Net Income Declines 39.4%

Ares Management (ARES) reported its fiscal 2025 Q1 earnings on May 05th, 2025. Ares Management experienced mixed results in Q1 2025, with revenue surpassing expectations and net income showing a significant decline. The company maintained its guidance, expecting performance income to be recognized primarily in Q4. Analysts had anticipated a stronger net income, but the company remains confident in its strategic positioning and investment capabilities. Despite the earnings miss, Ares Management's robust growth in management fees and available capital highlights its resilience in navigating market uncertainties.

Revenue

The total revenue of Ares Management increased by 53.9% to $1.09 billion in 2025 Q1, up from $707.36 million in 2024 Q1.

Earnings/Net Income

Ares Management's EPS declined 54.7% to $0.15 in 2025 Q1 from $0.33 in 2024 Q1. Meanwhile, the company's net income declined to $123.50 million in 2025 Q1, down 39.4% from $203.81 million reported in 2024 Q1. The sharp decrease in EPS highlights challenges in profitability.

Price Action

The stock price of Ares Management has edged up 2.75% during the latest trading day, has climbed 4.81% during the most recent full trading week, and has climbed 4.05% month-to-date.

Post-Earnings Price Action Review

The strategy of purchasing Ares Management (ARES) shares following a revenue increase and then holding them for 30 days resulted in a 2.75% return over the past five years, significantly underperforming the benchmark's 82.65% return. This strategy's low Sharpe ratio of 0.07 indicates poor risk-adjusted returns, reflecting its lackluster performance in terms of rewarding investors for the risk taken. Additionally, the strategy faced a maximum drawdown of -9.48%, underscoring the substantial losses incurred during periods of market downturns. These figures highlight the high risk associated with this approach and its inability to effectively navigate volatile market conditions. Overall, the strategy's historical performance suggests it struggles to deliver competitive returns compared to broader market benchmarks.

CEO Commentary

Michael Arougheti, CEO, highlighted Ares Management's robust performance in Q1 2025, reporting year-over-year growth in management fees of 18%, fee-related earnings (FRE) growth of 22%, and a 36% increase in after-tax realized income per share. He emphasized the firm's strategic positioning with a record $142 billion in available capital, allowing for opportunistic investments amid market volatility. Arougheti expressed confidence in the firm's resilience, noting that "we believe we are well-prepared to navigate the current economic and market uncertainty," and reiterated the importance of flexibility in capital solutions to capitalize on attractive investment opportunities.

Guidance

Ares Management maintains its target range for net realized performance income from European-style funds for 2025 at $225 million to $275 million, anticipating over 80% of this income will be recognized in the fourth quarter. The company expects to see materially higher European-style waterfall net realized performance income in 2026, with a focus on continued growth in management fees and maintaining a strong investment pipeline. Arougheti indicated optimism regarding the firm's ability to leverage its dry powder for strategic investments during market dislocations.

Additional News

In recent developments, Ares Management completed the acquisition of the international business of GLP Capital Partners, excluding operations in Greater China, effective March 1, 2025. This strategic move added $45.3 billion to its assets under management, enhancing the firm's global footprint. Furthermore, Ares Management declared a quarterly dividend of $1.12 per share for Class A and non-voting common stock, payable on March 31, 2025, showcasing its strong financial position. Additionally, Ares announced the integration of GCP International, which is expected to bolster its Real Assets business and drive future growth. These actions reflect Ares Management's commitment to expanding its investment capabilities and maintaining shareholder value, despite ongoing market volatility.