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October 2018
Last10K.com | 8-K Material Event Thu Oct 25 2018
Oaktree Announces Third Quarter 2018 Financial Results
As of September 30, 2018 or for the quarter then ended, and where applicable, per Class A unit:
• | GAAP net income attributable to Oaktree Capital Group, LLC (“OCG”) Class A unitholders was $52.8 million ($0.74 per unit), up from $45.8 million ($0.71) for the third quarter of 2017. |
• | Adjusted net income was $137.5 million ($0.78 per unit), up from $131.4 million ($0.67) for the third quarter of 2017, on $320.2 million of total adjusted revenues. |
• | Distributable earnings were $147.8 million ($0.88 per unit), up from $119.0 million ($0.74) for the third quarter of 2017, driven by higher realized investment income proceeds and incentive income. |
• | Assets under management were $123.5 billion, up 2% for the quarter and up 1% over the last 12 months. Gross capital raised was $3.4 billion and $10.2 billion for the quarter and last 12 months, respectively. Uncalled capital commitments (“dry powder”) were $21.4 billion, of which $15.4 billion were not yet generating management fees (“shadow AUM”). |
• | Management fee-generating assets under management were $100.7 billion, up slightly for the quarter and down 2% over the last 12 months. |
• | A distribution was declared of $0.70 per unit, bringing aggregate distributions relating to the last 12 months to $2.97. |
LOS ANGELES, CA. October 25, 2018 – Oaktree Capital Group, LLC (NYSE: OAK) today reported its unaudited financial results for the third quarter ended September 30, 2018.
Jay Wintrob, Chief Executive Officer, said, “The third quarter was highlighted by continued strong investment performance and solid fundraising of $3.4 billion in gross capital raised. Elevated closed-end fund realizations continued in the quarter, improving our outlook for incentive income over the next year or two. Importantly, we remain well positioned with ample dry powder across our investment funds and significant corporate balance sheet liquidity during this time of increasing market volatility.”
Series B Preferred Unit Issuance
On August 9, 2018, Oaktree issued 9,400,000 of its 6.550% Series B preferred units representing limited liability company interests with a liquidation preference of $25.00 per unit. The issuance resulted in $226.9 million in net proceeds to us, which will be used for general corporate purposes, including to fund investments. Distributions on the Series B preferred units, when and if declared by the board of directors of Oaktree, will be paid quarterly on March 15, June 15, September 15 and December 15 of each year, beginning on December 17, 2018. Distributions on the Series B preferred units are non-cumulative.
Class A Unit Distribution
A distribution of $0.70 per Class A unit attributable to the third quarter of 2018 will be paid on November 13, 2018 to Class A unitholders of record at the close of business on November 5, 2018.
Series A Preferred Unit Distribution
A distribution was declared of $0.414063 per Series A preferred unit, which will be paid on December 17, 2018 to Series A preferred unitholders of record at the close of business on December 1, 2018.
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Series B Preferred Unit Distribution
A distribution was declared of $0.573125 per Series B preferred unit, which will be paid on December 17, 2018 to Series B preferred unitholders of record at the close of business on December 1, 2018. The first distribution on Series B preferred units is calculated based on the date of the original issuance, reflecting a period longer than three months. Future distributions will reflect a period of three months.
Conference Call
Oaktree will host a conference call to discuss its third quarter 2018 financial results today at 11:00 a.m. Eastern Time / 8:00 a.m. Pacific Time. The conference call may be accessed by dialing (844) 824-3833 (U.S. callers) or +1 (412) 317-5102 (non-U.S. callers), participant password OAKTREE. Alternatively, a live webcast of the conference call can be accessed through the Unitholders – Investor Relations section of the Oaktree website, http://ir.oaktreecapital.com/. For those individuals unable to listen to the live broadcast of the conference call, a replay will be available for 30 days on Oaktree’s website, or by dialing (877) 344-7529 (U.S. callers) or +1 (412) 317-0088 (non-U.S. callers), access code 10124801, beginning approximately one hour after the broadcast.
About Oaktree
Oaktree is a leader among global investment managers specializing in alternative investments, with $124 billion in assets under management as of September 30, 2018. The firm emphasizes an opportunistic, value-oriented and risk-controlled approach to investments in credit, private equity, real assets and listed equities. The firm has over 900 employees and offices in 18 cities worldwide. For additional information, please visit Oaktree’s website at www.oaktreecapital.com.
Contacts:
Investor Relations: | Press Relations: | |||
Oaktree Capital Group, LLC | Sard Verbinnen & Co | Sard Verbinnen & Co | ||
Andrea D. Williams | John Christiansen | Alyssa Linn | ||
(213) 830-6483 | (415) 618-8750 | (310) 201-2040 | ||
investorrelations@oaktreecapital.com | jchristiansen@sardverb.com | alinn@sardverb.com | ||
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The table below presents (a) GAAP results, (b) non-GAAP results for both the Operating Group and per Class A unit, and (c) assets under management and accrued incentives (fund level) data. Please refer to the Glossary for definitions.
As of or for the Three Months Ended September 30, | As of or for the Nine Months Ended September 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
GAAP Results: | (in thousands, except per unit data or as otherwise indicated) | ||||||||||||||
Revenues | $ | 241,227 | $ | 235,032 | $ | 791,831 | $ | 1,158,672 | |||||||
Net income-Class A | 52,750 | 45,841 | 136,603 | 218,080 | |||||||||||
Net income per Class A unit | 0.74 | 0.71 | 1.95 | 3.41 | |||||||||||
Non-GAAP Results: (1) | |||||||||||||||
Adjusted revenues | $ | 320,166 | $ | 304,756 | $ | 1,044,847 | $ | 1,400,305 | |||||||
Adjusted net income | 137,511 | 131,436 | 389,369 | 574,254 | |||||||||||
Adjusted net income per Class A unit | 0.78 | 0.67 | 2.20 | 3.26 | |||||||||||
Distributable earnings revenues | 319,822 | 282,867 | 1,084,141 | 1,360,471 | |||||||||||
Distributable earnings | 147,849 | 119,030 | 456,108 | 567,541 | |||||||||||
Distributable earnings per Class A unit | 0.88 | 0.74 | 2.74 | 3.28 | |||||||||||
Fee-related earnings revenues | 197,056 | 203,440 | 595,938 | 607,361 | |||||||||||
Fee-related earnings | 56,286 | 76,579 | 165,648 | 209,359 | |||||||||||
Fee-related earnings per Class A unit | 0.34 | 0.42 | 0.99 | 1.13 | |||||||||||
Economic net income revenues | 380,644 | 385,843 | 1,048,918 | 1,246,873 | |||||||||||
Economic net income | 153,809 | 164,677 | 383,403 | 527,603 | |||||||||||
Economic net income per Class A unit | 0.86 | 0.89 | 2.18 | 2.96 | |||||||||||
Weighted Average Units: | |||||||||||||||
OCGH | 85,775 | 91,864 | 86,675 | 91,750 | |||||||||||
Class A | 71,369 | 64,394 | 70,167 | 63,875 | |||||||||||
Total | 157,144 | 156,258 | 156,842 | 155,625 | |||||||||||
Operating Metrics: (1) | |||||||||||||||
Assets under management (in millions): | |||||||||||||||
Assets under management | $ | 123,516 | $ | 122,589 | $ | 123,516 | $ | 122,589 | |||||||
Management fee-generating assets under management | 100,693 | 103,244 | 100,693 | 103,244 | |||||||||||
Incentive-creating assets under management | 33,626 | 31,564 | 33,626 | 31,564 | |||||||||||
Uncalled capital commitments | 21,435 | 21,202 | 21,435 | 21,202 | |||||||||||
Accrued incentives (fund level): | |||||||||||||||
Incentives created (fund level) | 134,966 | 135,595 | 365,468 | 508,414 | |||||||||||
Incentives created (fund level), net of associated incentive income compensation expense | 59,278 | 61,387 | 172,497 | 245,715 | |||||||||||
Accrued incentives (fund level) | 1,924,410 | 1,860,665 | 1,924,410 | 1,860,665 | |||||||||||
Accrued incentives (fund level), net of associated incentive income compensation expense | 914,886 | 899,891 | 914,886 | 899,891 | |||||||||||
Note: Oaktree discloses in this earnings release certain revenues and financial measures, including measures that are calculated and presented on a basis other than generally accepted accounting principles in the United States (“non-GAAP”). Examples of such non-GAAP measures are identified in the table above. Such non-GAAP measures should be considered in addition to, and not as a substitute for or superior to, net income, net income per Class A unit or other financial measures calculated in accordance with GAAP. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures are presented at Exhibit A. All non-GAAP measures and all interim results presented in this release are unaudited.
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(1) | Beginning with the first quarter of 2018, management fees and incentive income reflect the portion of the earnings from management fees and performance fees, respectively, attributable to our 20% ownership interest in DoubleLine Capital LP and its affiliates (collectively, “DoubleLine”). Such earnings were previously reported as investment income. Additionally, AUM, management fee-generating AUM, incentive-creating AUM and incentives created (fund level) now reflect our pro-rata portion (based on our 20% ownership stake) of DoubleLine’s total AUM, management fee-generating AUM, incentive-creating AUM and performance fees, respectively. All prior periods have been recast to reflect this change. |
GAAP Results
Oaktree consolidates entities in which it has a direct or indirect controlling financial interest. Investment vehicles in which we have a significant investment, such as collateralized loan obligation vehicles (“CLOs”) and certain Oaktree funds, are consolidated under GAAP. When a CLO or fund is consolidated, the assets, liabilities, revenues, expenses and cash flows of the consolidated funds are reflected on a gross basis, and the majority of the economic interests in those consolidated funds, which are held by third-party investors, are reflected as debt obligations of CLOs or non-controlling interests. All of the revenues earned by us as investment manager of the consolidated funds are eliminated in consolidation. However, because the eliminated amounts are earned from and funded by third-party investors, the consolidation of a fund does not impact net income or loss attributable to OCG.
In the first quarter of 2018, Oaktree adopted the new revenue recognition standard on a modified retrospective basis, which did not require prior periods to be recast. Instead, a cumulative-effect adjustment to increase retained earnings of $48.7 million, net of tax, was recorded as of January 1, 2018. This adjustment relates to revenues that would have met the recognition criteria under the new standard as of January 1, 2018.
Total revenues increased $6.2 million, or 2.6%, to $241.2 million for the third quarter of 2018, from $235.0 million for the third quarter of 2017, primarily reflecting higher incentive income. The impact on revenues as a result of applying the new revenue recognition standard was a net decrease of $2.1 million for the third quarter of 2018.
Total expenses increased $21.4 million, or 12.6%, to $191.2 million for the third quarter of 2018, from $169.8 million for the third quarter of 2017, primarily reflecting higher general and administrative expenses.
Total other income increased $16.6 million, or 20.0%, to $99.6 million for the third quarter of 2018, from $83.0 million for the third quarter of 2017, primarily reflecting variations in returns on our fund investments between periods.
Net income attributable to OCG Class A unitholders increased $7.0 million, or 15.3%, to $52.8 million for the third quarter of 2018, from $45.8 million for the third quarter of 2017, primarily reflecting higher profits, as well as a larger allocation of income to OCG Class A unitholders resulting from an increase in the average number of Class A units outstanding.
Operating Metrics
Assets Under Management
Assets under management were $123.5 billion as of September 30, 2018, $121.6 billion as of June 30, 2018 and $122.6 billion as of September 30, 2017. The $1.9 billion increase since June 30, 2018 primarily reflected $2.2 billion in new capital commitments to closed-end funds, $1.5 billion in market-value gains and $0.6 billion attributable to DoubleLine, partially offset by $1.5 billion of distributions to closed-end fund investors and $0.9 billion of net outflows from open-end funds. Commitments to closed-end funds included $0.7 billion for our Middle Market Direct Lending strategy, $0.5 billion for Oaktree Special Situations Fund II (“SSF II”) and $0.4 billion for our Emerging Markets Debt strategy.
The $0.9 billion increase in AUM since September 30, 2017 primarily reflected $5.9 billion of capital commitments to closed-end funds, $3.7 billion in market-value gains, $2.1 billion from becoming the investment adviser to two publicly-traded business development companies (the “BDC acquisition”) and $1.6 billion attributable to DoubleLine, largely offset by $8.2 billion of distributions to closed-end fund investors and $3.7 billion of net outflows from open-end funds. Commitments to closed-end funds included $1.6 billion for our Real Estate strategy, $1.2 billion for SSF II, $1.1 billion to Oaktree Transportation Infrastructure Fund (“TIF”), $0.7 billion for our Middle Market Direct Lending strategy and $0.5 billion for our Emerging Markets Debt strategy. Distributions to closed-end fund investors included $3.5 billion from Credit funds, $2.3 billion from Private Equity funds and $2.3 billion from Real Asset funds.
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Management Fee-generating Assets Under Management
Management fee-generating AUM, a forward-looking metric, was $100.7 billion as of September 30, 2018, $100.5 billion as of June 30, 2018 and $103.2 billion as of September 30, 2017. The $0.2 billion increase since June 30, 2018 primarily reflected $0.8 billion in market-value gains, $0.6 billion attributable to DoubleLine and $0.6 billion from capital drawn by funds that pay fees based on drawn capital, NAV or cost basis, largely offset by $1.2 billion attributable to closed-end funds in liquidation and $0.9 billion of net outflows from open-end funds.
The $2.5 billion decrease in management fee-generating AUM since September 30, 2017 primarily reflected $5.4 billion attributable to closed-end funds in liquidation, $3.8 billion of net outflows from open-end funds and $0.6 billion of distributions by closed-end funds that pay fees based on NAV. These decreases were partially offset by $2.1 billion from the BDC acquisition, $1.9 billion from capital drawn by closed-end funds that pay fees based on drawn capital, NAV or cost basis, $1.6 billion attributable to DoubleLine and $1.3 billion in market-value gains.
Incentive-creating Assets Under Management
Incentive-creating AUM was $33.6 billion as of September 30, 2018, $33.3 billion as of June 30, 2018 and $31.6 billion as of September 30, 2017. The $0.3 billion increase since June 30, 2018 reflected an aggregate $2.0 billion in drawdowns or contributions by closed-end and evergreen funds and market-value gains, partially offset by an aggregate $1.7 billion decline primarily attributable to distributions by closed-end funds. The $2.0 billion increase since September 30, 2017 reflected an aggregate $8.7 billion in drawdowns or contributions by closed-end and evergreen funds and market-value gains and $2.1 billion from the BDC acquisition, partially offset by an aggregate decline of $8.8 billion primarily attributable to distributions by closed-end funds.
Of the $33.6 billion in incentive-creating AUM as of September 30, 2018, $21.1 billion (or 63%) was generating incentives at the fund level, as compared with $21.0 billion (66%) of the $31.6 billion of incentive-creating AUM as of September 30, 2017.
Accrued Incentives (Fund Level) and Incentives Created (Fund Level)
Accrued incentives (fund level) were $1,924.4 million as of September 30, 2018, $1,863.9 million as of June 30, 2018 and $1,860.7 million as of September 30, 2017. The third quarter of 2018 reflected $135.0 million of incentives created (fund level) and $74.5 million of incentive income recognized.
Accrued incentives (fund level), net of incentive income compensation expense (“net accrued incentives (fund level)”), were $914.9 million as of September 30, 2018, $898.6 million as of June 30, 2018, and $899.9 million as of September 30, 2017. The portion of net accrued incentives (fund level) represented by funds that were currently paying incentives as of September 30, 2018, June 30, 2018 and September 30, 2017 was $329.9 million (or 36%), $214.6 million (24%) and $274.1 million (30%), respectively, with the remainder arising from funds that as of that date were not at the stage of their cash distribution waterfall where Oaktree was entitled to receive incentives, other than possibly tax-related distributions.
Uncalled Capital Commitments
Uncalled capital commitments were $21.4 billion as of September 30, 2018, $20.3 billion as of June 30, 2018, and $21.2 billion as of September 30, 2017. Invested capital during the quarter and 12 months ended September 30, 2018 aggregated $2.8 billion and $8.7 billion, respectively, as compared with $1.9 billion and $7.4 billion for the comparable prior-year periods.
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Non-GAAP Results
Adjusted Revenues
Adjusted revenues increased $15.4 million, or 5.1%, to $320.2 million for the third quarter of 2018, from $304.8 million for the third quarter of 2017, reflecting higher incentive income and investment income, partially offset by lower management fees.
Management Fees
Management fees decreased $6.3 million, or 3.1%, to $197.1 million for the third quarter of 2018, from $203.4 million for the third quarter of 2017. The decrease reflected an aggregate decline of $27.2 million primarily attributable to closed-end funds in liquidation, partially offset by an aggregate increase of $20.9 million principally from the BDC acquisition and closed-end funds that pay management fees based on drawn capital, NAV or cost basis.
Incentive Income
Incentive income increased $20.0 million, or 36.7%, to $74.5 million for the third quarter of 2018, from $54.5 million for the third quarter of 2017. The third quarter of 2018 included $45.8 million from OCM Opportunities Fund VIIb and $14.0 million from Emerging Markets Debt funds.
Investment Income
Investment income increased $1.8 million, or 3.8%, to $48.6 million for the third quarter of 2018, from $46.8 million for the third quarter of 2017. The increase primarily reflected higher returns on our Private Equity and non-Oaktree investments, largely offset by lower returns on our Credit, Real Assets and Listed Equities investments.
Adjusted Expenses
Compensation and Benefits
Compensation and benefits expense increased $4.9 million, or 5.1%, to $100.6 million for the third quarter of 2018, from $95.7 million for the third quarter of 2017, primarily reflecting higher expenses relating to the infrastructure investing team that Oaktree acquired in 2014. In 2017, a portion of the expenses attributable to that team were paid for by a legacy Highstar fund. That fund stopped paying management fees in the fourth quarter of 2017, and thereafter Oaktree became responsible for all of the expenses of the infrastructure team.
Equity-based Compensation
Equity-based compensation expense decreased $1.1 million, or 7.5%, to $13.6 million for the third quarter of 2018, from $14.7 million for the third quarter of 2017.
Incentive Income Compensation
Incentive income compensation expense increased $5.1 million, or 19.3%, to $31.5 million for the third quarter of 2018, from $26.4 million for the third quarter of 2017, primarily reflecting the growth in incentive income, partially offset by a lower overall compensation percentage in the third quarter of 2018.
General and Administrative
General and administrative expense increased $8.9 million, or 30.6%, to $38.0 million for the third quarter of 2018, from $29.1 million for the third quarter of 2017. The increase primarily reflected higher expenses relating to the infrastructure investing team, placement costs associated with fundraising for closed-end and evergreen funds, professional fees and other general operating items.
Depreciation and Amortization
Depreciation and amortization expense increased $0.2 million, or 10.0%, to $2.2 million for the third quarter of 2018, from $2.0 million for the third quarter of 2017.
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Interest Expense, Net
Interest expense, net decreased $4.1 million, or 65.1%, to $2.2 million for the third quarter of 2018, from $6.3 million for the third quarter of 2017. The decline reflected the refinancing of our senior notes in the fourth quarter of 2017 and higher interest income.
Other Income, Net
Other income, net increased $4.6 million, to $5.5 million for the third quarter of 2018, from $0.9 million for the third quarter of 2017. The increase primarily reflected gains associated with non-operating corporate activities in the third quarter of 2018.
Adjusted Net Income
ANI increased $6.1 million, or 4.6%, to $137.5 million for the third quarter of 2018, from $131.4 million for the third quarter of 2017, primarily reflecting $14.8 million in higher incentive income, net of incentive income compensation expense (“net incentive income”), $4.6 million in higher other income, $4.1 million in lower net interest expense and $1.8 million in higher investment income, partially offset by $20.3 million in lower fee-related earnings. The portion of ANI attributable to our Class A units was $55.6 million, or $0.78 per unit, and $43.3 million, or $0.67 per unit, for the third quarters of 2018 and 2017, respectively.
The effective tax rates applied to ANI for the third quarters of 2018 and 2017 were 8% and 20%, respectively, resulting from full-year effective tax rates of 9% and 12%, respectively. The rate used for interim fiscal periods is based on an estimated full-year effective tax rate on income that can be reliably forecasted, combined with tax expense in the current period on incentive income and any other income that cannot be reliably estimated. We generally expect variability in tax rates between periods because the effective tax rate is a function of the mix of income and other factors, each of which can have a material impact on the particular period’s income tax expense and often vary significantly within or between years. In general, the annual effective tax rate increases as the proportion of ANI arising from fee-related earnings and certain incentive and investment income rises, and vice versa.
Distributable Earnings
Distributable earnings increased $28.8 million, or 24.2%, to $147.8 million for the third quarter of 2018, from $119.0 million for the third quarter of 2017, primarily reflecting increases of $23.4 million in realized investment income proceeds, $14.8 million in net incentive income, $4.6 million in other income and a $4.1 million decrease in net interest expense, partially offset by a $20.3 million decline in fee-related earnings. For the third quarters of 2018 and 2017, realized investment income proceeds totaled $48.3 million and $24.9 million, respectively. The portion of distributable earnings attributable to our Class A units was $0.88 and $0.74 per unit for the third quarters of 2018 and 2017, respectively, reflecting distributable earnings per Operating Group unit of $0.94 and $0.76, respectively, less preferred unit distributions and costs borne by Class A unitholders for professional fees and other expenses, cash taxes attributable to the Intermediate Holding Companies, and amounts payable pursuant to the tax receivable agreement.
Fee-related Earnings
Fee-related earnings decreased $20.3 million, or 26.5%, to $56.3 million for the third quarter of 2018, from $76.6 million for the third quarter of 2017, primarily reflecting $6.3 million in lower management fees, $4.9 million in higher compensation and benefits expense and $8.9 million in higher general and administrative expense. The portion of fee-related earnings attributable to our Class A units was $0.34 and $0.42 per unit for the third quarters of 2018 and 2017, respectively.
The effective tax rates applicable to fee-related earnings for the third quarters of 2018 and 2017 were 5% and 14%, respectively, resulting from full-year effective tax rates of 6% and 15%, respectively. The rate used for interim fiscal periods is based on the estimated full-year effective tax rate, which is subject to change as the year progresses. In general, the annual effective tax rate increases as annual fee-related earnings increase, and vice versa.
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Capital and Liquidity
As of September 30, 2018, Oaktree and its operating subsidiaries had $1.0 billion of cash and U.S. Treasury and other securities, and $746 million of outstanding debt, which included no borrowings outstanding against its $500 million revolving credit facility. As of September 30, 2018, Oaktree’s investments in funds and companies on a non-GAAP basis had a carrying value of $1.7 billion, with the 20% investment in DoubleLine carried at $23 million based on cost, as adjusted under the equity method of accounting. Net accrued incentives (fund level) represented an additional $915 million as of that date.
Forward-Looking Statements
This release contains forward-looking statements within the meaning of Section 27A of the U.S. Securities Act of 1933, as amended, and Section 21E of the U.S. Securities Exchange Act of 1934, as amended, which reflect the current views of Oaktree, with respect to, among other things, our future results of operations and financial performance. In some cases, you can identify forward-looking statements by words such as “anticipate,” “approximately,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “outlook,” “plan,” “potential,” “predict,” “seek,” “should,” “will” and “would” or the negative version of these words or other comparable or similar words. These statements identify prospective information. Important factors could cause actual results to differ, possibly materially, from those indicated in these statements. Forward-looking statements are based on our beliefs, assumptions and expectations of our future performance, taking into account all information currently available to us. Such forward-looking statements are subject to risks and uncertainties and assumptions relating to our operations, financial results, financial condition, business prospects, growth strategy and liquidity, including, but not limited to, changes in our anticipated revenue and income, which are inherently volatile; changes in the value of our investments; the pace of our raising of new funds; changes in assets under management; the timing and receipt of, and impact of taxes on, carried interest; distributions from and liquidation of our existing funds; the amount and timing of distributions on our preferred units and our Class A units; changes in our operating or other expenses; the degree to which we encounter competition; and general political, economic and market conditions. The factors listed in the item captioned “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2017 filed with the SEC on February 23, 2018, which is accessible on the SEC’s website at www.sec.gov, provide examples of risks, uncertainties and events that may cause our actual results to differ materially from the expectations described in our forward-looking statements. Forward-looking statements speak only as of the date the statements are made. Except as required by law, we do not undertake any obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise.
This release and its contents do not constitute and should not be construed as (a) a recommendation to buy, (b) an offer to buy or solicitation of an offer to buy, (c) an offer to sell or (d) advice in relation to, any securities of OCG or securities of any Oaktree investment fund.
Investor Relations Website
Investors and others should note that Oaktree uses the Unitholders – Investor Relations section of its corporate website to announce material information to investors and the marketplace. While not all of the information that Oaktree posts on its corporate website is of a material nature, some information could be deemed to be material. Accordingly, Oaktree encourages investors, the media, and others interested in Oaktree to review the information that it shares on its corporate website at the Unitholders – Investor Relations section of the Oaktree website, http://ir.oaktreecapital.com/. Information contained on, or available through, our website is not incorporated by reference into this document.
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GAAP Consolidated Statements of Operations (1)
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
(in thousands, except per unit data) | |||||||||||||||
Revenues: | |||||||||||||||
Management fees | $ | 175,195 | $ | 181,312 | $ | 538,706 | $ | 542,268 | |||||||
Incentive income | 66,032 | 53,720 | 253,125 | 616,404 | |||||||||||
Total revenues | 241,227 | 235,032 | 791,831 | 1,158,672 | |||||||||||
Expenses: | |||||||||||||||
Compensation and benefits | (101,787 | ) | (98,224 | ) | (315,614 | ) | (304,713 | ) | |||||||
Equity-based compensation | (14,747 | ) | (15,828 | ) | (44,614 | ) | (45,529 | ) | |||||||
Incentive income compensation | (27,294 | ) | (26,362 | ) | (127,327 | ) | (327,526 | ) | |||||||
Total compensation and benefits expense | (143,828 | ) | (140,414 | ) | (487,555 | ) | (677,768 | ) | |||||||
General and administrative | (38,051 | ) | (24,096 | ) | (110,459 | ) | (90,703 | ) | |||||||
Depreciation and amortization | (6,459 | ) | (3,037 | ) | (19,412 | ) | (9,865 | ) | |||||||
Consolidated fund expenses | (2,829 | ) | (2,226 | ) | (9,383 | ) | (7,425 | ) | |||||||
Total expenses | (191,167 | ) | (169,773 | ) | (626,809 | ) | (785,761 | ) | |||||||
Other income (loss): | |||||||||||||||
Interest expense | (39,456 | ) | (35,776 | ) | (115,504 | ) | (128,797 | ) | |||||||
Interest and dividend income | 74,490 | 55,218 | 205,089 | 155,092 | |||||||||||
Net realized gain (loss) on consolidated funds’ investments | (9,812 | ) | 3,392 | (12,509 | ) | 1,755 | |||||||||
Net change in unrealized appreciation (depreciation) on consolidated funds’ investments | 10,552 | 3,662 | (34,939 | ) | 56,793 | ||||||||||
Investment income | 58,196 | 51,061 | 149,682 | 150,618 | |||||||||||
Other income, net | 5,629 | 5,418 | 7,240 | 14,979 | |||||||||||
Total other income | 99,599 | 82,975 | 199,059 | 250,440 | |||||||||||
Income before income taxes | 149,659 | 148,234 | 364,081 | 623,351 | |||||||||||
Income taxes | (6,568 | ) | (13,857 | ) | (17,832 | ) | (31,700 | ) | |||||||
Net income | 143,091 | 134,377 | 346,249 | 591,651 | |||||||||||
Less: | |||||||||||||||
Net income attributable to non-controlling interests in consolidated funds | (14,427 | ) | (9,990 | ) | (17,792 | ) | (23,543 | ) | |||||||
Net income attributable to non-controlling interests in consolidated subsidiaries | (72,005 | ) | (78,546 | ) | (187,945 | ) | (350,028 | ) | |||||||
Net income attributable to OCG | 56,659 | 45,841 | 140,512 | 218,080 | |||||||||||
Net income attributable to preferred unitholders | (3,909 | ) | — | (3,909 | ) | — | |||||||||
Net income attributable to OCG Class A unitholders | $ | 52,750 | $ | 45,841 | $ | 136,603 | $ | 218,080 | |||||||
Distributions declared per Class A unit | $ | 0.55 | $ | 1.31 | $ | 2.27 | $ | 2.65 | |||||||
Net income per Class A unit (basic and diluted): | |||||||||||||||
Net income per Class A unit | $ | 0.74 | $ | 0.71 | $ | 1.95 | $ | 3.41 | |||||||
Weighted average number of Class A units outstanding | 71,369 | 64,394 | 70,167 | 63,875 | |||||||||||
(1) | In the first quarter of 2018, Oaktree adopted the new revenue recognition standard on a modified retrospective basis, which did not require prior periods to be recast. Instead, a cumulative-effect adjustment to increase retained earnings of $48.7 million, net of tax, was recorded as of January 1, 2018. This adjustment relates to revenues that would have met the recognition criteria under the new standard as of January 1, 2018. |
9
Operating Metrics
We monitor certain operating metrics that are either common to the alternative asset management industry or that we believe provide important data regarding our business. As described below, these operating metrics include AUM, management fee-generating AUM, incentive-creating AUM, incentives created (fund level), accrued incentives (fund level) and uncalled capital commitments.
Assets Under Management | As of | ||||||||||||||
September 30, 2018 | June 30, 2018 | September 30, 2017 | |||||||||||||
(in millions) | |||||||||||||||
Assets Under Management: | |||||||||||||||
Closed-end funds | $ | 57,734 | $ | 56,294 | $ | 57,769 | |||||||||
Open-end funds | 32,454 | 32,824 | 35,793 | ||||||||||||
Evergreen funds | 8,672 | 8,426 | 5,953 | ||||||||||||
DoubleLine (1) | 24,656 | 24,040 | 23,074 | ||||||||||||
Total | $ | 123,516 | $ | 121,584 | $ | 122,589 | |||||||||
Three Months Ended September 30, | Twelve Months Ended September 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
(in millions) | |||||||||||||||
Change in Assets Under Management: | |||||||||||||||
Beginning balance | $ | 121,584 | $ | 121,053 | $ | 122,589 | $ | 121,076 | |||||||
Closed-end funds: | |||||||||||||||
Capital commitments/other (2) | 2,205 | 654 | 5,938 | 3,729 | |||||||||||
Distributions for a realization event / other (3) | (1,478 | ) | (2,160 | ) | (8,158 | ) | (10,521 | ) | |||||||
Change in uncalled capital commitments for funds entering or in liquidation (4) | 90 | (198 | ) | (73 | ) | (1,126 | ) | ||||||||
Foreign-currency translation | (41 | ) | 302 | (122 | ) | 429 | |||||||||
Change in market value (5) | 745 | 829 | 2,531 | 4,137 | |||||||||||
Change in applicable leverage | (81 | ) | 19 | (151 | ) | 633 | |||||||||
Open-end funds: | |||||||||||||||
Contributions | 841 | 1,427 | 3,431 | 7,557 | |||||||||||
Redemptions | (1,745 | ) | (2,209 | ) | (7,127 | ) | (8,997 | ) | |||||||
Foreign-currency translation | (49 | ) | 241 | (143 | ) | 411 | |||||||||
Change in market value (5) | 583 | 706 | 500 | 2,625 | |||||||||||
Evergreen funds: | |||||||||||||||
Contributions or new capital commitments (6) | 306 | 632 | 877 | 685 | |||||||||||
Acquisition (BDCs) | — | — | 2,110 | — | |||||||||||
Redemptions or distributions (7) | (205 | ) | (138 | ) | (947 | ) | (479 | ) | |||||||
Foreign-currency translation | 1 | — | — | 6 | |||||||||||
Change in market value (5) | 144 | 150 | 679 | 592 | |||||||||||
DoubleLine: | |||||||||||||||
Net change in DoubleLine | 616 | 1,281 | 1,582 | 1,832 | |||||||||||
Ending balance | $ | 123,516 | $ | 122,589 | $ | 123,516 | $ | 122,589 | |||||||
(1) | DoubleLine AUM reflects our pro-rata portion (based on our 20% ownership stake) of DoubleLine’s total AUM. |
(2) | These amounts include capital commitments, as well as the aggregate par value of collateral assets and principal cash related to new CLO formations. |
(3) | These amounts include distributions for a realization event, tax-related distributions, reductions in the par value of collateral assets and principal cash resulting from the repayment of debt as return of principal by CLOs, and recallable distributions at the end of the investment period. |
(4) | The change in uncalled capital commitments generally reflects declines attributable to funds entering their liquidation periods, as well as capital contributions to funds in their liquidation periods for deferred purchase obligations or other reasons. |
10
(5) | The change in market value reflects the change in NAV of our funds, less management fees and other fund expenses, as well as changes in the aggregate par value of collateral assets and principal cash held by CLOs and other levered funds. |
(6) | These amounts include contributions and capital commitments, and for our publicly-traded BDCs, issuances of equity or debt capital. |
(7) | These amounts include redemptions and distributions, and for our publicly-traded BDCs, dividends, repurchases of equity capital or repayment of debt. |
Management Fee-generating AUM | As of | ||||||||||||||
September 30, 2018 | June 30, 2018 | September 30, 2017 | |||||||||||||
Management Fee-generating AUM: | (in millions) | ||||||||||||||
Closed-end funds: | |||||||||||||||
Senior Loans | $ | 8,297 | $ | 7,896 | $ | 8,073 | |||||||||
Other closed-end funds | 28,054 | 28,754 | 31,953 | ||||||||||||
Open-end funds | 32,120 | 32,520 | 35,570 | ||||||||||||
Evergreen funds | 7,566 | 7,337 | 4,574 | ||||||||||||
DoubleLine | 24,656 | 24,040 | 23,074 | ||||||||||||
Total | $ | 100,693 | $ | 100,547 | $ | 103,244 | |||||||||
Three Months Ended September 30, | Twelve Months Ended September 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Change in Management Fee-generating AUM: | (in millions) | ||||||||||||||
Beginning balance | $ | 100,547 | $ | 101,600 | $ | 103,244 | $ | 99,942 | |||||||
Closed-end funds: | |||||||||||||||
Capital commitments to funds that pay fees based on committed capital / other (1). | 465 | 925 | 466 | 1,970 | |||||||||||
Capital drawn by funds that pay fees based on drawn capital, NAV or cost basis | 608 | 493 | 1,946 | 1,733 | |||||||||||
Change attributable to funds in liquidation (2). | (1,052 | ) | (1,350 | ) | (5,191 | ) | (4,054 | ) | |||||||
Change in uncalled capital commitments for funds entering or in liquidation that pay fees based on committed capital (3) | (174 | ) | — | (174 | ) | (382 | ) | ||||||||
Distributions by funds that pay fees based on NAV / other (4). | (95 | ) | (333 | ) | (619 | ) | (895 | ) | |||||||
Foreign-currency translation | (36 | ) | 236 | (122 | ) | 355 | |||||||||
Change in market value (5). | 63 | 45 | 165 | 256 | |||||||||||
Change in applicable leverage | (78 | ) | 19 | (146 | ) | 581 | |||||||||
Open-end funds: | |||||||||||||||
Contributions | 791 | 1,407 | 3,304 | 7,359 | |||||||||||
Redemptions | (1,721 | ) | (2,209 | ) | (7,103 | ) | (8,990 | ) | |||||||
Foreign-currency translation | (49 | ) | 241 | (143 | ) | 411 | |||||||||
Change in market value | 579 | 702 | 492 | 2,642 | |||||||||||
Evergreen funds: | |||||||||||||||
Contributions or capital drawn by funds that pay fees based on drawn capital or NAV (6) | 302 | 234 | 1,108 | 478 | |||||||||||
Acquisition (BDCs) | — | — | 2,110 | — | |||||||||||
Redemptions or distributions (7) | (206 | ) | (187 | ) | (874 | ) | (535 | ) | |||||||
Change in market value (5). | 133 | 140 | 648 | 541 | |||||||||||
DoubleLine: | |||||||||||||||
Net change in DoubleLine | 616 | 1,281 | 1,582 | 1,832 | |||||||||||
Ending balance | $ | 100,693 | $ | 103,244 | $ | 100,693 | $ | 103,244 | |||||||
(1) | These amounts include capital commitments to funds that pay fees based on committed capital, as well as the aggregate par value of collateral assets and principal cash related to new CLO formations. |
11
(2) | These amounts include the change for funds that pay fees based on the lesser of funded capital or cost basis during the liquidation period, as well as recallable distributions at the end of the investment period. For most closed-end funds, management fees are charged during the liquidation period on the lesser of (a) total funded capital or (b) the cost basis of assets remaining in the fund, with the cost basis of assets generally calculated by excluding cash balances. Thus, changes in fee basis during the liquidation period are not dependent on distributions made from the fund; rather, they are tied to the cost basis of the fund’s investments, which typically declines as the fund sells assets. |
(3) | The change in uncalled capital commitments reflects declines attributable to funds entering their liquidation periods, as well as capital contributions to funds in their liquidation periods for deferred purchase obligations or other reasons. |
(4) | These amounts include distributions by funds that pay fees based on NAV, as well as reductions in the par value of collateral assets and principal cash resulting from the repayment of debt as return of principal by CLOs. |
(5) | The change in market value reflects certain funds that pay management fees based on NAV and leverage, as applicable, as well as changes in the aggregate par value of collateral assets and principal cash held by CLOs and other levered funds. |
(6) | These amounts include contributions and capital commitments, and for our publicly-traded BDCs, issuances of equity or debt capital. |
(7) | These amounts include redemptions and distributions, and for our publicly-traded BDCs, dividends, repurchases of equity capital or repayment of debt. |
As of | |||||||||||
September 30, 2018 | June 30, 2018 | September 30, 2017 | |||||||||
Reconciliation of AUM to Management Fee-generating AUM: | (in millions) | ||||||||||
Assets under management | $ | 123,516 | $ | 121,584 | $ | 122,589 | |||||
Difference between assets under management and committed capital or the lesser of funded capital or cost basis for applicable closed-end funds (1). | (3,040 | ) | (2,326 | ) | (2,920 | ) | |||||
Undrawn capital commitments to closed-end funds that have not yet commenced their investment periods | (10,098 | ) | (10,092 | ) | (8,675 | ) | |||||
Undrawn capital commitments to funds for which management fees are based on drawn capital, NAV or cost basis | (5,263 | ) | (4,042 | ) | (3,714 | ) | |||||
Oaktree’s general partner investments in management fee-generating funds | (1,798 | ) | (1,724 | ) | (1,883 | ) | |||||
Funds that pay no management fees (2) | (2,624 | ) | (2,853 | ) | (2,153 | ) | |||||
Management fee-generating assets under management | $ | 100,693 | $ | 100,547 | $ | 103,244 | |||||
(1) | This difference is not applicable to closed-end funds that pay management fees based on NAV or leverage. |
(2) | This includes funds that are no longer paying management fees, co-investments that pay no management fees, certain accounts that pay administrative fees intended to offset Oaktree’s costs related to the accounts and CLOs in the warehouse stage that pay no management fees. |
The period-end weighted average annual management fee rates applicable to the closed-end, open-end and evergreen management fee-generating AUM balances above are set forth below.
As of | ||||||||
Weighted Average Annual Management Fee Rates: | September 30, 2018 | June 30, 2018 | September 30, 2017 | |||||
Closed-end funds: | ||||||||
Senior Loans | 0.50 | % | 0.50 | % | 0.50 | % | ||
Other closed-end funds | 1.46 | 1.47 | 1.49 | |||||
Open-end funds | 0.45 | 0.45 | 0.46 | |||||
Evergreen funds (1) | 1.19 | 1.20 | 1.17 | |||||
All Oaktree funds (2) | 0.90 | 0.91 | 0.91 | |||||
(1) | Fee rates reflect the applicable asset-based management fee rates, exclusive of quarterly incentive fees on investment income that are included in management fees. |
(2) | Excludes DoubleLine funds. |
12
Incentive-creating AUM
As of | |||||||||||
September 30, 2018 | June 30, 2018 | September 30, 2017 | |||||||||
Incentive-creating AUM: | (in millions) | ||||||||||
Closed-end funds | $ | 26,801 | $ | 26,677 | $ | 27,555 | |||||
Evergreen funds | 6,236 | 6,006 | 3,465 | ||||||||
DoubleLine | 589 | 608 | 544 | ||||||||
Total | $ | 33,626 | $ | 33,291 | $ | 31,564 | |||||
Accrued Incentives (Fund Level) and Incentives Created (Fund Level)
As of or for the Three Months Ended September 30, | As of or for the Nine Months Ended September 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Accrued Incentives (Fund Level): | (in thousands) | ||||||||||||||
Beginning balance | $ | 1,863,932 | $ | 1,779,578 | $ | 1,920,339 | $ | 2,014,097 | |||||||
Incentives created (fund level): | |||||||||||||||
Closed-end funds | 115,659 | 122,273 | 315,815 | 471,501 | |||||||||||
Evergreen funds | 18,787 | 12,542 | 49,033 | 33,434 | |||||||||||
DoubleLine | 520 | 780 | 620 | 3,479 | |||||||||||
Total incentives created (fund level) | 134,966 | 135,595 | 365,468 | 508,414 | |||||||||||
Less: incentive income recognized by us | (74,488 | ) | (54,508 | ) | (361,397 | ) | (661,846 | ) | |||||||
Ending balance | $ | 1,924,410 | $ | 1,860,665 | $ | 1,924,410 | $ | 1,860,665 | |||||||
Accrued incentives (fund level), net of associated incentive income compensation expense | $ | 914,886 | $ | 899,891 | $ | 914,886 | $ | 899,891 | |||||||
13
Non-GAAP Results
Our business is comprised of one segment, our investment management business, which consists of the investment management services that we provide to our clients. Management makes operating decisions and assesses the performance of our business based on financial data that are presented without the consolidation of our funds. The data most important to management in assessing our performance are adjusted net income, distributable earnings and fee-related earnings, each for both the Operating Group and per Class A unit. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures are presented at Exhibit A.
Adjusted Net Income
The following schedules set forth the components of adjusted net income:
Adjusted Revenues
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
(in thousands) | |||||||||||||||
Revenues: | |||||||||||||||
Management fees | $ | 197,056 | $ | 203,440 | $ | 595,938 | $ | 607,361 | |||||||
Incentive income | 74,488 | 54,508 | 361,397 | 661,846 | |||||||||||
Investment income | 48,622 | 46,808 | 87,512 | 131,098 | |||||||||||
Total adjusted revenues | $ | 320,166 | $ | 304,756 | $ | 1,044,847 | $ | 1,400,305 | |||||||
Adjusted Expenses
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
(in thousands) | |||||||||||||||
Expenses: | |||||||||||||||
Compensation and benefits | $ | (100,589 | ) | $ | (95,691 | ) | $ | (309,001 | ) | $ | (297,097 | ) | |||
Equity-based compensation | (13,649 | ) | (14,691 | ) | (40,788 | ) | (40,971 | ) | |||||||
Incentive income compensation | (31,508 | ) | (26,362 | ) | (182,934 | ) | (369,480 | ) | |||||||
General and administrative | (37,963 | ) | (29,134 | ) | (114,508 | ) | (94,042 | ) | |||||||
Depreciation and amortization | (2,218 | ) | (2,036 | ) | (6,781 | ) | (6,863 | ) | |||||||
Total adjusted expenses | $ | (185,927 | ) | $ | (167,914 | ) | $ | (654,012 | ) | $ | (808,453 | ) | |||
Adjusted Net Income
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
(in thousands) | |||||||||||||||
Interest expense, net of interest income (1) | $ | (2,197 | ) | $ | (6,280 | ) | $ | (8,006 | ) | $ | (19,795 | ) | |||
Other income, net | 5,469 | 874 | 6,540 | 2,197 | |||||||||||
Adjusted net income (2) | $ | 137,511 | $ | 131,436 | $ | 389,369 | $ | 574,254 | |||||||
(1) | Interest income was $4.0 million and $9.9 million for the three and nine months ended September 30, 2018, respectively, and $2.7 million and $6.8 million for the three and nine months ended September 30, 2017, respectively. |
(2) | This reflects the sum of total adjusted revenues, adjusted expenses, net interest expense and other income, net. |
14
Distributable Earnings and Distribution Calculation
Distributable earnings and the calculation of distributions are set forth below:
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Distributable Earnings: | (in thousands, except per unit data) | ||||||||||||||
Adjusted net income | $ | 137,511 | $ | 131,436 | $ | 389,369 | $ | 574,254 | |||||||
Investment income | (48,622 | ) | (46,808 | ) | (87,512 | ) | (131,098 | ) | |||||||
Realized investment income proceeds (1) | 48,278 | 24,919 | 126,806 | 91,264 | |||||||||||
Equity-based compensation | 13,649 | 14,691 | 40,788 | 40,971 | |||||||||||
Other (income) expense, net (2) | (2,745 | ) | — | (8,235 | ) | — | |||||||||
Operating Group income taxes | (222 | ) | (5,208 | ) | (5,108 | ) | (7,850 | ) | |||||||
Distributable earnings | 147,849 | 119,030 | 456,108 | 567,541 | |||||||||||
Preferred unit distributions | (3,909 | ) | — | (3,909 | ) | — | |||||||||
Distributable earnings after preferred unit distributions | $ | 143,940 | $ | 119,030 | $ | 452,199 | $ | 567,541 | |||||||
Distribution Calculation: | |||||||||||||||
Operating Group distribution with respect to the period | $ | 120,995 | $ | 101,586 | $ | 383,478 | $ | 474,832 | |||||||
Distribution per Operating Group unit | $ | 0.77 | $ | 0.65 | $ | 2.44 | $ | 3.04 | |||||||
Adjustments per Class A unit: | |||||||||||||||
Distributable earnings-Class A income taxes | (0.01 | ) | (0.01 | ) | (0.04 | ) | (0.20 | ) | |||||||
Tax receivable agreement | (0.06 | ) | (0.08 | ) | (0.18 | ) | (0.24 | ) | |||||||
Non-Operating Group expenses | — | — | (0.01 | ) | (0.02 | ) | |||||||||
Distribution per Class A unit (3). | $ | 0.70 | $ | 0.56 | $ | 2.21 | $ | 2.58 | |||||||
(1) | Amounts reflect the portion of income or loss on distributions received from funds and companies. In general, the income or loss component of a fund distribution is calculated by multiplying the amount of the distribution by the ratio of our investment’s undistributed income or loss to our remaining investment balance. In addition, if the distribution is made during the investment period, it is generally not reflected in distributable earnings until after the investment period ends. Additionally, any impairment charges on our CLO investments included in ANI are, for distributable earnings purposes, amortized over the remaining investment period of the respective CLO to align with the timing of expected cash flows. |
(2) | For distributable earnings purposes, the $22 million make-whole premium charge that was included in ANI in the fourth quarter of 2017 in connection with the early repayment of our 2019 Notes is amortized through the original maturity date of December 2019. |
(3) | With respect to the quarter ended September 30, 2018, a distribution was announced on October 25, 2018 and is payable on November 13, 2018. |
Units Outstanding
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||
(in thousands) | |||||||||||
Weighted Average Units: | |||||||||||
OCGH | 85,775 | 91,864 | 86,675 | 91,750 | |||||||
Class A | 71,369 | 64,394 | 70,167 | 63,875 | |||||||
Total | 157,144 | 156,258 | 156,842 | 155,625 | |||||||
Units Eligible for Fiscal Period Distribution: | |||||||||||
OCGH | 85,626 | 91,682 | |||||||||
Class A | 71,511 | 64,604 | |||||||||
Total | 157,137 | 156,286 | |||||||||
15
Additional Revenue Detail
Management Fees
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
(in thousands) | |||||||||||||||
Management fees: | |||||||||||||||
Closed-end funds | $ | 114,236 | $ | 131,612 | $ | 352,718 | $ | 395,215 | |||||||
Open-end funds | 36,201 | 40,882 | 111,399 | 121,507 | |||||||||||
Evergreen funds | 28,269 | 14,121 | 77,758 | 41,772 | |||||||||||
DoubleLine | 18,350 | 16,825 | 54,063 | 48,867 | |||||||||||
Total management fees | $ | 197,056 | $ | 203,440 | $ | 595,938 | $ | 607,361 | |||||||
Investment Income
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
(in thousands) | |||||||||||||||
Oaktree funds: | |||||||||||||||
Credit | $ | 21,537 | $ | 26,199 | $ | 59,338 | $ | 76,545 | |||||||
Private Equity | 7,063 | 3,985 | 14,515 | 15,055 | |||||||||||
Real Assets | 4,031 | 6,063 | 17,683 | 14,519 | |||||||||||
Listed Equities | 2,255 | 8,312 | (19,829 | ) | 18,738 | ||||||||||
Non-Oaktree | 13,736 | 2,249 | 15,805 | 6,241 | |||||||||||
Total investment income | $ | 48,622 | $ | 46,808 | $ | 87,512 | $ | 131,098 | |||||||
16
GAAP Statement of Financial Condition (Unaudited)
As of September 30, 2018 | |||||||||||||||
Oaktree and Operating Subsidiaries | Consolidated Funds | Eliminations | Consolidated | ||||||||||||
(in thousands) | |||||||||||||||
Assets: | |||||||||||||||
Cash and cash-equivalents | $ | 543,229 | $ | — | $ | — | $ | 543,229 | |||||||
U.S. Treasury and other securities | 469,800 | — | — | 469,800 | |||||||||||
Corporate investments | 1,753,683 | — | (698,332 | ) | 1,055,351 | ||||||||||
Deferred tax assets | 243,059 | — | — | 243,059 | |||||||||||
Receivables and other assets | 715,896 | — | (22,966 | ) | 692,930 | ||||||||||
Assets of consolidated funds | — | 6,425,680 | — | 6,425,680 | |||||||||||
Total assets | $ | 3,725,667 | $ | 6,425,680 | $ | (721,298 | ) | $ | 9,430,049 | ||||||
Liabilities and Capital: | |||||||||||||||
Liabilities: | |||||||||||||||
Accounts payable and accrued expenses | $ | 371,741 | $ | — | $ | — | $ | 371,741 | |||||||
Due to affiliates | 192,267 | — | — | 192,267 | |||||||||||
Debt obligations | 745,812 | — | — | 745,812 | |||||||||||
Liabilities of consolidated funds | — | 5,025,502 | (24,383 | ) | 5,001,119 | ||||||||||
Total liabilities | 1,309,820 | 5,025,502 | (24,383 | ) | 6,310,939 | ||||||||||
Non-controlling redeemable interests in consolidated funds | — | — | 696,307 | 696,307 | |||||||||||
Capital: | |||||||||||||||
Capital attributable to OCG preferred unitholders | 400,584 | — | — | 400,584 | |||||||||||
Capital attributable to OCG Class A unitholders | 958,949 | 317,165 | (317,165 | ) | 958,949 | ||||||||||
Non-controlling interest in consolidated subsidiaries | 1,056,314 | 379,750 | (379,750 | ) | 1,056,314 | ||||||||||
Non-controlling interest in consolidated funds | — | 703,263 | (696,307 | ) | 6,956 | ||||||||||
Total capital | 2,415,847 | 1,400,178 | (1,393,222 | ) | 2,422,803 | ||||||||||
Total liabilities and capital | $ | 3,725,667 | $ | 6,425,680 | $ | (721,298 | ) | $ | 9,430,049 | ||||||
Corporate Investments
As of | |||||||||||
September 30, 2018 | June 30, 2018 | September 30, 2017 | |||||||||
(in thousands) | |||||||||||
Oaktree funds: | |||||||||||
Credit | $ | 1,026,207 | $ | 925,539 | $ | 949,174 | |||||
Private Equity | 296,224 | 299,961 | 250,244 | ||||||||
Real Assets | 239,208 | 189,109 | 133,129 | ||||||||
Listed Equities | 94,258 | 117,939 | 139,628 | ||||||||
Non-Oaktree | 63,936 | 62,037 | 118,504 | ||||||||
Total corporate investments – Non-GAAP | 1,719,833 | 1,594,585 | 1,590,679 | ||||||||
Adjustments (1) | 33,850 | 29,010 | 17,403 | ||||||||
Total corporate investments – Oaktree and operating subsidiaries | 1,753,683 | 1,623,595 | 1,608,082 | ||||||||
Eliminations | (698,332 | ) | (611,749 | ) | (553,095 | ) | |||||
Total corporate investments – Consolidated | $ | 1,055,351 | $ | 1,011,846 | $ | 1,054,987 | |||||
(1) | This adjusts CLO investments carried at amortized cost to fair value for GAAP reporting. |
17
Fund Data
Information regarding our closed-end, open-end and evergreen funds, together with benchmark data where applicable, is set forth below. For our closed-end and evergreen funds, no benchmarks are presented in the tables as there are no known comparable benchmarks for these funds’ investment philosophy, strategy and implementation.
Closed-end Funds
As of September 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||
Investment Period | Total Committed Capital | % Invested (1) | % Drawn (2) | Fund Net Income Since Inception | Distri- butions Since Inception | Net Asset Value | Manage- ment Fee-gener- ating AUM | Incentive Income Recog- nized (Non-GAAP) | Accrued Incentives (Fund Level) (3) | Unreturned Drawn Capital Plus Accrued Preferred Return (4) | IRR Since Inception (5) | Multiple of Drawn Capital (6) | |||||||||||||||||||||||||||||||||||||
Start Date | End Date | Gross | Net | ||||||||||||||||||||||||||||||||||||||||||||||
Credit | (in millions) | ||||||||||||||||||||||||||||||||||||||||||||||||
Distressed Debt | |||||||||||||||||||||||||||||||||||||||||||||||||
Oaktree Opportunities Fund Xb (7)(13) | TBD | — | $ | 8,872 | 9 | % | 5 | % | $ | — | $ | — | $ | 443 | $ | 438 | $ | — | $ | — | $ | 456 | nm | nm | 1.0x | ||||||||||||||||||||||||
Oaktree Opportunities Fund X (7) | Jan. 2016 | Jan. 2019 | 3,603 | 86 | 72 | 1,081 | 152 | 3,518 | 3,486 | — | 210 | 2,777 | 33.3 | % | 21.1 | % | 1.5 | ||||||||||||||||||||||||||||||||
Oaktree Opportunities Fund IX | Jan. 2014 | Jan. 2017 | 5,066 | nm | 100 | 698 | 1,672 | 4,092 | 3,554 | — | — | 5,292 | 5.7 | 3.2 | 1.2 | ||||||||||||||||||||||||||||||||||
Oaktree Opportunities Fund VIIIb | Aug. 2011 | Aug. 2014 | 2,692 | nm | 100 | 938 | 2,100 | 1,530 | 1,469 | 52 | — | 1,860 | 9.0 | 6.2 | 1.5 | ||||||||||||||||||||||||||||||||||
Special Account B | Nov. 2009 | Nov. 2012 | 1,031 | nm | 100 | 629 | 1,568 | 171 | 165 | 16 | 3 | 53 | 13.8 | 11.4 | 1.7 | ||||||||||||||||||||||||||||||||||
Oaktree Opportunities Fund VIII | Oct. 2009 | Oct. 2012 | 4,507 | nm | 100 | 2,613 | 6,444 | 677 | 635 | 209 | 300 | — | 13.1 | 9.2 | 1.7 | ||||||||||||||||||||||||||||||||||
Special Account A | Nov. 2008 | Oct. 2012 | 253 | nm | 100 | 317 | 554 | 16 | 23 | 60 | 3 | — | 28.1 | 22.8 | 2.3 | ||||||||||||||||||||||||||||||||||
OCM Opportunities Fund VIIb | May 2008 | May 2011 | 10,940 | nm | 90 | 9,053 | 18,257 | 640 | 640 | 1,634 | 125 | — | 21.9 | 16.6 | 2.0 | ||||||||||||||||||||||||||||||||||
OCM Opportunities Fund VII | Mar. 2007 | Mar. 2010 | 3,598 | nm | 100 | 1,487 | 4,843 | 242 | — | 87 | — | 419 | 10.2 | 7.5 | 1.5 | ||||||||||||||||||||||||||||||||||
Legacy funds (8) | Various | Various | 12,495 | nm | 100 | 10,456 | 22,931 | 21 | — | 1,558 | 5 | — | 23.6 | 18.5 | 1.9 | ||||||||||||||||||||||||||||||||||
22.0 | % | 16.1 | % | ||||||||||||||||||||||||||||||||||||||||||||||
Private/Alternative Credit | |||||||||||||||||||||||||||||||||||||||||||||||||
Oaktree European Capital Solutions Fund (7)(9)(10) | Dec. 2015 | Dec. 2018 | € | 703 | 80 | % | 64 | % | € | 47 | € | 214 | € | 269 | € | 321 | € | — | € | 6 | € | 250 | 13.0 | % | 8.4 | % | 1.1x | ||||||||||||||||||||||
Oaktree European Dislocation Fund (10) | Oct. 2013 | Oct. 2016 | € | 294 | nm | 57 | € | 39 | € | 203 | € | 18 | € | 17 | € | 3 | € | 3 | € | — | 19.5 | 13.8 | 1.3 | ||||||||||||||||||||||||||
Special Account E (10) | Oct. 2013 | Apr. 2015 | € | 379 | nm | 69 | € | 64 | € | 321 | € | 4 | € | 3 | € | 9 | € | 1 | € | — | 14.3 | 11.0 | 1.3 | ||||||||||||||||||||||||||
14.9 | % | 10.7 | % | ||||||||||||||||||||||||||||||||||||||||||||||