KKR & Co. Inc. (KKR) Q1 2023 Earnings Call Transcript

For the period ending March 31, 2022

May 8, 2023 12:00 a.m. ET

Prepared Remarks

Questions and Answers

Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, thank you for standing by. Welcome to KKR's First Quarter 2023 Earnings Conference Call. During today's presentation, all parties will be in a listen-only mode. Following management's prepared remarks, the conference will be opened for questions. [Operator Instructions] Please note, this conference is being recorded.

I’ll now hand the call over to Craig Larson, Head of Investor Relations for KKR. Craig, please go ahead.

Craig Larson

Thank you, operator. Good afternoon, everyone. Welcome to our first quarter 2023 earnings call.

As usual, for the call, I'm joined by Scott Nuttall, our co-Chief Executive Officer; and Rob Lewin, our Chief Financial Officer. We'd like to remind everyone that we'll refer to non-GAAP measures on the call, which are reconciled to GAAP figures in our press release, which is available on the Investor Center section at kkr.com. And as a reminder, we report our segment numbers on an adjusted share basis.

This call will contain forward-looking statements, which do not guarantee future events or performance. Please refer to our earnings release and our SEC filings for cautionary factors about these statements.

This quarter, fee-related earnings per share came in at $0.62, and after-tax distributable earnings came in at $0.81 per share. I'm going to begin the call by walking through the details for the quarter before turning things over to Rob.

So, beginning with management fees. Management fee growth continues to be a real bright spot for us. In Q1, management fees were $738 million. That's up 18% year-over-year, and looking over the last 12 months, management fees are up 23%.

Looking a little deeper, over the last 12 months, management fees in private equity and credit both increased 18%, while in real assets, management fees are up 40%. Net transaction and monitoring fees were $142 million for the quarter, $102 million of which came from our Capital Markets business. Our fee-related compensation margin was at the midpoint for the quarter at 22.5% and other operating expenses were $150 million. So, putting that together, fee-related earnings were $549 million for the quarter or $0.62 per share, which I mentioned a moment ago, and that's with an FRE margin of 61%. This is now the 10th consecutive quarter where you've seen our FRE margin at or above that 60% level.

Walking further down the income statement. Realized performance income totaled $175 million, driven by our traditional and core private equity businesses, and realized investment income was $198 million for the quarter, driven by activity in growth equity. Both realized performance and investment income compensation margins were at their midpoints for the quarter. Our asset management operating earnings were $778 million, and our insurance segment generated $205 million of pretax operating earnings, which I'll spend another minute on shortly. So in aggregate, this resulted in after-tax distributable earnings of $719 million or $0.81 per share.