KKR & Co, Inc. (KKR) Q3 2022 Earnings Call Transcript

For the period ending September 30, 2022

November 1, 2022 10:00 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 Third Quarter 2022 Earnings Conference Call. [Operator Instructions].

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

Craig Larson

Thank you, operator. Good morning, everyone. Welcome to our third quarter 2022 earnings call. This morning, as usual, I'm joined by Rob Lewin, our Chief Financial Officer; and Scott Nuttall, our Co-Chief Executive 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.

I'm going to begin the call by spending a few minutes walking through the quarter. So we look at our results, I think they really highlight the resiliency of our business model. Our management fees for the quarter were $671 million. That's up 20% compared to Q3 of last year. Management fee growth for the quarter as well as over the last 12 months has been most meaningful within our Real Assets business which, as you'll recall, we began reporting separately last quarter. Net transaction and monitoring fees were $168 million for the quarter with capital markets contributing $116 million.

To go through our expenses. Our fee-related compensation margin consistent with prior quarters, was 22.5%, and other operating expenses increased modestly from last quarter, coming in at $146 million.

In total, our fee-related earnings grew to $542 million or $0.61 per share with an FRE margin of 61%. The -- this is now the eighth consecutive quarter that our FRE margin has exceeded 60%. Next, realized performance income was $498 million, with realized carried interest driven by monetizations of CHI overhead doors, Fiserv as well as Max Healthcare. Realized investment income was $285 million, driven by similar monetization events.

Adding these 2 lines together, so looking at realized performance income, together with realized investment income, really to get a complete picture of our monetization activities Total realized gains for the first 9 months of the year are 10% ahead of last year, given all of the volatility experienced across markets in 2022, we think this speaks to the breadth of our platform, and again, the resiliency of our business model.