KKR & Co. (KKR) Q2 2023 Earnings Call Transcript

For the period ending June 30, 2023

August 7, 2023 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 Second 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]

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

Craig Larson

Good afternoon, everyone. Welcome to our second quarter 2023 earnings call. 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.

Turning now to the quarter. We're pleased to be reporting fee-related earnings per share of $0.67 and after tax distributable earnings of $0.73 per share. I'm going to begin by walking through the financials.

Management fees in the quarter came in at $749 million; net transaction and monitoring fees were $190 million in Q2, with capital markets generating $150 million of revenues. Capital markets activity was most pronounced in our infrastructure business, which contributed approximately 45% of revenues in the quarter. And along with core private equity, these two strategies generated over 60% of capital markets transaction fees in the quarter, reflecting the continued diversification of the business. So, in total, fee-related revenues were $967 million. This was up 7% from last quarter, and it's up 25% year-over-year.

Fee-related compensation was right at the midpoint of our guided range at 22.5% of fee-related revenues and other operating expenses were $147 million. Putting this together, fee-related earnings came in at $602 million or $0.67 per share with an FRE margin of 62%, which continues to be best-in-class looking across our industry. And for the quarter, FRE improved 10% from last quarter and on a year-over-year basis, so this is compared to the second quarter of 2022, FRE is up 31%.

Moving to realized performance income. Realization activity, as we discussed last quarter, was more muted against the slower transaction environment. So, for the quarter, we generated $149 million of realized performance income, while realized investment income came in at $115 million. In total, our asset management operating earnings were $752 million.