KKR & Co Inc (KKR) Q1 2025 Earnings Call Highlights: Strong Growth in Fee-Related Earnings ...

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Fri, May 2, 2025, 1:10 AM 5 min read

Fee-Related Earnings Per Share: $0.92, up 22% year over year.
Total Operating Earnings Per Share: $1.24, up 16% year over year.
Adjusted Net Income Per Share: $1.15, up 19% year over year.
Management Fees: $917 million, up 13% year over year.
Total Transaction and Monitoring Fees: $262 million.
Capital Markets Transaction Fees: $229 million.
Fee-Related Revenues: $1.2 billion, up 22% year over year.
Fee-Related Earnings: $823 million with an FRE margin of 69%.
Insurance Segment Operating Earnings: $259 million.
Strategic Holdings Operating Earnings: $31 million.
Realized Performance Income: $348 million.
Realized Investment Income: $218 million.
Total Monetization Activity: $566 million, up almost 40% year over year.
Private Equity Portfolio Performance: Up 4% in the quarter and 11% over the last 12 months.
Opportunistic Real Estate Portfolio Performance: Up 2% in the quarter and 5% over the last 12 months.
Infrastructure Performance: Up 4% in the quarter and 13% over the last 12 months.
Leverage Credit Composite Performance: Flat in the quarter and up 7% over the last 12 months.
Alternative Credit Composite Performance: Up 3% in the quarter and 11% over the last 12 months.
Dividend: Increased to $0.74 per share on an annualized basis or $0.185 per share quarterly.
Total New Capital Raised: $31 billion in Q1.
North America XIV Fundraising: Initial close at $14 billion.
Private Wealth AUM: $22 billion, up from $9 billion a year ago.
Committed but Uncalled Capital: $116 billion.
Capital Not Yet Earning Fees: $64 billion committed.

Warning! GuruFocus has detected 9 Warning Signs with KKR.

Release Date: May 01, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

KKR & Co Inc (NYSE:KKR) reported a strong increase in fee-related earnings per share, up 22% year over year, reflecting a robust business model.
The company raised $31 billion in new capital during Q1, with significant contributions from its North America Private Equity strategy.
KKR's private equity portfolio showed solid performance, up 4% in the quarter and 11% over the last 12 months.
The firm increased its dividend for the sixth consecutive year, demonstrating a commitment to returning value to shareholders.
KKR's insurance segment operating earnings were in line with expectations, and the Strategic Holdings segment showed growth with new acquisitions.

Negative Points

The impact of tariffs and supply chain issues remains a concern, although KKR believes it is well-positioned to manage these challenges.
Volatility in the market could affect monetization opportunities, although KKR remains optimistic about its mature portfolio.
Fundraising efforts may face challenges due to evolving market conditions, although no changes to targets have been made yet.
The insurance segment's operating earnings are expected to remain flat in the near term, despite ongoing portfolio repositioning.
There is uncertainty about the broader economic impact of tariffs and potential second or third order effects on the portfolio.

Q & A Highlights

Q: What impact does the emerging trade war have on KKR's Asia strategy, fundraising, and investment efforts? A: Scott Nuttall, Co-Chief Executive Officer, stated that there is no change to KKR's strategy in Asia. The firm has learned from past experiences, such as the Trump administration's tariffs and COVID-19, and continues to focus on cross-asset class and Pan-Asia efforts. KKR sees significant growth opportunities in Asia, with a focus on intra-Asia trade, and believes that maintaining a global portfolio will benefit them in the long run.

Q: How does KKR view the resilience of private wealth flows, and what are the key drivers for potential acceleration? A: Scott Nuttall explained that KKR's ability to perform through cycles is a key driver. The firm believes that if public markets pull back, KKR tends to outperform, which could accelerate adoption in the private wealth channel. The firm has seen strong performance in private equity and infrastructure, and private wealth flows have remained resilient.

Q: Given the current market conditions, why hasn't KKR stepped up its share buyback program? A: Robert Lewin, Chief Financial Officer, emphasized that KKR's capital allocation strategy focuses on maximizing long-term earnings per share and increasing the quality of those earnings. Share buybacks are an important part of this strategy, but KKR also considers other areas such as core private equity, strategic M&A, and insurance. The firm aims to use its capital to drive the most earnings per share over time.

Q: Can you provide an update on KKR's asset-backed finance platform and its growth prospects? A: Craig Larson, Partner & Head of Investor Relations, highlighted that KKR's asset-backed finance business is growing rapidly, with AUM up 35% to 40% year over year. The firm sees a significant opportunity in this market due to high barriers to entry and a lack of scale capital. KKR continues to find attractive risk/reward opportunities and expects the current environment to be favorable for asset-backed finance.

Q: How does KKR view the potential impact of tariffs on its portfolio, and what mitigation strategies are in place? A: Robert Lewin stated that 90% of KKR's private equity portfolio has limited to no exposure to tariffs, and mitigation strategies are already underway for the remaining 10%. The infrastructure portfolio is well-protected through contractual measures, and the credit portfolio has even less exposure. KKR has invested in macro and geopolitical functions to anticipate and react to potential impacts.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

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