3rd Quarter Earnings Conference Call
KKR & Co. Inc. Investor Update
October 30, 2020
Operating Performance
Assets Under Management
Management Fees
($ in billions)
($ in millions)
$195
$168
$120 $130
$234
$218 $208
$732
$1,342
$1,227 $1,190
$1,069
$905
$798
2015 | 2016 | 2017 | 2018 | 2019 | 9/30/19 | 9/30/20 |
Book Value Per Adjusted Share
2015 | 2016 | 2017 | 2018 | 2019 | LTM | LTM |
9/30/19 | 9/30/20 |
After-tax Distributable Earnings
($ in millions) | $1,597 | ||||||||||||
$20.26 | |||||||||||||
$1,490 | $1,466 | ||||||||||||
$19.24 | $1,405 | ||||||||||||
$1,341 | $1,356 | ||||||||||||
$18.22 | $1,266 | ||||||||||||
$15.57 | |||||||||||||
$14.20 | |||||||||||||
$12.18 | $12.15 | ||||||||||||
2015 | 2016 | 2017 | 2018 | 2019 | 9/30/19 | 9/30/20 | 2015 | 2016 | 2017 | 2018 | 2019 | LTM | LTM |
9/30/19 | 9/30/20 |
Net Realized Gains | Distributable Earnings Less Net Realized Gains |
Note: See Appendix for a reconciliation to financial results prepared in accordance with GAAP.
2
Summary Financial Results
($ in millions, except per share amounts and unless otherwise stated)
3Q'19 | 3Q'20 | YTD 3Q'19 | YTD 3Q'20 | ||||
Management Fees | $315 | $360 | +14% | $910 | $1,024 | ||
Other Fees, Net | $131 | $214 | $461 | $421 | |||
Total Realized Performance Income | $308 | $234 | $891 | $962 | |||
Total Realized Investment Income | $210 | $260 | $459 | $496 | |||
Total Distributable Revenues | $964 | $1,068 | +11% | $2,721 | $2,903 | ||
Compensation (Including Equity-based Compensation) | $385 | $427 | $1,089 | $1,161 | |||
Non-compensation Expenses | $92 | $90 | $280 | $270 | |||
Total Distributable Expenses | $477 | $517 | $1,368 | $1,431 | |||
Distributable Operating Earnings | $487 | $551 | +13% | $1,353 | $1,473 | ||
After-tax Distributable Earnings | $389 | $410 | $1,030 | $1,091 | |||
After-tax Distributable Earnings Per Adjusted Share | $0.46 | $0.48 | +3% | $1.23 | $1.28 | ||
Total Compensation Margin | 40% | 40% | 40% | 40% | |||
Pre-tax Distributable Operating Margin | 51% | 52% | 50% | 51% | |||
AUM | $208,427 | $233,809 | $208,427 | $233,809 | |||
FPAUM | $152,997 | $177,290 | $152,997 | $177,290 | |||
New Capital Raised | $5,033 | $8,671 | $17,839 | $32,192 | |||
+13%
+7%
+9%
+4%
+80%
Note: See Appendix for a reconciliation to financial results prepared in accordance with GAAP.
3
Fund Investment Performance
Q3 Gross | LTM Gross | |
Return | Return |
Private Equity
Real Assets
Alternative Credit
Private Equity Flagship Funds
- Americas XII
- Asia III
- Europe IV
Opportunistic Real Estate Flagship Funds
- Americas II
- Europe
Global Infrastructure III
Alternative Credit Flagship Funds
- Special Situations II
- Private Credit Opportunities II
- Lending Partners III
16% 27%
6% 10%
10% 7%
6% -7%
Leveraged Credit | KKR Composite | |
5% 3%
Note: The private equity, real asset and alternative credit strategies shown above consist of KKR's strategies that could generate carry. For Private Equity the
funds represent the flagship funds within each major geographic region. The funds shown within each of the Real Assets and Alternative Credit strategies represent the flagship funds within each sub-strategy with at least $10 billion in capital across their respective platforms and that have been investing for at least two years. For a complete list of our carry paying funds, see the Investment Vehicle Summary on page 13 of KKR's third quarter earnings release, dated October 30, 2020. Leveraged credit encompasses all funds in that strategy. Past performance is no guarantee of future results.
4
Strong Flagship Private Equity Investment Performance
Americas XII | Asia III | |
Europe IV
29% | ||
22% | ||
13% | ||
Gross IRR | Net IRR | S&P 500 |
34% | ||
24% | ||
8% | ||
Gross IRR | Net IRR | MSCI Asia |
Pacific |
26% | ||
20% | ||
4% | ||
Gross IRR | Net IRR | MSCI Europe |
Note: KKR performance data reflects returns since inception. Market indices reflect total return.
5
Continued Balance Sheet Compounding
- Balance sheet investment portfolio appreciation: +11% in Q3 and +9% on an LTM basis
- Net Unrealized Carried Interest increased 44% in Q3 to $1.9 billion. On an LTM basis, Net Unrealized Carried Interest increased 6%, during which time Realized Carried Interest totaled $1.2 billion
Growth in Book Value Per Adjusted Share Over Time
$20.26
+15% | $19.24 |
CAGR |
$15.57
$14.20
$12.15
2016 | 2017 | 2018 | 2019 | September 30, 2020 |
Note: See Appendix for a reconciliation to financial results prepared in accordance with GAAP.
6
Key Takeaways
Robust Deployment Activity
Strong Investment Performance
Continued Fundraising Momentum
Resilient Business Model
Transformative Global Atlantic Transaction
7
Appendix
Reconciliation of Net Income (Loss) Attributable to KKR & Co. Inc. Common Stockholders (GAAP Basis) to After-tax Distributable Earnings
Net Income (Loss) Attributable to KKR & Co. Inc. Common Stockholders
- Net Income (Loss) Attributable to Noncontrolling Interests held by KKR Holdings L.P.
- Equity-basedand Other Compensation - KKR Holdings L.P.
- Amortization of Intangibles and Other, net
- Strategic Corporate Transaction-Related Charges(1)
- Non-recurringItem(2)
- Realized Losses on Certain Investments
(-) Net Unrealized Carried Interest
(-) Net Unrealized Gains (Losses)
(+) Unrealized Performance Income Compensation
(-) Gain from Remeasurement of Tax Receivable Agreement Liability
(+) Income Tax Expense (Benefit)
Twelve Months Ended | Nine Months Ended | Three Months Ended | ||||||||||||||||||
December 31, | September 30, | September 30, | September 30, | |||||||||||||||||
2015 | 2016 | 2017 | 2018 | 2019 | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | ||||||||||
$ 488,482 | $ | 287,072 | $ 984,941 | $ 1,097,699 | $ 1,971,685 | $ | 1,063,602 | $ | 981,366 | $ | 1,456,584 | $ | 466,265 | $ | 241,213 | $ | 1,056,502 | |||
433,693 | 212,878 | 791,021 | 561,052 | 1,369,671 | 714,359 | 653,790 | 1,017,827 | 301,946 | 175,231 | 691,730 | ||||||||||
75,233 | 78,663 | 141,727 | 100,632 | 91,296 | 81,613 | 86,432 | 68,460 | 63,596 | 22,539 | 21,802 | ||||||||||
47,599 | (17,267) | 122,870 | 26,116 | 226,422 | 99,294 | 102,684 | 131,192 | 7,454 | 49,659 | 11,211 | ||||||||||
- | - | - | - | - | - | 10,697 | - | 10,697 | - | 10,697 | ||||||||||
- | - | - | 11,501 | 22,839 | 22,839 | 88,322 | 22,839 | 88,322 | 22,839 | - | ||||||||||
- | - | - | 729,425 | - | - | - | - | - | - | - | ||||||||||
163,545 | (420,372) | 600,242 | (756,467) | 1,263,046 | (13,971) | 151,883 | 924,626 | (186,537) | 13,695 | 995,376 | ||||||||||
(391,962) | (584,423) | 395,358 | 1,043,912 | 1,854,867 | 547,016 | 484,637 | 1,352,181 | (18,049) | 130,972 | 1,088,901 | ||||||||||
66,927 | (161,510) | 247,601 | (295,794) | 520,033 | 2,011 | 83,081 | 379,181 | (57,771) | 9,281 | 418,728 | ||||||||||
- | - | 67,221 | - | - | - | - | - | - | - | - | ||||||||||
66,636 | 24,561 | 224,326 | (194,098) | 528,750 | 242,830 | 347,586 | 386,124 | 204,960 | 53,132 | 359,375 |
(-) Income Taxes Paid | 140,677 | 87,723 | 94,065 | 151,848 | 207,479 | 203,217 | 251,005 | 155,237 | 198,763 | 40,429 | 75,413 | |||||||||
After-tax Distributable Earnings | $ 1,266,310 | $ 1,341,469 | $ 1,355,600 | $ 1,597,240 | $ 1,405,304 | $ | 1,490,286 | $ | 1,466,433 | $ | 1,030,163 | $ | 1,091,292 | $ | 388,798 | $ | 410,355 | |||
Weighted Average Adjusted Shares | 839,255,710 | 851,501,835 | 842,585,116 | 861,854,785 | ||||||||||||||||
After-tax Distributable Earnings per Adjusted Share | $ | 1.23 | $ | 1.28 | $ | 0.46 | $ | 0.48 |
Note: Amounts in thousands, except Weighted Average Adjusted Shares and After-tax Distributable Earnings per Adjusted Share.
- Represents transaction costs related to the acquisition of Global Atlantic.
- Represents a $88.3 million non-recurring impairment charge taken on one of our equity method investments during the nine and twelve months ended September 30, 2020, a non-recurring $22.8 million make-whole premium associated with KKR's refinancing of its 2020 Senior Notes for the three, nine and twelve months ended September 30, 2019 and the twelve months ended December 31, 2019 and $11.5 million of costs in connection with the conversion during the twelve months ended December 31, 2018.
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Reconciliation of Total GAAP Revenues to Total Distributable Revenues and Total GAAP Expenses to Total Distributable Expenses
Three Months Ended | Nine Months Ended | ||||||||
September, 30 | Sepetmber 30, | ||||||||
2019 | 2020 | 2019 | 2020 | ||||||
Total GAAP Revenues | $ | 790,485 | $ | 1,895,238 | $ | 3,157,829 | $ | 2,225,727 | |
(+) Management Fees - Consolidated Funds and Other | 108,922 | 121,365 | 348,467 | 362,887 | |||||
(-) Fee Credits - Consolidated Funds | 3,838 | 25,955 | 21,469 | 40,422 | |||||
(-) Capital Allocation-Based Income (Loss) (GAAP) | 374,268 | 1,331,898 | 1,849,623 | 888,342 | |||||
(+) Realized Carried Interest | 296,344 | 217,978 | 838,608 | 924,974 | |||||
(+) Realized Investment Income (Loss) | 210,234 | 260,415 | 459,303 | 495,904 | |||||
(-) Revenue Earned by Other Consolidated Entities | 29,838 | 6,687 | 90,693 | 21,054 | |||||
(-) Capstone Fees | - | 17,429 | - | 55,542 | |||||
(-) Expense Reimbursements | 34,356 | 44,553 | 121,157 | 100,779 | |||||
Total Distributable Revenues | $ | 963,685 | $ | 1,068,474 | $ | 2,721,265 | $ | 2,903,353 | |
Three Months Ended | Nine Months Ended | ||||||||
September, 30 | Sepetmber 30, | ||||||||
2019 | 2020 | 2019 | 2020 | ||||||
Total GAAP Expenses | $ | 619,533 | $ | 1,093,699 | $ | 2,157,111 | $ | 1,754,075 | |
(-)Equity-based and Other Compensation - KKR Holdings L.P. | 22,539 | 21,802 | 69,085 | 63,596 | |||||
(-) Unrealized Performance Income Compensation | 9,281 | 418,728 | 379,181 | (57,771) | |||||
(-) Amortization of Intangibles | 383 | 399 | 1,301 | 1,158 | |||||
(-) Strategic Corporate Transaction-Related Charges | - | 10,697 | - | 10,697 | |||||
(-) Reimbursable Expenses | 38,515 | 50,382 | 140,241 | 123,364 | |||||
(-) Expenses relating to Other Consolidated Entities | 38,233 | 43,268 | 139,248 | 98,726 | |||||
(-) Capstone Expenses | - | 14,433 | - | 46,278 | |||||
(+) Other | (33,672) | (16,792) | (59,632) | (37,228) | |||||
Total Distributable Expenses | $ | 476,910 | $ | 517,198 | $ | 1,368,423 | $ | 1,430,799 |
Note: Amounts in thousands.
10
Reconciliation of KKR & Co. Inc. Stockholders' Equity - Series I and II Preferred Stock, Common Stock (GAAP Basis) to Book Value per Adjusted Share
KKR & Co. Inc. Stockholders' Equity - Series I and II Preferred Stock, Common Stock
- Impact of Consolidation of Funds and Other Entities (-) Other Reclassifications
- Noncontrolling Interests held by KKR Holdings L.P.
- Series C Mandatory Convertible Preferred Stock
(-) Equity Impact of KKR Management Holdings Corp.
Book Value
Adjusted Shares
Book Value per Adjusted Share
As Of
December 31, | September 30, | |||||||||||||
2015 | 2016 | 2017 | 2018 | 2019 | 2019 | 2020 | ||||||||
$ | 5,547,182 | $ | 5,457,279 | $ | 6,703,382 | $ | 8,167,056 | $ | 10,324,936 | $ | 9,635,200 | $ | 10,599,310 | |
133,208 | 118,635 | 214,188 | 205,502 | 327,826 | 248,003 | 398,649 | ||||||||
- | 17,446 | 17,446 | 17,446 | 17,446 | 17,446 | 17,446 | ||||||||
4,431,939 | 4,389,285 | 4,844,271 | 4,625,448 | 5,728,634 | 5,487,658 | 5,692,718 | ||||||||
- | - | - | - | - | - | 1,115,792 | ||||||||
133,100 | 151,162 | 70,486 | - | - | - | - | ||||||||
$ | 9,979,229 | $ | 9,796,591 | $ | 11,673,909 | $ | 12,980,560 | $ | 16,363,950 | $ | 15,353,415 | $ | 17,789,023 | |
819,181,463 | 806,137,733 | 822,146,070 | 833,938,476 | 850,388,924 | 842,585,116 | 877,876,658 | ||||||||
$ | 12.18 | $ | 12.15 | $ | 14.20 | $ | 15.57 | $ | 19.24 | $ | 18.22 | $ | 20.26 |
Note: Amounts in thousands, except Adjusted Shares and Book Value per Adjusted Share amounts.
11
Legal Disclosures
This presentation is prepared for KKR & Co. Inc. (NYSE: KKR) for the benefit of its public stockholders. This presentation is solely for informational purposes in connection with evaluating the business, operations and financial results of KKR & Co. Inc. and its subsidiaries (collectively, "KKR"). Any discussion of specific KKR entities is provided solely to demonstrate such entities' role within the KKR organization and their contributions to the business, operations and financial results of KKR
- Co. Inc. This presentation is not and shall not be construed as an offer to purchase or sell, or the solicitation of an offer to purchase or sell, any securities, any investment funds, vehicles or accounts, any investment advice, or any other service by any KKR entities, including Kohlberg Kravis Roberts & Co. L.P., KKR Credit Advisors (US) LLC, KKR Credit Advisors (Ireland), KKR Credit Advisers (Singapore) Pte. Ltd. or KKR Capital Markets LLC. Nothing in this presentation constitutes the provision of any tax, accounting, financial, investment, regulatory, legal or other advice by KKR or its advisors.
This presentation may not be referenced, quoted or linked by website, in whole or in part, except as agreed to in writing by KKR & Co. Inc.
This presentation contains certain forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended, pertaining to KKR and certain investment funds, vehicles and accounts that are managed by KKR (each, a "fund"). Forward- looking statements may be identified by use of words such as "plans," "expects," "will," "anticipates," "believes," "intends," "projects," "estimates" or other words of similar meaning, and relate to expectations, estimates, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts, including but not limited to the statements with respect to: the declaration and payment of dividends in future quarters; the timing, manner and volume of repurchase of common stock pursuant to its repurchase program; the transaction to acquire all outstanding shares of Global Atlantic Financial Group Limited ("Global Atlantic"); operation of Global Atlantic following the closing of the transaction; expansion and growth opportunities and other synergies resulting from the transaction; the transaction's effects on KKR's AUM, FPAUM, book value, fee related earnings and after-tax distributable earnings and the timing of such effects; the availability of cash on hand or liquidity from KKR's investment portfolio to fund the transaction; and expected timing of closing of the acquisition. The forward-looking statements are based on KKR's beliefs, assumptions and expectations, taking into account all information currently available to it. These beliefs, assumptions and expectations can change as a result of many possible events or factors, not all of which are known to KKR or are within its control. If a change occurs, KKR's business, financial condition, liquidity and results of operations, including but not limited to dividends, tax assets, tax liabilities, AUM, FPAUM, after-tax distributable earnings, capital invested, syndicated capital, uncalled commitments, cash and short-term investments, fee related earnings, adjusted EBITDA, core interest expense and book value, debt levels, outstanding shares of common stock and capital structure may vary materially from those expressed in the forward- looking statements. The following factors, among others, could cause actual results to vary from the forward-looking statements: failure to realize the anticipated benefits within the expected timeframes from the planned acquisition of Global Atlantic; unforeseen liabilities or integration and other costs of the Global Atlantic acquisition and timing related thereto; availability and cost of financing to fund the acquisition; ability to syndicate to potential co-investors; changes in Global Atlantic's business; any delays or difficulties in receiving regulatory approvals; failure to complete the Global Atlantic transaction; distraction of management or other diversion of resources within each company caused by the Global Atlantic transaction; retention of key Global Atlantic employees; Global Atlantic's ability to maintain business relationships during the pendency of and following the acquisition; the severity and duration of the COVID-19 pandemic; the pandemic's impact on the U.S. and global economies; federal, state and local governmental responses to the pandemic; whether KKR realizes all or any of the anticipated benefits from converting to a corporation and the timing of realizing such benefits; whether there are increased or unforeseen costs associated with the conversion, including any adverse change in tax law; the volatility of the capital markets; failure to realize the benefits of or changes in KKR's or Global Atlantic's business strategies including the ability to realize the anticipated synergies from acquisitions, strategic partnerships or other transactions; availability, terms and deployment of capital; availability of qualified personnel and expense of recruiting and retaining such personnel; changes in the asset management or insurance industry, interest rates, credit spreads, currency exchange rates or the general economy; underperformance of KKR's or Global Atlantic's investments and decreased ability to raise funds; changes in Global Atlantic policyholders' behavior; any disruption in servicing Global Atlantic's insurance policies; the use of estimates and risk management in Global Atlantic's business; outcome of Global Atlantic's litigation and regulatory matters; and the degree and nature of KKR's and Global Atlantic's competition. All forward-looking statements speak only as of the date hereof. KKR does not undertake any obligation to update any forward-looking statements to reflect circumstances or events that occur after the date on which such statements were made except as required by law. In addition, KKR's business strategy is focused on the long term and financial results are subject to significant volatility.
Additional information about factors affecting KKR, including a description of risks that may be important to a decision to purchase or sell any common or preferred stock of KKR & Co. Inc., can be found in KKR & Co. Inc.'s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and its other filings with the SEC, which are available at www.sec.gov.
12
Legal Disclosures (cont'd)
In addition to U.S. GAAP financials, this presentation includes certain non-GAAP financial measures. These non-GAAP measures are in addition to, not a substitute for or superior to, measures of financial performance prepared in accordance with U.S. GAAP and have important limitations as analytical tools because they may exclude items that are significant in understanding and analyzing our financial results. In addition, these measures are defined differently by different companies in our industry and, accordingly, such measures as used in this presentation may not be comparable to similarly titled measures of other companies. A reconciliation of non-GAAP measures to the closest comparable GAAP measures is contained in the Appendix to this presentation.
The statements contained in this presentation are made as of October 30, 2020, unless another time is specified in relation to them, and access to this presentation at any given time shall not give rise to any implication that there has been no change in the facts set forth in this presentation since that date. All financial information in this presentation is as of September 30, 2020 unless otherwise indicated. Certain information presented in this presentation have been developed internally or obtained from sources believed to be reliable; however, KKR does not give any representation or warranty as to the accuracy, adequacy, timeliness or completeness of such information, and assumes no responsibility for independent verification of such information.
Past performance is not indicative or a guarantee of future performance.
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KKR & Co. Inc. published this content on 30 October 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 30 October 2020 10:59:07 UTC