10-QPeriod: Q1 FY2017

KKR & Co. Inc. Quarterly Report for Q1 Ended Mar 31, 2017

Filed May 8, 2017For Securities:KKRKKRTKKR-PDKKRS

Summary

KKR & Co. Inc. reported a strong first quarter in 2017, demonstrating significant recovery and growth compared to the same period in 2016. Total segment revenues saw a substantial increase driven by robust performance in both the Private Markets and Capital Markets segments. The Private Markets segment, in particular, experienced a significant uplift in performance income, largely due to appreciation in its private equity portfolio. The Capital Markets segment also showed substantial growth in transaction fees, indicating increased deal activity. Financially, the company reported a significant increase in income before taxes and net income, a stark contrast to the net loss experienced in the prior year's quarter. This improved profitability is attributed to strong investment gains and increased fee-generating activities across its business segments. The company also managed its debt effectively, with recent note issuances aimed at optimizing its capital structure and potentially reducing interest expense. Despite market volatility and global economic uncertainties, KKR appears well-positioned, with healthy assets under management and a strategic approach to capital deployment.

Financial Highlights

26 data points
Beta

Revenue

$767.75M

Net Income

$267.68M

34.9% Net Margin

Total Assets

$41.64B

Cash & Equivalents

$4.49B

Free Cash Flow

-$1.17B

Financial Statements
Beta
Revenue$767.75M
Interest Expense$186.85M
Net Income$267.68M

Key Highlights

  • 1Significant increase in total segment revenues, primarily driven by strong performance in Private Markets and Capital Markets.
  • 2Substantial growth in transaction fees within the Capital Markets segment, signaling increased deal activity.
  • 3Private Markets segment saw a significant uplift in performance income due to appreciation in its private equity portfolio.
  • 4Shift from a net loss in Q1 2016 to a strong net income in Q1 2017, reflecting improved profitability.
  • 5Strategic debt management including the issuance of new senior unsecured notes.
  • 6Increase in Assets Under Management (AUM) across both Private Markets and Public Markets segments.
  • 7Positive momentum in capital raising, with increased uncalled commitments in Private Markets.

Frequently Asked Questions

KKR's revenue growth in Q1 2017 was primarily driven by a substantial increase in Fees and Other, particularly from higher transaction fees in the Capital Markets segment and increased carried interest gains in the Private Markets segment, reflecting strong performance in the private equity portfolio. Investment income also significantly improved, turning from a loss in the prior year to a gain.

The Private Markets segment saw a significant increase in total segment revenues, largely due to strong performance income from realized and unrealized carried interest, and higher transaction fees. The Public Markets segment also reported increased revenues, driven by higher management fees and performance income. The Capital Markets segment experienced robust growth in transaction fees due to an increase in the number and size of capital markets transactions. The Principal Activities segment also saw a substantial improvement in investment income, primarily from realized and unrealized gains.

Key developments include the strategic transaction to create a new liquid alternatives investment firm by combining PAAMCO and KKR Prisma, where KKR retains a 39.9% stake. Additionally, KFN redeemed its 7.500% Senior Notes due 2042 and issued $375.0 million of 5.500% Senior Unsecured Notes due 2032, potentially leading to annualized interest expense savings.

KKR has been actively managing its debt. The issuance of new 5.500% Senior Unsecured Notes due 2032 by KFN is expected to provide annualized interest expense savings compared to the redeemed notes. The company also has revolving credit facilities and senior notes outstanding. The company's liquidity position is supported by operating activities, investment realizations, and various borrowing arrangements.