What were KKR's main revenue drivers in the second quarter of 2018?

KKR's main revenue drivers in Q2 2018 included a significant increase in net gains from investment activities, particularly in Private Equity and Real Assets, alongside growth in interest income. While Fees and Other revenue saw an increase, primarily due to transaction and expense reimbursements, Capital Allocation-Based Income (including carried interest) decreased year-over-year.

How did the conversion to a corporation affect KKR's financial reporting?

The conversion to a corporation on July 1, 2018, will lead to KKR being subject to U.S. corporate income taxes on all its income, which is expected to increase overall tax expenses compared to its prior limited partnership structure. For reporting purposes, KKR has also revised its segment presentation, moving to a single reportable segment and altering how certain expenses, like interest expense and equity-based compensation, are treated in their segment results and key performance metrics like After-tax Distributable Earnings.

What is the significance of the FS Investments Transaction?

The strategic BDC partnership with FS Investments, completed on April 9, 2018, resulted in the formation of FS/KKR Advisor, LLC, which now serves as the investment adviser to six BDCs. This transaction is reflected in KKR's results starting in Q2 2018, contributing to an increase in AUM and FPAUM in the Public Markets segment, and influencing management fee and incentive fee income.

How has KKR's Assets Under Management (AUM) changed?

KKR's total AUM increased significantly, reaching $191.3 billion by June 30, 2018, up from $148.5 billion at the end of 2017. The Private Markets segment AUM saw a modest increase to $102.4 billion, while the Public Markets segment experienced substantial growth to $88.9 billion, largely driven by the integration of AUM from the FS Investments transaction.

KKR & Co. Inc. 10-Q Quarterly Report Q2 FY2018

Summary

KKR & Co. Inc. reported strong financial performance for the period ending June 29, 2018, driven by significant net gains from investment activities, particularly in private equity and real assets. The firm saw an increase in total revenues and a notable rise in net income attributable to common unitholders, up 67% year-over-year for the quarter. Key strategic developments include the completion of a BDC partnership with FS Investments and the conversion from a limited partnership to a corporation on July 1, 2018, which will impact future tax structures. Assets Under Management (AUM) and Fee Paying Assets Under Management (FPAUM) both saw substantial growth, indicating successful capital raising and deployment across KKR's Private Markets and Public Markets segments. While management fees experienced a slight decline due to specific transactions impacting the BDC and hedge fund platforms, this was offset by growth in transaction fees and significant increases in carried interest and net realized investment gains. The firm's balance sheet remains robust, with total assets increasing, though debt obligations also remain significant. Investors should note the shift to corporate taxation post-conversion and the anticipated adjustment in dividend policy, which may lead to lower dividends compared to prior limited partnership distributions.

Financial Highlights

28 data points

Beta

Revenue

$971.62M

Net Income

$688.72M

0.7% Net Margin

Total Assets

$48.57B

Cash & Equivalents

$3.28B

Free Cash Flow

-$2.42B

Financial Statements

Beta

Revenue	$971.62M
Interest Expense	$203.85M
Net Income	$688.72M

Key Highlights

1Total Revenues increased by $47.3 million to $808.2 million for the six months ended June 30, 2018, compared to the prior year period.
2Net Income Attributable to KKR & Co. L.P. Common Unitholders increased by 28% to $850.5 million for the six months ended June 30, 2018, compared to the prior year period.
3Total Assets increased to $48.6 billion as of June 30, 2018, from $45.8 billion as of December 31, 2017.
4Assets Under Management (AUM) grew to $191.3 billion as of June 30, 2018, from $148.5 billion as of December 31, 2017.
5Fee Paying Assets Under Management (FPAUM) increased to $138.8 billion as of June 30, 2018, from $112.6 billion as of December 31, 2017.
6KKR completed a strategic BDC partnership with FS Investments on April 9, 2018.
7KKR completed its conversion from a Delaware limited partnership to a Delaware corporation on July 1, 2018.

KKR & Co. Inc. Quarterly Report for Q2 Ended Jun 30, 2018

Summary

Financial Highlights

Key Highlights

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