10-QPeriod: Q2 FY2019

KKR & Co. Inc. Quarterly Report for Q2 Ended Jun 30, 2019

Filed August 2, 2019For Securities:KKRKKRTKKR-PDKKRS

Summary

KKR & Co. Inc. reported strong financial performance for the second quarter and first half of 2019, driven by robust growth in fee and capital allocation-based income. Total revenues increased significantly year-over-year, reflecting growth across its Private Markets, Public Markets, and Capital Markets businesses. The company's investment income also saw a notable increase, primarily due to strong performance in its Private Equity portfolio, which contributed substantially to both realized and unrealized gains. Despite an increase in compensation and benefits expenses, reflecting higher carried interest due to strong investment performance, KKR maintained healthy profitability. The company's balance sheet remains solid, with total assets growing and a healthy level of liquidity, supported by substantial uncalled capital commitments available to deploy. Key financial highlights include substantial increases in total revenues and capital allocation-based income, driven by strong performance across various business segments, particularly Private Markets and Public Markets. The company also benefited from significant net gains from investment activities, especially within its Private Equity portfolio, signaling positive valuation movements. KKR continues to manage its operations efficiently, with a slight decrease in general, administrative, and other expenses for the quarter, although overall compensation and benefits expenses rose due to strong performance-related payouts and equity awards. The company's commitment to returning capital to shareholders is evident through its share repurchase program and dividend payments. Looking ahead, KKR appears well-positioned to capitalize on market opportunities, supported by its diversified business lines, strong fundraising capabilities, and a disciplined investment approach. The company's focus on expanding its global platform and product offerings, coupled with its operational expertise, suggests continued growth and value creation for its investors.

Financial Highlights

33 data points
Beta

Revenue

$1.18B

Net Income

$522.73M

44.3% Net Margin

Total Assets

$57.52B

Cash & Equivalents

$3.19B

Free Cash Flow

-$3.39B

Financial Statements
Beta
Revenue$1.18B
Interest Expense$264.77M
Net Income$522.73M

Key Highlights

  • 1Total Revenues increased by $208.2 million (21%) to $1.2 billion for the three months ended June 30, 2019, compared to $971.6 million for the three months ended June 30, 2018.
  • 2Capital Allocation-Based Income significantly increased by $102.6 million (18%) to $660.4 million for the three months ended June 30, 2019, primarily driven by higher carried interest and general partner capital interest.
  • 3Net Gains (Losses) from Investment Activities decreased by $78.6 million to $1.04 billion for the three months ended June 30, 2019, compared to $1.12 billion for the three months ended June 30, 2018, with Private Equity being a significant contributor to gains.
  • 4Compensation and Benefits Expenses increased by $136.5 million to $609.0 million for the three months ended June 30, 2019, primarily due to higher carried interest compensation and cash compensation.
  • 5Net Income Attributable to KKR & Co. Inc. Class A Common Stockholders decreased by $166.0 million to $514.4 million for the three months ended June 30, 2019.
  • 6Total Assets grew to $57.5 billion as of June 30, 2019, from $50.7 billion as of December 31, 2018, driven by increases in Investments and Cash and Cash Equivalents.
  • 7KKR's Assets Under Management (AUM) increased to $205.7 billion as of June 30, 2019, from $199.5 billion as of March 31, 2019, reflecting growth across its Private Markets and Public Markets businesses.

Frequently Asked Questions

KKR's revenue growth in Q2 2019 was primarily driven by increases in transaction fees and management fees, which were partially offset by higher fee credits. Capital Allocation-Based Income, including carried interest and general partner capital interest, also saw a significant increase due to strong performance and appreciation in the value of its private equity portfolio.

KKR reported net gains from investment activities totaling $1.04 billion for Q2 2019, comprised of $74.2 million in net realized gains and $963.8 million in net unrealized gains. The Private Equity segment was a major contributor to these gains, with significant unrealized gains in growth equity investments and core investments.

Compensation and Benefits Expenses increased by $136.5 million primarily due to higher carried interest compensation resulting from strong investment performance and an increase in cash compensation. This increase was partially offset by lower equity-based compensation charges. General, administrative, and other expenses decreased slightly, mainly due to lower professional fees compared to the prior year's conversion-related costs.

KKR's total assets grew to $57.5 billion as of June 30, 2019, up from $50.7 billion as of December 31, 2018. This increase was mainly due to higher investment values and increased cash and cash equivalents. Total liabilities also increased, primarily driven by higher debt obligations.

KKR's Assets Under Management (AUM) increased to $205.7 billion as of June 30, 2019, from $199.5 billion as of March 31, 2019. This growth was driven by new capital raised across its Private Markets and Public Markets businesses, as well as favorable changes in the value of its investments, partially offset by distributions and redemptions.