Presenters
Craig Larson, Partner and Head of Investor Relations Rob Lewin, Chief Financial Officer Scott Nuttall, Co-Chief Executive OfficerQ&A Participants
Ladies and gentlemen, thank you for standing by. Welcome to KKR's First Quarter 2025 Earnings Conference Call.
During today's presentation, all parties will be in the listen-only mode. Following management's prepared remarks, the conference will be open for questions. If anyone should require operator assistance during the conference, please press "*" and "0" on your telephone keypad.
As a reminder, this conference is being recorded.
I will now hand the call over to Craig Larson, Partner and Head of Investor Relations for KKR. Craig, please go ahead.
Craig LarsonThank you, Operator. Good morning, everyone. Welcome to our first quarter 2025 earnings call. This morning, as usual, I'm joined by Rob Lewin, our Chief Financial Officer, and Scott Nuttall, our Co-Chief Executive Officer.
We would like to remind everyone that we'll refer to non-GAAP measures on the call, which are reconciled to GAAP figures in our press release, which is available on the Investor Center section at kkr.com. And as a reminder, we report our segment numbers on an adjusted share basis.
This call will contain forward-looking statements, which do not guarantee future events or performance. Please refer to our earnings release and our SEC filings for cautionary factors about these statements. I'm going to begin this morning by reviewing our results for the quarter, before Rob walks through the current environment, its impact on our key business drivers, as well as our strategic positioning longer term. Scott will then finish with some closing thoughts.
So, beginning with our headline, financial results for the quarter, Fee Related Earnings per share came in at $0.92, up 22%, year-over-year. Total Operating Earnings of $1.24 per share are up 16%, year-over-year. And Adjusted Net Income of $1.15 per share is up 19%, compared to a year ago.
All of these figures are among the highest we reported as a public company and are reflective of a diversified and global business model built over the last decade-plus.
Going into our quarterly results in a little more detail, management fees in Q1 were $917 million, up 13% year-over year, driven by fundraising and deployment activities. If anything, management fee growth in the quarter feels understated relative to the breadth of the $31 billion of new capital that we raised in Q1.
The largest component of this $31 billion was capital raised for North America XIV, the latest vintage of our flagship North America private equity strategy, which had not turned on as of March 31st, and therefore, did not contribute to management fees in the quarter. Rob is going to give a little bit of a more fulsome update on Americas XIV in a few minutes.
Total transaction and monitoring fees were $262 million in the quarter. Capital markets transaction fees were $229 million, driven primarily by activity in new and existing portfolio companies, within both private equity and infrastructure. Fee Related Performance Revenues were $21 million in the quarter. So, altogether, Fee Related Revenues came in at $1.2 billion. That's up 22%, year-over-year.
Turning to expenses, Fee Related Compensation was right at the midpoint of our guided range at 17.5% of Fee Related Revenues. Other operating expenses were $168 million for the quarter. So, in total, Fee Related Earnings were $823 million, or the $0.92 per share that I mentioned a moment ago, with an FRE margin of 69%.
Insurance Segment Operating Earnings were $259 million and Strategic Holdings Operating Earnings were $31 million, both of which were in line to modestly ahead of our recent guidance.
In terms of our Strategic Holdings segment, we've closed on our purchase of additional stakes in three existing Core Private Equity businesses, as we introduced on our call last quarter. We continue to feel that our Strategic Holdings business is a real differentiator for us, and these transactions are a further accelerant for this segment.
Today, our share of annual revenue and EBITDA across the 18-company portfolio is approximately $3.8 billion and $920 million, respectively. Again, that's our share. And since quarter end, we've announced the acquisition of a new Core Private Equity investment, Karo Healthcare, which will bring our Strategic Holdings portfolio to 19 companies.
So, altogether, Total Operating Earnings were $1.24 per share. As a reminder, Total Operating Earnings is comprised of our Fee Related Earnings together with our Insurance and Strategic Holdings Operating Earnings, which represent the more recurring components of our earnings streams.
Over the last 12 months, Total Operating Earnings comprised nearly 80% of total segment earnings. So, said differently, nearly 80% of our pretax earnings over the last 12 months were driven by more recurring earnings streams highlighting the durability of our business, especially during periods of volatility.
Turning now to investing earnings within our asset management segment, realized performance income was $348 million and realized investment income was $218 million for total monetization activity of $566 million. That's up almost 40%, year-over-year.
This quarter, activity was largely driven by the annual crystallization of carry from Core PE, as well as other monetization events across traditional PE as well as growth equity.
Turning to investment performance and looking at Page 10 of our earnings release. The private equity portfolio was up 4% in the quarter and up 11%, over the last 12 months. This was a quarter where investment performance was, undoubtedly, helped by the geographic diversification of our firm as European and Asian equity indices were both up in the quarter.
In real assets, the opportunistic real estate portfolio was up 2% in the quarter and up 5% over the LTM. Infrastructure was up 4% in the quarter and appreciated 13%, over the LTM. And in credit, the leveraged credit composite was flat in the quarter and up 7% over the last 12 months. And the alternative credit composite was up 3% in the quarter and up 11%, over the last 12 months.
And finally, consistent with historical practice, we increased our dividend to $0.74 per share on an annualized basis, or $0.185 per share per quarter, beginning with this quarter. This is now the sixth consecutive year we've increased our dividend since we changed our corporate structure, increasing our annualized dividend from $0.50 per share to $0.74, over this period of time.
And with that, I'm pleased to turn the call over to Rob.
Rob LewinThanks a lot, Craig. And thanks, everyone, for joining our call this morning. We've all experienced some real volatility, particularly since early April. It is in this type of environment that our business model and collaborative culture uniquely positions us. And we are using that to lean in and source attractive investment opportunities around the globe for our clients.
As we navigate this volatility, there are a number of themes and questions that we have, consistently, been hearing from our shareholders and clients. So, I thought I would spend my time this morning walking through a number of common areas of focus.
The first is the impact of tariffs on our existing portfolio. As a starting point, it is important to remember that tariffs and supply chain diversification and resilience have been front-of-mind topics for our investment, public affairs, and macro teams, dating back to the global pandemic. As a result, for five-plus years now, this has been a standard topic of conversation.
Taking a look at our global private equity portfolio today, this includes traditional, Core, and growth. Based on our initial findings, we estimate that 90% of our AUM has limited-to-no first order impact from the announced tariffs.
Importantly, this figure does not include identified mitigating measures that we are actively implementing. And specifically, our Core Private Equity portfolio and our Strategic Holdings segment are not expected to have any material impact from tariffs.
Across our infrastructure platform, the vast majority of our companies have either contractual protections that insulate KKR returns or minimal estimated exposure.
Looking at our infrastructure deployment over the last five years, approximately 70% has been in Europe and in Asia. And as we look at our credit portfolio, there will be pockets of exposure, but we believe the opportunities, and we really do think this is a credit pickers market, will outweigh the downsides.
So while we expect there will be individual instances of direct tariff impact in parts of the portfolio, based on how we understand tariffs today, we feel well-equipped to manage these challenges and on the whole, feel very good with how our portfolio is positioned.
The second theme that I wanted to cover this morning is the effect on both the deployment and the monetization environment. We find ourselves in the fortunate position of being ready as a firm to play offense on behalf of our clients.
Volatility brings opportunity, and we benefit from the global and connected nature of our firm. We've closed or committed to over $30 billion worth of new investments since the start of the year. Within private markets, these investments are diversified across geographies, with more than half coming outside the U.S. Notably, multiple of these investments are in Japan, where we continue to be at the forefront of activity, including the purchases of Fuji Soft and Topcon in our private equity strategy.
Looking only at investments that we announced over the last month, so when the tariff related volatility began, we committed over $10 billion of equity. This includes $7 billion in private markets across global opportunities in traditional PE, Core PE, infrastructure, and tech growth, to name a few, and another $3 billion in private credit across direct lending, high-grade ABF, and junior debt.
Moving next to monetizations, we think we remain really well positioned here. Our discipline around investment pacing and linear deployment has definitely contributed to the overall strength and maturity of our portfolio. At quarter end, our gross unrealized performance income stands at $8.7 billion. It's a high point for us and up over 25%, year-on-year. I think this number in particular stands out, given our healthy level of monetizations, over the past 12 months.
As a result of our mature and global portfolio and strong investment performance, we are better positioned than some might expect in terms of realization activity, even in the face of the market volatility.
To give you a sense, looking at our pending monetizations, so this is based on transactions that are signed, but not yet closed, we have direct line of sight to north of $800 million of monetization related revenue, most of which will be performance income. This includes exits of Seiyu in Japan, Kito Crosby in the U.S., and four infrastructure investments, to name a few of the key drivers. Of that $800 plus million, we expect at least $250 million to be generated in Q2. It's a very healthy figure for us, as we stand here in just early May.
The third theme that I wanted to hit on is the impact on our capital raising efforts. We are actively engaged with our clients. Part of this is making sure they know what is happening with their portfolios. But a lot of it is discussing how to invest into these markets and ways that we can work together. We've heard a range of responses, and they are evolving with the market. While it may be early as we see how this all plays out, today, there are no changes to our targets and we have continued conviction in our fundraising outlook.
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KKR & Co. Inc. published this content on May 05, 2025, and is solely responsible for the information contained herein. Distributed via Public Technologies (PUBT), unedited and unaltered, on May 06, 2025 at 01:53 UTC.
