KKR & Co. Inc. (NYSE:KKR) Bernstein 41st Annual Strategic Decisions Conference May 28, 2025 1:30 PM ET Company Participants Scott Nuttall - Co-Chief Executive Officer Conference Call Participants Patrick Davitt - Autonomous Research Patrick Davitt Good afternoon. I'm Patrick Davitt, U.S. Asset Manager analyst here at Autonomous. It's my pleasure to welcome KKR's Co-CEO, Scott Nuttall, back to the conference after having Joe here for the last couple of years. So welcome back, Scott. Scott Nuttall Great to be ...

Financial Data and Key Metrics Changes - The company has a long-term view on inflation and interest rates, expecting them to remain higher for longer, which aligns with historical trends [4][5][9] - The company has $116 billion of dry powder available for investment, indicating strong capital reserves for future opportunities [7] Business Line Data and Key Metrics Changes - The private equity portfolio is marked at over 60% at more than 1.5 times the cost, while public names are marked at an average of four times the cost, reflecting strong performance [18][19] - The company has been actively exiting investments, including sales in Japan and infrastructure, contributing to a mature portfolio [19] Market Data and Key Metrics Changes - More than 70% of the company's deployment in infrastructure over the last five years has been outside the United States, showcasing a global investment strategy [34] - The company has seen a shift in investor sentiment, with a more balanced approach to global allocations, particularly towards Europe and Asia [36] Company Strategy and Development Direction - The company is focusing on building portfolios that can navigate different economic cycles, emphasizing long-term investments [15][16] - Strategic holdings have been introduced to capture lower-risk, attractive reward investments, diversifying the company's offerings [23][25] Management's Comments on Operating Environment and Future Outlook - Management remains optimistic about the realization outlook, citing a strong pipeline of realizations and a disciplined investment approach [15][21] - The company does not foresee significant stress in its portfolios despite macroeconomic concerns, indicating confidence in its investment strategy [12][14] Other Important Information - The company is expanding its product offerings for high-net-worth individuals through partnerships, aiming to capture a larger share of the market [45][49] - The insurance segment is expected to see growth in earnings as the business model transitions and third-party capital is raised [92][93] Q&A Session Summary Question: What is the company's view on inflation and economic growth? - The company expects inflation and interest rates to remain higher for longer, which is consistent with historical trends [4][5] Question: How is the company managing its portfolio amidst macroeconomic concerns? - The company has not seen significant stress in its portfolios and feels confident due to its portfolio construction and historical experience with economic cycles [12][14] Question: What is the outlook for the company's strategic holdings? - The strategic holdings segment is designed to capture lower-risk investments with attractive returns, and the company is optimistic about its growth potential [23][25] Question: How is the company addressing client demand for alternative products? - The company is seeing significant adoption of its alternative products and is expanding its offerings to cater to high-net-worth individuals [38][45] Question: What is the company's strategy regarding direct lending and asset-based finance? - The company is actively involved in both direct lending and asset-based finance, with a focus on scaling third-party business alongside its own insurance growth [76][80]

Group 1 - KKR's stock has experienced significant volatility, reaching record highs before dropping 45% and then rebounding over 25% from the lows [1] - The company has over fifteen years of experience in making contrarian bets based on macro views and stock-specific turnaround stories [1]

Core Insights - Lifecore Biomedical (LFCR) is positioned to benefit from current trade policies, presenting both challenges and opportunities for the company [2] Company Summary - Lifecore's largest challenge is also its greatest opportunity, indicating a complex market environment that requires strategic navigation [2]

Core Insights - The article emphasizes the importance of a hybrid investment strategy that combines classic dividend growth stocks with Business Development Companies, REITs, and Closed End Funds to enhance investment income while achieving total returns comparable to traditional index funds [1]. Investment Strategy - The investment approach focuses on high-quality dividend stocks and assets that provide long-term growth potential, which can significantly contribute to income generation [1]. - A balanced portfolio that includes both growth and income-generating assets can lead to efficient investment income while maintaining a total return aligned with the S&P [1].

Group 1 - FS KKR Capital's quarterly earnings met expectations, indicating stable financial performance [1] - The quality of FS KKR Capital's balance sheet improved quarter-over-quarter, suggesting enhanced financial health [1] - The company supported its dividend through net investment income, reflecting strong operational performance [1] Group 2 - FS KKR Capital is actively growing its portfolio through new investments, indicating a strategic focus on expansion [1]

Financial Performance - Total revenues for the three months ended March 31, 2025, were $3,110,183, a decrease of 67.7% compared to $9,656,738 in the same period of 2024[36]. - Net income for the three months ended March 31, 2025, was $684,498, down 37.4% from $1,093,850 in 2024[37]. - The company reported a net loss attributable to common stockholders of $(185,924) for Q1 2025, compared to a profit of $682,214 in Q1 2024[37]. - Comprehensive income for the three months ended March 31, 2025, was $2,095,968, significantly higher than $911,648 in the same period of 2024[41]. - The company reported net gains from investment activities of $1,086,591 for Q1 2025, compared to $638,162 in Q1 2024, marking a growth of 70.0%[36]. - The company reported a net unrealized loss of $(335,565) in asset management and strategic holdings for the three months ended March 31, 2025[170]. Assets and Liabilities - Total assets increased to $372,372,919 thousand as of March 31, 2025, up from $360,099,411 thousand at December 31, 2024, representing a growth of approximately 3.5%[26]. - Total liabilities increased to $303,415,987 thousand as of March 31, 2025, compared to $298,114,719 thousand at December 31, 2024, marking a rise of approximately 1.1%[27]. - Stockholders' equity grew to $67,035,452 thousand, up from $60,399,515 thousand, indicating an increase of about 11.0%[27]. - The total investments as of March 31, 2025, amounted to $285,850,575, an increase from $276,597,795 as of December 31, 2024[77]. - The total liabilities at fair value as of March 31, 2025, amounted to $33.70 billion, an increase from $33.32 billion as of December 31, 2024, reflecting a growth of approximately 1.1%[146]. Investment Activities - Net investment income increased to $1,783,280 for Q1 2025, compared to $1,519,902 in Q1 2024, reflecting a growth of 17.3%[36]. - Total investments purchased in insurance for Q1 2025 amounted to $24,919,638, significantly higher than $13,726,204 in Q1 2024[48]. - Proceeds from investments in insurance for Q1 2025 were $21,793,291, compared to $7,528,657 in Q1 2024, indicating a substantial increase[48]. - The company reported unrealized losses on fixed maturity securities classified as trading of $99,579 in Q1 2024, which improved to unrealized gains of $259,207 in Q1 2025[73]. Cash Flow and Operating Activities - Net cash provided by operating activities increased to $2,549,726 in Q1 2025, up 67.0% from $1,527,433 in Q1 2024[44]. - The net cash used in investing activities for Q1 2025 was $(3,147,312), an improvement from $(6,198,779) in Q1 2024[48]. - KKR's net cash provided by financing activities in Q1 2025 was $3,603,104, a significant increase compared to $44,964 in Q1 2024[48]. Insurance Operations - Total insurance liabilities increased from $4,041,894 million in Q1 2024 to $4,338,050 million in Q1 2025, representing a growth of 7.3%[154]. - The total balance of funds withheld payable at interest decreased from $(2,447,303) million in Q1 2024 to $(2,373,981) million in Q1 2025, a reduction of 3.0%[154]. - The company reported a change in total liabilities of $162,223 million for insurance in Q1 2025, compared to $234,067 million in Q1 2024, reflecting a decrease of 30.7%[154]. Equity and Stockholder Information - The Series D Mandatory Convertible Preferred Stock issued increased to 51,750,000 shares as of March 31, 2025, compared to zero shares at December 31, 2024[27]. - Basic net income (loss) per share of common stock for Q1 2025 was $(0.22), a decrease from $0.77 in Q1 2024[13]. - The weighted average shares of common stock outstanding for basic calculations increased to 888,246,698 in Q1 2025 from 885,005,824 in Q1 2024[13]. Future Outlook and Strategic Initiatives - The company plans to expand its market presence through strategic acquisitions and new product developments in the upcoming quarters[149]. - Future guidance suggests a continued focus on enhancing operational efficiency and exploring new technology innovations[149].

Core Viewpoint - FS KKR Capital Corp. reported strong financial results for the quarter ended March 31, 2025, with a declared distribution of $0.70 per share, reflecting stability amid market volatility [1][4][3]. Financial and Operating Highlights - Adjusted Net Investment Income was $0.65 per share, with net investment income of $0.67 per share, compared to $0.61 per share for the previous quarter [8][28]. - The company originated approximately $2.0 billion in new investments during the quarter [3]. - Total investment income for the quarter was $400 million, down from $434 million in the same quarter of the previous year [24]. Portfolio Highlights - The total fair value of investments increased to $14.1 billion from $13.5 billion at the end of 2024 [6][9]. - Senior secured loans represented 58.1% of the portfolio, with 67.2% of debt investments being variable rate [6][9]. - Investments on non-accrual status were 2.1% of the total investment portfolio at fair value [9]. Leverage and Liquidity - The net debt to equity ratio was 114%, with total debt outstanding of $8.0 billion and stockholders' equity of $6.5 billion [10][8]. - Cash and cash equivalents stood at $472 million, with an additional $2.6 billion available under financing arrangements [10]. Earnings and Distributions - Earnings per share for the quarter were $0.43, down from $0.52 in the previous quarter [8][25]. - The company paid distributions totaling $0.70 per share to stockholders [8][4]. Additional Information - FS KKR Capital Corp. focuses on providing customized credit solutions to private middle-market U.S. companies, primarily investing in senior secured debt [14].

Core Insights - KKR & Co. Inc. reported a revenue of $1.2 billion for the quarter ended March 2025, reflecting a year-over-year increase of 21.7% and an EPS of $1.15, up from $0.97 in the same quarter last year, surpassing the Zacks Consensus Estimate for revenue by 0.90% and for EPS by 1.77% [1] Financial Performance - The company raised $30.54 billion in new capital, exceeding the average estimate of $24.74 billion [4] - Private Equity assets under management (AUM) reached $209.40 billion, compared to the average estimate of $200.41 billion [4] - Fee Paying AUM was reported at $526.05 billion, slightly below the average estimate of $526.99 billion [4] - Real Assets Segment's fee-paying AUM was $144.03 billion, above the average estimate of $143.57 billion [4] - Operating earnings from strategic holdings were $31.49 million, exceeding the average estimate of $25.26 million [4] - Fee related compensation was reported at -$210.02 million, better than the average estimate of -$211.66 million [4] - Fee related earnings from performance revenues were $21.28 million, below the average estimate of $24.99 million but showing an 11.4% increase year-over-year [4] - Operating earnings from insurance were $258.77 million, slightly above the average estimate of $255.09 million, representing a year-over-year decline of 5.2% [4] - Management fees generated $917.33 million, compared to the average estimate of $927.90 million, reflecting a year-over-year increase of 12.5% [4] - Total revenues from fee related earnings were $822.60 million, below the average estimate of $842.17 million [4] - Net realized investment income was $185.26 million, slightly below the average estimate of $187.68 million [4] - Total investing earnings were reported at $273.25 million, exceeding the average estimate of $271.37 million [4] Stock Performance - KKR & Co. shares have returned -5.5% over the past month, underperforming the Zacks S&P 500 composite, which changed by -0.7% [3] - The stock currently holds a Zacks Rank 5 (Strong Sell), indicating potential underperformance in the near term [3]

Core Insights - KKR & Co. Inc. reported an adjusted net income per share of $1.15 for Q1 2025, exceeding the Zacks Consensus Estimate of $1.13 and up from $0.97 in the prior-year quarter [1] - The company's total revenues reached $1.2 billion, a 21.6% increase year-over-year, driven by higher management fees and transaction fees, surpassing the Zacks Consensus Estimate of $1.19 billion [3] - Total assets under management (AUM) grew 14.8% year-over-year to $664.3 billion, with fee-paying AUM increasing 11.7% to $526 billion [4] Financial Performance - KKR's total operating earnings rose 15.6% year-over-year to $1.11 billion, supported by a 23% increase in fee-related earnings to $822.6 million [5] - The net loss attributable to the company on a GAAP basis was $185.9 million, contrasting with a net income of $682.2 million in the same quarter last year [2] - Total segment expenses increased by 18.8% to $377.5 million, reflecting the company's ongoing expansion and operational costs [3] Market Position and Outlook - KKR is expected to leverage its strong fundraising capabilities to capitalize on lucrative investment opportunities in the future [6] - The company is experiencing significant growth in fee-related and total operating earnings, although elevated expenses due to global expansion and a challenging operating environment are concerns [6] - KKR currently holds a Zacks Rank of 5 (Strong Sell), indicating market sentiment towards the stock [7]