Global investment firm KKR (KKR 0.14%)reported earnings for the third quarter on Thursday, Oct. 24, that topped analyst estimates for adjusted EPS and assets under management. The company reported a strong performance in revenue and earnings with fee-related earnings (FRE) reaching $1 billion, a 79% rise from the previous year. Revenue grew 44% year over year to $4.79 billion, highlighting significant growth in asset management operations.
Despite these positives, net income for common stockholders decreased 55% to $654.6 million, reflecting increased expenses. Overall, the quarter demonstrated notable revenue expansion amidst evolving market conditions.
| Metric | Q3 2024 | Analyst Estimate | Q3 2023 | Change (YOY) |
|---|---|---|---|---|
| Adjusted EPS | $1.38 | $1.20 | $0.88 | 57% |
| Fee-related earnings (FRE) | $1.0 billion | N/A | $557.5 million | 79% |
| Revenue | $4.79 billion | N/A | $3.32 billion | 44% |
| Net income | $654.6 million | N/A | $1.47 billion | (55%) |
| Assets under management (AUM) | $624 billion | $623.4 | $527.7 billion | 18% |
Source: KKR. Note: Analyst consensus estimates for the quarter provided by FactSet. YOY = Year over year.
Overview of KKR
KKR is a leading global investment firm that operates across five core asset management business lines: private equity, real assets, credit and liquid strategies, capital markets, and principal activities. This diversity allows it to tap into various investment opportunities and maintain resilience across market conditions. It extensively leverages its integrated global platform to boost cross-department collaboration and resource optimization.
Recent strategic focuses include expanding asset management functions and leveraging global expertise to stronger returns. Key to success is its diverse operations and ability to manage substantial capital, evidenced by its commitment to raise over $300 billion in new capital by 2026.
Quarterly Performance Highlights
KKR reported substantial growth across several metrics in the third quarter. Total revenue jumped 44% to $4.79 billion, primarily driven by the asset management segment and its revenue approaching $2 billion. This increase can be attributed to heightened management and transaction fees.
Despite increased revenue, net income for common stockholders declined to $654.6 million, compared to $1.47 billion in Q3 2023. This decrease was influenced by heightened costs and market factors affecting net margins. Operating earnings saw an increase to $1.32 billion from $768 million in the previous year, reflecting additional costs balancing robust revenue growth.
Fee-paying assets under management (FPAUM) expanded by 19% year over year thanks to strong asset inflows. Over the past year, KKR raised $118 billion in new capital, with $24 billion raised in the last quarter alone. Notably, the insurance segment under Global Atlantic experienced improved operating earnings and net investment income. However, certain cost and actuarial adjustments impacted the segment's return on equity (ROE).
KKR continued advancing its strategic goals by expanding its asset management capabilities, pursuing acquisitions, and raising new capital. The firm advanced with a $4.09 billion acquisition of Fujisoft, enhancing its software sector presence and highlighting growth ambitions focused on digital transformation trends.
Looking Ahead
Looking forward, KKR did not provide specific guidance for the fourth quarter or full year. In other reports, management has maintained an optimistic view, aiming to expand its investment products by leveraging its global platform. With plans to raise significant new capital by 2026, the firm is poised for sustained growth across diverse asset management sectors.
Management anticipates a strong capital environment, especially in technology and infrastructure, and is integrating recent acquisitions to fuel long-term growth. However, monitoring short-term impacts on financial metrics will be important, considering the strategic investments currently intended for long-term benefits.
