The Carlyle Group Inc.

Welcome to the Carlyle Group Second Quarter Earnings Call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during this session, you'll need to press star 1 on your telephone. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Daniel Harris, Head of Investor Relations. Please go ahead.

Thank you, Liz. Good morning, and welcome to Carlyle's second quarter 2022 earnings call. With me on the call this morning is our Chief Executive Officer, Qisong Li, and our Chief Financial Officer, Kurt Buser. Earlier this morning, we issued a press release and detailed earnings presentation, both of which are available on our investor relations website at ir.carlyle.com. This call is being webcast, and a replay will be available on our website. We will refer to certain non-GAAP financial measures during today's call. These measures should not be considered in isolation from or as a substitute for measures prepared in accordance with generally accepted accounting principles. We have provided reconciliations of these measures to GAAP in our earnings presentation to the extent reasonably available. Any forward-looking statements made today do not guarantee future performance and undue reliance should not be placed on them. These statements are based on current management expectations and involve inherent risks and uncertainties including those identified in the risk factor section of our most recent annual report on Form 10-K that could cause actual results to differ materially from those indicated. Carlisle assumes no obligation to update any forward-looking statements at any time. Turning to our results, for the second quarter, we generated $236 million in fee-related earnings and $529 million in distributable earnings with DE for common share of $1.17. We produced net realized performance revenues of $271 million, and our accrued carry balance remains at $4.3 billion. We declared a quarterly dividend of 32.5 cents per common share. To ensure participation by all is on the call, please limit yourself to one question and one follow-up, and then return to the queue for any additional questions. And with that, let me turn the call over to our Chief Executive Officer, Qu Song Lee.

Thanks, Dan. Hello, everyone, and thank you for joining us today. Carlyle once again delivered strong results for the second quarter. We continue to drive growth and diversify the earnings power of our business. And importantly, our investment performance remains strong amidst the volatility and uncertainty in markets around the world. All of this is the result of clear strategic priorities and the hard work of our teams globally. We're in a much different environment as inflation, rising interest rates, and uncertainty affect the real economy and financial markets. At Carlyle, we have been preparing for this complex and challenging environment, which is likely to continue in the near term. We are focused on continuously assessing risk, recalibrating valuations, and capturing opportunities as we move forward. The strength of our diversified platform, well-constructed portfolios, and over $80 billion of dry powder positions us well as we have deliberately built Carlyle into a more resilient firm that is set up to adapt and manage through all types of market conditions. We are a different firm today and better positioned than ever before as we drive forward from a position of strength. Given the environment, we know that questions about our portfolio are top of mind, so allow me to address this topic before we get into the points we'd like to discuss today. Thus far, portfolios across the firm continue to perform exceptionally well. Our focus on investment excellence and the diversification of our platform are supporting the firm's relative outperformance. with Carlyle's aggregate carry fund portfolio appreciating 3% in the second quarter, while various public benchmarks were down 10 to 20%. I'll provide some perspective, and Kurt will drill into more specifics. Our global private equity portfolio appreciated 2%, driven by strength in infrastructure and natural resources in real estate and flat performance in corporate private equity. Throughout the GPE segment, Our overarching view is that we have well-constructed and well-positioned portfolios. Our approach has been always to invest in good assets and establish companies led by strong management teams that have a differentiated path for growth and value creation. As a result, we have avoided the sectors that have been hardest hit, our portfolio is only 7% publicly traded, and we are benefiting from the strong demand that continues for high quality private assets even as public market multiples are contracting. And importantly, thus far taken as a whole, the top line of the companies in our corporate private equity portfolio continue growing at double digit rates while maintaining operating margins. Now turning to our credit portfolio, we're seeing resilience in the underlying performance of our assets and higher yields are driving better performance for LPs as most of our investment strategies benefit from higher rates. At this moment, credit quality remains strong and we have not seen any notable pickup in duress or non-accruals, although we are closely monitoring our portfolio. We actively manage all of our credit positions and are very focused on managing risk exposures and maintaining balanced risk-adjusted credit quality throughout our portfolios. Before I hand things over to Kurt, there are five important points to listen out for as he talks about the quarter. First, our focus remains on driving FRE growth. What we have done over the past several years to grow and change the nature of our FRE is, quite frankly, underappreciated. Just this quarter, we delivered a record $236 million of FRE, up more than 60% from last year, and we are on track to achieve our previously stated $850 million goal in FRE for the full year 2022. It's important to understand the vast amount of our fee revenue is agnostic to asset marks or valuations and is instead based on committed or invested capital. giving us greater visibility on the level of fees and FRE that we will earn. Second, our deliberate effort to diversify the firm is paying off. Our earnings mix is more diversified and more resilient than ever before, and it continues to grow because we have reshaped our business to capitalize on those areas where we see attractive growth in the private markets. As a result, The largest share of our fee-earning AOM is now associated with global credit. Furthermore, FRE contributed 50% of DE in the first half of 2022, making our earnings stream more balanced and distributable earnings more predictable throughout different market cycles. Third, the firm's capital formation efforts are powering us forward even during changing dynamics for fundraising. Importantly, Please listen for the impact of the Fortitude transaction and how it sets us up for the future, as total capital formation for the quarter was nearly $60 billion, with the addition of the highly scalable Fortitude Advisory assets under management. This includes the nearly $10 billion we raised in new capital from LPs, with more than half this amount from global credit and global investment solutions, even as we continue to raise in the more traditional private equity funds. Next, the firm is operating from a position of financial strength. We have a nominal level of net debt, our dividend is comfortably covered by our sustainable FRE, and our balance sheet is positioned to help us to continue to grow. Add to this over $2 billion in investments and more than $4 billion in net accrued carry, and our balance sheet today comprises over $16 per share in value. Finally, and perhaps most importantly from my perspective, we are executing against our strategic plan and delivering on what we told you we would do. Compared to just two years ago, Carlyle is more diversified, growing faster, and more profitable. My job as CEO is to make sure we stay focused on the right priorities, develop our people, and shape our culture. We are doing just that. Putting all this together, we believe we are positioned well to navigate through a period of increasing market uncertainty and complexity and have confidence in our ability to deliver long-term earnings growth and shareholder value. With that, over to you, Kurt.