The Carlyle Group Inc.

Good day, and thank you for standing by. Welcome to the Carlyle Group second quarter 2023 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To remove yourself from the queue, please press star 1-1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to Daniel Harris, Head of Investor Relations. Please go ahead, sir.

Thank you, Norma. Good morning and welcome to Carlyle's second quarter 2023 earnings call. With me on the call this morning is our Chief Executive Officer, Harvey Schwartz, Chief Financial Officer, Kurt Buser, and incoming Chief Financial Officer and Head of Corporate Strategy, John Rudette. Earlier this morning, we issued a press release and a detailed earnings presentation, which is also available on our investor relations website. 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 substitute for measures prepared in accordance with generally accepted accounting principles. We have provided reconciliation of these measures to GAAP in our earnings release 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 annual report on Form 10-K that could cause actual results to differ materially from those indicated. Carlyle assumes no obligation to update any forward-looking statements at any time. So turning to our results for the second quarter, we generated $207 million in fee-related earnings and $389 million in distributable earnings, with DE per common share of $0.88. Our acute carry balance was $3.7 billion as of the end of the quarter, and we declared a quarterly dividend of $0.35 per common share. In order to ensure participation by all those on the line today, please limit yourself to one question and then return to the queue for any additional follow-ups. And with that, let me turn the call over to our Chief Executive Officer, Harvey Schwartz.

Thanks, Dan. Good morning, everyone, and thank you for joining us. I'm excited to be joined today by John Redet, who you'll hear from later, as well as Kurt. There are two areas I'd like to cover. First, the macro environment. And second, a review of several work streams that will position us to drive long-term growth. First, the macro environment. As I've said previously, were in one of the most complex periods in recent economic history. The combination of sustained elevated inflation along with central bank rate hikes has led to a corresponding increase in the cost of capital. The peak of the inflationary cycle may have passed, but our base case is that rates stay higher for longer as we shift away from a decade of zero interest rate policy. It remains early days in understanding the impact of this shift on corporate capital structures and liquidity. Among other factors, This shift in interest rates further contributes to mixed investor appetite and sentiment. In part, our economic and market views are informed by the vast data and proprietary insights gathered from our portfolio. The data set includes nearly 300 global companies, 600 real estate investments, and loans to over 1,300 issuers. Let's start with inflation. We're starting to see it's more difficult for our portfolio companies to pass through increased costs. reinforcing the view that the inflationary cycle has peaked. Our portfolio company CEOs remain generally cautious in terms of how they're approaching the operating environment, but broadly, our portfolios have seen accelerating activity with over 10% EBITDA growth. As you'd expect, these economic forces have slowed the pace of investment across the industry. You see this in the amount of capital we are deploying, and you see it in lower fundraising as LPs slow decision making on new fund allocations. Having said that, in general, our teams are seeing signs of an increasing pace of early deal flow access across most asset classes. Now I want to update you on five key areas that we are focused on as a leadership team, though these are just a sample of activities around the firm. We have mobilized teams and launched work streams for each of these. As you'd expect, we are approaching these in a very deliberate and methodical manner, and while early, Let me give you a line of sight into what we're doing. First, our insurance solutions business. Our relationship with Fortitude is profitable, strategic, and vital, but only one piece in the opportunity set. As insurance companies look to free up capital and shift liabilities to improve their ROE, we're seeing a greater interest on their part to partner with us in a variety of important ways. Second, our capital markets team. They also have a large opportunity to scale their impact. We have in place today all the key ingredients for growth. A well-positioned and active private equity franchise and an experienced capital markets team. As activity rates pick up, we expect that we will further leverage our deal flow and our portfolio company's need for capital to create a natural tailwind in this business. Third, we're also focused on our technology and our AI strategy. This allows us to create operational efficiencies across the firm as well as at our portfolio companies and is an important driver of growth and scale over the long term. We recently appointed Lucia Suarez as our new Chief Information Officer and Head of Technology Transformation. She will work closely with the entire leadership team to drive technology transformation strategy and operations. Now fourth, as we said before, we see long-term opportunity around private wealth. We've recently hired a new head of private wealth strategy. While we only have three products in the market covering $5 billion of assets today, we view this as an important channel for growth. We'll be working with our distribution partners to bring product innovation globally to the wealth channel. Most importantly, the Carlyle brand is a huge differentiator here. And fifth, the last work stream I'll mention is around expense management and improving FRE margins. This means investing in our platform wisely to drive top-line growth, as well as closely monitoring the overall level and composition of expense, as well as the capital required to run the firm. This is a critical strategic effort. We will continue to move with a disciplined sense of urgency around each one of these, and we'll continue to update you as these progress. To close, as I said, we're still operating within a somewhat challenging market backdrop. It's important to state that we will be patient when we need to be, while at the same time capitalizing on opportunities to deploy capital where we see attractive risk-reward. As a leadership team, we are intensely focused on delivering performance excellence for our investors and driving long-term shareholder value. We are taking action to mobilize teams around priority areas to drive disciplined growth, and I'm really enthusiastic for Carlyle's future. Now, before I hand it to John, I'd also like to take a moment to thank Kurt for his tremendous contributions to Carlisle over the last nearly 20 years. I personally am thankful for Kurt's counsel and support as I transitioned into Carlisle over the past six months, and I've really enjoyed getting to know him. I know you'll all join me in wishing him the best in his upcoming retirement. And now, John, over to you.