KKR & Co. Inc.

Ladies and gentlemen, thank you for standing by. Welcome to KKR's first quarter 2026 earnings conference call. During today's presentation, all parties will be in a listen-only mode. Following management's prepared remarks, the conference will be open for questions. I will now hand the call over to Craig Larson, partner and head of investor relations for KKR. Craig, please go ahead.

Thank you, Operator. Good morning, everyone. Welcome to our first quarter 2026 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 will 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 as well as our SEC filings for cautionary factors about these statements. So first, beginning with our results for the quarter, fee-related earnings per share came in at $1.13. That's up 23% year-over-year. Total operating earnings of $1.47 are up 18% year-over-year. An adjusted net income of $1.39 per share is up 20% compared to one year ago. All of these figures are among the highest we've reported in our firm's history. Now going into a little more detail, management fees in the quarter were $1.2 billion. That's up 30% on a year-over-year basis. driven both by continued fundraising momentum alongside deployment activity really across the platform. Excluding catch-up fees in both periods, management fee growth was strong at a touch north of 20%. And as we highlighted previously, our fee base continues to be diversified with private equity, real assets, and credit, each contributing approximately one-third of total fees over the trailing 12 months. Total transaction and monitoring fees were $253 million in the quarter. Capital markets fees were in line with last quarter at $224 million, driven by activity across PE, infrastructure, and credit. And fee-related performance revenues in the quarter were $24 million. Turning to expenses, Q1 fee-related compensation was again right at the midpoint of our guided range, or 17.5%. And other operating expenses were $195 million. So in total, fee-related earnings were over $1 billion, or the $1.13 per share figure that I mentioned a few moments ago, up 23% year-over-year. And our FRE margin increased slightly quarter-over-quarter to approximately 69% at March 31. Insurance segment operating earnings were $260 million. Now, as a reminder, we report the insurance investment portfolio largely based on cash outcomes. So to give you a sense of the embedded profitability, as we've done the last couple of quarters, our insurance operating earnings would have been slightly north of $300 million in Q1 if we included the impact of marks on investments where a significant portion of the return relates to appreciation rather than cash yield. And as a reminder, insurance segment operating earnings alone do not capture the full economics of GA and KKR. Page 22 of our earnings release details the management fees under our investment management agreement, fees from IV-related vehicles where we have over $60 billion of AUM that wouldn't exist without GA, alongside GA-related capital markets fees. When you take all of that together, Total insurance economics over the LTM were $1.9 billion, that's net of compensation, up 14% versus the prior period. Strategic holdings operating earnings were $48 million in the quarter, and we continue to track nicely towards our expected $350-plus million of operating earnings for 2026, with earnings here expected to be more back-end weighted over the course of the year. So altogether, total operating earnings, which as a reminder represents the more recurring components of our earnings streams, were $1.47 per share, up nearly 20%. And over the last 12 months, 85% of total pre-tax segment earnings were driven by these more recurring earnings streams, demonstrating in our view the durability that you're seeing across our business model. Moving to investing earnings within the asset management segment, Realized performance income was over $750 million, and realized investment income was approximately $120 million, bringing total monetization activity to around $880 million, up over 50% versus Q1 of 2025. This activity was driven by a combination of public secondary sales and strategic transactions alongside of dividends and interest income. After interest expense and taxes, adjusted net income was $1.2 billion for the quarter, or $1.39 per share. Turning to investment performance, page 10 of the earnings release details performance we're seeing across asset classes both this quarter and over the last 12 months. Broadly, you're seeing healthy investment performance on behalf of our clients across asset classes, including through this recent period of heightened volatility. And given investment performance, importantly, total embedded gains, that's comprised of gross carry together with the gains that sit on our balance sheet across asset management and strategic holdings, were $18.3 billion at 3.31. That's up 11% compared to one year ago and remains elevated even as we've been generating healthy monetization activity. Now, as you can imagine, we've been fielding a lot of questions on direct lending, so we've added a couple of pages to our earnings release. First, just to level set, if you turn to page 20, you see the size of our direct lending platform. In total, direct lending is $39 billion, or 5% of our AUM. It's an important business for us, but in the framework of KKR, it's of modest size. And with a lot of focus on redemption activity in the wealth space, we note the size of our private BDC footprint in the second bar from the right. It's even smaller, around $3 billion of AUM or 0.4% of our AUM in total. In terms of our public BDC, FSK is a little less than 2% of our AUM. FSK reports its Q1 earnings next week. We're not going to get ahead of that. It's important, though, not to conflate FSK's portfolio with other pools of capital. So looking at page 21, you see investment performance across our institutional strategies as well as our private BDC, all vintages since 2017. You see very consistent outperformance versus benchmark. We thought the more granular framing of investment performance here across the direct lending platform would be helpful context for everyone. And then finally, consistent with historical practice, we increased our dividend to 78 cents per share on an annualized basis beginning with this quarter. This is now the seventh consecutive year we've increased our dividend since we changed our corporate structure, increasing our annualized dividend over this time frame from 50 cents per share to 78 cents. And with that, I'm pleased to turn the call over to Rob.

Thanks a lot, Greg. And thank you, everyone, for joining our call this morning. I'm going to cover four topics today. First, our continued momentum around capital raising. Second, our monetization activity, which has been increasing at a healthy pace in spite of the recent market volatility. Third, we have been making some important decisions around capital allocation. And finally, I'm going to go through how we think about the earnings power of our business. So let me start with capital raising. We raised $28 billion of new capital in the quarter. with demand really widespread across asset classes and geographies. A real bright spot for us this quarter was in credit, where we raised $15 billion across our platform. That momentum is driven by our asset-based finance business, which represents over $90 billion of AUM today. Given the current sentiment around private credit, it may be surprising that when you look at new capital raised, so this is excluding GA, This was one of our larger credit fundraising quarters. Inflows here more than doubled quarter over quarter, and our capital raising pipelines remain strong. Most recently, over the last few weeks, we've received meaningful inbound interest from institutions around our direct lending business, with several viewing the current dislocation as an interesting entry point given the redemption activity that exists today in the private BDC space. Another milestone for us this quarter was the final closing of our North America 14 fund at $23 billion, eclipsing the prior $19 billion fund. Across the most recent vintages of KKR's flagship regional funds, so that's Americas plus Europe plus Asia, we have $46 billion of total capital to invest across this vintage. We are the clear market leader in private equity. And finally in wealth, Across all of our asset classes, our K-Series suite brought in $4 billion of capital in Q1. Redemptions totaled around $250 million, and AUM now stands at over $38 billion. Our performance, deployment, and capital raising continue to be in line or ahead of our expectations. Given all the market noise, we were candidly surprised by the strength of flows in Q1. But we also do expect a slowdown in Q2, consistent with what we saw after the tariff announcement last year. We're still operating off of a relatively low base of AUM, and we continue to believe that this channel will be a long-term source of meaningful growth for our industry and us. Turning now to modernizations. As we have explained on prior calls, we are very pleased with the performance of our portfolio, and we are seeing the benefits of our focus on linear deployment and portfolio construction. You can see our continued monetization activity in our financial results. As Craig noted, we generated around $880 million of monetization revenue in the quarter. Realized carried interest was $720 million. That is up 120% year-on-year, and we have a healthy pipeline of realizations across strategies and regions. Over the past month or so, we have announced several encouraging transactions, including the closing of the sale of OneStream software for four and a half times our cost, and the sale of Cool IT Systems, a global leader in liquid data center cooling, for almost 15 times our cost. We have also agreed to sell two of our 2021 investments, despite the more challenging vintage year. One in infrastructure, which would generate approximately two times multiple of money, and one in traditional private equity at nearly three times our cost. And most recently, we completed a secondary of our remaining shares in Hyundai Marine Solution in Korea, resulting in a seven-plus times multiple of capital for the full life of that investment. I'd like to next shift to capital allocation. It is an area of critical importance to our long-term performance, and we have been making some important and deliberate decisions. As a reminder, we have focused on four key tools available to us to allocate our cash flow. Strategic M&A, insurance, share buybacks, and strategic holdings. Each of these tools takes full advantage of the KKR ecosystem and, as a result, have the potential for high ROEs. Importantly, we do not have a framework that assigns a specific amount of capital spend into any one of these areas. Our approach here is all about how we take our marginal dollar of cash flows and drive the most amount of recurring, durable, and growing earnings on a per share basis. That is the mindset we have consistently taken to capital allocation, and it is one that is highly aligned with our shareholders, given employees here own roughly 30% of our stock. We believe that we have delivered a lot of value to our shareholders through strategic capital allocation, and we are very confident in our ability to continue to do so in the future. So starting here with strategic M&A, this morning we announced the closing of our acquisition of Arctos. As a reminder, Arctos is the leading investor in professional sports franchise stakes and a leader in GP solutions with approximately $16 billion of AUM and $10 billion of fee-paying AUM. If we are able to achieve our objectives in partnership with the Arctos management team, and we are confident that we will. It is hard to find a better allocation of capital. Next, in insurance. In the first quarter, we continued to see increased levels of competition here, particularly in the retail channel. Given that backdrop, alongside tight spreads on the asset side, we were disciplined around pricing and a lot more selective in that channel. That said, as spreads have widened a bit more recently, we are starting to see a more attractive entry point. On the other hand, an area where we leaned in this quarter was share repurchases, where we saw attractive risk-adjusted returns given the volatility across our sector. We repurchased or retired $317 million of stock this year through May 1 at an average price of approximately $91.00. And our board recently authorized an increase to our share repurchase program by an additional $500 million. Taking a step back, there's clearly a lot of noise in some of the markets where we operate. But from our seats, there is a big disconnect between perception and our long-term prospects across our diversified business model. That's why we have been leaning into buying back our stock And you would have also seen our co-CEOs and a number of our directors buying stock personally in the quarter. Whether it's our performance in Q1 or the long-term earnings power of our franchise, our positioning stands in contrast to some of that market noise. Looking at Q1 in particular, we've grown our headline profitability metrics, FRE, total operating earnings, and ANI, all on a per share basis, each around 20% year on year. It's actually the second highest quarter we have reported in our history for FRE and TOE, and the third highest for ANI. And we continue to feel great about the durability of our model and the earnings power that we continue to create, which provides us with significant visibility into future earnings growth. Over 90% of our capital is perpetual or committed for eight years or more. Today, we have $125 billion of committed but uncalled capital, nearly as much as we've had at any point in our history. Looking at our management fees and fee-related earnings over the LTN, we've grown at a high teens CAGR over the last three years. Alongside this growth, the quality of these fees has significantly improved as we've diversified by strategy and geography. And finally, our embedded gains, which Craig mentioned, stand at over $18 billion, one of the highest levels in our history. And they provide a lens into the strength of our portfolio and our ability to create meaningful outcomes in the future. So we benefit from real stability and durability of our earnings and increased visibility on how they will grow. Finally, before I'm going to hand it over to Scott, I did want to provide an update on our 2026 guidance. First, based on the underlying momentum that we are seeing across the business, we continue to feel very confident in our ability to exceed our targets for fundraising, strategic holdings, operating earnings, and FRE on a per share basis. Turning to ANI, as we said last quarter, Following our bottoms-up budgeting process, we entered the year expecting 2026 A&I to reach $7-plus per share, assuming a constructive and more normalized monetization environment. At that level, earnings growth would be approximately 45% year-over-year. So it's clearly an ambitious target, but one that we did have line of sight to achieving. That said, the operating environment four months into the year has, of course, been more challenging than what was embedded in our plan. Importantly, we are still seeing healthy monetization activity. Gross monetization revenues in Q1 were up more than 50% year-on-year. And when we look at exits since March 31st, as well as signed transactions expected to close in the coming quarters, that represents over $1.2 billion of gross monetization revenue for KKR. Notably, That is the largest forward monetization figure we've discussed on a call in our history. So while we continue to generate very strong outcomes, we do have modestly less visibility today than what our budget would have suggested at this point in the year. As a result, if you were handicapping our ability to reach $7 per share, we do think it is more likely that we land below that level. Importantly, if that were to happen, Any delayed monetizations that impact 2026 would not be lost, as we would expect them to shift to 2027 and beyond. And stepping back, the broader portfolio remains in very good shape. Embedded gains are at or near record levels. The earnings power of the firm continues to grow at an attractive rate, and we feel extremely well positioned for the future. With that, I'm going to hand the call off to Scott.