8-K: Carlyle Group Reports Record Fee Related Earnings in First Quarter 2024

The Carlyle Group Inc. announced its first quarter 2024 financial results, highlighting record fee related earnings and a quarterly dividend of $0.35 per share.

Summary

• The Carlyle Group reported its unaudited financial results for the first quarter of 2024, ending March 31.
• The company's U.S. GAAP results included income before provision for income taxes of $121 million and net income per common share of $0.18 on a diluted basis.
• Total balance sheet assets were $21 billion as of March 31, 2024.
• Carlyle achieved record Fee Related Earnings (FRE) for the quarter.
• Assets under management (AUM) totaled $425 billion as of March 31, 2024, a 12% increase year-over-year.
• Fee-earning AUM reached $304 billion, also up 12% year-over-year.
• The company declared a quarterly dividend of $0.35 per common share, payable on May 21, 2024, to holders of record on May 14, 2024.
• Distributable Earnings (DE) were $431 million for the quarter, or $1.01 per common share on a post-tax basis.
• Fee Related Earnings (FRE) were $266 million for the quarter.
• Realized Net Performance Revenues were $142 million for the quarter.
• The company repurchased or withheld 3.3 million shares of common stock in Q1 2024, totaling $150 million.
• Over $1.2 billion of repurchase capacity remained under the company's $1.4 billion repurchase authorization as of March 31, 2024.

Sentiment

Score: 6

Explanation: The document presents a mixed picture. While there are positives like record fee-related earnings and AUM growth, the decrease in net income and the investment loss temper the overall sentiment. The company's forward-looking statements are positive, but the risks and challenges mentioned prevent a higher score.

Positives

• Carlyle achieved record Fee Related Earnings, indicating strong performance in its core business.
• The company's AUM and fee-earning AUM both grew by 12% year-over-year, demonstrating strong growth and investor confidence.
• The increase in FRE margin from 35% to 47% shows improved profitability.
• The company's continued share repurchases indicate confidence in its future prospects and a commitment to shareholder value.
• The company's dividend policy provides a consistent return to shareholders.

Negatives

• Net income attributable to The Carlyle Group Inc. common stockholders was $66 million for Q1 2024, or $0.18 per share on a diluted basis, which is down from $100.7 million in Q1 2023.
• Investment loss, including performance allocations, was $83.9 million in Q1 2024, reflecting the reversal of unrealized performance allocations in certain carry funds.
• Net Accrued Performance Revenues were $2.2 billion as of Q1 2024, down 9% from the prior quarter.
• Total AUM was flat compared to the prior quarter, as inflows and appreciation were offset by outflows across all segments.
• Fee-earning AUM was down 1% from the prior quarter, as capital deployment was outpaced by outflows.

Risks

• The company's performance is subject to market conditions, which could impact investment performance and fundraising.
• Changes in regulations and laws, including tax laws, could affect the company's operations and profitability.
• The company's ability to manage expenses and retain key personnel is crucial for its success.
• The pace and scale of capital deployment and exit activity may not be consistent with historical levels.
• There is no guarantee that fundraising will translate into increased earnings and margins.

Future Outlook

Carlyle remains confident in its ability to deliver its financial targets for 2024 and is well-positioned to capitalize on the improving investment environment. The company expects cash-based compensation and benefits to decrease and performance allocations and incentive fee related compensation to increase in 2024.

Management Comments

• Carlyle Chief Executive Officer Harvey M. Schwartz said, 'Carlyle's first quarter results reflect continued momentum across the firm including another quarter of record Fee Related Earnings.'
• Harvey M. Schwartz also stated, 'This is the outcome of our efforts to invest for growth and drive shareholder value. Carlyle is well-positioned to capitalize on the steadily improving investment environment and we remain confident in our ability to deliver our financial targets for 2024.'

Industry Context

The results reflect a positive trend in the alternative asset management industry, with Carlyle demonstrating strong growth in fee-related earnings and AUM. The company's focus on diverse investment strategies across private equity, credit, and investment solutions positions it well in the current market environment.

Comparison to Industry Standards

• Carlyle's 12% year-over-year growth in AUM is comparable to other large alternative asset managers such as Blackstone and Apollo, which have also seen strong growth in recent periods.
• The 47% FRE margin is a significant improvement and places Carlyle among the top performers in terms of profitability within the industry.
• The company's focus on perpetual capital, which represents 29% of total fee-earning AUM, is a strategy also employed by other large firms to ensure stable long-term revenue streams.
• Carlyle's fundraising of $5.3 billion in Q1 2024 is a solid result, but it is important to compare this to the fundraising performance of its peers to fully assess its competitive position.
• The 2% carry fund appreciation in Q1 2024 is a moderate result, and it is important to compare this to the performance of similar funds managed by competitors.

Stakeholder Impact

• Shareholders will benefit from the declared dividend of $0.35 per share and the ongoing share repurchase program.
• Employees may see changes in compensation structure with a shift towards performance-based incentives.
• Investors will be interested in the company's continued growth in AUM and fee-related earnings.
• Portfolio companies will benefit from Carlyle's continued investment and value creation efforts.

Next Steps

• Carlyle will host a conference call on May 1, 2024, to discuss its first quarter financial results.
• The company will continue to execute its strategic plan and focus on delivering its financial targets for 2024.

Key Dates

Keywords

Fee Related Earnings, Assets Under Management, Distributable Earnings, Private Equity, Global Credit, Investment Solutions, Fundraising, Dividends, Share Repurchase, Financial Results