CG - Earnings call transcript Q2 2024 | The Carlyle Group Inc.

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Operator

Good day, and thank you for standing by. Welcome to The Carlyle Group Second Quarter 2024 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker, Daniel Harris, Head of Investor Relations. Please go ahead.

Daniel Harris

Shannon. you, Thank welcome and Second XXXX Quarter Good to Call. Earnings morning, Carlyle's Head morning the our Chief and John on me is Chief Corporate Redett. call Officer and With Schwartz; this our Strategy, Harvey Executive Financial of Officer,

this and a earnings and be a on Investor replay presentation, press call This available detailed Relations also will morning, website. we is is Earlier a our release issued which being available. webcast,

in accepted non-GAAP certain should will measures from today's call. a to measures for accordance considered We These prepared not be substitute during financial isolation as accounting or in refer measures with principles. generally

have the measures to extent We GAAP to of available. release earnings a provided reasonably reconciliation in these our

on not differ could future those statements report those at on based today forward-looking are forward-looking to let section that undue and [Operator them. assumes on XX-K made current Any any any Officer, indicated. me Form annual management placed results time. the inherent in cause performance, of Executive including These guarantee call Schwartz. Instructions] With Harvey uncertainties, materially statements our risks and expectations obligation update our statements reliance over the do Factors and Risk involve identified be Carlyle that, should from no to turn to Chief not actual

Harvey Schwartz

morning, Good for joining us. thank Dan. everyone, Thanks, you and

see you at results. it, look The first truly half as in of 'XX reflects our strong when And you this momentum across our can business. clear momentum

we generated and months, FRE, X management strong record first the under FRE For record record margins, fundraising. assets

this quite last few Obviously, about morning, current and activity. the all moment we've seen talk to Let days remains over volatile. the market a the me take trading market

Fed balance the proprietary the improving we a important to big for GDP, the the us at our we back. activity the rate trajectory year. for is see. underlying of what cuts From this expected fundamentals all this tell across dynamics look data, year, platform step our still perspective, portfolio When The take it's our support

This Now Services. our insurance clients finalize our businesses the and announced large to all to acquire our billion asset-backed coming announced and of X fees. of Discover transactions consistent great our we've In to from capital transaction loans example recent others finance, Financial soon. is $XX have we with drive expect transaction landmark capabilities, portfolio a in we asset-backed value of that, credit markets intersection transaction and pipeline finance and the expertise a together generate for a

we're provider for to we've financial As here discussed, critical opportunity, finance early for. significant innings which of multitrillion-dollar sector. a opportunity a grow is in as the of capital well is the a asset-backed There positioned we're market

exits, have active considerable we IPO processes underway. of and a pipeline On sale

at portfolio You assets today, our billion. valuation manages just we Energy, and Cogentrix announced a of company, the it $X producer the power leading saw nearly of a sale

activity exit second half expect transactions of than in large higher We the likely in the first half with pipeline. year the our materially to be several

raised and our towards quarter U.S. our Moving fifth into XX to we're third and estate billion fund, of closed billion This north quarter credit record our last $XX billion $XX $X over the on target business our buyout alone. $XX saw the importantly, working business. in this real for was billion strong And year-to-date We months. credit of best for Japan fundraising. raised We XXXX. fundraising inflows

you business. today I'm run across is activity optimistic through specific year a some where compared about our Let me our ago. areas quite just of business quickly to

Credit, franchise. the lot In I positioned said, capitalize tailwinds As across of momentum Global industry well to share. a and capture we're there's market

real activity strong asset strategies. the transaction, to Services addition in credit Discover Financial and In saw we opportunistic

active. very remain we business, CLO our In

good largest CLO about year history. the first as feel The quite We ended QX in the and months the the XX-year our pipeline. CLO were forward X world's of we busiest second manager,

raised in the million We deployed investment needs billion levels Finally, high of we across co-investments. opportunities ] and the quite remain over see to attractive and and address $X our clients. Investment $XX Global last months secondaries [ XX continue Solutions, activity as the

In brand wealth wealth product, private been strong to our our continues adviser CAPM, with and half. momentum solutions product, credit our platforms. several resonate partners. global wealth, our wealth significant to has And first a CTAC, added had new has distribution

results it as up, the to the wrap are strong our To quarter stakeholders across believe as firm improve, said, [indiscernible] which our recent I well environment to benefit. market will, reflect things continues momentum despite, this activity we positioned

John. now the over turn call With me that, to let

John Redett

morning, Good everyone. Thanks, Harvey.

We to momentum financial targets. on platform XXXX across continue our see and track remain to significant achieve our

achieved AUM year-over-year. XX% billion the in $XXX of record We quarter, up

FRE, FRE also and record remain another produced quarter strong. margins of We

the for at We per XXXX, or Total second in half higher. shares DE are XXX quarter the remaining first per DE outstanding $X.XX amount million billion $X.XX million produced $XXX year. share lowest our we total X.X authorization. approximately year-to-date, And for million DE repurchase quarter, level the second is our share of repurchased bringing the shares share. have of the to on repurchase We since in of in XX% and XXX

cover up second XXXX. earnings of let's areas: investment X important Fee-related fee-related XX% earnings, the Now the increased the over to and million quarter, $XXX fundraising in quarter environment. from

far than and of first FRE and XX% is away the a higher of $XXX is half First XXXX. half million record

fees X% levels. year-over-year increased fees management growth Global double-digit in solutions the and quarter quarter and hit experienced to $XXX Second in Credit record million. Management

XXXX. highest second total by We accelerate level pending the nearly of of expect the the fees management AUM, across billion $XX driven year since to half fee-earning the

almost and improving fees environment. by steadily Transaction driven up were transaction XX% the advisory year-over-year

pace a record are year. on We for

half of XXXX, for towards XXXX implying the drive in our second billion first target to the of FRE be of than continue FRE higher will $X.X We half.

capital raised both Year-to-date, activity over fundraising. this and to and in billion new Equity last Global $XX Credit. saw Global turn Let's We months. quarter billion the in we XX $XX meaningful in Private

this $X billion our Japan fifth raised. than predecessor. capital vintage closed buyout brings fund, Equity, Across to larger XX% Private In we us nearly of Global Asia, its

announced and remains restaurant for recently food expertise to our our pan-Asia robust take This market KFC of leverage together Japan, We in us. teams sector. private the the where significant came a

fund, final than growth. quickly In terms of what higher of our release, a franchise, latest are the progressing our close. key in a worth earnings exceptional to real estate In a we disclosed on market, we closed we real noting performance amount our of remains which and it's materially area challenging estate

In Global we raised billion quarter. in Credit, the $X

we the first history. XX-plus said, of one months in Harvey CLO most X As year active our had

as CTAC, We also benefited from well continued other as our credit wealth product, strategies. strength in

segments significant towards our work balance of continue all capital the For to we $XX as year, of we to the expect target billion. raise across

Finally, investment touch environment. the let me on

As recent as investment Harvey activity across confidence seller mentioned, improved despite we the business are has volatility. and seeing increased buyer

access have data which great across We increased activity global our points to platform, also levels. proprietary to

competition is In picked more interest a and path real an terms of up. has IPO are exit exit strategic activity, robust where seeing we now buyer

activity expect We in increased the second XXXX. of half

focus results up, on delivering strong Wrapping our to shareholders. we for continue

good platform achieve we laid and momentum track the to our XXXX. across We are out financial on have for targets that

With your to operator for that, the the me let call questions. over turn

Operator

first ISI. line question [Operator Evercore of Schorr with Instructions] the comes Glenn from Our

Glenn Schorr

brokers exit pipeline, And both reported all comments have of similar the and have commentary. about DE guide advisers clear your heard the said and that and I your loud backdrop.

The a changed few last market lot days. in feels the sentiment and the it's outlook is like --

why that curious, are that's for perception A, it. I'm And down materially, to going things your mix, think slow different you the I is market's business but get so

capital-raising for I'd goes So how B, outlook into that thoughts your that. And all PE that love on to business hear just -- how specifically?

Harvey Schwartz

Yes.

So Glenn, the for again, thanks question.

markets the I and as lot obviously, we at said, of the growth. we and positioned this of portfolio So open extrapolate there's days our views the last look the trading way underlying morning, couple on screens. are economic of When and in that to terms red data John performance, we of a form

none Tuesday, having about the we this be environment. current questions would in If the mix were of these call market last

As a we things of fact, say you matter of felt. trajectory understating how were the might

a us solid. risk very which looks about think to fact to very call expected feels liquidity-driven I Again, so bit the GDP Fed careful last adjustment, moment very, were rate that have all we to having not sentiment-driven. this we're we talking be overreact and at week, a cuts, little if market And the of

that none changed of has our view. So

extend feel good. still ways. that. It's extrapolate problematic performance to too good. into good. announcements feels sentiment Portfolio itself early feel Exits way opportunity Pending Now looks can good. Market

is We'll really is see encourage what over the in which But market of this to happens think environment. market what next terms the I if several action, take Fed for. looking the weeks will anything,

than nothing things And mechanism reminded, of when be the raising again, rates one slower we is the is is Fed learned the have we of transmission how couple to when last years but the over my than they're this the ball the crystal view year couple our about last days of better again, Glenn, changes of is about stage. yours, the no balance cutting. at And

Operator

the of comes line Alexander question Sachs. with Our next Blostein from Goldman

Alexander Blostein

like how much really those they through, contributors today. are it just So estate to confidence seeing bit where on the in a maybe year fundraising half towards nice in sort you real the where clarify target you around guys around build come $XX year, the guys and real maybe for capital of billion for level plus billion your funds remaining you to And expect and about talk back that a the seems estate, momentum. particularly maybe raised stand $XX just working of the little key have

John Redett

Alex, at in Look, very feel quarter momentum year-to-date. we we We in strong have second John. obviously quarter. it's the $XX billion the about had good very a fundraising. We're

billion we're in As I months. remarks, last $XX said in XX at my the

we're working So billion. to we $XX the like feel do

the raising as the months, really where of look it's And I we're across platform at kind X money. next

lot the of product in We have market. strategies a

the solutions momentum see business, think the I secondaries, in fund. you'll continued both our co-investment

the Harvey CAPM more on As said, product platforms. is wealth

good about feel we that. So

of in seeing terms business, good our product we're momentum our In there, credit CTAC. wealth

in our our You'll on activity opportunities credit credit to strength CLO will see continue and continue. fund, infra

kind in I you'll when Private Equity, at And strength our of continued Global estate then real fundraise. see look

number be funds we the We're and disclosed. in we higher As we well, earlier, that's a the than market. launching product we'll infrastructure in I a X And later of lot as materially have momentum. buyout have said at year,

we we on we're the quite the So have. the market we lot back in of have in momentum positive and strategies really feel a half, --

Operator

from comes with of question JPMorgan. Ken next Our line Worthington the

Kenneth Worthington

both think CAP been CAP either for I fundraising and the billion. see for market? can comments How for you in $X next Can recent you And that is outlook Do Europe make on funds about buyout-focused you for talk and the or sized raised outlook vintages. more funds? here? longer in similarly Asia easier those fundraising fund Any in have vintage then or VI, as much VI CEP challenged VI? you the

John Redett

raising market I'm we've Look, CAP the about that pretty said what in terms stating money. John. VI will fund, think we've for specifically as fund CEP. of been it's And as previously do its say predecessor VI smaller Ken, that we limited well the are be we and clear current can CAP I than in

Look, our in overall, I it's facing CAP geopolitical billion. said, business $X we've some headwinds. of raised as Asia, But really look, terms

very to us, Asia [indiscernible] opportunities was We a attractive it. a Asia, -- But is see business committed pan-Asia business continue to fully is of a effort. transaction, our KFC in and kind we're to this the important which very

where in a we I you number. can't really end to As provide VI, CAP up

Operator

Barclays. Our next question the with Budish line Ben comes from of

Benjamin Budish

to transaction advisory wanted add fees. I about your

back as this the like half there's You year. coming a on last of lot more activity year it your sounds Based the of strategic a comments, in area focus. identified

on the would be color and line that very into XXXX going in any should half Just helpful. how item back evolve

John Redett

focused Yes. the been particular been very has part focus months. a is of last XX business. the this area clear firm is the on this that firm Harvey has John. This Look, our for

year months, to at for the platform, like I environment. generating of be we would And kind transaction It's new will private progress we're pleased transaction benefiting transactions the impressive. feel just over from up not a And at When with look we this growth it's you business our across specific the market fees. last obviously, a kind very the of X exits conducive it's in capital as how XX%. of we're more the say pipeline quite made. this equity, looking really record as well we've

Operator

Bedell Brian Our of Deutsche next question line Bank. comes from the of

Brian Bedell

back the half. going outlook to the deployment Just for second

terms If $XX in potential think, the fees? could about of the, pending a management billion little I AUM of build you bit timing fee that for nearly of talk

if outlook environment, as half, just the in persists I well? of then you sentiment how And the guess, the do in light U.S. envision potential impacting the and this that your risk-off in Japan, also second deployment

John Redett

investors, positive long-term a -- Look, John. think it's as today. can't happens, said this Brian, call, But Yes, of look, to we're less focus know probably we market extend what market where I we're period if than down market, not don't day-to-day in or in volatility I I already on it's sit but generations.

But looking in the see today, back the tremendous transaction pipeline at activity we half.

very feel about good earlier, as equity. it's that. solutions. again, it's And credit, in said It's and we I not it's So really only -- in private

solutions in I at mean if strong. deployment a you the pipeline. have quite levels business, year-to-date, billion look We're our $X.X we've at and had it's very good they

So I'd it's say broad-based.

don't are where we about we -- going where I'm very not sit you smart I feel to markets tell today, to But enough the be. good the deployment.

number, there's since which the XXXX, the pending there's fee-earning of is Equity it's in and been Private that $XX and billion of Global some AUM, also level terms In credit. some really highest AUM

turned be coming on the to that expect should over quarters. You

have So there. Equity, in we buyout Private in Japan Global

in the on platform. spread you assume it's We turn real over quarters. estate. have should across And fees the really coming Global But those Credit,

Operator

comes question Autonomous with of next line Patrick the Our Research. from Davitt

Patrick Davitt

It the realization like you're most were looks with so to of particularly XX% still think faster is XX% ratio now light. range, FRE I bit us which already a than kind happened of comp expecting, in

firstly, Or if, year we this from this expect new realizations be the here? say, light? can to stay later it up a back ratchet So baseline in could

John Redett

within it's we've we going look, honest, I the with Patrick, pleased on Yes, we're have in we're to to John. that ratio. we're specific range business not the And hit operate quarter. our very said that managing fourth specified -- But to always ratio. Yes, be

end [indiscernible] expect us business. that where range, that of at range should X% us upper in the of from is You kind which is are, minus operate the midpoint or to to at to you operate X% XX% should we or where expect the

the margin investing necessarily business Look, in the focused growth, on these but not completely focused of more investing we're businesses growth. very mindful driving on in for for

Operator

with comes Citizens of line the Mckenna Brian question Our from next JMP.

Brian Mckenna

direct the relates morning So of implications just [indiscernible] [indiscernible] BDCs. we about this of just announcement CG? update there. institutional you it Why on now financial X is get time your transaction? this? saw there talk your you're be for lending then merging that the an right and it to both specifically in And will for great merits to private strategy, Can the Are any the as

John Redett

Yes.

it and with of we'll merging announced we over details So QX Brian, won't close, merger BDCs the likely our public provide more a private until And time. BDC, XXXX.

in us the But business. public scale is look, benefit to is we get BDC. scale the more a It

I think will us to attractive the firm. raise it forward. to for capital equity going financially obviously easier be That's

is But and we benefit it's positive closer there as it's quantify to this net-net, merger, also close. with Carlyle. get But for that FRE we'll to the a a

Operator

Fannon from comes question line of of next Jefferies. Dan Our the

Daniel Fannon

second Within just kind year you and for fees at prospectively, were the your of Global still fees PE fundraising bucket? what quarter-over-quarter, look I of half up obviously guess Private Equity, as is the management management given but outlook year-over-year talked within the slightly the global dry powder. and about you down the

Harvey Schwartz

Yes.

we business. to fund predecessors. the So be our Global fees. real expect are Obviously, question, in management with Equity kind the couple strength we're the we're in vintages seeing other real side of showing Global of Asia to real terms expecting of flattish, Europe the But we're and But mitigate able estate some that Private and do the previous estate Equity, we business. Dan, smaller a as funds, fund of of buyout I business parts the said in of equity our in buyout private than Private growth

Operator

comes from the Chubak of next of Steven Wolfe Our Research. line question

Steven Chubak

on making the a the mark-to-market in for some channel. you're retail of ask progress just to wanted So

How improved some are quarter? designing that out PE just drill of the some with uptake? you more I more to And cited be trend was good specifically, there maybe down You hoping momentum. seen further. that offerings [indiscernible] your peer are just to some product have did in competitive the pretty retail-focused how

Harvey Schwartz

of spending space. been this lot in a I've time So

the Just David a office who to quarter. we're color, for focus whole distribution partners, extend I some platforms town on, our we and number series of past grateful did their in meetings which and the CAPM, we're to of with mentioned the looking you halls, launched give across U.S., really internationally. John a

and look our momentum at product about we feel when good So you the credit CAPM, CTAC, very, behind very it.

scale multiple In these terms of and not and have focus products. want we to of want strategy, are view we channels and really the with that flood partners long-term distribution performance. to We

period platform long then have funds, And part so selected stay build And have our a always feeder on obviously, time. been can you'll of on that which see we a us targeted very of of focused mix really over we'll programs strategy.

the the product, still us that key a across the In equity And footholds X coming that targeting terms private XXXX we we're give product. of want will complementary as for years. wealth

Operator

the question from Cowen. Katz next with comes of Our TD line Bill

William Katz

to billion that. then about turning balance think capital, that talked up should How company. updated of you for think the on could Maybe strategic triangulate the just What we this sheet? Harvey, $X.X us repurchase? how an maybe, the for pacing the M&A wondering -- residual how haven't about about you And was I if does thoughts give thinking against

John Redett

Yes.

Harvey growth buying runs the and we the and a took for past back think the allocation, really just in in I how look, M&A. we back, investing capital and step spectrum discussed and about Bill, shares really So capital of rethought allocation business

XXXX, with look, our time very down. the was first our And buyback That's year, we're IPO. since pleased Last activity. the I'd count say share

Year-to-date, a down is again. share think that's I count our positive.

that's think I another positive.

shares million year-to-date. remarks, said And we in XXX as repurchased I my

done of million past I hundred a a best in year. the couple think the in is we've ever

deliver on large to share repurchase. pace fairly we're a So

that of the buyers active you should share stock. billion and assume We remaining the on repurchase, we're have X.X

In it's do we question it culturally, again, was to comes to terms back we something multifaceted saw capital. it of compatible, how in M&A, deal the M&A allocating if sense the made stock the like absolutely And look, think strategically a buyback. to sense and me, financially, pivot would that and away we from about we

terms We we and think and business, for about allocating our returns where of growth stakeholders. our best capital shareholders get the our can in

away something transaction. sense, a capital would on for do pivot M&A an and stock the utilizing we M&A made if the So front from buyback

Harvey Schwartz

I we of agree to again, and terms But It's the to Yes. What we're of in remarks, the I allocation most X.X the look capital years at to said in would which my organic momentum really John way I the said. discipline obviously, lens say, what's accretive. everything here all, coming with really together. understand marginally first as and that important sitting the team is I like in at now applying Carlyle,

should us described. our expect those all fit position us right take directions. across, came to said flexibility if Having currently that, platform in lot John gives to to prerequisites They're but has flexible. it you not action, a the the of And opportunity just

Operator

Our Stanley. Morgan line of comes with next Michael the Cyprys from question

Michael Cyprys

Just how Fortitude is quarter, how progressing? from that on if and a about could see from your on you How more maybe in could us insurance pace initiatives accelerating book And just of the the over growth the the here? hoping and on broadly, you update just then of strategically I thinking contribution into you was Carlyle question strategies? insurance. elaborate the migrating pace you're Fortitude-related

Harvey Schwartz

has been partnership Fortitude the So fantastic.

really a partnerships Fortitude. insurance flywheel all a of we exemplify is credit, insurance gets our example Services an the partnership CSS And being and know, the and across And transaction. and business, it great effect clients by Discover about markets of insurance. you from collaboration talked one As across and business away the that does our really bit capital Financial

about that. we good quite So feel

from focus ability opportunity of to of over the there. so broadly, position and with the huge grow several number our growing sector One, insurance our investment in grade. in business But last terms gives being us more Again, ways. and example asset-backed focus any pivot fantastic our In importantly, obviously, quickly years Fortitude more in capital it on a is private a of of that's the light, ways. and positioning the there's number obviously,

quite narrow margin at deployment the to market being business. competitive capital We're there. disciplined of various more around. terms the our insurance answer partnership we question, trajectory But in bit good good the the transaction pipeline all the of your very reflecting about been regulatory has is the The partners. about around the and world, needs changes the flows a quite and in block But feel

Operator

Siegenthaler question of Our comes America. Bank last from the of Craig of line

Craig Siegenthaler

cut who you but of part think I okay? Can me my out, you hear I I know guys am. think name

Harvey Schwartz

you. we got Yes,

talk mean Sorry you. over about that. didn't I to

Craig Siegenthaler

Perfect. at No worries all.

another I So question. compensation actually have

'XX color is from surprise, could the lot about we the down comp us stock-based modifications how So of a the of roll-off over could step because year-over-year. run of stock-based a help XQ year up comp. in to hoping a stock-based 'XX announced you the quarter, due not had XQ coming really comp you there's the on XQ I running we forward ballpark but next rate on with comp you from to guys of were That's I $XX should tranches. give million maybe the model call, the believe but some stock-based per one

John Redett

Craig, a people we and the remain for stock the elevated clear these driven telling gave it's responsible of that And look, pretty will senior it earlier firm this to year, in individuals driving we've XXXX. the grant comp, Look, by of you lot growth. of in terms key stock-based unit that is saying, are John. in the been performance of

recall, They And as XX%, these instruments, and the up stock's XX% very great if you alignment. shareholder-friendly are vest very, XX%. only

shareholder-friendly again, very So instruments.

know even it front-end documents performance loaded. in in -- little is the award, we're sense. expensing of and that different to if expense of the middle the still that's though We we a award accounting have the even vests, The don't very

fairly from large grant. impact this So you're [indiscernible] seeing a

trickling number fourth probably from off to elevated down I to start. directionally, is and comp not where down would I'd say too in quarter XXXX. be expect far again, third stock-based I'd you -- expense the trickle and then alluded But start they

Harvey Schwartz

happy take on comes accounting reality, We're very this a Again, of up. obviously the always to because running we're offline that challenge. for of this and count little a the a focused share so which efficiency question of discipline Yes, more folks why bit over are how versus we've John all year bit and announced. is a moving dramatically come focusing ago the company I this the the capital into and since you're planning started we down that, on seeing that

to I agree, equity much. little so the to expense confusing But count share compensation and it's count. comp see up share eye a that expense reconcile on see and down -- It's an a little hard keep

Operator

conference I to would Harris now back hand closing for like to over the Daniel remarks.

Daniel Harris

Yes. attention Thank for your you time and today.

forward If talking you after Investor questions, follow-up next reach quarter. out any call. look to Relations you have We the to please to

Operator

This conference for call. Thank concludes participation. today's you your

now You disconnect. may

The Carlyle Group Inc. (CG) 5 Aug 242024 Q2 Earnings call transcript