Carlyle Third Quarter 2024 Earnings Analysis

 

Carlyle Group Inc., the global alternative investment management group reported strong third quarter 2024 earnings with revenue tripling and net income more than quintupling in the third quarter of 2024 compared to the second quarter of 2024, according to Wolfteam Ltd.'s projections and estimates:

Dollars in millions, except per share amounts) 3Q'23 3Q'24 YTD 3Q'23 YTD 3Q'24
REVENUES
Fund management fees $ 502.6 $ 532.7 $ 1,511.2 $ 1,590.7
Incentive fees 21.1 38.7 61.9 96.2
Investment income (loss), including performance allocations (17.7) 1,831.5 (99.2) 2,033.9
Revenue from consolidated entities 152.7 180.1 411.7 510.6
All other revenues 57.9 52.2 152.1 161.9
Total Revenues 716.6 2,635.2 2,037.7 4,393.3
EXPENSES
Cash-based compensation and benefits 267.6 207.5 798.4 635.7
Equity-based compensation 64.4 121.6 186.8 355.1
Performance allocations and incentive fee related compensation (53.9) 1,151.0 (40.4) 1,222.4
General, administrative and other expenses 143.0 176.6 470.7 512.2
Expenses from consolidated entities 102.5 162.0 298.3 438.7
Interest and other non-operating expenses 31.5 30.2 92.0 91.3
Total Expenses 555.1 1,848.9 1,805.8 3,255.4
Net investment income (loss) of consolidated funds (9.3) 2.5 9.9 (9.6)
Income (loss) before provision for income taxes1 152.2 788.8 241.8 1,128.3
Provision (benefit) for income taxes 41.2 173.1 68.2 264.5
Net income (loss) 111.0 615.7 173.6 863.8
Net income attributable to non-controlling interests 29.7 20.0 90.0 54.3
Net income (loss) attributable to The Carlyle Group Inc. Common Stockholders $ 81.3 $ 595.7 $ 83.6 $ 809.5
Net income (loss) attributable to The Carlyle Group Inc. per common share:
Basic $ 0.23 $ 1.67 $ 0.23 $ 2.26
Diluted $ 0.22 $ 1.63 $ 0.23 $ 2.21
Income (loss) before provision for taxes margin2 21.2 % 29.9 % 11.9 % 25.7 %
Effective tax rate 27.1 % 21.9 % 28.2 % 23.4 %
Net performance revenues3 $ (64.4) $ 634.5 $ (163.9) $ 604.3

One of the best quarterly results in Carlyle Group Inc.'s history was generated partly by previous strategic decisions like investing the long-term insurance fees for the long-term in private equity, real estate and credit business lines,  partly to pick up in investment activity.

Assets Under
Management
• Total Assets Under Management: $447 billion, up 17% year-over-year
• Fee-earning Assets Under Management: $314 billion, up 15% year-over-year
• Perpetual Capital Fee-earning AUM: $95 billion, representing 30% of total Fee-earning AUM
• Pending Fee-earning AUM: $21 billion, up 101% year-over-year
• Available Capital for investment: $85 billion, up 20% year-over-year

So called perpetual capital fee-earning Assets Under Management, AUM or 95 billion USD constitutes 30 % of total fee-earning AUM. The long-term insurance fees from Carlyle's proprietary insurance business provides for flexibility in investing securing long-term capital appreciation.  Private equity firms' long-term capital appreciation is underappreciated by Wall Street research analysts who put in 0, zero for the possible future investment returns from mainly the private equity business investments of the largest global alternative investment management firms.

Blackstone, KKR, Apollo, Carlyle and other alternative asset managers, mainly with private equity business lines have shown time and time again such assumptions by Wall Street equity research analysts are simply not entirely correct.

Fundraising by Carlyle was also strong:

Fundraising was $8.8 billion in Q3 2024, driven by additional commitments raised in our latest U.S. Real Estate fund, as well as capital
raised across our Global Credit and Global Investment Solutions segments. Fundraising of $43.5 billion for the LTM increased 73%
compared to the prior LTM period
• Invested Capital in carry funds was $3.9 billion in Q3 2024, led by investment activity in our Secondaries & Portfolio Finance and Co-
Investment strategies as well as our Opportunistic Credit and Real Estate funds. Invested Capital of $20.0 billion for the LTM
increased 3% compared to the prior LTM period
• Realized Proceeds from carry funds were $6.8 billion in Q3 2024, driven by realizations in our U.S. Buyout, Europe Technology, and
Opportunistic Credit funds, as well as in our Primary Investments strategy in Global Investment Solutions. Realized Proceeds of $23.8
billion for the LTM were flat compared to the prior LTM period

Carlyle Group Inc.'s main business line private equity did good during the third quarter of 2024:

17
Global Private Equity
• Total AUM was $169 billion as of September 30, 2024, up 3% from the prior
quarter as Q3 2024 Fundraising of $3.7 billion and portfolio appreciation
more than offset realizations. Fundraising in Q3 2024 was primarily driven
by our latest U.S. Real Estate fund. Total AUM increased 5% from the prior
year, including LTM Fundraising of $13.1 billion
• Invested Capital was $1.6 billion in Q3 2024 and $7.2 billion for the LTM.
Q3 2024 activity was driven by our Real Estate strategy, the purchase of
KFC Holdings Japan, Ltd. (CJP IV / CAP V), and follow-on activity across
the segment
• Realized Proceeds totaled $4.1 billion in Q3 2024 and $14.7 billion for the
LTM. Notable Q3 2024 realization activity included SER Group (CETP III),
Tokiwa Corporation (CJP III), and PNB Housing Finance Limited (CAP IV) 

Private equity assets under management comprise around 34 % of Carlyle's assets under management and Carlyle is showing stable investment prowess in investing in private equity deals.

Global Credit, the hottest asset class currently also reflects 194 billion USD or circa 40 % Carlyle's total 447 billion USD assets under management and is performing strongly for Carlyle:

Credit fundraising was strong and liquid credit CLO's performed nicely for Carlyle as well:

Global Credit
• Total AUM was $194 billion as of September 30, 2024, up 2% quarter-over-
quarter, as market activity and Fundraising of $2.8 billion more than offset
outflows. Fundraising activity reflects capital raised across the platform,
notably in our Direct Lending and Opportunistic Credit funds. Total AUM
increased 30% from one year ago, including $18.7 billion of Fundraising and
inflows of $24 billion from Fortitude’s transaction with Lincoln Financial in
the LTM
• Invested Capital in traditional carry funds was $0.6 billion in Q3 2024 and
$3.5 billion for the LTM
• Liquid Credit closed five CLO resets in Q3 2024, covering $2.8 billion in
AUM. For the LTM, Liquid Credit issued seven new CLOs for $3.3 billion and
closed 12 CLO resets covering $6.2 billion in AUM. Direct Lending had gross
originations of $1.3 billion in Q3 2024 and $3.9 billion LTM
• Realized Proceeds in traditional carry funds totaled $1.0 billion in Q3 2024
and $3.2 billion for the LTM