The private-equity firm
took a charge of more than $1 billion as it reported a net loss of nearly $700 million, or $1.92 a share, for its December quarter.
By late afternoon Wednesday, its stock was up 8.5%, to $44.20.
What gives? The charge follows a change in how the firm pays its buyout professionals. To better align them with Carlyle shareholders and fund investors, the buyout teams will now get more of their pay when Carlyle actually cashes out on a holding—or Carlyle stock rises—instead of getting paid when Carlyle deems the value of the holding to have increased on paper.
But for that charge, Carlyle still made 86 cents a share in distributable earnings on the quarter, and $3.24 a share for the 2023 year. It said it has the wherewithal to buy back $1.4 billion worth of stock.
Analysts welcomed Carlyle’s compensation change, even if it came with a $1.1 billion one-time charge. “Congrats on the comp change,” said
Brad Bedell on Wednesday’s conference call.
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The compensation move follows similar changes made at rival private-equity firms like
and
KKR
.
Capital markets haven’t offered buyout firms as many opportunities to cash out of their holdings, during the recent slow years for stock offerings and mergers. So investors have grumbled about the compensation levels of buyout pros.
Carlyle has also lagged behind its peers in expanding its business beyond traditional private equity. Blackstone and others have aggressively tried to grow their management of funds that pay recurring fees.
Profits margins on management fees exceed 60% at other firms. Carlyle reported record margins on its management fees in its December quarter, but those margins were just 43%, It aims to boost those margins above 50%, said Chief Executive Harvey Schwartz on the call.
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Carlyle believes it can raise $40 billion for its funds, in 2024.
Write to Bill Alpert at william.alpert@barrons.com
