Segment Reporting

9 Months Ended

Sep. 30, 2021

Segment Reporting [Abstract]

Segment Reporting

14. Segment Reporting

Carlyle conducts its operations through three reportable segments:

Global Private Equity – The Global Private Equity segment is comprised of the Company’s operations that advise a diverse group of funds that invest in buyout, middle market and growth capital, real estate and natural resources transactions.

Global Credit – The Global Credit segment advises a group of funds that pursue investment opportunities across various types of credit, including loans and structured credit, direct lending, opportunistic credit, energy credit, distressed credit, aircraft financing and servicing, and capital solutions.

Global Investment Solutions – The Global Investment Solutions segment advises global private equity fund of funds programs and related co-investment and secondary activities through AlpInvest. This segment also included Metropolitan Real Estate (“MRE”), a global manager of real estate fund of funds and related co-investment and secondary activities, prior to its sale on April 1, 2021.

The Company’s reportable business segments are differentiated by their various investment focuses and strategies. Overhead costs are generally allocated based on cash-based compensation and benefits expense for each segment. The Company’s earnings from its investment in NGP are presented in the respective operating captions within the Global Private Equity segment.

Distributable Earnings. Distributable Earnings, or “DE,” is a key performance benchmark used in the Company’s industry and is evaluated regularly by management in making resource deployment and compensation decisions and in assessing performance of the Company’s three reportable segments. Management also uses DE in budgeting, forecasting, and the overall management of the Company’s segments. Management believes that reporting DE is helpful to understanding the Company’s business and that investors should review the same supplemental financial measure that management uses to analyze the Company’s segment performance. DE is intended to show the amount of net realized earnings without the effects of the consolidation of the Consolidated Funds. DE is derived from the Company’s segment reported results and is used to assess performance.

Distributable Earnings differs from income (loss) before provision for income taxes computed in accordance with U.S. GAAP in that it includes certain tax expenses associated with certain foreign performance revenues (comprised of performance allocations and incentive fees), and does not include unrealized performance allocations and related compensation expense, unrealized principal investment income, equity-based compensation expense, net income (loss) attributable to non-Carlyle interests in consolidated entities, or charges (credits) related to Carlyle corporate actions and non-recurring items. Charges (credits) related to Carlyle corporate actions and non-recurring items include: charges (credits) associated with acquisitions, dispositions, or strategic investments, changes in the tax receivable agreement liability, corporate conversion costs, amortization and any impairment charges associated with acquired intangible assets, transaction costs associated with acquisitions and dispositions, charges associated with earnouts and contingent consideration including gains and losses associated with the estimated fair value of contingent considerations issued in conjunction with acquisitions or strategic investments, impairment charges associated with lease right-of-use assets, gains and losses from the retirement of debt, charges associated with contract terminations and employee severance. Management believes the inclusion or exclusion of these items provides investors with a meaningful indication of the Company’s core operating performance.

Fee Related Earnings. Fee Related Earnings, or “FRE,” is used to assess the ability of the business to cover direct base compensation and operating expenses from total fee revenues. FRE differs from income (loss) before provision for income

taxes computed in accordance with U.S. GAAP in that it adjusts for the items included in the calculation of DE and also adjusts DE to exclude net realized performance revenues, realized principal investment income, net interest (interest income less interest expense), and certain general, administrative and other expenses when the timing of any future payment is uncertain.

The following tables present the financial data for the Company’s three reportable segments for the three and nine months ended September 30, 2021:

	Three Months Ended September 30, 2021
	Global Private Equity		Global Credit		Global Investment Solutions		Total
	(Dollars in millions)
Segment Revenues
Fund level fee revenues
Fund management fees	$	265.1	$	92.5	$	59.3	$	416.9
Portfolio advisory and transaction fees, net and other	7.3		15.9		—		23.2
Total fund level fee revenues	272.4		108.4		59.3		440.1
Realized performance revenues	962.9		2.1		45.9		1,010.9
Realized principal investment income	61.6		7.4		2.3		71.3
Interest income	0.2		1.3		—		1.5
Total revenues	1,297.1		119.2		107.5		1,523.8
Segment Expenses
Compensation and benefits
Cash-based compensation and benefits	133.6		58.7		25.7		218.0
Realized performance revenues related compensation	434.5		1.0		41.9		477.4
Total compensation and benefits	568.1		59.7		67.6		695.4
General, administrative, and other indirect expenses	38.4		14.7		6.9		60.0
Depreciation and amortization expense	7.1		2.3		1.3		10.7
Interest expense	17.4		6.8		2.9		27.1
Total expenses	631.0		83.5		78.7		793.2
Distributable Earnings	$	666.1	$	35.7	$	28.8	$	730.6
(-) Realized Net Performance Revenues	528.4		1.1		4.0		533.5
(-) Realized Principal Investment Income	61.6		7.4		2.3		71.3
(+) Net Interest	17.2		5.5		2.9		25.6
(=) Fee Related Earnings	93.3		32.7		25.4		151.4

	Nine Months Ended September 30, 2021
	Global Private Equity		Global Credit		Global Investment Solutions		Total
	(Dollars in millions)
Segment Revenues
Fund level fee revenues
Fund management fees	$	788.7	$	258.6	$	171.6	$	1,218.9
Portfolio advisory and transaction fees, net and other	24.1		34.1		0.3		58.5
Total fund level fee revenues	812.8		292.7		171.9		1,277.4
Realized performance revenues	1,525.9		2.2		105.2		1,633.3
Realized principal investment income	109.3		23.1		6.7		139.1
Interest income	0.9		4.5		0.1		5.5
Total revenues	2,448.9		322.5		283.9		3,055.3
Segment Expenses
Compensation and benefits
Cash-based compensation and benefits	396.3		168.0		83.3		647.6
Realized performance revenues related compensation	688.3		1.0		97.1		786.4
Total compensation and benefits	1,084.6		169.0		180.4		1,434.0
General, administrative, and other indirect expenses	116.2		39.5		21.5		177.2
Depreciation and amortization expense	19.3		6.2		3.5		29.0
Interest expense	46.9		19.4		7.9		74.2
Total expenses	1,267.0		234.1		213.3		1,714.4
Distributable Earnings	$	1,181.9	$	88.4	$	70.6	$	1,340.9
(-) Realized Net Performance Revenues	837.6		1.2		8.1		846.9
(-) Realized Principal Investment Income	109.3		23.1		6.7		139.1
(+) Net Interest	46.0		14.9		7.8		68.7
(=) Fee Related Earnings	281.0		79.0		63.6		423.6
Segment assets as of September 30, 2021	$	10,146.4	$	2,169.7	$	1,874.6	$	14,190.7

    The following tables present the financial data for the Company’s three reportable segments for the three and nine months ended September 30, 2020:

	Three Months Ended September 30, 2020
	Global Private Equity		Global Credit		Global Investment Solutions		Total
	(Dollars in millions)
Segment Revenues
Fund level fee revenues
Fund management fees	$	248.1	$	86.2	$	54.8	$	389.1
Portfolio advisory and transaction fees, net and other	3.5		1.6		—		5.1
Total fund level fee revenues	251.6		87.8		54.8		394.2
Realized performance revenues	70.5		—		16.3		86.8
Realized principal investment income	7.5		4.5		0.8		12.8
Interest income	0.3		2.3		0.1		2.7
Total revenues	329.9		94.6		72.0		496.5
Segment Expenses
Compensation and benefits
Cash-based compensation and benefits	122.5		52.5		30.3		205.3
Realized performance revenues related compensation	32.9		—		14.0		46.9
Total compensation and benefits	155.4		52.5		44.3		252.2
General, administrative, and other indirect expenses	40.4		12.0		9.6		62.0
Depreciation and amortization expense	5.3		1.8		1.1		8.2
Interest expense	13.7		6.3		2.3		22.3
Total expenses	214.8		72.6		57.3		344.7
Distributable Earnings	$	115.1	$	22.0	$	14.7	$	151.8
(-) Realized Net Performance Revenues	37.6		—		2.3		39.9
(-) Realized Principal Investment Income	7.5		4.5		0.8		12.8
(+) Net Interest	13.4		4.0		2.2		19.6
(=) Fee Related Earnings	$	83.4	$	21.5	$	13.8	$	118.7

	Nine Months Ended September 30, 2020
	Global Private Equity		Global Credit		Global Investment Solutions		Total
	(Dollars in millions)
Segment Revenues
Fund level fee revenues
Fund management fees	$	779.3	$	237.5	$	140.2	$	1,157.0
Portfolio advisory and transaction fees, net and other	10.8		19.4		—		30.2
Total fund level fee revenues	790.1		256.9		140.2		1,187.2
Realized performance revenues	251.7		26.5		132.4		410.6
Realized principal investment income	34.0		14.9		1.9		50.8
Interest income	2.6		8.0		0.6		11.2
Total revenues	1,078.4		306.3		275.1		1,659.8
Segment Expenses
Compensation and benefits
Cash-based compensation and benefits	382.8		156.1		80.3		619.2
Realized performance revenues related compensation	114.4		12.2		125.0		251.6
Total compensation and benefits	497.2		168.3		205.3		870.8
General, administrative, and other indirect expenses	115.2		30.7		22.5		168.4
Depreciation and amortization expense	16.2		5.2		3.4		24.8
Interest expense	43.4		20.2		7.0		70.6
Total expenses	672.0		224.4		238.2		1,134.6
Distributable Earnings	$	406.4	$	81.9	$	36.9	$	525.2
(-) Realized Net Performance Revenues	137.3		14.3		7.4		159.0
(-) Realized Principal Investment Income	34.0		14.9		1.9		50.8
(+) Net Interest	40.8		12.2		6.4		59.4
(=) Fee Related Earnings	$	275.9	$	64.9	$	34.0	$	374.8

        The following tables reconcile the Total Segments to the Company’s Income (Loss) Before Provision for Taxes for the three months ended September 30, 2021 and 2020.

	Three Months Ended September 30, 2021
	Total  Reportable Segments		Consolidated Funds		Reconciling Items			Carlyle Consolidated
	(Dollars in millions)
Revenues	$	1,523.8	$	62.1	$	53.6	(a)	$	1,639.5
Expenses	$	793.2	$	51.9	$	93.0	(b)	$	938.1
Other income	$	—	$	(0.1)	$	—	(c)	$	(0.1)
Distributable earnings	$	730.6	$	10.1	$	(39.4)	(d)	$	701.3

	Three Months Ended September 30, 2020
	Total Reportable Segments		Consolidated Funds		Reconciling Items			Carlyle Consolidated
	(Dollars in millions)
Revenues	$	496.5	$	56.3	$	481.8	(a)	$	1,034.6
Expenses	$	344.7	$	47.9	$	250.8	(b)	$	643.4
Other income	$	—	$	23.9	$	—	(c)	$	23.9
Distributable earnings	$	151.8	$	32.3	$	231.0	(d)	$	415.1

The following tables reconcile the Total Segments to the Company’s Income (Loss) Before Provision for Taxes for the nine months ended September 30, 2021 and 2020, and Total Assets as of September 30, 2021.

	Nine Months Ended September 30, 2021
	Total Reportable Segments		Consolidated Funds		Reconciling Items			Carlyle Consolidated
	(Dollars in millions)
Revenues	$	3,055.3	$	185.3	$	3,542.4	(a)	$	6,783.0
Expenses	$	1,714.4	$	162.6	$	1,797.3	(b)	$	3,674.3
Other income (loss)	$	—	$	9.6	$	—	(c)	$	9.6
Distributable earnings	$	1,340.9	$	32.3	$	1,745.1	(d)	$	3,118.3
Total assets	$	14,190.7	$	6,778.2	$	(180.2)	(e)	$	20,788.7

	Nine Months Ended September 30, 2020
	Total Reportable Segments		Consolidated Funds		Reconciling Items			Carlyle Consolidated
	(Dollars in millions)
Revenues	$	1,659.8	$	164.5	$	(404.4)	(a)	$	1,419.9
Expenses	$	1,134.6	$	148.8	$	214.7	(b)	$	1,498.1
Other income (loss)	$	—	$	(38.9)	$	—	(c)	$	(38.9)
Distributable earnings	$	525.2	$	(23.2)	$	(619.1)	(d)	$	(117.1)

(a)The Revenues adjustment principally represents unrealized performance revenues, unrealized principal investment income (loss) (including Fortitude Re), revenues earned from the Consolidated Funds which were eliminated in consolidation to arrive at the Company’s total revenues, adjustments for amounts attributable to non-controlling interests in consolidated entities, adjustments related to expenses associated with the investments in NGP Management and its affiliates that are included in operating captions or are excluded from the segment results, adjustments to reflect the reimbursement of certain costs incurred on behalf of Carlyle funds on a net basis, and the inclusion of tax expenses associated with certain foreign performance revenues, as detailed below:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
	(Dollars in millions)
Unrealized performance revenues	$	(29.8)	$	387.6	$	3,212.7	$	315.7
Unrealized principal investment income (loss)	70.4		81.0		280.5		(643.2)
Adjusted unrealized principal investment income (loss) from investment in Fortitude Re	—		—		—		(104.4)
Adjustments related to expenses associated with investments in NGP Management and its affiliates	(3.6)		(4.0)		(10.2)		(11.8)
Tax expense associated with certain performance revenues	0.1		(0.1)		0.3		—
Non-Carlyle economic interests in acquired businesses and other adjustments to present certain costs on a net basis	33.2		57.6		119.6		36.7
Elimination of revenues of Consolidated Funds	(16.7)		(40.3)		(60.5)		2.6
	$	53.6	$	481.8	$	3,542.4	$	(404.4)

The following table reconciles the total segments fund level fee revenue to the most directly comparable U.S. GAAP measure, the Company’s consolidated fund management fees, for the three and nine months ended September 30, 2021 and 2020.

	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
	(Dollars in millions)
Total Reportable Segments - Fund level fee revenues	$	440.1	$	394.2	$	1,277.4	$	1,187.2
Adjustments (1)	(32.6)		(30.4)		(94.5)		(95.7)
Carlyle Consolidated - Fund management fees	$	407.5	$	363.8	$	1,182.9	$	1,091.5

(1) Adjustments represent the reclassification of NGP management fees from principal investment income, the reclassification of certain incentive fees from business development companies and other credit products, management fees earned from consolidated CLOs which were eliminated in consolidation to arrive at the Company’s fund management fees, and the reclassification of certain amounts included in portfolio advisory fees, net and other in the segment results that are included in interest and other income in the U.S. GAAP results.

(b)The Expenses adjustment represents the elimination of intercompany expenses of the Consolidated Funds payable to the Company, the inclusion of equity-based compensation, certain tax expenses associated with realized performance revenues related compensation, and unrealized performance revenues related compensation, adjustments related to expenses associated with the investment in NGP Management that are included in operating captions, adjustments to reflect the reimbursement of certain costs incurred on behalf of Carlyle funds on a net basis, changes in the tax receivable agreement liability, and charges and credits associated with Carlyle corporate actions and non-recurring items, as detailed below:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
	(Dollars in millions)
Unrealized performance revenues related compensation	$	15.0	$	207.2	$	1,567.1	$	76.8
Equity-based compensation	44.3		21.1		129.5		87.4
Acquisition or disposition-related charges (credits) and amortization of intangibles	24.4		18.5		54.7		28.6
Tax expense associated with certain foreign performance revenues related compensation	(2.5)		(7.8)		(12.1)		4.1
Non-Carlyle economic interests in acquired businesses and other adjustments to present certain costs on a net basis	15.9		19.2		53.2		32.4
Right-of-use asset impairment	—		—		26.8		—
Other adjustments including severance and C-Corp. conversion costs in 2020	3.2		3.4		7.2		12.2
Elimination of expenses of Consolidated Funds	(7.3)		(10.8)		(29.1)		(26.8)
	$	93.0	$	250.8	$	1,797.3	$	214.7

(c)The Other Income (Loss) adjustment results from the Consolidated Funds which were eliminated in consolidation to arrive at the Company’s total Other Income (Loss).

(d)The following table is a reconciliation of Income (Loss) Before Provision for Income Taxes to Distributable Earnings and to Fee Related Earnings:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
	(Dollars in millions)
Income (loss) before provision for income taxes	$	701.3	$	415.1	$	3,118.3	$	(117.1)
Adjustments:
Net unrealized performance revenues	44.8		(180.3)		(1,645.6)		(238.8)
Unrealized principal investment (income) loss (1)	(70.4)		(81.0)		(280.5)		643.2
Adjusted unrealized principal investment (income) loss from investment in Fortitude Re (2)	—		—		—		104.4
Equity-based compensation (3)	44.3		21.1		129.5		87.4
Acquisition or disposition-related charges (credits), including amortization of intangibles	24.4		18.5		54.7		28.6
Tax (expense) benefit associated with certain foreign performance revenues	(2.4)		(7.8)		(11.8)		4.1
Net (income) loss attributable to non-controlling interests in consolidated entities	(14.6)		(37.2)		(57.7)		1.2
Right-of-use asset impairment	—		—		26.8		—
Other adjustments including severance and C-Corp. conversion costs in 2020	3.2		3.4		7.2		12.2
Distributable Earnings	$	730.6	$	151.8	$	1,340.9	$	525.2
Realized performance revenues, net of related compensation (4)	533.5		39.9		846.9		159.0
Realized principal investment income (4)	71.3		12.8		139.1		50.8
Net interest	25.6		19.6		68.7		59.4
Fee Related Earnings	$	151.4	$	118.7	$	423.6	$	374.8

(1)Adjustments to unrealized principal investment income (loss) during the nine months ended September 30, 2020 are inclusive of $211.8 million of unrealized gains, resulting from changes in the fair value of embedded derivatives related to certain reinsurance contracts included in Fortitude Re’s U.S. GAAP financial statements prior to the contribution of the Company’s investment in Fortitude Holdings to Carlyle FRL on June 2, 2020. At the time of the contribution of the Company’s investment to Carlyle FRL, the Company began accounting for its investment under the equity method based on its net asset value in the fund, which is an investment company that accounts for its investment in Fortitude Holdings at fair value.

(2)Adjusted unrealized principal investment income (loss) from the investment in Fortitude Re represents 19.9% of Fortitude Holdings’ estimated net income (loss), excluding the unrealized gains (losses) related to embedded derivatives, prior to the contribution of the Company’s investment in Fortitude Holdings to Carlyle FRL on June 2, 2020.

(3)Equity-based compensation for the three and nine months ended September 30, 2021 and 2020 includes amounts that are presented in principal investment income and general, administrative and other expenses in the Company’s U.S. GAAP statement of operations.

(4)See reconciliation to most directly comparable U.S. GAAP measure below:

	Three Months Ended September 30, 2021
	Carlyle Consolidated		Adjustments (3)		Total Reportable Segments
	(Dollars in millions)
Performance revenues	$	974.5	$	36.4	$	1,010.9
Performance revenues related compensation expense	495.2		(17.8)		477.4
Net performance revenues	$	479.3	$	54.2	$	533.5
Principal investment income (loss)	$	160.4	$	(89.1)	$	71.3
	Nine Months Ended September 30, 2021
	Carlyle Consolidated		Adjustments (5)		Total Reportable Segments
	(Dollars in millions)
Performance revenues	$	4,841.3	$	(3,208.0)	$	1,633.3
Performance revenues related compensation expense	2,355.8		(1,569.4)		786.4
Net performance revenues	$	2,485.5	$	(1,638.6)	$	846.9
Principal investment income (loss)	$	477.2	$	(338.1)	$	139.1

	Three Months Ended September 30, 2020
	Carlyle Consolidated		Adjustments (3)		Total Reportable Segments
	(Dollars in millions)
Performance revenues	$	477.4	$	(390.6)	$	86.8
Performance revenues related compensation expense	250.6		(203.7)		46.9
Net performance revenues	$	226.8	$	(186.9)	$	39.9
Principal investment income (loss)	$	106.7	$	(93.9)	$	12.8
	Nine Months Ended September 30, 2020
	Carlyle Consolidated		Adjustments (3)		Total Reportable Segments
	(Dollars in millions)
Performance revenues	$	731.6	$	(321.0)	$	410.6
Performance revenues related compensation expense	343.7		(92.1)		251.6
Net performance revenues	$	387.9	$	(228.9)	$	159.0
Principal investment income (loss)	$	(659.2)	$	710.0	$	50.8

(5) Adjustments to performance revenues and principal investment income (loss) relate to (i) unrealized performance allocations net of related compensation expense and unrealized principal investment income, which are excluded from the segment results, (ii) amounts earned from the Consolidated Funds, which were eliminated in the U.S. GAAP consolidation but were

included in the segment results, (iii) amounts attributable to non-controlling interests in consolidated entities, which were excluded from the segment results, (iv) the reclassification of NGP performance revenues, which are included in principal investment income in U.S. GAAP financial statements, (v) the reclassification of certain incentive fees from business development companies, which are included in fund management fees in the segment results, and (vi) the reclassification of tax expenses associated with certain foreign performance revenues. Adjustments to principal investment income (loss) also include the reclassification of earnings for the investments in NGP Management and its affiliates to the appropriate operating captions for the segment results, and the exclusion of charges associated with the investment in NGP Management and its affiliates that are excluded from the segment results.

(e) The Total Assets adjustment represents the addition of the assets of the Consolidated Funds that were eliminated in consolidation to arrive at the Company’s total assets.