Apollo Global Management, LLC (APO)

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Apollo Global Management, LLC (APO)

Q1 2013 Earnings Call

May 06, 2013 10:00 am ET

Executives

Gary M. Stein - Head of Corporate Communications

Marc Adam Spilker - President and Member of Executive Committee

Martin Kelly - Chief Financial Officer

Analysts

Howard Chen - Crédit Suisse AG, Research Division

Christopher Harris - Wells Fargo Securities, LLC, Research Division

Kenneth B. Worthington - JP Morgan Chase & Co, Research Division

Michael Carrier - BofA Merrill Lynch, Research Division

Marc S. Irizarry - Goldman Sachs Group Inc., Research Division

Christoph M. Kotowski - Oppenheimer & Co. Inc., Research Division

David J. Chiaverini - BMO Capital Markets U.S.

Steve Fullerton

Robert Lee - Keefe, Bruyette, & Woods, Inc., Research Division

Presentation

Operator

Good morning, and welcome to Apollo Global Management's 2013 First Quarter Earnings Conference Call. [Operator Instructions] This conference call is being recorded.

I would now like to turn the call over to Gary Stein, Head of Corporate Communications.

Gary M. Stein

Thanks, operator, and welcome, everyone. Joining me today from Apollo are Marc Spilker, President; and Martin Kelly, Chief Financial Officer.

Earlier this morning, Apollo reported non-GAAP after-tax economic net income of $1.89 per share for the first quarter ended March 31, 2013, compared to $1.10 per share for the first quarter of 2012. We also declared a cash distribution of $0.57 per share for the first quarter of 2013, which is the second-largest quarterly distribution since Apollo became a public company in early 2011. Later on the call, we'll provide additional details regarding the composition of the first quarter's cash distribution.

For U.S. GAAP purposes, we reported net income attributable to Apollo Global Management of $249 million for the first quarter ended March 31, 2013, compared to $98 million for the first quarter of 2012.

Today's conference call may include forward-looking statements and projections, and we ask that you refer to our most recent filings with the SEC for important factors that could cause actual results to differ materially from these statements and projections. We don't undertake to update our forward-looking statements or projections unless required by law.

We will also be discussing certain non-GAAP measures on this call, such as economic net income and after-tax economic net income per share, which are reconciled to our GAAP net income or loss attributable to Class A shareholders and GAAP weighted average Class A shares outstanding. These reconciliations are included in our first quarter earnings press release, a copy of which is available in the Investor Relations section of our website at www.agm.com. Please also refer to our most recent form 10-K that was filed with the SEC for additional information on non-GAAP measures and risk factors relating to our business.

This conference call is copyrighted property and may not be duplicated, reproduced or rebroadcast without our consent. If you have any questions about any information in the release or on this call, please feel free to follow up with me or Patrick Parmentier after the call.

With that, I'd like to turn the call over to Marc Spilker, President of Apollo Global Management.

Marc Adam Spilker

Thanks, Gary, and good morning, everyone. Apollo's strong first quarter financial results reflect the positive themes that are playing out across our business and demonstrate again the benefits of having an integrated investment platform and value-oriented investment style. Before I discuss this quarter's activities in more detail, there are a few highlights I'd like to draw your attention to.

We continue to monetize our funds' investment portfolios as windows of opportunity permit, resulting in significant realizations and cash distributions for our investors in our funds, as well as our shareholders. Over the last 4 quarters, we have generated $14 billion of realizations and paid out $2.26 of cash per share, including a cash distribution of $0.57 per share for the first quarter of 2013. There have been a significant number of realization events that have taken place subsequent to the first quarter, and Martin will give you more details on this.

Our private equity business has remained active, and the funds we manage have deployed $1.2 billion of capital in several opportunistic transactions. There continues to be a lot of activity at Athene, including the pending acquisition of Aviva USA. And during the first quarter, we raised $1.2 billion of new capital and further expanded our retail distribution channel within our credit and real estate segments through the launch of a new closed-end fund and additional capital raises for our commercial mortgage REIT and our residential mortgage REIT. These accomplishments, which cut across all of our business segments, stem from our disciplined, value-oriented, absolute return-driven investment approach where we seek active, attractive investment opportunities in different market environments.

Turning to our private equity business. Our portfolio company investments appreciated by 14% during the first quarter. This appreciation across all of our private equity funds resulted in nearly $1 billion of carried interest income for the first quarter of 2013, assisted in part by Fund VI completing its 80% catch-up. This favorable performance was driven by investments that were made at different times throughout the market cycle. Fund VI invested in Norwegian Cruise Lines and Realogy right before the financial crisis in 2007 and 2008, while Lyondell and Charter were acquired by our private equity and credit funds in 2009 and 2010. Each of these fund investments had a meaningful impact on Apollo's financial results for the first quarter of 2013. Our realization activity in the first quarter was primarily driven by the sale of additional shares of Lyondell and Charter Communications by our private equity funds. There was also a significant realization activity in the second quarter of 2013 based upon our funds' recently completed or announced transactions, including the strategic sales of Metals USA, SourceHOV and our funds' remaining shares in Charter, secondary share sales for Realogy and Berry Plastics, the sale of shares in EVERTEC's recent IPO and dividend recaps for CKE, Sprouts and Constellium.

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