Apollo Global Management, LLC (APO)

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Apollo Global Management, LLC (APO)

Q2 2013 Earnings Call

August 08, 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

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

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

Michael Carrier - BofA Merrill Lynch, Research Division

Howard Chen - Crédit Suisse AG, Research Division

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

Christopher Harris - Wells Fargo Securities, LLC, Research Division

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

David Eads - UBS Investment Bank, Research Division

M. Patrick Davitt - BofA Merrill Lynch, Research Division

Neil Stratton

Presentation

Operator

Good morning, and welcome to Apollo Global Management's 2013 Second 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 aftertax economic net income of $0.50 per share for the second quarter ended June 30, 2013, compared to $0.05 per share for the second quarter of 2012. We also declared a cash distribution of $1.32 per share for the second quarter of 2013, which is the 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 second quarter's cash distribution.

For U.S. GAAP purposes, we reported net income attributable to Apollo Global Management of $59 million for the second quarter ended June 30, 2013, compared to a loss of $41 million for the second 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'll also be addressing 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 second quarter earnings press release, a copy of which is available in the Investor Relations section of our website. 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. During my prepared remarks this morning, I'd like to touch on a few highlights regarding Apollo's strong second quarter results, including our recent fundraising and realization activity and the continued growth and diversification of our integrated investment platform. I will also provide you with a quick update on our business segments.

First, during the quarter, we raised nearly $7 billion of new investment capital across the firm. As we have said before, we believe Apollo is well positioned to capitalize on several powerful secular trends that are saving our industry, including increasing allocations to alternatives as institutional investors seek to meet their return objectives in a low interest rate environment, increasing constraints on global financial intermediaries, the emergence of unconstrained credit as an asset class and the consolidation of limited partner relationships among branded, scale investment managers like Apollo that possess strong track records, robust infrastructures and a broad spectrum of alternative investment solutions.

Against this backdrop, we are pleased note that as of today, we have received commitments of approximately $8.4 billion of capital for our newest flagship private equity fund, which we refer to as Fund VIII.

Second, our funds continue to monetize investment portfolios as the window of opportunity remains open, resulting in significant realizations and cash distribution for our fund investors and shareholders. During the second quarter, our funds generated more than $7 billion of realizations, and we declared a distribution of $1.32 per share, bringing the total cash paid out to shareholders over the last 4 quarters to $3.34 per share.

Third, we continue to diversify and grow our business in a variety of ways by leveraging our integrated platform, our value-oriented contrarian-investment style and our credit expertise. For example, within natural resources, in addition to our private equity funds activity, funds we manage are providing mezzanine and other types of financing to energy companies. And on behalf of our funds, we're also evaluating opportunities, such as purchasing oil and gas royalties and establishing joint ventures for oil and gas drilling.

Within credit, we continue to expand our credit analysis and underwriting capabilities and enhance our focus on proprietary origination, which has enabled us to offer our clients an increasing array of unconstrained credit solutions. And within real estate, we have continued to execute a single-family home for rent strategy. The funds we manage have recently formed a joint venture with a high-quality servicer to acquire small balance non-performing loans in the United States and another venture with local investor to acquire office properties in targeted London submarkets. In addition, we continue to broaden our geographic footprint by expanding our Houston office, which we opened last year. And we are planning to establish a presence in Canada.

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