Apollo Global Management, LLC (APO)

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Apollo Global Management, LLC (APO)

Q4 2013 Earnings Call

February 07, 2014 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

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

Michael Carrier - BofA Merrill Lynch, Research Division

Matthew Kelley - Morgan Stanley, Research Division

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

William R. Katz - Citigroup Inc, Research Division

Brennan Hawken - UBS Investment Bank, Research Division

Christian Bolu

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

Christopher Harris - Wells Fargo Securities, LLC, Research Division

M. Patrick Davitt - Autonomous Research LLP

Brian Bedell - Deutsche Bank AG, Research Division

Presentation

Operator

Good morning, and welcome to Apollo Global Management's 2013 Fourth 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 $1.06 and $4.80 per share for the fourth quarter and year ended December 31, 2013, compared to $1.69 and $3.82 per share for the fourth quarter and year ended December 31, 2012. We also declared a cash distribution of $1.08 per share for the fourth quarter of 2013, bringing the total for 2013 to $3.98 per share. Later on the call, we'll discuss the composition of the fourth quarter's cash distribution.

For U.S. GAAP purposes, we reported net income attributable to Apollo Global Management of $159 million and $659 million for the fourth quarter and full year ended December 31, 2013, compared to $172 million and $311 million for the fourth quarter and full year ended December 31, 2012, respectively.

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 fourth 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 Noah Gunn after the call.

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

Marc Adam Spilker

Thanks, Gary, and good morning, everyone. The fourth quarter concluded an outstanding year for Apollo as our financial results for 2013 reflect the strength of our globally integrated and diversified investment platform that we continue to grow. I'd like to take a few minutes to highlight some significant achievements over the past year in areas such as realizations, AUM growth, investment performance, fundraising and our management business.

Our funds returned $23 billion of capital and realized profits to our limited partners during the year, which drove $3.98 of cash distributions per share for our shareholders. This brings total cash distributions paid out to our shareholders to more than $7 per share since our initial public offering in 2011. Our cash distributions in 2013 were driven by robust activity in the public markets where portfolio companies of our funds completed 23 secondary or block transactions, as well as 9 IPOs.

Our AUM increased 42% since the end of 2012 and now stands at approximately $161 billion despite heightened realization activity. This growth was driven by the combination of 3 important factors: strong investment performance, robust fundraising and the continued expansion of our credit franchise, including growth at Athene.

On performance, the fair value of the PE portfolio of the funds we manage was up 49% in 2013 compared to a 30% increase in the S&P during the same period. This strong performance during 2013 bolstered our long-term track record at a 39% gross and 26% net IRR in private equity since Apollo's inception.

On fundraising, we raised $22 billion of new investor capital, driven by our limited partners' strong support of Fund VIII which raised $17.5 billion, and I'll provide additional details on this shortly. We were also successful in raising capital among another strategic -- strategies across our credit and real estate businesses.

On Athene, it's recently completed acquisition of Aviva USA in October transformed the company into a leading fixed annuity provider in the U.S. and added $44 billion of fee-paying AUM to the Apollo credit platform, helping to further solidify our mutually beneficial long-term relationship.

Our 2013 financial results highlight a positive dynamic that we discussed previously, which is the growing earnings contribution from our management business to Apollo's overall earnings profile. Although Athene may be the most visible driver of this evolution, it's just one example of how we are leveraging our integrated platform and scale to create value for our investors by growing consistent cash-generative businesses.

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