Apollo Global Management, LLC Reports First Quarter 2013 Results

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Apollo Global Management, LLC Reports First Quarter 2013 Results

  • Apollo declares a distribution of $0.57 per Class A share for the first quarter of 2013
  • Total economic net income ("ENI") of $792 million for the first quarter ended March 31, 2013, a 72% increase compared to $462 million for the comparable period in 2012
  • ENI After Taxes per Share of $1.89 for the first quarter ended March 31, 2013, compared to $1.10 per share for the comparable period in 2012
  • Total assets under management ("AUM") of $114.3 billion as of March 31, 2013, compared to $86.1 billion as of March 31, 2012
  • Apollo returned $3.4 billion and $13.9 billion of capital and realized profits to limited partner investors during the first quarter and last twelve months ended March 31, 2013, respectively
  • U.S. GAAP net income attributable to Apollo Global Management, LLC of $249 million for the first quarter ended March 31, 2013, compared to $98 million for the same period in 2012

NEW YORK--(BUSINESS WIRE)-- Apollo Global Management, LLC (NYS: APO) and its consolidated subsidiaries (collectively, "Apollo") today reported results for the first quarter ended March 31, 2013.

Apollo reported ENI of $792.4 million for the first quarter ended March 31, 2013, compared to $462.0 million for the same period in 2012. The 72% increase in ENI was driven by favorable performance in both Apollo's Management and Incentive Businesses, which reported ENI of $66.0 million and $726.4 million for the first quarter ended March 31, 2013, respectively, compared to $35.1 million and $426.9 million, respectively, for the same period in 2012.


Apollo's total AUM was $114.3 billion as of March 31, 2013, an increase of $28.2 billion, or 33%, compared to $86.1 billion as of March 31, 2012. The increase in total AUM was primarily driven by both organic and strategic growth in the credit segment, which had $63.5 billion of AUM as of March 31, 2013, an increase of $27.0 billion, or 74%, compared to $36.5 billion as of March 31, 2012. Fee-generating AUM was $81.6 billion as of March 31, 2013, an increase of $22.0 billion, or 37%, compared to $59.6 billion as of March 31, 2012. The increase in fee-generating AUM was also primarily driven from both organic and strategic growth in Apollo's credit segment.

U.S. GAAP results for the first quarter ended March 31, 2013 included net income attributable to Apollo of $249.0 million, or $1.60 per Class A share, compared to $98.0 million, or $0.66 per Class A share for the first quarter ended March 31, 2012.

"Apollo is off to a great start in 2013 with solid first quarter results," said Leon Black, Chairman and Chief Executive Officer. "Over the last four quarters, we have generated nearly $14 billion of realizations and paid out $2.26 of cash per share, demonstrating yet again the substantial earnings and cash generating power of Apollo's integrated investment platform."

Combined Segments

Total revenue for Apollo's Management Business was $220.7 million for the first quarter ended March 31, 2013, an increase of $53.8 million, or 32%, from the same period in 2012. This includes management fee revenues of $164.3 million for the first quarter ended March 31, 2013, an increase of $34.3 million, or 26%, from the same period in 2012, which was primarily driven by growth in fee-generating AUM within Apollo's credit segment. There was also $47.4 million of advisory and transaction fees for the first quarter ended March 31, 2013, an increase of $20.1 million, or 74%, from the same period in 2012. The increase was primarily driven by the closing of the McGraw Hill Education transaction as well as an increase in advisory fees related to Athene Holdings Ltd. (together with its subsidiaries, "Athene").

Apollo's Incentive Business reported $1,116.6 million of total carried interest income for the first quarter ended March 31, 2013, an increase of $492.5 million, or 79%, from the same period in 2012. There was $345.2 million of realized gains from carried interest income for the first quarter ended March 31, 2013, an increase of $195.4 million, or 130%, compared to the same period in 2012. The increase in realized gains from carried interest income was largely attributable to dispositions of investments held in LyondellBasell and Charter Communications by funds managed by Apollo during the first quarter ended March 31, 2013.

Total expenses for Apollo's Management Business were $158.4 million for the first quarter ended March 31, 2013, an increase of $21.0 million, or 15%, from the same period in 2012. The increase in total expenses for the first quarter ended March 31, 2013 included an increase of $8.5 million in placement fees, which was primarily due to the launch of a closed-end fund within our credit segment, and an $8.3 million increase in salary, bonus and benefits, which was primarily due to increased headcount.

Private Equity Segment

ENI from Apollo's private equity segment was $678.8 million for the first quarter ended March 31, 2013, compared to $311.2 million for the first quarter ended March 31, 2012. The significant quarter over quarter increase was largely driven by total carried interest income of $991.0 million for the first quarter of 2013, compared to $448.1 million for the first quarter of 2012.

Apollo's private equity funds continued to perform well as measured by internal rate of return ("IRR") and appreciated by 14% during the first quarter ended March 31, 2013. From its inception in 2008 through March 31, 2013, Fund VII generated an annual gross and net IRR of 37% and 28%, respectively. Fund VI, which began investing in 2006, generated an annual gross and net IRR of 13% and 10%, respectively, since its inception through March 31, 2013. The combined fair value of Apollo's private equity funds, including AP Alternative Assets, L.P. ("AAA"), was 62% above cost as of March 31, 2013. Uncalled private equity commitments were $6.3 billion as of March 31, 2013 and $1.2 billion of private equity capital was deployed during the first quarter ended March 31, 2013.

The favorable performance of the underlying investments in Fund VII and Fund VI had a meaningful impact on Apollo's carried interest income for the first quarter of 2013. There was $313.0 million and $644.6 million of total carried interest income related to Fund VII and Fund VI, respectively, for the first quarter ended March 31, 2013, compared to $312.5 million and $123.6 million, respectively, for the same period in 2012. The significant increase in total carried interest income for Fund VI was largely impacted by the remaining 80-20 "catch-up" of unrealized carried interest income, which led to an additional $339 million of unrealized carried interest income for the first quarter ended March 31, 2013.

Credit Segment

ENI from Apollo's credit segment was $114.3 million for the first quarter ended March 31, 2013, compared to $155.6 million for the first quarter of 2012. The quarter over quarter decline in ENI was largely driven by total carried interest income of $124.7 million for the first quarter of 2013, compared to $174.3 million for the first quarter of 2012. In addition, the income from equity method investments and net gains from investment activities was collectively $10.9 million for the first quarter ended March 31, 2013, compared to $21.1 million for the same period in 2012.

Management fees from Apollo's credit segment were $84.4 million for the first quarter ended March 31, 2013, which increased by $31.8 million, or 60%, compared to the same period in 2012. The increase in management fees was largely driven by the acquisition of Stone Tower Capital LLC, which closed in April 2012, as well as the growth in assets managed by Athene Asset Management, LLC. Total Management Business expenses within the credit segment were $79.2 million for the first quarter of 2013, which increased by $17.6 million, or 29%, compared to the same period in 2012. The increase in Management Business expenses was largely driven by $6.7 million in placement fees associated with the launch of a closed-end fund and higher compensation expense from increased headcount.

Real Estate Segment

Apollo's real estate segment had an economic net loss of $0.7 million for the first quarter of 2013, compared to a $4.8 million loss for the first quarter of 2012. Total revenues for the real estate segment during the first quarter of 2013 were $15.6 million, an increase of $3.5 million, or 29%, compared to $12.1 million for the same period in 2012. The revenue growth during the first quarter of 2013 was largely due to a $4.3 million increase in both management fees and advisory and transaction fees, which was driven by a $1.6 billion year-over-year increase in fee-generating AUM. As of March 31, 2013, Apollo's real estate AUM was $9.4 billion, compared to $8.3 billion at March 31, 2012.

Capital and Liquidity

As of March 31, 2013, Apollo had $899 million of cash and cash equivalents and $738 million of debt. These amounts exclude cash and debt associated with Apollo's consolidated funds and consolidated variable interest entities ("VIEs"). As of March 31, 2013, Apollo had a $2,551.2 million carried interest receivable and corresponding profit sharing payable of $1,116.8 million as well as total investments in its private equity, credit and real estate funds of $475 million, excluding investments held by consolidated VIEs and consolidated funds.

Distribution

Apollo Global Management, LLC has declared a first quarter 2013 cash distribution of $0.57 per Class A share, which comprises a regular distribution of $0.07 per Class A share and a quarterly distribution of $0.50 per Class A share primarily attributable to fund realizations and interest and dividend income earned by our funds. This distribution will be paid on May 30, 2013 to holders of record at the close of business on May 16, 2013.

Apollo intends to distribute to its shareholders on a quarterly basis substantially all of its net after-tax cash flow in excess of amounts determined by its manager to be necessary or appropriate to provide for the conduct of its business. However, Apollo cannot assure its shareholders that they will receive any distributions.

Conference Call

Apollo will host a conference call on Monday, May 6, 2013 at 10:00 a.m. EST. During the call, Marc Spilker, President, Martin Kelly, Chief Financial Officer, and Gary Stein, Head of Corporate Communications, will review Apollo's financial results for the first quarter ended March 31, 2013. The conference call may be accessed by dialing (888) 868-4188 (U.S. domestic) or +1 (615) 800-6914 (international), and providing conference call ID 34359365 when prompted by the operator. The number should be dialed at least ten minutes prior to the start of the call. A simultaneous webcast of the conference call will be available to the public on a listen-only basis and can be accessed through the Investor Relations section of Apollo's website at www.agm.com.

Following the call, a replay of the event may be accessed either telephonically or via audio webcast. A telephonic replay of the live broadcast will be available approximately two hours after the live broadcast by dialing (800) 585-8367 (U.S. callers) or +1 (404) 537-3406 (non-U.S. callers), pass code 34359365. To access the audio webcast, please visit Events in the Investor Relations section of Apollo's website at www.agm.com.

About Apollo

Apollo is a leading global alternative investment manager with offices in New York, Los Angeles, Houston, London, Frankfurt, Luxembourg, Singapore, Mumbai and Hong Kong. Apollo had assets under management of approximately $114 billion as of March 31, 2013, in private equity, credit and real estate funds invested across a core group of nine industries where Apollo has considerable knowledge and resources. For more information about Apollo, please visit www.agm.com.

Forward-Looking Statements

This press release may contain forward looking statements that are within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements include, but are not limited to, discussions related to Apollo's expectations regarding the performance of its business, its liquidity and capital resources and the other non-historical statements in the discussion and analysis. These forward-looking statements are based on management's beliefs, as well as assumptions made by, and information currently available to, management. When used in this press release, the words "believe," "anticipate," "estimate," "expect," "intend" and similar expressions are intended to identify forward-looking statements. Although management believes that the expectations reflected in these forward-looking statements are reasonable, it can give no assurance that these expectations will prove to have been correct. These statements are subject to certain risks, uncertainties and assumptions, including risks relating to our dependence on certain key personnel, our ability to raise new private equity, credit or real estate funds, market conditions, generally, our ability to manage our growth, fund performance, changes in our regulatory environment and tax status, the variability of our revenues, net income and cash flow, our use of leverage to finance our businesses and investments by our funds and litigation risks, among others. We believe these factors include but are not limited to those described under the section entitled "Risk Factors" in the Company's Form 10-K filed with the Securities and Exchange Commission ("SEC") on March 1, 2013, and such factors may be updated from time to time in our periodic filings with the SEC, which are accessible on the SEC's website at www.sec.gov. These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in this press release and in other filings. We undertake no obligation to publicly update or review any forward-looking statements, whether as a result of new information, future developments or otherwise, except as required by applicable law. This press release does not constitute an offer of any Apollo fund.

 
 
 

APOLLO GLOBAL MANAGEMENT, LLC
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2013 AND 2012
(dollars in thousands, except share data)

 

Three Months Ended
March 31,

2013 2012
Revenues:
Advisory and transaction fees from affiliates$47,419$27,236
Management fees from affiliates150,447127,178
Carried interest income from affiliates 1,111,207  622,329 
Total Revenues 1,309,073  776,743 
 
Expenses:
Compensation and benefits:
Equity-based compensation45,286148,866
Salary, bonus and benefits73,39665,071
Profit sharing expense423,620249,024
Incentive fee compensation  35 
Total Compensation and Benefits542,302462,996
Interest expense7,51811,380
Professional fees16,06011,527
General, administrative and other22,94119,207
Placement fees9,358921
Occupancy9,8058,726
Depreciation and amortization 14,618  8,473 
Total Expenses 622,602  523,230 
 
Other Income:
Net gains from investment activities52,133157,708
Net gains (losses) from investment activities of consolidated variable interest entities47,861(16,201)
Income from equity method investments27,79043,251
Interest income3,0911,614
Other income, net 1,298  5,816 
Total Other Income 132,173  192,188 
Income before income tax provision818,644445,701
Income tax provision (18,579) (14,560)
Net Income800,065431,141
Net income attributable to Non-controlling Interests (551,087) (333,098)
Net Income Attributable to Apollo Global Management, LLC

$

248,978

 

$

98,043

 
 
Distributions Declared per Class A Share$1.05 $0.46 
 
Net Income Per Class A Share:
Net Income Available to Class A Share - Basic$1.60 $0.66 
Net Income Available to Class A Share -Diluted$1.59 $0.66 
Weighted Average Number of Class A Shares - Basic 131,249,034  125,269,253 
Weighted Average Number of Class A Shares - Diluted 136,019,801  127,515,663 
 
 
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APOLLO GLOBAL MANAGEMENT, LLC
SEGMENT RESULTS (UNAUDITED)
(dollars in millions, except share data)

 

Summary of Combined Segment Results for Management Business and Incentive Business:

 
Three Months Ended

March 31,
2012

 

June 30,
2012

 

September 30,
2012

 

December 31,
2012

 

March 31,
2013

Management Business:
 
Advisory and transaction fees from affiliates$27.3$70.0$15.2$37.5$47.4
Management fees from affiliates130.0156.4160.2176.4164.3
Carried interest income from affiliates:
Realized gains 9.6  9.2  9.7  9.3  9.0 
Total management business revenues166.9235.6185.1223.2220.7
 
Equity-based compensation(1)18.914.116.719.217.4
Salary, bonus and benefits65.174.964.670.073.4
 
Interest expense11.410.27.58.07.5
Professional fees11.316.510.924.615.4
General, administrative and other18.723.123.920.922.6
Placement fees0.98.14.39.09.4
Occupancy8.79.09.79.89.8
Depreciation and amortization(2) 2.4  2.4  2.8  2.6  2.9 
Total non-compensation expenses53.469.359.174.967.6
 
Total management business expenses137.4158.3140.4164.1158.4
 
Other income (loss)7.0(4.5)11.17.47.2
 
Non-controlling interest(3) (1.4) (2.4) (2.7) (2.2) (3.5)
 
Management Business Economic Net Income 35.1  70.4  53.1  64.3  66.0 
 
Incentive Business:
 
Carried interest income:
Unrealized gains (losses)474.3(52.8)344.2400.7771.4
Realized gains 149.8  56.0  229.8  561.6  345.2 
Total carried interest income624.13.2574.0962.31,116.6
 
Profit sharing expense:
Unrealized profit sharing expense178.4(10.8