Yahoo Finance Apollo Global Management Inc (APO) (Q1 2024) Earnings Call Transcript Highlights: Robust Growth ...
FRE (Fee-Related Earnings): $462 million, up 16% year-over-year.
SRE (Strategic Real Estate Earnings): $817 million, up 19% year-over-year.
Adjusted Net Income: $1.1 billion, up 26% year-over-year.
Earnings Per Share: $1.72, reflecting a 26% increase year-over-year.
Quarterly Cash Dividend: Approximately $0.46 per share.
Total Earnings Streams: $1.3 billion, an 18% increase year-over-year.
Record Inflows: $20 billion for the quarter.
Release Date: May 02, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
Apollo Global Management Inc reported strong first quarter financial results with FRE of $462 million, up 16% year-over-year, and SRE of $817 million, up 19% year-over-year.
The company declared a quarterly cash dividend of approximately $0.46 per share, reflecting a new higher annual run rate level of $1.85 per share.
Record inflow of $20 billion for the quarter, demonstrating robust capital formation and investor confidence.
Significant derisking of the floating rate book, reducing exposure to $16 billion, aligning with more normalized interest rates and reducing sensitivity to rate fluctuations.
Strong momentum in asset origination with $40 billion for the quarter, highlighting Apollo's capacity to generate high-quality investment opportunities.
Negative Points
Alternatives slightly underperformed compared to historical norms, which could impact the expected returns from these investments.
Higher cash balances due to back-end loaded origination, which could affect short-term investment efficiency.
The legal challenges in the pension risk transfer (PRT) market could potentially dampen volume and affect business in this segment.
Exposure to floating rate securities, while reduced, still presents a risk if interest rates fluctuate significantly.
Dependence on continued strong capital inflows to sustain growth, which could be impacted by market volatility or investor sentiment changes.
Q & A Highlights
Q: Can you discuss the progress in the wealth channel and how placement fees are impacting your FRE expectations for the year? A: Martin Bernard Kelly, CFO of Apollo Global Management, explained that Q1 represents a normalization in non-comp expenses going forward, consistent with the year's guidance. He noted that product distribution involves various structures, either involving upfront placement fees or trailer fees, depending on the product and distributor. There's no significant change in these structures, just different approaches suitable for different products.
Q: What is your outlook for third-party fundraising for the rest of the year, and how do you view the fee rate trends within the yield bucket? A: James Charles Zelter, Co-President of Apollo Asset Management, expressed confidence in maintaining strong fundraising trends across all channels, particularly in yield-oriented strategies. He highlighted the lack of fee compression, noting the attractiveness of investment-grade investments for insurance portfolios, which supports stable fee rates.
Q: Could you provide an update on the capital solutions segment and its growth drivers? A: James Charles Zelter discussed the momentum in capital solutions, emphasizing its role in enhancing client relationships and distributing innovative products. He mentioned the strategic importance of this segment in facilitating discussions with large companies about alternative financing solutions beyond traditional debt and equity.
Q: How does the rapid growth of your ecosystem influence your financial targets for FRE growth and SRE growth? A: CEO Marc Jeffrey Rowan highlighted the potential for robust growth in private markets, emphasizing the importance of maintaining a focus on excess return per unit of risk. He stressed the need for careful capital deployment and origination to sustain long-term, predictable growth rates.
Q: Can you comment on the nuances of retirement services flows and any potential impacts from shareholder lawsuits on PRT transactions? A: Marc Jeffrey Rowan addressed the variability in attractiveness across different channels within retirement services, noting that PRT was less attractive this year due to narrower spreads. He anticipated a potential industry-wide decline in PRT volume due to recent lawsuits, emphasizing the focus on high-spread business.
Q: What impact do you expect from the ATLAS-MassMutual partnership on your origination volumes and Apollo's earnings? A: James Charles Zelter and Marc Jeffrey Rowan discussed the strategic importance of the ATLAS platform and its role in expanding Apollo's origination capabilities. They highlighted the partnership with MassMutual as a significant step in enhancing Apollo's ability to meet its long-term origination targets and emphasized the holistic nature of this relationship in supporting Apollo's growth.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
