APO Financial Analysis

Analysis Date: 2/5/2025

Business Model

Apollo Global Management operates an asset management and retirement services business. Revenue is generated through management fees, capital solutions and transaction fees in the asset management segment, and net investment spread in the retirement services segment (Athene).

Revenue Sources

• Asset Management Segment: Management fees (Credit and Equity), Capital solutions fees and other, Fee-related performance fees, Advisory and transaction fees, net, Investment income, Incentive fees.
• Retirement Services Segment: Premiums, Product charges, Net investment income, Investment related gains (losses), Revenues of consolidated variable interest entities, Other revenues.

Income Statement Analysis

• Fee Related Earnings (FRE) increased by 21.2% YoY, driven by growth in management fees, capital solution fees and fee-related performance fees, indicating strong asset management performance. (Pro)
• Spread Related Earnings (SRE) increased by 12.4% YoY, driven by growth in net investment spread, showing continued strength in retirement services. (Pro)
• Principal Investing Income (PII) saw a significant increase of 172.5% YoY due to higher realized performance fees, which can be volatile but positive for the quarter. (Pro)
• Fee-related compensation and Non-compensation expenses increased, but at a lower rate than revenue growth, leading to FRE margin expansion. (Pro)
• Interest and other financing costs increased significantly by 48.9% YoY, potentially due to increased debt or higher interest rates, which is a concern. (Con)

Balance Sheet Analysis

• Slight increase in Cash and cash equivalents, indicating stable liquidity. (Neutral to Pro)
• Investments, net slightly decreased, which could be due to market fluctuations or investment realizations. (Neutral)
• Net accrued performance fees receivable increased significantly by 17.51%, reflecting strong performance and potential future revenue. (Pro)
• Debt increased by 4.83%, which needs to be monitored in relation to asset growth and profitability. (Con)
• Overall, Net Balance Sheet Value slightly increased, indicating a stable financial position. (Neutral to Pro)

Capital Allocation

Apollo is strategically allocating capital to drive stockholder value through share repurchases, dividends, and investments. In 2024, they repurchased over $1.2 billion of common stock and distributed over $1 billion in dividends. They intend to increase the annual dividend by 10% starting in Q1 2025. Additionally, $130 million of strategic capital was allocated to fund various investments supporting future growth. (Source: 4Q24 Earnings Release and Transcript)

Management Commentary

Our fourth quarter results punctuate a very strong year of performance for Apollo. 2024 highlights include record origination activity exceeding $220 billion, inflows of more than $150 billion, and assets under management surpassing $750 billion.

Record quarterly and annual FRE of $554 million and $2.1 billion, respectively, driven by strong growth in fee related revenues and disciplined expense growth.

Quarterly and annual SRE totaling $841 million and $3.2 billion, respectively, reflecting robust organic growth and higher alternative net investment income.

Entering 2025, our growth strategy is clear, our team is focused on execution, and we are playing to win.

Cost of funding Athene, which rose by 12 basis points sequentially.

Overall Sentiment: Positive. Management expresses strong confidence in the company's performance and future growth prospects, highlighting record results and strategic execution. While there are some cost pressures in funding, the overall tone is optimistic and focused on continued expansion and shareholder returns.

Recommendation

Rating: Buy

Reason for Rating: Based on strong financial performance, record FRE and SRE growth, robust AUM and inflows, and strategic capital allocation, Apollo Global Management presents a compelling investment opportunity.

Disclaimer: This report is for informational purposes only and not investment advice. The analysis is based on limited information and subject to change. Investing in securities involves risks, including potential loss of principal. Past performance doesn't guarantee future results. Always conduct your own research, understand the risks, and consult a financial professional before making investment decisions.

Generated on: 2/5/2025, 4:53:30 AM