Apollo Global Management, Inc. (New)

During today's discussion, all callers will be placed in listen-only mode, and following management's prepared remarks, the conference call will be open for questions. This conference call is being recorded. This call may include forward-looking statements and projections, which do not guarantee future events or performance. Please refer to Apollo's most recent SEC filings for risk factors related to these statements. Apollo will also be discussing certain non-GAAP measures on this call, which management believes are relevant in assessing the financial performance of the business. These non-GAAP measures are reconciled to the GAAP figures in Apollo's earnings presentation, which is available on the company's website. Also note that nothing on this call constitutes an offer to sell or a solicitation of an offer to purchase an interest in any Apollo fund. I would now like to turn the call over to Noah Gunn, Global Head of Investor Relations.

Great. Thanks, Operator, and welcome again, everyone, to our call this morning. Our fourth quarter and full year 2020 results reported earlier today reflect Apollo's financial results on a standalone basis before consideration of our recent merger with Athene, which closed on January 1st. That said, we will briefly touch on key highlights from Athene's results, which were issued separately this morning. In addition, we posted a financial supplement on our website, which updates our fourth quarter and full year results in our new post-merger financial construction. Beginning next quarter, this will be our primary view, including contributions from our three new segments, and will illustrate our combined earnings power. Fee-related earnings reached a quarterly record of $309 million, or 67 cents per share, in the fourth quarter of and $1.2 billion, or $2.68 per share, for full year 2021. In terms of distributable earnings, we reported $1.05 of DE per share for the fourth quarter and an annual record of $4.56 per share for full year 2021, which is more than double the level we earned in 2020. Joining me this morning to discuss all the business momentum we are seeing at Apollo And our results in further detail are Mark Rowan, CEO, Jim Zelter, co-president, and Martin Kelly, CFO. We look forward to addressing all your questions following the conclusion of our prepared remarks. And with that, I'll now turn the call over to Mark.

Thank you, Noah. Good morning to all. Thank you for spending time with us. As I often say, I'm fortunate to lead a company in an industry that gets better every day. Our industry is driven by powerful trends, demographics, generational transfer of wealth, low rates, and the extreme correlation and indexification of equity and fixed income markets. I am even more fortunate to lead a company with tremendous momentum and with a unique business model in the alternatives industry. 2021 was a transformational year for Apollo. AUM is a record, fundraising, a record, modernizations, a record, origination, a record, 424 people joined our platform, another record, and turnover was the lowest it's been in a very long time. We achieved 15% year-over-year FRE growth without any sizable inorganic activity and without a flagship fund, which, as all of you know, is in the cards for 2022. As excited as I was for 2021, 2022 should be even brighter. At our very detailed investor day in October, we communicated a strategic vision and financial plan. In just a few short months, we have made significant progress against that plan. Recall the three pillars of that plan, or the three key bets, as we like to say. One was the growth in our retail business and retail franchise, which I will touch on and Jim Zelter will spend more time on. The second, origination, which is the capacity to originate investments and therefore continue to provide above average rates of return per unit of risk for our clients. And the third in our capital markets segment. Let me take a second and just briefly touch on each of those three bets. In origination, we originated $37 billion in the fourth quarter. We're now running well over $100 billion on an annual basis. Recall why this is important. Our market sometimes loses sight of what's in short supply. Capital as a general matter is plentiful, and it is assets that offer appropriate risk rewards that are in short supply. Therefore, we are incredibly focused on growing our capacity to originate assets that offer attractive risk rewards They are, in fact, the limiter on our growth rather than the capacity to raise money. Every attractive asset that we originate across our platform has a home in a fund, in a co-invest, on a retirement services balance sheet, or through syndication. In short, it is never capital that is in short supply. It is assets, and we are micro-focused on scaling origination. Platforms which are recurring origination are a very significant portion of our strategy. In the fourth quarter alone, we added Aqua Finance in consumer, Petro's Pace Finance in solar, Alliant Inventory Solutions in partnership with BNP, and the momentum continues. No one is doing what we are doing at the size and scale, and we've talked a lot in our industry about permanent capital. I'm much more interested in talking with you about permanent origination. In global wealth, as you know, we announced the acquisition of Griffith. Griffin Capital is a meaningful accelerator to build out our global wealth platform. We also made, during the quarter, strategic investments in two technology companies to facilitate the growth of our distribution businesses. CASE and ICAP are two of the leading technology platforms helping financial advisors access alternative strategies. Tech-enabled distribution is a must-have for anyone hoping to serve this market. We also saw early product success in the channel. Our BDC, Apollo Debt Solutions, is off to a very strong start, which Jim Zelter will take you through. I continue to believe that democratization of finance is one of the most powerful tailwinds driving our platform. If you think about our industry, and us in particular, we in the alternatives industry have spent better than 30 years on the cutting edge of creating products and services primarily for large global institutions who are not taxpayers. We have the opportunity now as a result of increasing sophistication of retail investors, increasing technology, increased democratization and legalization of opportunity, and this massive generational transfer of wealth to take that brain power and focus on creating products and services that are bespoke for this particular channel. Early iterations of serving this channel have been very successful, but really are the first step They are nothing more than the institutionalization of products that already exist. I view the real steps here as creating unique products and services that are designed for this channel. And given our experience with Athene, which you will hear, we have tremendous insight into what it takes at a granular level to be successful in this channel. On capital solutions, again, Jim will go in more detail. Suffice it to say, 2021 revenues in capital solutions were up 20% year over year. And as you know, our plan that we've communicated is a doubling of capital solutions revenue over the next five years. Significant landmark transaction, which I know Jim will touch on in the fourth quarter, is SoftBank, which will help you imagine where we're going with capital solutions. Noah touched briefly on our quarterly reporting. This is the last quarter that we will report on a standalone basis, with the Athene merger having closed on January 1st. Athene had an awesome 2021. As good a year as Apollo had, Athene had an even better year. Record profitability, earning more than $2 billion. Record organic inflows, more than $37 billion of organic inflows. Not only record inflows across all four of its business channels, But the returns at which this new business was underwritten significantly exceeded the compelling mid-teens target that we have. With the merger closed and collaboration and creativity ongoing, I see nothing but upside from the combination that closed just a month ago. I'd be remiss if I didn't touch on the market. Everywhere I go, people want to understand the impact of current market trends on our business. You know, my standard answer, if you think about the environment we've been in for the past 10 years, purchase price has not mattered. The more risk you took, the more outrageous, generally the higher the payoff. We have seen a significant correction across equity markets as a result of revaluations. We have also seen a significant change in fixed income markets as a result of central bank activity. Our platform is built for purchase price matters. We have achieved amazing results over the past decade in a market that has not necessarily been kind to our strategy and where our patient, value-oriented, disciplined approach to capital deployment has not been rewarded. I believe we are in the right place at the right time. I believe the 2022 fundraise for Apollo 10 will be very successful as we offer our large institutional clients a different approach to how to get return in a market that seems to have lost a bit of the go-go spirit. Let me pivot to merger and governance as I get ready to hand over to Jim Zelter who's chomping at the bit to take over. The merger with Athene closed on January 1st. The next chapter is very exciting, low risk of execution as we know each other incredibly well having worked together for the past 12, 13 years. We are adding the 1400 person Athene team to the roughly 2000 Apollo employees Pro forma, 3,500 total employees, approximately $40 billion of market cap. In addition to the mere merger, this was an opportunity for us to complete the governance changes that we had hinted at and been very explicit at throughout the last year. We are one share, one vote. We are a two-thirds independent board. We have an independent chair. And we have all of the requisite requirements to be eligible for broad index inclusions. Now let me conclude. I often say, and I started our strategy day, by really pointing out that culture beats strategy every day. We have built an incredible culture. The marketplace understands the long-term benefit of what we are building and is helping us to win the war on talent. People are attracted to the clear strategic vision, the authentic nature of the people they meet, and our cultural values. As I suggested, we added 424 employees in 2021. While very exciting, we're not likely to repeat that in 2022, having made significant progress. These are senior hires across global wealth, origination, finance, Asia Pacific. We have incredible momentum going into 2022. The team is eager to execute the plan we have articulated for you. We're excited about the next chapter. and a more profitable one Apollo and ready to take the hill. Let me now turn it over to my partner, Jim Zelter.