Apollo Global Management, Inc. (New)

To Apollo Global Management's first quarter 2022 earnings conference call. 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. Please limit yourself to one question and then rejoin the queue. 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 GAAP figures in Apollo's earnings presentation, which is available on the company's website. Also note, then 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.

Thanks, Operator, and welcome again to our call this morning. Earlier today, we published our new earnings release and financial supplement on the Investor Relations portion of our website. We will also post a financial supplement on the Athene Investor Relations website in the coming days, which provides historically disclosed information on Athene's balance sheet and investment portfolio. Additionally, we plan on publishing a new quarterly investor presentation on our website in the near future. As you can see, our first quarter results reflect our post-merger financial construction, illustrating the strong combined earnings power of Apollo and Athene. For the first quarter, we reported fee-related earnings of $310 million, or 52 cents per share, and spread-related earnings of $670 million, or $1.12 per share. These two earnings streams combined to total $980 million in the first quarter, or $1.63 per share, as the business demonstrated strength and resilience amid a period of macro volatility. We also reported normalized spread-related earnings of $488 million, or $0.81 per share, to provide a supplemental view of this important and valuable earnings stream. As we move into a new era of financial reporting post-merger, we noted in a recent AK filing that we were going to rename our primary non-GAAP metric from distributable earnings to adjusted net income. This naming convention better aligns with our dividend policy as well as the broader financial services universe. This change had no impact on our historical financial results or construction of what has historically been DE. For the first quarter, we reported adjusted net income totaling $915 million, or $1.52 per share. Joining me this morning to discuss our strong results in further detail are Mark Rowan, CEO, Scott Kleinman, co-president, and Martin Kelly, CFO. Given that we published a new package for you this morning and our prepared remarks may run a bit longer, we will do our best to be as efficient with your time as possible and look forward to answering all your questions. With that, I'll now turn the call over to Mark.

Mr. Thank you, Noah, and good morning to all. Needless to say, we are pleased with the first quarter results. As you know, during the quarter, we completed the merger with Athene. In a period of great volatility, the merger proceeded seamlessly, as did the closing of the financial statements. As Noah mentioned, the first quarter results showcased the combined earnings power of the business. The trends that we're seeing in the marketplace, specifically rates up and volatility, historically have been very good for our business, particularly as it relates to spread-related earnings, which is biased to the upside with rising rates, as I'm sure Martin will detail in his remarks. FRE, SRE, spread-related earnings, and robust inflows position us to meet or exceed our 2022 financial targets. in the aggregate and each of the pieces. Martin again will take you through that in detail in his section. As I like to think about the strength of the alternatives business, the purpose of the alternatives business is to produce excess return per unit of risk. For us, purchase price matters as an investment philosophy permeates everything we do. Pricing and valuation are important for return generation really for the first time in about 14 years. As you see in the results, our PE portfolio was up 8 percent versus minus 5 for the S&P 500 and minus 9 for the NASDAQ. The era of being able to achieve results on the back of declining rates and increasing liquidity, I believe to be at an end, separating alpha from beta. Our approach on purchase price matters is resonating with clients in this macro backdrop. Purchase price matters is not only a tool that we think about in the equity business. As I suggested, it permeates everything we do. In our hybrid business, by giving away a portion of the upside and protecting the downside, we express purchase price matters. In our yield business, our yield business is primarily driven by senior secured, top of the capital structure, investment grade, and floating rate. Purchase price matters even in the yield business. We begin 2022 with tangible progress against the three goals, three bets essentially that we've made to power the company over the next five years. Origination, retail, and capital solution. In origination, volume for Q1 was some $22 billion and run rating at $100 billion. Recall that our five-year target is to push that on a run rate basis to $150 billion. We completed acquisitions in the quarter of Pace, Foundation, and NuFi. These are platforms, platforms you should think of as permanent origination. In our industry, we spend a lot of time talking about permanent capital. Permanent origination is just as important as permanent capital. We've positioned ourselves as a scaled solutions provider, executing deals with speed and certainty. Two that I'd like to mention for the quarter, ALDAR, a $1.4 billion commitment. It's one of the largest foreign direct investments in Abu Dhabi's private sector, investment grade primarily. SoftBank, some $5.1 billion investment grade. These are the kinds of transactions in the originated marketplace that allow us to provide our balance sheet and our clients excess return per unit of risk even against the backdrop of a volatile market. Let me turn to Capital Solutions next. Capital Solutions had a pretty good quarter, even against the backdrop of market volatility. We are well positioned to deliver on the 2022 growth targets, notwithstanding what's happened in the first quarter. The Q2 pipeline is incredibly strong and very encouraging. As you know, we announced the strategic partnership with Mubadala, to capitalize on these origination activities, augmenting the volume of origination and syndication activity we can now execute. Again, a very good start for the year, and I expect we will meet or exceed the targets we have in capital solutions. Again, recall in our five-year plan that we've projected $500 million of revenues over the five-year period, or I should say at the end of the five-year period. Let me turn to global wealth. Judging by the reporting coming out of the earnings season For the Alternatives Peer Group, what's happening in global wealth seems to be of interest to the analyst community and to the marketplace, and it should be. We made meaningful progress against global wealth and our objectives in Q1. We added 125 dedicated employees, bringing our total employment in global wealth to 145, I believe to be the second largest global wealth team amongst Alternative Peers. Team alone is not going to define success. Here, the acquisition of Griffin, which will be completed in all facets in the second quarter, is an incredibly exciting partnership. We're off to a very good start, and we expect to see significant progress. Apollo Debt Solutions, our private BDC, continues to enjoy fundraising traction, and we expect to expand and internationalize distribution over the year and the quarters as we continue to deploy and we see strong demand across a variety of wealth channels, particularly RIAs. Let me spend a minute and talk about how we see the global wealth market. First, I think I need to back up and I need to define what we believe to be an alternative. An alternative to us is simply an alternative to publicly traded stocks and bonds. That definition encompasses an incredibly large marketplace versus a definition historically that where alternatives have been thought of as private equity and a variety of very opportunistic products. We like those products. Those products are the foundation of our business, but the market for alternatives is broader than perhaps we even imagined. I believe you will see the global wealth market develop along two lines over the coming years. one will be against the backdrop of traditional definitions of alternatives. Think of that as private funds. Think of that as BDCs. Think of that as REITs. In many instances, these products have been in the marketplace for decades, but for the first time are being offered to clients at institutional fee scales and with ease of access through technologically augmented implementation and with a much better understanding at the end client of the purpose and of the value behind these products. And needless to say, clients really like them. We've seen tremendous take-up of alternatives using that definition over the past few years. But I believe that there's a broader market, and the broader market really will help clients deal with what I would say is their traditional portfolios. To the extent a high net worth client might have been following a 40-60 portfolio or a traditional portfolio, I believe that they will struggle in the coming years with volatility in rates, indexation in markets, volatility of equity to meet their retirement needs. You will see us focus on the next generation of products later this year. We intend to launch the first of a generation of products specifically created for this marketplace. We're focused not just on alternatives but on equity replacement. I could see a day in the not-too-distant future when a client's portfolio is not 10 or 15 percent alternatives, but is 50 percent alternatives. Alternatives under the definition of an alternative to publicly traded stocks and bonds. We believe that alternatives exist from double A to equity, and our job is to bring those products to market and offer clients excess return per unit of risk. Most clients can afford to take some amount of liquidity risk across their portfolio. The product set that we envision is large and scalable and coming soon. Culturally, this has been an amazing quarter. What we're doing, what we're saying is resonating in the professional services marketplace. This is incredibly critical to attract and retain talent. For the first quarter, we hired 185 new Apollo employees Turnover is down. Satisfaction is up. To close, the optionality in our business is huge. We've made meaningful progress on our strategic growth initiatives in a relatively short amount of time, and we have some exciting developments in capitalizing on white space opportunities in front of us. I will now turn the call over to Scott to provide you with some detail on these developments and also cover key drivers of our Q1 results.