Apollo Global Management, Inc. (New)

Good morning and welcome to Apollo Global Management's fourth quarter and full year 2024 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 opened 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 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 that nothing on this call constitutes an offer to sell or a solicitation of an offer to purchase any interest in Apollo Fund. I would now like to turn the call over to Noah Gunn, Global Head of Investor Relations. Please go ahead.

Great. Thanks, Operator, and welcome again, everyone, to our call. Joining me to discuss our results and the momentum we're seeing across the business are Mark Rowan, CEO, Jim Zelter, President, and Martin Kelly, CFO. Earlier this morning, we published our earnings release and financial supplement on the investor relations portion of our website. As you can see, fourth quarter results punctuated a very strong year of performance. In the quarter specifically, we generated record fee-related earnings of $554 million, or 90 cents per share, spread-related earnings of $841 million, or $1.37 per share, and adjusted net income of $1.4 billion, or $2.22 per share, the highest quarterly level we've earned to date. The fourth quarter represented another milestone for us as we were thrilled to be added to the S&P 500 in December. This is a testament to the firm's differentiated strategy, remarkable growth, and institutionalization as a public company. Since we listed on the NYSE in 2011, our market cap has grown from approximately $2 billion to more than $100 billion. We expect our inclusion will broaden our public shareholder base. and enable more investors to gain exposure to private markets by investing in our business. Of course, this milestone would not have been possible without the collective effort and ingenuity of all our colleagues across the firm who drive the business forward every day. And with that, I'll now hand the call over to Mark.

Thank you, Noah, and good morning to all. As Noah suggested, 2024 wrapped up in exactly the way we wanted, growth and execution. FRE for the quarter, 2.1 billion, up 17% year over year. SRE, 3.2 billion, in line with investor day guidance. Record annual ANI, 4.6 billion. As we've often suggested, the reward for good work is more work. Record AUM, 751 billion. Total inflows, 150 billion. And origination volume, over 220 billion. In short, this is exactly the quarter and exactly the year we wanted. Recall what we are trying to do and what we've reiterated in our five-year planning process. We are not here to grow the fastest. We are not here to grow the largest. We are here to deliver the plan, plus a little, and like who we are and like our franchise at the end of the five-year journey. As we've said, our goal over the next five years is to grow FRE at an average annual rate of 20%, SRE at 10%, And in any one year, FRE between 15 and 20%, particularly in non-fundraising years. This is exactly what we hope to do. And again, we are not here to blow the doors off any one quarter. We are investing in the business because what's in front of us dwarfs what's behind us. And it is important that we set ourselves up well for that opportunity. At a recent Partners Offsite, we gather all 200 partners of Apollo And among the questions I asked them was, if we have a challenge meeting our five-year plan, is that challenge external or internal? Ninety percent of the people recognize what I recognize, is that challenge is internal. It is all about us executing, all about us aligning the resources that we have, making the right investments. The market is coming our way. It doesn't mean every day. It doesn't mean every quarter. But I like the way the external environment is developing. And the toughest thing we do, and I know this will sound somewhat trite, toughest thing we do, and now that Jim does, because I get to share the responsibility with him, is to keep the team playing to win. Successful companies across our industry, across every industry, have a tendency to play not to lose. And with the amount of change that our industry is facing and the amount of opportunity in front of us, we want the team to that steps up every day and plays to win. The strategy, as you know, is set. So what does playing to win look like? Well, for us, it is to recognize where we think the industry is going and how we think the industry is developing. As we've said, our business is going to be driven by four really large fundamental changes taking place in the marketplace. The first is this notion of a global industrial renaissance. We're seeing it literally every day in the U.S. in particular. And this is not just about AI and deep sea. This is about fundamental investments in energy, in infrastructure, in power, in data, in next generation manufacturing, and a host of other things that are going to be needed, financed, and borrowed. The second big driver of our business is retirement. Retirement, not just in the traditional sense through a theme of providing guaranteed lifetime income, but in the nontraditional sense of helping retirees retire better. The third, recall that our entire industry was built out of the alternatives bucket of institutional clients. As all of you know from the past few years, individuals have the potential to be as large as institutions in the same sorts of products, and they will not take anywhere near 40 years to get to that size. And finally, And I think personally, the most important driver of our business is an entire rethink of public and private. And what I mean by that is our industry grew up where people thought private was risky and public was safe. And when something is risky, you put it in a small bucket and you call it an alternative and you want very high rates of return from it. And 40 years later, after our industry start, I think that professionals in our industry now understand that private is safe and risky. and public and safe and risky. And if people are not watching closely, the largest asset manager, the traditional asset manager in our industry has delivered a wake up call to their entire peer set that private is going to be an important part of client solutions going forward. So let me spend a little bit on each of these four drivers. When we think about the global industrial renaissance to us, this is the largest place we can originate. It is not just the origination coming off our 16 owned platforms, but it is the unique bespoke underwritings for the Intel's and others to build the next generation economy. This quarter, second best quarter ever, more than 60 billion of originations. Originations are not just about putting capital out the door. It's about putting capital out the door at excess return per unit of risk. We want to originate that which has value. So long as we originate and capture spread by offering clients things they cannot buy in the liquid public markets, we will win. It is not simply chasing a number for the quarter. In retirement, yes, we are well set up to serve retirement. Athene is the largest in the industry, continues to have industry leading market share. and for the year generated more than $70 billion of organic inflows. $70 billion could have been $75 billion or $80 billion. It is not our goal, as I suggested, to grow disproportionately in any one quarter or in any one year. And to give you a sense of momentum in retirement, just January of a theme inflows more than $9 billion. That should not be 12 times 9 for the year because that is not what we seek to do. We seek to earn excess returns, and when we see opportunities to do that, we will be very aggressive. And when returns are not as plentiful or not where we want them to be, we will back off. We run a principle-based business, and you can count us the good, responsible stewards of capital. Elsewhere in retirement, well, before I pivot from Athene, as I said, Athene has grown in traditional products that we would associate with the retirement industry. Tensions, funding agreements, individual annuities, group annuities, and the like. We will continue to do that, and that will continue to be a growing market. But the future of Athene is about the next generation of retirement products. We as a company and we as an industry have yet to really hit on our full potential, and I believe our full potential is to offer consumers and businesses and clients much simpler solutions. Guaranteed lifetime income versus a complex annuity. is where I think the journey is focused. There are other forms of guaranteed income that are prevalent throughout our financial system that Athene also has the opportunity to make inroads in and to offer industry-leading solutions. Away from the pure retirement business built on Athene, Apollo Asset Management continues to make inroads into the retirement market. This is in the absence of any legislative or regulatory change, as we suggested in our last get together. We already had one CIT up and running in a retirement solution. We now have our second, and we are making really good progress with record keepers and continue to believe that target date funds, managed accounts, and other forms of retirement solutions will offer a robust future in the absence of legislative change. And with legislative change, this could be one of the true drivers of our industry, not just our business going forward. As to individuals, record results, 12 billion in 2024, up 50%. Q4 was our second best ever. Just truly an exceptional year. And again, the philosophy by which we run this business is not to grow disproportionately in any one quarter. Consider ADS. We run this vehicle for the long term. We run it with the least leverage, the most senior, the largest companies, We want to be around for the long term. We want to take advantage of market dislocation. If we're innovating, we're innovating in access. As you know, we now offer it in a tokenized format. We'll innovate in how to serve our clients, but as an investment proposition, excess return per unit of risk, purchase price matters. We run these businesses for the long term, not for any quarterly goal or otherwise. Jim will talk more about the diversified portfolio of products that we now offer to individuals. And I continue to believe this will be one of the most promising areas. Just a word on public versus private before I wrap up and talk about a few other things. BlackRock made a number of very significant acquisitions in 2024. Those acquisitions lay a foundation for an integration of public and private. I continue to believe this convergence of public and private will be a very important source of demand for private assets. I see private assets in any number of forms. Our industry and our firm will be a supplier of product to traditional asset managers as they seek to make their products more competitive, given the incredible amount of indexation and correlation, and quite frankly, just data that exists in the market. We envision that traditional asset managers will evolve their businesses to include products that are public and private. Some traditional asset managers will actually want to launch new products that are co-branded. We are doing that as well. And some will seek to augment their business with massive managed accounts where they have access to private assets from a variety of different players. I think this is good for our entire industry. We will not, as an industry, serve the vast majority of clients around the world. We simply don't have the resources, we don't have the efficient systems, and we don't have the relationships. What we do have, so long as we're good at it, is products that offer excess return per unit of risk. I see a very good marriage between our industry, our company, and the public or traditional asset managers, who I believe are going to reinvent their businesses, spurred on by competitive forces. So enough on the market for a bit. I continue to think, in summary, that we have four drivers, any one of which could be a double in our business, and they will power our business forward in terms of demand for private assets. I continue to believe that the carburetor or limiter of growth in our business is limited to our capacity to originate good risk and to our culture and ability to absorb growth. We watch both very carefully, in particular on originations. One of the things that we have begun to do this year is to figure out how to expand our origination engine. In certain parts of our business, for instance in infrastructure, we have decided to do some modest M&A. You noticed in the quarter the addition of Argo. Argo is an infrastructure manager. We'll add some $6 billion of high-quality AUM to our platform, but the single most important factor in deciding to absorb Argo is the Argo team. The capacity to continue to originate, not just for their drawdown funds, but for our evergreen retail funds, for our SMAs and managed accounts, And for all the vehicles of the Apollo platform is eye-opening to the Argo team, and we will benefit by having a scaled business with an excellent track record join us. You should expect us to continue to do modest M&A along these same lines where we are quite focused on increasing our capacity to originate. That is what we intend to do. So I will leave lots of time for Q&A, and I'm sure we will talk about regulatory and the backdrop to what we do. But with that, I'm going to pass it over to my partner, Jim Selton.