How did Apollo's core earnings performance look in Q4 and full year 2023?

Apollo reported Q4 2023 Fee Related Earnings of $457 million and Spread Related Earnings of $748 million, with combined Fee and Spread Related Earnings of $1.2 billion. For full year 2023, these figures reached $1.8 billion (FRE) and $3.1 billion (SRE), or $4.9 billion combined, an increase of more than 25% year over year. Adjusted Net Income was $4.1 billion for the year, or $6.74 per share.

Why is GAAP net income so much higher than Adjusted Net Income?

GAAP net income for Q4 2023 ($2.9 billion) and full year 2023 ($5.1 billion) includes a one-time $1.9 billion tax benefit from the establishment of deferred tax assets following Bermuda's enactment of the Corporate Income Tax Act 2023. GAAP results also include items such as unrealized investment gains and non-operating insurance liability changes that Apollo excludes from its non-GAAP measures, so investors should focus on ANI and segment earnings for recurring performance.

What does the new $3.0 billion share repurchase program mean for shareholders?

The board authorized up to $3.0 billion of share repurchases, which can be used to opportunistically reduce the share count or offset dilution from equity incentive plans. The program has no expiration date, and timing and amounts depend on price, market conditions, and legal requirements. Apollo may suspend, modify, or discontinue it at any time, and the authorization does not obligate any specific level of repurchases.

What are the risks in Principal Investing and performance fee generation?

Principal Investing Income fell to $83 million in 2023 from $284 million in 2022, reflecting delayed monetization of flagship private equity funds (Fund VIII and IX) in a challenging exit environment. Realized performance fees of $742 million for 2023 were supported partly by crystallization from a credit-focused fund, and the PII compensation ratio was 81%. Investors should watch for further exit activity, since these fees depend on realization events that management has described as prudently delayed.

How is the dividend changing for shareholders?

Apollo declared a Q4 2023 dividend of $0.43 per common share, payable February 29, 2024. The company intends to pay an annual dividend of $1.85 per share starting with the first quarter 2024 dividend, a 7.5% increase from the $1.72 paid in 2023. Dividend declarations remain at the sole discretion of the board, which may change the policy at any time, including eliminating the dividend entirely.

APO 8-K: Earnings & Results & Regulation FD

01—Abstract

Summary

Summary of the 8-K filed February 8, 2024. Cited figures are marked; the original filing is the authoritative source.

Apollo Global Management (NYSE: APO) reported fourth quarter and full year 2023 results on February 8, 2024, with the headline message that Fee Related Earnings (FRE) and Spread Related Earnings (SRE) combined grew more than 25% year over year to $4.9 billion^a for 2023.

Fourth quarter FRE was $457 million^b and SRE was $748 million, while full year FRE reached a record $1.8 billion and SRE a record $3.1 billion. Adjusted Net Income (ANI), the company's primary non-GAAP earnings metric, totaled $1.2 billion ($1.91 per share) in the quarter and $4.1 billion ($6.74 per share) for the full year. GAAP net income attributable to Apollo common stockholders was $2.9 billion ($4.75 per share) for the quarter and $5.1 billion ($8.53 per share) for the year, though the fourth quarter included a one-time $1.9 billion tax benefit tied to Bermuda's Corporate Income Tax Act 2023, so GAAP results overstate the recurring earnings run rate.

Assets under management reached $651 billion^c, up roughly 19% year over year, with total 2023 inflows of $157 billion, including $32 billion in the fourth quarter. Management emphasized growth in the Retirement Services business (Athene), where gross organic inflows were a record in the quarter, and in Asset Management fee revenue, which rose 16% for the year. Investors should note that Principal Investing Income fell sharply to $83 million for 2023 from $284 million in 2022 because realized performance fees from flagship private equity funds (Fund VIII and IX) remain delayed amid a challenging exit environment, and the 2023 compensation ratio of 81% reflects this lower monetization.

Alternative investment returns at Athene were also lower, at a 7.2% return for 2023 versus management's 11% long-term expectation. On capital allocation, the board authorized a new $3.0 billion^d share repurchase program on February 8, 2024, terminating the prior program and its remaining capacity of roughly $924 million.

The company also declared a Q4 2023 common dividend of $0.43 per share and announced an intended annual dividend of $1.85 per share beginning with the first quarter 2024 payout, up 7.5% from $1.72 paid in 2023. These announcements, combined with $804 million of 2023 share repurchases, signal confidence in cash generation, though dividend and buyback levels remain at the discretion of the board.

02—Key points

Key Highlights

Fee and Spread Related Earnings (FRE + SRE) totaled $1.2 billion in Q4 2023 and $4.9 billion for full year 2023, up more than 25% year over year.
Adjusted Net Income of $1.2 billion ($1.91 per share) in Q4 2023 and $4.1 billion ($6.74 per share) for FY 2023, Apollo's primary non-GAAP earnings metric.
GAAP net income attributable to common stockholders was $2.9 billion ($4.75/share) in Q4 and $5.1 billion ($8.53/share) for FY 2023, inflated by a one-time $1.9 billion Bermuda-related tax benefit.
Total AUM reached $651 billion, with record annual inflows of $157 billion (Q4: $32 billion) and roughly 58% of AUM in perpetual capital.
New $3.0 billion share repurchase program authorized, replacing the prior program with roughly $924 million of remaining capacity.
Dividend policy: Q4 2023 common dividend of $0.43 per share declared, with an intended annual dividend of $1.85 per share starting Q1 2024 (up 7.5%).
Principal Investing Income declined to $83 million in FY 2023 from $284 million in FY 2022, as monetization of flagship private equity funds remains delayed.

03—Questions

Frequently Asked Questions

How did Apollo's core earnings performance look in Q4 and full year 2023?
Apollo reported Q4 2023 Fee Related Earnings of $457 million and Spread Related Earnings of $748 million, with combined Fee and Spread Related Earnings of $1.2 billion. For full year 2023, these figures reached $1.8 billion (FRE) and $3.1 billion (SRE), or $4.9 billion combined, an increase of more than 25% year over year. Adjusted Net Income was $4.1 billion for the year, or $6.74 per share.
Why is GAAP net income so much higher than Adjusted Net Income?
GAAP net income for Q4 2023 ($2.9 billion) and full year 2023 ($5.1 billion) includes a one-time $1.9 billion tax benefit from the establishment of deferred tax assets following Bermuda's enactment of the Corporate Income Tax Act 2023. GAAP results also include items such as unrealized investment gains and non-operating insurance liability changes that Apollo excludes from its non-GAAP measures, so investors should focus on ANI and segment earnings for recurring performance.
What does the new $3.0 billion share repurchase program mean for shareholders?
The board authorized up to $3.0 billion of share repurchases, which can be used to opportunistically reduce the share count or offset dilution from equity incentive plans. The program has no expiration date, and timing and amounts depend on price, market conditions, and legal requirements. Apollo may suspend, modify, or discontinue it at any time, and the authorization does not obligate any specific level of repurchases.
What are the risks in Principal Investing and performance fee generation?
Principal Investing Income fell to $83 million in 2023 from $284 million in 2022, reflecting delayed monetization of flagship private equity funds (Fund VIII and IX) in a challenging exit environment. Realized performance fees of $742 million for 2023 were supported partly by crystallization from a credit-focused fund, and the PII compensation ratio was 81%. Investors should watch for further exit activity, since these fees depend on realization events that management has described as prudently delayed.
How is the dividend changing for shareholders?
Apollo declared a Q4 2023 dividend of $0.43 per common share, payable February 29, 2024. The company intends to pay an annual dividend of $1.85 per share starting with the first quarter 2024 dividend, a 7.5% increase from the $1.72 paid in 2023. Dividend declarations remain at the sole discretion of the board, which may change the policy at any time, including eliminating the dividend entirely.

04—Continue

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