Earnings Call: Apollo Global Management Aims for Strong Growth by 2029
Apollo Global Management, Inc. (NYSE: APO) reported strong performance in the third quarter of 2024, with record fee-related earnings (FRE) and nearly record spread-related earnings (SRE). The company's adjusted net income reached $1.1 billion, setting ambitious targets for significant growth in FRE and SRE over the next five years, including a doubling of adjusted net income.
Key Highlights
Apollo Global Management reported record FRE of $531 million and robust SRE of $856 million in the third quarter of 2024. The company has set ambitious five-year targets of 20% annual FRE growth and 10% SRE growth. During the quarter, $62 billion in credit disbursements occurred, with a focus on four main trends that will drive future growth. Management remains optimistic about growth in fund-raising and retirement services. Jeff Jacobs was appointed CEO of Apollo’s third-party insurance business, underscoring the strategic importance of this area.
Company Outlook
Apollo aims to reach $10 billion in both FRE and SRE by 2029, with adjusted net income expected to double to $15 per share. The firm is investing in the third-party insurance business, targeting a doubling of this area over the next five years. Apollo is particularly focused on capitalizing on market opportunities in its private investment-grade sector.
Negative Highlights
The company reported a narrowing of spreads, which currently range from approximately 375 to 390 basis points, down from about 410 basis points a year ago.
Positive Highlights
Strong performance in credit management fees and a diversified credit disbursement pipeline contributed to record FRE. Retirement services exhibited strong organic growth, contributing $20 billion to enhanced net spread profitability during the quarter. Core investment income benefited from successful cash conversions, resulting in a net accrued performance fee balance of $1.4 billion.
Misses
No significant shortcomings were reported during the earnings discussion.
Q&A Highlights
CEO Marc Rowan emphasized the importance of transparency in metrics and shared insights into retail platform development. The firm is in the early stages of retail distribution, focusing on corporate-like family offices and serving wealthy clients through partnerships. Martin Kelly addressed concerns around rising distribution costs, clarifying that they did not experience significant margin pressure.
Apollo Global Management's third-quarter results show a solid trajectory for the company and a clear focus on expanding its footprint in the asset management sector. With strong financial results and strategic appointments, Apollo is positioning itself for significant growth in the coming years and capitalizing on key market trends. The management's confidence in the company’s growth strategies and commitment to maintaining asset utilization and competitive advantage is clearly reflected in its ambitious five-year plans.
InvestingPro Insights
Apollo Global Management's strong performance in Q3 2024 is further supported by data from InvestingPro. The company's market value stands impressively at $84.35 billion, reflecting its significant presence in the financial services sector. This aligns with InvestingPro's tip that describes Apollo as "a leading player in the financial services sector."
The company's P/E ratio of 15.94 indicates that investors are willing to pay a premium for Apollo's earnings, consistent with the record fee-related earnings and ambitious growth targets mentioned. Additionally, Apollo's revenue for the trailing twelve months as of Q2 2024 is $25.96 billion, with a gross profit margin of 37.18%, indicating a strong financial position.
An InvestingPro tip highlights that Apollo has "sustained uninterrupted dividend payments for 14 years," showcasing the company's financial stability and commitment to shareholder returns. This is particularly significant, given the strong performance and growth outlook discussed in the earnings report.
Another noteworthy InvestingPro tip reveals that Apollo is "trading near its 52-week high," with its stock price at 97.29% of the 52-week high. This is consistent with the company's solid quarterly results and optimistic five-year targets, likely contributing to investor confidence.
For readers interested in a more comprehensive analysis, InvestingPro offers 14 additional tips on Apollo Global Management, providing deeper insights into the company’s financial health and market positioning.