Apollo Global Management, Inc. — Form 8-K Summary
Business context and reporting period
Filed January 27, 2022, this Form 8-K provides selected preliminary financial updates for the fourth quarter and full year ended December 31, 2021, based on information available as of January 26, 2022. Apollo is a global alternative asset manager. Standalone full-year results were scheduled for release on February 11, 2022.
Apollo completed its all-stock merger with Athene Holding Ltd. on January 1, 2022. The filing therefore primarily presents Apollo standalone information for 2021 and does not provide consolidated post-merger operating results.
Key financial metrics and capital actions
| Metric or item | Filing disclosure |
|---|---|
| Full-year 2021 FRE margin | Expected to be approximately 57%, pro forma for segment allocations and the revised Athora fee agreement. |
| FRE margin impact from Griffin | Expected to be approximately 100 basis points lower pro forma for the Griffin acquisition because Griffin operates at a lower margin. |
| One-time GAAP compensation charge | Approximately $950 million in the fourth quarter of 2021, largely related to vested equity awards; the charge is non-cash and expected to be transitory. |
| Distributable Earnings tax rate | Approximately 8% for 2021; approximately 18% expected for full-year 2022. |
| Athora fee agreement | Expected annual increase of approximately $25 million in both revenue and expenses beginning with the 2021 reporting treatment. |
| Shares outstanding | Approximately 249 million common shares at December 31, 2021; approximately 571 million at January 6, 2022. DE shares were approximately 461 million and 600 million, respectively. |
| Griffin pro forma DE shares | Approximately 604 million upon the expected second-quarter 2022 closing. |
| Share repurchase authorization | Up to $1.5 billion for opportunistic share reduction and up to $1.0 billion to offset equity incentive-plan dilution. The authorization has no expiration date and does not require repurchases. |
The filing does not provide clear values for 2021 revenue, GAAP net income, distributable earnings, operating cash flow, free cash flow, debt, cash balances, liquidity, assets under management, or leverage.
Material changes versus the prior comparable period
- The Athene merger closed on January 1, 2022, expanding Apollo’s retirement services and capital solutions capabilities.
- Apollo implemented a compensation reset that includes a one-time issuance of vested equity awards. Management expects the fee-related compensation expense ratio to decline from approximately 30% to 25% over five years.
- Apollo agreed to acquire Griffin Capital’s U.S. wealth distribution and asset management businesses in an all-stock transaction. The transaction is expected to close in two phases during the first and second quarters of 2022 and is expected to be approximately breakeven to 2022 after-tax DE per share.
- Beginning in the first quarter of 2022, Apollo expects to report three segments: Asset Management, Retirement Services, and Principal Investing. The non-GAAP recast does not affect historical consolidated U.S. GAAP results.
- The share count increased materially following the merger-related share restructuring and compensation reset.
Guidance, outlook, commentary, risks, and unusual items
Management stated that it remained comfortable with the five-year growth strategy and the 2022 per-share FRE and SRE estimates presented at its October 2021 Investor Day. The strategy emphasizes origination, global wealth distribution, and capital solutions.
Management expects the Griffin acquisition to expand retail distribution, including through independent broker-dealer and wirehouse channels, and to add two retail interval funds with approximately $5 billion of assets under management. The acquisition remains subject to customary closing conditions, including approvals related to the funds.
Important unusual items include the approximately $950 million non-cash GAAP compensation charge, the revised Athora fee agreement that increases both revenue and expenses, and the substantial change in reported and DE share counts.
Key risks identified include dependence on key personnel, fundraising and fund performance, market and interest-rate volatility, COVID-19 and energy-market dislocation, growth-management challenges, variable revenue and cash flow, leverage, Athene’s financial strength ratings, reinsurer counterparty performance, insurance regulation, tax and regulatory changes, litigation, and the ability to realize expected merger benefits.
Investor verification checklist
- Verify the February 11, 2022 earnings release and subsequent filings for finalized 2021 GAAP and non-GAAP results.
- Reconcile the approximately $950 million compensation charge to reported GAAP earnings and assess its effect on DE and per-share measures.
- Confirm the final post-merger share count, dilution from equity awards, and treatment of Apollo Operating Group Units and RSUs.
- Review Athene’s standalone 2021 results and the accounting treatment of the January 1, 2022 merger.
- Confirm the timing, approvals, consideration, and financial contribution of the Griffin transaction.
- Assess debt, liquidity, cash flow, leverage, and capital requirements, which are not clearly quantified in this filing.
- Evaluate the effect of the new segment structure, expense allocations, and Athora fee agreement on comparability with prior periods.