EFTA02662226

From: Richard Kah Sent: Friday, February 3, 2017 3:29 PM To: jeffrey E. Subject: Fwd: APO US: Apollo Global Management - Revenue beat, with good performance and improving distribution - NEUTRAL - United States Richard =ahn HBRK Associates Inc. 575 Lexington =venue 4th Floor New York, NY 10022 Begin forwarded message: From: =/b>"Ens, Amanda" Subject: =/b>APO US: Apollo =lobal Management - Revenue beat, with good performance and improving =istribution - NEUTRAL - United States Date: =/b>February 3, 2017 at 9:25:48 AM =ST To: =/b>"Rich Kahn"< Reply-To: =/b>"Ens, Amanda" Rich, just as an =pdate Global Research Apollo Global Management EFTA_R1_01910963 EFTA02662226 Revenue beat, with good performance and =mproving distribution Maintain Rating: NEUTRAL PO: 23.00 USD I Price: 21.70 USD Equity I 03 February =017 Key takeaways • =/span>APO reported ENI of $0.98, beating =he Street/BofAML at $0.80/$0.96, on better-than-expected perf. fees and =ransaction fees. • =/span>Strong qtr included Athene mark (IPO in 4Q), but core results also =ealthy, with good performance and distribution of $0.45. =/span>A solid quarter but we remain =eutral given modest near-term outlook for distributions and valuation =n line with the sector. FULL REPORT 2 EFTA_R1_01910964 EFTA02662227 APO reported ENI/share =f $0.98, beating expectations APO reported ENI/share of $0.98, =eating the Street/our estimates of $0.80/50.96, due to =etter-than-expected revenue, driven by performance fees and transaction =ees. We would note that the strong quarter was driven in part by an =nticipated positive mark on Athene, which =span class="SpellE">IPO'd in 4Q. However, the core business =lso performed well, with strong performance (PE +5.9%, Credit +2.1% and =E +5.3%), growing AUM and rising accrued performance fees. This =uarter, APO changed its disclosure slightly and is no longer including =hare-based compensation in fee-related earnings (FRE), more in line =ith some peers. The distribution was relatively strong, at $0.45. =verall, a good quarter and we expect the stock to do well on the =onsensus beat, but, despite a healthy growth/ deployment outlook, given = modest outlook for distributions over the near term and a valuation in =ine with the sector, we maintain our Neutral rating. Positives in the =uarter 1. =/span>Distribution was stronger than expected, at =0.45. 2. =/span>Performance was healthy across segments: PE +5.9%, Credit =2.1%, and RE +5.3%. 3. =/span>Net =erformance fees were above our forecast, at $226M, driven by private =quity. 4. =/span>Fee =evenue was ahead of our forecast, driven by strong transaction/advisory =ees, partially offset by lower management fees. 5. =/span>AUM/FAUM increased 2%/1%, to $192B/$151B, with $266 of dry =owder. 6. =/span>Carry-gen. AUM +8% q/q, to $55.6B. 7. =/span>Net =ccrued receivables increased 34%, to $709M, driven by private equity. =/span> 8. =/span>Healthy fundraising of $6.66/$3.8B net of $2.86 outflows =$0.6B of which is redemptions). 9. =/span>Deployment was strong at $3.56, along with decent $1.76 of =ealizations. Issues in the quarter =/span> 1. =/span>Transaction fees were elevated again, but likely to moderate =rom here, and management fees came in lower than =xpected. 2. =/span>Core =xpenses, particularly comp, increased 16% q/q and were above =xpectations. 3. =/span>FRE =eclined 10% q/q, to $131M, while the FRE margin declined slightly, to =4%. We would note that APO started excluding share-based compensation =rom FRE this quarter. 4. =/span>The =ax rate aided the beat, at 13%, below the prior quarter and year =eriods. 5. =/span>Funds=VI & VII remain in escrow (although Fund VIII is out of escrow this =uarter), limiting future distributions from those =unds. 3 EFTA_R1_01910965 EFTA02662228 6. =/span>Pace =1 share repurchases picked up, with $54M spent in 4Q, up from $5M in =Q. $196M remains under $250M authorization. Conference call =/span> Our Neu " = in unchanged. APO is due to host a conference call at 10:00 AM ET to =iscuss results ( Michael Carrier, CFA Research Analyst MLPF&S </=able> This report is intended for [email protected] =o:p class=""> Click here to access the =esearch Library Read the research report, available through the link above, =or complete information including important disclosures and analyst =ertification(s). The research report and the link to such report are for the =se of Bank of America Merrill Lynch customers only and all copying, =edistribution, retransmission, publication, and any other dissemination =r use of the contents thereof are prohibited. There may be more recent =nformation available. Please visit one of the electronic venues that =arry BofA Merrill Lynch Global Research reports or contact your Bank of =merica Merrill Lynch representative for further information. "Bank of =merica Merrill Lynch" is the marketing name for the global banking and =lobal markets businesses of Bank of America Corporation. 4 EFTA_R1_01910966 EFTA02662229 Click here to stop or =odify the delivery of Research via Emails. Publication: 60342736-11703544.pdf Recipient: „adt.IIIIIIIIIIIIIIIIIIIIIIII http://rsch.baml.com/r?q=6qGH5VtXQRfyV.I2989T5Cw&e=richa=dkahn12%4Ogmail.com&h=20e8AQ This message, and any attachments, is for the intended =ecipient(s) only, may contain information that is privileged, =onfidential and/or proprietary and subject to important terms and =onditions available at http://www.bankofamerica.com/emaildisclaimer. If you are =ot the intended recipient, please delete this message. 2220144 5 EFTA_R1_01910967 EFTA02662230