RBC Capital Markets analyst Bulent Ozcan takes a look at the state of Apollo Global Management after the company reported Q4 earnings this morning.

Apollo Global Q4 Beats On Strong Private equity Performance

Apollo global earnings

Apollo Global Management LLC (NYSE:APO) reported December quarter results that were stronger than we had anticipated. Apollo raised close to $10 billion in the December quarter. The firm deployed $1 billion in private equity in 4Q13. Uncalled private equity commitments stand at $24 billion.

Apollo Global Management LLC (NYSE:APO) declared distributions of $1.08 versus our estimate of $0.98 per share. Economic net income of $1.06 in the December quarter exceeding our estimate of $0.69.

Apollo global’s management business

Total revenues for Apollo Global Management LLC (NYSE:APO)’s Management Business increased from $223.2 million in 4Q12 to $295.7 million in the December quarter. This was driven by higher fee earnings assets due to the Aviva plc (LON:AV) acquisition. Fee generating AUM stood at $128.4 billion as of December 2014, increasing $46.5 billion year over year.

While realized gains from carried interest income declined from $841 million in 2Q13, to $639 million in 3Q13 and $632 million in the December quarter, Apollo’s Incentive Business generated total carried interest above our expectation of $417 million.

Realizations were driven by a number of exits or partial sell-downs including: Evertec Inc (NYSE:EVTC), Sprouts Farmers Market Inc (NASDAQ:SFM), CKE Restaurants; Norwegian Cruise Line Holdings Ltd (NASDAQ:NCLH), Taminco Corp (NYSE:TAM); Countrywide PLC (LON:CWD); and LyondellBasell Industries NV (NYSE:LYB).

Apollo Global Management LLC (NYSE:APO)’s private equity funds appreciated 9% in the December quarter, resulting in a fair value of funds (incl. AAA) of 65% above cost – same as in the September quarter. This compares with an appreciation of 18% during the September quarter and a 5% appreciation in during the June quarter.

Credit Segment reported an Eni SpA (BIT:ENI) of $160.1 million, up 65% year over year. The Management Business ENI increased 2.6x due to the inclusion of Aviva’s assets in fee generating AUM. Realized gains from carried interest increased 32% year over year.

Real Estate Segment reported its first positive ENI since 2Q12. Economic net income stood at $3.9 million.

Net carried interest receivable increased from $1,254 million in the September quarter to $1,375 million in the December quarter.