| SEGMENT REPORTING | SEGMENT REPORTING Apollo conducts its business primarily in the United States and substantially all of its revenues are generated domestically. Apollo’s business is conducted through three reportable segments: credit, private equity and real assets. Segment information is utilized by our Managing Partners, who operate collectively as our chief operating decision maker, to assess performance and to allocate resources. These segments were established based on the nature of investment activities in each underlying fund, including the specific type of investment made and the level of control over the investment. The performance is measured by the Company’s chief operating decision maker on an unconsolidated basis because management makes operating decisions and assesses the performance of each of Apollo’s business segments based on financial and operating metrics and data that exclude the effects of consolidation of any of the affiliated funds. Economic Income (Loss) Economic Income (Loss), or “EI”, is a key performance measure used by management in evaluating the performance of Apollo’s credit, private equity and real assets segments. Management believes the components of EI, such as the amount of management fees, advisory and transaction fees and performance fees, are indicative of the Company’s performance. Management uses EI in making key operating decisions such as the following: • Decisions related to the allocation of resources such as staffing decisions including hiring and locations for deployment of the new hires; • Decisions related to capital deployment such as providing capital to facilitate growth for the business and/or to facilitate expansion into new businesses; and • Decisions related to expenses, such as determining annual discretionary bonuses and equity-based compensation awards to its employees. With respect to compensation, management seeks to align the interests of certain professionals and selected other individuals with those of the investors in such funds and those of the Company’s shareholders by providing such individuals a profit sharing interest in the performance fees earned in relation to the funds. To achieve that objective, a certain amount of compensation is based on the Company’s performance and growth for the year. EI is a measure of profitability and has certain limitations in that it does not take into account certain items included under U.S. GAAP. EI represents segment income (loss) before income tax provision excluding transaction-related charges arising from the 2007 private placement, and any acquisitions. Transaction-related charges includes equity-based compensation charges, the amortization of intangible assets, contingent consideration and certain other charges associated with acquisitions. In addition, EI excludes non-cash revenue and expense related to equity awards granted by unconsolidated related parties to employees of the Company, compensation and administrative related expense reimbursements, as well as the assets, liabilities and operating results of the funds and VIEs that are included in the condensed consolidated financial statements. We believe the exclusion of the non-cash charges related to the 2007 Reorganization for equity-based compensation provides investors with a meaningful indication of our performance because these charges relate to the equity portion of our capital structure and not our core operating performance. EI also excludes impacts of the remeasurement of the tax receivable agreement recorded in other income, which arises from changes in the associated deferred tax balance, including the impacts related to the TCJA. Management believes that excluding the remeasurement of the tax receivable agreement from EI is meaningful as it increases comparability between periods. Remeasurement of the tax receivable agreement is an estimate, and may change due to changes in interpretations and assumptions based on additional guidance that may be issued pertaining to the TCJA. The following tables present financial data for Apollo’s reportable segments. As of and for the Three Months Ended June 30, 2018 Credit Segment Private Equity Segment Real Assets Segment Total Reportable Segments Revenues: Management fees $ 184,587 $ 122,812 $ 18,465 $ 325,864 Advisory and transaction fees, net 2,284 13,294 2 15,580 Performance fees (1) : Unrealized (2) 7,649 13,228 (258 ) 20,619 Realized 64,797 52,641 2,802 120,240 Total performance fees 72,446 65,869 2,544 140,859 Principal investment income 10,888 11,105 799 22,792 Total Revenues (3) 270,205 213,080 21,810 505,095 Expenses: Compensation and benefits: Salary, bonus and benefits 57,894 36,509 10,098 104,501 Equity-based compensation 8,311 6,875 847 16,033 Profit sharing expense: Unrealized 3,052 6,380 (307 ) 9,125 Realized 37,106 31,644 1,060 69,810 Equity-based (4) 2,072 15,483 290 17,845 Total profit sharing expense 42,230 53,507 1,043 96,780 Total compensation and benefits 108,435 96,891 11,988 217,314 Non-compensation expenses: General, administrative and other 33,626 15,740 6,310 55,676 Placement fees 279 32 — 311 Total non-compensation expenses 33,905 15,772 6,310 55,987 Total Expenses (3) 142,340 112,663 18,298 273,301 Other Loss: Net gains (losses) from investment activities (47,432 ) (20,137 ) 4 (67,565 ) Net interest loss (5,382 ) (3,857 ) (1,097 ) (10,336 ) Other loss, net (2,319 ) (2,398 ) (699 ) (5,416 ) Total Other Loss (3) (55,133 ) (26,392 ) (1,792 ) (83,317 ) Non-Controlling Interests (1,364 ) — — (1,364 ) Economic Income (3) $ 71,368 $ 74,025 $ 1,720 $ 147,113 Total Assets (3) $ 2,648,979 $ 2,568,187 $ 206,413 $ 5,423,579 (1) Performance fees includes performance allocations and incentive fees. (2) Included in unrealized performance fees for the three months ended June 30, 2018 was a reversal of previously realized performance fees due to the general partner obligation to return previously distributed performance fees. (3) Refer below for a reconciliation of total revenues, total expenses, other income and total assets for Apollo’s total reportable segments to total consolidated revenues, total consolidated expenses, total consolidated other income (loss) and total assets. (4) Relates to amortization of restricted share awards granted under certain profit sharing arrangements. For the Three Months Ended June 30, 2017 Credit Segment Private Equity Segment Real Assets Segment Total Reportable Segments Revenues: Management fees $ 169,856 $ 77,275 $ 19,777 $ 266,908 Advisory and transaction fees, net 3,709 19,302 618 23,629 Performance fees (1) : Unrealized (2) 26,921 (98,372 ) 926 (70,525 ) Realized 57,119 136,497 5,175 198,791 Total performance fees 84,040 38,125 6,101 128,266 Principal investment income 5,856 10,348 1,015 17,219 Total Revenues (3) 263,461 145,050 27,511 436,022 Expenses: Compensation and benefits: Salary, bonus and benefits 59,244 30,294 9,022 98,560 Equity-based compensation 9,228 7,704 634 17,566 Profit sharing expense: Unrealized 12,927 (34,983 ) (70 ) (22,126 ) Realized 23,080 53,137 2,866 79,083 Equity-based (4) 582 462 — 1,044 Total profit sharing expense 36,589 18,616 2,796 58,001 Total compensation and benefits 105,061 56,614 12,452 174,127 Non-compensation expenses: General, administrative and other 31,760 16,617 5,297 53,674 Placement fees 3,918 1,341 — 5,259 Total non-compensation expenses 35,678 17,958 5,297 58,933 Total Expenses (3) 140,739 74,572 17,749 233,060 Other Loss: Net losses from investment activities (299 ) (100 ) — (399 ) Net interest loss (6,484 ) (4,336 ) (1,247 ) (12,067 ) Other income (loss), net (241 ) 781 240 780 Total Other Loss (3) (7,024 ) (3,655 ) (1,007 ) (11,686 ) Non-Controlling Interests (559 ) — — (559 ) Economic Income (3) $ 115,139 $ 66,823 $ 8,755 $ 190,717 (1) Performance fees includes performance allocations and incentive fees. (2) Included in unrealized performance fees for the three months ended June 30, 2017 was a reversal of previously realized performance fees due to the general partner obligation to return previously distributed performance fees. (3) Refer below for a reconciliation of total revenues, total expenses and other income for Apollo’s total reportable segments to total consolidated revenues, total consolidated expenses and total consolidated other income (loss). (4) Relates to amortization of equity-based awards granted under certain profit sharing arrangements. The following table reconciles total consolidated revenues to total revenues for Apollo’s reportable segments. For the Three Months Ended June 30, 2018 2017 Total Consolidated Revenues $ 523,316 $ 449,708 Equity awards granted by unconsolidated related parties and reimbursable expenses (1) (20,200 ) (15,179 ) Adjustments related to consolidated funds and VIEs (1) 1,979 1,493 Total Reportable Segments Revenues $ 505,095 $ 436,022 (1) Represents advisory fees, management fees and performance fees earned from consolidated VIEs which are eliminated in consolidation. Includes non-cash revenues related to equity awards granted by unconsolidated related parties to employees of the Company and certain compensation and administrative related expense reimbursements. The following table reconciles total consolidated expenses to total expenses for Apollo’s reportable segments For the Three Months Ended June 30, 2018 2017 Total Consolidated Expenses $ 301,394 $ 264,526 Equity awards granted by unconsolidated related parties and reimbursable expenses (1) (19,836 ) (15,179 ) Transaction-related compensation charges (1) 7,854 (1,549 ) Reclassification of interest expenses (15,162 ) (13,195 ) Amortization of transaction-related intangibles (1) (949 ) (1,543 ) Total Reportable Segments Expenses $ 273,301 $ 233,060 (1) Represents the addition of expenses of consolidated funds and VIEs, transaction-related charges, non-cash expenses related to equity awards granted by unconsolidated related parties to employees of the Company and certain compensation and administrative expenses. Transaction-related charges include equity-based compensation charges, the amortization of intangible assets, contingent consideration and certain other charges associated with acquisitions. The following table reconciles total consolidated other income (loss) to total other loss for Apollo’s reportable segments. For the Three Months Ended June 30, 2018 2017 Total Consolidated Other Income (Loss) $ (59,188 ) $ 6,983 Reclassification of interest expense (15,162 ) (13,195 ) Adjustments related to consolidated funds and VIEs (1) (8,967 ) (5,474 ) Total Reportable Segments Other Loss $ (83,317 ) $ (11,686 ) (1) Represents the addition of other income of consolidated funds and VIEs. The following table presents the reconciliation of income before income tax provision reported in the condensed consolidated statements of operations to Economic Income. For the Three Months Ended June 30, 2018 2017 Income before income tax provision $ 162,734 $ 192,165 Adjustments: Net income attributable to Non-Controlling Interests in consolidated entities (8,716 ) (4,535 ) Transaction-related charges, net (1) (6,905 ) 3,087 Total consolidation adjustments and other (15,621 ) (1,448 ) Economic Income $ 147,113 $ 190,717 (1) Transaction-related charges include equity-based compensation charges, the amortization of intangible assets, contingent consideration and certain other charges associated with acquisitions. The following tables present financial data for Apollo’s reportable segments. As of and for the Six Months Ended June 30, 2018 Credit Segment Private Equity Segment Real Assets Segment Total Reportable Segments Revenues: Management fees $ 367,657 $ 193,972 $ 36,438 $ 598,067 Advisory and transaction fees, net 4,632 23,892 50 28,574 Performance fees (1) : Unrealized (2) 35,360 (432,240 ) (2,923 ) (399,803 ) Realized 79,854 331,916 5,928 417,698 Total performance fees 115,214 (100,324 ) 3,005 17,895 Principal investment income (loss) 16,297 (6,426 ) 317 10,188 Total Revenues (3) 503,800 111,114 39,810 654,724 Expenses: Compensation and benefits: Salary, bonus and benefits 118,968 71,530 20,534 211,032 Equity-based compensation 18,038 13,647 1,706 33,391 Profit sharing expense: Unrealized 18,765 (131,253 ) (1,398 ) (113,886 ) Realized 43,708 133,726 2,646 180,080 Equity-based (4) 3,863 28,084 539 32,486 Total profit sharing expense 66,336 30,557 1,787 98,680 Total compensation and benefits 203,342 115,734 24,027 343,103 Non-compensation expenses: General, administrative and other 66,761 30,838 12,452 110,051 Placement fees 555 83 — 638 Total non-compensation expenses 67,316 30,921 12,452 110,689 Total Expenses (3) 270,658 146,655 36,479 453,792 Other Loss: Net gains (losses) from investment activities (102,699 ) (32,014 ) 11 (134,702 ) Net interest loss (10,353 ) (7,784 ) (2,140 ) (20,277 ) Other income (loss), net 1,627 (2,147 ) (636 ) (1,156 ) Total Other Loss (3) (111,425 ) (41,945 ) (2,765 ) (156,135 ) Non-Controlling Interests (2,579 ) — — (2,579 ) Economic Income (Loss) (3) $ 119,138 $ (77,486 ) $ 566 $ 42,218 Total Assets (3) $ 2,648,979 $ 2,568,187 $ 206,413 $ 5,423,579 (1) Performance fees includes performance allocations and incentive fees. (2) Included in unrealized performance fees for the six months ended June 30, 2018 was a reversal of previously realized performance fees due to the general partner obligation to return previously distributed performance fees. (3) Refer below for a reconciliation of total revenues, total expenses, other income and total assets for Apollo’s total reportable segments to total consolidated revenues, total consolidated expenses, total consolidated other income (loss) and total assets. (4) Relates to amortization of equity-based awards granted under certain profit sharing arrangements. For the Six Months Ended June 30, 2017 Credit Segment Private Equity Segment Real Assets Segment Total Reportable Segments Revenues: Management fees $ 328,198 $ 154,673 $ 36,090 $ 518,961 Advisory and transaction fees, net 6,265 31,074 1,357 38,696 Performance fees (1) : Unrealized (2) 33,243 65,247 3,530 102,020 Realized 88,055 291,958 5,239 385,252 Total performance fees 121,298 357,205 8,769 487,272 Principal investment income 12,339 42,076 2,018 56,433 Total Revenues (3) 468,100 585,028 48,234 1,101,362 Expenses: Compensation and benefits: Salary, bonus and benefits 114,126 61,763 17,392 193,281 Equity-based compensation 18,330 14,799 1,182 34,311 Profit sharing expense: Unrealized 15,142 20,033 1,964 37,139 Realized 36,525 128,389 2,892 167,806 Equity-based 869 462 — 1,331 Total profit sharing expense 52,536 148,884 4,856 206,276 Total compensation and benefits 184,992 225,446 23,430 433,868 Non-compensation expenses: General, administrative and other 63,850 33,977 9,779 107,606 Placement fees 5,688 1,475 — 7,163 Total non-compensation expenses 69,538 35,452 9,779 114,769 Total Expenses (3) 254,530 260,898 33,209 548,637 Other Income (Loss): Net gains from investment activities 30,795 3,296 — 34,091 Net interest loss (13,006 ) (8,578 ) (2,471 ) (24,055 ) Other income, net 570 18,571 303 19,444 Total Other Income (Loss) (3) 18,359 13,289 (2,168 ) 29,480 Non-Controlling Interests (1,493 ) — — (1,493 ) Economic Income (3) $ 230,436 $ 337,419 $ 12,857 $ 580,712 (1) Performance fees includes performance allocations and incentive fees. (2) Included in unrealized performance fees for the six months ended June 30, 2017 was a reversal of previously realized performance fees due to the general partner obligation to return previously distributed performance fees. (3) Refer below for a reconciliation of total revenues, total expenses and other income for Apollo’s total reportable segments to total consolidated revenues, total consolidated expenses and total consolidated other income (loss). The following table reconciles total consolidated revenues to total revenues for Apollo’s reportable segments: For the Six Months Ended June 30, 2018 2017 Total Consolidated Revenues $ 690,219 $ 1,131,812 Equity awards granted by unconsolidated related parties, reimbursable expenses and other (1) (39,113 ) (33,402 ) Adjustments related to consolidated funds and VIEs (1) 3,618 2,952 Total Reportable Segments Revenues $ 654,724 $ 1,101,362 (1) Represents advisory fees, management fees and performance fees earned from consolidated VIEs which are eliminated in consolidation. Includes non-cash revenues related to equity awards granted by unconsolidated related parties to employees of the Company and certain compensation and administrative related expense reimbursements. The following table reconciles total consolidated expenses to total expenses for Apollo’s reportable segments: For the Six Months Ended June 30, 2018 2017 Total Consolidated Expenses $ 516,269 $ 610,514 Equity awards granted by unconsolidated related parties, reimbursable expenses and other (1) (38,571 ) (33,402 ) Transaction-related compensation charges (1) 6,962 1,134 Reclassification of interest expenses (28,959 ) (26,194 ) Amortization of transaction-related intangibles (1) (1,909 ) (3,415 ) Total Reportable Segments Expenses $ 453,792 $ 548,637 (1) Represents the addition of expenses of consolidated funds and VIEs, transaction-related charges, non-cash expenses related to equity awards granted by unconsolidated related parties to employees of the Company and certain compensation and administrative expenses. Transaction-related charges include equity-based compensation charges, the amortization of intangible assets, contingent consideration and certain other charges associated with acquisitions. The following table reconciles total consolidated other income (loss) to total other income (loss) for Apollo’s reportable segments: For the Six Months Ended June 30, 2018 2017 Total Consolidated Other Income (Loss) $ (111,984 ) $ 65,058 Reclassification of interest expense (28,959 ) (26,194 ) Adjustments related to consolidated funds and VIEs (1) (15,192 ) (9,384 ) Total Reportable Segments Other Income (Loss) $ (156,135 ) $ 29,480 (1) Represents the addition of other income of consolidated funds and VIEs. The following table presents the reconciliation of income before income tax provision reported in the condensed consolidated statements of operations to Economic Income: For the Six Months Ended June 30, 2018 2017 Income before income tax provision $ 61,966 $ 586,356 Adjustments: Transaction-related charges (1) (5,053 ) 2,275 Net income attributable to Non-Controlling Interests in consolidated entities and appropriated partners’ capital (14,695 ) (7,919 ) Total consolidation adjustments and other (19,748 ) (5,644 ) Economic Income $ 42,218 $ 580,712 (1) Transaction-related charges include equity-based compensation charges, the amortization of intangible assets, contingent consideration and certain other charges associated with acquisitions. The following table presents the reconciliation of Apollo’s total reportable segment assets to total assets: As of As of Total reportable segment assets $ 5,423,579 $ 5,740,943 Adjustments (1) 1,215,434 1,250,127 Total assets $ 6,639,013 $ 6,991,070 (1) Represents the addition of assets of consolidated funds and VIEs and consolidation elimination adjustments. |
