| 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 September 30, 2018 Credit Segment Private Equity Segment Real Assets Segment Total Reportable Segments Revenues: Management fees $ 196,507 $ 123,304 $ 20,094 $ 339,905 Advisory and transaction fees, net 2,310 5,925 4,737 12,972 Performance fees (1) : Unrealized (2) (4,896 ) 29,005 2,338 26,447 Realized 22,790 76,746 559 100,095 Total performance fees 17,894 105,751 2,897 126,542 Principal investment income 6,803 10,328 607 17,738 Total Revenues (3) 223,514 245,308 28,335 497,157 Expenses: Compensation and benefits: Salary, bonus and benefits 57,694 33,673 10,166 101,533 Equity-based compensation 11,525 7,905 521 19,951 Profit sharing expense: Unrealized (1,409 ) 8,537 1,775 8,903 Realized 12,079 41,553 548 54,180 Equity-based (4) 3,150 20,267 385 23,802 Total profit sharing expense 13,820 70,357 2,708 86,885 Total compensation and benefits 83,039 111,935 13,395 208,369 Non-compensation expenses: General, administrative and other 38,071 19,740 6,186 63,997 Placement fees 695 51 — 746 Total non-compensation expenses 38,766 19,791 6,186 64,743 Total Expenses (3) 121,805 131,726 19,581 273,112 Other Income: Net gains from investment activities 113,188 42,074 — 155,262 Net interest loss (4,858 ) (3,680 ) (983 ) (9,521 ) Other income, net 1,155 666 1,277 3,098 Total Other Income (3) 109,485 39,060 294 148,839 Non-Controlling Interests (1,187 ) — — (1,187 ) Economic Income (3) $ 210,007 $ 152,642 $ 9,048 $ 371,697 Total Assets (3) $ 2,828,917 $ 2,691,289 $ 233,728 $ 5,753,934 (1) Performance fees includes performance allocations and incentive fees. (2) Included in unrealized performance fees for the three months ended September 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 and total assets. (4) Relates to amortization of restricted share awards granted under certain profit sharing arrangements. For the Three Months Ended September 30, 2017 Credit Segment Private Equity Segment Real Assets Segment Total Reportable Segments Revenues: Management fees $ 187,885 $ 76,079 $ 18,470 $ 282,434 Advisory and transaction fees, net 4,219 10,572 1,418 16,209 Performance fees (1) : Unrealized (2) 4,179 286,589 (5,169 ) 285,599 Realized 32,131 21,859 6,985 60,975 Total performance fees 36,310 308,448 1,816 346,574 Principal investment income (loss) 8,222 39,875 (83 ) 48,014 Total Revenues (3) 236,636 434,974 21,621 693,231 Expenses: Compensation and benefits: Salary, bonus and benefits 59,027 31,467 10,513 101,007 Equity-based compensation 9,925 6,335 798 17,058 Profit sharing expense: Unrealized 2,266 96,992 (4,812 ) 94,446 Realized 14,643 17,394 3,636 35,673 Equity-based (4) 518 808 — 1,326 Total profit sharing expense 17,427 115,194 (1,176 ) 131,445 Total compensation and benefits 86,379 152,996 10,135 249,510 Non-compensation expenses: General, administrative and other 35,709 19,699 5,520 60,928 Placement fees 3,140 2,257 — 5,397 Total non-compensation expenses 38,849 21,956 5,520 66,325 Total Expenses (3) 125,228 174,952 15,655 315,835 Other Income: Net gains from investment activities 60,570 7,959 — 68,529 Net interest loss (5,972 ) (4,374 ) (1,163 ) (11,509 ) Other income, net 16,318 7,344 2,044 25,706 Total Other Income (3) 70,916 10,929 881 82,726 Non-Controlling Interests (1,751 ) — — (1,751 ) Economic Income (3) $ 180,573 $ 270,951 $ 6,847 $ 458,371 (1) Performance fees includes performance allocations and incentive fees. (2) Included in unrealized performance fees for the three months ended September 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. (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 September 30, 2018 2017 Total Consolidated Revenues $ 517,731 $ 711,720 Equity awards granted by unconsolidated related parties and reimbursable expenses (1) (23,019 ) (19,832 ) Adjustments related to consolidated funds and VIEs (1) 2,445 1,343 Total Reportable Segments Revenues $ 497,157 $ 693,231 (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 September 30, 2018 2017 Total Consolidated Expenses $ 312,727 $ 357,483 Equity awards granted by unconsolidated related parties and reimbursable expenses (1) (23,153 ) (19,832 ) Transaction-related compensation charges, net (1) (206 ) (7,543 ) Reclassification of interest expenses (15,209 ) (13,302 ) Amortization of transaction-related intangibles (1) (1,047 ) (971 ) Total Reportable Segments Expenses $ 273,112 $ 315,835 (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 to total other income for Apollo’s reportable segments. For the Three Months Ended September 30, 2018 2017 Total Consolidated Other Income $ 176,780 $ 96,668 Reclassification of interest expense (15,209 ) (13,302 ) Adjustments related to consolidated funds and VIEs (1) (12,732 ) (640 ) Total Reportable Segments Other Income $ 148,839 $ 82,726 (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 September 30, 2018 2017 Income before income tax provision $ 381,784 $ 450,905 Adjustments: Net income attributable to Non-Controlling Interests in consolidated entities (11,340 ) (1,048 ) Transaction-related charges, net (1) 1,253 8,514 Total consolidation adjustments and other (10,087 ) 7,466 Economic Income $ 371,697 $ 458,371 (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 Nine Months Ended September 30, 2018 Credit Segment Private Equity Segment Real Assets Segment Total Reportable Segments Revenues: Management fees $ 564,164 $ 317,276 $ 56,532 $ 937,972 Advisory and transaction fees, net 6,942 29,817 4,787 41,546 Performance fees (1) : Unrealized (2) 30,464 (403,235 ) (585 ) (373,356 ) Realized 102,644 408,662 6,487 517,793 Total performance fees 133,108 5,427 5,902 144,437 Principal investment income 23,100 3,902 924 27,926 Total Revenues (3) 727,314 356,422 68,145 1,151,881 Expenses: Compensation and benefits: Salary, bonus and benefits 176,662 105,203 30,700 312,565 Equity-based compensation 29,563 21,552 2,227 53,342 Profit sharing expense: Unrealized 17,356 (122,716 ) 377 (104,983 ) Realized 55,787 175,279 3,194 234,260 Equity-based (4) 7,013 48,351 924 56,288 Total profit sharing expense 80,156 100,914 4,495 185,565 Total compensation and benefits 286,381 227,669 37,422 551,472 Non-compensation expenses: General, administrative and other 104,832 50,578 18,638 174,048 Placement fees 1,250 134 — 1,384 Total non-compensation expenses 106,082 50,712 18,638 175,432 Total Expenses (3) 392,463 278,381 56,060 726,904 Other Loss: Net gains from investment activities 10,489 10,060 11 20,560 Net interest loss (15,211 ) (11,464 ) (3,123 ) (29,798 ) Other income (loss), net 2,782 (1,481 ) 641 1,942 Total Other Loss (3) (1,940 ) (2,885 ) (2,471 ) (7,296 ) Non-Controlling Interests (3,766 ) — — (3,766 ) Economic Income (3) $ 329,145 $ 75,156 $ 9,614 $ 413,915 Total Assets (3) $ 2,828,917 $ 2,691,289 $ 233,728 $ 5,753,934 (1) Performance fees includes performance allocations and incentive fees. (2) Included in unrealized performance fees for the nine months ended September 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 loss and total assets for Apollo’s total reportable segments to total consolidated revenues, total consolidated expenses, total consolidated other income and total assets. (4) Relates to amortization of equity-based awards granted under certain profit sharing arrangements. For the Nine Months Ended September 30, 2017 Credit Segment Private Equity Segment Real Assets Segment Total Reportable Segments Revenues: Management fees $ 516,083 $ 230,752 $ 54,560 $ 801,395 Advisory and transaction fees, net 10,484 41,646 2,775 54,905 Performance fees (1) : Unrealized (2) 37,422 351,836 (1,639 ) 387,619 Realized 120,186 313,817 12,224 446,227 Total performance fees 157,608 665,653 10,585 833,846 Principal investment income 20,561 81,951 1,935 104,447 Total Revenues (3) 704,736 1,020,002 69,855 1,794,593 Expenses: Compensation and benefits: Salary, bonus and benefits 173,153 93,230 27,905 294,288 Equity-based compensation 28,255 21,134 1,980 51,369 Profit sharing expense: Unrealized 17,408 117,025 (2,848 ) 131,585 Realized 51,168 145,783 6,528 203,479 Equity-based 1,387 1,270 — 2,657 Total profit sharing expense 69,963 264,078 3,680 337,721 Total compensation and benefits 271,371 378,442 33,565 683,378 Non-compensation expenses: General, administrative and other 99,559 53,676 15,299 168,534 Placement fees 8,828 3,732 — 12,560 Total non-compensation expenses 108,387 57,408 15,299 181,094 Total Expenses (3) 379,758 435,850 48,864 864,472 Other Income (Loss): Net gains from investment activities 91,365 11,255 — 102,620 Net interest loss (18,978 ) (12,952 ) (3,634 ) (35,564 ) Other income, net 16,888 25,915 2,347 45,150 Total Other Income (Loss) (3) 89,275 24,218 (1,287 ) 112,206 Non-Controlling Interests (3,244 ) — — (3,244 ) Economic Income (3) $ 411,009 $ 608,370 $ 19,704 $ 1,039,083 (1) Performance fees includes performance allocations and incentive fees. (2) Included in unrealized performance fees for the nine months ended September 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 (loss) for Apollo’s total reportable segments to total consolidated revenues, total consolidated expenses and total consolidated other income. The following table reconciles total consolidated revenues to total revenues for Apollo’s reportable segments: For the Nine Months Ended September 30, 2018 2017 Total Consolidated Revenues $ 1,207,950 $ 1,843,532 Equity awards granted by unconsolidated related parties, reimbursable expenses and other (1) (62,132 ) (53,234 ) Adjustments related to consolidated funds and VIEs (1) 6,063 4,295 Total Reportable Segments Revenues $ 1,151,881 $ 1,794,593 (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 Nine Months Ended September 30, 2018 2017 Total Consolidated Expenses $ 828,996 $ 967,997 Equity awards granted by unconsolidated related parties, reimbursable expenses and other (1) (61,724 ) (53,234 ) Transaction-related compensation charges, net (1) 6,756 (6,409 ) Reclassification of interest expenses (44,168 ) (39,496 ) Amortization of transaction-related intangibles (1) (2,956 ) (4,386 ) Total Reportable Segments Expenses $ 726,904 $ 864,472 (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 to total other income (loss) for Apollo’s reportable segments: For the Nine Months Ended September 30, 2018 2017 Total Consolidated Other Income $ 64,796 $ 161,726 Reclassification of interest expense (44,168 ) (39,496 ) Adjustments related to consolidated funds and VIEs (1) (27,924 ) (10,024 ) Total Reportable Segments Other Income (Loss) $ (7,296 ) $ 112,206 (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 Nine Months Ended September 30, 2018 2017 Income before income tax provision $ 443,750 $ 1,037,261 Adjustments: Transaction-related charges (1) (3,800 ) 10,789 Net income attributable to Non-Controlling Interests in consolidated entities and appropriated partners’ capital (26,035 ) (8,967 ) Total consolidation adjustments and other (29,835 ) 1,822 Economic Income $ 413,915 $ 1,039,083 (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 $ 5,753,934 $ 5,740,943 Adjustments (1) 1,218,224 1,250,127 Total assets $ 6,972,158 $ 6,991,070 (1) Represents the addition of assets of consolidated funds and VIEs and consolidation elimination adjustments. |
