| 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. Segment Reporting Changes During the first quarter of 2019, Apollo’s chief operating decision makers determined that Segment Distributable Earnings, together with its main components including Fee Related Earnings, is the key performance measure used by management in evaluating the performance of Apollo’s credit, private equity and real assets segments. Accordingly, Apollo will no longer report Economic Income. Apollo believes these changes better reflect the manner in which it makes key operating decisions pertaining to resource allocation, capital deployment, budgeting and forecasting, and are consistent with what shareholders consider to be most important in evaluating its performance. Apollo determined to change the business segment in which it reports certain funds and accounts to align its segment reporting with the manner in which such funds and accounts were managed. Effective January 1, 2019, the European Principal Finance Fund series, which has been historically reported in the credit segment, moved to the real assets segment. Several funds and accounts that generally invest in illiquid opportunistic investments and the latest fund in the Credit Opportunity Fund series, which have been historically reported in the credit segment, moved to the private equity segment. Certain commercial real estate mortgage loan assets, previously reported in the credit segment, moved to the real assets segment. These changes affected the composition, but not the determination, of Apollo’s reporting segments. Apollo changed its definition of “Distributable Earnings” to include depreciation and amortization expenses and renamed it “Segment Distributable Earnings.” Historically, depreciation and amortization expenses were not reflected in Apollo’s calculation of Segment Distributable Earnings. Apollo also renamed “Distributable Earnings after Taxes and Related Payables” to “Distributable Earnings.” In connection with these changes, all prior periods have been recast to conform to the new presentation. Consequently, this information will be different from the historical segment financial results previously reported by Apollo in its reports filed with the SEC. Segment Distributable Earnings Segment Distributable Earnings, or “Segment DE”, is the 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 Segment DE, such as the amount of management fees, advisory and transaction fees and realized performance fees, are indicative of the Company’s performance. Management uses Segment DE 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; • 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 the funds and those of Apollo’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 Apollo’s performance and growth for the year; and • Decisions related to the amount of earnings available for distribution to Class A shareholders, holders of RSUs that participate in distributions and holders of AOG Units. Segment DE is a measure of profitability and has certain limitations in that it does not take into account certain items included under U.S. GAAP. Segment DE represents the amount of Apollo’s net realized earnings, excluding the effects of the consolidation of any of the related funds, Taxes and Related Payables, transaction-related charges 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, Segment DE 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 variable interest entities 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. Segment DE 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. Segment DE may not be comparable to similarly titled measures used by other companies and is not a measure of performance calculated in accordance with U.S. GAAP. We use Segment DE as a measure of operating performance, not as a measure of liquidity. Segment DE should not be considered in isolation or as a substitute for net income or other income data prepared in accordance with U.S. GAAP. The use of Segment DE without consideration of related U.S. GAAP measures is not adequate due to the adjustments described above. Management compensates for these limitations by using Segment DE as a supplemental measure to U.S. GAAP results, to provide a more complete understanding of our performance as management measures it. A reconciliation of Segment DE to its most directly comparable U.S. GAAP measure of income (loss) before income tax provision can be found in this footnote. Fee Related Earnings Fee Related Earnings (“FRE”) is derived from our segment reported results and refers to a component of Segment DE that is used as a supplemental performance measure to assess whether revenues that we believe are generally more stable and predictable in nature, primarily consisting of management fees, are sufficient to cover associated operating expenses and generate profits. FRE is the sum across all segments of (i) management fees, (ii) advisory and transaction fees, (iii) performance fees earned from business development companies and Redding Ridge Holdings (as defined below) and (iv) other income, net, less (x) salary, bonus and benefits, excluding equity-based compensation, (y) other associated operating expenses and (z) non-controlling interests in the management companies of certain funds the Company manages. The following tables present financial data for Apollo’s reportable segments. As of and for the Three Months Ended June 30, 2019 Credit Segment Private Equity Segment Real Assets Segment Total Reportable Segments Management fees $ 190,275 $ 129,638 $ 46,398 $ 366,311 Advisory and transaction fees, net 5,510 20,257 5,295 31,062 Performance fees (1) 9,261 — — 9,261 Fee Related Revenues 205,046 149,895 51,693 406,634 Salary, bonus and benefits (50,465 ) (40,267 ) (19,537 ) (110,269 ) General, administrative and other (31,647 ) (22,962 ) (8,547 ) (63,156 ) Placement fees (157 ) (618 ) — (775 ) Fee Related Expenses (82,269 ) (63,847 ) (28,084 ) (174,200 ) Other income, net of Non-Controlling Interest 1,968 3,963 156 6,087 Fee Related Earnings 124,745 90,011 23,765 238,521 Realized performance fees 18,030 12,231 3,074 33,335 Realized profit sharing expense (7,877 ) (4,089 ) (1,340 ) (13,306 ) Net Realized Performance Fees 10,153 8,142 1,734 20,029 Realized principal investment income 7,909 1,877 1,495 11,281 Net interest loss and other (4,656 ) (7,650 ) (2,708 ) (15,014 ) Segment Distributable Earnings (2) $ 138,151 $ 92,380 $ 24,286 $ 254,817 Total Assets (2) $ 2,865,509 $ 2,741,435 $ 520,817 $ 6,127,761 (1) Represents certain performance fees from business development companies and Redding Ridge Holdings LP (“Redding Ridge Holdings”), an affiliate of Redding Ridge. (2) Refer below for a reconciliation of total revenues, total expenses, other income (loss) and total assets for Apollo’s total reportable segments to total consolidated revenues, total consolidated expenses, total consolidated other income (loss) and total assets. For the Three Months Ended June 30, 2018 Credit Segment Private Equity Segment Real Assets Segment Total Reportable Segments Management fees $ 153,177 $ 132,417 $ 40,270 $ 325,864 Advisory and transaction fees, net 2,100 13,319 161 15,580 Performance fees (1) 5,766 — — 5,766 Fee Related Revenues 161,043 145,736 40,431 347,210 Salary, bonus and benefits (42,729 ) (41,879 ) (19,893 ) (104,501 ) General, administrative and other (27,843 ) (18,333 ) (9,500 ) (55,676 ) Placement fees (279 ) (32 ) — (311 ) Fee Related Expenses (70,851 ) (60,244 ) (29,393 ) (160,488 ) Other income (loss), net of Non-Controlling Interest (1,188 ) 82 55 (1,051 ) Fee Related Earnings 89,004 85,574 11,093 185,671 Realized performance fees 14,635 54,640 45,199 114,474 Realized profit sharing expense (11,493 ) (31,512 ) (26,805 ) (69,810 ) Net Realized Performance Fees 3,142 23,128 18,394 44,664 Realized principal investment income 5,931 9,079 4,363 19,373 Net interest loss and other (3,952 ) (5,259 ) (1,968 ) (11,179 ) Segment Distributable Earnings (2) $ 94,125 $ 112,522 $ 31,882 $ 238,529 (1) Represents certain performance fees from business development companies and Redding Ridge Holdings. (2) 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 (loss). The following table reconciles total consolidated revenues to total revenues for Apollo’s reportable segments: For the Three Months Ended June 30, 2019 2018 Total Consolidated Revenues $ 636,579 $ 523,316 Equity awards granted by unconsolidated related parties, reimbursable expenses and other (1) (23,847 ) (20,200 ) Adjustments related to consolidated funds and VIEs (1) 90 1,979 Performance fees (2) (163,014 ) (135,093 ) Principal investment income (43,174 ) (22,792 ) Total Fee Related Revenues 406,634 347,210 Realized performance fees 33,335 114,474 Realized principal investment income and other 10,438 18,530 Total Segment Revenues $ 450,407 $ 480,214 (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. (2) Excludes certain performance fees from business development companies and Redding Ridge Holdings. The following table reconciles total consolidated expenses to total expenses for Apollo’s reportable segments: For the Three Months Ended June 30, 2019 2018 Total Consolidated Expenses $ 342,525 $ 301,394 Equity awards granted by unconsolidated related parties, reimbursable expenses and other (1) (23,865 ) (19,836 ) Reclassification of interest expenses (23,302 ) (15,162 ) Transaction-related compensation charges, net (1) (18,135 ) 6,905 Charges associated with corporate conversion (2) (10,006 ) — Equity-based compensation (18,237 ) (16,028 ) Total profit sharing expense (3) (74,780 ) (96,785 ) Total Fee Related Expenses 174,200 160,488 Realized profit sharing expense 13,306 69,810 Total Segment Expenses $ 187,506 $ 230,298 (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. (2) Represents expenses incurred in relation to the previously announced plans to convert from a publicly traded partnership to a C corporation, as described in note 1 . (3) Includes unrealized profit sharing expense, realized profit sharing expense and equity based profit sharing expense and other. 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, 2019 2018 Total Consolidated Other Income (Loss) $ 65,004 $ (59,188 ) Adjustments related to consolidated funds and VIEs (1) (4,367 ) (8,967 ) Net (gains) losses from investment activities (45,053 ) 67,565 Interest income and other, net of Non-Controlling Interest (9,497 ) (461 ) Other Income (Loss), net of Non-Controlling Interest 6,087 (1,051 ) Net interest loss and other (14,171 ) (10,336 ) Total Segment Other Loss $ (8,084 ) $ (11,387 ) (1) Represents the addition of other income of consolidated funds and VIEs. The following table presents the reconciliation of income (loss) before income tax provision reported in the condensed consolidated statements of operations to Segment Distributable Earnings: For the Three Months Ended June 30, 2019 2018 Income before income tax provision $ 359,058 $ 162,734 Transaction-related charges (1) 18,135 (6,905 ) Charges associated with corporate conversion (2) 10,006 — Net income attributable to Non-Controlling Interests in consolidated entities and appropriated partners’ capital (5,143 ) (8,716 ) Unrealized performance fees (129,679 ) (20,619 ) Unrealized profit sharing expense 40,799 9,125 Equity-based profit sharing expense and other (3) 20,675 17,850 Equity-based compensation 18,237 16,028 Unrealized principal investment income (31,893 ) (3,419 ) Unrealized net (gains) losses from investment activities and other (45,378 ) 72,451 Segment Distributable Earnings $ 254,817 $ 238,529 (1) Transaction-related charges include equity-based compensation charges, the amortization of intangible assets, contingent consideration and certain other charges associated with acquisitions. (2) Represents expenses incurred in relation to the previously announced plans to convert from a publicly traded partnership to a C corporation, as described in note 1 . (3) Equity-based profit sharing expense and other includes certain profit sharing arrangements in which a portion of performance fees distributed to the general partner are allocated by issuance of equity-based awards, rather than cash, to employees of Apollo. Equity-based profit sharing expense and other also includes non-cash expenses related to equity awards granted by unconsolidated related parties to employees of Apollo. The following tables present financial data for Apollo’s reportable segments. As of and for the Six Months Ended June 30, 2019 Credit Segment Private Equity Segment Real Assets Segment Total Reportable Segments Management fees $ 373,017 $ 260,134 $ 91,783 $ 724,934 Advisory and transaction fees, net 8,358 36,393 5,371 50,122 Performance fees (1) 9,922 — — 9,922 Fee Related Revenues 391,297 296,527 97,154 784,978 Salary, bonus and benefits (94,769 ) (83,500 ) (37,725 ) (215,994 ) General, administrative and other (59,143 ) (48,824 ) (18,222 ) (126,189 ) Placement fees 148 (483 ) — (335 ) Fee Related Expenses (153,764 ) (132,807 ) (55,947 ) (342,518 ) Other income, net of Non-Controlling Interest 1,564 4,159 94 5,817 Fee Related Earnings 239,097 167,879 41,301 448,277 Realized performance fees 21,357 72,687 3,080 97,124 Realized profit sharing expense (11,395 ) (41,816 ) (1,234 ) (54,445 ) Net Realized Performance Fees 9,962 30,871 1,846 42,679 Realized principal investment income 10,958 9,965 1,794 22,717 Net interest loss and other (9,042 ) (13,783 ) (4,881 ) (27,706 ) Segment Distributable Earnings (2) $ 250,975 $ 194,932 $ 40,060 $ 485,967 Total Assets (2) $ 2,865,509 $ 2,741,435 $ 520,817 $ 6,127,761 (1) Represents certain performance fees from business development companies and Redding Ridge Holdings. (2) 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 (loss) and total assets. For the Six Months Ended June 30, 2018 Credit Segment Private Equity Segment Real Assets Segment Total Reportable Segments Management fees $ 302,892 $ 214,697 $ 80,478 $ 598,067 Advisory and transaction fees, net 4,295 23,974 305 28,574 Performance fees (1) 11,041 — — 11,041 Fee Related Revenues 318,228 238,671 80,783 637,682 Salary, bonus and benefits (89,550 ) (82,604 ) (38,878 ) (211,032 ) General, administrative and other (54,211 ) (36,316 ) (19,524 ) (110,051 ) Placement fees (555 ) (83 ) — (638 ) Fee Related Expenses (144,316 ) (119,003 ) (58,402 ) (321,721 ) Other income, net of Non-Controlling Interest 1,995 391 223 2,609 Fee Related Earnings 175,907 120,059 22,604 318,570 Realized performance fees (2) 17,749 167,412 51,615 236,776 Realized profit sharing expense (2) (14,327 ) (89,260 ) (29,870 ) (133,457 ) Net Realized Performance Fees 3,422 78,152 21,745 103,319 Realized principal investment income 10,211 27,409 5,146 42,766 Net interest loss and other (7,470 ) (10,615 ) (3,877 ) (21,962 ) Segment Distributable Earnings (3) $ 182,070 $ 215,005 $ 45,618 $ 442,693 (1) Represents certain performance fees from business development companies and Redding Ridge Holdings. (2) Excludes realized performance fees and realized profit sharing expense settled in the form of shares of Athene Holding during the six months ended June 30, 2018 . (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 (loss). The following table reconciles total consolidated revenues to total revenues for Apollo’s reportable segments: For the Six Months Ended June 30, 2019 2018 Total Consolidated Revenues $ 1,314,356 $ 690,219 Equity awards granted by unconsolidated related parties, reimbursable expenses and other (1) (52,976 ) (39,113 ) Adjustments related to consolidated funds and VIEs (1) 1,722 3,618 Performance fees (2) (411,186 ) (6,854 ) Principal investment income (66,938 ) (10,188 ) Total Fee Related Revenues 784,978 637,682 Realized performance fees (3) 97,124 236,776 Realized principal investment income and other 21,032 41,081 Total Segment Revenues $ 903,134 $ 915,539 (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. (2) Excludes certain performance fees from business development companies and Redding Ridge Holdings. (3) Excludes realized performance fees settled in the form of shares of Athene Holding during the six months ended June 30, 2018 . The following table reconciles total consolidated expenses to total expenses for Apollo’s reportable segments: For the Six Months Ended June 30, 2019 2018 Total Consolidated Expenses $ 720,542 $ 516,269 Equity awards granted by unconsolidated related parties, reimbursable expenses and other (1) (52,707 ) (38,571 ) Reclassification of interest expenses (42,410 ) (28,959 ) Transaction-related charges, net (1) (23,598 ) 5,053 Charges associated with corporate conversion (2) (10,006 ) — Equity-based compensation (36,660 ) (33,463 ) Total profit sharing expense (3) (212,643 ) (98,608 ) Total Fee Related Expenses 342,518 321,721 Realized profit sharing expense (4) 54,445 133,457 Total Segment Expenses $ 396,963 $ 455,178 (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. (2) Represents expenses incurred in relation to the previously announced plans to convert from a publicly traded partnership to a C corporation, as described in note 1 . (3) Includes unrealized profit sharing expense, realized profit sharing expense and equity based profit sharing expense and other. (4) Excludes realized profit sharing expense settled in the form of shares of Athene Holding during the six months ended June 30, 2018 . The following table reconciles total consolidated other income (loss) to total other loss for Apollo’s reportable segments: For the Six Months Ended June 30, 2019 2018 Total Consolidated Other Income (Loss) $ 100,465 $ (111,984 ) Adjustments related to consolidated funds and VIEs (1) (13,501 ) (15,192 ) Net (gains) losses from investment activities (63,878 ) 134,702 Interest income and other, net of Non-Controlling Interest (17,269 ) (4,917 ) Other Income, net of Non-Controlling Interest 5,817 2,609 Net interest loss and other (26,021 ) (20,277 ) Total Segment Other Loss $ (20,204 ) $ (17,668 ) (1) Represents the addition of other income of consolidated funds and VIEs. The following table presents the reconciliation of income (loss) before income tax provision reported in the condensed consolidated statements of operations to Segment Distributable Earnings: For the Six Months Ended June 30, 2019 2018 Income before income tax provision $ 694,279 $ 61,966 Transaction-related charges (1) 23,598 (5,053 ) Charges associated with corporate conversion (2) 10,006 — Net income attributable to Non-Controlling Interests in consolidated entities and appropriated partners’ capital (13,805 ) (14,695 ) Unrealized performance fees (3) (314,062 ) 229,922 Unrealized profit sharing expense (3) 116,561 (67,263 ) Equity-based profit sharing expense and other (4) 41,637 32,414 Equity-based compensation 36,660 33,463 Unrealized principal investment (income) loss (44,221 ) 32,578 Unrealized net (gains) losses from investment activities and other (64,686 ) 139,361 Segment Distributable Earnings $ 485,967 $ 442,693 (1) Transaction-related charges include equity-based compensation charges, the amortization of intangible assets, contingent consideration and certain other charges associated with acquisitions. (2) Represents expenses incurred in relation to the previously announced plans to convert from a publicly traded partnership to a C corporation, as described in note 1 . (3) Includes realized performance fees and realized profit sharing expense settled in the form of shares of Athene Holding during the six months ended June 30, 2018 . (4) Equity-based profit sharing expense and other includes certain profit sharing arrangements in which a portion of performance fees distributed to the general partner are allocated by issuance of equity-based awards, rather than cash, to employees of Apollo. Equity-based profit sharing expense and other also includes non-cash expenses related to equity awards granted by unconsolidated related parties to employees of Apollo. The following table presents the reconciliation of Apollo’s total reportable segment assets to total assets: As of As of Total reportable segment assets $ 6,127,761 $ 4,791,646 Adjustments (1) 1,220,483 1,200,008 Total assets $ 7,348,244 $ 5,991,654 (1) Represents the addition of assets of consolidated funds and VIEs and consolidation elimination adjustments. |
