DigitalBridge Group, Inc. Q3 FY2024 earnings call

• Financial Performance: Continued mid-teens fee revenue growth with expanding margins; FRE up 42% YOY and margins up 500 basis points to 34%.
• Capital Formation: $6.1 billion raised year-to-date, on track to exceed $7 billion target; strong pipeline with $1.9 billion raised in the last 30 days.
• Capital Deployment: Active in existing platforms (DataBank, Vertical Bridge) and new opportunities (Yondr, JTOWER); significant capital deployment in Q3.
• Private Wealth Channel: Andrew Cocks hired to head Global Wealth Solutions; expect over $1 billion raised from private wealth vertical by end of 2024.
• Key Transactions: Vertical Bridge's $3.3 billion deal with Verizon; DataBank's $2 billion equity raise; establishment of JTOWER and acquisition of Yondr.

In the third quarter, DigitalBridge recorded $77 million in fee revenue and $26 million in fee-related earnings (FRE), both up substantially from the prior year on a higher capital base. FRE was up 42% year-on-year and FRE margins were up 500 basis points at 34%. Year-to-date, $6.1 billion in capital formation has been raised, with the company on track to exceed the $7 billion annual fundraising target. Capital deployment has been active in existing platforms like DataBank and Vertical Bridge, as well as new opportunities such as Yondr and JTOWER.

• Capital Formation: On track to exceed $7 billion annual target; $6.1 billion raised year-to-date.
• Fee Earning Equity Under Management: Revised target to $35 billion to $37 billion from prior $36 billion to $38 billion.
• Fee Revenue and FRE: 2024 fee revenue expected between $305 million and $320 million (short of prior guidance); FRE expected between $100 million and $110 million, representing >20% growth YOY.

• Fundraising Composition: Shift towards co-invest with lower fee structure impacting 2024 FRE.
• Carried Interest Reversals: Portfolio evaluations leading to carried interest reversals, but no individual significant driver.
• Market and Execution Risks: Timing and composition of capital raised affecting fee recognition; market conditions impacting asset valuations and exits.

Q: Jade Rahmani asked about the disconnect between the positive industry backdrop and disappointing results, and fundraising mix shift.

A: Marc Ganzi explained that co-invest is part of the strategy, all products are working, and there's a strong fundraising pipeline.

Q: Jade Rahmani inquired about carried interest reversal.

A: Tom Mayrhofer said it was due to portfolio evaluations aligning with preferred returns.

Q: Ric Prentiss asked about fundraising composition and catch-up fees.

A: Tom Mayrhofer and Marc Ganzi discussed the timing of catch-up fees and the difference between co-invest and fund commitments.

Q: Richard Choe asked about the capital formation environment and private wealth platform.

A: Marc Ganzi talked about the multi-strat firm evolution and the success of the private wealth product.

Q: Eric Luebchow asked about M&A and asset manager acquisitions.

A: Marc Ganzi discussed M&A criteria, focusing on credit, private equity, and energy transition.

Q: Jonathan Atkin asked about monetizing balance sheet assets and fiber trends.

A: Marc Ganzi and Tom Mayrhofer discussed data center and fiber investments in Latin America and the U.S.

Q: Anthony Howe asked about private wealth product economics and the sales team.

A: Tom Mayrhofer and Marc Ganzi discussed the profitability of the private wealth product and the progress of the sales team