DigitalBridge Group, Inc. Q4 FY2024 earnings call

Management Statement and Operational Highlights

• Fundraising: Record $9 billion fundraising in 2024, with $4.8 billion in Q4. Co-investment was higher than planned in 2024 but expected to be 30%-35% of fundraising in 2025. Co-investment provides continuous fundraising, high-margin incremental revenue, and expands carry-eligible capital.
• Investing: Invested in new platforms (JTower, Yondr) and existing platforms (Vertical Bridge, DataBank). Secured power and land banks for data centers. Tapped debt capital markets successfully, with securitized notes issuances like Zayo's.
• Scaling: Focus on growing FEEUM to over $40 billion in 2025, involving finalizing fundraising for third flagship and second credit strategies, launching new investment products, and scaling portfolio companies like JTower, Yondr, etc.

Segment Performance

• Fundraising: In 2024, DigitalBridge achieved record fundraising of $9 billion, with $4.8 billion raised in the fourth quarter. Assets under management grew from $80 billion to $96 billion. Management fees saw over 20% growth in 2024 and over 35% in the fourth quarter, while fee-related earnings grew over 30% in both the fourth quarter and the full year.
• Investing: The company invested approximately $16 billion in 2024 across various sectors, including data centers. It made acquisitions like JTower, Yondr, and the bolt-on acquisition of Verizon cell towers. It also secured significant equity raises for platforms like DataBank and formed partnerships with Silver Lake and ADIA for Vantage and Landmark.
• Scaling: DigitalBridge aims to scale by growing fee-earning assets under management (FEEUM) to over $40 billion in 2025. It plans to grow fee-related earnings (FRE) by 10%-20% compared to 2024 and improve FRE margins by approximately 200 basis points.

Guidance

• 2025 Outlook: Expect FEEUM to grow to over $40 billion net by year-end 2025. Anticipate FRE growth of 10%-20% compared to 2024 and improve FRE margins by ~200 basis points. Performance in 2025 is front-loaded due to fundraising timing. Target to grow FEEUM from $35.5 billion to over $40 billion, including finalizing fundraising for key strategies and launching new products.
• Long-Term Goals: Aim for $60 billion-$70 billion FEEUM by 2028, driven by multi-strat strategies including credit, private wealth, and power/stabilized data center initiatives.

Risks

• Market Volatility: Public investors may not tolerate fundraising quarterly fluctuations. Co-investment over-raised in 2024, affecting FRE targets. Interest rate changes and securitization market conditions can impact capital raising and preferred stock buybacks.
• Operational Hurdles: Challenges in executing fundraising, investing, and scaling plans. Administrative expenses may have anomalies due to fundraising initiatives. Potential issues with data center development yields and pricing if not managed strategically.

Question and Answer

Q: How does the qualified demand pipeline across the data center platform in 2025 compare to last year?

A: The pipeline is up year-over-year. Data center pipeline is up ~22%, towers are up materially, and fiber is up over 50% year-over-year.

Q: What are the expectations for pricing and development yield in 2025?

A: In locations with advantages (power, permits, land), prices can be set. Development yields have stabilized, and the ability to tap ABS/CMBS markets helps maintain yields.

Q: What about exits and monetizations in 2025?

A: InfraBridge 1 and the first flagship are winding down with exits in progress. Anticipate delivering DPI and carried interest, with an average hold period of 5-9 years.

Q: What's the status of preferred stock repurchase?

A: No preferred stocks were repurchased in 2024 as they traded back to par. Active in the securitization market this year to consider repurchasing prefs if interest rates allow.

Q: How much DPI is baked into the 2025-ending FEEUM?

A: Anticipate returning $1 billion-$2 billion in DPI, with $5 billion-$6 billion of new capital, leading to ~$4 billion net FEEUM.

Q: Tell us about the fundraising infrastructure?

A: The fundraising team has 38 full-time employees, scaled with geographic reach. Asia and Gulf regions were strong in fundraising, with a multi-strat approach resonating with LPs.

Q: What about co-investment preference and carry infrastructure?

A: Co-investment and flagship funds work harmoniously. Carry infrastructure varies by vehicle, with management fees and carried interest in competitive ranges.

Q: Can you elaborate on the digital energy and stabilized data center strategy?

A: Digital energy focuses on building power infrastructure adjacent to data centers. The stabilized strategy targets stranded assets with yieldcos, working with partners to deploy capital.