DigitalBridge Group, Inc. Q2 FY2025 earnings call

Fundraise: - Continued strong demand from LPs, raising $1.3 billion in the quarter, YTD total $2.5 billion, making progress toward $40 billion FEEUM target. - Flagship DBP III strategy attracted $6.9 billion YTD, with final close in Q3 expected to take total to over $7 billion. - Co-investment program matured, with fee rate in co-investments 30% higher YTD, averaging ~60 basis points. ### Invest: - Over 5.4 gigawatts of data center pipeline, up 50% y-o-y, with $50+ billion to be invested in contracted data center projects. - Launched new platforms: Yondr in hyperscale data centers and Takanock in digital power strategy. - Significant financings at Switch and Vantage for growth capital, including Switch's $3 billion AI campus in Nevada. ### Scale: - Underlying demand drivers for AI capital deployment strong, with token volume exploding (e.g., Google processing 980 trillion tokens/month, 50x increase y-o-y). - Leasing demand for hyperscale data centers at record 5-gigawatt U.S. pipeline, driven by AI workloads.

In the second quarter, DigitalBridge recorded $85 million in fee revenue, an 8% year-over-year increase. Fee-earning equity under management rose to $39.7 billion as of June 30, a 21% increase from the prior year. Distributable earnings were negative $19 million for the quarter, primarily due to a $40 million realized loss from an InfraBridge fund investment. Fee revenue growth drove a 23% increase in fee-related earnings as margins expanded. The fundraising mix was aligned with the budget, with $1.3 billion raised in the quarter, bringing YTD total to $2.5 billion towards the $40 billion FEEUM target.

Financial Metrics: - Reaffirmed guidance for 2025, aiming for fee-related earnings up 10-20% y-o-y with expanding margins. ### Fundraising: - On track to exceed $40 billion FEEUM target, with high conviction in hitting fundraising targets. ### Strategies: - New strategies like digital energy (Takanock) and private wealth offering in progress, with private wealth product expected to launch in Q4. ### Balance Sheet: - Maintaining a strong balance sheet with $158 million available corporate cash, and revolver downsized to $100 million to avoid unused fees.

Macro Factors: - Macro market uncertainty may impact timing of carried interest events. - Different leverage levels in public vs. private markets can cause consternation, balancing between continuing investment in companies and returning capital to investors. ### Market Dynamics: - Carried interest realization timing can be episodic due to portfolio activity and balancing investment growth with capital return obligations.

Q: One of the themes is inference scaling. Are hyperscalers focusing more on inference compute, and how does it drive financial results for DigitalBridge?

A: Inference is in early innings. Returns in inference and edge workloads are differentiated, with potential for higher returns. For example, DataBank's EBITDA growth is strong, and inferencing workloads benefit from interconnection and power availability. Returns in edge inferencing can be well north of 30% on a levered basis.

Q: What do you expect for fund outflows in 2026 and FEEUM growth?

A: Deployment of $43 billion into AI infrastructure is accelerating. Fund outflows and FEEUM growth in 2026 not specifically forecasted yet, but deployment schedule expected to continue accelerating. FEEUM is expected to grow as the business matures and more capital is raised than distributed over time.

Q: What drove the carried interest reversal this quarter, and when can we expect realized carried interest?

A: GAAP reversal in carried interest is due to quarterly marks of private assets. Carried interest realization is dependent on exit activity. With younger vintage funds (e.g., 2019 and 2022 funds), realizations and carried interest are expected in 2026-2027 and beyond as funds mature. The average hold time for infrastructure assets is ~7 years, aligning with expected realization timelines.

Q: How is M&A progress, and what's the competition like?

A: Active in M&A with over 20 new ideas and opportunities tracked. Pipeline for Fund III is up 20% y-o-y. Focus is on accretive, high-IRR opportunities. DigitalBridge is constantly in discussions but focuses on building the best alternative asset manager tethered to the digital AI economy rather than responding to market rumors.