DigitalBridge Group, Inc. (NYSE:DBRG) Q2 2023 Results Conference Call August 4, 2023 10:00 PM ET Company Participants Severin White - MD and Head, IR Marc Ganzi - CEO Jacky Wu - CFO Conference Call Participants Michael Elias - TD Cowen Dan Day - B. Riley Securities Richard Choe - JP Morgan Eric Luebchow - Wells Fargo Jon Atkin - RBC Capital Markets Operator Greetings, and welcome to the DigitalBridge Group, Inc. Second Quarter 2023 Earnings Call. At this time, all participants are in a listen only mode. A q ...

Financial Performance - Total revenues for Q2 2023 were $424.9 million, a slight increase from $416.6 million in Q2 2022, representing a growth of 0.8% year-over-year[16] - Net loss attributable to common stockholders for Q2 2023 was $22.4 million, compared to a net loss of $37.3 million in Q2 2022, showing an improvement of 40.5%[16] - Total revenues for Q2 2023 were $149.1 million, a decrease of 5.4% from $157.9 million in Q2 2022[18] - Fee income increased to $66.6 million in Q2 2023, up 47.8% from $45.1 million in Q2 2022[18] - Net loss for Q2 2023 was $52.5 million, compared to a net loss of $68.1 million in Q2 2022, showing an improvement[21] - The company reported a comprehensive loss of $49.4 million for Q2 2023, compared to a loss of $88.1 million in Q2 2022[21] - For the first half of 2023, total revenues were $155.9 million, down 9.2% from $171.7 million in the same period of 2022[20] Assets and Liabilities - Total assets decreased to $10.76 billion as of June 30, 2023, down from $11.03 billion at the end of 2022, reflecting a decline of 2.4%[12] - Total liabilities increased to $6.60 billion as of June 30, 2023, compared to $6.46 billion at the end of 2022, an increase of 2.2%[12] - Cash and cash equivalents decreased to $426.9 million from $918.3 million at the end of 2022, a decline of 53.5%[12] - The company’s accumulated deficit increased to $7.20 billion as of June 30, 2023, compared to $6.96 billion at the end of 2022, reflecting a growth of 3.5%[12] Corporate Debt - Corporate debt reduced to $370.5 million from $568.9 million at the end of 2022, a decrease of 34.9%[12] - As of June 30, 2023, total corporate debt amounted to $5,149 million, an increase from $4,634 million as of December 31, 2022, representing an increase of approximately 11.1%[134] - The weighted average interest rate for corporate debt was 3.77% as of June 30, 2023, compared to 3.71% as of December 31, 2022[135] Investment Activities - The company acquired InfraBridge, a mid-market global infrastructure equity platform, for $314.27 million, enhancing its investment offerings[38] - The company reported a principal investment loss of $33.97 million, compared to a loss of $22.90 million in the prior year, representing a deterioration in investment performance[31] - The company reported a business combination resulting in an increase of $161,744 thousand in investments during the first half of 2023[119] Stockholder Equity - As of June 30, 2023, total stockholders' equity was $4,129,011, a decrease from $4,151,812 at March 31, 2023[28] - The company reinstated quarterly common stock dividends at $0.01 per share starting in Q3 2022 after a suspension from Q2 2020 to Q2 2022[161] - The company executed a one-for-four reverse stock split in August 2022, increasing additional paid-in capital by approximately $4.9 million[163] Cash Flow - Net cash provided by operating activities was $92.21 million, compared to $74.07 million in the prior year, reflecting a year-over-year increase of approximately 24.5%[31] - Cash flows from investing activities showed a net outflow of $571.55 million, significantly reduced from $2.15 billion in the same period of 2022[34] Other Comprehensive Income - The company reported an accumulated other comprehensive income of $1,122 thousand as of June 30, 2023[166] - Other comprehensive income for the second quarter of 2023 was $3,143, which included $2,582 from accumulated other comprehensive income[28] Noncontrolling Interests - The balance of redeemable noncontrolling interests decreased from $359.2 million at January 1, 2022, to $31.9 million at June 30, 2023, reflecting a significant reduction of approximately 91.1%[170] - The net income (loss) from redeemable noncontrolling interests was $4.5 million for the six months ended June 30, 2023, compared to a loss of $25.5 million in the same period of 2022[170] Real Estate and Property Operations - Property operating income for Q2 2023 was $234.8 million, slightly up from $234.3 million in Q2 2022, indicating a growth of 0.2%[16] - The company recognized a depreciation expense of $94.3 million for real estate held for investment for the three months ended June 30, 2023, compared to $87.3 million for the same period in 2022[113] Acquisitions and Dispositions - The company acquired InfraBridge for $314.3 million in cash, with additional contingent consideration based on future fundraising targets[84] - The Company sold its equity method investment in BrightSpire Capital, Inc. for net proceeds of $201.6 million, which was classified as discontinued operations[71]

[PART I. FINANCIAL INFORMATION](index=4&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This section provides the unaudited consolidated financial statements and management's discussion and analysis for the quarter ended March 31, 2023 [Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited consolidated financial statements for DigitalBridge Group, Inc. for the quarterly period ended March 31, 2023 [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets) As of March 31, 2023, total assets decreased slightly to **$10.74 billion** from **$11.03 billion** at December 31, 2022, primarily due to reduced cash and assets held for disposition Consolidated Balance Sheet Summary (in thousands) | Account | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $668,524 | $918,254 | | Real estate | $5,964,807 | $5,921,298 | | Goodwill | $907,937 | $761,368 | | **Total assets** | **$10,743,429** | **$11,028,503** | | **Liabilities** | | | | Corporate debt | $569,771 | $568,912 | | Non-recourse investment-level debt | $4,752,050 | $4,587,228 | | **Total liabilities** | **$6,484,204** | **$6,458,440** | | **Equity** | | | | Total stockholders' equity | $1,452,321 | $1,660,698 | | **Total equity** | **$4,151,812** | **$4,469,489** | [Consolidated Statements of Operations](index=6&type=section&id=Consolidated%20Statements%20of%20Operations) For the three months ended March 31, 2023, total revenues increased to **$250.2 million**, but the company reported a net loss attributable to common stockholders of **$212.5 million**, an improvement from the prior-year period Consolidated Statement of Operations Summary (in thousands, except per share data) | Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | Total revenues | $250,160 | $232,834 | | Total expenses | $384,499 | $339,405 | | Income (Loss) from continuing operations | $(278,126) | $(249,039) | | Net income (loss) | $(292,344) | $(343,684) | | Net income (loss) attributable to common stockholders | $(212,473) | $(262,316) | | Net income (loss) per common share—basic/diluted | $(1.34) | $(1.84) | [Consolidated Statements of Cash Flows](index=11&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) For Q1 2023, net cash provided by operating activities was **$20.2 million**, while net cash used in investing activities totaled **$258.9 million**, primarily due to the InfraBridge acquisition Cash Flow Summary (in thousands) | Activity | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $20,185 | $1,257 | | Net cash provided by (used in) investing activities | $(258,870) | $(1,102,149) | | Net cash provided by (used in) financing activities | $26,786 | $559,318 | | **Net increase (decrease) in cash** | **$(212,525)** | **$(542,225)** | - The primary use of cash in investing activities was the **$313.2 million** acquisition of InfraBridge, net of cash acquired[29](index=29&type=chunk) [Notes to Consolidated Financial Statements](index=13&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes detail key events including the February 2023 acquisition of InfraBridge, the sale of the BrightSpire Capital, Inc. investment, and ongoing operations in the Investment Management and Operating segments - In February 2023, the Company acquired the global infrastructure equity investment management business of AMP Capital, rebranded as InfraBridge, for **$313.2 million** in upfront cash plus contingent consideration[36](index=36&type=chunk)[78](index=78&type=chunk) - The Company sold its entire equity method investment in BrightSpire Capital, Inc. (BRSP) in March 2023 for net proceeds of **$201.6 million**, which is treated as a discontinued operation[67](index=67&type=chunk) - In May 2022, the Company redeemed the 31.5% noncontrolling interest in its investment management business held by Wafra, making a **$90 million** contingent payment in March 2023[166](index=166&type=chunk)[169](index=169&type=chunk) - The company operates through two reportable segments: Investment Management and Operating, with the Operating segment including equity interests in DataBank (**11% ownership**) and Vantage SDC (**13% ownership**)[56](index=56&type=chunk)[57](index=57&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=50&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's performance, highlighting growth in Assets Under Management (AUM) to **$69.3 billion** and Fee Earning Equity Under Management (FEEUM) to **$27.7 billion**, largely due to the InfraBridge acquisition [Significant Developments](index=51&type=section&id=MD%26A-Significant%20Developments) In Q1 2023, the company completed the InfraBridge acquisition, fully disposed of its non-digital investment in BrightSpire Capital, Inc. (BRSP), and recorded a significant non-cash write-down on a promissory note - Completed the acquisition of InfraBridge in February 2023 for **$313.2 million** in upfront cash, adding **$5.1 billion** in FEEUM[263](index=263&type=chunk) - Fully disposed of its investment in BrightSpire Capital, Inc. (BRSP) for approximately **$202 million** in net proceeds in Q1 2023[266](index=266&type=chunk) - Recorded a **$133 million** non-cash fair value write-down on an unsecured promissory note from the 2022 sale of the Wellness Infrastructure business[266](index=266&type=chunk)[272](index=272&type=chunk) - Repaid **$200 million** of convertible senior notes upon maturity in April 2023 using cash on hand[262](index=262&type=chunk) [Results of Operations](index=53&type=section&id=MD%26A-Results%20of%20Operations) Consolidated revenues for Q1 2023 increased by **7%** to **$250.2 million**, driven by a **$28.4 million** increase in property operating income from the Operating segment, despite a **51%** decrease in Investment Management revenue Revenues by Segment (in thousands) | Segment | Q1 2023 | Q1 2022 | Change | | :--- | :--- | :--- | :--- | | Investment Management | $6,829 | $13,831 | $(7,002) | | Operating | $231,664 | $202,522 | $29,142 | | Corporate and Other | $11,667 | $16,481 | $(4,814) | | **Total** | **$250,160** | **$232,834** | **$17,326** | - Fee income increased by **$16.3 million** (**38%**) year-over-year, driven by the InfraBridge acquisition and new capital raises[269](index=269&type=chunk)[275](index=275&type=chunk) - A net reversal of unrealized carried interest of **$54.8 million** was recorded, compared to a **$31.1 million** reversal in Q1 2022, primarily driven by DBP II[276](index=276&type=chunk) - Property operating income increased by **$28.4 million**, reflecting results from data center acquisitions and lease-ups during 2022[279](index=279&type=chunk)[280](index=280&type=chunk) - Other loss of **$142.7 million** in Q1 2023 was driven by a **$133.3 million** write-down on a promissory note[292](index=292&type=chunk) [Non-GAAP Supplemental Financial Measures](index=58&type=section&id=MD%26A-Non-GAAP%20Measures) For Q1 2023, Distributable Earnings improved to a loss of **$3.4 million**, Adjusted EBITDA increased to **$25.6 million**, and Investment Management Fee Related Earnings (FRE) more than doubled to **$34.5 million** Non-GAAP Measures Summary (in thousands) | Measure | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | Distributable Earnings | $(3,365) | $(5,064) | | Adjusted EBITDA | $25,626 | $20,494 | | Investment Management FRE | $34,512 | $16,989 | - Investment Management FRE is used to assess the profitability of the investment management business, excluding start-up strategies, with its significant increase indicating strong core business performance[307](index=307&type=chunk)[308](index=308&type=chunk)[309](index=309&type=chunk) [Liquidity and Capital Resources](index=60&type=section&id=MD%26A-Liquidity%20and%20Capital%20Resources) As of March 31, 2023, the company had a liquidity position of approximately **$749 million**, including **$300 million** available under its VFN, which management believes is sufficient to meet obligations - Total liquidity was approximately **$749 million** at March 31, 2023, consisting of corporate unrestricted cash and full availability under the **$300 million** VFN[314](index=314&type=chunk) - Key uses of funds in Q1 2023 were the InfraBridge acquisition (**$313 million**) and a contingent payment to Wafra (**$90 million**)[320](index=320&type=chunk) - The company has unfunded commitments totaling **$126 million** to its sponsored funds as of March 31, 2023[323](index=323&type=chunk) - Following the repayment of **$200 million** in notes in April 2023, outstanding corporate debt principal is **$378.4 million**[321](index=321&type=chunk)[322](index=322&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=65&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company is primarily exposed to market risks from interest rates, foreign currency rates, and equity prices, with mitigation strategies in place for each - Interest rate risk on corporate debt is limited as the VFN revolver had no outstanding balance, and only **7%** (**$0.4 billion** of **$4.9 billion**) of investment-level debt is variable rate[367](index=367&type=chunk)[368](index=368&type=chunk) - A hypothetical **100 basis point** increase in interest rates on investment-level variable rate debt would increase annualized interest expense by **$3.6 million** on a consolidated basis, but only **$0.4 million** after attribution to noncontrolling interests[369](index=369&type=chunk) - Foreign currency exposure is limited to the UK-based InfraBridge operations and a single **A$35 million** equity investment[364](index=364&type=chunk)[365](index=365&type=chunk) - Equity price risk exists from **$166 million** in long positions and **$46 million** in short positions in marketable securities, primarily within consolidated funds with significant noncontrolling interests[370](index=370&type=chunk) [Controls and Procedures](index=67&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were effective as of March 31, 2023, with no material changes to internal control over financial reporting during the quarter - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective at March 31, 2023[373](index=373&type=chunk) - No material changes to internal control over financial reporting occurred during the quarter ended March 31, 2023[374](index=374&type=chunk) [PART II. OTHER INFORMATION](index=68&type=section&id=PART%20II.%20OTHER%20INFORMATION) This section covers legal proceedings, risk factors, and details on unregistered sales of equity securities [Legal Proceedings](index=68&type=section&id=Item%201.%20Legal%20Proceedings) As of March 31, 2023, the company was not involved in any material legal proceedings - The Company was not involved in any material legal proceedings as of March 31, 2023[376](index=376&type=chunk) [Risk Factors](index=68&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes from the risk factors previously disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2022 - No material changes from the risk factors disclosed in the 2022 Form 10-K were reported[377](index=377&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=68&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) Under a **$200 million** stock repurchase program, the company repurchased **2,738** shares of preferred stock for approximately **$52,000** during the quarter, with **$92.4 million** remaining available Issuer Purchases of Equity Securities (Q1 2023) | Period | Total Number of Shares Purchased | Weighted Average Price Paid Per Share | Maximum Approximate Dollar Value that May Yet Be Purchased ($ in thousands) | | :--- | :--- | :--- | :--- | | Jan 2023 | — | $ — | $92,430 | | Feb 2023 | — | $ — | $92,430 | | Mar 2023 | 2,738 | $18.89 | $92,378 | | **Total** | **2,738** | **$18.89** | **$92,378** |

Financial Data and Key Metrics - Fee income increased by 36% year-over-year, driven by higher FEEUM on co-invest and the acquisition of InfraBridge [1] - Fee earning equity under management (FEEUM) increased by $8.9 billion or 47% year-over-year, reaching $28 billion [2] - Total consolidated revenues were $250 million, a 7% increase from the same period last year [4] - GAAP net loss attributable to common stockholders was $212 million, while adjusted EBITDA grew by 25% to $26 million [4] - Assets under management (AUM) grew by 49% year-over-year to $69.3 billion [2] - Run rate fee revenues were $252 million, calculated by multiplying committed FEEUM by the weighted average effective annual fee rate [5] Business Line Performance - Investment management platform showed strong growth with fee income up 36% and FRE up 40% [1] - Digital IM distributable earnings increased significantly to $32 million for the quarter compared to $9 million in the same period last year [18] - The company's share of digital operating revenues was $27 million, down 25% year-over-year, while adjusted EBITDA was $12 million, down 23% [18] - The acquisition of InfraBridge contributed $11 million in fee income, representing less than two months of fees from the platform [18] Market Performance - The company raised $700 million in new capital formation in Q1, driven by co-investments in platforms like GD Towers, Switch, Highline do Brasil, and Vantage [2] - In Europe, the company plans to spend $2.7 billion on data centers, fiber, and edge infrastructure [47] - In Asia, the company is spending nearly $700 million on greenfield data centers and fiber networks [47] - The leasing pipeline for DataBank and Vantage in the US is up significantly year-over-year, with Switch's leasing pipeline growing from 57 megawatts to over 500 megawatts [12] Strategic Direction and Industry Competition - The company is focused on scaling FEEUM, which is the key metric driving revenue, earnings, and shareholder value [2] - DigitalBridge is executing a disciplined capital allocation strategy, with over $7 billion in growth CapEx budgeted for 2023 to support customer growth [9] - The company is focused on high-quality digital infrastructure platforms, avoiding investments in aging or legacy assets [39] - The company is leveraging its global presence and strong customer relationships to drive growth in digital infrastructure [48] Management Commentary on Operating Environment and Future Outlook - The company sees a "tale of two cities" in digital infrastructure, with high-quality platforms continuing to attract capital while out-of-favor companies underperform [7] - Management remains confident in achieving the 2023 fundraising target of $8 billion, with $2.3 billion in new commitments secured in recent months [7] - The company is optimistic about the deconsolidation of DataBank and Vantage SDC, which will simplify the corporate structure and reduce leverage [3] - Management highlighted the strong secular tailwinds in digital infrastructure, driven by global demand for connectivity and compute [21] Other Important Information - The company completed the sale of BrightSpire for $202 million, eliminating $7 million of dividend income but providing additional liquidity for high-quality digital infrastructure investments [4] - The company repaid $200 million of convertible notes in April, reducing corporate leverage to below 2.5x [5] - The company expects to complete the deconsolidation of its operating segments, leaving only $300 million of corporate debt, which is not expected to be repaid or refinanced until 2025 [5] Q&A Session Summary Question: Demand trends in the data center space - The leasing pipeline for DataBank, Vantage, and Switch is up significantly year-over-year, driven by demand from cloud players, mobile operators, and AI deployments [12] - Management emphasized the importance of secure workloads and 100% renewable energy environments, which are now a must-have for customers [12] Question: Long-term ambitions for Vantage - Vantage has three businesses: Asia, North America, and Europe, all showing strong growth and leasing demand [28] - The company has created permanent capital vehicles for Vantage SDC and Vantage Europe, aiming to recycle capital and provide stable cash flows to LPs [28] Question: Monetization plans for Vantage SDC - The company is in the process of raising new capital for Vantage SDC, with strong investor appetite for stabilized US data centers producing high yields [31] - The company expects to deconsolidate Vantage SDC soon, with a target of reducing its position to around $200 million [32] Question: Fundraising progress for DigitalBridge Partners Series - The company has received its first commitments for the new flagship strategy, with strong momentum in attracting new capital [65] - Management remains confident in achieving the $8 billion fundraising target for 2023, with $2 billion expected from core and credit, $2 billion from co-invest, and $4 billion from flagship strategies [79] Question: Valuation trends in digital infrastructure - High-quality digital infrastructure assets continue to trade at a premium, while legacy assets are underperforming [67] - The company is focused on investing in good businesses with strong cash flows and avoiding overvalued or poorly financed assets [22] Question: Capital allocation priorities - The company plans to use its liquidity for accretive M&A, paying down preferreds, and repurchasing stock at the right price [92] - Management emphasized the importance of maintaining a strong balance sheet and focusing on free cash flow and EPS growth [92]

PART I [Business](index=8&type=section&id=Item%201%2E%20Business) DigitalBridge is a global digital infrastructure investment manager with two segments that recently completed its transformation into a C-Corporation - DBRG is a leading global digital infrastructure investment manager with **$53 billion of AUM** as of December 31, 2022, focusing on data centers, cell towers, fiber networks, small cells, and edge infrastructure[30](index=30&type=chunk) - The company operates through two reportable segments: **Investment Management** (managing capital for institutional investors) and **Operating** (direct co-investment in digital infrastructure assets)[32](index=32&type=chunk) - In February 2022, the company completed its transformation into an investment manager focused primarily on digital infrastructure, moving away from a diversified real estate portfolio[33](index=33&type=chunk) - Effective for the 2022 taxable year, the company discontinued its REIT status and became a taxable C Corporation, which provides more flexibility for strategic initiatives and reinvestment of earnings[63](index=63&type=chunk)[64](index=64&type=chunk) [Our Business and Investment Management Platform](index=8&type=section&id=Item%201%2E%20Business%20-%20Our%20Business%20and%20Investment%20Management%20Platform) The company's two segments are Investment Management, which earns fees, and Operating, which holds equity in digital infrastructure companies like DataBank Business Segments Overview | Segment | Description | Revenue Source | | :--- | :--- | :--- | | **Investment Management** | Manages capital for institutional investors in digital infrastructure funds | Management fees, incentive fees, carried interest | | **Operating** | Holds balance sheet equity in digital infrastructure companies (DataBank, Vantage SDC) | Rental income from digital asset space/capacity | - The Investment Management platform has expanded beyond its flagship DigitalBridge Partners (DBP) value-add funds to include core equity, credit, liquid securities, and mid-market investments via the acquisition of InfraBridge[34](index=34&type=chunk)[39](index=39&type=chunk) - The acquisition of InfraBridge in February 2023 added **$9 billion of AUM** to the investment management platform[39](index=39&type=chunk) [Investment Strategy and Process](index=9&type=section&id=Item%201%2E%20Business%20-%20Investment%20Strategy%20and%20Process) The investment strategy leverages deep operational expertise and proprietary deal flow to invest in resilient digital infrastructure assets with strong growth drivers - The investment strategy targets digital infrastructure assets with durable cash flow profiles and compelling growth characteristics driven by themes like 5G, AI, and cloud applications[37](index=37&type=chunk) - Core strengths include deep operational expertise, a differentiated M&A program leveraging industry relationships for proprietary deal flow, and dynamic balance sheet management, including asset securitization[40](index=40&type=chunk) - The underwriting process is comprehensive, focusing on asset quality, customer credit, and structuring for downside protection, with portfolio diversification being a key consideration to manage concentration risk[43](index=43&type=chunk)[44](index=44&type=chunk)[45](index=45&type=chunk) [Fund Management and Competition](index=11&type=section&id=Item%201%2E%20Business%20-%20Fund%20Management%20and%20Competition) The company manages third-party capital through limited partnerships, earning various fees while facing intense competition for both capital and investments Fee Structure | Fee Type | Basis | | :--- | :--- | | **Management Fees** | Contractual rates (0.2% to 1.5% p.a.) of committed or invested capital | | **Incentive Fees** | Performance-based fees from sub-advisory accounts in Liquid Strategies | | **Carried Interest** | Disproportionate allocation of returns after fund performance exceeds minimum hurdles | - The company competes for capital from outside investors and for investment opportunities against a wide range of financial institutions, including other private equity firms, REITs, and investment banks[55](index=55&type=chunk)[57](index=57&type=chunk) [Regulations and Human Capital](index=13&type=section&id=Item%201%2E%20Business%20-%20Regulations%20and%20Human%20Capital) The company operates under significant regulation, including the Investment Advisers Act, and emphasizes human capital through diversity and ESG programs - The company intends to conduct operations to avoid being deemed an investment company under the Investment Company Act of 1940, relying on various exemptions[67](index=67&type=chunk)[69](index=69&type=chunk) - Subsidiaries registered as investment advisers are subject to the Investment Advisers Act of 1940, which imposes fiduciary duties and regulatory oversight by the SEC[70](index=70&type=chunk) - The company has a strong focus on diversity and inclusion, with **45% of 2022 hires being female** and **62% from underrepresented ethnic groups**[77](index=77&type=chunk)[79](index=79&type=chunk) - DBRG has an established ESG program with a cross-functional committee and board oversight, guided by a Responsible Investment Policy that integrates ESG considerations throughout the investment lifecycle[83](index=83&type=chunk)[84](index=84&type=chunk) [Risk Factors](index=16&type=section&id=Item%201A%2E%20Risk%20Factors) The company faces material risks across its business, operations, financing, and regulatory environment, including capital needs and fund performance [Risks Related to Our Business](index=16&type=section&id=Item%201A%2E%20Risk%20Factors%20-%20Risks%20Related%20to%20Our%20Business) Business risks include the critical need for capital, adverse economic and political conditions, foreign operations exposure, and climate change impacts - The company requires significant capital to fund investments, operations, and distributions; failure to obtain this capital from public/private markets could materially harm the business[92](index=92&type=chunk)[93](index=93&type=chunk) - Business performance is materially affected by global economic and political conditions, including interest rates, inflation, and geopolitical instability, which can reduce the value of investments and make fundraising more difficult[95](index=95&type=chunk)[96](index=96&type=chunk) - Operations in Europe, Asia, and other foreign markets expose the company to risks such as currency fluctuations, political instability, and complex regulatory environments[100](index=100&type=chunk) [Risks Related to our Investment Management Business](index=19&type=section&id=Item%201A%2E%20Risk%20Factors%20-%20Risks%20Related%20to%20our%20Investment%20Management%20Business) The investment management business faces intense competition, fee pressure, and risks from poor fund performance and subjective valuation of illiquid assets - The investment management business is intensely competitive based on performance, fees, and brand recognition, which could adversely affect the ability to raise capital and make successful investments[107](index=107&type=chunk)[108](index=108&type=chunk) - **Poor performance of managed investment vehicles** can reduce management fees and carried interest, directly impacting revenue and cash flow[109](index=109&type=chunk) - Valuing illiquid investments in private funds involves significant management judgment and is subject to uncertainty; incorrect valuations could misstate performance and accrued fees[111](index=111&type=chunk)[114](index=114&type=chunk) - Conflicts of interest may exist in allocating investment opportunities, fees, and costs among the company and its various managed funds, which could damage its reputation if not handled appropriately[116](index=116&type=chunk)[117](index=117&type=chunk) [Risks Related to our Digital Infrastructure Investments](index=22&type=section&id=Item%201A%2E%20Risk%20Factors%20-%20Risks%20Related%20to%20our%20Digital%20Infrastructure%20Investments) Digital infrastructure assets face risks from physical failures, intense competition, reliance on third-party suppliers, and technological obsolescence - Failures of physical infrastructure, such as power or cooling systems, could result in service interruptions, liability under customer leases, and damage to the company's reputation[124](index=124&type=chunk)[125](index=125&type=chunk) - The business is dependent on third-party suppliers for power and network connectivity; service failures or price increases from these suppliers could adversely affect operations and profitability[131](index=131&type=chunk)[134](index=134&type=chunk) - A reduction in demand for digital infrastructure assets, driven by economic slowdowns, technological changes, or industry consolidation, could harm operating results[130](index=130&type=chunk) - Digital infrastructure assets may become obsolete due to new technologies, requiring costly upgrades to remain competitive[136](index=136&type=chunk) [Risks Related to Our Organizational Structure and Business Operations](index=25&type=section&id=Item%201A%2E%20Risk%20Factors%20-%20Risks%20Related%20to%20Our%20Organizational%20Structure%20and%20Business%20Operations) Operational risks include dependence on key personnel, conflicts of interest with senior executives, cybersecurity threats, and potential asset impairments - The company depends on the skills and reputations of key personnel; the loss of their services could harm the business[141](index=141&type=chunk)[142](index=142&type=chunk) - Potential conflicts of interest exist between the company and its CEO and President due to their personal investments in certain portfolio companies (DataBank, Vantage SDC) made prior to the DBH acquisition[145](index=145&type=chunk)[147](index=147&type=chunk) - A cybersecurity incident could disrupt operations, compromise confidential information, and result in significant financial and reputational harm[153](index=153&type=chunk)[154](index=154&type=chunk) - The company's assets are subject to impairment charges, which could materially impact results; in 2022, a **$60 million impairment charge** was recorded on the investment in BrightSpire Capital, Inc (BRSP)[150](index=150&type=chunk)[151](index=151&type=chunk) [Risks Related to Financing](index=29&type=section&id=Item%201A%2E%20Risk%20Factors%20-%20Risks%20Related%20to%20Financing) The company's use of leverage creates substantial risk, including meeting debt service obligations, adhering to restrictive covenants, and exposure to rising interest rates - The company's ability to meet its debt service obligations depends on generating sufficient cash flow, which is subject to conditions beyond its control[165](index=165&type=chunk) - As of December 31, 2022, the company had significant debt, including **$300 million in securitized financing**, **$278 million in convertible/exchangeable notes**, and **$4.6 billion of non-recourse investment-level debt**[177](index=177&type=chunk) - Higher interest rates could adversely affect the value of investments, increase interest expense, and negatively impact profitability and cash available for distributions[178](index=178&type=chunk)[181](index=181&type=chunk) - The transition from LIBOR to alternative reference rates like SOFR for floating-rate debt and hedging instruments creates uncertainty and could adversely affect financial results[183](index=183&type=chunk)[184](index=184&type=chunk) [Regulatory and Tax Risks](index=33&type=section&id=Item%201A%2E%20Risk%20Factors%20-%20Regulatory%20and%20Tax%20Risks) The company faces extensive regulation, increased tax obligations after its C-Corp transition, and potential limitations on using NOL carryforwards - The business is subject to extensive regulation by the SEC and other agencies, which creates compliance costs and the potential for significant liabilities[195](index=195&type=chunk) - In September 2022, a legacy investment adviser subsidiary (CCIA) received an information request from the SEC's Division of Enforcement related to alleged deficiencies identified in a recent examination[198](index=198&type=chunk) - Effective January 1, 2022, the company no longer qualifies as a REIT and will be taxed as a C Corporation, increasing its income tax obligations as it can no longer deduct dividends paid[210](index=210&type=chunk) - The company's ability to use its significant capital loss and NOL carryforwards to reduce future tax payments could be limited by tax rules, including potential "ownership changes" under Section 382 of the Code[213](index=213&type=chunk)[214](index=214&type=chunk) [Unresolved Staff Comments](index=37&type=section&id=Item%201B%2E%20Unresolved%20Staff%20Comments) The company reports that it has no unresolved staff comments from the Securities and Exchange Commission - None[220](index=220&type=chunk) [Properties](index=37&type=section&id=Item%202%2E%20Properties) The Operating segment consists of 84 data centers with 373 megawatts of power capacity and a 79% lease rate as of year-end 2022 Data Center Portfolio Overview (as of Dec 31, 2022) | Metric | Value | | :--- | :--- | | **Total Properties** | 84 | | Hyperscale | 13 | | Colocation | 71 | | **Total Rentable Square Feet** | 2.41 million | | **Leased Percentage** | 79% | | **Total Power Capacity** | 373 MW | | **Total Annualized MRR** | $774 million | - The top 10 customers account for **41.0% of the total portfolio's annualized MRR**, with the largest customer, in the Software & Services industry, representing 19.2%[226](index=226&type=chunk) [Legal Proceedings](index=39&type=section&id=Item%203%2E%20Legal%20Proceedings) Information regarding legal proceedings is incorporated by reference from Note 19 to the consolidated financial statements - The company refers to Note 19 of its consolidated financial statements for information on legal proceedings[227](index=227&type=chunk) [Mine Safety Disclosures](index=39&type=section&id=Item%204%2E%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not applicable[228](index=228&type=chunk) PART II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=40&type=section&id=Item%205%2E%20Market%20for%20Registrant's%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's stock (DBRG) underwent a reverse split, reinstated dividends, and was subject to a significant repurchase program in 2022 - A **one-for-four reverse stock split** of common stock was completed in August 2022[233](index=233&type=chunk) - Quarterly common stock dividends were reinstated in Q3 2022 at **$0.01 per share**[235](index=235&type=chunk) Q4 2022 Stock Repurchases | Period | Total Shares Purchased | Weighted Avg. Price | Remaining Authorization | | :--- | :--- | :--- | :--- | | Oct 2022 | 3,250,450 | $12.71 | $92,430,000 | | Nov 2022 | — | — | $92,430,000 | | Dec 2022 | — | — | $92,430,000 | | **Total** | **3,250,450** | **$12.71** | **$92,430,000** | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=41&type=section&id=Item%207%2E%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) In 2022, the company finalized its business transformation, grew FEEUM by 21%, and increased revenues, though net loss widened due to a non-cash charge [Significant Developments](index=42&type=section&id=Item%207%2E%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations%20-%20Significant%20Developments) Key 2022 developments include the C-Corp transition, redemption of Wafra's interest, the DataBank recapitalization, and the post-year-end InfraBridge acquisition - The company transitioned to a taxable C-Corporation, discontinuing its REIT status for 2022 to gain strategic flexibility[244](index=244&type=chunk) - In May 2022, DBRG redeemed Wafra's 31.5% interest in its investment management business for consideration valued at **$862 million**, giving DBRG 100% of net cash flows from its fee business going forward[247](index=247&type=chunk)[248](index=248&type=chunk) - The partial recapitalization of DataBank in H2 2022 resulted in **$425 million in proceeds** for DBRG and reduced its ownership from 20% to 11.0%[249](index=249&type=chunk) - In February 2023, the company acquired InfraBridge, adding **$5.6 billion in Fee Earning Equity Under Management (FEEUM)**[246](index=246&type=chunk) [Assets Under Management](index=43&type=section&id=Item%207%2E%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations%20-%20Assets%20Under%20Management) Fee Earning Equity Under Management (FEEUM) increased by 21% to $22.2 billion in 2022, driven by the DataBank recapitalization and a new fund launch AUM and FEEUM Growth (in billions) | Metric | Dec 31, 2022 | Dec 31, 2021 | Change | | :--- | :--- | :--- | :--- | | **Assets under Management (AUM)** | $51.3 | $43.6 | +17.7% | | **Fee Earning Equity under Management (FEEUM)** | $22.2 | $18.3 | +21.3% | - The **$3.9 billion increase in FEEUM** in 2022 was primarily due to capital raised in the DataBank recapitalization and the launch of a new Core Equity fund[253](index=253&type=chunk) [Results of Operations](index=44&type=section&id=Item%207%2E%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations%20-%20Results%20of%20Operations) Total revenues grew 18.5% to $1.14 billion in 2022, but net loss widened to $211.7 million due to a large non-cash loss on debt exchange Consolidated Results from Continuing Operations (Year Ended Dec 31) | (In thousands) | 2022 | 2021 | Change | | :--- | :--- | :--- | :--- | | **Total Revenues** | $1,144,572 | $965,799 | +$178,773 | | **Income (loss) from continuing operations** | $(421,293) | $(216,823) | $(204,470) | | **Net loss from continuing operations attributable to DBRG** | $(211,704) | $(72,639) | $(139,065) | - The increase in net loss was primarily driven by a **$133.2 million non-cash loss** on the early exchange of 5.75% exchangeable notes in the Corporate and Other segment[262](index=262&type=chunk)[287](index=287&type=chunk) - Investment Management net income attributable to DBRG increased by **35.6% to $69.9 million**, boosted by the full attribution of income post-Wafra redemption and $63.7 million in net carried interest[262](index=262&type=chunk) - Compensation expense increased significantly to **$447.5 million** from $301.9 million in 2021, driven by $202.3 million in incentive and carried interest compensation[281](index=281&type=chunk) - Equity method earnings rose to **$397.8 million** from $226.5 million, predominantly due to $152.5 million of gross carried interest distributed from the DataBank recapitalization and other investment sales[289](index=289&type=chunk) [Non-GAAP Supplemental Financial Measures](index=52&type=section&id=Item%207%2E%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations%20-%20Non-GAAP%20Supplemental%20Financial%20Measures) The company uses non-GAAP metrics like Distributable Earnings (DE) and Fee Related Earnings (FRE) to evaluate core business performance Non-GAAP Measures Attributable to Operating Company (2022) | (In thousands) | Amount | | :--- | :--- | | **Distributable Earnings (DE)** | $37,060 | | **Adjusted EBITDA** | $108,278 | | **Investment Management FRE** | $83,474 | - Distributable Earnings (DE) is an after-tax measure that adjusts GAAP net income for items like transaction costs, unrealized gains/losses, depreciation, and equity-based compensation to reflect ongoing operating performance[306](index=306&type=chunk) - Fee Related Earnings (FRE) for the Investment Management segment is used to assess the profitability of the core investment management business by measuring recurring fee revenues against direct compensation and operating expenses[311](index=311&type=chunk) [Liquidity and Capital Resources](index=54&type=section&id=Item%207%2E%2E%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations%20-%20Liquidity%20and%20Capital%20Resources) The company maintained a strong liquidity position of approximately $1 billion at year-end 2022, sufficient to meet its short-term obligations - The company's liquidity position was approximately **$1 billion** at year-end 2022, comprising corporate unrestricted cash and $300 million of VFN availability[315](index=315&type=chunk) - Significant 2022 cash inflows included **$425 million** from the partial monetization of DataBank and **$428 million** from returning capital on warehoused investments[318](index=318&type=chunk) - Major cash outflows included **$388.5 million** for the Wafra redemption and approximately **$108 million** for stock repurchases[319](index=319&type=chunk) Debt Maturities (as of Dec 31, 2022) | (In thousands) | 2023 | 2024 | 2025 | 2026 | 2027 | Total | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | **Corporate-level Debt** | $200,000 | $— | $78,422 | $300,000 | $— | $578,422 | | **Non-recourse Investment-level Debt** | $228,792 | $879,503 | $1,175,250 | $1,750,690 | $600,000 | $4,634,235 | | **Total** | **$428,792** | **$879,503** | **$1,253,672** | **$2,050,690** | **$600,000** | **$5,212,657** | [Critical Accounting Policies and Estimates](index=60&type=section&id=Item%207%2E%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations%20-%20Critical%20Accounting%20Policies%20and%20Estimates) Critical accounting policies require significant judgment, particularly for carried interest recognition, deferred tax asset valuation, and impairment testing - Recognition of carried interest is a critical estimate as it is based on the cumulative performance of investment vehicles, which is driven by the fair value of underlying, often illiquid, investments[367](index=367&type=chunk)[368](index=368&type=chunk) - Determining the realizability of deferred tax assets requires significant judgment regarding future taxable income; a valuation allowance is established if it is more likely than not that some portion will not be realized[370](index=370&type=chunk)[372](index=372&type=chunk) - The company performs periodic impairment tests on long-lived assets like real estate, equity method investments (e.g., BRSP), and goodwill, which involve estimating future cash flows and fair values[375](index=375&type=chunk) - Fair value measurement for Level 3 assets, such as certain loans receivable and CLO subordinated notes, requires unobservable inputs and significant management judgment[395](index=395&type=chunk)[396](index=396&type=chunk) - Consolidation decisions, particularly for Variable Interest Entities (VIEs), require significant judgment to determine if the company is the primary beneficiary[403](index=403&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=65&type=section&id=Item%207A%2E%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company is primarily exposed to market risks from interest rates, foreign currency, and equity prices affecting its debt, operations, and investments - The company's primary market risks are interest rate, foreign currency, and equity price risk[406](index=406&type=chunk) - A hypothetical **100 basis point increase in interest rates** would increase annualized interest expense by **$9.9 million** on a consolidated basis, or $1.1 million after attribution to noncontrolling interests, due to its $1 billion of investment-level variable rate debt[410](index=410&type=chunk) - Foreign currency risk is limited, stemming from data center operations in the U.K. and France and a single AUD-denominated equity investment held on the balance sheet[411](index=411&type=chunk)[413](index=413&type=chunk) - Equity price risk exists from **$156 million in long positions** and **$41 million in short positions** in marketable equity securities, held mainly by consolidated liquid funds[416](index=416&type=chunk) [Financial Statements and Supplementary Data](index=66&type=section&id=Item%208%2E%20Financial%20Statements%20and%20Supplementary%20Data) This section indicates that the required financial statements are provided in Item 15 of the Annual Report - The financial statements required by this item are located in Item 15, "Exhibits and Financial Statement Schedules"[418](index=418&type=chunk) [Changes in and Disagreements With Accountants on Accounting and Financial Disclosure](index=66&type=section&id=Item%209%2E%20Changes%20in%20and%20Disagreements%20With%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reports no changes in or disagreements with its accountants on accounting and financial disclosure - None[419](index=419&type=chunk) [Controls and Procedures](index=67&type=section&id=Item%209A%2E%20Controls%20and%20Procedures) Management and its independent auditor concluded that the company's disclosure controls and internal control over financial reporting were effective as of year-end 2022 - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of December 31, 2022[421](index=421&type=chunk) - Management concluded that internal control over financial reporting was effective as of December 31, 2022, based on the COSO framework[424](index=424&type=chunk) - The independent registered public accounting firm, Ernst & Young LLP, audited and issued an **unqualified opinion** on the effectiveness of the company's internal control over financial reporting[426](index=426&type=chunk)[429](index=429&type=chunk) PART III [Directors, Executive Officers and Corporate Governance](index=70&type=section&id=Item%2010%2E%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) The information required for this item is incorporated by reference from the company's definitive proxy statement - Information is incorporated by reference from the forthcoming definitive proxy statement[441](index=441&type=chunk) [Executive Compensation](index=70&type=section&id=Item%2011%2E%20Executive%20Compensation) The information required for this item is incorporated by reference from the company's definitive proxy statement - Information is incorporated by reference from the forthcoming definitive proxy statement[442](index=442&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=70&type=section&id=Item%2012%2E%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) The information required for this item is incorporated by reference from the company's definitive proxy statement - Information is incorporated by reference from the forthcoming definitive proxy statement[443](index=443&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=70&type=section&id=Item%2013%2E%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) The information required for this item is incorporated by reference from the company's definitive proxy statement - Information is incorporated by reference from the forthcoming definitive proxy statement[444](index=444&type=chunk) [Principal Accountant Fees and Services](index=70&type=section&id=Item%2014%2E%20Principal%20Accountant%20Fees%20and%20Services) The information required for this item is incorporated by reference from the company's definitive proxy statement - Information is incorporated by reference from the forthcoming definitive proxy statement[445](index=445&type=chunk) PART IV [Exhibits and Financial Statement Schedules](index=71&type=section&id=Item%2015%2E%20Exhibits%20and%20Financial%20Statement%20Schedules) This section contains the company's audited consolidated financial statements, the independent auditor's report, and related schedules and exhibits [Notes to Consolidated Financial Statements](index=83&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes detail key financial activities including the C-Corp transition, acquisitions, debt structure, the Wafra transaction, and discontinued operations - **Note 3 (Acquisitions):** Details asset acquisitions including Vantage SDC, DataBank's purchase of zColo, and the temporary warehousing of TowerCo assets; in February 2023, the company acquired InfraBridge for $316 million plus contingent consideration[632](index=632&type=chunk)[635](index=635&type=chunk)[642](index=642&type=chunk) - **Note 5 (Equity and Debt Investments):** The company's investment in BRSP was determined to be other-than-temporarily impaired in 2022, resulting in a **$60.4 million impairment charge**; the company also recognized **$152.5 million of distributed carried interest** in 2022[657](index=657&type=chunk)[661](index=661&type=chunk) - **Note 8 (Debt):** As of Dec 31, 2022, total debt was **$5.2 billion**, consisting of $578 million in corporate-level recourse debt and $4.6 billion in non-recourse investment-level debt; in March 2022, the company exchanged $60.3 million of its 5.75% exchangeable notes, resulting in a debt extinguishment loss of **$133.2 million**[683](index=683&type=chunk)[697](index=697&type=chunk) - **Note 10 (Noncontrolling Interests):** In May 2022, the company redeemed Wafra's 31.5% interest in its investment management business; in H2 2022, a recapitalization of DataBank reduced the company's ownership to 11.0% and generated **$425.5 million in proceeds**[730](index=730&type=chunk)[737](index=737&type=chunk) - **Note 17 (Income Taxes):** Following the transition to a C-Corp, the company recognized significant deferred tax assets related to capital loss carryforwards and its interest in the OP, but established a **full valuation allowance** against them as their realizability did not meet the more-likely-than-not threshold[826](index=826&type=chunk) - **Note 22 (Discontinued Operations):** The company presents the operations of its former Wellness Infrastructure, OED, Other IM, and Hotel businesses as discontinued operations following their disposition as part of its strategic transformation[866](index=866&type=chunk)[867](index=867&type=chunk)

Financial Data and Key Metrics Changes - The company reported total consolidated revenues of $301 million for the fourth quarter, an 18% increase year-over-year [50] - GAAP net loss attributable to common stockholders was $19 million or $0.12 per share [50] - Total company adjusted EBITDA was $28 million, a 32% increase from $21 million in the same period last year [50] - Total company distributable earnings was a loss of $11 million or $0.07 per share [50] - Digital AUM was $53 million in the fourth quarter, growing by 17% from $45 million in the same period last year [20] Business Line Data and Key Metrics Changes - The company raised $22 billion in fee-earning equity under management, up 22% year-over-year [51] - Recurring Investment Management revenue and earnings increased, with fee-related earnings up 33% year-over-year [52] - Annualized fee revenues increased from $120 million to $233 million since Q4 2021 [53] Market Data and Key Metrics Changes - The company achieved approximately $28 billion in FEEUM, a 52% increase from the previous year [13] - The company expects to achieve leverage ratios in the low single digits [26] Company Strategy and Development Direction - The company established its asset management platform as the strategic growth driver, focusing on a scalable, asset-light, high-return business model [41] - The company aims to simplify its corporate profile and deconsolidate its operating segments into Investment Management [30] - The company plans to raise over $8 billion in new net capital across its platforms in 2023 [64] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving strong fundraising in 2023, driven by interest in digital infrastructure [59] - The company is focused on maintaining strong liquidity and deleveraging its business [43] - Management highlighted the importance of organic revenue growth at the asset level for long-term success [28] Other Important Information - The company executed a share repurchase program and initiated a regular quarterly dividend, with plans to increase it in the future [21] - The company has built significant balance sheet liquidity, with approximately $700 million available [25] Q&A Session Summary Question: What new swim lanes might a target fit into to expand your offering? - Management indicated they are exploring opportunities in private equity and other complementary strategies to expand their offerings [37] Question: Can you talk about how your discussions with investors have changed given the macro economy? - Management noted strong interest from existing and new investors, with verbal commitments significantly exceeding expectations [80] Question: What is the status of the deconsolidation of DataBank and Vantage SDC? - Management confirmed ongoing fundraising efforts for DataBank and indicated a strong appetite from investors for stabilized data center assets like Vantage SDC [99][100]

Financial Performance - Total revenues for the three months ended September 30, 2022, were $2,299 thousand, compared to $4,008 thousand for the same period in 2021, reflecting a decrease of 42.5%[14] - Net loss attributable to DigitalBridge Group, Inc. for the three months ended September 30, 2022, was $(49,088) thousand, compared to a net income of $61,357 thousand for the same period in 2021[14] - Comprehensive loss for the three months ended September 30, 2022, was $(146,511) thousand, compared to $(89,879) thousand for the same period in 2021, reflecting an increase in loss of 63.1%[17] - Loss from continuing operations before income taxes for the three months ended September 30, 2022, was $(102,439) thousand, compared to $(51,908) thousand for the same period in 2021, indicating a worsening of 97.5%[14] - The net loss for the nine months ended September 30, 2022, was $532,752, a decrease from a net loss of $774,046 for the same period in 2021, representing a 31.2% improvement[36] - The company reported a net loss attributable to common stockholders of $63.3 million for the three months ended September 30, 2022, compared to a net income of $41.0 million for the same period in 2021[191] Assets and Liabilities - Total assets decreased to $11,740,829 thousand as of September 30, 2022, down from $14,197,816 thousand at December 31, 2021, representing a decline of approximately 17.2%[10] - Total liabilities decreased to $7,036,112 thousand as of September 30, 2022, down from $8,926,203 thousand at December 31, 2021, a reduction of approximately 21.2%[10] - Cash and cash equivalents decreased to $636,366 thousand as of September 30, 2022, down from $1,602,102 thousand at December 31, 2021, a decline of approximately 60.3%[10] - The company's total debt reached $5,394,134 thousand as of September 30, 2022, an increase from $4,922,722 thousand as of December 31, 2021, marking an increase of approximately 9.6%[107] - The accrued and other liabilities totaled $1,662,606 thousand as of September 30, 2022, up from $928,042 thousand as of December 31, 2021, which is an increase of 79.2%[102] Equity and Stockholder Information - As of June 30, 2021, total stockholders' equity was $6,059,030, a decrease of $58,633 from the previous period[27] - The balance at September 30, 2022, showed total equity of $4,608,689, with a preferred stock balance of $800,355[34] - Preferred stock dividends amounted to $(17,456) for the quarter, impacting the accumulated deficit[27] - The Company reinstated quarterly common stock dividends beginning Q3 2022, declaring a dividend of $0.01 per share paid in October 2022[123] - The stock repurchase program has a total authorization of $200 million, set to expire on June 30, 2023[125] Operational Highlights - Property operating income increased to $244,336 thousand for the three months ended September 30, 2022, compared to $194,854 thousand for the same period in 2021, an increase of 25.4%[14] - Net cash provided by operating activities increased to $194,773 for the nine months ended September 30, 2022, compared to $181,412 for the same period in 2021, reflecting a 7.5% increase[36] - The company completed its digital transformation in February 2022, which included the disposition of non-digital assets and a strategic shift in operations[43] Investments and Acquisitions - The Company acquired a data center in Santa Clara, California for $404.5 million, with an additional deferred payment of $56.9 million contingent on future lease-up[64] - DataBank acquired four colocation data centers in Houston, Texas for $670 million, funded by $262.5 million of debt and $407.5 million of equity, with the Company's share being $87.0 million[64] - The Company entered into an agreement to acquire AMP Capital's global infrastructure equity investment management business for A$458 million ($314 million) plus a contingent amount of up to A$180 million ($125 million)[70] Discontinued Operations - Discontinued operations reported a loss of $26.4 million for the three months ended September 30, 2022, compared to a loss of $10.4 million for the same period in 2021[157] - Revenues from discontinued operations were $6.4 million for the three months ended September 30, 2022, down from $218.5 million in the same period of 2021[157] - The company incurred $7.6 million in expenses from discontinued operations for the three months ended September 30, 2022, compared to $199.4 million in the prior year[157] Accounting and Compliance - The Company adopted ASU No. 2021-5 regarding lessor accounting, effective January 1, 2022, which impacts lease classification for variable lease payments[58] - Future accounting standards include ASU 2022-03, effective January 1, 2024, which clarifies the treatment of equity securities subject to contractual sale restrictions[62] - The Company evaluates acquisitions to determine if they qualify as business combinations, requiring a substantive process that contributes to revenue generation[53] Compensation and Equity Awards - The total compensation expense for the three months ended September 30, 2022, was $8.576 million, compared to $6.914 million for the same period in 2021[202] - The company granted 1,098,185 restricted stock units and 185,674 PSUs during the reporting period[203] - The aggregate unrecognized compensation cost for all unvested equity awards was $41.8 million, expected to be recognized over a weighted average period of 2.1 years[203]

DigitalBridge Group, Inc. (NYSE:DBRG) Q3 2022 Earnings Conference Call November 4, 2022 10:00 AM ET Company Participants Severin White - MD & Head, Public IR Marc Ganzi - CEO & Director Jacky Wu - EVP, CFO & Treasurer Conference Call Participants Michael Elias - Cowen Dan Day - B. Riley Securities Jade Rahmani - KBW Brent Penter - Raymond James & Associates Richard Choe - JPMorgan Chase & Co. Eric Luebchow - Wells Fargo Securities Jon Atkin - RBC Capital Markets Ric Prentiss - Raymond James & Associates Op ...

[PART I. FINANCIAL INFORMATION](index=4&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) The unaudited consolidated financial statements detail the company's financial position as of June 30, 2022 [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets) Total assets decreased to $11.9 billion due to the disposition of non-digital assets, with a corresponding drop in liabilities Consolidated Balance Sheet Summary (in thousands) | Account | June 30, 2022 (Unaudited) | December 31, 2021 | | :--- | :--- | :--- | | **Total Assets** | **$11,877,288** | **$14,197,816** | | Assets held for disposition | $156,672 | $3,676,615 | | Real estate, net | $6,047,928 | $4,972,284 | | **Total Liabilities** | **$7,213,758** | **$8,926,203** | | Liabilities related to assets held for disposition | $719 | $3,088,699 | | Debt, net | $5,539,732 | $4,860,402 | | **Total Equity** | **$4,561,519** | **$4,912,390** | [Consolidated Statements of Operations](index=5&type=section&id=Consolidated%20Statements%20of%20Operations) Total revenues increased year-over-year, while the net loss attributable to common stockholders significantly improved Statement of Operations Highlights (in thousands, except per share data) | Metric | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | **Total Revenues** | **$289,409** | **$237,187** | **$546,868** | **$457,768** | | Income (Loss) from Continuing Operations | ($53,310) | $3,823 | ($289,596) | ($142,516) | | Loss from Discontinued Operations | ($14,771) | ($98,906) | ($122,169) | ($580,166) | | **Net Loss Attributable to Common Stockholders** | **($37,321)** | **($141,260)** | **($299,637)** | **($406,066)** | | Net Loss Per Share—Basic | ($0.06) | ($0.29) | ($0.51) | ($0.85) | [Consolidated Statements of Cash Flows](index=9&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Net cash from operations was positive, while significant investing outflows were funded by financing inflows Cash Flow Summary for Six Months Ended June 30 (in thousands) | Activity | 2022 | 2021 | | :--- | :--- | :--- | | Net cash provided by operating activities | $67,303 | $104,896 | | Net cash (used in) provided by investing activities | ($2,145,642) | $408,596 | | Net cash provided by (used in) financing activities | $760,345 | ($308,682) | | **Net (decrease) increase in cash** | **($1,320,409)** | **$211,115** | [Notes to Consolidated Financial Statements](index=13&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) Key disclosures cover the C-Corp transition, digital asset sales, significant acquisitions, and the Wafra stake redemption - The company completed its digital transformation in February 2022 by disposing of its non-digital businesses, now classified as **discontinued operations**[36](index=36&type=chunk)[48](index=48&type=chunk) - Effective for the 2022 taxable year, the company discontinued its REIT status and will operate as a **C-Corporation**[35](index=35&type=chunk)[84](index=84&type=chunk) - In May 2022, the company acquired Wafra's **31.5% interest** in the Digital IM business for **$388.5 million in cash**, **57.7 million shares**, and contingent payments[117](index=117&type=chunk)[118](index=118&type=chunk) - Significant H1 2022 acquisitions include four data centers for **$670 million** and a mobile tower business for **€740.1 million** ($791.3 million)[56](index=56&type=chunk)[57](index=57&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=61&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management details the company's strategic transition, segment performance, and key non-GAAP financial metrics - As of June 30, 2022, the company has **$48 billion** of assets under management (AUM), with Fee Earning Equity Under Management (FEEUM) increasing to **$19.0 billion**[203](index=203&type=chunk)[205](index=205&type=chunk)[219](index=219&type=chunk) - The company redeemed Wafra's **31.5% interest** in the Digital IM business, resulting in 100% of fee cash flows accruing to the company[212](index=212&type=chunk) - An agreement was made to acquire AMP Capital's infrastructure business, expected to add **$5.5 billion** in FEEUM upon closing[214](index=214&type=chunk)[220](index=220&type=chunk) Q2 2022 Non-GAAP Measures (Attributable to Operating Company, in thousands) | Measure | Amount | | :--- | :--- | | Distributable Earnings (DE) | $7,585 | | Adjusted EBITDA | $30,928 | | Digital IM FRE | $20,759 | [Quantitative and Qualitative Disclosures About Market Risk](index=72&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risks include interest rate, foreign currency, and equity price exposures - A hypothetical **100 basis point** increase in interest rates would increase annualized interest expense by **$2.4 million** attributable to the company[302](index=302&type=chunk) - Foreign currency risk is limited and generally mitigated through economic hedges like forward contracts[303](index=303&type=chunk)[305](index=305&type=chunk) - Incentive fees and carried interest are subject to market risk from fluctuations in underlying investment values[306](index=306&type=chunk) [Controls and Procedures](index=74&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of June 30, 2022 - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were **effective** as of June 30, 2022[310](index=310&type=chunk) - No material changes to internal control over financial reporting occurred during the quarter[311](index=311&type=chunk) [PART II. OTHER INFORMATION](index=75&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Legal Proceedings](index=75&type=section&id=Item%201.%20Legal%20Proceedings) The company was not involved in any material legal proceedings as of the reporting date - The Company was not involved in any **material legal proceedings** as of June 30, 2022[315](index=315&type=chunk) [Risk Factors](index=75&type=section&id=Item%201A.%20Risk%20Factors) No material changes were reported to the risk factors previously disclosed in the 2021 Form 10-K - No material changes from the risk factors previously disclosed in the 2021 Form 10-K and Q1 2022 Form 10-Q were reported[316](index=316&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=75&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company issued shares of class A common stock to Wafra and former employees during the quarter - On May 23, 2022, **57,741,599 shares** of class A common stock were issued to Wafra in connection with the redemption of its interest in the Digital IM business[317](index=317&type=chunk) - In Q2 2022, **400,000 shares** of class A common stock were issued to former employees in satisfaction of OP Unit redemption requests[317](index=317&type=chunk) [Defaults Upon Senior Securities](index=75&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) None reported [Mine Safety Disclosures](index=75&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) Not applicable [Other Information](index=75&type=section&id=Item%205.%20Other%20Information) None reported [Exhibits](index=75&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including key transaction agreements and certifications

Financial Data and Key Metrics Changes - Total consolidated revenues for Q2 2022 were $289 million, a 22% increase from the same period last year, driven by expansion in AUM and FEEUM [38] - GAAP net income attributable to common stockholders was a loss of $37 million, representing a $104 million increase compared to the same quarter of last year [38] - Total company adjusted EBITDA was $31 million, up from $15 million in the same period last year [38] - Digital AUM reached $48 billion, growing by 37% from $35 billion in the same period last year [39] Business Line Data and Key Metrics Changes - The Investment Management (IM) segment saw revenue and earnings growth driven by higher levels of fee-earning equity under management, with annualized fee revenues increasing from $94 million to $240 million [43] - The Digital Operating segment's consolidated adjusted EBITDA was $101 million, a 24% increase from the same period last year [41] - The IM revenue growth was impacted by one-time catch-up fees from last year, but excluding those, consolidated revenues increased by approximately 18% [40] Market Data and Key Metrics Changes - Bookings across global tower portfolios increased by 5% year-over-year, with fiber businesses seeing over a 28% increase [27] - Data center bookings experienced a 6x growth factor, indicating strong demand in that vertical [27] - The company reported a 128% year-over-year increase in the pipeline for data center leases that are in diligence or discussions [69] Company Strategy and Development Direction - The company aims to double its FEEUM from just under $25 billion to over $50 billion in the next three years, focusing on high-quality investments [9][10] - The strategic roadmap includes capital deployment in three areas: strategic digital M&A, capital structure optimization, and share purchases/dividends [13][16] - The company is transitioning to an asset-light model, which is expected to enhance earnings growth and scalability [19] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in executing their strategy despite macroeconomic challenges, highlighting the resilience of digital infrastructure demand [25] - The company anticipates continued strong performance in its portfolio companies, with positive growth across all core verticals [26] - Management noted that periods of economic downturn often present opportunities for growth and deeper customer relationships [21] Other Important Information - The company has achieved 2/3 of its fundraising goals for 2022 at the halfway point, indicating strong investor interest [32] - The recent recapitalization of DataBank is expected to create a permanent capital vehicle, enhancing growth prospects [29] - The company plans to reinitiate dividends in Q3, reflecting a commitment to returning value to shareholders [16] Q&A Session Summary Question: What is the outlook for the pipeline across digital infrastructure verticals given the macro environment? - Management reported a tremendous second quarter in terms of new bookings, with data center backlogs up over 128% year-over-year, indicating strong demand across verticals [69] Question: What is the update on M&A opportunities and private market valuations? - Management noted that valuations are coming down, with fiber deals moving from expected 22-24x to low to mid-teens, presenting opportunities for strategic acquisitions [72] Question: Which segments of digital infrastructure have the most pricing power going forward? - Management indicated that the data center sector has experienced the highest price increases, with prices per megawatt and rack rising by 10% to 20% [75] Question: What is the current carried interest split between shareholders and employees? - Management stated that the carried interest split is typically in the range of 60-40 to 70-30, and they are comfortable with this structure [82]