Blue Owl Capital (OWL) - 2025 Q2 - Quarterly Report

PART I - FINANCIAL INFORMATION Item 1. Financial Statements The required financial statements are located in the F-pages of this report - The financial statements required by this item are located in the F-pages of the report[20] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's financial condition and results of operations, covering key metrics, business environment, and liquidity Overview GAAP Net Income declined to $17.4 million in Q2 2025, while non-GAAP Fee-Related and Distributable Earnings showed significant growth Key Financial Metrics (Q2 & H1 2025 vs. 2024) | (dollars in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Net Income Attributable to Blue Owl Capital Inc. | $17,426 | $33,945 | $24,856 | $59,036 | | Fee-Related Earnings (Non-GAAP) | $358,343 | $296,475 | $703,734 | $586,173 | | Distributable Earnings (Non-GAAP) | $323,014 | $272,965 | $585,530 | $513,064 | Assets Under Management Total Assets Under Management reached $284.1 billion, supported by a stable Permanent Capital base and a significant shadow AUM pipeline AUM and FPAUM by Platform (as of June 30, 2025) | Platform | AUM (billions) | FPAUM (billions) | | :--- | :--- | :--- | | Credit | $145.5 | $93.7 | | Real Assets | $71.5 | $45.4 | | GP Strategic Capital | $67.1 | $38.4 | | Total | $284.1 | $177.5 | - The company has $28.6 billion in AUM not yet paying fees, which is expected to generate an additional $379 million in annualized management fees once deployed or upon expiration of fee holidays[25][38] - Permanent Capital constitutes a significant portion of the asset base, generating approximately 86% of GAAP management fees over the last twelve months, enhancing earnings resiliency[28][41] Changes in AUM (Six Months Ended June 30, 2025) | (dollars in millions) | Beginning Balance | Acquisitions | New Capital Raised | Change in Debt | Distributions | Change in Value / Other | Ending Balance | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Credit | $135,710 | — | $9,803 | $4,421 | ($5,918) | $1,452 | $145,468 | | Real Assets | $49,374 | $14,206 | $7,952 | $142 | ($1,392) | $1,204 | $71,486 | | GP Strategic Capital | $66,035 | — | $1,003 | — | ($900) | $993 | $67,131 | | Total | $251,119 | $14,206 | $18,758 | $4,563 | ($8,210) | $3,649 | $284,085 | Changes in FPAUM (Six Months Ended June 30, 2025) | (dollars in millions) | Beginning Balance | Acquisitions | New Capital Raised / Deployed | Distributions | Change in Value / Other | Ending Balance | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Credit | $90,957 | — | $6,034 | ($4,753) | $1,446 | $93,684 | | Real Assets | $31,500 | $10,723 | $3,860 | ($1,333) | $616 | $45,366 | | GP Strategic Capital | $37,337 | — | $1,211 | ($235) | $119 | $38,432 | | Total | $159,794 | $10,723 | $11,105 | ($6,321) | $2,181 | $177,482 | Business Environment The company demonstrated earnings resiliency through its management-fee-centric model, achieving a record fundraising quarter despite market volatility - The company's business model, focused on management fees and Permanent Capital, demonstrated resiliency against market volatility and uncertainty in Q2 2025[27] - A record fundraising quarter brought in $13.9 billion of new capital, totaling $54.6 billion over the last twelve months[28] - Direct lending deployment was moderately active with $9.7 billion in originations during the quarter[30] - The Real Assets platform is financing the largest data center project in the U.S, highlighting robust deployment opportunities in the sector[31] Product Performance Performance metrics for select products across Credit, Real Assets, and GP Strategic Capital platforms show varied returns - Product performance information is not indicative of Blue Owl's corporate performance, and past performance does not guarantee future results[51] Select Credit Product Performance | (dollars in millions) | Year of Inception | Net MoIC | Net IRR | | :--- | :--- | :--- | :--- | | Blue Owl Capital Corporation | 2016 | 1.51x | 9.9% | | Blue Owl Credit Income Corp. | 2020 | 1.17x | 10.6% | | Blue Owl Technology Finance Corp. | 2018 | 1.18x | 9.0% | Select Real Assets Product Performance | (dollars in millions) | Year of Inception | Net MoIC | Net IRR | | :--- | :--- | :--- | :--- | | Blue Owl Real Estate Fund V | 2020 | 1.35x | 13.1% | | Blue Owl Digital Infrastructure Fund II | 2020 | 1.42x | 11.3% | Select GP Strategic Capital Product Performance | (dollars in millions) | Year of Inception | Net MoIC | Net IRR | | :--- | :--- | :--- | :--- | | Blue Owl GP Stakes III | 2015 | 2.94x | 22.5% | | Blue Owl GP Stakes IV | 2018 | 2.14x | 36.0% | | Blue Owl GP Stakes V | 2020 | 1.20x | 15.3% | GAAP Results of Operations Analysis Q2 2025 revenues grew to $703.1 million, but a significant rise in expenses led to a decrease in net income GAAP Results of Operations (Three Months Ended June 30) | (dollars in thousands) | 2025 | 2024 | $ Change | | :--- | :--- | :--- | :--- | | Total Revenues, Net | $703,106 | $549,848 | $153,258 | | Management fees, net | $623,369 | $465,754 | $157,615 | | Total Expenses | $603,824 | $377,295 | $226,529 | | Compensation and benefits | $326,300 | $227,103 | $99,197 | | General, administrative and other | $188,052 | $93,458 | $94,594 | | Income Before Income Taxes | $84,494 | $156,251 | ($71,757) | | Net Income Attributable to Blue Owl Capital Inc. | $17,426 | $33,945 | ($16,519) | - The increase in management fees for Q2 2025 was primarily driven by growth in the Credit platform (+$79.7M), Real Assets (+$63.2M, largely from the IPI Acquisition), and GP Strategic Capital (+$14.7M)[72] - The rise in Q2 2025 expenses was mainly due to a $56.9 million increase related to the Services Agreement from the IPI acquisition, higher compensation from growth, and increased amortization from recurring and acquisition-related equity grants[77] Non-GAAP Analysis Non-GAAP Fee-Related Earnings (FRE) and Distributable Earnings (DE) grew by 21% and 18% respectively in Q2 2025 Fee-Related and Distributable Earnings Summary (Three Months Ended June 30) | (dollars in thousands) | 2025 | 2024 | $ Change | | :--- | :--- | :--- | :--- | | FRE revenues | $646,050 | $520,006 | $126,044 | | FRE expenses | $277,801 | $213,875 | $63,926 | | Fee-Related Earnings (FRE) | $358,343 | $296,475 | $61,868 | | Distributable Earnings (DE) | $323,014 | $272,965 | $50,049 | FRE Revenues by Platform (Three Months Ended June 30) | (dollars in thousands) | 2025 | 2024 | $ Change | | :--- | :--- | :--- | :--- | | Credit Platform | $391,077 | $330,201 | $60,876 | | Real Assets Platform | $91,720 | $42,278 | $49,442 | | GP Strategic Capital Platform | $163,253 | $147,527 | $15,726 | | Total FRE Revenues | $646,050 | $520,006 | $126,044 | - The FRE Margin was 57% for Q2 2025, compared to 59% for Q2 2024[109] Liquidity and Capital Resources The company maintains a strong liquidity position with significant cash and revolver availability to cover its debt and dividend obligations - The company ended Q2 2025 with $117.6 million of cash and cash equivalents and approximately $0.9 billion available under its Revolving Credit Facility[111] - As of June 30, 2025, long-term debt consisted of approximately $2.5 billion in various Senior Notes and $780.0 million outstanding under the Revolving Credit Facility[113] - The company expects to pay approximately $1.7 billion under the Tax Receivable Agreement (TRA) over its lifetime, assuming sufficient taxable income is generated[115] - A quarterly dividend of $0.225 per Class A Share was declared for Q2 2025, consistent with the targeted annual dividend of $0.90 per share for fiscal year 2025[127] Critical Accounting Estimates Key accounting estimates involve the fair value of investments, liabilities like the TRA, and purchase price allocations for acquisitions - Key estimates include the fair value of investments in managed products, which is a primary input for calculating management fees for the Credit and some Real Assets products[142] - The valuation of the TRA liability, earnout liabilities, and a preferred equity investment are sensitive to assumptions like discount rates and expected future cash flows, and changes can materially impact GAAP results[144][145][146] - Accounting for business combinations requires significant judgment in allocating the purchase price to assets acquired and liabilities assumed, particularly intangible assets and goodwill[150][151] Quantitative and Qualitative Disclosures About Market Risk Primary market risks include the impact of investment fair value on management fees, interest rate risk, and credit risk concentration - The primary market risk is the effect of changes in the fair value of investments in managed products on management fee revenue, especially within the Credit platform[156] - Interest rate risk affects borrowings under the variable-rate Revolving Credit Facility and the valuation of both fixed-rate and variable-rate investments held by the company's products[157][158] - Credit risk is concentrated as the majority of cash balances are held with a single highly-rated financial institution, in amounts exceeding FDIC insured limits[159] Controls and Procedures Management concluded that disclosure controls and procedures were effective as of the quarter-end with no material changes - Management concluded that as of June 30, 2025, the company's disclosure controls and procedures were effective[161] - No changes occurred during the quarter ended June 30, 2025, that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[162] PART II - OTHER INFORMATION Legal Proceedings The company is not subject to any pending legal proceedings expected to have a material financial impact - The company is not currently a party to any pending legal proceedings that it expects to have a material impact on its financial statements[165] Risk Factors No material changes to the risk factors disclosed in the company's latest Annual Report have occurred - As of the report date, there have been no material changes to the risk factors previously disclosed in the company's Annual Report[166] Unregistered Sales of Equity Securities and Use of Proceeds The company issued 4.4 million Common Units for an acquisition and repurchased 114,228 shares for $1.7 million - In April and May 2025, the company issued a combined 4,417,921 Common Units and Class C Shares as partial consideration for the IPI Acquisition in unregistered private placements[167][168] Issuer Purchases of Equity Securities (Q2 2025) | Period | Total Number of Shares Purchased | Average Price Paid Per Share | Approximate Dollar Value of Shares that May Yet be Purchased | | :--- | :--- | :--- | :--- | | April 1-30, 2025 | 114,228 | $14.81 | $148,309 (in thousands) | | May 1-31, 2025 | — | — | — | | June 1-30, 2025 | — | — | — | | Total | 114,228 | | | Defaults Upon Senior Securities None reported - The company reports no defaults upon senior securities[172] Mine Safety Disclosures None reported - The company reports no mine safety disclosures[173] Other Information No directors or executive officers adopted or terminated Rule 10b5-1 trading plans during the quarter - No directors or executive officers adopted or terminated Rule 10b5-1 trading plans during the quarter[174] Exhibits This section lists all documents filed as part of the Form 10-Q - Refers to the Exhibit Index on the following page for a list of filed documents[174] Notes to Consolidated Financial Statements Note 1. Organization Blue Owl operates as a single-segment global alternative asset manager with a detailed corporate and capital structure - Blue Owl operates as a single reportable segment providing asset management services, with Co-CEOs as the Chief Operating Decision Makers[200] - On April 1, 2025, the company completed an internal reorganization where Blue Owl Capital Carry LP became a wholly owned subsidiary of Blue Owl Capital Holdings LP[202] - The company completed the acquisition of digital infrastructure fund manager IPI Partners, LLC on January 3, 2025[209] Note 3. Acquisitions, Goodwill and Intangible Assets, Net The IPI Acquisition added $923.8 million in goodwill, increasing total company goodwill to $5.62 billion IPI Acquisition Purchase Price Allocation | (dollars in thousands) | Amount | | :--- | :--- | | Total Consideration | $1,305,691 | | Equity consideration | $922,174 | | Cash consideration | $243,434 | | Earnout liability | $140,083 | | Net Identifiable Assets Acquired | $381,856 | | Goodwill | $923,835 | - The IPI business contributed $100.5 million in GAAP revenues for the six months ended June 30, 2025[236] Goodwill Roll-Forward (Six Months Ended June 30, 2025) | (dollars in thousands) | Amount | | :--- | :--- | | Beginning balance | $4,699,465 | | IPI Acquisition | $923,835 | | Atalaya Acquisition adjustment | $1,169 | | Ending Balance | $5,624,469 | Note 4. Investments and Fair Value Disclosures The company holds $485.9 million in investments, with the majority of fair value assets and liabilities classified as Level III Assets and Liabilities at Fair Value (June 30, 2025) | (dollars in thousands) | Level I | Level II | Level III | Total | | :--- | :--- | :--- | :--- | :--- | | Assets, at Fair Value | $— | $87,547 | $279,502 | $367,049 | | Preferred equity investment | $— | $— | $272,630 | $272,630 | | Liabilities, at Fair Value | $— | $— | $271,200 | $271,200 | | TRA liability | $— | $— | $99,502 | $99,502 | | Earnout liability | $— | $— | $171,698 | $171,698 | - The fair value of the preferred equity investment is determined using a discounted cash flow model with a discount rate of 14%, and is classified as Level III[257][266] Note 7. Debt Obligations, Net Total outstanding debt stands at $3.29 billion, comprising Senior Notes and borrowings on the Revolving Credit Facility Debt Obligations (as of June 30, 2025) | (dollars in thousands) | Outstanding Debt | Net Carrying Value | | :--- | :--- | :--- | | 2028 Notes | $59,800 | $58,968 | | 2031 Notes | $700,000 | $689,947 | | 2032 Notes | $400,000 | $393,816 | | 2034 Notes | $1,000,000 | $980,359 | | 2051 Notes | $350,000 | $338,529 | | Revolving Credit Facility | $780,000 | $780,000 | | Total | $3,289,800 | $3,241,619 | - Of the $780.0 million borrowed under the Revolving Credit Facility as of June 30, 2025, $400.0 million was repaid subsequent to quarter end[281] Note 9. Revenues The Credit platform is the largest revenue contributor, accounting for $832.5 million of the $1.39 billion total for H1 2025 Total GAAP Revenues by Platform (Six Months Ended June 30) | (dollars in thousands) | 2025 | 2024 | | :--- | :--- | :--- | | Credit Platform | $832,544 | $674,317 | | Real Assets Platform | $240,183 | $96,960 | | GP Strategic Capital Platform | $313,865 | $291,911 | | Total GAAP Revenues | $1,386,592 | $1,063,188 | Note 12. Earnings Per Share Diluted earnings per Class A share was $0.02 for Q2 2025 and for the six-month period ending June 30, 2025 Earnings Per Share (EPS) Reconciliation (Three Months Ended June 30, 2025) | (dollars in thousands, except per share) | Net Income | Weighted-Average Shares | EPS | | :--- | :--- | :--- | :--- | | Basic | $17,426 | 649,685,215 | $0.03 | | Effect of dilutive securities | ($4,800) | 6,370,821 | | | Diluted | $12,626 | 656,056,036 | $0.02 | Earnings Per Share (EPS) Reconciliation (Six Months Ended June 30, 2025) | (dollars in thousands, except per share) | Net Income | Weighted-Average Shares | EPS | | :--- | :--- | :--- | :--- | | Basic | $24,856 | 637,835,492 | $0.04 | | Effect of dilutive securities | ($10,496) | 9,504,619 | | | Diluted | $14,360 | 647,340,111 | $0.02 | Note 14. Subsequent Events Subsequent events include the declaration of a Q2 dividend and the enactment of new U.S. tax legislation - On July 31, 2025, the company declared a Q2 cash dividend of $0.225 per Class A Share[333] - New U.S. tax legislation was enacted on July 4, 2025, the impact of which is currently being evaluated and will be reflected in the third quarter[334]