Bridge Investment (BRDG) - 2023 Q1 - Quarterly Report

Cautionary Note Regarding Forward-Looking Statements Nature of Forward-Looking Statements Forward-looking statements on operations, finance, and dividends are subject to risks causing actual results to differ - The report includes forward-looking statements regarding company operations, taxes, earnings, financial performance, and dividends, which are not historical facts[76] - Forward-looking statements are subject to known and unknown risks, assumptions, and uncertainties, which may cause actual results to differ materially from expectations[6][76] - The company does not plan to publicly update or revise any forward-looking statements[77] Certain Definitions Key Terms Defined Key terms like 'Company,' 'AUM,' and 'fee-earning AUM' are defined for consistent report understanding - 'We,' 'Company,' 'Bridge' refer to Bridge Investment Group Holdings Inc. and its subsidiaries (post-IPO), and the Operating Company and its subsidiaries (pre-IPO)[8] - 'Assets Under Management' (AUM) refers to assets managed by the company, calculated as the fair value of fund and vehicle assets plus uncalled capital commitments[8] - 'Fee-earning AUM' refers to assets from which the company earns management fees or other income[83] - 'Operating Company' refers to Bridge Investment Group Holdings LLC, a Delaware limited liability company[12] PART I. FINANCIAL INFORMATION Condensed Consolidated Balance Sheets Total assets increased to $1.37 billion, liabilities grew 43.6%, and equity decreased 0.7% as of March 31, 2023 Condensed Consolidated Balance Sheet Key Data | Metric | March 31, 2023 (in thousands) | December 31, 2022 (in thousands) | Change (Amount, in thousands) | Change (%) | | :--------------------------------- | :------------------------- | :-------------------------- | :-------------- | :--------- | | Total Assets | $1,371,936 | $1,154,835 | $217,101 | 18.8% | | Cash and cash equivalents | $77,508 | $183,576 | $(106,068) | -57.8% | | Other investments | $184,961 | $85,456 | $99,505 | 116.4% | | Accrued performance allocations | $447,698 | $554,723 | $(107,025) | -19.3% | | Intangible assets, net | $153,410 | $4,894 | $148,516 | 3034.7% | | Goodwill | $234,603 | $55,982 | $178,621 | 319.1% | | Total Liabilities | $730,339 | $508,516 | $221,823 | 43.6% | | Line of credit | $80,000 | $— | $80,000 | N/A | | Notes payable | $446,387 | $297,294 | $149,093 | 50.1% | | Total Shareholders' Equity | $641,597 | $646,319 | $(4,722) | -0.7% | Condensed Consolidated Statements of Operations The company reported a $67.4 million net loss for Q1 2023, a significant decline from prior year, driven by decreased revenue and investment losses Condensed Consolidated Statements of Operations Key Data | Metric | Three Months Ended March 31, 2023 (in thousands) | Three Months Ended March 31, 2022 (in thousands) | Change (Amount, in thousands) | Change (%) | | :--------------------------------- | :-------------------------------- | :-------------------------------- | :-------------- | :--------- | | Total Revenues | $91,448 | $104,134 | $(12,686) | -12.2% | | Fund management fees | $53,849 | $52,700 | $1,149 | 2.2% | | Transaction fees | $2,377 | $21,998 | $(19,621) | -89.2% | | Total Investment Income (Loss) | $(103,863) | $74,839 | $(178,702) | -238.8% | | Unrealized performance allocations | $(107,025) | $65,862 | $(172,887) | -262.5% | | Total Expenses | $61,656 | $75,938 | $(14,282) | -18.8% | | Unrealized performance allocations compensation | $(14,670) | $9,238 | $(23,908) | -258.8% | | (Loss) Income before income taxes | $(73,275) | $103,050 | $(176,325) | -171.1% | | Net (Loss) Income | $(67,431) | $97,505 | $(164,936) | -169.1% | | Net Income attributable to Bridge Investment Group Holdings Inc. | $2,034 | $9,772 | $(7,738) | -79.2% | | Basic EPS (Class A common stock) | $0.03 | $0.35 | $(0.32) | -91.4% | | Diluted EPS (Class A common stock) | $(0.13) | $0.35 | $(0.48) | -137.1% | Condensed Consolidated Statements of Comprehensive Income For Q1 2023, the company reported a total comprehensive loss of $67.3 million, a significant decline from prior year's income, primarily due to net loss Condensed Consolidated Statements of Comprehensive Income Key Data | Metric | Three Months Ended March 31, 2023 (in thousands) | Three Months Ended March 31, 2022 (in thousands) | Change (Amount, in thousands) | Change (%) | | :--------------------------------- | :-------------------------------- | :-------------------------------- | :-------------- | :--------- | | Net (loss) income | $(67,431) | $97,505 | $(164,936) | -169.1% | | Other comprehensive income (loss)—foreign currency translation adjustments, net of tax | $87 | $9 | $78 | 866.7% | | Total comprehensive (loss) income | $(67,344) | $97,514 | $(164,858) | -169.0% | | Comprehensive income attributable to Bridge Investment Group Holdings Inc. | $2,121 | $9,781 | $(7,660) | -78.3% | Condensed Consolidated Statements of Changes in Shareholders'/Members' Equity Total shareholders' equity decreased to $641.6 million by March 31, 2023, primarily due to net loss and distributions, partially offset by equity compensation Condensed Consolidated Shareholders'/Members' Equity Key Data | Metric | Balance as of December 31, 2022 (in thousands) | Balance as of March 31, 2023 (in thousands) | Change (Amount, in thousands) | Change (%) | | :--------------------------------- | :------------------------------ | :--------------------------- | :-------------- | :--------- | | Total Shareholders'/Members' Equity | $646,319 | $641,597 | $(4,722) | -0.7% | | Net income (loss) | $14,230 (Retained Earnings) | $10,723 (Retained Earnings) | $(3,507) | -24.6% | | Distributions | N/A | $(25,428) | N/A | N/A | | Dividends on Class A Common Stock/Units | N/A | $(5,541) | N/A | N/A | | Share-based compensation, net of forfeitures | N/A | $9,360 | N/A | N/A | Condensed Consolidated Statements of Cash Flows Net cash from operations significantly decreased to $12.8 million, investing activities used $316 million (Newbury acquisition), and financing provided $197.4 million (new debt) Condensed Consolidated Cash Flow Key Data | Metric | Three Months Ended March 31, 2023 (in thousands) | Three Months Ended March 31, 2022 (in thousands) | Change (Amount, in thousands) | Change (%) | | :--------------------------------- | :-------------------------------- | :-------------------------------- | :-------------- | :--------- | | Net cash provided by operating activities | $12,815 | $50,389 | $(37,574) | -74.6% | | Net cash (used in) provided by investing activities | $(315,996) | $75,954 | $(391,950) | -516.1% | | Net cash provided by (used in) financing activities | $197,373 | $(51,932) | $249,305 | 480.1% | | Net (decrease) increase in cash, cash equivalents, and restricted cash | $(105,808) | $74,411 | $(180,219) | -242.2% | | Cash paid for acquisition, net of cash acquired | $(319,364) | $(15,089) | $(304,275) | 2016.6% | | Proceeds from revolving line of credit | $150,000 | $— | $150,000 | N/A | | Borrowings on private notes | $150,000 | $— | $150,000 | N/A | Notes to Condensed Consolidated Financial Statements This section provides detailed notes to the condensed consolidated financial statements, covering organization, accounting policies, and specific financial items 1. ORGANIZATION Bridge Investment Group Holdings Inc. operates as an alternative investment manager, controlling the Operating Company and holding approximately 25% economic interest - Bridge Investment Group Holdings Inc. is a leading diversified alternative asset manager, achieving significant growth since its inception in 2009[34] - The company acts as the sole managing member of the Operating Company, indirectly operating and controlling it and all its direct and indirect subsidiaries[27][41] - As of March 31, 2023, the company held approximately 25% economic interest in the Operating Company[27] - The 2021 IPO involved a series of organizational transactions where interests in Contributed Bridge GPs were contributed to the Operating Company in exchange for LLC interests, leading to consolidation[39][40][101] 2. SIGNIFICANT ACCOUNTING POLICIES Financial statements are prepared under GAAP, consolidating controlled entities, with key estimates for investments, deferred taxes, and goodwill, and revenue recognized per ASC 606 - The company consolidates entities where it has a controlling financial interest, either as the primary beneficiary of a variable interest entity (VIE) or through a majority voting interest[43][44][106] - Management's estimates, particularly for investment valuations, deferred tax balances, and goodwill, may exhibit higher variability and volatility due to global market fluctuations, inflation, and rising interest rates[46][47][110] - Revenue is recognized based on distinct performance obligations, including fund management fees, property management and leasing fees, construction management fees, development fees, transaction fees, fund administration fees, insurance premiums, and other asset management and property income[62][133][134][126][64][135][65][136][66] - Performance allocations are accounted for as financial asset gains under ASC 323, recognized at fair value based on a hypothetical liquidation, and may be subject to reversal[68][69][117][139] - The company adopted ASU 2016-13 (credit losses) on January 1, 2023, using a modified retrospective transition method, with no material impact on the condensed consolidated financial statements[218] 3. REVENUE Total revenue decreased 12% to $91.4 million for Q1 2023, mainly due to an 89% drop in transaction fees, partially offset by growth in other fee types Revenue Details (by Product Category) | Revenue Type | Three Months Ended March 31, 2023 (in thousands) | Three Months Ended March 31, 2022 (in thousands) | Change (Amount, in thousands) | Change (%) | | :--------------------------------- | :-------------------------------- | :-------------------------------- | :-------------- | :--------- | | Total Revenues | $91,448 | $104,134 | $(12,686) | -12.2% | | Fund management fees | $53,849 | $52,700 | $1,149 | 2.2% | | Property management and leasing fees | $19,899 | $18,279 | $1,620 | 8.9% | | Construction management fees | $3,285 | $1,887 | $1,398 | 74.1% | | Development fees | $335 | $1,259 | $(924) | -73.4% | | Transaction fees | $2,377 | $21,998 | $(19,621) | -89.2% | | Fund administration fees | $4,177 | $3,640 | $537 | 14.7% | | Insurance premiums | $4,729 | $2,416 | $2,313 | 95.7% | | Other asset management and property income | $2,797 | $1,955 | $842 | 43.1% | - As of March 31, 2023, deferred revenue was $16.6 million, of which $3.2 million was recognized as revenue during the quarter[259] 4. MARKETABLE SECURITIES Marketable securities decreased 13% to $12.7 million as of March 31, 2023, reported at fair value and primarily comprising mutual and exchange-traded funds Marketable Securities Fair Value | Metric | March 31, 2023 (in thousands) | December 31, 2022 (in thousands) | Change (Amount, in thousands) | Change (%) | | :------------------------- | :------------- | :---------------- | :-------------- | :--------- | | Total marketable securities | $12,717 | $14,614 | $(1,897) | -13.0% | | Common shares in publicly traded company | $108 | $86 | $22 | 25.6% | | Exchange traded funds | $1,860 | $2,117 | $(257) | -12.1% | | Mutual funds | $10,749 | $12,411 | $(1,662) | -13.4% | 5. INVESTMENTS Other investments significantly increased to $185 million, while accrued performance allocations decreased 19.3% to $447.7 million, resulting in a $102.4 million loss for Q1 2023 Investment Portfolio Key Data | Metric | March 31, 2023 (in thousands) | December 31, 2022 (in thousands) | Change (Amount, in thousands) | Change (%) | | :--------------------------------- | :------------- | :---------------- | :-------------- | :--------- | | Accrued performance allocations | $447,698 | $554,723 | $(107,025) | -19.3% | | Partnership interests | $174,250 | $77,087 | $97,163 | 126.0% | | Other investments | $10,711 | $8,369 | $2,342 | 28.0% | - For the three months ended March 31, 2023, the company recognized a $102.4 million loss from accrued performance allocations and other investments, compared to a $75.2 million gain in the prior year period[236] - The fair value of accrued performance allocations is reported with a three-month lag[263] 6. NOTES RECEIVABLES FROM AFFILIATES Notes receivable from affiliates decreased 11.6% to $59.4 million, including short-term notes and employee notes, with short-term notes bearing a 4.88% weighted-average interest rate Notes Receivable from Affiliates | Metric | March 31, 2023 (in thousands) | December 31, 2022 (in thousands) | Change (Amount, in thousands) | Change (%) | | :--------------------------------- | :------------- | :---------------- | :-------------- | :--------- | | Total notes receivable from affiliates | $59,432 | $67,244 | $(7,812) | -11.6% | | Short-term notes receivables from affiliates | $55,019 | $63,066 | $(8,047) | -12.8% | | Notes receivables from employees | $4,413 | $4,178 | $235 | 5.6% | - As of March 31, 2023, short-term notes receivable from affiliates had a weighted-average fixed interest rate of 4.88%[265] 7. FAIR VALUE MEASUREMENTS Total assets measured at fair value were $645.4 million, with $12.7 million in Level 1, $10.7 million in Level 3, and $621.9 million measured at NAV as of March 31, 2023 Assets and Liabilities Measured at Fair Value | Metric | March 31, 2023 (in thousands) | December 31, 2022 (in thousands) | Change (Amount, in thousands) | Change (%) | | :--------------------------------- | :------------- | :---------------- | :-------------- | :--------- | | Total assets at fair value | $645,376 | $654,793 | $(9,417) | -1.4% | | Level 1 Assets | $12,717 | $14,614 | $(1,897) | -13.0% | | Level 3 Assets | $10,711 | $8,369 | $2,342 | 28.0% | | Measured at NAV Assets | $621,948 | $631,810 | $(9,862) | -1.6% | | General Partner Notes Payable (Measured at NAV) | $7,690 | $8,633 | $(943) | -10.9% | - Accrued performance allocations and partnership interests typically use the net asset value (NAV) per share calculated by investment managers as a practical expedient for determining fair value[267] 8. BUSINESS COMBINATION AND GOODWILL The Newbury Partners LLC acquisition for $320.1 million cash resulted in $178.6 million goodwill and significant intangible assets, following the 2022 GBC acquisition - Newbury acquisition (March 31, 2023)[272] Newbury Acquisition Key Data | Metric | Amount (in thousands) | | :--------------------------------- | :-------------------- | | Total consideration | $320,100 | | Goodwill recognized | $178,622 | | Management contracts acquired | $98,000 | | Client relationships acquired | $48,000 | | Trade name acquired | $3,000 | | Transaction costs expensed | $3,500 | - GBC acquisition (January 31, 2022)[253] GBC Acquisition Key Data | Metric | Amount (in thousands) | | :--------------------------------- | :-------------------- | | Total consideration | $30,019 | | Goodwill recognized | $46,152 | | Intangible assets acquired (in place contracts) | $3,195 | | Intangible assets acquired (trade name) | $150 | 9. INSURANCE LOSS RESERVES AND LOSS AND LOSS ADJUSTMENT EXPENSES Insurance loss reserves increased to $9.8 million as of March 31, 2023, based on estimated settlement costs for reported and unreported claims, with BIGRM providing various insurance policies - As of March 31, 2023, insurance loss reserves were $9.8 million, an increase from $9.4 million as of December 31, 2022[300] - BIGRM provides insurance policies for lease deposit fulfillment, landlord legal liability, workers' compensation deductibles, property deductibles, and general liability deductible reimbursements[299] 10. SELF-INSURANCE RESERVES Total self-insurance reserves increased to $4.1 million as of March 31, 2023, comprising $1.6 million for general liability SIR and $2.5 million for medical self-insurance - As of March 31, 2023, total self-insurance reserves were $4.1 million, an increase from $3.5 million as of December 31, 2022[303] - As of March 31, 2023, general liability SIR reserves were $1.6 million, an increase from $1.1 million as of December 31, 2022[282] - As of March 31, 2023, medical self-insurance reserves were $2.5 million, an increase from $2.3 million as of December 31, 2022[301] 11. GENERAL PARTNER NOTES PAYABLE General Partner Notes Payable decreased to $7.69 million as of March 31, 2023, with the company electing fair value option for these notes, recording changes in unrealized gains/losses General Partner Notes Payable | Fund | Commitment (in thousands) | March 31, 2023 (in thousands) | December 31, 2022 (in thousands) | Change (Amount, in thousands) | Change (%) | | :-------------------------- | :--------- | :------------- | :---------------- | :-------------- | :--------- | | Bridge Seniors Housing Fund I | $4,775 | $3,946 | $4,319 | $(373) | -8.6% | | Bridge Multifamily Fund III | $9,300 | $3,744 | $4,314 | $(570) | -13.2% | | Total | $14,075 | $7,690 | $8,633 | $(943) | -10.9% | - The company has elected the fair value option for General Partner Notes Payable, with changes in value recorded in unrealized gains and losses[284] 12. LINE OF CREDIT The credit line's total revolving commitment increased to $225 million, with an $80 million outstanding balance at a 6.56% weighted-average interest rate as of March 31, 2023 - The total revolving commitment increased to $225 million[307] - The variable interest rate was increased by 15 basis points, and the quarterly unused commitment fee increased to 0.25%[307] - As of March 31, 2023, the outstanding balance on the line of credit was $80 million, with a weighted-average interest rate of 6.56%[308] - As of March 31, 2023, the company was in full compliance with all debt covenants[308] 13. NOTES PAYABLE Notes payable increased to $446.4 million as of March 31, 2023, primarily due to the issuance of $150 million in 2023 private notes, with the company fully compliant with debt covenants - Private notes net carrying value: $446.4 million as of March 31, 2023, an increase from $297.3 million as of December 31, 2022[311] - $150 million in 2023 private notes were issued (two tranches: $120 million at 6.0% interest due 2030; $30 million at 6.1% interest due 2033)[310] - Interest expense was $3.4 million for the three months ended March 31, 2023, compared to $1.5 million for the same period in 2022[313] - As of March 31, 2023, the company was in full compliance with all debt covenants[311] 14. REALIZED AND UNREALIZED GAINS (LOSSES) Total realized and unrealized gains (losses) increased to $1.4 million for Q1 2023, driven by $2.16 million in unrealized gains, partially offset by $0.73 million in realized losses Realized and Unrealized Gains (Losses) | Metric | Three Months Ended March 31, 2023 (in thousands) | Three Months Ended March 31, 2022 (in thousands) | Change (Amount, in thousands) | Change (%) | | :--------------------------------- | :-------------------------------- | :-------------------------------- | :-------------- | :--------- | | Total realized and unrealized gains (losses) | $1,436 | $495 | $941 | 190.1% | | Net Realized Gains (Losses) | $(728) | $(101) | $(627) | 620.8% | | Net Unrealized Gains (Losses) | $2,164 | $596 | $1,568 | 263.1% | 15. INCOME TAXES The effective tax rate for Q1 2023 was (9)%, fluctuating due to non-controlling interest income allocation, with deferred tax assets at $54.1 million and TRA liabilities at $52.1 million - Effective tax rate: (9)% for Q1 2023, compared to 5% for Q1 2022[328] - As of March 31, 2023, deferred income tax assets were $54.1 million, compared to $53.9 million as of December 31, 2022[293] - As of March 31, 2023, TRA liabilities were $52.1 million, compared to $52.0 million as of December 31, 2022[293] - As of March 31, 2023, the company had no unrecognized tax positions[318] 16. SHAREHOLDERS' EQUITY As of March 31, 2023, 32.7 million Class A and 85.3 million Class B common shares were outstanding, with a $0.17 dividend per Class A share paid for the quarter Outstanding Common Stock | Metric | March 31, 2023 | December 31, 2022 | Change (Amount) | Change (%) | | :--------------------------------- | :------------- | :---------------- | :-------------- | :--------- | | Class A common stock outstanding | 32,686,835 | 29,488,521 | 3,198,314 | 10.8% | | Class B common stock outstanding | 85,301,127 | 85,301,127 | 0 | 0.0% | Class A Common Stock Dividends | Dividend Details | March 10, 2023 | March 11, 2022 | Change (Amount, in thousands) | Change (%) | | :--------------------------------- | :------------- | :------------- | :-------------- | :--------- | | Dividend per Share of Common Stock | $0.17 | $0.21 | $(0.04) | -19.0% | | Dividend to Common Stockholders | $5,541 | $5,917 | $(376) | -6.4% | - On January 1, 2023, 2020 profits interest awards converted into 801,927 shares of Class A common stock and 2,025,953 Class A units[333] - As of March 31, 2023, the company is the sole managing member of the Operating Company, owning 32,686,835 Class A units (representing 25%) and 97,463,981 Class B units (representing 100%) of the Operating Company[341] 17. COMMITMENTS AND CONTINGENCIES Operating lease liabilities totaled $15.4 million with a 4.0-year weighted-average remaining term, and potential performance income clawback is $178 million, deemed unlikely by management Operating Lease Liabilities | Metric | March 31, 2023 (in thousands) | December 31, 2022 (in thousands) | Change (Amount, in thousands) | Change (%) | | :--------------------------------- | :------------- | :---------------- | :-------------- | :--------- | | Total operating lease liabilities | $15,415 | $17,490 | $(2,075) | -11.9% | | Weighted-average remaining lease term | 4.0 years | 4.2 years | -0.2 years | -4.8% | - The amount of performance income that general partners might have to repay (net of tax distributions) is approximately $178 million if all existing investments became worthless, a possibility management considers remote[345] - As of March 31, 2023, the company had guaranteed $6.8 million in letters of credit for property self-insurance programs and $0.4 million for operating leases[347] 18. VARIABLE INTEREST ENTITIES Consolidated VIEs had total assets of $1.31 billion and liabilities of $677.9 million as of March 31, 2023, with maximum loss exposure for unconsolidated funds limited to $174.3 million - As of March 31, 2023, consolidated VIEs had total assets of $1.31 billion, an increase from $1.10 billion as of December 31, 2022[358] - As of March 31, 2023, consolidated VIEs had total liabilities of $677.9 million, an increase from $455.6 million as of December 31, 2022[358] - The company's maximum loss exposure for unconsolidated private equity funds is limited to the carrying value of its investments, which was $174.3 million as of March 31, 2023, an increase from $77.1 million as of December 31, 2022[351] 19. RELATED PARTY TRANSACTIONS Most revenue is from related parties, with $61.2 million in receivables and $59.4 million in notes receivable from affiliates, and $52 million owed for TRA liabilities as of March 31, 2023 Related Party Transactions Key Data | Metric | March 31, 2023 (in thousands) | December 31, 2022 (in thousands) | Change (Amount, in thousands) | Change (%) | | :--------------------------------- | :------------- | :---------------- | :-------------- | :--------- | | Total receivables from affiliates | $61,188 | $53,804 | $7,384 | 13.7% | | Notes receivables from affiliates | $59,432 | $67,244 | $(7,812) | -11.6% | | Due to affiliates (TRA) | $52,000 | $52,000 | $0 | 0.0% | 20. SHARE-BASED COMPENSATION AND PROFITS INTERESTS Unrecognized compensation cost for unvested restricted stock, RSUs, and profits interests totaled $89 million, with $9.4 million in share-based compensation expense for the quarter Share-Based Compensation Expense | Metric | Three Months Ended March 31, 2023 (in thousands) | Three Months Ended March 31, 2022 (in thousands) | Change (Amount, in thousands) | Change (%) | | :--------------------------------- | :-------------------------------- | :-------------------------------- | :-------------- | :--------- | | Total share-based compensation expense | $9,360 | $7,266 | $2,094 | 28.8% | - As of March 31, 2023, total unrecognized compensation cost for all unvested restricted stock and RSU awards was $82.6 million, expected to be recognized over a weighted-average period of 2.3 years[368] - As of March 31, 2023, total unrecognized compensation cost for all unvested profits interest awards was $6.4 million, expected to be recognized over a weighted-average period of 1.5 years[370] - As of March 31, 2023, 4,346,353 shares were available for future grants under the 2021 Incentive Plan[361] 21. (LOSS) EARNINGS PER SHARE Basic EPS for Class A common stock was $0.03, down from $0.35 last year, and diluted EPS was a $0.13 loss, reflecting the net loss attributable to Bridge Investment Group Holdings Inc. Earnings Per Share Key Data | Metric | Three Months Ended March 31, 2023 (in thousands) | Three Months Ended March 31, 2022 (in thousands) | Change (Amount, in thousands) | Change (%) | | :--------------------------------- | :-------------------------------- | :-------------------------------- | :-------------- | :--------- | | Net income available to Class A common shareholders - basic | $728 | $8,014 | $(7,286) | -90.9% | | Basic EPS (Class A common stock) | $0.03 | $0.35 | $(0.32) | -91.4% | | Diluted EPS (Class A common stock) | $(0.13) | $0.35 | $(0.48) | -137.1% | | Weighted-average shares of Class A common stock outstanding - basic | 25,068,319 | 23,138,030 | 1,930,289 | 8.3% | | Weighted-average shares of Class A common stock outstanding - diluted | 123,881,500 | 23,138,030 | 100,743,470 | 435.4% | 22. SUBSEQUENT EVENTS No subsequent events requiring recognition or disclosure occurred Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Overview Bridge Investment Group, a leading alternative investment manager, had $48.8 billion AUM as of March 31, 2023, diversified across specialized asset classes, with Newbury acquisition completed - As of March 31, 2023, Assets Under Management (AUM) were approximately $48.8 billion, including the acquisition of Newbury Partners[387] - The company's business is diversified across specialized asset classes including multifamily, workforce and affordable housing, seniors housing, single-family rental, development, net lease, logistics, debt strategies, agency mortgage-backed securities, office, real estate tech, renewable energy, and secondaries[387] - Future performance is highly dependent on attracting new capital, generating strong and consistent returns, identifying investments with attractive risk-adjusted returns, and offering compelling investment products to a growing investor base[389] - The Newbury acquisition was completed on March 31, 2023, for a total cash consideration of $320.1 million[399] Key Financial Measures This section details the company's diverse revenue streams, including various management fees and performance fees, and explains expense categories, highlighting market impact on performance allocations - Revenue sources include fund management fees (based on committed capital, invested capital, or net asset value), property management and leasing fees (typically 2.5% to 5% of managed property cash collections), construction management fees (typically 0.5% to 5.0% of construction costs), development fees, transaction fees (typically 0.5% to 1.0% of gross acquisition cost or total development budget), fund administration fees, insurance premiums, and other asset management and property income[418][402][404][419][405][406][420] - Performance fees include incentive fees (calculated as a percentage of profits from specific accounts, subject to minimum return hurdles) and performance allocations (typically 15% to 20% of a fund's cumulative performance, subject to minimum return hurdles)[421][422][407][409] - Performance allocations are recognized based on fund governing documents as the amount payable to the company upon a hypothetical liquidation at current investment fair values, and may be subject to reversal due to declines in cumulative returns[409] - Expenses include employee compensation and benefits (salaries, bonuses, share-based compensation), performance allocations compensation (up to 60% of performance allocation revenue), loss and loss adjustment expenses, third-party operating expenses, general and administrative expenses, and depreciation and amortization[423][412][413][414][424][431] Operating Metrics Total AUM grew 25.6% to $48.8 billion, and fee-earning AUM increased 51.2% to $22.2 billion by March 31, 2023, including $5.2 billion from the Newbury acquisition Assets Under Management (AUM) and Fee-Earning AUM | Metric | March 31, 2023 (in millions) | March 31, 2022 (in millions) | Change (Amount, in millions) | Change (%) | | :--------------------------------- | :------------- | :------------- | :-------------- | :--------- | | AUM as of end of period | $48,805 | $38,847 | $9,958 | 25.6% | | New capital / commitments raised | $5,862 | $1,101 | $4,761 | 432.4% | | Fee-earning AUM as of end of period | $22,168 | $14,657 | $7,511 | 51.2% | | Fee-earning AUM increase (capital raised/deployment) | $4,970 | $1,565 | $3,405 | 217.6% | - Q1 2023 AUM growth includes $5.2 billion from the Newbury acquisition[446] - Undrawn capital: $4.4 billion available, of which $3.2 billion is currently fee-earning[452] - The company's closed-end funds have a historical investment return track record rated in the top quartile by Preqin Ltd[475] Revenues Total revenue decreased 12% to $91.4 million for Q1 2023, primarily due to an 89% drop in transaction fees, partially offset by growth in construction management and insurance fees Revenue Details (by Product Category) | Revenue Type | Three Months Ended March 31, 2023 (in thousands) | Three Months Ended March 31, 2022 (in thousands) | Change (Amount, in thousands) | Change (%) | | :--------------------------------- | :-------------------------------- | :-------------------------------- | :-------------- | :--------- | | Total Revenues | $91,448 | $104,134 | $(12,686) | -12.2% | | Fund management fees | $53,849 | $52,700 | $1,149 | 2.2% | | Property management and leasing fees | $19,899 | $18,279 | $1,620 | 8.9% | | Construction management fees | $3,285 | $1,887 | $1,398 | 74.1% | | Development fees | $335 | $1,259 | $(924) | -73.4% | | Transaction fees | $2,377 | $21,998 | $(19,621) | -89.2% | | Fund administration fees | $4,177 | $3,640 | $537 | 14.7% | | Insurance premiums | $4,729 | $2,416 | $2,313 | 95.7% | | Other asset management and property income | $2,797 | $1,955 | $842 | 43.1% | - One-time catch-up fees within fund management fees decreased from $8.4 million in Q1 2022 to $2.7 million in Q1 2023[460] Expenses Total expenses decreased 19% to $61.7 million for Q1 2023, mainly due to a 259% drop in unrealized performance allocations compensation, despite increases in employee and G&A expenses Expense Details | Expense Type | Three Months Ended March 31, 2023 (in thousands) | Three Months Ended March 31, 2022 (in thousands) | Change (Amount, in thousands) | Change (%) | | :--------------------------------- | :-------------------------------- | :-------------------------------- | :-------------- | :--------- | | Total Expenses | $61,656 | $75,938 | $(14,282) | -18.8% | | Employee compensation and benefits | $51,178 | $47,480 | $3,698 | 7.8% | | Unrealized performance allocations compensation | $(14,670) | $9,238 | $(23,908) | -258.8% | | Loss and loss adjustment expenses | $2,320 | $1,751 | $569 | 32.5% | | General and administrative expenses | $13,893 | $9,508 | $4,385 | 46.1% | | Depreciation and amortization | $1,093 | $633 | $460 | 72.7% | - General and administrative expenses include $3.5 million in transaction costs related to the Newbury acquisition and $0.6 million in corporate office lease termination costs[484] Other Income (Expense) Total other income significantly increased to $0.8 million for Q1 2023, driven by higher net realized/unrealized gains and interest income, partially offset by increased interest expense Other Income (Expense) Details | Metric | Three Months Ended March 31, 2023 (in thousands) | Three Months Ended March 31, 2022 (in thousands) | Change (Amount, in thousands) | Change (%) | | :--------------------------------- | :-------------------------------- | :-------------------------------- | :-------------- | :--------- | | Total other income | $796 | $15 | $781 | 5206.7% | | Realized and unrealized gains (losses), net | $1,487 | $427 | $1,060 | 248.2% | | Interest income | $3,454 | $1,209 | $2,245 | 185.7% | | Interest expense | $(4,145) | $(1,621) | $(2,524) | 155.7% | Non-GAAP Financial Measures Total Fee Related Earnings decreased 32% to $30.9 million, and Distributable Earnings decreased 30% to $33.4 million for Q1 2023, primarily due to reduced fee-related revenue and performance allocations Non-GAAP Financial Measures | Metric | Three Months Ended March 31, 2023 (in thousands) | Three Months Ended March 31, 2022 (in thousands) | Change (Amount, in thousands) | Change (%) | | :--------------------------------- | :-------------------------------- | :-------------------------------- | :-------------- | :--------- | | Total Fee Related Earnings to the Operating Company | $30,872 | $45,362 | $(14,490) | -32.0% | | Distributable Earnings attributable to the Operating Company | $33,395 | $47,900 | $(14,505) | -30.3% | | Total fee related revenues | $66,778 | $84,491 | $(17,713) | -21.0% | | Transaction fees (component of Fee Related Revenues) | $2,377 | $21,998 | $(19,621) | -89.2% | | Net realized performance allocations and incentive fees (net of compensation) | $1,430 | $8,377 | $(6,947) | -82.9% | - Fee Related Earnings (FRE) and Distributable Earnings (DE) are non-GAAP measures used to assess the company's ability to generate profits from fee-based revenues and core operating performance[470][487] Liquidity and Capital Resources Net cash from operations significantly decreased to $12.8 million, investing activities used $316 million (Newbury acquisition), and financing provided $197.4 million (new debt) for Q1 2023 Cash Flow Summary | Cash Flow Activity | Three Months Ended March 31, 2023 (in thousands) | Three Months Ended March 31, 2022 (in thousands) | Change (Amount, in thousands) | Change (%) | | :--------------------------------- | :-------------------------------- | :-------------------------------- | :-------------- | :--------- | | Net cash provided by operating activities | $12,815 | $50,389 | $(37,574) | -74.6% | | Net cash (used in) provided by investing activities | $(315,996) | $75,954 | $(391,950) | -516.1% | | Net cash provided by (used in) financing activities | $197,373 | $(51,932) | $249,305 | 480.1% | - Cash paid for Newbury acquisition: $319.4 million[494] - Proceeds from 2023 private notes: $150 million[495] - Net draws on line of credit: $80 million[495] - As of March 31, 2023, the company was in full compliance with all debt covenants[499] Critical Accounting Estimates No significant changes occurred in critical accounting estimates for the quarter ended March 31, 2023 - No significant changes occurred in critical accounting estimates for the quarter ended March 31, 2023[192] Recent Accounting Pronouncements The company adopted ASU 2016-13 on January 1, 2023, with no significant impact on condensed consolidated financial statements - The company adopted ASU 2016-13 on January 1, 2023[218] - The adoption of ASU 2016-13 had no material impact on the condensed consolidated financial statements[218] JOBS Act The company operates as an emerging growth company under the JOBS Act, utilizing extended transition periods for new accounting standards and other exemptions - The company is an emerging growth company under the JOBS Act[501] - The company has elected to use the extended transition period for complying with new or revised accounting standards and relies on other exemptions provided by the JOBS Act, including not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act[193] Market Risk The company faces market, interest rate, credit, liquidity, and foreign exchange risks, though management fee revenue is not significantly impacted by investment value changes - The company faces market risk, interest rate risk, credit and counterparty risk, liquidity risk, and foreign currency exchange rate risk[502] - Management and advisory fee revenues are not significantly impacted by changes in investment values, as they are generally based on committed or invested capital[530] - Interest rate risk is limited as the company holds cash in non-interest-bearing and interest-bearing accounts, and its line of credit has a variable interest rate[503] - Foreign currency exchange rate fluctuations are not expected to have a material impact on the financial statements[505] Controls and Procedures Management deems disclosure controls and procedures effective as of March 31, 2023, with no material changes to internal financial reporting controls during the quarter - As of March 31, 2023, disclosure controls and procedures are considered effective at a reasonable assurance level[506] - No material changes occurred in internal control over financial reporting during the three months ended March 31, 2023[533] PART II. OTHER INFORMATION Item 1. Legal Proceedings The company does not believe any legal proceedings will have a material adverse effect on its business, financial condition, or results of operations - The company does not believe any legal proceedings will have a material adverse effect on its business, consolidated financial condition, or results of operations[534] Item 1A. Risk Factors No material changes occurred in risk factors compared to those disclosed in the Form 10-K annual report as of December 31, 2022 - No material changes occurred in risk factors compared to those disclosed in the Form 10-K annual report as of December 31, 2022[508] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds No unregistered equity securities were sold during Q1 2023, other than previously disclosed - No unregistered equity securities were sold during Q1 2023[172][535] Item 3. Defaults Upon Senior Securities No defaults upon senior securities occurred - No defaults upon senior securities occurred[536] Item 4. Mine Safety Disclosures Not applicable Item 5. Other Information None Item 6. Exhibits The report includes a list of filed exhibits, such as asset purchase agreements and certifications SIGNATURES This report has been duly signed by the Chief Executive Officer and Chief Financial Officer