DigitalBridge (US:DBRG)2023-05-04 16:00PART I. FINANCIAL INFORMATION This section provides the unaudited consolidated financial statements and management's discussion and analysis for the quarter ended March 31, 2023 Financial Statements This section presents the unaudited consolidated financial statements for DigitalBridge Group, Inc. for the quarterly period ended March 31, 2023 Consolidated Balance Sheets 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 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 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 acquired29 Notes to Consolidated Financial Statements 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 consideration3678 - 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 operation67 - 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 2023166169 - 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)5657 Management's Discussion and Analysis of Financial Condition and Results of Operations 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 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 FEEUM263 - Fully disposed of its investment in BrightSpire Capital, Inc. (BRSP) for approximately $202 million in net proceeds in Q1 2023266 - Recorded a $133 million non-cash fair value write-down on an unsecured promissory note from the 2022 sale of the Wellness Infrastructure business266272 - Repaid $200 million of convertible senior notes upon maturity in April 2023 using cash on hand262 Results of Operations 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 raises269275 - 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 II276 - Property operating income increased by $28.4 million, reflecting results from data center acquisitions and lease-ups during 2022279280 - Other loss of $142.7 million in Q1 2023 was driven by a $133.3 million write-down on a promissory note292 Non-GAAP Supplemental Financial Measures 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 performance307308309 Liquidity and Capital Resources 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 VFN314 - Key uses of funds in Q1 2023 were the InfraBridge acquisition ($313 million) and a contingent payment to Wafra ($90 million)320 - The company has unfunded commitments totaling $126 million to its sponsored funds as of March 31, 2023323 - Following the repayment of $200 million in notes in April 2023, outstanding corporate debt principal is $378.4 million321322 Quantitative and Qualitative Disclosures About Market Risk 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 rate367368 - 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 interests369 - Foreign currency exposure is limited to the UK-based InfraBridge operations and a single A$35 million equity investment364365 - 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 interests370 Controls and Procedures 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, 2023373 - No material changes to internal control over financial reporting occurred during the quarter ended March 31, 2023374 PART II. OTHER INFORMATION This section covers legal proceedings, risk factors, and details on unregistered sales of equity securities Legal Proceedings 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, 2023376 Risk Factors 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 reported377 Unregistered Sales of Equity Securities and Use of Proceeds 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 |