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DigitalBridge (DBRG) - 2024 Q3 - Earnings Call Transcript
DBRGDigitalBridge (DBRG)2024-11-01 16:17
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Financial Performance - DigitalBridge reported a 16% increase in fee revenue to 77millionanda4277 million and a 42% increase in fee-related earnings (FRE) to 26 million year-over-year, with FRE margins expanding to 34% [6][35][36] - The company raised 1.8billioninnewcapitalduringthethirdquarter,bringingtotalfee−earningequityundermanagementto1.8 billion in new capital during the third quarter, bringing total fee-earning equity under management to 34 billion, a 14% increase from the previous year [24][27] Capital Formation and Deployment - DigitalBridge is on track to exceed its 7billionannualfundraisingtarget,havingraised7 billion annual fundraising target, having raised 6.1 billion to date, with a strong pipeline expected to yield an additional 3billioninQ4[7][10][13]−Thecapitaldeploymentfocusisonexistingplatformsandnewopportunitiesindatacentersandtowerverticals,includingsignificantinvestmentsinDataBankandVerticalBridge[8][18][19]MarketandStrategicInsights−Thefundraisingenvironmentisimproving,drivenbyincreaseddemandfordigitalinfrastructureandAIcapabilities,withanotableuptickincommitmentsfrominvestors[12][15]−Thecompanyisexpandingitsprivatewealthchannel,expectingtoraiseover3 billion in Q4 [7][10][13] - The capital deployment focus is on existing platforms and new opportunities in data centers and tower verticals, including significant investments in DataBank and Vertical Bridge [8][18][19] Market and Strategic Insights - The fundraising environment is improving, driven by increased demand for digital infrastructure and AI capabilities, with a notable uptick in commitments from investors [12][15] - The company is expanding its private wealth channel, expecting to raise over 1 billion by year-end, which was not initially factored into the 2024 business plan [16][17] Management's Outlook - Management remains confident in the long-term growth strategy, aiming to double fee-earning equity under management in five years while expanding margins from the 30s to the mid-40s [48][50] - The company is focused on maintaining a strong balance sheet and liquidity position, with 127millioninavailablecorporatecashandtotalliquidityof127 million in available corporate cash and total liquidity of 427 million as of September 30 [40][41] Other Important Information - DigitalBridge is actively pursuing M&A opportunities, with recent transactions including the acquisition of Yondr and a significant deal with Verizon [20][86] - The company is committed to creating value at its portfolio companies and optimizing capital allocation to enhance returns [50][71] Q&A Session Summary Question: Concerns about fundraising outlook and composition - Management emphasized that co-investments are integral to their strategy and that fundraising is progressing well despite the current FRE results [52][55] Question: Carried interest reversal explanation - The carried interest reversal was attributed to portfolio evaluations aligning with preferred returns, with no significant individual drivers [58] Question: Impact of fundraising composition on catch-up fees - Approximately 10 million in catch-up fees have been realized year-to-date, with expectations that half will roll into 2025 due to the composition of capital raised [60][61] Question: Timing of carried interest recognition - Management indicated that carried interest is a significant part of their value proposition, with a focus on creating DPI and realizing carried interest at the right time [67][71] Question: M&A environment and pipeline - The company is actively pursuing acquisitions, with a robust pipeline of over 20 ideas and 10 billion in new opportunities [85][88]