DigitalBridge (DBRG) - 2023 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported total revenues of $477 million for Q3 2023, an 11% increase year-over-year [93] - Distributable earnings were $35 million or $0.20 per share, including $28 million of carried interest from the DataBank recapitalization [50] - Total assets under management (AUM) increased to $75 billion, a 48% growth from the same period last year, while fee-earning equity under management (FEEUM) rose to $30 billion, a 46% increase [50][65] Business Line Data and Key Metrics Changes - Monthly recurring revenue in the data center vertical increased by 20%, while towers grew by 6.6%, fiber by 10%, and small cells by 5.5% [71] - Fee income excluding incentive fees was $66 million, representing a 57% increase from the same period last year [74] - Investment management segment distributable earnings increased by 51% to $53 million, benefiting from carried interest recognized from the DataBank recapitalization [74] Market Data and Key Metrics Changes - The company is optimistic about the fundraising environment, having raised $2 billion since the last quarter, totaling $5.4 billion year-to-date [43][60] - The company is seeing a robust pipeline with over $30 billion in new investment ideas [6][10] - The demand for digital infrastructure continues to grow, particularly driven by AI workloads, with expectations of significant capital deployment in the data center sector [97][110] Company Strategy and Development Direction - The company is focusing on diversifying its investments, targeting 12 to 16 investments in its third fund, with a strong emphasis on North America and Asia [1] - There is a strategic interest in sectors such as data centers, wholesale fiber, private 5G networking, and small cells, particularly in relation to AI [2] - The company aims to simplify its capital structure and improve financial reporting, aligning with alternative asset management peers [69][75] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the fundraising environment despite a tough market, indicating strong interest in digital infrastructure [9][10] - The company is confident in achieving its fundraising goals for the year, driven by AI-related demand [62][64] - Management highlighted the importance of maintaining competitive advantages and generating long-term shareholder success [11][55] Other Important Information - The company completed the recapitalization of DataBank, generating a 32% internal rate of return for shareholders and simplifying its balance sheet by deconsolidating $2.3 billion of debt [41][67] - The company is actively exploring opportunities in residential fiber, particularly in under-penetrated markets [15][16] - The company is also focusing on the growth of its private credit business, which is expected to fill the gap left by traditional lenders [97][100] Q&A Session Summary Question: Observations on the depth of the debt capital markets for data centers - The company noted a significant demand for debt capital in the data center sector, estimating a $500 billion total addressable market for new financings over the next seven years [110] Question: Comments on small cells and outdoor small cells - Management indicated optimism due to increased bookings and demand from U.S. carriers, with expectations of significant growth in small cell deployments [20][25] Question: Insights on the M&A landscape and interest rates - The company observed a decline in private market multiples for fiber, particularly in residential fiber, while data center valuations remain strong for high-quality assets [27][28]