DigitalBridge (DBRG) - 2023 Q1 - Earnings Call Transcript

Financial Data and Key Metrics - Fee income increased by 36% year-over-year, driven by higher FEEUM on co-invest and the acquisition of InfraBridge [1] - Fee earning equity under management (FEEUM) increased by $8.9 billion or 47$28 billion [2] - Total consolidated revenues were $250 million, a 7$212 million, while adjusted EBITDA grew by 25% to $26 million [4] - Assets under management (AUM) grew by 49$69.3 billion [2] - Run rate fee revenues were $252 million, calculated by multiplying committed FEEUM by the weighted average effective annual fee rate [5] Business Line Performance - Investment management platform showed strong growth with fee income up 36$32 million for the quarter compared to $9 million in the same period last year [18] - The company's share of digital operating revenues was$27 million, down 25% year-over-year, while adjusted EBITDA was $12 million, down 23$11 million in fee income, representing less than two months of fees from the platform [18] Market Performance - The company raised $700 million in new capital formation in Q1, driven by co-investments in platforms like GD Towers, Switch, Highline do Brasil, and Vantage [2] - In Europe, the company plans to spend$2.7 billion on data centers, fiber, and edge infrastructure [47] - In Asia, the company is spending nearly $700 million on greenfield data centers and fiber networks [47] - The leasing pipeline for DataBank and Vantage in the US is up significantly year-over-year, with Switch's leasing pipeline growing from 57 megawatts to over 500 megawatts [12] Strategic Direction and Industry Competition - The company is focused on scaling FEEUM, which is the key metric driving revenue, earnings, and shareholder value [2] - DigitalBridge is executing a disciplined capital allocation strategy, with over$7 billion in growth CapEx budgeted for 2023 to support customer growth [9] - The company is focused on high-quality digital infrastructure platforms, avoiding investments in aging or legacy assets [39] - The company is leveraging its global presence and strong customer relationships to drive growth in digital infrastructure [48] Management Commentary on Operating Environment and Future Outlook - The company sees a "tale of two cities" in digital infrastructure, with high-quality platforms continuing to attract capital while out-of-favor companies underperform [7] - Management remains confident in achieving the 2023 fundraising target of $8 billion, with$2.3 billion in new commitments secured in recent months [7] - The company is optimistic about the deconsolidation of DataBank and Vantage SDC, which will simplify the corporate structure and reduce leverage [3] - Management highlighted the strong secular tailwinds in digital infrastructure, driven by global demand for connectivity and compute [21] Other Important Information - The company completed the sale of BrightSpire for $202 million, eliminating$7 million of dividend income but providing additional liquidity for high-quality digital infrastructure investments [4] - The company repaid $200 million of convertible notes in April, reducing corporate leverage to below 2.5x [5] - The company expects to complete the deconsolidation of its operating segments, leaving only$300 million of corporate debt, which is not expected to be repaid or refinanced until 2025 [5] Q&A Session Summary Question: Demand trends in the data center space - The leasing pipeline for DataBank, Vantage, and Switch is up significantly year-over-year, driven by demand from cloud players, mobile operators, and AI deployments [12] - Management emphasized the importance of secure workloads and 100% renewable energy environments, which are now a must-have for customers [12] Question: Long-term ambitions for Vantage - Vantage has three businesses: Asia, North America, and Europe, all showing strong growth and leasing demand [28] - The company has created permanent capital vehicles for Vantage SDC and Vantage Europe, aiming to recycle capital and provide stable cash flows to LPs [28] Question: Monetization plans for Vantage SDC - The company is in the process of raising new capital for Vantage SDC, with strong investor appetite for stabilized US data centers producing high yields [31] - The company expects to deconsolidate Vantage SDC soon, with a target of reducing its position to around $200 million [32] Question: Fundraising progress for DigitalBridge Partners Series - The company has received its first commitments for the new flagship strategy, with strong momentum in attracting new capital [65] - Management remains confident in achieving the$8 billion fundraising target for 2023, with $2 billion expected from core and credit,$2 billion from co-invest, and $4 billion from flagship strategies [79] Question: Valuation trends in digital infrastructure - High-quality digital infrastructure assets continue to trade at a premium, while legacy assets are underperforming [67] - The company is focused on investing in good businesses with strong cash flows and avoiding overvalued or poorly financed assets [22] Question: Capital allocation priorities - The company plans to use its liquidity for accretive M&A, paying down preferreds, and repurchasing stock at the right price [92] - Management emphasized the importance of maintaining a strong balance sheet and focusing on free cash flow and EPS growth [92]