What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-08-08 compared with 2024-05-03 · 141 added, 127 removed, 347 unchanged (44% of the section changed)

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Our diverse global investor base includes public and private pensions, sovereign wealth funds, asset managers, insurance companies, and endowments.

At March 31, 2024, we had $33 billion of fee earning equity under management ("FEEUM").

At June 30, 2024, we had $32.7 billion of fee earning equity under management ("FEEUM").

We are headquartered in Boca Raton, Florida, with key offices in New York, Los Angeles, London, Luxembourg and Singapore, and have approximately 300 employees.

We operate as a taxable C Corporation and conduct substantially all of our activities and hold substantially all of our assets and liabilities through our Operating Company.

At March 31, 2024, we owned 93% of the Operating Company as its sole managing member.

At June 30, 2024, we owned 93% of the Operating Company as its sole managing member.

Our Investment Management Platform

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• Our DBP series of funds focus on value-add digital infrastructure, investing in and building businesses across the digital infrastructure sector.

• Core Equity invests in digital infrastructure businesses and assets with long-duration cash flow profiles, primarily in more developed geographies (the Strategic Assets Fund, or "SAF").

• Core Equity invests in digital infrastructure businesses and assets with long-duration cash flow profiles, primarily in more developed geographies ("SAF").

• DigitalBridge Credit is our private credit strategy that delivers credit solutions to corporate borrowers in the digital infrastructure sector globally through credit financing products such as first and second lien term loans, mezzanine debt, preferred equity and construction/delay-draw loans, among other products.

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Capital Raise

• In 2024 through April 2024, we have raised $1.14 billion of capital, primarily $0.5 billion for DigitalBridge Partners III ("DBP III"), the third series in our flagship value-add strategy, and $0.3 billion for the second series of our credit strategy.

To date, total third party capital raised for DBP III stands at $3.2 billion.

• As of the end of April 2024, we have further reduced our leverage with full exchange/redemption of our remaining $78.4 million of 5.75% senior notes, which will result in annual interest savings of approximately $4.5 million.

• In the year to-date period through July 2024, we have raised $3.4 billion of capital, primarily for the third series in our flagship value-add strategy and syndications through various co-investment vehicles.

• In 2024, we further reduced our leverage with the full exchange/redemption of our remaining $78.4 million of 5.75% senior notes, which results in annual interest savings of approximately $4.5 million.

$73.4 million of note principal was exchanged for 8.2 million shares of the Company's class A common stock and $5.0 million of note principal was redeemed for cash.

Fund Performance Metrics

Certain performance metrics for our key investment funds from inception through March 31, 2024 are presented in the table below.

Excluded are funds with less than one year of performance history as of March 31, 2024, funds and separately managed accounts in the liquid strategy, co-investment vehicles and separately capitalized portfolio companies.

Certain performance metrics for our key investment funds from inception through June 30, 2024 are presented in the table below.

Excluded are funds with less than one year of performance history as of June 30, 2024, funds and separately managed accounts in the liquid strategy, co-investment vehicles and separately capitalized portfolio companies.

The historical performance of our funds is not indicative of their future performance nor indicative of the performance of our other existing funds or of any of our future funds.

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(2) Inception date represents first close date of the fund, except for Credit I which is the first capital call date.

The manager/general partner of the InfraBridge funds were acquired in Feb-2023.

The manager/general partner of the InfraBridge funds were acquired in February 2023.

(3) Invested capital represents the original cost and subsequent fundings to investments.

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Gross IRR is calculated from the date of investment fundings (taking into account the benefit of any credit facility at the fund level) to the date of investment distributions.

For unrealized investments, assumes a liquidating distribution equal to the investment fair value, net of amounts funded through the fund's credit facility, if any.

For unrealized investments, gross IRR assumes a liquidating distribution equal to the investment fair value, net of amounts funded through the fund's credit facility, if any.

Gross IRR is calculated at the fund level and does not reflect gross IRR of any individual investor due to timing of investor level inflows and outflows, among other factors.

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Net IRR is calculated at the individual investor level based upon timing and amount of fee-paying third party investor level inflows and outflows, and excludes capital not subject to fees and/or carried interest, including general partner and general partner affiliate capital.

If an investment is later syndicated to one or more third-party investors, the IRRs set forth herein will include cash flows associated with such syndication.

This treatment of syndication transactions was implemented in fiscal year 2024 and applied on a life-to-date basis for all funds presented.

If an investment is later syndicated to third-party investor(s), the IRRs will include cash flows associated with such syndication.

This treatment with respect to syndications was implemented in fiscal year 2024 and applied on a life-to-date basis for all funds presented.

(9) Our funds generally permit us to recycle certain capital distributed to limited partners during certain time periods.

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Results of Operations

Three Months Ended March 31,

(In thousands) 2024 2023 Change

Three Months Ended June 30, Six Months Ended June 30,

(In thousands) 2024 2023 Change 2024 2023 Change

Fee revenue $ 78,605 $ 65,742 $ 12,863 $ 151,560 $ 124,868 $ 26,692

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Total revenues 390,336 189,874 200,462 464,729 208,370 256,359

Interest expense 5,192 8,131 (2,939)

Transaction-related costs 760 8,527 (7,767)

Depreciation and amortization 9,167 6,875 2,292

Compensation expense—cash and equity-based 51,661 56,557 (4,896) 102,845 104,028 (1,183)

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Administrative and other expenses 26,508 21,505 5,003 50,818 41,952 8,866

Interest expense 3,136 5,665 (2,529) 8,328 13,796 (5,468)

Transaction-related costs 671 1,113 (442) 1,431 9,640 (8,209)

Depreciation and amortization 8,097 11,353 (3,256) 17,264 18,228 (964)

Total expenses 268,503 132,269 136,234 352,402 186,889 165,513

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91,423 (8,663) 100,086 61,795 (206,460) 268,255

Preferred stock repurchases — (927) 927 — (927) 927

Preferred stock dividends 14,660 14,675 (15) 29,320 29,351 (31)

Net income (loss) attributable to common stockholders $ 76,763 $ (22,411) 99,174 $ 32,475 $ (234,884) 267,359

Total revenues were $74.4 million in 2024 compared to $18.5 million in 2023, driven by significant variability in unrealized carried interest and an increase in fee revenue, primarily benefiting from continued fundraising.

Total revenues were $390.3 million and $189.9 million for the three months ended June 30, 2024 and 2023, respectively, and $464.7 million and $208.4 million for the six months ended June 30, 2024 and 2023, respectively, driven by significant variability in unrealized carried interest, with higher fee revenues largely offset by a decrease in principal investment income.

The key components of revenue are discussed in more detail below.

Three Months Ended March 31,

(In thousands) 2024 2023 Change

Three Months Ended June 30, Six Months Ended June 30,

(In thousands) 2024 2023 Change 2024 2023 Change

Management fees

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Incentive fees

1,651 171 1,480 2,532 1,040 1,492

Other fee revenue

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$ 78,605 $ 65,742 12,863 $ 151,560 $ 124,868 26,692

Fee revenue increased $13.8 million or 23% as FEEUM increased $4.8 billion or 17% from $27.7 billion at March 31, 2023 to $32.5 billion at March 31, 2024.

The higher fee revenue was driven by our third flagship fund, DBP III, which held its first close in November 2023 ($9.3 million) and InfraBridge funds, acquired in February 2023, that contributed a full quarter of fees in 2024 ($3.4 million).

Incentive fees in both periods were attributed to our liquid securities strategy.

Other fees were higher in 2023, attributed largely to loan origination fees in connection with syndication of our credit investments.

Carried Interest Allocation

Three Months Ended March 31,

(In thousands) 2024 2023 Change

Fee revenue increased $12.9 million, or 20%, in the quarter-to-date comparison and $26.7 million, or 21%, in the year-to-date comparison, as FEEUM increased $3.6 billion or 12% from $29.1 billion at June 30, 2023 to $32.7 billion at June 30, 2024.

Management fees were higher in the three and six months ended June 30, 2024, driven by (i) our third flagship fund, which held its first close in November 2023, contributing $13.6 million and $22.9 million of fees, respectively (including catch-up fees), and (ii) additional deployments in DBP I and our credit fund ($1.9 million and $3.6 million, respectively), partially offset by lower fees in DBP II due to a change in fee basis to invested capital and syndication of an investment in 2024, as well as recapitalization of a portfolio company in a co-invest vehicle (aggregate decrease of $6.1 million and $8.9 million, respectively).

Additionally, in the year-to-date comparison, 2024 also had higher fees from InfraBridge funds that were acquired in February 2023 ($2.6 million).

Higher Incentive fees earned in 2024 are attributed to our liquid securities strategy.

Carried Interest Allocation (Reversal)

Three Months Ended June 30, Six Months Ended June 30,

(In thousands) 2024 2023 Change 2024 2023 Change

Carried interest allocation

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Unrealized carried interest is subject to adjustments each period, including reversals, based upon the cumulative performance of the underlying investments of these vehicles that are measured at fair value, until such time as the carried interest is distributed.

There was a higher net reversal of unrealized carried interest in 2023 compared to 2024, with reversals in both periods driven by DBP II.

As DBP II is still in the early stage of its lifecycle, the carried interest reversal is a function of continuing accrual of preferred returns over time at a higher rate than fair value increases on its underlying investments.

In 2024, this reversal was partially offset by co-investment vehicles and our credit fund that recently began accruing carried interest.

Unrealized carried interest was higher in 2024 in both periods under comparison, primarily driven by DBP II.

Principal Investment Income

Principal investment income decreased $14.4 million in the quarter-to-date comparison and $15.1 million in the year-to-date comparison.

Principal investment income represents the Company's proportionate share of net income (loss) from investments in its sponsored investment vehicles, which is predominantly unrealized gain (loss) from changes in fair value of underlying fund investments.

Principal investment income of $2.8 million was a net decrease of $0.7 million from 2023.

The change was driven by fair value decrease in InfraBridge funds and the Company's co-investment in an InfraBridge portfolio company ($11.9 million), largely offset by fair value increase in the DataBank funds ($9.8 million) and distribution of interest income from our credit fund ($1.2 million).

Other income was $3.5 million lower at $7.1 million in 2024.

2023 had higher interest income from money market deposits and dividend income from our credit fund ($4.6 million), which was partially offset by incremental costs reimbursable by InfraBridge funds in 2024 that are grossed up as other income and expense ($1.0 million).

Total expenses was $83.9 million in 2024 compared to $54.6 million in 2023, primarily attributed to the change in unrealized carried interest compensation.

There was realized principal investment income of $8.2 million in the second quarter of 2024 and $10.5 million year-to-date 2024, including gains from syndication of an investment in DBP II and in the second quarter of 2024, $4.2 million of previously escrowed proceeds received from the partial sale of our interest in DataBank in prior years.

However, in both the quarter-to-date and year-to-date periods, these increases were more than offset by lower unrealized income in 2024 from fair value decreases or lower fair value increases in other funds.

Other income decreased $7.0 million in the quarter-to-date comparison and $10.5 million in the year-to-date comparison.

In 2023, there was higher interest income from our subordinated notes in a collateralized loan obligation ("CLO") and money market deposits, and dividend income from our credit fund which was deconsolidated in the fourth quarter of 2023 (aggregate effect of $8.9 million and $13.5 million, respectively).

This was partially offset by incremental costs reimbursable by InfraBridge funds in 2024 that are grossed up as other income and expense ($1.7 million and $2.6 million, respectively).

Total expenses were $268.5 million and $132.3 million for the three months ended June 30, 2024 and 2023, respectively, and $352.4 million and $186.9 million for the six months ended June 30, 2024 and 2023, respectively, with the increase attributed primarily to unrealized carried interest compensation.

Changes in the various expense items are discussed below.

Interest Expense

Interest expense decreased $2.9 million to $5.2 million in 2024 due to full repayment of the $200 million 5.00% convertible notes upon maturity in April 2023.

Transaction-Related Costs

Transaction-related costs were $7.8 million lower in 2024 at $0.8 million, as 2023 included costs associated with InfraBridge acquisition ($7.0 million) and unconsummated deals.

Depreciation and Amortization

Depreciation and amortization expense increased $2.3 million in 2024 due to a full quarter of amortization on InfraBridge intangible assets acquired in February 2023.

Compensation Expense

Three Months Ended March 31,

(In thousands) 2024 2023 Change

Three Months Ended June 30, Six Months Ended June 30,

(In thousands) 2024 2023 Change 2024 2023 Change

Cash and equity-based compensation

Cash compensation and benefits $ 41,970 $ 36,701 $ 5,269

Cash compensation $ 34,020 $ 35,866 $ (1,846) $ 75,990 $ 72,567 $ 3,423

Equity-based compensation 17,641 20,691 (3,050) 26,855 31,461 (4,606)

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Incentive fee and carried interest compensation allocation (reversal) $ 178,430 $ 36,076 142,354 $ 171,716 $ (755) 172,471

Cash and equity-based compensation— The increase can be attributed to a full quarter of cash compensation in 2024 for InfraBridge which was acquired in February 2023 and additional headcount to support our growing investment management business.

Incentive and carried interest compensation allocation— The net reversal in compensation expense is consistent with the movement in carried interest, as discussed above.

Cash and equity-based compensation— Cash compensation was $1.8 million lower in the quarter-to-date comparison as 2023 included higher expenses from severance and an InfraBridge deferred bonus plan that was fully paid out in the first quarter of 2024, totaling $3.8 million, partially offset by higher headcount in 2024.

In comparison, cash compensation increased $3.4 million in the year-to-date comparison, which can be attributed to higher headcount to support our growing investment management business, partially offset by lower severance costs of $3.3 million.

Equity-based compensation was lower in both periods under comparison, as 2023 had higher expenses associated with performance-based awards as a result of target metrics for such awards being achieved.

Incentive fee and carried interest compensation allocation— The increase in compensation expense is consistent with the movement in carried interest, as discussed above.

The 2023 year-to-date period, however, reflected a reversal of compensation expense.

This is because management allocation of carried interest is reflected entirely as compensation expense for DBP II, which recorded a reversal of carried interest in the first quarter, but such allocation is split between compensation expense and net income attributable to noncontrolling interests for DBP I and its associated co-investment vehicles (Note 15 to the consolidated financial statements), which had positive carried interest.

Administrative and Other Expenses

Administrative and other expenses increased $3.9 million to $24.3 million, which can be attributed largely to placement fees in 2024 for DBP III fundraising.

Administrative and other expenses increased $5.0 million in the quarter-to-date comparison and $8.9 million in the year-to-date comparison.

In both periods under comparison, the increases can be attributed largely to an increase in third party professional service costs, reimbursable costs from our funds, office lease expense and information technology costs ($5.4 million and $7.7 million, respectively).

In the quarter-to-date comparison, the increase was partially offset by $3.7 million of placement fees in the second quarter of 2023 in connection with fundraising for our third flagship fund and co-investment vehicles.

Interest Expense

Interest expense decreased $2.5 million in the quarter-to-date comparison and $5.5 million in the year-to-date comparison as a result of the Company's full exchange or redemption of its remaining 5.75% exchangeable senior notes in 2024 ($2.1 million decrease in both periods under comparison).

Additionally, interest expense decreased in the year-to-date comparison due to the full repayment of the $200 million 5.00% convertible notes upon maturity in April 2023 ($3.1 million).

Transaction-Related Costs

Transaction-related costs decreased $0.4 million in the quarter-to-date comparison and $8.2 million in the year-to-date comparison.

Both periods under comparison in 2023 included higher costs associated with the InfraBridge acquisition ($0.4 million and $7.5 million, respectively) and higher expense related to unconsummated deals.

Depreciation and Amortization

Depreciation and amortization expense decreased $3.3 million in the quarter-to-date comparison and $1.0 million in the year-to-date comparison primarily due to management contract intangible assets which have a declining amortization rate over time based upon projected cash flows to be generated from these contracts.

The decrease was partially offset in the year-to-date comparison with an additional month of amortization in 2024 on InfraBridge intangible assets acquired in February 2023.

Other Gain (Loss), Net

Other loss was $5.9 million in 2024 compared to $144.5 million in 2023.

Other loss in 2024 was driven by $5.1 million loss due to an increase in the liability fair value of previously issued warrants and $3.3 million write-down in other equity investment fair value, partially offset by $2.0 million net gain on marketable equity securities of our consolidated liquid funds

Other loss in 2023 was driven by (i) a $133.3 million fair value write-down in March 2023 on an unsecured promissory note from the 2022 sale of our Wellness Infrastructure business, (ii) $13.7 million write-down in other equity investment fair value, and (iii) $4.5 million loss due to an increase in the liability fair value of previously issued warrants.

This was partially offset by $8.6 million net gain on marketable equity securities of our consolidated liquid funds.

Other gain of $8.8 million and $2.9 million was recognized in the three and six months ended June 30, 2024, respectively, and other loss of $11.9 million and $156.4 million was recognized in the three and six months ended June 30, 2023, respectively.

The net gain in 2024 was primarily driven by the fair value decrease of warrant liability ($8.4 million and $3.0 million in the three and six months ended June 30, 2024, respectively).

The net loss in 2023 can be attributed mainly to a $133.3 million write-off of an unsecured promissory note from the 2022 sale of our Wellness Infrastructure business in the year-to-date period, and additionally, in both the three and six months ended June 30, 2023, the write-down in the value of a warehoused investment ($2.9 million and $16.5 million, respectively) and fair value increase of warrant liability ($6.8 million and $11.3 million, respectively).

Income Tax Benefit (Expense)

Income tax expense was $1.2 million in 2024 and $1.1 million in 2023.

2024 reflects primarily the income tax effect of foreign subsidiaries, in particular, the InfraBridge investment management business in Europe that was acquired in February 2023.

In 2024, current tax expense from the operating activities of the foreign InfraBridge entities was largely offset by deferred tax benefit driven by intangible asset amortization, resulting in an immaterial income tax expense.

The Company otherwise has operating losses and capital loss carryforwards that can be applied against current income tax

expense for its domestic entities, and have established a full valuation allowance on the deferred tax assets of these entities, resulting in no net income tax effect for its domestic entities.

Income tax benefit was immaterial and income tax expense was $2.8 million in the three months ended June 30, 2024 and 2023, respectively.

In the year-to-date comparison, income tax expense was $1.2 million and $3.9 million, respectively.

This reflects the income tax expense of foreign subsidiaries, partially offset by an income tax benefit recorded as a result of various U.S.

state tax refunds, particularly in 2024.

The Company otherwise has operating losses and capital loss carryforwards that can be applied against current income tax expense for its domestic entities, and has established a full valuation allowance on the deferred tax assets of these entities, resulting in no net federal income tax effect for its domestic entities.

Income (Loss) from Discontinued Operations

Three Months Ended March 31,

(In thousands) 2024 2023 Change

Three Months Ended June 30, Six Months Ended June 30,

(In thousands) 2024 2023 Change 2024 2023 Change

Revenues $ 1,924 $ 236,927 $ (235,003) $ 3,756 $ 470,561 $ (466,805)

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$ (674) $ (12,726) 12,052 $ (13,804) $ (35,784) 21,980

Loss from discontinued operations in 2024 primarily included a loss associated with a guarantee in connection with a previous bulk sale of the Company's real estate investments.

The loss in 2023 represent primarily the operations of the former Operating segment and $9.7 million impairment of BRSP shares prior to disposition in March 2023, as discussed in Note 2 to the consolidated financial statements.

Loss from discontinued operations for the six months ended June 30, 2024 included primarily a loss on a guarantee related to the previous bulk sale of the Company's real estate investments.

The loss in 2023 represents primarily the operations of the former Operating segment and $9.7 million impairment of BRSP shares prior to disposition in March 2023, as discussed in Note 2 to the consolidated financial statements.

Operating Metrics

Assets Under Management ("AUM") and Fee Earning Equity Under Management ("FEEUM")

Assets Under Management and Fee Earning Equity Under Management

We present below our AUM and FEEUM, which are key operating metrics in the alternative investment management industry.

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Presented below are total AUM and FEEUM by product:

(In billions) March 31, 2024 December 31, 2023

(In billions) June 30, 2024 December 31, 2023

Assets Under Management

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Fee Earning Equity Under Management

DBP infrastructure equity $ 13.1 $ 13.0

InfraBridge Global Infrastructure 5.1 5.1

Core Equity, Credit and Liquid Strategies 2.9 2.8

Co-invest vehicles 9.9 9.5

DBP Series $ 13.9 $ 13.0

Co-Investment Vehicles 9.5 9.5

InfraBridge 5.2 5.1

Core, Credit and Liquid Strategies 2.9 2.8

Separately Capitalized Portfolio Companies 1.2 2.4

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The following table summarizes changes in FEEUM:

Three Months Ended March 31, 2024

Six Months Ended June 30, 2024

(In billions)

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Market activity and other (3)

Balance at March 31

Balance at June 30

(1) Inflows include closing on new capital raised where fees are earned on committed capital, deployment of capital where fees are earned on invested capital, new subscriptions where fees are based on NAV, other changes in invested capital such as the effect of recapitalization and syndication, and FEEUM from acquired investment vehicles.

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(3) Market activity and other include changes in investment value based on NAV or GAV, and the effect of foreign exchange rates.

Amount was less than $100 million in the first quarter of 2024.

There was a marginal 1% decrease in FEEUM to $32.5 billion at March 31, 2024 compared to December 31, 2023.

In the first quarter of 2024, FEEUM contributed by DBP III capital raise and additional invested capital from other DBP funds were offset by the effects of various recapitalization and syndication of fund investments, resulting in a marginal net decrease in our fee base.

Amount was less than $100 million in the first half of 2024.

There was a marginal decrease in FEEUM to $32.7 billion at June 30, 2024 compared to $32.8 billion at December 31, 2023.

In the first half of 2024, FEEUM contributed by capital raise for our third flagship fund and additional invested capital from other DBP funds were offset by the effects of various recapitalization and syndication of fund investments, resulting in a marginal net decrease in our fee base.

Non-GAAP Supplemental Financial Measures

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FRE and DE are common metrics utilized in the investment management sector.

We present FRE and DE at the Operating Company level, which is net of amounts attributed to noncontrolling interests, composed largely of the limited partners's share of our consolidated funds and Wafra's share of earnings attributed to our general partner interest in certain funds.

We present FRE and DE at the Operating Company level, which is net of amounts attributed to noncontrolling interests, composed largely of the limited partners' share of our consolidated funds and Wafra's share of earnings attributed to our general partner interest in certain funds.

Beginning in 2024, FRE is reported on a Company-wide basis, consistent with the entirety of the Company's business representing a single reportable segment (as discussed in Note 16 to the consolidated financial statements).

In prior periods, the Company had reported Investment Management FRE, which was an FRE measure specific to its previously reported Investment Management segment.

The Investment Management segment previously bore only operating costs that were directly attributable or otherwise can be subjected to a reasonable and systematic attribution to the investment management business.

Prior to 2024, the Company had reported Investment Management FRE, which was an FRE measure specific to its previously reported Investment Management segment.

Company-wide FRE includes all operating costs of the Company as a whole that fall within the definition of FRE.

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As we evaluate profitability based upon continuing operations, these non-GAAP measures exclude results from discontinued operations.

DE presented for 2023 comparative period has been recast to exclude the Operating segment which qualified as discontinued operations on December 31, 2023.

DE presented for the 2023 comparative period has been recast to exclude the Operating segment which qualified as discontinued operations on December 31, 2023.

These non-GAAP financial measures should be considered as a supplement to and not an alternative or in lieu of GAAP net income (loss) as measures of operating performance, or to cash flows from operating activities as indicators of liquidity.

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Such expenses generally exclude non-cash equity-based compensation, carried interest compensation, and placement fee expense.

Also, consistent with DE, FRE excludes costs associated with strategic corporate actions, which are considered non-core items, and presents costs reimbursable by our managed funds on a net basis (as opposed to a gross-up of other income and administrative costs).

Also, consistent with DE, FRE excludes non-core items, and presents costs reimbursable by our managed funds on a net basis (as opposed to a gross-up of other income and administrative costs).

Where applicable, FRE is adjusted for Start-Up FRE as defined below.

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or 2) not yet achieved break-even FRE only for investment products that may be terminated solely at the Company’s discretion.

The Company evaluates new investment strategies on a regular basis and excludes Start-Up FRE until such time as a new strategy is determined to form part of the Company’s core investment management business.

The Company regularly evaluates new investment strategies and exclude Start-Up FRE until such time a new strategy is determined to form part of the Company’s core investment management business.

We believe that FRE is a useful measure to investors as it reflects the Company’s profitability based upon recurring fee streams that are not subject to realization events related to underlying fund investments, and without the effects of income taxes, leverage, non-cash expenses, income (loss) items that are unrealized and other items that may not be indicative of core operating results in an investment management service business.

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transaction-related costs;

costs associated with strategic corporate actions which are considered to be non-core;

non-core items;

other gain (loss);

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amortization of deferred financing costs, debt premiums and discounts;

our share of unrealized carried interest allocation, net of associated compensation expense;

our share of unrealized carried interest allocation, net of associated expense;

non-cash equity-based compensation costs;

and preferred stock redemption gain (loss).

Transaction-related costs are incurred in connection with acquisitions and include legal costs post-acquisition and costs of unconsummated transactions.

Costs associated with strategic corporate actions represent non-core items, primarily severance and litigation-related costs.

These costs, along with other gain (loss) amounts, are excluded from DE as they are related to discrete items, are not considered part of our ongoing operating cost structure, and are not reflective of our core operating performance.

Transaction-related costs are incurred in connection with acquisitions, including legal costs post-acquisition, and costs of unconsummated transactions.

Non-core items primarily include acquisition-related compensation and certain severance costs, as well as litigation and settlement-related matters, which are presented within compensation expense—cash and equity-based, administrative and other expenses, and other gain (loss), net on GAAP income statement.

These costs, along with certain other gain (loss) amounts, are excluded from DE as they are related to discrete items, are not considered part of our ongoing operating cost structure, and are not reflective of our core operating performance.

Other items excluded from DE are generally non-cash in nature, including income (loss) items that are unrealized, or otherwise do not represent current or future cash obligations such as amortization of deferred financing costs and straight-line lease adjustment.

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As the income tax benefit arising from these excluded expense items do affect actual income tax paid or payable by the Company in any one period, the Company believes their inclusion in DE is appropriate to more accurately reflect amounts available for distribution.

The items we have excluded from DE are generally consistent with the exclusions made by our peers, which we believe allows for better comparability to the DE presented by our peers.

Non-GAAP Results

Results of our non-GAAP measures attributable to the Operating Company were determined as follows:

Three Months Ended March 31,

Three Months Ended June 30,

(In thousands) 2024 2023 Change

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7,551 2,087 5,464

Distributed carried interest and incentive fees subject to realization events, net of expense allocation 99 — 99

Distributed carried interest and incentive fees subject to realization events, net of associated expense allocation 186 — 186

Interest, dividend and other income 3,094 10,720 (7,626)

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Fee-Related Earnings .

FRE increased $4.2 million to $19.6 million, resulting from continued growth in our investment management business as FEEUM increased 17% from $27.7 billion at March 31, 2023 to $32.5 billion at March 31, 2024.

This reflects primarily fee revenue from new capital raised for DBP III and various co-investment vehicles, and the acquisition of InfraBridge in February 2023.

The increase in fee revenue was partially offset by higher compensation cost, which can be attributed to a full quarter of InfraBridge cash compensation in 2024 and additional headcount to support our growing investment management business.

FRE increased $4.4 million, or 20%, to $26.0 million, resulting from continued growth in our investment management business as FEEUM increased 12% from $29.1 billion at June 30, 2023 to $32.7 billion at June 30, 2024.

This reflects primarily fee revenue from new capital raised for our third flagship fund, partially offset by decreases in fees in other funds due to change in fee basis, syndications and recapitalizations.

Additionally, higher compensation and administrative costs were incurred in 2024 in supporting our growing investment management business.

Distributable Earnings .

DE was $2.2 million in the first quarter of 2024.

In comparison, DE was a negative $7.4 million in the first quarter of 2023, driven by a $7.1 million reversal of accrued interest income upon write-off of an unsecured promissory note from the 2022 sale of our Wellness Infrastructure business.

DE increased $14.1 million to $19.6 million.

In addition to the improvement in FRE, DE also benefited from the receipt of final proceeds from the 2023 sale of our interest in DataBank which represented a gain in 2024, lower interest expense following the exchange into equity or redemption of our exchangeable notes, and the absence of placement fee expense in 2024.

However, DE was partially reduced by lower interest income in 2024.

Distributable Earnings and Fee-Related Earnings Reconciliation

Three Months Ended March 31,

Three Months Ended June 30,

(In thousands) 2024 2023

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Net income (loss) attributable to Operating Company 82,189 (24,156)

Transaction-related and strategic corporate charges 7,556 18,277

Transaction-related and non-core items (1)

Other (gain) loss, net (2)

(13,451) 11,739

Unrealized principal investment income (7,813) (30,409)

Unrealized carried interest, net of expense (allocation) reversal 1,044 18,240

Unrealized carried interest, net of associated expense (allocation) reversal (3)

(75,065) (9,974)

Equity-based compensation 17,641 20,691

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Amortization of deferred financing costs, debt premiums and discounts 584 690

Preferred stock redemption (gain) loss — (927)

Adjustments attributable to noncontrolling interests in investment entities (4)

2,667 (7,536)

OP share of (income) loss from discontinued operations (5) (6)

14,120 26,926

Distributable Earnings, after tax—attributable to Operating Company

2,232 (7,430)

Realized principal investment income (6)

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$ 25,968 $ 21,607

(1) Adjustments attributable to noncontrolling interests in investment entities pertain to other gain/loss attributed to limited partners of consolidated funds, management allocation of unrealized carried interest, and Wafra's share of unrealized carried interest and principal investment income attributed to our general partner interest in certain funds.

(2) OP share of discontinued operations represent primarily operating results of portfolio companies previously consolidated in the former Operating segment in 2023, net of associated noncontrolling interests in investment entities.

(1) Non-core items primarily include acquisition-related compensation and certain severance costs, as well as litigation and settlement-related matters, which are presented within compensation expense—cash and equity-based, administrative and other expenses, and other gain (loss), net on GAAP income statement.

(2) Comprises (i) all unrealized gains and losses;

and (ii) realized gains and losses recorded by consolidated funds or associated with non-core investments.

(3) Carried interest and incentive fees are presented net of expense allocation or reversal.

The expense component is included within compensation expense — incentive fees and carried interest allocation (reversal), other gain (loss), and net income (loss) attributable to noncontrolling interests in investment entities on the GAAP income statement.

(4) Adjustments attributable to noncontrolling interests in investment entities pertain to other gain/loss attributed to limited partners of consolidated funds, and a third party investor's share of principal investment income attributed to our general partner interest in certain sponsored funds.

Allocation of unrealized carried interest to management and a third party investor is netted against "unrealized carried interest, net of expense (allocation) reversal" for all periods presented (recasted for periods prior to the second quarter of 2024 when it was presented gross in "adjustments attributable to noncontrolling interests in investment entities").

(5) OP share of discontinued operations represents primarily operating results of portfolio companies consolidated in the former Operating segment prior to 2024, net of associated noncontrolling interests in investment entities.

(6) For purposes of DE, 2023 included distributions from a portfolio company in the former Operating segment.

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• our general partner and general partner affiliate commitments to our investment vehicles;

• acquisitions of target investment management businesses;

• warehouse investments pending the raising of third party capital for future investment vehicles;

• principal and interest payments on our debt;

• our operations, including compensation, administrative and overhead costs;

• principal and interest payments on our debt;

• dividends to our preferred and common stockholders;

• our liability for corporate and other taxes;

• acquisitions of target investment management businesses;

• warehouse investments pending the raising of third party capital for future investment vehicles;

• obligation for lease payments on our corporate offices.

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• proceeds from public or private equity and debt offerings.

At March 31, 2024, our liquidity position was approximately $413 million, composed of corporate unrestricted cash and including the full $300 million availability under our VFN.

At June 30, 2024, our liquidity position was approximately $427 million, composed of corporate unrestricted cash and including the full $300 million availability under our VFN.

We believe we have sufficient cash on hand, and anticipated cash generated from operating activities and external financing sources, to meet our short term and long term capital requirements.

While we have sufficient liquidity to meet our operational needs, we continue to evaluate alternatives to manage our capital structure and market opportunities to strengthen our liquidity and to provide further operational and strategic flexibility.

While we have sufficient liquidity to meet our operational needs, we continuously evaluate alternatives to manage our capital structure and market opportunities to strengthen our liquidity and to provide further operational and strategic flexibility.

Significant Liquidity and Capital Activities in 2024

• We continue to reduce higher cost corporate indebtedness through full exchange or redemption of the remaining $72.4 million of 5.75% senior notes as of the end of April 2024, which will result in annual interest savings of approximately $4.5 million.

• We continued to reduce higher cost corporate indebtedness through the full exchange or redemption of the remaining $78.4 million of 5.75% senior notes, which will result in annual interest savings of approximately $4.5 million.

• We settled the remaining $35 million contingent consideration payable to Wafra i n connection with the 2022 redemption of their investment in the Company's investment management business, 50% each in shares of the Company's Class A common stock and in cash.

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Our fund capital investments further align our interests to our investors.

As of March 31, 2024, we have unfunded commitments totaling $259.8 million to our sponsored funds.

As of June 30, 2024, we have unfunded commitments totaling $281.1 million to our sponsored funds.

Generally, the timing for funding of these commitments is not known and the commitments are callable on demand at any time prior to their respective expirations.

Contingent Consideration

InfraBridge Acquisition —In connection with the InfraBridge acquisition in February 2023, contingent consideration of up to $129 million may become payable based upon achievement of future fundraising targets for the third and fourth flagship InfraBridge funds.

InfraBridge Acquisition —In connection with the InfraBridge acquisition in February 2023, contingent consideration of up to AUD 180 million may become payable based upon achievement of future fundraising targets for the third and fourth flagship InfraBridge funds.

The current estimated fair value of the contingent consideration is $9.5 million.

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Nevertheless, investment warehousing is undertaken only if it is determined that we will have sufficient liquidity through the anticipated warehousing period.

At March 31, 2024, warehoused investments aggregate to $51 million at cost.

At June 30, 2024, warehoused investments aggregated to $51 million at cost.

Carried Interest Clawback

Depending on the final realized value of all investments at the end of the life of a fund (and, with respect to certain funds, periodically during the life of the fund), if it is determined that cumulative carried interest distributions have exceeded the final carried interest amount earned (or amount earned as of the calculation date), we are obligated to return the excess carried interest received.

Therefore, carried interest distributions may be subject to clawback if decline in investment values results in cumulative performance of the fund falling below minimum return hurdles in the interim period.

Therefore, carried interest distributions may be subject to clawback if a decline in investment values results in the cumulative performance of the fund falling below minimum return hurdles in the interim period.

If it is determined that the Company has a clawback obligation, a liability would be established based upon a hypothetical liquidation of the net assets of the fund at reporting date.

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Generally, the Company, through the OP, has guaranteed the clawback obligation of its subsidiaries that act as general partner or special limited partner of its respective sponsored funds, for the benefit of these funds and their limited partners.

At March 31, 2024, the Company has no liability for clawback obligations on distributed carried interest.

At June 30, 2024, the Company had no liability for clawback obligations on distributed carried interest.

Lease Obligations

At March 31, 2024, we had $46 million of operating lease obligations on our corporate offices, which will be funded through corporate operating cash.

At June 30, 2024, we had $44 million of operating lease obligations on our corporate offices, which will be funded through corporate operating cash.

The lease obligation amount represents fixed lease payments, excluding any contingent or other variable lease payments, and factor in lease renewal or termination options only if it is reasonably certain that such options would be exercised.

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We intend to monetize and recycle capital from our non-core investments through opportunistic asset sales.

At March 31, 2024, we have $32 million of marketable equity securities that are available for future monetization.

In July 2024, we monetized marketable equity securities that form non-core investments for total net proceeds of $9.8 million.

Following this sale, remaining marketable equity securities available for future monetization totaled $25.1 million based upon their June 30, 2024 market price.

Public Offerings

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The following table summarizes the activities from our consolidated statements of cash flows, including discontinued operations.

Three Months Ended March 31,

Six Months Ended June 30,

(In thousands) 2024 2023

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$ 350,250 $ 1,036,739

Net cash provided by (used in):

Net cash generated by (used in):

Operating activities (4,483) 91,850

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Operating Activities

Cash inflows from operating activities are generated primarily through fee-related earnings, including incentive fees, distributions of our share of net carried interest, distribution of earnings from our general partner affiliate interests in our sponsored funds, and prior to deconsolidation of the portfolio companies in the former Operating segment during 2023, net operating income from investment properties.

Cash inflows from operating activities are generated primarily through fee-related earnings, distributions of our share of net carried interest, distribution of earnings from our general partner affiliate interests in our sponsored funds, and prior to deconsolidation of the portfolio companies in the former Operating segment during 2023, net operating income from investment properties.

Our operating activities generated net cash outflows of $4.5 million in 2024 and inflows of $91.9 million in 2023.

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Investing Activities

Investing activities relate to general partner and general partner affiliate investments in sponsored funds, including subsequent drawdown of commitments and return of investments, primarily from realized fund investments;

Investing activities relate to general partner and general partner affiliate investments in sponsored funds, including drawdown of commitments and return of investments from realized fund investments;

origination or acquisition of warehoused investments and subsequent repayments, sales and transfers of warehoused investments;

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Our investing activities generated net cash outflows of $17.2 million in 2024 and $571.6 million in 2023.

• Equity investments —Equity investments generated net cash outflow in 2024 and inflows in 2023.

In 2024, equity investments recorded net cash outflows of $19.7 million, attributed primarily to net fundings of our general partner and general partner affiliate commitments in our sponsored funds, partially offset by proceeds from investing activities of our consolidated liquid funds which hold marketable equity securities.

2023 saw net cash inflows of $219.5 million, largely representing the $201.6 million from the sale of BRSP shares, return of capital from a non-digital equity investment following a final sale of its underlying assets, and investing activities of our consolidated liquid funds which hold marketable equity securities, partially offset by funding of our general partner and general partner affiliate commitments, net of return of capital.

• Business combination —In 2023, we paid $313.2 million (net of cash assumed) for the acquisition of InfraBridge.

• Real estate investments —Real estate investing activities generated net cash outflows of $163.2 million in 2023, attributable to capital expenditures in the data center portfolio of our former Operating segment.

There were no real estate investing activities in 2024.

• In 2024, equity investments recorded net cash outflows of $14.2 million, attributed primarily to fundings of our general partner and general partner affiliate commitments in our sponsored funds, net of return of capital.

This was partially offset by net proceeds from investing activities of our consolidated liquid funds which hold marketable equity securities.

• The large net cash outflows in 2023 can be attributed to (i) real estate investing activities which generated net cash outflows of $511.0 million, attributable to capital expenditures in the data center portfolio of our former Operating segment;

and (ii) $314.3 million paid, net of cash assumed, for the acquisition of InfraBridge.

These outflows were partially offset by net cash inflows of $245.1 million from equity investments, largely representing $201.6 million proceeds from the sale of BRSP shares, return of capital from a non-digital equity investment following a final sale of its underlying assets, and investing activities of our consolidated liquid funds which hold marketable equity securities, partially offset by funding of our general partner and general partner affiliate commitments, net of return of capital.

Financing Activities

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Accordingly, we incur cash outlays primarily for payments on our corporate debt, and dividends to our preferred stockholders and common stockholders.

Separately, prior to deconsolidation in 2023, portfolio companies in the former Operating segment financed their investing activities largely through investment-level secured debt and incurred cash outlays for debt servicing and distributions to their third party investors who represent noncontrolling interests.

Financing activities generated net cash outflows in 2024 and inflows in 2023.

• In 2024, net cash outflows of $48.5 million represent cash settlement of the Wafra contingent consideration of $17.5 million, $14.0 million of investor capital redeemed by our consolidated liquid funds, net of contribution, and $16.3 million payment of our preferred and common stock dividends.

This was partially offset by a $6.1 million syndication of our interest in a consolidated fund and Wafra's share of our general partner funding of commitments in DBP I.

• Net cash inflows of $26.8 million in 2023 were driven by additional investment-level debt in the former Operating segment, largely offset by $90 million settlement of Wafra contingent consideration.

• In 2024, net cash outflows of $61.9 million represent cash settlement of the Wafra contingent consideration of $17.5 million, $5.0 million cash redemption of our 5.75% senior notes, $14.6 million of investor capital redeemed by our consolidated liquid funds, net of contribution, and $32.6 million payment of our preferred and common stock dividends.

This was partially offset by a $6.1 million syndication of our interest in a consolidated fund and separately, Wafra's share of our general partner funding of commitments in DBP I.

• Net cash inflows of $24.1 million in 2023 represent primarily $421.1 million of additional investment-level debt in the former Operating segment, largely offset by the full repayment of our $200 million 5.00% convertible senior notes, $90 million contingent consideration payment to Wafra, $73.5 million distributed for capital redeemed by a noncontrolling interest in a consolidated liquid fund, and income distribution to noncontrolling interests in our former Operating segment.

Guarantees and Off-Balance Sheet Arrangements

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With respect to all critical estimates, we have established policies and control procedures which seek to ensure that estimates and assumptions are appropriately governed and applied consistently from period to period.

We believe that all

of the decisions and assessments applied were reasonable at the time made, based upon information available to us at that time.

We believe that all of the decisions and assessments applied were reasonable at the time made, based upon information available to us at that time.

Due to the inherently judgmental nature of the various projections and assumptions used, and unpredictability of economic and market conditions, actual results may differ from estimates, and changes in estimates and assumptions could have a material effect on our financial statements in the future.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis