DigitalBridge Group, Inc. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. The following discussion should be read in conjunction with our unaudited consolidated financial statements and accompanying notes thereto, which are included in Item 1 of this Quarterly Report, as well as information contained in our Annual Report on Form 10-K for the year ended December 31, 2023, which is accessible on the SEC's website at www.sec.gov . In this Quarterly Report, unless specifically stated otherwise or the context indicates otherwise, the terms " the "Company," "DBRG," "we," "our" and "us" refer to DigitalBridge Group, Inc. and its consolidated subsidiaries. References to the “Operating Partnership,” our “Operating Company” and the “OP” refer to DigitalBridge Operating Company, LLC, a Delaware limited liability company and the operating company of the Company, and its consolidated subsidiaries. Our Business We are a leading global digital infrastructure investment manager, deploying and managing capital across the digital ecosystem, including data centers, cell towers, fiber networks, small cells, and edge infrastructure. Our diverse global investor base includes public and private pensions, sovereign wealth funds, asset managers, insurance companies, and endowments. At September 30, 2024, we had $34.1 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 September 30, 2024, we owned 93% of the Operating Company as its sole managing member. Our Investment Management Platform Our investment management platform is anchored by our value-add funds within the DigitalBridge Partners ("DBP") infrastructure equity offerings. In providing institutional investors access to investments across different segments of the digital infrastructure ecosystem, our investment offerings have expanded to include core equity, credit and liquid securities. • 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 ("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. 42 Table of Contents • Our Liquid Strategies are fundamental long-only and long-short public equities strategies with well-defined mandates, leveraging the network and intellectual capital of our platform to build liquid portfolios of high quality, undervalued businesses across digital infrastructure, real estate, and technology, media, and telecom. • InfraBridge is focused on mid-market investments in the digital infrastructure and related sectors of transportation and logistics, and energy transition (the Global Infrastructure Fund ("GIF") series of funds). Significant Developments The following summarizes significant developments that affected our business and results of operations in 2024 through the date of this filing. Capital Raise • In the year to-date period through October 2024, we have raised $6.1 billion of capital, primarily for the third series in our flagship value-add strategy and syndications through various co-investment vehicles. Financing • 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. Return of Capital • We monetized a substantial portion of marketable equity securities that form DBRG's non-core investments for total net proceeds of $35.0 million. • In October 2024, as the subordinated note holder of a third party managed CLO, we received $10.4 million of excess net proceeds from a refinancing of the CLO. 43 Table of Contents Fund Performance Metrics Certain performance metrics for our key investment funds from inception through September 30, 2024 are presented in the table below. Excluded are funds with less than one year of performance history as of September 30, 2024, funds and separately managed accounts in the liquid strategy, co-investment vehicles and separately capitalized portfolio companies. The historical performance of our funds is not indicative of their future performance nor indicative of the performance of our other existing funds or of any of our future funds. An investment in DBRG is not an investment in any of our funds and these fund performance metrics are not indicative of the performance of DBRG. ($ in millions) Inception Date (2) Total Commitments Invested Capital (3) Available Capital (4) Investment Value MOIC (7) (9) IRR (8) (9) Fund (1) Unrealized Realized (5) Total (6) Gross Net Gross Net Value-Add DBP I Mar-2018 $ 4,059 $ 4,838 $ 138 $ 6,303 $ 1,287 $ 7,590 1.6x 1.4x 14.4% 10.2% DBP II Nov-2020 8,286 7,409 1,380 9,059 818 9,877 1.3x 1.2x 12.6% 8.5% Core SAF Nov-2022 1,110 951 174 1,014 22 1,036 1.1x 1.1x 7.0% 4.6% InfraBridge GIF I Mar-2015 1,411 1,504 388 1,336 1,093 2,429 1.6x 1.4x 9.8% 7.3% GIF II Jun-2018 3,382 3,118 26 2,294 245 2,539 0.8x 0.7x <0% <0% Credit Credit I Dec-2022 697 428 391 346 140 486 1.1x 1.1x 13.8% 9.1% __________ (1) Performance metrics are presented in aggregate for main fund vehicle, its parallel vehicles and alternative investment vehicles. (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 February 2023. (3) Invested capital represents the original cost and subsequent fundings to investments. Invested capital includes financing costs and investment related expenses which are capitalized. With respect to InfraBridge funds, such costs are expensed during the period and excluded from their determination of invested capital. (4) Available capital represents unfunded commitments, including recallable capital. (5) Realized value represents proceeds from dispositions that have closed and all earnings from both realized and unrealized investments, including interest, dividend and ticking fees. (6) Total value is the sum of unrealized fair value and realized value of investments. (7) Total investment gross multiple of invested capital ("MOIC") is calculated as total value of investments, that is realized proceeds and unrealized fair value, divided by invested capital, without giving effect to allocation of management fee expense, other fund expenses and general partner carried interest (both distributed and unrealized). Total investment net MOIC is calculated as total value of investments, that is realized proceeds and unrealized fair value, divided by invested capital, after giving effect to allocation of management fee expense, other fund expenses and general partner carried interest (both distributed and unrealized). MOIC calculations exclude capital not subject to fees and/or carried interest, including general partner and general partner affiliate capital. MOICs are calculated at the fund level and do not reflect MOICs at the individual investor level. (8) Gross internal rate of return ("IRR") represents annualized time-weighted return on invested capital based upon total value of investments, that is realized proceeds and unrealized fair value, without giving effect to allocation of management fee expense, other fund expenses and general partner carried interest (both distributed and unrealized). 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, 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. Net IRR is gross IRR after giving effect to allocation of management fee expense, other fund expenses and general partner carried interest (both distributed and unrealized). 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 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. The exclusion of recycled capital generally causes invested and realized amounts to be lower and MOICs to be higher than had recycled capital been included. In addition, for funds that utilize a subscription line credit facility in advance of receiving capital contributions from investors, reported IRRs may be higher or lower than if such facility had not been utilized. 44 Table of Contents Results of Operations Three Months Ended September 30, Nine Months Ended September 30, (In thousands) 2024 2023 Change 2024 2023 Change Revenues Fee revenue $ 76,582 $ 65,240 $ 11,342 $ 228,142 $ 190,108 $ 38,034 Carried interest allocation (reversal) (15,799) 168,891 (184,690) 263,967 193,389 70,578 Principal investment income 9,955 17,943 (7,988) 28,782 51,914 (23,132) Other income 5,387 10,629 (5,242) 19,963 35,662 (15,699) Total revenues 76,125 262,703 (186,578) 540,854 471,073 69,781 Expenses Compensation expense—cash and equity-based 43,426 53,116 (9,690) 146,271 157,144 (10,873) Compensation expense—incentive fee and carried interest allocation (reversal) (8,474) 72,865 (81,339) 163,242 72,110 91,132 Administrative and other expenses 27,193 17,741 9,452 78,011 59,693 18,318 Interest expense 4,129 5,518 (1,389) 12,457 19,314 (6,857) Transaction-related costs 1,771 896 875 3,202 10,536 (7,334) Depreciation and amortization 8,227 9,319 (1,092) 25,491 27,547 (2,056) Total expenses 76,272 159,455 (83,183) 428,674 346,344 82,330 Other income (loss) Other gain (loss), net 47,927 256,439 (208,512) 50,843 100,044 (49,201) Income (Loss) before income taxes 47,780 359,687 (311,907) 163,023 224,773 (61,750) Income tax benefit (expense) (887) (59) (828) (2,126) (3,927) 1,801 Income (Loss) from continuing operations 46,893 359,628 (312,735) 160,897 220,846 (59,949) Income (Loss) from discontinued operations 1,439 (80,851) 82,290 (13,403) (286,929) 273,526 Net income (loss) 48,332 278,777 (230,445) 147,494 (66,083) 213,577 Net income (loss) attributable to noncontrolling interests: Redeemable noncontrolling interests 580 132 448 1,471 4,634 (3,163) Investment entities 34,024 (17,746) 51,770 68,412 (142,241) 210,653 Operating Company (50) 19,918 (19,968) 2,038 1,511 527 Net income (loss) attributable to DigitalBridge Group, Inc. 13,778 276,473 (262,695) 75,573 70,013 5,560 Preferred stock repurchases — — — — (927) 927 Preferred stock dividends 14,661 14,645 16 43,981 43,996 (15) Net income (loss) attributable to common stockholders $ (883) $ 261,828 (262,711) $ 31,592 $ 26,944 4,648 45 Table of Contents Revenues Total revenues were $76.1 million and $262.7 million for the three months ended September 30, 2024 and 2023, respectively, and $540.9 million and $471.1 million for the nine months ended September 30, 2024 and 2023, respectively. The decrease of $186.6 million in the quarter-to-date comparison and increase of $69.8 million in the year-to-date comparison was driven largely by significant variability in carried interest. Excluding carried interest, revenues were higher in both periods under comparison, driven by an increase in fee income of $11.3 million quarter-to-date and $38.0 million year to-date. Principal investment income and other income were lower in 2024, and these decreases largely offset the higher fee revenue in the quarter-to-date and year-to-date comparison. The key components of revenue are discussed in more detail below. Fee Revenue Three Months Ended September 30, Nine Months Ended September 30, (In thousands) 2024 2023 Change 2024 2023 Change Management fees $ 76,011 $ 65,236 $ 10,775 $ 223,542 $ 187,138 $ 36,404 Incentive fees 291 — 291 2,823 1,040 1,783 Other fee revenue 280 4 276 1,777 1,930 (153) $ 76,582 $ 65,240 11,342 $ 228,142 $ 190,108 38,034 Fee revenue increased $11.3 million or 17% in the quarter-to-date comparison and $38.0 million or 20% in the year-to-date comparison, consistent with increase in FEEUM of $4.2 billion or 14% in the 12-month period to $34.1 billion at September 30, 2024. Management fees were $10.8 million and $36.4 million higher in the three and nine months ended September 30, 2024, respectively, driven by our third flagship fund that held its first close in November 2023, contributing $16.7 million and $39.6 million of fees, respectively (including catch-up fees), as well as additional deployments and commitments in other funds. These increases were partially offset by lower fees in DBP II following 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 $6.9 million and $15.9 million, respectively). Higher incentive fees earned in 2024 are attributed to our liquid securities strategy. Carried Interest Allocation (Reversal) Three Months Ended September 30, Nine Months Ended September 30, (In thousands) 2024 2023 Change 2024 2023 Change Carried interest allocation Distributed $ — $ 27,927 $ (27,927) $ 118 $ 28,403 $ (28,285) Unrealized (15,799) 140,964 (156,763) 263,849 164,986 98,863 $ (15,799) $ 168,891 (184,690) $ 263,967 $ 193,389 70,578 Carried interest allocation represents gross carried interest from our general partner interests in sponsored investment vehicles prior to allocations to management and Wafra. 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. The distributed carried interest in 2023 arose from the recapitalization of DataBank. In the quarter-to-date comparison, 2024 included a reversal of unrealized carried interest, while a large unrealized carried interest was recognized in 2023, attributed primarily to DBP funds and a DataBank investment that was not subject to recapitalization. In the year-to-date comparison, unrealized carried interest was higher in 2024, driven by DBP funds and partially offset by a reversal of carried interest in DataBank funds. 46 Table of Contents Principal Investment Income Three Months Ended September 30, Nine Months Ended September 30, (In thousands) 2024 2023 Change 2024 2023 Change Principal investment income Realized $ 2,647 $ — $ 2,647 $ 13,193 $ — $ 13,193 Unrealized 7,308 17,943 (10,635) 15,589 51,914 (36,325) $ 9,955 $ 17,943 (7,988) $ 28,782 $ 51,914 (23,132) 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. Realized principal investment income in 2024 arose largely from gains related to syndication of investments in DBP funds and distribution of interest income. Additionally, the year-to-date period included $4.2 million of previously escrowed proceeds received from the partial sale of our interest i n DataBank in prior years. However, in both the quarter-to-date and year-to-date periods, the realized income in 2024 was more than offset by lower unrealized income from fair value decreases or lower fair value increases in underlying investments of other funds. Other Income Other income decreased $5.2 million in the quarter-to-date comparison and $15.7 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 $4.8 million and $18.2 million, respectively). This was partially offset by incremental costs reimbursable by InfraBridge funds in 2024 that are grossed up as other income and administrative expense ($0.9 million and $3.5 million, respectively). Expenses Total expenses were $76.3 million and $159.5 million for the three months ended September 30, 2024 and 2023, respectively, and $428.7 million and $346.3 million for the nine months ended September 30, 2024 and 2023, respectively, with the changes attributed primarily to significant variability in unrealized carried interest compensation. Excluding incentive fee and carried interest compensation, expenses were lower in both periods under comparison, attributed largely to lower compensation expense, partially offset by higher administrative costs. The year-to-date period also benefited from lower interest expense and transaction costs. Changes in the various expense items are discussed below. Compensation Expense Three Months Ended September 30, Nine Months Ended September 30, (In thousands) 2024 2023 Change 2024 2023 Change Cash and equity-based compensation Cash compensation $ 34,598 $ 38,776 $ (4,178) $ 110,588 $ 111,343 $ (755) Equity-based compensation 8,828 14,340 (5,512) 35,683 45,801 (10,118) $ 43,426 $ 53,116 (9,690) $ 146,271 $ 157,144 (10,873) Incentive fee and carried interest compensation allocation (reversal) $ (8,474) $ 72,865 (81,339) $ 163,242 $ 72,110 91,132 Cash and equity-based compensation— Cash compensation was $4.2 million lower in the quarter-to-date comparison and $0.8 million lower in the year-to-date comparison, as a result of lower estimated bonus, severance and retention costs (decreased $6.5 million and $5.8 million, respectively), partially offset by the effects of a higher headcount in 2024 to support our growing investment management business. Equity-based compensation was lower in both periods under comparison as 2023 had higher expenses associated with performance-based awards that had achieved their targets. Incentive fee and carried interest compensation allocation— The change in compensation expense for both periods is consistent with the change in carried interest, as discussed above. 47 Table of Contents Administrative and Other Expenses Administrative and other expenses increased $9.5 million in the quarter-to-date comparison and $18.3 million in the year-to-date comparison. In both periods under comparison, the increase can be attributed largely to higher third party professional service costs and also, reimbursable costs from our funds ($5.9 million and $11.3 million, respectively) that are grossed up in other income and administrative expense. Interest Expense Interest expense decreased $1.4 million in the quarter-to-date comparison and $6.9 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 (decreased $1.3 million and $3.4 million, respectively). 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 increased $0.9 million in the quarter-to-date comparison due to higher unconsummated deal costs, and decreased $7.3 million in the year-to-date comparison as 2023 included higher costs related to the InfraBridge acquisition. Depreciation and Amortization Depreciation and amortization expense decreased $1.1 million in the quarter-to-date comparison and $2.1 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. Other Gain (Loss), Net Other gain of $47.9 million and $50.8 million was recognized in the three and nine months ended September 30, 2024, respectively, and $256.4 million and $100.0 million was recognized in the three and nine months ended September 30, 2023, respectively. The net gain in the three and nine months ended September 30, 2024 was primarily driven by (i) net fair value increase in investments held by consolidated funds ($44.4 million and $46.0 million, respectively), (ii) net gain from partial sale and price changes on our non-core marketable equity securities ($6.5 million and $9.3 million, respectively), and (iii) fair value decrease of warrant liability ($1.2 million and $4.2 million, respectively), all of which were partially offset by impairment of warehoused investments ($8.9 million and $12.5 million, respectively). The net gain in the three and nine months ended September 30, 2023 is mainly attributed to a $278.7 million gain recognized in connection with the deconsolidation of DataBank in September 2023 (of which $3.7 million was realized and $275.0 million unrealized), which was largely offset in the year-to-date period by a $133.3 million write-off of an unsecured promissory note from the 2022 sale of our Wellness Infrastructure business. Both periods in 2023 also included losses related to fair value increase of warrant liability ($12.4 million and $23.7 million, respectively), and net decreases in investment values, including those held by our consolidated funds ($8.0 million and $16.1 million, respectively). Income Tax Benefit (Expense) Income tax expense was $0.9 million and $0.1 million in the three months ended September 30, 2024 and 2023, respectively, and $2.1 million and $3.9 million in the nine months ended September 30, 2024 and 2023. This reflects the income tax expense of foreign subsidiaries, partially offset in year-to-date 2024 by various U.S. state tax refunds. 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. 48 Table of Contents Income (Loss) from Discontinued Operations Three Months Ended September 30, Nine Months Ended September 30, (In thousands) 2024 2023 Change 2024 2023 Change Revenues Revenues $ 2,269 $ 216,147 $ (213,878) $ 6,025 $ 686,708 $ (680,683) Expenses (2,204) (295,540) 293,336 (7,924) (960,174) 952,250 Other gain (loss) 1,356 (1,696) 3,052 (11,601) (13,269) 1,668 Income (Loss) from discontinued operations before income taxes 1,421 (81,089) 82,510 (13,500) (286,735) 273,235 Income tax benefit (expense) 18 238 (220) 97 (194) 291 Income (Loss) from discontinued operations $ 1,439 $ (80,851) 82,290 $ (13,403) $ (286,929) 273,526 Income (Loss) from discontinued operations attributable to noncontrolling interests: Investment entities — (68,798) 68,798 — (236,287) 236,287 Operating Company 94 (849) 943 (944) (3,654) 2,710 Income (Loss) from discontinued operations attributable to DigitalBridge Group, Inc. $ 1,345 $ (11,204) 12,549 $ (12,459) $ (46,988) 34,529 Loss from discontinued operations for the nine months ended September 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 and Fee Earning Equity Under Management We present below our AUM and FEEUM, which are key operating metrics in the alternative investment management industry. Our calculation of AUM and FEEUM may differ from other investment managers, and as a result, may not be directly comparable to similar measures presented by other investment managers. Assets Under Management AUM represents the total capital for which we provide investment management services and our general partner capital. AUM is generally composed of third party capital managed by the Company and its affiliates, including capital that is not yet fee earning, or not subject to fees and/or carried interest; and our general partner and general partner affiliate capital committed to our funds. AUM is largely determined based upon invested capital as of the reporting date, including capital funded through third party financing at the underlying portfolio companies; and committed capital for funds in their commitment stage. Our AUM is not based upon any definitions that may be set forth in the governing documents of our managed funds or other investment vehicles, and not calculated pursuant to any regulatory definitions. Fee Earning Equity Under Management FEEUM represents the total capital managed by the Company and its affiliates which earns management fees and/or incentive fees or carried interest. FEEUM is generally based upon committed capital, invested capital, NAV or GAV, pursuant to the terms of each underlying investment management agreement. 49 Table of Contents Presented below are total AUM and FEEUM by product: (In billions) September 30, 2024 December 31, 2023 Assets Under Management $ 88.0 $ 80.1 Fee Earning Equity Under Management DBP Series $ 14.7 $ 13.0 Co-Investment Vehicles 10.1 9.5 InfraBridge 5.1 5.1 Core, Credit and Liquid Strategies 3.0 2.8 Separately Capitalized Portfolio Companies 1.2 2.4 $ 34.1 $ 32.8 The following table summarizes changes in FEEUM: Nine Months Ended September 30, 2024 (In billions) Fee Earning Equity Under Management Balance at January 1 $ 32.8 Inflows (1) 4.2 Outflows (2) (2.9) Market activity and other (3) — Balance at September 30 $ 34.1 ________ (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. (2) Outflows include redemptions and withdrawals in Liquid Strategies, realizations where fees are based on invested capital, other changes in invested capital such as the effect of recapitalization and syndication, change in fee basis from committed to invested capital and expiration of fee paying capital. (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 2024. FEEUM increased $1.3 billion in 2024 to $34.1 billion at September 30, 2024, driven by capital raise for our third flagship fund and deployments in other DBP funds, partially offset by the effects of various recapitalization and syndication of investments. Non-GAAP Supplemental Financial Measures We report the following non-GAAP financial measures attributable to the Operating Company: Fee Related Earnings (“FRE”) and Distributable Earnings (“DE”). 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' 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). Prior to 2024, 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 segment. Company-wide FRE includes all operating costs of the Company as a whole that fall within the definition of FRE. Additionally, Adjusted Earnings before Interest, Taxes, Depreciation and Amortization (“Adjusted EBITDA”) is no longer reported as a non-GAAP financial measure in 2024 following the discontinuance of the Operating segment effective December 31, 2023. Adjusted EBITDA was previously reported to facilitate an evaluation of the relative contribution of the Company's former Operating segment absent the effect of leverage as the Operating segment had higher leverage relative to the Company's own capital structure. 50 Table of Contents We believe the non-GAAP financial measures of FRE and DE supplement and enhance the overall understanding of our underlying financial performance and trends, and facilitate comparison among current, past and future periods and to other companies in similar lines of business. We use FRE and DE in evaluating the Company’s ongoing business performance and in making operating decisions. For the same reasons, we believe FRE and DE are useful financial measures to the Company’s investors and analysts. As we evaluate profitability based upon continuing operations, these non-GAAP measures exclude results from discontinued operations. 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. Our calculation of these non-GAAP measures may differ from methodologies utilized by other companies for similarly titled performance measures and, as a result, may not be fully comparable to those calculated by our peers. Fee-Related Earnings FRE is used to assess the extent to which direct base compensation and core operating expenses are covered by recurring fee revenues in a stabilized investment management business. FRE represents recurring fee revenue, including incentive fees that are not subject to realization events related to underlying fund investments, net of compensation and administrative expenses. Such expenses generally exclude non-cash equity-based compensation, carried interest compensation, and placement fee expense. 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. Fee revenues earned from consolidated funds and other investment vehicles are eliminated in consolidation. However, because the fees are funded by and earned from third party investors in these consolidated vehicles who represent noncontrolling interests, our allocated share of net income from the consolidated funds and other vehicles is increased by the amount of fees that are eliminated. The elimination of these fees, therefore, does not affect net income (loss) attributable to DBRG. Accordingly, FRE is presented without giving effect to the elimination of fee revenue to the extent such fees meet the definition of FRE. FRE does not include distributed carried interest as these are not recurring revenues and are subject to variability given that they are dependent upon realization events related to underlying fund investments. Placement fees are also excluded from FRE as they are inconsistent in amount and frequency depending upon timing of fundraising for our funds. Other items excluded from FRE include realized principal investment income (loss); and interest, dividend and other income, all of which are not core to the investment management service business. Unlike DE, which is a post-tax measure, FRE does not incorporate the effect of income taxes as it is a pre-tax measure. To reflect a stabilized investment management business, FRE is further adjusted to exclude Start-Up FRE, where applicable. Start-Up FRE is FRE associated with new investment strategies that have 1) not yet held a first close raising FEEUM; or 2) not yet achieved break-even FRE only for investment products that may be terminated solely at the Company’s discretion. 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. This allows for better comparability of the Company's profitability on a recurring and sustainable basis and relative to its peers. Distributable Earnings DE generally represents the net realized earnings of the Company and is an indicative measure used by the Company to assess ongoing operating performance and in making decisions related to distributions and reinvestments. Accordingly, we believe DE provides investors and analysts transparency into the measure of performance used by the Company in its decision making. DE is an after-tax measure that reflects the ongoing operating performance of the Company’s core business by including earnings that are realized and generally excluding non-cash expenses, other income (loss) items that are unrealized and items that may not be indicative of core operating results. This allows the Company, and its investors and analysts, to assess its operating results on a more comparable basis period-over-period. 51 Table of Contents Realized earnings included in DE are generally comprised of fee revenue, including all incentive fees, realized principal investment income (loss), distributed carried interest, interest and dividend income. Income (loss) on principal investments is realized when the Company redeems all or a portion of its investment or when the Company receives or is due income such as dividends, interest or distributions of income. The following items are excluded from DE: transaction-related costs; non-core items; other gain (loss); unrealized principal investment income (loss); non-cash depreciation and amortization expense, non-cash impairment charges (if any); amortization of deferred financing costs, debt premiums and discounts; 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, 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. These items are excluded from DE as they do not contribute to the measurement of DE as a net realized earnings measure that is used in decision making related to distributions and reinvestments. Income taxes applied in the determination of DE generally represents GAAP income tax related to continued operations, and includes the benefit of deductions available to the Company on certain expense items excluded from DE (for example, equity-based compensation). 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. Non-GAAP Results Results of our non-GAAP measures attributable to the Operating Company were determined as follows: Three Months Ended September 30, (In thousands) 2024 2023 Change Fee revenue $ 76,664 $ 66,058 $ 10,606 Cash compensation (33,774) (34,316) 542 Administrative and other expenses (16,736) (14,493) (2,243) Start-Up FRE — 1,155 (1,155) Fee-Related Earnings—attributable to Operating Company 26,154 18,404 7,750 Realized principal investment income (1) 2,129 1,994 135 Distributed carried interest and incentive fees subject to realization events, net of associated expense allocation — 27,927 (27,927) Interest, dividend and other income 2,828 6,436 (3,608) Interest expense and preferred dividends (18,245) (19,261) 1,016 Placement fee and other expenses (1,247) (1,668) 421 Income tax benefit (expense) (887) (59) (828) Start-up FRE — (1,155) 1,155 Distributable Earnings, after tax—attributable to Operating Company $ 10,732 $ 32,618 (21,886) ________ (1) For purposes of DE, 2023 included distributions from a portfolio company in the former Operating segment. Fee-Related Earnings . FRE increased $7.8 million, or 42%, to $26.2 million, resulting from continued growth in our investment management business as FEEUM increased 14% from $29.9 billion at September 30, 2023 to $34.1 billion at September 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 administrative costs were incurred in 2024 in supporting our growing investment management business. 52 Table of Contents Distributable Earnings . DE in the third quarter of 2023 of $32.6 million had benefited from $27.9 million of realized carried interest from the recapitalization of DataBank. As a result, notwithstanding a $7.8 million increase in FRE, DE decreased $21.9 million to $10.7 million in the third quarter of 2024. Distributable Earnings and Fee-Related Earnings Reconciliation Three Months Ended September 30, (In thousands) 2024 2023 Net income (loss) attributable to common stockholders $ (883) $ 261,828 Net income (loss) attributable to noncontrolling interests in Operating Company (50) 19,918 Net income (loss) attributable to Operating Company (933) 281,746 Transaction-related costs and non-core items (1) 9,541 6,515 Other (gain) loss, net (2) (47,906) (256,439) Unrealized principal investment income (7,308) (17,943) Unrealized carried interest, net of associated expense (allocation) reversal (3) 7,658 (24,874) Equity-based compensation 8,828 14,340 Depreciation and amortization expense 8,227 9,319 Amortization of deferred financing costs, debt premiums and discounts 524 660 Preferred stock redemption (gain) loss — — Adjustments attributable to noncontrolling interests in investment entities (4) 33,540 5,243 OP share of (income) loss from discontinued operations (5) (6) (1,439) 14,051 Distributable Earnings, after tax—attributable to Operating Company 10,732 32,618 Realized principal investment income (6) (2,129) (1,994) Distributed carried interest and incentive fees subject to realization events, net of associated expense allocation (3) — (27,927) Interest, dividend and other income (2,828) (6,436) Interest expense and preferred dividends 18,245 19,261 Placement fee and other expenses 1,247 1,668 Income tax (benefit) expense 887 59 Start-up FRE — 1,155 Fee-Related Earnings—attributable to Operating Company $ 26,154 $ 18,404 __________ (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 previously 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. Liquidity and Capital Resources We regularly evaluate our liquidity position, and anticipated cash needs to fund our business and operations based upon our projected financial performance. Our evaluation of future liquidity requirements is regularly reviewed and updated for changes in internal projections, economic conditions, and other factors as applicable. 53 Table of Contents Liquidity Needs and Sources of Liquidity Our primary liquidity needs, both short term and long term, are to fund: • our operations, including compensation, administrative and overhead costs; • our general partner and general partner affiliate commitments to our investment vehicles; • 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; and • obligation for lease payments on our corporate offices. Our primary sources of liquidity are: • cash on hand; • fees received from our investment management business, including our share of distributed net incentive fees and carried interest; • cash flow generated from our investments, both from operations and return of capital, including proceeds from full or partial realization of investments; • availability under our Variable Funding Notes ("VFN"); • issuance of additional term notes under our corporate securitization; and • proceeds from public or private equity and debt offerings. Overview At September 30, 2024, our liquidity position was approximately $427 million, composed of available corporate cash and including the full $300 million under our VFN. Available corporate cash generally represents cash at our OP entity after allocating cash for certain compensatory liabilities, and excludes cash held at subsidiaries of the OP, including cash maintained to satisfy regulatory capital requirements in applicable foreign jurisdictions. We believe we have sufficient cash on hand, and anticipated cash generated from operating activities and availability of external financing sources, to meet our short term and long term liquidity and capital requirements. 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 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 results 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. • We monetized marketable equity securities that form non-core investments for total net proceeds of $35.0 million. • As the subordinated note holder of a third party managed CLO, we received $10.4 million of excess net proceeds from a refinancing of the CLO in October 2024, which we applied as a return of capital. Liquidity Needs and Capital Activities Dividends Common Stock —The payment of common stock dividends and determination of the amount thereof is at the discretion of our Board of Directors. Preferred Stock— We have outstanding preferred stock totaling $822 million, bearing a weighted average dividend rate of 7.135% per annum, with aggregate dividend payments of $14.7 million per quarter. 54 Table of Contents Contractual Obligations, Commitments and Contingencies Debt Obligations As of the date of this filing, our corporate debt is composed of our securitized financing facility, as summarized below. ($ in thousands) Outstanding Principal Interest Rate (Per Annum) Anticipated Repayment Date Years Remaining to Maturity Class A-2 Notes $ 300,000 3.93 % September 2026 2.0 Investment Commitments Fund Commitments —As general partner, we typically have minimum capital commitments to our sponsored funds. With respect to our flagship value-add DBP fund series, and InfraBridge funds, we have made additional capital commitments as a general partner affiliate alongside our limited partner investors. Our fund capital investments further align our interests to our investors. As of September 30, 2024, we have unfunded equity commitments to our unconsolidated funds as general partner and general partner affiliate of $262.5 million (including commitments attributed to the ownership by employees and former employees in the general partner entities). 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 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 $9.1 million. Warehoused Investments We temporarily warehouse investments on behalf of prospective sponsored investment vehicles that are actively fundraising. The warehoused investments are transferred to the investment vehicle if and when sufficient third party capital, including debt, is raised. Generally, the timing of future warehousing activities is not known. Nevertheless, investment warehousing is undertaken only if it is determined that we will have sufficient liquidity through the anticipated warehousing period. At September 30, 2024, warehoused investments have an aggregate carrying value of $22 million. 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 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. The actual determination and required payment of any clawback obligation would generally occur after final disposition of the investments of the fund or otherwise as set forth in the governing documents of the fund. If the related carried interest distributions received by the Company are subject to clawback, the previously distributed carried interest would be similarly subject to clawback. The Company withholds a portion of the distribution of carried interest to employees to satisfy their potential clawback obligation. 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 September 30, 2024, the Company had no liability for clawback obligations on distributed carried interest. Lease Obligations At September 30, 2024, we had $45 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. 55 Table of Contents Sources of Liquidity Debt Funding As of the date of this filing, we have $300 million of outstanding principal on our corporate debt, as discussed above under " —Debt Obligation. " Our securitized financing facility is subject to various covenants, including financial covenants that require the maintenance of minimum thresholds for debt service coverage ratio and maximum loan-to-value ratio, as defined. As of the date of this filing, we are in compliance with all of the financial covenants, and the full $300 million is available to be drawn on our VFN. Our securitized financing facility allows for the issuance of additional term notes in the future to supplement our liquidity. The decision to enter into a particular financing arrangement is made after consideration of various factors including future cash needs, current sources of liquidity, demand for the Company’s debt or equity, and prevailing interest rates. Cash From Operations Fee-Related Earnings— We generate FRE from our investment management business, generally encompassing recurring fee revenue net of associated compensation and administrative expenses. Management fee revenue is generally a predictable and stable revenue stream. Our ability to generate new management fee streams through establishing new investment vehicles and raising investor capital depends on general market conditions and availability of attractive investment opportunities as well as availability of debt capital. Incentive Fees— Incentive fees, net of employee allocations, are earned based upon the financial performance of a vehicle above a specified return threshold, which is largely driven by appreciation in value of underlying investments. Incentive fees are recognized as fee revenue when they are no longer probable of significant reversal. As investment fair values and changes thereof could be affected by various factors, including market and economic conditions, incentive fees are by nature less predictable in amount and timing. Carried Interest Distributions— Carried interest is distributed generally upon profitable disposition of an investment if at the time of distribution, cumulative returns of the fund exceed minimum return hurdles. Carried interest distributions are recognized in earnings net of clawback obligations, if any. The amount and timing of carried interest distributions received may vary substantially from period to period depending upon the occurrence and size of investments realized by our sponsored funds. Investments— Our investments, primarily in our sponsored funds as general partner affiliate, generate cash largely through capital appreciation upon liquidation, and interest income from our credit fund. Asset Monetization We intend to monetize and recycle capital from our non-core investments through opportunistic asset sales. Following monetization of a substantial portion of our holdings in the third quarter of 2024, remaining marketable equity securities available for future monetization totaled $6.4 million at September 30, 2024. Public Offerings We may offer and sell various types of securities from time to time at our discretion based upon our needs and depending upon market conditions and available pricing. 56 Table of Contents Consolidated Cash Flows The following table summarizes the activities from our consolidated statements of cash flows, including discontinued operations. Nine Months Ended September 30, (In thousands) 2024 2023 Cash, cash equivalents and restricted cash—beginning of period $ 350,250 $ 1,036,739 Net cash generated by (used in): Operating activities 31,418 192,080 Investing activities (6,847) (768,072) Financing activities (77,806) 78,596 Effect of exchange rates on cash, cash equivalents and restricted cash 1,461 (673) Cash, cash equivalents and restricted cash—end of period $ 298,476 $ 538,670 Operating Activities 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 inflows of $31.4 million and $192.1 million in 2024 and 2023, respectively. 2023 cash inflows were driven largely by the operating activities of portfolio companies in the former Operating segment. Investing Activities Investing activities relate to general partner and general partner affiliate investments in sponsored funds, including drawdown of commitments and return of capital from realized fund investments; business combinations; and prior to deconsolidation of portfolio companies in the Operating segment in 2023, acquisition of real estate. Our investing activities generated net cash outflows of $6.8 million in 2024 and $768.1 million in 2023. • Net cash outflows in 2024 were driven by $76.8 million of fundings for our general partner and general partner affiliate commitments in our sponsored funds, net of return of capital, largely offset by $35.0 million of net proceeds from sale of our non-core investments and $38.0 million of net inflows from the 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 $613.1 million, attributable to capital expenditures in the data center portfolio of our former Operating segment; (ii) derecognition of $102.4 million of cash and restricted cash following the deconsolidation of a portfolio company in our former Operating segment, and (iii) $314.3 million paid, net of cash assumed, for the acquisition of InfraBridge. These outflows were partially offset by net cash inflows of $232.3 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 We may draw upon our securitized financing facility to finance our operating activities, and have the ability to raise capital in the public markets through issuances of preferred stock, common stock and private placement notes. We incur cash outlays primarily for payments on our corporate debt, and dividends to our preferred stockholders and common stockholders. Prior to deconsolidation in 2023, portfolio companies in the former Operating segment financed their activities largely through investment-level secured debt and incurred cash outlays for debt servicing and distributions to their third party investors who represented noncontrolling interests. Financing activities generated net cash outflows in 2024 and inflows in 2023. • In 2024, net cash outflows of $77.8 million were driven by preferred dividend payments of $44.0 million, cash settlement of contingent consideration to Wafra of $17.5 million, and limited partner redemptions in our consolidated liquid funds, partially offset by syndication of our interest in a consolidated fund and funding by Wafra for its share of our general partner commitment in DBP I. 57 Table of Contents • Net cash inflows of $78.6 million in 2023 represent primarily $489.9 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 redemption by a limited partner in a consolidated liquid fund, and income distribution to noncontrolling interests in our former Operating segment. Guarantees and Off-Balance Sheet Arrangements We have no guarantees or off-balance sheet arrangements that we believe are reasonable likely to have a material effect on our financial condition. Critical Accounting Policies and Estimates Our financial statements are prepared in accordance with GAAP, which requires the use of estimates and assumptions that involve the exercise of judgment and that affect the reported amounts of assets, liabilities, and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Our critical accounting policies and estimates are integral to understanding and evaluating our reported financial results as they require subjective or complex management judgments, resulting from the need to make estimates about the effect of matters that are inherently uncertain and unpredictable. There have been no changes to our critical accounting policies or those of our unconsolidated joint ventures since the filing of our Annual Report on Form 10-K for the year ended December 31, 2023. 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. 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. Recent Accounting Updates The effects of accounting standards adopted in 2024 and the potential effects of accounting standards to be adopted in the future are described in Note 2 to our consolidated financial statements in Item 1 of this Quarterly Report.