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Item 7. Management’s Discussion and Analysis

2023-02-27 compared with 2022-02-28 · 254 added, 206 removed, 389 unchanged (54% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

This MD&A contains forward-looking statements and involves numerous risks and uncertainties, including, but not limited to, those described in “Part I—Item 1A.

Risk Factors” of this report, and should be read in conjunction with the consolidated and combined financial statements notes included elsewhere in this report.

2021 was a pivotal year for Blue Owl.

We completed our transition to a publicly traded company, a successful combination of Owl Rock and Dyal Capital, record level of AUM and FPAUM, over $1.0 billion raised in the debt markets and closed out the year with the closing of the Oak Street Acquisition.

2021 GAAP and Non-GAAP Results

This Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) contains forward-looking statements and involves numerous risks and uncertainties, including, but not limited to, those described in “Item 1A.

Risk Factors” of this report, and should be read in conjunction with the Financial Statements.

Year Ended December 31,

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(1) For the specific components and calculations of these Non-GAAP measures, as well as a reconciliation of these measures to the most comparable measure in accordance with GAAP, see “—Non-GAAP Analysis” and “—Non-GAAP Reconciliations.”

Net Loss Attributable to Blue Owl Capital Inc.

(“Net Loss”) during the year ended December 31, 2021 was impacted by significant non-cash equity-based compensation expenses recognized in connection with the Business Combination.

Our results for periods prior to the Business Combination Date do not include the results of Dyal Capital;

Our results for the year ended 2021 do not include the results of Oak Street or Wellfleet, and include partial results of Dyal Capital;

therefore, prior period amounts are not comparable to current period.

Additionally, since the Oak Street Acquisition closed on December 29, 2021, their results were not material to our 2021 results.

We expect Oak Street, which will be part of our single reportable segment, to be accretive to our results in 2022.

Please see “— GAAP Results of Operations Analysis” and “—Non-GAAP Analysis” for a detailed discussion of the underlying drivers of our results, including the accretive impacts of the Dyal Acquisition.

Assets Under Management

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$21.1 billion

$11.0 billion

Diversified Lending

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$21.1 billion

$11.0 billion

Technology Lending

Commenced 2018

$16.0 billion

$12.1 billion

GP Debt Financing

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Commenced 2018

Professional Sports Minority Investments

Professional Sports

Minority Investments

Commenced 2021

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Commenced 2020

We finished the year with $94.5 billion of AUM, which included $61.4 billion of FPAUM.

During the fourth quarter of 2021, approximately 98% of our management fees were earned on AUM that we refer to as permanent capital.

Commenced 2022

We finished the year ended December 31, 2022 with $138.2 billion of AUM, which included $88.8 billion of FPAUM.

For the year ended 2022, approximately 93% of our management fees were earned on AUM from Permanent Capital.

As of December 31, 2022, we have approximately $10.8 billion in AUM not yet paying fees, providing approximately $141 million of annualized management fees once deployed or upon the expiration of certain fee holidays.

See “—Assets Under Management” for additional information, including important information on how we define these metrics.

Oak Street Acquisition

On December 29, 2021, we closed the Oak Street Acquisition, expanding our product offering into real estate.

Please see Note 3 to our Financial Statements for additional information.

Business Environment

Our business is impacted by conditions in the financial markets and economic conditions in the U.S., and to a lesser extent, elsewhere in the world.

In the alternative asset management industry, 2021 was a year of robust levels of fundraising and investment activity across the industry.

Allocations to alternative strategies have continued to rise across institutional and retail investors, driven by a need for yield and demand for differentiated, uncorrelated returns.

Alternative asset managers were able to deploy their dry powder across a wide spectrum of investment opportunities, driving record M&A activity for the year.

We have benefited from these ongoing secular tailwinds, providing the capital that managers require to finance acquisitions in their funds through our Direct Lending products, and the capital that managers need to expand and diversify their platforms through our GP Capital Solutions products.

Higher than expected inflation has impacted expectations for the pace of rate hikes, driving market volatility and adjusting investors’ views on earnings growth for many public companies.

We anticipate a net positive effect on our business from a rising rate environment.

We expect our Direct Lending products to benefit from rising rates, as investor demand would increase for senior secured floating rate assets, and over time, the effect of rising rates would be positive for the net interest income of our Direct Lending products’ loan portfolios.

For GP Capital Solutions, market volatility should drive demand for products managed by large, diversified managers, benefiting the types of firms our GP Capital Solutions products have typically taken stakes in.

With respect to our Real Estate products, we believe there will continue to be strong demand for real estate strategies with long-term, contractual income that are positively correlated to inflation and backed by investment grade tenants.

We believe that our disciplined investment philosophy across our distinct but complementary products contributes to the stability of our performance throughout market cycles.

Our products have a stable base of permanent or long-term capital enabling us to invest in assets with a long-term focus over different points in a market cycle.

We believe that our management-fee centric business model and base of Permanent Capital contribute to the resiliency of our earnings and the strength of our business growth.

In 2022, macroeconomic factors, including inflation, interest rates, global gross domestic product (“GDP”) growth, geopolitical instability and the impact of COVID-19 variants on economic growth, drove significant volatility in the public equity and fixed income markets.

inflation rose steeply through the first half of 2022, and although it eased during the second half of 2022, it has remained at an elevated level.

In an effort to combat inflation, the Federal Reserve began raising its target federal funds range during the first quarter of 2022 and continued raising throughout the year, weighing on U.S.

GDP growth and corporate earnings.

Through an environment where capital availability was more scarce, our Direct Lending products took market share, providing financing solutions to sponsors and companies at wider spreads and lower loan to value ratios on average, though our Direct Lending origination volume was impacted by the market environment and declined year over year.

Rising interest rates had a beneficial impact to our management fees, as higher base rates drove a meaningful increase in Part I Fees for the year.

Despite a more challenging industry fundraising backdrop, we held a final close for Dyal Fund V in 2022 at $12.9 billion, surpassing the initial $9 billion target.

The deployment potential for investment remains attractive with significant capital needs across the private alternative asset management universe.

Across the real estate industry, rising interest rates pressured cap rates and restrained transaction volume, while the inflationary environment in conjunction with higher interest expense impacted net operating income for many real estate owners.

Our Real Estate products, focused on triple net lease, benefited from the inflation-mitigating net lease structure and raised meaningful amounts of capital as we launched fundraising for a couple of new products in the second half of 2022.

We are continuing to closely monitor developments related to the macroeconomic factors that have contributed to market volatility, and to assess the impact of these factors on financial markets and on our business.

Our future results may be adversely affected by slowdowns in fundraising activity and the pace of capital deployment, which could result in delayed or decreased management fees.

It is currently not possible to predict the ultimate effects of these events on the financial markets, overall economy and our consolidated financial statements.

See “ Item 1A.

Risk Factors—Risks Related to Macroeconomic Factors.”

Assets Under Management

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In addition, our calculation of AUM includes amounts that are fee exempt (i.e., not subject to fees).

As of December 31, 2021, our assets under management include approximately $1.9 billion related to executives and other employees and approximately $1.0 billion related to other related parties.

A portion of these assets under management relate to accrued carried interests, as well as investments that are not charged fees.

As of December 31, 2022, assets under management related to us, our executives and other employees totaled approximately $3.1 billion (including $1.1 billion related to accrued carried interest).

A portion of these assets under management are not charged fees.

Composition of Assets Under Management

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AUM not yet paying fees generally relates to unfunded capital commitments (to the extent such commitments are not already subject to fees), undeployed debt (to the extent we earn fees based on total asset values or investment cost, inclusive of assets purchased using debt) and AUM that is subject to a temporary fee holiday.

Fee-exempt AUM represents certain investments by us, our employees, other related parties and third parties, as well as certain co-investment vehicles on which we do not earn fees.

Management uses AUM not yet paying fees as an indicator of management fees that will be coming online as we deploy existing assets in products that charge fees based on deployed and not uncalled capital, as well as AUM that is currently subject to a fee holiday that will expire at a predetermined time in the future.

Fee-exempt AUM represents certain investments by us, our employees, other related parties and third parties, as well as certain co-investment vehicles on which we never earn fees.

AUM not yet paying fees could pr ovide approximately $141 million of additional annualized management fees once deployed or upon the expiration of the relevant fee holidays.

Approximately $2.2 billion of AUM not yet paying fees moved to FPAUM on January 1, 2022, driven primarily by the expiration of certain fee holidays in Dyal Fund V.

Permanency and Duration of Assets Under Management

Our capital base is heavily weighted toward Permanent Capital.

We use the term “permanent capital” to refer to AUM in our products that do not have ordinary redemption provisions or a requirement to exit investments and return the proceeds to investors after a prescribed period of time.

Some of these products, however, may be required, or elect, to return all or a portion of capital gains and investment income.

Permanent capital includes certain products that are subject to management fee step downs and/or roll-offs over time.

Substantially all of our remaining AUM is in what we refer to as “long-dated funds.” These are funds in which the contractual remaining life is five years or more.

We view the permanency and duration of the products that we manage as a differentiator in our industry and as a means of measuring the stability of our future revenues stream.

The chart below presents the composition of our management fees by remaining product duration.

Changes in these relative percentages will occur over time as the mix of products we offer investors change.

For example, our Real Estate products have a higher concentration in long-dated funds, which in isolation may cause our percentage of management fees from permanent capital to decline.

Changes in these relative percentages will occur over time as the mix of products we offer changes.

For example, our Real Estate products have a higher concentration in what we refer to as “long-dated” funds, or funds in which the contractual remaining life is five years or more, which in isolation may cause our percentage of management fees from Permanent Capital to decline.

Changes in AUM

Year Ended December 31, 2022 Year Ended December 31, 2021

(dollars in millions) Direct Lending GP Capital Solutions Real Estate Total Direct Lending GP Capital Solutions Real Estate Total

(dollars in millions) Direct Lending GP Capital Solutions Real

Estate Total Direct Lending GP Capital Solutions Real

Beginning Balance $ 39,227 $ 39,906 $ 15,362 $ 94,495 $ 27,101 $ 26,220 $ — $ 53,321

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Distributions (1,651) (1,803) (1,210) (4,664) (848) (579) — (1,427)

Change in value 1,486 9,799 — 11,285 626 2,193 — 2,819

Change in value / other 1,441 1,384 2,198 5,023 1,486 9,799 — 11,285

Ending Balance $ 68,607 $ 48,510 $ 21,085 $ 138,202 $ 39,227 $ 39,906 $ 15,362 $ 94,495

Direct Lending.

Increase in AUM was driven by a combination of continued fundraising and debt deployment across the platform.

• $2.5 billion new capital raised in Diversified Lending, primarily driven by retail fundraising in ORCIC.

• $0.9 billion new capital raised in Technology Lending, driven by the initial launch of ORTF II, our second technology-focused BDC.

• $0.6 billion new capital raised in Opportunistic Lending, driven by additional commitments to our Owl Rock Opportunistic private fund.

• $7.3 billion of debt deployment across all of Direct Lending, as we continue to opportunistically deploy leverage in our BDCs.

Increase in AUM for the year ended December 31, 2022 was driven by the following:

• $6.5 billion from the Wellfleet Acquisition.

• $6.8 billion new capital raised in diversified lending, primarily driven by private wealth fundraising in ORCIC and a separately managed account.

• $4.1 billion new capital raised in technology lending, driven by continued fundraising in ORTF II and ORTIC.

• $1.0 billion in new capital raised in CLOs.

• $11.0 billion of additional net debt commitments across all of Direct Lending, as we continue to opportunistically manage leverage in our BDCs.

• $1.7 billion in distributions, which primarily relate to dividends paid from our BDCs.

Redemptions from these products were not material in 2022.

• $1.4 billion of overall appreciation across the platform.

GP Capital Solutions.

Increase in AUM was driven by new capital raised, primarily in Dyal Fund V, and overall appreciation across all of our major products.

Our Real Estate products represent the products added in connection with the Oak Street Acquisition that closed at the end of 2021.

Increase in AUM for the year ended December 31, 2022 was driven by new capital raised, primarily in Dyal Fund V and related co-investment vehicles, and overall appreciation across all of our major products, partially offset by distributions in co-investment vehicles and Dyal Fund III.

Increase in AUM for the year ended December 31, 2022 was driven by new capital raised of $3.7 billion across various products, primarily Oak Street Real Estate Capital Fund VI, our recently launched triple net-lease drawdown fund, and Oak Street Net Lease Trust, our recently launched REIT, additional net debt commitments of $1.1 billion, primarily related to Oak Street Net Lease Trust, and $2.2 billion of overall appreciation across the platform, partially offset by distributions across various products.

Changes in FPAUM

Year Ended December 31, 2022 Year Ended December 31, 2021

(dollars in millions) Direct Lending GP Capital Solutions Real Estate Total Direct Lending GP Capital Solutions Real Estate Total

(dollars in millions) Direct Lending GP Capital Solutions Real

Estate Total Direct Lending GP Capital Solutions Real

Beginning Balance $ 32,029 $ 21,212 $ 8,203 $ 61,444 $ 20,862 $ 17,608 $ — $ 38,470

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New capital raised / deployed (1)

12,472 9,425 3,304 25,201 10,598 3,700 — 14,298

Fee basis step down (1)

— (1,779) — (1,779) — — — —

Distributions (1,695) (86) (998) (2,779) (824) (96) — (920)

Change in value 1,393 — — 1,393 582 — — 582

Change in value / other (266) — 488 222 1,393 — — 1,393

Ending Balance $ 49,041 $ 28,772 $ 10,997 $ 88,810 $ 32,029 $ 21,212 $ 8,203 $ 61,444

(1) Reflects a change in classification during the fourth quarter of 2022 from fee basis step down to new capital raised / deployed for the fee holiday expiration in GP Capital Solutions Dyal Fund V of $2.1 billion on January 1, 2022.

Direct Lending.

Increase in FPAUM was driven by a combination of continued fundraising and debt deployment as discussed in the AUM section above.

Increase in FPAUM for the year ended December 31, 2022 was driven by a combination of continued fundraising and debt deployment, and the Wellfleet acquisition, partially offset by distributions, which primarily related to dividends paid from our BDCs, and a change in methodology included within change in value / other that reduced FPAUM by approximately $1.5 billion.

GP Capital Solutions.

Increase in FPAUM was driven by new capital raised, primarily in Dyal Fund V.

On January 1, 2022, $2.2 billion of AUM not yet paying fees moved to FPAUM due to the expiration of certain fee holidays in Dyal Fund V.

Our Real Estate products represent the products added in connection with the Oak Street Acquisition that closed at the end of 2021.

Increase in FPAUM for the year ended December 31, 2022 was driven by new capital raised, primarily in Dyal Fund V.

Additionally, the expiration of a fee holiday in Dyal Fund V on January 1, 2022, drove an increase in FPAUM of $2.1 billion, which was partially offset by a decrease in FPAUM in Dyal Fund I of $0.8 billion, as such fund no longer pays management fees, and a step down of $0.9 billion from committed to invested capital in Dyal Fund III.

Increase in FPAUM for the year ended December 31, 2022 was driven primarily by capital raised of $1.7 billion in Oak Street Real Estate Capital Net Lease Property Fund and new capital raised of $1.1 billion in Oak Street Net Lease Trust.

Product Performance

Product performance for certain of our products is included throughout this discussion with analysis to facilitate an understanding of our results of operations for the periods presented.

The performance information of our products reflected is not indicative of our performance.

The performance information of our products reflected is not indicative of Blue Owl’s performance.

An investment in Blue Owl is not an investment in any of our products.

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ORCC II (9) 2017 $ 2,595 $ 1,345 $ 1,345 $ 340 $ 1,297 $ 1,637 NM 1.24 x NM 6.9 %

ORCC III 2020 $ 3,497 $ 1,702 $ 1,653 $ 64 $ 1,668 $ 1,732 NM NM NM NM

ORCIC 2020 $ 3,996 $ 1,584 $ 1,577 $ 31 $ 1,581 $ 1,612 NM NM NM NM

ORCC III 2020 $ 4,018 $ 1,800 $ 1,800 $ 229 $ 1,814 $ 2,043 1.14 x 1.13 x 11.0 % 10.1 %

ORCIC (9) 2020 $ 13,066 $ 5,532 $ 5,532 $ 332 $ 5,250 $ 5,582 NM 1.05 x NM 5.9 %

Technology Lending

ORTF 2018 $ 6,986 $ 3,234 $ 3,234 $ 441 $ 3,386 $ 3,827 1.25 x 1.18 x 11.7 % 8.3 %

ORTF II 2021 $ 5,739 $ 3,495 $ 1,220 $ 17 $ 1,225 $ 1,242 NM NM NM NM

First Lien Lending (10)

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Owl Rock First Lien Fund Unlevered 2019 $ 154 $ 150 $ 150 $ 28 $ 143 $ 171 1.13x 1.09x 5.0 % 3.5 %

(1) Includes reinvested dividends, if applicable.

(1) Includes reinvested dividends and share repurchases, if applicable.

(2) Invested capital includes capital calls, reinvested dividends and periodic investor closes, as applicable.

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(5) Gross multiple of invested capital (“MoIC”) is calculated by adding total realized proceeds and unrealized values of a product’s investments and dividing by the total amount of invested capital.

Gross MoIC is before giving effect to management fees (including Part I Fees) and Part II Fees, as applicable.

Gross MoIC is calculated before giving effect to management fees (including Part I Fees) and Part II Fees, as applicable.

(6) Net MoIC measures the aggregate value generated by a product’s investments in absolute terms.

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(8) Net IRRs are calculated consistent with gross IRRs, but after giving effect to management fees (including Part I Fees) and Part II Fees, as applicable, and all other expenses.

An individual investor’s IRR may be different to the reported IRR based on the timing of capital transactions.

(9) For the purposes of calculating Gross IRR, the expense support provided to the fund would be impacted when assuming a performance excluding management fees (including Part I Fees) and Part II Fees, and therefore is not meaningful for ORCC II.

An individual investor’s IRR may differ from the reported IRR based on the timing of capital transactions.

(10) Owl Rock First Lien Fund is comprised of three feeder funds:

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Dyal Fund IV 2018 $ 13,875 $ 9,041 $ 5,596 $ 3,012 $ 6,430 $ 9,442 2.01 x 1.69 x 83.4 % 50.8 %

Dyal Fund V 2020 $ 6,724 $ 5,826 $ 593 $ — $ 1,321 $ 1,321 NM NM NM NM

Dyal Fund V 2020 $ 13,471 $ 12,852 $ 1,789 $ — $ 2,283 $ 2,283 1.49 x 1.28 x 69.4 % 37.1 %

(1) Valuation-related amounts and performance metrics are presented on a quarter lag and are exclusive of investments made by us and the related carried interest vehicles of the respective products.

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(5) Gross MoIC is calculated by adding total realized proceeds and unrealized values of a product’s investments and dividing by the total amount of invested capital.

Gross MoIC is before giving effect to management fees and carried interest, as applicable.

Gross MoIC is calculated before giving effect to management fees and carried interest, as applicable.

(6) Net MoIC measures the aggregate value generated by a product's investments in absolute terms.

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Net IRRs are calculated after giving effect to management fees and carried interest, as applicable, and all other expenses.

An individual investor's IRR may be different to the reported IRR based on the timing of capital transactions.

An individual investor's IRR may differ from the reported IRR based on the timing of capital transactions.

(dollars in millions) Year of Inception AUM Capital Raised Invested Capital

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Value Gross (5) Net (6) Gross (7) Net (8)

Net Lease (1)

Oak Street Real Estate Capital Fund IV (1) 2017 $ 1,194 $ 1,250 $ 1,250 $ 1,384 $ 573 $ 1,957 1.72x 1.55x 27.1 % 21.8 %

Oak Street Real Estate Capital Net Lease Property Fund 2019 $ 6,345 $ 3,472 $ 3,472 $ 540 $ 3,719 $ 4,259 1.24x 1.22x 17.7 % 16.4 %

Oak Street Real Estate Capital Fund V 2020 $ 3,818 $ 2,500 $ 637 $ 108 $ 747 $ 855 NM NM NM NM

Oak Street Asset-Backed Securitization (9) 2020 $ 3,001 $ 2,716 $ 258 $ 16 $ 296 $ 312 NM NM NM NM

Oak Street Real Estate Capital Fund V (1) 2020 $ 3,579 $ 2,500 $ 1,377 $ 363 $ 1,488 $ 1,851 1.43x 1.34x 38.4 % 30.9 %

Oak Street Net Lease Trust (1) 2022 $ 3,259 $ 1,123 $ 361 $ 2 $ 359 $ 361 NM NM NM NM

Oak Street Real Estate Capital Fund VI (1) 2022 $ 1,850 $ 1,850 $ — $ — $ — $ — NM NM NM NM

(1) Valuation-related amounts and performance metrics, as well as invested capital and realized proceeds, are presented on a quarter lag where applicable.

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(5) Gross MoIC is calculated by adding total realized proceeds and unrealized values of a product’s investments and dividing by the total amount of invested capital.

Gross MoIC is before giving effect to management fees and carried interest, as applicable.

Gross MoIC is calculated before giving effect to management fees and carried interest, as applicable.

(6) Net MoIC measures the aggregate value generated by a product's investments in absolute terms.

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Net IRRs are calculated after giving effect to management fees and carried interest, as applicable, and all other expenses.

An individual investor's IRR may be different to the reported IRR based on the timing of capital transactions.

(9) Capital raised for this product includes the par value of notes issued in the securitization.

Invested capital, realized proceeds, unrealized and total values relate to the subordinated notes/equity of the securitization.

An individual investor's IRR may differ from the reported IRR based on the timing of capital transactions.

GAAP Results of Operations Analysis

As a result of the Dyal Acquisition, prior year amounts are not comparable to current year amounts or expected future trends.

Dyal Capital’s results of operations are included from the Business Combination Date.

For a discussion of our results for the year ended December 31, 2020, compared to the year ended December 31, 2019, please refer to “Owl Rocks Management's Discussion and Analysis of Financial Condition and Results of Operations” in our Proxy Statement/Prospectus , filed May 3, 2021.

As a result of the Acquisitions, prior period amounts are not comparable to current period amounts or expected future trends.

Dyal Capital’s, Oak Street’s and Wellfleet’s results of operations are included from the business combination dates, May 19, 2021, December 29, 2021, and April 1, 2022, respectively.

For a discussion of our results for the year ended December 31, 2021, compared to the year ended December 31, 2020, please refer to “Blue Owl Management's Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K , filed February 28, 2022.

Year Ended December 31, 2022, Compared to the Year Ended December 31, 2021

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Total Expenses 1,372,205 1,751,145 (378,940)

Other Income (Loss)

Net losses on investments (132) (3,526) 3,394

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Change in earnout liability (14,488) (834,255) 819,767

Total Other Loss (940,210) (23,816) (916,394)

Total Other Income (Loss) (47,132) (940,210) 893,078

Loss Before Income Taxes (49,615) (1,867,477) 1,817,862

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Management Fees .

Management fees increased primarily due to the $234.3 million accretive impact of GP Capital Solution’s management fees from the Business Combination Date.

Additionally, management fees increased due to the fee waivers in ORCC that expired in October 2020.

These waivers totaled $130.9 million (inclusive of $74.8 million of Part I Fees) in 2020.

The remaining increase was driven primarily by the overall growth in FPAUM across all of our Diversified Lending product strategies.

See Note 6 to our consolidated and combined financial statements for additional details on our GAAP management fees by product and strategy.

The increase in management fees was primarily driven by the drivers below.

See Note 6 to our Financial Statements for additional details on our GAAP management fees by product and strategy.

• Direct Lending increased $206.3 million due to both the accretive impact of the Wellfleet Acquisition, as well as continued fundraising and deployment of capital within new and existing Direct Lending products.

• GP Capital Solutions increased $257.1 million, primarily driven by the accretive impact of the Dyal Acquisition that closed in May 2021, as well as continued fundraising in Dyal Fund V, partially offset by a $27.5 million increase in Strategic Revenue-Share Purchase consideration amortization.

• Real Estate increased $80.2 million due to the accretive impact of the Oak Street Acquisition that closed at the end of 2021, as well as continued fundraising and deployment of capital within new and existing Real Estate products.

Administrative, Transaction and Other Fees .

The increase in administrative, transaction and other fees was driven primarily by a $66.6 million increase in fee income earned for services provided to portfolio companies.

Also contributing to the year-over-year increase was $18.6 million of fees related to our GP Capital Solutions products, which are included from the Business Combination Date.

Realized Performance Income.

Realized performance income in 2021 was driven by Part II Fees from our technology lending products.

The decrease in administrative, transaction and other fees was driven primarily by the following:

(i) a $42.2 million decrease in fee income earned for services provided to portfolio companies, reflecting a lower volume of transactions on which we earn such fees;

(ii) partially offset by a $21.8 million increase in dealer manager revenues due to growth in the distribution of our retail BDCs;

and (iii) an increase of $16.3 million in administrative fees, driven by a higher level of reimbursable expenses due to growth in our products and business overall.

Compensation and Benefits.

Compensation and benefits expenses increased due to non-cash equity-based compensation charges totaling $1.2 billion in connection with Common Units issued in connection with the Business Combination and the additional $72.1 million was primarily related to subsequent compensation and acquisitions related equity grants and growth in our employee headcount.

Compensation and benefits expenses decreased primarily due to the following:

• $784.0 million decrease in equity-based compensation, which was driven by the following:

(i) a $935.7 million decrease related to acquisitions, primarily due to a $1.2 billion charge related to Blue Owl Operating Group Units issued in connection with the Business Combination, with the remaining offsetting increase related to the Oak Street and Wellfleet Earnouts, which are classified as compensation;

(ii) an offsetting $93.1 million increase related to recurring annual equity-based grants to employees, as such amounts were granted for the first time during the fourth quarter of 2021;

and (iii) an offsetting $58.6 million increase related to one-time equity-based grants to employees in connection with the Business Combination, as such equity-based grants were made during the fourth quarter of 2021.

• $66.1 million increase due to the amortization of cash earnouts, primarily related to the Oak Street Acquisition.

• Remaining offsetting increase was driven by the higher compensation for existing and new employees, inclusive of the increase in headcount related to the Dyal Acquisition, Oak Street Acquisition and Wellfleet Acquisition.

Amortization of Intangible Assets.

These expenses relate to the amortization of intangible assets acquired in connection with the Dyal Acquisition.

Amortization of intangible assets increased due to the addition of intangible assets in connection with the Business Combination, the Oak Street Acquisition and the Wellfleet Acquisition.

See Note 3 to our Financial Statements for additional information.

General, Administrative and Other Expenses .

The increase in general, administrative and other expenses was primarily due to Transaction Expenses of $56.2 million that were not eligible to be netted against offering proceeds for GAAP, an $8.9 million increase driven by higher legal, accounting and insurance expenses associated with being a public company and a $9.0 million increase in placement fees primarily due to closes in Dyal Fund V.

Partially offsetting these increases in expenses was a $21.9 million decrease in expense support to certain Direct Lending products.

Net losses on retirement of debt .

The net loss on retirement of debt in the current year period was primarily due to a $12.5 million call protection premium paid in connection with the early repayment of our Term Loan.

The remaining amount relates to the write-off of unamortized deferred financing costs related to the Term Loan and terminated revolving credit facilities.

See Note 4 to our Financial Statements for additional information.

General, administrative and other expenses increased, primarily driven by the following:

(i) an increase in distribution costs of $67.7 million due to increased fundraising;

(ii) a $26.1 million increase in reimbursed expenses due to growth in our products and business overall;

(iii) a $13.9 million increase in occupancy costs driven by the increase in headcount and our continued growth;

(iv) a $12.8 million increase in professional fees driven by our continued growth and (v) an $11.2 million increase in expense support to certain Direct Lending products.

These increases were partially offset by a $47.1 million decrease in Transaction Expenses, primarily due to Business Combination and Oak Street Acquisition related expenses that were incurred in the prior year period.

Interest Expense .

The increase in interest expense was driven by higher average debt outstanding, as in 2020 our long-term debt outstanding related to the $250.0 million Term Loan that was repaid in the second quarter of 2021 using proceeds from the $700 million of 2031 Notes, a larger size facility.

Further, we issued the $350 million of 2051 Notes during the fourth quarter of 2021.

Partially offsetting the impact of higher average borrowing outstanding were lower average borrow rates on the Notes in 2021 compared to the Term Loan in 2020.

The increase in interest expense was driven by higher average debt outstanding.

Change in TRA Liability.

The change in TRA liability was due to the impact of the time value of money on the portion of the TRA that is carried at fair value (i.e., Dyal Acquisition contingent consideration), as well as changes in estimated future tax rates due to changes in our state income tax apportionment.

The change in the TRA liability for the current year period and prior year period was not material.

Change in Warrant Liability.

The change in warrant liability was driven by the increase in the price of our publicly traded warrants, as such price directly impacts the Public Warrants and is also a significant input to the valuation of our Private Placement Warrants.

In August 2022, the Public Warrants were redeemed, see Note 1 for additional information.

The change in the warrant liability for the current year period was driven by the decrease in the price of our Class A Shares, as well as a markdown to the contractual redemption values for the Public Warrants that were redeemed in August 2022.

The change in the warrant liability in the prior year period was driven by the increase in the price of our Class A Shares.

Change in Earnout Liability.

The change in earnout liability was primarily due to the increase in our Class A Share price, as such input was a material driver of the valuation of the Earnout Securities carried at fair value through the Class E Trigger Event Dates.

No Earnout Securities remained outstanding as of December 31, 2021;

however, the Oak Street Cash Earnout was brought onto the statement of financial condition at the end of 2021 in connection with the Oak Street Acquisition, and such amounts will be subject to fair value remeasurement each period until the relevant Oak Street Trigger Events occur.

See Note 3 to our Financial Statements for additional information on the Oak Street Cash Earnout.

The increase in the earnout liability for the current year was primarily driven by the passage of time for the Oak Street Earnouts.

The change in the fair value of the earnout liability in the prior year was primarily due to the increase in our Class A Share price, as such input was a material driver of the valuation of the Earnout Securities (as defined in Note 1 to the Financial Statements) carried at fair value which were settled as of December 2021.

Income Tax Benefit

Prior to the Business Combination, our income was generally subject to New York City UBT, as the operating entities are partnerships for U.S.

Prior to the Business Combination, our income was generally subject to New York City unincorporated business tax, as the operating entities are partnerships for U.S.

federal income tax purposes.

In connection with the Business Combination, the portion of income allocable to the Registrant is also generally subject to corporate tax rates at the U.S.

As a result of the Business Combination, the portion of income allocable to the Registrant is now also generally subject to corporate tax rates at the U.S.

federal and state and local levels.

This resulted in an increase in income tax benefit in the current year period.

For the period, the income tax benefit decreased due to lower pre-tax loss as a result of the drivers discussed above.

Please see Note 10 to our Financial Statements for a discussion of the significant tax differences that impacted our effective tax rate.

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Net loss attributable to noncontrolling interests in the current year primarily represents the allocation to Common Units of their pro rata share of the Blue Owl Operating Group’s post-Business Combination net loss due to the drivers discussed above.

The Common Units represent an approximately 74% weighted average economic interest in the Blue Owl Operating Group.

Prior to the Business Combination, amounts attributable to noncontrolling interests were not significant, and related primarily to third-party interests held in certain of our consolidated investment advisor holding companies.

The Common Units represented an approximately 70% weighted average economic interest in the Blue Owl Operating Group during the year ended December 31, 2022.

Non-GAAP Analysis

In addition to presenting our consolidated and combined results in accordance with GAAP, we present certain other financial measures that are not presented in accordance with GAAP.

Management uses these measures to assess the performance of our business, and we believe that this information enhances the ability of shareholders to analyze our performance from period to period.

In addition to presenting our results in accordance with GAAP, we present certain other financial measures that are not presented in accordance with GAAP.

Management uses these measures in budgeting and to assess the operating results of our business, and we believe that this information enhances the ability of stockholders to analyze our performance from period to period.

These non-GAAP financial measures supplement and should be considered in addition to and not in lieu of our GAAP results, and such measures should not be considered as indicative of our liquidity.

Our non-GAAP measures may not be comparable to other similarly titled measured used by other companies.

Our non-GAAP measures may not be comparable to other similarly titled measures used by other companies.

Please see “—Non-GAAP Reconciliations” for reconciliations of these measures to the most comparable measures prepared in accordance with GAAP.

Fee-Related Earnings and Related Components

Fee-Related Earnings is a supplemental non-GAAP measure of operating performance used to make operating decisions and assess our operating performance.

Fee-Related Earnings excludes certain items that are required for the presentation of our results on a GAAP basis.

Fee-Related Earnings is a supplemental non-GAAP measure of our core operating performance used to make operating decisions and assess our core operating results, focusing on whether our core revenue streams, primarily consisting of management fees, are sufficient to cover our core operating expenses.

Management also reviews the components that comprise Fee-Related Earnings (i.e., FRE revenues and FRE expenses) on the same basis used to calculate Fee-Related Earnings, and such components are also non-GAAP measures and have been identified with the prefix “FRE” in the tables and discussion below.

Management believes that by excluding these items, which are described below, Fee-Related Earnings and its components can be useful as supplemental measures to our GAAP results in assessing our operating performance and focusing on whether our recurring revenues, primarily consisting of management fees, are sufficient to cover our recurring operating expenses.

Fee-Related Earnings exclude various items that are required for the presentation of our results under GAAP, including the following:

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compensation expenses related to capital contributions in certain subsidiary holding companies that are in-turn paid as compensation to certain employees, as such contributions are not included in Fee-Related Earnings or Distributable Earnings;

amortization of acquisition-related earnouts;

amortization of intangible assets;

“Transaction Expenses” as defined below;

net gains (losses) on investments, changes in TRA, earnout and warrant liabilities;

net losses on retirement of debt;

interest and taxes.

In addition, management reviews revenues by reducing GAAP administrative, transaction and other fees for certain expenses related to reimbursements from our products, which are presented gross for GAAP but net for non-GAAP measures.

Transaction Expenses are expenses incurred in connection with the Business Combination and other acquisitions and strategic transactions, including subsequent adjustments related to such transactions, that were not eligible to be netted against consideration or recognized as acquired assets and assumed liabilities in the relevant transaction.

expense support payments and subsequent reimbursements;

net gains (losses) on investments, net losses on retirement of debt;

changes in TRA, warrant and earnout liabilities;

FRE revenues and FRE expenses also exclude realized performance income and related compensation expense, as well as revenues and expenses related to amounts reimbursed by our products, including administrative fees and dealer manager reallowed commissions, that have no impact to our bottom line operating results, and therefore FRE revenues and FRE expenses do not represent our total revenues or total expenses in any given period.

Distributable Earnings

Distributable Earnings is a supplemental non-GAAP measure of operating performance that equals Fee-Related Earnings plus or minus, as relevant, realized performance income and related compensation, interest expense, as well as amounts payable for taxes and payments made pursuant to the TRA.

Amounts payable for taxes presents the current income taxes payable related to the respective period’s earnings, assuming that all Distributable Earnings were allocated to the Registrant, which would occur following the exchange of all Blue Owl Operating Group Units for Class A Shares.

Current income taxes payable and payments made pursuant to the TRA reflect the benefit of tax deductions that are excluded when calculating Distributable Earnings (e.g., equity-based compensation expenses, net losses on retirement of debt, Transaction Expenses, tax goodwill, etc.).

Amounts payable for taxes presents the current income taxes payable, excluding the impact of tax contingency-related accrued expenses or benefits, as such amounts are included when paid or received, related to the respective period’s earnings, assuming that all Distributable Earnings were allocated to the Registrant, which would occur following the exchange of all Blue Owl Operating Group Units for Class A Shares.

If these tax deductions were to be excluded from amounts payable for taxes, Distributable Earnings would be lower and our effective tax rate would appear to be higher, even though a lower amount of income taxes would have been paid or payable for a period’s earnings.

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Year Ended December 31,

(dollars in thousands) 2021 2020

(dollars in thousands) 2022 2021 $ Change

FRE revenues $ 1,321,740 $ 785,901 $ 535,839

FRE expenses 529,318 330,256 199,062

Net (income) loss allocated to noncontrolling interests included in Fee-Related Earnings (3,961) 4,610

Net loss (income) allocated to noncontrolling interests included in Fee-Related Earnings 7,709 (3,961) 11,670

Fee-Related Earnings $ 800,131 $ 451,684 $ 348,447

Distributable Earnings $ 742,802 $ 427,322 $ 315,480

Fee-Related Earnings and Distributable Earnings increased year-over-year as a result of the accretive impact of the Dyal Acquisition, as well as higher FRE revenues from our Direct Lending products as certain fee waivers in ORCC, our largest BDC, expired in the fourth quarter of 2020.

These increases were offset by higher FRE expenses, primarily due to compensation and benefits as discussed further below.

Fee-Related Earnings and Distributable Earnings increased as a result of the accretive impact of the Dyal Acquisition, Oak Street Acquisition and Wellfleet Acquisition, as well as higher FRE revenues in Direct Lending, GP Capital Solutions and Real Estate, partially offset by higher FRE expenses, as further discussed below.

Year Ended December 31,

(dollars in thousands) 2021 2020

(dollars in thousands) 2022 2021 $ Change

Direct Lending Products

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Opportunistic lending 8,756 3,993 4,763

CLOs 19,440 — 19,440

Management Fees, Net 639,975 433,630 206,345

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FRE Revenues - GP Capital Solutions Products 533,932 245,298 288,634

Real Estate Products

Net lease 80,179 — 80,179

Management Fees, Net 80,179 — 80,179

Administrative, transaction and other fees 254 — 254

FRE Revenues - Real Estate Products 80,433 — 80,433

Total FRE Revenues $ 1,321,740 $ 785,901 $ 535,839

FRE revenues increased primarily due to higher management fees from our Direct Lending products due to the fee waivers in ORCC, our largest BDC, that expired in October 2020.

These waivers totaled $130.9 million (inclusive of $74.8 million of Part I Fees) for the year ended December 31, 2020.

The remaining increase was driven primarily by the overall growth in FPAUM across all of our Diversified Lending product strategies.

Also contributing to the increase were higher administrative, transaction and other fees due to higher fee income earned for services provided to portfolio companies.

FRE revenues also increased due to the accretive impact of Dyal Capital’s management fees from the Business Combination Date.

FRE Management Fees .

The increase in FRE management fees was primarily driven by the drivers below:

• Direct Lending increased due to both the accretive impact of the Wellfleet Acquisition, as well as continued fundraising and deployment of capital within new and existing Direct Lending products.

• GP Capital Solutions increased, primarily driven by the accretive impact of the Dyal Acquisition that closed in May 2021, as well as continued fundraising in Dyal Fund V.

• Real Estate increased due to the accretive impact of the Oak Street Acquisition, as well as continued fundraising and deployment of capital within new and existing Real Estate products.

FRE Administrative, Transaction and Other Fees .

The decrease in FRE administrative, transaction and other fees was driven primarily by a decrease in fee income earned for services provided to portfolio companies, reflecting a lower volume of transactions on which we e arn such fees.

Year Ended December 31,

(dollars in thousands) 2021 2020

(dollars in thousands) 2022 2021 $ Change

FRE compensation and benefits $ 361,041 $ 255,626 $ 105,415

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Total FRE Expenses $ 529,318 $ 330,256 $ 199,062

FRE expenses increased primarily due to higher FRE compensation and benefits as a result of increased headcount, both in the legacy Owl Rock business, as well as due to an increase related to the Dyal Acquisition.

FRE general, administrative and other expenses were up primarily due to placement fees related to Dyal Fund V, expenses related to being a public company and increased travel and office-related expenses as we transition from working remotely back to the office.

These increases were partially offset by lower expense support to certain products.

See “—GAAP Results of Operations Analysis” for additional information on these drivers.

FRE Compensation and Benefits.

FRE compensation and benefits expenses increased, driven by higher compensation for existing and new employees, inclusive of the increase in headcount related to the Dyal Acquisition, Oak Street Acquisition and Wellfleet Acquisition.

FRE General, Administrative and Other Expenses .

FRE general, administrative and other expenses increased, primarily driven by:

(i) an increase in distribution costs of $44.8 million due to increased fundraising;

(ii) a $13.9 million increase in occupancy costs driven by the increase in headcount and our continued growth;

(iii) a $12.8 million increase in professional fees driven by our continued growth;

and (iv) the remaining net increase was across various categories, driven by our continued growth.

Non-GAAP Reconciliations

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(dollars in thousands) 2022 2021

GAAP Net Loss Attributable to Class A Shares $ (9,289) $ (376,171)

Net loss attributable to noncontrolling interests (30,946) (1,426,095)

Income tax benefit (9,380) (65,211)

GAAP Loss Before Income Taxes (49,615) (1,867,477)

Net (income) loss allocated to noncontrolling interests included in Fee-Related Earnings (3,961) 4,610

Net loss (income) allocated to noncontrolling interests included in Fee-Related Earnings 7,709 (3,961)

Strategic Revenue-Share Purchase consideration amortization 37,383 9,892

Realized performance income (12,221) (5,906)

Realized performance compensation 4,282 2,067

Equity-based compensation 1,205,336 90,525

Equity-based compensation - other 99,520 6,891

Equity-based compensation - acquisition related 248,455 1,184,170

Equity-based compensation - Business Combination grants 72,857 14,275

Acquisition-related cash earnout amortization 66,110 —

Capital-related compensation 4,327 1,416

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Transaction Expenses 9,089 56,218

Interest expense 27,275 23,816

Realized performance income (5,906) —

Expense support 8,194 —

Net losses on investments 132 3,526

Net losses on early retirement of debt 17,636 —

Net losses on retirement of debt — 17,636

Change in TRA liability 11,435 13,848

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Change in earnout liability 14,488 834,255

Interest expense 55,711 27,275

Fee-Related Earnings 800,131 451,684

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Realized performance income (12,221) (5,906)

Administrative and other fees (41,963) (16,505)

Reimbursed expenses (73,144) (41,963)

FRE Revenues $ 1,321,740 $ 785,901

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Realized performance compensation (4,282) (2,067)

Equity-based compensation (1,204,119) (90,525)

Equity-based compensation - other (98,798) (5,674)

Equity-based compensation - acquisition related (248,455) (1,184,170)

Equity-based compensation - Business Combination grants (72,857) (14,275)

Capital-related compensation (4,327) (1,416)

Administrative and other expenses (33,760) (13,009)

Acquisition-related cash earnout amortization (66,110) —

Reimbursed expenses (38,816) (33,760)

FRE Compensation and Benefits $ 361,041 $ 255,626

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Transaction Expenses (9,089) (56,218)

Equity-based compensation (1,217) —

Administrative and other expenses (8,203) (3,496)

Equity-based compensation - other (722) (1,217)

Expense support (8,194) —

Reimbursed expenses (34,328) (8,203)

FRE General, Administrative and Other Expenses $ 168,277 $ 74,630

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We rely on management fees as the primary source of our operating liquidity.

From time-to-time we may rely on the use of revolving credit facilities between management fee collection dates, which generally occur on a quarterly basis.

From time to time we may rely on the use of our Revolving Credit Facility between management fee collection dates, which generally occur on a quarterly basis.

We may also rely on our Revolving Credit Facility for liquidity needed to fund acquisitions, which we may replace with longer-term financing, subject to market conditions.

To the extent that we have excess liquidity, we may invest such excess liquidity in corporate bonds, agency securities and other investments.

We ended 2021 with $42.6 million of cash and cash equivalents, excess liquidity investments of $1.3 million and $487.0 million available under our Revolving Credit Facility.

We had $153.0 million outstanding on our Revolving Credit Facility, and such amounts were repaid in January 2022 in connection with revenues collected at the start of the quarter.

In February, we increased the capacity of our Revolving Credit Facility, and as of the date of this filing, we have $715.0 million available under the Revolving Credit Facility, which is available for general corporate purposes.

In February 2022, we also issued the $400.0 million 2032 Notes, providing additional liquidity for general corporate purposes, including to fund future strategic acquisitions or related transactions and growth initiatives.

We ended 2022 with $68.1 million of cash and cash equivalents and approximately $900 million available under our Revolving Credit Facility.

Based on management’s experience and our current level of liquidity and assets under management, we believe that our current liquidity position and cash generated from management fees will continue to be sufficient to meet our anticipated working capital needs for at least the next 12 months.

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• Grow our existing investment management business.

• Expand, or acquire, into businesses that are complementary to our existing investment management businesses or other strategic growth initiatives.

• Expand, or acquire, into businesses that are complementary to our existing investment management business or other strategic growth initiatives.

• Pay operating expenses, including cash compensation to our employees.

• Repay debt obligations and interest thereon.

• Opportunistically repurchase Class A Shares pursuant to the Share Repurchase Program (as defined below).

• Opportunistically repurchase Class A Shares on the open market, as well as pay withholding taxes on net settled, vested RSUs.

• Pay income taxes and amounts due under the TRA.

• Pay dividends to holders of our Class A Shares, as well as make corresponding distributions to holders of Common Units at the Blue Owl Operating Group level.

• Fund investment commitments to existing or future products.

• Fund debt and equity investment commitments to existing or future products.

Debt Obligations

Our long-term debt obligations consisted of the $700.0 million 2031 Notes and the $350.0 million 2051 Notes as of December 31, 2021.

We also had $153.0 million outstanding on our Revolving Credit Facility, and such amounts were repaid in January 2022, as discussed above, and issued the $400.0 million 2032 Notes in February 2022.

We expect to use cash on hand to pay interest and principal due on our financing arrangements over time, which would reduce amounts available for dividends and distributions to our shareholders.

As of December 31, 2022, our long-term debt obligations consisted of $700.0 million aggregate principal amount of 3.125% Senior Notes due 2031 (the “2031 Notes”), $400.0 million aggregate principal amount of 4.375% Senior Notes due 2032 (the “2032 Notes”) and $350.0 million aggregate principal amount of 4.125% Senior Notes due 2051 (the “2051 Notes”and collectively with the 2031 Notes and the 2032 Notes, the “Notes”).

We also had $210.0 million outstanding under our Revolving Credit Facility as of December 31, 2022.

We expect to use cash on hand to pay interest and principal due on our financing arrangements over time, which would reduce amounts available for dividends and distributions to our stockholders.

We may choose to refinance all or a portion of any amounts outstanding on or prior to their respective maturity dates by issuing new debt, which could result in higher borrowing costs.

We may also choose to repay borrowing by using proceeds from the issuance of equity or other securities, which would dilute shareholders.

See Note 4 to our consolidated and combined financial statements in this report for additional information regarding our debt obligations.

Management regularly reviews Adjusted EBITDA to assess our ability to service our debt obligations.

Adjusted EBITDA is equal to Distributable Earnings plus interest expense, taxes and TRA payable, and fixed assets depreciation and amortization.

We may also choose to repay borrowing by using proceeds from the issuance of equity or other securities, which would dilute stockholders.

See Note 4 to our Financial Statements for additional information regarding our debt obligations.

Management regularly reviews Adjusted EBITDA to assess our ability to service our debt obligations, and as such believes that such measure is meaningful to our investors.

Adjusted EBITDA is equal to Distributable Earnings plus interest expense, taxes payable and TRA payments, and fixed assets depreciation and amortization.

Adjusted EBITDA is a non-GAAP financial measure that supplements and should be considered in addition to and not in lieu of our GAAP results, and such measure should not be considered as indicative of our liquidity.

Adjusted EBITDA may not be comparable to other similarly titled measured used by other companies.

Adjusted EBITDA was $169.4 million for the quarter ended December 31, 2021.

Adjusted EBITDA was $810.4 million for the year ended December 31, 2022.

Please see “—Non-GAAP Reconciliations” for reconciliations of Adjusted EBITDA to the most comparable measures prepared in accordance with GAAP.

Tax Receivable Agreement

As discussed in Note 11 to our consolidated and combined financial statements in this report, we may in the future be required to make payments under the TRA.

As of December 31, 2021, assuming no material changes in the relevant tax law and that we generate sufficient taxable income to realize the full tax benefit of the increased amortization resulting from the increase in tax basis of certain Blue Owl Operating Group assets, we expect to pay approximately $670.7 million under the TRA, net of fair value adjustments.

As discussed in Note 11 to our Financial Statements in this report, we may in the future be required to make payments under the TRA.

As of December 31, 2022, assuming no material changes in the relevant tax law and that we generate sufficient taxable income to realize the full tax benefit of the increased amortization resulting from the increase in tax basis of certain Blue Owl Operating Group assets, we expect to pay approximately $936.2 million under the TRA (such amount excludes the adjustment to fair value for the portion classified as contingent consideration).

Future cash savings and related payments under the TRA in respect of subsequent exchanges of Blue Owl Operating Group Units for Class A or B Shares would be in addition to these amounts.

Payments under the tax receivable agreement are anticipated to increase the tax basis adjustment and, consequently, result in increasing annual amortization deductions in the taxable years of and after such increases to the original basis adjustments, and potentially will give rise to increasing tax savings with respect to such years and correspondingly increasing payments under the TRA.

The obligation to make payments under the tax receivable agreement is an obligation of Blue Owl GP, and any other corporate taxpaying entities that in the future may hold GP Units, and not of the Blue Owl Operating Group.

Payments under the TRA are anticipated to increase the tax basis adjustment and, consequently, result in increasing annual amortization deductions in the taxable years of and after such increases to the original basis adjustments, and potentially will give rise to increasing tax savings with respect to such years and correspondingly increasing payments under the TRA.

The obligation to make payments under the TRA is an obligation of Blue Owl GP, and any other corporate taxpaying entities that in the future may hold GP Units, and not of the Blue Owl Operating Group.

We may need to incur debt to finance payments under the TRA to the extent the Blue Owl Operating Group does not distribute cash to Registrant or Blue Owl GP in an amount sufficient to meet our obligations under the TRA.

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In light of the numerous factors affecting our obligation to make payments under the TRA, the timing and amounts of any such actual payments are not reasonably ascertainable.

Share Repurchases and RSUs Withheld for Tax Withholding

On May 4, 2022, our Board authorized the repurchase of up to $150.0 million of Class A Shares (the “Program”).

Under the Program, repurchases may be made from time to time in open market transactions, in privately negotiated transactions or otherwise.

The timing and the actual numbers repurchased will depend on a variety of factors, including legal requirements, price and economic and market conditions.

The Program may be changed, suspended or discontinued at any time and will terminate upon the earlier of (i) the purchase of all shares available under the Program or (ii) December 31, 2024.

The Program replaced the previously authorized program (the “2021 Program,” collectively the “Programs”).

During the year ended December 31, 2022, we repurchased 7,637,877 Class A Shares under the Programs for an aggregate amount of $78.6 million, excluding commission costs, which includes 2,000,000 shares repurchased under the 2021 Program for an aggregate amount of $24.2 million, excluding commission costs, using cash on hand.

Future share repurchases may be funded using cash on hand, which would reduce amounts available for dividends and distributions, or by incurring additional debt.

Additionally, pursuant to the terms of our RSU agreements, upon the vesting of RSUs to employees, we may net settle awards to satisfy employee tax withholding obligations.

In such instances, we cancel a number of RSUs equivalent in value to the amount of tax withholding payments that we make on behalf of employees out of available cash.

During the year ended December 31, 2022, 194,355 RSUs with a fair value of $2.4 million were withheld to satisfy tax withholding obligations.

We classify the warrants issued in connection with the Business Combination as liabilities in our consolidated and combined statements of financial condition, as in the event of a change in control, warrant holders have the ability to demand cash settlement from us.

In addition, we have the option to cash settle outstanding warrants when certain criteria is met, as described in Note 2 to our Financial Statements.

To the extent we have insufficient cash on hand or that we opt to, we may rely on debt or equity financing to facilitate these transactions in the future if needed.

Earnout Securities and Oak Street Cash Earnout

We classified certain Earnout Securities as liabilities in our consolidated and combined statements of financial condition, as described in Note 2 to our Financial Statements.

The settlement of these liabilities during 2021 was in the form of Class A Shares and Common Units that were issued upon the relevant Class E Triggering Events and did not require cash settlement.

A portion of the Oak Street Cash Earnouts are also liability classified and represent the fair value of the obligation to make future cash payments that would need to be made if all the respective Oak Street Triggering Events occur.

Further, the portion classified as compensation expense will be expensed and a corresponding accrued compensation liability will be recorded over the service period.

To the extent we have insufficient cash on hand or that we opt to, we may rely on debt or equity financing to facilitate these transactions in the future.

In August 2022 (the “Redemption Date”), we redeemed all outstanding Public Warrants.

See Note 1 to our Financial Statements for additional information.

The Private Placement Warrants are not redeemable at our option and continue to remain outstanding following the Redemption Date.

Oak Street Cash Earnout and Wellfleet Earnout

A portion of the Oak Street Cash Earnout and the Wellfleet Earnout (each as defined in Note 3 to our Financial Statements) is classified as a liability and represents the fair value of the obligation to make future cash payments that would need to be made if all the respective Oak Street Triggering Events and Wellfleet Triggering Events occur.

As we approach each Triggering Event, we generally would expect the respective liabilities to increase due to the passage of time, which would result in mark-to-market losses being recognized in our consolidated statement of operations.

Further, the cash portion classified as compensation expense will be expensed and a corresponding accrued compensation liability will be recorded over the service period.

To the extent we have insufficient cash on hand or that we opt to, we may rely on debt or equity financing to facilitate these transactions in the future.

For details on the Oak Street Cash Earnout and Wellfleet Earnout, see Note 3 to the Financial Statements.

Dividends and Distributions

We intend to continue to pay to Class A Shareholders (and Class B Shareholders in the future to the extent any Class B Shares are outstanding) a quarterly dividend representing approximately 85% of Distributable Earnings following the end of each quarter.

Blue Owl Capital Inc.’s share of Distributable Earnings, subject to adjustment as determined by our Board to be necessary or appropriate to provide for the conduct of our business, to make appropriate investments in our business and products, to comply with applicable law, any of our debt instruments or other agreements, or to provide for future cash requirements such as tax-related payments, operating reserves, clawback obligations and dividends to shareholders for any ensuing quarter.

For the fourth quarter of 2022, we declared a dividend of $0.13 to holders of record as of the close of business on February 24, 2023, which will be paid on March 6, 2023.

Starting in 2023, we intend to move to a fixed quarterly dividend based on the Company’s expected annual Distributable Earnings for the current fiscal year, and will be reassessed on an annual basis.

We expect to set the target annual dividend for fiscal year 2023 at $0.56 per Class A Share (representing a fixed quarterly dividend of $0.14 per Class A Share), subject to the approval of the Board each quarter on or prior to each quarterly distribution date and in compliance with Delaware law, and such dividends are paid following the end of each quarter.

We intend to increase our fixed dividend each year, in line with our expected growth in Distributable Earnings.

When setting our dividend, our Board considers Blue Owl’s share of Distributable Earnings, and makes adjustments as necessary or appropriate to provide for the conduct of our business, to make appropriate investments in our business and products, including funding of GP commitments and potential strategic transactions;

to provide for future cash requirements such as tax-related payments, operating reserves, fixed asset purchases under the Company's share repurchase program and dividends to stockholders for any ensuing quarter;

or to comply with applicable law and the Company's contractual obligations.

All of the foregoing is subject to the qualification that the declaration and payment of any dividends are at the sole discretion of our Board, and our Board may change our dividend policy at any time, including, without limitation, to reduce or eliminate dividends entirely.

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Holders of our Class A and B Shares may not always receive distributions or may receive lower distributions on a per share basis at a time when we, indirectly through Blue Owl GP, and holders of our Common Units are receiving distributions on their interests, as distributions to the Registrant and Blue Owl GP may be used to settle tax and TRA liabilities, if any, and other obligations.

Dividends are expected to be treated as qualified dividends under current law to the extent of the Company’s current and accumulated earnings and profits, with any excess dividends treated as a return of capital to the extent of a shareholder’s basis, and any remaining excess generally treated as gain realized on the sale or other disposition of stock.

Dividends are expected to be treated as qualified dividends under current law to the extent of the Company’s current and accumulated earnings and profits, with any excess dividends treated as a return of capital to the extent of a stockholder’s basis, and any remaining excess generally treated as gain realized on the sale or other disposition of stock.

Risks to our Liquidity

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No assurance can be given that we will be able to issue new debt, enter into new credit facilities or issue equity or other securities in the future on attractive terms or at all.

Adverse market conditions, including from the COVID-19 pandemic or any other market dislocation event, may negatively impact our liquidity.

Adverse market conditions, including from unexpectedly high and persistent inflation, an increasing interest rate environment, geopolitical events, and ongoing impact from COVID-19 globally, may negatively impact our liquidity.

Cash flows from management fees may be impacted by a slowdown or a decline in fundraising and deployment, as well as declines in the value of investments held in certain of our products.

LIBOR Transition

On March 5, 2021, the UK Financial Conduct Authority announced that it would phase out LIBOR as a benchmark immediately after December 31, 2021, for sterling, euro, Japanese yen, Swiss franc and 1-week and 2-month U.S.

On March 5, 2021, the U.K.

Financial Conduct Authority announced that it would phase out LIBOR as a benchmark immediately after December 31, 2021, for sterling, euro, Japanese yen, Swiss franc and 1-week and 2-month U.S.

Dollar settings and immediately after June 30, 2023, the remaining U.S.

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Our senior management has oversight of these transition efforts.

See “Risk Factors—Risks Related to Legal and Regulatory Environment—Changes to the method of determining the London Interbank Offered Rate (“LIBOR”) or the selection of a replacement for LIBOR may affect the value of investments held by our products and could affect our results of operations and financial results.”

See “Item 1A.

Risk Factors—Risks Related to Our Legal and Regulatory Environment—Changes to the method of determining LIBOR or the selection of a replacement for LIBOR may affect the value of investments held by our products.”

Cash Flows Analysis

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One of our largest operating cash outflows generally relates to bonus expense, which are generally paid out during the first quarter of the year following the expense.

The cash flows related to Dyal Capital are included starting on the Business Combination Date, and therefore our historical operating cash flows are not representative of our future cash flows.

Net cash flows from operating activities increased from the prior year period due to the inclusion of the Dyal Capital related cash flows, as well as higher management fees from our Direct Lending products.

Net cash flows from operating activities increased from the prior year period due to the inclusion of the GP Capital Solutions and Real Estate related cash flows, as well as higher management fees from our Direct Lending products.

These increases were partially offset by higher 2021 discretionary bonuses, which were paid in the first quarter of 2022, as compared to discretionary bonuses in 2020, which were paid in the first quarter of 2021.

Investing Activities.

Cash flows related to investing activities for 2021 primarily related to the cash consideration paid in connection with the Dyal Acquisition and Oak Street Acquisition.

Cash flows from investing activities for 2022 were primarily attributable to investments by us into our products, cash consideration paid in connection with the Wellfleet Acquisition and cash outflows related to office space-related leasehold improvements.

In 2021, cash flows from investing activities were primarily related to the cash consideration paid in connection with the Dyal Acquisition and Oak Street Acquisition.

In 2021, we also invested excess liquidity from our Notes offerings and retained earnings in various fixed income investments and subsequently sold such investments for general corporate purposes.

In 2020, cash flows related to investing activities were not material.

Financing Activities.

Cash flows from financing activities for 2022 were primarily driven by dividends on our Class A Shares and related distributions on our Common Units (i.e., noncontrolling interests).

Our cash flows from financing activities also benefited from a net increase related to the proceeds from our 2032 Notes, which were used to finance working capital needs and general capital purposes, including acquisitions, partially offset by repayments under our Revolving Credit Facility.

Cash flows related to financing activities for 2021 were primarily driven by cash proceeds from the Business Combination, as well as related cash consideration paid to certain pre-Business Combination Owl Rock owners.

Additionally, distributions of pre-Business Combination-related earnings were also made during 2021, with a final distribution of $52.0 million related to pre-Business Combination-related earnings made during the third quarter of 2021.

Cash flows related to financing activities in 2021 also included the proceeds from our 2031 Notes, which proceeds were used in part to repay our previously outstanding Term Loan and proceeds from our 2051 Notes, which proceeds were used to finance working capital needs and general capital purposes.

We also made various short-term borrowings and repayments under our revolving credit facilities.

Such borrowings were fully repaid by January 2022.

Our 2020 cash flows related to financing activities included borrowings and repayments under our previously outstanding revolving credit facilities.

In addition, distributions related to pre-Business Combination-related earnings was another significant financing cash flow in the prior-year period.

Critical Accounting Estimates

We prepare our Financial Statements in accordance with U.S.

In applying many of these accounting principles, we make estimates that affect the reported amounts of assets, liabilities, revenues and expenses in our consolidated and combined financial statements.

In applying many of these accounting principles, we make estimates that affect the reported amounts of assets, liabilities, revenues and expenses in the Financial Statements.

We base our estimates on historical experience and other factors that we believe are reasonable under the circumstances.

These estimates, however, are subjective and subject to change, and actual results may differ materially from our current estimates due to the inherent nature of these estimates, including uncertainty in the current economic environment due to the COVID-19 pandemic and other factors.

These estimates, however, are subjective and subject to change, and actual results may differ materially from our current estimates due to the inherent nature of these estimates, including geopolitical, macro-environmental and other uncertainty.

For a summary of our significant accounting policies, see Note 2 to our Financial Statements.

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Investments Held by our Products

The fair value of the investments held by our Direct Lending products is the primary input to the calculation for the majority of our management fees.

Management fees from our GP Capital Solutions and Real Estate products are generally based on commitments or investment cost, so our management fees are generally not impacted by changes in the estimated fair values of investments held by these products.

The fair value of the investments held by our Direct Lending products and certain Real Estate products is the primary input to the calculation for the majority of our management fees.

Management fees from our GP Capital Solutions and other Real Estate products are generally based on commitments or investment cost, so our management fees are generally not impacted by changes in the estimated fair values of investments held by these products.

However, to the extent that management fees are calculated based on investment cost of the product’s investments, the amount of fees that we may charge will increase or decrease from the effect of changes in the cost basis of the product’s investments, including potential impairment losses.

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For investments where little market activity exists, the determination of fair value is based on the best information available, we incorporate our own assumptions and involves a significant degree of judgment, and the consideration of a combination of internal and external factors.

Our products generally value their investments at fair value, as determined in good faith by each product’s respective board of directors or valuation committee, as applicable, based on, among other things, the input of third party valuation firms and taking into account the nature and realizable value of any collateral, an investee’s ability to make payments and its earnings, the markets in which the investee operates, comparison to publicly traded companies, discounted cash flow, current market interest rates and other relevant factors.

Our products generally value their investments at fair value, as determined in good faith by each product’s respective board of directors or valuation committee, as applicable, based on, among other things, the input of third party valuation firms and taking into account the nature and realizable value of any collateral, an investee’s ability to make payments and its earnings, the markets in which the investee operates, comparison to publicly traded companies, discounted cash flows, current market interest rates and other relevant factors.

Because such valuations are inherently uncertain, the valuations may fluctuate significantly over time due to changes in market conditions.

These valuations would, in turn, have corresponding proportionate impacts on the amount management fees that we may earn from certain products on which revenues are based on the fair value of investments.

These valuations would, in turn, have corresponding proportionate impacts on the amount of management fees that we may earn from certain products on which revenues are based on the fair value of investments.

TRA Liability

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Earnout Liability and Private Placement Warrants Liability

The fair values of our Earnout Securities liability and Private Placement Warrants liability were determined using Monte Carlo simulations that have various significant unobservable inputs.

The assumptions used could have a material impact on the valuation of these liabilities, and include our best estimate of expected volatility, expected holding periods and appropriate discounts for lack of marketability.

Changes in the estimated fair values of these liabilities may have material impacts on our results of operations in any given period, as any increases in these liabilities have a corresponding negative impact on our GAAP results of operations in the period in which the changes occur.

The fair values of our Earnout Securities liability and Private Placement Warrants liability were determined using various significant unobservable inputs, including a discount rate and our best estimate of expected volatility and expected holding periods.

See Note 9 to our Financial Statements for additional details.

Equity-based Compensation

The fair values of our equity-based compensation RSU and Incentive Unit grants are generally determined using our Class A Share price on the grant date, adjusted for the lack of dividend participation during the vesting period, and the application of a discount for lack of marketability on RSUs and Incentive Units that are subject to a one-year post-vesting transfer restriction.

The grant-date fair values of our RSU and Incentive Unit grants, as well as the Wellfleet Earnouts are generally determined using our Class A Share price on the grant date, adjusted for the lack of dividend participation during the vesting period, and the application of a discount for lack of marketability on RSUs and Incentive Units that are subject to post-vesting transfer restrictions.

The higher these discounts, the lower the compensation expense taken over time for these grants.

For the Seller Earnout Securities and Oak Street Earnout Units that were classified as equity-based compensation for GAAP, we used Monte Carlo simulations that had various significant unobservable inputs.

For the Oak Street Earnout Units that were classified as equity-based compensation for GAAP, we determines the grant date fair value using Monte Carlo simulations that had various significant unobservable inputs.

The assumptions used have a material impact on the valuation of these grants, and include our best estimate of expected volatility, expected holding periods and appropriate discounts for lack of marketability.

The higher the expected volatility, the higher the compensation expense taken each period for these grants.

The higher the expected holding periods and discount for lack of marketability, the lower the compensation expense taken each period for these grants.

The higher the expected volatility, the higher the compensation expense taken for these grants.

The higher the expected holding periods and discount for lack of marketability, the lower the compensation expense taken for these grants.

See Note 8 to our Financial Statements for additional details.

Deferred Tax Assets

As a result of the Business Combination, deferred tax assets comprise one of our largest assets in our consolidated and combined statements of financial condition.

Substantially all of our deferred tax assets relate to the goodwill and other intangible assets deductible for tax purposes that arose in connection with the purchase of Blue Owl Operating Group Units with proceeds from the Business Combination, as well as subsequent payments expected to be made under the TRA and other capital transactions that have occurred since the Business Combination.

In accordance with relevant tax rules, we expect to take substantially all of these goodwill and other intangible deductions over the 15-year period following the Business Combination Date.

Substantially all of our deferred tax assets relate to goodwill and other intangible assets deductible for tax purposes, as well as payments expected to be made under the TRA.

In accordance with relevant tax rules, we expect to take substantially all of these goodwill and other intangible deductions over a 15-year period following the applicable transaction.

To the extent we generate insufficient taxable income to take the full deduction in any given year, we will generate a net operating loss (“NOL”) that is available for us to use over an indefinite carryforward period in order to fully realize the deferred tax assets.

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Impairment of Goodwill and Other Intangible Assets

Our ongoing accounting for goodwill and other intangible assets acquired as part of the Business Combination requires us to make significant estimates and assumptions as we exercise judgement to evaluate these assets for impairment.

Our ongoing accounting for goodwill and other intangible assets requires us to make significant estimates and assumptions when evaluating these assets for impairment.

We generally undertake a qualitative review of factors that may indicate whether an impairment exists.

We take into account factors such as the growth in AUM and FPAUM, general economic conditions, and various other factors that require judgement in deciding whether a quantitative analysis should be undertaken.

We take into account factors such as the growth in FPAUM and management fees, general economic conditions, and various other factors that require judgement in deciding whether a quantitative analysis should be undertaken.

Our evaluation for indicators of impairment may not capture a potential impairment, which could result in an overstatement of the carrying values of goodwill and other intangible assets.

Variable Interest Entities

The determination of whether to consolidate a variable interest entity (“VIE”) under GAAP requires a significant amount of judgment concerning the degree of control over an entity by its holders of variable interests.

To make these judgments, we conduct an analysis, on a case-by-case basis, of whether we are the primary beneficiary and are therefore required to consolidate an entity.

We continually reconsider whether we should consolidate a VIE.

Upon the occurrence of certain events, such as modifications to organizational documents and investment management agreements of our products, we will reconsider our conclusion regarding the status of an entity as a VIE.

Our judgement when analyzing the status of an entity and whether we consolidate an entity could have a material impact on individual line items within our Financial Statements, as a change in our conclusion would have the effect of grossing up the assets, liabilities, revenues and expenses of the entity being evaluated.

In light of the relevantly insignificant direct and indirect investments into our products, the likelihood of a reasonable change in our estimation and judgement would likely not result in a change in our conclusions to consolidate or not consolidate any VIEs to which we have exposure.

Impact of Changes in Accounting on Recent and Future Trends

We believe that none of the changes to GAAP that went into effect during the year ended December 31, 2021, or that have been issued but that we have not yet adopted, are expected to substantively impact our future trends.

We believe that none of the changes to GAAP that went into effect during the year ended December 31, 2022, or that have been issued but that we have not yet adopted, are expected to materially impact our future trends.

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What changed 10-K

Item 7. Management’s Discussion and Analysis