What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2023-05-04 compared with 2022-11-04 · 246 added, 314 removed, 381 unchanged (60% of the section changed)

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For a description of our business, please see “Business of Blue Owl” in the Annual Report.

2022 Third Quarter Overview

Three Months Ended September 30, Nine Months Ended September 30,

2023 First Quarter Overview

Three Months Ended March 31,

(dollars in thousands) 2023 2022

Net Income (Loss) Attributable to Blue Owl Capital Inc.

(After May 19, 2021) / Owl Rock (Prior to May 19, 2021) $ 2,060 $ (53,323) $ (10,881) $ (376,253)

$ 8,317 $ (11,815)

Fee-Related Earnings (1)

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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.”

Our results for the third quarter of 2021 do not include the results of Oak Street or Wellfleet;

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

Our results for the nine months ended September 30, 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.

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, Oak Street Acquisition and Wellfleet Acquisition.

Please see “—GAAP Results of Operations Analysis” and “—Non-GAAP Analysis” for a detailed discussion of the underlying drivers of our results.

Assets Under Management

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$17.2 billion

$13.3 billion

GP Debt Financing

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Commenced 2022

We finished the quarter with $132.1 billion of AUM, which included $84.1 billion of FPAUM.

During the third quarter of 2022, approximately 93% of our management fees were earned on AUM from Permanent Capital.

As of September 30, 2022, we have approximately $10.7 billion in AUM not yet paying fees, providing approximately $139 million of annualized management fees once deployed or upon the expiration of certain fee holidays.

As of March 31, 2023, our AUM was $144.4 billion, which included $91.6 billion of FPAUM.

For the three months ended March 31, 2023, approximately 93% of our management fees were earned on AUM from Permanent Capital.

As of March 31, 2023, we have $11.7 billion in AUM not yet paying fees, providing approximately $155 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.

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 a continuation of the trends seen during the first half of 2022, inflation, interest rates, global gross domestic product (“GDP”) growth, geopolitical instability and the impact of COVID-19 variants on economic growth have remained in the spotlight, driving ongoing volatility in the public markets.

Although U.S.

inflation eased during the third quarter of 2022, it remains at a high level with slower global GDP growth forecasts.

As expected, the Federal Reserve voted to increase the federal funds rate during the first three quarters of 2022.

Despite the elevated volatility in public markets, our operating trends remained positive and durable across the platform during the third quarter of 2022 with record fundraising that was diversified across institutional and private wealth channels.

Direct Lending products continued to trend positively benefiting from rising interest rates and with limited impact from inflation, GP Capital Solutions products continued to fundraise successfully, and Real Estate products continued to realize 100% rent payment from tenants.

We have patient and Permanent Capital and resilient management fees, providing underlying support to our existing earnings profile even as we continue to grow.

We anticipate a net positive impact to earnings as interest rates continue to rise, particularly for our Direct Lending business, where Part I Fees benefit from higher rates.

At the strategy level, that same Permanent Capital allows us to provide flexible, certain financing solutions to sponsors, corporations, and alternative asset managers during a time when liquidity is scarce and public markets are closed or much more expensive than they used to be.

And for the investors in our strategies, our products offer attractive qualities in volatile, uncertain markets:

income generation, downside protection, positive leverage to rising rates, and structural inflation hedges.

We are continuing to closely monitor developments related to inflation, rising interest rates, global GDP growth, geopolitical instability and COVID-19, 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.

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

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.

During the first quarter of 2023, investor concerns over macroeconomic factors, including inflation, interest rates, global gross domestic product growth and geopolitical instability, persisted.

In addition, shocks to deposit bases at regional banks and subsequent Federal Reserve action introduced another element of uncertainty and volatility to the public equity and credit markets centered around the duration of capital and capital availability.

During the first quarter of 2023, 93% of our management fees were generated by permanent capital and the remainder from long-dated capital, with no meaningful pressure to our asset base from redemptions.

We also ended the first quarter of 2023 with substantial available capital to deploy, reporting $11.7 billion of AUM not yet paying fees.

As a number of legacy participants have remained on the sidelines in the broadly syndicated loan market, direct lenders continue to take market share, providing financing solutions to sponsors and companies at wider spreads and lower loan to value ratios on average.

Rising interest rates continue to have a beneficial impact on our management fees, as higher base rates continue to drive increased Part I Fees.

We continue to see attractive deployment opportunities for our GP Capital Solutions products, as capital needs across the private alternative asset management universe remain elevated.

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

In Real Estate, a combination of rising interest rates, elevated inflation, and uncertainty around future capital availability in the wake of regional bank shocks continue to affect valuations and transaction volumes.

Our Real Estate products, focused on triple net lease, continue to benefit from the inflation-mitigating net lease structure and we continue to deploy capital into attractive opportunities as we raise new capital through various new products launched in 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 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 “Risk Factors—Risks Related to Our Business and Operations—The COVID-19 pandemic has caused severe disruptions in the U.S.

and global economy, has disrupted, and may continue to disrupt, industries in which we, our products and our products’ investments operate and could potentially negatively impact us, our products or our products’ investments” and “—Difficult market and political conditions may reduce the value or hamper the performance of the investments made by our products or impair the ability of our products to raise or deploy capital, each of which could materially reduce our revenue, earnings and cash flow and adversely affect our financial prospects and condition” in our Annual Report.

See “Item 1A.

Risk Factors — Risks Related to Macroeconomic Factors” in our Annual Report and “Item 1A.

Risk Factors — Difficult market and political conditions may reduce the value or hamper the performance of the investments made by our products or impair the ability of our products to raise or deploy capital” in this report.

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 September 30, 2022, our assets under management included approximately $3.1 billion (includes $1.0 billion related to accrued carried interest) related to us, our executives and other employees.

A portion of these assets under management relate to accrued carried interests and other amounts that are not charged fees.

As of March 31, 2023, assets under management related to us, our executives and other employees totaled approximately $3.4 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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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.

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.

AUM not yet paying fees could pr ovide approximately $155 million of additional annualized management fees once deployed or upon the expiration of the relevant fee holidays.

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Changes in AUM

Three Months Ended September 30, 2022 Three Months Ended September 30, 2021

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

Beginning Balance $ 56,827 $ 45,674 $ 16,639 $ 119,140 $ 31,156 $ 31,211 $ — $ 62,367

Acquisition — — — — — — — —

New capital raised 5,472 2,910 434 8,816 724 1,598 — 2,322

Change in debt 3,058 — 1,590 4,648 2,422 — — 2,422

Distributions (471) (304) (239) (1,014) (239) (249) — (488)

Change in value / other 800 (441) 190 549 514 3,380 — 3,894

Ending Balance $ 65,686 $ 47,839 $ 18,614 $ 132,139 $ 34,577 $ 35,940 $ — $ 70,517

Nine Months Ended September 30, 2022 Nine Months Ended September 30, 2021

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

Three Months Ended March 31, 2023 Three Months Ended March 31, 2022

(dollars in millions) Direct Lending GP Capital Solutions Real

Estate Total Direct Lending GP Capital Solutions Real

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

Acquisition 6,529 — — 6,529 — — — —

New capital raised 1,940 320 1,539 3,799 1,938 1,566 360 3,864

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Direct Lending.

Increase in AUM for the nine months ended September 30, 2022 was driven by a combination of continued fundraising and debt deployment across the strategy, and the Wellfleet Acquisition.

• $6.1 billion new capital raised in Diversified Lending, primarily driven by retail fundraising in ORCIC and a managed vehicle with a state pension fund.

Increase in AUM for the three months ended March 31, 2023 was driven by the following:

• $1.2 billion new capital raised in diversified lending, primarily driven by private wealth fundraising in ORCIC and a separately managed account.

• $0.7 billion new capital raised in technology lending, driven by continued fundraising in ORTF II and ORTIC.

• $9.8 billion of debt deployment across all of Direct Lending, as we continue to opportunistically deploy leverage in our BDCs.

• $6.5 billion from the Wellfleet Acquisition.

• $0.9 billion of additional net debt commitments across all of Direct Lending, as we continue to opportunistically manage leverage in our BDCs.

• $0.9 billion of overall appreciation across the platform.

• $0.8 billion in distributions, which primarily relate to dividends paid from our BDCs.

Redemptions from these products were not material during the first quarter of 2023.

GP Capital Solutions.

Increase in AUM for the nine months ended September 30, 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.

Increase in AUM for the nine months ended September 30, 2022 was driven by new capital raised of $1.0 billion across various products and debt deployed of $1.6 billion, primarily related to Oak Street Real Estate Trust, our recently launched real estate investment trust (“REIT”).

Increase in AUM for the three months ended March 31, 2023 was driven by the overall appreciation across all of our major products and new capital raised, primarily in our professional sports minority investments strategy, partially offset by distributions in Dyal Fund IV and our professional sports minority investments strategy.

Increase in AUM for the three months ended March 31, 2023 was driven by new capital raised of $1.5 billion across various products, primarily Real Estate Fund VI, our recently launched triple net-lease drawdown fund, Net Lease Trust, our recently launched REIT, and Net Lease Property Fund;

overall appreciation across the platform of $0.7 billion and additional debt commitments of $0.5 billion, primarily related to Net Lease Property Fund, partially offset by distributions across various products.

Changes in FPAUM

Three Months Ended September 30, 2022 Three Months Ended September 30, 2021

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

Beginning Balance $ 41,409 $ 26,678 $ 9,430 $ 77,517 $ 24,162 $ 18,657 $ — $ 42,819

Acquisition — — — — — — — —

New capital raised / deployed 3,595 2,675 1,095 7,365 2,808 1,177 — 3,985

Fee basis change — (881) — (881) — — — —

Distributions (433) (15) (220) (668) (212) (115) — (327)

Change in value / other 721 — 81 802 482 — — 482

Ending Balance $ 45,292 $ 28,457 $ 10,386 $ 84,135 $ 27,240 $ 19,719 $ — $ 46,959

Nine Months Ended September 30, 2022 Nine Months Ended September 30, 2021

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

Three Months Ended March 31, 2023 Three Months Ended March 31, 2022

(dollars in millions) Direct Lending GP Capital Solutions Real

Estate Total Direct Lending GP Capital Solutions Real

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

Acquisition 6,501 — — 6,501 — — — —

New capital raised / deployed (1)

Fee basis change — 387 — 387 — — — —

2,021 (8) 1,078 3,091 2,200 3,337 1,077 6,614

Fee basis step down (1)

— — — — — (898) — (898)

Distributions (732) (203) (151) (1,086) (278) — (161) (439)

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Ending Balance $ 51,150 $ 28,561 $ 11,922 $ 91,633 $ 32,658 $ 23,651 $ 9,275 $ 65,584

(1) The three months ended March 31, 2022, reflects a change in classification 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 for the nine months ended September 30, 2022 was driven by a combination of the Wellfleet Acquisition, continued fundraising and debt deployment as discussed in the AUM section above, partially offset by a change in methodology that reduced FPAUM by approximately $1.5 billion.

Increase in FPAUM for the three months ended March 31, 2023 was driven by a combination of continued fundraising and debt deployment and the overall appreciation across the platform, partially offset by distributions, which primarily related to dividends paid from our BDCs.

GP Capital Solutions.

Increase in FPAUM for the nine months ended September 30, 2022 was driven by new capital raised, primarily in Dyal Fund V, and the expiration of certain fee holidays on January 1, 2022.

The expiration of the fee holiday drove an increase in FPAUM of $2.2 billion, which was partially offset by a decrease in FPAUM for a step down in fee basis in Dyal Fund I of $0.8 billion and Dyal Fund III of $0.9 billion.

Increase in FPAUM for the nine months ended September 30, 2022 was driven primarily by new capital deployed of $1.5 billion in Oak Street Real Estate Capital Net Lease Property Fund.

FPAUM for the three months ended March 31, 2023 remained relatively unchanged.

Increase in FPAUM for the three months ended March 31, 2023 was driven primarily by capital raised in Real Estate Fund VI and 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 III 2020 $ 4,018 $ 1,800 $ 1,800 $ 229 $ 1,814 $ 2,043 1.19 x 1.17 x 12.1 % 11.1 %

ORCIC 2020 $ 12,560 $ 4,918 $ 4,918 $ 224 $ 4,706 $ 4,930 NM NM NM NM

ORCIC (2) 2020 $ 13,066 $ 5,532 $ 5,532 $ 332 $ 5,250 $ 5,582 NM 1.08 x NM 8.4 %

Technology Lending (1)

ORTF 2018 $ 6,986 $ 3,234 $ 3,234 $ 441 $ 3,386 $ 3,827 1.29 x 1.21 x 12.1 % 8.6 %

ORTF II 2021 $ 5,739 $ 3,495 $ 1,220 $ 17 $ 1,225 $ 1,242 1.09 x 1.06 x 13.3 % 8.5 %

First Lien Lending (3)

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Owl Rock First Lien Fund Unlevered 2019 $ 169 $ 163 $ 156 $ 31 $ 142 $ 173 1.15x 1.11x 5.4 % 3.9 %

(1) Information presented in the AUM through Total Value columns for these vehicles is presented on a quarter lag due to these vehicles being public filers with the SEC and have not yet filed their quarterly information as of our filing date.

Additional information related to these vehicles can be found in their filings with the SEC, which are not part of this report.

(2) 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 and ORCIC.

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

Onshore Levered, Offshore Levered and Insurance Unlevered.

The gross and net MoIC and IRR presented in the chart are for Onshore Levered and Insurance Unlevered as those are the largest of the levered and unlevered feeder funds.

The gross and net MoIC for the Offshore Levered feeder fund is 1.29x and 1.21x, respectively.

The gross and net IRR for the Offshore Levered feeder is 9.7% and 6.7%, respectively.

All other values for Owl Rock First Lien Fund Levered are for Onshore Levered and Offshore Levered combined.

AUM is presented as the aggregate of the three Owl Rock First Lien Fund feeders.

Owl Rock First Lien Fund Unlevered Investor equity and note commitments are both treated as capital for all values.

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

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An individual investor’s IRR may differ from 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.

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

Onshore Levered, Offshore Levered and Insurance Unlevered.

The gross and net MoIC and IRR presented in the chart are for Onshore Levered and Insurance Unlevered as those are the largest of the levered and unlevered feeder funds.

The gross and net MoIC for the Offshore Levered feeder fund is 1.22x and 1.15x, respectively.

The gross and net IRR for the Offshore Levered feeder is 8.9% and 5.8%, respectively.

All other values for Owl Rock First Lien Fund Levered are for Onshore Levered and Offshore Levered combined.

AUM is presented as the aggregate of the three Owl Rock First Lien Fund feeders.

Owl Rock First Lien Fund Unlevered Investor equity and note commitments are both treated as capital for all values.

GP Capital Solutions

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Dyal Fund IV 2018 $ 14,056 $ 9,041 $ 5,864 $ 3,012 $ 7,329 $ 10,341 2.09x 1.76x 79.8 % 50.2 %

Dyal Fund V 2020 $ 13,223 $ 12,452 $ 1,336 $ — $ 1,956 $ 1,956 NM NM NM NM

(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.

Dyal Fund V 2020 $ 13,513 $ 12,852 $ 2,579 $ 410 $ 2,757 $ 3,167 1.49x 1.23x 59.7 % 31.9 %

(1) Information presented in the Invested Capital through IRR columns for these vehicles is presented on a quarter lag and are exclusive of investments made by us and the related carried interest vehicles of the respective products.

(2) Invested capital includes capital calls.

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Value Gross (6) Net (7) Gross (8) Net (9)

Net Lease (1)

Oak Street Real Estate Capital Fund IV (1) 2017 $ 1,180 $ 1,250 $ 1,250 $ 1,410 $ 562 $ 1,972 1.74x 1.56x 26.6 % 21.5 %

Oak Street Real Estate Capital Net Lease Property Fund 2019 $ 6,839 $ 3,298 $ 3,298 $ 634 $ 3,695 $ 4,329 1.24x 1.22x 15.7 % 14.4 %

Oak Street Real Estate Capital Fund V 2020 $ 3,643 $ 2,500 $ 1,267 $ 341 $ 1,322 $ 1,663 NM NM NM NM

Oak Street Asset-Backed Securitization (9) 2020 $ 3,005 $ 2,713 $ 342 $ 74 $ 370 $ 444 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.

Oak Street Real Estate Capital Fund V (1) 2020 $ 3,810 $ 2,500 $ 1,912 $ 521 $ 1,910 $ 2,431 1.35x 1.27x 35.9 % 27.9 %

Oak Street Net Lease Trust (2) 2022 $ 3,259 $ 1,123 $ 1,123 $ 15 $ 1,090 $ 1,105 NM NM NM NM

Oak Street Real Estate Capital Fund VI (1) 2022 $ 3,307 $ 3,015 $ — $ — $ — $ — NM NM NM NM

(1) Information presented in the Invested Capital through IRR columns for these vehicles is presented on a quarter lag.

(2) Information presented in the AUM through Total Value columns for this vehicle is presented on a quarter lag due to the vehicle being a public filer with the SEC and has not yet filed its quarterly information as of our filing date.

Additional information related to this vehicle can be found in its filings with the SEC, which are not part of this report.

(3) Invested capital includes investments by the general partner, capital calls, dividends reinvested and periodic investors closes, as applicable.

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An individual investor's IRR may differ from 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.

GAAP Results of Operations Analysis

As a result of the Dyal, Oak Street and Wellfleet 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.

Three Months Ended September 30, 2022, Compared to the Three Months Ended September 30, 2021

Three Months Ended September 30,

As a result of the Wellfleet Acquisition, prior period amounts may not be comparable to current period amounts or expected future trends.

Wellfleet’s results of operations are included from April 1, 2022.

Three Months Ended March 31, 2023, Compared to the Three Months Ended March 31, 2022

Three Months Ended March 31,

(dollars in thousands) 2023 2022 $ Change

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Administrative, transaction and other fees 31,655 28,345 3,310

Realized performance income 506 — 506

Total Revenues, Net 390,986 275,977 115,009

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Total Expenses 324,643 298,712 25,931

Other Income (Loss)

Net losses on investments (592) (145) (447)

Interest expense (15,027) (6,112) (8,915)

Change in TRA liability 3,599 (4,733) 8,332

Change in warrant liability (2,747) (27,462) 24,715

Change in earnout liability (1,760) (293,122) 291,362

Total Other Income (Loss) (16,527) (331,574) 315,047

Loss Before Income Taxes (14,093) (255,238) 241,145

Income tax expense (benefit) (4,085) (14,391) 10,306

Consolidated and Combined Net Loss (10,008) (240,847) 230,839

Net loss attributable to noncontrolling interests 12,068 187,524 (175,456)

Net Income (Loss) Attributable to Blue Owl Capital Inc.

$ 2,060 $ (53,323) $ 55,383

Revenues, Net

Management Fees .

The increase in management fees was primarily driven by increased management fees across the Direct Lending products of $56.7 million, which includes both the accretive impact of the Wellfleet Acquisition that closed in April 2022, as well as continued fundraising and deployment of capital within new and existing Direct Lending products.

Management fees also increased $56.8 million in our GP Capital Solutions products, primarily driven by fundraising in Dyal Fund V.

Our Real Estate products contributed $21.1 million towards the increase due to the accretive impact of the Oak Street Acquisition that closed in December 2021.

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

Administrative, Transaction and Other Fees .

The decrease in 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 earn such fees.

Compensation and Benefits.

Compensation and benefits expenses increased due to a $92.4 million increase in equity-based compensation, which was driven by the following:

(i) a $47.1 million increase related to acquisitions, driven by the Oak Street and Wellfleet Acquisitions;

(ii) a $27.4 million increase related to recurring annual grants to employees, as such amounts were granted for the first time during the fourth quarter of 2021;

and (iii) a $17.9 million increase related to one-time grants to employees in connection with the Business Combination, as such grants were made during the fourth quarter of 2021.

Additionally, compensation and benefits increased by $16.5 million due to the amortization of cash earnouts, primarily related to the Oak Street Acquisition.

The remaining increase was driven by the 73% increase in headcount from September 30, 2021 to September 30, 2022, which is inclusive of the increase in headcount related to the Oak Street Acquisition and Wellfleet Acquisition.

Amortization of Intangible Assets.

Amortization of intangible assets increased due to the addition of intangible assets in connection with the Oak Street Acquisition in December 2021 and the Wellfleet Acquisition in April 2022.

See Note 3 to our Financial Statements for additional information.

General, Administrative and Other Expenses .

General, administrative and other expenses increased, primarily driven by a $33.3 million increase in distribution costs due to increased fundraising.

Interest Expense .

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

Net gains on investments 612 5 607

Interest expense, net (13,573) (12,834) (739)

Change in TRA liability (1,964) (9,652) 7,688

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

Change in warrant liability (1,950) 17,758 (19,708)

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 not material.

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 (994) (496) (498)

There was no material change to the earnout liability for the current year period.

The change in the fair value of the earnout liability for the prior year period 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.

Total Other Loss (17,869) (5,219) (12,650)

Income (Loss) Before Income Taxes 48,474 (27,954) 76,428

Income tax expense (benefit) 6,440 (5,038) 11,478

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

federal income tax purposes.

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.

For the period, the income tax benefit decreased due to higher pre-tax income 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.

Consolidated and Combined Net Income (Loss) 42,034 (22,916) 64,950

Net (income) loss attributable to noncontrolling interests (33,717) 11,101 (44,818)

Net income (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 income due to the drivers discussed above.

The Common Units represent an approximately 69% interest in the Blue Owl Operating Group during the third quarter of 2022.

Prior to the Business Combination, amounts attributable to noncontrolling interests were not significant.

Nine Months Ended September 30, 2022, Compared to the Nine Months Ended September 30, 2021

Nine Months Ended September 30,

(dollars in thousands) 2022 2021 $ Change

Management fees, net (includes Part I Fees of $155,893 and 108,646)

$ 870,334 $ 440,598 $ 429,736

Administrative, transaction and other fees 103,875 94,761 9,114

Total Revenues, Net 974,209 535,359 438,850

Compensation and benefits 646,755 1,366,459 (719,704)

Amortization of intangible assets 192,246 67,527 124,719

General, administrative and other expenses 165,655 94,818 70,837

Total Expenses 1,004,656 1,528,804 (524,148)

Other Income (Loss)

Net losses on investments (710) (145) (565)

Net losses on retirement of debt — (16,145) 16,145

Interest expense (42,912) (17,787) (25,125)

Change in TRA liability (4,683) (5,879) 1,196

Change in warrant liability 35,734 (42,762) 78,496

Change in earnout liability (2,464) (756,092) 753,628

Total Other Income (Loss) (15,035) (838,810) 823,775

Loss Before Income Taxes (45,482) (1,832,255) 1,786,773

Income tax expense (benefit) (3,492) (43,402) 39,910

Consolidated and Combined Net Loss (41,990) (1,788,853) 1,746,863

Net loss attributable to noncontrolling interests 31,109 1,412,600 (1,381,491)

Net Loss Attributable to Blue Owl Capital Inc.

Net Income (Loss) Attributable to Blue Owl Capital Inc.

$ 8,317 $ (11,815) $ 20,132

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Management Fees .

The increase in management fees was primarily driven by increased management fees across the Direct Lending products of $136.4 million, which includes both the accretive impact of the Wellfleet Acquisition, as well as continued fundraising and deployment of capital within new and existing Direct Lending products.

Management fees also increased $235.9 million in our GP Capital Solutions products, primarily driven by the accretive impact of the Dyal Acquisition that closed in May 2021, as well as continued fundraising in Dyal Fund V.

Our Real Estate products contributed $57.5 million due to the accretive impact of the Oak Street Acquisition.

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 $74.5 million due to continued fundraising and deployment of capital within new and existing Direct Lending products, as well as the $7.5 million accretive impact of the Wellfleet Acquisition.

• GP Capital Solutions increased $27.9 million, primarily driven by continued fundraising in Dyal Fund V.

• Real Estate increased $8.8 million due to continued fundraising and deployment of capital within new and existing Real Estate products, primarily Net Lease Trust and Net Lease Property Fund.

Administrative, Transaction and Other Fees .

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

(i) an increase of $15.9 million in administrative fees, driven by a higher level of reimbursable expenses due to growth in our products and business overall;

(ii) a $14.4 million increase in dealer manager revenues due to growth in the distribution of our retail BDCs;

(iii) partially offset by a $21.1 million decrease in fee income earned for services provided to portfolio companies, reflecting a lower volume of transactions on which we earn such fees.

(i) an increase of $7.5 million in administrative fees, driven by a higher level of reimbursable expenses due to growth of our products and business overall;

(ii) an increase of $2.8 million in dealer manager revenues due to growth in the distribution of our retail BDCs;

and (iii) an offsetting decrease of $7.0 million due to fee income earned for services provided to portfolio companies, reflecting a lower volume of transactions on which we earn such fees.

Compensation and Benefits.

Compensation and benefits expenses decreased due to an $865.0 million decrease in equity-based compensation, which was driven by the following:

(i) a $988.7 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 Acquisitions;

(ii) an offsetting $69.2 million increase related to recurring annual grants to employees, as such amounts were granted for the first time during the fourth quarter of 2021;

and (iii) an offsetting $54.5 million increase related to one-time grants to employees in connection with the Business Combination, as such grants were made during the fourth quarter of 2021.

Additionally, compensation and benefits was impacted by an increase of $48.7 million due to the amortization of cash earnouts, primarily related to the Oak Street Acquisition.

The remaining offsetting increase was driven by the increase in headcount, which is inclusive of the increase in headcount related to the Dyal Acquisition, Oak Street Acquisition and Wellfleet Acquisition.

Compensation and benefits expenses increased primarily due to the following:

• $36.2 million increase driven by higher compensation to existing employees, as well as increased headcount due to our continued growth, inclusive of the Wellfleet Acquisition.

• $22.9 million offsetting decrease in equity-based compensation, reflecting a $40.0 million decrease in acquisition-related equity-based compensation due to the settlement of the First Oak Street Earnout (as described in Note 3 to the financial statements in our Annual Report) in January 2023, partially offset by an $18.5 million increase in our other recurring annual equity grants driven by the additional grants made during the fourth quarter of 2022 in connection with year-end bonus compensation.

• $10.0 million offsetting decrease in acquisition-related cash compensation, primarily due to the settlement of the First Oak Street Earnout in January 2023.

Amortization of Intangible Assets.

Amortization of intangible assets increased due to the addition of intangible assets in connection with the Business Combination in May 2021, the Oak Street Acquisition in December 2021 and the Wellfleet Acquisition in April 2022.

Amortization of intangible assets increased primarily due to corporate actions taken during the first quarter of 2023 resulting in a change of the estimated useful lives of acquired trademarks.

The remaining unamortized balances of the trademarks are being expensed through June 30, 2023.

See Note 3 to our Financial Statements for additional information.

General, Administrative and Other Expenses .

General, administrative and other expenses increased, primarily driven by an increase in distribution costs of $54.3 million due to increased fundraising, partially offset by a $14.6 million decrease in professional fees due in part to Business Combination-related expenses that were incurred in the prior year period.

The remaining net increase was across various categories, driven by our continued growth.

Interest Expense .

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

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

(i) an increase of $12.8 million in distribution costs due to increased fundraising;

and (ii) an increase of $5.8 million in occupancy costs driven by additional leased space to accommodate our continued growth.

These increases were offset by a favorable change of $8.9 million in expense support resulting from recoveries with certain products we manage.

The remaining net change was across various categories, driven by our continued growth.

Change in TRA Liability.

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

The change in the TRA liability was driven by accretion and a decrease in the risk free rate used to value the contingent consideration portion of the TRA liability.

Change in Warrant Liability.

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.

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.

There was no material change to the earnout liability for the current year period.

The change in the fair value of the earnout liability in the prior year period 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.

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

The change in the warrant liability in the prior year period was driven by the increase in the price of our Public Warrants.

In August 2022, the Public Warrants were redeemed.

See Note 1 to our Financial Statements for additional information.

Income Tax Expense (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.

federal income tax purposes.

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.

For the period, the income tax benefit decreased due to higher pre-tax income 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.

Net Loss Attributable to Noncontrolling Interest

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 represented an approximately 70% weighted average economic interest in the Blue Owl Operating Group during the nine months ended September 30, 2022.

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 change in income tax expense (benefit) was due to pre-tax income in the current period as a result of the drivers discussed above.

Please see Note 10 to our Financial Statements and financial statements in our Annual Report for a discussion of the significant tax differences that impacted our effective tax rate.

Net (Income) Loss Attributable to Noncontrolling Interest

Net (income) loss attributable to noncontrolling interests in the current period and prior period primarily represents the allocation to Common Units of their pro rata share of the Blue Owl Operating Group’s net income or loss due to the drivers discussed above.

The Common Units represented an approximately 68% and 71% weighted average economic interest in the Blue Owl Operating Group for the three months ended March 31, 2023 and March 31, 2022, respectively.

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.

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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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“Transaction Expenses” as defined below;

net gains (losses) on investments, changes in TRA liability, 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 Combinations 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.

Starting in the first quarter of 2022, Transaction Expenses also include expenses paid on behalf of certain products that are expected to be reimbursed in subsequent periods;

such amounts were not material to the prior periods presented, and therefore such periods have not been restated for this change.

expense support payments and subsequent reimbursements;

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

changes in TRA, warrant and earnout liabilities;

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 transactions.

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.

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, net, as well as amounts payable for taxes and payments made pursuant to the TRA.

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.

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.).

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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Fee-Related Earnings and Distributable Earnings Summary

Three Months Ended September 30, Nine Months Ended September 30,

(dollars in thousands) 2022 2021 2022 2021

Three Months Ended March 31,

(dollars in thousands) 2023 2022 $ Change

FRE revenues $ 377,403 $ 272,598 $ 104,805

FRE expenses 151,630 101,735 49,895

Net loss (income) allocated to noncontrolling interests included in Fee-Related Earnings 4,451 (1,469) 6,330 (3,243)

Net income allocated to noncontrolling interests included in Fee-Related Earnings 126 520 (394)

Fee-Related Earnings $ 225,899 $ 171,383 $ 54,516

Distributable Earnings $ 209,014 $ 155,726 $ 53,288

Fee-Related Earnings and Distributable Earnings increased year-over-year 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, partially offset by higher FRE expenses, as further discussed below.

Three Months Ended September 30, Nine Months Ended September 30,

(dollars in thousands) 2022 2021 2022 2021

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

Three Months Ended March 31,

(dollars in thousands) 2023 2022 $ Change

Direct Lending Products

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Management Fees, Net 25,957 17,158 8,799

Administrative, transaction and other fees 82 — 82

FRE Revenues - Real Estate Products 26,039 17,158 8,881

Total FRE Revenues $ 377,403 $ 272,598 $ 104,805

For the three months ended September 30, 2022, Direct Lending FRE revenues 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 FRE revenues increased primarily driven the fundraising in Dyal Fund V.

Our Real Estate products increased due to the accretive impact of the Oak Street Acquisition.

These increases were partially offset by lower administrative, transaction and other fees, driven primarily by a decrease in fee income earned for services provided to portfolio companies, reflecting a lower volume of transactions on which we earn such fees.

For the nine months ended September 30, 2022, Direct Lending FRE revenues 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 FRE revenues 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.

Our Real Estate products increased due to the accretive impact of the Oak Street Acquisition.

Three Months Ended September 30, Nine Months Ended September 30,

(dollars in thousands) 2022 2021 2022 2021

FRE Management Fees .

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

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

• GP Capital Solutions increased, primarily driven by continued fundraising in Dyal Fund V.

• Real Estate increased due to continued fundraising and deployment of capital within new and existing Real Estate products, primarily Net Lease Trust and Net Lease Property Fund.

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.

Three Months Ended March 31,

(dollars in thousands) 2023 2022 $ Change

FRE compensation and benefits $ 103,600 $ 74,969 $ 28,631

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Total FRE Expenses $ 151,630 $ 101,735 $ 49,895

For the three months ended September 30, 2022, FRE compensation and benefits expenses increase was driven by the 73% increase in headcount from September 30, 2021 to September 30, 2022, which is inclusive of the increase in headcount related to the Oak Street Acquisition and Wellfleet Acquisition.

FRE general, administrative and other expenses increased, primarily driven by an increase of $29.2 million in distribution costs due to increased fundraising.

For the nine months ended September 30, 2022, FRE compensation and benefits expenses increase was driven by the increase in headcount, which is inclusive of the increase in headcount related to the Dyal Acquisition, Oak Street Acquisition and Wellfleet Acquisition.

FRE general, administrative and other expenses increased, primarily driven by an increase in distribution costs of $39.6 million due to increased fundraising and the remaining net increase was across various categories, driven by our continued growth.

FRE Compensation and Benefits.

FRE compensation and benefits expenses increased, driven by higher compensation to existing employees, as well as increased headcount due to our continued growth, inclusive of the Wellfleet Acquisition.

FRE General, Administrative and Other Expenses .

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

(i) an increase of $10.0 million in distribution costs due to increased fundraising;

and (ii) an increase of $5.8 million in occupancy costs driven by additional leased space to accommodate our continued growth, with the remaining net increase across various categories, driven by our continued growth.

Non-GAAP Reconciliations

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Please see “—Non-GAAP Analysis” for important information regarding these measures.

Three Months Ended September 30, Nine Months Ended September 30,

Three Months Ended March 31,

(dollars in thousands) 2023 2022

GAAP (Loss) Income Before Income Taxes $ (14,093) $ (255,238) $ (45,482) $ (1,832,255)

Net loss (income) allocated to noncontrolling interests included in Fee-Related Earnings 4,451 (1,469) 6,330 (3,243)

GAAP Net Income (Loss) Attributable to Class A Shares $ 8,317 $ (11,815)

Net income (loss) attributable to noncontrolling interests 33,717 (11,101)

Income tax expense (benefit) 6,440 (5,038)

GAAP Income (Loss) Before Income Taxes 48,474 (27,954)

Net income allocated to noncontrolling interests included in Fee-Related Earnings 126 520

Strategic Revenue-Share Purchase consideration amortization 9,769 8,922

Realized performance income (506) —

Realized performance compensation 177 —

Equity-based compensation - other 35,628 17,526

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Equity-based compensation - Business Combination grants 16,968 18,421

Capital-related compensation 972 — 2,652 —

Acquisition-related cash earnout amortization 6,098 16,082

Capital-related compensation 1,698 830

Amortization of intangible assets 70,891 61,526

Transaction Expenses 116 2,425

Interest expense 15,027 6,112 42,912 17,787

Net losses (gains) on investments 592 145 710 145

Net losses on early retirement of debt — — — 16,145

Expense support (2,088) 7,212

Net gains on investments (612) (5)

Change in TRA liability 1,964 9,652

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Change in earnout liability 994 496

Interest expense, net 13,573 12,834

Fee-Related Earnings 225,899 171,383

Interest expense (15,033) (6,112) (42,912) (17,787)

Realized performance income 506 —

Realized performance compensation (177) —

Interest expense, net (13,573) (12,834)

Taxes and TRA payments (3,641) (2,823)

Distributable Earnings 209,014 155,726

Interest expense 15,033 6,112 42,912 17,787

Interest expense, net 13,573 12,834

Taxes and TRA payments 3,641 2,823

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Adjusted EBITDA $ 228,150 $ 171,601

Three Months Ended September 30, Nine Months Ended September 30,

Three Months Ended March 31,

(dollars in thousands) 2023 2022

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Strategic Revenue-Share Purchase consideration amortization 9,769 8,922

Administrative and other fees (17,783) (13,113) (48,441) (25,287)

Realized performance income (506) —

Reimbursed expenses (22,846) (12,301)

FRE Revenues $ 377,403 $ 272,598

Three Months Ended September 30, Nine Months Ended September 30,

Three Months Ended March 31,

(dollars in thousands) 2023 2022

GAAP Compensation and Benefits $ 197,618 $ 193,892

Realized performance compensation (177) —

Equity-based compensation - other (35,628) (17,113)

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Equity-based compensation - Business Combination grants (16,968) (18,421)

Capital-related compensation (973) — (2,652) —

Acquisition-related cash earnout amortization (6,098) (16,082)

Administrative and other expenses (10,646) (10,524) (27,442) (20,795)

Capital-related compensation (1,698) (830)

Reimbursed expenses (12,770) (5,823)

FRE Compensation and Benefits $ 103,600 $ 74,969

Three Months Ended September 30, Nine Months Ended September 30,

Three Months Ended March 31,

(dollars in thousands) 2023 2022

GAAP General, Administrative and Other Expenses $ 56,134 $ 43,294

Transaction Expenses (1,761) (4,108) (21,796) (40,211)

Equity-based compensation - other — (413)

Administrative and other expenses (7,136) (2,589) (20,999) (4,492)

Transaction Expenses (116) (2,425)

Expense support 2,088 (7,212)

Reimbursed expenses (10,076) (6,478)

FRE General, Administrative and Other Expenses $ 48,030 $ 26,766

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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 unexpectedly high and persistent inflation, a shifting interest rate environment, geopolitical events, and ongoing impact from COVID-19 globally.

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

For a summary of our significant accounting policies, see Note 2 to our Financial Statements and financial statements in our Annual Report.

Estimation of Fair Values

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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Earnout Liability and Private Placement Warrants Liability

The fair values of our Earnout Securities liability and Private Placement Warrants liability were determined using 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, Incentive Unit grants and Wellfleet Earnout 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 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.

See Note 8 to our Financial Statements for additional details.

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 and financial statements in our Annual Report for additional details.

Deferred Tax Assets

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

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.

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However, given the indefinite carryforward period available for NOLs and the conservative estimates used to prepare the taxable income projections, the sensitivity of our estimates and assumptions are not likely to have a material impact on our conclusion that a valuation allowance is not needed.

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.

Goodwill and Other Intangible Assets

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 adverse impacts to 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.

We also estimate the useful lives of our finite-lived intangible assets for purposes of amortization.

The useful lives are based on our judgment of the expected future economic benefits of the assets.

Changes in estimated useful lives could result in significant changes to the amount of amortization expense recognized in future periods.

Variable Interest Entities

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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 consolidated and combined 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.

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 nine months ended September 30, 2022, 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 three months ended March 31, 2023, or that have been issued but that we have not yet adopted, are expected to materially impact our future trends.

Liquidity and Capital Resources

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 the third quarter of 2022 with $39.5 million of cash and cash equivalents and $1.0 billion available under our Revolving Credit Facility.

We ended the first quarter of 2023 with $37.9 million of cash and cash equivalents and approximately $758.6 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 discussed 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.

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Debt Obligations

As of September 30, 2022, our long-term debt obligations consisted of $700.0 million of 2031 Notes, $400.0 million of 2032 Notes and $350.0 million of 2051 Notes.

We also had $112.0 million outstanding under our Revolving Credit Facility, which amount was fully repaid subsequent to quarter end.

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 March 31, 2023, 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 $350.0 million outstanding under our Revolving Credit Facility as of March 31, 2023, and as of the date of this filing, the balance was $140.0 million.

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 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 payable and TRA payments, 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 and financial statements in our Annual Report 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, net, 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 $210.0 million for the quarter ended September 30, 2022.

Adjusted EBITDA was $228.2 million for the three months ended March 31, 2023.

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

Share Repurchase Program

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

Under the repurchase program (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.

During the three months ended September 30, 2022, we repurchased 1,021,079 Class A Shares for an aggregate amount of $9.8 million, excluding commission costs, using cash on hand.

The Program replaced the previously authorized program, under which program we repurchased 2,000,000 shares during the first quarter of 2022 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.

Tax Receivable Agreement

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 September 30, 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 $908.2 million under the TRA.

As of March 31, 2023, 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 $936.8 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.

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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.

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 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.

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 under which we repurchased 2,000,000 shares during the first quarter of 2022.

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 three months ended March 31, 2023 and 2022, 319,306 RSUs with a fair value of $4.4 million and 56,981 RSUs with a fair value of $0.7 million, respectively, were withheld to satisfy tax withholding obligations.

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.

A portion of the Oak Street Cash Earnout and the Wellfleet Earnout (each as defined in Note 3 to the financial statements in our Annual Report) 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.

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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 see Note 3 to the consolidated and combined audited financial statements included in the Company’s Annual Report for additional information.

For the Wellfleet Earnout see Note 3 to our Financial Statements for additional information.

In January 2023, the Oak Street Triggering Event occurred with respect to the First Oak Street Earnout.

In April 2023, the Wellfleet Triggering Event occurred with respect to the First Wellfleet Earnout.

For details on the Oak Street Cash Earnout and Wellfleet Earnout, see Note 3 to the financial statements in our Annual Report.

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 first quarter of 2023, we declared a dividend of $0.14 to holders of record as of the close of business on May 19, 2023, which will be paid on May 31, 2023.

Starting in 2023, we moved to a fixed quarterly dividend based on our expected annual Distributable Earnings for the current fiscal year, which will be reassessed on an annual basis.

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

Adverse market conditions, including from unexpectedly high and persistent inflation, an increasing interest rate environment, geopolitical events, and the current instability experienced by some financial institutions, 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.

We hold the majority of our cash balances with a single highly rated financial institution and such balances are in excess of Federal Deposit Insurance Corporation insured limits.

See “Item 1A.

Risk Factors — Risks Related to Macroeconomic Factors” in our Annual Report and “Item 1A.

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 the London Interbank Offered Rate (“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 Notes are fixed rate borrowings, and therefore the LIBOR phase out will not have an impact on this borrowing.

The Revolving Credit Facility is subject to SOFR rates at our option, or alternative rates that are not tied to LIBOR.

The Revolving Credit Facility is subject to the secured overnight financing rate (“SOFR”) at our option, or alternative rates that are not tied to LIBOR.

Certain of our products hold investments and have borrowings that are tied to LIBOR, and we continue to focus on managing any risk related to those exposures.

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” in our Annual Report.

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” in our Annual Report.

Cash Flows Analysis

Nine Months Ended September 30,

Three Months Ended March 31,

(dollars in thousands) 2023 2022 $ Change

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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.

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.

Net cash flows from operating activities increased from the prior year period due to higher management fees, partially offset by operating expenses, in particular higher bonus payments made during the first quarter related to the prior year.

Included in the three months ended March 31, 2023, were the cash outflows of the portion of the First Oak Street Earnout classified as contingent consideration that settled in January 2023;

the amount paid up to the acquisition-date fair value was included in financing activities and the remainder (i.e., accretion since the acquisition date) was included in operating activities.

Investing Activities.

Cash flows from investing activities for 2022 were primarily related to cash consideration paid in connection with the Wellfleet Acquisition.

In addition, investment activities also included cash outflows related to office space-related leasehold improvements and investments by us into our products.

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

Cash flows from investing activities for the three months ended March 31, 2023, were primarily related to purchases of investments in our products.

Cash flows from investing activities for the three months ended March 31, 2022, were primarily related to leasehold improvements associated with certain office spaces.

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 (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, 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 to be 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.

We also made various borrowings and repayments under our previously outstanding revolving credit facilities.

Cash flows from financing activities for the three months ended March 31, 2023, were primarily driven by dividends on our Class A Shares and related distributions on our Common Units (noncontrolling interests).

In addition, we had borrowings and repayments under our Revolving Credit Facility, which borrowings were used to finance working capital needs and general capital purposes.

Included in the three months ended March 31, 2023, were a portion of the cash outflows related to the First Oak Street Earnout classified as contingent consideration that settled in January 2023, as discussed above.

Cash flows from financing activities for the three months ended March 31, 2022, were primarily driven by dividends on our Class A Shares and related distributions on our Common Units (noncontrolling interests).

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

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis