What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-08-08 compared with 2023-05-04 · 255 added, 164 removed, 463 unchanged (48% of the section changed)

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

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”), should be read in conjunction with the unaudited consolidated and combined financial statements and the related notes included in this report.

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”), should be read in conjunction with the Financial Statements.

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

2023 First Quarter Overview

Three Months Ended March 31,

As part of our brand’s evolution, we have transitioned to one Blue Owl.

In connection with this initiative, our legacy brands - Owl Rock, Dyal Capital and Oak Street - have been renamed to Credit, GP Strategic Capital and Real Estate investment platforms, respectively, including products within each of these investment platforms.

The strategic shift to a unified brand reflects our long-term commitment to delivering the collective power of our investment capabilities to the market.

As we emerge as one Blue Owl, our mission and the solutions we provide to our investors and users of our capital remain unchanged.

2023 Second Quarter Overview

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

(dollars in thousands) 2023 2022 2023 2022

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$93.6 billion

Direct Lending Products

$73.8 billion

$52.1 billion

GP Capital Solutions Products

GP Strategic Capital

$50.9 billion

$28.5 billion

Real Estate Products

$24.8 billion

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$27.0 billion

GP Minority Equity

GP Minority Stakes

Commenced 2010

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Professional Sports

Minority Investments

Minority Stakes

Commenced 2021

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Commenced 2020

Liquid Credit

Commenced 2022

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.

As of June 30, 2023, our AUM was $149.6 billion, which included $93.6 billion of FPAUM.

For the six months ended June 30, 2023, approximately 93% of our management fees were earned on AUM from Permanent Capital.

As of June 30, 2023, we have $12.0 billion in AUM not yet paying fees, providing approximately $170 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.

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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.

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, including during periods of market uncertainty and volatility.

During the second quarter of 2023, the persistence of elevated inflation, in conjunction with higher interest rates and slowing global gross domestic product growth, continued to weigh on industry deal activity.

However, compared to the first quarter of 2023, announced global M&A and capital markets issuances increased.

During the quarter, 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.

As a result, fundraising and capital deployment contributed to continued management fee and earnings growth for Blue Owl.

We also ended the second quarter of 2023 with substantial available capital to deploy, reporting $12.0 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.

An increase in repayments over the prior quarter allowed us to redeploy capital into higher yielding opportunities, while 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 Strategic Capital products, as capital needs across the private alternative asset management sector remain elevated.

In Real Estate, industry valuations and transaction volumes remain under pressure due to a combination of rising interest rates, cost inflation, elevated vacancy rates and uncertainty around future capital availability.

In contrast, our Real Estate business, focused on triple net lease, continued to deploy significant capital and identify opportunities to monetize assets at meaningful spreads to our entry points.

Our investors continue to benefit from the inflation-mitigating characteristics of the net lease structure and ongoing 100% rent collection across the portfolio, and we are raising 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.

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

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.

Additionally, we intend to pursue strategic acquisitions and investments to accelerate our growth and broaden our product offerings.

Our acquisition strategy is centered around driving additional scale or expanding capabilities that complement or augment our existing products.

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 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).

As of June 30, 2023, assets under management related to us, our executives and other employees totaled approximately $3.4 billion (including $1.3 billion related to accrued carried interest).

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

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Changes in AUM

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

Three Months Ended June 30, 2023 Three Months Ended June 30, 2022

(dollars in millions) Credit GP Strategic Capital Real

Estate Total Credit GP Strategic Capital Real

Beginning Balance $ 71,617 $ 49,167 $ 23,590 $ 144,374 $ 44,775 $ 41,153 $ 16,090 $ 102,018

Acquisition — — — — 6,529 — — 6,529

New capital raised 1,529 184 1,150 2,863 3,015 3,958 208 7,181

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Ending Balance $ 73,793 $ 50,934 $ 24,826 $ 149,553 $ 56,827 $ 45,674 $ 16,639 $ 119,140

Direct Lending.

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.

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

Six Months Ended June 30, 2023 Six Months Ended June 30, 2022

(dollars in millions) Credit GP Strategic Capital Real

Estate Total Credit GP Strategic Capital 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 3,469 504 2,689 6,662 4,953 5,524 568 11,045

Change in debt 1,655 — 696 2,351 6,760 — — 6,760

Distributions (1,605) (1,111) (416) (3,132) (664) (977) (265) (1,906)

Change in value / other 1,667 3,031 772 5,470 22 1,221 974 2,217

Ending Balance $ 73,793 $ 50,934 $ 24,826 $ 149,553 $ 56,827 $ 45,674 $ 16,639 $ 119,140

Increase in AUM for the six months ended June 30, 2023 was driven by the following:

• $2.2 billion new capital raised in diversified lending, primarily driven by private wealth fundraising in OCIC and a separately managed account.

• $1.0 billion new capital raised in technology lending, driven by continued fundraising in OTF II and OTIC.

• $1.7 billion of overall appreciation across the platform.

• $1.7 billion of additional net debt commitments primarily in diversified lending and technology lending strategies, as we continue to opportunistically manage leverage in our BDCs.

• $1.6 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 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.

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

GP Strategic Capital.

Increase in AUM for the six months ended June 30, 2023 was driven by the overall appreciation across all of our major products of $3.0 billion and new capital raised of $0.5 billion, primarily in our professional sports minority stakes strategy, partially offset by distributions in Blue Owl GP Stakes IV and Blue Owl GP Stakes III.

Increase in AUM for the six months ended June 30, 2023 was driven by new capital raised of $2.7 billion across various products, primarily Blue Owl Real Estate Fund VI (“OREF VI”), our recently launched triple net-lease drawdown fund, Blue Owl Real Estate Net Lease Trust (“ORENT”), our recently launched real estate investment trust, and Blue Owl Real Estate Net Lease Property Fund (“ONLP”), overall appreciation across the platform of $0.8 billion and additional debt commitments of $0.7 billion, primarily related to ONLP, partially offset by distributions in ONLP and Blue Owl Real Estate Capital Fund V.

Changes in FPAUM

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

Three Months Ended June 30, 2023 Three Months Ended June 30, 2022

(dollars in millions) Credit GP Strategic Capital Real

Estate Total Credit GP Strategic Capital Real

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

Acquisition — — — — 6,501 — — 6,501

New capital raised / deployed 1,001 234 1,279 2,514 2,898 3,023 121 6,042

Fee basis step down — (333) — (333) — — — —

Distributions (765) — (141) (906) (381) 4 (113) (490)

Change in value / other 691 — 24 715 (267) — 147 (120)

Ending Balance $ 52,077 $ 28,462 $ 13,084 $ 93,623 $ 41,409 $ 26,678 $ 9,430 $ 77,517

Six Months Ended June 30, 2023 Six Months Ended June 30, 2022

(dollars in millions) Credit GP Strategic Capital Real

Estate Total Credit GP Strategic Capital 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)

3,022 226 2,357 5,605 5,098 6,360 1,198 12,656

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Ending Balance $ 52,077 $ 28,462 $ 13,084 $ 93,623 $ 41,409 $ 26,678 $ 9,430 $ 77,517

(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 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.

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.

(1) The six months ended June 30, 2022, reflects a change in classification from fee basis step down to new capital raised / deployed for the fee holiday expiration in Blue Owl GP Stakes V of $2.1 billion on January 1, 2022.

Increase in FPAUM for the six months ended June 30, 2023 was driven by a combination of continued fundraising and the overall appreciation across the platform, partially offset by distributions, which primarily related to dividends paid from our BDCs.

GP Strategic Capital.

FPAUM for the six months ended June 30, 2023 remained relatively unchanged.

Increase in FPAUM for the six months ended June 30, 2023 was driven primarily by capital raised in OREF VI and ORENT, and deployed in OREF VI.

Product Performance

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There can be no assurance that any of these products or our other existing and future products will achieve similar returns.

MoIC and IRR data has not been presented for products that have launched within the last two years as such information is generally not meaningful (“NM”).

Direct Lending

Multiple of invested capital (“MoIC”) and internal rate of return (“IRR”) data has not been presented for products that have launched within the last two years as such information is generally not meaningful (“NM”).

(dollars in millions) Year of

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Diversified Lending (1)

ORCC 2016 $ 14,878 $ 6,019 $ 6,019 $ 2,409 $ 5,884 $ 8,293 1.57 x 1.42 x 12.7 % 9.3 %

ORCC II (2) 2017 $ 2,595 $ 1,345 $ 1,345 $ 340 $ 1,297 $ 1,637 NM 1.27 x NM 7.0 %

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

Blue Owl Capital Corporation 2016 $ 14,975 $ 5,970 $ 5,970 $ 2,554 $ 5,917 $ 8,471 1.62x 1.45x 13.0 % 9.4 %

Blue Owl Capital Corporation II (2) 2017 $ 2,590 $ 1,333 $ 1,306 $ 364 $ 1,291 $ 1,655 NM 1.30x NM 7.3 %

Blue Owl Capital Corporation III 2020 $ 4,044 $ 1,812 $ 1,812 $ 282 $ 1,846 $ 2,128 1.22x 1.21x 12.6 % 11.6 %

Blue Owl Credit Income Corp.

(2) 2020 $ 13,982 $ 6,156 $ 5,860 $ 466 $ 5,872 $ 6,338 NM 1.08x NM 7.7 %

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 %

Blue Owl Technology Finance Corp.

2018 $ 7,185 $ 3,250 $ 3,250 $ 514 $ 3,429 $ 3,943 1.34x 1.25x 12.6 % 9.2 %

Blue Owl Technology Finance Corp.

II 2021 $ 6,527 $ 4,054 $ 1,222 $ 40 $ 1,252 $ 1,292 NM NM NM NM

First Lien Lending (3)

Owl Rock First Lien Fund Levered 2018 $ 2,820 $ 1,161 $ 863 $ 193 $ 880 $ 1,073 1.31x 1.25x 10.3 % 8.3 %

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

Blue Owl First Lien Fund Levered 2018 $ 2,765 $ 1,161 $ 912 $ 218 $ 940 $ 1,158 1.33x 1.28x 10.8 % 8.9 %

Blue Owl First Lien Fund Unlevered 2019 $ 231 $ 224 $ 156 $ 34 $ 143 $ 177 1.18x 1.14x 5.8 % 4.4 %

(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:

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

Onshore Levered, Offshore Levered and Insurance Unlevered.

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The gross and net IRR for the Offshore Levered feeder is 10.1% and 7.2%, 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.

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

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

Blue Owl 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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There can be no assurance that unrealized values will be realized at the valuations indicated.

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

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

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

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

GP Capital Solutions

GP Strategic Capital

(dollars in millions) Year of

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

GP Minority Equity (1)

Dyal Fund I 2011 $ 812 $ 1,284 $ 1,266 $ 672 $ 601 $ 1,273 1.15x 1.01x 2.9 % 0.1 %

Dyal Fund II 2014 $ 2,885 $ 2,153 $ 1,857 $ 672 $ 2,054 $ 2,726 1.73x 1.47x 13.7 % 8.8 %

Dyal Fund III 2015 $ 8,708 $ 5,318 $ 3,268 $ 3,159 $ 4,405 $ 7,564 2.84x 2.31x 30.7 % 23.1 %

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 $ 13,513 $ 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.

GP Minority Stakes (1)

Blue Owl GP Stakes I 2011 $ 807 $ 1,284 $ 1,266 $ 672 $ 610 $ 1,282 1.16x 1.01x 3.0 % 0.2 %

Blue Owl GP Stakes II 2014 $ 3,078 $ 2,153 $ 1,857 $ 672 $ 2,238 $ 2,910 1.86x 1.57x 14.8 % 9.9 %

Blue Owl GP Stakes III 2015 $ 9,103 $ 5,318 $ 3,268 $ 3,159 $ 4,902 $ 8,061 3.03x 2.47x 31.2 % 23.8 %

Blue Owl GP Stakes IV 2018 $ 14,673 $ 9,041 $ 5,864 $ 3,928 $ 6,962 $ 10,890 2.21x 1.86x 76.6 % 48.9 %

Blue Owl GP Stakes V 2020 $ 13,675 $ 12,852 $ 2,609 $ 498 $ 2,787 $ 3,285 1.47x 1.26x 52.9 % 27.7 %

(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 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)

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 (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

Blue Owl Real Estate Fund IV (1) 2017 $ 1,148 $ 1,250 $ 1,250 $ 1,412 $ 569 $ 1,981 1.75x 1.57x 26.0 % 21.1 %

Blue Owl Real Estate Net Lease Property Fund 2019 $ 6,829 $ 3,388 $ 3,388 $ 776 $ 3,732 $ 4,508 1.27x 1.24x 15.3 % 13.9 %

Blue Owl Real Estate Fund V (1) 2020 $ 3,790 $ 2,500 $ 2,137 $ 649 $ 2,000 $ 2,649 1.32x 1.24x 30.1 % 23.0 %

Blue Owl Real Estate Net Lease Trust (2) 2022 $ 3,558 $ 1,418 $ 1,418 $ 21 $ 1,383 $ 1,404 NM NM NM NM

Blue Owl Real Estate Fund VI (1) 2022 $ 3,989 $ 3,686 $ 193 $ 1 $ 193 $ 194 NM NM NM NM

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

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GAAP Results of Operations Analysis

Three Months Ended June 30, 2023, Compared to the Three Months Ended June 30, 2022

Three Months Ended June 30,

(dollars in thousands) 2023 2022 $ Change

Management fees, net (includes Part I Fees of $91,938 and $46,346)

$ 371,829 $ 284,325 $ 87,504

Administrative, transaction and other fees 45,108 42,921 2,187

Total Revenues, Net 416,937 327,246 89,691

Compensation and benefits 208,281 218,118 (9,837)

Amortization of intangible assets 115,917 64,885 51,032

General, administrative and other expenses 51,482 54,389 (2,907)

Total Expenses 375,680 337,392 38,288

Other Income (Loss)

Net gains (losses) on investments 3,030 (123) 3,153

Interest expense, net (13,568) (15,051) 1,483

Change in TRA liability 10,116 1,370 8,746

Change in warrant liability 450 20,723 (20,273)

Change in earnout liability (1,844) (208) (1,636)

Total Other Income (Loss) (1,816) 6,711 (8,527)

Income (Loss) Before Income Taxes 39,441 (3,435) 42,876

Income tax expense 5,402 5,631 (229)

Consolidated and Combined Net Income (Loss) 34,039 (9,066) 43,105

Net (income) loss attributable to noncontrolling interests (21,180) 7,940 (29,120)

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

$ 12,859 $ (1,126) $ 13,985

Revenues, Net

Management Fees .

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.

• Credit increased $70.8 million due to continued fundraising and deployment of capital within new and existing Credit products, including an increase in Part I Fees of $45.3 million driven by higher interest rates.

• GP Strategic Capital increased $5.5 million, primarily driven by continued fundraising in Blue Owl GP Stakes V.

• Real Estate increased $11.2 million due to continued fundraising and deployment of capital within new and existing Real Estate products, primarily ONLP and ORENT.

Compensation and Benefits.

Compensation and benefits expenses decreased primarily due to the following:

• $33.6 million decrease in equity-based compensation, reflecting a $41.2 million decrease in acquisition-related equity-based compensation primarily due to the settlement of the First Oak Street Earnout in January 2023, partially offset by an $8.2 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.

• $9.6 million decrease in acquisition-related cash compensation, primarily due to the settlement of the First Oak Street Earnout in January 2023.

• $35.1 million offsetting increase driven by higher compensation to existing employees, as well as increased headcount due to our continued growth.

Amortization of Intangible Assets.

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 were 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 decreased primarily due to the following:

• a favorable change of $8.7 million in expense support resulting from recoveries with certain products we manage.

• $6.8 million offsetting increase in occupancy costs driven by additional leased space to accommodate our continued growth.

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

Other Income (Loss)

Change in TRA Liability.

The change in the TRA liability was driven by the portion of the liability classified as contingent consideration, which amount is carried at fair value.

The change in fair value was driven by a combination of a higher discount rate, as well as a change in the expected timing of future payments.

Change in Warrant Liability.

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

The change in Income tax expense 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 for a discussion of the significant tax differences that impacted our effective tax rate.

Net (Income) Loss Attributable to Noncontrolling Interests

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 68% and 70% weighted average economic interest in the Blue Owl Operating Group for the three months ended June 30, 2023 and June 30, 2022, respectively.

Six Months Ended June 30, 2023, Compared to the Six Months Ended June 30, 2022

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,

Six Months Ended June 30,

(dollars in thousands) 2023 2022 $ Change

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Total Expenses 700,323 636,104 64,219

Net gains on investments 612 5 607

Other Income (Loss)

Net gains (losses) on investments 3,642 (118) 3,760

Interest expense, net (27,141) (27,885) 744

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Change in earnout liability (2,838) (704) (2,134)

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

Total Other Income (Loss) (19,685) 1,492 (21,177)

Income (Loss) Before Income Taxes 87,915 (31,389) 119,304

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

Income tax expense 11,842 593 11,249

Consolidated and Combined Net Income (Loss) 76,073 (31,982) 108,055

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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.

• Credit increased $145.3 million due to continued fundraising and deployment of capital within new and existing Credit products, including an increase in Part I Fees of $84.1 million driven by higher interest rates.

• GP Strategic Capital increased $33.4 million, primarily driven by continued fundraising in Blue Owl GP Stakes V.

• Real Estate increased $20.0 million due to continued fundraising and deployment of capital within new and existing Real Estate products, primarily ONLP and ORENT.

Administrative, Transaction and Other Fees .

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

(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.

• $10.9 million increase in administrative fees, driven by a higher level of reimbursable expenses due to growth of our products and business overall.

• $6.6 million increase in dealer manager revenues due to growth in the distribution of our retail BDCs.

• $12.0 million offsetting 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 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.

Compensation and benefits expenses decreased primarily due to the following:

• $56.5 million decrease in equity-based compensation, reflecting a $81.2 million decrease in acquisition-related equity-based compensation primarily 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 $26.7 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.

• $19.6 million decrease in acquisition-related cash compensation, primarily due to the settlement of the First Oak Street Earnout in January 2023.

• $71.3 million offsetting increase driven by higher compensation to existing employees, as well as increased headcount due to our continued growth.

Amortization of Intangible Assets.

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.

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

See Note 3 to our Financial Statements for additional information.

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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.

• $11.1 million increase in distribution costs due to fundraising in our Credit products.

• $12.6 million increase in occupancy costs driven by additional leased space to accommodate our continued growth.

• an offsetting favorable change of $17.6 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.

Other Income (Loss)

Change in TRA Liability.

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.

The change in the TRA liability was driven by the portion of the liability classified as contingent consideration, which amount is carried at fair value.

The change in fair value was driven by a combination of a higher discount rate, as well as a change in the expected timing of future payments.

Change in Warrant Liability.

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See Note 1 to our Financial Statements for additional information.

Income Tax Expense (Benefit)

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.

Income Tax Expense

The change in income tax expense 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 for a discussion of the significant tax differences that impacted our effective tax rate.

Net (Income) Loss Attributable to Noncontrolling Interests

Net (income) loss attributable to noncontrolling interests in the current period and prior period primarily represents the allocation to Common Units (as defined in Note 1 to our Financial Statements) 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 six months ended June 30, 2023 and June 30, 2022, respectively.

Non-GAAP Analysis

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Fee-Related Earnings and Distributable Earnings Summary

Three Months Ended March 31,

(dollars in thousands) 2023 2022 $ Change

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

(dollars in thousands) 2023 2022 2023 2022

FRE revenues $ 401,476 $ 317,811 $ 778,879 $ 590,409

FRE expenses 154,732 122,106 306,362 223,841

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

Net income (loss) allocated to noncontrolling interests included in Fee-Related Earnings (2,147) 1,359 (2,021) 1,879

Fee-Related Earnings $ 244,597 $ 197,064 $ 470,496 $ 368,447

Distributable Earnings $ 227,016 $ 180,402 $ 436,030 $ 336,128

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

Fee-Related Earnings and Distributable Earnings increased as a result of higher FRE revenues in Credit, GP Strategic Capital and Real Estate, partially offset by higher FRE expenses, as further discussed below.

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

(dollars in thousands) 2023 2022 2023 2022

Credit Strategies

Diversified lending $ 155,086 $ 108,909 $ 301,181 $ 214,361

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Opportunistic lending 2,475 2,730 4,875 4,271

CLOs 7,518 — 7,518

Liquid credit 6,136 6,295 13,654 6,295

Management Fees, Net 216,542 145,710 424,730 279,414

Administrative, transaction and other fees 18,509 23,396 26,033 37,869

FRE Revenues - Direct Lending Products 215,712 148,177 67,535

GP Capital Solutions Products

GP minority equity investments 130,296 102,100 28,196

FRE Revenues - Credit Strategies 235,051 169,106 450,763 317,283

GP Strategic Capital Strategies

GP minority stakes 130,424 124,434 260,720 226,534

GP debt financing 3,626 3,366 7,377 6,458

Professional sports minority investments 402 500 (98)

Professional sports minority stakes 565 513 967 1,013

Management Fees, Net 134,615 128,313 269,064 234,005

Administrative, transaction and other fees 1,306 1,168 2,509 2,739

FRE Revenues - GP Capital Solutions Products 135,652 107,263 28,389

Real Estate Products

FRE Revenues - GP Strategic Capital Strategies 135,921 129,481 271,573 236,744

Real Estate Strategies

Net lease 30,442 19,224 56,399 36,382

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Administrative, transaction and other fees 62 — 144 —

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

FRE Revenues - Real Estate Strategies 30,504 19,224 56,543 36,382

Total FRE Revenues $ 401,476 $ 317,811 $ 778,879 $ 590,409

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.

For the three and six months ended June 30, 2023, the increase in FRE management fees was primarily driven by the drivers below:

• Credit increased due to continued fundraising and deployment of capital within new and existing Credit products, including higher Part I Fees due to higher interest rates as discussed above in “—GAAP Results of Operations Analysis.”

• GP Strategic Capital increased, primarily driven by continued fundraising in Blue Owl GP Stakes V.

• Real Estate increased due to continued fundraising and deployment of capital within new and existing Real Estate products, primarily ONLP and ORENT.

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

For the three and six months ended June 30, 2023, 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 June 30, Six Months Ended June 30,

(dollars in thousands) 2023 2022 2023 2022

FRE compensation and benefits $ 115,621 $ 85,809 $ 219,221 $ 160,778

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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.

For the three and six months ended June 30, 2023, FRE compensation and benefits expenses increased, driven by higher compensation to existing employees, as well as increased headcount due to our continued growth.

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.

For the three months ended June 30, 2023, FRE general, administrative and other expenses increased, primarily driven by an increase in occupancy costs driven by additional leased space to accommodate our continued growth, partially offset by a decrease in distribution costs related to our Credit products.

For the six months ended June 30, 2023, FRE general, administrative and other expenses increased, primarily driven by an increase in occupancy costs driven by additional leased space to accommodate our continued growth and an increase in distribution costs due to higher distribution costs related to fundraising in our Credit products, 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 March 31,

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

(dollars in thousands) 2023 2022 2023 2022

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Net income (loss) attributable to noncontrolling interests 21,180 (7,940) 54,897 (19,041)

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

Income tax expense 5,402 5,631 11,842 593

GAAP Income (Loss) Before Income Taxes $ 39,441 $ (3,435) $ 87,915 $ (31,389)

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

Net income (loss) allocated to noncontrolling interests included in Fee-Related Earnings (2,147) 1,359 (2,021) 1,879

Strategic Revenue-Share Purchase consideration amortization 9,770 8,922 19,539 17,844

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Expense support (3,085) 5,661 (5,173) 12,873

Net gains on investments (612) (5)

Net gains (losses) on investments (3,030) 123 (3,642) 118

Change in TRA liability (10,116) (1,370) (8,152) 8,282

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Adjusted EBITDA $ 247,178 $ 197,305 $ 475,328 $ 368,906

Three Months Ended March 31,

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

(dollars in thousands) 2023 2022 2023 2022

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FRE Revenues $ 401,476 $ 317,811 $ 778,879 $ 590,409

Three Months Ended March 31,

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

(dollars in thousands) 2023 2022 2023 2022

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FRE Compensation and Benefits $ 115,621 $ 85,809 $ 219,221 $ 160,778

Three Months Ended March 31,

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

(dollars in thousands) 2023 2022 2023 2022

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

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

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

The fair value of the investments held by our products in our Credit and Real Estate platforms is the primary input to the calculation for the majority of our management fees.

Management fees from our GP Strategic Capital 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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TRA Liability

We carry a portion of our TRA liability at fair value, as it is contingent consideration related to the Dyal Acquisition.

We carry a portion of our TRA liability at fair value, as it is contingent consideration related to the Dyal Acquisition (as defined in Note 1 to our Financial Statements).

The valuation of this portion of the TRA liability is mostly sensitive to our expectation of future cash savings that we may ultimately realize related to our tax goodwill and other intangible assets deductions.

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See Note 9 to our Financial Statements for additional details.

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, including a discount rate and our best estimate of expected volatility and expected holding periods.

Earnout Liability and Warrant Liability

The fair values of our earnout liability and warrant liability were determined using various significant unobservable inputs, including a discount rate and our best estimate of expected volatility and expected holding periods.

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.

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Equity-based Compensation

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 grant-date fair values of our RSU and Incentive Unit (both defined in Note 1 to our Financial Statements) 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.

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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.

See Note 8 to our Financial Statements and the financial statements in our Annual Report for additional details.

Deferred Tax Assets

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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 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.

We believe that none of the changes to GAAP that went into effect during the six months ended June 30, 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

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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.

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.

We ended the second quarter of 2023 with $41.3 million of cash and cash equivalents and approximately $1.3 billion 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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Debt Obligations

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.

As of June 30, 2023, our long-term debt obligations consisted of $59.8 million aggregate principal amount of 7.397% Senior Notes due 2028 (the “2028 Notes”), $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 2028 Notes, 2031 Notes and the 2032 Notes, the “Notes”).

We also had $280.0 million outstanding under our Revolving Credit Facility as of June 30, 2023, and as of the date of this filing, the balance was $55.0 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.

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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.

See Note 4 to our Financial Statements and the 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.

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

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

Adjusted EBITDA was $247.2 million and $475.3 million for the three and six months ended June 30, 2023, respectively.

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

Tax Receivable Agreement

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

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

As of June 30, 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 $959.4 million under the TRA (such amount excludes the adjustment to fair value for the portion classified as contingent consideration).

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

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

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

The obligation to make payments under the TRA is an obligation of Blue Owl GP, and any other corporate taxpaying entities that in the future may hold GP Units (as defined in Note 1 to our Financial Statements) and not of the Blue Owl Operating Group.

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

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In 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.

During the three and six months ended June 30, 2023, 39,640 RSUs with a fair value of $0.4 million and 358,946 RSUs with a fair value of $4.8 million, respectively, were withheld to satisfy tax withholding obligations.

During the three and six months ended June 30, 2022 50,189 RSUs with a fair value of $0.6 million and 107,170 with a fair value of $1.3 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 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.

In April 2023, we modified our purchase agreement with the Wellfleet sellers, such that Wellfleet Earnout Shares will be delivered in cash in lieu of Wellfleet Earnout Shares.

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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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.

For details on the Oak Street Cash Earnout and Wellfleet Earnouts, see Note 8 to our Financial Statements and Note 3 to the financial statements in our Annual Report for additional information.

Dividends and Distributions

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.

For the second quarter of 2023, we declared a dividend of $0.14 to holders of record as of the close of business on August 21, 2023, which will be paid on August 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.

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

LIBOR Transition

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Cash Flows Analysis

Three Months Ended March 31,

Six Months Ended June 30,

(dollars in thousands) 2023 2022 $ Change

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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;

Included in the six months ended June 30, 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 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.

Cash flows from investing activities for the six months ended June 30, 2023, were primarily related to purchases of investments in our Real Estate products, as well as cash outflows related to office space-related leasehold improvements.

Cash flows from investing activities for the six months ended June 30, 2022, were primarily related to cash consideration paid in connection with the Wellfleet Acquisition, as well as cash outflows related to office space-related leasehold improvements and investments by us into our Credit products.

Financing Activities.

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.

Cash flows from financing activities for the six months ended June 30, 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, as well as the issuance of our 2028 Notes, which borrowings were used to finance working capital needs and general capital purposes.

Included in the six months ended June 30, 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 six months ended June 30, 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.

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