BLUE OWL CAPITAL INC. 10-Q

Item 2. 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 Financial Statements. For a description of our business, please see “Item 1. Business” in our Annual Report and “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations—One Blue Owl” in our quarterly report on Form 10-Q for the quarter ended June 30, 2023 . 2023 Third Quarter Overview Three Months Ended September 30, Nine Months Ended September 30, (dollars in thousands) 2023 2022 2023 2022 Net Income (Loss) Attributable to Blue Owl Capital Inc. $ 15,109 $ 2,060 $ 36,285 $ (10,881) Fee-Related Earnings (1) $ 247,829 $ 209,814 $ 718,325 $ 578,261 Distributable Earnings (1) $ 229,523 $ 191,673 $ 665,553 $ 527,801 (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.” Please see “—GAAP Results of Operations Analysis” and “—Non-GAAP Analysis” for a detailed discussion of the underlying drivers of our results. Acquisitions On August 15, 2023, we closed the Par-Four Acquisition (as defined in Note 1 to our Financial Statements), expanding our product offering in our liquid credit strategy. See Note 3 to our Financial Statements for additional information. On October 30, 2023, we announced an agreement to acquire funds managed by Cowen Healthcare Investments, a life sciences investment manager, from Cowen Investment Management. The transaction is subject to customary closing conditions and expected to close in the fourth quarter of 2023. The acquisition is expected to add approximately $1 billion in assets under management across several funds and further strengthen Blue Owl’s market presence in the life sciences sector with an emphasis on mid-to-late-stage equity investments into biopharmaceutical and healthcare companies. 7 Table of Contents Assets Under Management Blue Owl AUM: $156.9 billion FPAUM: $97.0 billion Credit AUM: $79.5 billion FPAUM: $54.3 billion GP Strategic Capital AUM: $51.4 billion FPAUM: $28.6 billion Real Estate AUM: $25.9 billion FPAUM: $14.1 billion Diversified Lending Commenced 2016 AUM: $46.1 billion FPAUM: $28.1 billion GP Minority Stakes Commenced 2010 AUM: $49.1 billion FPAUM: $27.4 billion Net Lease Commenced 2009 AUM: $25.9 billion FPAUM: $14.1 billion Technology Lending Commenced 2018 AUM: $18.8 billion FPAUM: $13.6 billion GP Debt Financing Commenced 2019 AUM: $1.6 billion FPAUM: $0.9 billion First Lien Lending Commenced 2018 AUM: $3.7 billion FPAUM: $2.6 billion Professional Sports Minority Stakes Commenced 2021 AUM: $0.7 billion FPAUM: $0.3 billion Opportunistic Lending Commenced 2020 AUM: $2.4 billion FPAUM: $1.5 billion Liquid Credit Commenced 2022 AUM: $8.5 billion FPAUM: $8.5 billion As of September 30, 2023, our AUM was $156.9 billion, which included $97.0 billion of FPAUM. For the nine months ended September 30, 2023, approximately 92% of our management fees were earned on AUM from Permanent Capital. As of September 30, 2023, we have $12.6 billion in AUM not yet paying fees, providing approximately $175 million of annualized management fees once deployed. 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, 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, including during periods of market uncertainty and volatility. During the third quarter of 2023, uncertainty around the pace of inflation growth, in conjunction with elevated interest rates and slowing global gross domestic product growth, continued to weigh on industry deal activity, though activity has picked up from earlier in the year. During the quarter, 92% of our management fees were generated by Permanent Capital and the remainder predominantly 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 third quarter of 2023 with substantial available capital to deploy, reporting $12.6 billion of AUM not yet paying fees. While broadly syndicated loan market activity modestly picked up, direct lenders continued to occupy a substantial share of the leveraged loan market. Increasing repayments from levels seen earlier in the year allowed us to redeploy capital into higher yielding opportunities, while elevated interest rates continue to have a beneficial impact on our management fees compared to the prior year. 8 Table of Contents 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, particularly in the current challenging fundraising and realization environment. 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, highly predictable net rent growth, and long-duration contractual income 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 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 our quarterly report on Form 10-Q for the period ended March 31, 2023. 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 We present information regarding our AUM, FPAUM and various other related metrics throughout this MD&A to provide context around our fee generating revenues results, as well as indicators of the potential for future earnings from existing and new products. Our calculations of AUM and FPAUM may differ from the calculation methodologies of other asset managers, and as a result these measures may not be comparable to similar measures presented by other asset managers. In addition, our calculation of AUM includes amounts that are fee exempt (i.e., not subject to fees). As of September 30, 2023, assets under management related to us, our executives and other employees totaled approximately $2.9 billion (including $1.7 billion related to accrued carried interest). A portion of these assets under management are not charged fees. Composition of Assets Under Management Our AUM consists of FPAUM, AUM not yet paying fees, fee-exempt AUM and net appreciation and leverage in products on which fees are based on commitments or investment cost. AUM not yet paying fees generally relates to unfunded capital commitments (to the extent such commitments are not already subject to fees), undeployed debt (to the extent we earn fees based on total asset values or investment cost, inclusive of assets purchased using debt) and AUM that is subject to a temporary fee holiday. Fee-exempt AUM represents certain investments by us, our employees, other related parties and third parties, as well as certain co-investment vehicles on which we 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 in the future. AUM not yet paying fees could pr ovide approximately $175 million of additional annualized management fees once deployed or upon the expiration of the relevant fee holidays. 9 Table of Contents Permanency and Duration of Assets Under Management Our capital base is heavily weighted toward Permanent Capital. We view the permanency and duration of the products that we manage as a differentiator in our industry and as a means of measuring the stability of our future revenues stream. The chart below presents the composition of our management fees by remaining product duration. Changes in these relative percentages will occur over time as the mix of products we offer changes. For example, our Real Estate products have a higher concentration in what we refer to as “long-dated” funds, or funds in which the contractual remaining life is five years or more, which in isolation may cause our percentage of management fees from Permanent Capital to decline. 10 Table of Contents Changes in AUM Three Months Ended September 30, 2023 Three Months Ended September 30, 2022 (dollars in millions) Credit GP Strategic Capital Real Estate Total Credit GP Strategic Capital Real Estate Total Beginning Balance $ 73,793 $ 50,934 $ 24,826 $ 149,553 $ 56,827 $ 45,674 $ 16,639 $ 119,140 Acquisition 1,645 — — 1,645 — — — — New capital raised 2,148 98 680 2,926 5,472 2,910 434 8,816 Change in debt 1,954 — — 1,954 3,058 — 1,590 4,648 Distributions (926) (47) (184) (1,157) (471) (304) (239) (1,014) Change in value / other 913 413 619 1,945 800 (441) 190 549 Ending Balance $ 79,527 $ 51,398 $ 25,941 $ 156,866 $ 65,686 $ 47,839 $ 18,614 $ 132,139 Nine Months Ended September 30, 2023 Nine Months Ended September 30, 2022 (dollars in millions) Credit GP Strategic Capital Real Estate Total Credit GP Strategic Capital Real Estate Total Beginning Balance $ 68,607 $ 48,510 $ 21,085 $ 138,202 $ 39,227 $ 39,906 $ 15,362 $ 94,495 Acquisition 1,645 — — 1,645 6,529 — — 6,529 New capital raised 5,617 602 3,369 9,588 10,425 8,434 1,002 19,861 Change in debt 3,609 — 696 4,305 9,818 — 1,590 11,408 Distributions (2,531) (1,158) (600) (4,289) (1,135) (1,281) (504) (2,920) Change in value / other 2,580 3,444 1,391 7,415 822 780 1,164 2,766 Ending Balance $ 79,527 $ 51,398 $ 25,941 $ 156,866 $ 65,686 $ 47,839 $ 18,614 $ 132,139 Credit. Increase in AUM for the nine months ended September 30, 2023 was driven by the following: • $1.6 billion of products in the liquid credit strategy were added in connection with the Par-Four Acquisition that closed in August 2023. • $3.3 billion new capital raised in diversified lending, primarily driven by private wealth fundraising in OCIC and a separately managed account. • $1.9 billion new capital raised in technology lending, driven by continued fundraising in OTIC, a separately managed account and OTF II. • $3.6 billion of additional net debt commitments primarily in diversified lending and technology lending strategies, as we continue to opportunistically manage leverage in our BDCs. • $2.6 billion of overall appreciation across the platform. • $2.5 billion offsetting decrease in distributions, which primarily relate to dividends paid from our BDCs. Redemptions from these products were not material. GP Strategic Capital. Increase in AUM for the nine months ended September 30, 2023 was driven by the overall appreciation across all of our major products of $3.4 billion and new capital raised of $0.6 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. Real Estate. Increase in AUM for the nine months ended September 30, 2023 was driven by new capital raised of $3.4 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 $1.4 billion and additional debt commitments of $0.7 billion, primarily related to ONLP, partially offset by distributions in ONLP and Blue Owl Real Estate Fund V. 11 Table of Contents Changes in FPAUM Three Months Ended September 30, 2023 Three Months Ended September 30, 2022 (dollars in millions) Credit GP Strategic Capital Real Estate Total Credit GP Strategic Capital Real Estate Total Beginning Balance $ 52,077 $ 28,462 $ 13,084 $ 93,623 $ 41,409 $ 26,678 $ 9,430 $ 77,517 Acquisition 1,645 — — 1,645 — — — — New capital raised / deployed 603 161 997 1,761 3,595 2,675 1,095 7,365 Fee basis step down — (1) — (1) — (881) — (881) Distributions (860) — (179) (1,039) (433) (15) (220) (668) Change in value / other 835 — 197 1,032 721 — 81 802 Ending Balance $ 54,300 $ 28,622 $ 14,099 $ 97,021 $ 45,292 $ 28,457 $ 10,386 $ 84,135 Nine Months Ended September 30, 2023 Nine Months Ended September 30, 2022 (dollars in millions) Credit GP Strategic Capital Real Estate Total Credit GP Strategic Capital Real Estate Total Beginning Balance $ 49,041 $ 28,772 $ 10,997 $ 88,810 $ 32,029 $ 21,212 $ 8,203 $ 61,444 Acquisition 1,645 — — 1,645 6,501 — — 6,501 New capital raised / deployed (1) 3,625 387 3,354 7,366 8,693 9,035 2,293 20,021 Fee basis step down (1) — (334) — (334) — (1,779) — (1,779) Distributions (2,357) (203) (471) (3,031) (1,092) (11) (494) (1,597) Change in value / other 2,346 — 219 2,565 (839) — 384 (455) Ending Balance $ 54,300 $ 28,622 $ 14,099 $ 97,021 $ 45,292 $ 28,457 $ 10,386 $ 84,135 (1) The nine months ended September 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. Credit. Increase in FPAUM for the nine months ended September 30, 2023 was driven by a combination of continued fundraising, primarily in diversified lending and technology lending strategies, the overall appreciation across the platform and the Par-Four Acquisition, partially offset by distributions, which primarily related to dividends paid from our BDCs. GP Strategic Capital. FPAUM for the nine months ended September 30, 2023 remained relatively unchanged. Real Estate. Increase in FPAUM for the nine months ended September 30, 2023 was driven primarily by capital raised in OREF VI and ORENT, and deployment in OREF VI. 12 Table of Contents 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 Blue Owl’s performance. An investment in Blue Owl is not an investment in any of our products. Past performance is not indicative of future results. As with any investment, there is always the potential for gains as well as the possibility of losses. There can be no assurance that any of these products or our other existing and future products will achieve similar returns. 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”). Credit MoIC IRR (dollars in millions) Year of Inception AUM Capital Raised (4) Invested Capital (5) Realized Proceeds (6) Unrealized Value (7) Total Value Gross (8) Net (9) Gross (10) Net (11) Diversified Lending (1) Blue Owl Capital Corporation 2016 $ 14,767 $ 5,970 $ 5,970 $ 2,706 $ 5,947 $ 8,653 1.67x 1.48x 13.2 % 9.6 % Blue Owl Capital Corporation II (2) 2017 $ 2,590 $ 1,311 $ 1,284 $ 389 $ 1,280 $ 1,669 NM 1.33x NM 7.4 % Blue Owl Capital Corporation III 2020 $ 4,168 $ 1,824 $ 1,824 $ 344 $ 1,865 $ 2,209 1.27x 1.25x 13.1 % 12.2 % Blue Owl Credit Income Corp. (2) 2020 $ 15,410 $ 7,000 $ 6,628 $ 615 $ 6,567 $ 7,182 NM 1.13x NM 10.5 % Technology Lending (1) Blue Owl Technology Finance Corp. 2018 $ 7,269 $ 3,269 $ 3,269 $ 581 $ 3,503 $ 4,084 1.35x 1.26x 12.2 % 8.8 % Blue Owl Technology Finance Corp. II 2021 $ 6,497 $ 4,078 $ 1,525 $ 66 $ 1,568 $ 1,634 NM NM NM NM First Lien Lending (3) Blue Owl First Lien Fund Levered 2018 $ 2,638 $ 1,161 $ 912 $ 248 $ 946 $ 1,194 1.38x 1.32x 11.3 % 9.3 % Blue Owl First Lien Fund Unlevered 2019 $ 550 $ 296 $ 156 $ 46 $ 135 $ 181 1.20x 1.16x 6.1 % 4.7 % (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 OBDC II and OCIC. (3) Blue Owl 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 1.36x and 1.27x, respectively. The gross and net IRR for the Offshore Levered feeder is 10.6% and 7.8%, respectively. 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. (5) Invested capital includes capital calls, reinvested dividends and periodic investor closes, as applicable. (6) Realized proceeds represent the sum of all cash distributions to investors. (7) Unrealized value represents the product’s NAV. There can be no assurance that unrealized values will be realized at the valuations indicated. (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. (9) Net MoIC measures the aggregate value generated by a product’s investments in absolute terms. Net 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. Net MoIC is calculated after giving effect to management fees (including Part I Fees) and Part II Fees, as applicable, and all other expenses. (10) Gross IRR is an annualized since inception gross internal rate of return of cash flows to and from the product and the product’s residual value at the end of the measurement period. Gross IRRs are calculated before giving effect to management fees (including Part I Fees) and Part II Fees, as applicable. (11) Net IRRs are calculated consistent with gross IRRs, but after giving effect to management fees (including Part I Fees) and Part II Fees, as applicable, and all other expenses. An individual investor’s IRR may differ from the reported IRR based on the timing of capital transactions. 13 Table of Contents GP Strategic Capital MoIC IRR (dollars in millions) Year of Inception AUM Capital Raised Invested Capital (2) Realized Proceeds (3) Unrealized Value (4) Total Value Gross (5) Net (6) Gross (7) Net (8) GP Minority Stakes (1) Blue Owl GP Stakes I 2011 $ 774 $ 1,284 $ 1,266 $ 687 $ 563 $ 1,250 1.14x 0.99x 2.5 % -0.2 % Blue Owl GP Stakes II 2014 $ 3,219 $ 2,153 $ 1,857 $ 695 $ 2,334 $ 3,029 1.94x 1.63x 15.2 % 10.3 % Blue Owl GP Stakes III 2015 $ 9,240 $ 5,318 $ 3,273 $ 3,362 $ 4,813 $ 8,175 3.07x 2.50x 30.7 % 23.5 % Blue Owl GP Stakes IV 2018 $ 14,900 $ 9,041 $ 5,864 $ 3,928 $ 7,144 $ 11,072 2.25x 1.89x 71.3 % 45.8 % Blue Owl GP Stakes V 2020 $ 13,607 $ 12,852 $ 3,563 $ 641 $ 3,546 $ 4,187 1.34x 1.18x 43.3 % 20.8 % (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. (3) Realized proceeds represent the sum of all cash distributions to investors. (4) Unrealized value represents the product's NAV. There can be no assurance that unrealized values will be realized at the valuations indicated. (5) Gross MoIC is calculated by adding total realized proceeds and unrealized values of a product’s investments and dividing by the total amount of invested capital. Gross MoIC is calculated before giving effect to management fees and carried interest, as applicable. (6) Net MoIC measures the aggregate value generated by a product's investments in absolute terms. Net 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. Net MoIC is calculated after giving effect to management fees and carried interest, as applicable, and all other expenses. (7) Gross IRR is an annualized since inception gross internal rate of return of cash flows to and from the product and the product’s residual value at the end of the measurement period. Gross IRRs are calculated before giving effect to management fees and carried interest, as applicable. (8) Net IRR is an annualized since inception net internal rate of return of cash flows to and from the product and the product's residual value at the end of the measurement period. Net IRRs reflect returns to all investors. Net IRRs are calculated after giving effect to management fees and carried interest, as applicable, and all other expenses. An individual investor's IRR may differ from the reported IRR based on the timing of capital transactions. Real Estate MoIC IRR (dollars in millions) Year of Inception AUM Capital Raised Invested Capital (3) Realized Proceeds (4) Unrealized Value (5) Total Value Gross (6) Net (7) Gross (8) Net (9) Net Lease Blue Owl Real Estate Fund IV (1) 2017 $ 1,133 $ 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 $ 6,875 $ 3,421 $ 3,421 $ 776 $ 3,732 $ 4,508 1.27x 1.24x 15.3 % 13.9 % Blue Owl Real Estate Fund V (1) 2020 $ 4,027 $ 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 $ 4,022 $ 1,760 $ 1,652 $ 48 $ 1,673 $ 1,721 NM NM NM NM Blue Owl Real Estate Fund VI (1) 2022 $ 4,529 $ 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. (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. (4) Realized proceeds represent the sum of all cash distributions to all investors. (5) Unrealized value represents the fund’s NAV. There can be no assurance that unrealized values will be realized at the valuations indicated. (6) 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 and carried interest, as applicable. (7) Net MoIC measures the aggregate value generated by a product's investments in absolute terms. Net 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. Net MoIC is calculated after giving effect to management fees and carried interest, as applicable, and all other expenses. (8) Gross IRR is an annualized since inception gross internal rate of return of cash flows to and from the product and the product’s residual value at the end of the measurement period. Gross IRRs are calculated before giving effect to management fees and carried interest, as applicable. (9) Net IRR is an annualized since inception net internal rate of return of cash flows to and from the product and the product's residual value at the end of the measurement period. Net IRRs reflect returns to all investors. Net IRRs are calculated after giving effect to management fees and carried interest, as applicable, and all other expenses. An individual investor's IRR may differ from the reported IRR based on the timing of capital transactions. 14 Table of Contents GAAP Results of Operations Analysis Three Months Ended September 30, 2023, Compared to the Three Months Ended September 30, 2022 Three Months Ended September 30, (dollars in thousands) 2023 2022 $ Change Revenues Management fees, net (includes Part I Fees of $97,621 and $62,808) $ 386,009 $ 338,377 $ 47,632 Administrative, transaction and other fees 43,641 32,609 11,032 Total Revenues, Net 429,650 370,986 58,664 Expenses Compensation and benefits 213,976 234,745 (20,769) Amortization of intangible assets 56,724 65,835 (9,111) General, administrative and other expenses 65,485 67,972 (2,487) Total Expenses 336,185 368,552 (32,367) Other Loss Net losses on investments (1,227) (592) (635) Interest expense, net (13,986) (15,027) 1,041 Change in TRA liability 35 3,599 (3,564) Change in warrant liability (2,050) (2,747) 697 Change in earnout liability (2,074) (1,760) (314) Total Other Loss (19,302) (16,527) (2,775) Income (Loss) Before Income Taxes 74,163 (14,093) 88,256 Income tax expense (benefit) 10,652 (4,085) 14,737 Consolidated and Combined Net Income (Loss) 63,511 (10,008) 73,519 Net (income) loss attributable to noncontrolling interests (48,402) 12,068 (60,470) Net Income Attributable to Blue Owl Capital Inc. $ 15,109 $ 2,060 $ 13,049 Revenues, Net Management Fees . The increase in management fees was primarily due to the drivers below. See Note 6 to our Financial Statements for additional details on our GAAP management fees by strategy. • Credit increased $56.2 million due to continued fundraising and deployment of capital within new and existing Credit products, including an increase in Part I Fees of $34.1 million driven by higher interest rates. • GP Strategic Capital decreased $20.5 million, primarily driven by $21.5 million of catch-up fees related to additional closings in Blue Owl GP Stakes V during the prior period. • Real Estate increased $11.9 million due to continued fundraising and deployment of capital within new and existing Real Estate products, primarily ORENT and OREF VI. Administrative, Transaction and Other Fees . The increase in administrative, transaction and other fees was driven primarily by the following: • $6.3 million increase in dealer manager revenues due to growth in the distribution of our retail BDCs, OCIC and OTIC; and • $3.9 million increase in administrative fees, driven by a higher level of reimbursable expenses due to the growth of our products and business overall. Expenses Compensation and Benefits. Compensation and benefits expenses decreased primarily due to the following: • $33.1 million decrease in equity-based compensation, reflecting a $41.6 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 15 Table of Contents an $8.8 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. • $9.9 million decrease in acquisition-related cash compensation, primarily due to the settlement of the First Oak Street Earnout in January 2023. • $22.0 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 decreased 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: • $21.4 million decrease in distribution costs primarily related to our Credit products. • $7.9 million offsetting increase in professional fees driven by a $7.0 million increase in Transaction Expenses (as defined below). • $6.8 million offsetting increase in occupancy costs driven by additional leased space to accommodate our continued growth. • $6.1 million offsetting increase in reimbursed expenses due to growth in our products and business overall. The remaining net change was across various categories. 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 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 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 post-Business Combination net income due to the drivers discussed above. The Common Units represent an approximately 67% and 69% weighted average economic interest in the Blue Owl Operating Group for the three months ended September 30, 2023 and September 30, 2022, respectively. 16 Table of Contents Nine Months Ended September 30, 2023, Compared to the Nine Months Ended September 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. Nine Months Ended September 30, (dollars in thousands) 2023 2022 $ Change Revenues Management fees, net (includes Part I Fees of $275,423 and $155,893) $ 1,116,663 $ 870,334 $ 246,329 Administrative, transaction and other fees 120,404 103,875 16,529 Realized performance income 506 — 506 Total Revenues, Net 1,237,573 974,209 263,364 Expenses Compensation and benefits 619,875 646,755 (26,880) Amortization of intangible assets 243,532 192,246 51,286 General, administrative and other expenses 173,101 165,655 7,446 Total Expenses 1,036,508 1,004,656 31,852 Other Loss Net gains (losses) on investments 2,415 (710) 3,125 Interest expense, net (41,127) (42,912) 1,785 Change in TRA liability 8,187 (4,683) 12,870 Change in warrant liability (3,550) 35,734 (39,284) Change in earnout liability (4,912) (2,464) (2,448) Total Other Loss (38,987) (15,035) (23,952) Income (Loss) Before Income Taxes 162,078 (45,482) 207,560 Income tax expense (benefit) 22,494 (3,492) 25,986 Consolidated and Combined Net Income (Loss) 139,584 (41,990) 181,574 Net (income) loss attributable to noncontrolling interests (103,299) 31,109 (134,408) Net Income (Loss) Attributable to Blue Owl Capital Inc. $ 36,285 $ (10,881) $ 47,166 Revenues, Net Management Fees . The increase in management fees was primarily due to the drivers below. See Note 6 to our Financial Statements for additional details on our GAAP management fees by strategy. • Credit increased $201.5 million due to continued fundraising and deployment of capital within new and existing Credit products, including an increase in Part I Fees of $118.2 million driven by higher interest rates. • GP Strategic Capital increased $12.9 million, primarily driven by continued fundraising in Blue Owl GP Stakes V. • Real Estate increased $31.9 million due to continued fundraising and deployment of capital within new and existing Real Estate products, primarily ORENT, OREF VI and ONLP . Administrative, Transaction and Other Fees . The increase in administrative, transaction and other fees was driven primarily by the following: • $14.8 million increase in administrative fees, driven by a higher level of reimbursable expenses due to growth of our products and business overall. • $12.9 million increase in dealer manager revenues due to growth in the distribution of our retail BDCs. • $11.1 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. 17 Table of Contents Expenses Compensation and Benefits. Compensation and benefits expenses decreased primarily due to the following: • $89.6 million decrease in equity-based compensation, reflecting a $122.9 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 $35.5 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. • $29.5 million decrease in acquisition-related cash compensation, primarily due to the settlement of the First Oak Street Earnout in January 2023. • $93.3 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 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 increased driven by the following: • $19.4 million increase in occupancy costs driven by additional leased space to accommodate our continued growth. • $14.0 million increase in reimbursed expenses due to growth in our products and business overall. • $19.3 million offsetting favorable change in expense support resulting from recoveries with certain products we manage. • $10.3 million offsetting decrease in distribution costs primarily related to our Credit products. The remaining net change was across various categories, driven by our continued growth. Other Loss Change in TRA Liability. The change in the TRA liability for the current period was driven by a change in the expected timing of future payments. The change in the TRA liability for the prior period was driven by a higher discount rate. 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 decrease in the price of our Class A Shares. In August 2022, the Public Warrants were redeemed. 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 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 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 70% weighted average economic interest in the Blue Owl Operating Group for the nine months ended September 30, 2023 and September 30, 2022, respectively. 18 Table of Contents Non-GAAP Analysis In addition to presenting our results in accordance with GAAP, we present certain other financial measures that are not presented in accordance with GAAP. Management uses these measures in budgeting and to assess the operating results of our business, and we believe that this information enhances the ability of stockholders to analyze our performance from period to period. These non-GAAP financial measures supplement and should be considered in addition to and not in lieu of our GAAP results, and such measures should not be considered as indicative of our liquidity. Our non-GAAP measures may not be comparable to other similarly titled measures used by other companies. Please see “—Non-GAAP Reconciliations” for reconciliations of these measures to the most comparable measures prepared in accordance with GAAP. Fee-Related Earnings and Related Components Fee-Related Earnings is a supplemental non-GAAP measure of 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. Fee-Related Earnings exclude various items that are required for the presentation of our results under GAAP, including the following: noncontrolling interests in the Blue Owl Operating Partnerships; equity-based compensation expense; compensation expenses related to capital contributions in certain subsidiary holding companies that are in-turn paid as compensation to certain employees, as such contributions are not included in Fee-Related Earnings or Distributable Earnings; amortization of acquisition-related earnouts; amortization of intangible assets; “Transaction Expenses” as defined below; expense support payments and subsequent reimbursements; net gains (losses) on investments, net losses on retirement of debt; interest; changes in TRA, warrant and earnout liabilities; and taxes. 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, 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, 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. We make these adjustments when calculating Distributable Earnings to more accurately reflect the net realized earnings that are expected to be or become available for distribution or reinvestment into our business. Management believes that Distributable Earnings can be useful as a supplemental performance measure to our GAAP results assessing the amount of earnings available for distribution. 19 Table of Contents Fee-Related Earnings and Distributable Earnings Summary Three Months Ended September 30, Nine Months Ended September 30, (dollars in thousands) 2023 2022 2023 2022 FRE revenues $ 412,771 $ 362,973 $ 1,191,650 $ 953,382 FRE expenses 161,840 157,610 468,202 381,451 Net income (loss) allocated to noncontrolling interests included in Fee-Related Earnings (3,102) 4,451 (5,123) 6,330 Fee-Related Earnings $ 247,829 $ 209,814 $ 718,325 $ 578,261 Distributable Earnings $ 229,523 $ 191,673 $ 665,553 $ 527,801 Fee-Related Earnings and Distributable Earnings for the three months ended September 30, 2023, increased as a result of higher FRE revenues in Credit and Real Estate, partially offset by higher FRE expenses, as further discussed below. Fee-Related Earnings and Distributable Earnings for the nine months ended September 30, 2023, 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. FRE Revenues Three Months Ended September 30, Nine Months Ended September 30, (dollars in thousands) 2023 2022 2023 2022 Credit Strategies Diversified lending $ 159,461 $ 126,492 $ 460,642 $ 340,853 Technology lending 52,889 29,905 148,676 76,738 First lien lending 4,525 4,213 13,758 11,867 Opportunistic lending 2,422 2,312 7,297 6,583 Liquid credit 6,590 6,778 20,244 13,073 Management Fees, Net 225,887 169,700 650,617 449,114 Administrative, transaction and other fees 14,722 13,667 40,755 51,536 FRE Revenues - Credit Strategies 240,609 183,367 691,372 500,650 GP Strategic Capital Strategies GP minority stakes 132,498 153,563 393,218 380,097 GP debt financing 4,613 3,532 11,990 9,990 Professional sports minority stakes 683 283 1,650 1,296 Management Fees, Net 137,794 157,378 406,858 391,383 Administrative, transaction and other fees 1,321 1,159 3,830 3,898 FRE Revenues - GP Strategic Capital Strategies 139,115 158,537 410,688 395,281 Real Estate Strategies Net lease 32,987 21,069 89,386 57,451 Management Fees, Net 32,987 21,069 89,386 57,451 Administrative, transaction and other fees 60 — 204 — FRE Revenues - Real Estate Strategies 33,047 21,069 89,590 57,451 Total FRE Revenues $ 412,771 $ 362,973 $ 1,191,650 $ 953,382 FRE Management Fees . For the three months ended September 30, 2023, Credit FRE revenues increased due to continued fundraising and deployment of capital within existing Credit products, including increased Part I Fees of $34.1 million driven by higher interest rates. The change in GP Strategic Capital FRE revenues reflects $21.5 million of catch-up fees related to additional closings in Blue Owl GP Stakes V during the prior period. Real Estate FRE revenues increased due to continued fundraising and deployment of capital within existing Real Estate products, primarily ORENT and ONLP. 20 Table of Contents For the nine months ended September 30, 2023, Credit FRE revenues increased due to continued fundraising and deployment of capital within new and existing Credit products, including increased Part I Fees of $118.2 million driven by higher interest rates. GP Strategic Capital FRE revenues increased due to continued fundraising in Blue Owl GP Stakes V. Real Estate FRE revenues increased due to continued fundraising and deployment of capital within new and existing Real Estate products, primarily OREF VI and ORENT. FRE Administrative, Transaction and Other Fees . For the three months ended September 30, 2023, the increase in FRE administrative, transaction and other fees was driven primarily by an increase in fee income earned for services provided to portfolio companies. For the nine months ended September 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. FRE Expenses Three Months Ended September 30, Nine Months Ended September 30, (dollars in thousands) 2023 2022 2023 2022 FRE compensation and benefits $ 116,197 $ 98,535 $ 335,418 $ 259,313 FRE general, administrative and other expenses 45,643 59,075 132,784 122,138 Total FRE Expenses $ 161,840 $ 157,610 $ 468,202 $ 381,451 FRE Compensation and Benefits. For the three months ended September 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. For the nine months ended September 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 . For the three months ended September 30, 2023, FRE general, administrative and other expenses decreased, primarily due to a decrease in distribution costs of $27.6 million, primarily related to our Credit products, partially offset by an increase of $6.8 million in occupancy costs, driven by additional leased space, with the remaining net change across various categories, driven by our continued growth. For the nine months ended September 30, 2023, FRE general, administrative and other expenses increased, due to an increase of $19.4 million in occupancy costs driven by additional leased space to accommodate our continued growth and other various categories driven by our continued growth, partially offset by a decrease in distribution costs of $23.0 million primarily related to our Credit products. 21 Table of Contents Non-GAAP Reconciliations The table below presents the reconciliation of the non-GAAP measures presented throughout this MD&A. Please see “—Non-GAAP Analysis” for important information regarding these measures. Three Months Ended September 30, Nine Months Ended September 30, (dollars in thousands) 2023 2022 2023 2022 GAAP Net Income (Loss) Attributable to Class A Shares $ 15,109 $ 2,060 $ 36,285 $ (10,881) Net income (loss) attributable to noncontrolling interests 48,402 (12,068) 103,299 (31,109) Income tax expense (benefit) 10,652 (4,085) 22,494 (3,492) GAAP Income (Loss) Before Income Taxes 74,163 (14,093) 162,078 (45,482) Net income (loss) allocated to noncontrolling interests included in Fee-Related Earnings (3,102) 4,451 (5,123) 6,330 Strategic Revenue-Share Purchase consideration amortization 10,659 9,770 30,198 27,614 Realized performance income — — (506) — Realized performance compensation — — 177 — Equity-based compensation - other 36,185 27,381 104,017 69,200 Equity-based compensation - acquisition related 21,192 62,831 62,768 185,624 Equity-based compensation - Business Combination grants 17,597 17,864 52,290 54,538 Acquisition-related cash earnout amortization 6,567 16,515 19,163 48,708 Capital-related compensation 1,894 972 5,452 2,652 Amortization of intangible assets 56,724 65,835 243,532 192,246 Transaction Expenses 8,000 976 11,817 8,138 Expense support (1,352) 785 (6,525) 13,658 Net gains (losses) on investments 1,227 592 (2,415) 710 Change in TRA liability (35) (3,599) (8,187) 4,683 Change in warrant liability 2,050 2,747 3,550 (35,734) Change in earnout liability 2,074 1,760 4,912 2,464 Interest expense, net 13,986 15,027 41,127 42,912 Fee-Related Earnings 247,829 209,814 718,325 578,261 Realized performance income — — 506 — Realized performance compensation — — (177) — Interest expense, net (13,986) (15,033) (41,127) (42,912) Taxes and TRA payments (4,320) (3,108) (11,974) (7,548) Distributable Earnings 229,523 191,673 665,553 527,801 Interest expense, net 13,986 15,033 41,127 42,912 Taxes and TRA payments 4,320 3,108 11,974 7,548 Fixed assets depreciation and amortization 2,903 235 7,406 694 Adjusted EBITDA $ 250,732 $ 210,049 $ 726,060 $ 578,955 Three Months Ended September 30, Nine Months Ended September 30, (dollars in thousands) 2023 2022 2023 2022 GAAP Revenues $ 429,650 $ 370,986 $ 1,237,573 $ 974,209 Strategic Revenue-Share Purchase consideration amortization 10,659 9,770 30,198 27,614 Realized performance income — — (506) — Reimbursed expenses (27,538) (17,783) (75,615) (48,441) FRE Revenues $ 412,771 $ 362,973 $ 1,191,650 $ 953,382 22 Table of Contents Three Months Ended September 30, Nine Months Ended September 30, (dollars in thousands) 2023 2022 2023 2022 GAAP Compensation and Benefits $ 213,976 $ 234,745 $ 619,875 $ 646,755 Realized performance compensation — — (177) — Equity-based compensation - other (36,185) (27,381) (104,017) (68,478) Equity-based compensation - acquisition related (21,192) (62,831) (62,768) (185,624) Equity-based compensation - Business Combination grants (17,597) (17,864) (52,290) (54,538) Acquisition-related cash earnout amortization (6,567) (16,515) (19,163) (48,708) Capital-related compensation (1,894) (973) (5,452) (2,652) Reimbursed expenses (14,344) (10,646) (40,590) (27,442) FRE Compensation and Benefits $ 116,197 $ 98,535 $ 335,418 $ 259,313 Three Months Ended September 30, Nine Months Ended September 30, (dollars in thousands) 2023 2022 2023 2022 GAAP General, Administrative and Other Expenses $ 65,485 $ 67,972 $ 173,101 $ 165,655 Equity-based compensation - other — — — (722) Transaction Expenses (8,000) (976) (11,817) (8,138) Expense support 1,352 (785) 6,525 (13,658) Reimbursed expenses (13,194) (7,136) (35,025) (20,999) FRE General, Administrative and Other Expenses $ 45,643 $ 59,075 $ 132,784 $ 122,138 Liquidity and Capital Resources Overview We rely on management fees as the primary source of our operating liquidity. 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. We ended the third quarter of 2023 with $76.7 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. Over the short and long term, we may use cash and cash equivalents, issue additional debt or equity securities, or may seek other sources of liquidity to: • Grow our existing investment management business. • 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 on the open market, as well as pay withholding taxes on net settled, vested RSUs. • Pay income taxes and amounts due under the TRA. • Pay dividends to holders of our Class A Shares, as well as make corresponding distributions to holders of Common Units at the Blue Owl Operating Group level. • Fund debt and equity investment commitments to existing or future products. 23 Table of Contents Debt Obligations As of September 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 $270.0 million outstanding under our Revolving Credit Facility as of September 30, 2023, which 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 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 stockholders. 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. 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 $250.7 million and $726.1 million for the three and nine months ended September 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, we may in the future be required to make payments under the TRA. As of September 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 $961.0 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 (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. The actual increase in tax basis of the Blue Owl Operating Group assets resulting from an exchange or from payments under the TRA, as well as the amortization thereof and the timing and amount of payments under the TRA, will vary based upon a number of factors, including the following: • The amount and timing of our taxable income will impact the payments to be made under the TRA. To the extent that we do not have sufficient taxable income to utilize the amortization deductions available as a result of the increased tax basis in the Blue Owl Operating Partnerships’ assets, payments required under the TRA would be reduced. • The price of our Class A Shares at the time of any exchange will determine the actual increase in tax basis of the Blue Owl Operating Partnerships’ assets resulting from such exchange; payments under the TRA resulting from future exchanges, if any, will be dependent in part upon such actual increase in tax basis. • The composition of the Blue Owl Operating Group assets at the time of any exchange will determine the extent to which we may benefit from amortizing the increased tax basis in such assets and thus will impact the amount of future payments under the TRA resulting from any future exchanges. • The extent to which future exchanges are taxable will impact the extent to which we will receive an increase in tax basis of the Blue Owl Operating Group assets as a result of such exchanges, and thus will impact the benefit derived by us and the resulting payments, if any, to be made under the TRA. 24 Table of Contents • The tax rates in effect at the time any potential tax savings are realized, which would affect the amount of any future payments under the TRA. Depending upon the outcome of these and other factors, payments that we may be obligated to make under the TRA in respect of exchanges could be substantial. In light of the numerous factors affecting our obligation to make payments under the TRA, the timing and amounts of any such actual payments are not reasonably ascertainable. Share Repurchases and RSUs Withheld for Tax Withholding On May 4, 2022, our Board authorized the repurchase of up to $150.0 million of Class A Shares (the “Program”). Under the Program, repurchases may be made from time to time in open market transactions, in privately negotiated transactions or otherwise. The timing and the actual numbers repurchased will depend on a variety of factors, including legal requirements, price and economic and market conditions. The Program may be changed, suspended or discontinued at any time and will terminate upon the earlier of (i) the purchase of all shares available under the Program or (ii) December 31, 2024. There were no repurchases made under the Program during the three and nine months ended September 30, 2023. 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. 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 and nine months ended September 30, 2023, 542,167 RSUs with a fair value of $6.4 million and 901,113 RSUs with a fair value of $11.2 million, respectively, were withheld to satisfy tax withholding obligations. During the three and nine months ended September 30, 2022, 45,668 RSUs with a fair value of $0.6 million and 152,838 with a fair value of $1.9 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. Further, the cash portion classified as compensation expense will be expensed and a corresponding accrued compensation liability will be recorded over the service period. To the extent we have insufficient cash on hand or that we opt to, we may rely on debt or equity financing to facilitate these transactions in the future. 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 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 third quarter of 2023, we declared a dividend of $0.14 to holders of record as of the close of business on November 20, 2023, which will be paid on November 30, 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. 25 Table of Contents 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. The Blue Owl Operating Partnerships will make cash distributions (“Tax Distributions”) to the partners of such partnerships, including to Blue Owl GP, if we determine that the taxable income of the relevant partnership will give rise to taxable income for its partners. Generally, Tax Distributions will be computed based on our estimate of the taxable income of the relevant partnership allocable to a partner multiplied by an assumed tax rate equal to the highest effective marginal combined U.S. federal, New York State and New York City income tax rates prescribed for an individual or corporate resident in New York City (taking into account certain assumptions set forth in the relevant partnership agreements). Tax Distributions will be made only to the extent distributions from the Blue Owl Operating Partnerships for the relevant year were otherwise insufficient to cover the estimated assumed tax liabilities. 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 stockholder’s basis, and any remaining excess generally treated as gain realized on the sale or other disposition of stock. Risks to our Liquidity Our ability to obtain financing provides us with additional sources of liquidity. Any new financing arrangement that we may enter into may have covenants that impose additional limitations on us, including with respect to making distributions, entering into business transactions or other matters, and may result in increased interest expense. If we are unable to secure financing on terms that are favorable to us, our business may be adversely impacted. 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 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. 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 our quarterly report on Form 10-Q for the quarter ended March 31, 2023. LIBOR Transition 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. Dollar settings. 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 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 “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. 26 Table of Contents Cash Flows Analysis Nine Months Ended September 30, (dollars in thousands) 2023 2022 $ Change Net cash provided by (used in): Operating activities $ 640,796 $ 452,393 $ 188,403 Investing activities (94,110) (345,874) 251,764 Financing activities (538,070) (109,552) (428,518) Net Change in Cash and Cash Equivalents $ 8,616 $ (3,033) $ 11,649 Operating Activities. Our net cash flows from operating activities are generally comprised of management fees, less cash used for operating expenses, including interest paid on our debt obligations. 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 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 nine months ended September 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 nine months ended September 30, 2023, were primarily related to purchases of investments in our Real Estate products, cash outflows related to office space-related leasehold improvements, as well as cash consideration paid in connection with the Par-Four Acquisition. In addition, investment activities included inflows from repayments on our notes receivable. Cash flows from investing activities for the nine months ended September 30, 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. Financing Activities. Cash flows from financing activities for the nine months ended September 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 nine months ended September 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 nine months ended September 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. Critical Accounting Estimates We prepare our Financial Statements in accordance with U.S. GAAP. 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 geopolitical, macro-environmental and other uncertainty. For a summary of our significant accounting policies, see Note 2 to our Financial Statements and the financial statements in our Annual Report. 27 Table of Contents Estimation of Fair Values Investments Held by our 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. In the absence of observable market prices, we use valuation methodologies applied on a consistent basis and assumptions that we believe market participants would use to determine the fair value of the investments. For investments where little market activity exists, the determination of fair value is based on the best information available, we incorporate our own assumptions and involves a significant degree of judgment, and the consideration of a combination of internal and external factors. Our products generally value their investments at fair value, as determined in good faith by each product’s respective board of directors or valuation committee, as applicable, based on, among other things, the input of third party valuation firms and taking into account the nature and realizable value of any collateral, an investee’s ability to make payments and its earnings, the markets in which the investee operates, comparison to publicly traded companies, discounted cash flows, current market interest rates and other relevant factors. Because such valuations are inherently uncertain, the valuations may fluctuate significantly over time due to changes in market conditions. These valuations would, in turn, have corresponding proportionate impacts on the amount of management fees that we may earn from certain products on which revenues are based on the fair value of investments. TRA Liability 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. We then apply a discount rate that we believe is appropriate given the nature of and expected timing of payments of the liability. A decrease in the discount rate assumption would result in an increase in the fair value estimate of the liability, which would have a correspondingly negative impact on our GAAP results of operations. However, payments under the TRA are ultimately only made to the extent we realize the offsetting cash savings on our income taxes due to the tax goodwill and other intangibles deduction. See Note 9 to our Financial Statements for additional details. 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. See Note 9 to our Financial Statements for additional details. Equity-based Compensation 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. For the Oak Street Earnout Units that were classified as equity-based compensation for GAAP, we determined 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 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 the financial statements in our Annual Report for additional details. 28 Table of Contents Deferred Tax Assets Substantially all of our deferred tax assets relate to goodwill and other intangible assets deductible for tax purposes, as well as payments expected to be made under the TRA. In accordance with relevant tax rules, we expect to take substantially all of these goodwill and other intangible deductions over a 15-year period following the applicable transaction. To the extent we generate insufficient taxable income to take the full deduction in any given year, we will generate a net operating loss (“NOL”) that is available for us to use over an indefinite carryforward period in order to fully realize the deferred tax assets. When evaluating the realizability of deferred tax assets, all evidence—both positive and negative—is considered. This evidence includes, but is not limited to, expectations regarding future earnings, future reversals of existing temporary tax differences and tax planning strategies. We did not take into account any tax planning strategies when arriving at this conclusion; however, the other assumptions underlying the taxable income estimates, are based on our near-term operating model. If we experience a significant decline in AUM for any extended time during the period for which these estimates relate and we do not otherwise experience offsetting growth rates in other periods, we may not generate taxable income sufficient to realize the deferred tax assets and may need to record a valuation allowance. 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. 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 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 The determination of whether to consolidate a variable interest entity (“VIE”) under GAAP requires a significant amount of judgment concerning the degree of control over an entity by its holders of variable interests. To make these judgments, we conduct an analysis, on a case-by-case basis, of whether we are the primary beneficiary and are therefore required to consolidate an entity. We continually reconsider whether we should consolidate a VIE. Upon the occurrence of certain events, such as modifications to organizational documents and investment management agreements of our products, we will reconsider our conclusion regarding the status of an entity as a VIE. Our judgement when analyzing the status of an entity and whether we consolidate an entity could have a material impact on individual line items within our Financial Statements, as a change in our conclusion would have the effect of grossing up the assets, liabilities, revenues and expenses of the entity being evaluated. In light of the relevantly insignificant direct and indirect investments into our products, the likelihood of a reasonable change in our estimation and judgement would likely not result in a change in our conclusions to consolidate or not consolidate any VIEs to which we have exposure. Impact of Changes in Accounting on Recent and Future Trends We believe that none of the changes to GAAP that went into effect during the nine months ended September 30, 2023, or that have been issued but that we have not yet adopted, are expected to materially impact our future trends. 29 Table of Contents