What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-08-01 compared with 2024-05-03 · 224 added, 92 removed, 539 unchanged (37% of the section changed)

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Business” in the Annual Report.

2024 First Quarter Overview

Three Months Ended March 31,

2024 Second Quarter Overview

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

(dollars in thousands) 2024 2023 2024 2023

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

In April 2024, we announced our entry into an agreement to acquire Kuvare Insurance Services LP (dba Kuvare Asset Management) (“KAM”), a boutique investment management firm focused on providing asset management services to the insurance industry, including Kuvare UK Holdings (“Kuvare”), for $750 million (the “KAM Acquisition”).

We will fund the KAM Acquisition through a combination of $325 million in cash and $425 million in Blue Owl Class A common stock.

The KAM Acquisition is expected to close in the second or third quarter of 2024 and remains subject to customary regulatory approvals and other closing conditions and specified termination rights.

Separately, we made a long-term investment in Kuvare, purchasing $250 million of preferred equity.

In April 2024, we announced our entry into an agreement to acquire Prima Capital Advisors (“Prima”) for $170 million (the “Prima Acquisition”).

The Prima Acquisition will be funded through a combination of approximately $157 million of Class A Shares, Class C Shares and Blue Owl Operating Group Units and approximately $13 million in cash, subject to certain closing consideration adjustments.

The Prima Acquisition is expected to close in the second or third quarter of 2024, subject to customary closing conditions.

On June 6, 2024, we completed the Prima Acquisition (as defined in Note 1 to our Financial Statements) for $173 million, through a combination of cash and Blue Owl equity, creating our real estate finance strategy.

See Note 3 to our Financial Statements for additional information.

Additionally, subject to achievement of certain milestones, we will deliver earnout consideration in the form of Class A Shares representing an aggregate value of approximately $26.3 million and earnout consideration in the form of Class C Shares and Common Units representing an aggregate value of up to approximately $8.7 million, representing a total value of up to $35.0 million.

On July 1, 2024, we completed the KAM Acquisition (as defined in Note 14 to our Financial Statements) for $750 million.

We funded the KAM Acquisition through a combination of $325 million in cash and $425 million in Blue Owl Class A common stock, subject to certain closing consideration adjustments.

In addition, there is potential for up to a $250 million earnout subject to certain adjustments and achievements of future revenue targets.

On July 16, 2024 we announced our entry into an agreement to acquire substantially all of the assets of Atalaya Capital Management LP (“Atalaya”), Atalaya Capital Leasing LLC and Atalaya’s other investment advisor affiliates and subsidiaries (the “Atalaya Acquisition”) for $450 million.

The Atalaya Acquisition will be funded through a combination of approximately $350 million of Class A Shares, Common Units and corresponding Class C Shares, and cash of approximately $100 million, subject to certain closing consideration adjustments.

Additionally, subject to achievement of certain revenue targets, we will deliver earnout consideration in the form of Common Units and Class C Shares representing an aggregate value of up to approximately $350 million.

The Atalaya Acquisition is expected to close in the second half of 2024, subject to customary closing conditions.

Assets Under Management

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Commenced 2019

Real Estate Finance

Commenced 2024

$10.8 billion

First Lien Lending

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Commenced 2022

All amounts shown as of March 31, 2024, totals may not sum due to rounding.

As of March 31, 2024, our AUM was $174.3 billion, which included $105.4 billion of FPAUM.

For the three months ended March 31, 2024, approximately 90% of our management fees were earned on AUM from Permanent Capital.

As of March 31, 2024, we have $16.8 billion in AUM not yet paying fees, providing over $240 million of annualized management fees once deployed.

All amounts shown as of June 30, 2024, totals may not sum due to rounding.

As of June 30, 2024, our AUM was $192.2 billion, which included $121.5 billion of FPAUM.

As of June 30, 2024, we have $15.9 billion in AUM not yet paying fees, providing over $200 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.

Our business is impacted by conditions in the financial markets and economic conditions in the United States, 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 first quarter of 2024, industry M&A and capital markets activity remained moderately constructive, a continuation of the improvement relative to late 2022 and early 2023.

Over the past twelve months, 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.

During the second quarter of 2024, industry M&A and capital markets activity remained moderately constructive, a continuation of the improvement relative to late 2022 and early 2023.

Over the past twelve months, 91% of our GAAP management fees and 92% of our FRE management fees were generated by Permanent Capital and the remainder was predominantly from long-dated capital, with no meaningful pressure to our asset base from redemptions.

Fundraising and capital deployment contributed to management fee growth of 21% over the last twelve months.

We ended the first quarter of 2024 with substantial available capital to deploy, reporting $16.8 billion of AUM not yet paying fees.

Activity in the loan market improved during the quarter, with direct lenders continuing to play a significant role in new financings alongside syndicated market activity, which recovered meaningfully from low levels in 2023.

Industry-wide, refinancings accelerated with greater capital availability, offsetting some of the new origination volume.

For Blue Owl, positive net deployment, ongoing capital raising, and the listing of OBDE on the NYSE continued to drive management fees higher.

We ended the second quarter of 2024 with substantial available capital to deploy, reporting $15.9 billion of AUM not yet paying fees.

The second quarter of 2024 was our most active deployment quarter ever, with $19 billion of originations, as direct lenders continued to play a significant role in new deals, add-ons and refinancings alongside the syndicated market.

For Blue Owl, positive net deployment and ongoing capital raising continued to drive management fees higher while the credit quality of our portfolio remains strong.

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 addition to our leading franchise in larger-cap GP stakes, we recently launched a strategy intended to finance mid-cap alternative asset managers, further expanding our suite of solutions.

In Real Estate, industry transaction volumes increased slightly, in conjunction with higher commercial mortgage-backed securities issuances.

Our Real Estate business, focused on single tenant triple net lease to primarily investment grade tenants, continued to deploy capital across four major themes:

We continue to raise capital across our large-cap and mid-cap GP stakes strategies.

In Real Estate, we continue to actively deploy capital in our net lease strategy at attractive cap rates in the mid to high 7 percent range behind our four major themes:

digital infrastructure, onshoring, healthcare real estate and essential retail.

Investors in our Real Estate products 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 across institutional and wealth channels.

Investors in our net lease strategy continue to benefit from inflation-mitigation, highly predictable net rent growth and long-duration contractual income across the portfolio.

We also closed the Prima Acquisition during the second quarter, forming the base of our newly launched real estate finance strategy and expanding the array of financing solutions we offer.

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.

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See “ Item 1A.

Risk Factors — Risks Related to Macroeconomic Factors.

” in our Annual Report.

Risk Factors — Risks Related to Macroeconomic Factors ” in our Annual Report.

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

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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, 2024, assets under management related to us, our executives and other employees totaled approximately $3.6 billion (including $1.8 billion related to accrued carried interest).

As of June 30, 2024, assets under management related to us, our executives and other employees totaled approximately $3.9 billion (including $1.8 billion related to accrued carried interest).

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

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AUM not yet paying fees could provide over $200 million of additional annualized management fees once deployed or upon the expiration of the relevant fee holidays.

All amounts shown as of June 30, 2024, totals may not sum due to rounding.

Permanency and Duration of Assets Under Management

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Changes in AUM

Three Months Ended March 31, 2024 Three Months Ended March 31, 2023

Three Months Ended June 30, 2024 Three Months Ended June 30, 2023

(dollars in millions) Credit GP Strategic Capital Real Estate Total Credit GP Strategic Capital Real Estate Total

Beginning Balance $ 91,289 $ 55,793 $ 27,238 $ 174,320 $ 71,617 $ 49,167 $ 23,590 $ 144,374

Acquisitions — — 10,850 10,850 — — — —

New capital raised 3,433 1,288 659 5,380 1,529 184 1,150 2,863

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Ending Balance $ 95,104 $ 57,844 $ 39,208 $ 192,156 $ 73,793 $ 50,934 $ 24,826 $ 149,553

The increase in AUM for the three months ended March 31, 2024 was driven by the following:

Six Months Ended June 30, 2024 Six Months Ended June 30, 2023

(dollars in millions) Credit GP Strategic Capital Real Estate Total Credit GP Strategic Capital Real Estate Total

Beginning Balance $ 84,632 $ 54,199 $ 26,856 $ 165,687 $ 68,607 $ 48,510 $ 21,085 $ 138,202

Acquisitions — — 10,850 10,850 — — — —

New capital raised 6,463 1,950 1,708 10,121 3,469 504 2,689 6,662

Change in debt 5,238 — 735 5,973 1,655 — 696 2,351

Distributions (2,918) (729) (468) (4,115) (1,605) (1,111) (416) (3,132)

Change in value / other 1,689 2,424 (473) 3,640 1,667 3,031 772 5,470

Ending Balance $ 95,104 $ 57,844 $ 39,208 $ 192,156 $ 73,793 $ 50,934 $ 24,826 $ 149,553

The increase in AUM for the six months ended June 30, 2024 was driven by the following:

• $3.3 billion new capital raised in diversified lending, primarily driven by continued private wealth fundraising in OCIC.

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• $5.2 billion of additional net debt commitments, primarily in diversified lending and technology lending strategies as we continue to opportunistically manage leverage in our BDCs.

• $1.2 billion offsetting decrease in distributions, which primarily relate to dividends paid from our BDCs.

• $2.9 billion offsetting decrease in distributions, which primarily relate to distributions paid from our BDCs.

Redemptions and repurchases from these products were not material.

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GP Strategic Capital.

The increase in AUM for the three months ended March 31, 2024 was driven by overall appreciation primarily in our GP minority stakes strategy of $1.0 billion and new capital raised of $0.7 billion, primarily from our new mid-cap minority equity stakes product.

The increase in AUM for the three months ended March 31, 2024 was driven by new capital raised of $1.0 billion across various products, primarily Blue Owl Real Estate Net Lease Trust (“ORENT”), our real estate investment trust, and Blue Owl Real Estate Fund VI (“OREF VI”), our triple net-lease drawdown fund, partially offset by dispositions of certain assets of $0.6 billion.

The increase in AUM for the six months ended June 30, 2024 was driven by overall appreciation primarily in our GP minority stakes strategy of $2.4 billion and new capital raised of $2.0 billion, primarily in our sixth flagship minority equity stakes product and our new mid-cap minority equity stakes product.

The increase in AUM for the six months ended June 30, 2024 was driven by the products added in connection with the Prima Acquisition that closed in June 2024 and new capital raised of $1.7 billion across various products, primarily Blue Owl Real Estate Net Lease Trust (“ORENT”), our real estate investment trust, and Blue Owl Real Estate Fund VI (“OREF VI”), our triple net-lease drawdown product.

Changes in FPAUM

Three Months Ended March 31, 2024 Three Months Ended March 31, 2023

Three Months Ended June 30, 2024 Three Months Ended June 30, 2023

(dollars in millions) Credit GP Strategic Capital Real Estate Total Credit GP Strategic Capital Real Estate Total

Beginning Balance $ 58,779 $ 31,763 $ 14,895 $ 105,437 $ 51,150 $ 28,561 $ 11,922 $ 91,633

Acquisitions — — 9,430 9,430 — — — —

New capital raised / deployed 5,760 1,025 919 7,704 1,001 234 1,279 2,514

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

Distributions (1,547) — (270) (1,817) (765) — (141) (906)

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Ending Balance $ 63,736 $ 32,788 $ 25,025 $ 121,549 $ 52,077 $ 28,462 $ 13,084 $ 93,623

The increase in FPAUM for the three months ended March 31, 2024 was driven by the following:

Six Months Ended June 30, 2024 Six Months Ended June 30, 2023

(dollars in millions) Credit GP Strategic Capital Real Estate Total Credit GP Strategic Capital Real Estate Total

Beginning Balance $ 57,074 $ 31,075 $ 14,547 $ 102,696 $ 49,041 $ 28,772 $ 10,997 $ 88,810

Acquisitions — — 9,430 9,430 — — — —

New capital raised / deployed 7,850 1,713 1,858 11,421 3,022 226 2,357 5,605

Fee basis step down

— — — — — (333) — (333)

Distributions (2,704) — (468) (3,172) (1,497) (203) (292) (1,992)

Change in value / other 1,516 — (342) 1,174 1,511 — 22 1,533

Ending Balance $ 63,736 $ 32,788 $ 25,025 $ 121,549 $ 52,077 $ 28,462 $ 13,084 $ 93,623

The increase in FPAUM for the six months ended June 30, 2024 was driven by the following:

• $5.4 billion new capital raised in diversified lending, primarily driven by continued private wealth fundraising in OCIC.

• $0.4 billion new capital raised in our strategic equity investment strategy.

• $1.8 billion new capital raised in technology lending, driven by continued private wealth fundraising in OTIC.

• $0.5 billion new capital raised in our strategic equity investment strategy.

• $2.7 billion offsetting decrease in distributions, which primarily relate to dividends paid from our BDCs.

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GP Strategic Capital.

The increase in FPAUM for the three months ended March 31, 2024 was driven by new capital raised of $0.7 billion, primarily from our new mid-cap minority equity stakes product.

The increase in FPAUM for the three months ended March 31, 2024 was driven primarily by capital raised and deployment in ORENT and OREF VI, partially offset by dispositions of certain assets.

The increase in FPAUM for the six months ended June 30, 2024 was driven by new capital raised of $1.7 billion, primarily in our sixth flagship minority equity stakes product and our new mid-cap minority equity stakes product.

The increase in FPAUM for the six months ended June 30, 2024 was driven by the products added in connection with the Prima Acquisition that closed in June 2024, and by capital raised and deployment of $1.9 billion primarily in ORENT and OREF VI.

Product Performance

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II 2021 $ 7,784 $ 4,166 $ 1,987 $ 173 $ 2,095 $ 2,268 1.21x 1.15x 16.6 % 11.8 %

Blue Owl Technology Income Corp.

(2) 2022 $ 4,875 $ 2,274 $ 2,092 $ 229 $ 2,159 $ 2,388 NM 1.14x NM 11.9 %

First Lien Lending (3)

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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:

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GAAP Results of Operations Analysis

Three Months Ended March 31, 2024, Compared to the Three Months Ended March 31, 2023

Three Months Ended March 31,

Three Months Ended June 30, 2024, Compared to the Three Months Ended June 30, 2023

Three Months Ended June 30,

(dollars in thousands) 2024 2023 $ Change

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• $22.6 million increase in fee income earned for services provided to portfolio companies, reflecting an increase in volume of transactions on which we earn such fees.

• $8.0 million increase in dealer manager revenues, due primarily to growth in the distribution of our retail BDCs.

• $9.9 million increase in dealer manager revenues, due primarily to growth in the distribution of OCIC and ORENT.

• $6.3 million increase in administrative fees, driven by a higher level of reimbursable compensation expenses due to the growth of our products and business overall.

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.

• $10.9 million offsetting decrease in equity-based compensation, primarily reflecting an $18.7 million decrease in acquisition-related equity-based compensation primarily due to the settlement of the Second Oak Street Earnout (as described in Note 3 to the financial statements in our Annual Report) in January 2024, partially offset by an $8.0 million increase in our other recurring annual equity grants driven by the additional grants made during the fourth quarter of 2023 in connection with year-end bonus compensation.

• $6.5 million offsetting decrease in acquisition-related cash compensation, primarily due to the settlement of the Second Oak Street Earnout in January 2024 .

Amortization of Intangible Assets.

Amortization of intangible assets decreased $59.2 million reflecting the increase in trademarks amortization as a result of corporate actions taken in the prior year period that resulted in a shorter useful life.

General, Administrative and Other Expenses .

General, administrative and other expenses increased primarily due to the following:

• $20.2 million increase in distribution costs, primarily related to our Credit and Real Estate Products.

• $10.5 million increase in reimbursed expenses, primarily related to dealer manager expenses, due to growth in our products and business overall.

• $7.9 million increase in Transaction Expenses, primarily due to the KAM Acquisition and Prima Acquisition.

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

Interest and Dividend Income.

The increase in interest and dividend income was driven by dividend income from the preferred equity investment related to the KAM Acquisition.

Interest Expense .

The increase in interest expense was driven by higher average debt outstanding, reflecting the issuance of senior notes during the three months ended June 30, 2024.

Change in TRA Liability.

The change in TRA for the current year and prior year periods was driven by changes in fair value attributable to the portion of the TRA classified as contingent consideration from the Business Combination.

The change for the current year period was driven by the passage of time, while the change for the prior year period was driven by a combination of a higher discount rate, a change in the expected timing of future payments and the passage of time.

Income Tax Expense

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

Please see Note 11 to our Financial Statements for a discussion of the significant tax differences that impacted our effective tax rate.

Net Income Attributable To Noncontrolling Interests

Net income 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 66% and 68% weighted average economic interest in the Blue Owl Operating Group for the three months ended June 30, 2024 and June 30, 2023, respectively.

Six Months Ended June 30, 2024, Compared to the Six Months Ended June 30, 2023

Six Months Ended June 30,

(dollars in thousands) 2024 2023 $ Change

Management fees, net (includes Part I Fees of $249,603 and $177,802)

$ 913,652 $ 730,654 $ 182,998

Administrative, transaction and other fees 147,303 76,763 70,540

Performance revenues 2,233 506 1,727

Total Revenues, Net 1,063,188 807,923 255,265

Compensation and benefits 451,894 405,899 45,995

Amortization of intangible assets 112,929 186,808 (73,879)

General, administrative and other expenses 170,206 107,616 62,590

Total Expenses 735,029 700,323 34,706

Net gains on investments 5,797 3,642 2,155

Interest and dividend income 18,542 10,395 8,147

Interest expense (55,199) (37,536) (17,663)

Change in TRA liability (1,959) 8,152 (10,111)

Change in warrant liability (11,650) (1,500) (10,150)

Change in earnout liability (655) (2,838) 2,183

Total Other Loss (45,124) (19,685) (25,439)

Income Before Income Taxes 283,035 87,915 195,120

Income tax expense 32,968 11,842 21,126

Consolidated Net Income 250,067 76,073 173,994

Net income attributable to noncontrolling interests (191,031) (54,897) (136,134)

Net Income Attributable to Blue Owl Capital Inc.

$ 59,036 $ 21,176 $ 37,860

Revenues, Net

Management Fees .

The increase in management fees was primarily due to the drivers below.

See Note 9 to our Financial Statements for additional details on our GAAP management fees by strategy.

• Credit increased $134.4 million, including an increase in Part I Fees of $69.5 million, due to continued fundraising and deployment of capital within new and existing Credit products.

• GP Strategic Capital increased $21.5 million, primarily driven by fundraising in our sixth flagship minority equity stakes product.

• Real Estate increased $27.1 million, attributable to continued fundraising and deployment of capital within new and existing Real Estate products, primarily OREF VI and ORENT.

Administrative, Transaction and Other Fees .

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

• $38.9 million increase in fee income earned for services provided to portfolio companies, reflecting an increase in volume of transactions on which we earn such fees.

• $17.9 million increase in dealer manager revenues, due primarily to growth in the distribution of our retail OCIC and ORENT.

• $13.7 million increase in administrative fees, driven by a higher level of reimbursable compensation expenses due to growth of our products and business overall.

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• $77.0 million increase, driven by higher compensation to existing employees, as well as increased headcount due to our continued growth.

• $7.6 million offsetting decrease in equity-based compensation, primarily reflecting an $18.6 million decrease in acquisition-related equity-based compensation primarily due to the settlement of the Second Oak Street Earnout (as described in Note 3 to the financial statements in our Annual Report) in January 2024, partially offset by a $10.5 million increase in our other recurring annual equity grants driven by the additional grants made during the fourth quarter of 2023 in connection with year-end bonus compensation.

• $18.4 million offsetting decrease in equity-based compensation, primarily reflecting a $37.3 million decrease in acquisition-related equity-based compensation primarily due to the settlement of the Second Oak Street Earnout (as described in Note 3 to the financial statements in our Annual Report) in January 2024, 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 2023 in connection with year-end bonus compensation.

• $12.6 million offsetting decrease in acquisition-related cash compensation, primarily due to the settlement of the Second Oak Street Earnout in January 2024.

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

• $8.1 million increase in Transaction Expenses, primarily due to the KAM Acquisition and Prima Acquisition.

• $24.1 million increase in distribution costs, primarily related to our Credit and Real Estate products.

• $18.4 million increase in reimbursed expenses, primarily related to dealer manager expenses, due to growth in our products and business overall.

• $4.0 million increase in distribution costs, primarily related to our Credit products.

• $16.0 million increase in Transaction Expenses, primarily due to the KAM Acquisition and Prima Acquisition.

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

Interest and Dividend Income.

The increase in interest and dividend income was driven by dividend income from the preferred equity investment related to the KAM Acquisition.

Interest Expense .

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

The increase in interest expense was driven by higher average debt outstanding, reflecting the issuance of senior notes during the six months ended June 30, 2024.

Change in TRA Liability.

The change for the current year period was driven by a combination of a change in the expected timing of future payments, the passage of time and a higher discount rate, while the change for the prior year period was driven by a combination of a change in the expected timing of future payments and the passage of time.

Change in Warrant Liability.

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Net income 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 66% weighted average economic interest in the Blue Owl Operating Group for the three months ended March 31, 2024.

The Common Units represented an approximately 65% and 68% weighted average economic interest in the Blue Owl Operating Group for the six months ended June 30, 2024 and June 30, 2023, respectively.

Non-GAAP Analysis

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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.

GAAP Margin is calculated as income before income taxes, divided by total revenues.

FRE Margin is a supplemental non-GAAP measure that equals Fee-Related Earnings before net (income) loss allocated to noncontrolling interests, divided by FRE revenues.

Management believes that FRE Margin can be useful as a supplemental performance measure used to make operating decisions and assess our core operating results.

Fee-Related Earnings and Distributable Earnings Summary

Three Months Ended March 31,

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

(dollars in thousands) 2024 2023 2024 2023

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FRE expenses 213,875 154,732 404,912 306,362

Net (income) loss allocated to noncontrolling interests included in Fee-Related Earnings (5,813) 126

Net income allocated to noncontrolling interests included in Fee-Related Earnings (9,656) (2,147) (15,469) (2,021)

Fee-Related Earnings $ 296,475 $ 244,597 $ 586,173 $ 470,496

Distributable Earnings $ 272,965 $ 227,016 $ 513,064 $ 436,030

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 March 31,

Fee-Related Earnings and Distributable Earnings for the three months ended June 30, 2024 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.

Fee-Related Earnings and Distributable Earnings for the six months ended June 30, 2024 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) 2024 2023 2024 2023

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Net lease 40,853 30,442 82,187 56,399

Real estate finance 1,356 — 1,356 —

Management Fees, Net 42,209 30,442 83,543 56,399

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FRE Management Fees .

The increase in FRE management fees was primarily due to the drivers below.

For the three months ended June 30, 2024, the increase in FRE management fees was primarily driven by the following:

• Credit FRE management fees increased $71.8 million, including an increase in Part I Fees of $36.3 million, due to continued fundraising and deployment of capital within new and existing Credit products.

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• Real Estate FRE management fees increased $11.8 million, attributable to continued fundraising and deployment of capital within new and existing Real Estate products, primarily OREF VI and ORENT.

FRE Management Fees .

For the six months ended June 30, 2024, the increase in FRE management fees was primarily driven by the following:

• Credit FRE management fees increased $134.4 million, including an increase in Part I Fees of $69.5 million, due to continued fundraising and deployment of capital within new and existing Credit products.

• GP Strategic Capital FRE management fees increased $23.3 million, primarily driven by fundraising in our sixth flagship minority equity stakes product.

• Real Estate FRE management fees increased $27.1 million, attributable 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 .

The increase in FRE administrative, transaction and other fees was driven primarily by a $16.3 million increase in fee income earned for services provided to portfolio companies, reflecting an increase in volume of transactions on which we earn such fees .

Three Months Ended March 31,

For the three and six months ended June 30, 2024, the increase in FRE administrative, transaction and other fees was driven primarily by an increase of $22.6 million and $38.9 million, respectively, in fee income earned for services provided to portfolio companies, reflecting an increase in volume of transactions on which we earn such fees.

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

(dollars in thousands) 2024 2023 2024 2023

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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.

For the three and six months ended June 30, 2024, 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, driven by the following:

For the three months ended June 30, 2024, FRE general, administrative and other expenses increased, driven by the following:

• $13.3 million increase primarily in office-related expenses and professional fees due to increased headcount and our continued growth.

• $10.2 million increase in distribution costs, primarily related to our Credit and Real Estate products.

• $2.2 million increase in occupancy costs, driven by additional leased space to accommodate our continued growth.

• $4.1 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.

FRE General, Administrative and Other Expenses .

For the six months ended June 30, 2024, FRE general, administrative and other expenses increased, driven by the following:

• $17.9 million increase primarily in office-related expenses and professional fees due to increased headcount and our continued growth.

• $6.1 million increase in distribution costs, primarily related to our Credit products.

• $5.5 million 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.

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) 2024 2023 2024 2023

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GAAP Income Before Income Taxes 156,251 39,441 283,035 87,915

Net (income) loss allocated to noncontrolling interests included in Fee-Related Earnings (5,813) 126

Strategic Revenue-Share Purchase consideration amortization 10,660 9,770 21,320 19,539

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Interest expense 32,715 19,174 55,199 37,536

Fee-Related Earnings Before Noncontrolling Interests 306,131 246,744 601,642 472,517

Net income allocated to noncontrolling interests included in Fee-Related Earnings (9,656) (2,147) (15,469) (2,021)

Fee-Related Earnings 296,475 244,597 586,173 470,496

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Distributable Earnings $ 272,965 $ 227,016 $ 513,064 $ 436,030

Three Months Ended March 31,

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

(dollars in thousands) 2024 2023 2024 2023

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FRE Revenues $ 520,006 $ 401,476 $ 1,006,554 $ 778,879

Three Months Ended March 31,

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

(dollars in thousands) 2024 2023 2024 2023

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FRE Compensation and Benefits $ 148,202 $ 115,621 $ 286,868 $ 219,221

Three Months Ended March 31,

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

(dollars in thousands) 2024 2023 2024 2023

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FRE General, Administrative and Other Expenses $ 65,673 $ 39,111 $ 118,044 $ 87,141

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

(dollars in thousands) 2024 2023 2024 2023

Income Before Income Taxes $ 156,251 $ 39,441 $ 283,035 $ 87,915

GAAP Revenues 549,848 416,937 1,063,188 807,923

GAAP Margin 28 % 9 % 27 % 11 %

Fee-Related Earnings Before Noncontrolling Interests 306,131 246,744 601,642 472,517

FRE Revenues 520,006 401,476 1,006,554 778,879

FRE Margin 59 % 61 % 60 % 61 %

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 2024 with $155.8 million of cash and cash equivalents and approximately $0.9 billion available under our Revolving Credit Facility.

In April 2024, we issued $750.0 million of 6.250% Senior Notes due 2034 (the “2034 Notes”), repaying outstanding borrowings under our Revolving Credit Facility and providing additional liquidity for general corporate purposes, including to fund strategic acquisitions and related transactions and growth initiatives.

We ended the second quarter of 2024 with $436.8 million of cash and cash equivalents and approximately $1.5 billion available under our Revolving Credit Facility.

During the three months ended June 30, 2024, we issued $1.0 billion of 6.250% Senior Notes due 2034 (the “2034 Notes”), which proceeds we used to repay outstanding borrowings under our Revolving Credit Facility and provide additional liquidity for general corporate purposes, including to fund strategic acquisitions and related transactions and growth initiatives.

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, 2024, 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 $595.0 million outstanding under our Revolving Credit Facility as of March 31, 2024, and all outstanding amounts under our Revolving Credit Facility were repaid in connection with the issuance of the 2034 Notes.

As of June 30, 2024, 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”), $1.0 billion aggregate principal amount of 2034 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, 2032 and the 2034 Notes, the “Notes”).

Our Revolving Credit Facility was fully repaid as of June 30, 2024.

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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As discussed in Note 8 to our Financial Statements, we made a payment under the TRA and may in the future be required to make additional payments.

As of March 31, 2024, 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 $1.1 billion under the TRA (such amount excludes the adjustment to fair value for the portion classified as contingent consideration).

As of June 30, 2024, 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 $1.3 billion under the TRA (such amount excludes the adjustment to fair value for the portion classified as contingent consideration).

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

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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 months ended March 31, 2024 and 2023.

There were no repurchases made under the Program during the three and six months ended June 30, 2024 and 2023.

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

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

During the three months ended March 31, 2024 and 2023, 969,149 RSUs with a fair value of $17.4 million and 319,306 RSUs with a fair value of $4.4 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 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.

During the three and six months ended June 30, 2024, 31,669 RSUs with a fair value of $0.6 million and 1,000,818 RSUs with a fair value of $18.1 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.

Oak Street Cash Earnouts, Wellfleet Earnouts and Prima Earnouts

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

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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.

For the first quarter of 2024, we declared a dividend of $0.18 to holders of record as of the close of business on May 21, 2024, which will be paid on May 30, 2024.

For the second quarter of 2024, we declared a dividend of $0.18 to holders of record as of the close of business on August 21, 2024, which will be paid on August 30, 2024.

We set the target annual dividend for fiscal year 2024 at $0.72 per Class A Share (representing a fixed quarterly dividend of $0.18 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.

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Cash Flows Analysis

Three Months Ended March 31,

Six Months Ended June 30,

(dollars in thousands) 2024 2023 $ Change

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

Included in the three months ended March 31, 2024, were the cash outflows of the portion of the Second Oak Street Earnout classified as contingent consideration in excess of the acquisition-date fair value that settled in January 2024;

Included in the six months ended June 30, 2024 were the cash outflows of the portion of the Second Oak Street Earnout classified as contingent consideration in excess of the acquisition-date fair value that settled in January 2024;

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.

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 in excess of the acquisition-date fair value 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, 2024, were primarily related to purchases of investments in our products and cash outflows for office space-related leasehold improvements.

In addition, investment activities included inflows from repayments on our interest-bearing revolving promissory note receivable from a product we manage.

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 six months ended June 30, 2024 were primarily related to a preferred equity investment in Kuvare UK Holdings, investments in our products and cash outflows for office space-related leasehold improvements.

In addition, investment activities included inflows from repayments on our interest-bearing revolving promissory note receivable from a product we manage that was fully repaid.

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.

Financing Activities.

Cash flows from financing activities for the three months ended March 31, 2024, were primarily related to borrowing and repayment activity under our Revolving Credit Facility,which borrowings were used to finance working capital needs and general capital purposes.

Cash flows from financing activities for the six months ended June 30, 2024 were primarily related to the issuance of our 2034 Notes and borrowing and repayment activity under our Revolving Credit Facility, which borrowings were used to finance the Prima Acquisition that closed on June 6, 2024 and the KAM Acquisition that closed on July 1, 2024.

In addition, we had distributions on our Common Units (noncontrolling interests) and dividends on our Class A Shares.

Included in the three months ended March 31, 2024, was a portion of the cash outflows related to the Second Oak Street Earnout classified as contingent consideration that settled in January 2024, as discussed above, as well as amounts paid under the TRA.

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.

Included in the six months ended June 30, 2024 was a portion of the cash outflows related to the Second Oak Street Earnout classified as contingent consideration that settled in January 2024, as discussed above, as well as amounts paid under the TRA.

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.

Critical Accounting Estimates

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See Note 4 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.

Earnout Liability

The fair value of our earnout liability was 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 this liability may have a material impacts on our results of operations in any given period, as any increases in this liability has a corresponding negative impact on our GAAP results of operations.

See Note 4 to our Financial Statements for additional details.

Preferred Equity Investment

We have elected the fair value option on our preferred equity investment.

The valuation of the preferred equity investment considers our best estimate of future cash flow, including timing of repayment, which is discounted considering the risk free rate and credit assumptions related to the underlying issuer.

A decrease in the expected cash flows or increase in the discount rate assumptions would result in a decrease in the fair value of the preferred equity investment, which would have a correspondingly negative impact on our GAAP results of operations.

These assumptions require a significant amount of judgment and could have a material impact on the valuation.

See Note 4 to our Financial Statements for additional details.

Equity-based Compensation

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

Deferred Tax Assets

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

Goodwill and Other Intangible Assets

Purchase Price Allocation

We account for business combinations using the acquisition method of accounting, under which the purchase price of the acquisition is allocated to the assets acquired and liabilities assumed, with any excess consideration allocated to goodwill, using the fair values determined by management as of the acquisition date.

Management’s determination of the fair value of assets acquired and liabilities assumed at the acquisition date is based on the best information available and may incorporate management’s own assumptions and involve significant judgment.

We use our best estimates and assumptions to accurately assign fair value to the tangible and identifiable intangible assets acquired and liabilities assumed at the acquisition date.

Assumptions in valuing certain intangible assets include, but are not limited to, future expected cash inflows and outflows, future fundraising and timing of new product launches, discount rates, revenue volatility and income tax rates.

Our estimates for future cash flows are based on historical data, internal estimates and external sources, and are based on assumptions that are consistent with the plans and estimates we use to manage the underlying assets acquired.

We estimate the useful lives of intangible assets based on the expected period over which we anticipate generating substantially all of the economic benefit from the asset.

We base our estimates on assumptions we believe to be reasonable but that are unpredictable and inherently uncertain.

Unanticipated events and circumstances may occur that could affect the accuracy or validity of such assumptions, estimates or actual results.

Impairment Testing of 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.

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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, 2024, 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, 2024, or that have been issued but that we have not yet adopted, are expected to materially impact our future trends.

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