What changed in this filing

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Item 7. Management’s Discussion and Analysis

2025-02-21 compared with 2024-02-23 · 199 added, 165 removed, 472 unchanged (44% of the section changed)

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(dollars in thousands) 2024 2023

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

Net Income Attributable to Blue Owl Capital Inc.

$ 109,584 $ 54,343

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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.

On August 15, 2023, we closed the Par Four Acquisition, expanding our liquid credit strategy team.

Recent Transactions

On June 6, 2024, we completed the Prima Acquisition, creating our real estate finance strategy.

See Note 3 to our Financial Statements for additional information.

On December 1, 2023, we closed the CHI Acquisition.

The acquisition increased our assets under managment by approximately $1 billion comprised of 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.

On July 1, 2024, we completed the KAM Acquisition.

KAM is a boutique investment management firm focused on providing asset management services to the insurance industry.

KAM’s capabilities in investment grade credit and real estate strategies supplement Blue Owl’s existing strength in these asset classes and further accelerate our ability to bring differentiated products and strategies to the market for insurance clients.

Our acquisition of KAM enhances our ability to serve the insurance market at scale and marks the official launch of Blue Owl Insurance Solutions.

Working seamlessly across our investment platforms, Blue Owl Insurance Solutions combines the focused alternatives approach with expanded industry capabilities to now serve insurance clients across a broader range of their needs.

See Note 3 to our Financial Statements for additional information.

On September 30, 2024, we completed the Atalaya Acquisition.

Atalaya focuses primarily on asset-based credit investments across consumer and commercial finance, corporate and real estate assets.

The completion of the acquisition of Atalaya’s business represents a significant expansion of Blue Owl’s alternative credit presence.

See Note 3 to our Financial Statements for additional information.

On January 3, 2025, we completed the previously announced IPI Acquisition.

The aggregate consideration for the IPI Acquisition was approximately $1.0 billion.

We funded the IPI Acquisition through the issuance of 39,091,754 Common Units and corresponding Class C Shares and cash consideration of $204.1 million.

We expect to issue additional Common Units and corresponding Class C Shares in the first half of 2025 when the purchase price is finalized.

In addition, in connection with the IPI Acquisition, we entered into a services agreement with ICONIQ (as defined in Note 14 to our Financial Statements) (the “Services Agreement”), pursuant to which ICONIQ will provide certain services, including investment analysis and investor relations services to us or our subsidiaries.

Under the terms of the Services Agreement, in 2026 we expect to issue 14,175,000 Incentive Units, subject to future targets.

We also expect to issue in 2027 or 2028 a meaningful amount of additional Incentive Units pursuant to the Services Agreement, subject to the achievement of certain future targets.

The Incentive Units will be fully vested upon issuance.

Assets Under Management

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$31.5 billion

Diversified Lending

Commenced 2016

Direct Lending

$98.1 billion

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GP Minority Stakes

Commenced 2010

$62.4 billion

$35.9 billion

Commenced 2009

$33.9 billion

$17.4 billion

Technology Lending

Commenced 2018

$20.0 billion

Alternative Credit

$10.5 billion

GP Debt Financing

Commenced 2019

First Lien Lending

Commenced 2018

Real Estate Credit

$15.5 billion

$14.1 billion

Investment Grade Credit

$17.6 billion

$17.7 billion

Professional Sports

Minority Stakes

Commenced 2021

Opportunistic Lending

Commenced 2020

Liquid Credit

Commenced 2022

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

As of December 31, 2024, our AUM was $251.1 billion, which included $159.8 billion of FPAUM.

For the year ended December 31, 2023, approximately 92% of our management fees were earned on AUM from Permanent Capital.

As of December 31, 2023, we have $14.5 billion in AUM not yet paying fees, providing approximately $200 million of annualized management fees once deployed.

As of December 31, 2024, we have $22.6 billion in AUM not yet paying fees, providing over $300 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 2023, uncertainty around the pace of inflation growth, in conjunction with elevated interest rates and slowing global gross domestic product growth, weighed on industry M&A and capital markets activity, though volumes began to pick up in the latter part of 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 management fee and revenue growth of 26% in 2023 compared with the prior year.

We also ended the fourth quarter of 2023 with substantial available capital to deploy, reporting $14.5 billion of AUM not yet paying fees.

As trends in loan market activity improved again in the fourth quarter, direct lenders continued to play a significant role in the leveraged loan market.

Increasing repayments from levels seen earlier in the year allowed us to redeploy capital into higher yielding opportunities, while higher origination volume continued to have a beneficial impact on our management fees compared to the prior year and on our transaction fees quarter over quarter.

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 remained muted due to a higher average interest rate environment, cost inflation, elevated vacancy rates, new supply dynamics, and uncertainty around future capital availability.

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

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 launched in 2022.

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, particularly during periods of market uncertainty and volatility, as we have seen over the past few years.

During the fourth 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 and 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.

The fourth quarter of 2024 was a record fundraising quarter for Blue Owl, in which we raised $9.5 billion of equity across an increasingly diversified set of products and strategies.

Inclusive of debt, we raised $18.1 billion of capital in the fourth quarter and $47.5 billion in 2024.

Fundraising and capital deployment contributed to management fee growth of over 25% compared

with the prior year.

We ended the fourth quarter of 2024 with substantial available capital to deploy, reporting approximately $22.6 billion of AUM not yet paying fees.

Subsequent to quarter end, we completed the IPI Acquisition, reflecting a significant step forward in Blue Owl’s presence in the digital infrastructure ecosystem.

Pro forma for the IPI Acquisition, our AUM as of December 31, 2024 was approximately $265 billion.

The fourth quarter of 2024 was once again a very active quarter for direct lending deployment, with $13.4 billion of originations, bringing our full year gross deployment to $52.0 billion and net funded deployment of $16.6 billion.

Blue Owl continued to play a significant role in new deals, add-ons and refinancings alongside the syndicated market.

We were also active in deploying capital for our alternative credit strategy and insurance solutions platform.

For Blue Owl, positive net deployment and ongoing capital raising remained key drivers of higher management fees.

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

We raised incremental capital in our large-cap GP minority stakes strategy from both the institutional and private wealth channels and held an incremental close for our mid-cap minority stakes strategy, bringing this new strategy to nearly $1 billion dollars.

During the fourth quarter, Blue Owl GP Stakes III completed another strip sale of certain assets within the fund, providing liquidity for existing investors while offering a creative way for new investors to access our pool of leading notable Partner Managers.

In Real Assets, we continue to actively deploy capital in our net lease strategy across a number of scaled opportunities, with our latest fund now over 75% committed despite having just held a final close in the first quarter of 2024.

Our pipeline of deployment opportunities remains robust, reflecting the very significant capital needs of corporations, and we continue to see robust demand from investors in these products.

During the fourth quarter, we held an additional close for our European net lease strategy and continued to see strong interest in our non-traded REIT.

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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Risk Factors — Risks Related to Macroeconomic Factors.

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

Additionally, we intend to continue pursuing 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.

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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 $200 million of additional annualized management fees once deployed or upon the expiration of the relevant fee holidays.

AUM not yet paying fees could provide over $300 million of additional annualized management fees once deployed or upon the expiration of the relevant fee holidays.

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

Permanency and Duration of Assets Under Management

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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.

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

Changes in AUM

Year Ended December 31, 2024 Year Ended December 31, 2023

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

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

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

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The increase in AUM for the year ended December 31, 2024 was driven by the following:

• $2.7 billion of products were added in connection with the Par Four Acquisition and the CHI Acquisition that closed in August 2023 and December 2023, respectively.

• $5.1 billion new capital raised in diversified lending, primarily driven by continued private wealth fundraising in OCIC, a private credit product and separately managed accounts.

• $2.4 billion new capital raised in technology lending, driven by continued private wealth fundraising in OTIC, OTF II and separately managed accounts.

• $5.3 billion of additional net debt commitments primarily in diversified lending and technology lending strategies, as we continue to opportunistically manage leverage in our BDCs.

• $3.5 billion offsetting decrease in distributions, which primarily relate to dividends paid from our BDCs.

Redemptions from these products were not material.

• $3.4 billion of overall appreciation across the platform.

• $27.8 billion driven by the products added in connection with the KAM Acquisition and the Atalaya Acquisition.

• $10.9 billion new capital raised in direct lending, primarily driven by continued private wealth fundraising in OCIC and OTIC, as well as additional fundraise in other recently launched products.

• $12.7 billion of additional net debt commitments, primarily in direct lending as we continue to opportunistically manage leverage in our BDCs.

• $7.3 billion offsetting decrease in distributions, which primarily relates to distributions paid from our BDCs and CLOs.

Redemptions and repurchases from these products were not material.

• $3.9 billion of overall appreciation across the platform, primarily in direct lending.

GP Strategic Capital.

The increase in AUM for the year ended December 31, 2023 was driven by the overall appreciation primarily in our GP minority stakes and professional sports minority stakes strategies of $4.2 billion and new capital raised of $3.2 billion, primarily in Blue Owl GP Stakes VI, partially offset by distributions across the platform.

The increase in AUM for the year ended December 31, 2023 was driven by new capital raised of $4.4 billion across various products, primarily Blue Owl Real Estate Fund VI (“OREF VI”), our triple net-lease drawdown fund, Blue Owl Real Estate Net Lease Trust (“ORENT”), our 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 and ORENT, partially offset by distributions of $0.8 billion primarily related to ONLP and Blue Owl Real Estate Fund V (“OREF V”).

The increase in AUM for the year ended December 31, 2024 was driven by new capital raised of $8.7 billion, primarily in our sixth flagship minority equity stakes product and our new mid-cap minority equity stakes product, and overall appreciation primarily in our GP minority stakes strategy of $5.1 billion.

The increase in AUM for the year ended December 31, 2024 was driven by $15.2 billion of products added in connection with the Prima Acquisition and the KAM Acquisition, as well as new capital raised of $4.9 billion across various products, primarily Blue Owl Real Estate Net Lease Trust (“ORENT”), our real estate investment trust, our European net lease product and Blue Owl Real Estate Fund VI (“OREF VI”), our triple net-lease drawdown product, and $4.1 billion of additional net debt commitments, primarily in OREF VI.

Changes in FPAUM

Year Ended December 31, 2024 Year Ended December 31, 2023

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

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

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

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New capital raised / deployed 15,294 7,315 5,347 27,956 5,675 2,845 3,975 12,495

5,675 2,845 3,975 12,495 12,472 9,425 3,304 25,201

Fee basis step down

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Ending Balance $ 90,957 $ 37,337 $ 31,500 $ 159,794 $ 57,074 $ 31,075 $ 14,547 $ 102,696

(1) The year ended December 31, 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.

The increase in FPAUM for the year ended December 31, 2024 was driven by the following:

• $2.6 billion of products were added in connection with the Par Four Acquisition and the CHI Acquisition that closed in August 2023 and December 2023, respectively.

• $3.7 billion new capital raised in diversified lending, primarily driven by continued private wealth fundraising in OCIC.

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

• $3.3 billion offsetting decrease in distributions, which primarily relate to dividends paid from our BDCs.

Redemptions from these products were not material.

• $3.1 billion of overall appreciation across the platform.

• $22.8 billion driven by the products added in connection with the KAM Acquisition and the Atalaya Acquisition.

• $11.9 billion new capital raised in direct lending, primarily driven by continued private wealth fundraising in OCIC, OTIC.

• $6.6 billion offsetting decrease in distributions, which primarily relate to dividends paid from our BDCs and CLOs.

Redemptions and repurchases from these products were not material.

• $2.3 billion of overall appreciation across the platform, primarily in direct lending.

GP Strategic Capital.

The increase in FPAUM for the year ended December 31, 2023 was driven primarily by capital raised in Blue Owl GP Stakes VI.

The increase in FPAUM for the year ended December 31, 2023 was driven primarily by capital raised and deployment in OREF VI, ORENT and OREF V.

The increase in FPAUM for the year ended December 31, 2024 was driven by new capital raised of $7.3 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 year ended December 31, 2024 was driven by the $13.5 billion of products added in connection with the Prima Acquisition and the KAM Acquisition, as well as capital raised and deployed of $5.3 billion, primarily in ORENT and OREF VI.

Product Performance

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Value Gross (8) Net (9) Gross (10) Net (11)

Diversified Lending (1)

Direct Lending

Blue Owl Capital Corporation (1) 2016 $ 15,625 $ 5,977 $ 5,977 $ 3,536 $ 5,972 $ 9,508 1.84x 1.59x 13.7 % 9.8 %

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(1)(2) 2020 $ 28,636 $ 13,944 $ 12,907 $ 1,872 $ 13,205 $ 15,077 NM 1.17x NM 11.2 %

Technology Lending (1)

Blue Owl Technology Finance Corp.

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II (1) 2021 $ 8,207 $ 4,178 $ 2,623 $ 303 $ 2,736 $ 3,039 1.22x 1.16x 16.5 % 11.7 %

First Lien Lending (3)

Blue Owl Technology Income Corp.

(1)(2) 2022 $ 6,071 $ 3,131 $ 2,840 $ 357 $ 2,904 $ 3,261 NM 1.15x NM 11.6 %

Blue Owl First Lien Fund Levered (3) 2018 $ 1,419 $ 986 $ 912 $ 590 $ 647 $ 1,237 1.44x 1.36x 10.2 % 8.3 %

Blue Owl First Lien Fund Unlevered (3) 2019 $ 68 $ 175 $ 156 $ 122 $ 68 $ 190 1.27x 1.22x 6.4 % 5.2 %

(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 not yet filing their quarterly information as of our filing date.

(1) Information presented in the AUM through IRR columns for these vehicles is presented on a quarter lag due to these vehicles being public filers with the SEC and not yet filing 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:

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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.

gross and net MoIC for the Offshore Levered feeder fund is 1.38x and 1.29x, respectively.

The gross and net MoIC for the Offshore Levered feeder fund is 1.42x and 1.31x, respectively.

The gross and net IRR for the Offshore Levered feeder is 9.7% and 7.0%, respectively.

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(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 not yet filing its quarterly information as of our filing date.

(2) Information presented in the AUM through Total Value columns for this vehicle, as well as total return, is presented on a quarter lag due to the vehicle being a public filer with the SEC and not yet filing 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.

MoIC and IRR are not meaningful as we consider total return to be a useful measure of the overall investment performance for this product.

Total net return was 7.7%, calculated as the change in NAV per Class I share since inception (annualized) plus any distributions per share declared in the period and assumes any distributions are reinvested in accordance with our distribution reinvestment plan.

(3) Invested capital includes investments by the general partner, capital calls, dividends reinvested, recallable capital which has been reinvested and periodic investor closes, as applicable.

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GAAP Results of Operations Analysis

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.

For a discussion of our results for the year ended December 31, 2022, compared to the year ended December 31, 2021, please refer to “Blue Owl Management's Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K , filed February 27, 2023.

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

Prima’s, KAM’s and Atalaya’s results of operations are included from June 6, 2024, July 1, 2024, and September 30 2024, respectively.

For a discussion of our results for the year ended December 31, 2023, compared to the year ended December 31, 2022, please refer to “Blue Owl Management's Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K , filed with the SEC on February 23, 2024.

Year Ended December 31, 2024, Compared to the Year Ended December 31, 2023

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Total Other Loss (137,529) (71,432) (66,097)

Income (Loss) Before Income Taxes 246,384 (49,615) 295,999

Income tax expense (benefit) 25,608 (9,380) 34,988

Consolidated and Combined Net Income (Loss) 220,776 (40,235) 261,011

Net (income) loss attributable to noncontrolling interests (166,433) 30,946 (197,379)

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

Income Before Income Taxes 469,228 246,384 222,844

Income tax expense 48,782 25,608 23,174

Consolidated Net Income 420,446 220,776 199,670

Net income attributable to noncontrolling interests (310,862) (166,433) (144,429)

Net Income Attributable to Blue Owl Capital Inc.

$ 109,584 $ 54,343 $ 55,241

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

• Credit increased $259.9 million, including an increase in Part I Fees of $151.2 million, due to continued fundraising and deployment of capital within new and existing Credit products.

The increase in Part I Fees was also driven by higher interest rates.

• GP Strategic Capital increased $13.5 million, primarily driven by continued fundraising in Blue Owl GP Stakes V.

• Real Estate increased $42.2 million, attributable to continued fundraising and deployment of capital within new and existing Real Estate products, primarily ORENT, OREF VI and OREF V.

• Credit increased $334.7 million, including an increase in Part I Fees of $137.4 million, due to continued fundraising and deployment of capital primarily within new and existing Credit products, as well as management fees from products relating to the KAM Acquisition of $27.9 million and Atalaya Acquisition of $19.8 million.

• GP Strategic Capital increased $66.7 million, primarily driven by fundraising in our sixth flagship minority equity stakes product.

• Real Assets increased $65.4 million, attributable to continued fundraising and deployment of capital within new and existing Real Assets products, primarily OREF VI and ORENT, as well as management fees from products relating to the Prima Acquisition of $11.2 million and KAM Acquisition of $7.9 million.

Administrative, Transaction and Other Fees .

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

• $21.0 million increase in administrative fees, driven by a higher level of reimbursable expenses due to growth of our products and business overall.

• $17.8 million increase in fee income earned for services provided to portfolio companies reflecting an increase in average transaction size.

• $16.1 million increase in dealer manager revenues due to growth in the distribution of our retail BDCs.

• $35.6 million increase in dealer manager revenues, due primarily to growth in the distribution of OCIC and ORENT.

• $30.0 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.

• $26.3 million increase in administrative fees, driven by a higher level of reimbursable compensation expenses due to growth of our products and business overall.

Compensation and Benefits.

Compensation and benefits expenses decreased, primarily due to the following:

• $107.5 million decrease in equity-based compensation, primarily reflecting a $163.9 million decrease in acquisition-related equity-based compensation primarily due to the settlement of the First Oak Street Earnout (as described in Note 3) in January 2023, partially offset by a $59.8 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.

• $40.4 million decrease in acquisition-related cash compensation, primarily due to the settlement of the First Oak Street Earnout in January 2023.

• $123.9 million offsetting increase, driven by higher compensation to existing employees, as well as increased headcount due to our continued growth.

Compensation and benefits expenses increased, primarily due to the following:

• $172.5 million increase, driven by higher compensation to existing employees, as well as increased headcount due to our continued growth.

• $56.9 million increase in our other recurring annual equity grants driven by additional grants made during the fourth quarter of 2023 in connection with year-end bonus compensation, offset by a $56.6 million decrease in acquisition-related equity-based compensation primarily due to the settlement of the Second Oak Street Earnout (as described in Note 1 to our Financial Statements) in January 2024.

• $25.7 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 increased $61.6 million, primarily due to corporate actions taken during the first quarter of 2023, resulting in a change of the estimated useful lives of acquired trademarks.

Amortization of intangible assets decreased $42.1 million, primarily due to corporate actions taken during the first quarter of 2023, resulting in a change of the estimated useful lives of acquired trademarks.

As a result of the corporate actions, the remaining unamortized balance of the trademarks of $72.4 million was expensed through June 30, 2023.

This increase was partially offset by a decrease of $18.5 million related to investment management agreements that fully amortized in 2022.

See Note 3 to our Financial Statements for additional information.

This decrease was partially offset by an increase of $32.2 million related to intangible assets acquired in the KAM Acquisition, Atalaya Acquisition and Prima Acquisition.

General, Administrative and Other Expenses .

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

• $23.2 million increase in occupancy costs, driven by additional leased space to accommodate our continued growth.

• $17.0 million increase in reimbursed expenses due to growth in our products and business overall.

• $14.0 million offsetting favorable change in expense support resulting from recoveries with certain products we manage.

• $10.5 million offsetting decrease in distribution costs, primarily related to our Credit and GP Strategic Capital products.

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

• $61.2 million increase in Transaction Expenses, primarily due to the KAM Acquisition, Atalaya Acquisition and Prima Acquisition.

See Note 3 to our Financial Statements for additional details on our Transaction Expenses by acquisition.

• $35.9 million increase related to dealer manager expenses, due to growth in our products and business overall.

• $73.0 million increase in other operating expenses across various categories, driven by our continued growth.

Interest and Dividend Income.

The increase in interest and dividend income was driven by our $250.0 million interest-bearing revolving promissory note receivable from a product we manage that was entered into on August 8, 2022, and amended in November 2023.

The increase in interest and dividend income was driven by dividend income from the preferred equity investment made in April 2024 in Kuvare UK Holdings.

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 the 6.250% Senior Notes due 2034 (the “2034 Notes”) during the second quarter of 2024.

Change in Warrant Liability.

The change in the warrant liability for the current year 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, as well as a markdown to the contractual redemption values for the Public Warrants that were redeemed in August 2022.

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.

The change in the warrant liability for the current year period was driven by the increase in the price of our Class A Shares and the exercise of the Private Placement Warrants in November 2024.

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

Change in Earnout Liability.

The change in the earnout liability for the current year period was driven by the change in the fair value of the Prima Earnouts and KAM Earnouts (as described in Note 3 to our Financial Statements).

Income Tax Expense

The increase 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.

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expense support payments and subsequent reimbursements;

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

net gains (losses) on investments;

interest and dividend income;

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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 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

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FRE expenses 881,125 652,052

Net income (loss) allocated to noncontrolling interests included in Fee-Related Earnings (10,690) 7,709

Net income allocated to noncontrolling interests included in Fee-Related Earnings (36,072) (10,690)

Fee-Related Earnings $ 1,253,366 $ 997,717

Distributable Earnings $ 1,129,248 $ 927,838

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.

Fee-Related Earnings and Distributable Earnings for the year ended December 31, 2024 increased as a result of higher FRE revenues in Credit, GP Strategic Capital and Real Assets, partially offset by higher FRE expenses, as further discussed below.

Year Ended December 31,

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Credit Platform

Diversified lending $ 637,999 $ 480,874

Technology lending 204,680 114,876

First lien lending 18,089 16,029

Opportunistic lending 9,707 8,756

Direct lending $ 1,133,304 $ 870,475

Alternative credit 19,834 —

Investment grade credit 27,892 —

Liquid credit 27,750 27,936

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FRE Revenues - GP Strategic Capital Platform 622,427 551,076

Real Estate Platform

Real Assets Platform

Net lease 168,588 122,365

Real estate credit 19,161 —

Management Fees, Net 187,749 122,365

FRE performance revenues 4,413 —

Administrative, transaction and other fees 736 274

FRE Revenues - Real Estate Platform 122,639 80,433

FRE Revenues - Real Assets Platform 192,898 122,639

Total FRE Revenues $ 2,170,563 $ 1,660,459

FRE Management Fees .

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

• Credit FRE management fees increased $259.9 million, including an increase in Part I Fees of $151.2 million, due to continued fundraising and deployment of capital within new and existing Credit products.

The increase in Part I Fees was also driven by higher interest rates.

• GP Strategic Capital FRE management fees increased $17.0 million, primarily due to continued fundraising in Blue Owl GP Stakes V.

• Real Estate FRE management fees increased $42.2 million, primarily due to continued fundraising and deployment of capital within new and existing Real Estate products, primarily ORENT, OREF VI and OREF V.

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

• Credit FRE management fees increased $334.7 million, including an increase in Part I Fees of $137.4 million, due to continued fundraising and deployment of capital primarily within new and existing Credit products, as well as management fees from products relating to the KAM Acquisition of $27.9 million and Atalaya Acquisition of $19.8 million.

• GP Strategic Capital FRE management fees increased $69.4 million, primarily driven by fundraising in our sixth flagship minority equity stakes product.

• Real Assets FRE management fees increased $65.4 million, attributable to continued fundraising and deployment of capital within new and existing Real Assets products, primarily OREF VI and ORENT, as well as management fees from products relating to the Prima Acquisition of $11.2 million and KAM Acquisition of $7.9 million.

FRE Administrative, Transaction and Other Fees .

The increase in FRE administrative, transaction and other fees was driven primarily by a $17.8 million increase in fee income earned for services provided to portfolio companies reflecting an increase in average transaction size.

The increase in FRE administrative, transaction and other fees was driven primarily by an increase of $30.0 million in fee income earned for services provided to portfolio companies, reflecting an increase in volume of transactions on which we earn such fees.

Year Ended December 31,

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FRE General, Administrative and Other Expenses .

FRE general, administrative and other expenses increased, driven by the following:

• $22.5 million increase in occupancy costs, driven by additional leased space to accommodate our continued growth.

• $8.1 million increase in professional fees, driven by our continued growth.

• $26.3 million offsetting decrease in distribution costs, primarily related to our Credit and GP Strategic Capital products.

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

The increase in FRE general, administrative and other expenses was driven by higher operating expenses across various categories, driven by our continued growth.

Non-GAAP Reconciliations

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(dollars in thousands) 2024 2023

GAAP Net Income (Loss) Attributable to Class A Shares $ 54,343 $ (9,289)

Net income (loss) attributable to noncontrolling interests 166,433 (30,946)

Income tax expense (benefit) 25,608 (9,380)

GAAP Income (Loss) Before Income Taxes 246,384 (49,615)

Net income (loss) allocated to noncontrolling interests included in Fee-Related Earnings (10,690) 7,709

GAAP Net Income Attributable to Class A Shares $ 109,584 $ 54,343

Net income attributable to noncontrolling interests 310,862 166,433

Income tax expense 48,782 25,608

GAAP Income Before Income Taxes 469,228 246,384

Strategic Revenue-Share Purchase consideration amortization 43,553 40,858

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Expense support (9,805) (6,617)

Net gains (losses) on investments (4,203) 132

Net losses on investments (1,713) (4,203)

Change in TRA liability (7,080) 1,656

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Interest expense 121,894 75,696

Fee-Related Earnings Before Noncontrolling Interests 1,289,438 1,008,407

Net income allocated to noncontrolling interests included in Fee-Related Earnings (36,072) (10,690)

Fee-Related Earnings 1,253,366 997,717

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GAAP General, Administrative and Other Expenses $ 412,931 $ 242,809

Equity-based compensation - other — (722)

Transaction Expenses (74,476) (13,308)

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FRE General, Administrative and Other Expenses $ 260,248 $ 184,780

Year Ended December 31,

(dollars in thousands) 2024 2023

Income Before Income Taxes $ 469,228 $ 246,384

GAAP Revenues $ 2,295,427 $ 1,731,608

GAAP Margin 20 % 14 %

Fee-Related Earnings Before Noncontrolling Interests $ 1,289,438 $ 1,008,407

FRE Revenues $ 2,170,563 $ 1,660,459

FRE Margin 59 % 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 2023 with $104.2 million of cash and cash equivalents and approximately $1.3 billion available under our Revolving Credit Facility.

We ended the fourth quarter of 2024 with $152.1 million of cash and cash equivalents and approximately $1.6 billion available under our Revolving Credit Facility.

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

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• 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.

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

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

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Debt Obligations

As of December 31, 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”).

As of December 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”), $1.0 billion aggregate principal amount of the 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, the 2031 Notes, the 2032 Notes and the 2034 Notes, the “Notes”).

We also had $130.0 million outstanding under our Revolving Credit Facility as of December 31, 2024.

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See Note 7 to our Financial Statements for additional information regarding our debt obligations.

In September 2024, the Issuer (as defined in Note 7 to our Financial Statements) commenced an offer to exchange the Notes for newly issued registered notes with substantially similar terms of the respective series of Notes sought to be exchanged (the “Exchange Notes”).

The Exchange Notes settled on October 28, 2024 and approximately 99.8% of the Notes had been validly tendered, which consisted of $59.8 million aggregate principal amount of 2028 Notes, $697.2 million aggregate principal amount of 2031 Notes, $397.3 million aggregate principal amount of 2032 Notes, $999.4 million aggregate principal amount of 2034 Notes and $350.0 million aggregate principal amount of 2051 Notes.

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 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 December 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 $1.5 billion under the TRA (such amount excludes the adjustment to fair value for the portion classified as contingent consideration).

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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.

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 the 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:

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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 year ended December 31, 2023.

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

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

On February 20, 2025, Blue Owl’s Board authorized the 2025 Program.

Under the 2025 Program, up to $150.0 million of Class A Share repurchases could be made from time to time in open market transactions, in privately negotiated transactions or otherwise.

The timing and the actual number of shares repurchased will depend on a variety of factors, including legal

requirements, price and economic and market conditions.

The 2025 Program may be changed, suspended or discontinued at any time and will terminate upon the earlier and (i) the purchase of all shares available under the 2025 Program and (ii) February 28, 2027.

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.

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During the year ended December 31, 2024, 2,150,962 RSUs with a fair value of $38.8 million were withheld to satisfy tax withholding obligations.

Oak Street Cash Earnout and Wellfleet Earnout

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

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 and combined 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.

Earnout Liability

The KAM Earnouts and the Wellfleet Earnouts (each defined in Note 3 to the Financial Statements), are classified as liabilities in our consolidated statements of financial position and represent the fair value of the obligation to make future cash payments if the respective triggering events occur.

As we approach each triggering event, we generally would expect the respective liabilities to increase due to the passage of time and meeting certain revenue thresholds, which would result in mark-to-market losses being recognized in our consolidated statements of operations.

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.

In January 2024, the Oak Street Triggering Event occurred with respect to the Second Oak Street Earnout.

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

For additional information on these earnout liabilities, see Note 1 and Note 3 to the Financial Statements.

The Prima Earnouts and Atalaya Earnouts (each defined in Note 3 to the Financial Statements) are payable in Class A Shares or Common Units.

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

Dividends and Distributions

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 fourth quarter of 2023, we declared a dividend of $0.14 to holders of record as of the close of business on February 23, 2024, which will be paid on March 5, 2024.

For the fourth quarter of 2024, we declared a dividend of $0.18 to holders of record as of the close of business on February 19, 2025, which will be paid on February 28, 2025, bringing our full fiscal year 2024 dividends to $0.72.

We set the target annual dividend for fiscal year 2025 at $0.90 per Class A Share (representing a fixed quarterly dividend of $0.225 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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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;

to provide for future cash requirements such as TRA and 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.

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

Included in the year ended December 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;

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 year ended December 31, 2023 were the cash outflows of the portion of the First Oak Street Earnout classified as contingent consideration that settled in January 2023;

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Investing Activities.

Cash flows from investing activities for 2023 were primarily related to purchases of investments including funding of the promissory note from a product that we manage, cash outflows related to office space-related leasehold improvements, as well as cash consideration paid in connection with the Par Four Acquisition.

Cash flows from investing activities for the year ended December 31, 2024 were primarily related to cash consideration paid in connection with the KAM Acquisition and Atalaya Acquisition, 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 year ended December 31, 2023 were primarily related to purchases of investments including funding of the promissory note from a product that we manage, 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 interest-bearing revolving promissory note receivable from a product we manage.

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

Financing Activities.

Cash flows from financing activities for 2023 were primarily related to distributions on our Common Units (noncontrolling interests) and dividends on our Class A Shares.

Cash flows from financing activities for the year ended December 31, 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, the KAM Acquisition and the Atalaya Acquisition.

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

Included in the year ended December 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 year ended December 31, 2023 were primarily related to distributions on our Common Units (noncontrolling interests) and dividends on our Class A Shares.

In addition, we had borrowings and repayment activity under our Revolving Credit Facility and the issuance of our 2028 Notes, the net proceeds of which borrowings were used to finance working capital needs and general capital purposes.

Included in the year ended December 31, 2023, was 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 2022 were primarily related to distributions on our Common Units (noncontrolling interests) and dividends on our Class A Shares.

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

Included in the year ended December 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.

Critical Accounting Estimates

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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.

The fair value of the investments held by our products in our Credit and Real Assets 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 Assets 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.

For investments where little market activity exists, the determination of fair value is based on the best information available, our own assumptions, 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.

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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

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 grant-date fair values of our RSU and Incentive Unit (both defined in Note 1 to our Financial Statements) grants, as well as the compensation-classified 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.

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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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-K

Item 7. Management’s Discussion and Analysis