DigitalBridge Group, Inc. Q1 FY2024 earnings call

Management Statement and Operational Highlights

• Business Transformation: Completed business transformation, simplified earnings presentation into one document, and announced an upcoming Investor Day on May 13th to outline simplified business profile, private markets, digital infrastructure, AI, and platform scaling.
• Power Challenge in Data Centers: Addressed power transmission and distribution constraints, with solutions including locating data centers near renewables and bringing power closer to data centers. 2 out of 6 data center portfolios are 100% renewable, and data centers are being made more efficient using AI-powered technology.
• Data Center Growth and Connectivity: Leasing backlog across data center companies is at an all-time high. Connectivity (fiber) is critical for AI and edge workloads, with Zayo and fiber infrastructure playing a role in providing holistic solutions to customers.

Segment Performance

• FEEUM: Grew 17% year-over-year to $32.5 billion at the end of Q1 2024. Driven by DigitalBridge Partners III, co-investments, credit, and liquid strategies. Excluding the step-down in separately capitalized portcos, FEEUM would have been up over 20% y-o-y.
• New Capital Formation: Closed $1.1 billion in new capital commitments in Q1, a 47% increase from the prior year. Received over $600 million in continuing commitments to DigitalBridge Partners III and had contributions from credit, liquid, and co-investments.

Guidance

• FEEUM: Guidance remains $36 billion to $38 billion for the full year, unchanged from prior outlook.
• Capital Formation: Confident in meeting or exceeding fundraising targets for 2024, driven by a multi-strategy approach.
• Fee Revenue and FRE: No change to guidance on fee revenue and fee-related earnings (FRE), with growth expected as capital is closed and strategies scale.

Risks

• Power and Transmission Constraints: Grid transmission and distribution capacity challenges, especially with increasing renewables, pose risks to data center expansion.
• Market Volatility: Uncertainties in market conditions, including pricing pressures in data centers and potential challenges in executing M&A deals at desired valuations.

Question and Answer Q: Thoughts on data center markets in new locations and interplay with connectivity?

A: Marc Ganzi discussed locating data centers in less latency-sensitive areas near renewables and the importance of connectivity with Zayo and fiber infrastructure to provide holistic solutions.

Q: Carried interest reversal and distributable earnings?

A: Thomas Mayrhofer explained carried interest reversal is mark-to-market and doesn't impact distributable earnings; guidance remains unchanged.

Q: Data center growth, power solutions, and incremental returns?

A: Marc Ganzi outlined applied learnings from portfolio companies, renewable energy progress, and potential for significant AUM growth from power solutions, with focus on portfolio company execution and new strategies.

Q: M&A in towers, fiber, small cells?

A: Marc Ganzi mentioned continued acquisitiveness in towers across regions, focus on small cell infrastructure and fiber for 5G densification, and confidence in long-term opportunities for small cell and fiber solutions.