DigitalBridge Group, Inc. Q4 FY2023 Earnings Call

Good morning, everyone, and welcome to the DigitalBridge fourth quarter 2023 earnings conference call. Speaking on the call today from the company is Marc Ganzi, our CEO, and Jacky Wu, our CFO. We're also joined by Tom Mayrhofer, who will be transitioning into the CFO role during the second quarter of this year, as previously announced. I'll quickly cover the safe harbor and then we can get started. Some of the statements that we make today regarding our business operations and financial performance may be considered forward-looking and such statements involve a number of risks and uncertainties that could cause actual results to differ materially. All information discussed on this call is as of today, February 20, 2024, and DigitalBridge doesn't intend and undertakes no duty to update it for future events or circumstances. For more information, please refer to the risk factor discussed in our most recent Form 10-K to be filed with the SEC for the year ending December 31st, 2023. Great. So we're going to start with Marc summarizing the progress we've made on our key priorities in 2023. Jacky will walk us through our new simplified financial results and turn it back over to Marc to lay out our 2024 business plan. With that, I'll turn the call over to Marc Ganzi, our CEO. Marc?

Thanks, Severin. Before we look ahead to 2024 in our third section, executing the digital playbook, I'd like to recap 2023 and summarize how we delivered on our key priorities for the following year. As I like to say, it's the three things that matter: fundraising, simplification, and performance down at our portfolio companies. And let's put this report in a broader context, because at the end of 2023, we have successfully completed a multi-year transformation at DigitalBridge, taking a diversified read across five real estate verticals and refocusing that business exclusively on the digital infrastructure ecosystem, where my team has been successfully investing and operating for over 25 years. Along the way, on this $80 billion transformation, we harvested real value for DigitalBridge shareholders, from the sale of legacy assets while continuing to grow what I believe is the leading global asset management platform focused on digital infrastructure. So let's start with fundraising, where we saw terrific growth in the fourth quarter. The combination of new capital formation, contribution from the InfraBridge acquisition, and FEEUM activation drove our fee revenues up 59% year-over-year and fee related earnings in our investment management segment up over 64% year-over-year. This is really industry-leading growth. Much of that growth was fueled by new capital formation, $7.7 billion in new capital formed since January of last year through today, including the closing of over $1 billion in our inaugural credit strategy, which is a key piece of the multi-strategy asset manager that we are building here today at DigitalBridge. Next up, simplify. This really was front and center in 2023. De-consolidating our operating segments successfully with DataBank and Vantage SDC both moving off the books. We got this done. And as a part of that process, we monetized a ton of value while simultaneously deleveraging our balance sheet by over $5 billion. That's a huge win-win. We realigned our financial reporting over the course of the year to match our alternative asset manager peer set, including enhancing our returns disclosure. And in the fourth quarter, we moved the operating segment to discontinued operations. I think you'll agree, the simplified financial profile is much easier to follow and to understand for you, the investor. Lastly, my third priority, performance at the portfolio company level. This is always front and center for us in terms of what drives returns, what drives LP interest in partnering with us, and what drives the continued growth of our platform. In 2023, digital infrastructure continued to perform across all of our verticals. Interestingly, we are seeing the early impacts of Generative AI demand, particularly across the data center ecosystem. Let's cover these three topics in a little more detail, and then I'll turn it over to Jacky to cover the financials. So it starts right here. FEEUM and AUM are two metrics that I now track vigorously. First, with AUM, we ended the year up just over $80 billion, which represents a 52% growth rate year-over-year. As you can see here at FEEUM, our key revenue and earnings driver, continued its strong growth in Q4, with the activation of our most recent flagship strategy. We're now up over $10 billion or 47% year-over-year to $33 billion in FEEUM, driven by a combination of organic capital formation and the contribution from the InfraBridge acquisition, which we successfully and fully integrated this year into our platform. In fact, we're confident that the InfraBridge platform will provide a good growth vector for us in 2025, amplifying our ability to take advantage of the middle market opportunities across a broader set of digital infrastructure and adjacent industries. Next slide, please. So, here we are, new capital formation. This is the slide I know you all wanted to see. It's the fuel that allows us to meet the growing need for connectivity and compute. I'm pleased to report that despite a historically challenging fundraising environment, DigitalBridge raised close to $8 billion in new FEEUM since January of last year. That's $2.3 billion since last quarter, including $800 million year-to-date, led by strong initial commitments in our latest flagship product. As I mentioned earlier, our credit strategy completed the successful closing of its first fund with over $1 billion in cumulative capital commitments. Before we move on to the next slide, I want to put our fundraising into context because our team, Kevin, Leslie, they've done an unbelievable job. New FEEUM is up over 60% in a year, when global infrastructure fundraising was down over 50%. This is testimonial to the strength of our team, the power of digital infrastructures and asset class, and the dedication and focus of our firm to meet the call of our customers, bringing the resources necessary to meet our key commitments. This is really an incredible accomplishment, and I'm really proud of our team, and I'm proud of the firm. Next slide, please. So next up, our second priority was quite clear, simplify. Here the centerpiece was the successful deconsolidation of our operating segment. On the left, I've highlighted not only the successful deconsolidation of DataBank but it's really important to note the significant value creation for DigitalBridge shareholders through this investment. Starting less than four years ago, we invested $466 million of DigitalBridge balance sheet capital, which doubled in value to over $900 million by the time we recapped the business in the summer of 2022. Since we made the strategic decision to rotate our business to an asset-light investment manager and deconsolidate our operating segment, we successfully monetized almost $500 million in value that's come back to the DigitalBridge balance sheet. In fact, based on where we're set to raise the next tranche of capital to fuel DataBank's edge computing growth, the fair value has increased another 20% just in the last year. We brought that asset under a 10% threshold in September of last year and deconsolidated it while maintaining exposure to DataBank's strong future growth profile, which, as all of you know, is focused on edge computing. The other crucial aspect of the operating segment deconsolidation is that there was substantial deleveraging of our balance sheet. We took consolidated debt last year from $5.5 billion down to under $400 million, with investment level debt moving off of our books. Consolidating that investment level debt was really a distortion that I believe made it unnecessarily hard for investors to understand and evaluate and appreciate DigitalBridge. Bottom line, we've created significant value for DigitalBridge shareholders and we simplified our business profile. Next slide please. So, just as you can see here, to give you a better sense of the impact of the deconsolidation on our balance sheet today compared to a year ago, we're talking about around $8 billion of assets that were really relevant at the portfolio level, not at the corporate level. A few key takeaways from the simplification include the movement of the net equity value of Vantage and DataBank assets into investment, consistent with the treatment you'd see at other asset managers. On the liability side, I mentioned earlier, over $5 billion in investment level debt has moved off the books. Net-net, the complexity of our balance sheet is significantly reduced, facilitating investor analysis in our business. We want to make it easy for you. So I really want to thank Jacky and the whole finance team as well as our legal team and our advisors and of course our LPs. When Jacky talks through the financials, the simplicity and clarity that comes from not having to deconsolidate and then subsequently separate two different business units is quite stark. On top of that, it's less expensive to account for. So the changes generate real savings. I cannot thank everyone on our team enough for their hard work on this initiative. And that includes our partners at Vantage and DataBank. Next slide, please. Finally, performance. Performance at our portfolio companies matter. MRR was up across all of our four verticals again, driven by a combination of organic and investment-led growth. Data centers continue to be the standout this quarter, with MRR up nearly 25% and the rest of our verticals also performing extremely well. Towers are up 7%, fiber is up 6%, and small cells are up 3%. Really good, consistent performance, and most importantly, consistent organic growth. Demand for compute and connectivity ultimately underpins this growth, and our ability to deliver for customers continues to expand along with our portfolio. So before I turn it over to Jacky to cover the financials, I want to say a few words about Jacky. As most of you know, this will be the last quarter that Jacky will be operating in his capacity as my partner and as our CFO. I first want to highlight his partnership, his friendship, and the incredible transformation that we've been able to accomplish together, Jacky, over the last four years. It's been one heck of a ride. Jacky's tireless work ethic and his never-quit attitude were a big part and remain a big part of the fabric that makes DigitalBridge so unique. As Jacky moves into an operating role where I know he'll flourish, he'll continue to be a part of that fabric. So Jacky, goodbye. Thank you from all of your partners, from all the employees, and of course the shareholders. You've done a tremendous job, and we really appreciate you. So with that, I hand the mic over to Jacky Wu.

Thank you, Marc, and good morning everyone. As a reminder, in addition to the release of our full year 2023 earnings, we filed a supplemental financial report this morning, which is available within the shareholder section of our website. Starting on Page 15, our key operating and financial metrics have increased significantly during 2023, led by our investment management segment, which continues to grow at an industry-leading rate. This quarter marks the end of our successful corporate transformation with our sector-leading investment management business at scale and our corporate structure simplified. More importantly, recurring distributable earnings and free cash flows continue to trend positively. We foresee this powerful momentum to continue in 2024 and beyond as the company continues to asset manage, realize superior returns, and fundraise off of this track record, which drives significant yield and flow through to distributable earnings and free cash flow. Turning to Page 16, the company's distributable earnings were $18 million, or $0.10 per share, highlighted by new fee revenues from the launch of our latest flagship fund, DigitalBridge Partners III, or DBP III, which had its first closing on November 1st. Assets under management increased to $80 billion in the fourth quarter, representing a 52% growth over the same period last year. Fee earning equity under management increased to $33 billion, which is a 47% increase from the same period last year. AUM and FEEUM growth have primarily been driven by capital raised in our new strategies and fee-paying co-invests, as well as the InfraBridge acquisition, which closed at the beginning of 2023. Our fundraising pipeline continues to be very strong, fueled by new commitments to our latest flagship fund, DBP III, and we anticipate making significant progress with our dynamic product offerings in 2024. Moving to Page 17, with the substantial growth in our investment management platform further enhanced by our streamlined corporate structure, the company achieved significant year-over-year improvements. In December, we completed the deconsolidation of Vantage SDC, and results from the digital operating segment are reflected in discontinued operations. Going forward, the remaining non-controlling interest in Vantage SDC will be held as an equity method investment, similar to the treatment of our remaining interest in DataBank, which was deconsolidated in the third quarter of 2023. Financial results have been recast in all prior periods presented to reflect digital operating segment results in discontinued operations. Consolidated revenues were $350 million, which were 29% higher than the same period last year. Total company adjusted EBITDA was $32 million, up 88% from the same period last year. This growth is primarily attributable to higher fee revenues from our new products and co-investments, which we will cover in more detail on the following pages. Moving to Page 18, the company continues to grow its investment management earnings and fee-earning equity under management, generated by strong fundraising throughout our product suite led by DBP III, fee-paying co-investments, credit, liquid strategies, and the addition of the InfraBridge funds. Fee revenues excluding incentive fees were $72 million and fee related earnings were $40 million, representing 59% and 64% increases from the same period last year, respectively. Investment management segment distributable earnings increased by 31% to $39 million from the same period last year, benefiting primarily from new fees associated with DBP III. Turning to Page 19, net carried interest income, including incentive fee revenue, before non-controlling interest, was $58 million in 4Q 2023, compared to $84 million in the prior year period, due to the fair value increases of our managed funds at a rate that exceeds the preferred return hurdles, which generate carried interest to DigitalBridge as the manager. Turning to Page 20, fee revenues in our high margin investment management segment have continued on an upward trajectory, led by our DBP fund series and new product lines. Since the fourth quarter of 2022, our annualized fee revenues increased from $181 million to $289 million, and fee-related earnings increased from $97 million to $159 million. Looking at the right side of the page, the run rate annual fee revenues are now up to $311 million. Turning to Page 21, the company maintains strong liquidity and has significantly de-levered its balance sheet. With approximately $475 million of liquidity, including the full $300 million available from our securitization revolver, our balance sheet remains poised for accretive uses. Current corporate debt level with no near-term debt maturities allows the company to be nimble and position DigitalBridge for long-term shareholder success. I am pleased to report we have achieved our target corporate debt level, adjusting for our perpetual preferred equity and now more aligned to our peers in the alternative asset management space. Moving to Page 22, our 2024 guidance range shown on the page highlights the significant progress made in the company's earnings profile. Fee-related earnings are projected to be between $150 million and $165 million at the end of 2024, and are now presented to include net corporate overhead expenses in line with our new simplified financial reporting definition going forward. We are expecting a strong fundraising year in 2024 driven by our latest flagship fund, DBP III. In summary, Marc and I are very pleased with the company's performance in 2023. We achieved many key milestones throughout the year in our journey of transforming DigitalBridge into a leading asset-light investment manager in the digital infrastructure space. The company is now much simpler and primed to generate long-term shareholder success by scaling the new products in our dynamic investment management platform. Our newest equity fund, DBP III, is off to a great start with some promising traction despite a global slowdown across the industry in fundraising. We are excited about the progress we are seeing in our products to start the year. As today marks my last earnings call as Executive Vice President and Chief Financial Officer of DigitalBridge, I would like to express my personal gratitude to Marc and the rest of our leadership team, the Board of Directors, all our employees, and all of our shareholders for what a truly remarkable experience these last four years have been. We have seen a tremendous change at the company, from a business where over 80% of our assets comprised of senior living facilities, medical offices, hospitality, commercial office, industrial and other legacy real estate assets made even more distressed and dislocated during the COVID-19 pandemic to now a 100% fast-growing digital infrastructure asset manager. This company and all of our stakeholders should be proud of the significant transformation. The stock was at low single-digits. Our leverage was challenged while the top line and bottom line metrics were in rapid decline. But we endured and we persevered, and we are now strong and healthy. I would also like to welcome Tom Mayrhofer, who has joined the executive team as the incoming Chief Financial Officer. Tom is an industry veteran with a proven successful track record in the investment management space, and he has already proven to be a great addition to the leadership team here at DigitalBridge. The company is set to accomplish some incredible achievements this year and in the future, especially with Marc at the helm. And with that, I will turn it back to Marc for his final remarks. Thank you.

Thanks, Jacky. Well, look, here we are today, and the thing that most excites us about finishing up our transformation is really the bandwidth that frees up for all of us to focus exclusively on scaling the DigitalBridge platform. That's what our 2024 business plan is all about, taking the strong momentum we've already built up and accelerating the DigitalBridge flywheel. As I said earlier today, it starts with fundraising, architecting investment solutions that are tailored to our clients' needs. This is what allows us to form capital sufficient to fuel the AI revolution. The second priority for 2024 centers on our portfolio companies, where our budgets today call for over $15 billion of success-based mission-critical greenfield construction. This is CapEx that's being deployed at increasingly attractive development yields as rents have risen and our growth rates have risen across our data center businesses and the other three verticals. I'm also excited about a significant pipeline of new opportunities to back great management teams and the launch of the next generation of investment platforms at DigitalBridge. The third cog in our flywheel is all about scaling DigitalBridge at the corporate level. That starts with driving corporate operating leverage, improving our earnings and cash flows and ultimately redeploying that capital into the highest return opportunities for DigitalBridge shareholders. I haven't been shy about this. Whether it's developing new investment management products or going out and buying great investment management platforms, we know how to buy and build, and we will execute that strategy in 2024. I'm incredibly excited about what lies ahead for this year. It's a real opportunity for us to finally go on offense. So let's cover some of those priorities in a little more detail. Next slide, please. Let's start with fundraising. New capital formation remains a key driver for our business. To meet the growing demand that we're seeing for AI powered investment in digital infrastructure, we're targeting over $7 billion in fresh capital across our multi-strategy platform. We expect at least 50% of that to come from our flagship strategy alongside a significant co-invest raise to support the growth of our existing portfolio companies, which we have demonstrated for the last three years. Our newer strategies, credit in particular, will drive the balance of our capital formation in 2024. We believe these targets are both achievable and attractive, representing over 20% year-over-year growth, again, in a difficult fundraising environment. One of the ways we're achieving this is through expanding our LP base. As you can see on the right, in just a couple of years, we've grown our primary LP base from 100 LPs to over 250 LPs across DigitalBridge. We think there's a lot of room to grow here, particularly as our flagship enters its third vintage and investors are increasingly familiar with both the resilience of digital infrastructure as an asset class, strong secular tailwinds that underpin its growth and the track record of the DigitalBridge investment management team over the last decade. In fact, we're spending a lot more time now with our existing LPs and new LPs, walking them through the opportunities that we're seeing that are emerging from the demand that's being created by Generative AI. That's a long education process, and one that we think is going to drive strong growth over the next couple of years in fundraising, particularly as the demand manifests itself in new leasing. The key, however, is the conversion into organic growth and new leases and ultimately new construction where we're showing up for our customers. I'm excited to work with the capital formation team this year as we expand our partnerships with new LPs, some of whom I've highlighted here. These are really thoughtful investors with long-term investment horizons, and we're excited to call them our partners. Next slide please. So let's cover the AI powered demand for digital infrastructure that backs our underwriting on new investments, particularly across the data center ecosystem. We believe AI is going to take a decade or more to build, and with 50 gigawatts of global data center capacity today, over the next six to ten years, we will double that capacity to 100 gigawatts. Data centers are becoming AI factories, with data as the input and intelligence and insights as the output. Just look at some of the leading logos in the space, Microsoft, Nvidia, Amazon, Meta, all of these companies are substantially increasing their investments and capacity to meet the current and projected demands for AI. These customers of our portfolio companies were already trying to stay ahead of cloud demand and cloud to the edge. Now, AI has pushed that into a whole new gear. When Nvidia reported their most recent quarter, chip sales to their data center segment were $14 billion, up 3.8x over the prior year. That's simply amazing. It's important to note those chips ultimately need a home in a data center. It'll be interesting to see what numbers they post tomorrow. So bring that back to DigitalBridge. Today, we've got a pipeline of over 5 gigawatts looking out over the next five years. Building on top of what's already one of the leading global data center footprints with over 190 data centers across 80 markets on a global basis. This is a big opportunity, and it's going to take investors who understand power, infrastructure, land acquisition, permitting, renewables, proximity and connectivity to terrestrial and sub-oceanic fiber routes, the latest advances in cooling technology, data sovereignty, and increasingly software-defined networks to meet this demand. We've got that expertise. We've got that experience. DigitalBridge is ready for the cloud-trained, edge-delivered future of AI. Next slide. So what does building the AI revolution look like? Today, data centers are dominating CapEx with $11 billion of the $15 billion that's budgeted at the portfolio companies in 2024 and we're really focused on these data center investments. This is where we're leading in mission-critical greenfield CapEx. Make no mistake, that's not a typo, $11 billion of committed CapEx to data centers alone. North America and Europe are our most active markets today, but the rest of the world is accelerating. I've said AI is cloud trained and ultimately edge delivered. This is a global opportunity at scale. What you see here are images from active construction happening today across our portfolio. This is not science fiction. We're building new data centers, we're putting up new towers, and laying new fiber optic networks. These are all critical aspects of next-generation digital infrastructure networks. This is actually just a small sampling. There are so many other places where we’ve got shovels in the ground. But we wanted to give you a sense of what the AI revolution looks like in the real world today. Next page. So, the final priority for me in 2024 is scaling DigitalBridge, focusing particularly on profitability and operating leverage. One of the side benefits of deconsolidating is the ability to look at a clear picture of the progress we've made growing our alternative asset management platform over the past couple of years. We've generated attractive revenue growth, increasing earnings, and substantially expanding our margins from the low 30s to the mid-40s in 2024. I'm really proud of that progress we've made scaling a high-margin, asset-light investment platform. I'm excited about 2024 and beyond as we continue that momentum with solid revenue and earnings growth. Next page, please. Finally, before I wrap it up, I wanted to highlight our corporate capital allocation priorities, giving you a sense of where we plan to deploy those earnings from scale in the future. In the past few years, the biggest investments we've made alongside of our LPs, compounding value like we showed you earlier with the data bank example, we think that's a great use of capital and allows legitimate shareholders to get direct exposure to the value creation we drive at the portfolio company level. Capital structure optimization has been another big priority for us. We've highlighted this in previous earnings calls. I'm not just talking about deconsolidation. We've made significant investments in de-levering our corporate balance sheet over the past few years, which will continue to be a priority, even as we scale the business. Next up, accretive digital M&A is another significant focus. We think there are attractive high-return opportunities to expand our platform, and we have an active pipeline of opportunities. We were pleased with the Wafra transaction we executed a couple of years ago, buying back 100% of our investment management business. The AMP InfraBridge acquisition has now been successfully integrated with better-than-expected cost synergies and a value-add expansion in our investment mandate into middle market digital plus investing. Finally, on share repurchases and dividends, we've committed to a low but growing dividend policy and expect opportunistic share repurchases to become more prominent as we finalize the capital structure over the next few years. Next slide, please. So that covers my top three priorities for 2024. As you can see here on the CEO checklist, we've got a quick recap. One, fundraising: secure the $7 billion in fresh capital to meet the early stages of AI-powered demand we're seeing across the DigitalBridge infrastructure ecosystem. Two, continue to invest in our portfolio. This year alone, we'll deploy over $15 billion in success-based Greenfield CapEx, building out all those megawatts and gigawatts to meet customer demand. This also means capitalizing on a growing pipeline of new opportunities fueled by our latest flagship strategy. Finally, what we just talked about, scaling DigitalBridge, delivering operating leverage with higher margins and reinvesting those earnings effectively into the best high-return investments at the corporate level. I look forward to updating you throughout the year, including an Investor Day that we're scheduling for May after the Q1 earnings. So stay tuned. Thank you again for your continued support and interest in DigitalBridge. With that, I'll hand it over to the operator and we can begin the Q&A section. Thank you.

Thank you. Our first question comes from Michael Elias with TD Cowen. Please proceed.

Great. Thanks for taking the questions. Two, if I may. First, Marc, you talked about a historically challenging fundraising year in 2024. Just curious as we enter the year, how you've seen the fundraising environment evolve, are you seeing LPs come back to the tables with more appetite for digital infrastructure? Curious your thoughts there. And then second, on the data center side, it's great to see the CapEx that you're deploying into the sector. But one of the headwinds that we see is availability of power. I'm just curious, as you think about the state of play of the grid globally, what do you think from the ability to access incremental power at the data center level and as part of that, how you're thinking about ensuring the long-term access to power at your portfolio company level? Thanks.

Well, first of all, good morning and thank you. Let's start with fundraising. Look, the fundraising environment is tough. I've been out on the road for the first six weeks of the year, and I would say investor interest is high, investor interest is strong, engagement is there. The calendar is plenty deep with meetings. We've got a lot of investors that are working through various products with us, whether they're doing on-site due diligence here in South Florida, or whether they're in the data room, or whether we're negotiating final terms. We've got a deep pipeline. As I mentioned last time, we have over 200 investors engaged on our current flagship strategy. We feel very good about the trajectory of the fundraising for our flagship product. Nothing has really changed there. I would say interest in new products is up as well, particularly credit. Some of the things that we're doing in our digital ventures group are going quite well, particularly around co-investments. We had a fantastic partnership with Intel. We went out to raise some co-invest capital, and we were oversubscribed to the tune of 2x to 3x. So good ideas, good products, good execution. I’ll finish with one thing, DPI. We've had a great track record of returning capital to investors. We've returned over $4 billion of capital to investors in the last 18 months. We're returning more capital to investors this year. We have a series of closings and a series of assets that are in strategic reviews. So we've done a really good job of listening. I think you have to be in this environment, two words matter: listen and patience. I think we've been very patient and in due course, we've been rewarded. If you deliver DPI, you deliver good returns, and you're patient, the results come. So that second piece is patience, and it just requires a different level of patience and cadence. You have to be prepared to take a commitment 30 days later, 60 days later, 90 days later, or maybe a smaller check. Check sizes are down anywhere between 10% and 30%. We did have a few surprises where some check sizes came in a little higher. And then of course new logos. One of the great things about having a 28-person team that goes out and prosecutes our various strategies on a global basis is we're getting access to more logos. Having a multi-strategy approach where we have three different products in the market really shows the depth of what we're doing and shows, as I mentioned earlier, the ecosystem and flywheel. Things are working well for us, and we're pretty happy. $7.7 billion is the new $8 billion. So, you round that up, we feel like we hit our goals of trying to get to $8 billion in a tough fundraising environment. As I said, we remain positive and constructive around this year. We've closed some capital and we're going to close more capital inside this quarter. Things from our perspective are in pretty good shape. I don't want to overstate probably what you haven't heard from our peers like Blackstone, Carlyle, KKR, or Brookfield, which is that fundraising is trickier today. We just have a different playbook and cadence, and so far it's working out pretty well for us. On the power issue, Michael, you and I have been talking about this for two years. I don't think this is anything new. I highlighted two years ago that the grid was insufficient to meet the demands of data center growth. So we started down a slightly different road two years ago, getting will serve letters when others weren't focused. We were designing data center capacity in markets that perhaps others weren't focused on, whether you take a look at what we've done in Reno, by example, or you take a look at what we've done in Quebec, in Quebec City, by example, or you look at what we did in Berlin, or Cardiff, Wales, or Milan, or Warsaw. You've got to skate sometimes to where the puck is going, not where everyone's up against the boards. We've tried to be the leader in this infrastructure business and digital infrastructure. We've always tried to be a step ahead. Our 5 gigawatts that we’re currently contemplating have power sources for that. In addition, we've been working very hard on renewable energy sources. The Switch investment was a big case study in that; we know how to source and develop renewable energy adjacent to our data centers. We’re working hard on energy independence across all of our data center platforms, and that remains front and center for us. Again, that's a mission that started two years ago. If people are just now waking up to the fact that we have a grid transmission issue, they probably weren't paying attention two years ago. A lot of people have jumped into this business in the last 12 months, and there's a difference between those who have been native to the sector and those who are just tourists. We tell investors that we're really focused on making sure that we're preparing for the future, and to do that, you've got to have great management teams, capital formation, good ideas, and executives that have been there and done that. We just brought on board Alex Hernandez, who was formerly the CEO of Talen. He’s a multi-decade veteran in energy transition, and he knows how to bring renewable sources of energy to data centers. We're excited to have him here working with our internal team on energy transition. As we've said it when we bought AMP and converted to InfraBridge, energy transition is going to be a big issue. We brought in industry expert Christian Belady from Microsoft to help us understand how to source renewable energy. This isn't just something that looks good; it's table stakes. If we're going to be ultimately the consistent provider of the next generation of digital infrastructure, we have to do that in concert with our customers. That's understanding their needs from an energy efficiency perspective, renewable energy, different sources of cooling, and just thinking differently. We must continue to evolve as a firm, and that's something I’ve always been open to. The ideas we’re prosecuting and the recruits to our team show this focus and have been so for a while. This is not a new narrative.

Thanks for all the color, Marc. Much appreciated.

Thank you very much. In terms of the fundraising outlook, would you say that alongside a slowdown in fundraising, there is increased competition in the verticals that DigitalBridge target? To what extent is that a factor in your outlook?

Well, remember there's two dimensions to this alternative asset management business. One is we compete for capital across our product set and, inside this quarter, we demonstrated our ability to compete. To be honest, I think we sort of punched above our weight class, if you look at the performance of the other alternative asset managers in fundraising. Secondly, down at the portfolio company level, we've competed for 30 years. That's a playing field I'm comfortable on. I like competing for new BTS orders and our portfolio companies are going out and winning. Switch had an incredible first year under our stewardship in terms of new bookings. Zayo had a great year and a turnaround, EBITDA up 6%, 7% in a tough macro, demonstrating our capability to get out there and ultimately deliver a business plan. We're competing every day. We have to compete for customers. What gives me optimism is that the wallet we compete for is growing. The tailwinds we've had for the last decade and ahead for the next 10 years are immense. We're not done building public cloud and edge workloads for cloud. Here comes AI that requires robust connectivity solutions to data centers, massive compute power, and power efficiency. Very few can do that. We have the fiber, the tower infrastructure, and the edge compute infrastructure. We also have the ability to offload into controlled environments. We will continue to evolve and keep taking outsized wallet share. It's really important.

Thank you. In terms of the guidance range, looking beyond what you provided to 2024, I believe the last FEEUM target was $49 billion for 2025. If $7 billion is now the rate of organic growth and fundraising, should we think more along the lines of $44 billion, $45 billion as a reasonable target for 2025?

Look, we haven't put out those targets. What we have done is given a specific set of parameters around what we feel we will deliver this year. That was pretty clear from the earnings presentation. As we've made this final transition from diversified REIT into alternative asset manager, part of that transition is now reporting like our peer group. You need to flush a little bit of the old way we reported, which was more in a re-cadence and more based on run rate to now actually going to what our peer set does in the alternative asset management space, which is reporting on actuals. When we plan to give that level of comfort to investors on our Investor Day, we look forward to that.

Would you say there’s any reason for a re-acceleration in growth in 2025? Let's say rates moderate, and that part of the headwind subsides. That could add to LP investor confidence in deploying capital. Is there potential for a re-acceleration?

An acceleration for us would be amplified fundraising because that ultimately leads to FEEUM and FRE and distributed earnings. We've given you a $7 billion guide for fundraising this year. It flows through evenly to the rest of the key metrics about our business. I don’t think there’s any magic to ‘25 versus ‘24 versus ‘26. What we’re delivering on existing products for investors, which is that key metric DPI is what really matters. If you return capital back to investors, you can then ask for more new capital. Investors are becoming a lot more hawkish around DPI. Giving new commitments is linked heavily to performance so we will continue to focus on that this year.

Yeah, we're not guiding to EPS. The factors that drive that from FRE down to EPS or distributable earnings will be our interest expense as well as preferred equity.

Thanks, Jade.

Thanks. Good morning, everybody.

Hey, Ric, how are you?

Great, thanks. First, thanks for getting us to the simpler story. I know it took a lot of work and it was busy. And hats off, Jacky, it's been great working with you and we welcome you to beginning to know Tom better.

Thanks, Ric.

Questions. Marc, I want to follow along. Fundraising is a key topic. First, also thank you for getting the calendar year guidance. When we think about the $7 billion in fresh capital in ‘24, how should we think about the pacing through the year on that one? The other piece of the question too is, how should that return to capital affect our thoughts longer-term 2025, 2026, 2027?

I don't think there's a specific algorithm between DPI and what investors bring back to us. I want to make sure you don't feel like there's a direct correlation there. We've delivered over $4 billion of DPI. I think it’s $4.6 billion of DPI in the last 18 months. We have scheduled to deliver another $5 billion of DPI this year, which could go a little higher. We’ll see. It’s primarily focused on a couple of our continuation funds, some of the legacy DigitalBridge funds. We will continue to update you on DPI each quarter. On the $7 billion this year, we've been clear that the bulk will be flagship. We've got closings that are scheduled for the end of this month, with rolling closings essentially every 30 days. Remember, we are no longer a one product shop. We have ample products in the market, ensuring a closing happening at some point in time. The key is updating you all on quarterly fundraising progress and then ultimately how that offsets against our annual objectives. We feel good about the start to the year.

It might be premature, but Tom, you're in the background there on the call. It sounds like you've got extensive experience in the alt world. What are you seeing so far as the pros and cons of DigitalBridge versus others in the alt asset manager space? What do you think the market's missing as far as people look at DigitalBridge?

It's probably a little premature for me to comment on that specifically, but what attracted me to DigitalBridge is that we have a focus and an area of expertise that differentiates us. That's what attracted me here. I think that's fundamentally what's important when you think about investing capital.

Hey Marc, you've been around for a long time, we’ve known each other for over 20 years. What do you think are the pros and cons of the simpler story, and what is the market not giving you credit for yet?

We’ve been pounding the table now for three years. I’ve been at your conferences being an evangelist of the asset light digital infrastructure player. At our core, our capillaries, heart, and brain is that of an operator. When you're asset-light, you can go faster and form capital quicker. Make no mistake in AI infrastructure; you need a big wallet to compete for business. As you can tell from Equinix and DLR, they’re scrambling to form capital. It proves what we're doing is the new thinking in infrastructure. Our investor base reflects a crossover from traditional infrastructure to TMT investors. Over time, I believe you'll begin to see us grow into an appropriate multiple for our business. We need to earn that carried interest delivery for our shareholders.

I just wanted to follow up on the $11 billion in data center CapEx. What kind of return rate should we expect from those investments? I think there's concern that we're entering a peak data center demand environment. Can you talk a bit about the sustainability you see?

I agree that we should always be worried about peaks, not troughs. In this business for three decades, we've seen peaks and valleys. I'm watching what the rental rates are doing. I actually believe rates will continue to rise. But it's market-specific and given that we operate globally, we have a good view of what's happening. Certain markets are seeing lease rates increase significantly. It's tied directly to power and availability. Our 5 gigawatt pipeline is highly qualified and we have planning permissions in place, ready to deliver insatiable demand. Our six different data center platforms give us a competitive edge to be surgical and local. Our track record speaks for itself; we're committed and signed to deliver. What this means is we’ll work through the 5 gigawatt pipeline and potentially see very good results this year.

Thanks. Could you touch on kind of the buy versus build equation across your key industry verticals? It seems you’re focused on building via CapEx and greenfield in 2024. Have you seen changes in transaction multiples across your key verticals?

We skate to where we think we can achieve the best IRR. Right now in data centers, it's built. Acquiring existing centers is challenging due to tight returns as many infrastructure firms are competing. That said, we have been focused on greenfield. In terms of towers, we’re seeing some value opportunities, and we're discreetly working on tuck-in M&A, but our focus remains strong on new builds. Our global built-to-suit pipeline is growing significantly and we have a clear line of sight for M&A and expansion. Returning capital remains top of mind as well. We’ll use M&A strategically as we find opportunities to expand our platform. We have a strong pipeline of ideas that we’re executing on.

Hey, thanks for taking the question. One question, one housekeeping. You talked about seeing early impacts of GenAI demand. Can you talk about how much data center leasing has been tied directly to AI and when you may see this demand translating to more activity for your fiber and edge assets?

If you look across our 5 gigawatt pipeline today, AI was about 20% last year. Today, it’s about 40%. AI edge leasing is probably more like three to four years out, but it’s already impacting fiber. We’re seeing connectivity demand driven by those AI workloads, which means we’re busy in that segment. I expect our investments in fiber to yield greater returns in the near term as demand surges for infrastructure driven by AI workloads.

Thank you.

Thank you. Thanks, Matt, appreciate it. Well, thank you to all of you, our investors, for your continued patience and support of what we're doing. We appreciate those of you who have joined our shareholder roster in the last quarter. As we've transitioned and move into a new speaking rhythm, we look forward to meeting with all of you and telling the story and giving you visibility into what we're doing. I'm really excited about our upcoming Investor Day and hope to see everyone there. Most importantly, I want to thank Jacky for his partnership and friendship. I'm excited for him and for what he’s doing for us moving forward. Aligning his passion with where he can be really useful to DigitalBridge shareholders is exciting and with that, I look forward to seeing all of you out on the conference circuit. Thanks and have a great day.

Thank you. This will conclude our conference. You may disconnect your lines at this time and thank you for your participation.