DigitalBridge Group, Inc.

Digital Bridge Group Incorporated Third Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce Severin White, Managing Director and Head of Public Investor Relations. Thank you. You may begin.

Good morning, everyone, and welcome to Digital Bridges' third quarter 2021 earnings conference call. Speaking on the call today from the company is Mark Gansey, our president and CEO, and Jackie Wu, our CFO. 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, including the effect of COVID-19 pandemic on those areas, 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, November 4th, 2021, and DigitalBridge does not intend and undertakes no duty to update it for future events or circumstances. For more information, please refer to the risk factors discussed in our most recent Form 10-K filed with the SEC and in our Form 10-Q for the quarter ended September 30, 2021. Great. So we're going to cover our standard agenda today. Mark will start with our three Q highlights. Jackie will provide an overview of our quarterly financial results. And then Mark will do a quick deep dive on one of our innovative businesses in executing the digital playbook section. And we'll end with some key takeaways, followed by Q&A. We've had a great quarter, and we've been busy. So let's get started. With that, I'll turn the call over to Mark Gansey, our president and CEO. Mark.

Thanks, Severn. I'd like to start by thanking everyone for their interest and attention today, especially new investors that are just learning about DigitalBridge for the first time. So, where are we on our finish the mission mantra for 2021? As many of you know, we announced the sale of our wellness business earlier this quarter, taking us effectively to 100% rotated on digital infrastructure on a pro forma basis. I want to put that into some perspective because the team will have really achieved something special this year when that deal closes in Q1 of 2022. As you can see on this slide, that's the successful rotation of over $73 billion in assets under management. We've harvested $33 billion of legacy assets and building over $40 billion of AUM in digital infrastructure. a sector and asset class where the DigitalBridge team has a long history of investing successfully over the last 25 years. Not only investing, but building, managing, and owning and operating digital infrastructure assets. We are now 100% aligned with the powerful secular tailwinds driving investment and connectivity on a global basis. The transition, as we call it, is not just about asset rotation. I'm here to tell you it's been a complete transformation of the company. Our corporate capitalization has gone from being over levered with over $7 billion in debt to just over $1 billion in the last year alone. And just as important to this, our corporate governance has also been completely overhauled with new senior leadership in place and a more digital, more focused, and more diverse board helping us navigate the digital bridge roadmap and ecosystem. I want to take this opportunity to thank the entire team for really amazing execution, especially when you consider it's happened in less than three years. We're a new digital bridge, and we're completely aligned with the future of where real estate is going. Next slide, please. Speaking of our strategic roadmap, the next slide gives you some context for where we are along that progression. As we contemplate the transition, stage one, ahead of schedule by over a year, and with nearly $2 billion of digital purchasing power, we're in the position we promised investors we wanted to be. Finally, being able to play offense and off of our front foot and invest in the best asset classes that we see globally. This is really an exciting inflection point for us. We're set to enter the second stage of our business transformation, the acceleration, where our two high-growth business lines really achieve scale just as a number of exciting thematics begin to play out in our sector. 5G, IoT, AI, edge computing. These are the emerging demand drivers we're aligned with in our investment thesis. The place we believe investors want to be today. First, our digital IAM business is raising record amounts of capital, and we're set to broaden and deepen our investment offerings next year and beyond. That'll drive new opportunity, and of course, in turn, fumes. which in turn drives our revenues and earnings. Next, our digital operating division is set to lift off, fueled by the deployment of our balance sheet capital into high-quality, stabilized digital infrastructure assets. That means supporting our existing platforms, data bank advantage, or building exposure to new, mature, developed market assets. This is going to be a significant growth driver for us, as you can see here. and it underpins earnings growth for the next two years. The bottom line, in the acceleration stage that we're entering is where this opportunity becomes very compelling. I couldn't be more excited. Next slide, please. Next, I want to talk about our capital formation efforts at Digital Ridge, and specifically fundraising at DCP2, our second flagship fund. This is the most powerful part of our results this quarter. We didn't slow down in Q3. We maintained and built on our strong pace of capital formation, and we hit our $8.1 billion hard cap in early October. In fact, we continue to see strong investor interest, and our LPs have agreed to increase the hard cap in this fund to $8.6 billion, which will wrap up at the end of this year. We exceeded our original $6 billion target by over 35 percent. The second fund is almost 2x the size of DCP1, and we've raised it in a speedy time period of less than 18 months. This is really, truly exceptional, and it's testament to the power of having the largest dedicated digital infrastructure platform, and most importantly, a best-in-class fundraising team led by my partner, Kevin Smithen. DigiBridge has established itself as the partner of choice to institutional capital looking to build exposure to this resilient and growing digital infrastructure asset class. I want to thank my entire team for their tireless work this past year and for this fantastic achievement that serves our shareholders. Next page, please. So, what have we told you in the past about the impact of capital formation? First, not only does it give us the firepower to invest and build new digital infrastructure businesses, it drives our revenue and earnings with long-term, predictable management fees. This is our simple algorithm. and it's on display here. Our success in capital formation, driving our revenue and earnings guidance for the year, a true beat and raise. We're increasing our digital IAM earnings guidance by 5% to 95 to 100 million on a consolidated basis. And it wasn't just our flagship DCP2 fundraise. As I've signaled to you before, our co-invest program is not only strategic, but it really deepens our relationship with our most important partners and LPs. It also gives us that incremental firepower, allowing us to evaluate almost any transaction in our sector while simultaneously generating incremental fee and carry to the benefit of our shareholders. We recently closed in the quarter $750 million of co-invest across three distinct programs. First, Vertical Bridge, the largest private tower company in the U.S., where we took a control stake in Fund II. and have bought in key LP relationships alongside of our investment. Second and third, Scala and Highline are two Brazilian portfolio companies in, first, the hyperscale data center business, and in the tower business, respectively. Both of these businesses have enjoyed incredible growth, and investors acknowledge the strength of these two platforms. This fundraising takes us past $17 billion in Fiam, exceeding our year-end 2021 target ahead of schedule by a full quarter, and we've got another 60 days to close out the year. I'm looking forward to a strong finish, and once again, cannot thank enough my global capital formation team. Next slide, please. So, we've talked about our excellent fundraising momentum this year, but what does that future look like? How do we continue to extend our sector leadership? What's interesting in digital infrastructure to me is that it's really emerged out of the pandemic as its own asset class, no longer stuck inside the broader infrastructure asset group. And at the same time, as that asset class has emerged as its own asset class, we see the investable universe of digital infrastructure growing. As the sector pioneer and a dedicated digital infrastructure specialist, I believe we are uniquely positioned to continue to lead and develop new offerings to meet investor interest and our customers' persistent need for new infrastructure. As I look forward to 2022, our next step here is to continue scaling our IAM platform with a focus on new and emerging strategies, broadening and deepening the base, as you can see here to the right. First and foremost, that means forming capital around a private credit strategy, which we believe is a significant opportunity. We've already deployed some balance sheet capital to seed investments in the space that will be contributed to credit products in the future. This is a big focus for us in 2022. Our liquid strategies already have over $600 million in AUM, and there's significant additional capacity at both the hedged and long-only strategies. Finally, we're looking at some logical extensions on either side of our existing flagship, whether that's core or continuation-oriented vehicles, that appear to be a good fit for asset class or growth capital-oriented investments that leverage our unique insights and access across the digital ecosystem. Next quarter, we'll lay out some of these new goals for the Digital IAM platform in 2022 and beyond. The key here is there are endless opportunities in this ecosystem. And once again, we believe we have the best team to take advantage of the secular opportunity. Next page. Next is our portfolio activity update. This is where we've thoughtfully deployed that capital and we're building value. Last quarter we talked about how we're already investing in some exciting new geographies, Asia in particular, and emerging sub-verticals like edge infrastructure. What we'd like to highlight here is how effective we've been quickly transforming and scaling these new portfolio companies. This is a compelling digital bridge differentiator. I want to start in Asia, where we've taken the previously announced PCCW data center acquisition and agile data center platform and combined them to launch Vantage APAC. Leveraging the strong relationships of our CEO, Cyril Chosky, and his team that have global hyperscale customers into these new exciting markets, including Tokyo, Osaka, Melbourne, Hong Kong, Kuala Lumpur, and executing a playbook that has worked incredibly well for us in the U.S. and Europe. Our EdgePoint platform is also growing in the region, with now over 10,000 sites across Indonesia and Malaysia. We're the premier tower consolidator in these key growth markets. Finally, in Asia, we partnered inside this quarter with our friends at Columbia Capital to acquire Superloop, our first fiber acquisition in the region. We'll talk more about Atlas Edge later, but suffice to say it's a great example of our ability to add value and build scale in short order for our investments. Finally, closer to home, here in this hemisphere, DCP2 took a controlling stake in VerticalBridge, consolidating the ownership base and extending our partnership with the largest private tower company in the United States. On the digital operating side, to the far right, highlighted in green, Vantage SDC acquired another high-quality hyperscale data center in one of the most protected markets in the world, Santa Clara, California. closing on CA-22. Next slide, please. So let's start right there with Vantage SDC's acquisition of CA-22. This is a 24-megawatt hyperscale data center that's adjacent to SDC's already-owned California 21 data center. You can see the campus plan to the lower right, which shows our ability to keep growing on this campus and deliver more high-quality long-term earnings growth. As you know, Vantage SDC is a core element of our digital operating segment, and continuing to grow our portfolio of world-class, stabilized, hyperscale data centers is a key focus for us. We're excited about this first acquisition, which increased our capacity by 14% to over 177 megawatts. I'd like to wrap up this section on the left-hand side with an update on our wellness infrastructure sale. This transaction remains on time and is slated to reach a final financial close in early Q1 2022. Not only does this complete our asset rotation, but as you can see, it delivers our balance sheet by $2.2 billion and generates over $300 million of cash in new value that will contribute to our digital purchasing firepower. Before I hand it over to Jackie, I just want to acknowledge what a breathtaking quarter this has been. We've hit the hard cap in DCP2 over $8 billion, raising hundreds of millions of dollars in new co-invest capital alongside of some of our best ideas, rapidly scaling and transforming our portfolio companies and wrapping up our diversified to digital transformation with the sale of our wellness business. It's truly been an amazing quarter. So with that, I'm going to turn it over to my partner and our CFO, Jackie Wu. Thanks, Jackie.