DigitalBridge Group, Inc.

Greetings and welcome to the Digital Bridge Group, Inc. second quarter 2023 earnings 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. I would now like to turn the conference over to your host, Debra White, Managing Director and Head of Investor Relations.

Good morning, everyone, and welcome to DigitalBridge's second quarter 2023 earnings conference call. Speaking on the call today from the company is Mark Gansey, our 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 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 the call is as of today, August 4th, 2023, 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 for the year ending December 31st, 2022, and for our Form 10-Q that will be filed with the SEC for the quarter ending June 30, 2023. Great. Let's start with Mark providing an update on our key objectives for 2023. Jackie will outline our financial results and turn it back over to Mark to discuss some of the early impacts we're seeing from generative AI on our ecosystem. With that, I'll turn the call over to Mark Gansey, our CEO. Mark.

Thanks, Evan. I want to start by recognizing this as the third anniversary of my first quarterly call as CEO of DigitalBridge. When I took the helm over in the summer of 2020, we were facing the depths of COVID and we had a very different business profile. Today, we're on the five yard line of an unprecedented 80 plus billion dollar rotation and transformation. We've been very focused on three key priorities that I outlined at the beginning of the year. Today, all that hard work has positioned us to meet the persistent and growing demand for digital infrastructure investment, particularly as we see the early signs of new demand driven by Gen AI. I'll talk more about that in Section 3 today. We're really excited about what we're seeing and how it impacts DigitalBridge, and more importantly, how it impacts our portfolio companies and our investments. So let's stay focused and touch on those top three priorities. First, starting with fundraising. In the second quarter, we generated strong year-over-year growth in our investment management platform, with fee income up 47%, and segment-level FRE up 35%. Higher FEM, which was driven from core, credit, and co-investment, along with a full quarter of InfraBridge, activated that growth. Most importantly, new capital formation. $2.7 billion in new capital was committed over the past three months, with half of that coming to accrue to our latest flagship Digital Bridge Partner Series and the balance between co-investment and incremental core and credit commitments. I'm pleased to report we remain on track to achieve our fundraising objectives for 2023. On simplification, the big news here is we expect to receive sufficient final commitments to our data bank recap to deconsolidate that business from our financial statements later this quarter, followed shortly thereafter by a financial close. This is a tremendous milestone on simplification, and it will deliver additional capital back to the balance sheet. On the final priority, Portfolio performance. We demonstrated sustained growth across all four key verticals. I also want to highlight development CapEx here. Our portfolio company's ability to deliver new capacity to our tech and telco customers, whether it's on towers, data centers, or across fiber routes, really sets DigitalBridge apart. Year-to-date, we've successfully deployed over $4 billion to meet the next leg of demand at very attractive build yields. supported by long-term customer contracts with a high concentration on investment-grade counterparty risk. So let's detail fundraising and our simplification progress before we get into the financials. Next slide, please. New capital formation. As I highlighted earlier in the year, this will be the seminal KPI for 2023, and I'm pleased to report we've raised $2.7 billion since last quarter. This brings us to $3.4 billion year-to-date, About half of that, $1.2 billion, came from initial commitments to our flagship DigitBridge partner series, which will start generating fee income once we finalize an initial close. We've also completed $900 million of co-investment syndications, most notably Switch, which is one of the best positioned data center platforms for next generation compute. Last quarter, I highlighted the structural growth we expected to see in co-investment as our platforms continue to grow. and how more of that would flow into FIEM this year. That manifested itself inside this quarter. You should expect as demand for digital infrastructure increases with the advent of GenAI, so does our need for co-investment capital at our digital portfolio companies globally, which in turn helps us scale and drive FIEM and FRE. The balance of fundraising came from core, credit, and our liquid strategies, which continue to add AUM at a steady pace. I'm very pleased with the progress on all three of those strategies. They continue to be strong contributors to where we're going. So this puts us right on track to hit our fundraising targets for this year. Institutional interest in allocating to digital infrastructure remains strong. And just as we're seeing early signs of demand driven by gen AI at our portfolio companies, we're spending more and more time with our institutional clients, helping them understand the implications of generative AI on the investment needed to satisfy that demand. Next slide, please. So, this slide highlights the solid year-over-year growth that we've seen in our FIEM and AUM. We ended last quarter with $29 billion in FIEM, up $10 billion over the prior year, representing a 53% annual growth rate, driven by an equal combination of organic capital formation and contribution from the infra-bridge acquisition. Similarly, on the right, AUM, which tracks the NAV of the assets that we manage, was up to $72 billion last quarter. That's up 51% over the prior year. So, as our platforms continue to scale, we look forward to updating on our progress here as we continue to grow revenues organically and earnings over the course of the year. Next slide, please. So, deconsolidation. This is the number two topic behind fundraising for 2023. So I'm pleased to report we've received $170 million in commitments to the data bank recap process. We'll close additional commitments shortly, which will provide us with sufficient capital to deconsolidate that business from our financial statements inside this quarter. We expect us to report final numbers later during Q3. So once completed, this will reduce our per-rata ownership below 10% and generate at least $45 million of incremental proceeds to the DigitalBridge balance sheet, which we can recycle into our capital allocation framework. I can't underscore how big of a milestone this is for us, and the kudos to the capital formation team and everyone at DataBank. We've placed over $2-plus billion into the permanent capital vehicle that was responsible for recapitalizing DataBank. And what's even better is that our leasing pipeline has grown over 3X year over year and has seen the steepest jump across our portfolio on the back of new AI-driven interest. So at the end of the day, we're thrilled to maintain a significant stake in that business, and we're proud to back Raul and the team going forward, and at the same time, deconsolidate that stake and continue to press forward with our main corporate objectives. We really feel excited about this. So at the end of the day, one down, one to go. Vantage SDC is up next, and we're pleased with the progress we're seeing there. Consequently, we remain committed and confident to finalizing the deconsolidation of Vantage SDC before the end of this year. So, really good progress on both of those two initiatives. Data Bank will get done in this quarter, and we'll finish up Vantage SDC by the end of the year. Next slide, please. So, portfolio performance. This is the last of the three legs of the stool for my key initiatives for 2023. I want to highlight the continued growth we're seeing across our four key swim lanes. MMR across the portfolio is up in all of our verticals, driven by organic and investment-led growth. First, data centers, up 22% year over year. Towers, also driving substantial growth, up 21% year over year, as carriers proliferate their 5G networks around the world. Fiber has seen a dramatic increase, up 15%. And small cells quite didn't deliver the double-digit growth we'd like, but nonetheless, we are seeing sustained growth in small cells. And we believe densification in 5G networks will drive those numbers higher in the back half of this year and certainly into 24 and 25. I talked last quarter about supporting our portfolio companies as they serve the world's leading tech and telcos with development CapEx. That's how this investment pays off. manifesting itself in growth and the value of our portfolio, as you see above. So this year, year to date, we've deployed $4 billion supporting the growth of our portfolio companies in a challenging macro environment. I believe this enforces the consistent need for new digital infrastructure by our customers, despite some of those headwinds. Even more importantly, we're deploying this capital at very attractive development yields, that exceed last year's returns and will drive performance into 2024 and beyond. Demand for compute and connectivity continues to grow steadily, and our ability to deliver for customers continues to expand along with our portfolio. So with that, I'd like to turn it over to Jackie to cover our financials. Jackie.