DigitalBridge Group, Inc.

Good day, and welcome to the Digital Bridge Group, Inc. Second Quarter 2025 Earnings Conference Call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then 1 on a touch-tone phone. To withdraw your question, please press star, then 2. Please note this event is being recorded. I would now like to turn the conference over to Severin White, Managing Director, Head of Public Investor Relations. Please go ahead.

Good morning, everyone, and welcome to DigitalBridge's second quarter 2025 earnings conference call. Speaking on the call today from the company is Mark Gansey, our CEO, and Tom Maroff, our CFO. I'll quickly cover the safe harbor. 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 is as of today, August 7th, 2025, 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, 2024, and for the Form 10-Q to be filed with the SEC for the quarter ending June 30, 2025. With that, let's get started. I'll turn the call over to Mark Ganze, our CEO.

Mark. Thanks, Devin. Good morning, everyone, and welcome to our second quarter 2025 business update. We appreciate you joining us, and as always, we appreciate your interest in DigiBridge. We had another strong quarter of execution across the board. continuing the momentum from the start of the year. The key takeaways for me are simple, and they align with the three pillars of our strategy you see here, fundraise, invest, and scale. This makes three quarters back to back where we've essentially gone out and done exactly what we said we would do. We took care of business. First, let's start with the financial front. We delivered solid revenue and earnings growth, keeping us firmly on track to meet our full year objectives. Fee revenue growth of 8% year-over-year drove strong fee-related earnings growth of 23% as margins continued to expand. This is the core of the Ditterbridge investment case, scalable growth with expanding margins, and we are delivering on that fundamental premise. Second, on fundraising, we continue to see exceptional demand from LPs to partner with us and invest in the digital economy. We raised another $1.3 billion in the quarter, bringing our year-to-date total of 2.5 billion and making great progress towards our 40 billion PM target for the year. And third, on the investment front, this was an important quarter. With a built and under construction pipeline of over 5.4 gigawatts of 50% over the prior year, we're putting 50-plus billion dollars to work over the next few years on contracted data center projects tethered to our power bank, which we'll talk a little bit about later. We weren't just deploying capital. We were making decisive, strategic moves to solve the biggest bottlenecks for our customers in the AI revolution. We established two new critical platforms in the quarter, Yonder in hyperscale data centers and TechNoc in the digital power strategy. While continuing to fuel the growth of our existing market leaders like Switch and Vantage, and the rest of the constellation of the Ditter Ridge portfolio companies. We are building the AI factories that will power the next decade of innovation. Let's dig into capital formation momentum. As you can see, at the mid-year point, we are tracking right where we need to be to achieve our full-year objectives. Importantly, the fundraising mix is aligned with our budget, and as we get back into the second half of the year, new strategies will start to contribute alongside the final close of our third flagship fund. We're building a multi-strat fundraising platform, and you'll see that on display as the year progresses. Our flagship DB3 strategy continues to attract capital, and we've raised $6.9 billion year to date, with a final close in the third quarter that will take the total to over $7 billion plus, which was our new target. This is the bedrock of our platform. providing diversified global exposure to the entire digital infrastructure ecosystem. But what's really exciting and a key indicator of the value that we're creating is the maturation of our co-investment program. We talked about this last year, and we told you exactly where we were going this year. Our market-leading platforms like Vantage and Switch become more critical to the AI ecosystem. Our partners want more direct exposure. You can see that and the fee rate in our co-investments, which are 30% higher year to date, averaging just about 60 basis points compared to our 45 basis point historical average. Again, this was a key component to our strategy and something we talked about last year that we thought we could do a better job at. This is high quality, high conviction capital from LPs who know our assets, they know our leadership teams, and they see the performance firsthand. It's a powerful testament to the value we're creating at the portfolio company level. This is incredibly unique to the DigiBridge story. This all flows ultimately straight into FIEM, the key metric that drives our earnings. The activation of new capital from the DigiBridge partner series and high-quality co-investments puts us in a great position to exceed our 40 billion FIEM target for 2025. We are building predictable, reoccurring revenue, for our shareholders. Next slide, please. So, the next question is, we're raising all this capital, where is it going? Where are we putting it to work? Look, it's going directly to work in critical infrastructure that our customers need. This slide is a great snapshot of our investment thesis in action, identifying key new secular trends and establishing platforms to capture them, while simultaneously fueling the growth of our established winners, Let's start with new platforms. The two biggest constraints in the AI build-out today are power and data center capacity. I'm not the only one talking about this. I've been talking about it, in fact, for the last two years, and now everyone's talking about it. This quarter, we made moves to extend and establish our leadership position in both verticals, digital power and continue to light up data center capacity. Let's start with power. We committed up to $500 million alongside of our partners Arclight to launch TACNOC. This isn't just an investment. It's a new strategy. We've been talking about it for the last few quarters. Where are we going to put our capital to work and where are we going to put our best ideas to work in powering the AI economy? TACNOC fits that prototype. It develops powered land, solving the number one headache for hyperscalers and accelerating their ability to deploy AI capacity. We'll talk more about this in a minute. Second, capacity. We're thrilled to close the multi-billion dollar acquisition of Yonder, a premier global hyperscale developer that is super focused on powered shell. With over 400 megawatts of leased capacity and a clear path over a gigawatt, Yonder immediately becomes our eighth global data center platform and significantly expands our ability to serve the largest cloud and AI players. At the same time, We're not taking RF the ball with our existing portfolio. You see significant financings at both Switch and Vantage. This isn't maintenance capital. This is growth capital, and that's a critical thing to acknowledge. It's funding massive expansions, including a new $3 billion AI campus in Nevada for Switch and continued build outs across North America and Europe for Vantage to meet record customer bookings. Next slide, please. So now I want to spend a few minutes on the underlying demand drivers that give us so much conviction in our strategy and our investment thesis at DigiRich today. If you recall, the first quarter was characterized by some macro questions, including what's the ROI of AI? But in the second quarter, the signal broke through the noise. The narrative shifted decisively, and AI's return on invested capital came in a sharp focus. And you don't have to take my word for it. Listen to the leaders of the world's largest technology and hyperscale companies. Mark Zuckerberg, describing the pace of AI innovation, highlighted last week that the more aggressive assumptions were the fastest assumptions have been the ones that have most accurately predicted what would happen. Microsoft CFO Amy Hood was confirming the same. The return on invested capital is real, stating that their AI spend is correlated to basically contracted on the books business, direct free cash flow conversion directly correlated to AI workloads. And most powerfully, Google CFO, and they confirmed that they're increasing their 2025 CapEx forecast by 10 billion to 85 billion. And they expect a further increase in 2026 demand, and that's not going to stop anytime soon. So, we've seen this step function in CapEx. We talked about it in the fourth quarter last year. We then reforecast it again in the first quarter of this year. And now, we're again back at the table, reforecasting CapEx for this year, which we're anticipating going to over $380 billion. When the world's largest cloud providers are telling you in no uncertain terms that demand is exceeding the most aggressive assumptions and they're increasing spending by tens of billions of dollars to keep up, you listen.