Blue Owl Capital Inc.

Good morning. My name is Chris, and I'll be your conference operator today. At this time, I'd like to welcome everyone to the Blue Owl Q4 2022 conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you'd like to ask a question during this time, simply press star, then the number one on your telephone keypad. Please limit yourself to one initial question, and you may re-queue for a follow-up. Thank you. And I, Head of Investor Relations, You may begin.

Thanks, Operator, and good morning to everyone. Joining me today are Doug Ostrover, our Chief Executive Officer, Mark Lipschultz and Michael Reif, our Co-President, and Alan Kirschenbaum, our Chief Financial Officer. I'd like to remind our listeners that remarks made during the call may contain forward-looking statements which are not a guarantee of future performance or results and involve a number of risks and uncertainties that are outside the company's control. Actual results may differ materially from those in forward-looking statements as a result of a number of factors, including those described from time to time in Blue Owl Capital's filings with the Securities and Exchange Commission. The company assumes no obligation to update any forward-looking statements. We'd also like to remind everyone that we'll refer to non-GAAP measures on the call, which are reconciled to GAAP figures in our earnings presentation, available in the Investor Resources section of our website at blueowl.com. Please note that nothing on this call constitutes an offer to sell or a solicitation of an offer to purchase an interest in any Blue Owl Fund. This morning, we issued our financial results for the fourth quarter and full year of 2022. For the fourth quarter, we reported fee-related earnings, or FRE, of $0.16 per share and distributable earnings, or DE, of $0.15 per share, bringing full-year FRE to $0.57 per share and full-year DE to $0.53 per share. We declared a dividend of 13 cents per share for the fourth quarter, payable on March 6th to holders of record as of February 24th, and also announced a fixed dividend of 56 cents for 2023, or 14 cents per quarter, starting with our first quarter 2023 earnings. During the call today, we'll be referring to the earnings presentation, which we posted to our website this morning, so please have that on hand to follow along. With that, I'd like to turn the call over to Doug.

Thank you, Anne, and good morning, everyone. Today we reported another strong quarter of growth for Blue Owl, capping off our first full year as a public company. Since Blue Owl's entrance to the public markets, we have grown our AUM by 122% and fee-paying AUM by 107%, anchored largely by permanent capital. And over the past year, we have achieved over 40% growth on the key metrics we use to evaluate our business, including management fees, FRE, and DE, and have maintained an industry-leading margin of 60%. This extraordinary growth has been driven by robust fundraising and capital deployment, despite a very challenging period in the markets. Let me provide some color on our achievements that drove this growth. We raised 25 billion of fee-paying AUM in 2022, bringing us halfway to our 50 billion fundraising goal for 2022 and 2023. Notably, in the third quarter of 2022 alone, we raised more equity in that quarter than we had the entire year of 2021. reflecting robust demand and the expanding power of our increasingly global and integrated fundraising platforms across institutional and private wealth channels. Our strategies appeal to investors looking for positive leverage to rising interest rates, income generation with downside protection, inflation hedging, and access to the positive secular trends across the alternative asset manager space, and we continue to see strong demand for these investment characteristics. Not only have we had strong fundraising trends, but our redemptions from products that offer quarterly tenders have remained de minimis, with just 186 million of tenders received on the $13.4 billion of fee-paying AUM managed by those funds. or less than 1.5%. By contrast, inflows into those same products were close to $1.6 billion during the quarter. Private wealth remains a successful market for Blue Owl, with healthy flows despite a more challenging market environment, a testament to the attractiveness of our products and the relationships we've built in the space. In direct lending, we had gross originations of $22 billion for the year, just slightly off our pace from the prior year, despite a 20% decline in U.S. leveraged loan volumes and a 42% decline in announced U.S. M&A transactions. This speaks to the increasing breadth and scale of Blue Isle's platform, as well as the importance of direct lenders in today's marketplace. Volatility and uncertainty have created an environment where other market participants are unable or unwilling to lend capital despite the very attractive opportunities present today, and we are benefiting greatly from that dynamic. In GP Capital Solutions, we deployed about $4 billion of capital, completing transactions with world-class managers such as Dragoneer, KPS, Veritas, and PAI, and bringing us to 70% committed for Fund 5. During the fourth quarter, we held a final close for Fund 5 at nearly $13 billion, over 40% higher than our $9 billion target during a period that many across the industry have described as a difficult fundraising environment. And in real estate, we are now fundraising for our net lease strategy across multiple product offerings, and we are off to a great start. We closed approximately $2 billion for our drawdown product during the fourth quarter and are confident in reaching our fundraising target during the first half of 2023. In this current market environment, what we're seeing is that the safety, inflation hedging, and tax-advantaged yield characteristics of this strategy have resonated with investors, and the cost of capital relative to the public markets has resonated with companies. We're very proud of the substantial asset growth Luau has achieved over this short period of time, but our goal is not to be asset gatherers. Not all AUM is created equal. And our focus is on raising very long-dated assets with attractive fee and margin characteristics where we can provide a differentiated experience for our investors. That is how we look to drive meaningful earnings and dividend growth for our shareholders. And we believe that should translate into substantial value over time. And we look to do so in a way that is predictable and resilient to a wide range of market conditions which is why our permanent capital base and FRE-centric model are so important. Since our investor day in May, sell-side analysts' expectations for 2022 earnings growth across our peer groups steadily declined as the street adjusted its view of carried interest and other difficult-to-predict earnings streams. In contrast, expectations for Blue Owl were unchanged. speaking to our differentiated financial profile, and we delivered on what we said we would do, achieving our goal of reaching $1.3 billion of revenue in 2022. For the year, Blue Owl generated FRE growth of 46% and DE growth of 42%, while maintaining an industry-leading 60% FRE margin. This is especially notable given the market headwinds present throughout the year, which impacted the larger financial sector. We have nearly doubled our dividend over the last six quarters. And as Alan will highlight in greater detail later, we are now moving to a fixed dividend that we expect to grow meaningfully over time. Our asset base is very resilient. It's based on permanent capital. Compared to our peers who must monetize assets, return capital, and raise a new fund and hopefully larger fund, we generally hold on to the assets we have. So each dollar of incremental assets raised is additive to our capital base. This is what we call the layer cake model. On top of that, we have over 10 billion of AUM that will start paying fees once the capital is deployed. providing incremental visibility into our earnings growth ahead. This is what we call the embedded earnings power of our business. All of this should sound familiar to those of you who already know the Blue Owl story. Although the public equity and credit markets have been volatile, although interest rates have moved significantly this year, and although inflation rose swiftly and has remained persistently high, weighing on GDP and many corporate earnings, The core goals that we outlined for you at Investor Day back in May have not changed. And for those that are just getting to know us, we think the past seven quarters as a public company have proven out the predictability, the stability, the resiliency, and the growth potential of our business. Looking to 2023, we're excited about the runway we see ahead In spite of the challenging market environment, we continue to progress towards the financial goals we laid out for our shareholders at Investor Day. We are committed to providing strong performance, attractive income solutions, and downside-protected returns for our fund investors. We continue to deepen the relationships we have with our current institutional and wealth partners and build many new ones. and we continue to innovate to stay ahead of the competition and drive growth for our shareholders. The market backdrop has changed significantly since we've been public and continues to shift. But we think Blue Owl's business was purpose-built for this type of market, and our value proposition increases during environments such as these. That's not to say that these are easy environments to navigate, to fundraise through, or to deploy capital into. It is truly a testament to the incredible efforts of our employees, the invaluable expertise we have across the firm, and the benefits we're seeing from bringing these businesses together. Ultimately, the way I think about our business is this. We operate a capital-light model focused on subsidizing capital return to shareholders, supported by a very stable and growing asset and fee base, essentially an annuity with growth. And in thinking about our earnings profile over the next few years, the question for us is not, as it is for many companies, whether we're going to grow. It's how fast we'll grow. That is the value of permanent capital and management fee-driven earnings. With that, I'd like to turn the call over to Mark to give you an update on our direct lending and real estate businesses. Mark. Great. Thanks so much, Doug.