Blue Owl Capital Inc.

Good morning and welcome to Blue Owl Capital's third quarter 2024 earnings call. During the presentation, your lines will remain on listen only. I'd like to advise all parties that this conference call is being recorded. I will now turn the call over to Anne Dai, Head of Investor Relations for Blue Owl.

Thanks, Operator, and good morning to everyone. Joining me today are Mark Lipschultz, our Co-Chief Executive Officer, and Alan Kirshenbaum, 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 on the shareholder 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 third quarter of 2024 and reporting fee-related earnings, or FRE, of $0.22 per share and distributable earnings, or DE, of $0.20 per share. We also declared a dividend of $0.18 per share for the third quarter, payable on November 22nd to holders of record as of November 11th. 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 Mark.

Great. Thank you so much, Anne. During the third quarter, Blue Owl continued to generate extremely strong growth while making significant progress on our strategic M&A goals, further diversifying our business and positioning us well to participate in the transformational shifts happening within the financial markets. Over the last 12 months, we've grown management fees by 26%, fee-related earnings by 27%, and distributable earnings by 22%, all compared to the prior year period. Looking back further, we have grown management fees by nearly 200% and FRE by over 150% in just three and a half years, representing 14 consecutive quarters of growth in these metrics. We've achieved these impressive results through inflationary periods, geopolitical events, rate volatility, and a significant slowdown in capital markets, highlighting the stability and strength of our business and the durability of our earnings. And the vast majority of this growth has been organic, driven by a handful of factors which we think make Blue Owl's business model very distinct. One, we have extremely high levels of permanent capital, meaning few assets leave the system. For many of our products, there is zero redemption, so every incremental dollar of assets raised contributes to our earnings layer cake. Two, Our earnings are essentially all management fee-driven, so we don't experience the same type of volatility or uncertainty that many others see during periods of market transition as we've observed. Three, our business is geared towards the largest secular trends within the alternative asset market. These include the growth of direct lending, the increasing importance of alternatives in the wealth channel, a growing number of investment-grade companies looking for bespoke capital solutions like net lease, and the rising capital needs of alternative asset managers themselves. And this is intentional positioning. It has been by design that we chose to be in these markets because this is where we saw the greatest divergence in the demand and supply of capital and observed meaningful shifts in how certain markets are financed. On its own, I believe our organic growth has been quite impressive, particularly given market conditions these past few years. However, as many of you know, strategic M&A has been a key component of our strategy since we started our business. And in the past year, we have made select and modest-sized acquisitions to supplement Blue Owl's core growth. These have been focused on specific areas of the market where we anticipate meaningful capital needs and strong investor interest. In other words, we are further positioning ourselves to be on the forefront of trends that will define the alternatives industry in the coming decade. Subsequent to quarter end, we announced an acquisition of IPI's business, reflecting a significant step forward in Blue Owl's presence in the digital infrastructure ecosystem. There is massive demand for data centers and very low vacancy, catalyzed by data storage needs and the proliferation of generative AI tools. IPI is one of the most scaled data center developers, owners, and operators in the world, owning roughly 4% of the world's hyperscale capacity. Their tenants include some of the largest hyperscalers and AI companies globally. We're talking about excellent counterparties, on average rated AA. And the capital investment of these enterprises is expected to measure in the trillions of dollars over the next several years. There is a huge demand-supply imbalance in this market, which relates to both the scale capital needed to fund the new development, as well as the expertise required to successfully source, develop, and operate these properties. Taken together, this dynamic creates a very high barrier to entry and is one of the reasons we are so enthused about this acquisition. There are a lot of companies talking about being in the data center space today. But there are very few that actually have the skill set, proven record, and deep relationships to do what IPI does. And that's why they're decidedly a leader in the market. Within the context of Blue Owl, IPI will be very complementary to what we have in place today. Our current net lease business has a much wider mandate across multiple types of real estate. Well, IPI is a pure play on digital infrastructure. And one of the few managers out there that offers funds solely focused on data centers. We anticipate numerous synergies in bringing them on board, considering the firm's strong relationships with hyperscaler community, modest investor overlap between Bluehalla and IPI, and an opportunity to create very interesting and differentiated products for the wealth distributed market where Bluehalla has built a very strong franchise with CIC, TIC, and O-Rent. This acquisition, like others we've announced, was a proprietary discussion centered around the benefits and synergies of joining Bluehalla. We think our M&A strategy is something between buy and build, a hybrid model where we are bringing on teams who excel at what they do and are scaled in their market. In joining Blue Owl, they can access incremental resources and distribution platforms that supplement and accelerate strong growth that already exists. Most of the employees on these teams see basically no change in their day-to-day, but at the platform level, the synergies can be very impactful. There are numerous similarities between IPI and Adelaide, which closed during the third quarter. Adelaide's deep expertise in asset-backed finance, combined with their almost 20-year track record through market cycles, complements Blue Olive's direct lending business nicely, and we're thrilled that they are officially a part of Blue Olive. We see both digital infrastructure and alternative credit as multi-trillion dollar markets with transformational shifts happening in real time. Through these acquisitions, we have established an expanded foothold in these areas, and similar to Oak Street, we believe we can drive multiplicative growth over time. Collectively, these new additions have been modest, with initial consideration of roughly $2.5 billion for all the transactions announced in 2024, or less than 10% of our market cap. So in the early days, none of these businesses will be highly impactful to our revenues or earnings on their own because they're just not that big. But over the next three, five, seven years, we look forward to demonstrating and quantifying the significant value creation that we are already seeing in some ways across the platform. Just to give a couple of early data points around this. Our real estate credit team has already identified and created deal flow for the liquid portion of O-Rent's portfolio and for our insurance solutions platform, which closed in July. Similarly, Adelia and our credit teams have been active in sourcing investment-grade flow, and across Blue Owl, we have tripled the pipeline from private alpha and beta plus opportunities for insurance. Separately, we are hard at work on a co-mingled real estate credit product that should launch later this year or early next year, and our teams began driving towards this goal prior to Prima's closing. When it comes to integration, we start work streams very early, before our deals are even announced. And by closing, these businesses are largely integrated into Blue Olive, as demonstrated by the examples I just highlighted. Moving on to the quarters. We had our second highest quarter of fundraising with $7.9 billion of equity capital raised and $12 billion including debt. Private wealth fundraising constituted $4.2 billion, a record quarter for this channel, driven by our perpetually distributed and fundraised for GP stakes. Growth inflows into our perpetually distributed products were $2.5 billion in the third quarter and $9.3 billion over the last 12 months, or 67% higher than the prior 12-month period. We continue to make strong inroads in this vast and growing market for alternatives and wealth, supported by our incumbency and strong relationships in this market. The level of trust that we have built with distributors through our thoughtful partnership and high-touch service continues to bear fruit. And just this quarter, we formally launched The Nest at wealth.blueolive.com to further that engagement. The Nest features educational content, portfolio construction resources, and more to guide advisors and their clients in their journey to learn about alternative markets. We're also having exciting conversations with platforms regarding new product development in areas such as alternative credit and digital infrastructure. Our partners continue to look to Blue Owl for differentiated products with attractive and downside-protected income objectives and thought leadership. This is true during strong markets, but particularly true during times of uncertainty. We raised $3.6 billion from institutional investors from a number of strategies across the platform, complementing our robust flows in private wealth and reflecting the ongoing diversification of fundraising across our platform. In total, we have raised over $38 billion organically across equity and debt over the past 12 months. That's equivalent to approximately 25% of our AUM a year ago that we've raised in 12 months. And that is prior to contributions we anticipate from Adelia, IPI, and new products we plan to have in market in the coming quarters. Turning to business performance, in credit, we had another robust quarter of deployment with nearly $11 billion of gross originations, and net deployments were roughly 40% of that, resulting in a last 12-month net deployment pace of nearly $18 billion, up nearly 140% year-over-year during a period where broadly syndicated markets were very active. Direct lending metrics remain strong. On average, underlying revenue growth and EBITDA growth was high single digits across the portfolio with no significant step-ups in non-accruals or amendment requests. In alternative credit, we have experienced strong demand for the capital solutions we offer and recently announced an agreement for certain Blue Owl, formerly Adelaide Funds, to purchase up to $2 billion of loans from Upstart over the next 18 months. We've always highlighted the advantage of having scale in these markets in which we participate. And this is a great example of how Adelaide's team has brought diverse and long-dated pools of capital together to transact in size in one of their core markets. In GP stakes, we continue to position ourselves behind two substantial secular trends, growing allocations to alternatives and GP consolidations. Collectively, our partner managers now manage over $2.1 trillion, providing us with a comprehensive bird's eye view of the industry. We continue to see the big getting bigger, and we continue to see scaled managers increasingly selected as the partners of choice by allocators. Since the end of the second quarter, we've also completed two strip sales of assets in GP Stakes Fund 3 for what is expected to be roughly 15% of the fund's interest, providing liquidity for investors while bringing in a new set of investors to Blue Wallet. We've seen the number of allocators interested in GP Stakes continue to expand, and these transactions represent a creative way to offer access to our pool of notable partner managers while affirming Blue Wallet's leading position in the space. In real estate, we continue to actively deploy capital and net lease at very attractive cap rates behind our four major themes, digital infrastructure, onshoring, healthcare real estate, and essential retail. The capital needs in each of these areas remains very significant, and we continue to expect we'll be approximately 60% committed for Fund 6 by year-end after just completing fundraising in the first quarter of this year. We are now underway on our new net lease Europe strategy and are on track to be at or above our $1 billion target by the first quarter of 2025. To bring it all together, there is clearly a lot more to the blue olive story today than there was last year. But the big picture has not changed. We continue to focus on finding areas with significant capital needs, like data centers and alternative credit, and we are raising large pools of long-dated capital to address those needs. We now have scaled platforms to address the institutional, private wealth, and insurance markets, and we continue to add new and differentiated products with the same underlying characteristics of income generation and downside protection. For our shareholders, the proposition remains simple. Our revenues come from durable, permanent capital with best-in-class fee rates, and our earnings are made up entirely of fee-related earnings, which are coming from increasingly diversified sources. We think this makes our business quite unique and compelling and well-positioned for continued strong and stable growth. With that, let me turn it to Alan to discuss our financial results.