DigitalBridge Group, Inc. — 2023 Form 10-K
Reporting period: Year ended December 31, 2023. DigitalBridge is a global digital-infrastructure investment manager, with $80.1 billion of assets under management (AUM) at year-end. Its single reportable segment is Investment Management. The Operating segment was discontinued after DataBank and Vantage SDC were deconsolidated on December 31, 2023.
Key financial metrics
| Metric | 2023 | 2022 |
|---|---|---|
| Total revenue | $821.4 million | $694.8 million |
| Income (loss) from continuing operations | $365.6 million | ($59.8) million |
| Net income (loss) | $45.2 million | ($570.0) million |
| Net income (loss) attributable to common stockholders | $127.6 million; $0.78 per basic share | ($382.3) million; ($2.47) per basic share |
| Cash from operating activities | $233.6 million | $262.6 million |
| Cash, cash equivalents and restricted cash, year-end | $350.3 million | $1,036.7 million |
| Distributable Earnings attributable to Operating Company (non-GAAP) | $48.6 million | ($14.0) million |
| Investment Management Fee-Related Earnings (non-GAAP) | $137.9 million | $83.5 million |
Revenue increased 18%. Management and other fee revenue was $264.1 million, up 53%; carried-interest allocation was $363.1 million, including $334.7 million unrealized and $28.4 million distributed. Principal investment income was $145.4 million. Expenses totaled $551.9 million, down from $571.7 million. The filing does not present a single consolidated operating-margin measure.
Cash-flow figures include discontinued operations. Investing activities used $979.0 million and financing activities provided $58.2 million in 2023. The company reported approximately $475 million of liquidity, including unrestricted corporate cash and the full $300 million available under its variable funding notes (VFN).
At year-end, corporate debt principal was $378.4 million: $300 million of fixed-rate securitized financing at 3.93% and $78.4 million of 5.75% exchangeable notes due July 2025. The securitized facility has an anticipated repayment date in September 2026. The company reported compliance with its financial covenants and no investment-level debt at year-end. Preferred stock liquidation preference was $821.9 million, with a weighted-average dividend rate of 7.135% and quarterly dividends of about $14.7 million.
Material changes versus 2022
- Fee revenue rose with new fund capital and the February 2023 InfraBridge acquisition, which added $5.1 billion of fee-earning equity under management (FEEUM). FEEUM rose 48% to $32.8 billion; AUM increased to $80.1 billion from $52.8 billion.
- Investment Management segment revenue increased 14% to $645.9 million and segment income from continuing operations rose to $205.4 million from $186.1 million.
- Carried-interest allocation declined $15.3 million as distributed carry fell, partly offset by higher unrealized carry. The company cautions that unrealized carry depends on estimated investment fair values and may reverse.
- DataBank’s recapitalization and deconsolidation generated a $278.7 million gain, including a $275.0 million unrealized remeasurement gain. DigitalBridge held approximately 9.5% of DataBank at year-end. The company’s share of Vantage SDC was 12.8% after deconsolidation.
- Consolidated assets and liabilities fell substantially following deconsolidation, which removed $8.55 billion of assets and $5.94 billion of liabilities. The reported $320.5 million loss from discontinued operations partly offset continuing-operations income.
- DigitalBridge repaid $200 million of 5.00% senior notes at maturity in April 2023, reducing corporate debt and annual financing costs by about $10 million.
Outlook, risks and unusual items
The filing gives no numerical earnings or revenue guidance. Management said it believed available liquidity, expected operating cash flow and financing sources were sufficient for short- and long-term requirements, while continuing to assess options to strengthen liquidity and flexibility. Through February 19, 2024, the company reported approximately $7.7 billion raised, including $6.9 billion in 2023.
Common dividends were $0.01 per share quarterly in 2023; their amount remains at the board’s discretion, and preferred dividends must be paid before common distributions. Near-term obligations include $35 million of remaining Wafra contingent consideration payable in March 2024, $260 million of unfunded fund commitments callable on demand, and $49 million of corporate-office lease liabilities. InfraBridge acquisition earnout consideration may reach $129 million subject to fundraising targets; its estimated fair value was $11 million.
Key risks include volatile fundraising and performance-fee income; valuation uncertainty in illiquid investments and potential carried-interest reversals; higher interest rates and refinancing risk; competition for investors and assets; conflicts of interest, including interests of certain executives in legacy portfolio companies; and evolving regulatory, cybersecurity, data-privacy, climate and ESG requirements. The SEC was investigating legacy adviser CCIA following an examination; the company said it was cooperating and could not predict the outcome. No material adverse legal proceeding was reported at year-end, and no carried-interest clawback liability was recorded.
Other notable items: a $133 million write-down of the unsecured Wellness Infrastructure sale note; the full valuation allowance against most deferred tax assets; and a full-year audit opinion without qualification. Management and the auditor excluded InfraBridge from the 2023 internal-control assessment while it is being integrated; the auditor nevertheless opined that the company maintained effective internal control in all material respects.
Important facts for investors to verify
- How much of reported earnings and revenue growth is recurring fee income versus unrealized carried interest, investment gains and the DataBank remeasurement gain.
- Fundraising progress, fee-paying capital, fund performance and the sensitivity of carried interest and principal investment income to valuation changes.
- Liquidity composition and availability of the VFN, upcoming debt repayment or refinancing requirements, and the ability to fund dividends, commitments and contingent payments.
- The effect of deconsolidating DataBank and Vantage SDC on future reported revenue, cash flows, investment values and exposure to their operating risks.
- Progress integrating InfraBridge into financial controls, and developments in the CCIA SEC investigation and executive-related-party arrangements.